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Exhibit
10.4
CALPINE
CORPORATION
CHANGE IN CONTROL AND
SEVERANCE
BENEFITS
PLAN
Calpine Corporation, a
Delaware corporation (the “Company”) has adopted the
Calpine Corporation Change in Control and Severance Benefits Plan
(the “Plan’”) for the benefit of certain
Participant employees of the Company and its subsidiaries, on the
terms and conditions hereinafter stated. The Plan is intended to
help retain qualified employees, maintain a stable work environment
and provide financial security to certain Participant employees of
the Company in the event of a Change in Control and in the event of
a termination of employment in connection with or without a Change
in Control. The Plan, as a “severance pay arrangement”
within the meaning of section 3(2)(B)(i) of ERISA, is intended to
be excepted from the definitions of “employee pension benefit
plan” and “pension plan” set forth under
Section 3(2) of ERISA, and is intended to meet the descriptive
requirements of a plan constituting a “severance pay
plan” within the meaning of regulations published by the
Secretary of Labor at Title 29, Code of Federal Regulations ss.
2510.3-2(b).
ARTICLE I
DEFINITIONS AND
INTERPRETATIONS
Section 1.01
Definitions . Capitalized terms used in this Plan shall have
the following respective meanings, except as otherwise provided or
as the context shall otherwise require:
“Annual Salary”
shall mean the base salary paid to a Participant immediately prior
to his or her Termination Date on an annual basis exclusive of any
bonus payments or additional payments under any Benefit
Plan.
“Benefit Plan”
shall mean any “employee benefit plan” (including any
employee benefit plan within the meaning of Section 3(3) of
ERISA); program, arrangement or practice maintained, sponsored or
provided by the Company, including those relating to compensation,
bonuses, profit-sharing, stock option, or other stock related
rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured
arrangements) health or medical benefits, disability benefits,
workers’ compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance
or other benefits).
“Board” means the
Board of Directors of the Company.
“Cause” shall
have the meaning set forth in any individual employment, severance
or similar agreement between the Company and a Participant, or in
the event that a Participant is not party to such an agreement,
Cause shall mean:
(i) the Participant’s
act of fraud, dishonesty, misappropriation, or embezzlement with
respect to the Company;
(ii) the Participant’s
conviction of, or plea of guilty or no contest to, any
felony;
(iii) the Participant’s
violation of the Company’s drug policy or anti-harassment
policy;
(iv) the Participant’s
admission of liability of, or finding by a court or the SEC (or a
similar agency of any applicable state) of liability for, the
violation of any “Securities Laws” (as hereinafter
defined) (excluding any technical violations of the Securities Laws
which are not criminal in nature). As used herein, the term
“Securities Laws” means any Federal or state law, rule
or regulation governing the issuance or exchange of securities,
including without limitation the Securities Act of 1933, the
Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder;
(v) the Participant’s
failure after reasonable prior written notice from the Company to
comply with any valid and legal directive of the Chief Executive
Officer or the Board that is not remedied within thirty
(30) days of the Participant being provided written notice
thereof from the Company or the Participant’s gross
negligence in performance, or willful non-performance, of any of
the Participant’s duties and responsibilities with respect to
the Company that is not remedied within thirty (30) days of
the Participant being provided written notice thereof from the
Company; or
(vi) other than as provided
in clauses (i) through (v) above, the Participant’s
material breach of any material provision of this Plan that is not
remedied within thirty (30) days of the Participant being
provided written notice thereof.
The Participant shall not
have acted in a “willful” manner if the Participant
acted, or failed to act, in a manner that he believed in good faith
to be in, or not opposed to, the best interests of the Company.
Cause shall be determined by the Governance and Nominating
Committee of the Board in its sole discretion.
“Change in
Control” shall mean:
(i) the acquisition (other
than from the Company) by any person, entity or “group”
(within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, but excluding, for this purpose,
the Company or its subsidiaries, or any employee benefit plan of
the Company or its subsidiaries which acquires beneficial ownership
of voting securities of the Company) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of a majority of either the then-outstanding
shares of Common Stock or the combined voting power of the
Company’s then-outstanding voting securities entitled to vote
generally in the election of directors; or
(ii) individuals who, as of
the Effective Date, constitute the Board of Directors (as of such
date, the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however,
that any person becoming a director subsequent to such date whose
election, or nomination for election, was approved by a vote of at
least a majority of the directors then constituting the Incumbent
Board or was
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effected in satisfaction of a
contractual requirement that was approved by at least a majority of
the directors when constituting the Incumbent Board (in each case,
other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the
Company) shall be, for purposes of this Section 16(b),
considered as though such person were a member of the Incumbent
Board; or
(iii) consummation of a
reorganization, merger, consolidation or share exchange, in each
case with respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger,
consolidation or share exchange do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged,
consolidated or other surviving entity’s then-outstanding
voting securities, or approval by the stockholders of the Company
of a liquidation or dissolution of the Company or consummation of
the sale of all or substantially all of the assets of the Company
(determined on a consolidated basis).
“COBRA” shall
mean Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
“Code” shall mean
the Internal Revenue Code of 1986, as amended. Reference in this
Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any
regulations under such section.
“Common Stock”
means common stock of the Company.
“Compensation
Committee” shall mean the Compensation Committee of the
Board.
“Disability”
shall have the meaning set forth in Section 409A(a)
(2) (C) of the Code.
“Effective Date”
shall mean the “effective date” of the Company’s
“Joint Plan of Reorganization Pursuant to Chapter 11 of the
United States Bankruptcy Code Dated August 27,
2007.”
“ERISA” shall
mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated
thereunder.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“Good Reason”
shall mean, when used with reference to any Participant, any of the
following actions or failures to act, but in each case only if it
occurs while such Participant is employed by the Company and then
only if it is not consented to by such Participant in
writing:
(i) assignment of a position
that is of a lesser rank than held by the Participant prior to the
assignment and that results in such Participant ceasing to be an
executive officer of a company with securities registered under the
Securities Exchange Act of 1934;
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(ii) a material reduction in
such Participant’s base salary or target bonus opportunity
(including an adverse change in performance criteria or a decrease
in ultimate target bonus opportunity) in effect the day prior to
the Effective Date; or
(iii) any change of more than
fifty (50) miles in the location of the principal place of
employment of such Participant immediately prior to the effective
date of such change.
For purposes of this
definition, none of the actions described in clauses (i) and
(ii) above shall constitute “Good Reason” with
respect to any Participant 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 thirty (30) days after receipt of
written notice thereof given by such Participant (or, if the matter
is not capable of remedy within thirty (30) days, then within
a reasonable period of time following such thirty (30) day
period, provided that the Company has commenced such remedy within
said thirty (30) day period); provided that “Good
Reason” shall cease to exist for any action described in
clauses (i) through (iii) above on the sixtieth
(60th) day following the later of the occurrence of such
action or the Participant’s knowledge thereof, unless such
Participant has given the Company written notice thereof prior to
such date.
“Participant”
shall mean an employee of the Company who is included on Schedule A
hereto, as that schedule may be amended in accordance with
Section 2.01.
“Plan” shall mean
this Calpine Corporation Change in Control and Severance Benefits
Plan, as amended, supplemented or modified from time to time in
accordance with its terms.
“Potential Change in
Control” shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have
occurred:
(i) the Company enters into
an agreement, the consummation of which would result in the
occurrence of a Change in Control; or
(ii) the Company or any
person, entity or “group” (within the meaning of
Sections 13(d)(3) or 14(d)(2) of the Exchange Act, but excluding,
for this purpose, the Company or its subsidiaries, or any employee
benefit plan of the Company or its subsidiaries which acquires
beneficial ownership of voting securities of the Company) publicly
announces an intention to take or to consider taking actions which,
if consummated, would constitute a Change in Control; or
(iii) the acquisition (other
than from the Company) by any person, entity or “group”
(within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Exchange Act, but excluding, for this purpose, the Company or its
subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting
securities of the Company) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
fifteen (15%) or more of either the then-outstanding shares of
Common Stock or the combined voting power of the Company’s
then-outstanding voting securities entitled to vote generally in
the election of Directors; or
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(iv) the Compensation
Committee adopts a resolution to the effect that a Potential Change
in Control has occurred.
“Successor” shall
mean a successor to all or substantially all of the business,
operations or assets of the Company.
“Termination
Date” shall mean, with respect to any Participant, the
termination date specified in the Termination Notice delivered by
such Participant to the Company in accordance with
Section 2.02 or as set forth in any Termination Notice
delivered by the Company, or as applicable, the Participant’s
date of death or a Tier 1 Participant’s voluntary termination
under Section 5.01.
“Termination
Notice” shall mean, as appropriate, written notice from
(a) a Participant to the Company purporting to terminate such
Participant’s employment for Good Reason in accordance with
Section 2.02 or (b) the Company to any Participant
purporting to terminate such Participant’s employment for
Cause or Disability in accordance with
Section 2.03.
“Tier 1
Participant” shall mean each Participant designated in
Schedule A hereto as a Tier 1 Participant, as that schedule may be
amended in accordance with section 2.01.
“Tier 2
Participant” shall mean each Participant designated in
Schedule A hereto as a Tier 2 Participant, as that schedule may be
amended in accordance with Section 2.01.
“Tier 3
Participant” shall mean each Participant designated in
Schedule A hereto as a Tier 3 Participant, as that schedule may be
amended in accordance with Section 2.01.
“Tier 4
Participant” shall mean each Participant designated in
Schedule A hereto as a Tier 4 Participant, as that schedule may be
amended in accordance with Section 2.01.
Section 1.02
Interpretation . In this Plan, unless a clear contrary
intention appears, (a) the words “herein,”
“hereof” and “hereunder” refer to this Plan
as a whole and not to any particular Article, Section or other
subdivision, (b) reference to any Article or Section, means
such Article or Section hereof and (c) the words
“including” (and with correlative meaning
“include”) means including, without limiting the
generality of any description preceding such term. The Article and
Section headings herein are for convenience only and shall not
affect the construction hereof.
ARTICLE II
ELIGIBILITY AND
BENEFITS
Section 2.01 Eligible
Employees .
(a) An employee of the
Company shall be a “Participant” in the Plan during
each calendar year (or partial calendar year) for which he or she
has been designated as a Participant (and in the Tier so
designated) by the Compensation Committee and for each succeeding
calendar year, unless the Participant is given written notice by
October 31 of the preceding year of the determination of the
Compensation Committee that such Participant shall
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cease to be a Participant or shall
participate in a different Tier for such succeeding calendar year.
Notwithstanding the foregoing, a Participant may not be removed
from the Plan, nor placed in a lower tier (with Tier 1 being the
highest Tier and Tier 4 being the lowest Tier), during the pendency
of, or within six (6) months following, a Potential Change in
Control or within two years following a Change in
Control.
(b) This Plan is only for the
benefit of Participants, and no other employees, personnel,
consultants or independent contractors shall be eligible to
participate in this Plan or to receive any rights or benefits
hereunder.
Section 2.02
Termination Notices from Participants . For purposes of this
Plan, in order for any Participant to terminate his or her
employment for Good Reason, such Participant must give a
Termination Notice to the Company, which notice shall be signed by
such Participant, shall be dated the date it is given to the
Company, shall specify the Termination Date and shall state that
the termination is for Good Reason and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for such Good Reason. Any Termination Notice given by a
Participant that does not comply in all material respects with the
foregoing requirements as well as the “Good Reason”
definition provisions set forth in Section 1.01 shall be
invalid and ineffective for purposes of this Plan. If the Company
receives from any Participant a Termination Notice that it believes
is invalid and ineffective as aforesaid, it shall promptly notify
such Participant of such belief and the reasons therefor. Any
termination of employment by the Participant that either does not
constitute Good Reason or fails to meet the Termination Notice
requirements set forth above shall be deemed a termination by the
Participant without Good Reason.
Section 2.03
Termination Notices from Company . For purposes of this
Plan, in order for the Company to terminate any Participant’s
employment for Cause, the Company must give a Termination Notice to
such Participant, which notice shall be dated the date it is given
to such Participant, shall specify the Termination Date and shall
state that the termination is for Cause and shall set forth in
reasonable detail the particulars thereof. For purposes of this
Plan, in order for the Company to terminate any Participant’s
employment for Disability, the Company must give a Termination
Notice to such Participant, which notice shall be dated the date it
is given to such Participant, shall specify the Termination Date
and shall state that the termination is for Disability and shall
set forth in reasonable detail the particulars thereof. Any
Termination Notice given by the Company that does not comply, in
all material respects, with the foregoing requirements shall be
invalid and ineffective for purposes of this Plan. Any Termination
Notice purported to be given by the company to any Participant
after the death or retirement of such Participant shall be invalid
and ineffective.
ARTICLE III
CHANGE IN CONTROL
BENEFITS
Section 3.01
Accelerated Vesting of Equity . Upon the occurrence of a
Change in Control, notwithstanding the provisions of any Benefit
Plan or agreement (except as provided in this
Section 3.01):
(a) each outstanding option
to purchase Company Common Stock (each, a “Stock
Option”) shall become automatically vested and exercisable
and
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(i) in the case of those
Stock Options outstanding as of the Effective Date, shall remain
exercisable by such Participant until the later of the 15th day of
the third month following the date at which, or December 31 of
the calendar year in which, the Stock Option would have otherwise
expired, but in no event beyond the original term of such Stock
Option; and
(ii) in the case of all Stock
Options granted to a Participant after the Effective Date, shall
remain exercisable by such Participant for a period of
(x) three years in the case of a Tier 1 Participant,
(y) two years in the case of a Tier 2 Participant or
(z) one year in the case of a Tier 3 Participant, beyond the
date at which the Stock Option would have otherwise expired, but in
no event beyond the original term of such Stock Option;
(b) the vesting restrictions
on all other awards relating to Common Stock (including but not
limited to restricted stock, restricted stock units and stock
appreciation rights) held by a Participant shall immediately lapse
and in the case of restricted stock units and stock appreciation
rights shall become immediately payable.
ARTICLE IV
SEVERANCE AND RELATED
BENEFITS
WHICH ARE NOT IN
CONNECTION WITH
A CHANGE IN
CONTROL
Section 4.01
Termination of Employment . In the event that a
Participant’s employment is terminated (i) by the
Participant for Good Reason or (ii) by the Company without
Cause, then in each case, such Participant (or his or her
beneficiary) shall be entitled to receive, and the Company shall be
obligated to pay to the Participant, subject to Sections 4.02
through 4.03 and Section 7.15 hereof:
(a) In the case of a Tier 1
Participant, (i) a lump sum payment within sixty
(60) days following such Participant’s Termination Date
in an amount equal to 2.0 times the sum of (A) the
Participant’s highest Annual Salary in the three years
preceding the Termination Date plus (B) the
Participant’s highest target bonus for the year of
termination; plus (ii) a lump sum payment equal to all unused
vacation time accrued by such Participant as of the Termination
Date under the Company’s vacation policy plus (iii) all
accrued but unpaid compensation earned by such Participant as of
the Termination Date to be paid by the Company as soon as
practicable following the Termination Date ((ii) and (iii),
together referred to herein as the “Accrued
Obligations”). In addition, for a period of twenty-four
months following the Termination Date, such Participant and his or
her dependents shall continue to be covered by all health care,
medical and dental insurance plans and programs (excluding
disability) maintained by the Company under which the Participant
was covered immediately prior to the Termination Date (collectively
the “Continued Health Care Benefits”) at the same cost
sharing between the Company and Participant as a similarly situated
active employee, and the Continued Health Care Benefits shall be
provided concurrently with any health care benefit required under
COBRA.
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(b) In the case of a Tier 2
Participant, (i) a lump sum payment within sixty
(60) days following such Participant’s Termination Date
in an amount equal to 1.5 times the sum of (A) the
Participant’s highest Annual Salary in the three years
preceding the Termination Date plus (B) the
Participant’s highest target bonus for the year of
termination; plus (ii) payment of all Accrued Obligations as
soon as practicable following the Termination Date. In addition,
for a period of eighteen months following the Termination Date,
such Participant and his or her dependents shall receive Continued
Health Care Benefits at the same cost sharing between the Company
and Participant as a similarly situated active employee, and the
Continued Health Care Benefit shall be provided concurrently with
any health care benefit required under COBRA.
(c) In the case of a Tier 3
Participant, (i) a lump sum payment within sixty
(60) days following such Participant’s Termination Date
in an amount equal to 1.5 times the sum of (A) the
Participant’s highest Annual Salary in the three years
preceding the Termination Date plus (B) the
Participant’s highest target bonus for the year of
termination; plus (ii) payment of all Accrued Obligations as
soon as practicable following the Termination Date. In addition,
for a period of eighteen months following the Termination Date,
such Participant and his or her dependents shall receive Continued
Health Care Benefits at the same cost sharing between the Company
and Participant as a similarly situated active employee, and the
Continued Health Care Benefit shall be provided concurrently with
any health care benefit required under COBRA.
(d) In the case of a Tier 4
Participant, (i) a lump sum payment within sixty
(60) days following such Participant’s Termination Date
in an amount equal to the sum of (A) the Participant’s
highest Annual Salary in the three years preceding the Termination
Date plus (B) the Participant’s highest target bonus for
the year of termination; plus (ii) payment of all Accrued
Obligations as soon as practicable following the Termination Date.
In addition, for a period of twelve months following the
Termination Date, such Participant and his or her dependents shall
receive Continued Health Care Benefits at the same cost sharing
between the Company and Participant as a similarly situated active
employee, and the Continued Health Care Benefit shall be provided
concurrently with any health care benefit required under
COBRA.
(e) Notwithstanding anything
herein to the contrary, if a Participant is a “specified
employee” as defined in Section 409A(a)(2)(B)(i) of the
Code (“Specified Employee”), then any severance payment
as set forth in Section 4.01(a), (b), (c) and
(d) above which is not otherwise exempt from Section 409A
of the Code shall be paid during a 30 day period which commences on
the date which is the day after the six month anniversary of such
Specified Employee’s Termination Date. In any event, all
Accrued Obligations shall be paid to the Participant as soon as
practicable following the Termination Date and no later than sixty
(60) days following the Termination Date. Except as provided
below with respect to a Specified Employee, the payment of any
health or medical claims for the health and medical coverage
provided in Sections 4.01(a), (b), (c) and (d) shall be
made to a Participant as soon as administratively practicable after
the Participant has provided the appropriate claim documentation,
but in no event shall the payment for any such health or medical
claim be paid later than the last day of the calendar year
following the calendar year in which the expense was incurred.
Notwithstanding anything herein to the contrary, to the extent
required by Section
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409A of the Code: (1) the amount of
medical claims el
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