Document:

ex10-2.htm

    EXHIBIT
      10.2

     

    EXECUTION
      COPY

    
 

    AMENDED
      AND RESTATED EMPLOYMENT AGREEMENT

     

    This
      Amended and Restated Employment Agreement (the “Agreement”) is entered into
      effective as of October 10, 2007, between CALPINE CORPORATION, a Delaware
      corporation (the “Company”), and ROBERT P. MAY (“Executive”) to provide the
      terms and conditions for Executive’s employment with the Company and its
      affiliates from time to time (together, the “Group”).

     

    The
      Board of Directors of the Company (the “Board”) named Executive as Chief
      Executive Officer of the Company and a member of the Board on December 12,
      2005
      (the “Start Date”) pursuant to an Employment Agreement dated as of December 12,
      2005 (the “Prior Agreement”).

     

    The
      Company and Executive have agreed that Executive will continue to be employed
      by
      the Company and will serve as the Company’s Chief Executive Officer, upon the
      terms and conditions set forth below.

     

    Accordingly,
      and in consideration of the mutual obligations set forth in this Agreement,
      which Executive and the Company agree are sufficient, Executive and the Company
      agree as follows:

     

    
      	
              1

            	
              Term
                of Employment.

            

    

     

    Executive’s
      term of employment (“Term of Employment”) begins as of the date hereof and ends
      on June 30, 2008, subject to the termination provisions of paragraph 4
      below.

     

    
      	
              2

            	
              Position
                and Responsibilities.

            

    

     

    During
      the Term of Employment, Executive shall have the position and responsibilities
      described below.  Executive shall be employed as the Company’s Chief
      Executive Officer, with the general executive powers and authority that
      accompany that position.  Executive shall report directly to the Board
      and shall have the duties and responsibilities that are typically performed
      by
      the chief executive officer of a public company, as well as any other duties
      consistent with his position that are assigned to Executive by the
      Board.  Unless and until the Board elects a President of the Company,
      Executive shall also have the powers, duties and responsibilities that the
      Company’s Bylaws confer on the President of the Company.  Executive
      agrees to comply with such lawful policies of the Company as may be adopted
      from
      time to time.  Although Executive may be reasonably required to travel
      from time to time for business reasons, his principal place of employment shall
      be the Company’s corporate offices wherever located.

     

    
      	
               

            	
              (a)

            	
              Executive
                shall devote all of his full business time and his best efforts,
                skill,
                and attention to the Company’s business and affairs and to promoting the
                Company’s best interests.

            

    

     

    
      	
               

            	
              (b)

            	
              Executive
                shall serve as a non-chairman member of the Board for as long as
                Executive
                continues to be nominated and
                elected.

            

    

     

    
      	
               

            	
              (c)

            	
              Notwithstanding
                the foregoing, nothing herein shall preclude Executive from (i) serving
                on
                the boards of directors of other corporations and/or charitable
                organizations (subject to the approval of the Board, such approval
                not to
                be

            

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    unreasonably
      withheld), (ii) engaging in charitable activities and community affairs, and
      (iii) managing his personal investments and affairs, provided that any such
      activities listed in (i) and (ii) above do not interfere in more than a de
      minimis manner with the proper performance of his duties and responsibilities
      hereunder and comply with the limitations set forth in paragraph
      5.a.

     

    
      	
              3

            	
              Compensation.

            

    

     

    For
      all of his services during the Term of Employment, Executive shall receive
      the
      following compensation:

     

    
      	
               

            	
              (a)

            	
              Base
                Salary.  Executive’s annual base salary shall be
                $1,500,000 (as may be increased from time to time, the “Base
                Salary”).  The Board will review the Base Salary at least
                annually and may increase it at any time for any reason, in its sole
                discretion; however, it shall have no obligation to do
                so.

            

    

     

    
      	
               

            	
              (b)

            	
              Bonus.  In
                addition to his Base Salary, Executive shall be eligible to receive
                an
                annual cash performance bonus (the “Bonus”) for each fiscal year ending
                during the Term of Employment if, and to the extent that, (x) except
                with
                respect to any Bonus payable earlier as severance under paragraph
                4.b.ii.1, Executive remains employed by the Company on the last day
                of
                such fiscal year and (y) corporate performance objectives established
                by
                the Board are achieved, as determined by the Board or a committee
                thereof
                in its sole discretion.  Payment of the Bonus shall be made at
                the same time that other senior-level executives receive their bonuses,
                and no later than March 15th of the calendar year after the calendar
                year
                in which the Bonus is earned.  The target level for Executive’s
                Bonus shall be established by the Board (or a committee thereof)
                in its
                sole discretion, provided that the minimum target level for any year
                shall
                be 100% of the Base Salary (the “Target Annual
                Bonus”).  However, subject to the minimum Bonuses for the
                Company’s fiscal years ending December 31, 2006, and December 31, 2007,
                set forth below, Executive’s actual Bonus in any year may range from 0% to
                200% of the Target Annual Bonus:

            

    

     

    
      	
               

            	
              (i)

            	
              For
                the Company’s fiscal year ending December 31, 2006, Executive shall be
                entitled to receive a minimum Bonus of $2,250,000, to be paid no
                later
                than March 15, 2007 but no earlier than January 1,
                2007.

            

    

     

    
      	
               

            	
              (ii)

            	
              For
                the Company’s fiscal year ending December 31, 2007, Executive shall be
                entitled to receive a minimum Bonus of $1,500,000, to be paid no
                later
                than March 15, 2008 but no earlier than January 1,
                2008.

            

    

     

    
      	
               

            	
              (c)

            	
              Benefits.  Executive
                shall be eligible to participate in all Company benefit plans and
                programs
                as are generally available for its senior executives, and his benefits
                shall be based on the terms of the applicable plan as established
                by the
                Company from time to time.  Nothing in this Agreement shall
                restrict the Company’s ability to change or terminate any or all of its
                employee benefit plans and programs from time to time; nor shall
                anything
                in this Agreement prevent any such change from affecting
                Executive.

            

    

     

     

    
      

    

    
      
        
          2

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    
      	
               

            	
              (d)

            	
              Signing
                Bonus.  In addition to the Base Salary and Bonus,
                Executive shall be entitled to receive a one-time payment of $2,000,000,
                payable within 15 days of the Start Date.  If Executive resigns
                his employment without Good Reason or Executive’s employment is terminated
                by the Company for Cause, Executive shall repay a pro rata portion
                (based
                on the number of full calendar months remaining in the initial 24
                month
                term divided by 24 months) of the signing bonus (net of any associated
                income and employment taxes) within 10 days after such resignation
                or
                termination of employment.  Within 10 days after the filing of
                Executive’s federal income tax return for the year in which such repayment
                is made, Executive shall pay to the Company the amount by which
                Executive’s federal and state income tax liability for such year was
                reduced as a result of such repayment.  If Executive resigns for
                Good Reason, dies or becomes Disabled or if Executive’s employment is
                terminated by the Company without Cause, Executive shall be entitled
                to
                retain the full amount of the signing bonus.  The Company
                acknowledges and agrees that the payment of Executive’s signing bonus is
                unrelated to any services that he performed in the State of
                California.

            

    

     

    
      	
               

            	
              (e)

            	
              Success
                Fee.  When a plan of reorganization that is confirmed
                by the Bankruptcy Court becomes effective (the “Plan Effective Date”)
                during Executive’s tenure as Chief Executive Officer of the Company,
                Executive shall be entitled to receive a one-time payment in an amount
                equal to the amount set forth on Exhibit A attached hereto (the “Success
                Fee”).  If at any time after the Start Date, Executive resigns
                his employment with Good Reason or Executive’s employment is terminated by
                the Company without Cause before the Plan Effective Date, Executive
                shall
                be entitled to payment of the Success Fee if the Plan Effective Date
                occurs within 12 months after the date of termination of
                employment.  In any case such Success Fee shall be due and
                payable on the Plan Effective Date.  Executive shall not be
                entitled to all or any portion of the Success Fee if the Company
                terminates his employment for Cause, Executive resigns his employment
                without Good Reason or Executive’s employment terminates due to death or
                Disability before the Plan Effective
                Date.

            

    

     

    
      	
               

            	
              (f)

            	
              Guaranteed
                Minimum Success Fee.  Executive shall be entitled to
                receive the guaranteed minimum success fee (the “Guaranteed Minimum
                Success Fee”) described in this paragraph 3.f; provided, however, to the
                extent the Success Fee is paid, the Success Fee shall be reduced
                by the
                Guaranteed Minimum Success Fee, or any portion thereof, paid to Executive
                and shall be paid as promptly as practicable in a lump sum.  In
                such case, no further payment shall be made with respect to the Guaranteed
                Minimum Success Fee.  The Guaranteed Minimum Success Fee shall
                be deemed earned as of the date this Agreement is approved by the
                Bankruptcy Court.

            

    

     

    
      	
               

            	
              (i)

            	
              Amount
                and Payment Schedule.  Executive’s Guaranteed Minimum
                Success Fee (in addition to the other payments specifically contemplated
                in this Agreement including, without limitation, the minimum emergence
                bonus set forth on Exhibit A attached hereto) shall be an annual
                amount
                equal to the sum of his (x) annual Base Salary and (y) Target
                Annual

            

    

     

     

    
      

    

    
      
        
          3

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    Bonus
      as of the earlier of (a) the date his term of employment under this Agreement
      terminates or (b) the Plan Effective Date, for one year, provided that if
      Executive is terminated in calendar year 2006 or 2007, in lieu of the Target
      Annual Bonus referenced in (y) above, Executive shall receive his minimum Bonus
      for the applicable year as set forth in paragraph 3(b), above.  The
      Guaranteed Minimum Success Fee shall be paid to Executive on the earliest of
      (1)
      the date Executive is terminated by the Company without Cause, (2) the date
      Executive terminates his employment for Good Reason and (3) the Plan Effective
      Date.  Subject to the timing rule described in paragraph 3.f.ii,
      below, all payments shall be made as promptly as practicable.  Subject
      to paragraph 3.f above, if the Guaranteed Minimum Success Fee is paid on any
      date prior to the Plan Effective Date, the Guaranteed Minimum Success Fee shall
      be paid ratably on the same payment schedule that applied to Executive’s salary
      as of such date.  If the Guaranteed Minimum Success Fee is paid on the
      Plan Effective Date, Executive shall be entitled to a lump sum
      payment.

     

    
      	
               

            	
              (ii)

            	
              Timing.  To
                the extent necessary to comply with the restriction in Section
                409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the
                “Code”) concerning payments to specified employees, the first Guaranteed
                Minimum Success Fee payment (if the Guaranteed Minimum Success Fee
                is paid
                ratably) to Executive shall be made on the first installment date
                (determined under paragraph 3.f.i, above) that is at least six months
                after Executive’s termination date.  The first payment shall
                include any installments that would have been paid previously under
                paragraph 3.f.i were it not for this special timing rule, plus interest
                on
                the delayed installments at an annual rate (compounded monthly) equal
                to
                the federal short-term rate (as in effect under Section 1274(d) of
                the
                Code on Executive’s termination
                date).

            

    

     

    
      	
               

            	
              (g)

            	
              Relocation.  Executive
                shall be reimbursed for the following costs associated with relocating
                to
                the area in which the Company’s headquarters is
                located:

            

    

     

    
      	
               

            	
              (i)

            	
              All
                reasonable transaction costs (including any real estate brokerage
                fees
                Executive incurs) and reasonable moving expenses incurred by Executive,
                in
                each case while an employee of the Company, in connection with moving
                his
                household goods from Executive’s current residence to area in which the
                Company’s headquarters is located, provided that Executive provides
                appropriate documentation (the “Reimbursement”).  Reimbursements
                under this paragraph 3(f) below shall be paid on or before March
                15th of
                the calendar year after the calendar year in which the applicable
                expenses
                were incurred.  In connection with such payment, during the
                calendar year after the calendar year in which the applicable expenses
                are
                incurred, the Company shall pay Executive an additional payment in
                an
                amount such that after the actual payment by Executive of an taxes,
                if
                any, imposed in

            

    

     

     

    
      

    

    
      
        
          4

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    connection
      with the Reimbursement, Executive retains an amount equal to the
      Reimbursement;

     

    
      	
               

            	
              (ii)

            	
              Reimbursement
                of all reasonable temporary housing and living expenses incurred
                by
                Executive, in each case while an employee of the Company, for the
                shorter
                of (A) 9 months or (B) the period from the Start Date until Executive
                moves to a residence of his choosing in the area in which the Company’s
                headquarters is located; provided, that the Board may extend such
                period
                from time to time.  Reimbursements under this paragraph 3(f)
                below shall be paid on or before March 15th of the calendar year
                after the
                calendar year in which the applicable expenses were
                incurred.

            

    

     

    
      	
               

            	
              (h)

            	
              Legal
                Fees.  On or before March 30, 2006, or such later date
                to which Executive and Company mutually agree, the Company shall
                pay
                Executive’s reasonable legal fees that are directly related to the
                negotiation, entry and approval by the Bankruptcy Court of this Agreement
                and were actually incurred during such negotiation, entry or approval,
                in
                an amount not to exceed $50,000.

            

    

     

    
      	
              4

            	
              Termination

            

    

    
      	
               

            	
              (a)

            	
              Termination
                of Employment.

            

    

     

    
      	
               

            	
              (i)

            	
              Termination
                by the Company for Cause.  The Board may terminate
                Executive’s employment for Cause at any time after (x) providing Executive
                with 5 business days’ advance written notice explaining the circumstances
                that justify the termination (a “Termination Notice”); and (y) except in
                the case of termination for an event covered by (2) below, providing
                Executive with the opportunity to appear before the Board prior to
                any
                vote to terminate Executive’s employment for Cause, which opportunity may
                occur during the 5-business-day notice period.  “Cause” means
                any of the following:  (1) Executive’s breach of any material
                term of this Agreement that is not corrected within 10 days after
                delivery
                of a Termination Notice to Executive with respect to such breach;
                (2)
                Executive’s commission of, or formal prosecutorial charge or indictment
                alleging commission of, a felony or any crime of similar status,
                any crime
                involving fraud, or any crime involving moral turpitude (other than
                motor
                vehicle related) (it being agreed that in the case of a crime involving
                moral turpitude, only to the extent such crime materially and adversely
                affects the business, standing or reputation of the Company or any
                other
                member of the Group); (3) Executive’s breach of fiduciary duty to the
                Company or any other member of the Group that has any material and
                adverse
                impact on the Company that is not corrected within 10 days after
                delivery
                of a Termination Notice to Executive with respect to such breach;
                (4)
                Executive’s misappropriation of funds or material property of the Company
                or any other member of the Group; (5) Executive’s  refusal to
                follow the lawful directives of the Board without a materially valid
                business justification that is not corrected within 10 days after
                delivery
                of a Termination Notice to Executive with respect to such refusal;
                (6)
                Executive’s fraud related to the Company that is
                not

            

    

     

     

    
      

    

    
      
        
          5

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    corrected
      within 10 days after delivery of a Termination Notice to Executive with respect
      to such fraud; (7) Executive’s material dishonesty, disloyalty, gross negligence
      or willful misconduct, where such dishonesty, disloyalty, gross negligence
      or
      willful misconduct is reasonably likely to result, in substantial and material
      damage to the Company or any other member of the Group and that is not corrected
      within 10 days after delivery of a Termination Notice to Executive with respect
      to such event; (8) Executive’s willful and material violation of any of the
      Company’s Code of Conduct or employment policies that is not corrected within 10
      days after delivery of a Termination Notice to Executive with respect to such
      violation; or (9) Executive’s material violation of any federal, state or local
      laws that could result in a direct or indirect financial loss to the Company
      or
      any other member of the Group or damage the reputation of the Company or any
      other member of the Group.

     

    For
      this definition, no act or omission by the Executive will be “willful” unless it
      is made by him in bad faith or without a reasonable belief that his act or
      omission was in the best interests of the Company or the Group.  Any
      act, or failure to act, based upon the advice of counsel to the Company or
      any
      member of the Group shall be presumed to be done, or omitted to be done, by
      the
      Executive in good faith and in the best interests of the Company and the
      Group.

     

    
      	
               

            	
              (ii)

            	
              Termination
                by the Company without Cause.  The Company may
                terminate Executive’s employment under this Agreement without Cause upon
                at least 20 days’ prior written notice to Executive.  For purposes hereof,
                a Termination
                by the Company without Cause shall also include a termination of
                Executive’s employment after the parties’ failure to enter into a new
                employment agreement prior to June 30, 2008 that results in Executive’s
                termination of employment with the Company on June 30,
                2008.

            

    

     

    
      	
               

            	
              (iii)

            	
              Death
                or Disability.  Executive’s employment by the Company
                will immediately terminate upon Executive’s death and at the option of
                either Executive or the Company, exercisable upon written notice
                to the
                other party, may terminate upon the Executive’s Disability.  For
                purposes of this Agreement, “Disability” will occur if (A) Executive
                becomes eligible for benefits under a long-term disability policy
                provided
                by the Company, if any, or (B) Executive has become unable, due to
                physical or mental illness or incapacity, to substantially perform
                the
                essential duties of his employment with reasonable accommodation
                for a
                period of 90 days or an aggregate of 180 days during any consecutive
                12
                month period, as determined by an independent physician approved
                by the
                Company and Executive.

            

    

     

    
      	
               

            	
              (iv)

            	
              Termination
                by Executive for Good Reason.  Executive may terminate
                his employment for Good Reason within 90 days of the occurrence of
                an

            

    

     

     

    
      

    

    
      
        
          6

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    event
      constituting Good Reason.  “Good Reason” shall mean the occurrence,
      during the Term of Employment, of any of the following actions or failures
      to
      act, but in each case only if it is not consented to by Executive in
      writing:  (A) a material adverse change in Executive’s duties,
      reporting responsibilities, titles or elected or appointed offices (including
      the failure to be elected to the Company’s Board) as in effect immediately prior
      to the effective date of such change (including but not limited to the
      appointment of any person to an executive position at the Company that is
      co-equal or senior to that of Executive); (B) any reduction or failure to pay
      when due the Executive’s Base Salary, the minimum 2006 and 2007 Bonus, Signing
      Bonus or Success Fee; (C) any reduction by the Company in Executive’s Target
      Annual Bonus opportunity; (D) the Company’s breach of any material term of this
      Agreement that is not corrected within 10 days after delivery of a notice to
      the
      Company with respect to such breach or (E) the failure of the Company to obtain
      the assumption in writing of this Agreement by any successor to or an acquirer
      of all or substantially all of the assets of the Company on or prior to a
      merger, consolidation, sale or similar transaction; provided, however, that
      Executive first notifies the Company in writing of an occurrence constituting
      Good Reason and the Company fails to cure such occurrence within 30 days of
      such
      notice.  For purposes of this definition, none of the actions
      described in clauses (A) through (E) above shall constitute “Good Reason” with
      respect to Executive if it was an isolated and inadvertent action not taken
      in
      bad faith by the Company and if it is remedied by the Company within 10 days
      after receipt of written notice thereof given by Executive.

     

    
      	
               

            	
              (v)

            	
              Termination
                by Executive without Good Reason.  Executive may
                terminate his employment under this Agreement without Good Reason
                upon at
                least 20 days’ prior written notice to the
                Company.

            

    

     

    
      	
               

            	
              (b)

            	
              Consequences
                of Termination of
                Employment.

            

    

     

    
      	
               

            	
              (i)

            	
              Termination
                by the Company without Cause or by Executive for Good Reason prior
                to the
                Plan Effective Date.  Executive shall receive the
                benefits described in this paragraph 4.b (excluding the severance
                benefits
                set forth in paragraphs 4.b.ii.1 and 4.b.ii.2) if the Executive’s
                employment is terminated without Cause (under paragraph 4.a.ii) at
                any
                time during the Term of Employment or if Executive terminates his
                employment at any time during the Term of Employment for Good Reason
                (under paragraph 4.a.iv) prior to the Plan Effective Date.  For
                a period of one year following the date of termination of Executive’s
                employment from the Company, the Company shall at its sole cost and
                expense (but disregarding any individual tax liability of Executive),
                and
                at the election of COBRA by Executive, provide Executive (and his
                spouse
                and eligible dependents) with group health benefits substantially
                similar
                to those benefits that Executive (and
                his

            

    

     

     

    
      

    

    
      
        
          7

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    spouse
      and eligible dependents) were receiving immediately before his termination
      (which may at the Company’s election be pursuant to reimbursement of the
      applicable COBRA premium).  Such coverage shall be provided to
      Executive as COBRA benefits and shall terminate prior to the end of the one-year
      period if Executive, his spouse or eligible dependents are no longer eligible
      for COBRA coverage.  To the extent possible, the benefits under this
      section 4.b.i.3 shall be made in a manner that is tax efficient for the
      Executive so long as there is no adverse tax consequences to the
      Company.

     

    
      	
               

            	
              (ii)

            	
              Termination
                by the Company without Cause or by Executive for Good Reason after
                the
                Plan Effective Date.  Executive shall receive the
                benefits described in this paragraph 4.b (including the benefits
                set forth
                in paragraph 4.b.i.) if the Executive’s employment is terminated without
                Cause (under paragraph 4.a.ii) at any time during the Term of Employment
                or if Executive terminates his employment at any time during the
                Term of
                Employment for Good Reason (under paragraph 4.a.iv) after the Plan
                Effective Date.  If Executive receives the benefits set forth in
                this paragraph 4.b.ii, Executive shall not be eligible for severance
                benefits from any other plan, program or policy of the Company then
                in
                effect.

            

    

     

    
      	
               

            	
              1.

            	
              Amount
                and Payment Schedule.  Executive’s severance benefit (in
                addition to the other payments specifically contemplated in this
                Agreement) shall be an annual amount equal to the sum of his (x)
                annual
                Base Salary and (y) Target Annual Bonus as of the date his employment
                terminates, paid for one year, provided that if Executive is terminated
                in
                calendar year 2006 or 2007, in lieu of the Target Annual Bonus referenced
                in (y) above, Executive shall receive his minimum Bonus for the applicable
                year as set forth in paragraph 3(b), above.  Subject to the
                timing rule described in paragraph 4.b.ii.2, below, the severance
                benefit
                shall be paid ratably on the same payment schedule that applied to
                Executive’s salary at the time of his
                termination.

            

    

     

    
      	
               

            	
              2.

            	
              Timing.  To
                the extent necessary to comply with the restriction in Section
                409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the
                “Code”) concerning payments to specified employees, the first severance
                payment to Executive shall be made on the first installment date
                (determined under paragraph 4.b.ii.1, above) that is at least six
                months
                after Executive’s termination date.  The first payment shall
                include any installments that would have been paid previously under
                paragraph 4.b.ii.1 were it not for this special timing rule, plus
                interest
                on the delayed installments at an annual rate (compounded monthly)
                equal
                to the federal short-term rate (as
                in

            

    

     

     

    
      

    

    
      
        
          8

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

                            effect
      under Section
      1274(d) of the Code on Executive's termination date).

    
 

    
      	
               

            	
              (iii)

            	
              Death
                or Disability.  In the event of termination of
                Executive’s employment due to death or Disability (under paragraph
                4.a.ii), Executive shall be entitled to receive (in addition to any
                other
                payments specifically contemplated in this Agreement) a pro rata
                portion
                of his Target Annual Bonus for the portion of the calendar year before
                the
                date of termination of employment, as promptly as practicable and
                in any
                event payable on or before March 15th of the calendar year after
                the
                calendar year in which such termination of employment occurs; but
                Executive shall not be eligible to receive any other severance benefit
                under this paragraph 4.  Executive’s eligibility (if any) to
                receive a severance or retirement benefit under any other severance
                or
                retirement plan or program maintained by the Company shall be determined
                by the terms of that plan or program as in effect on his termination
                date.

            

    

     

    
      	
               

            	
              (iv)

            	
              Termination
                for Cause or Voluntary Termination.   If the
                Company terminates Executive’s employment for Cause (under paragraph
                4.a.i), or if Executive terminates his employment without Good Reason
                (under paragraph 4.a.v), Executive shall not be eligible to receive
                any
                severance benefit under this paragraph 4.b.iv.  Executive’s
                eligibility (if any) to receive a severance or retirement benefit
                under
                any other severance or retirement plan or program maintained by the
                Company shall be determined by the terms of that plan or program
                as in
                effect on his termination date.  The foregoing shall not limit
                the remedies available to the Group, at law or in equity, for any
                loss or
                other injury caused directly or indirectly by
                Executive.

            

    

     

    
      	
               

            	
              (v)

            	
              Earned
                but Unpaid Bonus.  In addition to any other amounts
                owed to Executive under this paragraph 4.b, if the Company terminates
                the
                Executive’s employment for any reason other than Cause or if Executive
                terminates employment after December 31 of any year, Executive shall
                be
                entitled to receive any Bonus earned by Executive for the preceding
                year
                as calculated in accordance with paragraph 3(b) but not yet paid
                as of the
                termination date.

            

    

     

    
      	
               

            	
              (vi)

            	
              Release.  The
                Company will not be required to make the payments stated in this
                paragraph
                4 unless the Executive executes and delivers to the Company an agreement
                releasing from all liability (other than Executive’s rights under this
                Agreement and any indemnification arrangement of the Company with
                respect
                to Executive) the Group and any of their respective past or present
                directors, officers, employees, shareholders, controlling persons
                or
                agents of the Group.  No payment will be made until the period
                for revocation of the release has ended and unless Executive has
                not
                revoked the release.  This agreement will be substantially in
                the form attached hereto as Exhibit
                B.

            

    

     

     

    
      

    

    
      
        
          9

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
              5

            	
              Restrictive
                Covenants.

            

    

     

    
      	
               

            	
              (a)

            	
              Non-Competition.  During
                the time Executive is employed by the Company and for 12 months
                thereafter, Executive shall not directly or indirectly manage, operate,
                participate in, be employed by, perform consulting services for,
                or
                otherwise be connected with NRG Energy, Inc., Mirant Corporation,
                Reliant
                Energy, Dynegy Inc., Edison Mission Energy/Edison International,
                Constellation Energy Group, Inc. (FPL Group, Inc.) and Pacific Gas
&
                Electric Company (each a “Competitive Enterprise”); nor shall Executive
                receive compensation from any other company or business during the
                time
                Executive is employed with the Company unless the arrangement giving
                rise
                to such compensation has been (i) disclosed to and approved by the
                Board
                in advance or (ii) is otherwise permitted by the terms of this
                Agreement.  Executive may invest in any Competitive Enterprise,
                provided that Executive and his immediate family members (as defined
                in
                Section 1361(c)(B) of the Code) do not own collectively more than
                three
                percent of the voting securities of any such entity at any
                time.

            

    

     

    
      	
               

            	
              (b)

            	
              Use
                and Disclosure of Proprietary
                Information.

            

    

     

    
      	
               

            	
              (i)

            	
              Definition
                of Proprietary Information.  “Proprietary Information”
                means confidential or proprietary information, knowledge or data
                concerning (1) the Group’s businesses, strategies, operations, financial
                affairs, organizational matters, personnel matters, budgets, business
                plans, marketing plans, studies, policies, procedures, products,
                ideas,
                processes, software systems, trade secrets and technical know-how,
                (2) any
                other matter relating to the Group, (3) any matter relating to clients
                of
                the Group or other third parties having relationships with the Group
                and
                (4) any confidential information from which the Group derives business
                advantage or economic value.  Proprietary Information includes
                (A) the names, addresses, phone numbers and buying habits and preferences
                and other information concerning clients and prospective clients
                of the
                Group, and (B) information and materials concerning the personal
                affairs
                of employees of the Group.  In addition, Proprietary Information
                may include information furnished to Executive orally or in writing
                (whatever the form or storage medium) or gathered by inspection,
                in each
                case before or after the date of this Agreement.  Proprietary
                Information does not include information (X) that was or becomes
                generally
                available to Executive on a non-confidential basis, if the source
                of this
                information was not reasonably known to Executive to be bound by
                a duty of
                confidentiality,  (Y) that was or becomes generally available to
                the public, other than as a result of a disclosure by Executive,
                directly
                or indirectly, or (Z) that Executive can establish was independently
                developed by Executive without reference to Proprietary
                Information.

            

    

     

    
      	
               

            	
              (ii)

            	
              Acknowledgements.  Executive
                acknowledges that he will obtain or create Proprietary Information
                in the
                course of Executive’s involvement in the Group’s activities and may
                already have Proprietary
                Information.

            

    

     

     

    
      

    

    
      
        
          10

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    Executive
      agrees that the Proprietary Information is the exclusive property of the
      Group.  In addition, nothing in this Agreement will operate to weaken
      or waive any rights the Group may have under statutory or common law, or any
      other agreement, to the prohibition of unfair competition or the protection
      of
      trade secrets, confidential business information and other confidential
      information.

     

    
      	
               

            	
              (iii)

            	
              During
                Employment.  Executive will use and disclose
                Proprietary Information only for the Group’s benefit and in accordance
                with any restrictions placed on its use or disclosure by the
                Group.

            

    

     

    
      	
               

            	
              (iv)

            	
              Post-Employment.  After
                the termination of Executive’s employment, Executive will not use or
                disclose any Proprietary Information for any purpose.  For the
                avoidance of doubt, but without limitation of the foregoing, after
                termination of Executive’s employment, Executive will not directly or
                indirectly use Proprietary Information from which the Group derives
                business advantage or economic benefit to solicit, impair or interfere
                with, or attempt to solicit, impair or interfere with, any person
                or
                entity, who, at the time of the termination of Executive’s employment, is
                then a customer, vendor or business relationship of the Group (or
                who
                Executive knew was a potential customer, vendor or business relationship
                of the Company within the six months prior to the termination of
                his
                Employment).

            

    

     

    
      	
               

            	
              (c)

            	
              Non-Solicitation
                of Employees.  During the Term of Employment and for an
                18 month period after termination of Executive’s employment, Executive
                will not directly or indirectly solicit or attempt to solicit anyone
                who,
                at the time of the termination of Executive’s employment, is then an
                employee of the Group (or who was an employee of the Group within
                the six
                months prior to the termination of his Employment) to resign from
                the
                Group or to apply for or accept employment with any company or other
                enterprise.

            

    

     

    
      	
               

            	
              (d)

            	
              Non-Disparagement.  During
                and after Executive’s employment with the Company, the parties mutually
                covenant and agree that neither will directly or indirectly disparage
                the
                other, or make or solicit any comments, statements, or the like to
                any
                clients, competitors, suppliers, employees or former employees of
                the
                Company, the press, other media, or others that may be considered
                derogatory or detrimental to the good name or business reputation
                of the
                other party.  Nothing herein shall be deemed to constrain either
                party’s cooperation in any Board authorized investigation or governmental
                action.  In the event of Executive’s termination or the
                non-renewal of this Agreement, Executive and Company shall agree
                on any
                press release relating to such termination or non-renewal and the
                Company
                and Executive shall not publicly discuss or comment on Executive’s
                termination or non-renewal in any manner other than as mutually agreed
                in
                the press release.

            

    

     

    
      	
              6

            	
              Excise
                Tax.  If, (I) in the written opinion of the Company’s
                independent accountants, (x) any payment or benefit to Executive
                under
                this Agreement or otherwise
                contingent

            

    

     

     

    
      

    

    
      
        
          11

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    upon
      a change of control (including without limitation, the Success Fee, the
      Guaranteed Minimum Success Fee and any payments under paragraph 4.b above)
      is an
“excess parachute payment” as defined in Section 280G(b) of the Code, and (y)
      such excess parachute payment is subject to the excise tax imposed by Section
      4999 of the Code (or any similar tax under state or local law) or (II) the
      Internal Revenue Service determines that any payment or benefit to Executive
      under this Agreement is an excess parachute payment that is subject to the
      excise tax imposed by Section 4999 of the Code, the Company shall pay to
      Executive such amount or amounts necessary to place Executive in the same
      after-tax position in which Executive would have been if such excise tax
      (together with any interest and penalties) had not been imposed (the
“Gross-Up”).  The Gross-Up shall be in an amount determined by the
      Company’s independent accountants and shall be paid on or prior to the date the
      applicable withholding taxes are due. For purposes of determining the amount
      of
      the Gross-Up, the Executive shall be deemed to pay federal, state and local
      income taxes at the highest marginal rate of taxation for the calendar year
      in
      which the Gross-Up is to be made.  Notwithstanding anything to the
      contrary, the Gross-Up obligation of the Company under this Section shall
      survive any termination of this Agreement or Executive’s termination of
      employment.

     

    
      	
              7

            	
              Employment
                Taxes.  All payments and other compensation under this
                Agreement shall be subject to withholding of the applicable income
                and
                employment taxes.

            

    

     

    
      	
              8

            	
              Nonduplication
                of Benefits.  No term or other provision of this
                Agreement may be interpreted to require the Company to duplicate
                any
                payment or other compensation that Executive is already entitled
                to
                receive under a compensation or benefit plan, program, or other
                arrangement maintained by the
                Company.

            

    

     

    
      	
              9

            	
              Indemnification.  To
                the fullest extent permitted by applicable law, the Company shall
                provide
                indemnification for Executive under its Articles of Incorporation
                and
                Bylaws.  Executive shall be covered by the Company’s standard
                indemnification agreement and by any director’s and officer’s liability
                insurance policy maintained by the
                Company.

            

    

     

    
      	
              10

            	
              Successors.  Any
                successor to the Company or to all or substantially all of the Company’s
                business and/or assets (whether a direct or indirect successor, and
                whether by purchase, lease, merger, consolidation, liquidation, or
                otherwise) shall assume the obligations under this
                Agreement.  In case of any succession, the term “Company” shall
                refer to the successor.  The terms of this Agreement and all of
                Executive’s rights hereunder shall inure to the benefit of, and be
                enforceable by, Executive’s personal or legal representatives, executors,
                administrators, successors, heirs, distributees, devisees, and
                legatees.

            

    

     

    
      	
              11

            	
              No
                Third-Party Beneficiaries.  Except as provided in
                paragraph 9 above, nothing in this Agreement may confer upon any
                person or
                entity not a party to this Agreement any rights or remedies of any
                nature
                or kind whatsoever under or by reason of this
                Agreement.

            

    

     

    
      	
              12

            	
              No
                Duty to Mitigate.  Executive shall not be required to
                seek new employment or otherwise to mitigate the payments contemplated
                by
                this Agreement.  The payments contemplated by this Agreement
                shall not be reduced by earnings that Executive
                may

            

    

     

     

    
      

    

    
      
        
          12

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    receive
      from any other source; provided, however, that COBRA payments may cease in
      accordance with the provisions of this Agreement.

     

    
      	
              13

            	
              Notice.  Notices
                and other communications between the parties to this Agreement shall
                be
                delivered in writing and shall be deemed to have been given when
                personally delivered or on the third business day after mailing by
                U.S.
                registered or certified mail, return receipt requested and postage
                prepaid.

            

    

     

    
      	
               

            	
              (a)

            	
              Notices
                and other communications to Executive shall be addressed to Executive,
                at
                the most recent home address that he provided in writing to the
                Company.

            

    

     

    
      	
               

            	
              (b)

            	
              Notices
                and other communications to the Company shall be addressed to the
                Company’s corporate headquarters, to the attention of the Company’s
                Secretary.

            

    

     

    
      	
              14

            	
              Waiver
                and Amendments.  No provision of this Agreement may be
                modified, waived, or discharged, unless the modification, waiver,
                or
                discharge is agreed to in writing signed by Executive and by an authorized
                representative of the Company (other than Executive).  Unless
                specifically characterized as a continuing waiver, no waiver of a
                condition or provision at anyone time may be considered a waiver
                of the
                same provision or condition (or any different provision or condition)
                at
                any other time.

            

    

     

    
      	
              15

            	
              Costs.  In
                the event that Executive is a prevailing party in any dispute or
                disagreement with the Company relating to this Agreement and/or the
                Company’s obligations under this Agreement, the Company will reimburse any
                expenses, including reasonable attorney’s fees  (and such fees
                incurred at Executive’s attorney’s normal hourly rates will be presumed
                reasonable), incurred by Executive as a result of, or in connection
                with,
                any such dispute or disagreement.  Nothing herein shall
                adversely impair or limit any rights Executive has under the Company’s
                Articles of Incorporation, Bylaws and directors’ and officers’ liability
                insurance policies.  Notwithstanding anything to the contrary,
                the obligation of the Company under this Section shall survive any
                termination of this Agreement or Executive’s termination of
                employment.

            

    

     

    
      	
              16

            	
              Ability
                to Enter this Agreement.  Executive represents and
                warrants that neither the execution and delivery of this Agreement
                nor the
                performance of Executive’s services hereunder will conflict with, or
                result in a breach of any employment or other agreement to which
                Executive
                is a party or by which Executive might be bound or
                affected.  Executive further represents and warrants that
                Executive has full right, power, and authority to enter into and
                carry out
                the provisions of this Agreement.

            

    

     

    
      	
              17

            	
              Remedy
                at Law Inadequate.  Executive acknowledges that a
                remedy at law for any breach or attempted breach of the covenants
                described in paragraph 5 of this Agreement will be inadequate and
                agrees
                that the Group shall be entitled to specific performance and injunctive
                and other equitable relief in the case of any such breach or attempted
                breach.

            

    

     

    
      	
              18

            	
              American
                Jobs Creation Act of 2004.  This Agreement shall be
                construed, administered and interpreted in accordance with a good-faith
                interpretation of Section 409A of the Code and Section 885 of the
                American
                Jobs Creation Act of 2004.  If the Company or Executive
                determines that any provision of this Agreement is or might be
                inconsistent with such provisions (including any administrative guidance
                issued

            

    

     

     

    
      

    

    
      
        
          13

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    thereunder),
      the parties shall make their best efforts in good faith to agree to such
      amendments to this Agreement as may be necessary or appropriate to comply with
      such provisions.

     

    
      	
              19

            	
              Choice
                of Law.  This Agreement (including its validity,
                interpretation, construction, and performance) shall be governed
                by the
                laws of the State of New York, without regard to any concerning conflicts
                or choice of law that might otherwise refer construction or interpretation
                to the substantive law of another
                jurisdiction.

            

    

     

    
      	
              20

            	
              Section
                Headings.  All headings in this Agreement are inserted
                for convenience only.  Headings do not constitute a part of the
                Agreement and may not affect the meaning or interpretation of any
                term or
                other provision of this Agreement.

            

    

     

    
      	
              21

            	
              Severability
                and Reformation.  Each substantive provision of this
                Agreement is a separate agreement, independently supported by good
                and
                adequate consideration, and is severable from the other provisions
                of the
                Agreement.  If a court of competent jurisdiction determines that
                any term or provision of this Agreement is unenforceable, then the
                other
                terms and provisions of this Agreement shall remain in full force
                and
                effect, and the unenforceable terms or provisions shall be equitably
                modified to the extent necessary to achieve the underlying purpose
                in an
                enforceable way.

            

    

     

    
      	
              22

            	
              Whole
                Agreement.  This Agreement reflects the entire
                understanding and agreement between the Company and Executive regarding
                Executive’s employment.  This Agreement supersedes all prior
                negotiations, discussions, correspondence, communications, understandings,
                and agreements, including the Prior Agreement, whether oral or written,
                relating to Executive’s employment with the Company.  The
                respective rights and obligations of the parties to this Agreement
                shall
                survive the termination of Executive’s employment to the extent necessary
                to give such rights and obligations their intended
                effect.

            

    

     

     

    
      

    

    
      
        
          14

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    
      	
              23

            	
              Counterparts.  This
                Agreement may be executed in counterparts, each of which shall be
                deemed
                an original, but all of which together shall constitute a single
                instrument.

            

    

     

    *           *           *

     

    IN
      WITNESS WHEREOF, the parties to this Agreement have executed this Agreement
      on
      [        ], 2007.

     

    CALPINE
      CORPORATION:

     

    

     

    
      	
              By:

            	
               
/s/
                Kenneth T. Derr

            	
               

            	
               
/s/
                Robert P. May

            
	
               

            	
              Kenneth
                T. Derr

            	
               

            	
              Robert
                P. May, in his individual capacity

            
	
               

            	
              Chairman
                of the Board of Directors

            	
               

            	
               

            

    

     

     

    
      
 15ex10-3.htm

     

    EXHIBIT
      10.3

     

     

    

      August
        31, 2007

      

      Eric
        Pryor

      [Address]

       

      

      Re.     
        Employment Separation

      

      Dear
        Eric:

      

      As
        you are aware, your employment with Calpine will end effective August 31,
        2007
as
        a result of restructuring activities (“Qualifying Event”).  This
        letter agreement (the “Agreement”) confirms the terms of your separation from
        employment with Calpine Corporation, a Delaware corporation or one or more
        of
        its subsidiaries (collectively, “Calpine”) and offers you the following benefits
        in exchange for a release of all claims.

      

      1.           Separation
        Date.  Your employment with Calpine will be terminated effective
        August 31, 2007 (the “Separation Date”).

       

      2.           Additional
        Payment and Benefits.  In exchange for the waiver and release
        described in Paragraphs 7 and 8 below, Calpine agrees to provide you with
        an
        additional payment and benefits as described in the Calpine Corporation U.S.
        Severance Program and the Severance Benefit Summary Sheet provided to you
        with
        this letter. By signing this Agreement, you also warrant that you understand
        and
        have read the terms of the Calpine Corporation U.S. Severance
        Program.  In addition to the payment and benefits described in the
        attached Summary Sheet, you shall also be eligible to receive a one-time
        payment
        of a success fee at the sole discretion of the Chief Executive Officer of
        Calpine as part of Calpine’s emergence incentive plan.

       

      3.           Participation
        in Stock/401(k) and Life and Disability Insurance Plans.  As you
        will no longer be a Calpine employee after the Separation Date, you will
        not
        participate in Calpine’s Employee Stock Purchase Plan and life and disability
        insurance plans after the Separation Date.  Distribution options under
        Calpine’s 401(k) plan will be pursuant to the plan rules, and you will be
        provided with notice of such options by separate letter.

      

      4.           Return
        of Company Property.  You warrant that, by the Separation Date,
        you will return to your manager or human resources representative all Calpine
        property or data of any type, including computer and e-mail passwords, that
        are
        in your possession or control, without retaining any copies, notes or extracts
        thereof.

      

      5.           References.  You
        should direct all requests for employment references to Kelly Zelinski in
        Calpine’s Human Resources Department, kellyz@calpine.com, or her
        successor.  Human Resources will respond to all such inquiries by
        stating that, as a matter of company policy, Calpine declines to provide
        any
        information regarding former employees other than the former employee’s dates of
        employment and job title, and with written authorization from the employee,
        the
        former employee’s salary.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            August
              31, 2007

            Page
              2

             

             

             

          

        

      

      6.           Confidential
        Information; Use of Confidential Information to Compete.  By
        signing below, you acknowledge that as a result of your employment with Calpine
        you have had access to Confidential Information of Calpine (for the purposes
        of
        this Agreement, Confidential Information includes but is not limited to trade
        secrets, inventions, marketing plans, product plans, business strategies,
        financial information, forecasts, personnel information, customer lists,
        customer information, and any other information which gives Calpine an
        opportunity to obtain advantage over competitors who do not know or use it)
        and
        that you will hold all such Confidential Information in strictest confidence
        and
        will not disclose to any person or entity or make use, directly or indirectly,
        of such Confidential Information.  You confirm that you will deliver
        to your manager or human resources representative, within ten (10) days of
        the
        Separation Date, all diskettes, documents and data of any nature pertaining
        to
        any such Confidential Information and that you have not taken or retained
        any
        such diskettes, documents or data or any reproductions.  Nor shall you
        directly or indirectly use Confidential Information of Calpine to compete
        with
        Calpine, or disclose Confidential Information to a competitor of Calpine
        or to
        any other person or entity.

      

      7.           Release
        of Claims.  You acknowledge that you have no claims against
        Calpine based on your employment with Calpine or the separation of that
        employment, except for claims asserted as of February 1, 2006 in Virgil D.
        Hulsey, Jr., et al. v. Calpine Corporation, et al., Case No. 1-04-CV-032103
        (CA
        Superior Court, Santa Clara County), if you are a class member identified
        in
        that lawsuit, and except for other claims that are specifically excluded
        from
        this release by Paragraph 8, below.  By signing below, you release
        Calpine and forever discharge Calpine from all claims, demands, causes of
        action, damages and liabilities, known or unknown, that you have ever had,
        now
        have or may claim to have had relating to or arising from your employment
        with
        or separation from Calpine, except for claims that are specifically excluded
        from this release by Paragraph 8, below.

      

      You
        expressly waive the benefits of Section 1542 of the Civil Code of the State
        of
        California (and under other state and federal provisions of similar effect)
        which provides:

      

      A
        GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
        OR
        SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
        WHICH
        IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
        WITH
        THE DEBTOR.

      

      8.           Waiver
        of Claims Including Employment-Related Claims. You understand that the
        release you are providing releases and waives any and all claims you may
        have
        against Calpine and its owners, agents, officers, shareholders, employees,
        directors, attorneys, subscribers, subsidiaries, affiliates, insurers,
        successors and assigns, whether known or not known, including, without
        limitation, claims under any employment laws,

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            August
              31, 2007

            Page
              3

             

             

             

          

        

      

      including,
        but not limited to, claims of unlawful discharge, breach of contract, breach
        of
        the covenant of good faith and fair dealing, retaliation, harassment, fraud,
        violation of public policy, defamation, physical injury, emotional distress,
        claims for compensation or benefits arising out of your employment or your
        separation of employment, claims under Title VII of the 1964 Civil Rights
        Act,
        as amended, the California Fair Employment and Housing Act, and any other
        laws
        and/or regulations relating to employment or employment discrimination,
        including, without limitation, claims based on age or under the Age
        Discrimination in Employment Act or Older Workers Benefit Protection Act,
        provided, that this waiver and release does not extend to: claims for breach
        of
        this agreement; claims for legally required indemnification; claims for
        unemployment compensation benefits, workers’ compensation benefits, or state
        and/or long term disability benefits; claims asserted in Calpine’s Chapter 11
        bankruptcy proceeding for unpaid accrued vacation pay, unpaid deferred
        compensation, or indemnity, contribution or reimbursement; or claims for
        acts
        occurring after the Separation Date.  This waiver and release also
        does not apply to claims asserted as of February 1, 2006 in Virgil D. Hulsey,
        Jr., et al., v. Calpine Corporation, et al., Case No. 1-04-CV-032103 (CA
        Superior Court, Santa Clara County).

      

      9.           Covenant
        Not to Prosecute.  You agree never, individually or with any
        person or in any way, to commence, prosecute or cause or permit to be commenced
        or prosecuted against Calpine, any legal action or other proceeding based
        upon
        any claim, demand, cause of action, damage or liability which is released
        by
        this Agreement, except as required by law.  If such action has been
        filed on your behalf, you agree to immediately cause the dismissal of such
        action with prejudice and without any further right of appeal.

      

      10.           Review
        of Severance Agreement and Timing of Payment. You acknowledge your
        understanding that you may take up to forty-five (45) days
        to consider this Agreement and, by signing below, affirm that you were advised
        to consult with an attorney before signing this Agreement.  You
        further acknowledge that you understand you may revoke this Agreement within
        seven (7) days of signing it, by faxing a written revocation signed by you
        to
        Kelly Zelinski, fax number 408-794-4333, so that your fax is received by
        Ms.
        Zelinski by the end of that seven (7) day period.  You further agree
        that the severance pay to be provided to you, identified in paragraph 2 above,
        in exchange for your agreement will commence one to two pay periods after
        the
        end of that seven (7) day revocation period and only after Calpine receives
        this
        original signed Agreement, and that this Agreement will not become effective
        or
        enforceable until the revocation period has expired.

      

      11.           Legal
        and Equitable Remedies.  Both you and Calpine have the right to
        enforce this Agreement and its provisions by injunction, specific performance
        or
        other relief without prejudice to any other rights or remedies you may have
        at
        law or in equity for breach of this Agreement. You understand and have read
        the
        terms of the Calpine Corporation U.S. Severance Program (“the Program”) and
        understand that under the terms

      
 

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

            
              August
                31, 2007

              Page
                4

               

               

               

            

          

        

      

      

      of
        the Program, with respect to claims relating in any way to benefits provided
        under the Program, you may be required to follow the claims procedures
        identified in the Program.

      

      12.           Attorneys’
        Fees.  If any legal action is brought to enforce the terms of this
        Agreement, the prevailing party will be entitled to recover its reasonable
        attorneys’ fees, costs, and expenses from the other party, in addition to any
        other relief to which such prevailing party may be entitled.

      

      13.           Assignment,
        Successors and Assigns.  Calpine and you understand that this
        Agreement will benefit and be binding upon you and your heirs, successors,
        permitted assigns, and agents.  This Agreement will not benefit any
        other person or entity except as specifically described in this
        Agreement.

      

      14.           Confidentiality.  You
        agree to keep the contents, terms and conditions of this Agreement
        confidential.  You may disclose this information to your spouse,
        immediate family, accountants, or attorneys, provided that they first agree
        not
        to disclose any information concerning the contents, terms and conditions
        of
        this Agreement to anyone.  You also may disclose the contents, terms
        and conditions of this Agreement to the IRS or other taxing authorities or
        as
        required by subpoena or court order. Any breach of this confidentiality
        provision, or of any other obligation by you set forth in this Agreement,
        will
        be deemed a material breach of this Agreement.

      

      15.           Non-Solicitation
        and Non-Disparagement.  For a two (2) year period after the date
        of this letter, you agree not to directly or indirectly solicit any employee
        of
        Calpine to perform services for another business entity, and not to make
        any
        disparaging or derogatory statements about Calpine or its directors, officers,
        agents or employees.

      

      16.           No
        Admission of Liability.  This Agreement is not and may not be
        contended by you to be an admission or evidence of any wrongdoing or liability
        on Calpine’s part.  This Agreement will be afforded the maximum
        protection allowable under California Evidence Code Section 1152 and/or other
        state or Federal provisions of similar effect.

      

      17.           Entire
        Agreement.  This Agreement constitutes the entire agreement
        between you and Calpine with respect to the subject matter of this
        Agreement.  It supersedes all prior negotiations and agreements,
        whether written or oral, relating to this subject matter except those provisions
        of prior written agreements that expressly extend beyond the term of your
        employment.  You acknowledge that neither Calpine nor its agents have
        made any promise or representation either express or implied, written or
        oral,
        which is not contained in this Agreement for the purpose of inducing you
        to sign
        this Agreement, and you acknowledge that you have signed this Agreement relying
        only on the promises and representations stated herein.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            August
              31, 2007

            Page
              5

             

             

              

          

        

      

      18.           Modification.  This
        Agreement may not be altered, amended, or otherwise changed except by another
        written agreement that specifically refers to this Agreement, signed by you
        and
        by Calpine or its authorized representative.

      

      19.           Governing
        Law.  This Agreement is governed by and will be interpreted
        according to the laws of the State of California.  If any term of this
        Agreement is deemed invalid or unenforceable, the remainder of this Agreement
        will remain in full force and effect.

      

      20.           Your
        Understanding.  By signing below, you acknowledge that you have
        read this Agreement and fully understand and agree to it.

      

      PLEASE
        READ CAREFULLY.  THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND
        UNKNOWN CLAIMS.

       

      
        

        
          	
                   

                	
                   

                	
                   

                	
                  CALPINE
                    CORPORATION

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                   

                
	
                  Dated:

                	
                     August
                    21

                	
                  , 2007

                	
                  By:

                	
                     /s/
                    Kelly J. Zelinski

                
	
                   

                	
                   

                	
                   

                	
                  Kelly
                    J. Zelinski

                
	
                   

                	
                   

                	
                   

                	
                  Vice
                    President of Human Resources

                

        

        
 

      

      
 

      

      

       

      

      [CONTINUED
        ON NEXT PAGE]

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            August
              31, 2007

            Page
              6

             

             

             

          

        

      

      I
        have read the above Agreement, have had an opportunity to obtain legal advice,
        and by signing below voluntarily accept and agree to its terms including
        the
        release of all claims, known and unknown.

       

       

      
        

        
          	
                   

                	
                   

                	
                   

                	
                  EMPLOYEE

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                   

                
	
                  Dated:

                	
                   August 21

                	
                  ,
                    2007

                	
                  By:

                	
                     /s/
                    Eric Pryor

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                  Employee’s
                    Signature

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                   

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                     Eric
                    Pryor

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                  Print
                    Name

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                   

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                   

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                  Print
                    Address

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                   

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                   

                
	
                   

                	
                   

                	
                   

                	
                   

                	
                  Print
                    Social Security Number

                

        

         

      

      
        
           

        

      

      Please
        indicate by checking one of the boxes below, whether you choose to receive
        outplacement services or Calpine subsidized benefit continuation, as described
        in the Calpine Corporation U.S. Severance Program.

      

      Outplacement
        Services   [  ]

      

      Subsidized
        Benefit Continuation  [x]

      

      

      
         

        
          	
                   *Please
                    note: regardless of your decision above to
                    elect either Outplacement Services or Subsidized Health Benefits
                    continuation (i.e., paid for by Calpine), if you want to
                    continue your health benefits under COBRA you MUST
                    complete and return the separate
                    COBRA
                    enrollment form which will be mailed to your home by United
                    Healthcare Direct Bill 2 – 3 weeks after your termination
                    date.

                   

                  
                    Calpine
                      is not responsible for interruptions in health care coverage
                      that result
                      from your failure to return the COBRA election form to
                      UnitedHealthcare.

                  

                

        

      

      
         

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            August
              31, 2007

            Page
              7

             

             

             

          

        

      

      Affected
        Employees of Calpine Corporation

      

      You
        and the employees listed below are eligible to receive severance benefits
        from
        Calpine Corporation pursuant to the Calpine Corporation U.S. Severance Program
        (“the Program”).  To receive benefits, you must sign the Release you
        have been given and return it to Calpine Corporation, Kelly Zelinski, VP
        HR , 50
        West San Fernando Street, San Jose, CA 95113 by the end of the forty-five
        (45)
        day period after you receive this Agreement.

      

      The
        listing below shows the number of employees eligible and ineligible for benefits
        by job title.  Eligible employees are those who were notified February
        01, 2006 through August 31, 2007 pursuant to the Calpine Corporation U.S.
        Severance Program.  Ineligible employees are not subject to lay-off
        under the Program.

      

      The
        groups of individuals eligible for benefits under this Program consist of
        certain employees in various job classifications listed below. The criteria
        used
        by Calpine for determining eligibility for the reduction in workforce or
        restructuring activities (“Qualifying Event”) are Calpine’s current and
        anticipated business needs, and/or the skills and job performance of employees
        in the affected business units.

      

      Please
        note that this information is subject to change and may be affected by future
        employment decisions including those decisions contemplated by the
        Program.  If you have any questions about this information, contact
        your Human Resources Representative.

      

      

      See
        attached list of Eligible Employees and Ineligible
        Employees

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