EXHIBIT 10.2

 
CALPINE CORPORATION
 
 
ANNUAL EXECUTIVE
NON-QUALIFIED STOCK OPTION AGREEMENT
(Pursuant to the 2008 Equity Incentive Plan)

 
OPTION granted December 17, 2008 (the "Grant Date"), by Calpine Corporation, a
Delaware corporation (the "Corporation"), to ZAMIR RAUF (the "Grantee") pursuant
to this Non-Qualified Stock Option Agreement ("Stock Option Agreement").
 
1.   GRANT OF OPTION.  The Corporation hereby grants to the Grantee the
irrevocable Option to purchase, on the terms and subject to the conditions set
forth herein and in the Plan (as defined below), up to 100,000 fully paid and
nonassessable shares ("Total Shares") of the Corporation's Common Stock, par
value $.001 per share, at the option price of $8.01 per share, being not less
than 100% of the fair market value of such Common Stock on the Grant Date.
 
The Option is granted pursuant to the Corporation's 2008 Equity Incentive Plan
(the "Plan"), a copy of which is attached hereto. The Option is subject in its
entirety to all the applicable provisions of the Plan as in effect on the Grant
Date, which are hereby incorporated herein by reference.  The Option is not
intended to qualify as an “incentive stock option” within the meaning of Section
422 of the Code.  Except as otherwise provided herein, or unless the context
clearly indicates otherwise, capitalized terms not otherwise defined herein
shall have the same definitions as provided in the Plan.
 
2.   PERIOD OF OPTION.  The period of the Option shall commence on the Grant
Date and expire on the tenth (10th) anniversary of the Grant Date ("Option
Period").  Notwithstanding the foregoing, upon a termination of employment or
service with the Corporation, the Option shall expire in accordance with Section
13 of the Plan.
 
The Option (or any lesser amount thereof) may be exercised from time to time
during the Option Period as to the number of Total Shares allowable under
Section 3 below and the Plan.
 
3.   EXERCISE OF OPTION.  The Option is cumulatively exercisable ("vested") in
installments in accordance with the following schedule, provided the Grantee has
been continuously employed by the Corporation through the anniversary dates of
the Grant Date set forth below:
 

 
Fiscal Year Beginning on the
 
Cumulative Percentage
 
Grant Date and the Anniversary
 
of Total Shares Subject
 
Date of the Grant Date
 
to Option Purchasable
         
First
 
33-1/3%
 
Second
 
66-2/3%
 
Third
 
100%

 
 

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Continuous employment includes any paid leave of absence and any unpaid leave of
absence up to 30 days, but does not include any unpaid leave of absence after 30
days.
 
Notwithstanding any other provision herein to the contrary, upon the occurrence
of a Change in Control (as defined in the Plan), the Option shall become
immediately vested in full.
 
4.   SECURITIES ACT REQUIREMENTS.  In addition to the requirements set forth
herein and in the Plan, (i) the Option shall not be exercisable in whole or in
part, and the Corporation shall not be obligated to issue any shares of Common
Stock subject to any such Option, if such exercise and sale or issuance would,
in the opinion of counsel for the Corporation, violate the Securities Act of
1933 (the "1933 Act") or other Federal or state statutes having similar
requirements, as they may be in effect at that time; and (ii) each Option shall
be subject to the further requirement that, at any time that the Committee shall
determine, in its discretion, that the listing, registration or qualification of
the shares of Common Stock subject to such Option under any securities exchange
requirements or under any applicable law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the issuance of shares of Common Stock, such Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
 
5.   METHOD OF EXERCISE OF OPTION.  Subject to the provisions of the Plan and
Section 4 hereof, the exercise price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash or by certified or bank check at the time the
Option is exercised or (ii) in the discretion of the Committee, upon such terms
as the Committee shall approve, the exercise price may be paid:  (A) by delivery
to the Corporation of other Common Stock, duly endorsed for transfer to the
Corporation, with a Fair Market Value on the date of delivery equal to the
exercise price (or portion thereof) due for the number of shares being acquired,
or by means of attestation whereby the Grantee identifies for delivery specific
shares of Common Stock that have a Fair Market Value on the date of attestation
equal to the exercise price (or portion thereof) and receives a number of shares
of Common Stock equal to the difference between the number of shares thereby
purchased and the number of identified attestation shares of Common Stock (a
“Stock for Stock Exchange”); (B) a “cashless” exercise program established with
a broker; (C) by reduction in the number of shares of Common Stock otherwise
deliverable upon exercise of such Option with a Fair Market Value equal to the
aggregate exercise price at the time of exercise, or (D) in any other form of
legal consideration that may be acceptable to the Committee.  The purchase price
of Common Stock acquired pursuant to an Option that is paid by delivery (or
attestation) to the Corporation of other Common Stock acquired, directly or
indirectly from the Corporation, shall be paid only by shares of the Common
Stock of the Corporation that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).  Notwithstanding the foregoing, during any
period for which the Common Stock is publicly traded (i.e., the Common Stock is
listed on any established stock exchange or a national market system) an
exercise by Grantee that involves or may involve a direct or indirect extension
of credit or arrangement of an extension of credit by the Corporation, directly
or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act
(codified as Section 13(k) of the Exchange Act) shall be prohibited with respect
to this award.

 
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6.   TRANSFERABILITY.  The Option is not transferable otherwise than by will or
pursuant to the laws of descent and distribution, and is exercisable during the
Grantee's lifetime only by the Grantee.
 
7.   BINDING AGREEMENT.  This Stock Option Agreement shall be binding upon and
shall inure to the benefit of any successor or assign of the Corporation, and,
to the extent herein provided, shall be binding upon and inure to the benefit of
the Grantee's beneficiary or legal representatives, as they case may be.
 
8.   ENTIRE AGREEMENT.  This Stock Option Agreement and the Plan set forth the
entire agreement of the parties with respect to the Option granted hereby and
may not be changed orally but only by an instrument in writing signed by the
party against whom enforcement of any change, modification or extension is
sought.
 
9.   ELECTRONIC DELIVERY AND SIGNATURES.  The Corporation may, in its sole
discretion, decide to deliver any documents related to the Option or to
participation in the Plan or to future options that may be granted under the
Plan by electronic means or to request the Grantee's consent to participate in
the Plan by electronic means.  Grantee hereby consents to receive such documents
by electronic delivery and, if requested, to agree to participate in the Plan
through an on-line or electronic system established and maintained by the
Corporation or another third party designated by the Corporation.  If the
Corporation establishes procedures of an electronic signature system for
delivery and acceptance of Plan documents (including any Award Agreement like
this Option), the Grantee hereby consents to such procedures and agrees that his
or her electronic signature is the same as, and shall have the same force and
effect as, his or her manual signature.
 
10.   WITHHOLDING OF TAX.  To the extent that the exercise of the Option or the
disposition of shares of Corporation's Common Stock acquired by exercise of the
Option results in compensation income to the Grantee for federal or state income
tax purposes, the Grantee shall pay to the Corporation at the time of such
exercise or disposition such amount of money or, if the Corporation so
determines, shares of Common Stock, as the Corporation may require to meet its
obligation under applicable tax laws or regulations and, if the Grantee fails to
do so, the Corporation is authorized to withhold from any cash remuneration then
or thereafter payable to the Grantee, any tax required to be withheld by reason
of such resulting compensation income or the Corporation may otherwise refuse to
issue or transfer any shares otherwise required to be issued or transferred
pursuant to the terms hereof.  
 
11.   ADJUSTMENTS/CHANGES IN CAPITALIZATION.  This award is subject to the
adjustment provisions set forth in the Plan.
 

 
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Subject to Section 9 above, if the foregoing is in accordance with your
understanding and approved by you, please so confirm by signing and returning
the duplicate of this Stock Option Agreement enclosed for that purpose.
 

 

 
CALPINE CORPORATION
             
By:
/s/  Jack Fusco
   
Jack Fusco
   
President and Chief Executive Officer

The foregoing is in accordance with my understanding and is hereby confirmed and
agreed to as of the Grant Date.

 
/s/  Zamir Rauf
     
Zamir Rauf

 
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