Exhibit 1.1
EXECUTION COPY
SHARE LENDING AGREEMENT
Dated as of September 28, 2004
Among
CALPINE CORPORATION ("LENDER"),
and
DEUTSCHE BANK AG LONDON ("BORROWER"), through DEUTSCHE BANK SECURITIES
INC., as agent for Borrower ("BORROWING AGENT"),
and
DEUTSCHE BANK SECURITIES INC., in its capacity as Collateral Agent (as
hereinafter defined).
This AGREEMENT sets forth the terms and conditions under which Borrower
may, from time to time, borrow from Lender shares of Common Stock.
The parties hereto agree as follows:
Section 1. Certain Definitions. The following capitalized terms shall have
the following meanings:
"BUSINESS DAY" means, with respect to any Loan hereunder, a day on which
regular trading occurs in the principal trading market for the Common Stock.
"CASH" means any coin or currency of the United States as at the time
shall be legal tender for payment of public and private debts.
"CLEARING ORGANIZATION" means The Depository Trust Company, or, if agreed
to by Borrower and Lender, such other Securities Intermediary at which Borrower
(or Borrowing Agent) and Lender maintain accounts.
"CLOSING PRICE" on any day means, with respect to the Common Stock (i) if
the Common Stock is listed on a U.S. securities exchange registered under the
Exchange Act, is traded on The Nasdaq National Market or is included in the OTC
Bulletin Board Service (operated by the National Association of Securities
Dealers, Inc.), the last reported sale price, regular way, in the principal
trading session on such day on such market on which the Common Stock is then
listed or is admitted to trading (or, if the day of determination is not a
Business Day, the last preceding Business Day) and (ii) if the Common Stock is
not so listed or
admitted to trading or if the last reported sale price is not obtainable (even
if the Common Stock is listed or admitted to trading on such market ), the
average of the bid prices for the Common Stock obtained from as many dealers in
the Common Stock (which may include Borrower or its affiliates), but not
exceeding three, as shall furnish bid prices available to the Lender.
"COLLATERAL" means any Cash or Non-Cash Collateral. Each of the parties to
this Agreement hereby agree that Cash and each item within the definition of
Non-Cash Collateral shall be treated as a "financial asset" as defined by
Section 8-102(a)(9) of the UCC.
"COLLATERAL ACCOUNT" means the securities account of the Collateral Agent
maintained on the books of Deutsche Bank Securities Inc., as securities
intermediary, and designated "Deutsche Bank Securities Inc., as Collateral Agent
of Calpine Corporation, as pledgee of Deutsche Bank AG, as Borrower of Loaned
Shares". Any Collateral deposited in the Collateral Account shall be segregated
from all other assets and property of the Collateral Agent, which such
segregation may be accomplished by appropriate identification on the books and
records of Collateral Agent, as a "securities intermediary" within the meaning
of the UCC. The Securities Intermediary acknowledges that the Collateral Account
is maintained for the Collateral Agent and undertakes to treat the Collateral
Agent as entitled to exercise the rights that comprise the Collateral credited
to the Collateral Account.
"COLLATERAL AGENT" means Deutsche Bank Securities Inc., in its capacity as
collateral agent for Lender hereunder, or any successor thereto under Section
20.
"COLLATERAL PERCENTAGE" means 100%.
"CONVERTIBLE NOTES" means the $725,000,000 aggregate principal amount at
maturity of Contingent Convertible Notes due 2014 issued by Lender, or up to
$833,750,000 aggregate principal amount maturity to the extent the
over-allotment option to purchase additional Convertible Notes is exercised in
full.
"COMMON STOCK" means shares of Common Stock, par value $.001, of Lender,
or any other security into which the Common Stock shall be exchanged or
converted as the result of any merger, consolidation, other business
combination, reorganization, reclassification, recapitalization or other
corporate action (including, without limitation, a reorganization in
bankruptcy), in each case not involving an Unaffiliated Third Party.
"CUTOFF TIME" shall mean 10:00 a.m. in the jurisdiction of the Clearing
Organization, or such other time on a Business Day by which a transfer of Loaned
Shares must be made by Borrower or Lender to the other, as shall be determined
in accordance with market practice.
2
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"LOAN AVAILABILITY PERIOD" means the period beginning on the date hereof
and ending on the earlier of (i) September 30, 2014, (ii) the date as of which
the entire principal amount of Convertible Notes ceases to be outstanding,
whether as a result of conversion, redemption, repurchase, cancellation or
otherwise and (iii) the date on which this Agreement shall terminate in
accordance with the terms of this Agreement.
"LOANED SHARES" means shares of Common Stock transferred in a Loan
hereunder until such Common Stock (or identical Common Stock) is transferred
back to Lender hereunder. If, as the result of a stock dividend, stock split or
reverse stock split, the number of outstanding shares of Common Stock is
increased or decreased, then the number of outstanding Loaned Shares shall be
proportionately increased or decreased, as the case may be. If any new or
different security (or two or more securities) shall be exchanged for the
outstanding shares of Common Stock as the result of any reorganization, merger,
consolidation, reclassification, recapitalization or other corporate action
(including, without limitation, a reorganization in bankruptcy) not involving an
Unaffiliated Third Party, such new or different security (or such two or more
securities collectively) shall, effective upon such exchange, be deemed to
become a Loaned Share in substitution for the former Loaned Share for which such
exchange is made.
"MARKET VALUE" on any day means (i) with respect to Common Stock, the most
recent Closing Price of the Common Stock prior to such day and (ii) with respect
to any Collateral that is (a) Cash, the face amount thereof, (b) a letter of
credit, the undrawn amount thereof and (c) any other security or property, the
market value thereof, as determined by the Collateral Agent, in accordance with
market practice for such securities or property, based on the price for such
security or property as of the most recent close of trading obtained from a
generally recognized source or the closing bid quotation at the most recent
close of trading obtained from such source, plus accrued interest to the extent
not included therein, unless market practice with respect to the valuation of
such securities or property in connection is to the contrary.
"MAXIMUM NUMBER OF SHARES" means 89,000,000 shares of Common Stock,
subject to the following adjustments:
(a) If, as the result of a stock dividend, stock split or reverse stock
split, the number of outstanding shares of Common Stock is increased or
decreased, the Maximum Number of Shares shall, effective as of the payment or
delivery date of any such event, be proportionally increased or decreased, as
the case may be.
(b) If, pursuant to a merger, consolidation, other business combination,
reorganization, reclassification, recapitalization or other corporate action
(including, without limitation, a reorganization in bankruptcy), in each case
3
involving an Unaffiliated Third Party, the Common Stock is exchanged for or
converted into cash, securities or other property, the Maximum Number of Shares
shall be reduced to zero on the effective date of such event.
(c) If Lender issues any shares of Common Stock upon conversion of any
Convertible Notes, the Maximum Number of Shares shall, effective as of the
delivery date of such shares of Common Stock, be reduced by the number of shares
so delivered upon conversion
(d) Upon the termination of any Loan pursuant to Section 6(a) the Maximum
Number of Shares shall be reduced by the number of Loaned Shares surrendered by
Borrower to Lender; provided that if the number of Loaned Shares offered and
sold by Borrower in a registered public offering under the Securities Act of
1933, as amended, on or about the date of this Agreement is less than 89,000,000
(the "UNSOLD AMOUNT"), any termination of a Loan of the Unsold Amount prior to
March 28, 2005, shall not so reduce the Maximum Number of Shares.
"NON-CASH COLLATERAL" means (i) any evidence of indebtedness issued, or
directly and fully guaranteed or insured, by the United States of America or any
agency or instrumentality thereof; (ii) any deposits, certificates of deposit or
acceptances of any institution which is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than $500
million at the time of deposit (and which may include the Collateral Agent or
any affiliate of the Collateral Agent so long as the Collateral Agent is other
than Borrower or an affiliate of Borrower); (iii) any investments of any Person
that is fully and unconditionally guaranteed by a bank referred to in clause
(ii); (iv) any repurchase agreements and reverse repurchase agreements relating
to marketable direct obligations issued or unconditionally guaranteed by the
United States of America or issued by any agency thereof and backed as to timely
payment by the full faith and credit of the United States of America; (v)
commercial paper of any corporation incorporated under the laws of the United
States or any State thereof that is rated "investment grade" A-1 by Standard &
Poor's Rating Group, a division of McGraw Hill Inc., or any successor thereto,
or P-1 by Xxxxx'x Investors Services, Inc., or any successor thereto; (vi) any
money market funds (including, but not limited to, money market funds managed by
the Collateral Agent or an affiliate of the Collateral Agent) registered under
the Investment Company Act of 1940, as amended; (vii) any letter of credit
issued by a bank referred to in clause (ii); and (viii) all proceeds of the
foregoing; provided that in no event shall Non-Cash Collateral include "margin
stock" as defined by Regulation U of the Board of Governors of the Federal
Reserve System.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York on the date hereof and as it may be amended from time to time.
"UNAFFILIATED THIRD PARTY" shall mean, with respect to any transaction by
the Company, any person that the Company does not "control" (as that term is
4
defined by Rule 12b-2 under the Exchange Act) immediately prior to the
transaction.
"SECURITIES INTERMEDIARY" means a "securities intermediary" as defined by
Section 8-102(a)(14) of the UCC.
Section 2. Loans Of Shares; Transfers of Loaned Shares
(a) Subject to the terms and conditions of this Agreement, Lender hereby
agrees to make available for borrowing by Borrower, at any time and from time to
time, during the Loan Availability Period, shares of Common Stock up to, in the
aggregate, the Maximum Number of Shares.
(b) Subject to the terms and conditions of this Agreement, Borrower may,
from time to time, by written notice to Lender (a "BORROWING NOTICE"), seek to
initiate a transaction in which Lender will lend Loaned Shares to Borrower
through the issuance by Lender of such Loaned Shares to Borrower upon the terms,
and subject to the conditions, set forth in this Agreement (each such issuance
and loan, a "LOAN"). Such Loan shall be confirmed by a schedule and receipt
listing the Loaned Shares provided by Lender to Borrower (the "CONFIRMATION").
Such Confirmation shall constitute conclusive evidence with respect to the Loan,
including the number of shares of Common Stock that are the subject of the Loan,
to which the Confirmation relates, unless a written objection to the
Confirmation specifying the reasons for the objection is received by Lender
within five Business Days after the delivery of the Confirmation to Borrower;
provided that in no event shall the delivery of the Confirmation or any such
objection thereto delay the transfer of Loaned Shares to which a Borrowing
Notice relates pursuant to clause (d) below.
(c) Notwithstanding anything to the contrary in this Agreement, Borrower
shall not be permitted to borrow, and may not initiate a Loan hereunder with
respect to, any shares of Common Stock at any time to the extent that Borrower
determines that any Loan of such shares of Common Stock shall cause Borrower to
become, directly or indirectly, a "beneficial owner" (within the meaning of
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) of more than 9.9% of the shares of Common Stock outstanding at such
time. Under no circumstances shall Lender be liable to Borrower for any Loan in
contravention of this Section 2(c).
(d) Lender shall transfer Loaned Shares to Borrower on or before the
Cutoff Time on the date specified in the Borrowing Notice for the commencement
of the Loan, which date shall not be earlier than the third Business Day
following the receipt by Lender of the Borrowing Notice. Delivery of the Loaned
Shares to Borrower shall be made in the manner set forth under Section 13 below.
Section 3. Collateral.
5
(a) Unless otherwise agreed by Borrower and Lender, Borrower shall, prior
to or concurrently with the transfer of the Loaned Shares to Borrower, but in no
case later than the close of business on the day of such transfer, transfer to
Collateral Agent, for deposit to the Collateral Account, Collateral with a
Market Value at least equal to the Collateral Percentage of the Market Value of
the Loaned Shares as of the date of such transfer.
(b) Any Collateral transferred by Borrower to Collateral Agent shall be
security for Borrower's obligations in respect of the Loaned Shares and for any
other obligations of Borrower to Lender hereunder. Borrower hereby pledges with,
assigns to, and grants Collateral Agent for the benefit of Lender a continuing
first priority security interest in, and a lien upon, the Collateral, which
shall attach upon the transfer of the Loaned Shares by Lender to Borrower and
which shall cease upon the transfer of the Loaned Shares by Borrower to Lender
or upon the transfer of any such Collateral to Borrower in accordance with the
terms of this Agreement. In addition to the rights and remedies given to Lender
hereunder, Lender shall have all the rights and remedies of a secured party
under the UCC. Notwithstanding anything to the contrary herein, Lender may not
use or invest the Collateral and Collateral Agent shall take no instruction from
Lender regarding the use or investment of Collateral.
(c) Following the transfer to Lender of Loaned Shares pursuant to Section
6, Collateral Agent shall release to Borrower Collateral with a Market Value
equal to the Collateral Percentage of the Market Value of the Loaned Shares so
transferred but only to the extent that immediately following such transfer of
Collateral, no Collateral Deficit would exist. Such transfer of Collateral shall
be made no later than the Cutoff Time on the day the Loaned Shares are
transferred, or if such day is not a day on which a transfer of such Collateral
may be effected under Section 13, or if the transfer of Loaned Shares by Lender
to Borrower occurs after the Cutoff Time on such day, then in each case the next
day on which such a transfer may be effected.
(d) If Borrower transfers Collateral to Collateral Agent, as provided in
this Section 3, and Lender does not transfer the Loaned Shares to Borrower,
Borrower shall have the absolute right to the return of the Collateral; and if
Lender transfers Loaned Shares to Borrower and Borrower does not transfer
Collateral to Collateral Agent as provided in this Section 3, Lender shall have
the absolute right to the return of the Loaned Shares.
(e) Borrower may, upon notice to Lender and Collateral Agent, substitute
Collateral for Collateral securing any Loan or Loans; provided that such
substituted Collateral shall have a Market Value such that the aggregate Market
Value of such substituted Collateral, together with all other Collateral, shall
equal or exceed the Collateral Percentage of the Market Value of the Loaned
Shares as of the date of such substitution.
Section 4. Xxxx To Market.
6
(a) If at the close of trading on any Business Day during the Loan
Availability Period the aggregate Market Value of all Collateral shall be less
than the Collateral Percentage of the Market Value of all the outstanding Loaned
Shares (a "COLLATERAL DEFICIT"), Lender may, by notice to Borrower and
Collateral Agent, demand that Borrower transfer to Collateral Agent, for deposit
to the Collateral Account, no later than the following Business Day, additional
Collateral so that the Market Value of such additional Collateral, when added to
the Market Value of all other Collateral, shall equal or exceed the Collateral
Percentage of the Market Value of the Loaned Shares on such Business Day of
determination.
(b) If at the close of trading on any Business Day during the Loan
Availability Period the aggregate Market Value of all Collateral shall be
greater than the Collateral Percentage of the Market Value of all the
outstanding Loaned Shares (a "COLLATERAL EXCESS"), Borrower may, by notice to
Lender and Collateral Agent, demand that Collateral Agent transfer to Borrower
such amount of the Collateral selected by Borrower so that the Market Value of
the Collateral, after deduction of such amounts, shall thereupon be at least
equal to the Collateral Percentage of the Market Value of the Loaned Shares on
such Business Day of determination.
(c) Notwithstanding the foregoing, with respect to any outstanding Loans
secured by Collateral, the respective rights of Lender and Borrower under
Section 4(a) and Section 4(b) may be exercised only where a Collateral Excess or
Collateral Deficit exceeds 2% of the Market Value of the Loaned Shares.
Section 5. Loan Fee. Borrower agrees to pay Lender a single loan fee per
Loan (a "LOAN FEE") equal to $.001 per Loaned Share. The Loan Fee shall be paid
by Borrower on or before the time of transfer of the Loaned Shares pursuant to
Section 2(d) on a delivery-versus-payment basis through the facilities of the
Clearing Organization.
Section 6. Loan Terminations.
(a) Borrower may terminate all or any portion of a Loan on any Business
Day by giving written notice thereof to Lender and transferring the
corresponding number of Loaned Shares to Lender , without any consideration
being payable in respect thereof by Lender to Borrower.
(b) All outstanding Loans, if any, on the last day of the Loan
Availability Period shall terminate on the first Business Day following the last
day of the Loan Availability Period (the "FACILITY TERMINATION DATE") and all
outstanding Loaned Shares shall be delivered by Borrower to Lender, without any
consideration being payable in respect thereof by Lender to Borrower, no later
than the fifth Business Day following the Facility Termination Date
(c) If on any date, the number of Loaned Shares exceeds the Maximum Number
of Shares, the number of Loaned Shares in excess of the Maximum
7
Number of Shares shall be delivered by Borrower to Lender, without any
consideration being payable in respect thereof by Lender to Borrower, no later
than the third Business Day following such date.
(d) If a Loan is terminated upon the occurrence of a Default as set forth
in Section 11, the Loaned Shares shall be delivered by Borrower to Lender,
without any consideration being payable in respect thereof by Lender to
Borrower, no later than the third Business Day following the termination date of
such Loan as provided in Section 11.
Section 7. Distributions.
(a) If at any time when there are Loaned Shares outstanding under this
Agreement, Lender pays a cash dividend or makes a cash distribution in respect
of its outstanding Common Stock to the then holder or holders of such Loaned
Shares, Borrower shall pay to Lender (whether or not Borrower is a holder of any
or all of the outstanding Loan Shares), within one Business Day after the
payment of such dividend or distribution, an amount in cash equal to the product
of (i) the amount per share of such dividend or distribution and (ii) the number
of Loaned Shares on which the dividend or distribution was paid.
(b) If at any time when there are Loaned Shares outstanding under this
Agreement, Lender makes a distribution in respect of its outstanding Common
Stock in property or securities, including any options, warrants, rights or
privileges in respect of securities (other than a distribution of Common Stock,
but including any options, warrants, rights or privileges exercisable for,
convertible into or exchangeable for Common Stock) to the then holder or holders
of such Loaned Shares (a "NON-CASH DISTRIBUTION"), Borrower shall deliver to
Lender (whether or not Borrower is a holder of any or all of the outstanding
Loan Shares) in kind, within one Business Day after the date of such Non-Cash
Distribution, the property or securities distributed in an amount equal to the
product of (i) the amount per share of Common Stock of such Non-Cash
Distribution and (ii) the number of Loaned Shares on which such Non-Cash
Distribution was made.
(c) Any interest, cash distribution or cash dividend made on or in respect
of any Collateral for any Loan hereunder, shall, subject to (e) below, be
delivered by the Collateral Agent to Borrower , on the date such interest, cash
distribution or cash dividend is received by the Collateral Agent.
(d) Any non-cash distributions or dividend made on or in respect of any
Collateral for any Loan hereunder shall, subject to (e) below, be delivered by
the Collateral Agent to Borrower on the date such non-cash distribution or
dividend is received by the Collateral Agent.
(e) If the cash or other property received by the Collateral Agent under
the provisions of paragraph (c) or (d) of this Section 7 qualifies as
Collateral, to the extent that a transfer of such cash or other property to
Borrower by the Collateral
8
Agent would give rise to a Collateral Deficit, the Collateral Agent shall (only
to the extent of any such Collateral Deficit) not make such transfer of cash or
other property in accordance with this Section 7, but shall in lieu of such
transfer immediately credit the amounts that would have been transferable under
this Section 7 to the Collateral Account.
Section 8. Rights in Respect of Loaned Shares.
(a) Subject to the terms of this Agreement, and except as otherwise agreed
by Borrower and Lender, Borrower, insofar as it is the record owner of Loaned
Shares, shall have all of the incidents of ownership in respect of any such
Loaned Shares until such Loaned Shares are required to be delivered to Lender in
accordance with the terms of this Agreement, including the right to transfer the
Loaned Shares to others.
Section 9. Representations and Warranties.
(a) Each of Borrower and Lender represent and warrant to the other that:
(i) it has full power to execute and deliver this Agreement, to
enter into the Loans contemplated hereby and to perform its obligations
hereunder;
(ii) it has taken all necessary action to authorize such execution,
delivery and performance;
(iii) this Agreement constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms; and
(iv) the execution, delivery and performance of this Agreement does
not and will not violate, contravene, or constitute a default under, (A)
its certificate of incorporation, bylaws or other governing documents, (B)
any laws, rules or regulations of any governmental authority to which it
is subject, (C) any contracts, agreements or instrument to which it is a
party or (D) any judgment, injunction, order or decree by which it is
bound.
(b) Lender represents and warrants to Borrower, as of the date hereof, and
as of the date any Loaned Shares are transferred to Borrower in respect of any
Loan hereunder, that the Loaned Shares and all other outstanding shares of
Common Stock of the Company have been duly authorized and, upon the issuance and
delivery of the Loaned Shares to Borrower in accordance with the terms and
conditions hereof, and subject to the contemporaneous or prior receipt of the
applicable Loan Fee by Lender, will be duly authorized, validly issued, fully
paid nonassessible shares of Common Stock; and the stockholders of Lender have
no preemptive rights with respect to the Loaned Shares.
9
(c) Lender represents and warrants to Borrower, as of the date hereof, and
as of the date any Loaned Shares are transferred to Borrower in respect of any
Loan hereunder, that the outstanding shares of Common Stock are listed on the
New York Stock Exchange (the "STOCK EXCHANGE") and the Loaned Shares have been
approved for listing on the Stock Exchange, subject to official notice of
issuance.
(d) Borrower represents to Lender that it has, or at the time of transfer
to the Collateral Agent shall have, the right to grant to Borrower, and that
Borrower shall acquire, a continuing first priority security interest in the
Collateral.
(e) The representations and warranties of Borrower and Lender under this
Section 9 shall remain in full force and effect at all times during the term of
this Agreement and shall survive the termination for any reason of this
Agreement.
Section 10. Covenants.
(a) Borrower covenants and agrees with Lender that, in so far as it is the
record owner of any Loaned Shares, such Loaned Shares will be used solely for
the purpose of directly or indirectly facilitating the sale of the Convertible
Notes and the hedging of the Convertible Notes by the holders thereof.
(b) The parties hereto acknowledge that Borrower has informed Lender that
Borrower is a "financial institution" within the meaning of Section 101(22) of
Title 11 of the United States Code (the "BANKRUPTCY CODE"). The parties hereto
further acknowledge and agree that (i) each Loan hereunder is intended to be a
"securities contract," as such term is defined in Section 741(7) of the
Bankruptcy Code; (ii) each and every transfer of funds, securities and other
property under this Agreement is intended to be a "settlement payment" or a
"margin payment," as such terms are used in Sections 362(b)(6) and 546(e) of the
Bankruptcy Code; and (iii) the rights given to Lender hereunder upon a Default
by Borrower are intended to constitute the rights to cause the liquidation of a
securities contract and to set off mutual debts and claims in connection with a
securities contract, as such terms are used in Sections 555 and 362(b)(6) of the
Bankruptcy Code.
Section 11. Events of Default.
(a) All Loans, and any further obligation to make Loans under this
Agreement, may, at the option of Lender by a written notice to Borrower (which
option shall be deemed exercised, even if no notice is given, immediately on the
occurrence of an event specified in either Section 11(a)(iv) or Section 11(a)(v)
below), be terminated (i) immediately on the occurrence of any of the events set
forth in Section 11(a)(iv) or Section 11(a)(v) below and (ii) two Business Days
following such notice on the occurrence of any of the other events set forth
below, (each, a "DEFAULT"):
10
(i) Borrower fails to deliver Loaned Shares to Lender as required by
Section 6;
(ii) Borrower fails to deliver or pay to Lender when due any cash,
securities or other property as required by Section 7;
(iii) Borrower fails to transfer Collateral when due as required by
Section 3 and Section 4;
(iv) the filing by or on behalf of Borrower of a voluntary petition
or an answer seeking reorganization, arrangement, readjustment of its
debts or for any other relief under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution,
winding-up or liquidation or similar act or law, of any state, federal or
other applicable foreign jurisdictions, now or hereafter existing
("BANKRUPTCY LAW"), or any action by Borrower for, or consent or
acquiescence to, the appointment of a receiver trustee or other custodian
of Borrower, or of all or a substantial part of its property; or the
making by Borrower of a general assignment for the benefit of creditors;
or the admission by Borrower in writing of its inability to pay its debts
as they become due;
(v) the filing of any involuntary petition against Borrower in
bankruptcy or seeking reorganization, arrangement, readjustment of its
debts or for any other relief under any Bankruptcy Law and an order for
relief by a court having jurisdiction in the premises shall have been
issued or entered therein; or any other similar relief shall be granted
under any applicable federal or state law or law of any other applicable
foreign jurisdictions; or a decree or order of a court having jurisdiction
in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer having similar powers over Borrower
or over all or a part of its property shall have been entered; or the
involuntary appointment of an interim receiver, trustee or other custodian
of Borrower or of all or a substantial part of its property; or the
issuance of a warrant of attachment, execution or similar process against
any substantial part of the property of Borrower; and continuance of any
such event for 15 consecutive calendar days unless dismissed, bonded to
the satisfaction of the court having jurisdiction in the premises or
discharged;
(vi) Borrower fails to provide any indemnity as required by Section
14;
(vii) Borrower notifies Lender of its inability to or intention not
to perform Borrower's obligations hereunder or otherwise disaffirms,
rejects or repudiates any of its obligations hereunder; or
11
(viii) Any representation made by Borrower under this Agreement in
connection with any Loan or Loans hereunder shall be incorrect or untrue
in any material respect during the term of any Loan hereunder or Borrower
fails to comply in any material respect with any of its covenants under
this Agreement.
Section 12. Lender's Remedies.
(a) Upon the termination of any Loan by Lender under Section 11, Borrower
may, with the prior written consent of Lender, in lieu of the delivery of Loaned
Shares to Lender in accordance with Section 6(d), pay to Lender, no later than
one Business Day following notice of such Default to Borrower, an amount in
immediately available funds (the "REPLACEMENT CASH") equal to the product of the
Closing Price as of the date of such notice of Default and the number of Loaned
Shares otherwise required to be delivered; provided that if Lender consents to
the delivery of Replacement Cash, Borrower may direct the Collateral Agent to
deliver to Lender any Collateral held by the Collateral Agent in respect of the
Loan so terminated and, to the extent the Market Value of any such Collateral
delivered to Lender is less than the required amount of Replacement Cash, pay to
Lender such difference in immediately available funds. Any Collateral in respect
of the Loan so terminated that is not so delivered to Lender pursuant to this
clause shall, upon payment in full of the Replacement Cash to Lender, be
immediately delivered by Collateral Agent to Borrower.
(b) Notwithstanding anything to the contrary herein, if, upon the
termination of any Loan by Lender under Section 11 and, at the time of such
termination, the purchase of Common Stock in an amount equal to the Loaned
Shares to be delivered to Lender in accordance with Section 6(d) shall (i) be
prohibited by any law, rules or regulation of any governmental authority to
which it is or would be subject, (ii) violate, or would upon such purchase
likely violate, any order or prohibition of any court, tribunal or other
governmental authority or (iii) require the prior consent of any court, tribunal
or governmental authority prior to any such repurchase (each of (i), (ii) and
(iii), a ("LEGAL OBSTACLE"), then, in each case, Borrower shall immediately
notify Lender of the Legal Obstacle and the basis therefor, whereupon Borrower's
obligations under Section 6(d) shall be suspended until such time as no Legal
Obstacle with respect to such obligations shall exist (a "REPAYMENT
SUSPENSION"). Upon notification of a Repayment Suspension and for so long as the
Repayment Suspension shall continue, Lender shall have the right, exercisable in
it sole discretion, to direct the Collateral Agent to, and the Collateral Agent
upon receipt of the written request of Lender (with a copy to Borrower) shall,
release to Lender an amount of Collateral with a Market Value equal to the
Market Value of all (or such fewer number as Lender may specify) of the Loaned
Shares that are the subject of the Repayment Suspension, whereupon the
Borrower's obligation to return the specified number of Loaned Shares to the
Lender shall be automatically extinguished.
12
(c) If Borrower shall fail to deliver Loaned Shares to Lender pursuant to
Section 6(d) when due or shall fail to pay the Replacement Cash to Lender when
due in accordance with Section 12(a) or (b) above (to the extent Borrower is
permitted and elects to pay Replacement Cash), then, in either case, in addition
to any other remedies available to Lender under this Agreement or under
applicable law, Lender shall have the right (without further notice to Borrower)
to (i) purchase a like amount of Loaned Shares ("REPLACEMENT SHARES") in the
principal market for such securities in a commercially reasonable manner, (ii)
sell any Collateral in the principal market for such Collateral in a
commercially reasonable manner and (iii) apply and set off the Collateral and
any proceeds thereof (including any amounts drawn under a letter of credit
supporting any Loan) against the payment of the purchase price for such
Replacement Shares and any amounts due to Lender under this Agreement. To the
extent Lender shall exercise such right, Borrower's obligation to return a like
amount of Loaned Shares or to pay the Replacement Cash, as applicable, shall
terminate and Borrower shall be liable to Lender for the purchase price of
Replacement Shares (plus all other amounts, if any, due to Lender hereunder). In
the event that (i) the purchase price of Replacement Shares (plus all other
amounts, if any, due to Lender hereunder) exceeds (ii) the amount of the
Collateral, Borrower shall be liable to Lender for the amount of such excess.
The purchase price of Replacement Shares purchased under this Section 12 shall
include, and the proceeds of any sale of Collateral shall be determined after
deduction of, broker's fees and commissions and all other reasonable costs, fees
and expenses related to such purchase and sale. In the event Lender exercises
its rights under this Section 12, Lender may elect in its sole discretion, in
lieu of purchasing all or a portion of the Replacement Shares or selling all or
a portion of the Collateral, to be deemed to have made, respectively, such
purchase of Replacement Shares or sale of Collateral for an amount equal to the
Closing Price of the Common Stock on the date Lender elects to exercise this
remedy. Upon the satisfaction of all Borrower's obligations hereunder, any
remaining Collateral shall be returned to Borrower.
Section 13. Transfers.
(a) All transfers of Loaned Shares to Borrower or to Lender hereunder
shall be made by the crediting by a Clearing Organization of such financial
assets to the transferee's "securities account" (within the meaning of Section
8-501 of the UCC) maintained with such Clearing Organization. All transfers of
Collateral to Collateral Agent by Borrower shall be made by crediting the
Collateral Account. All transfers of Collateral to Lender by Collateral Agent
shall be made in the manner directed by Lender. In every transfer of "financial
assets" (within the meaning of Section 8-102 of the UCC) hereunder, the
transferor shall take all steps necessary (a) to effect a delivery to the
transferee under Section 8-301 of the UCC, or to cause the creation of a
security entitlement in favor of the transferee under Section 8-501 of the UCC,
(b) to enable the transferee to obtain "control" (within
13
the meaning of Section 8-106 of the UCC), and (c) to provide the transferee with
comparable rights under any applicable foreign law or regulation.
(b) All transfers of cash hereunder to Borrower or Lender shall be by wire
transfer in immediately available, freely transferable funds.
(c) A transfer of securities or cash may be effected under this Section 13
on any day except (i) a day on which the transferee is closed for business at
its address set forth in Section 17 or (ii) a day on which a Clearing
Organization or wire transfer system is closed, if the facilities of such
Clearing Organization or wire transfer system are required to effect such
transfer.
Section 14. Indemnities.
(a) Lender hereby agrees to indemnify and hold harmless Borrower and its
affiliates and its former, present and future directors, officers, employees and
other agents and representatives from and against any and all liabilities,
judgments, claims, settlements, losses, damages, fees, liens, taxes, penalties,
obligations and expenses incurred or suffered by any such person or entity
directly or indirectly arising from, by reason of, or in connection with, (i)
any breach by Lender of any of its representations or warranties contained in
Section 9 or (ii) any breach by Lender of any of its covenants or agreements in
this Agreement.
(b) Borrower hereby agrees to indemnify and hold harmless Lender and its
affiliates and its former, present and future directors, officers, employees and
other agents and representatives from and against any and all liabilities,
judgments, claims, settlements, losses, damages, fees, liens, taxes, penalties,
obligations and expenses incurred or suffered by any such person or entity
directly or indirectly arising from, by reason of, or in connection with (i) any
breach by Borrower of any of its representations or warranties contained in
Section 9 or (ii) any breach by Borrower of any of its covenants or agreements
in this Agreement.
(c) In case any claim or litigation which might give rise to any
obligation of a party under this Section 14 (each an "INDEMNIFYING PARTY") shall
come to the attention of the party seeking indemnification hereunder (the
"INDEMNIFIED PARTY"), the Indemnified Party shall promptly notify the
Indemnifying Party in writing of the existence and amount thereof; provided that
the failure of the Indemnified Party to give such notice shall not adversely
affect the right of the Indemnified Party to indemnification under this
Agreement, except to the extent the Indemnifying Party is materially prejudiced
thereby. The Indemnifying Party shall promptly notify the Indemnified Party in
writing if it accepts such claim or litigation as being within its
indemnification obligations under this Section 14. Such response shall be
delivered no later than 30 days after the initial notification from the
Indemnified Party; provided that, if the Indemnifying Party reasonably cannot
respond to such notice within 30 days, the Indemnifying Party shall respond to
the Indemnified Party as soon thereafter as reasonably possible.
14
(d) An Indemnifying Party shall be entitled to participate in and, if (i)
in the judgment of the Indemnified Party such claim can properly be resolved by
money damages alone and the Indemnifying Party has the financial resources to
pay such damages and (ii) the Indemnifying Party admits that this indemnity
fully covers the claim or litigation, the Indemnifying Party shall be entitled
to direct the defense of any claim at its expense, but such defense shall be
conducted by legal counsel reasonably satisfactory to the Indemnified Party. An
Indemnified Party shall not make any settlement of any claim or litigation under
this Section 14 without the written consent of the Indemnifying Party.
Section 15. Termination Of Agreement.
(a) This Agreement may be terminated (i) at any time by the written
agreement of Lender and Borrower, or (ii) by Lender upon the occurrence of a
Default.
(b) Unless otherwise agreed by Borrower and Lender, the provisions of
Section 14 shall survive the termination of this Agreement.
Section 16. Registration Provisions.
(a) If, following the initial Loan hereunder and registration of the
initial Loaned Shares in respect of such Loan, any subsequent Loan and public
sale of the Loaned Shares in respect of such subsequent Loan, in the reasonable
opinion of counsel to Borrower, would require registration under the Securities
Act of 1933, as amended, Lender shall register such sale in a form and manner
reasonably satisfactory to Borrower, and shall enter into an underwriting
agreement substantially in the form of the Underwriting Agreement dated as of
September 27, 2004 relating to the issuance and sale of such initial Loaned
Shares and shall afford Borrower and its representatives and agents an
opportunity to conduct an appropriate "due diligence" investigation to
Borrower's reasonable satisfaction, all at the expense of Lender. In no event
shall this Section 16 require Lender to register shares of Common Stock in
excess of the Maximum Number of Shares.
Section 17. Notices.
(a) All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when received.
(b) All such notices and other communications shall be directed to the
following address:
(i) If to Borrower or Borrowing Agent to:
Deutsche Bank Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
15
(ii) If to Collateral Agent to:
Deutsche Bank Securities Inc., as Collateral Agent for
Calpine Corporation
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
(iii) If to Securities Intermediary to:
Deutsche Bank Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
(iv) If to Lender to:
Calpine Corporation
00 Xxxx Xxx Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Attention: General Counsel
With a copy to:
Xxxxxxxxx & Xxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
(c) In the case of any party, at such other address as may be designated
by written notice to the other parties.
Section 18. Governing Law; Submission To Jurisdiction; Severability.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, but excluding any choice of law provisions
that would require the application of the laws of a jurisdiction other than New
York.
(b) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY
FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS
16
OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN
HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF
RESIDENCE OR DOMICILE.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(d) To the extent permitted by law, the unenforceability or invalidity of
any provision or provisions of this Agreement shall not render any other
provision or provisions herein contained unenforceable or invalid.
Section 19. Counterparts. This Agreement may be executed in any number of
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same agreement.
Section 20 . Designation Of Replacement Collateral Agent. If at any time
while this Agreement is in effect (i) Deutsche Bank Securities Inc. ceases to be
a Securities Intermediary or (ii) Lender shall determine, in its sole
discretion, that any of the relationships by or among the parties hereto are
reasonably likely to prevent Lender from acquiring, or jeopardize the
continuation of, Lender's continuing first priority security interest in the
Collateral as contemplated under Section 3(b), Lender shall be entitled to
designate a bank or trust company reasonably satisfactory to Borrower as a
successor Collateral Agent. In the event of a designation of a successor
Collateral Agent, each of the parties to this Agreement agrees to take all such
actions as are reasonably necessary to effect the transfer of rights and
obligations of Deutsche Bank Securities Inc. as Collateral Agent hereunder to
such successor Collateral Agent, including the execution and delivery of
amendments to this Agreement as shall be necessary to effect such designation
and transfer.
17
EXECUTION COPY
IN WITNESS WHEREOF, the parties hereto to have executed this Share Lending
Agreement as of the date and year first above written.
CALPINE CORPORATION DEUTSCHE BANK AG LONDON
as Lender as Borrower
By: /s/ Xxxx Xxxxx By: /s/ Xxxxxx Xxxxxxxxx
---------------------------- -----------------------------
Name: Xxxx Xxxxx Name: Xxxxxx Xxxxxxxxx
Title: Senior Vice President Title: Managing Director
By: /s/ Xxxxxx XxXxxxx
-----------------------------
Name: Xxxxxx XxXxxxx
Title: Managing Director, ECM
DEUTSCHE BANK SECURITIES INC. as
Collateral Agent
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Director
By: /s/ Xxxxxx Xxxx
-----------------------------
Name: Xxxxxx Xxxx
Title: Managing Director
DEUTSCHE BANK SECURITIES INC. DEUTSCHE BANK SECURITIES INC.
as Collateral Agent as Borrowing Agent
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------- -----------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx X. Xxxxx
Title: Managing Director Title: Managing Director
By: /s/ Xxxxxx Xxxx By: /s/ Xxxxxx Xxxx
---------------------------- -----------------------------
Name: Xxxxxx Xxxx Name: Xxxxxx Xxxx
Title: Managing Director Title: Managing Director
