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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 Employment Agreement between the Company and
the Grantee, dated August 11, 2008 (the “Employment
Agreement”), and (except as otherwise provided herein) the Plan (as
defined below), 1,678,000 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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345,000
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$16.60
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Tranche
2
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394,000
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$19.19
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Tranche
3
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443,000
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$21.59
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Tranche
4
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496,000
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$23.99
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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 Sections
4 and 8 of the Employment Agreement, 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 other than in connection with a Potential Change in
Control or a Change in Control, Section 8(c)(vi) of the Employment
Agreement shall govern. In the event that the Grantee’s
employment with the Company is terminated for Disability or by reason of
the Grantee’s death, Section 8(b)(iii) of the Employment Agreement shall
govern. 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. All
capitalized terms in this Section 4 shall have the definitions ascribed to
them in the Employment Agreement.
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5.
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CHANGE
IN CONTROL. In the event of a Change in Control (as defined in
the Employment Agreement), Section 4(a)(i) of the Employment Agreement
shall govern, and accordingly, 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 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
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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 Employment Agreement, including but not limited to, the
clawback and share holding
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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 Employment
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, if the Grantee
fails to do so, the Company is authorized to withhold from any cash
remuneration then or thereafter payable to the Grantee, any tax required
to be withheld by reason of such resulting compensation income or the
Company may otherwise refuse to issue or transfer any shares otherwise
required to be issued or transferred pursuant to the terms
hereof.
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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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CALPINE
CORPORATION
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By:
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/s/ William J.
Patterson
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| /s/ W. Thaddeus Miller | |
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Grantee
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