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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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CALPINE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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[ ] Fee paid previously with preliminary materials. Total fee paid:
[ ] 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,
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(1) Amount Previously Paid:
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[CALPINE LOGO]
CALPINE CORPORATION
50 WEST SAN FERNANDO STREET
SAN JOSE, CALIFORNIA 95113
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NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2001
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders of
Calpine Corporation, a Delaware corporation (the "Company"), will be held at the
Boston Harbor Hotel, located at 70 Rowes Wharf, Boston, Massachusetts 02110, at
9:00 a.m., Eastern Standard Time, on May 17, 2001, for the purpose of
considering and voting upon the following matters:
1. To elect two Class II Directors to the Board of Directors, each for a
term of three years;
2. To act upon a proposal to amend the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares
of Common Stock, par value $.001 per share ("Common Stock");
3. To ratify the appointment of Arthur Andersen LLP as independent
accountants for the Company for the fiscal year ending December 31,
2001; and
4. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
Only stockholders of record at the close of business on March 23, 2001 are
entitled to notice of and to vote at the 2001 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
Company's Eastern Regional offices located at The Pilot House, 2nd Floor, Lewis
Wharf, Boston, Massachusetts 02110, for at least 10 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
PETER CARTWRIGHT
Chairman of the Board, President
and Chief Executive Officer
April 19, 2001
San Jose, California
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CALPINE CORPORATION
50 WEST SAN FERNANDO STREET
SAN JOSE, CALIFORNIA 95113
PROXY STATEMENT
FOR THE
2001 ANNUAL MEETING OF STOCKHOLDERS
OF
CALPINE CORPORATION
TO BE HELD ON MAY 17, 2001
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 2001
Annual Meeting of Stockholders of the Company, to be held at 9:00 a.m., Eastern
Standard Time, on May 17, 2001, at the Boston Harbor Hotel, located at 70 Rowes
Wharf, Boston, Massachusetts 02110 and at any and all adjournments or
postponements thereof. At the 2001 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 for a term of three years, (ii) a
proposal to amend the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") to increase the number of
authorized shares of common stock, par value $.001 per share (the "Common
Stock") and (iii) the ratification of the appointment of Arthur Andersen LLP as
independent accountants for the Company for the year ending December 31, 2001.
This Proxy Statement and the enclosed form of proxy are first being mailed
to stockholders of the Company on or about April 19, 2001. The Company's 2000
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 2000
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. Requests for such copies or additional copies of the 2000 Annual Report to
Stockholders should be directed to the Secretary of the Company, 50 West San
Fernando Street, San Jose, California 95113.
RECORD DATE, VOTING AND QUORUM
The close of business on March 23, 2001 was the record date (the "Record
Date") for stockholders entitled to notice of and to vote at the 2001 Annual
Meeting of Stockholders. At the close of business on the Record Date,
285,075,132 shares of Common Stock were 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 2001 Annual
Meeting of Stockholders. Directors will be elected by a plurality of the votes
cast for the election of directors. Approval of the proposed amendment to the
Certificate of Incorporation requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock. An affirmative vote of the
holders of a majority of the shares of Common Stock present and entitled to vote
at the meeting is required for approval of each of the other items being
submitted to the stockholders for a vote at the meeting. In the case of the
proposed amendment to the Certificate of Incorporation, both abstentions and
proxies for which a broker, bank or institutional holder does not have
discretionary voting authority and has not received voting instructions from the
beneficial owner ("broker non-votes") will have the effect of a vote against the
proposal. On each of the other items being submitted to a vote of stockholders,
(i) abstentions will
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be treated as present and entitled to vote and, therefore, will have the effect
of a vote against the proposal and (ii) broker non-votes will be treated as
shares not present and entitled to 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 2001 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 in
time for voting at the 2001 Annual Meeting of Stockholders will, unless such
proxy is 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 Directors nominees
as Class II Directors, (ii) FOR the amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock and
(iii) FOR the ratification of the appointment of Arthur Andersen LLP as the
Company's independent accountants for the Company for the year ending December
31, 2001. No business other than as set forth in the accompanying Notice of
Annual Meeting is expected to come before the 2001 Annual Meeting of
Stockholders, but should any other matter requiring a vote of stockholders be
properly brought before the 2001 Annual Meeting of Stockholders, it is the
intention of the persons named in the enclosed form of proxy to vote all proxies
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 or electronically by officers
and other employees of the Company who will not receive additional compensation
for such solicitation. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the Common Stock, and such persons will 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, California 95113, a written notice of revocation
or a duly executed proxy bearing a later date, or it may be revoked by attending
the 2001 Annual Meeting of Stockholders and voting in person. Attendance at the
2001 Annual Meeting of Stockholders will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 2002 Annual
Meeting of Stockholders must be received by the Company no later than December
17, 2001 in order to be considered for inclusion in the Company's proxy
statement and form of proxy relating to that meeting. The proposal must be
mailed to the Secretary of the Company, 50 West San Fernando Street, San Jose,
California 95113. Proposals may be included in the proxy statement if they
comply with certain rules and regulations promulgated by the Securities and
Exchange Commission. Notification to the Company of stockholder proposals to be
introduced at the 2002 Annual Meeting of Stockholders that are not included in
the proxy statement relating to that meeting must be received by the Company no
more than 60 days nor less than 20 days prior to the date announced by the
Company for the 2002 Annual Meeting of Stockholders.
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MATTERS TO BE CONSIDERED AT THE 2001 ANNUAL MEETING OF STOCKHOLDERS
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
The Company's Bylaws currently provide that the number of directors that
shall constitute the Board of Directors shall not be less than five nor more
than nine, with the actual number within these limits to be fixed from time to
time by resolution of the Board of Directors or by the stockholders. The
authorized number of directors is currently set at eight. The Company's
Certificate of Incorporation provides that the Board of Directors shall be
divided into three classes, with each class having a three-year term. Two seats
have been designated as Class II Board seats, with the term of the directors
occupying such seats expiring as of the 2001 Annual Meeting of Stockholders.
Three seats each have been designated as Class III and Class I Board seats,
respectively. The directors elected to Class III will continue to hold office
until the 2002 Annual Meeting and until such directors' successors have been
elected and qualified or until their earlier death, resignation or removal. The
directors elected to Class I will continue to hold office until the 2003 Annual
Meeting of Stockholders and until such directors' successors have been elected
and qualified or until their earlier death, resignation or removal.
At the 2001 Annual Meeting of Stockholders, the Company intends to nominate
Ann B. Curtis and V. Orville Wright for re-election as Class II Directors, each
of whom currently serves as a Class II Director. Each would be elected to serve
for a three-year term ending at the 2004 Annual Meeting of Stockholders and
until their respective successors are elected and qualified or until their
earlier death, resignation or removal.
Mr. Wright has advised the Company that he intends to retire as a director
when the Company identifies a successor to him as a director. Since that time,
the Company has been actively engaged in a search to identify a successor to Mr.
Wright and has retained the executive search firm of Heidrick & Struggles to
assist it in its search for a suitable successor to Mr. Wright. Mr. Wright has
agreed to stand for re-election as a Class II Director on the understanding
that, as soon as a successor is identified, he will resign from the Board of
Directors and the Board will elect a successor to serve for the remainder of Mr.
Wright's term.
The proxy holders intend to vote all proxies received by them for each of
the nominees for election as a Class II Director 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 2001 Annual Meeting of
Stockholders and the Board of Directors designates a replacement nominee, the
proxies will be voted for the replacement nominee. 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.
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Set forth in the table below is a list of the Company's directors, together
with certain biographical information.
NAME AGE PRINCIPAL OCCUPATION CLASS
---- --- -------------------- -----
Peter Cartwright............ 71 Chairman of the Board, President and Chief Executive III
Officer of the Company
Ann B. Curtis............... 50 Executive Vice President, Chief Financial Officer and II
Corporate Secretary of the Company
Jeffrey E. Garten........... 54 Dean of the Yale School of Management I
Michael P. Polsky........... 51 President, SkyGen Energy LLC and Senior Vice III
President, Calpine Corporation
Susan C. Schwab............. 46 Dean of the School of Public Affairs at the University III
of Maryland
George J. Stathakis......... 70 International Investment Banker I
John O. Wilson.............. 62 Senior Research Fellow, Berkeley Roundtable on the I
International Economy and Executive Vice President
and Chief Economist, SDR Capital Management
V. Orville Wright........... 80 Retired Co-Chief Executive Officer of MCI II
Communications Corp.
NOMINEES FOR CLASS II DIRECTORS WITH TERMS EXPIRING IN 2004
Ann B. Curtis has served as Executive Vice President of the Company since
August 1998, and before that had been 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 in September 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 has
overall management responsibility for the Company's Western, Central and Eastern
Regional Offices, and 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 the Company, Ms. Curtis was Manager of Administration for Gibbs & Hill,
Inc., 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 in various positions with MCI Communications Corp., including Vice
Chairman and Co-Chief Executive Officer from 1988 to 1991, Vice Chairman and
Chief Executive Officer from 1985 to 1987, and President and Chief Operating
Officer from 1975 to 1985. 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.
CONTINUING CLASS III DIRECTORS WITH TERMS EXPIRING IN 2002
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 in September
1996. From 1979 to 1984, Mr. Cartwright was Vice President and General Manager
of Gibbs & Hill, Inc.'s Western Regional Office. From 1960 to 1979, Mr.
Cartwright worked for General Electric Corporation'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.
Michael P. Polsky became a director in October 2000 in connection with the
Company's acquisition of SkyGen Energy LLC (see "Certain Relationships and
Related Transactions" below). He is the President, Chief Executive Officer and
founder of SkyGen Energy LLC, a wholly owned business unit of Calpine
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Corporation. In 1985, Mr. Polsky co-founded Indeck Energy Services, Inc. He has
held management positions with Fluor Engineers, Brown Boveri Turbomachinery and
Bechtel Power Corporation.
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.
CONTINUING CLASS I DIRECTORS WITH TERMS EXPIRING IN 2003
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, an investment banking firm, 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 in September 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 32 years with General Electric Corporation in various
management and executive positions. During his service with General Electric,
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 a Senior Research Fellow at the Berkeley Roundtable on the
International Economy and as Executive Vice President and Chief Economist of SDR
Capital Management since January 1999. Mr. Wilson served as Executive Vice
President and Chief Economist at Bank of America from August 1984 to January
1999. 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 19 meetings and acted by unanimous
written consent twice in 2000. The Board of Directors has an Audit Committee, a
Compensation Committee and an Executive Committee. The Audit Committee meets
with the Company's finance and accounting managers and its independent public
accountants to review 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 four meetings in 2000. The Compensation
Committee administers salaries, incentives and other forms of compensation for
executive officers of the Company, as well as certain incentive compensation and
benefit plans of the Company. The Compensation Committee is comprised of Susan
C. Schwab (Chair), Jeffrey E. Garten, and V. Orville Wright. After the 2001
Annual Meeting of Stockholders, Jeffrey E. Garten will assume the chairmanship
of the Compensation Committee. The Compensation Committee held five meetings and
acted by unanimous
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written consent once in 2000. The Executive Committee is empowered to take
actions on behalf of the Board of Directors, particularly in the event such
actions are necessary on short notice. The Executive Committee is comprised of
Peter Cartwright (Chair), George J. Stathakis and John O. Wilson. The Executive
Committee acted by unanimous written consent twice in 2000. There is currently
no Nominating Committee. The Board of Directors as a whole has oversight for
recommendations regarding the size of the Board of Directors and for recruiting
and recommending candidates for election to the Board of Directors. The Company
has retained the executive search firm of Heidrick & Struggles to assist it in
its search for candidates for election to the Board of Directors.
DIRECTOR COMPENSATION
As of January 1, 2001, non-employee members of the Board of Directors are
each paid an annual fee of $42,000 and are reimbursed for all expenses incurred
in attending meetings of the Board of Directors or any committee thereof. The
chairs of the Compensation Committee and the Audit Committee receive an
additional annual fee of $7,000. Under the Automatic Option Grant Program in
effect under the Company's 1996 Stock Incentive Plan, each non-employee Board
member receives, on an annual basis, an option grant to purchase shares of
Common Stock equal in value to $20,000. The shares subject to these option
grants vest upon the optionee's completion of one year of Board service measured
from the grant date. Each option has an exercise price per share equal to the
fair market value per share of Common Stock on the grant date and a term of 10
years, subject to earlier termination upon the optionee's cessation of Board
service. Each option 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 the optionee's
cessation of Board service prior to vesting in those shares. However, option
shares issuable upon exercise of options granted 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.
Non-employee directors are also eligible to participate in the Director Fee
Option Grant Program in effect under the 1996 Stock Incentive Plan, pursuant to
which they may elect to apply all or a portion of their annual retainer fee
towards the acquisition of special below-market option grants. For each
director, the number of shares of Common Stock subject to these options is
determined by dividing (i) the portion of the annual retainer fee each director
elects to apply toward the acquisition of options by (ii) 66 2/3% of the fair
market value per share of Common Stock on the grant date. Each option has an
exercise price per share equal to 33 1/3% of the fair market value per share of
Common Stock on the grant date. The options became fully exercisable on December
31, 2000. The options have a term of 10 years, subject to earlier termination of
two years following cessation of Board service.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote "FOR" the
election of the Class II Director nominees listed above.
PROPOSAL TWO: AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED SHARES
BACKGROUND
Under the Company's Certificate of Incorporation, the Company is authorized
to issue up to 500,000,000 shares of Common Stock. As of December 31, 2000,
283,715,058 shares of Common Stock were issued and outstanding. In addition,
approximately 35,140,000 shares were reserved for issuance under the Company's
stock-based employee compensation and incentive plans, approximately 44,900,000
shares were reserved for issuance in connection with convertible securities
issued by the Company or subsidiaries of the Company, approximately 31,260,000
shares were reserved for issuance in connection with acquisition transactions,
and approximately 104,985,000 shares were available for future corporate
purposes.
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THE PROPOSAL
The Board of Directors has unanimously adopted a resolution declaring it
advisable to amend the Certificate of Incorporation to increase from 500,000,000
to 1,000,000,000 the number of shares of Common Stock that the Company has the
authority to issue. This amendment is being submitted to the stockholders of the
Company for approval.
REASONS FOR THE AMENDMENT
At the 2000 Annual Meeting of Stockholders, the stockholders approved an
increase in the authorized Common Stock of the Company from 100,000,000 shares
of Common Stock to 500,000,000 shares of Common Stock. Since that time, in
connection with the rising price of its Common Stock, the Company declared two 2
for 1 splits of its Common Stock, effective on June 8, 2000 and November 14,
2000, respectively. In addition, the Company has completed two registered
offerings of its Common Stock, and two registered offerings of securities
convertible into its Common Stock, thereby raising needed capital for the
Company. The Company and has also issued, or reserved for issuance, shares of
its Common Stock in connection with several acquisition transactions.
Accordingly, much of the additional Common Stock authorized to be issued has
been issued or is reserved for issuance.
The Board of Directors believes that it is in the Company's best interest
to increase the number of authorized but unissued shares of Common Stock in
order to have additional shares available to meet the Company's future business
needs as they arise. While the Company's management has no current arrangements,
agreements, understandings or plans for the use of the additional shares
proposed to be authorized, the Board of Directors believes that the availability
of such additional shares will provide the Company with the flexibility to issue
Common Stock for a variety of purposes that the Board of Directors may deem
advisable. These purposes could include, among other things, the sale of stock
to raise additional capital, the purchase of property or assets, the acquisition
or merger into the Company of other companies, the use of stock for various
equity compensation and other employee benefit plans and arrangements, the
declaration of stock splits or dividends, and other bona fide corporate
purposes. In some situations, the issuance of additional shares of Common Stock
could have a dilutive effect on earnings per share, and, for a stockholder who
does not purchase additional shares to maintain its, his or her pro rata
interest, on a stockholder's percentage voting power in the Company. If
authorized, the additional shares of Common Stock could be issued without
further action by the Company's stockholders, unless stockholder approval is
required by law, regulation or stock exchange rule.
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, be construed as having an anti-takeover effect (for
example, by diluting the stock ownership of a person seeking to effect a change
in the composition of the Board of Directors or contemplating a tender offer or
other transaction for the combination of the Company with another company), the
Board of Directors is not proposing this amendment to the Certificate of
Incorporation in response to any effort known to the Board of Directors to
accumulate Common Stock or to obtain control of the Company by means of a
merger, tender offer or solicitation in opposition to management. In addition,
the proposal is not part of any plan by management to recommend a series of
similar amendments to the Board of Directors and the stockholders. Finally, the
Board of Directors does not currently contemplate recommending the adoption of
any other amendments to the Certificate of Incorporation which could be
construed as affecting the ability of third parties to take over or to change
the control of the Company.
In addition to the Common Stock, the Certificate of Incorporation currently
grants to the Board of Directors the authority to authorize the issuance up to
10,000,000 shares of preferred stock, in one or more series, without stockholder
approval. The Board of Directors has authorized the issuance of up to 500,000
shares of Series A Participating Preferred Stock in connection with the exercise
of certain preferred stock purchase rights associated with the Common Stock. The
Company has also authorized the issuance of one share of Special Voting
Preferred Stock in connection with the Company's acquisition of Encal Energy
Ltd. There are no shares of preferred stock (or Series A Participating Preferred
Stock) currently outstanding. The one share of Special Voting Preferred Stock
will be issued upon consummation of the Company's acquisition
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of Encal Energy Ltd., which is expected to occur by the end of April 2001. The
proposed amendment to the Certificate of Incorporation would not change the
Company's authority to issue shares of preferred stock, including in connection
with any preferred stock purchase rights.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote "FOR" the
amendment to the Certificate of Incorporation to increase the number of
authorized shares of Common Stock.
PROPOSAL THREE: RATIFICATION OF APPOINTMENT 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, 2000. Subject to
stockholder ratification, the Board of Directors has reappointed the firm to
serve as the Company's independent public accountants for the year ending
December 31, 2001. Accordingly, a resolution will be presented at the 2001
Annual Meeting of Stockholders to ratify the appointment 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,
2001. In the event that stockholders fail to ratify the appointment of Arthur
Andersen LLP, the Board of Directors would reconsider such appointment. Even if
the appointment 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.
The Audit Committee of the Board of Directors has determined that the
accounting advice and tax services provided by Arthur Andersen LLP are
compatible with maintaining Arthur Andersen LLP's independence.
One or more representatives of Arthur Andersen LLP are expected to be
present at the 2001 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
appropriate questions.
FEES BILLED TO THE COMPANY BY ARTHUR ANDERSEN LLP DURING FISCAL 2000
AUDIT FEES
Arthur Andersen LLP's fees for performing the Company's audit for the
fiscal year ended December 31, 2000 were approximately $1,428,000, and its fees
relating to the review of the Company's financial statements included in the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000 were approximately $156,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage Arthur Andersen LLP to provide advice to the
Company regarding financial information systems design and implementation during
the fiscal year ended December 31, 2000.
ALL OTHER FEES
The aggregate amount of fees billed by Arthur Andersen LLP for all services
rendered during the fiscal year ended December 31, 2000, other than as described
above in "-- Audit Fees," was approximately $2,796,000.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the year ending December 31, 2001.
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OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
2001 Annual Meeting of Stockholders other than those set forth herein and in the
Notice of Annual Meeting 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 judgment. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed proxy.
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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 Common Stock as of December 31, 2000
by (i) each person known by the Company to be the beneficial owner of more than
five percent of the outstanding shares of Common Stock, (ii) each director of
the Company, (iii) each executive officer of the Company listed in the Summary
Compensation Table below and (iv) all executive officers and directors of the
Company as a group.
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
------------------------------------ --------------------- ---------------------
Putnam Investments, Inc.(2)............................ 17,317,717 6.1%
One Post Office Square
Boston, MA 02109
FMR Corporation(3)..................................... [16,833,072] [5.9%]
82 Devonshire Street
Boston, MA 02109
Wellington Management Company, LLP(4).................. 16,570,100 5.89%
75 State Street
Boston, MA 02109
Peter Cartwright(5).................................... 9,507,838 3.2%
Ann B. Curtis(6)....................................... 2,332,063 *
Jeffrey E. Garten(7)................................... 181,416 *
Robert D. Kelly(8)..................................... 873,711 *
Thomas R. Mason(9)..................................... 47,112 *
Michael P. Polsky...................................... 1,792,480 *
Susan C. Schwab(10).................................... 88,880 *
George J. Stathakis(11)................................ 324,632 *
John O. Wilson(12)..................................... 158,636 *
V. Orville Wright(13).................................. 192,060 *
All executive officers and directors as a group (12
persons)(14)......................................... 15,179,664 5.11%
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
issuable upon the exercise of options or warrants or upon the conversion of
convertible securities that are immediately exercisable or convertible or
that will become exercisable or convertible within the next 60 days are
deemed beneficially owned by the beneficial owner of such options, warrants
or convertible securities and are deemed outstanding for the purpose of
computing the percentage of shares beneficially owned by the person holding
such instruments 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 sole 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 December 31, 2000 was 283,715,058.
(2) According to the Form 13F filed with the Commission, Putnam Investments,
Inc. possesses shared voting power over 224,416 shares and shared
investment power over 17,317,717 shares.
(3) According the Schedule 13G filed with the Commission, FMR Corporation
possesses sole voting power over 2,244,548 shares and sole investment power
over 16,833,072 shares.
(4) According to the Schedule 13G filed with the Securities and Exchange
Commission, Wellington Management Company, LLP possesses shared voting
power over 14,555,810 shares and shared investment power over 16,570,100
shares.
(5) Includes options to purchase 9,388,638 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
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(6) Includes options to purchase 2,316,476 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(7) Includes options to purchase 90,708 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(8) Includes options to purchase 861,032 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(9) Includes options to purchase 35,702 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(10) Includes options to purchase 86,380 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(11) Includes options to purchase 300,632 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(12) Includes options to purchase 158,636 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(13) Includes options to purchase 152,060 shares of Common Stock issuable upon
the exercise of options outstanding as of December 31, 2000 or within 60
days thereafter.
(14) Includes options to purchase 14,845,048 shares of Common Stock issuable
upon the exercise of options outstanding as of December 31, 2000 or within
60 days thereafter.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
Set forth in the table below is a list of the Company's executive officers
who are not directors, together with certain biographical information.
OTHER EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Thomas R. Mason................................. 57 Executive Vice President
Robert D. Kelly................................. 43 Senior Vice President -- Finance
Ron Walter...................................... 51 Senior Vice President -- Business Development
Charles B. Clark, Jr. .......................... 53 Vice President and Corporate Controller
Thomas R. Mason has served as Executive Vice President since August 1999
and Senior Vice President from March 1999 until August 1999. Mr. Mason is
responsible for managing the Company's power plant construction and operations
activities. From March 1995 to February 1999, prior to joining the Company, Mr.
Mason was President and Chief Operating Officer of CalEnergy Operating Services
Inc., a wholly owned subsidiary of MidAmerica Energy Holdings Company. He
obtained a Master of Business Administration Degree from the University of
Chicago in 1970 and a Bachelor of Science Degree in Electrical Engineering from
Purdue University in 1966.
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, from 1990 to 1991, he was
the Marketing Manager of Westinghouse Credit Corporation. 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.
RON WALTER HAS SERVED AS THE COMPANY'S SENIOR VICE PRESIDENT -- BUSINESS
DEVELOPMENT SINCE JANUARY 1998 AND VICE PRESIDENT, GEOTHERMAL DEVELOPMENT FROM
JULY 1990 TO JANUARY 1998. MR. WALTER'S RESPONSIBILITIES INCLUDE ALL BUSINESS
DEVELOPMENT ACTIVITIES AND CORPORATE AND ASSET PORTFOLIO ACQUISITIONS. FROM 1984
TO 1990, MR. WALTER SERVED AS MANAGER -- GEOTHERMAL PROJECTS FOR THE COMPANY.
PRIOR TO JOINING THE COMPANY, MR. WALTER SERVED AS DIRECTOR OF
SALES -- GEOTHERMAL OF GIBBS & HILL, INC. FROM 1983 TO 1984, AND AS SENIOR
ENGINEER FOR GIBBS & HILL, INC. FROM 1982 TO 1983. HE OBTAINED A MASTER OF
SCIENCE DEGREE IN MECHANICAL ENGINEERING FROM OREGON STATE UNIVERSITY IN 1976
AND A BACHELOR OF SCIENCE DEGREE IN MECHANICAL ENGINEERING FROM THE UNIVERSITY
OF NEBRASKA IN 1971.
Charles B. Clark, Jr. has served as the Company's Vice President and
Corporate Controller since May 1999 and as Director of Business Services for the
Geysers from February 1999 to April 1999. Prior to joining the Company, Mr.
Clark served as the Chief Financial Officer of Hobbs Group, LLC from March 1998
to November 1998. Mr. Clark also served as Senior Vice President -- Finance and
Administration of CNF Industries, Inc. from February 1997 to February 1998. He
served as Vice President and Chief Financial Officer of Century Contractors
West, Inc. from May 1988 to January 1997. Mr. Clark obtained a Master of
Business Administration, with a concentration in Finance, from Harvard Graduate
School of Business Administration in 1976 and a Bachelor of Science Degree in
Mathematics from Duke University in 1969.
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SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain information concerning the
compensation for services rendered to the Company in all capacities during each
of the fiscal years ended December 31, 1998, 1999 and 2000 by the Company's
chief executive officer and each of the four other most highly-compensated
executive officers of the Company in 2000 who were serving as executive officers
as of December 31, 2000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------------
---------------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION(1)
--------------------------- ---- -------- ---------- ------------------ ---------------
Peter Cartwright.................... 2000 $860,078 $1,000,000 93,236 $8,130
Chairman of the Board, 1999 575,004 833,756 4,000,000 8,130
President and Chief 1998 400,002 600,000 880,000 8,130
Executive Officer
Ann B. Curtis....................... 2000 383,655 400,000 92,932
Executive Vice President, 1999 262,500 400,480 324,520 4,800
Chief Financial Officer 1998 220,000 250,000 240,000 4,800
and Corporate Secretary
Thomas R. Mason(2).................. 2000 393,271 400,000 93,302
Senior Vice President 1999 219,241 305,320 160,000 4,800
1998 -- -- -- --
Robert D. Kelly..................... 2000 321,924 250,000 76,568
Senior Vice President -- 1999 260,770 306,850 249,032 4,800
Finance 1998 205,000 230,000 172,000 4,800
Michael Polsky(3)................... 2000 100,922 57,000 100
Senior Vice President -- 1999 -- -- -- --
SkyGen 1998 -- -- -- --
- ---------------
(1) In 2000, the Company made a contribution of $4,800 to the Company's 401(k)
plan for the account of each of the named executive officers and paid a
premium of $3,330 on a special life insurance policy maintained by the
Company for the benefit of Mr. Cartwright.
(2) Mr. Mason began his employment with the Company on March 29, 1999.
(3) Mr. Polsky began his employment with the Company on October 12, 2000.
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STOCK OPTIONS
The following table sets forth certain information concerning grants of
stock options during the fiscal year ended December 31, 2000 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 10-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 fiscal year ended December 31, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE AT
------------------------------------------ ASSUMED ANNUAL RATES OF STOCK
OPTIONS PERCENTAGE OF TOTAL PRICE APPRECIATION
GRANTED OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(3)
(NO. OF EMPLOYEES PRICE PER EXPIRATION ------------------------------
NAME SHARES) IN FISCAL YEAR(2) SHARE DATE 5% 10%
---- ------- ------------------- --------- ---------- ------------- -------------
Peter Cartwright..... 4,472(4) * $ 5.565 1/2/10 $ 96,673.99 $ 168,653.70
Peter Cartwright..... 88,764(5) 2.173% $19.455 2/2/05 $1,085,664.42 $2,751,070.17
Ann B. Curtis........ 1,788(4) * $ 5.565 1/2/10 $ 38,652.30 $ 67,431.31
Ann B. Curtis........ 3,012 * $18.205 1/27/10 $ 34,472.53 $ 87,353.28
Ann B. Curtis........ 11,332(5) * $19.455 2/2/05 $ 60,910.15 $ 134,595.51
Ann B. Curtis........ 76,800 1.8801% $19.455 2/1/10 $ 939,333.82 $2,380,268.90
Robert D. Kelly...... 1,788(4) * $ 5.565 1/2/10 $ 38,652.30 $ 67,431.31
Robert D. Kelly...... 3,012 * $18.205 1/27/10 $ 34,472.53 $ 87,353.28
Robert D. Kelly...... 14,168(5) * $19,455 2/2/05 $ 76,153.82 $ 168,280.02
Robert D. Kelly...... 57,600 1.4101% $19.455 2/1/10 $ 704,500.37 $1,785,201.68
Ron Walter........... 43,200 1.0576% $19.455 2/1/10 $ 528,375.28 $1,338,901.26
Thomas R. Mason...... 4,472(4) * $ 5.565 1/2/10 $ 96,673.99 $ 168,653.70
Thomas R. Mason...... 3,012 * $18.205 1/27/10 $ 34,472.53 $ 87,353.28
Thomas R. Mason...... 7,556(5) * $19.455 2/2/05 $ 40,613.94 $ 89,746.18
Thomas R. Mason...... 76,800 1.8801% $19.455 2/1/10 $ 939,333.82 $2,380,268.90
Thomas R. Mason...... 536 * $ 48.75 9/19/10 $ 16,427.33 $ 41,626.80
Thomas R. Mason...... 926 * $ 48.75 9/19/10 $ 28,380.05 $ 71,914.95
Michael P. Polsky.... 100 * $ 43.00 10/11/10 $ 2,703.31 $ 6,850.18
- ---------------
* Less than one percent
(1) Unless otherwise noted herein, the following applies to each option set
forth in the table above. Each option has a term of 10 years, 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 the officer's completion of each of the four years of service
measured from the grant date. Each 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 4,109,002 shares of Common Stock
during the fiscal year ended December 31, 2000.
(3) The 5% and 10% assumed annual rates of compound stock price appreciation are
mandated by the rules of the Commission and do not represent the Company's
estimate or a projection by the Company of future stock prices.
(4) These options were granted under the Salary Investment Option Grant Program
under the 1996 Stock Incentive Plan. They each have a term of 10 years
subject to earlier termination upon the executive officer's termination of
service with the Company. Each option vested pro rata on a monthly basis
over the twelve calendar months of 2000.
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(5) These options were granted under the Discretionary Option Grant Program
under the 1996 Stock Incentive Plan as part of a bonus. They each have a
term of 5 years subject to earlier termination upon the executive officer's
termination of service with the Company. The options vested on the date of
grant.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning the exercise
of options during the fiscal year ended December 31, 2000 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, 2000. No stock appreciation rights were exercised by such executive officers
during the fiscal year ended December 31, 2000, 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
NUMBER OF UNEXERCISED
OPTIONS VALUE OF UNEXERCISED
AT DECEMBER 31, 2000 IN-THE-MONEY OPTIONS
(NO. OF SHARES) AT DECEMBER 31, 2000(2)
SHARES ACQUIRED VALUE --------------------------- ----------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ------------ -------------
Peter Cartwright..... 687,000 $22,035,550 9,088,265 3,643,265 $393,944,155 $138,530,153
Ann B. Curtis........ 195,400 $ 6,072,599 2,217.276 496,800 $ 97,726,160 $ 19,573,754
Robert D. Kelly...... 240,000 $ 6,353,886 786,483 363,749 $ 33,970,937 $ 14,300,484
Ron Walter........... 10,800 $ 269,886 1,376,752 323,200 $ 61,199,487 $ 12,812,105
Michael Polsky....... 0 -- -- -- -- --
Thomas R. Mason...... -- -- 16,129 237,173 $ 436,292 $ 8,513,107
- ---------------
(1) Based upon the market price of the purchased shares on the exercise date
less the option exercise price paid for those shares.
(2) Based upon the closing selling price ($45.063 per share) of the Common Stock
on December 29, 2000, as reported by the New York Stock Exchange, less the
option exercise price payable per share.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with Mr. Cartwright, Ms.
Curtis, Mr. Kelly, Mr. Mason and Mr. Walter. Each of the employment agreements
expires during 2004 unless earlier terminated or subsequently extended. The
employment agreements provide for the payment of a base salary, which is subject
to periodic adjustment by the Board of Directors, and provide for annual bonuses
under 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.
Under the terms of the 1996 Stock Incentive Plan, 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 1996 Stock
Incentive 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 Compensation Committee, as plan administrator of the 1996 Stock
Incentive Plan, has the authority to provide for the accelerated vesting of the
shares of Common Stock subject to outstanding options held by the chief
executive officer or any other executive officer or any unvested shares of
Common Stock acquired 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.
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EXECUTIVE COMPENSATION REPORT
The following Report of the Compensation Committee 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, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors administers the
Company's compensation policies and programs. The Compensation Committee was
established in 1996 following the Company's initial public offering. The
Compensation Committee (i) sets the cash compensation of the Chief Executive
Officer, (ii) reviews the design, administration, and effectiveness of the cash
compensation programs for other key executives and (iii) administers the
Company's stock incentive plans, approving stock option grants for executive
officers and approving the size of the stock option grant pool for all
employees. The Compensation Committee serves under a charter adopted by the
Board of Directors and is comprised entirely of outside directors who have never
served as officers of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company operates in the extremely competitive and rapidly changing
power industry. The Compensation 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. These programs should be developed and implemented within a competitive
framework and should take into account the achievement of overall financial
results and individual contributions. Within this overall philosophy, the
Compensation 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 individual contributions; and
- Align the financial interests of executive officers with those of
stockholders by providing significant long-term, equity-based incentives.
COMPENSATION COMPONENTS AND PROCESS
The three major components of the Company's executive officer compensation
are: (i) base salary, (ii) annual variable incentive awards under the Annual
Management Incentive Plan (the "MIP") and (iii) long-term, equity-based
incentive awards under the 1996 Stock Incentive Plan.
The Compensation Committee determines executive officers' compensation
levels with the assistance of an independent consulting firm that furnishes the
Compensation Committee with executive compensation data drawn from a nationally
recognized survey of comparable companies.
The positions of the Company's Chief Executive Officer and executive
officers are compared with those of their counterparts at comparable companies,
and the market compensation levels for comparable positions are examined to
determine base salary, target incentives, and total cash compensation. In
addition, comparable companies' practices concerning stock option grants are
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 that are among the most
competitive in the Company's industry. Under the Salary Investment Option Grant
Program in effect under the Company's 1996 Stock Incentive Plan, officers and
directors of the Company subject to the short-swing profit liabilities of
Section 16 of the Securities Exchange Act of 1934, as amended, and other
16
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highly compensated employees may elect to have between $10,000 and $50,000 of
their base salary invested each year in special option grants.
Annual Variable Incentive Awards. To reinforce the attainment of Company
goals, the Compensation Committee believes that a substantial portion of the
annual compensation of each executive officer should be in the form of variable
incentive pay. Under the MIP, 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 MIP 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 2000, 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 made under the 1996 Stock Incentive
Plan 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 Compensation 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 Compensation 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 Compensation Committee's
discretion.
During 2000, the Board of Directors made option grants to Mr. Cartwright,
Ms. Curtis, Mr. Kelly and Mr. Mason under the Company's 1996 Stock Incentive
Plan. Each grant allows the officer to acquire shares of Common Stock at a fixed
price per share (the market price on the grant date) over a specified period of
time. Specifically, each 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, 2004, unless extended). The
base salary rate for Mr. Cartwright in 2000 was $856,000, effective as of
January 1, 2000, an increase of $106,000 from his prior salary. The increase 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 was tied to Company
performance and long-term stock price appreciation.
Mr. Cartwright's incentive award for 2000 was based on the Company's 2000
net income relative to a pre-established target. Because the target level was
exceeded by 200%, Mr. Cartwright received a cash award for 2000 of $1,000,000.
Compliance with Section 162(m) of the Internal Revenue Code. Under Section
162(m) of the Internal Revenue Code, the Company is not permitted to deduct for
federal income tax purposes any compensation in excess of $1,000,000 paid to its
Chief Executive Officer or to any of its four other most highly compensated
executive officers, unless the compensation qualifies as performance-based
compensation within the meaning of Section 162(m). In 2000, none of the
compensation paid to the executive officers named in the Summary Compensation
Table was nondeductible by reason of Section 162(m), except $860,078 paid to Mr.
Cartwright under the MIP. In order to maintain its current flexibility to adjust
annual incentive payments to reflect business and individual performance, the
Committee does not presently intend to amend the MIP to meet the requirements
for exemption from the deduction limit. The Committee will continue to monitor
the effect of the deduction limit on the Company's net compensation costs, and
will take appropriate action to address the limit if it is warranted.
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Any compensation deemed paid in connection with the exercise of
nonqualified stock options granted under the 1996 Stock Incentive Plan before
the 2001 Annual Meeting of Stockholders automatically qualifies as
performance-based compensation deductible under Section 162(m). The Company is
submitting the Discretionary Option Grant Program under the 1996 Stock Incentive
Plan to stockholders for approval at the 2001 Annual Meeting of Stockholders to
ensure that the compensation deemed paid in connection with the exercise of
options and stock appreciation rights under the Discretionary Option Grant
Program will remain exempt from the deduction limit under Section 162(m).
Submitted on behalf of the Compensation Committee of the Board of
Directors.
Compensation Committee:
Susan C. Schwab (Chair)
Jeffrey E. Garten
V. Orville Wright
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee 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, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such acts.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is primarily responsible for
assisting the Board of Directors in carrying out its duties as they relate to
the Company's accounting policies, and its internal control and financial
reporting practices. The Audit Committee was established in 1996 following the
Company's initial public offering. The Audit Committee serves under a charter
adopted by the Board of Directors that specifies the responsibilities of the
Audit Committee. A copy of the Audit Committee Charter is attached as Appendix I
to this Proxy Statement. The Audit Committee is comprised entirely of outside
directors who have never served as officers of the Company.
In accordance with the Audit Committee Charter, the Audit Committee of the
Board of Directors assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing, and financial reporting practices of the Company. During the fiscal
year ended December 21, 2000, the Audit Committee met four times. The Audit
Committee chairman, as representative of the Audit Committee, periodically
discussed the interim financial information contained in each quarterly earnings
announcement with the Company's Chief Financial Officer, its corporate
controller and its independent auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the Company's independent auditors a formal
written statement describing all relationships between the auditors and the
Company that might bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditors'
independence. The Audit Committee also discussed with management, the internal
auditors and the independent auditors the quality and adequacy of the Company's
internal controls and the internal audit function's organization,
responsibilities, budget and staffing and concurred in the appointment of a new
director of internal audit. The Audit Committee reviewed with both the
independent and the internal auditors their audit plans, audit scope and
identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, both with and without
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management present, discussed and reviewed the results of the independent
auditors' examination of the financial statements. The Audit Committee also
discussed the results of the internal audit examinations.
The Audit Committee reviewed the audited financial statements of the
Company as of and for the fiscal year ended December 31, 2000, with management
and the independent auditors. Management has the responsibility for the
preparation of the Company's financial statements and the independent auditors
have the responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board of Directors
that the Company's audited financial statements be included in its Annual Report
on Form 10-K for the fiscal year ended December 31, 2000, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended the
reappointment, subject to shareholder approval, of the independent auditors and
the Board of Directors concurred in such recommendation.
Submitted on behalf of the Audit Committee of the Board of Directors.
Audit Committee:
John O. Wilson (Chair)
Jeffrey E. Garten
V. Orville Wright
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1998, the Company entered into a consulting contract with
George J. Stathakis, a director of the Company. The contract became effective
January 1, 1999 and terminated on December 31, 1999. Pursuant to the consulting
contract, Mr. Stathakis was 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 provided 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 20,000
shares of Common Stock under the 1996 Stock Incentive Plan at an exercise price
of $13.28125 per share, which was fully vested on October 1, 1999. As of January
1, 2000, Mr. Stathakis became a part-time employee of the Company. As a
part-time employee of the Company, Mr. Stathakis is paid an annual salary of
$60,000 and was granted 3,858 options on September 20, 2000 at an exercise price
of $48.75 per share, vest fully on May 18, 2001, and have a ten year term.
In June 1999, the Company made an interest-free, five-year loan to Thomas
R. Mason, Executive Vice President of the Company, in a principal amount of
$500,000, secured by a deed of trust on Mr. Mason's residence. The entire
balance of this loan is currently outstanding.
In October 2000, the Company completed the acquisition of Northbrook,
Illinois-based SkyGen Energy LLC ("SkyGen") from Wisvest Corporation and Michael
Polsky, a Vice President and director of the Company and the President of the
Company's SkyGen Energy LLC subsidiary (the "SkyGen Subsidiary"). Mr. Polsky was
appointed as a Class III director of the Company upon the completion of the
acquisition. Pursuant to the Stock and Note Purchase Agreement entered into in
connection with the acquisition of SkyGen, the Company is obligated to make
contingent payments to Mr. Polsky and two Polsky family trusts upon completion
on or before July 31, 2003, of certain project development milestones with
respect to each of 20 identified projects. The contingent payments equal $50,000
per megawatt of the maximum capacity of the applicable project if it is a
combined-cycle project, or $37,500 per megawatt of the maximum capacity of the
applicable project if it is a simple-cycle project. The maximum aggregate amount
of all such contingent payments is $200,000,000, of which no more than
$40,000,000 may be paid with respect to simple-cycle projects. In addition, a
development budget has been allocated for each of the 20 identified projects
and, to the extent that actual funds expended to achieve project development
milestones with respect to a project are less than that project's development
budget, the excess of the development budget over the actual expenditures is
payable to Mr. Polsky and the Polsky family trusts. If, on or before July 31,
2003, Mr. Polsky is terminated by the Company without cause or certain change of
control events related to the Company or the SkyGen Subsidiary occur, Mr. Polsky
and the Polsky family trusts are entitled to receive a payment equal to the net
present value of the remaining contingent payments that could have been earned.
Alternatively, the Company may at any time terminate its obligation to make
further contingent payments by making a payment to Mr. Polsky and the Polsky
family trusts equal to the net present value of the remaining contingent
payments that could have been earned. If Mr. Polsky voluntarily terminates his
employment with the Company, any contingent payments with respect to a project
made after his termination will be reduced by an amount equal to 150% of the
aggregate expenditures reflected in that project's development budget. In lieu
of payment to Mr. Polsky and the Polsky family trusts, Mr. Polsky has the right
to cause payment of all or some of such contingent payments to instead be made
to a trust, the beneficiaries of which are former participants in a phantom
rights plan maintained by SkyGen and terminated in connection with the Company's
acquisition of SkyGen. No contingent payments have yet been made to or on behalf
of Mr. Polsky or the Polsky family trusts pursuant to the Stock and Note
Purchase Agreement.
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
10% 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
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changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% stockholders are required by Commission
regulations 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 fiscal year ended December
31, 2000 with all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than 10% beneficial owners.
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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, as amended, or under the Securities
Exchange Act of 1934, as amended, 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 for the period of September 30,
1996 through December 31, 2000, the total return on the 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") and (ii) an index of
comparable peer issuers ("Peer Group") consisting of AES Corp., Dynegy, Inc. and
Duke Energy Corp. In accordance with the rules of the Commission, the returns
are indexed to a value of $100 at September 30, 1996 and the returns of each
company in the Peer Group have been weighted according to their market
capitalization as of the beginning of the period.
COMPARISON OF CUMULATIVE TOTAL EARNINGS
1996-2000 MEASUREMENT PERIOD
[PERFORMANCE GRAPH]
-----------------------------------------------------------------------------------------------------------------------
Base
Company/Index Period
Name 9/30/96 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-----------------------------------------------------------------------------------------------------------------------
CALPINE 100.00 125.00 92.96 157.80 800.00 2,253.18
-----------------------------------------------------------------------------------------------------------------------
S&P 500 100.00 108.34 144.48 185.78 224.88 204.40
-----------------------------------------------------------------------------------------------------------------------
PEER GROUP 100.00 112.96 146.69 162.51 185.07 349.89
-----------------------------------------------------------------------------------------------------------------------
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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 refrain from
voting in person and allow their proxies to be voted.
By Order of the Board of Directors,
Peter Cartwright
Chairman of the Board, President and
Chief Executive Officer
April 19, 2001
San Jose, California
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APPENDIX I
CALPINE CORPORATION
AUDIT COMMITTEE CHARTER
(APPROVED SEPTEMBER 16, 1999)
I. MEMBERSHIP
There shall be a committee of the Board of Directors of Calpine Corporation
("the "Corporation") to be known as the Audit Committee ("the Committee"). The
Committee shall be comprised of at least three directors elected by the Board of
Directors for a term of one year. Each such director shall be independent of the
management of the Corporation and free of any relationship that would interfere
with their exercise of independent judgement as committee members. A chairperson
shall be designated by the Board of Directors.
II. STATEMENT OF POLICY
The Committee shall provide assistance to the Board of Directors ("Board")
in fulfilling the directors' responsibility to the stockholders, potential
stockholders, and investment community relating to corporate accounting,
reporting practices of the Corporation and the quality and integrity of the
financial reports of the Corporation. The independent auditors ultimately are
accountable to the Board and the Committee. The Board and the Committee have
ultimate power to hire or remove the independent auditors. The Committee shall
maintain free and open communication among directors, independent auditors,
internal auditors and financial management of the Corporation.
III. RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and stockholders that the corporate
accounting and reporting practices of the Corporation are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
A. Review and recommend to the directors, for shareholder approval,
the independent auditors to be selected to audit the financial statements
of the Corporation and its division and subsidiaries.
B. Meet with the independent auditors and financial management of the
Corporation to review the scope of the proposed audit for the current year
and the audit procedures to be used, and at the conclusion thereof review
such audit, including any comments or recommendations of the independent
auditors. Review the statement of services provided by the independent
auditors to ensure their independence and objectivity is not impacted.
C. Review with the independent auditors, the controller, internal
audit director and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the Corporation,
and elicit any recommendations for the improvement of such internal
controls procedures or particular areas where new or more detailed controls
or procedures are desirable. Further, the Committee periodically should
review the Corporation's policy statements to determine their adherence to
the code of conduct.
D. Review the internal audit function of the Corporation including the
independence and authority of its reporting obligations, the proposed audit
plans for the coming year, and the coordination of such plans with the
independent auditors.
E. Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit plan,
with explanations for any deviations from the original plan.
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F. Review the financial statements contained in the annual report to
stockholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the stockholders. Any changes
in accounting principles should be reviewed.
G. The Committee Chairman shall review with management the
appointment, replacement, reassignment or dismissal of the director of
internal auditing.
H. Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose if,
in its judgment, that is appropriate.
I. Provide reports to the Board of Directors regarding the matters
reviewed or investigated by the Committee.
K. Review and reassess the adequacy of the Charter of the Committee at
least on an annual basis. Present any amendments or revisions of the
Charter to the Board of Directors for approval.
IV. MEETINGS
The Committee shall meet regularly with representatives of the
Corporation's management and representatives of the independent auditors. As
part of the Committee's responsibility to foster open communication, the
Committee should meet at least annually with management, the director of
internal audit, and the independent auditors in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be
discussed privately.
V. MINUTES
Minutes shall be kept of each meeting of the Committee and will be provided
to each member of the Board of Directors.
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[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
1. Election of Directors Nominees: Ann B. Curtis
V. Orville Wright
FOR WITHHELD
[ ] [ ]
FOR, except vote withheld from the following nominee: _______________
2. Amendment of the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock, par value $.001 per share.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratification of the appointment of Arthur Andersen LLP as independent
accountants for the Company for the year ending December 31, 2001.
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)____________________________________________________________________
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
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ANNUAL MEETING OF STOCKHOLDERS
OF CALPINE CORPORATION
THURSDAY, MAY 17, 2001 9:00 A.M. EST
BOSTON HARBOR HOTEL
BOSTON, MASSACHUSETTS
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[SEE MAP ON REVERSE SIDE FOR DIRECTIONS]
YOUR VOTE IS IMPORTANT.
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PLEASE COMPLETE, DATE AND SIGN PROXY CARD AND
PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
[CALPINE LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CALPINE CORPORATION
2001 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 2001 Annual Meeting of Stockholders of Calpine Corporation to be held May
17, 2001, 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 the
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" (i) THE ELECTION OF THE BOARD OF DIRECTORS NOMINEES AS CLASS
II DIRECTORS, (ii) THE AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK, PAR VALUE $.001 PER SHARE AND (iii) THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY
FOR THE YEAR ENDING DECEMBER 31, 2001, AND AS THE PROXY HOLDER DEEMS ADVISABLE
ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
COMMENTS/ADDRESS CHANGE (PLEASE MARK COMMENTS/ADDRESS BOX ON THE REVERSE SIDE)
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SEE REVERSE SIDE
FOLD AND DETACH HERE
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