Calpine requests court OK of full-time employee severance program

By Caroline Salls

Pittsburgh, Feb. 17 - Calpine Corp. requested court approval to implement a severance program for all of its full-time employees without written employment agreements, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the release, the purpose of the proposed severance program is to provide an incentive for the company's workforce to perform at optimum levels of productivity and remain focused on the company's successful and timely emergence from reorganization "instead of devoting time and energy to searching for new employment because of a perceived lack of job security in the Chapter 11 environment."

Under the severance program, benefits are contingent on the employee's releasing all claims and executing a written agreement containing non-solicitation, non-competition, non-disclosure and non-disparagement provisions.

The primary cash component of the program consists of payments in the form of salary continuation, as opposed to the lump-sum payment provided by Calpine's pre-bankruptcy severance program.

The salary continuation benefit will be measured in terms of the number of weeks of salary provided to eligible employees and varies based on employee level and years of service.

The severance program also provides an additional cash benefit equal to a maximum of one year's worth of accrued vacation time for each employee, which would amount to salary for five weeks, the maximum vacation time an employee can accrue in one year.

Eligible employees may elect either benefits continuation or outplacement services at the time of their termination. Under this component, most employees will receive 12 weeks of benefits continuation or outplacement services.

For employees at the director/manager level and higher, either benefits continuation or outplacement services will be provided for a period of time equal to the period of that employee's salary continuation under the severance program.

For employees at the executive vice president and senior vice president level who obtain alternate employment within the period of time that they are entitled to receive salary continuation and other benefits under the severance program, the severance payments and other benefits will be terminated on the later of 26 weeks and the day on which the employee begins the alternate employment.

There are 33 executive vice presidents and senior vice presidents covered under the severance program, and they will receive 39 weeks' base salary continuation, accrued vacation and benefits continuation or outplacement services.

A total of 88 vice presidents will receive 26 weeks; 586 directors and managers will receive 17 weeks and 2,359 other employees will receive two weeks.

The severance program is expected to cost Calpine $10.8 million per year over a two-year period, and it will result in savings of $57 million over the same two-year period for a net savings of about $46 million.

A hearing is scheduled for March 1.

Calpine, a San Jose, Calif., power company, filed for bankruptcy on Dec. 20. Its Chapter 11 case number is 05- 60200.

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