-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RN9sH589I3vdRnQ6L8temyhAn4i/OTFSYP5tb/KjIfbyloYh6JtqxYLzxSW1ZFp5 ZtbA3yAT8SF1INzJIInydw== 0000916457-05-000027.txt : 20050317 0000916457-05-000027.hdr.sgml : 20050317 20050316214640 ACCESSION NUMBER: 0000916457-05-000027 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050308 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050317 DATE AS OF CHANGE: 20050316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALPINE CORP CENTRAL INDEX KEY: 0000916457 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 770212977 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12079 FILM NUMBER: 05687242 BUSINESS ADDRESS: STREET 1: 50 WEST SAN FERNANDO ST CITY: SAN JOSE STATE: CA ZIP: 95113 BUSINESS PHONE: 4089955115 MAIL ADDRESS: STREET 1: 50 W SAN FERNANDO STREET 2: SUITE 500 CITY: SAN JOSE STATE: CA ZIP: 95113 8-K 1 o30805.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 8, 2005 CALPINE CORPORATION (A Delaware Corporation) Commission file number: 001-12079 I.R.S. Employer Identification No. 77-0212977 50 West San Fernando Street San Jose, California 95113 Telephone: (408) 995-5115 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT Chairman, President and Chief Executive Officer Employment Agreement On March 9, 2005, the Board of Directors (the "Board") of Calpine Corporation (the "Issuer") approved an employment agreement with Peter Cartwright to serve as the Issuer's Chairman, President and Chief Executive Officer. The agreement, attached as Exhibit 10.1 hereto, is made effective as of January 1, 2005, and includes the following provisions: 1. The term of the agreement is two years (until December 31, 2006) and is renewable for three successive one-year terms upon the mutual agreement of the Board and Mr. Cartwright. 2. Mr. Cartwright will receive a minimum base salary of $1,000,000, as adjusted annually by the Compensation Committee and Nominating and Governance Committee of the Board, acting jointly (the "Joint Committee"), and shall be eligible to receive an annual performance bonus as determined by the Joint Committee. Mr. Cartwright's target bonus is 180% of his base salary. 3. Upon signing the agreement, Mr. Cartwright will be granted an option to purchase 1,250,000 shares of common stock pursuant to the Discretionary Option Grant Program of the Issuer's 1996 Stock Incentive Plan, as amended. Such option was granted on March 9, 2005 at an exercise price of $3.80 per share (representing the closing price of Calpine common stock on January 3, 2005). The option has a six-year term and will vest upon the earlier of (i) the Company's common stock closing price equaling at least $10.00 per share for four consecutive trading days and (ii) December 31, 2009. A filing for such equity award was made with the Securities and Exchange Commission on Form 4 on March 10, 2005. 4. Mr. Cartwright shall continue to serve as Chairman of the Board for as long as he continues to be nominated and elected. 5. Mr. Cartwright is entitled to certain severance benefits as set forth in the agreement in the event that (i) Mr. Cartwright resigns for good cause, (ii) the Company terminates his employment other than for cause or (iii) the agreement is not renewed for any of the three one-year renewal terms. The severance benefits include an annual amount equal to the sum of Mr. Cartwright's base salary and target bonus at the time of the termination of his employment, paid for the shorter of (i) two years and (ii) the period from his termination date to December 31, 2009. 6. Disputes under the agreement will be resolved by arbitration. Other Officer Compensation Arrangements On March 8, 2005, the Compensation Committee of the Board approved annual base salary and equity awards of (i) options to purchase common stock under the Discretionary Option Program of the Issuer's 1996 Stock Incentive Plan, as amended, and (ii) performance-based restricted stock under the Stock Issuance Program of the Issuer's 1996 Stock Incentive Plan, as amended, for eligible employees, including Peter Cartwright, Chairman, President and Chief Executive Officer; Ann B. Curtis, Vice Chair, Executive Vice President and Corporate Secretary; Robert D. Kelly, Executive Vice President, Chief Financial Officer and President - Calpine Finance Company; E. James Macias, Executive Vice President; and Thomas R. Mason, Executive Vice President and President - Calpine Power Company. The Compensation Committee of the Board determined not to issue bonus awards for performance in 2004 to the Issuer's executive officers under the Issuer's Management Incentive Plan. The Compensation Committee of the Board made the following approvals:
- --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ 2005 Stock Option 2005 Restricted Stock Executive Officer 2005 Salary (1) 2004 Bonus (2) Grant (3) Grant (4) - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Peter Cartwright, Chairman, President $1,000,000 $0 350,500 406,627 and Chief Executive Officer - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Ann B. Curtis, Vice Chair, $550,000 $0 350,000 124,247 Executive Vice President and Corporate Secretary - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Robert D. Kelly, $530,000 $0 500,000 301,205 Executive Vice President, Chief Financial Officer and President - Calpine Finance Company - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ E. James Macias, $500,000 $0 225,000 112,952 Executive Vice President - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Thomas R. Mason, $500,000 $0 200,000 112,952 Executive Vice President and President - Calpine Power Company - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ (1) No increases for 2005, except that Mr. Kelly will receive an annual base salary of $650,000, effective as of July 1, 2005. (2) Bonus awards payable in 2005 for performance during 2004. (3) Each stock option has an exercise price of $3.32 representing the closing price of Calpine common stock on the New York Stock Exchange on the date of grant. The options have a seven-year term and will vest in a series of four successive equal annual installments upon completion of each year of continued service as a service provider of the Issuer over the four-year period measured from the grant date. (4) The performance-based restricted stock has a purchase price of $3.32 per share representing the closing price of Calpine common stock on the New York Stock Exchange on the date of grant and such purchase price is payable in past services. Each restricted stock grant has an expiration date of December 31, 2009. The performance-based restricted stock vests as follows: 50% shall vest upon such time as the closing selling price of the Issuer's common stock is equal to or greater than $5.00 per share for four consecutive trading days, and 50% shall vest upon such time as the closing selling price of the Issuer's common stock is equal to or greater than $10.00 per share for four consecutive trading days.
The stock options were granted subject to the terms of a stock option agreement, the form of which is attached as Exhibit 10.2 hereto. The restricted stock awards were granted subject to the terms of a restricted stock agreement, the form of which is attached as Exhibit 10.3 hereto. As reported to the Securities and Exchange Commission on applicable Forms 4 on March 10, 2005, Mr. Cartwright and the other executive officers of the Company were granted the performance-based restricted stock and stock option awards described in the table above on March 8, 2005. On March 8, 2005, the Compensation Committee of the Board approved an increase in annual base salary from $530,000 to $650,000 for Robert D. Kelly, Executive Vice President, Chief Financial Officer and President - Calpine Finance Company, effective July 1, 2005. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Businesses Acquired. Not Applicable (b) Pro Forma Financial Information. Not Applicable (c) Exhibits. 10.1 Employment Agreement, effective as of January 1, 2005, between Calpine Corporation and Peter Cartwright 10.2 Form of Stock Option Agreement 10.3 Form of Restricted Stock Agreement 10.4 Base Salary, Bonus, Stock Option Grant and Restricted Stock Summary Sheet SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CALPINE CORPORATION By: /s/ Charles B. Clark, Jr. ------------------------------------ Charles B. Clark, Jr. Senior Vice President, Controller and Chief Accounting Officer Date: March 16, 2005 EXHIBITS 10.1 Employment Agreement, effective as of January 1, 2005, between Calpine Corporation and Peter Cartwright 10.2 Form of Stock Option Agreement 10.3 Form of Restricted Stock Agreement 10.4 Base Salary, Bonus, Stock Option Grant and Restricted Stock Summary Sheet EX-10 2 ex10-1.txt EXHIBIT 10.1 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into effective as of January 1, 2005, between CALPINE CORPORATION, a Delaware Corporation (the "Company"), and PETER CARTWRIGHT ("Mr. Cartwright") to provide the terms and conditions for Mr. Cartwright's employment. Mr. Cartwright has served as the President and Chief Executive Officer of the Company since its inception in 1984 and has served as the Chairman of the Board of Directors of the Company (the "Board") since September 1996. Mr. Cartwright's current employment agreement expires on December 31, 2004. The Company and Mr. Cartwright have agreed that Mr. Cartwright will remain employed by the Company and will continue to serve as the Company's President and Chief Executive Officer, under the terms and conditions set forth below. Accordingly, and in consideration of the mutual obligations set forth in this Agreement, which Mr. Cartwright and the Company agree are sufficient, Mr. Cartwright and the Company agree as follows: 1. Term of Employment. Mr. Cartwright's 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 January 1, 2005, and ends on December 31, 2006. Mr. Cartwright and the Company may agree to renew the Agreement for one or more of three successive one-year terms, as follows: a. On or before June 30, 2006, Mr. Cartwright and the Board shall decide whether to renew the Agreement for the first renewal term, which would begin on January 1, 2007, and end on December 31, 2007. b. If the Agreement is renewed for the first renewal term, Mr. Cartwright and the Board shall decide on or before June 30, 2007, whether to renew the Agreement for a second renewal term, which would begin on January 1, 2008, and end on December 31, 2008. c. If the Agreement is renewed for the second renewal term, Mr. Cartwright and the Board shall decide on or before June 30, 2008, whether to renew the Agreement for a third renewal term, which would begin on January 1, 2009, and end on December 31, 2009. d. If the Agreement is renewed for the third renewal term, Mr. Cartwright's Term of Employment shall end on December 31, 2009, unless the Board and Mr. Cartwright agree to an extension of Mr. Cartwright's employment with the Company. If Mr. Cartwright and the Board decide on or before June 30 of the year preceding any renewal term not to renew the Agreement for such renewal term, Mr. Cartwright's Term of Employment shall end when the current term expires. Page 1 If Mr. Cartwright's Agreement is not renewed for the first, second, or third renewal term, Mr. Cartwright shall continue to be available to serve as Chairman of the Board if he continues to be nominated and elected as such, and shall provide consulting and advisory services to the Company and to the Board to the extent requested by the Company or the Board, in each case through December 31, 2009. Mr. Cartwright shall be entitled to reasonable compensation for such services, as shall be mutually agreed between Mr. Cartwright and the Board. Mr. Cartwright's undertaking to provide continued services to the Board or the Company under this paragraph shall apply only to the extent that the undertaking does not make it necessary to delay the payment of any severance benefit to which he is entitled under paragraph 4, in order to comply with the distribution restrictions imposed by Section 409A of the Internal Revenue Code. During any period in which Mr. Cartwright is obligated to provide continued services to the Company or the Board, Mr. Cartwright shall not provide services to any competitor of the Company. The Board may terminate Mr. Cartwright's employment for Cause at any time after providing Mr. Cartwright with 10 days' advance written notice explaining the circumstances that justify the termination. "Cause" means any of the following: (1) material breach of any material term of this Agreement that is not corrected within 10 days after the Board's written notice to Mr. Cartwright of the breach; (2) conviction of a felony; (3) repeated unexplained or unjustified absence; (4) willful breach of fiduciary duty under this Agreement; or (5) gross negligence or willful misconduct, where the gross negligence or willful misconduct has resulted, or is likely to result, in substantial and material damage to the Company or any of its subsidiaries. Mr. Cartwright may terminate his employment for Good Reason at any time. "Good Reason" means the material breach by the Company of one or more of its material obligations under this Agreement that is not corrected within 10 days after Mr. Cartwright's written notice to the Company of the breach. 2. Position and Responsibilities. During the Term of Employment, Mr. Cartwright shall have the position and responsibilities described in this paragraph 2. Mr. Cartwright shall serve as the Company's Chief Executive Officer, with the general executive powers that accompany that position. He shall report directly to the Board and shall have the duties 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 Mr. Cartwright by the Board. Although Mr. Cartwright may be required to travel from time to time for business reasons, his principal place of employment shall be the Company's corporate offices in San Jose, California. a. Mr. Cartwright shall devote 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. Mr. Cartwright shall continue to serve as the Chairman of the Board for as long as he continues to be nominated and elected. Page 2 c. Mr. Cartwright shall also serve as the Company's President until such time as he and the Board agree to name someone else as President. If someone else is named, all of the provisions of this contract will remain in place. d. While employed by the Company, Mr. Cartwright shall not directly or indirectly manage, operate, participate in, be employed by, perform consulting services for, or otherwise be connected with, any company or other enterprise that would compete with the Company's business. Mr. Cartwright may invest in an entity that competes with the Company's business, provided that Mr. Cartwright and his immediate family members do not own more than one percent of the voting securities of any such entity at any time. e. Mr. Cartwright shall not disclose any confidential information relating to the Company or its business; such information is the exclusive property of the Company. 3. Compensation. For all of his services during the Term of Employment, Mr. Cartwright shall receive the following compensation: a. Base Salary. Mr. Cartwright's minimum Base Salary shall be $1,000,000 per calendar year. The amount of any increase in Mr. Cartwright's Base Salary shall be determined annually, jointly by a Special Joint Meeting of the Nominating and Governance and Compensation Committees of the Board (the "Joint Committee"), in its sole discretion, based on Mr. Cartwright's performance and taking into account salaries paid to other chief executive officers in comparable companies and in the Company's industry. b. Bonus. In addition to his Base Salary, Mr. Cartwright shall be eligible to receive an annual performance bonus if, and to the extent that, any individual or corporate performance objectives established by the Joint Committee are achieved. Mr. Cartwright's Target Bonus shall be at least 180 percent of his Base Salary. The Joint Committee shall determine, in its sole discretion, the extent to which the performance objectives have been achieved. c. Health Care. Mr. Cartwright shall be eligible to participate in any health insurance or health reimbursement plan maintained by the Company for its executives, and his benefits shall be based on the terms of the applicable plan. d. 401(k) Plan. Subject to its terms, Mr. Cartwright shall be eligible to participate in the Calpine Corporation Retirement Savings Plan. e. Vacation. Mr. Cartwright shall be eligible to take 25 paid vacation days per year. These vacation days shall accrue according to the Company's vacation policy for executive officers. f. Equity Programs. Mr. Cartwright shall be eligible to participate in the Company's stock incentive programs and in any other equity program established by the Company for its senior executives. Page 3 g. Option. When Mr. Cartwright signs this Agreement, Mr. Cartwright shall receive an option to purchase one million two hundred and fifty thousand (1,250,000) shares of common stock under the Discretionary Option Grant Program of the Company's 1996 Stock Incentive Plan. This option shall have a term of six years and an exercise price equal to the greater of (i) $3.80 or (ii) the fair market value of the Company's common stock on the date the option is granted, and shall vest upon the earlier of: 1) the stock price closing at or above $10.00 per share (or the corresponding price after adjustment to reflect any stock split, reverse stock split, stock dividend, recapitalization, or similar change affecting the Company's outstanding common stock as a class without the Company's receipt of consideration) for four consecutive trading days, or 2) December 31, 2009. Except as provided below in the case of Disability (paragraph 3.h), death (paragraph 3.i), or severance (paragraph 4.c), Mr. Cartwright shall forfeit the option if he ceases to be employed as the Company's Chief Executive Officer before the option vests. h. Disability Benefits. If Mr. Cartwright becomes Disabled (as defined below) while he is an active employee of the Company, the Company shall continue to pay his Base Salary until his employment terminates as provided in the next sentence; and the Company shall also pay Mr. Cartwright a pro rata portion of his annual Target Bonus for the portion of the calendar year before his Disability. If Mr. Cartwright remains Disabled for a continuous period exceeding six calendar months, the Company may terminate his employment at any time after the end of the six-month period, in which case Mr. Cartwright shall be eligible for any long-term disability benefits provided under the Company's employee benefit plans; for full vesting of any unvested option described in paragraph 3.g, above; and for the severance benefits described in paragraph 4, below. For purposes of this Agreement, Mr. Cartwright shall be "Disabled" if he is unable to perform all the material duties of his position, as determined by an independent physician approved by the Company and Mr. Cartwright; and "Disability" shall mean a period during which Mr. Cartwright remains Disabled. i. Death Benefits. Subject to its terms, Mr. Cartwright shall be eligible to participate in the Company's group life insurance program. If Mr. Cartwright dies while he is employed by the Company, any unvested option described in paragraph 3.g, above, shall become fully vested at the time of his death, and the option may be exercised by his beneficiary or personal representative at any time during its remaining term. Unless Mr. Cartwright has executed a valid written instrument designating a beneficiary or beneficiaries to receive any benefit payable under this Agreement in the event of his death, his beneficiary under this Agreement shall be deemed to be the same as his beneficiary under the Company's group life insurance program. Page 4 4. Severance. Mr.Cartwright shall receive the severance benefit described in this paragraph 4 if the Company terminates Mr. Cartwright's employment at any time during the Term of Employment or if this Agreement is not renewed for the first, second, or third renewal term (and the termination or failure to renew is not for Cause), or if Mr. Cartwright resigns for Good Reason. a. Amount and Payment Schedule. Mr. Cartwright's severance benefit shall be an annual amount equal to the sum of his annual Base Salary and Target Bonus as of the date his employment terminates, paid for the shorter of (i) two years or (ii) the period from his termination date to December 31, 2009. For purposes of this paragraph, Mr. Cartwright's employment shall be deemed to have terminated at the end of his Term of Employment even if he remains obligated to provide continued services as Chairman of the Board or continued consulting and advisory services as provided in paragraph 1. Subject to the timing rule described in paragraph 4.b, below, and the special rule in case of death described in paragraph 4.d, below, the severance benefit shall be paid ratably on the same payment schedule that applied to Mr. Cartwright's salary at the time of his termination. b. Timing. To the extent necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code concerning payments to specified employees, the first severance payment to Mr. Cartwright shall be made on the first installment date (determined under paragraph 4.a, above) that is at least six months after Mr. Cartwright's termination date. The first payment shall include any installments that would have been paid previously under paragraph 4.a 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 Internal Revenue Code on his termination date). c. Other Severance Benefits. If Mr. Cartwright is entitled to receive a severance benefit under paragraph 4.a as a result of his termination, he shall also receive the following benefits: 1. All stock options, restricted stock, warrants, rights, and other equity awards granted by the Company (including the option described in paragraph 3.g) shall vest and remain exercisable through their initial terms. 2. Until December 31, 2009, the Company shall at its sole cost and expense (but disregarding any individual tax liability of Mr. Cartwright) provide Mr. Cartwright (and his spouse and eligible dependents) with life insurance, disability insurance, group health benefits, and accidental death or dismemberment benefits substantially similar to those benefits that Mr. Cartwright (and his spouse and eligible dependents) were receiving immediately before his termination. If Mr. Cartwright (or his spouse or dependent) elects to receive health care continuation coverage under Section 4980B of the Internal Revenue Code, that coverage shall be in lieu of, and not in addition to, the group health coverage described in this subparagraph. Page 5 3. If all or any portion of the amounts payable to Mr. Cartwright under this Agreement or otherwise are subject to the golden parachute excise tax imposed by Section 4999 of the Internal Revenue Code (or any similar tax under state or local law), the Company shall pay Mr. Cartwright an amount necessary to place Mr. Cartwright in the same after-tax position that Mr. Cartwright would have been in if the excise tax had not been imposed. The amount of the additional payment shall be determined by the Company's independent accountants. d. No Severance After Death. If Mr. Cartwright qualifies for a severance benefit under paragraph 4.a but he dies before the last severance payment is made, any remaining severance payments under paragraph 4.a shall be canceled and his beneficiary (or beneficiaries) shall receive any benefit payable under paragraph 3.i. e. No Severance Benefit for Termination for Cause or Voluntary Termination. If the Company terminates Mr. Cartwright's employment for Cause, or if Mr. Cartwright resigns (and his resignation is not for Good Reason), Mr. Cartwright shall not be eligible to receive any severance benefit under this paragraph 4. Mr. Cartwright's eligibility (if any) to receive a severance or retirement benefit under any other severance or retirement plan or program maintained by the Company shall be determined by the terms of that plan or program as in effect on his termination date. 5. Employment Taxes. All payments and other compensation under this Agreement shall be subject to withholding of the applicable income and employment taxes. At the same time, however, Mr. Cartwright is solely responsible for paying all required taxes on any payments or other compensation provided under this Agreement (including imputed compensation), regardless of whether taxes are withheld. 6. Nonduplication of Benefits. No term or other provision of this Agreement may be interpreted to require the Company to duplicate any payment or other compensation that Mr. Cartwright is already entitled to receive under a compensation or benefit plan, program, or other arrangement maintained by the Company. 7. Indemnification. To the extent permitted by applicable law, the Companyshall provide indemnification for Mr. Cartwright under its Articles of Incorporation and Bylaws. Mr. Cartwright shall be covered by the Company's standard indemnification agreement and by any director's and officer's liability insurance policy maintained by the Company. 8. Successors. Any successor to the Company or to all or substantially all of the Company's business and/or assets (whether a direct or indirect successor, and whether by purchase, lease, merger, consolidation, liquidation, or otherwise) shall assume the obligations under this Agreement. In case of any succession, the term "Company" shall refer to the successor. The terms of this Agreement and all of Mr. Cartwright's rights hereunder shall inureto the benefit of, and be enforceable by, Mr. Cartwright's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. Page 6 9. No Third-Party Beneficiaries. Except as provided in paragraph 8, above, nothing in this Agreement may confer upon any person or entity not a party to this Agreement any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement. 10. No Duty to Mitigate. Mr. Cartwright shall not be required to seek new employment or otherwise to mitigate the payments contemplated by this Agreement. The payments contemplated by this Agreement shall not be reduced by earnings that Mr. Cartwright may receive from any other source. 11. Notice. Notices and other communications between the parties to this Agreement shall be delivered in writing and shall be deemed to have been given when personally delivered or on the third business day after mailing by U.S. registered or certified mail, return receipt requested and postage prepaid. a. Notices and other communications to Mr. Cartwright shall be addressed to Mr. Cartwright, at the most recent home address that he provided in writing to the Company. b. Notices and other communications to the Company shall be addressed to the Company's corporate headquarters, to the attention of the Company's Secretary. 12. Waiver and Amendments. No provision of this Agreement may be modified, waived, or discharged, unless the modification, waiver, or discharge is agreed to in writing signed by Mr. Cartwright and by an authorized representative of the Company (other than Mr. Cartwright). Unless specifically characterized as a continuing waiver, no waiver of a condition or provision at any one time may be considered a waiver of the same provision or condition (or any different provision or condition) at any other time. 13. Agreement to Arbitrate. Any dispute arising out of or relating to this Agreement, or otherwise arising out of or relating to Mr. Cartwright's employment with the Company, may be settled by arbitration in the County of Santa Clara, California, using the rules of the American Arbitration Association then in effect. Any arbitration proceedings shall be non-binding: any claim with respect to this Agreement, whether or not previously arbitrated, may be brought in any court of competent jurisdiction. 14. Choice of Law. This Agreement (including its validity, interpretation, construction, and performance) shall be governed by the laws of the State of California, without regard to any rule or principle concerning conflicts or choice of law that might otherwise refer construction or interpretation to the substantive law of another jurisdiction. 15. Section Headings. All headings in this Agreement are inserted for convenience only. Headings do not constitute a part of the Agreement and may not affect the meaning or interpretation of any term or other provision of this Agreement. Page 7 16. Severability and Reformation. Each substantive provision of this Agreement is a separate agreement, independently supported by good and adequate consideration, and is severable from the other provisions of the Agreement. If a court of competent jurisdiction determines that any term or provision of this Agreement is unenforceable, then the other terms and provisions of this Agreement shall remain in full force and effect, and the unenforceable terms or provisions shall be equitably modified to the extent necessary to achieve the underlying purpose in an enforceable way. 17. Whole Agreement. This Agreement reflects the entire understanding and agreement between the Company and Mr. Cartwright regarding Mr. Cartwright's employment. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings, and agreements (including without limitation the employment agreement between the Company and Mr. Cartwright that was entered into effective as of January 1, 2000), whether oral or written, relating to Mr. Cartwright's employment with the Company. The respective rights and obligations of the parties to this Agreement shall survive the termination of Mr. Cartwright's employment to the extent necessary to give such rights and obligations their intended effect. 18. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute a single instrument. * * * IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement on March 9, 2005. CALPINE CORPORATION: By: /s/ Jeffrey E. Garten /s/ Peter Cartwright --------------------------------- ----------------------------------- Jeffrey E. Garten Peter Cartwright, in his individual Chair of the Compensation capacity Committee of the Board of Directors By: /s/ Susan C. Schwab --------------------------------- Susan C. Schwab Chair of the Nominating and Governance Committee of the Board of Directors Page 8 EX-10 3 ex10-2.txt EXHIBIT 10.2 - -------------------------------------------------------------------------------- Calpine Corporation Notice of Grant of Stock Options ID: 77-0212977 and Option Agreement 50 West San Fernando Street Suite 550 San Jose, California 95113 - -------------------------------------------------------------------------------- Name Option Number: Address Plan: 1996 - -------------------------------------------------------------------------------- Effective __________, you have been granted a __________ Stock Option to buy __________ shares of Calpine Corporation (the Company) stock at $_______ per share. The total option price of the shares granted is $ . Shares in each period will become fully vested on the date shown. Shares Vest Type Full Vest Expiration - -------------------------------------------------------------------------------- By your signature and the Company's signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company's Stock Option Plan, as amended, and the Option Agreement, all of which are attached and made a part of this document. - -------------------------------------------------------------------------------- ________________________________________ ______________________________ Calpine Corporation Date ________________________________________ ______________________________ Name Date CALPINE CORPORATION FORM OF STOCK OPTION AGREEMENT RECITALS A. The Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or of the board of directors of any Parent or Subsidiary and consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). B. Optionee is to render valuable services to the Corporation (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation's grant of an option to Optionee. C. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. The Corporation hereby grants to Optionee, as of the Grant Date, an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at the Exercise Price. 2. Option Term. This option shall have a maximum term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6. 3. Limited Transferability. This option shall be neither transferable nor assignable by Optionee other than by will or by the laws of descent and distribution following Optionee's death and may be exercised, during Optionee's lifetime, only by Optionee. However, if this option is designated a Non-Statutory Option in the Grant Notice, then this option may be assigned in whole or in part during Optionee's lifetime either as (a) as a gift to one or more members of Optionee's Immediate Family, to a trust in which Optionee and/or one or more such family members hold more than fifty percent (50%) of the beneficial interest or an entity in which more than fifty percent (50%) of the voting interests are owned by Optionee and/or one or more such family members, or (b) pursuant to a domestic relations order. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. 4. Dates of Exercise. This option shall become exercisable for the Option Shares in one or more installments as specified in the Grant Notice. As the option becomes exercisable for such installments, those installments shall accumulate and the option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 5 or 6. 5. Cessation of Service. The option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable: (a) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability, Retirement, or Misconduct) while this option is outstanding, then Optionee shall have a period of three (3) months (commencing with the date of such cessation of Service) during which to exercise this option, but in no event shall this option be exercisable at any time after the Expiration Date. (b) If Optionee dies while this option is outstanding, then the personal representative of Optionee's estate or the person or persons to whom the option is transferred pursuant to Optionee's will or in accordance with the laws of descent and distribution shall have the right to exercise this option. Such right shall lapse, and this option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)- month period measured from the date of Optionee's death or (ii) the Expiration Date. (c) Should Optionee cease Service by reason of Permanent Disability while this option is outstanding, then Optionee shall have a period of twelve (12) months (commencing with the date of such cessation of Service) during which to exercise this option. In no event shall this option be exercisable at any time after the Expiration Date. (d) Should Optionee cease Service by reason of Retirement while this option is outstanding, then Optionee shall have the life of the option during which to exercise this option. In no event shall this option be exercisable at any time after the Expiration Date. (e) If the Optionee has completed at least twelve (12) months of Service after the Grant Date and then ceased Service by reason of Retirement, this option shall become immediately vested and fully exercisable for all Option Shares (including Option Shares not previously vested) during the limited period of post-Service exercisability. If the Optionee ceased Service in any circumstances other than those described in the preceding sentence, this option may not be exercised in the aggregate during the limited period of post-Service exercisability for more than the number of vested Option Shares for which the option is exercisable at the time of Optionee's cessation of Service. Upon the expiration of such limited exercise period or (if earlier) upon the Expiration Date, this option shall terminate and cease to be outstanding for any vested Option Shares for which the option has not been exercised. However, this option shall, immediately upon Optionee's cessation of Service for any reason other than Retirement as described in the first sentence of this paragraph, terminate and cease to be outstanding with respect to any Option Shares in which Optionee is not otherwise at that time vested or for which this option is not otherwise at that time exercisable. (f) Should Optionee's Service be terminated for Misconduct, then this option shall terminate immediately and cease to remain outstanding. 6. Special Acceleration of Option. (a) This option, to the extent outstanding at the time of a Corporate Transaction but not otherwise fully exercisable, shall automatically accelerate so that this option shall, immediately prior to the effective date of 2. the Corporate Transaction, become exercisable for all of the Option Shares at the time subject to this option and may be exercised for any or all of those Option Shares as fully-vested shares of Common Stock. No such acceleration of this option, however, shall occur if and to the extent: (i) this option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof) or (ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested Option Shares at the time of the Corporate Transaction (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and provides for subsequent pay-out in accordance with the same option exercise/vesting schedule set forth in the Grant Notice. The determination of option comparability under clause (i) shall be made by the Plan Administrator, and such determination shall be final, binding and conclusive. (b) Immediately following the Corporate Transaction, this option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) in connection with the Corporate Transaction. (c) If this option is assumed in connection with a Corporate Transaction, then this option shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. (d) This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 7. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option and (ii) the Exercise Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 8. Stockholder Rights. The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased shares. 9. Manner of Exercising Option. (a) In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising the option) must take the following actions: 3. (i) Execute and deliver to the Corporation a Notice of Exercise for the Option Shares for which the option is exercised. (ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms: (A) cash or check made payable to the Corporation; (B) [deleted] (C) shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or (D) to the extent the option is exercised for vested Option Shares, through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable written instructions (I) to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (II) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. Except to the extent the sale and remittance procedure is utilized in connection with the option exercise, payment of the Exercise Price must accompany the Notice of Exercise delivered to the Corporation in connection with the option exercise. (iii) Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option. (iv) Make appropriate arrangements with the Corporation (or Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state and local income and employment tax withholding requirements applicable to the option exercise. (b) As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto. (c) In no event may this option be exercised for any fractional shares. 4. 10. Compliance with Laws and Regulations. (a) The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance. (b) The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals. 11. Successors and Assigns. Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee's assigns and the legal representatives, heirs and legatees of Optionee's estate. 12. Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee's signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. 13. [Deleted]. 14. Construction. This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option. 15. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules. 16. Excess Shares. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this option shall be void with respect to those excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. 5. 17. Additional Terms Applicable to an Incentive Option. In the event this option is designated an Incentive Option in the Grant Notice, the following terms and conditions shall also apply to the grant: (a) This option shall cease to qualify for favorable tax treatment as an Incentive Option if (and to the extent) this option is exercised for one or more Option Shares: (i) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability or (ii) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability. (b) No installment under this option shall qualify for favorable tax treatment as an Incentive Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or any other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this option shall nevertheless become exercisable for the excess shares in such calendar year as a Non-Statutory Option. (c) Should the exercisability of this option be accelerated upon a Corporate Transaction, then this option shall qualify for favorable tax treatment as an Incentive Option only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this option first becomes exercisable in the calendar year in which the Corporate Transaction occurs does not, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or one or more other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar year of such Corporate Transaction, the option may nevertheless be exercised for the excess shares in such calendar year as a Non-Statutory Option. (d) Should Optionee hold, in addition to this option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this option, then the foregoing limitations on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 18. Leave of Absence. The following provisions shall apply upon the Optionee's commencement of an authorized leave of absence: (a) The exercise schedule in effect under the Grant Notice shall be frozen as of the first day of the authorized leave, and this option shall not become exercisable for any additional installments of the Option Shares during the period Optionee remains on such leave. 6. (b) Should Optionee resume active Employee status within sixty (60) days after the start date of the authorized leave, Optionee shall, for purposes of the exercise schedule set forth in the Grant Notice, receive Service credit for the entire period of such leave. If Optionee does not resume active Employee status within such sixty (60)-day period, then no Service credit shall be given for the period of such leave. (c) If the option is designated as an Incentive Option in the Grant Notice, then the following additional provision shall apply: If the leave of absence continues for more than three (3) months, then this option shall automatically convert to a Non-Statutory Option under the Federal tax laws at the end of the three (3)-month period measured from the ninety-first (91st) day of such leave, unless the Optionee's reemployment rights are guaranteed by statute or by written agreement. Following any such conversion of the option, all subsequent exercises of such option, whether effected before or after Optionee's return to active Employee status, shall result in an immediate taxable event, and the Corporation shall be required to collect from Optionee the Federal, state and local income and employment withholding taxes applicable to such exercise. (d) In no event shall this option become exercisable for any additional Option Shares or otherwise remain outstanding if Optionee does not resume Employee status prior to the Expiration Date of the option term. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 7. EXHIBIT I NOTICE OF EXERCISE I hereby notify Calpine Corporation (the "Corporation") that I elect to purchase ____________ shares of the Corporation's Common Stock (the "Purchased Shares") at the option exercise price of $____________ per share (the "Exercise Price") pursuant to that certain option (the "Option") granted to me under the Corporation's 1996 Stock Incentive Plan on __________________, ______. Concurrently with the delivery of this Exercise Notice to the Corporation, I shall hereby pay to the Corporation the Exercise Price for the Purchased Shares in accordance with the provisions of my agreement with the Corporation (or other documents) evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. Alternatively, I may utilize the special broker-dealer sale and remittance procedure specified in my agreement to effect payment of the Exercise Price. ________________________, _____ Date _________________________________________ Optionee Address: ________________________________ _________________________________________ Print name in exact manner it is to appear on the stock certificate: _________________________________________ Address to which certificate is to be sent, if different from address above: _________________________________________ Social Security Number: Employee Number: _________________________________________ APPENDIX The following definitions shall be in effect under the Agreement: A. Agreement shall mean this Stock Option Agreement. B. Board shall mean the Corporation's Board of Directors. C. Code shall mean the Internal Revenue Code of 1986, as amended. D. Common Stock shall mean the Corporation's common stock. E. Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. F. Corporation shall mean Calpine Corporation, a Delaware corporation. G. Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. H. Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement. I. Exercise Price shall mean the exercise price per share as specified in the Grant Notice. J. Expiration Date shall mean the date on which the option expires as specified in the Grant Notice. K. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as the price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. A-1. (ii)If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. L. Grant Date shall mean the date of grant of the option as specified in the Grant Notice. M. Grant Notice shall mean the Notice of Grant of Stock Option accompanying the Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby. N. Immediate Family of Optionee shall mean Optionee's child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister in law, including adoptive relationships. O. Incentive Option shall mean an option which satisfies the requirements of Code Section 422. P. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by Optionee adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of Optionee or any other individual in the Service of the Corporation (or any Parent or Subsidiary). Q. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. R. Notice of Exercise shall mean the notice of exercise in the form attached hereto as Exhibit I. S. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice. T. Optionee shall mean the person to whom the option is granted as specified in the Grant Notice. A-2. U. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. V. Permanent Disability shall mean the inability of Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or has lasted or can be expected to last for a continuous period of twelve (12) months or more. W. Plan shall mean the Corporation's 1996 Stock Incentive Plan, as amended fro time to time. X. Plan Administrator shall mean either the Board or a committee of the Board acting in its administrative capacity under the Plan. Y. Retirement shall mean voluntary termination of Service by the Optionee after meeting either of the following criteria: (i) attainment of age 60 and completion of 10 years of Service, or (ii) attainment of age 55 and completion of a number of years of Service that, when added to current age, equals at least 70. Z. Service shall mean the Optionee's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor. AA. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. AB. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A-3. EX-10 4 ex10-3.txt EXHIBIT 10.3 - -------------------------------------------------------------------------------- Calpine Corporation Notice of Grant of Restricted Stock and ID: 77-0212977 Restricted Stock Agreement 50 West San Fernando Street Suite 550 San Jose, California 95113 - -------------------------------------------------------------------------------- - ---------------------------------------- ---------------------------------- Name of Grant Recipient - ---------------------------------------- ---------------------------------- Address - ---------------------------------------- ---------------------------------- Date of Grant - ---------------------------------------- ---------------------------------- Plan from which Award Is Made 1996 Stock Incentive Plan - Stock Issuance Program - ---------------------------------------- ---------------------------------- Number of Shares Granted - ---------------------------------------- ---------------------------------- Grant Expiration Date - ---------------------------------------- ---------------------------------- Vesting Schedule: - -------------------------- ------------------------------------------------ Percent Vested Vesting Event - -------------------------- ------------------------------------------------ - -------------------------- ------------------------------------------------ By your signature and the Company's signature below, you and the Company agree that these shares of restricted stock are granted under and governed by the terms and conditions of the Plan specified above and the Restricted Stock Agreement attached to this document. - --------------------------------- ------------------------------ Calpine Corporation Date - --------------------------------- ------------------------------ Recipient Date CALPINE CORPORATION 1996 STOCK INCENTIVE PLAN FORM OF RESTRICTED STOCK AGREEMENT RECITALS A. The Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or of the board of directors of any Parent or Subsidiary, and consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). B. The Participant has rendered and is to render valuable services to the Corporation (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation's grant of restricted stock to the Participant. C. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Restricted Stock The Corporation hereby grants to the Participant, as of the Grant Date, the number of shares of Common Stock specified in the Grant Notice, subject to the restrictions stated in the Grant Notice. The Purchase Price of the restricted stock shall be the Fair Market Value per share of Common Stock on the date of grant and is payable in past services, unless otherwise specified in the Grant Notice. 2. Stockholder Rights The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under this Agreement, whether or not the Participant's interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. Any dividend payable with respect to unvested Common Stock shall be paid to the Participant no later than 2 1/2 months after the end of the calendar year in which the record date for the dividend occurs. 3. Additional Property Any new, substituted, or additional securities or other property (including money paid other than as a regular cash dividend) that the Participant receives with respect to the Participant's unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares, or similar event shall be issued subject to the same vesting requirements and other restrictions that are applicable to the Participant's unvested shares of Common Stock under this Agreement. 4. Vesting and Forfeiture (a) The shares of Common Stock granted under this Agreement shall vest in one or more installments when the conditions specified in the Grant Notice are satisfied, unless the shares are previously forfeited as provided below. (b) If the Participant's Service terminates for any reason other than death, Permanent Disability, or Retirement, the Participant shall forfeit any shares that have not vested when the Participant's Service terminates, except as provided in the Grant Notice. (c) If the Participant's Service terminates as a result of the Participant's death, the shares of Common Stock granted under this Agreement that have not vested when the Participant dies shall remain outstanding until the earlier of (i) the expiration of the twelve (12)- month period measured from the date of the Participant's death or (ii) the date on which the grant expires. (d) If the Participant's Service terminates as a result of the Participant's Permanent Disability, the shares of Common Stock granted under this Agreement that have not vested when the Participant becomes Permanently Disabled shall remain outstanding until the earlier of (i) the expiration of the twelve (12)- month period measured from the date the Participant becomes Permanently Disabled or (ii) the date on which the grant expires. (e) If the Participant's Service terminates as a result of the Participant's Retirement, the shares of Common Stock granted under this Agreement that have not vested when the Participant Retires shall remain outstanding until the date the grant expires. (f) The Participant shall immediately surrender any forfeited shares to the Corporation for cancellation, and shall have no further stockholder rights with respect to those shares. To the extent the Participant paid cash or cash equivalent for the shares when they were awarded, the Corporation shall return to the Participant the consideration paid for the surrendered shares (or, if less, the fair market value of the shares on the date when they are surrendered). 5. No Transfer or Assignment While the shares of Common Stock granted under this Agreement remain unvested, the shares shall be neither transferable nor assignable by the Participant. Calpine shall not be required to transfer on its books any of the shares of Common Stock that the Participant has attempted to sell or transfer in violation of any of the provisions set forth in this Agreement, or to treat as the owner of such shares of Common Stock any person or entity to whom the Participant has attempted to sell or transfer the shares. -2- 6. Escrow or Restrictive Legends Unvested shares may, in the Plan Administrator's discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests, or may be issued directly to the Participant with the following restrictive legend: "These shares of Common Stock have been issued or transferred subject to a Restricted Stock Agreement between Calpine and the registered owner of such shares, and are subject to substantial restrictions, including (but not limited to) a prohibition against transfer, either voluntary or involuntary, and a provision requiring the transfer of these shares to Calpine without any payment in the event of the registered owner's termination of service, all as more particularly set forth in the aforementioned Restricted Stock Agreement, a copy of which is on file with Calpine and its transfer agent." When the shares of Common Stock granted under this Agreement vest, the Participant may tender to Calpine the certificates containing the legend described above and receive new certificates not containing this legend. 7. Withholding As a condition to the delivery of a certificate for shares of Common Stock subject to this Agreement that bear no legend (or, if the Participant makes the election permitted by Section 83(b) of the Internal Revenue Code, as a condition to the initial delivery of a certificate for shares of Common Stock bearing such legend), Calpine may, by notice to the Participant, require that Calpine be paid the amount of any federal, state, or local taxes required by law to be withheld. 8. Corporate Transaction All of the shares of Common Stock granted under this Agreement shall immediately vest in full in the event of any Corporate Transaction, except to the extent the Corporation's rights and obligations under this Agreement are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction. The Corporation may assign its rights under this Agreement to a successor corporation (or the parent thereof) without the consent of the Participant. 9. Notices Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address indicated in the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. -3- 10. Construction This Agreement and the restricted stock award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this award. 11. Governing Law The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules. 12. Excess Shares If the shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this award shall be void with respect to those excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. 13. Amendment Calpine may revoke this Agreement at any time with respect to unvested shares of Common Stock if Calpine determines that the Agreement is contrary to law; and, in that event, Calpine may give notice to the Participant that the unvested shares of Common Stock subject to the Agreement are to be delivered to Calpine as though the Participant's Service with Calpine had terminated on the date of the notice. Calpine may also modify this Agreement to the extent necessary to bring the Agreement and the issuance or transfer of the shares of Common Stock into compliance with any applicable law or regulation now or hereafter promulgated by any governmental agency, including, but not limited to, the provisions in Section 409A of the Internal Revenue Code governing deferred compensation. By entering into this Agreement and accepting the issuance or transfer of shares of Common Stock under this Agreement, the Participant agrees that, upon request in writing by Calpine, the Participant will tender any certificates for shares of Common Stock subject to this Agreement for amendment of the legend or for change in the number of shares of Common Stock issued or transferred as Calpine deems necessary in light of the amendment to this Agreement. Except as otherwise provided in the first two sentences of this Section 13 or in the Plan, the Plan Administrator shall obtain the Participant's consent before it amends this Agreement in a manner that significantly reduces the Participant's rights or benefits under this Agreement. 14. Waiver The waiver by Calpine or the Plan Administrator of any vesting condition or other provision of this Agreement at any time or for any purpose shall not operate as, or be construed to be, a waiver of the same or any other provision of this Agreement at any subsequent time or for any other purpose. -4- APPENDIX The following definitions shall be in effect under the Agreement: A. Agreement shall mean this Restricted Stock Agreement. B. Board shall mean the Corporation's Board of Directors. C. Common Stock shall mean the Corporation's common stock. D. Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. E. Corporation shall mean Calpine Corporation, a Delaware corporation. F. Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. G. Grant Date shall mean the date of grant of the restricted stock as specified in the Grant Notice. H. Grant Notice shall mean the Notice of Grant of Restricted Stock accompanying the Agreement, pursuant to which the Participant has been informed of the basic terms of the restricted stock award evidenced hereby. The Grant Notice shall be part of the Agreement, and shall be subject to all of the terms and conditions stated in the Agreement and in the Plan. I. Participant shall mean the person to whom the restricted stock award is granted as specified in the Grant Notice. J. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. -5- K. Permanent Disability shall mean the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or has lasted or can be expected to last for a continuous period of twelve (12) months or more. L. Plan shall mean the Corporation's 1996 Stock Incentive Plan. M. Plan Administrator shall mean either the Board or a committee of the Board acting in its administrative capacity under the Plan. N. Retirement shall mean voluntary termination of Service by the Participant after meeting either of the following criteria: (i) attainment of age 60 and completion of 10 years of Service, or (ii) attainment of age 55 and completion of a number of years of Service that, when added to current age, equals at least 70. O. Service shall mean the Participant's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors, or a consultant or independent advisor. P. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. -6- SECTION 83(b) ELECTION 1. Nature of Election. The undersigned hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986 and Treasury Regulation ss. 1.83-2, to include the value of the restricted property described below in gross income in the year of transfer. 2. Identity of Taxpayer. Name: Address: Taxpayer Identification Number: 3. Description of Property. This election is made with respect to _______________ shares of the common stock of Calpine Corporation. 4. Date of Award. The property covered by this election was transferred to the taxpayer on March 8, 2005. 5. Taxable Year of Election. This election relates to calendar year 2005. 6. Nature of Restrictions. The property covered by this election is subject to the following restrictions: If the taxpayer's service with Calpine Corporation terminates before the vesting conditions specified in the award agreement have been satisfied, Calpine Corporation has the right to repurchase the shares at a price per share equal to the lower of (1) the purchase price per share paid by the taxpayer, or (2) the fair market value of the shares on the repurchase date. 7. Fair Market Value of Property. The fair market value of the property on the date when it was transferred to the taxpayer was $3.32 per share. This fair market value is determined without regard to any restrictions other than restrictions that, by their terms, will never lapse. 8. Amount Paid for Property. The taxpayer paid $______________ per share for the property covered by this election. 9. Statement to Employer. The taxpayer received the property covered by this election in connection with services that the taxpayer has performed or will perform for Calpine Corporation. The taxpayer has furnished a copy of this statement to Calpine Corporation. Date:___________________________ Signature:__________________________ File the original of this statement with the Internal Revenue Service office where you file your tax return not later than 30 days after the date on which you received a restricted stock award, and provide a copy of the statement to Calpine. Attach a copy of this statement to your tax return for the year in which you received the restricted stock award. EX-10 5 ex10-4.txt EXHIBIT 10.4 Base Salary, Bonus, Stock Option Grant and Restricted Stock Summary Sheet
- --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ 2005 Stock Option 2005 Restricted Stock Executive Officer 2005 Salary (1) 2004 Bonus (2) Grant (3) Grant (4) - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Peter Cartwright, Chairman, President $1,000,000 $0 350,500 406,627 and Chief Executive Officer - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Ann B. Curtis, Vice Chair, $550,000 $0 350,000 124,247 Executive Vice President and Corporate Secretary - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Robert D. Kelly, $530,000 $0 500,000 301,205 Executive Vice President, Chief Financial Officer and President - Calpine Finance Company - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ E. James Macias, $500,000 $0 225,000 112,952 Executive Vice President - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ Thomas R. Mason, $500,000 $0 200,000 112,952 Executive Vice President and President - Calpine Power Company - --------------------------------------- ------------------- ----------------------- ------------------- ------------------------ (1) No increases for 2005, except that Mr. Kelly will receive an annual base salary of $650,000, effective as of July 1, 2005. (2) Bonus awards payable in 2005 for performance during 2004. (3) Each stock option has an exercise price of $3.32 representing the closing price of Calpine common stock on the New York Stock Exchange on the date of grant. The options have a seven-year term and will vest in a series of four successive equal annual installments upon completion of each year of continued service as a service provider of the Issuer over the four-year period measured from the grant date. (4) The performance-based restricted stock has a purchase price of $3.32 per share representing the closing price of Calpine common stock on the New York Stock Exchange on the date of grant and such purchase price is payable in past services. Each restricted stock grant has an expiration date of December 31, 2009. The performance-based restricted stock vests as follows: 50% shall vest upon such time as the closing selling price of the Issuer's common stock is equal to or greater than $5.00 per share for four consecutive trading days, and 50% shall vest upon such time as the closing selling price of the Issuer's common stock is equal to or greater than $10.00 per share for four consecutive trading days.
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