Chief Financial Officer Employment Agreement - dated January 30, 2006

Exhibit 10.5.3 EMPLOYMENT AGREEMENT This Employment Agreement (the " Agreement" ) is entered into effective as of January 30, 2006, between CALPINE CORPORATION, a Delaware corporation (the " Company" ), and SCOTT J. DAVIDO (" Executive" ) to provide the terms and conditions for Executive' s employment with the Company and its affiliates from time to time (together, the " Group" ). The Board of Directors of the Company (the " Board" ) named Executive as Executive Vice President and Chief Financial Officer of the Company on February 1, 2006 (the " Start Date" ) and Chief Restructuring Officer thereafter. The Company and Executive have agreed that Executive will be employed by the Company and will serve as the Company' s Executive Vice President, Chief Financial Officer and Chief Restructuring Officer, upon the terms and conditions set forth below. Accordingly, and in consideration of the mutual obligations set forth in this Agreement, which Executive and the Company agree are sufficient, Executive and the Company agree as follows: 1 Term of Employment. Subject to the provisions of paragraph 4 below, Executive' s term of employment (" Term of Employment" ) consists of the initial term and any subsequent term for which the Agreement is renewed. The initial term of this Agreement begins on February 1, 2006, and ends on February 1, 2008, subject to the termination provisions of paragraph 4 below. No later than 150 days prior to the end of the initial Term of Employment, the Company shall inform Executive if it intends to renew this Agreement for a subsequent Term of Employment. If no notice is given, and Executive' s employment continues after the Term of Employment, Executive' s continued employment and any subsequent termination thereof shall not be subject to the terms of this Agreement. 2 Position and Responsibilities. During the Term of Employment, Executive shall have the position and responsibilities described in this paragraph 2. Executive shall be employed as the Company' s Executive Vice President, Chief Financial Officer and Chief Restructuring Officer, with the general executive powers and authority that accompany those positions. Executive shall report directly to the Chief Executive Officer and shall have the duties and responsibilities that are typically performed by the chief financial officer of a public company, as well as any other duties consistent with his position that are assigned to Executive by the Chief Executive Officer or the Board. In addition, as Executive Vice President, Chief Financial Officer and Chief Restructuring Officer, Executive shall have overall responsibility for management of the Company' s chapter 11 reorganization, including: (i) development of a short-term and long-term business plan and a strategic plan; (ii) development of a plan of reorganization; (iii) evaluation of all assets and management of the disposition of nonstrategic assets; and (iv) employment and management of all outside professionals involved in any matter relating to the restructuring. Executive agrees to comply with such lawful policies of the Company as may be adopted from time to time. Although Executive may be reasonably required to travel from time to time for business reasons, his principal place of employment shall be the Company' s corporate offices wherever located.


(a) Executive shall devote all of his full business time and his best efforts, skill, and attention to the Company' s business and affairs and to promoting the Company' s best interests. (b) Notwithstanding the foregoing, nothing herein shall preclude Executive from (i) serving on the boards of directors of not more than two other corporations and/or charitable organizations (subject to the approval of the Chief Executive Officer, such approval not to be unreasonably withheld), (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, provided that any such activities listed in (i) and (ii) above do not interfere in more than a de minimis manner with the proper performance of his duties and responsibilities hereunder and comply with the limitations set forth in paragraph 5.a. 3 Compensation. For all of his services during the Term of Employment, Executive shall receive the following compensation: (a) Base Salary . Executive' s annual base salary shall be $700,000 (as may be increased from time to time, the " Base Salary" ). The Chief Executive Officer and Board (or a committee thereof) will review the Base Salary at least annually and the Board may increase it at any time for any reason, in its sole discretion; however, they shall have no obligation to do so. (b) Bonus . In addition to his Base Salary, Executive shall be eligible to receive an annual cash performance bonus (the " Bonus" ) for each fiscal year ending during the Term of Employment if, and to the extent that, (x) except with respect to any Bonus payable earlier as severance under paragraph 4.b.ii.1, Executive remains employed by the Company on the last day of such fiscal year and (y) corporate performance objectives established by the Chief Executive Officer and the Board are achieved, as determined by the Chief Executive Officer and the Board (or a committee thereof), in their sole discretion. Payment of the Bonus shall be made at the same time that other senior-level executives receive their bonuses, and no later than March 15th of the calendar year after the calendar year in which the Bonus is earned. The target level for Executive' s Bonus shall be established by the Chief Executive Officer and the Board (or a committee thereof), in their sole discretion, provided that the minimum target level for any year shall be 100% of the Base Salary (the " Target Annual Bonus" ). However, subject to the minimum Bonuses for the Company' s fiscal years ending December 31, 2006, and December 31, 2007, set forth below, Executive' s actual Bonus in any year may range from 0% to 150% of the Target Annual Bonus: (i) For the Company' s fiscal year ending December 31, 2006, Executive shall be entitled to receive a minimum Bonus of $700,000 to be paid no later than March 15, 2007 but no earlier than January 1, 2007. (ii) For the Company' s fiscal year ending December 31, 2007, Executive shall be entitled to receive a minimum Bonus of $700,000, to be paid no later than March 15, 2008 but no earlier than January 1, 2008.

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(c) Benefits . Executive shall be eligible to participate in all Company benefit plans and programs as are generally available for its senior executives, and his benefits shall be based on the terms of the applicable plan as established by the Company from time to time. Nothing in this Agreement shall restrict the Company' s ability to change or terminate any or all of its employee benefit plans and programs from time to time; nor shall anything in this Agreement prevent any such change from affecting Executive. (d) Signing Bonus . In addition to the Base Salary and Bonus, Executive shall be entitled to receive a one-time payment of $500,000, payable within 15 days after entry of an order approving this Agreement by the U.S. bankruptcy court having jurisdiction over the Company' s bankruptcy case (the " Bankruptcy Court" ). If Executive resigns his employment without Good Reason or Executive' s employment is terminated by the Company for Cause, Executive shall repay a pro rata portion (based on the number of full calendar months remaining in the initial 24-month term divided by 24 months) of the signing bonus (net of any associated income and employment taxes) within 10 days after such resignation or termination of employment. Within 10 days after the filing of Executive' s federal income tax return for the year in which such repayment is made, Executive shall pay to the Company the amount by which Executive' s federal and state income tax liability for such year was reduced as a result of such repayment. If Executive resigns for Good Reason, dies or becomes Disabled or if Executive' s employment is terminated by the Company without Cause, Executive shall be entitled to retain the full amount of the signing bonus. The Company acknowledges and agrees that the payment of Executive' s signing bonus is unrelated to any services that he performed in the State of California. (e) Success Fee . When a plan of reorganization that is confirmed by the Bankruptcy Court becomes effective (the " Plan Effective Date" ) during Executive' s tenure as Chief Financial Officer and Chief Restructuring Officer of the Company, Executive shall be entitled to receive a one-time payment in an amount equal to the amount set forth on Exhibit A attached hereto (the " Success Fee" ). If at any time after the Start Date, Executive resigns his employment for Good Reason or Executive' s employment is terminated by the Company without Cause before the Plan Effective Date, Executive shall be entitled to payment of the Success Fee if the Plan Effective Date occurs within 12 months after the date of termination of employment. In any case such Success Fee shall be due and payable on the Plan Effective Date. Executive shall not be entitled to all or any portion of the Success Fee if the Company terminates his employment for Cause, Executive resigns his employment without Good Reason or Executive' s employment terminates due to death or Disability before the Plan Effective Date. (f) Guaranteed Minimum Success Fee . Executive shall be entitled to receive the guaranteed minimum success fee (the " Guaranteed Minimum Success Fee" ) described in this paragraph 3.f; provided, however, to the extent the Success Fee is paid, the Success Fee shall be reduced by the Guaranteed Minimum Success Fee, or any portion thereof, paid to Executive and shall be paid as promptly as

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practicable in a lump sum. In such case, no further payment shall be made with respect to the Guaranteed Minimum Success Fee. The Guaranteed Minimum Success Fee shall be deemed earned as of the date this Agreement is approved by the Bankruptcy Court. (i) Amount and Payment Schedule . Executive' s Guaranteed Minimum Success Fee (in addition to the other payments specifically contemplated in this Agreement including, without limitation, the minimum emergence bonus set forth on Exhibit A attached hereto) shall be an amount equal to two times his annual Base Salary as of the earlier of (a) the date his term of employment under this Agreement terminates or (b) the Plan Effective Date. The Guaranteed Minimum Success Fee shall be paid to Executive on the earliest of (x) the date Executive is terminated by the Company without Cause, (y) the date Executive terminates his employment for Good Reason and (z) the Plan Effective Date. Subject to the timing rule described in paragraph 3.f.ii below, all payments shall be made as promptly as practicable. Subject to paragraph 3.f above, if the Guaranteed Minimum Success Fee is paid on any date prior to the Plan Effective Date, the Guaranteed Minimum Success Fee shall be paid ratably on the same payment schedule that applied to Executive' s salary as of such date. If the Guaranteed Minimum Success Fee is paid on the Plan Effective Date, Executive shall be entitled to a lump sum payment. (ii) Timing . To the extent necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the " Code" ) concerning payments to specified employees, the first Guaranteed Minimum Success Fee payment (if the Guaranteed Minimum Success Fee is paid ratably) to Executive shall be made on the first installment date (determined under paragraph 3.f.i above) that is at least six months after Executive' s termination date. The first payment shall include any installments that would have been paid previously under paragraph 3.f i were it not for this special timing rule, plus interest on the delayed installments at an annual rate (compounded monthly) equal to the federal short-term rate (as in effect under Section 1274(d) of the Code on Executive' s termination date). (g) Relocation . The Company shall reimburse Executive for customary and reasonable commuting expenses from Executive' s current residence in St. Paul, Minnesota, and temporary furnished housing and living expenses in the area in which the Company' s headquarters is located for a period of six months from the Start Date. In the sole discretion of the Chief Executive Officer, this initial six-month period may be extended from time to time. Reimbursements shall be paid monthly, on an " as incurred" basis, and in all events before March 15 of the calendar year after the calendar year in which the applicable expenses were incurred. Upon termination of this temporary commuting arrangement, Executive shall be reimbursed for the following costs associated with relocating to the area in which the Company' s headquarters is located:

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All reasonable transaction costs and expenses (including any real estate brokerage fees, commissions and closing costs) and moving expenses incurred by Executive, in each case while an employee of the Company, in connection with relocating his spouse, dependents and personal property and goods from Executive' s current residence to the area in which the Company' s headquarters is located, provided that Executive provides appropriate documentation (the " Reimbursement" ). Reimbursements under this paragraph shall be paid promptly and in all events on or before March 15 of the calendar year after the calendar year in which the applicable expenses were incurred. In connection with such payment, during the calendar year after the calendar year in which the applicable expenses are incurred, the Company shall pay Executive an additional payment in an amount such that after the actual payment by Executive of taxes, if any, imposed in connection with the Reimbursement, Executive retains an amount equal to the Reimbursement. (h) Legal Fees . On or before March 30, 2006, or such later date to which Executive and Company mutually agree, the Company shall pay Executive' s reasonable legal fees that are directly related to the negotiation, entry and approval by the Bankruptcy Court of this Agreement and were actually incurred during such negotiation, entry or approval, in an amount not to exceed $50,000. 4 Termination. (a) Termination of Employment. (i) Termination by the Company for Cause . The Board or Chief Executive Officer may terminate Executive' s employment for Cause at any time after (x) providing Executive with 5 business days' advance written notice explaining the circumstances that justify the termination (a " Termination Notice" ); and (y) except in the case of termination for an event covered by (2) below, providing Executive with the opportunity to appear before the Board prior to any vote to terminate Executive' s employment for Cause, which opportunity may occur during the 5 business day notice period. " Cause" means any of the following: (1) Executive' s breach of any material term of this Agreement that is not corrected within 10 days after delivery of a Termination Notice to Executive with respect to such breach; (2) Executive' s commission of, or formal prosecutorial charge or indictment alleging commission of, a felony or any crime of similar status, any crime involving fraud, or any crime involving moral turpitude (other than motor vehicle related) (it being agreed that in the case of a crime involving moral turpitude, only to the extent such crime materially and adversely affects the business, standing or reputation of the Company or any other member of the Group); (3) Executive' s breach of fiduciary duty to the Company or any other member of the Group that has any material and adverse impact on the Company that is not corrected with ...