This Employment
Agreement (the “Agreement”) is entered into effective
as of January 30, 2006, between CALPINE CORPORATION, a
Delaware corporation (the “Company”), and SCOTT J.
DAVIDO (“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 Executive Vice President and Chief Financial Officer of the
Company on February 1, 2006 (the “Start Date”) and
Chief Restructuring Officer thereafter.
The Company and
Executive have agreed that Executive will be employed by the
Company and will serve as the Company’s Executive Vice
President, Chief Financial Officer and Chief Restructuring 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:
Subject to the
provisions of paragraph 4 below, Executive’s term of
employment (“Term of Employment”) consists of the
initial term and any subsequent term for which the Agreement is
renewed. The initial term of this Agreement begins on
February 1, 2006, and ends on February 1, 2008, subject
to the termination provisions of paragraph 4 below. No later than
150 days prior to the end of the initial Term of Employment,
the Company shall inform Executive if it intends to renew this
Agreement for a subsequent Term of Employment. If no notice is
given, and Executive’s employment continues after the Term of
Employment, Executive’s continued employment and any
subsequent termination thereof shall not be subject to the terms of
this Agreement.
|
2
|
|
Position and
Responsibilities.
|
During the Term of
Employment, Executive shall have the position and responsibilities
described in this paragraph 2. Executive shall be employed as the
Company’s Executive Vice President, Chief Financial Officer
and Chief Restructuring Officer, with the general executive powers
and authority that accompany those positions. Executive shall
report directly to the Chief Executive Officer and shall have the
duties and responsibilities that are typically performed by the
chief financial officer of a public company, as well as any other
duties consistent with his position that are assigned to Executive
by the Chief Executive Officer or the Board. In addition, as
Executive Vice President, Chief Financial Officer and Chief
Restructuring Officer, Executive shall have overall responsibility
for management of the Company’s chapter 11 reorganization,
including: (i) development of a short-term and long-term
business plan and a strategic plan; (ii) development of a plan of
reorganization; (iii) evaluation of all assets and management
of the disposition of nonstrategic assets; and (iv) employment
and management of all outside professionals involved in any matter
relating to the restructuring. 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.
|
|
(a)
|
|
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.
|
|
|
|
|
|
|
|
(b)
|
|
Notwithstanding the foregoing,
nothing herein shall preclude Executive from (i) serving on the
boards of directors of not more than two other corporations and/or
charitable organizations (subject to the approval of the Chief
Executive Officer, such approval not to be 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:
|
|
(a)
|
|
Base Salary . Executive’s annual base
salary shall be $700,000 (as may be increased from time to time,
the “Base Salary”). The Chief Executive Officer and
Board (or a committee thereof) will review the Base Salary at least
annually and the Board may increase it at any time for any reason,
in its sole discretion; however, they shall have no obligation to
do so.
|
|
|
|
|
|
|
|
(b)
|
|
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 Chief Executive Officer and the Board
are achieved, as determined by the Chief Executive Officer and the
Board (or a committee thereof), in their 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 Chief Executive Officer and the Board (or a
committee thereof), in their 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
150% of the Target Annual Bonus:
|
|
|
(i)
|
|
For
the Company’s fiscal year ending December 31, 2006,
Executive shall be entitled to receive a minimum Bonus of $700,000
to be paid no later than March 15, 2007 but no earlier than
January 1, 2007.
|
|
|
|
|
|
|
|
(ii)
|
|
For
the Company’s fiscal year ending December 31, 2007,
Executive shall be entitled to receive a minimum Bonus of $700,000,
to be paid no later than March 15, 2008 but no earlier than
January 1, 2008.
|
2
|
|
(c)
|
|
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.
|
|
|
|
|
|
|
|
(d)
|
|
Signing Bonus
. In addition to the
Base Salary and Bonus, Executive shall be entitled to receive a
one-time payment of $500,000, payable within 15 days after
entry of an order approving this Agreement by the U.S. bankruptcy
court having jurisdiction over the Company’s bankruptcy case
(the “Bankruptcy Court”). 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.
|
|
|
|
|
|
|
|
(e)
|
|
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 Financial Officer and Chief Restructuring 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 for 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.
|
|
|
|
|
|
|
|
(f)
|
|
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
|
3
|
|
|
|
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.
|
|
|
(i)
|
|
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 amount equal
to two times his annual Base Salary as of the earlier of
(a) the date his term of employment under this Agreement
terminates or (b) the Plan Effective Date. The Guaranteed
Minimum Success Fee shall be paid to Executive on the earliest of
(x) the date Executive is terminated by the Company without
Cause, (y) the date Executive terminates his employment for
Good Reason and (z) 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.
|
|
|
|
|
|
|
|
(ii)
|
|
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).
|
|
|
(g)
|
|
Relocation . The Company shall reimburse
Executive for customary and reasonable commuting expenses from
Executive’s current residence in St. Paul, Minnesota, and
temporary furnished housing and living expenses in the area in
which the Company’s headquarters is located for a period of
six months from the Start Date. In the sole discretion of the Chief
Executive Officer, this initial six-month period may be extended
from time to time. Reimbursements shall be paid monthly, on an
“as incurred” basis, and in all events before
March 15 of the calendar year after the calendar year in which
the applicable expenses were incurred. Upon termination of this
temporary commuting arrangement, Executive shall be reimbursed for
the following costs associated with relocating to the area in which
the Company’s headquarters is located:
|
4
|
|
|
|
All
reasonable transaction costs and expenses (including any real
estate brokerage fees, commissions and closing costs) and moving
expenses incurred by Executive, in each case while an employee of
the Company, in connection with relocating his spouse, dependents
and personal property and goods from Executive’s current
residence to the area in which the Company’s headquarters is
located, provided that Executive provides appropriate documentation
(the “Reimbursement”). Reimbursements under this
paragraph shall be paid promptly and in all events on or before
March 15 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 taxes, if any, imposed in connection
with the Reimbursement, Executive retains an amount equal to the
Reimbursement.
|
|
|
(h)
|
|
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.
|
|
|
(a)
|
|
Termination of
Employment.
|
|
|
(i)
|
|
Termination by the Company for
Cause . The
Board or Chief Executive Officer 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
|
5
|
|
|
|
Company or any other member of the
Group; (5) Executive’s refusal to follow the lawful
directives of the Chief Executive Officer or 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 not 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.
|
|
|
|
|
|
|
|
(ii)
|
|
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.
|
|
|
|
|
|
|
|
(iii)
|
|
Death or Disability
. Executive’s
employment by the Company will immediately terminate upon
Executive’s death and, at the option of either Executive or
the Company, exercisable upon written notice to the other party,
may terminate upon the Executive’s Disability. For purposes
of this Agreement, “Disability” will occur if
(A) Executive becomes eligible for benefits under a long-term
disability policy provided by the Company, if any, or
(B) Executive has become unable, due to physical or mental
illness or incapacity, to substantially perform the essential
duties of his employment with reasonable accommodation for a period
of 90 days or an aggregate of 180 days during any
consecutive 12 mon
|
|
