<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Calpine Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
-------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------
3) Filing party:
-----------------------------------------------------
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4) Date filed:
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<PAGE> 2
CALPINE LOGO
CALPINE CORPORATION
50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
------------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
Calpine Corporation, a Delaware corporation (the "Company"), will be held at the
Silicon Valley Athletic Club, located at 196 North Third Street, San Jose, CA
95112, at 9:00 a.m., Pacific Time, on May 27, 1998, for the purpose of
considering and voting upon the following matters:
1. To elect two (2) Class II Directors to the Board of Directors, each to
serve for a term of three years;
2. To ratify the selection of Arthur Andersen LLP as independent
accountants for the Company for the year ending December 31, 1998; and
3. To transact such other business as may properly come before the meeting
and any adjournments or postponement thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
Only stockholders of record at the close of business on April 15, 1998 are
entitled to notice of and to vote at the 1998 Annual Meeting of Stockholders and
at any and all adjournments or postponements thereof. A list of stockholders
entitled to vote at the meeting will be available for inspection at the office
of the Secretary of the Company, 50 West San Fernando Street, San Jose, CA
95113, for at least ten days prior to the meeting, and will also be available
for inspection at the meeting.
Representation of at least a majority of all outstanding shares of Common
Stock of the Company is required to constitute a quorum. Accordingly, it is
important that your shares be represented at the meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. Should you receive more than one
proxy because your shares are registered in different names and addresses, each
proxy should be signed and returned to assure that all your shares will be
voted. Your proxy may be revoked at any time prior to the time it is voted.
Please read the proxy material carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
By Order of the Board of Directors
/s/ PETER CARTWRIGHT
Peter Cartwright
Chairman of the Board, President
and Chief Executive Officer
April 22, 1998
San Jose, CA
<PAGE> 3
CALPINE CORPORATION
50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
------------------------
PROXY STATEMENT
FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
OF
CALPINE CORPORATION
TO BE HELD ON MAY 27, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is being furnished to the stockholders of Calpine
Corporation, a Delaware corporation ("Calpine" or the "Company"), in connection
with the solicitation of proxies by the Board of Directors for use at the 1998
Annual Meeting of Stockholders of the Company, to be held at 9:00 a.m., Pacific
Time, on May 27, 1998, at the Silicon Valley Athletic Club, 196 North Third
Street, San Jose, CA 95112, and at any and all adjournments or postponements
thereof. At the 1998 Annual Meeting of Stockholders, the stockholders of the
Company are being asked to consider and vote upon (i) the election of two Class
II Directors, each to serve for a term of three years, and (ii) a proposal to
ratify the appointment of the Company's independent accountants for the year
ending December 31, 1998.
This Proxy Statement and the enclosed form of proxy are first being mailed
to stockholders of the Company on or about April 22, 1998. The Company's 1997
Annual Report to Stockholders, which includes audited financial statements, is
being mailed to stockholders of the Company concurrently with this Proxy
Statement. Additional copies are available without charge upon request. The 1997
Annual Report to Stockholders is not to be regarded as proxy soliciting material
or as a communication by means of which any solicitation of proxies is to be
made. In compliance with Rule 14a-3 promulgated under the Securities Exchange
Act of 1934, the Company hereby undertakes to provide without charge to each
person upon written request, a copy of the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, including the financial statements and
financial schedules thereto. Requests for such copies or additional copies of
the 1997 Annual Report to Stockholders should be directed to the Secretary of
the Company, 50 West San Fernando Street, San Jose, CA 95113.
RECORD DATE, SHARE OWNERSHIP AND VOTING
The close of business on April 15, 1998 was the record date (the "Record
Date") for stockholders entitled to notice of and to vote at the 1998 Annual
Meeting of Stockholders. At the close of business on the Record Date, there were
20,104,890 shares of the Company's Common Stock, $.001 par value per share (the
"Common Stock"), outstanding.
Each stockholder will be entitled to one vote per share, in person or by
proxy, for each share of Common Stock held in such stockholder's name as of the
Record Date on any matter submitted to a vote of stockholders at the 1998 Annual
Meeting of Stockholders. An affirmative vote of a majority of the shares of
Common Stock present and voting at the meeting is required for approval of all
items being submitted to the stockholders for their consideration. In
determining whether each of the proposals submitted to a vote of stockholders
has received the requisite number of affirmative votes (i) abstentions will be
counted and will have the same effect as a vote against the proposal, except
that abstentions will not be counted as votes cast in
1
<PAGE> 4
connection with determining the number of votes required to elect a director and
will have no effect on the outcome of that vote and (ii) proxies for which the
broker does not have discretionary authority and has not received voting
instructions from the beneficial owners ("broker non-votes") will be disregarded
and will have no effect on the outcome of such vote.
The presence, either in person or by proxy, of the holders of a majority of
the shares of Common Stock outstanding on the Record Date is necessary to
constitute a quorum at the 1998 Annual Meeting of Stockholders. All abstentions
and broker non-votes will be included as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the meeting.
PROXIES AND SOLICITATION COSTS
Shares of Common Stock represented by properly executed proxies received on
time for voting at the 1998 Annual Meeting of Stockholders will, unless such
proxy has previously been revoked, be voted in accordance with the instructions
indicated thereon. In the absence of specific instructions to the contrary, the
persons named in the accompanying form of proxy intend to vote all properly
executed proxies received by them (i) FOR the election of the Board of
Director's nominees as Class II Directors and (ii) FOR the ratification of the
selection of Arthur Andersen LLP as the Company's independent accountants for
the year ending December 31, 1998. No business other than as set forth in the
accompanying Notice of Annual Meeting is expected to come before the 1998 Annual
Meeting of Stockholders, but should any other matter requiring a vote of
stockholders be properly brought before the 1998 Annual Meeting of Stockholders,
it is the intention of the persons named in the enclosed form of proxy to vote
such proxy in accordance with their best judgment on such matters.
This solicitation is being made by the Company. The entire cost of
soliciting proxies will be borne by the Company. Solicitation will be made by
mail, and may be made personally or by telephone by officers and other employees
of the Company who will not receive additional compensation for such
solicitation. Arrangements may be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the Company's Common Stock, and such persons may be
reimbursed for their expenses.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive offices, 50 West
San Fernando Street, San Jose, CA 95113, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
1998 Annual Meeting of Stockholders and voting in person. Attendance at the 1998
Annual Meeting of Stockholders will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
In accordance with Rule 14a-8 under the Securities Exchange Act of 1934,
any stockholder proposals intended to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Company no later than December 22, 1998, in
order to be considered for inclusion in the Company's Proxy Statement and form
of proxy relating to such meeting. The proposal must be mailed to the Secretary
of the Company, 50 West San Fernando Street, San Jose, CA 95113. Such proposals
may be included in the Proxy Statement if they comply with certain rules and
regulations promulgated by the Securities and Exchange Commission.
2
<PAGE> 5
MATTERS TO BE CONSIDERED AT 1998 ANNUAL MEETING
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes, with each class
having a three-year term. Directors are assigned to each class in accordance
with a resolution or resolutions adopted by the Board of Directors. Vacancies on
the Board of Directors resulting from death, resignation, disqualification,
removal or other causes shall be filled by either the affirmative vote of the
holders of a majority of the then-outstanding shares of the Company's Common
Stock or by the affirmative vote of a majority of the remaining directors then
in office, even if less than a quorum of the Board of Directors. Newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines otherwise, be filled only by the
affirmative vote of the directors then in office, even if less than a quorum of
the Board of Directors. A director elected by the Board of Directors to fill a
vacancy (including a vacancy created by an increase in the size of the Board of
Directors) shall serve for the remainder of the full term of the class of
directors in which the vacancy occurred and until such director's successor is
elected and qualified.
The Company's Restated Certificate of Incorporation provides that the
number of directors which shall constitute the whole Board of Directors shall be
fixed exclusively by one or more resolutions adopted from time to time by the
Board of Directors. The authorized number of directors is currently set at
seven. Two seats on the Board of Directors, currently held by Ann B. Curtis and
V. Orville Wright, have been designated as Class II Board seats, with the term
of the directors occupying such seats expiring as of the 1998 Annual Meeting of
Stockholders. The initial directors elected to Class III will continue to hold
office until the 1999 Annual Meeting of Stockholders or until the director's
successor has been elected and qualified. The initial directors elected to Class
I will continue to hold office until the 2000 Annual Meeting of Stockholders or
until the director's successor has been elected and qualified.
At the 1998 Annual Meeting of Stockholders, two Class II Directors are to
be elected to serve three-year terms ending at the 2001 Annual Meeting of
Stockholders or until their respective successors are elected and qualified or
their earlier death, resignation or removal. The nominees for the Board of
Directors designated to serve as Class II are set forth below.
The proxy holders intend to vote all proxies received by them in the
accompanying form for the nominees for director listed below, unless
instructions to the contrary are marked on the proxy. In the event that a
nominee is unable or declines to serve as a director at the time of the 1998
Annual Meeting of Stockholders, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the vacancy. In
the event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them for the nominees
listed below. As of the date of this Proxy Statement, the Board of Directors is
not aware of any nominee who is unable or will decline to serve as a director.
3
<PAGE> 6
Set forth in the table below is a list of the Company's directors and
executive officers, together with certain biographical information.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION CLASS
---- --- -------------------- -----
<S> <C> <C> <C>
Peter Cartwright........ 68 Chairman of the Board, President and Chief III
Executive Officer of Calpine
Ann B. Curtis........... 47 Senior Vice President, Chief Financial Officer II
and Corporate Secretary of Calpine
Jeffrey E. Garten....... 51 Dean of the Yale School of Management I
Susan C. Schwab......... 43 Dean of the School of Public Affairs at the III
University of Maryland
George J. Stathakis..... 67 International Investment Banker I
John O. Wilson.......... 59 Executive Vice President and Chief Economist at I
Bank of America
V. Orville Wright....... 77 Retired Co-Chief Executive Officer of MCI II
Communications Corp.
</TABLE>
NOMINEES FOR CLASS II DIRECTORS WITH TERMS EXPIRING IN 2001
ANN B. CURTIS has served as Senior Vice President of the Company since
September 1992 and has been employed by the Company since its inception in 1984.
Ms. Curtis became a Director of the Company on September 19, 1996. She is
responsible for the Company's financial and administrative functions, including
the functions of general counsel, corporate and project finance, accounting,
human resources, public relations and investor relations. Ms. Curtis also serves
as Chief Financial Officer and Corporate Secretary for the Company. From the
Company's inception in 1984 through 1992, she served as the Company's Vice
President for Management and Financial Services. Prior to joining Calpine, Ms.
Curtis was Manager of Administration for Gibbs & Hill, Inc. ("Gibbs & Hill"), an
architect-engineering firm which specialized in power engineering projects.
V. ORVILLE WRIGHT became a Director of the Company in January 1997. Mr.
Wright served as vice chairman and co-chief executive officer of MCI
Communications Corp. from May 1975 to May 1991. Prior to 1975 Mr. Wright served
in senior positions at Xerox Corp. from 1973 to 1975, at Amdahl Corporation from
1971 to 1973, at RCA from 1969 to 1971, and at IBM from 1949 to 1969.
CLASS III DIRECTORS WITH TERMS EXPIRING IN 1999
PETER CARTWRIGHT founded the Company in 1984 and has since served as a
Director and as the Company's President and Chief Executive Officer. Mr.
Cartwright became Chairman of the Board of Directors of the Company on September
19, 1996. From 1979 to 1984, Mr. Cartwright was Vice President and General
Manager of Gibbs & Hill's Western Regional Office. From 1960 to 1979, Mr.
Cartwright worked for General Electric's Nuclear Energy Division. His
responsibilities included plant construction, project management and new
business development. He served on the Board of Directors of nuclear fuel
manufacturing companies in Germany, Italy and Japan. Mr. Cartwright was
responsible for General Electric's technology development and licensing programs
in Europe and Japan. Mr. Cartwright obtained a Master of Science Degree in Civil
Engineering from Columbia University in 1953 and a Bachelor of Science Degree in
Geological Engineering from Princeton University in 1952.
SUSAN C. SCHWAB became a Director of the Company in January 1997. Dr.
Schwab has served as Dean of the School of Public Affairs at the University of
Maryland since August 1995. Dr. Schwab served as Director, Corporate Business
Development at Motorola, Inc. from July 1993 to August 1995. She also served as
Assistant Secretary of Commerce for the U.S. and Foreign Commercial Service from
March 1989 to May 1993.
4
<PAGE> 7
CLASS I DIRECTORS WITH TERMS EXPIRING IN 2000
JEFFREY E. GARTEN became a Director of the Company in January 1997. Mr.
Garten has served as Dean of the Yale School of Management and William S.
Beinecke Professor in the Practice of International Trade and Finance since
November 1995. Mr. Garten served as Undersecretary of Commerce of International
Trade from November 1993 to October 1995. He was a managing director of The
Blackstone Group from October 1990 to October 1992. Prior thereto, Mr. Garten
founded and managed The Eliot Group, a small investment bank, from November 1987
to October 1990, and served as managing director of Lehman Brothers from January
1979 to November 1987.
GEORGE J. STATHAKIS became a Director of the Company on September 19, 1996
and has served as a Senior Advisor to the Company since December 1994. Mr.
Stathakis has been providing financial, business and management advisory
services to numerous corporations since 1985. He also served as Chairman of the
Board and Chief Executive Officer of Ramtron International Corporation, an
advanced technology semiconductor company, from 1990 to 1994. From 1986 to 1989,
he served as Chairman of the Board and Chief Executive Officer of International
Capital Corporation, a subsidiary of American Express. Prior to 1986, Mr.
Stathakis served thirty-two years with General Electric Corporation in various
management and executive positions. During his service with General Electric
Corporation, Mr. Stathakis founded the General Electric Trading Company and was
appointed its first President and Chief Executive Officer.
JOHN O. WILSON became a Director of the Company in January 1997. Mr. Wilson
has served as Executive Vice President and Chief Economist at Bank of America
since August 1984. He joined Bank of America in June 1975 as Director of
Economics-Policy Research. He served as a faculty member at the University of
California at Berkeley from September 1979 to June 1991, at the University of
Connecticut from September 1974 to June 1975, and at Yale University from
January 1967 to September 1970. Mr. Wilson also served as Director of Regulatory
Analysis of the U.S. Atomic Energy Commission from April 1972 to October 1972,
as Director of Welfare Reform of the Department of Health, Education and Welfare
from April 1971 to April 1972, and as Assistant Director of the U.S. Office of
Economic Opportunity from August 1969 to April 1971.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company's Board of Directors held eight meetings in 1997. The Board of
Directors has an Audit Committee, a Compensation Committee and a Stock Plan
Administration Committee. There is currently no Nominating Committee. The Audit
Committee meets with the Company's financial management and its independent
public accountants to review internal auditing procedures, the adequacy of
internal controls and the results and scope of the audit and other services
provided by the independent auditors. The Audit Committee is comprised of John
O. Wilson (Chair), Jeffrey E. Garten and V. Orville Wright. The Audit Committee
held two meetings during 1997. The Compensation Committee administers salaries,
incentives and other forms of compensation for officers and other employees of
the Company, as well as certain incentive compensation and benefit plans of the
Company. The Compensation Committee is comprised of George J. Stathakis (Chair),
Jeffrey E. Garten, Susan C. Schwab and V. Orville Wright. The Compensation
Committee held three meetings in 1997. The Stock Plan Administration Committee
administers the Company's stock incentive plans. The Stock Plan Administration
Committee is comprised of Susan C. Schwab (Chair), Jeffrey E. Garten and V.
Orville Wright. The Stock Plan Administration Committee held two meetings in
1997.
DIRECTOR COMPENSATION
Non-employee members of the Board are each paid an annual fee of $25,000
and are reimbursed for all expenses incurred in attending meetings of the Board
of Directors or any committee thereof. The chair of the Compensation Committee
and the Audit Committee receive an additional annual fee of $5,000.
Under the Automatic Option Grant Program ("the Program") in effect under
the Company's 1996 Stock Incentive Plan (the "1996 Plan"), each individual who
first joins the Board as a non-employee Board member will receive, at the time
of his or her initial election or appointment to the Board, an option grant to
purchase
5
<PAGE> 8
10,000 shares of Common Stock. On the date of each Annual Meeting of
Stockholders, beginning with the 1997 Annual Meeting of Stockholders, each
individual who is to continue to serve as a non-employee Board member will
receive an option grant under the Program to purchase an additional 1,500 shares
of Common Stock, provided such individual has served as a Board member for at
least six months. Each option granted under the Program has an exercise price
per share equal to the fair market value per share of Common Stock on the grant
date, and has a maximum term of 10 years measured from such grant date, subject
to earlier termination upon the optionee's cessation of Board service. Each
option granted under the Program is immediately exercisable for all the option
shares, but any shares purchased upon exercise of the option will be subject to
repurchase by the Company, at the option exercise price paid per share, upon
optionee's cessation of Board service prior to vesting in those shares. The
shares subject to each 10,000 share grant will vest in a series of four
successive equal annual installments upon the optionee's completion of each year
of Board service over the four-year period measured from the grant date. The
shares subject to each 1,500 share grant will vest upon the optionee's
completion of one year of Board service measured from the grant date. However,
option shares issuable upon exercise of options granted under the Program will
immediately vest on an accelerated basis upon certain changes in control of the
Company or upon the death or disability of the optionee while a Board member.
Messrs. Stathakis, Garten, Wilson and Wright and Dr. Schwab each received,
upon their appointment to the Board of Directors, an option grant under the
Program to purchase 10,000 shares of Common Stock. Such options were granted to
Mr. Stathakis in September 1996 at $16.00 per share, to Mr. Garten, Mr. Wilson
and Ms. Schwab in January 1997 at $20.50 per share, and to Mr. Wright in January
1997 at $20.75 per share.
On January 2, 1997, Mr. Stathakis, in connection with his election to apply
$18,000 of his cash retainer fee for the 1997 fiscal year to the acquisition of
a special grant under the Director Fee Option Grant Program in effect under the
1996 Plan, was granted an option for 1,317 shares of Common Stock under that
program. The option has an exercise price of $6.83 per share, one-third of the
fair market value per share of the Common Stock on the grant date. Accordingly,
the spread on the option shares at the time of grant (the fair market value of
these shares less the aggregate exercise price) was equal to the $18,000 of the
cash retainer fee which Mr. Stathakis elected to apply to the grant. The option
became fully exercisable on December 31, 1997. The option has a maximum term of
10 years measured from the grant date, subject to earlier termination two years
following his cessation of Board service.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote "FOR" the
election of the nominees listed above.
6
<PAGE> 9
PROPOSAL TWO: RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP served as independent public accountants
for the Company for the fiscal year ended December 31, 1997. Subject to
stockholder ratification, the Board of Directors has reappointed the firm to
continue in this capacity for the year ending December 31, 1998. Accordingly, a
resolution will be presented at the 1998 Annual Meeting of Stockholders to
ratify the selection of Arthur Andersen LLP by the Board of Directors as
independent public accountants to audit the accounts and records of the Company
for the fiscal year ending December 31, 1998, and to perform other appropriate
services. In the event that stockholders fail to ratify the selection of Arthur
Andersen LLP, the Board of Directors would reconsider such selection. Even if
the selection is ratified, the Board of Directors in its discretion may direct
the appointment of a different independent public accounting firm at anytime
during the year if the Board of Directors believes that such a change would be
in the best interests of the Company and its stockholders.
One or more representatives of Arthur Andersen LLP are expected to be
present at the 1998 Annual Meeting of Stockholders, will have the opportunity to
make a statement if they desire to do so, and will be available to respond to
questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote "FOR" such
ratification.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
1998 Annual Meeting of Stockholders other than those set forth herein and in the
Notice accompanying this Proxy Statement. However, if any other matters properly
come before the meeting, it is intended that the persons named in the enclosed
proxy will vote on such matters in accordance with their best judgement.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed proxy.
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<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of April 1,
1998 by: (i) each person known by the Company to be the beneficial owner of more
than five percent of the outstanding shares of the Company's Common Stock, (ii)
each Director of the Company, (iii) each executive officer of the Company listed
in the Summary Compensation Table, and (iv) all executive officers and Directors
of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) BENEFICIALLY OWNED(1)
------------------------------------ ---------------- ---------------------
<S> <C> <C>
J. & W. Seligman & Co. Incorporated(2)...................... 2,664,915 13.3%
100 Park Avenue
New York, NY 10017
Wellington Management Company, LLP(3)....................... 1,977,500 9.8%
75 State Street
Boston, MA 02109
HL Investment Advisors, Inc.
Hartford Investment Financial Services Company(4)........... 1,886,000 9.4%
200 Hopmeadow Street
Simsbury, CT 06070
Lazard Freres & Co. LLC..................................... 1,836,415 9.1%
30 Rockefeller Plaza
New York, NY 10020
Public Employees Retirement System of Ohio.................. 1,800,000 9.0%
277 East Town Street
Columbus, OH 43215
Putnam Investments, Inc.(5)................................. 1,425,800 7.1%
One Post Office Square
Boston, MA 02109
Boston Partners Asset Management, L.P.(6)................... 1,243,180 6.2%
One Financial Center, 43rd Floor
Boston, MA 02111
Mellon Bank Corporation(7).................................. 1,165,873 5.8%
One Mellon Bank Center
Pittsburgh, PA 15258
Peter Cartwright(8)......................................... 933,568 4.4%
Ann B. Curtis(9)............................................ 237,595 1.2%
Lynn A. Kerby(10)........................................... 148,234 *
Robert D. Kelly(11)......................................... 95,465 *
Gloria S. Gee(12)........................................... 9,140 *
Rodney M. Boucher(13)....................................... 3,125 *
Jeffrey E. Garten(14)....................................... 2,500 *
Susan C. Schwab(14)......................................... 2,500 *
George J. Stathakis(14)..................................... 13,817 *
John O. Wilson(14).......................................... 2,500 *
V. Orville Wright(14)....................................... 2,500 *
All executive officers and directors as a group (10
persons)(15).............................................. 1,447,819 6.7%
</TABLE>
- ---------------
* Less than one percent
(1) This table is based in part upon information supplied by Schedules 13G
filed by principal stockholders with the Securities and Exchange Commission
(the "Commission"). Beneficial ownership is determined in accordance with
the rules of the Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock subject to
options, warrants and convertible
8
<PAGE> 11
notes currently exercisable or convertible, or exercisable or convertible
within 60 days after a specified date, are deemed outstanding for computing
the percentage of the person holding such options but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by them. The number of shares of Common Stock outstanding as of April
1, 1998 was 20,104,890.
(2) According to the Schedule 13G filed with the Commission, J. & W. Seligman &
Co. Incorporated possesses shared voting power over 2,340,000 shares and
shared investment power over 2,664,915 shares.
(3) According to the Schedule 13G filed with the Commission, Wellington
Management Company, LLP possesses shared voting power over 1,935,000 shares
and shared investment power over 1,997,500 shares.
(4) According to the Schedule 13G filed with the Commission, (i) HL Investment
Advisors, Inc. possesses shared voting and investment power over 1,735,000
shares in its capacity as investment advisor to Hartford Capital
Appreciation Fund, Inc., The Hartford Capital Appreciation Fund, Hartford
Small Company Fund, Inc. and The Hartford Small Company Fund, and (ii)
Hartford Investment Financial Services Company possesses shared voting and
investment power over 151,000 shares.
(5) According to the Schedule 13G filed with the Commission, Putnam
Investments, Inc. possesses shared voting power over 42,500 shares and
shared investment power over 1,425,800 shares.
(6) According to the Schedule 13G filed with the Commission, Boston Partners
Asset Management, L.P. possesses shared voting and investment power with
Boston Partners, Inc. and Desmond John Heathwood.
(7) According to the Schedule 13G filed with the Commission, Mellon Bank
Corporation and Mellon Bank, N.A. beneficially own all or a portion of the
shares reflected in the table. As indicated in such Schedule 13G, (i)
Mellon Bank Corporation possesses sole voting power over 1,138,450 shares,
sole investment power over 1,160,873 shares and shared investment power
over 5,000 shares, and (ii) Mellon Bank, N.A. possesses sole voting and
investment power over 1,136,450 shares and shared investment power over
5,000 shares.
(8) Includes options to purchase 927,618 shares of the Company's Common Stock
issuable upon the exercise of options outstanding as of April 1, 1998 or
within 60 days thereafter.
(9) Includes options to purchase 237,282 shares of the Company's Common Stock
issuable upon the exercise of options outstanding as of April 1, 1998 or
within 60 days thereafter.
(10) Includes options to purchase 147,734 shares of the Company's Common Stock
issuable upon the exercise of options outstanding as of April 1, 1998 or
within 60 days thereafter.
(11) Includes options to purchase 94,465 shares of the Company's Common Stock
issuable upon the exercise of options outstanding as of April 1, 1998 or
within 60 days thereafter.
(12) Includes options to purchase 9,040 shares of the Company's Common Stock
issuable upon the exercise of options outstanding as of April 1, 1998 or
within 60 days thereafter
(13) Mr. Boucher resigned from the Company effective September 24, 1997.
(14) Represents shares of the Company Common Stock issuable upon exercise of
options that are exercisable as of April 1, 1998 or will become exercisable
within 60 days thereafter.
(15) Includes options to purchase 1,439,956 shares of the Company's Common Stock
issuable upon the exercise of options outstanding as of April 1, 1998 or
within 60 days thereafter.
9
<PAGE> 12
EXECUTIVE COMPENSATION AND OTHER INFORMATION
OTHER EXECUTIVE OFFICERS
Set forth in the table below is a list of the Company's executive officers
that are not directors, together with certain biographical information.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lynn A. Kerby..................... 59 Senior Vice President-Operations
Robert D. Kelly................... 40 Senior Vice President-Finance
Gloria S. Gee..................... 48 Controller and Chief Accounting
Officer
</TABLE>
LYNN A. KERBY joined the Company in January 1991 and served as Vice
President of Operations through January 1993, at which time he became a Senior
Vice President-Operations for the Company. Prior to joining the Company, Mr.
Kerby served as Senior Vice President-Operations of Guy F. Atkinson Company
("Guy F. Atkinson"), an engineering and construction company, from 1989 to 1990,
and served in various other positions within Guy F. Atkinson since 1961. Mr.
Kerby served on Calpine's Board of Directors from 1984 to 1988 as a Guy F.
Atkinson representative. He obtained a Bachelor of Science Degree in Civil
Engineering and Business from the University of Idaho in 1961. Mr. Kerby holds a
Class A Contractors License in the states of California, Arizona and Hawaii.
ROBERT D. KELLY has served as the Company's Senior Vice President-Finance
since January 1998 and Vice President, Finance from April 1994 to January 1998.
Mr. Kelly's responsibilities include all project and corporate finance
activities. From 1992 to 1994, Mr. Kelly served as Director-Project Finance for
the Company, and from 1991 to 1992, he served as Project Finance Manager. Prior
to joining the Company, he was the Marketing Manager of Westinghouse Credit
Corporation from 1990 to 1991. From 1989 to 1990, Mr. Kelly was Vice President
of Lloyds Bank PLC. From 1982 to 1989, Mr. Kelly was employed in various
positions with The Bank of Nova Scotia. He obtained a Master of Business
Administration Degree from Dalhousie University, Canada in 1980 and a Bachelor
of Commerce Degree from Memorial University, Canada, in 1979.
GLORIA S. GEE has been the Company's Controller and Chief Accounting
Officer since October 1994. Prior to joining the Company, Ms. Gee served as
Chief Financial Officer and co-founder of G&E Engineering Systems, Inc., an
engineering consulting firm, from 1993 to 1994. Ms. Gee's prior experience
includes over 20 years with Pacific Gas & Electric Company, where she served as
Controller from 1989 to 1993. Ms. Gee obtained a Master of Business
Administration Degree from the University of California at Berkeley in 1985 and
a Bachelor of Science Degree in Accounting also from the University of
California at Berkeley in 1972. Ms. Gee is a certified public accountant in the
state of California.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned, paid or awarded for services rendered to the Company in all
capacities during each of the years ended December 31, 1995, 1996 and 1997 to
the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company serving in that capacity as of
December 31, 1997. Mr. Boucher is also included in the table because he would
have been among the four most highly compensated executive officers at the
Company on the last day of the 1997 fiscal year had he not resigned earlier
during that year. No other executive officer who would have otherwise been
included in such table on
10
<PAGE> 13
the basis of salary and bonus earned for the 1997 fiscal year has been excluded
by reason of his or her termination of employment or change in executive status
during that year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Peter Cartwright 1997 $375,000 $300,000 110,000 $3,330
Chairman of the Board, 1996 341,000 272,071 181,790 3,330
President and Chief 1995 341,000 255,750 178,673 1,665
Executive Officer
Lynn A. Kerby 1997 220,000 90,000 25,000 --
Senior Vice President 1996 206,250 75,000 41,552 --
1995 195,000 72,000 53,602 --
Ann B. Curtis 1997 205,000 90,000 30,000 --
Senior Vice President, 1996 175,000 75,000 51,940 --
Chief Financial Officer 1995 160,000 60,000 53,602 --
and Corporate Secretary
Robert D. Kelly 1997 190,000 100,000 20,000 --
Senior Vice President 1996 162,428 75,000 36,358 --
1995 126,684 42,000 22,334 --
Gloria S. Gee 1997 120,000 25,630 5,000 --
Controller and Chief 1996 106,000 19,190 15,582 --
Accounting Officer 1995 100,000 19,000 -- --
Rodney M. Boucher(2) 1997 162,352(2) 45,000 -- --
Senior Vice President 1996 185,000 45,000 15,582 --
1995 100,208 40,000 25,970 --
</TABLE>
- ---------------
(1) Represents the premium paid on a special life insurance policy maintained by
the Company.
(2) Mr. Boucher resigned from the Company effective September 24, 1997. In
addition, the Company paid $275,000 to Mr. Boucher in connection with his
resignation from the Company. See "Employment Agreements, Termination of
Employment and Change in Control Arrangements."
11
<PAGE> 14
STOCK OPTIONS
The following table sets forth certain information concerning grants of
stock options during the fiscal year ended December 31, 1997 to each of the
executive officers named in the Summary Compensation Table above. The table also
sets forth hypothetical gains or "option spreads" for the options at the end of
their respective ten-year terms. These gains are based on the assumed rates of
annual compound stock price appreciation of 5% and 10% from the date the option
was granted over the full option term. No stock appreciation rights were granted
during the year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
PERCENTAGE OF ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION
OPTIONS GRANTED TO FOR OPTION TERM(3)
GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------------------
NAME (NO. OF SHARES) FISCAL YEAR(2) PER SHARE DATE 5% 10%
---- --------------- -------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Peter Cartwright 110,000 31.8% $18.00 3/31/07 1,245,211 3,155,610
Lynn A. Kerby 25,000 7.2% $18.00 3/31/07 283,003 717,184
Ann B. Curtis 30,000 8.7% $18.00 3/31/07 339,603 860,621
Robert D. Kelly 20,000 5.8% $18.00 3/31/07 226,402 573,747
Gloria S. Gee 5,000 1.4% $18.00 3/31/07 56,601 143,437
Rodney M. Boucher -- -- -- -- -- --
</TABLE>
- ---------------
(1) Each option set forth in the table above has a maximum term of ten (10)
years measured from the grant date, subject to earlier termination upon the
executive officer's termination of service with the Company. Each option
will become exercisable for 25% of the option shares upon completion of one
year of service measured from the grant date and will become exercisable for
the remaining shares in equal annual installments over the next three years
of service thereafter. The option will immediately become exercisable for
all of the option shares upon an acquisition of the Company by merger or
asset sale unless the options are assumed by the successor corporation.
(2) The Company granted options to purchase 345,400 shares of Common Stock
during the year ended December 31, 1997.
(3) The 5% and 10% assumed annual rates of compound stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or a projection by the Company of future
stock prices.
12
<PAGE> 15
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning the exercise
of options during the 1997 fiscal year and the number of shares subject to
exercisable and unexercisable stock options held by the executive officers named
in the Summary Compensation Table above as of December 31, 1997. Also reported
are values for "in-the-money" options that represent the positive spread between
the respective exercise prices of outstanding stock options and the closing
price of the Company's Common Stock of $14.875 per share on December 31, 1997.
No stock appreciation rights were exercised by such executive officers during
the year ended December 31, 1997, and no stock appreciation rights were
outstanding at the end of that year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT DECEMBER 31, VALUE OF UNEXERCISED
1997 IN-THE-MONEY OPTIONS
(NO. OF OPTIONS) AT DECEMBER 31, 1997(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter Cartwright...... 75,000 $1,285,696 825,118 245,565 $9,902,257 $1,018,314
Lynn A. Kerby......... 10,000 166,650 131,484 59,177 1,344,030 264,566
Ann B. Curtis......... 3,700 68,446 226,082 69,371 2,704,493 297,309
Robert D. Kelly....... -- -- 89,465 43,764 907,075 170,274
Gloria S. Gee......... -- -- 7,790 12,792 49,108 49,121
Rodney M. Boucher..... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Based upon the market price of the purchased shares on the exercise date
less the option exercise price paid for those shares.
(2) In-the-money options are options where the current market value exceeds the
exercise price. Also reported are values for in-the-money options that
represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of the Company's Common
Stock.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with Mr. Cartwright, Mr.
Kerby, Ms. Curtis, Mr. Boucher and Mr. Kelly. Each of the employment agreements
expires during 1999 unless earlier terminated or subsequently extended. The
employment agreements provide for the payment of a base salary, subject to
periodic adjustment by the Board of Directors, and provide for annual bonuses
based on the Company's bonus plans and participation in all benefit and equity
plans. The employment agreements also provide for other employee benefits such
as life insurance and health care, in addition to certain disability and death
benefits. Severance benefits, including the acceleration of outstanding options,
are also payable upon an involuntary termination or a termination following a
change of control in the Company. Severance benefits would not be payable in the
event that termination was for cause.
In December 1997, the Company entered into an agreement with Mr. Boucher in
connection with his resignation from the Company. Pursuant to this agreement,
the Company paid Mr. Boucher $275,000 and entered into a Consulting Services
Agreement pursuant to which Mr. Boucher has agreed to provide the Company with
up to 25 hours per month of strategic planning consultant services during 1998
in exchange for $120,000 from the Company.
Should the Company be acquired by merger or asset sale, then all
outstanding options held by the Chief Executive Officer and the other executive
officers under the Company's 1996 Plan will automatically accelerate and vest in
full, except to the extent those options are to be assumed by the successor
corporation. In addition, the Stock Plan Administration Committee as Plan
Administrator of the 1996 Plan will have the authority to provide for the
accelerated vesting of the shares of Common Stock subject to outstanding options
13
<PAGE> 16
held by the Chief Executive Officer or any other executive officer or any
unvested shares of Common Stock subject to direct issuances held by such
individual, in connection with the termination of that individual's employment
following: (i) a merger or asset sale in which these options are assumed or are
assigned; or (ii) certain hostile changes in control of the Company. In
addition, certain executive officers have existing employment agreements that
provide for the acceleration of their options upon a termination of their
employment following certain changes in control or ownership of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee and the Stock Plan Administration
Committee of the Company's Board of Directors are as named above in the
Compensation Committee Report. No member of either committee was at anytime
during 1997 or at any other time an officer or employee of the Company. During
1997, Mr. Stathakis served as a consultant to the Company.
In April 1997, the Company entered into a Consulting Contract with Mr.
George J. Stathakis, effective as of January 1, 1997, which replaced a previous
Consulting Agreement. Pursuant to the Consulting Contract, Mr. Stathakis has
been retained to provide, among other things, advice to the Company with regard
to domestic and international business, to identify project investment
opportunities and to provide advisory support to the Company's management. The
Consulting Contract provides for a monthly retainer of $5,000 plus reimbursement
of expenses. In addition, pursuant to the Consulting Contract, the Company
granted to Mr. Stathakis a stock option to purchase 10,000 shares of the
Company's Common Stock under the Company's 1996 Plan at an exercise price of
$18.00 per share, which was fully vested on January 1, 1998. The Company will
also pay Mr. Stathakis a fee to be negotiated between Mr. Stathakis and the
Company for those project investment opportunities identified and otherwise
earlier terminated or extended by mutual agreement of the parties. Under the
Consulting Agreement, Mr. Stathakis received total compensation of $60,000 in
1997.
No executive officer of the Company serves as a member of the board of
directors or the compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
its Compensation or Stock Plan Administration Committees.
14
<PAGE> 17
EXECUTIVE COMPENSATION REPORT
The following Report of the Compensation and Stock Plan Administration
Committees on Executive Compensation and related disclosure shall not be deemed
incorporated by reference by any general statement incorporating this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPENSATION COMMITTEE AND STOCK PLAN ADMINISTRATION COMMITTEE REPORT
The Compensation and Stock Plan Administration Committees of the Board of
Directors administer the Company's compensation policies and programs. The
Compensation Committee was established in 1996 following the Company's initial
public offering and the Stock Plan Administration Committee was established in
1997. The Compensation Committee sets the cash compensation of the Chief
Executive Officer and reviews the design, administration, and effectiveness of
the cash compensation programs for other key executives. The Stock Plan
Administration Committee administers the Company's stock incentive plans and
approves stock option grants for all employees, including executive officers.
Both Committees serve under charters adopted by the Board of Directors and are
comprised entirely of outside directors who have never served as officers of the
Company. The Compensation Committee and Stock Plan Administration Committee are
collectively referred to herein as the "Committee".
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company operates in the extremely competitive and rapidly changing
power industry. The Committee believes that the compensation programs for
executive officers of the Company should be designed to attract, motivate, and
retain talented executives responsible for the success of the Company and should
be determined within a competitive framework and based on the achievement of
overall financial results and individual contributions. Within this overall
philosophy, the Committee's objectives are to:
- Offer a total compensation program that takes into consideration the
compensation practices of certain comparable companies with whom the
Company competes for executive talent.
- Provide annual variable incentive awards that take into account the
Company's overall financial performance relative to corporate
objectives and based on individual contributions.
- Align the financial interests of executive officers with those of
shareholders by providing significant equity-based, long-term
incentives.
COMPENSATION COMPONENTS AND PROCESS
The three major components of the Company's executive officer compensation
are: (i) base salary, (ii) variable incentive awards, and (iii) long-term
equity-based incentive awards.
The Committee determines executive officers' compensation levels with the
assistance of the Company's Human Resources Department, which works with an
independent consulting firm that furnishes the Committee with executive
compensation data drawn from a nationally recognized survey of comparable
companies.
The positions of the Company's CEO and executive officers were compared
with those of their counterparts at comparable companies, and the market
compensation levels for comparable positions were examined to determine base
salary, target incentives, and total cash compensation. In addition, comparable
companies' practices concerning stock option grants were reviewed and compared.
Base Salary. The base salary for each executive officer is determined at
levels considered appropriate for comparable positions at comparable companies.
The Company's policy is to target base salary levels between the 50th and 75th
percentile of compensation practices at comparable companies.
15
<PAGE> 18
Variable Incentive Awards. To reinforce the attainment of Company goals,
the Committee believes that a substantial portion of the annual compensation of
each executive officer should be in the form of variable incentive pay. The
annual incentive pool for executive officers is determined on the basis of the
Company's achievement of the financial performance targets established at the
beginning of the fiscal year and the executive's individual contribution. The
incentive plan requires that certain performance objectives be attained before
any incentives are awarded. Once the threshold is reached, specific formulas are
in place to calculate the actual incentive payment for each officer. A target is
set for each executive officer based on targets for comparable positions at
comparable companies. In 1997, the Company exceeded its performance objectives.
Awards paid reflected these results plus individual accomplishments of both
corporate and functional objectives.
Long-Term, Equity-Based Incentive Awards. The goal of the Company's
long-term equity-based incentive awards is to align the interests of executive
officers with stockholders and to provide each executive officer with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. The Committee determines the size of
long-term, equity-based incentives according to each executive's position within
the Company and sets the incentives at a level it considers appropriate to
create a meaningful opportunity for stock ownership. In addition, the Committee
takes into account an individual's recent performance, his or her potential for
future responsibility and promotion, and comparable awards made to individuals
in similar positions with comparable companies. The relative weight given to
each of these factors varies among individuals at the Committee's discretion.
During 1997, the Board of Directors made option grants to Mr. Cartwright,
Mr. Kerby, Ms. Curtis, Mr. Kelly and Ms. Gee under the Company's Stock Option
Program. Each grant allows the officer to acquire shares of the Company's Common
Stock at a fixed price per share (the market price on the grant date) over a
specified period of time. Specifically, the option vests in periodic
installments over a four-year period, contingent upon the executive officer's
continued employment with the Company. Accordingly, the option will provide a
return only if the officer remains with the Company and only if the market price
appreciates over the option term.
CEO Compensation. The Company's Chairman, President and Chief Executive
Officer, Peter Cartwright, has an existing employment agreement with the Company
which has a term of five years (ending December 31, 1999 unless extended). The
annual base salary for Mr. Cartwright for 1997 was $375,000. The base
compensation payable to Mr. Cartwright was determined by the Board of Directors
based on Mr. Cartwright's personal performance of his duties and on salary
levels paid to chief executive officers of comparable companies. In setting the
compensation payable to Mr. Cartwright, a significant percentage of his total
compensation is tied to Company performance and long-term stock price
appreciation.
Mr. Cartwright's variable incentive award for 1997 was based on the actual
financial performance of the Company relative to corporate objectives and a
measure of his individual contribution. His award was based on the incentive
plan used for all executive officers. The option grant made to Mr. Cartwright
during 1997 was based upon his performance and leadership with the Company.
Compliance with Internal Revenue Code Section 162(m). As a result of
Section 162(m) of the Internal Revenue Code, which was enacted into law in 1993,
the Company will not be allowed a Federal income tax deduction for compensation
paid to certain officers, to the extent that compensation exceeds $1 million per
officer in any one year. This limitation will apply to all compensation which is
not considered to be performance based. Compensation which does qualify as
performance-based compensation will not have to be taken into account for
purposes of this limitation. The 1996 Plan has been structured so that any
compensation deemed paid in connection with the exercise of stock options
granted under the 1996 Plan will qualify as performance-based compensation.
The cash compensation paid to the Company's executive officers during 1997
did not exceed the $1 million limit per officer, nor is the cash compensation to
be paid to the Company's executive officers for 1998 expected to reach that
level. Because it is very unlikely that the cash compensation payable to any of
the Company's executive officers in the foreseeable future will approach the $1
million limitation, the Committee has decided not to take any action at this
time to limit or restructure the elements of cash compensation
16
<PAGE> 19
payable to the Company's executive officers. The Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
Submitted on behalf of the Compensation Committee and the Stock Plan
Administration Committee of the Board of Directors.
<TABLE>
<S> <C>
Compensation Committee: Stock Plan Administration Committee:
George Stathakis (Chair) Susan C. Schwab (Chair)
Jeffrey E. Garten Jeffrey E. Garten
Susan C. Schwab V. Orville Wright
V. Orville Wright
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1994, the Company entered into a Consulting Agreement with Mr.
George Stathakis, a Director, which was amended and restated effective June 3,
1996. In April 1997, the Company entered into a Consulting Contract with Mr.
George Stathakis, a Director, effective January 1, 1997 to replace the prior
agreement. See "Compensation Committee Interlocks and Insider Participation."
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent stockholders are
required by Securities and Exchange Commission regulation to furnish the Company
with copies of all Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that there was compliance for the year ended December 31, 1997
with all Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten percent beneficial owners except that Dr. Susan
C. Schwab filed a late Form 3 upon joining the Board of Directors of the Company
in January 1997.
17
<PAGE> 20
STOCK PERFORMANCE GRAPH
The following performance graph shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
On September 20, 1996, the Company issued Common Stock in its initial
public offering. The Common Stock trades on the New York Stock Exchange under
the symbol "CPN". The following graph compares the total return on the Company's
Common Stock with the cumulative weighted average total return assuming
reinvestment of dividends of (i) the Standard & Poor's 500 Stock Index ("S&P
500"), (ii) an index of comparable peer issuers which includes AES Corp.,
CalEnergy Company, Inc. ("CalEnergy"), NGC Corporation ("NGC") and Trigen Energy
Corporation ("Trigen") ("Peer Group 1"), and (iii) an index consisting of
CalEnergy, NGC and Trigen ("Peer Group 2") for the period of September 30, 1996
through December 31, 1997. In accordance with the rules of the Securities and
Exchange Commission, the returns are indexed to a value of $100 at September 30,
1996 and the returns of Peer Group 1 and Peer Group 2 have been weighted
according to capitalization as of the beginning of the period.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Calpine Corp S&P 500 Peer Group 1 Peer Group 2
<S> <C> <C> <C> <C>
9/30/96 100.00 100.00 100.00 100.00
12/31/96 125.00 108.34 126.19 132.13
12/31/97 92.97 144.48 157.17 104.03
</TABLE>
18
<PAGE> 21
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. YOU ARE, THEREFORE, URGED TO EXECUTE
PROMPTLY AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE WHICH HAS BEEN
ENCLOSED FOR YOUR CONVENIENCE. Stockholders who are present at the meeting may
revoke their proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
By Order of the Board of Directors,
/s/ PETER CARTWRIGHT
Peter Cartwright
Chairman of the Board,
President and Chief Executive Officer
April 22, 1998
San Jose, CA
19
<PAGE> 22
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CALPINE CORPORATION
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Calpine Corporation hereby acknowledges
receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement for
the 1998 Annual Meeting of Stockholders of Calpine Corporation to be held on
May 27, 1998 and hereby appoints Peter Cartwright and Ann B. Curtis, and each
of or either of them, proxy and attorney-in-fact, with full power of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at such meeting and at any adjournment or postponement thereof, and
to vote all shares of Common Stock which the undersigned would be entitled to
vote, if then and there personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR ELECTION OF THE COMPANY'S NOMINEES AS DIRECTORS
AND THE RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS, AND AS THE PROXYHOLDERS DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING AND ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
COMMENTS/ADDRESS CHANGE [PLEASE MARK COMMENTS/ADDRESS BOX ON THE REVERSE SIDE]
_______________________________________________________________________________
_______________________________________________________________________________
- -------------------------------------------------------------------------------
(FOLD AND DETACH HERE)
DIRECTIONS TO SILICON VALLEY ATHLETIC CLUB
196 North Third Street, San Jose, California (408) 292-1281
[Directional map to Silicon Valley Athletic Club]
[X] Please mark your choices like this
FOR WITHHELD Nominees: Ann B. Curtis and
1. ELECTION OF DIRECTORS [ ] [ ] V. Orville Wright
For, except vote withheld from the following nominee(s):
____________________________________________________________________________
2. Proposal to ratify the selection of Arthur Andersen LLP as the independent
auditors for the year ending December 31, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING [ ]
COMMENT/ADDRESS CHANGE (Please mark this box if you have written
comments/address change on the reverse side.) [ ]
SIGNATURE(S) __________________________________________ DATE ______________
NOTE: Please sign exactly as name appears hereon, joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
(FOLD AND DETACH HERE)
ANNUAL MEETING OF STOCKHOLDERS
OF CALPINE CORPORATION
Wednesday, May 27, 1998
9:00 A.M.
Silicon Valley Athletic Club
Corinthian Room
San Jose, California
YOUR VOTE IS IMPORTANT
Please complete, date and sign your proxy card and
promptly return it in the enclosed postage-paid envelope.
[CALPINE LOGO]
