DEF 14A 1 scheduledef14a-information.htm 2015 CALPINE FINAL PROXY STATEMENT Schedule DEF14A - Information Required in Proxy Statement - 2015

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 (Amendment No.)
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Definitive Proxy Statement
¨
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¨
Soliciting Material under Rule 14a-12
CALPINE CORPORATION
(Name of Registrant as Specified in Charter)
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Aggregate number of securities to which transaction applies:
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March 31, 2015
To our Shareholders:
It is our pleasure to invite you to attend our 2015 Annual Meeting of Shareholders. The meeting will be held at 8:00 a.m. (Central Time) on May 13, 2015 at our corporate headquarters, located at 717 Texas Avenue, 10th Floor, Houston, Texas 77002.
The following Notice of Annual Meeting of Shareholders outlines the business to be conducted at the meeting.
This year we are again using the Internet as our primary means of furnishing proxy materials to shareholders. Accordingly, most shareholders will not receive paper copies of our proxy materials. We instead sent shareholders a notice with instructions for accessing the proxy materials and voting via the Internet. The notice also provides information on how shareholders may obtain paper copies of our proxy materials if they so choose. We encourage you to review these materials and vote your shares.
You may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card. If you attend the Annual Meeting, you may vote your shares in person, even if you have previously voted your proxy. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible to ensure that your shares will be represented and voted at the Annual Meeting.
We are proud that you have chosen to invest in Calpine Corporation. On behalf of our management and directors, thank you for your continued support and confidence in 2015.
Very truly yours,







NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
CALPINE CORPORATION
717 Texas Avenue, Suite 1000
Houston, Texas 77002
Date of Meeting:
May 13, 2015
Time:
8:00 a.m. (Central Time)
Place:
717 Texas Avenue, 10th Floor, Houston, Texas 77002
Items of Business:
We are holding the 2015 Annual Meeting of Shareholders (the “Annual Meeting”) for the following purposes:
to elect eight directors to serve on our Board of Directors until the 2016 Annual Meeting of Shareholders;
to ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for the year ending December 31, 2015;
to approve, on an advisory basis, named executive officer compensation;
to amend and restate the Company’s bylaws to implement majority voting in uncontested director elections;
to reapprove the material terms of the performance goals under the Calpine Corporation 2008 Equity Incentive Plan (the “Equity Incentive Plan”) for purposes of Section 162(m) of the Internal Revenue Code; and
to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
The proxy statement describes these items in more detail. As of the date of this notice, we have not received notice of any other matters that may be properly presented at the Annual Meeting.
Record Date:
March 16, 2015
Voting:
We strongly encourage you to vote. Please vote as soon as possible, even if you plan to attend the Annual Meeting in person. You have three options for submitting your vote prior to the date of the Annual Meeting: Internet, telephone, or mail. In accordance with New York Stock Exchange (“NYSE”) rules, your broker will not be able to vote your shares with respect to any non-routine matters (including the election of directors) if you have not given your broker specific instructions to do so. The only routine matter to be voted on at the Annual Meeting is the ratification of the selection of our independent registered public accounting firm for the current year (Proposal No. 2). The election of directors (Proposal No. 1), the advisory approval of the named executive officer compensation (Proposal No. 3), the amendment and restatement of the Company's bylaws to implement majority voting in uncontested director elections (Proposal No. 4) and the reapproval of the material terms of the performance goals under the Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code (Proposal No. 5) are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore broker non-votes may exist in connection with such proposals.
Date These Proxy Materials Are First Being Made
Available on the Internet:
On or about March 31, 2015
By order of the Board of Directors
W. Thaddeus Miller
Corporate Secretary
March 31, 2015
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON MAY 13, 2015:
The Notice of Annual Meeting of Shareholders, Proxy Statement and 2014 Annual Report are available at www.proxyvote.com.



TABLE OF CONTENTS
Notice of Annual Meeting of Shareholders of Calpine Corporation
Cover
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 13, 2015
Cover

i



ii



iii


2015 Proxy Summary

To assist you in reviewing our 2014 performance, we would like to call your attention to key elements of our proxy statement. The following description is only a summary that highlights more detailed information contained elsewhere in this proxy statement. For more complete information about these topics, please review our Annual Report on Form 10-K and the complete proxy statement.
Annual Meeting of Shareholders
ž
Time and Date:
8:00 a.m. (Central Time), May 13, 2015
ž
Place:
717 Texas Avenue, 10th Floor
 
 
Houston, Texas 77002
ž
Record Date:
March 16, 2015
ž
Voting:
Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each other matter to be voted on.
ž
Admission:
No admission card is required to enter Calpine’s Annual Meeting. Please follow the advance registration instructions on page 4.
Voting Matters and Board Recommendations
 
 
 
Page Reference
Item
Activity
Board Vote Recommendation
(for more detail)
1
Election of Directors
FOR EACH NOMINEE
2
Ratification of PwC as Auditor for 2015
FOR
3
Advisory Resolution to Approve Named Executive Officer Compensation
FOR
4
Proposal to Amend and Restate the Company’s Bylaws to Implement Majority Voting in Uncontested Director Elections
FOR
5
To reapprove the material terms of the performance goals under the Calpine Corporation 2008 Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code.
FOR
2014 Performance and Strategic Accomplishments
Under the leadership of our executive management team, our key financial and operational performance accomplishments over the course of 2014 include:
We delivered annual TSR of 13.4%, in line with the S&P 500 Index.
We returned capital to shareholders in the form of repurchasing approximately 49.7 million shares of our outstanding common stock for approximately $1.1 billion at an average price of $22.14 per share.
We exceeded our target thresholds for Commodity Margin, TRIR and Average EFOF. See “— Elements of Compensation” for how these corporate performance goals are defined.
Our Adjusted Free Cash Flow per share increased 34% from 2013 and our Adjusted EBITDA increased 7% from 2013 (see Annex A).
Our employees achieved a lost time incident rate of 0.08 lost time injuries per 100 employees which places us in the first quartile performance for power generation companies with 1,000 or more employees.
Our entire fleet achieved a forced outage factor of 1.9% and a starting reliability of 98.6%.
We completed the acquisition of a 1,000 MW power plant in Texas and a 731 MW power plant in Massachusetts and completed the expansions of our Deer Park and Channel Energy Centers which add long-term value to our fleet of power plants.
We successfully originated several new long-term contracts with customers in our West, Texas and East segments, including those related to our Geysers Assets, our RockGen, Pastoria, Delta and Osprey power plants and our Texas power plant fleet which add long-term value to our fleet of power plants.
We completed the sale of six of our power plants in our East segment for a purchase price of approximately $1.57 billion in cash which better aligns our asset base with our long-term strategic focus on competitive wholesale markets.
We strengthened our balance sheet and liquidity by refinancing debt to secure lower interest rates and amending our Corporate Revolving Facility to increase the capacity by an additional $500 million.

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Item 1: Election of Directors
Board Nominees
The following table provides summary information about each nominee. Each director is currently elected annually by a plurality of votes cast, which means that the eight nominees receiving the highest number of “FOR” votes will be elected directors.
 
 
Director
Principal
 
Committee Memberships
Name
Age
Since
Occupation
Independent
AC
CC
NGC
Frank Cassidy(1)
68

2008
Retired President and Chief Operating Officer, PSEG Power LLC
X
 
X
 
Jack A. Fusco(2)
52

2008
Executive Chairman, Calpine Corporation
 
 
 
 
John B. (Thad) Hill III
47

2014
President and Chief Executive Officer, Calpine Corporation
 
 
 
 
Michael W. Hofmann
56

2013
Retired Vice President and Chief Risk Officer, Koch Industries, Inc.
X
F
X
 
David C. Merritt
60

2006
Private Investor and Consultant
X
F, C
 
 
W. Benjamin Moreland
51

2008
President and Chief Executive Officer, Crown Castle International Corp.
X
F
 
 
Robert A. Mosbacher, Jr.
63

2009
Chairman, Mosbacher Energy Company
X
 
C
X
Denise M. O’Leary
57

2008
Private Venture Capital Investor
X
 
X
C
_______________________
(1)
Mr. Cassidy was appointed lead director effective May 14, 2014.
(2)
In accordance with his employment agreement, Mr. Fusco's term as Executive Chairman will expire on December 31, 2015.
AC
Audit Committee
 
F
Financial Expert
C
Chair
 
NGC
Nominating and Governance Committee
CC
Compensation Committee
 
 
 
Attendance
Each director nominee who was a director during 2014 attended at least 75% of the aggregate of all meetings of the Board of Directors (“Board” or “Board of Directors”) and each committee on which he or she sits.
Item 2: Ratification of PwC as Auditor for 2015
As a matter of good corporate governance, we are asking our shareholders to ratify the selection of PwC as our independent registered public accounting firm for 2015. Set forth below is summary information with respect to PwCs fees for services provided in 2014 and 2013 (in millions).
 
2014
 
 
2013
 
Audit Fees
$
6.0

 
 
$
6.1

 
Tax Fees
 
0.1

 
 
 

 
Total
$
6.1

 
 
$
6.1

 
Item 3: Approval, on an Advisory Basis, of Named Executive Officer Compensation
Our Board of Directors recommends that shareholders vote to approve, on an advisory basis, the compensation paid to our named executive officers as described in this proxy.
The Compensation Committee believes that the mix and structure of compensation for our executives strikes an appropriate balance to promote long-term returns without motivating or rewarding excessive risk taking. The Compensation Committee believes that our executive compensation program also helps Calpine to recruit, retain and motivate a highly talented team of executives with the requisite set of skills and experience to successfully lead the Company in creating value for our shareholders. The compensation objectives, principles and philosophies that govern the Company’s compensation decisions include:
Alignment with Shareholders Interests. Our long-term incentive awards are equity-based, linking a significant portion of our named executive officers pay to the value and appreciation in the value of our share price.
Pay for Performance. A significant portion of compensation for our named executive officers is linked to performance through appreciation of the price of our common stock and the achievement of corporate performance goals and certain financial and operating metrics that we believe drive the value of our share price. We believe our performance share unit program strengthens the link between pay and performance.
Emphasis on Performance Over Time. The compensation program for our named executive officers is designed to mitigate excessive short-term decision making and risk taking. The value of long-term incentives is substantially greater than the annual cash incentive bonus

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and our annual incentive plan limits the maximum cash incentive bonus that can be earned in a given year. The Compensation Committee also retains the discretionary power to reduce annual incentive awards below calculated values.
Recruitment, Retention and Motivation of Key Leadership Talent. We provide an appropriate combination of fixed and variable compensation designed not only to attract and motivate the most talented executives for Calpine, but also to encourage retention by vesting equity awards over three to five years.
Compensation Summary and Overview
Best Practices in Compensation Governance and Highlights of Recent Developments
We regularly review our compensation practices and policies and periodically modify our compensation programs in light of evolving best practices, competitive positions and changing regulatory requirements. Some of our significant practices, policies and recent modifications include:
Pay for Performance. In accordance with our pay for performance philosophy, a significant portion of the total compensation of our Chief Executive Officer and our other named executive officers is based on the Company’s performance.
Emphasis on Performance Over Time. Also in accordance with our philosophy, the compensation program for our named executive officers is designed to mitigate imprudent short-term decision making and risk taking and emphasize long-term performance.
Clawbacks. The employment agreements for Messrs. Fusco and Miller, and the letter agreement for Mr. Hill, provide for a three-year clawback related to any after-tax portion of income realized from the exercise of their respective sign-on options, and the employment agreement for Mr. Hill also provides for a three-year clawback related to any after-tax portion of his annual cash incentive compensation, in each case, in the event they commit a willful and intentional act which directly results in a material restatement of the Company’s earnings.
Performance-Based Annual Incentive Awards. Our Calpine Incentive Plan (“CIP”) is 100% performance-based and uses multiple financial and operational performance measures.
Limited Perquisites. We offer a limited amount of perquisites and other personal benefits to our senior executives consistent with prevailing market practice and the Company’s overall compensation program. Perquisites do not constitute a material part of our compensation program.
Stock Holding and Ownership Policy. Messrs. Fusco, Miller and Hill are required to hold shares equal to at least 50% of the after-tax proceeds of each exercise of their sign-on options until their employment with the Company terminates. In addition, Mr. Hill is required to hold shares equal to at least five times his base salary by the fifth anniversary of the effective date of his employment agreement.
No Pledging of Shares. Our insider trading policy (which is applicable to all employees, including named executive officers) expressly prohibits hedging of Company shares.
Compensation Risk Assessment. Our Compensation Committee regularly conducts risk assessments to determine the extent, if any, to which our compensation practices and programs may create incentives for excessive risk taking. We believe that our compensation practices and policies do not encourage excessive or unnecessary risk taking.
Independent Compensation Consultant. The Compensation Committee utilizes the services of Meridian Compensation Partners, LLC, a national compensation consulting firm, as its independent compensation advisor.
No Supplemental Retirement Benefits. Our named executive officers participate in retirement plan programs provided to all Calpine employees and do not receive special retirement plans or benefits.
No Excise Tax “Gross-ups”. Our executive officers are not entitled to an excise tax gross-up payment in the event that any benefit or payment by the Company is determined to be subject to the excise tax imposed by Code Section 4999.
Performance Share Unit Program and Elimination of Stock Option Awards. Our long-term incentive program for the Company’s officers, including the named executive officers, is designed to closely align the interests of our officers and shareholders, and provides that 50% of the award opportunity, or 40% in the case of Mr. Adams, is in the form of performance share units that are earned (or forfeited) based on the Company's relative total shareholder return (“TSR”) performance over a three-year period, with the remaining 50% of the award opportunity, or 60% in the case of Mr. Adams, in the form of restricted stock awards. The Company does not award options to our named executive officers.
Results of the 2014 Advisory Vote on Executive Compensation (“say-on-pay”)
At the Company’s Annual Meeting of Shareholders held in May 2014, our shareholders were asked to approve the Company’s fiscal 2013 executive compensation programs. A substantial majority (99%) of the votes cast on the “say-on-pay” proposal at that meeting were voted in favor of the proposal. As Calpine regularly engages shareholders to discuss a variety of aspects of our business and welcomes shareholder input and feedback, the “say-on-pay” vote serves as an additional tool to guide the Board and the Compensation Committee in ensuring alignment of Calpine’s executive compensation programs with shareholder interests. We believe that these results reaffirm our shareholders’ support of the Company’s approach to executive compensation.
The Compensation Committee continues working to ensure that the design of the Company’s executive compensation program is focused on long-term shareholder value creation, emphasizes pay for performance and does not encourage imprudent short-term risks. The Compensation Committee also continues to use the “say-on-pay” vote as a guidepost for shareholder sentiment and believe it is critical to maintain and continually develop this program to promote ongoing shareholder engagement, communication and transparency.

vi


Executive Compensation Elements
The primary elements of the 2014 executive compensation program are as follows:
Type
Purpose
Page Reference
Base Salary
To provide a minimum, fixed level of cash compensation for the named executive officers to compensate executives for services rendered during the fiscal year.
Annual Cash Incentives
To drive achievement of annual corporate goals including key financial and operating results and strategic goals that drive value for shareholders.
Long-Term Incentives
To align executive officers’ interests with the interests of shareholders by rewarding increases in the value of our share price.
Post-Employment Compensation
To help retain executive officers and certain other qualified employees, maintain a stable work environment and provide financial security in the event of a change in control or in the event of a termination of employment in connection with or without a change in control.
To assist executive officers and other eligible employees to prepare financially for retirement, to offer benefits that are competitive and tax-efficient, and to provide a benefits structure that allows for reasonable certainty of future costs.

2014 Executive Compensation Summary
Set forth below is the 2014 compensation for each of our named executive officers.
 
 
 
 
 
 
 
 
Non-Equity
 
 
 
 
 
 
 
 
 
 
Stock
 
Incentive Plan
 
All Other
 
 
 
 
Principal
 
Salary
 
Awards
 
Compensation
 
Compensation
 
Total
Name
 
Position
 
($)
 
($)
 
($)
 
($)
 
($)
Jack A. Fusco
 
Executive Chairman
 
913,226

 
5,451,311

 
1,278,610

 
13,000

 
7,656,147

John B. (Thad) Hill III
 
President and CEO
 
895,903

 
2,544,976

 
1,152,010

 
13,000

 
4,605,889

Zamir Rauf
 
EVP and CFO
 
594,647

 
1,292,311

 
745,268

 
13,000

 
2,645,226

W. Thaddeus Miller
 
EVP and CLO
 
816,493

 
1,758,932

 
1,014,362

 
13,000

 
3,602,787

Steven D. Pruett
 
EVP and CCO
 
506,095

 
1,072,200

 
639,529

 
13,000

 
2,230,824

John M. Adams
 
EVP, Power Operations
 
405,223

 
643,302

 
336,967

 
13,000

 
1,398,492

2016 Annual Meeting
Deadline for shareholder proposals:    December 3, 2015
Item 4: To Amend and Restate the Company’s Bylaws to Implement Majority Voting in Uncontested Director Elections
Our Board recommends that shareholders vote to approve the proposal to amend and restate the Company’s bylaws to implement majority voting in uncontested director elections.
Our Board believes that the adoption of a majority voting standard for uncontested director elections is in the best interest of the Company and its shareholders, as it increases a board’s accountability to shareholders. Under our current plurality voting standard, an uncontested director is elected if he receives the highest number of votes cast, whether or not votes in favor of such director’s election exceed the number of votes against such director’s election. However, under the proposed majority voting standard, an uncontested director is only elected if he or she receives more votes in favor of such director’s election than received against such director’s election.
Pursuant to the bylaws, as amended:
any incumbent director whose reelection was not approved by a majority of votes cast will be required to promptly tender his or her resignation;
such resignation will be considered by the appropriate committee, which will then recommend to the Board whether to accept, reject, or take other action regarding the resignation;
the Board (excluding the resigning director) will vote on whether to accept or reject the committee’s recommendation and will publicly disclose its decision and the rationale supporting it; and
if resignation is accepted, the resigning director will be prohibited from serving on the Board for one year after the annual meeting in which resignation was submitted, or, if resignation is rejected, such director will continue to serve until a successor is elected at the next annual meeting or his or her earlier resignation or removal.

vii


Item 5: To Reapprove the Material Terms of the Performance Goals under the Calpine Corporation 2008 Equity Incentive Plan for Purposes of Section 162(m) of the Internal Revenue Code
The Company is asking shareholders to reapprove the material terms of the performance goals of the Equity Incentive Plan in order to allow for certain awards under the Equity Incentive Plan to qualify as tax-deductible performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code. The Board of Directors is not proposing that any of the performance goals under the Equity Incentive Plan be modified. If the Equity Incentive Plan is not reapproved by shareholders, the Equity Incentive Plan will continue in effect in accordance with its terms and the performance goals described in the Equity Incentive Plan will not be deemed to have been reapproved by shareholders for purposes of Section 162(m).



viii



CALPINE CORPORATION
717 Texas Avenue, Suite 1000
Houston, Texas 77002
PROXY STATEMENT
PROXY SOLICITATION AND VOTING INFORMATION
The Board of Directors (“Board” or “Board of Directors”) of Calpine Corporation (the “Company” or “Calpine”) solicits your proxy for our 2015 Annual Meeting of Shareholders (the “Annual Meeting”) to be held at our corporate headquarters on May 13, 2015, at 8:00 a.m. (Central Time) at 717 Texas Avenue, 10th Floor, Houston, Texas 77002, and any adjournment or postponement of the meeting, for the purposes set forth in the Notice of Annual Meeting of Shareholders.

Questions and Answers About the Annual Meeting and Voting
Why am I receiving these proxy materials?
The proxy materials include our Notice of Annual Meeting of Shareholders, proxy statement and 2014 annual report. If you requested printed versions of these materials by mail, these materials also include the proxy card or voting instructions form for the Annual Meeting. Our Board of Directors has made these materials available to you in connection with the solicitation of proxies by the Board. The proxies will be used at our Annual Meeting, or any adjournment or postponement thereof. We made these materials available to shareholders beginning on or about March 31, 2015.
Our shareholders are invited to attend the Annual Meeting and vote on the proposals described in this proxy statement. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may vote by completing, signing, dating and returning a proxy card or by executing a proxy via the Internet or by telephone.
How can I access the proxy materials on the Internet?
In accordance with U.S. Securities and Exchange Commission (the “SEC”) rules, we are using the Internet as the primary means of furnishing proxy materials to shareholders. Accordingly, most shareholders will not receive paper copies of our proxy materials. We instead sent shareholders a Notice of Internet Availability of the Proxy Materials (the “Notice”) with instructions for accessing the proxy materials including the Notice of Annual Meeting of Shareholders, proxy statement and 2014 annual report, via the Internet and voting via the Internet or by telephone. The Notice was mailed on or about March 31, 2015. The Notice also provides information on how shareholders may obtain paper copies of our proxy materials if they so choose. Additionally, and in accordance with SEC rules, you may access our proxy materials at www.proxyvote.com.
The Notice provides you with instructions regarding how to:
view the proxy materials for the Annual Meeting on the Internet and execute a proxy; and
instruct us to send future proxy materials to you in printed form or electronically by e-mail.
Choosing to receive future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.
Who can vote?
Only shareholders of record of our common stock at the close of business on March 16, 2015 (the “record date”), may vote, either in person or by proxy, at the Annual Meeting. On the record date, we had 375,312,062 shares of common stock outstanding. You are entitled to one vote for each share of common stock that you owned on the record date. The shares of common stock held in our treasury, which are not considered outstanding, will not be voted.
How do I know if I am a beneficial owner of shares?
If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. The organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. Those instructions are contained in a “voting instructions form.” If you request printed copies of the proxy materials by mail, you will receive a voting instructions form.

1



What am I voting on?
You will be voting on each of the following:
to elect eight directors to serve on our Board;
to ratify the selection of PwC to serve as our independent registered public accounting firm for the year ending December 31, 2015;
to approve, on an advisory basis, named executive officer compensation;
to amend and restate the Company’s bylaws to implement majority voting in uncontested director elections;
to reapprove the material terms of the performance goals under the Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code; and
to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
As of the date of this proxy statement, the Board knows of no other matters that will be brought before the Annual Meeting. If you return your signed and completed proxy card or vote by telephone or over the Internet and other matters are properly presented at the Annual Meeting for consideration, the persons appointed as proxies will have the discretion to vote for you.
How do I vote?
You may vote using one of the following methods:
Over the Internet. If you have access to the Internet, we encourage you to vote in this manner. Refer to your Notice for instructions on voting via the Internet and carefully follow the directions.
By telephone. You may vote by calling the toll-free telephone number listed on your proxy card or the voting instructions form. Refer to your Notice for instructions on voting by telephone and carefully follow the directions.
By mail. For those shareholders who request to receive a paper proxy card or voting instructions form in the mail, you may complete, sign and return the proxy card or voting instructions form.
In person at the Annual Meeting. All shareholders of record may vote in person at the Annual Meeting. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank or other holder of record and present it with your ballot to be able to vote at the Annual Meeting. Even if you plan to be present at the Annual Meeting, we encourage you to vote your shares prior to the Annual Meeting date via the Internet, by telephone or by mail in order to record your vote promptly, as we believe voting this way is convenient.
Instructions for voting via the Internet, by telephone or by mail are also set forth on the proxy card or voting instructions form. Please follow the directions on these materials carefully.
Can I change my mind after I vote?
You may change your vote at any time before the polls close at the Annual Meeting. You may do this by using one of the following methods:
Voting again by telephone or over the Internet prior to 11:59 p.m., Eastern Time, on May 12, 2015
Giving timely written notice to the Corporate Secretary of our Company
Delivering a timely later-dated proxy
Voting in person at the Annual Meeting
If you hold your shares through a broker, bank, or other nominee, you may revoke any prior voting instructions by contacting that firm or by voting in person via legal proxy at the Annual Meeting.

2



How many votes must be present to hold the Annual Meeting?
In order for us to conduct the Annual Meeting, the holders of a majority of the shares of the common stock outstanding as of March 16, 2015, must be present at the Annual Meeting in person or by proxy. This is referred to as a quorum. Abstentions and “broker non-votes” (shares held by a broker or nominee that does not have discretionary authority to vote on a particular matter and has not received voting instructions from its client) are counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting. Your shares will be counted as present at the Annual Meeting if you do one of the following:
Vote via the Internet or by telephone
Return a properly executed proxy by mail (even if you do not provide voting instructions)
Attend the Annual Meeting and vote in person
Will my shares be voted if I do not provide my proxy?
If you hold your shares directly in your own name, your shares will not be voted if you do not vote them or provide a proxy.
If your shares are held in the name of a brokerage firm or other nominee, under rules of the NYSE, your broker may vote your shares on “routine” matters even if you do not provide a proxy. The only routine matter to be voted on at the Annual Meeting is the ratification of the selection of our independent registered public accounting firm for the current calendar year. If a brokerage firm votes your shares on these matters in accordance with these rules, your shares will count as present at the Annual Meeting for purposes of establishing a quorum and will count as “FOR” votes or “AGAINST” votes, as the case may be, depending on how the broker votes. If a brokerage firm signs and returns a proxy on your behalf that does not contain voting instructions, your shares will count as present at the Annual Meeting for quorum purposes and will be voted in connection with the selection of PwC as our independent public accounting firm for the current year, but will not count as a “FOR” vote for any other matter, including the election of directors.
What are broker non-votes?
A “broker non-vote” occurs when a broker, bank or other nominee that holds our common stock for a beneficial owner returns a proxy to us but cannot vote the shares it holds as to a particular matter because it has not received voting instructions from the beneficial owner and the matter to be voted on is not “routine” under the NYSE rules.
What if I return my proxy but do not provide voting instructions?
If you hold your shares directly in your own name, and you sign and return your proxy card (including over the Internet or by telephone) but do not include voting instructions, your proxy will be voted as the Board recommends on each proposal.
What vote is required to adopt each of the proposals?
Each share of our common stock outstanding on the record date is entitled to one vote on each of the eight director nominees and one vote on each other matter.
Proposal 1. Election of Directors. Directors will be elected by a plurality of votes, which means that the eight nominees receiving the highest number of “FOR” votes will be elected directors. If you do not instruct your broker how to vote with respect to this item, your broker may not vote with respect to this proposal. For your vote to be counted, you must submit your voting instructions to your broker or custodian. Broker non-votes will not be counted as present and are not entitled to vote on this proposal.
Proposal 2. Ratification of PwC as Auditor for 2015. The affirmative vote of a majority of the shares present and entitled to vote, in person or by proxy, at the Annual Meeting is required to ratify the Audit Committee's appointment of PwC as the Company's independent auditors for 2015. Even if you do not instruct your broker how to vote with respect to this item, your broker may vote your shares with respect to this proposal. Abstentions will be counted as present for the purposes of this vote, and therefore will have the same effect as a vote against the proposal. Broker non-votes will be counted as present and entitled to vote on the proposal.
Proposal 3. Advisory Resolution to Approve Named Executive Officer Compensation. Approval of the advisory resolution to approve named executive officer compensation requires the affirmative vote of a majority of the shares present at the Annual Meeting in person or by proxy and entitled to vote. If you do not instruct your broker how to vote with respect to this item, your broker may not vote with respect to this proposal. For your vote to be counted, you must submit your voting instructions to your broker or custodian. Abstentions will be counted as present for the purposes of this vote, and therefore will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on the proposal.

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Proposal 4. Amendment and Restatement of the Company’s Bylaws to Implement Majority Voting in Uncontested Director Elections. The affirmative vote of a majority of the shares present and entitled to vote, in person or by proxy, at the Annual Meeting is required to ratify the proposal to amend and restate the Company’s Bylaws to implement majority voting in uncontested director elections. If you do not instruct your broker how to vote with respect to this item, your broker may not vote with respect to this proposal. For your vote to be counted, you must submit your voting instructions to your broker or custodian. Abstentions will be counted as present for the purposes of this vote, and therefore will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on the proposal.
Proposal 5. Reapproval of the Material Terms of the Performance Goals under the Equity Incentive Plan for Purposes of Section 162(m) of the Internal Revenue Code. The affirmative vote of a majority of the shares present and entitled to vote, in person or by proxy, at the Annual Meeting is required to ratify the proposal to reapprove the material terms of the performance goals under the Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code. If you do not instruct your broker how to vote with respect to this item, your broker may not vote with respect to this proposal. For your vote to be counted, you must submit your voting instructions to your broker or custodian. Abstentions will be counted as present for the purposes of this vote, and therefore will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on the proposal.
When will the voting results be announced?
We will announce preliminary voting results at the Annual Meeting. We will report final results on our website at www.calpine.com and in a filing with the SEC on a Form 8-K.
Annual Meeting Admission
Only shareholders and certain other permitted attendees may attend the Annual Meeting. If you plan to attend the Annual Meeting in person, we ask that you also complete and return the reservation form attached to the end of the proxy statement. Please note that space limitations make it necessary to limit attendance to shareholders and one guest. Admission to the Annual Meeting will be on a first-come, first-served basis. Proof of Calpine Corporation stock ownership as of the record date, along with photo identification, will be required for admission. Shareholders holding stock in an account at a brokerage firm, bank, broker-dealer or other similar organization (“street name” holders) will need to bring a copy of a brokerage statement reflecting their stock ownership as of the record date. No cameras, recording equipment, electronic devices, use of cell phones or other mobile devices, large bags or packages will be permitted at the Annual Meeting.
Expenses of Solicitation
We pay all costs of soliciting proxies, including the cost of preparing, assembling and mailing the Notice, proxy statement and proxy. In addition to solicitation of proxies by mail, solicitation may be made personally, by telephone or by other electronic means. We may pay persons holding shares for others their expenses for sending proxy materials to their principals. While we presently intend that solicitations will be made only by directors, officers and employees of the Company, we may retain outside solicitors to assist in the solicitation of proxies. Any expenses incurred in connection with the use of outside solicitors will be paid by us.
Householding
To reduce the expense of delivering duplicate proxy materials to our shareholders, we are relying on the SEC rules that permit us to deliver only one set of proxy materials, including our proxy statement, our 2014 annual report and the Notice, to multiple shareholders who share an address unless we receive contrary instructions from any shareholder at that address. This practice, known as “householding,” reduces duplicate mailings, thus saving printing and postage costs as well as natural resources. Each shareholder retains a separate right to vote on all matters presented at the Annual Meeting. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you wish to receive a separate copy of the 2014 annual report or other proxy materials, free of charge, or if you wish to receive separate copies of future annual reports or proxy materials, please mail your request to Calpine Corporation, 717 Texas Avenue, Suite 1000, Houston, Texas 77002, attention: Investor Relations, or call us at (713) 830-2000.

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PROPOSAL 1
ELECTION OF DIRECTORS
Nominees for Election as Directors
Upon recommendation of our Nominating and Governance Committee, our Board has nominated eight directors to serve on our Board of Directors until the 2016 Annual Meeting of Shareholders and until their successors have been elected and qualified. All eight nominees listed below currently serve on our Board of Directors; six of the eight nominees are non-management directors. John B. (Thad) Hill III serves as the President and Chief Executive Officer of the Company and Jack A. Fusco serves as Executive Chairman. The size of our Board is currently set at nine members but has been reduced to eight members effective at the conclusion of the Annual Meeting.
If, at the time of the Annual Meeting, any nominee is unable or unwilling to serve as a director, the persons named as proxy holders will vote your proxy for the election of such substitute candidate as may be designated by the Board of Directors in accordance with Article III of our bylaws to fill the vacancy. The Board of Directors has no reason to believe any of the nominees will be unable or unwilling to serve if elected.
Our bylaws currently provide that the affirmative vote of a plurality of the shares present and voting is required to elect a director, which means that the eight nominees receiving the highest numbers of “FOR” votes at the Annual Meeting by the holders of shares of our common stock will be elected as directors.
The Board of Directors recommends you vote “FOR” each of the nominees described below.
Set forth in the table below is a list of our director nominees, together with certain biographical information, including their ages as of the date of this proxy statement.
Name
Age
Principal Occupation
Frank Cassidy
68
Retired President and Chief Operating Officer, PSEG Power LLC
Jack A. Fusco(1)
52
Executive Chairman, Calpine Corporation
John B. (Thad) Hill III
47
President and Chief Executive Officer, Calpine Corporation
Michael W. Hofmann
56
Retired Vice President and Chief Risk Officer, Koch Industries, Inc.
David C. Merritt
60
Private Investor and Consultant
W. Benjamin Moreland
51
President and Chief Executive Officer, Crown Castle International Corp.
Robert A. Mosbacher, Jr.
63
Chairman, Mosbacher Energy Company
Denise M. O’Leary
57
Private Venture Capital Investor
_____________
(1)
In accordance with his employment agreement, Mr. Fusco's term as Executive Chairman will expire on December 31, 2015.
Frank Cassidy became a director of the Company on January 31, 2008 and has served as lead independent director since May 14, 2014. From 1969 to his retirement in 2007, Mr. Cassidy was employed at Public Service Enterprise Group, Inc. (“PSEG”), an energy and energy services company. From 1999 to 2007, Mr. Cassidy served as President and Chief Operating Officer of PSEG Power LLC, the wholesale energy subsidiary of PSEG. From 1996 to 1999, Mr. Cassidy was President and Chief Executive Officer of PSEG Energy Technologies, Inc. Prior to 1996, Mr. Cassidy held various positions of increasing responsibility at the Public Service Electric and Gas Company. Mr. Cassidy obtained a Bachelor of Science degree in Electrical Engineering from the New Jersey Institute of Technology and a Master of Business Administration degree from Rutgers University. Mr. Cassidy is a member of the Compensation Committee. Mr. Cassidy’s almost 40 years of diversified experience in the power generation and energy industries in various positions of increasing responsibility with PSEG provide him with strong insight, particularly with regard to power operations, power sector strategy, management and corporate governance matters, and make him a qualified lead independent director of our Board and an effective member of our Compensation Committee.
Jack A. Fusco became a director of the Company on August 10, 2008. He has served as our Executive Chairman since May 14, 2014. He previously served as our Chief Executive Officer from August 2008 to May 2014 and President from August 2008 to December 2012. From July 2004 to February 2006, Mr. Fusco served as the Chairman and Chief Executive Officer of Texas Genco LLC. From 2002 through July 2004, Mr. Fusco was an exclusive energy investment advisor for Texas Pacific Group. From November 1998 until February 2002, he served as President and Chief Executive Officer of Orion Power Holdings, Inc. Prior to his founding of Orion Power Holdings, Inc., Mr. Fusco was a Vice President at Goldman Sachs Power, an affiliate of

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Goldman, Sachs & Co. Prior to joining Goldman Sachs, Mr. Fusco was employed by Pacific Gas & Electric Company or its affiliates in various engineering and management roles for approximately 13 years. Mr. Fusco obtained a Bachelor of Science degree in Mechanical Engineering from California State University, Sacramento. Mr. Fusco served as a director on the board of Foster Wheeler Ltd., a global engineering and construction contractor and power equipment supplier, until February 2009 and Graphics Packaging Holdings, a paper and packaging company, until 2008. Mr. Fusco’s current management and leadership roles in the operation of Calpine Corporation coupled with more than 30 years of experience in the power industry, including as former Chief Executive Officer of two independent power companies, provide him with strong insight, particularly with regard to commercial and power operations, power sector strategy, commodities and management matters and make Mr. Fusco a valuable and effective Executive Chairman.
John B. (Thad) Hill III became a director of the Company and has served as our President and Chief Executive Officer since May 14, 2014. He previously served as our President and Chief Operating Officer from December 2012, as our Executive Vice President and Chief Operating Officer from November 2010 to December 2012 and as our Executive Vice President and Chief Commercial Officer from September 2008 to November 2010. Prior to joining the Company, Mr. Hill served as Executive Vice President of NRG Energy, Inc. from February 2006 to September 2008 and President of NRG Texas LLC from December 2006 to September 2008. Prior to joining NRG Energy, Inc., Mr. Hill was Executive Vice President of Strategy and Business Development at Texas Genco LLC from 2005 to 2006. From 1995 to 2005, Mr. Hill was with Boston Consulting Group, Inc., where he rose to Partner and Managing Director and led the North American energy practice, serving companies in the power and natural gas sectors with a focus on commercial and strategic issues. Mr. Hill received his Bachelor of Arts degree from Vanderbilt University and a Master of Business Administration degree from the Amos Tuck School of Dartmouth College. Mr. Hill’s expertise in the power sector, power operations and energy commodities along with his knowledge of the Company’s day-to-day operations and overall strategic plan make him a valuable member of our Board.
Michael W. Hofmann became a director of the Company on May 10, 2013. From 1991 until his retirement in 2012, Mr. Hofmann was employed in various capacities at Koch Industries, Inc. (“Koch”), one of the largest private companies in America active in refining, chemicals and biofuels; forest and consumer products; fertilizers; polymers and fibers; process and pollution control equipment and technologies; commodity trading and services; minerals; ranching; and investments. From 2005 until 2012, Mr. Hofmann served as Vice President and Chief Risk Officer at Koch and also held the position of Chief Risk Officer since 2000 after serving as Chief Market Risk Officer during 1999. Prior to 1999, Mr. Hofmann held various positions of increasing responsibility at Koch, including in its commodity trading operations. Before joining Koch, he had a seven-year audit career with KPMG Peat Marwick. Mr. Hofmann previously served as a member of the economic advisory council for the Federal Reserve Bank of Kansas City and as a member of the Board of Trustees of the Global Association of Risk Professionals, a globally recognized membership association for risk managers. Mr. Hofmann obtained a Master of Business Administration degree as well as a Bachelor of Business Administration degree in Accounting from Wichita State University. He is a Certified Public Accountant and National Association of Corporate Director Board Leadership Fellow. Mr. Hofmann's knowledge and expertise in enterprise risk management and commodity trading operations developed during his 21 years at Koch provide him with strong insight, particularly with regard to strategy, commodities, finance and valuation matters and make him a valuable member of our Board and of our Audit Committee and Compensation Committee.
David C. Merritt became a director of the Company on February 8, 2006. Mr. Merritt has served as Senior Vice President and Chief Financial Officer of iCRETE LLC from October 2007 to March 12, 2009. Mr. Merritt was an audit and consulting partner of KPMG LLP from 1985 to 1999. Mr. Merritt also serves as a director of Taylor Morrison Home Corporation, where he serves as a member of the Audit Committee and Charter Communications, Inc., where he also serves as a chairman of the Audit Committee. Mr. Merritt obtained a Bachelor of Science degree in Business and Accounting from California State University, Northridge. Mr. Merritt’s knowledge and expertise in accounting developed during his 14 years as a partner in a major accounting firm and his service on other boards of directors, including as chairman of other board audit committees provide him with strong insight, particularly with regard to accounting and financial matters, and make him a valuable member of our Board and an effective Chairman of our Audit Committee.
W. Benjamin Moreland became a director of the Company on January 31, 2008. Since 1999, Mr. Moreland has been employed by Crown Castle International Corp., a provider of wireless communications infrastructure in Australia, Puerto Rico and the U.S., in various capacities, including his current position as President and Chief Executive Officer and, prior to that, as Executive Vice President and Chief Financial Officer. Mr. Moreland is also a director at Crown Castle International. Prior to joining Crown Castle International, he held various positions in corporate finance and real estate investment banking with Chase Manhattan Bank from 1984 to 1999. Mr. Moreland obtained a Bachelor of Business Administration degree from the University of Texas and
a Master of Business Administration degree from the University of Houston. Mr. Moreland is a member of the Audit Committee. Mr. Moreland’s successful leadership and executive experience as a Chief Executive Officer and Chief Financial Officer provide him with strong insight, particularly with regard to finance, equity markets, valuation and management matters, and make him a valuable member of our Board and of our Audit Committee.

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Robert A. Mosbacher, Jr. became a director of the Company on February 11, 2009. Mr. Mosbacher is the Chairman of Mosbacher Energy Company, a privately-held independent oil and gas exploration and production company located in Houston, Texas. Prior to that, Mr. Mosbacher was appointed by President George W. Bush in 2005 as the President and Chief Executive Officer of the Overseas Private Investment Corporation (“OPIC”), an independent U.S. government agency that helps small, medium and large American businesses expand into developing nations and emerging markets around the globe; he served in that position through January 2009. From 1986 until 2005, he served as President and Chief Executive Officer of Mosbacher Energy Company. From 1995 to 2003, Mr. Mosbacher also served as Vice Chairman of Mosbacher Power Group LLC. From August 1999 to October 2005, Mr. Mosbacher served as a Director of the Devon Energy Corporation. He also served on Devon’s Compensation Committee from June 2003 to October 2005. In April 2009, Mr. Mosbacher resumed his role as a director of Devon, and in June 2009 he resumed his role as a member of Devon’s Compensation Committee and the Nominating and Governance Committee. Mr. Mosbacher obtained a Bachelor of Arts degree in Political Science from Georgetown University and a Juris Doctorate from Southern Methodist University. Mr. Mosbacher is a member of the Compensation Committee and the Nominating and Governance Committee. Mr. Mosbacher’s extensive and varied management experience in the energy sector including natural gas and independent power generation, his experience with the Federal government at OPIC, and his service as a member of other boards and board committees provide him with strong insight, particularly with regard to energy, management and government and community relations matters, and make him a valuable member of our Board and of our Nominating and Governance Committee, in addition to being an effective Chairman of our Compensation Committee.
Denise M. OLeary became a director of the Company on January 31, 2008. Since 1996, she has been a private venture capital investor in a variety of early stage companies. From 1983 to 1996, Ms. O’Leary was an associate, then general partner, at Menlo Ventures, a venture capital firm providing long-term capital and management services to development stage companies. From 2002 to 2006, Ms. O’Leary was a member of the Board of Directors of Chiron Corporation, at which time the company was sold to Novartis AG. Previously a director of U.S. Airways Group Inc., Ms. O’Leary became a director of American Airlines Group Inc. in December 2013 upon the completion of the merger of the two airlines and American Airlines’ emergence from bankruptcy. She is also a director of Medtronic plc., where she serves as a member of the Compensation Committee. She obtained a Bachelor of Science degree in Industrial Engineering from Stanford University and obtained a Master in Business Administration from Harvard Business School. Ms. O’Leary’s knowledge and understanding of capital markets as a result of her experiences as a venture capital investor as well as her experience serving as a director and member of committees of other boards of directors provide her with strong insight, particularly with regard to corporate governance, ethics and financial matters, and make her a valuable member of our Board and our Compensation Committee, in addition to being an effective Chair of our Nominating and Governance Committee.
BOARD MEETINGS AND BOARD COMMITTEE INFORMATION
Meetings
During 2014, the Board of Directors held four meetings. In 2014, all directors attended at least 75% of the aggregate number of meetings of the Board and the committees on which they served. It is our policy that all members of our Board attend our Annual Meetings of Shareholders. Each director attended our 2014 Annual Meeting. From time to time, the Board may create special committees to address specific matters such as financial or corporate transactions. During 2014, the Board held six special committee meetings to address various ad hoc corporate matters.
Committees and Committee Charters
Our Board of Directors has established the following standing committees: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. The charter of each of these committees is available on our website at www.calpine.com/about/oc_corpgov_committees.asp. You may also request printed copies of the charter(s) by sending a written request to our Corporate Secretary at the address set forth on the cover of this proxy statement.

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The following table identifies the current members of our Board serving on the Audit Committee, the Compensation Committee and the Nominating and Governance Committee:
Director
Audit Committee
 
Compensation Committee
 
Nominating and Governance Committee
Frank Cassidy(1)
 
X
 
Jack A. Fusco(2)
 
 
John B. (Thad) Hill III
 
 
Robert C. Hinckley(3)
X
 
 
X
Michael W. Hofmann
X
 
X
 
David C. Merritt
Chair
 
 
W. Benjamin Moreland
X
 
 
Robert A. Mosbacher, Jr.
 
Chair
 
X
Denise M. O’Leary
 
X
 
Chair
_____________
(1)
Mr. Cassidy was appointed lead director on May 14, 2014.
(2)
Executive Chairman.
(3)
Mr. Hinckley will not stand for re-election at the Annual Meeting.
Audit Committee
The Audit Committee meets a minimum of four times a year, and holds such additional meetings as it deems necessary to perform its responsibilities. In 2014, the Audit Committee held eight meetings.
The Audit Committee has direct responsibility for the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm engaged to prepare an audit report, to perform other audits, and to perform review or attest services for us. The independent registered public accounting firm reports directly to the Audit Committee. Annually, the Audit Committee recommends that the Board request shareholder ratification of the appointment of the independent registered public accounting firm. The Audit Committee also has direct responsibility to retain, evaluate and, when appropriate, to terminate the independent registered public accounting firm. The Audit Committee is also responsible for the pre-approval of all audit and permitted non-audit services performed by our independent registered public accounting firm.
The Audit Committee acts on behalf of the Board in monitoring and overseeing the performance of our internal audit function, and our chief accounting officer has direct access to the Audit Committee. The Audit Committee also oversees the operation of our internal controls covering the integrity of our financial statements and reports, compliance with laws, regulations and corporate policies, and the qualifications, performance and independence of our independent registered public accounting firm. The Audit Committee is also responsible for determining whether any waiver of our Code of Conduct will be permitted, and for reviewing and determining whether to approve any related party transactions required to be disclosed pursuant to Item 404(a) of Regulation S-K. The responsibilities and activities of the Audit Committee are further described in “Report of the Audit Committee” and the Audit Committee charter.
The Board of Directors has determined that the Audit Committee consists entirely of directors who meet the independence requirements of the NYSE listing standards and the rules and regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has also determined that each member of the Audit Committee has sufficient knowledge and understanding of the Company’s financial statements to serve on the Audit Committee and is financially literate within the meaning of the NYSE listing standards as interpreted by the Board. The Board has further determined that each member of the Audit Committee satisfies the definition of “audit committee financial expert” as defined under the federal securities laws.
Compensation Committee
The Compensation Committee meets a minimum of four times a year and holds additional meetings as it deems necessary to perform its responsibilities. In 2014, the Compensation Committee held four meetings.
The Compensation Committee has authority to review and approve total compensation, including determining salaries, performance-based incentives, and other matters related to the compensation of our executive officers. The Compensation Committee is responsible for administering our equity plans, including reviewing and granting equity awards to our executive

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officers. It also establishes and evaluates the achievement of any related performance goals. The Compensation Committee’s recommendations concerning equity plans are subject to approval by our entire Board.
The Compensation Committee also reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluates the Chief Executive Officer’s performance in light of those goals and objectives and determines and approves the Chief Executive Officer’s compensation level on the basis of its evaluation. While the Compensation Committee has overall responsibility for executive compensation matters, as specified in its charter, the Compensation Committee reports its preliminary conclusions with respect to the performance evaluation and compensation decisions regarding our Chief Executive Officer to the other independent directors of our Board in executive session and solicits their input prior to finalizing its conclusions.
The Compensation Committee is also generally responsible for overseeing our employee compensation and benefit policies and programs, our management development and succession programs, the development and oversight of a succession plan for the position of Chief Executive Officer and our diversity and inclusion programs.
The Compensation Committee is authorized to retain and terminate compensation consultants, legal counsel or other advisors to the Committee and to approve the engagement of any such consultant, counsel or advisor, to the extent it deems necessary or appropriate after specifically analyzing the independence of any such consultant retained by the Committee.
As further described in the Compensation Discussion and Analysis section of this proxy statement, our management provides information, analysis and recommendations for the Compensation Committee’s decision-making process in connection with the amount and form of executive compensation, except that no member of management may participate in the decision-making process with respect to his or her own compensation. The Compensation Discussion and Analysis discusses the role of our Chief Executive Officer in determining or recommending the amount and form of executive compensation. In addition, the Compensation Discussion and Analysis addresses the role of management and of the Compensation Committee’s independent compensation advisor, Meridian Compensation Partners, LLC, in determining and recommending executive compensation. The responsibilities and activities of the Compensation Committee are further described under “Compensation Discussion & Analysis” and, “Report of the Compensation Committee” and in the Compensation Committee charter.
Our Board of Directors has determined that the Compensation Committee consists entirely of directors who meet the independence requirements of the NYSE listing standards, including the additional independence requirements applicable to the members of a compensation committee.
Nominating and Governance Committee and Director Nominations
The Nominating and Governance Committee meets a minimum of four times a year and holds such additional meetings as it deems necessary to perform its responsibilities. In 2014, the Nominating and Governance Committee held four meetings.
The Nominating and Governance Committee’s principal responsibilities are to assist the Board in reviewing and identifying individuals qualified to become Board members, consistent with the criteria established by the Board for director candidates, to recommend to the Board nominees for directors for the next Annual Meeting of Shareholders and to fill vacancies on the Board.
In carrying out its responsibilities, the Nominating and Governance Committee considers proposals from a number of sources, including recommendations for nominees from shareholders submitted upon written notice to the chairman of the Nominating and Governance Committee, c/o Corporate Secretary, Calpine Corporation, 717 Texas Avenue, Suite 1000, Houston, Texas 77002. When considering a person to be recommended for nomination as a director, the Nominating and Governance Committee evaluates, among other factors, experience, accomplishments, education, skills, personal and professional integrity, diversity of the Board (in all aspects of that term) and the candidate’s ability to devote the necessary time for service as a director (including directorships and other positions held at other corporations and organizations).
The Nominating and Governance Committee has no specific policy on director diversity. However, the Board reviews diversity of viewpoints, background, experience, accomplishments, education and skills when evaluating nominees. The Board believes that such diversity is important because it provides varied perspectives and promotes active and constructive discussion among Board members and between the Board and management, resulting in more effective oversight of management’s formulation and implementation of strategic initiatives. The Board believes this diversity is demonstrated in the range of experiences, qualifications and skills of the current members of the Board. In the Board’s executive sessions and in annual performance evaluations conducted by the Board and its committees, the Board from time to time considers whether the Board’s composition promotes a constructive and collegial environment. In determining whether an incumbent director should stand for re-election, the Nominating and Governance Committee considers the above factors, as well as that director’s personal and professional

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integrity, attendance, preparedness, participation and candor, the individual’s satisfaction of the criteria for the nomination of directors set forth in our Corporate Governance Guidelines and other relevant factors as determined by the Board.
The Nominating and Governance Committee also oversees evaluations of the Board and committees of the Board and, unless performed by the Compensation Committee, our senior managers.
Finally, the Nominating and Governance Committee has the responsibility to develop and recommend to the Board a set of corporate governance guidelines and propose changes to such guidelines from time to time as may be appropriate. See “Corporate Governance Matters — Corporate Governance Guidelines.” The responsibilities and activities of the Nominating and Governance Committee are further described in the Nominating and Governance Committee charter.
Our Board of Directors has determined that the Nominating and Governance Committee consists entirely of directors who meet the independence requirements of the NYSE listing standards.
Compensation Committee Interlocks and Insider Participation
None of the current members of our Compensation Committee (whose names appear under “— Report of the Compensation Committee”) is, or has ever been, an officer or employee of the Company or any of its subsidiaries. In addition, during the last fiscal year, no executive officer of the Company served as a member of the board of directors or the compensation committee of any other entity that has one or more executive officers serving on our Board or our Compensation Committee.
REPORT OF THE AUDIT COMMITTEE
On behalf of the Board of Directors of Calpine Corporation (the “Company”), the Audit Committee oversees the operation of the Company’s system of internal controls in respect of the integrity of its financial statements and reports, compliance with laws, regulations and corporate policies, and the qualifications, performance and independence of its independent registered public accounting firm. The Audit Committee’s function is one of oversight, recognizing that the Company’s management is responsible for preparing its financial statements, and the Company’s independent registered public accounting firm is responsible for auditing those financial statements.
Consistent with this oversight responsibility, the Audit Committee has reviewed and discussed with management the audited financial statements of the Company for the year ended December 31, 2014, and management’s assessment of internal control over financial reporting as of December 31, 2014.
The Audit Committee has also discussed with PwC the matters required to be discussed by the Statement on Auditing Standards No. 16, adopted by the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee has also received the written disclosures in the letter from PwC required by the applicable requirements of the PCAOB regarding PwC’s independence and has discussed with PwC their independence.
Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements for the year ended December 31, 2014, be included in its annual report on Form 10-K for the fiscal year then ended. The Audit Committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm and has asked the shareholders to ratify the selection.
David C. Merritt (Chair)
Robert C. Hinckley
Michael W. Hofmann
W. Benjamin Moreland
The Report of the Audit Committee does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates the Report of the Audit Committee by reference therein.


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CORPORATE GOVERNANCE MATTERS
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines covering, among other things, the duties and responsibilities of and independence standards applicable to our directors. The Corporate Governance Guidelines cover a number of other matters, including the Board’s role in overseeing executive compensation, compensation and expenses of non-management directors, communications between shareholders and directors, Board committee structures and assignments and review and approval of related person transactions. A copy of our Corporate Governance Guidelines is available on our website at www.calpine.com/about/oc_corpgov.asp. You may also request a printed copy of the guidelines free of charge by sending a written request to our Corporate Secretary at the address on the cover of this proxy statement.
Board Leadership Structure
The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board believes that, given the dynamic and competitive environment in which we operate, the optimal Board leadership structure may vary as circumstances warrant.
At present, the Board has chosen to continue separating the two roles as our current leadership structure promotes balance between the authority of those who oversee our business and those who manage it on a day-to-day basis. Nevertheless, the Board recognizes that it is important to retain the organizational flexibility to determine whether the roles of the Chairman of the Board and Chief Executive Officer should be separated or combined in one individual. The Board periodically evaluates whether the Board leadership structure should be changed in light of specific circumstances applicable to us.
Mr. Fusco was appointed by the Board as Executive Chairman effective May 14, 2014. Because Mr. Fusco remains an employee of the Company, he is not an independent director. Therefore, the Board appointed Mr. Cassidy to serve as Lead Director concurrent with Mr. Fusco’s appointment as Executive Chairman.
Director Independence
Our independent directors are: Frank Cassidy, Robert C. Hinckley (Mr. Hinckley will not stand for re-election at the Annual Meeting), Michael W. Hofmann, David C. Merritt, W. Benjamin Moreland, Robert A. Mosbacher, Jr. and Denise M. O’Leary. Therefore, the Board has satisfied its objective as set forth in the Corporate Governance Guidelines to have at least two-thirds of the Board consist of independent directors, as well as NYSE listing standards requiring that at least a majority of the Board consist of independent directors.
For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with us. The Board considers the following transactions, relationships and arrangements in determining director independence (which are included in our Corporate Governance Guidelines). Under these guidelines, a member of the Board of Directors may be considered independent if such member:
has not been employed by the Company within the last three years (other than as interim Chairman of the Board of Directors or interim Chief Executive Officer);
does not have an immediate family member who is, or has been, employed by the Company as an executive officer within the last three years;
has not received, and does not have an immediate family member who has received, more than $120,000 in direct compensation from the Company during any twelve-month period within the last three years, other than for services as a member of the Board of Directors or compensation for prior service (including pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service); provided that, compensation received by a director for former service as an interim Chairman or Chief Executive Officer or other executive officer need not be considered in determining independence under this test; provided further that, compensation received by an immediate family member for service as an employee of the Company (other than an executive officer) need not be considered in determining independence under this test;
(A) is not a current partner or employee of a firm that is the Company’s internal or external auditor; (B) does not have an immediate family member who is a current partner of a firm that is the Company’s internal or external auditor; (C) does not have an immediate family member who is a current employee of a firm that is the Company’s internal or external auditor and personally works on the Company’s audit; and (D) is not, and has not been within the last three years, and does not have an immediate family member who is, or has been within the last three years, a partner or

11



employee of a firm that is the Company’s internal or external auditor and personally worked on Company’s audit within such time;
is not, and has not been within the last three years, and does not have an immediate family member who is, or has been within the last three years, employed as an executive officer of a public company where any of the Company’s present executive officers at the same time serves or served as a member of such public company’s compensation committee;
is not, and has not been within the last three years, an employee of a significant customer or supplier of the Company, including any company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, and does not have an immediate family member who is, or has been within the last three years, an executive officer of such a significant customer or supplier; provided that contributions to not- for-profit organizations shall not be considered payments for purposes of this test;
has not had any of the relationships described above with any affiliate of the Company; and
has no other material relationship, which, in the business judgment of the Board of Directors, would impair his or her ability to exercise independent judgment.
Notwithstanding the foregoing, each member of the Board of Directors must meet any mandatory qualifications for membership on the Board, and the Board as a whole must meet the minimum independence requirements imposed by any exchange or market on which our common stock is listed and any other laws and regulations applicable to us. Each member of the Board of Directors is required to promptly advise the Chairman of the Board (or the Lead Director if one has been appointed as described below) and the Nominating and Governance Committee of any matters which, at any time, may affect such member’s qualifications for membership under the criteria imposed by any applicable exchange or market, any other laws and regulations or these guidelines, including, but not limited to, such member’s independence.
In reaching its determinations, the Board reviewed the categorical standards listed above, the corporate governance rules of the NYSE and the individual circumstances of each director and determined that each of the directors identified above as independent satisfied each standard.
Code of Conduct and Ethics
Our Code of Conduct and Corporate Governance Guidelines regulate related party transactions and apply to all directors, officers and employees. The Code of Conduct requires that each individual deal fairly, honestly and constructively with governmental and regulatory bodies, customers, suppliers and competitors. It prohibits any individual’s taking unfair advantage through manipulation, concealment, abuse of privileged information or misrepresentation of material facts. Further, it imposes an express duty to act in the best interests of the Company and to avoid influences, interests or relationships that could give rise to an actual or apparent conflict of interest. If any question as to a potential conflict of interest arises, employees are directed to notify their supervisors and the Chief Legal Officer and, in the case of directors and the Chief Executive Officer, the Audit Committee of our Board of Directors. We require our executives to comply with our Code of Conduct as a condition of employment.
Our Code of Conduct also prohibits directors, officers and employees from competing with us, using Company property or information, or such employee’s position, for personal gain, and taking corporate opportunities for personal gain. Waivers of our Code of Conduct must be explicit. The director, officer or employee seeking a waiver must provide his supervisor and the Chief Legal Officer with all pertinent information and, if the Chief Legal Officer recommends approval of a waiver, it shall present such information and the recommendation to the Audit Committee of our Board of Directors. A waiver may only be granted if (i) the Audit Committee is satisfied that all relevant information has been provided and (ii) adequate controls have been instituted to assure that the interests of the Company remain protected. In the case of our Chief Executive Officer and our directors, any waiver must also be approved by both the Audit Committee and the Nominating and Governance Committee. Any waiver that is granted, and the basis for granting the waiver, will be publicly communicated as appropriate, including posting on our website, as soon as practicable. We granted no waivers under our Code of Conduct in 2014. Our Code of Conduct is posted on our website at http://www.calpine.com/about/oc_corpgov.asp. We intend to post any amendments to and any waivers of our Code of Conduct on our website within four business days.
Business Relationships and Related Person Transactions Policy
We have adopted a written policy regarding approval requirements for related person transactions. Under our related person transactions policy, our Chief Legal Officer is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and executive officers with respect to related person transactions and for then determining, based on the relevant facts and circumstances, whether a related person has a direct or indirect material interest

12



in the transaction. Under our policy, transactions (i) that involve directors, director nominees, executive officers, significant shareholders or other “related persons” in which the Company is or will be a participant and (ii) of the type that must be disclosed under the SEC’s rules must be referred by the Chief Legal Officer to our Audit Committee for the purpose of determining whether such transactions are in the best interests of the Company. Under our policy, it is the responsibility of the individual directors, director nominees, executive officers and holders of five percent or more of the Company’s common stock to promptly report to our Chief Legal Officer all proposed or existing transactions in which the Company and they, or any related person of theirs, are parties or participants. The Chief Legal Officer (or the Chief Executive Officer, in the event the transaction in question involves the Chief Legal Officer or a related person of the Chief Legal Officer) is then required to furnish to the Chairman of the Audit Committee reports relating to any transaction that, in the Chief Legal Officer’s judgment, may require reporting pursuant to the SEC’s rules or may otherwise be the type of transaction that should be brought to the attention of the Audit Committee. The Audit Committee considers material facts and circumstances concerning the transaction in question, consults with counsel and other advisors as it deems advisable and makes a determination or recommendation to the Board of Directors and appropriate officers of the Company with respect to the transaction in question. In its review, the Audit Committee considers the nature of the related person’s interest in the transaction, the material terms of the transaction, the relative importance of the transaction to the related person, the relative importance of the transaction to the Company and any other matters deemed important or relevant. Upon receipt of the Audit Committee’s recommendation, the Board of Directors or officers take such action as deemed appropriate in light of their respective responsibilities under applicable laws and regulations.
Chairman/Lead Director, Executive Sessions of Independent Directors and Communications with the Board
Our Corporate Governance Guidelines provide that a Chairman will be selected annually by a majority of the entire Board of Directors. The Chairman is to be selected from among the management and non-management members of the Board of Directors, including the Chief Executive Officer, provided that, if the Board of Directors determines that it is appropriate to have, and selects, a Chairman that is not independent, the Board of Directors shall select a Lead Director from among the members of the Board of Directors who are determined by the Board of Directors to be independent and who have served a minimum of one year as a director. If the Lead Director is not present at any meeting of the Board of Directors, a majority of the independent members of the Board of Directors present will select an independent member of the Board of Directors to act as Lead Director for the purpose and duration of such meeting. The Chairman and the Lead Director, if any, have such clearly delineated duties and responsibilities as set forth in our Corporate Governance Guidelines. Mr. Fusco was appointed by the Board as Executive Chairman effective May 14, 2014. Because Mr. Fusco remains an employee of the Company, he is not an independent director. Therefore, the Board appointed Mr. Cassidy to serve as Lead Director concurrent with Mr. Fusco’s appointment as Executive Chairman.
Under our Corporate Governance Guidelines, non-management directors hold an executive session without management at each regularly scheduled Board meeting. Our Corporate Governance Guidelines also require that, at least once each year, the independent members of the Board of Directors meet in executive session. The Chairman, or, if the Chairman is not an independent director, the Lead Director, presides over all of the executive sessions.
A majority of our independent directors has approved procedures with respect to the receipt, review and processing of, and any response to, written communications sent by shareholders and other interested persons to our Board of Directors. Such communications may be addressed to:
Calpine Corporation
717 Texas Avenue, Suite 1000
Houston, Texas 77002
Attn: Corporate Secretary
Interested parties may also send communications by e-mail addressed to the Board, individual director(s) or committee (s) at Board_of_Directors@calpine.com.
Our Corporate Secretary is authorized to open and review any mail or other correspondence received that is addressed to the Board, a committee or any individual director. If, upon opening any correspondence, the Corporate Secretary determines that it contains materials unrelated to the business or operations of the Company or to the Board’s functions, including magazines, solicitations or advertisements, the contents may be discarded.
Any interested party, including any employee, may make confidential, anonymous submissions regarding questionable accounting or auditing matters or internal accounting controls and may communicate directly with the Chairman (or Lead Director) by letter to the above address, marked for the attention of the Chairman or Lead Director, as applicable. Any written communication regarding accounting, internal accounting controls or other financial matters are processed in accordance with procedures adopted by the Audit Committee.

13



The Boards Role in Risk Oversight
In the normal course of its business, Calpine is exposed to a variety of risks, including (i) financial risks relating to changes in commodity prices and interest rates, (ii) operational risks, including long-term changes in commodity prices, risks of changing technology affecting the Company’s resource base, governmental policy decisions, and increasing competition from renewable sources of power generation, (iii) legislative and regulatory risks, including those related to climate change and air emissions, and (iv) general economic, credit and investment risks.
The full Board of Directors oversees the Company’s risk management policies with an emphasis on understanding the key enterprise risks affecting the Company’s business. In addition, the Board monitors the ways in which the Company attempts to prudently mitigate risks, to the extent reasonably practicable and consistent with the Company’s long-term strategies.
The Company has a Risk Management Committee, chaired by the Chief Risk Officer, comprised of key operating, finance, legal and control executives. The committee meets throughout the year to review risk exposures and controls. At least annually, the Chief Risk Officer presents a comprehensive review of the Company’s corporate risk policy to the full Board of Directors, discussing the risk control organization and risk control practices. The full Board of Directors also receives updates at other meetings during the year on any particular matters relating to risk controls that management believes need to be brought to the attention of the Board of Directors.

14



SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The following table sets forth certain information known to the Company regarding the beneficial ownership of its common stock as of March 2, 2015, by (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of its common stock, (ii) each of our directors and nominees, (iii) each of our named executive officers and (iv) all of our executive officers and directors serving as of March 2, 2015, as a group. Unless otherwise stated, the address of each named executive officer and director is c/o Calpine Corporation, 717 Texas Avenue, Suite 1000, Houston, Texas 77002.
Name
Common Shares Beneficially Owned(1)
 
Shares Individuals Have the Right to Acquire Within 60 Days
 
Total Number of Shares Beneficially Owned(1)
 
Percent of Class
Luminus Management, LLC(2)
30,971,720

 

 
30,971,720

 
8.2
%
Brahman Capital Corp.(3)
26,648,241

 

 
26,648,241

 
7.1
%
BlackRock, Inc.(4)
24,314,460

 

 
24,314,460

 
6.5
%
The Vanguard Group(5)
24,285,951

 

 
24,285,951

 
6.4
%
Jack A. Fusco(6)
1,474,642

 
5,039,000

 
6,513,642

 
1.7
%
John B. (Thad) Hill III(7)
474,867

 
1,662,651

 
2,137,518

 
*

Zamir Rauf(8)
141,747

 
502,566

 
644,313

 
*

W. Thaddeus Miller(9)
492,145

 
1,563,667

 
2,055,812

 
*

Steven D. Pruett(10)
58,543

 
92,087

 
150,630

 
*

John M. Adams(11)
55,473

 
133,962

 
189,435

 
*

Frank Cassidy(12)
30,969

 
4,362

 
35,331

 
*

Robert C. Hinckley(12)
36,563

 

 
36,563

 
*

Michael W. Hofmann(12)

 
4,362

 
4,362

 
*

David C. Merritt(12)
24,602

 
10,729

 
35,331

 
*

W. Benjamin Moreland(12)
35,331

 

 
35,331

 
*

Robert A. Mosbacher, Jr.(12)
14,802

 

 
14,802

 
*

Denise M. O’Leary(12)
28,964

 
6,367

 
35,331

 
*

All executive officers and directors as a group
(14 persons)
2,904,877

 
9,200,750

 
12,105,627

 
3.2
%
_____________
*
The percentage of shares beneficially owned by such director or named executive officer does not exceed one percent of the outstanding shares of common stock.
(1)
Beneficial ownership is determined in accordance with the rules of the SEC and consists of either or both voting or investment power with respect to securities. Shares of common stock issuable upon the exercise of options, warrants or rights 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 rights 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 the purpose of computing the percentage of any other person. Except as otherwise indicated by footnote, and subject to community property laws where applicable, the persons named in the table have reported that they have sole voting and sole investment power with respect to all shares of common stock shown as beneficially owned by them. A total of 376,562,918 shares of common stock are considered to be outstanding on March 2, 2015, calculated pursuant to Rule 13d-3(d)(1)(i) under the Exchange Act.
(2)
According to filings made with the SEC, Luminus Management, LLC (“Luminus”) possesses shared voting and dispositive power over such shares with the following reporting persons:

15



Reporting Person
Number
of Shares with Sole Voting
and Dispositive Power
 
Number
of Shares with
Shared Voting
and Dispositive
Power
 
Aggregate
Number of
Shares
Beneficially
Owned
 
Percent
of Class
Beneficially Owned
Luminus Management, LLC

 
30,971,720

 
30,971,720

 
8.2
%
LSP Cal Holdings II, LLC

 
30,971,720

 
30,971,720

 
8.2
%
LS Power Partners II, L.P.

 
30,971,720

 
30,971,720

 
8.2
%
Vega Asset Partners, LP

 
30,971,720

 
30,971,720

 
8.2
%
Vega Energy GP, LLC

 
30,971,720

 
30,971,720

 
8.2
%
Luminus Energy Partners Master Fund, Ltd.

 
30,971,720

 
30,971,720

 
8.2
%
Luminus Investment Partners Master Fund, L.P

 
30,971,720

 
30,971,720

 
8.2
%
Luminus Special Opportunities I Onshore, L.P.

 
30,971,720

 
30,971,720

 
8.2
%
Luminus Special Opportunities I PIE Master, L.P.

 
30,971,720

 
30,971,720

 
8.2
%
Farrington Capital, L.P.

 
30,971,720

 
30,971,720

 
8.2
%
Farrington Management, LLC

 
30,971,720

 
30,971,720

 
8.2
%
According to filings made with the SEC and information provided by Luminus, the principal business address of each of Luminus Management, LLC, Luminus Investment Partners Master Fund, L.P., Luminus Special Opportunities I Onshore, L.P., Luminus Special Opportunities I PIE Master, L.P., Vega Asset Partners, LP, Vega Energy GP, LLC and Luminus Energy Partners Master Fund, Ltd. is 1700 Broadway, 38th Floor, New York, NY 10019 and the principal business address of each of LSP Cal Holdings II, LLC, LS Power Partners II, L.P., Farrington Capital, L.P. and Farrington Management, LLC is 1700 Broadway, 35th Floor, New York, NY 10019. Luminus may have made additional transactions in our common stock since their most recent filings with the SEC. Accordingly, the information presented may not reflect all of the shares currently beneficially owned by Luminus.
(3)
According to filings made with the SEC, Brahman Capital Corp. (“Brahman”) possesses shared voting and dispositive power over such shares with the following reporting persons:
Reporting Person
Number
of Shares with Sole Voting
and Dispositive Power
 
Number
of Shares with
Shared Voting
and Dispositive
Power
 
Aggregate
Number of
Shares
Beneficially
Owned
 
Percent
of Class
Beneficially Owned
Brahman Capital Corp.

 
26,648,241

 
26,648,241

 
7.1
%
Brahman Management, L.L.C.

 
9,370,698

 
9,370,698

 
2.5
%
Robert J. Sobel

 
26,648,241

 
26,648,241

 
7.1
%
Mitchell A. Kuflik

 
26,648,241

 
26,648,241

 
7.1
%
Peter A. Hochfelder

 
26,648,241

 
26,648,241

 
7.1
%
According to filings made with the SEC, the principal business address of Brahman is 655 Third Avenue, 11th Floor, New York, New York 10017. Brahman may have made additional transactions in our common stock since their most recent filings with the SEC. Accordingly, the information presented may not reflect all of the shares currently beneficially owned by Brahman.
(4)
According to filings made with the SEC, BlackRock, Inc. (“BlackRock”) possesses sole voting power over 22,052,703 shares and sole dispositive power over 24,314,460 shares. According to filings made with the SEC, the principal business address of BlackRock is 55 East 52nd Street, New York, NY 10022. BlackRock may have made additional transactions in our common stock since their most recent filings with the SEC. Accordingly, the information presented may not reflect all of the shares currently beneficially owned by BlackRock.
(5)
According to filings made with the SEC, The Vanguard Group (“Vanguard”) possesses sole voting power over 349,371 shares, sole dispositive power over 23,971,280 shares and shared dispositive power over 314,671 shares. According to filings made with the SEC, the principal business address of Vanguard is 100 Vanguard Boulevard, Malvern, PA 19355. Vanguard may have made additional transactions in our common stock since their most recent filings with the SEC. Accordingly, the information presented may not reflect all of the shares currently beneficially owned by Vanguard.
(6)
Of the total shares reported, 500,000 shares are owned by Fusco Energy Investment LLP and may be deemed to be beneficially owned by Mr. Fusco as the General Partner thereof. Mr. Fusco has the right to acquire 5,039,000 vested option shares (consisting of 1,271,000 shares, 1,435,000 shares, 1,613,000 shares, 300,000 shares, and 420,000 shares at exercise prices of $19.19, $21.59, $23.99, $9.49, and $12.64 per share, respectively), in addition to 224,636 unvested shares of restricted

16



stock previously granted to the executive under the Company’s Equity Incentive Plan as to which Mr. Fusco has voting but not dispositive power.
(7)
Of the total shares reported, Mr. Hill has the right to acquire 1,662,651 vested option shares (consisting of 309,920 shares, 349,705 shares, 393,026 shares, 100,000 shares, 210,000 shares, and 300,000 shares at exercise prices of $21.60, $24.30, $27.00, $9.49, $12.64, and $12.13 per share, respectively), in addition to 183,223 unvested shares of restricted stock previously granted to the executive under the Company’s Equity Incentive Plan as to which Mr. Hill has voting but not dispositive power.
(8)
Of the total shares reported, Mr. Rauf has the right to acquire 502,566 vested option shares (consisting of 23,200 shares, 21,700 shares, 100,000 shares, 69,963 shares, 149,431 shares and 138,272 shares at exercise prices of $16.90, $18.38, $8.01, $11.24, $14.30 and $15.31 per share, respectively), in addition to 59,490 unvested shares of restricted stock previously granted to the executive under the Company’s Equity Incentive Plan as to which Mr. Rauf has voting but not dispositive power.
(9)
Of the total shares reported, 341,368 shares are held directly by Mr. Miller; 42,886 shares are owned by grantor retained annuity trusts and may be deemed to be beneficially owned by Mr. Miller as the sole recipient of the annuity payments and the trustee of such trusts; and 107,891 shares are owned by separate trusts of which Mr. Miller's children are respective beneficiaries and Mr. Miller and his spouse serve as trustees, and therefore may be deemed to be indirectly beneficially owned by Mr. Miller. Of the total shares reported, Mr. Miller has the right to acquire 1,563,667 vested option shares (consisting of 394,000 shares, 443,000 shares, 496,000 shares, 100,000 shares, and 130,667 shares at exercise prices of $19.19, $21.59, $23.99, $9.49, and $12.64 per share, respectively), in addition to 109,059 unvested shares of restricted stock previously granted to the executive under the Company’s Equity Incentive Plan as to which Mr. Miller has voting but not dispositive power.
(10)
Of the total shares reported, Mr. Pruett has the right to acquire 92,087 vested option shares (consisting of 42,704 shares and 49,383 shares at exercise prices of $13.19 and $15.31 per share, respectively), in addition to 29,084 unvested shares of restricted stock previously granted to the executive under the Company’s Equity Incentive Plan as to which Mr. Pruett has voting but not dispositive power.
(11)
Of the total shares reported, Mr. Adams has the right to acquire 133,962 vested option shares (consisting of 42,270 shares, 49,922 shares and 41,770 shares at exercise prices of $11.74, $14.30 and $15.31 per share, respectively), in addition to 35,213 unvested shares of restricted stock previously granted to the executive under the Company’s Equity Incentive Plan as to which Mr. Adams has voting but not dispositive power.
(12)
On May 19, 2010, each non-employee member of the Board of Directors received an award of 6,367 restricted stock units pursuant to the Director Plan, vesting on May 10, 2011. Mr. Merritt elected to defer the distribution date of such restricted stock units to May 19, 2020 and Ms. O’Leary elected to defer the distribution date of such restricted stock units to June 2, 2017. On May 10, 2013, each non-employee member of the Board of Directors received an award of 4,362 restricted stock units pursuant to the Director Plan, vesting on May 10, 2014. Mr. Cassidy elected to defer the distribution date of such restricted stock units to September 7, 2017, Mr. Merritt elected to defer the distribution date of such restricted stock units to May 19, 2020 and Mr. Hofmann elected to defer the distribution date of such restricted stock units to their termination of service on the Board or a Change in Control as defined in the Restricted Stock Unit Agreement. All restricted stock units awarded to our directors will be automatically distributed on their elected distribution dates, subject to an earlier distribution upon termination of the director's service on the Board of Directors or a Change in Control as defined in the Restricted Stock Unit Agreement.

17



PROPOSAL 2
TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDING DECEMBER 31, 2015
The Audit Committee has appointed PwC as our independent registered public accounting firm for the year ending December 31, 2015. We have been advised by PwC that it is an independent registered public accounting firm with the PCAOB, and complies with the auditing, quality control and independence standards and rules of the PCAOB.
We expect that representatives of PwC will be present at the Annual Meeting to respond to appropriate questions, and they will have the opportunity to make a statement if they desire.
While the Audit Committee retains PwC as our independent registered public accounting firm, the Board of Directors is submitting the selection of PwC to the shareholders for ratification upon the recommendation to do so by the Audit Committee.
Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted for the ratification of the selection of PwC as our independent registered public accounting firm for the year ending December 31, 2015. If the selection of PwC is not ratified by the shareholders, the Audit Committee will reconsider the matter. Even if the selection of PwC is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change is in our best interests.
Audit Fees
The following table presents fees for professional services rendered by PwC for the years ended December 31, 2014 and 2013, respectively. PwC did not bill us for other services during those periods.
 
 
2014
 
2013
 
 
 
(in millions)
 
Audit Fees(1)
 
$
6.0

 
$
6.1

 
Tax Fees(2)
 
 
0.1

 
 

 
Total
 
$
6.1

 
$
6.1

 
_______________
(1)
Our Audit fees consisted of approximately $4.3 million and $4.2 million for the audits and quarterly reviews of our consolidated financial statements, registration statements and offerings for Calpine Corporation for 2014 and 2013, respectively, and fees of approximately $1.7 million and $1.9 million for 2014 and 2013, respectively, which were billed for performing audits and reviews of certain of our subsidiaries.
(2)
PwC provided $0.1 million in tax compliance services during the year ended December 31, 2014 related to various state and international tax matters. PwC did not provide us with any tax compliance or tax consulting services for the year ended December 31, 2013.
Audit Committee Pre-Approval Policies and Procedures
All audit and non-audit services provided by our independent registered public accounting firm must be pre-approved by our Audit Committee. Any service proposals submitted by our independent registered public accounting firm need to be discussed and approved by the Audit Committee during its meetings, which take place at least four times a year. Once a proposed service is approved, we or our subsidiaries formalize the engagement of the service. The approval of any audit and non-audit services to be provided by our independent registered public accounting firm is specified in the minutes of our Audit Committee meetings. In addition, the members of our Board of Directors are briefed on matters discussed by the different Committees of our Board.
The Board of Directors recommends that you vote “FOR” approval of PwC as our independent registered public accounting firm for the year ending December 31, 2015.

18



PROPOSAL 3
TO APPROVE, ON AN ADVISORY BASIS, NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in 2010, an advisory vote on the frequency of shareholder votes on executive compensation was conducted in connection with the 2011 Annual Meeting of Shareholders. The Board recommended, our shareholders agreed, and the Board subsequently determined that we will hold an advisory vote on executive compensation annually. Accordingly, our shareholders now have the opportunity to cast an advisory vote on our named executive officer compensation program, as set forth in Proposal 3, also referred to as “say-on-pay.” This proposal gives shareholders the opportunity to approve, reject or abstain from voting with respect to our fiscal 2014 executive compensation programs and policies for the named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers as described in this proxy statement. In evaluating this say-on-pay proposal, we recommend that our shareholders review our Compensation Discussion and Analysis and executive compensation tables and accompanying narratives for additional details about our executive compensation program, including information about the fiscal year 2014 compensation of our named executive officers, explaining how and why the Compensation Committee of our Board arrived at its executive compensation decisions for 2014. Our Board of Directors recommends that shareholders vote to approve, on an advisory basis, the compensation paid to our named executive officers as described in this proxy statement.
At the Company’s Annual Meeting of Shareholders held in May 2014, our shareholders were asked to approve the Company’s fiscal 2013 executive compensation programs. A substantial majority (99%) of the votes cast on the “say-on-pay” proposal at that meeting were voted in favor of the proposal. The Compensation Committee believes that these results reaffirm our shareholders’ support of the Company’s approach to executive compensation.
In summary, the Board of Directors, the Compensation Committee and Calpine’s management believe that compensation should help recruit, retain and motivate a highly talented team of executives with the requisite set of skills and experience to successfully lead Calpine in creating value for our shareholders. Our executive compensation and benefit programs are designed to reward increased shareholder value and the achievement of key operating objectives. Our equity plans are designed to help align executive compensation with the long-term interests of our shareholders. Our performance objectives measure our management team’s success in implementing our business plan and our goal of being recognized as the premier independent power company in the U.S. We believe that our executive compensation program satisfies this goal and is closely aligned with the long-term interests of our shareholders.
Our executive compensation program is simple in design. The compensation of our named executive officers consists almost exclusively of base salary, annual cash incentives, and grants of equity, a significant portion of which is tied to performance. The Compensation Committee sets the compensation of our named executive officers based on their achievement of annual financial and operational objectives that further our long-term business goals and based on the creation of sustainable long-term shareholder value. This is done by basing a significant portion of their compensation on performance incentives whether through equity awards, which are tied to the appreciation of the price of our common stock or other performance metrics, or through annual cash incentive bonuses, which are tied to the achievement of corporate performance goals and certain financial and operating metrics. Our compensation program mitigates risk by emphasizing long-term compensation and financial performance measures correlated with growing shareholder value rather than simply rewarding shorter-term performance and payout periods. We believe that the mix and structure of our executive compensation packages strikes the appropriate balance to promote long-term returns without motivating or rewarding excessive risk taking. The principles and objectives that govern Calpine’s compensation decisions include:
alignment with shareholders’ interests;
emphasis on pay for performance;
focus on performance over time; and
recruitment, retention and motivation of key executive leadership talent.
This proposal allows our shareholders to express their opinions regarding the decisions of the Compensation Committee on the prior year’s annual compensation to the named executive officers. Because the shareholder vote on this proposal is advisory, it will not be binding on us, the Compensation Committee or the Board. However, the Compensation Committee and the Board will take into account the outcome of the vote when considering future executive compensation arrangements. Further, this advisory vote will serve as an additional tool to guide the Board and the Compensation Committee in continuing to improve the alignment of the Company’s executive compensation programs with the interests of Calpine and its shareholders, and is consistent with our commitment to high standards of corporate governance.

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For the reasons outlined above, we believe that our executive compensation program is well designed, appropriately aligns executive pay with Company performance and incentivizes desirable behavior. Accordingly, we are asking our shareholders to endorse our executive compensation program by voting for the following resolution:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
The Board of Directors recommends that you vote “FOR” the foregoing resolution for the reasons outlined above.

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PROPOSAL 4
TO AMEND AND RESTATE THE COMPANY’S BYLAWS TO IMPLEMENT MAJORITY VOTING IN UNCONTESTED DIRECTOR ELECTIONS

The Company’s bylaws currently provide for a plurality voting standard, under which a director nominee who receives the highest number of affirmative votes cast is elected, whether or not such “FOR” votes constitute a majority of all votes (including those withheld). By contrast, a majority voting standard requires that the number of votes cast “FOR” a director nominee’s election exceed the number of votes cast “against” that nominee in order for the nominee to be elected. Abstentions and broker non-votes would have no effect in determining whether the required majority vote had been obtained.
After careful consideration, the Board has determined that the adoption of a majority voting standard for uncontested director elections is in the best interests of the Company and its shareholders at this time. The Board recognizes that many shareholders believe that a majority voting standard increases a board’s accountability to shareholders and that many public companies recently have adopted a majority voting standard in uncontested director elections. The majority voting standard would only apply in uncontested elections. Uncontested elections are elections where the number of director nominees does not exceed the number of directors to be elected at the meeting. In a contested election, director nominees would continue to be elected by a plurality vote standard. A contested election is an election where the number of director nominees exceeds the number of directors to be elected at the annual meeting, as determined by the secretary of the company.
Further, if a director nominee fails to receive the required number of votes for reelection in an uncontested election, such director will be required to promptly submit a letter of resignation to the Board for consideration. The applicable committee of the Board will review such director’s letter of resignation and make a recommendation to the Board as to whether the Board should accept the resignation of the unsuccessful incumbent director or take alternative action. In making its recommendation, the committee will consider all relevant factors and alternatives. Within 90 days of receiving the certified vote, the Board will consider the recommendation of the applicable committee of the Board and determine the appropriate course of action. If the committee recommends that the Board accept such resignation, then the Board (i) will follow the committee’s recommendation, unless it determines that it is in the best interest of the Company for such director to continue serving as a director, (ii) will not elect or appoint such director for at least one year after the annual meeting at which resignation was submitted, and (iii) may fill the vacancy or otherwise decrease the size of the Board in accordance with the Company’s Bylaws. If the committee recommends that the Board reject such resignation, then such director shall continue to serve until the next annual meeting and until such director’s successor is duly elected, or his or her earlier resignation or removal. The Board will publicly disclose (either through an SEC filing or a widely-disseminated press release) its decision and the rationale supporting it.
The discussion above is qualified in its entirety by reference to the full text of the proposed Amended and Restated Bylaws, which is attached hereto as Annex B.
The Board of Directors recommends that you vote “FOR” the proposal to amend and restate the Company’s bylaws to implement majority voting in uncontested director elections.

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PROPOSAL 5
TO REAPPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER THE CALPINE CORPORATION 2008 EQUITY INCENTIVE PLAN FOR PURPOSES OF SECTION 162(M) OF THE INTERNAL REVENUE CODE
Introduction
The Company provides stock-based compensation under the Calpine Corporation 2008 Equity Incentive Plan (the “Equity Incentive Plan”) to our directors, executive officers, employees and consultants of the Company and its affiliates. The Equity Incentive Plan became effective on January 31, 2008 and was amended in 2010 and in 2013, in each case following approval by our shareholders.
The Equity Incentive Plan is designed to comply with Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Section 162(m) places a limit on the tax deductibility of compensation in excess of $1.0 million paid to certain “covered employees” of a publicly held corporation (generally, the corporation’s chief executive officer and its next three most highly compensated executive officers (other than the chief financial officer) in the year that the compensation is paid. This limitation applies only to compensation that is not considered performance-based under the Section 162(m) rules so long as the material terms of the performance goals underlying the performance-based award are approved by shareholders at least every five years. In order to allow for certain awards under the Equity Incentive Plan to qualify as tax-deductible performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code, the Company is asking shareholders to reapprove the material terms of the performance goals of the Equity Incentive Plan. We generally structure our compensation programs, where feasible, to minimize or eliminate the impact of the limitations of Section 162(m) when we believe such payments are appropriate, after taking into consideration business conditions or the officer’s performance.
The Board of Directors is not proposing that any of the performance goals under the Equity Incentive Plan be modified. The Company is asking shareholders to reapprove the material terms of the performance goals of the Equity Incentive Plan. If the material terms of the performance goals under the Equity Incentive Plan are not reapproved by shareholders, the Equity Incentive Plan will continue in effect in accordance with its terms and the performance goals described in the Equity Incentive Plan will not be deemed to have been reapproved by shareholders for purposes of Section 162(m).
The Company may issue up to 40,533,000 million shares under the Equity Incentive Plan, subject to adjustment. As of March 2, 2015, there were 9,768,753 shares available for future issuance as awards under the Equity Incentive Plan, excluding outstanding awards subject to forfeiture. As of March 2, 2015, the number of outstanding awards granted under the Equity Incentive Plan totals 6,703,373 shares.
Plan Description
The principal features of the Equity Incentive Plan are summarized in this proxy statement. Shareholders should read the Equity Incentive Plan for a full statement of its legal terms and conditions. Annex C attached to this proxy statement contains the full text of the Equity Incentive Plan.
Purpose. The purpose of the Equity Incentive Plan is to promote our long-term growth and profitability by (a) providing certain of our directors, executive officers, employees and consultants of the Company and its affiliates with incentives to maximize shareholder value and otherwise contribute to our success and (b) enabling us to attract, retain and reward the best available persons for positions of responsibility.
Types of Awards. Grants of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards, or any combination of the foregoing may be made under the Equity Incentive Plan.
Administration. The Board has delegated its authority to administer the Equity Incentive Plan to the Compensation Committee. The Compensation Committee has authority to, among other things, select those grantees to whom awards are granted under the Equity Incentive Plan, determine the number of shares of common stock subject to each award, modify outstanding awards (such as to modify the time or manner of vesting), make decisions regarding outstanding awards under the Equity Incentive Plan that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments, construe and interpret the Equity Incentive Plan and apply its provisions and exercise discretion to make any other determinations which it determines to be necessary or advisable for administration of the Equity Incentive Plan. The Compensation Committee may also modify the purchase price or exercise price of any outstanding award under the Equity Incentive Plan. However, except in connection with a corporate transaction involving the Company, such as a stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares, or as described under “Adjustments” below, the terms of outstanding awards under the Equity Incentive Plan may not be amended to reduce the exercise

22



price of outstanding options or stock appreciation rights or cancel outstanding options or stock appreciation rights in exchange for cash, other awards or options or stock appreciation rights with an exercise price that is less than the exercise price of the original options or stock appreciation rights, without, in each such case, first obtaining approval by the Company’s shareholders. The Board may delegate to our officers the authority to administer the Equity Incentive Plan, within certain limitations specified by the Equity Incentive Plan. Interpretations and construction by the Compensation Committee of the Equity Incentive Plan or any award granted under the Equity Incentive Plan are final, binding and conclusive. The Compensation Committee is comprised of one or more members of the Board who are appointed by the Board. Currently, the members of the Compensation Committee are Robert A. Mosbacher, Jr. (chair), Frank Cassidy, Michael W. Hofmann and Denise M. O’Leary, each of whom is an independent director.
Shares Subject to the Equity Incentive Plan. The aggregate number of shares of our common stock for which awards may be granted under the Equity Incentive Plan is 40,533,000 subject to adjustment for certain changes in our capital structure (described below under “Adjustments”). Each share subject to an option or stock appreciation right granted under the Equity Incentive Plan will reduce the aggregate number of shares for which awards may be granted under the Equity Incentive Plan by 1 share. Each share subject to a restricted stock or restricted stock unit award, or an other stock-based award or dividend equivalent, granted under the Equity Incentive Plan will reduce the aggregate number of shares for which awards may be granted under the Equity Incentive Plan by 2.22 shares. The shares of common stock that may be issued under the Equity Incentive Plan are either authorized and unissued shares or previously issued shares that have been reacquired by us and are held as treasury stock. Any shares subject to an option that expires or is terminated without having been fully exercised, or subject to a restricted stock or other award that is forfeited, prior to termination of the Equity Incentive Plan, will again become available for the grant of awards under the Equity Incentive Plan (based on the share counting rules in effect on the grant date of the award). Any shares used to pay the exercise price of an option or withheld to satisfy tax withholding obligations will not become available for the grant of awards under the Equity Incentive Plan. All shares that were subject to a stock-settled stock appreciation right that were not issued upon the exercise of such stock appreciation right will also not become available for the grant of awards under the Equity Incentive Plan. If (1) an award under the Equity Incentive Plan is settled in cash in lieu of shares of common stock, or (2) an award is exchanged with the Compensation Committee’s permission, prior to the issuance of shares of common stock, for an award pursuant to which shares of common stock may not be issued, then, in either such case, such shares will become available for the grant of awards under the plan. Any shares of common stock that are subject to awards that may only be settled in cash will not reduce the aggregate number of shares of common stock for which awards may be granted under the Equity Incentive Plan. No more than 1,250,000 shares of common stock may be subject to awards granted to any individual during any calendar year. On March 2, 2015, the closing price of our common stock on the NYSE was $20.68.
Eligibility. Awards may be granted under the Equity Incentive Plan to our directors, executive officers, employees and consultants of the Company and its affiliates who are selected by the Compensation Committee, as well as those reasonably expected to become directors, officers, executive officers or consultants following the grant date. Only our employees or employees of our subsidiaries are eligible to receive incentive stock options.
Incentive Stock Options and Nonstatutory Options. Options granted under the Equity Incentive Plan provide grantees with the right to purchase shares of common stock at a predetermined exercise price. The Compensation Committee may grant options that are intended to qualify as incentive stock options or options that are not intended to so qualify (“nonstatutory options”). The expiration date of an option is no later than the tenth anniversary of the date of grant (or the fifth anniversary in the case of incentive stock options granted to employees who, at the time of grant, own more than 10% of the Company’s outstanding shares of common stock).
Stock Appreciation Rights. A stock appreciation right (“SAR”) generally permits a grantee who receives it to receive, upon exercise, cash and/or shares of common stock equal in value to an amount determined by multiplying (a) the excess of the fair market value, on the date of exercise, of a share of common stock over the exercise price of such SAR by (b) the number of shares with respect to which the SAR is being exercised. The Compensation Committee may grant SARs in conjunction with options or independently of them. The expiration date of a SAR granted independently of an option is no later than the tenth anniversary of the date of grant.
Exercise Price for Options and Stock Appreciation Rights. The exercise price for incentive stock options, nonstatutory options, and stock appreciation rights will not be less than the fair market value of a share of common stock on the date of grant, unless the option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Internal Revenue Code.
Exercise of Options and Stock Appreciation Rights. The Compensation Committee determines the time or times at which an option or SAR may be exercised in whole or in part, the methods by which the exercise price of options may be paid or deemed to be paid, the form of such payment, and the methods by which shares are delivered or deemed to be delivered to participants, and all other conditions of options and SARs. In general, and except as provided in an individual agreement with a grantee, upon termination of a grantee’s employment or service with us, all unvested options or SARs held by such grantee will immediately

23



terminate, and the grantee may exercise all vested options or SARs during the three-month period after such termination. In the event that a grantee’s employment or service with us or an affiliate terminates due to death or retirement (or a grantee dies during the three-month period following termination as described in the preceding sentence), the grantee’s options or SARs become fully vested and may be exercised during the one-year period after such death or retirement. In no case, however, may an option or SAR be exercised later than the termination date of the option or SAR. In the event a grantee’s employment or service is terminated for cause, then all options or SARs, whether vested or unvested, will immediately terminate.
Transferability of Options. An incentive stock option may not be transferred except by will or the laws of descent and distribution and is exercisable during the lifetime of the grantee only by him or her. A nonstatutory option may, in the sole discretion of the Compensation Committee be transferable, upon written approval by the Compensation Committee and to the extent provided in the award agreement, to an immediate family member or related trust or similar entity or another transferee. The holder of any option may designate in writing a third party who shall, in the event of the holder’s death, be entitled to exercise such option.
Restricted Stock and Restricted Stock Units. The Compensation Committee may grant restricted stock that is forfeitable unless certain vesting requirements are met, and may grant restricted stock units (“RSUs”) which represent the right to receive shares of common stock after certain vesting requirements are met. The Equity Incentive Plan provides the Compensation Committee with discretion to determine the terms and conditions under which a grantee vests in his or her restricted stock or RSU award. The grantee of a restricted stock award will generally have the rights and privileges of a shareholder as to such restricted stock, including the right to vote such restricted stock, but such restricted stock will be subject to restrictions set forth in the award agreement, including forfeiture conditions and any restrictions on transfer of such restricted stock. At the Compensation Committee’s discretion, any cash and stock dividends with respect to restricted stock may either be paid currently to the grantee or withheld by us (and credited with interest, if determined by the Compensation Committee) until such time as the restrictions on the related restricted stock lapse (and will be forfeited if such restricted stock is forfeited). Each RSU may, in the Compensation Committee’s discretion, be credited with any cash and stock dividends paid with respect to one share of common stock. Such dividend equivalents may either be paid currently to the grantee or withheld by us (and credited with interest, if determined by the Compensation Committee) until settlement of the RSU (and will be forfeited if the RSU is forfeited). Dividends or dividend equivalents withheld by us may be paid in cash or common stock having an equivalent fair market value. Except as provided by the Compensation Committee (in an award agreement or otherwise), at such time as a grantee ceases to be our director, executive, employee or consultant of the Company and its affiliates for any reason, all shares of restricted stock or RSUs granted to such grantee on which the restrictions relating thereto have not lapsed are immediately forfeited to us.
Other Stock-based Awards. The Compensation Committee may grant other stock-based awards, consisting of rights or other interests granted under the Equity Incentive Plan that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock (including, for example, dividend equivalents or performance units), each of which may be subject to the attainment of performance goals, a period of continued employment and/or other terms or conditions, each as determined by the Compensation Committee. The Compensation Committee determines the terms and conditions of other stock-based awards, consistent with the terms of the Equity Incentive Plan, at the date of grant or thereafter.
Performance Compensation Awards. Awards granted under the Equity Incentive Plan may, as determined by the Compensation Committee, be conditioned upon the achievement of specified performance goals and are intended to be “performance-based compensation” under Section 162(m) of the Internal Revenue Code. Such performance compensation awards are generally paid or vested solely on account of the attainment of one or more pre-established, objective performance goals, within the meaning of Section 162(m) of the Internal Revenue Code, over a performance period selected by the Compensation Committee. Any such performance goals are based on one more of the following performance criteria:

net earnings or net income (before or after taxes);
basic or diluted earnings per share (before or after taxes);
net revenue or net revenue growth;
gross revenue;
gross profit or gross profit growth
net operating profit (before or after taxes);
return measures (including return on assets, capital, invested capital, equity, or sales);
cash flow (including operating cash flow, free cash flow, and cash flow return on capital);
earnings before or after taxes, interest, depreciation and/or amortization;
gross or operating margins;
productivity ratios
share price (including growth measures and total shareholder return);
expense targets;
margins;

24



operating efficiency;
objective measures of customer satisfaction;
working capital targets;
measures of economic value added;
inventory control; and
enterprise value.
Performance goals may be determined in relation to us or an affiliate, division or operational unit, or any combination thereof, on an absolute basis or relative basis in comparison to a group of comparable companies or an index, all as determined by the Compensation Committee. To the extent permitted by Section 162(m) of the Internal Revenue Code, the Compensation Committee may exercise discretion to adjust or modify the calculation of a performance goal to prevent the dilution or enlargement of the rights of grantees based on the following events: asset write-downs, litigation or claim judgments or settlements, the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; any reorganization and restructuring programs, extraordinary nonrecurring items described in Accounting Principles Board Opinion No. 30 (or any successor or pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in our annual report to shareholders for the applicable year; acquisitions or divestitures; any other specific or unusual or nonrecurring events or objectively determinable category thereof; foreign exchange gains and losses and a change in our fiscal year. In the event that applicable tax and/or securities laws change to permit Compensation Committee discretion to alter the governing performance criteria without obtaining shareholder approval of such changes, the Compensation Committee shall have sole discretion to make such changes without obtaining shareholder approval. Unless otherwise provided by the applicable award agreement, a grantee must be employed by us on the last day of a performance period to be eligible for payment of his or her performance compensation award. The maximum performance compensation award payable to any one grantee under the Equity Incentive Plan for a performance period is 1,250,000 shares of common stock or, in the case of awards payable in cash, the cash equivalent thereof on the first or last day of the performance period, as determined by the Compensation Committee.
Adjustments. In the event of a change in the number or class of the outstanding shares of common stock due to split-ups, combinations, mergers, consolidations or recapitalizations, or by reason of stock dividends, the number or class of shares which thereafter may be issued pursuant to awards granted under the Equity Incentive Plan, both in the aggregate and as to any grantee, and the number and class of shares then subject to outstanding awards and the exercise price per share of outstanding options or stock appreciation rights (“SARs”), shall be adjusted to reflect such change, all as determined by the Compensation Committee. In the event of any other change in the number or kind of outstanding shares of common stock, or of any stock or other securities or property into which such common stock shall have been changed, or for which it shall have been exchanged, if the Compensation Committee determines that such change equitably requires an adjustment in any award that has been or may be granted under the Equity Incentive Plan, such adjustment shall be made in accordance with such determination. Further, with respect to any awards intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code, such adjustments or substitutions shall be made only to the extent that the Compensation Committee determines that such adjustments or substitutions may be made without causing us to be denied a tax deduction on account of Section 162(m) of the Internal Revenue Code.
Change in Control. Any outstanding options and restricted stock awards will become immediately vested in full upon a change in control of the Company (as defined in the Equity Incentive Plan). Any other outstanding awards will become immediately vested in full upon a change in control of the Company, unless otherwise determined by the Compensation Committee or stated in an award agreement.
Modification or Termination of the Equity Incentive Plan and Awards. In general, the Board can modify, alter, amend or terminate the Equity Incentive Plan (at any time and with or without retroactive effect) in whole or in part in its discretion without approval of the shareholders or any other person, except that no amendment will become effective unless approved by our shareholders to the extent shareholder approval is necessary to satisfy any applicable law or securities exchange listing requirements. However, no amendment to or termination of the Equity Incentive Plan may adversely affect any rights of any grantee under any outstanding award without his or her written consent. The Board may, at any time, amend the terms of an outstanding award, except that no such amendment may impair the rights under any award without the written consent of the affected grantee. Additionally, the Board may unilaterally amend from time to time the provisions of the Equity Incentive Plan and the provisions of any outstanding award in such respects as the Board shall, in its sole discretion, deem advisable to incorporate in the Equity Incentive Plan or any such award any new provision or change designed to comply with or take advantage of requirements or provisions of the Internal Revenue Code or any other statute, or rules or regulations of the Internal Revenue Service or any other governmental agency enacted or promulgated after the adoption of the Equity Incentive Plan.
Unless otherwise provided by any award agreement, in the event (1) of a change in control of the Company (as defined in the Equity Incentive Plan), (2) we merge or are consolidated with another entity and in connection therewith consideration other than equity is provided to our shareholders or outstanding awards are not to be assumed by the resulting entity, (3) all or substantially all of our assets are acquired by another person, (4) we are reorganized or liquidated or (5) we enter into a written agreement to

25



undergo a transaction specified in (2), (3) or (4) above, the Compensation Committee may, in its discretion and upon advance notice to the affected persons, cancel any outstanding awards and cause the holders thereof to be paid in cash, stock or other property (or any combination thereof) the value of such awards based on the price per share of common stock received or to be received by other shareholders of the Company in such event.
Duration of the Equity Incentive Plan. If not previously terminated by the Board, the Equity Incentive Plan will terminate on the close of business on January 31, 2018, which is the ten-year anniversary of the effective date of the Equity Incentive Plan.
Tax Withholding Obligations. To the extent provided by the terms of an award agreement and subject to the discretion of the Compensation Committee, a grantee may satisfy any tax withholding obligation relating to an award by any, or a combination, of the following means, in addition to our right to withhold from any compensation paid to the grantee by us: (a) payment in cash, (b) authorizing us to withhold shares of common stock from the shares otherwise issuable to the grantee upon exercise or acquisition of common stock under the award or (c) delivering to us previously owned and unencumbered shares of common stock.
Certain Federal Income Tax Consequences of the Equity Incentive Plan
The following is a brief and general summary of certain federal income tax consequences applicable to transactions under the Equity Incentive Plan. The consequences of transactions depend on a variety of factors, including a participant’s tax status. References to “the Company” in this summary of tax consequences mean us, or any affiliate of us that employs or receives the services of a recipient of an award under the Equity Incentive Plan, as the case may be.
Incentive Stock Options. A grantee will not recognize any income upon the grant of an incentive stock option or, assuming requirements of the Equity Incentive Plan and the Internal Revenue Code are met, upon exercise thereof. If the shares are disposed of by the grantee more than two years after the date of grant of the incentive stock option, and more than one year after those shares are transferred to the grantee, any gain or loss realized upon the disposition will be a long-term capital gain or loss, and the Company will not be entitled to any income tax deduction in respect of the option or its exercise. If the grantee disposes of the shares within either such period in a taxable transaction, the excess, if any, of the amount realized (up to the fair market value of such shares on the exercise date) over the exercise price will be compensation taxable to the grantee as ordinary income, and the Company will generally be entitled to a deduction equal to the amount of ordinary income recognized by the grantee. If the amount realized upon that disqualifying disposition exceeds the fair market value of the shares on the exercise date, the excess will be a capital gain. If the exercise price exceeds the amount realized upon such disqualifying disposition, the difference will be a capital loss.
Nonstatutory Options. Upon the grant of a nonstatutory option, a grantee will not recognize any taxable income. Generally, at the time a nonstatutory option is exercised, the grantee will recognize compensation taxable as ordinary income, and the company will generally be entitled to a deduction, in an amount equal to the excess of the fair market value on the exercise date of the shares of common stock purchased upon exercise over the exercise price. Upon a subsequent disposition of the shares, the grantee will realize either long-term or short-term capital gain or loss, depending upon the holding period of the shares.
Stock Appreciation Rights. Upon the grant of a stock appreciation right, a grantee will not recognize any taxable income. Generally, at the time a stock appreciation right is exercised, a grantee will recognize compensation taxable as ordinary income, and the Company will generally be entitled to a tax deduction, in an amount equal to any cash received (before applicable withholding) plus the fair market value on the exercise date of any shares of common stock received.
Restricted Stock. A grantee will not recognize any income upon the award of restricted stock that is not transferable and is subject to a substantial risk of forfeiture, unless the grantee has made an election under Section 83(b) of the Internal Revenue Code. If a grantee makes such an election, he or she will recognize compensation taxable as ordinary income, and the Company will generally be entitled to a tax deduction, equal to the fair market value of the common stock subject to the award on the award date, and the grantee will not recognize additional taxable compensation income on the vesting date. If no such election is made, at the time the vesting terms and conditions applicable to restricted stock are satisfied, the grantee will recognize compensation taxable as ordinary income, and the Company will generally be entitled to a deduction, equal to the then fair market value of the common stock on the vesting date, together with the amount of any accrued dividends and any interest thereon received by the grantee.
Restricted Stock Units. Upon the grant of restricted stock units, a grantee will not recognize any taxable income. Generally, the grantee will recognize compensation taxable as ordinary income, and the Company will generally be entitled to a tax deduction, in an amount equal to any cash received (before applicable withholding), plus the

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then-current fair market value of any shares of common stock received, by the grantee upon settlement of the restricted stock units.
Other Stock-based Awards. The granting of an other stock-based award will not result in the recognition of taxable income by the grantee or a tax deduction by the Company. The payment or settlement of an other stock-based award generally results in immediate recognition of taxable ordinary income by the grantee equal to the amount of any cash received or the then-current fair market value of the shares of common stock received, and a corresponding tax deduction by the company. If the shares covered by the award are not transferable and subject to a substantial risk of forfeiture, the tax consequences to the grantee and the company will be similar to the tax consequences of restricted stock awards, described above. If the award consists of unrestricted shares of common stock, the recipient of those shares will immediately recognize as taxable ordinary income the fair market value of those shares on the date of the award (less any amount paid for those shares), and the company will be entitled to a corresponding tax deduction.
Under Section 162(m) of the Internal Revenue Code, the Company may be limited as to federal income tax deductions to the extent that total annual compensation in excess of $1 million is paid to our Chief Executive Officer or any one of our other three highest paid executive officers, other than the Chief Executive Officer or Chief Financial Officer, who are employed by us on the last day of the Company’s taxable year. However, certain “performance-based compensation” the material terms of which are disclosed to and approved by our shareholders is not subject to this deduction limitation. The Equity Incentive Plan has been structured with the intention that compensation resulting from stock options and SARs granted under the Equity Incentive Plan with an exercise price at least equal to the grant date fair market value of the common stock will be qualified performance-based compensation and deductible without regard to the limitations otherwise imposed by Section 162(m) of the Internal Revenue Code. As discussed above under “Performance Compensation Awards,” the Equity Incentive Plan allows the Compensation Committee discretion to grant performance compensation awards that are intended to be qualified performance-based compensation for purposes of Section 162(m).
Under certain circumstances, accelerated vesting, exercise or payment of awards under the Equity Incentive Plan in connection with a “change in control” of the Company might be deemed an “excess parachute payment” for purposes of the golden parachute payment provisions of Section 280G of the Internal Revenue Code. To the extent it is so considered, the grantee holding the award would be subject to an excise tax equal to 20% of the amount of the excess parachute payment, and the Company would be denied a tax deduction for the excess parachute payment.

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Aggregate Outstanding Grants
As of March 2, 2015, outstanding awards under the Equity Incentive Plan are held by, or approved to be granted to, the following named individuals and groups:
Name and Position
 
Stock Options
(Number of Shares)
 
Restricted Stock
(Number of Shares)
 
Performance Share Units (Number of Units)
Jack A. Fusco, Executive Chairman
 
5,039,000

 
 
224,636

 
 
266,690

 
John B. (Thad) Hill III, President and Chief Executive Officer
 
1,662,651

 
 
183,223

 
 
151,350

 
Zamir Rauf, Executive Vice President and Chief Financial Officer
 
502,566

 
 
59,490

 
 
90,674

 
W. Thaddeus Miller, Executive Vice President and Chief Legal Officer
 
1,563,667

 
 
109,059

 
 
123,415

 
Steven D. Pruett, Executive Vice President and Chief Commercial Officer
 
92,087

 
 
29,084

 
 
37,235

 
John M. Adams, Executive Vice President, Power Operations
 
133,962

 
 
35,213

 
 
34,872

 
All current executive officers as a group
 
9,174,930

 
 
653,370

 
 
721,144

 
All current directors who are not executive officers as a group
 

 
 

 
 

 
Each nominee for election as a director
 

 
 

 
 

 
Each associate of any such directors, executive officers or nominees
 

 
 

 
 

 
Each other person who received or is to receive 5% of such options or restricted stock
 

 
 

 
 

 
All employees, including all current officers who are not executive officers, as a group
 
1,728,330

 
 
3,487,467

 
 
502,377

 
Because it is within the Compensation Committee’s discretion to determine which directors, employees and consultants receive awards under the Equity Incentive Plan, and the types and amounts of those awards, it is not possible at present to specify the persons to whom awards will be granted in the future or the amounts and types of individual grants. However, it is anticipated that, among others, all of our current executive officers, including our named executive officers, will receive restricted stock and performance share awards under the Equity Incentive Plan. See “ — Grants of Plan-Based Awards” table for a description of equity grants made to our named executive officers during the year ended December 31, 2014.
The Board of Directors recommends that you vote “FOR” the proposal to reapprove the material terms of the performance goals under the Calpine Corporation 2008 Equity Incentive Plan for Purposes of Section 162(m) of the Internal Revenue Code.

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DIRECTOR COMPENSATION
The following table provides certain information concerning the compensation for services rendered in all capacities by each non-employee director serving on our Board for the year ended December 31, 2014:
Name
 
Fees Earned or
Paid in Cash
($)
 
Stock Awards
($)(1)
 
Total
($)
Frank Cassidy
 
107,500
 
99,992
 
207,492
Robert C. Hinckley
 
104,000
 
99,992
 
203,992
Michael W. Hofmann
 
104,000
 
99,992
 
203,992
David C. Merritt
 
110,000
 
99,992
 
209,992
W. Benjamin Moreland
 
90,000
 
99,992
 
189,992
Robert A. Mosbacher, Jr.
 
109,000
 
99,992
 
208,992
Denise M. O’Leary
 
114,000
 
99,992
 
213,992
J. Stuart Ryan(2)
 
70,467
 
 
70,467
_____________
(1)
The amounts set forth next to each award represent the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). For discussion of the assumptions used in these valuations, see Note 12 of the Notes to Consolidated Financial Statements included in the Company’s 2014 Annual Report. Represents 4,452 restricted stock units granted to each of Ms. O’Leary and Messrs. Cassidy, Hinckley, Hofmann, Merritt, Moreland and Mosbacher on May 14, 2014 pursuant to the 2008 Amended and Restated Director Incentive Plan (the “Director Plan”), vesting on the earlier to occur of the first anniversary date of the date of grant or the day immediately preceding the date of the 2015 Annual Meeting of the Stockholders. All such grants remained outstanding at December 31, 2014. In addition, the following members of the Board have elected to defer the distribution date of restricted stock units granted prior to 2014 and such awards remain outstanding at December 31, 2014: Mr. Cassidy - 4,362 shares, Mr. Hofmann - 4,362 shares, Mr. Merritt - 10,729 shares and Ms. O’Leary - 6,367 shares.
(2)
Mr. Ryan did not stand for re-election as a member of our Board at the annual meeting of shareholders held on May 14, 2014. Thus, he did not receive a grant of restricted stock in 2014.
Our Corporate Governance Guidelines provide that compensation for our non-employee directors’ services may include annual cash retainers, shares of our common stock and options for such shares; meeting fees; fees for serving as a committee chairman; and fees for serving as a director of a subsidiary. We also reimburse directors for their reasonable out-of-pocket and travel expenses in connection with attendance at Board and committee meetings. Our Compensation Committee reviews director compensation annually and makes recommendations to the Board with respect to compensation and benefits provided to the members of the Board. Our Corporate Governance Guidelines provide that director compensation should be fair and equitable to enable the Company to attract qualified members to serve on its Board.
We had the following compensation structure for non-employee directors for 2014:
 
 
Annual Retainer ($)
 
Meeting Fees
($)
 
Restricted Stock Unit Award Value
($)
 
Committee Chair Retainer
($)
Outside Board Members
 
56,000
 
20,000
 
100,000(1)
 
Chairman of the Board
 
100,000(2)
 
 
50,000(3)
 
Lead Director
 
25,000
 
 
 
Audit Committee
 
 
14,000
 
 
20,000
Compensation Committee
 
 
14,000
 
 
10,000
Nominating and Governance Committee
 
 
14,000
 
 
10,000
_____________
(1)
Restricted stock units vest on the earlier to occur, the first anniversary of the date of grant or the day immediately preceding the date of the next Annual Meeting of the Shareholders. Annual equity grants to non-employee directors are generally approved by the Board of Directors during its first meeting of the calendar year. All non-employee directors are generally eligible for annual equity awards granted pursuant to the Director Plan.
(2)
The independent Chairman of the Board receives this amount in addition to the annual retainer paid to independent outside board members.
(3)
The Chairman of the Board receives this additional amount in the form of a grant of restricted shares.

29



COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis section of the proxy statement explains how our executive compensation programs are designed and operate with respect to the following officers identified in the “Summary Compensation Table” below (the “named executive officers”):
Jack A. Fusco
Executive Chairman
John B. (Thad) Hill III
President and Chief Executive Officer
Zamir Rauf
Executive Vice President and Chief Financial Officer
W. Thaddeus Miller
Executive Vice President, Chief Legal Officer and Secretary
Steven D. Pruett(1)
Executive Vice President and Chief Commercial Officer
John M. Adams
Executive Vice President, Power Operations
_____________
(1)
Mr. Pruett retired effective March 13, 2015.
Executive Summary
Our goal is to be recognized as the premier power generation company in the U.S. and our Compensation Committee believes that our executive compensation program is instrumental in helping us achieve this goal. We maintain simple, straightforward compensation programs pursuant to which our named executive officer compensation consists almost entirely of base salary, annual cash incentives and equity grants.
During 2014, we achieved strong operational and financial results despite challenging environments in the competitive wholesale markets in which we operate. Our executive management team remains focused on executing their strategic plan to create long-term value for our shareholders. The compensation decisions made by the Compensation Committee in 2014 reflect our commitment to aligning executive compensation with shareholder value and focus on incentivizing our executives to improve financial and operating performance. In addition, Mr. Hill succeeded Mr. Fusco as Chief Executive Officer in May 2014 and Mr. Fusco assumed the role of Executive Chairman. This management transition secured important leadership continuity over the next several years.
Best Practices in Compensation Governance and Highlights of Recent Developments
We regularly review our compensation practices and policies and periodically modify our compensation programs in light of evolving best practices, competitive positions and changing regulatory requirements. Some of our significant practices, policies and recent modifications include:
Pay for Performance. In accordance with our pay for performance philosophy, a significant portion of the total compensation of our Chief Executive Officer and our other named executive officers is based on the Company’s performance.
Emphasis on Performance Over Time. Also in accordance with our philosophy, the compensation program for our named executive officers is designed to mitigate imprudent short-term decision making and risk taking and emphasize long-term performance.
Clawbacks. The employment agreements for Messrs. Fusco and Miller, and the letter agreement for Mr. Hill, provide for a three-year clawback related to any after-tax portion of income realized from the exercise of their respective sign-on options, and the employment agreement for Mr. Hill also provides for a three-year clawback related to any after-tax portion of his annual cash incentive compensation, in each case, in the event they commit a willful and intentional act which directly results in a material restatement of the Company’s earnings.
Performance-Based Annual Incentive Awards. Our Calpine Incentive Plan (“CIP”) is 100% performance-based and uses multiple financial and operational performance measures.
Limited Perquisites. We offer a limited amount of perquisites and other personal benefits to our senior executives consistent with prevailing market practice and the Company’s overall compensation program. Perquisites do not constitute a material part of our compensation program.
Stock Holding and Ownership Policy. Messrs. Fusco, Miller and Hill are required to hold shares equal to at least 50% of the after-tax proceeds of each exercise of their sign-on options until their employment with the Company terminates. In addition, Mr. Hill is required to hold shares equal to at least five times his base salary by the fifth anniversary of the effective date of his employment agreement.

30



No Pledging of Shares. Our insider trading policy (which is applicable to all employees, including named executive officers) expressly prohibits hedging of Company shares.
Compensation Risk Assessment. Our Compensation Committee regularly conducts risk assessments to determine the extent, if any, to which our compensation practices and programs may create incentives for excessive risk taking. We believe that our compensation practices and policies do not encourage excessive or unnecessary risk taking.
Independent Compensation Consultant. The Compensation Committee utilizes the services of Meridian Compensation Partners, LLC, a national compensation consulting firm, as its independent compensation advisor.
No Supplemental Retirement Benefits. Our named executive officers participate in retirement plan programs provided to all Calpine employees and do not receive special retirement plans or benefits.
No Excise Tax “Gross-ups”. Our executive officers are not entitled to an excise tax gross-up payment in the event that any benefit or payment by the Company is determined to be subject to the excise tax imposed by Code Section 4999.
Performance Share Unit Program and Elimination of Stock Option Awards. Our long-term incentive program for the Company’s officers, including the named executive officers, which is designed to more closely align the interests of our officers and shareholders, provides that 50% of the award opportunity, or 40% in the case of Mr. Adams, is in the form of performance share units that are earned (or forfeited) based on the Company's relative total shareholder return (“TSR”) performance over a three-year period, with the remaining 50% of the award opportunity, or 60% in the case of Mr. Adams, in the form of restricted stock awards. The Company does not award stock options to our named executive officers.
The following charts illustrate the mix of pay for our Chief Executive Officer (“CEO”) and our other named executive officers (“Other NEO”) excluding Jack Fusco, our Executive Chairman, a significant portion of which is tied to performance-based short- and long-term incentives.
 
 
2014 Performance and Strategic Accomplishments Considered in Determining Executive Compensation
Our executive compensation decisions in 2014 were greatly influenced by continued strong financial and operating results in a challenging economic environment. Our CIP focuses on several key financial and operating performance measures, including:
Commodity Margin;
Cost management;
Capital spending discipline;
Power plant availability and reliability; and
Operational safety.

31



Under the leadership of our executive management team, our key financial and operational performance accomplishments over the course of 2014 include:
We delivered annual TSR of 13.4%, in line with the S&P 500 Index.
We returned capital to shareholders in the form of repurchasing approximately 49.7 million shares of our outstanding common stock for approximately $1.1 billion at an average price of $22.14 per share.
We exceeded our target thresholds for Commodity Margin, TRIR and Average EFOF. See “— Elements of Compensation” for how these corporate performance goals are defined.
Our Adjusted Free Cash Flow per share increased 34% from 2013 and our Adjusted EBITDA increased 7% from 2013 (see Annex A).
Our employees achieved a lost time incident rate of 0.08 lost time injuries per 100 employees which places us in the first quartile performance for power generation companies with 1,000 or more employees.
Our entire fleet achieved a forced outage factor of 1.9% and a starting reliability of 98.6%.
We completed the acquisition of a 1,000 MW power plant in Texas and a 731 MW power plant in Massachusetts and completed the expansions of our Deer Park and Channel Energy Centers which add long-term value to our fleet of power plants.
We successfully originated several new long-term contracts with customers in our West, Texas and East segments, including those related to our Geysers Assets, our RockGen, Pastoria, Delta and Osprey power plants and our Texas power plant fleet which add long-term value to our fleet of power plants.
We completed the sale of six of our power plants in our East segment for a purchase price of approximately $1.57 billion in cash which better aligns our asset base with our long-term strategic focus on competitive wholesale markets.
We strengthened our balance sheet and liquidity by refinancing debt to secure lower interest rates and amending our Corporate Revolving Facility to increase the capacity by an additional $500 million.
A comparison of our financial and operating performance over the past two years is provided below (in millions, except percentages and per share amounts):
 
 
2014
 
2013
 
Commodity Margin(1)
 
$
2,820

 
$
2,631

 
Expenses(1)
 
$
871

 
$
801

 
CAPEX & major maintenance expense(1)
 
$
391

 
$
392

 
Average EFOF(1)
 
 
2.38

%
 
2.1

%
TRIR(1)
 
 
0.64

%
 
0.88

%
Income from operations
 
$
1,989

 
$
874

 
Adjusted EBITDA(2)
 
$
1,949

 
$
1,830

 
Diluted Earnings (Loss) Per Share
 
$
2.31

 
$
0.03

 
Adjusted Free Cash Flow Per Share(2)
 
$
2.03

 
$
1.52

 
Share Price on December 31
 
$
22.13

 
$
19.51

 
_____________
(1)
As defined later in this section in our 2014 CIP Performance Score Calculation in “—Elements of Compensation.”
(2)
See Annex A to this proxy statement for a discussion of Adjusted EBITDA and Adjusted Free Cash Flow per share as well as a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures.
Our fiscal year 2014 compensation actions and decisions were substantially based on our named executive officers’ accomplishments and contributions to the Company’s performance results, as highlighted above. The annual cash incentive bonus, pursuant to the Calpine Incentive Plan, was 118% of target for 2014 compared to 104% for 2013. Further details of our base salaries, 2014 CIP performance score calculation and other key strategic achievements are discussed in greater detail under “Compensation Discussion and Analysis — Determining Executive Compensation.”
Our Compensation Program Objectives and Guiding Principles
The Compensation Committee believes that the compensation program for our named executive officers emphasizes at-risk, performance-based compensation without motivating imprudent risk taking. The Compensation Committee believes that our

32



executive compensation program also helps Calpine recruit, retain and motivate a highly talented team of executives with the requisite set of skills and experience to successfully lead the Company in creating value for our shareholders. In addition, the Compensation Committee believes that the mix and structure of compensation for our executives strikes an appropriate balance to promote long-term returns without motivating or rewarding excessive risk taking. The compensation objectives and principles that govern the Company’s compensation decisions include:
Alignment with Shareholders’ Interests — Our long-term incentive awards are equity-based, linking a significant portion of our named executive officers’ pay to the value and appreciation in the value of our share price.
Pay for Performance — A significant portion of compensation for our named executive officers is linked to performance through appreciation of the price of our common stock and the achievement of corporate performance goals and certain financial and operating metrics that we believe drive the value of our share price. We believe our performance share unit program strengthens the link between pay and performance.
Emphasis on Performance Over Time — The compensation program for our named executive officers is designed to mitigate excessive short-term decision making and risk taking. The value of long-term incentives is substantially greater than the annual cash incentive bonus and our annual incentive plan limits the maximum cash incentive bonus that can be earned in a given year. The Compensation Committee also retains the discretionary power to reduce annual incentive awards below calculated values.
Recruitment, Retention and Motivation of Key Leadership Talent — We provide an appropriate combination of fixed and variable compensation designed not only to attract and motivate the most talented executives for Calpine, but also to encourage retention by vesting equity awards over three to five years.
Results of the 2014 Advisory Vote on Executive Compensation (“say-on-pay”)
At the Company’s Annual Meeting of Shareholders held in May 2014, our shareholders were asked to approve the Company’s fiscal 2013 executive compensation programs. A substantial majority (99%) of the votes cast on the “say-on-pay” proposal at that meeting were voted in favor of the proposal. As Calpine regularly engages shareholders to discuss a variety of aspects of our business and welcomes shareholder input and feedback, the “say-on-pay” vote serves as an additional tool to guide the Board and the Compensation Committee in ensuring alignment of Calpine’s executive compensation programs with shareholder interests. The Compensation Committee believes that these results reaffirm our shareholders’ support of the Company’s approach to executive compensation.
The Compensation Committee continues working to ensure that the design of the Company’s executive compensation program is focused on long-term shareholder value creation, emphasizes pay for performance and does not encourage imprudent short-term risks. The Compensation Committee also continues to use the “say-on-pay” vote as a guidepost for shareholder sentiment and believes it is critical to maintain and continually develop this program to promote ongoing shareholder engagement, communication and transparency.
Determining Executive Compensation
The Compensation Committee bases any adjustments to current pay levels on several factors, including the scope and complexity of the functions an executive officer oversees, the contribution of those functions to our overall performance, individual experience and capabilities, individual performance and competitive pay practices. Any variations in compensation among our executive officers reflect differences in these factors.
Compensation Consultant
The Compensation Committee has authority to retain compensation consulting firms to assist it in the evaluation of executive officer and employee compensation and benefit programs. Since 2012, the Compensation Committee has retained Meridian Compensation Partners, LLC (“Meridian”), a national compensation consulting firm, as its independent compensation advisor. Meridian provides an additional objective perspective as to the reasonableness of our executive compensation programs and practices and their effectiveness in supporting our business and compensation objectives. During 2014, Meridian regularly participated in Compensation Committee meetings and advised the Compensation Committee with respect to compensation trends and best practices, incentive plan design, competitive pay levels, our proxy disclosure, and individual pay decisions with respect to our named executive officers and other executive officers.
While Meridian regularly consults with management in performing work requested by the Compensation Committee, Meridian did not perform any separate additional services for management. The Compensation Committee has assessed the

33



independence of Meridian pursuant to applicable SEC rules and concluded that no conflict of interests exists that would prevent Meridian from independently representing the Compensation Committee.
Comparator Group
We believe that it is appropriate to offer industry-competitive cash and equity compensation packages to our named executive officers in order to attract and retain top executive talent. The compensation comparator group allows us to monitor the compensation practices of our primary competitors for executive talent. However, we do not rely on this information to target any specific pay percentile for our executive officers. Instead, we use this information to provide a general overview of market practices and to ensure that we make informed decisions regarding our executive pay programs.
To help the Compensation Committee establish 2014 target compensation levels for the named executive officers, Meridian prepared an analysis that compared the current level of compensation for our named executive officers and compensation paid to comparable positions at companies in an industry comparator group approved by the Compensation Committee. The primary criteria used to identify our compensation comparator group were: (1) industry and energy portfolio - we compete for talent with energy and utility companies that have significant generation portfolios and significant non-regulated energy operations, and (2) financial scope - our management talent should be similar to that of companies that have similar financial characteristics. Due to the unique characteristics of Calpine’s non-regulated portfolio of power plants, the companies represented in the comparator group do not contain the exact mix of generating assets as Calpine and some contain regulated energy and other energy-related operations. However, the companies in the comparator group represent entities of relatively proportionate size, from a financial and/or operational perspective, and contain non-regulated power operations. We believe that the comparator group provides an appropriate reference for compensation data for companies with which Calpine competes for talent. The 11 companies in the 2014 comparator group are set forth below:
The AES Corporation
 
Entergy Corporation
 
PPL Corporation
DTE Energy Co.
 
FirstEnergy Corp.
 
Public Service Enterprise Group Inc.
Dynegy Inc.
 
NRG Energy, Inc.
 
TransAlta Corp.
Edison International
 
PG&E Corp.
 
 
The Compensation Committee considers pay data from the appropriate position matches within the comparator group for our named executive officers, including the effect on compensation, if any, of specific company size differences. We do not formally target total compensation, or any specific element of compensation, of our named executive officers against the comparator group, but instead use this market data to obtain a general understanding of current compensation practices in our industry.
Role of Executive Officers in Executive Compensation Decisions
The Chief Executive Officer reviews the compensation data gathered from the compensation surveys, considers each executive officer’s performance (other than himself) and makes a recommendation to the Compensation Committee on base salary, annual bonus and equity awards for each named executive officer other than himself. The Chief Executive Officer participates in Compensation Committee meetings at the Compensation Committee’s request to provide background information regarding the Company’s strategic objectives and to evaluate the performance of and compensation recommendations for the other executive officers. The Committee utilizes the information provided by the Chief Executive Officer along with input from its compensation advisor and the knowledge and experience of its members in making compensation decisions. Executive officers do not propose or seek approval for their own compensation. The Chairman of the Compensation Committee, with input from the Chairman of the Board of Directors, recommends the Chief Executive Officer’s compensation to the Compensation Committee in an executive session, not attended by the Chief Executive Officer.

34



Elements of Compensation
Compensation for the named executive officers primarily consists of:
Type
Purpose
Base Salary
To provide a minimum, fixed level of cash compensation for the named executive officers to compensate executives for services rendered during the fiscal year.
Annual Cash Incentives
To drive achievement of annual corporate goals including key financial and operating results and strategic goals that drive value for shareholders.
Long-Term Incentives
To align executive officers’ interests with the interests of shareholders by rewarding increases in the value of our share price.
Post-Employment Compensation
To help retain executive officers and certain other qualified employees, maintain a stable work environment and provide financial security in the event of a change in control or in the event of a termination of employment in connection with or without a change in control.
To assist executive officers and other eligible employees to prepare financially for retirement, to offer benefits that are competitive and tax-efficient, and to provide a benefits structure that allows for reasonable certainty of future costs.
Allocation and Distribution of Each Element of Compensation
The portion of total compensation delivered in the form of base salary and benefits is intended to provide a competitive foundation and fixed rate of pay for the work being performed by each named executive officer and the associated level of responsibility and contributions to Calpine. The compensation opportunity beyond those pay elements is at risk and must be earned through achievement of annual goals, which represent performance expectations of the Board and management and long-term value creation for shareholders. In setting target compensation, the Compensation Committee focuses on the total compensation opportunity for the executive. The proportion of compensation designed to be delivered in base salary versus variable pay depends on the executive’s position and the ability of that position to influence overall Company performance. The more senior the level of the executive, the greater is the percentage of total pay opportunity that is variable.
Details of Each Element of Compensation
Base Salary. We pay base salaries to provide a minimum, fixed level of cash compensation for our named executive officers to compensate them for services rendered during the fiscal year. The 2014 base salary of each of our named executive officers was set following an annual review, during which adjustments were made to reflect performance-based factors, as well as competitive considerations. During its annual review of base salaries, the Compensation Committee primarily considers:
our budget for annual merit increases;
the appropriateness of each executive officer’s compensation, both individually and relative to the other executive officers;
the individual performance of each executive officer; and
pay data from our comparator group of companies provided by our independent compensation advisor.

35



We do not apply specific formulas to determine increases. Generally, executive salaries are adjusted effective with the first payroll period after the adjustment is determined. Base salary for each executive was increased to recognize performance and individual contributions to the improved strategy and operations of the Company and to ensure the base salary level is consistent with market practice. Base salaries and percentage increases from the previous year's base salary for our named executive officers are indicated below for 2014 and 2015:
 
2014
 
2015
 
 
Base Salary
 
Percentage increase from previous year
 
Base Salary
 
Percentage increase from previous year
 
Jack A. Fusco(1)
$
1,339,000

 
3.0
%
 
$
669,500

 
%
 
John B. (Thad) Hill III(2)
$
708,548

 
3.0
%
 
$
1,100,000

 
10.0
%
 
Zamir Rauf
$
592,662

 
3.0
%
 
$
609,257

 
2.8
%
 
W. Thaddeus Miller
$
806,656

 
3.0
%
 
$
829,242

 
2.8
%
 
Steven D. Pruett(3)(4)
$
500,000

 
n/a

 
n/a

 
n/a

 
John M. Adams(3)
$
400,000

 
n/a

 
$
411,200

 
2.8
%
 
_____________
(1)
On May 14, 2014, Mr. Fusco resigned as our Chief Executive Officer but continued to be employed as our Executive Chairman, and Mr. Fusco’s base salary was reduced by half in accordance with his employment agreement.
(2)
On May 14, 2014, Mr. Hill was appointed as our Chief Executive Officer. In connection with this promotion, Mr. Hill’s base salary was increased to $1,000,000 in accordance with his employment agreement.
(3)
Mr. Pruett retired effective March 13, 2015.
(4)
Messrs. Pruett and Adams each received an increase in their base salary on January 1, 2014 in conjunction with their promotions to Executive Vice President.
Annual Incentive — Calpine Incentive Plan. Our annual incentive program, the Calpine Incentive Plan (the “CIP”), is designed to promote the achievement of annual corporate goals including key financial, operating and strategic goals that, in turn, drive value for shareholders. All regular full-time, non-collective bargaining unit employees hired prior to October 1, 2014, were eligible to participate in the CIP including all our named executive officers. The Compensation Committee assigned to each executive officer a target incentive, expressed as a percentage of incentive eligible earnings (base salary amount paid in 2014), which is dependent on the level of the employee’s position and the scope of the employee’s responsibilities. Target annual incentive levels for each named executive officer are shown in a table below. The total target CIP incentive pool is the sum of all participants’ target annual incentive amounts. In addition, the Board retains the authority to award special bonuses for exceptional achievement.
Funding of CIP. Funding of the CIP incentive pool is triggered only if we meet a minimum corporate performance target established by the Compensation Committee. For fiscal 2014, this minimum corporate performance target was $1,448 million of Adjusted EBITDA, which was 80% of our fiscal 2014 Adjusted EBITDA goal of $1,810 million. Adjusted EBITDA, defined in our 2014 annual report, is primarily comprised of corporate net income before interest, income taxes and depreciation and amortization adjusted for the effects of impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, adjustments to exclude the Adjusted EBITDA related to the noncontrolling interest, stock-based compensation expense, operating lease expense, non-cash gains and losses from foreign currency translations, major maintenance expense, gains or losses on the repurchase or extinguishment of debt, non-cash GAAP-related adjustments to levelize revenues from tolling agreements and any extraordinary, unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. Our Adjusted EBITDA of $1,949 million as reported in our 2014 annual report exceeded our minimum corporate performance target for fiscal year 2014.

36



The size of the CIP incentive pool is based on the extent to which we achieve the corporate performance goals that are established by the Compensation Committee. The Compensation Committee selected these performance goals to reflect a balanced evaluation of annual operating performance including cash generation, cost containment, safety and achievement of key goals that would drive future financial performance. The 2014 performance goals are based on financial and strategic goals. These goals and the actual results are shown in the following table and discussed in further detail below:
CIP Performance Score Calculation ($ in millions) for 2014

Performance Level Performance Score
 
Threshold 60%
 
Target 100%
 
Maximum 150%
 
Results
 
Score(1)
 
Weight
 
Weighted Score
 
Commodity Margin
 
$
2,562

 
$
2,662

 
$
2,762

 
$
2,820

 
 
150.0

%
 
35.0

%
 
52.5

%
Expenses
 
$
936

 
$
851

 
$
732

 
$
871

 
 
90.6

%
 
35.0

%
 
31.7

%
CAPEX/Maintenance
 
$
410

 
$
383

 
$
351

 
$
391

 
 
88.0

%
 
10.0

%
 
8.8

%
TRIR
 
 
1.7

 
 
1.11

 
 
0.70

 
 
0.64

 
 
150.0

%
 
10.0

%
 
15.0

%
Average EFOF
 
 
4.5

%
 
2.49

%
 
1.50

%
 
2.38

%
 
106.0

%
 
5.0

%
 
5.3

%
Regulatory Compliance (Pass/Fail)
 
No material non-compliance events
 
 
PASS
 
 
100.0

%
 
5.0

%
 
5.0

%
Overall Performance Score
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100

%
 
118.3

%
_______________
(1)
For performance between target and maximum, score is determined by linear interpolation.

Explanation of Performance Measures.
Commodity Margin, as used for purposes of determining our CIP goal, is a non-GAAP financial measure that includes power and steam revenues, sales of purchased power and physical natural gas, capacity revenues, renewable energy credit revenue, sales of surplus emission allowances, transmission revenue and expenses, fuel and purchased energy expense, fuel transportation expense, environmental compliance expense and realized settlements from marketing, hedging and optimization activities including natural gas transactions hedging future power sales, but excludes mark-to-market activity. This amount differs from “Commodity Margin” as reported in our 2014 annual report as it also includes other revenue, as referenced in the CIP performance score calculation, Adjusted EBITDA from Calpine’s unconsolidated operations at Greenfield and Whitby, and certain other adjustments.
Expenses, as used solely for purposes of determining our CIP pool, is comprised of Plant Operating Expense (excluding major maintenance, scrap and stock-based compensation), Royalty Expense from Calpine’s geothermal operations, Sales, General & Administrative Expense (excluding stock-based compensation), and Other Operating Expense (excluding amortization and stock-based compensation), in each case, as calculated in accordance with U.S. GAAP and included in the amounts reported on our Consolidated Statement of Operations for the year ended December 31, 2014 in our 2014 annual report. We believe that Expenses is a useful tool for assessing the performance of our core operations and is a key operational measure reviewed by our management.
CAPEX/Maintenance refers to Calpine’s Capital Expenditure and Major Maintenance Expense related to the refurbishment of major turbine generator equipment and other plant-related facilities inclusive of Calpine’s unconsolidated operations at Greenfield and Whitby. CAPEX is capitalized into Property, Plant and Equipment and Maintenance is recorded as a component of Plant Operating Expense. We monitor these expenditures and establish targets as useful tools to measure our operating performance.
Average EFOF refers to Equivalent Forced Outage Factor, which is a measure indicating the percent of time that our power plants are not capable of reaching full capacity due to forced outages and forced equipment limitations.
TRIR refers to Total Reportable Incident Rate, which is a measure of operational safety. TRIR is calculated as the sum of our lost time, restricted duty and other recordable cases as well as any fatality incidents during the year multiplied by 200,000 and then divided by total hours worked during the year.
Regulatory Compliance refers to the Compensation Committee evaluation of overall regulatory compliance based on consultation with the Chief Compliance Officer. This performance criterion was met as there were no events of material non-compliance in 2014.
Determination of CIP Bonus Pool and Payouts. Based on the extent to which we achieved the performance goals, as shown above, approximately $53 million was funded to the total CIP bonus pool for 2014 for allocation among the plan participants. With the exception of Messrs. Pruett and Adams, each named executive officer’s target and maximum incentive as a percentage

37



of his base salary is set forth in his employment agreement or letter agreement. In the case of Messrs. Pruett and Adams, their maximum incentive is consistent with the terms of the CIP. Threshold incentive levels under the CIP are set at 60% of the target incentive percentage for all participants. The following table shows the incentive eligible earnings and threshold, target and maximum incentive percentages and actual payout amounts for each named executive officer.
Name
 
Incentive Eligible Earnings
 
Threshold Incentive %
 
Target Incentive %
 
Maximum Incentive %
 
Incremental Incentive Rate
 
Incentive Calculation Overall
Performance
Score(2)
 
Incentive %(3)
 
Incentive Amount
 
Jack A. Fusco
 
$
936,025

 
60
%
 
100
%
 
200
%
 
2.0
(1) 
118.3
%
 
136.6
%
 
$
1,278,610

 
John B. (Thad) Hill III
 
$
875,294

 
60
%
 
100
%
 
200
%
 
2.0
(1) 
118.3
%
 
131.6
%
 
$
1,152,010

 
Zamir Rauf
 
$
588,679

 
54
%
 
90
%
 
200
%
 
2.22
(1) 
118.3
%
 
126.6
%
 
$
745,268

 
W. Thaddeus Miller
 
$
801,234

 
54
%
 
90
%
 
200
%
 
2.22
(1) 
118.3
%
 
126.6
%
 
$
1,014,362

 
Steven D. Pruett
 
$
497,692

 
54
%
 
90
%
 
200
%
 
2.22
(1) 
118.3
%
 
128.5
%
 
$
639,529

 
John M. Adams
 
$
399,366

 
36
%
 
60
%
 
90
%
 
2.22
(1) 
118.3
%
 
84.4
%
 
$
336,967

 
_______________
(1)
Incremental Incentive Rate equals the additional percentage of eligible earnings for each percent that Overall Performance Score exceeds 100%. Rate is calculated as the ratio of the difference between maximum and target incentive percentage and maximum and target Performance Score.
(2)
From 2014 CIP performance score calculation shown above.
(3)
Incentive % equals sum of Target Incentive plus product of excess of Overall Performance Score over 100% multiplied by Incremental Incentive Rate.
Equity Compensation. Effective January 31, 2008, our Board of Directors adopted, and our shareholders approved, the 2008 Equity Incentive Plan (the “Equity Incentive Plan”). The Equity Incentive Plan is administered by the Compensation Committee, which has authority to grant the following types of awards to our directors, executive officers, employees and consultants: stock options, stock appreciation rights, restricted stock, restricted stock units, performance compensation awards, other stock-based awards or any combination of these types of awards. Equity grants directly align our named executive officers’ interests with the interests of shareholders by rewarding increases in the value of our stock price. Such grants enable us to attract and retain highly qualified individuals for positions of responsibility. See “—Proposal 5 To Reapprove the Material Terms of the Performance Goals Under the Calpine Corporation 2008 Equity Incentive Plan for Purposes of Section 162(m) of the Internal Revenue Code” for a summary of the material terms of the Equity Incentive Plan. We have also granted sign-on options outside the Equity Incentive Plan (but subject to the same terms and conditions as those of the Equity Incentive Plan) to Messrs. Fusco, Hill and Miller, as described under “— Summary of Employment Agreements.”
Generally, during its first meeting of the calendar year, the Compensation Committee approves annual equity grants to executive officers. All named executive officers are generally eligible for equity awards each February. The Compensation Committee determines the size of equity awards granted to each named executive officer based on general market pay trends in the industry, an evaluation of the Company’s and each individual named executive officer’s performance and internal equity. Such grants enable us to attract and retain highly qualified individuals for positions of responsibility. Vesting for stock options, restricted stock and performance share units is generally subject to continued employment, with exceptions in some cases for a change in control or termination due to death or retirement.
Determination of Target Value of Long-Term Incentive Compensation. On an annual basis, during its first meeting of the calendar year, the Compensation Committee determines, and makes its recommendations to the Board regarding, the form and amounts of long-term incentive compensation for our executive officers. In February 2014, the Board approved annual awards of restricted stock and performance share unit awards, as applicable, to our named executive officers. The target value of the equity awards granted to Mr. Fusco was based on his employment agreement. The target value of annual equity awards granted to each of the other named executive officers is generally determined based on internal equity considerations, data regarding similar positions at other companies within our industry, differences in responsibilities within our Company for each of the named executive officers and their respective contributions to our overall corporate success. In 2014, the target value of each named executive officer’s equity awards expressed as a percentage of base salary were 200% of base salary for Messrs. Hill, Rauf, Miller and Pruett and 150% of base salary for Mr. Adams. In making equity award grants to our most senior executives, we seek to closely align their interests with the long-term interests of our shareholders and reward the executives for an increase in the value of the Company’s stock price. The equity awards granted in 2014 to Messrs. Fusco, Hill, Miller, Rauf and Pruett consisted 50% of restricted stock and 50% of performance share units and to Mr. Adams consisted 60% of restricted stock and 40% of performance share units. See “ — Grants of Plan-Based Awards.”

38



On May 13, 2014, our Board of Directors approved an award of 44,483 shares of restricted stock to Mr. Hill in conjunction with his promotion to Chief Executive Officer and in recognition of his past achievements. See “ — Grants of Plan-Based Awards.”
Restricted Stock Grants. Restricted stock awards granted to our named executive officers in February 2014 vest ratably over a three-year service period on each of the first, second and third anniversaries of the grant date with the exception of Messrs. Fusco and Miller whose restricted stock awards vest 33 1/3% on the first anniversary of the grant date with the remaining 66 2/3% vesting on December 31, 2015 in accordance with their respective employment agreements. The restricted stock is subject to forfeiture upon termination with vesting accelerating upon certain events including death or disability.
Performance Share Unit Grants. An important aspect of the Company’s equity compensation strategy features the performance share unit program, which further strengthens the link between executive officer pay and performance. Specifically, the performance share unit program helps to closely align the interests of the Company’s executives with those of our shareholders.
In February 2014, the Compensation Committee approved awards of performance share units. Each performance share unit has the same value as one share of Calpine common stock. Awarded performance share units will vest and be paid in cash based on the Company’s total shareholder return (“TSR”) over the three-year performance period of January 1, 2014 through December 31, 2016 relative to the S&P 500 companies’ TSR over the same period. TSR captures the total returns of a company’s stock to investors over the three-year performance period. The performance share unit program will measure TSR by comparing the average stock price in the last month of the performance period to the average stock price in the month immediately prior to the start of the performance period, adjusting for stock splits and assuming dividends paid during the performance period are reinvested into additional shares. Our Compensation Committee chose TSR as it is a widely used benchmark of corporate performance which links the Company’s performance to shareholder return.
Payouts of the 2014 performance share unit awards will range from 0 to 200% of the target award based on the Company’s TSR ranking within the S&P 500 as shown below:
Percentile Rank
within the S&P 500
 
Percent of Performance
Units Earned
90th or higher
 
200%
80th
 
175%
70th
 
150%
60th
 
125%
50th
 
100%
40th
 
75%
30th
 
50%
Below 30th
 
0%
Actual amounts of awards granted in February 2014 are disclosed in the “Summary Compensation Table” and the “Grants of Plan-Based Awards” table. In February 2015, the Board approved annual awards of restricted stock and performance share units, as applicable, to our named executive officers excluding Mr. Fusco, who now serves as our Executive Chairman, and Mr. Pruett, who retired effective March 13, 2015. In May 2015, Mr. Fusco will receive $150,000 in restricted stock awards for his service as our Executive Chairman which will vest on December 31, 2015 in accordance with his employment agreement. These awards will be included in the “Summary Compensation Table” and the “Grants of Plan-Based Awards” table in our 2016 proxy statement, as applicable.
Perquisites and Other Personal Benefits. We offer a very limited amount of perquisites and other personal benefits to our named executive officers. The Compensation Committee believes that these perquisites are reasonable and consistent with prevailing market practice and the Company’s overall compensation program. Perquisites are not a material part of our compensation program. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to our named executive officers. See “— Summary Compensation Table — All Other Compensation.”
Post-Employment Compensation Arrangements
To promote retention and recruiting, we offer various arrangements that provide certain post-employment benefits in order to alleviate concerns that may arise in the event of an employee’s separation from service with us and enable employees to focus on Company duties while employed by us. These post-employment severance benefits are provided through employment agreements and letter agreements as described more fully below under “— Summary of Employment Agreements” and “— Potential Payments Upon Termination or Change in Control.”

39



Severance Benefits. We maintain the Calpine Corporation Change in Control and Severance Benefits Plan (the “Severance Plan”) that provides certain severance benefits to our executive officers and other qualified employees. The purpose of the Severance Plan is to help retain our executive officers and other qualified employees, maintain a stable work environment and provide financial security to our executive officers and certain other employees of the Company in the event of a change in control or in the event of a termination of employment in connection with or without a change in control. The Severance Plan does not provide for the payment of an excise tax gross-up under any circumstances.
For a further discussion of the Severance Plan, see “— Potential Payments Upon Termination or Change in Control” below. For a further discussion of the Employment Agreements, see “— Summary of Employment Agreements” below.
Retirement Benefits. Our executive officers participate in retirement plan programs provided to all Calpine employees and do not receive special retirement plans or benefits. Our primary objectives for providing retirement benefits is to assist employees in preparing financially for retirement, to offer benefits that are competitive and to provide a benefits structure that allows for reasonable certainty of future costs. Calpine does not have a defined benefit plan for employees not represented by a collective bargaining agreement, including our named executive officers.
Our primary retirement benefit is the Calpine Corporation Retirement Savings Plan (the “401(k) Plan”), a defined contribution plan. For our executive officers as well as all other non-bargaining unit employees, we match employee contributions 100% up to 5% of eligible earnings, subject to all applicable regulatory limits, and the match vests immediately. In addition, if an employee leaves our employment due to retirement, the employee can use any money remaining in his or her health reimbursement account to pay for post-employment medical insurance.
Officer Stock Holding and Ownership Policy
Messrs. Fusco, Miller and Hill are required to hold shares of Company stock equal to at least 50% of the after-tax proceeds of each exercise of their sign-on option until their employment with the Company terminates. In addition, Mr. Hill is required to hold shares equal to at least five times his base salary by the fifth anniversary of the effective date of his employment agreement. See “— Summary of Employment Agreements.”
Clawback Provisions
The employment agreements for Messrs. Fusco and Miller, and the letter agreement for Mr. Hill, include a three-year clawback provision related to any after-tax portion of income realized from the exercise of their sign-on options, and the employment agreement for Mr. Hill provides for a three-year clawback related to any after-tax portion of his annual cash incentive compensation, in each case, in the event they commit a willful and intentional act which directly results in a material restatement of the Company’s earnings.

Deductibility Cap on Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”), precludes a public corporation from deducting for federal income tax purposes compensation in excess of $1 million in any taxable year for its chief executive officer or any of its three other highest paid executive officers, not including the chief financial officer (for these purposes, the “Named Executives”). Certain performance-based compensation is not subject to that limitation. As part of its role, the Compensation Committee considers the anticipated tax treatment to us and the executive officers in its review and establishment of compensation programs and payments. In general, the Compensation Committee believes that it is in our best interest to receive maximum tax deductions for compensation paid to the Named Executives. In general, we intend to pay performance-based compensation, including equity compensation, in a manner that preserves our ability to deduct the amounts paid to executive officers, although to maintain flexibility in compensating Named Executives in a manner designed to promote varying corporate goals, the Compensation Committee may award compensation that is not fully deductible when it deems such award to be in the best interest of the Company. Due to our substantial net operating loss carryforwards from bankruptcy, this has no impact on our post-tax results.

40



Report of the Compensation Committee
The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” section of this proxy statement with the Company’s management. Based on this review and discussion, the Compensation Committee recommended to our Board of Directors that the “Compensation Discussion and Analysis” section be included in this proxy statement and the Company’s 2014 annual report.
Robert A. Mosbacher, Jr. (Chair)
Frank Cassidy
Michael W. Hofmann
Denise M. O’Leary


41



EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain information concerning the compensation for services rendered to us during the years ended December 31, 2014, 2013 and 2012 by (i) each person serving as a principal executive officer during the year ended December 31, 2014, (ii) each person serving as a principal financial officer during the year ended December 31, 2014, (iii) each of the three other most highly-compensated individuals who were serving as executive officers as of December 31, 2014 (collectively, “the named executive officers”):
 
 
 
 
 
 
 
 
 
 
Non-Equity
 
 
 
 
 
 
 
 
 
 
Stock
 
Option
 
Incentive Plan
 
All Other
 
 
 
 
 
 
Salary
 
Awards
 
Awards
 
Compensation
 
Compensation
 
Total
Name and Principal Position
 
Year
 
($)
 
($)(1)
 
($)(1)
 
($)(2)
 
($)(3)
 
($)
Jack A. Fusco
 
2014
 
913,226

 
5,451,311

 

 
1,278,610

 
13,000

 
7,656,147

Executive Chairman
 
2013
 
1,289,880

 
5,387,206

 

 
1,376,523

 
17,783

 
8,071,392

 
 
2012
 
1,180,499

 
4,999,986

 

 
1,761,472

 
29,412

 
7,971,369

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John B. (Thad) Hill III
 
2014
 
895,903

 
2,544,976

 

 
1,152,010

 
13,000

 
4,605,889

President and Chief Executive Officer
 
2013
 
694,494

 
1,482,355

 

 
668,622

 
77,750

 
2,923,221

 
 
2012
 
670,676

 
1,338,986

 

 
937,650

 
12,500

 
2,959,812

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Zamir Rauf
 
2014
 
594,647

 
1,292,311

 

 
745,268

 
13,000

 
2,645,226

Executive Vice President and
 
2013
 
588,789

 
1,239,895

 

 
559,265

 
12,750

 
2,400,699

Chief Financial Officer
 
2012
 
558,280

 
325,169

 
716,249

 
778,211

 
12,500

 
2,390,409

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W. Thaddeus Miller
 
2014
 
816,493

 
1,758,932

 

 
1,014,362

 
13,000

 
3,602,787

Executive Vice President,
 
2013
 
807,975

 
1,687,623

 

 
761,201

 
14,427

 
3,271,226

Chief Legal Officer and
 
2012
 
771,676

 
1,524,390

 

 
1,067,479

 
18,137

 
3,381,682

Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Steven D. Pruett
 
2014
 
506,095

 
1,072,200

 

 
639,529

 
13,000

 
2,230,824

Executive Vice President and
 
 
 
 
 
 
 
 
 
 
 
 
 


Chief Commercial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John M. Adams
 
2014
 
405,223

 
643,302

 

 
336,967

 
13,000

 
1,398,492

Executive Vice President,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Power Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________
(1)
The amounts set forth next to each award represent the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. The stock awards granted in 2014 were issued in the form of restricted stock and performance share units. For discussion of the assumptions used in these valuations, see Note 12 of the Notes to Consolidated Financial Statements included in the Company’s 2014 annual report. Assuming the maximum performance levels were probable on the grant date for the performance share units, the grant date fair values for each of our named executive officers performance share units awarded in 2014 would be as follows: $5,902,644 for Mr. Fusco, $1,672,914 for Mr. Hill, $1,399,307 for Mr. Rauf, $1,904,560 for Mr. Miller, $944,407 for Mr. Pruett and $566,617 for Mr. Adams.
(2)
Bonus paid pursuant to the CIP and/or the named executive officer’s employment agreement or letter agreement, as applicable.
(3)
For 2014, the amounts set forth under “All Other Compensation” include $13,000 of employer contributions to the Company’s 401(k) plan.

42



Grants of Plan-Based Awards
The following table sets forth the information concerning the grants of any plan-based compensation to each named executive officer during 2014. The non-equity awards described below were made under the CIP. The equity awards described below were made under the Equity Incentive Plan.
 
 
 
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)
 
Estimated Future Payouts Under Equity Incentive Plan Awards(2)
All other Stock Awards: Number of Shares of Stock or Units (#)
 
 
Grant Date Fair Value of Stock and Option Awards ($)
Name
 
Grant Date
 
Threshold ($)
 
Target
($)
 
Maximum
($)
 
Threshold(#)(3)
 
Target (#)
 
Maximum(#)
Jack A. Fusco
 
2/26/2014

 
 

 
 

 
 

 

 

 

130,821

(4)
 
 
2,499,989

 
 
2/26/2014

 
 

 
 

 
 

 
65,411

 
130,821