EXHIBIT 10.2

CALPINE CORPORATION

2009 Calpine Incentive Plan

I.             Effective Date

The 2009 Calpine Incentive Plan (the “CIP” or the “Plan”) is effective as of
January 1, 2009.

II.           Plan Purpose

The CIP is a key element of Calpine Corporation’s (“Company”) total compensation
program and is designed to attract, motivate, retain and reward eligible
employees. The plan rewards eligible employees by allowing them to receive
bonuses based upon how well the Company performs against certain financial
objectives, how an individual personally performs and how well the individual’s
plant/department performs (when applicable).  In order for any bonuses to be
earned and paid, the Company must meet minimally acceptable performance
targets.  If those targets are not met, no bonuses will be paid.  If those
targets are met, then bonuses will be paid based on a combination of Company
performance, individual performance and the individual’s plant/department
performance (when applicable).

III.          Plan Eligibility

All regular full time (working 30 or more hours per week), non-collective
bargaining unit employees who will not receive a benefit from another Company
incentive plan during 2009 are eligible to participate in the Plan.

IV.          Bonus Pool Determination

The aggregate CIP bonus pool amount approved by the Compensation Committee of
the Board of Directors (the “Committee”), is determined in the following steps:
 
1.    Prior to the start of, or early in each performance period, the Company
shall confirm the business/performance goals for the Company (“Corporate Goals”)
and/or for various plant/departments (“Plant/Department Goals”) for that
period.  For the current performance period, Exhibit A attached hereto provides
specific Corporate Goals and the areas in which Corporate Goals and
Plant/Department Goals will be evaluated.
 
2.    During the fiscal quarter following the performance period (which is the
entire calendar year), the Plan Administrator shall review how the actual
results for the

 
 

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period compared to the Corporate Goals and Plant/Department Goals for that
period and determine the level of achievement of the various goals, expressed as
a percentage.  As required, the Committee will review and approve, modify,
adjust or cancel the achievement in its sole discretion.
 
3.    The sum each participant’s “Annual Cash Bonus Target” which is each
participant’s Target Percentage (described in Section V (1) below) multiplied by
his or her Compensation (as defined in Section V(2) below), for the calendar
year to which Corporate Goals and/or Plant/Department Goals (as defined in
Section IV(1) above) and Individual Goals (as defined in Section V(3)) apply,
establishes the target aggregate CIP bonus pool (“Aggregate Target CIP Bonus
Pool”).
 
4.    The percentage of goal achievement shall be applied to the Aggregate
Target CIP Bonus Pool, and may result in a final actual aggregate CIP bonus pool
(“Final Aggregate CIP Bonus Pool”) greater than, or less than, the sum each
participant’s Annual Cash Bonus Target.  As a general rule, the level of the
Final Aggregate CIP Bonus Pool shall be consistent with the Company’s level of
Corporate Goal and/or Plant/Department Goals achievement.

Based upon the achievement of the Corporate Goals and/or Plant/Department Goals,
the Committee may adjust the Aggregate Target CIP Bonus Pool up or down based on
unplanned circumstances or events.

V.           Participant Bonus Determination

Although participant bonus determinations are completely at the discretion of
the Plan Administrator and subject to the achievement of Corporate Goals and/or
Plant/Department Goals, many factors are taken into consideration in determining
an individual participant’s bonus under the Plan.

The bonus amount allocated to a participant (“Bonus”) is generally determined by
the following factors:
 
1.    Position – Each eligible position is associated with a job code that is
assigned a target percentage based on the level of responsibility and market
practices for the position (“Target Percentage”).  The Target Percentage, which
is based on market data and internal/Calpine discretion (provided that a 16B
officer’s is based on market data and the discretion of the Board of Directors
of Calpine), will be communicated to each participant upon hire, placement in,
or promotion to any CIP eligible position.
 
2.    Compensation – The amount of a participant’s Compensation, which is a
participant’s base salary and overtime pay, earned in a CIP eligible position
during a performance period is directly related to a participant’s Bonus.  The
“Compensation” for a participant shall be prorated for any partial service on
account of disability, leaves, promotions or any other position changes.

 
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“Compensation” does not include step up pay, time off for leave of absences or
supplemental payments, including but not limited to bonuses, awards and vacation
payouts.
 
3.    Participant Job Performance – An additional component in calculating a
participant’s Bonus is the attainment of specific individual goals and
objectives, which are established by the participant along with the
participant’s respective manager at the beginning of the measurement period
(“Individual Goals”).  Individual Goals may be inapplicable in some
circumstances.
 
4.    Mix of Corporate Goals, Plant/Department Goals and Individual Goals –
Bonuses are determined based on a combination, or mix, of the achievement of
Corporate Goals, Plant/Department Goals and Individual Goals (as applicable).
 
5.    Other Factors Considered:
 

·     
Foremost are Calpine’s overriding principles of ethical conduct and
integrity.  It is expected that each participant will conduct Calpine’s business
in an open and honest fashion and actions, and that decisions will represent the
Company with honor and distinction in the face of public scrutiny.

·     
Furthermore, a participant’s compliance with all applicable laws and Company
policies, procedures and standards (including, but not limited to, the Code of
Conduct, the Risk Management Procedures Manual, the Antitrust Policy, the Safety
and Health Policy, the Equal Employment Opportunity Policy and NERC, FERC and
any other regulatory laws, rules or regulations) is an essential consideration
in determining bonus eligibility and amount.  In addition, a participant’s Bonus
under the Plan may be adjusted for his or her individual performance and
contribution, as determined by the participant’s manager.

VI.          Payment of Bonus

Each Bonus under the Plan will be calculated based on attainment of goals and
paid as follows:

·     
   Provided the Corporate Goals and/or Department Goals are achieved as set
forth in Exhibit A, it is intended that the Bonus will be paid between January
1, 2010 and March 15, 2010, but it will be paid no later than December 31, 2010.

·     
   Participants in the Transition Incentive Award program of the CIP:  The CIP
also provides a limited number of awards to participants under the Transition
Incentive Provision (“Exhibit B”).  These employees are engaged in activities
such as asset sales, plant closings, etc. which may, by the nature of the
activity, result in the elimination of their jobs. Employees in this
classification will be

 
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        advised of their respective participation based on criteria determined
by the Company from time to time.

·     
   In all cases, bonus payments will be subject to all applicable taxes and any
applicable and appropriate deductions for garnishments, 401(k) Retirement
Savings Plan, and other deductions or withholdings.

VII.        Transfers and New Hires

In the event that a participant transfers from one position to another during
the course of the performance period, or is a new hire, his/her Plan bonus for
the year will be calculated on a pro-rated basis to reflect the actual time
spent in each position and the bonus target for each position during the
performance period.  An employee hired on or after November 1 is not eligible to
participate in the CIP for the calendar year in which he or she was hired.

VIII.       Retirements, Disability, Death and Terminations

Except as provided below, participants are eligible to receive a bonus under
this Plan provided they remain actively employed on the day bonus payments are
paid.  Participants in the Transition Incentive Award program of the CIP are
exempt from this provision.

Notwithstanding the foregoing, in the event of a participant’s retirement
(provided such participant qualified under the Company’s retirement policy),
short-term or long-term disability or death during a Plan year, his/her Bonus
will be pro-rated to reflect the actual time in active service during the Plan
year. If a Plan participant dies, retires or becomes subject to short-term or
long-term disability after the conclusion of a performance period, but prior to
the bonus payout for such period, he or she will still be eligible to receive
the entire Bonus under the Plan for such period.

Except as otherwise provided hereunder, any participant whose employment is
terminated by the Company for any reason (including such termination by the
Company after a participant becomes eligible for retirement) or who voluntarily
resigns (except for retirement) prior to the Bonus payout is not eligible to
receive a bonus payment under such program.

IX           Administration

The Plan will be administered by the Plan Administrator who shall be Calpine’s
Chief Executive Officer, or the Company officer designated by the Chief
Executive Officer from time to time (i.e., SVP Human Resources, etc.).  The Plan
Administrator shall have broad authority to interpret the terms and conditions
of the Plan, subject to the following decisions reserved for the Committee:

 
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1.   As required, the approval of the Company’s financial and non-financial
goals discussed in Section IV above; and

2.   Interpretation of the Plan on any matters in which the Chief Executive
Officer or the Plan Administrator is not a disinterested party.

Furthermore, the Plan Administrator must approve any modifications, amendments,
or adjustments to the Plan or any of its key provisions and all bonus
payments.  In addition, all bonus payments under this Plan are subject to the
review and the approval of the Chief Executive Officer. Any decisions of the
Plan Administrator in the interpretation of the Plan may be appealed in writing
to the Committee.  However, any decision of the majority of the Committee is
final and binding on all parties.

X           Disputes

If a Plan participant disputes a Bonus payment or the absence of a payment under
such program, he or she must submit a claim in writing describing the claim to
the Plan Administrator.  The Plan Administrator will respond to the claim within
a reasonable time.  Any decisions of the Plan Administrator may be appealed in
writing to the Committee.  However, any decision of a majority of the Committee
is final and binding on all parties.

XI           Discretion in Amendment/Termination

Distribution and payout of all Bonus amounts under the CIP are at the sole
discretion of the Plan Administrator. The Plan Administrator may at any time and
for any reason, amend, alter, suspend or terminate this Plan, subject to the
approval of the Committee.  Any amendment, supplement, or exception to this Plan
must be in writing and will be communicated to all eligible
participants.  Likewise, any superseding management incentive plan must be in
writing and expressly state that it supersedes this Plan.  The Committee may in
its discretion suspend any and all payments under the Plan.

XII         No Employment Rights

Notwithstanding anything to the contrary herein, each Plan participant’s
employment with the Company is and shall continue to be at-will.  A
participant’s employment with the Company may be terminated at any time by the
participant or the Company, with or without cause and with or without notice, as
permitted by law.

XIII        Governing Law

The validity, interpretation, construction and performance of this Plan shall be
governed in accordance with Texas law, except for its conflict of laws
provisions, unless a superseding federal law is applicable or, in the case of
Canada, unless a superseding law under Canadian jurisdiction is applicable.

 
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XIV        No Assignment

Without the written consent of the Plan Administrator, no participant may assign
any right or obligation under this Plan to any other person or
entity.  Notwithstanding the foregoing, the terms of this Plan and all rights of
the participant hereunder shall inure to the benefit of, and be enforceable by,
the participant’s personal and legal representatives, executors, administrators,
successors, heirs, distributes, devisees or legatees.

XV          Integration

This document and each exhibit hereto represent the entire agreement and
understanding between the Company and the participants in the Plan as to the
subject matter herein, and therefore supersede all prior or contemporaneous
agreements, whether written or oral.

XVI         Severability

The invalidity of unenforceability of any provision or provisions of this Plan
shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.

 
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EXHIBIT A
2009

Pool Funding and CIP Bonus Plan Goals/Metrics

Pool Funding

·      
Each plan participant has an Annual Cash Bonus Target that equals the product of
his/her Compensation times the Target Percentage associated with his/her job
level.  The Aggregate Target CIP Bonus Pool equals the sum of the participants’
Annual Cash Bonus Targets.

·     
Based upon results, the Bonus Pool may be adjusted upward or downward based on
unplanned extra ordinary events.

 

* * * * *

·     
Corporate Goal:  The Company must meet a minimum threshold performance of at
least 80 percent of projected adjusted EBITDA in order for the CIP program to be
funded in 2009.  For 2009, the projected adjusted EBITDA target is $1,687
million dollars.  Eighty percent of this target is $1,349 million.

·     
Corporate and Plant/Department Goal Performance:  Performance at the Corporate
and Plant/Department levels will directly relate to how the Company and
Plant/Department (where applicable) satisfy performance measure targets in the
following areas: Economic Commodity Margin and Other Income, Expenses,
CAPEX/Major Maintenance Expenses and Strategic Initiatives.  (See attached
Addendum to Exhibit A for more details.)  Some Plant/Departments will affect all
of the areas, while others will affect as few as one area.  This will be
accounted for.  Plant performance will include, but not be limited to,
evaluation of safety, environmental compliance and controllable expenses.

With the exception of awards paid under the Transition Incentive program
(Exhibit B) that may involve the elimination of a participant’s own position,
participants must be actively employed on the date of the payment of the Bonus
in order to receive payment.

* * * * *

 
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EXHIBIT B
2009
Transition Incentive Plans

In connection with activities necessary to the successfully disposition of
assets, closing of plants and similar activities designed to support the
restructuring of Calpine, there may be a number of employees who, by the nature
of their activities, eliminate their respective jobs.  The Transition Incentive
Plans provide a program that rewards these participants for their work in
completing assignments and specific transactions that enhance Calpine’s value.

A.  Transaction/Transition Bonus

To be paid to CIP eligible employees who are working on a specific assignment
with a targeted end date.  In the majority of cases, the completion of the
assignment will result in the affected employee’s lay-off.  Generally, the
Transaction/Transition Bonus for an affected employee will be calculated based
upon his/her Annual Cash Bonus Target.  Any Transaction/Transition Bonus may be
paid during the assignment or specific transaction, upon the assignment’s or
transaction’s completion, or both.  The Transaction/Transition bonus is paid in
lieu of a CIP bonus.  A Transaction/Transition Bonus shall be paid within 2½
months following the assignment’s or transaction’s completion date.

Subject to a written agreement, an employee who voluntarily resigns or is
terminated by the Company for any reason prior to successful completion of the
specified assignment will not be eligible for a Transaction/Transition bonus
payout.

B.  Construction Completion Bonus

To be paid to construction, engineering and commissioning employees at the level
of Director and below assigned to specific capital or construction
projects.  Each specified project will have a construction completion bonus pool
assigned to it.  A Construction Completion Bonus will be made on a discretionary
basis by management based upon an employee’s contribution to that project.  A
Construction Completion Bonus may be paid during the project, upon completion of
the construction project or both.  Each Construction Completion Bonus may be
paid to employees who are no longer employed with Calpine at the time the entire
construction project is completed as long as management deems their services to
have been satisfactorily completed and no longer needed at some time prior to
the project’s completion date.

Subject to a written agreement, an employee who voluntarily resigns or is
terminated by the Company for any reason prior to completion of the construction
project will not be eligible for a Construction Completion Bonus payout.
 
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