exv10w5w3w2



 





Exhibit 10.5.3.2




Detroit New York Chicago Dallas









November 3, 2006




Robert May

Calpine Corporation

50 West San Fernando Street

San Jose, CA 95113




Re: Agreement for Restructuring Services



This letter is the first amendment of the Agreement dated December 17, 2005 (the “Agreement”),
between AP Services LLC, a Michigan limited liability company (“APS”) and Calpine Corporation
(“Calpine” or the “Company”). Unless otherwise modified herein, the terms and conditions of the
Agreement remain in full force and effect.







Tasks







The following tasks are added to those stated in the Agreement:





	•	 	Assist in the review and assessment of executory contracts to identify rejection opportunities.
	 
	•	 	Collaborate with internal and external legal counsel to develop strategies for dealing with uneconomic contracts that
cannot be rejected due to jurisdictional issues.
	 
	•	 	Support Company process to evaluate and sell certain plants and assets that are no longer strategically relevant to
Calpine.
	 
	•	 	Assist in the development and process for completing the monthly operating reports and other reporting required during
the bankruptcy.
	 
	•	 	Assist the Company in analyzing and reconciling Chapter 11 bankruptcy claims, including reclamation analysis and
potential preferences.
	 
	•	 	Advising the Company’s accounting department on certain reporting requirements and evaluating the closing process to
accelerate the reporting of financial results.
	 
	•	 	Support US company and evaluate issues related to the Canadian chapter 11 filing.
	 
	•	 	Develop analysis to assess solvency of CES, LP and the trading operations, including evaluating interco transactions.





2000 Town Center | Suite 2400 | Southfield, MI | 48075 | 248.358.4420 | 248.358.1969 fax | www.alixpartners.com





 









 









Calpine Corporation

November 3, 2006

Page 2





	•	 	Work with the Company to identify the total population of inter-company general ledger accounts and to understand the
purpose and nature of activity for each inter-company account.
	 
	•	 	Work with management and the Company’s outside counsel to review a sample of structured finance transactions, assess
the economic value of the transactions, and identify potential pre and post-petition claims for the respective
transactions.
	 
	•	 	Maintain a controlled and repeatable forecasting methodology for the Debtors’ trading operations to provide a forecast
of cash flows based on current commodity prices and dispatch trends rather than historical trends.
	 
	•	 	Develop a model whereby contractual toll payments indexed to power and gas prices can be updated on a weekly basis to
account for changes in the commodity price index.
	 
	•	 	Assist the Company by providing an analyst in the Treasury department responsible for maintaining a daily bank
reconciliation between forecasted and actual cash flow activity for all cash accounts that sweep to Corp (over 20
accounts).
	 
	•	 	Assist the Company by providing an analyst in the Credit Department responsible for interacting with all counterparties
on a daily basis, assessing the net exposure between the counterparty and Calpine, and determining if any cash
collateral will need to posted or can be colleted. This analyst maintains the information and documentation that will
allow the Director of Credit the ability to help minimize the working capital required in the trading organization.
	 
	•	 	Assist the Company and its legal advisors in identifying possible substantive consolidation scenarios, as well as
support the Company in understanding both the third-party and intercompany affiliate claims associated with each legal
entity and scenario
	 
	•	 	Managing the transition of accounting and finance functions from San Jose to Houston, to include:






	 	•	 	Retentions of key San Jose staff through an appropriate transition period
	 
	 	•	 	Recruiting, retention and training of new staff in Houston
	 
	 	•	 	Transitioning of duties from San Jose staff to Houston staff






	•	 	Diagnosis and develop strategies and tactics to enhance processes surrounding accounting close and consolidation




 









 














Calpine Corporation

November 3, 2006

Page 3







Staffing





The Staffing section of the Agreement is replaced in its entirety by the following:



APS will provide Lisa Donahue to serve as the Company’s Chief Financial Officer, reporting to the
Company’s Chief Executive Officer. Working collaboratively with the senior management team, the
Board of Directors and other Company professionals, Ms. Donahue will assist the Company in
evaluating and implementing strategic and tactical options through the restructuring process. She
will be assisted by Michael Feder and a staff of professionals at various levels as provided on
Exhibit A, all of whom have a wide range of skills and abilities related to this type of
assignment. In addition, we have relationships with and periodically retain independent
contractors with specialized skills and abilities to assist us.



Staffing levels and assignments shall be determined through consultation between the Company and
APS. The staff may be assisted by or replaced by other professionals at various levels, as
required. APS will keep the Company informed as to APS’ staffing and will add additional staff to
the assignment after consulting with the Company.



If APS finds it desirable to augment its professional staff with independent contractors (an “I/C”)
in this case, it shall do so consistent with applicable bankruptcy law.







Schedule 1, Fees and Expenses





Section 2, Contingent Success Fee, of Schedule 1 is replaced in its entirety with the following:



APS shall be eligible to receive an Emergence Incentive Bonus of up to $6.0 million earned upon
consummation of a confirmed plan of reorganization. The threshold at which such bonus shall be
earned and the maximum amount of the Emergence Incentive Bonus shall be as specified in the
schedule attached hereto; provided that it shall remain within the sole discretion of the CEO to
reduce the Emergence Incentive Bonus below the maximum amount specified in the schedule.



Please see the attached schedule for a detailed analysis of the APS Incentive Bonuses.



APS reviews and revises its billing rates on January 1 of each year. However, rates were not
revised for the Temporary Staff in place on the engagement at January 1, 2006. Therefore, APS will
be returning to standard rates effective January 1, 2007







Exhibit A





The attached Exhibit A replaces in its entirety the Exhibit A attached to the Agreement.




 









 










Calpine Corporation

November 3, 2006

Page 4



APS reviews and revises its billing rates on January 1 of each year. However, rates were not
revised for the Temporary Staff in place on the engagement at January 1, 2006. Therefore, APS will
be returning to standard rates effective January 1, 2007







Exhibit A






The attached Exhibit A replaces in its entirety the Exhibit A attached to the Agreement.




* * *



This letter is supplemental to, and not in lieu of, the Agreement, and, except as modified herein,
the Agreement shall remain in full force and effect.




Sincerely yours,




AP Services, LLC




/s/ Lisa J. Donahue




Lisa J. Donahue

Managing Director




Acknowledged and Agreed to:

CALPINE CORPORATION




	 	 	 	 	 
	By: 

Its:

	 	/s/ Robert P. May
 

	 	 
	Dated:

	 	 

	 	 
	 

	 	 

	 	 






 









 





AP Services, LLC

Employment by Calpine Corporation




Exhibit A — Temporary Employees




Individuals with Executive Officer Positions




	 	 	 	 	 	 	 
	 	 	 	 	 	 	Commitment
	Name	 	Description	 	Hourly Rate	 	Full1 or Part Time
	 
	Lisa Donahue
	 	Chief Financial Officer	 	$670	 	Full
	 





Additional Temporary Employees




	 	 	 	 	 	 	 
	 	 	 	 	 	 	Commitment
	Name	 	Description	 	Hourly Rate	 	Full1 or Part2Time
	Amanda Knudsen
	 	Claims Resolution	 	$220	 	Full
	 
	Timothy Rosolio
	 	Claims Resolution	 	$220	 	Full
	 
	Christopher Anderson
	 	Contract Resolution	 	$260	 	Full
	 
	Aleksandra Bozic
	 	Contract Resolution	 	$280	 	Full
	 
	Adam Hollerbach
	 	Treasury Analyst	 	$300	 	Full
	 
	Robert Albergotti
	 	Restructuring	 	$300	 	Full
	 
	Andrew Baker
	 	Intercompany claims	 	$300	 	Full
	 
	Ryan Thurber-Dean
	 	Contract Resolution	 	$300	 	Part
	 
	Robb McWilliams
	 	Claims Management	 	$300	 	Full
	 
	Lauren Schulman
	 	Intercompany Claims	 	$300	 	Full
	 
	Terry Singla
	 	Cash Management and Forecasting	 	$320	 	Full
	 
	Meaghan Frawley
	 	Intercompany Claims	 	$330	 	Full
	 
	Drew Lockard
	 	Claims Management	 	$330	 	Full
	 
	Kevin Montague
	 	Restructuring	 	$350	 	Full
	 
	Kyle Braden
	 	Cash Management and Forecasting	 	$380	 	Full
	 
	Salvador Caputto
	 	Accounts Payable	 	$380	 	Full
	 
	Jeffrey Webb
	 	Credit Analyst	 	$380	 	Full
	 
	Heather Stack
	 	Intercompany Claims	 	$380	 	Full
	 
	Tamie Vitek
	 	Accounting	 	$425	 	Full
	 
	Jon Shell
	 	Accounting	 	$430	 	Full
	 
	Henry Colvin
	 	Restructuring	 	$440	 	Full
	 
	David Johnston
	 	Restructuring	 	$460	 	Full
	 
	Bryan Porter
	 	Claims Management	 	$460	 	Full
	 
	Thomas Osmun
	 	Business Plan/Restructuring	 	$480	 	Full
	 
	Deborah Rieger-Paganis
	 	Contract Resolution	 	$480	 	Full
	 
	Barry Folse
	 	Claims Management	 	$480	 	Full
	 
	Doug Jung
	 	Intercompany Claims	 	$495	 	Full
	 
	Michael Tinsely
	 	Contract Resolution	 	$495	 	Full
	 
	Jamie Lisac
	 	Contract Resolution	 	$495	 	Full
	 
	Robert Rakowski
	 	Contract Resolution	 	$495	 	Full
	 
	John Castellano
	 	Cash Management, Forecasting and Restructuring	 	$510	 	Full
	 
	Jared Yerian
	 	Restructuring	 	$590	 	Part
	 
	Michael Feder
	 	Restructuring	 	$630	 	Full
	 






	 	 	 
	The parties agree that Exhibit A can be amended by APS from time to time to add or delete staff,
and the Monthly Staffing Reports shall be treated by the parties as such amendments.
	 
	1 	 	Full time is defined as substantially full time.
	 
	2 	 	 Part time is defined as approximately 2-3 days per week, with some weeks more or less
depending on the needs and issues facing the Company at that time.





 









 





Calpine Corporation

AP Services, LLC Compensation Summary

($MM)




	 	 	 	 	 
	Additional Emergence Incentive Component

	 	-
	 	At the discretion of the CEO, upon consummation of a confirmed plan of reorganization, earned on achievement of Market Adjusted
Enterprise Value (“Market AEV”) (1) and Plan Adjusted Enterprise Value (“Plan AEV”) metrics(2)
	 
	 	 	 	 
	 

	 	-
	 	To be earned beginning at Initial Market AEV hurdle of $5.0 billion provided that Plan AEV is greater than $5.0 billion
	 
	 	 	 	 
	 

	 	-
	 	Increase by $133,334 for each $100 million increase in market AEV over $4.5 billion(3) provided that payments do
not exceed $4.0 million and Total Incentive Bonus does not exceed $6.0 million.






Plan Adjusted Enterprise Value > $5,000




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Market Adjusted Enterprise Value	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	$	3,500	 	 	$	4,000	 	 	$	4,500	 	 	$	5,000	 	 	$	5,500	 	 	$	6,000	 	 	$	6,500	 	 	$	7,000	 	 	$	7,500	 	 	$	8,000	 	 	$	8,500	 	 	$	9,000	 
	 	 	 
	Minimum Emergence Bonus
	 	 	*	 	 	 	*	 	 	 	*	 	 	$	2.00	 	 	$	2.00	 	 	$	2.00	 	 	$	2.00	 	 	$	2.00	 	 	$	2.00	 	 	$	2.00	 	 	$	2.00	 	 	$	2.00	 
	Valuation Component
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.67	 	 	 	1.33	 	 	 	2.00	 	 	 	2.67	 	 	 	3.33	 	 	 	4.00	 	 	 	4.00	 	 	 	4.00	 	 	 	4.00	 
	% of Valuation Increase
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.13	%	 	 	0.13	%	 	 	0.13	%	 	 	0.13	%	 	 	0.13	%	 	 	0.13	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%
	 	 	 
	Total Incentive Bonus
	 	$	0.00	 	 	$	0.00	 	 	$	0.00	 	 	$	2.67	 	 	$	3.33	 	 	$	4.00	 	 	$	4.67	 	 	$	5.33	 	 	$	6.00	 	 	$	6.00	 	 	$	6.00	 	 	$	6.00	 








 




			
	(1)	 	Market AEV shall be equal to: The market
value of debt that is primarily the obligation of reorganized Calpine
Corporation (“Calpine”) (i.e., debt other than all project-level
debt and guarantees thereon including, without limitation, notes payable,
capital leases, project loans, project-level preferred interests, and sale
lease back obligations (collectively, “Project-Level Debt”); plus the market
value of preferred equity at reorganized Calpine; minus cash on the balance
sheet of reorganized Calpine upon the effective date of a Plan or
Reorganization (other than any restricted cash held by direct or indirect
subsidiaries posted in favor of trading counterparties, cash posted to
collateralize letters of credit and pre-petition asset sales proceeds in
escrow); plus the market value of reorganized Calpine’s common stock (and
any other equity-link securities including warrants) excluding non-vested
equity (including options) issued as part of the management incentive
compensation pursuant to a Plan of Reorganization. All market prices shall be
calculated as a 10-day average beginning on the 60th trading day
following the consummation date and for the following nine (9) trading days.
Prices for debt and preferred equity shall be calculated as an average price
based on AdvantageData (ADI quote), Factset, Market Loans (LoanX) and
Bloomberg. The average market price for any given debt, preferred or
convertible security on any given day shall be equal to the average of the
trade prices for all trades recorded on that day greater than or equal to $1
million of said security. Any corporate-level debt, equity or equity-linked
security (“Corporate-Level Securities” for which there is no publicly
quoted price shall be valued at face value. Volume weighted-average prices for
common equity shall be determined by reference to Bloomberg’s AQR
function. Market AEV shall be further adjusted for the exclusion of any debt
or other securities issues at reorganized Calpine used to refinance
Project-Level Debt.
	 
	(2)	 	Plan AEV shall be equal to: Total
Enterprise Value, as set forth in a confirmed Plan of Reorganization and/or its
accompanying Disclosure Statement, plus cash (excluding cash escrowed from
pre-petition asset sales) which will be distributed on or around the effective
date in accordance with said Plan of Reorganization (excluding any cash raised
through any and all post-petition and exit financing transactions); minus the
book value of all Project-Level Debt. Plan AEV shall be further adjusted
upward, to include 9a) cash received from asset sales consummated post-petition
used to repay any Corporate-Level Securities prior to the consummation of the
Plan of Reorganization; and (b) corporate-level cash used to repay
Corporate-Level Securities during the pendency of the chapter 11 cases
(excluding any cash raised through all pre- or post-petition financing and cash
held in escrow from pre-petition asset sales).
	 
	(3)	 	Equivalent to 13.3 bps for each
incremental $100 million in AEV achieved.
	 
	*	 	APS will have the same threshhold as for the senior executives in the
Emergence Incentive Plan.