ex10-2_9.htm


     

    EXHIBIT 10.2.9


    


    


    


    CALPINE
CORPORATION

    


    2008
Calpine Incentive Plan

    


    


    I.             
Effective
Date

    


    The 2008
Calpine Incentive Plan (the “CIP” or the “Plan”) is effective as of
January 1, 2008.

    


    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
both how well the Company performs against certain financial objectives as well
as how the individual personally performs.  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 and individual performance.

    


    III.           Plan
Eligibility

    


    Participants
eligible to participate in the Plan are defined in Exhibit
A.

    


    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 departments ("Department Goals") for that
      period.  The Corporate Goals and Department Goals for the
      current performance period are attached hereto as Exhibit
    B.

            


    

    


    
      	
               
      

            	
              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 period compared to the Corporate Goals and 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 base salary, for the calendar year to which
      Corporate Goals and/or Department Goals (as defined in Section IV(1)
      above) and Individual Goals (as defined in Section V(4)) apply ("Base
      Salary"), 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 Department Goals
      achievement.

            


    

    


    Based
upon the achievement of the Corporate Goals and/or 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
Department Goals, many factors are taken into consideration in determining an
individual participant’s earned bonus under the Plan.

    


    The bonus
amount allocated to a participant ("Earned 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.

            	
              Base
      Salary – The amount of a participant's Base Salary earned
      in a CIP eligible position during a performance period is directly related
      to a participant's Earned Bonus.  The "Base Salary" for a
      participant shall be prorated for any partial service on account of
      disability, leaves, promotions or any other position
    changes.

            


    

    


    
      	
               
      

            	
              3.

            	
              Company
      Performance – The level of Corporate Goal achievement and
      the resulting funding level as determined by the Committee and described
      in Section IV is one factor used in determining a participant’s
      Earned Bonus.

            


    

    


    
      
        
           


        

        
          2

          
            

          

        

        
           


        

      

    

    


    
      	
               
      

            	
              4.

            	
              Department
      Performance – The level of a Department Goal achievement
      and the resulting funding level as determined by the Committee as
      described in Section IV is another factor in determining a participant's
      Earned Bonus.

            


    

    


    
      	
               
      

            	
              5.

            	
              Participant Job
      Performance – An additional component in calculating a
      participant's Earned 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").

            


    

    


    
      	
               
      

            	
              6.

            	
              Corporate
      Initiatives – Each Plan year the Company will define
      several key corporate goals that participants can influence through their
      performance.  The 2008 corporate initiatives are listed on
      Exhibit B.

            


    

    


    
      	
               
      

            	
              7.

            	
              Mix of Corporate Goals,
      Department Goals and Individual Goals – Earned Bonuses
      are determined based on a combination, or mix, of the achievement of
      Corporate Goals, Department Goals, Corporate Initiatives and Individual
      Goals that is determined by Job Level, and is included in Exhibits A and B
      attached hereto.

            


    

    


    
      	
               
      

            	
              8.

            	
              Other Factors
      Considered:

            


    

     

    
      
        	
                 
      

              	
                Ÿ

              	
                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.

              


      

      


      
        	
                 
      

              	
                Ÿ

              	
                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, and the Equal Employment Opportunity Policy) is
      an essential consideration in determining bonus eligibility and
      amount.  In addition, a participant’s Earned 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 Earned
Bonus

    


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

     

    
      
        	
                 
      

              	
                Ÿ

              	
                Provided
      the Corporate Goals and/or Department Goals are achieved as set forth in
      Exhibit A, the Earned Bonus will be paid within 75 days after the end of
      the Plan Year –
December 31.

              


      

    

     

    
      
        
           


        

        
          3

          
            

          

        

        
           


        

      

    

     

    
      
        	
                 
      

              	
                Ÿ

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

              


      

      


      
        	
                 
      

              	
                Ÿ

              	
                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 between November 1 and December 31 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), long-term
disability or death during a Plan year, his/her Earned 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 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 Earned 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 Earned 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, or the Company officer designated by the Chief Executive Officer
from

    


    
      
        
           


        

        
          4

          
            

          

        

        
           


        

      

    

    


    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:

    


    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 Earned 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.

    


    
      
        
           


        

        
          5

          
            

          

        

        
           


        

      

    

    


    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.

    


    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.

    


    
      
        
           


        

        
          6

          
            

          

        

        
           


        

      

    

    


    EXHIBIT
A

    2006

    Calpine Incentive Plan –
Eligible Participants

    


    


    I.          Power Operations, Central
Operations and Corporate Staff as listed below

     

                
Participants in the Calpine Incentive Plan (“CIP”) will include employees at the
following levels:

    


    Ÿ      Executive
Vice President

    Ÿ      Senior
Vice President

    Ÿ      Vice
President and equivalent

    Ÿ      Director
and equivalent

    Ÿ      Managers
and equivalent

    Ÿ      Individual
Contributors as determined by the Plan Administrator

     

    Eligible
participants will be notified by the Plan Administrator and will receive a plan
document at the time they are nominated for participation.

    


    II.          Earned Bonus and Annual
Goals

    


    The
Earned Bonus will be determined upon attainment of the annual Corporate Goals
and/or Department Goals as described in Exhibit B. Payout will occur within 75
days after the end of the Plan year (12/31).

     

    Participants’
Earned Bonus will be determined by the achievement of Corporate Goals,
Department Goals, Corporate Initiatives and Individual
Goals.

    


    


    


    


    
      
        
           


        

        
          7

          
            

          

        

        
           


        

      

    

    


    EXHIBIT
B

    2006

    


    Pool Funding and CIP Bonus
Plan Goals/Metrics

    


    


    


    Pool
Funding

     

    
      
        	
                 
      

              	
                Ÿ

              	
                Each
      plan participant has an Annual Cash Bonus Target that equals the product
      of his/her Base Salary times the Target Percentage associated with his/her
      job level (see table in Exhibit A).  The Aggregate Target CIP
      Bonus Pool equals the sum of the participants’ Annual Cash Bonus
      Targets.

              


      

      


      
        	
                 
      

              	
                Ÿ

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

              


      



    * * * * *

    


     

    
      
        	
                 
      

              	
                Ÿ

              	
                Corporate
      Goal:  The Company must meet a minimum threshold
      performance of at least 80 percent of budgeted EBITDAR in order for the
      CIP program to be funded in 2008.  For 2008, the budgeted
      EBITDAR target is $1.694 billion dollars.  Eighty percent of
      this target is $1.355 billion.  The Corporate Goal will account for 50
      percent of the Plan funding.  To receive any funding for this
      half of the goal, the Company must achieve a minimum of 90 percent of the
      budgeted EBITDAR, which equates to $1.524 billion.  As
      previously noted, this number could be adjusted for unplanned
      circumstances or events.

              


      

      


      
        	
                 
      

              	
                Ÿ

              	
                Departmental
      Goal:  This will account for 50 percent of the Plan
      funding.  A departmental expense budget was established for each
      CEO direct report during the 2008 budget process.  If a
      department exceeds its expense budget by more than 10 percent, the
      department will receive no funding for this portion of the CIP
      program.  If a department is over its expense budget but does
      not exceed the 10 percent above budget cap as previously described,
      funding of this portion of the CIP will be reduced one percent for each
      percent the department's actual expense performance is above its expense
      budget target.  If a department performs at or under budget, it
      will receive the full 50 percent funding for this portion of the
      Plan.

              


      

    

     

     

    
      
        
           


        

        
          8

          
            

          

        

        
           


        

      

    

    


    


    
      
        
          
            
              	
                      Department
      Goal

                    	
                      Corporate
      Goal

                    	
                      Result

                    
	 
      	
                       

                      Below
      80 percent

                      budgeted
      EBITDAR

                    	
                       

                      Neither
      goal funded

                    
	
                       

                      Meet
      or below expense

                      budget

                    	
                       

                      90
      percent or above

                      budgeted
      EBITDAR

                    	
                       

                       

                      Both
      goals funded proportionately

                    
	
                       

                      Meet
      or below expense

                      budget

                    	
                       

                      Below
      90 percent

                      budgeted
      EBITDAR

                    	
                       

                      Department
      goal funded

                      proportionately

                    
	
                       

                      Exceeded
      expense budget by

                      less
      than 10 percent

                    	
                       

                      90
      percent or above

                      budgeted
      EBITDAR

                    	
                       

                       

                      Both
      goals funded proportionately

                    
	
                       

                      Exceeded
      expense budget by

                      more
      than 10 percent

                    	
                       

                      90
      percent or above

                      budgeted
      EBITDAR

                    	
                       

                      Corporate
      goal funded

                      proportionately

                    


            

          

        

      

    

    


    


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

    


    


    * * * *
*

    


    Corporate
Initiatives for 2008

     

    
      
        	
                 
      

              	
                Ÿ

              	
                The Company will work to
      improve corporate fundamentals with emphasis on both corporate culture and
      corporate operations.  Using tools such as ACE and SPRC,
      the Company will continue the cultural transformation that is under
      way.  The Company will also focus on improved retention,
      recruitment and training.  The Company will also enhance its
      performance management reporting using such tools as dashboard snapshots
      of performance as well as key performance
  indices.

              


      

      


      
        	
                 
      

              	
                Ÿ

              	
                The Company will work to
      improve performance above the 2008 business plan target of $1,239 million
      in gross profit.  Calpine Commercial Operations will be
      focusing on trading optimization and Calpine Plant Operations will be
      focusing on improving efficiency and
  reliability.

              


      

      


      
        	
                 
      

              	
                Ÿ

              	
                The Company will work to
      improve performance above the 2008 business plan EBITDAR of $1,694 billion
      and $19 million in cash flow.  Key areas of focus will
      include managing reorganization costs, reducing controllable expenses and
      managing construction projects to achieve on-time and on-budget
      results.

              


      

    

     

     

    
      
        
           


        

        
          9

          
            

          

        

        
           


        

      

    

    


    EXHIBIT
C

    2006

    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 Earned Bonus for an affected employee will be calculated based upon his/her
Annual Cash Bonus Target.  Any Earned 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.  An Earned Bonus shall be paid with 75 days of the
assignment's or transaction's completion.

    


    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 (including designated employees who are not eligible for the
CIP) assigned to specific capital or construction projects.  Each
specified project will have a construction completion bonus pool assigned to
it.  An Earned Bonus will be made on a discretionary basis by
management based upon an employee’s contribution to that project.  An
Earned Bonus may be paid during the project, upon completion of the construction
project or both.  Each Earned 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 Earned Bonus payout.

     

     

    10