Document:

Exhibit

Exhibit 10.2.8

	
		
	CPN MANAGEMENT, LP
717 TEXAS AVENUE 
SUITE 100 
HOUSTON, TEXAS 77002

	 

[ Date ]

[Employee address]
 

		
	Re:
	Award of Class B Interest in CPN Management, LP

Dear Sir/Madam:
Reference is made to that certain Second Amended and Restated Limited Partnership Agreement of CPN Management, LP, a Delaware limited partnership (“CPN Management”), dated and effective as of August 29, 2018 (as it may be amended, modified or supplemented from time to time, the “CPN Management LP Agreement”), a copy of which is attached as Exhibit A hereto.   Capitalized terms used but not otherwise defined in this letter agreement (this “Award Agreement”) shall have the meanings set forth in the CPN Management LP Agreement (unless otherwise stated herein).
This Award Agreement sets forth the understanding between CPN Management and [______] (the “Employee”), an employee of Calpine Corporation, a Delaware corporation and a wholly owned subsidiary of CPN Management (“Calpine”), or one of its subsidiaries, regarding the terms and conditions under which CPN Management shall grant the Employee an award of a Class B Interest.   Such Class B Interest shall entitle the Employee to share in the profits, losses and distributions of CPN Management to the extent set forth in the CPN Management LP Agreement.  The Employee shall be entitled to such other rights, and shall be subject to such obligations, associated with such Class B Interest as are provided in the CPN Management LP Agreement.
1.Award of Class B Interest to the Employee.
(a)    As of [______] (the “Date of Grant”), CPN Management hereby awards a Class B Interest to the Employee as set forth in the following table with a Benchmark Component of $5,452,861,009 (the “Class B Interest”).  The Award  shall be subject to the terms and conditions of the CPN Management LP Agreement and this Award Agreement.  Subject to the Employee’s continuous provision of services to Calpine or any of its subsidiaries through each applicable vesting date, the Award shall vest in accordance with the vesting schedule set forth in the following table.
	
		
	Total Class B Interest subject to vesting 
(as of the Date of Grant)
	Incremental Vesting of 
Award
(as of annual vesting dates)

	[       ], 2018:  [    ]%
	March 8, 2019: 20% 
March 8, 2020: 20% 
March 8, 2021: 20%
March 8, 2022: 20%
March 8, 2023: 20%

(b)    As a condition to receiving the Award, the Employee must duly execute and deliver this Award Agreement and a joinder to the CPN Management LP Agreement (a form of which is attached as Exhibit B hereto).
2.    Change in Control; Termination of Employment.
(a)    In the event of a Change in Control, the Award shall vest in full, to the extent not already then vested.
(b)    On a Date of Termination that occurs due to the Employee’s death or Disability, the Award shall vest in full, to the extent not already then vested.
(c)    On a Date of Termination that occurs for any reason other than as described in Section 2(b) above, the Employee shall forfeit any then unvested portion of the Award without payment therefor.
(d)    Following a Change in Control, a Drag-Along Sale, a Tag-Along Sale or a Date of Termination that occurs for any reason, any portion of the Award that is not forfeited in accordance with the terms hereof shall continue to be subject to the terms and conditions of the CPN Management LP Agreement, including, without limitation, the provisions of Section 6.05 (Repurchase Rights) and all other provisions of Article VI of the CPN Management LP Agreement.
3.    Award Agreement Definitions.  
For purposes of this Award Agreement, the following terms shall have the meanings set forth below:
(a)    “Cause” shall, if the Employee is party to an Employment Agreement that includes such term, have the meaning ascribed to such term in such Employment Agreement.  If the Employee is not a party to such an Employment Agreement, “Cause” shall mean (i) the Employee’s willful failure to substantially perform the Employee’s duties (other than any such failure resulting from the Employee’s Disability); (ii) the Employee’s willful failure to carry out, or comply with, in any material respect any lawful directive of Calpine; (iii) the Employee’s commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crime involving moral turpitude; (iv) the Employee’s unlawful use (including being under the influence) or possession of illegal drugs on Calpine’s premises or while performing the Employee’s duties and responsibilities; (v) the Employee’s commission at any time of any act of fraud, embezzlement, misappropriation, material misconduct, conversion of assets of Calpine, or breach of fiduciary duty against Calpine; or (vi) the Employee’s material breach of this Award Agreement, the CPN Management LP Agreement or any Employment Agreement or other agreement with Calpine or CPN Management or any of their respective Affiliates (including, without limitation, any breach of the restrictive covenants of any such agreement); and which, in the case of clauses (i), (ii) and (vi), continues beyond thirty (30) days after Calpine or CPN Management, as applicable, has provided the Employee written notice of such failure or breach (to the extent that, in the reasonable judgment of Calpine or CPN Management, as applicable, such failure or breach can be cured by the Employee).
(b)    “Change in Control” shall mean (i) a change in beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of Calpine, CPN Management or Volt Parent LP, a 

Delaware limited partnership (“Volt Parent”), effected through a transaction or series of transactions (including, without limitation, any merger, consolidation or other business combination, or sale of assets or equity interests) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than (A) Calpine, CPN Management, Volt Parent or any of their respective Affiliates, (B) any limited partner of Volt Parent as of March 8, 2018 or any Affiliate of any such limited partner, or (C) any employee benefit plan maintained by Calpine or any of its subsidiaries (x) directly or indirectly acquires beneficial ownership of securities of Calpine possessing more than 50% of the total combined voting power of the securities of Calpine outstanding immediately after such acquisition or (y) acquires all or substantially all of the assets of Calpine, CPN Management or Volt Parent, whether by liquidation, dissolution, merger, consolidation or sale, or (ii) any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than (1) ECP, Calpine, CPN Management, Volt Parent or any of their respective Affiliates or (2) any employee benefit plan maintained by Calpine or any of its subsidiaries directly or indirectly acquires beneficial ownership from ECP of (I) more than 75% of ECP’s aggregate interest in Volt Parent as of March 8, 2018 or (II) interests in Volt Parent such that, following such acquisition, ECP (directly or indirectly) is no longer the largest holder of interests in Volt Parent; provided that, notwithstanding the foregoing, an offering of securities of Calpine or any successor entity to the general public through a registration statement filed with the Securities and Exchange Commission under the Securities Act shall not, on its own, constitute a Change in Control.
(c)    “Code” shall mean the Internal Revenue Code of 1986, as amended.
(d)    “Date of Termination” shall mean the date on which the Employee’s employment with Calpine or any of its subsidiaries terminates for any reason.
(e)    “Disability” shall, if the Employee is party to an Employment Agreement that includes such term, have the meaning ascribed to such term in such Employment Agreement, and if the Employee is not a party to such an Employment Agreement that includes such term, mean the Employee’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that can be expected to last for a continuous period of not less than twelve (12) months, as determined by an accredited physician jointly selected by the Employee and Calpine.
(f)    “Employment Agreement” shall mean a written employment agreement with Calpine or any of its subsidiaries.
(g)    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(h)    “Noncompete Agreement” shall mean any written agreement with Calpine or any of its subsidiaries, other than the agreement in Section 6.10(a) (“Non-Competition”) of the CPN Management LP Agreement, that restricts or prohibits the Employee from competing with the business of Calpine or any of its subsidiaries.
(i)    “Noncompete Option” shall mean the option of Calpine or the applicable employing subsidiary, in its sole discretion, if the Employee is not a party to a Noncompete Agreement as of the Date of Termination, to extend the Restricted Period (as defined below) for purposes of Section 6.10(a) (“Non-Competition”) of the CPN Management LP Agreement to a date on or prior to (i) in the case of an Employee who is a Vice President or below at the Date of Termination, three (3) 

months following the Date of Termination, and (ii) in the case of an Employee who is a Senior Vice President or above at the Date of Termination, six (6) months following the Date of Termination, in each case upon written notice to the Employee no later than thirty (30) days after the Date of Termination and subject to Section 5.
(j)    “Noncompete Option Payment” shall mean an amount equal to (a) the Employee’s annual base salary as of the Date of Termination, multiplied by (b) a fraction, the numerator of which is equal to the number of days from the Date of Termination through the expiration date of the Restricted Period (as elected by Calpine or the applicable employing subsidiary pursuant to its Noncompete Option), and the denominator of which is 365.
(k)    “Section 409A” shall mean Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof.
4.    CPN Management LP Agreement Definitions.  For purposes of the CPN Management LP Agreement (solely with respect to the Award being awarded hereunder), the following terms shall have the meanings set forth below:
(a)     “Repurchase Price” shall mean (i) in the event of a Date of Termination that occurs due to termination by Calpine for Cause or the Employee’s purported “Transfer” in violation of the provisions of Article VI of the CPN Management LP Agreement, $0.00, and (ii) in the event of a Date of Termination that occurs for any other reason, an amount equal to the Fair Market Value of the Class B Interest subject to the Award.
(b)    “Restricted Period”, for purposes of Section 6.10(b) (“Non-Solicitation”) of the CPN Management LP Agreement, shall mean the period from the Date of Grant through the first anniversary of the Date of Termination.  For purposes of Section 6.10(a) (“Non-Competition”) of the CPN Management LP Agreement, “Restricted Period” shall mean (i) if the Employee is a party to a Noncompete Agreement as of the Date of Termination, the period from the Date of Grant through the date as may be set forth as the expiration date of any applicable non-competition covenant provided for in such Noncompete Agreement and (ii) if the Employee is not a party to a Noncompete Agreement as of the Date of Termination, the period from the Date of Grant through (A) in the event that Calpine or the applicable employing subsidiary does not exercise its Noncompete Option, the Date of Termination or (B) in the event that Calpine or the applicable employing subsidiary exercises its Noncompete Option, the date elected by such entity thereunder.
5.    Noncompete Option Payment.  If Calpine or the applicable employing subsidiary exercises its Noncompete Option, then the Employee will be entitled to a payment equal the excess of (y) the amount of the Noncompete Option Payment over (z) the amount of cash severance, if any, to which the Employee is entitled under any severance agreement with or plan or policy of Calpine or any of its subsidiaries as a result of the Employee’s termination of employment.  Notwithstanding anything herein to the contrary, (i) no portion of the Noncompete Option Payment shall be paid unless, on or prior to the 30th day following the Date of Termination, the Employee timely executes a general waiver and release of claims agreement acceptable to Calpine or the applicable employing subsidiary, and such release shall not have been revoked by the Employee prior to the expiration of the period (if any) during which any portion of such release is revocable under applicable law, and (ii) as of the first date on which the Employee violates any covenant contained in Section 6.10 (“Non-Competition; Non-Solicitation; Non-Disparagement”) of the CPN Management LP 

Agreement, any remaining unpaid portion of the Noncompete Option Payment shall thereupon be forfeited.  The Noncompete Option Payment shall be paid in equal installments during the period beginning on the Date of Termination and ending on the expiration date of the Restricted Period (as elected by Calpine or the applicable employing subsidiary pursuant to its Noncompete Option), in accordance with the normal payroll policies of the applicable employer as in effect on the Date of Termination; provided that any installment that would otherwise have been paid prior to the first normal payroll payment date that occurs on or after the 30th day following the Date of Termination (such payroll date, the “First Payment Date”) shall instead be paid on the First Payment Date.
6.    Section 409A.  The parties hereto acknowledge and agree that, to the extent applicable, this Award Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A.  Notwithstanding anything herein to the contrary, (a) to the extent that the Noncompete Option Payment is deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury regulations), the Employee’s right to receive the Noncompete Option Payment in the form of installment payments (the “Installment Payments”) shall be treated as a right to receive a series of separate payments and, accordingly, each Installment Payment shall at all times be considered a separate and distinct payment; (b) the Noncompete Option Payment shall not be payable unless the Employee’s termination of employment constitutes a “separation from service” within the meaning of Section 1.409A-1(h) of the Department of Treasury regulations; (c) if the Employee is deemed at the time of the Employee’s separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the Noncompete Option Payment (after taking into account all applicable exclusions under Section 409A) is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Noncompete Option Payment shall not be provided to the Employee prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Employee’s “separation from service” and (ii) the date of the Employee’s death; provided that, upon the earlier of such dates, any portion of the Noncompete Option Payment deferred pursuant to this Section 6 shall be paid in a lump sum to the Employee, and any remaining portion shall be provided as otherwise specified herein; and (d) the determination of whether the Employee is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Employee’s separation from service shall be made by Calpine in accordance with the terms of Section 409A (including, without limitation, Section 1.409A-1(i) of the Department of Treasury regulations and any successor provision thereto).
7.    Tax Consequences.
(a)    Calpine and CPN Management have encouraged the Employee to review the tax consequences of the transactions contemplated by this Award Agreement and the CPN Management LP Agreement with the Employee’s own personal tax or financial advisor.  The Employee understands that, subject to Section 4.07(c) of the CPN Management LP Agreement, he or she, and not Calpine, CPN Management or any of their respective Affiliates, will be responsible for the Employee’s own tax liability that may arise as a result of the transactions contemplated by this Award Agreement and the CPN Management LP Agreement.
(b)    The Employee acknowledges that nothing in this Award Agreement or CPN Management LP Agreement constitutes tax advice.

8.    Profits Interest.  The Class B Interest awarded pursuant to this Award Agreement is intended to be treated as a “profits interest” for U.S. federal income tax purposes.
9.    Securities Laws.  The Employee and CPN Management acknowledge that the Class B Interest has been awarded and issued in reliance on applicable exemptions from registration, including without limitation Section 4(a)(2) of the Securities Act and/or the provisions of Regulation D and/or Rule 701 promulgated by the Securities and Exchange Commission, and upon an exemption from registration under any applicable state “blue sky” laws
10.    Conflicts.  Except to the extent explicitly provided herein, if this Award Agreement contains any provision that conflicts with the CPN Management LP Agreement, the applicable provision of the CPN Management LP shall prevail and control and the conflicting provision of this Award Agreement (and only such provision) shall be of no force or effect.
*  *  *  *  * 

CPN MANAGEMENT, LP

By:       Volt Parent GP, LLC, its general partner

By:__________________________
Name:  
Title:  

[2018 Award Agreement between CPN Management, LP and the Employee]

THE EMPLOYEE

__________________________________________
 

[2018 Award Agreement between CPN Management, LP and the Employee]

Exhibit A
CPN Management, LP Amended and Restated Limited Partnership Agreement

A-1

Exhibit B
Form of Joinder to the CPN Management, LP Amended and Restated Limited Partnership Agreement
[See Attached]

B-1Exhibit

Exhibit10.2.4.1
 August 29, 2018
By Mail
Charles M. Gates
777 Preston Street, Apt #37H
Houston, TX 77002
 

Re: Letter Addressing Code Section 280G Gross-Up and Retirement Severance Benefit
Dear Charlie:
This letter will serve to (i) summarize for you important details associated with your compensation, including the addition of a tax-gross up for excise taxes incurred under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) and severance benefits and to (ii) amend certain items set forth in your offer letter with Calpine Corporation (the “Company”), dated February 23, 2016 (“Offer Letter”) accordingly.
In order to provide you with this Code Section 280G tax gross-up benefit, we are adding the language set forth set forth in Exhibit A, attached hereto, in a new paragraph “Section 280G Gross-Up”. Further, your Offer Letter will be amended to replace the current “Severance Benefits Eligibility” paragraph, with the language set forth in Exhibit A and the “Equity Award Program” paragraph of your Offer Letter shall be deleted in its entirety.
Please sign and date this letter below and return the signed and dated letter to me on or before August 29, 2018 to acknowledge the revised terms of your Offer Letter.           
	
					
	 
	 
	 
	Sincerely,

	 
	 
	 
	 
	 

	 
	 
	 
	Calpine Corporation

	 
	 
	 
	 
	 

	 
	 
	 
	By:
	/s/ HETHER BENJAMIN BROWN

	 
	 
	 
	Name:
	Hether Benjamin Brown

	 
	 
	 
	Title:
	Sr. Vice President, Chief Administrative Officer

	ACKNOWLEDGED & AGREED
	 
	 
	 

	 
	 
	 
	 
	 

	Charles M. Gates
	 
	 
	 

	 
	 
	 
	 
	 

	By:
	/s/ CHARLES M. GATES
	 
	 
	 

	Name:
	Charles M. Gates
	 
	 
	 

	Title:
	Executive Vice President, Power Operations
	 
	 
	 

    

 

Exhibit A
	
		
	Severance Benefits Eligibility:

	As an Executive Vice President, and in the event of severance, your severance benefits are defined and will be subject to the Calpine Corporation Change in Control and Severance Benefits Plan, as in effect as of today’s date (the “Plan”). Your status as a Tier 3 Participant, and your benefits as a Tier 3 Participant set forth in the Plan as it stands today will remain unchanged notwithstanding anything to the contrary in Section 2.01(a) or Section 7.03 of the Plan.  For the avoidance of doubt, any target bonus amount under the Plan shall be determined based on your participation in the Calpine Incentive Plan and not any other bonus program or arrangement. Notwithstanding the foregoing, following the third anniversary of the date of this letter, if your employment terminates for any reason, you shall be entitled to the benefits provided in this paragraph, without duplication of any other severance payments for which you may be eligible under the Plan:
(a)
Calpine shall, on the date on which bonuses are paid to all other employees, provided that such payment shall be made in all events in the calendar year immediately following the calendar year of such termination of employment, pay you an amount equal to your annual cash bonus that you would have been entitled to receive in respect of the fiscal year in which the termination date occurs, had you continued in employment until the end of such fiscal year, which amount, determined based on Calpine’s actual performance for such year relative to the performance goals applicable to you, shall be multiplied by a fraction (i) the numerator of which is the number of days in such fiscal year through the termination date and (ii) the denominator of which is 365;
(b)
upon your election, CPN Management’s, LP, a Delaware limited partnership (the “Partnership”) and/or Calpine’s exercise of the Partnership Redemption Right (as defined in the Amended and Restated Limited Partnership Agreement of CPN Management, LP, dated and effective as of March 8, 2018 (the “LP Agreement”)), and/or the Calpine Repurchase Right (as defined in the LP Agreement), respectively, and/or any other applicable call right in favor of the Partnership and/or Calpine that may be applicable to vested Class B Interests (as defined in the LP Agreement) under the plans, documents and agreements governing such interests shall be subject to your consent, which may be withheld in your absolute discretion.  

	 
	 

	Section 280G Gross-Up:

	(a) Calpine shall pay to or for your benefit, at the time specified in this paragraph, an additional amount (the “Gross-up Payment”) such that the net after-tax amount of the Gross-Up Payment retained by you, after deduction of any Excise Tax (as defined below) and any federal and state and local taxes imposed on the Gross-Up Payment itself, shall be equal to the Excise Tax imposed on the 280G Payments (as defined below) if:

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	(i)    there is a change in the ownership of Calpine, a change in the effective control of Calpine or a change in the ownership of a substantial portion of the assets of Calpine (in each case, within the meaning of Section 280G of Code and the regulations thereunder);
(ii)    immediately before the change described in subparagraph (a)(i), the stock in Calpine was readily tradeable on an established securities market or otherwise (within the meaning of Section 280G of the Code and the regulations thereunder); and
(iii)    it is determined that any payments, rights or benefits, or the lapse or termination of any restriction, whether pursuant to the terms of this Offer Letter or any other plan, arrangement or agreement between you and Calpine or with any person affiliated with Calpine, or with any person who acquires ownership or effective control or ownership of a substantial portion of Calpine’s assets (within the meaning of Section 280G of the Code and the regulations thereunder) or with any affiliate of such person, and whether or not your employment has then terminated (collectively, the “280G Payments”), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the “Excise Tax”).
The Gross-Up Payment shall be paid to or for your benefit no later than fifteen (15) business days prior to the date by which you are required to pay the Excise Tax or any portion thereof to any federal, state or local taxing authority, without regard to extensions, subject to the terms of this paragraph.
(b)    For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence in the calendar year in which the Gross-Up Payment is made, net of the maximum reduction in federal income taxes, if any, which could be obtained from deduction of such state and local taxes. For the avoidance of doubt, the intent of the Gross-Up Payment is solely to make the imposition of the Excise Tax tax-neutral for you.
(c)    Subject to any determinations made by the Internal Revenue Service (the “IRS”), all determinations required to be made under this paragraph relating to the Gross-Up Payment, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm or a consulting firm (the “Accountants”) as may be designated by Calpine and that is not serving as accountant or auditor for Calpine or the individual, entity or group effecting the 

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	Change in Control (as defined in the award agreement granting you Class B Interests (as defined in the Amended and Restated Limited Partnership Agreement of CPN Management, LP, dated and effective as of March 8, 2018), which shall provide detailed supporting calculations both to you and Calpine.  All fees and expenses of the Accountants will be borne by Calpine.  Subject to any determinations made by the IRS, determinations of the Accountants under this Offer Letter with respect to (i) the initial amount of any Gross-Up Payment and (ii) any subsequent adjustment of such payment shall be binding on you and Calpine.
(d)    In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, you shall repay to Calpine at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction, with the amount of such repayment determined by the Accountants; provided, however, that if Calpine determines that such repayment obligation would be or result in an unlawful extension of credit under Section 13(k) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), repayment shall not be required.  In the event that the Excise Tax is determined by the Accountants to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), Calpine shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.
(e)    You shall notify Calpine of any audit or review by the IRS of your federal income tax return for the year in which a payment under this Offer Letter is made within ten (10) days of your receipt of notification of such audit or review.  You shall not pay any IRS claim resulting from any such audit or review prior to the expiration of the thirty (30)-day period following the date on which he gives notice to Calpine (or such shorter period ending on the date that any payment of taxes with respect to such claim is due).  If Calpine notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall:
(i)    give Calpine any information reasonably requested by Calpine relating to such claim;
(ii)    take such action in connection with contesting such claim as Calpine shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Calpine;
(iii)    cooperate with Calpine in good faith in order to effectively contest such claim; and
(iv)    permit Calpine to participate in any proceedings relating to such claim; provided, however, that Calpine shall bear directly all costs and expenses (including additional interest and penalties) incurred in 

 

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	connection with such contest and shall indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or federal, state and local income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this subparagraph (e), Calpine shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Calpine shall determine; provided, however, that if Calpine directs you to pay such claim and sue for a refund, Calpine shall advance the amount of such payment to you, on an after-tax basis, and shall hold you harmless from any Excise Tax or federal, state or local income or employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to your payment of taxes for the taxable year with respect to with such contested amount is claimed to be due is limited solely to such contested amount.  The Company’s control of the contest, however, shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and you shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority.  If, after your receipt of an amount advanced by Calpine pursuant to this subparagraph, you become entitled to receive any refund with respect to such claim, you shall (subject to Calpine’s complying with the requirements of this subparagraph) promptly pay to Calpine the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, that if Calpine determines that such repayment obligation would be or result in an unlawful extension of credit under Section 13(k) of the Exchange Act, repayment shall not be required.  If, after your receipt of an amount advanced by Calpine pursuant to this subparagraph, a determination is made that you shall not be entitled to any refund with respect to any such claim and Calpine does not notify you in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(f)    If, other than in the circumstances described in subparagraph (a), it is determined that any of the 280G Payments would be subject to the Excise Tax, then, to the extent necessary to make such portion of the 280G Payments not 

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	subject to the Excise Tax (and after taking into account any reduction in the 280G Payments provided by reason of Section 280G of the Code under any other plan, arrangement or agreement), the portion of the 280G Payments that do not constitute deferred compensation within the meaning of Section 409A shall first be reduced (if necessary, to zero), and all other 280G Payments shall thereafter be reduced (if necessary, to zero) with cash payments being reduced before noncash payments, and payments to be paid last being reduced first, but only if (i) the net amount of such 280G Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced 280G Payments and after taking into account any phase out of itemized deductions and personal exemptions attributable to such reduced 280G Payments) is greater than or equal to (ii) the net amount of such 280G Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such 280G Payments and the amount of Excise Tax to which you would be subject in respect of such unreduced 280G Payments and after taking into account any phase out of itemized deductions and personal exemptions attributable to such unreduced 280G Payments).

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