Item 5.02 — DEPARTURE
OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF
CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
OFFICERS
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ITEM 9.01 — FINANCIAL
STATEMENTS AND EXHIBITS
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SIGNATURES
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EXHIBIT
INDEX
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Calpine Cp - Recent Material EventITEM
5.02 — DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
OFFICERS.
(b),
(c) On September 1, 2008, Calpine Corporation (the “Company”)
appointed John B. (Thad) Hill, as Executive Vice President and Chief
Commercial Officer. Mr. Hill will have responsibility for the Company’s
commercial and power operations. He succeeds Todd W. Filsinger, the Company’s
Interim Chief Operating Officer prior to the appointment of Mr. Hill, who
will return to his responsibilities as a Managing Partner at PA Consulting
Group.
Mr. Hill,
40, most recently was Executive Vice President of NRG Energy since
February 2006 and President of NRG Texas since December 2006. Prior to
joining NRG, Mr. Hill was Executive Vice President of Strategy and Business
Development at Texas Genco LLC from 2005 to 2006. From 1995 to 2005,
Mr. Hill was with Boston Consulting Group, Inc., where he rose to Vice
President and Director and led the North American energy practice, serving
companies in the power and gas sector with a focus on commercial and strategic
issues. Mr. Hill received his bachelor of arts degree from Vanderbilt
University and a master of business administration degree from the Amos Tuck
School of Dartmouth College.
In
connection with his appointment as Executive Vice President and Chief Commercial
Officer, Mr. Hill entered into a letter agreement, dated September 1,
2008, with the Company (the “Letter Agreement”). The following is a summary of
the significant terms of the Letter Agreement:
Under the
Letter Agreement, Mr. Hill is entitled to an annual base salary of $600,000
and is eligible for an annual cash target performance bonus equal to 90% of
annual base salary, with a maximum annual performance bonus opportunity of 200%
of base salary. For fiscal 2008, Mr. Hill will receive a prorated bonus
based on the period of his employment and actual achievement of 2008 performance
targets, which prorated bonus is guaranteed to be paid at a minimum of target,
provided he is otherwise eligible for such bonus. The after-tax portion of
Mr. Hill’s annual bonus is subject to a three-year recoupment provision in
the event that he commits a willful and intentional act resulting in a material
restatement of the Company’s earnings. In connection with entering into the
Letter Agreement, Mr. Hill will receive a one-time cash bonus of $1,000,000
to compensate him for the value of equity he forfeited when he left his
prior employment to accept employment with the Company.
Pursuant
to the Letter Agreement, Mr. Hill also was granted a sign-on option to
purchase 1,314,734 shares of common stock of the Company (the “Option”), of
which (i) 1,250,000 shares are granted pursuant to the Company’s 2008 Equity
Incentive Plan (the “Equity Plan”) and (ii) 64,734 shares are granted outside of
the Equity Plan, but are generally subject to the same terms and conditions as
are set forth in the Equity Plan. The Option was granted in four tranches of
262,083, 309,920, 349,705 and 393,026 shares of common stock, with such tranches
having a per share exercise price of $18.00, $21.60, $24.30 and $27.00,
respectively. The Option has a seven year term and each tranche will vest
ratably, subject to continued employment, on the first, second, third, fourth,
and fifth anniversaries of the grant date. If Mr. Hill commits a willful
and intentional act resulting in a material restatement of the Company’s
earnings, the proceeds of the Option will be subject to recoupment by the
Company for a period of three years from the relevant vesting date (and any
affected portion of the Option that has not been exercised at the end of such
three-year period will be forfeited). In addition, the Letter Agreement requires
that Mr. Hill hold shares equal to at least fifty percent of the after tax
proceeds of each Option exercise until he terminates employment with the
Company. In the event of a change in control of the Company, vesting of the
Option will immediately accelerate and the Option will be cashed out in
accordance with the terms set forth in the stock option agreement. If
Mr. Hill’s employment terminates by reason of disability or death, the
Option will vest in full and will remain exercisable for the remainder of the
original term. Vesting of the Option also accelerates if Mr. Hill’s
employment with the Company is terminated by the Company without “cause” or if
Mr. Hill resigns for “good reason,” in which case the portion of the Option
that is scheduled to vest over the thirty-six months immediately following the
date of termination will vest and remain exercisable for a period of two years
following such date (but in no event beyond the original term), and
any remaining
portion of the Option will be forfeited as of the date of such termination. If
Mr. Hill is terminated for “cause,” or if Mr. Hill resigns other than
for “good reason,” he will forfeit any portion of the Option that is
outstanding, whether vested or unvested.
The
Letter Agreement provides that Mr. Hill will be designated as a “Tier 3
Participant” in the Company’s Change in Control and Severance Benefits Plan (the
“Plan”). Under the terms of the Plan, if Mr. Hill is terminated by the
Company without “cause” or if he resigns for “good reason,” he will be entitled
to certain severance payments and benefits, including a lump sum cash severance
payment equal to one and one-half (1.5) times the sum of his base salary and
target bonus, continuation of certain health and welfare benefits for a period
of up to 18 months following the date of termination and outplacement services
for a period of up to 18 months following such termination. If Mr. Hill’s
employment terminates without “cause” or if he resigns for “good reason” during
the 24-month period following a change in control of the Company or within the
six-month period following a potential change in control of the Company,
Mr. Hill generally will be entitled to the same payments and benefits as
set forth in the preceding sentence, except that the applicable severance
multiplier will be three (3) instead of 1.5, and the provision of health and
welfare benefits will continue for a period of up to 36 months following such
termination. The Plan provides that Mr. Hill will be eligible for a
gross-up payment in the event that any amounts under the Plan (or any other
plan, program, policy or arrangement with the Company) become subject to the
“golden parachute” excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”). In addition to the payments and benefits
under the Plan, Mr. Hill’s Letter Agreement provides that he will also be
entitled to a prorated bonus for the year in which his employment with the
Company is terminated without “cause” or he resigns for “good
reason.”
Pursuant
to the Letter Agreement, Mr. Hill has agreed to certain non-solicitation
and non-competition restrictive covenants (which remain in effect during the
term of employment and for 12 months following termination of employment); a
non-disparagement clause; and trade secrets, work product and post-termination
cooperation clauses.
To the
extent applicable, the Letter Agreement is intended to comply with the
provisions of Section 409A of the Code.
The
foregoing description is not complete and is qualified in its entirety by
reference to the full text of the letter agreement between the Company and
Mr. Hill, filed herewith as Exhibit 10.1, and the stock option
agreement between the Company and Mr. Hill, filed herewith as
Exhibit 10.2, each of which are incorporated herein by
reference.
ITEM
9.01 — FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
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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
EXHIBIT
INDEX
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