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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:
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.
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Position and Responsibilitie s.
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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.
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(a)
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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.
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(b)
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Executive shall serve as a non-chairman member of the Board for as
long as Executive continues to be nominated and
elected.
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(c)
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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
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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.
For all of his services during the Term of Employment, Executive
shall receive the following compensation:
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(a)
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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.
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(b)
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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:
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(i)
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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.
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(ii)
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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.
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(c)
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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.
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(d)
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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.
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(e)
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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.
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(f)
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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.
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(i)
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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
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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.
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(ii)
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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).
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(g)
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Relocation . Executive shall be
reimbursed for the following costs associated with relocating to
the area in which the Company’s headquarters is
located:
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(i)
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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
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connection with the Reimbursement, Executive retains an amount
equal to the Reimbursement;
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(ii)
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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.
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(h)
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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.
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(a)
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Termination of Employment .
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(i)
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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
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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.
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(ii)
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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
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