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1.
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GRANT
OF OPTION. The Company hereby grants to the Grantee the
irrevocable Option to purchase, on the terms and subject to the conditions
set forth herein and in the letter agreement between the Company and the
Grantee, dated September 1, 2008 (the “Letter
Agreement”), and (except as otherwise provided herein) the Plan (as
defined below), 1,314,734 fully paid and nonassessable shares of the
Company’s Common Stock, par value $.001 per share. The Company
grants the Option to the Grantee in four (4) tranches (each a “Tranche”). The
corresponding number of shares of Company Common Stock and the
corresponding exercise price per share for each Tranche is set forth
below.
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Tranche
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Number of
Shares
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Exercise
Price
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Tranche
1
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262,083
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$18.00
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Tranche
2
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309,920
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$21.60
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Tranche
3
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349,705
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$24.30
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Tranche
4
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393,026
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$27.00
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2.
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PERIOD
OF OPTION. The period of the Option shall commence on the Grant Date and
shall expire on the seventh (7th) anniversary of the Grant Date (the
“Option
Period”). The Option (or any lesser amount thereof) may be
exercised from time to time during the Option Period as to the number of
Total Shares allowable under Section 3 below and the
Plan.
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3.
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EXERCISE
OF OPTION. Except to the extent otherwise provided in the
Letter Agreement or herein, each Tranche of the Option shall vest ratably
on each of the first, second, third, fourth, and fifth anniversaries of
the Grant Date; provided, however, that
the Grantee must be continuously employed by the Company beginning on the
Grant Date through each applicable vesting
date.
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4.
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TERMINATION
OF EMPLOYMENT. In the event that the Grantee’s employment with
the Company is terminated by the Company without Cause or by the Grantee
for Good Reason, in each case, prior to a Change in Control, the portion
of the Option scheduled to vest within a period of thirty-six (36) months
following the Grantee’s date of termination shall become immediately
vested and exercisable and shall remain exercisable for a period of two
(2) years following the Grantee’s date of termination but in no event
beyond its original term; and the remaining portion of the Option shall be
forfeited as of the date of the Grantee’s termination of
employment. In the event that the Grantee’s employment with the
Company is terminated for Disability or by reason of the Grantee’s death,
the Option shall become immediately vested and exercisable and shall
remain exercisable for its full original term. In the event
that the Grantee’s employment with the Company is terminated by the
Company for Cause, any portion of the Option that remains outstanding,
whether vested or unvested, shall immediately terminate as of the date of
such termination. In the event of termination of employment by
the Grantee without Good Reason, any unvested portion of the Option shall
immediately terminate, and any vested portion of the Option shall remain
exercisable for a period of 90 days following such termination and shall
terminate thereafter.
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5.
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CHANGE
IN CONTROL. In the event of a Change in Control, each Option
shall become fully vested and shall immediately be cancelled, and, in
exchange therefor, the Grantee shall be entitled to receive an amount per
share equal to the excess, if any, of the per share merger consideration,
over the per share exercise price of such Option. The Grantee
shall in all cases be entitled to receive such amount fully in
cash.
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6.
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SECURITIES
ACT REQUIREMENTS. In addition to the requirements set forth herein and in
the Plan, (i) the Option shall not be exercisable in whole or in part, and
the Company shall not be obligated to issue any shares of Common Stock
subject to any such Option, if such exercise and sale or issuance would,
in the opinion of counsel for the Company, violate the Securities Act of
1933 (the “1933
Act”) or other Federal or state statutes having similar
requirements, as they may be in effect at that time; and (ii) each Option
shall be subject to the further requirement that, at any time that the
Committee shall determine, in its discretion, that the listing,
registration or qualification of the
shares
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7.
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METHOD
OF EXERCISE OF OPTION. Subject to the provisions of the Plan and Section 6
hereof, the exercise price of Common Stock acquired pursuant to an Option
shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash or by certified or bank check at the time
the Option is exercised or (ii) upon such reasonable terms as the
Committee shall approve, the exercise price may be paid, in the discretion
of the Grantee: (A) by delivery to the Company of other Common Stock, duly
endorsed for transfer to the Company, with a Fair Market Value on the date
of delivery equal to the exercise price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby the
Grantee identifies for delivery specific shares of Common Stock that have
a Fair Market Value on the date of attestation equal to the exercise price
(or portion thereof) and receives a number of shares of Common Stock equal
to the difference between the number of shares thereby purchased and the
number of identified attestation shares of Common Stock (a “Stock for Stock
Exchange”); (B) a “cashless” exercise program established with a
broker, if such a program is in place; (C) by reduction in the number of
shares of Common Stock otherwise deliverable upon exercise of such Option
with a Fair Market Value equal to the aggregate exercise price at the time
of exercise, or (D) in any other form of legal consideration that may be
acceptable to the Committee. The purchase price of Common Stock acquired
pursuant to the Option that is paid by delivery (or attestation) to the
Company of other Common Stock acquired, directly or indirectly from the
Company, shall be paid only by shares of the Common Stock of the Company
that have been held for more than six months (or such longer or shorter
period of time required to avoid a charge to earnings for financial
accounting purposes). Notwithstanding the foregoing, during any period for
which the Common Stock is publicly traded (i.e., the Common Stock is
listed on any established stock exchange or a national market system) an
exercise by the Grantee that involves or may involve a direct or indirect
extension of credit or arrangement of an extension of credit by the
Company, directly or indirectly, in violation of Section 402(a) of the
Sarbanes-Oxley Act (codified as Section 13(k) of the Exchange Act) shall
be prohibited with respect to this
award.
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8.
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OTHER
LIMITATIONS, REQUIREMENTS, PROTECTIONS, ETC. The Grantee shall
be subject to all other terms and conditions relating to the Option as set
forth in the Letter Agreement, including but not limited to, the potential
repayment and share ownership requirements set forth
therein. It is expressly acknowledged and agreed that nothing
in this Stock Option Agreement or the Plan shall be inconsistent in a
manner adverse to the Grantee with, or otherwise limit adversely to the
Grantee, the express terms of the Letter Agreement, and, in the case of
any conflict between the Letter Agreement, on the one hand, and this Stock
Option Agreement or the Plan, on the other, the Letter
Agreement
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9.
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TRANSFERABILITY.
The Option is not transferable otherwise than by will or pursuant to the
laws of descent and distribution, and is exercisable during the Grantee’s
lifetime only by the Grantee.
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10.
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BINDING
AGREEMENT. This Stock Option Agreement shall be binding upon and shall
inure to the benefit of any successor or assign of the Company, and, to
the extent herein provided, shall be binding upon and inure to the benefit
of the Grantee’s beneficiary or legal representatives, as they case may
be.
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11.
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ENTIRE
AGREEMENT. This Stock Option Agreement, the Plan, and the Letter Agreement
set forth the entire agreement of the parties with respect to the Option
granted hereby and may not be changed orally but only by an instrument in
writing signed by the party against whom enforcement of any change,
modification or extension is sought. Without limiting any
protection the Grantee may otherwise have, the Plan shall not be amended
in any way that adversely affects the Grantee or the Option without the
prior written consent of the
Grantee.
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12.
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ELECTRONIC
DELIVERY AND SIGNATURES. The Company may, in its sole discretion, decide
to deliver any documents related to the Option or to participation in the
Plan or to future options that may be granted under the Plan by electronic
means or to request the Grantee’s consent to participate in the Plan by
electronic means. The Grantee hereby consents to receive such documents by
electronic delivery and, if requested, to agree to participate in the Plan
through an on-line or electronic system established and maintained by the
Company or another third party designated by the Company. If the Company
establishes procedures of an electronic signature system for delivery and
acceptance of Plan documents (including any Award Agreement like this
Option), the Grantee hereby consents to such procedures and agrees that
his or her electronic signature is the same as, and shall have the same
force and effect as, his or her manual
signature.
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13.
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WITHHOLDING
OF TAX. To the extent that the exercise of the Option or the disposition
of shares of Company’s Common Stock acquired by exercise of the Option
results in compensation income to the Grantee for federal or state income
tax purposes, the Grantee shall pay to the Company at the time of such
exercise or disposition such amount of money or, if the Company so
determines, shares of Common Stock, as the Company may require to meet its
obligation under applicable tax laws or regulations
and,
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14.
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ADJUSTMENTS/CHANGES
IN CAPITALIZATION. This award is subject to the adjustment provisions set
forth in the Plan.
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15.
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DEFINITIONS. As
used herein, the terms “Cause,” “Change in Control” and “Good Reason”
shall have the meanings ascribed to them in the Calpine Corporation Change
in Control and Severance Benefits Plan and the term “Disability” shall
have the meaning ascribed to it in the Letter
Agreement.
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CALPINE
CORPORATION
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By:
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/s/ Jack A. Fusco | |
| /s/ Thad Hill | |
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Grantee
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