CALPINECORPORATION EXECUTIVESIGN ON NON-QUALIFIEDSTOCK OPTION AGREEMENT

1.

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.

Tranche 1

262,083

$18.00

Tranche 2

309,920

$21.60

Tranche 3

349,705

$24.30

Tranche 4

393,026

$27.00

2.

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.

3.

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.

4.

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.

5.

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.

6.

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

7.

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.

8.

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

9.

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.

10.

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.

11.

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.

12.

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.

13.

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,

14.

ADJUSTMENTS/CHANGES IN CAPITALIZATION. This award is subject to the adjustment provisions set forth in the Plan.

15.

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.

CALPINE CORPORATION

By:

Grantee