Exhibit 10.12
SECURITY AGREEMENT
Dated as
of May 28, 1999
Between
CAITHNESS COSO FUNDING CORP.,
a Delaware corporation
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
TABLE OF CONTENTS
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Page
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PREFACE............................................................... 1
1. DEFINITIONS...................................................... 1
2. ASSIGNMENT, PLEDGE AND GRANT OF SECURITY INTEREST................ 2
3. OBLIGATIONS SECURED.............................................. 4
4. EVENTS OF DEFAULT................................................ 4
5. REMEDIES......................................................... 4
6. REMEDIES CUMULATIVE; DELAY NOT WAIVER............................ 6
7. COVENANTS........................................................ 6
8. REPRESENTATIONS AND WARRANTIES................................... 7
9. NOTICES.......................................................... 7
10. FURTHER ASSURANCES............................................... 8
11. PLACE OF PERFECTION; RECORDS..................................... 8
12. CONTINUING ASSIGNMENT AND SECURITY INTEREST; TRANSFER OF LOANS... 9
13. RELEASE OF COLLATERAL............................................ 9
14. ATTORNEYS' FEES.................................................. 9
15. SEVERABILITY..................................................... 10
16. TIME............................................................. 10
17. AGREEMENT FOR SECURITY PURPOSES.................................. 10
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18. LIABILITY........................................................ 10
19. GOVERNING LAW.................................................... 10
20. ATTORNEY-IN-FACT................................................. 10
21. REINSTATEMENT.................................................... 11
22. WAIVER OF JURY TRIAL............................................. 11
23. AMENDMENT........................................................ 11
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SECURITY AGREEMENT
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This Security Agreement ("Agreement"), dated as of May 28, 1999, is
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entered into by and between CAITHNESS COSO FUNDING CORP., a Delaware corporation
("Grantor"), and U.S. BANK TRUST NATIONAL ASSOCIATION, in its capacity as
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collateral agent ("Collateral Agent"), for the benefit of U.S. BANK TRUST
NATIONAL ASSOCIATION, in its capacity as trustee ("Trustee") for the holders of
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all senior secured notes issued pursuant to that certain Indenture dated as of
May 28, 1999 (the "Indenture") among Grantor, Trustee, COSO FINANCE PARTNERS, a
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California general partnership ("Navy I"), COSO ENERGY DEVELOPERS, a California
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general partnership ("BLM") and COSO POWER DEVELOPERS, a California general
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partnership ("Navy II" and together with Navy I and BLM the "Partnerships")
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(such notes, the "Senior Secured Notes", and the holders thereof, the "Holders
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of the Senior Secured Notes"), and all other Permitted Additional Senior Lenders
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(as defined in the Indenture).
PREFACE
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A. Grantor has, simultaneously with the execution and delivery of this
Agreement, issued $110,000,000 of Senior Secured Notes due 2001, and
$303,000,000 of Senior Secured Notes due 2009, the proceeds of which will be
used to make loans to the Partnerships.
B. Grantor desires now to grant Collateral Agent, for the benefit of
Trustee, the Holders of the Senior Secured Notes and the Permitted Additional
Senior Lenders, if any, a security interest in the Collateral (as defined below)
as security for the payment and performance of Grantor's obligations under the
Indenture.
AGREEMENT
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In consideration of the premises herein, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with the Collateral Agent as follows:
1. Definitions. (a) Unless otherwise defined, all terms used herein
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which are defined in the Indenture shall have their respective meanings therein
defined and the Rules of Interpretation included in the Indenture shall apply
hereto. All terms defined in the UCC shall have the respective meanings given to
those terms in the UCC; (b) "UCC" shall mean the Uniform Commercial Code as the
same may, from time to time, be in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of the security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
2. Assignment, Pledge and Grant of Security Interest.
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(a) To secure the timely payment and performance of the Obligations
(as that term is defined in Section 3), Grantor does hereby assign, grant and
pledge to, and subject to a security interest in favor of, the Collateral Agent,
on behalf of the Trustee, the Holders of the Senior Secured Notes, and the
Permitted Additional Senior Lenders, if any, all the estate, right, title and
interest of Grantor, whether now owned or hereafter acquired, in, to and under:
(i) the following agreements and documents, as amended,
supplemented, substituted, renewed or replaced from time to time (individually,
an "Assigned Agreement," collectively, the "Assigned Agreements") and all of
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Grantor's rights thereunder:
(A) Credit Agreement, dated as of May 28, 1999, by and
between Grantor and Navy I; and
(B) Credit Agreement, dated as of May 28, 1999, by and
between Grantor and BLM; and
(C) Credit Agreement, dated as of May 28, 1999, by and
between Grantor and Navy II.
(ii) all rents, profits, income, royalties and revenues
derived in any other manner by Grantor;
(iii) all other personal property and fixtures of Grantor,
whether now owned or existing or hereafter acquired or arising, or in which
Grantor may have an interest, and wheresoever located, whether or not of a type
which may be subject to a security interest under the UCC, including all
furnishings, furniture, equipment, motor vehicles, supplies, goods and property
covered by any warehouse receipts or bills of lading or other such documents,
spare parts, maps, plans, specifications, architectural, engineering,
construction or shop drawings, manuals or similar documents, copyrights,
trademarks and trade names, and any replacements, renewals or substitutions for
any of the foregoing or additional tangible or intangible personal property
hereafter acquired by Grantor;
(iv) all goods, money, instruments, investment securities,
accounts, contract rights, documents, deposit accounts, bank accounts, chattel
paper, general intangibles, equipment and inventory;
(v) the Revenue Account, the Principal Account, the Interest
Account, the Debt Service Reserve Account, the Capital Expenditure Reserve
Account, the Operating and Maintenance Fees Account, the Management Fees
Account, the Distribution Account, the Distribution Suspense Account, the
Redemption Account and the Loss Proceeds Account, (as such terms are defined in
the Depositary Agreement dated as of the date hereof) including any subaccounts
within such accounts, and all other accounts and sub-accounts established
pursuant to the Depositary Agreement; and
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(vi) the proceeds of all of the foregoing (all of the collateral
described in clauses (i) through (vi) being herein collectively referred to as
the "Collateral"), including without limitation (1) all rights of Grantor to
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receive moneys due and to become due under or pursuant to the Collateral, (2)
all rights of Grantor to receive return of any premiums for or proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Collateral or to
receive condemnation proceeds, (3) all claims of Grantor for damages arising out
of or for breach of or default under the Assigned Agreements or any other
Collateral, and (4) to the extent not included in the foregoing, all proceeds
receivable or received when any and all of the foregoing Collateral is sold,
collected, exchanged or otherwise disposed, whether voluntarily or
involuntarily.
(b) Grantor has heretofore delivered or concurrently with the
delivery hereof is delivering to the Collateral Agent, a copy of an executed
counterpart of each of the Assigned Agreements.
(c) Anything herein contained to the contrary notwithstanding, Grantor
shall remain liable under each of the Assigned Agreements, to perform all of the
obligations undertaken by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Collateral Agent shall have no
obligation or liability under any of such Assigned Agreements by reason of or
arising out of this Agreement (during the period of Grantor's right of use and
possession thereof as provided herein), nor shall the Collateral Agent be
required or obligated in any manner to perform or fulfill any obligations of
Grantor thereunder or to make any payment, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
(d) Subject to the terms of the Indenture, upon the occurrence and
during the continuance of an Event of Default, Grantor does hereby constitute
the Collateral Agent, acting for and on behalf of Trustee, the Holders of the
Senior Secured Notes, and the Permitted Additional Senior Lenders, if any, and
each successor or assign thereof, the true and lawful attorney of Grantor,
irrevocably, with full power coupled with an interest (in the name of Grantor or
otherwise) to ask, require, demand, receive, compound and give acquittance for
any and all moneys and claims for moneys due and to become due under or arising
out of the Assigned Agreements or any of the other Collateral, including without
limitation any insurance policies with respect to the Project, to elect remedies
thereunder, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
in connection therewith which the Collateral Agent may deem to be necessary or
advisable; provided, however, that the Collateral Agent shall give Grantor
notice of any action taken by it as such attorney-in-fact promptly after taking
any such action.
(e) If any default by Grantor under any of the Assigned Agreements
shall occur, the Collateral Agent shall, at its option, be permitted (but shall
not be obligated) to remedy any such default by giving written notice of such
intent to Grantor and to the parties to each Assigned Agreement in default. The
Collateral Agent shall have a reasonable opportunity, but not fewer than sixty
(60) days (or such other period as the Collateral Agent and the Persons other
than
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Grantor who are parties to the Assigned Agreement may agree) after giving
such notice, in which to cure such default and upon the commencement thereof
will proceed diligently to cure such default. Any curing by the Collateral Agent
of Grantor's default under any of the Assigned Agreements shall not be construed
as an assumption by the Collateral Agent of any obligations, covenants or
agreements of Grantor under such Assigned Agreements, and the Collateral Agent
shall not incur any liability to Grantor or any other Person as a result of any
actions undertaken by the Collateral Agent in curing or attempting to cure any
such default. This Agreement shall not be deemed to release or to affect in any
way the obligations of Grantor under the Assigned Agreements.
3. Obligations Secured. This Agreement and all of the Collateral secure
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the payment and performance of Grantor's (a) obligations under the Indenture,
including, but not limited to, the payment of all amounts owed to Trustee for
the benefit of the Holders of the Senior Secured Notes and (b) obligations
owing, if any, to the Permitted Additional Senior Lenders, of every kind and
description (whether or not evidenced by any note or instrument and whether or
not for the payment of money), direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, pursuant to the terms of
the Indenture, or any other instrument evidencing Permitted Indebtedness (other
than Permitted Indebtedness described in clause (4) of the definition of
Permitted Indebtedness), including, but not limited to, the payment of all
amounts owed to the Collateral Agent of every kind and description (whether or
not evidenced by any note or instrument and whether or not for the payment of
money), direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, pursuant to the terms of the Indenture, the
Financing Documents or this Agreement, including all interest, fees, charges,
expenses, attorney's fees and accountant's fees (all such obligations being
herein called the "Obligations").
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4. Events of Default. The occurrence and continuance of an Event of
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Default under the Indenture (as such term is defined in the Indenture), whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body, shall constitute an Event of Default
hereunder.
5. Remedies.
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(a) Subject to the terms of the Indenture and the notice and other
requirements of applicable law, if any Event of Default has occurred and is
continuing, the Collateral Agent may (i) exercise the rights of acceleration set
forth in Section 5.2 of the Indenture, (ii) proceed to protect and enforce the
rights vested in it by this Agreement, including, but not limited to, the right
to cause all revenues hereby pledged as security and all other moneys pledged
hereunder to be paid directly to it, and to enforce its rights hereunder to such
payments and all other rights hereunder by such appropriate judicial proceedings
as it shall deem most effective to protect and enforce any of such rights,
either at law or in equity or otherwise, whether for specific enforcement of any
covenant or agreement contained in any of the Assigned Agreements, or in aid of
the exercise of any power therein or herein granted, or for any foreclosure
hereunder and sale under a judgment or decree in any judicial proceeding, or to
enforce any other legal or
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equitable right vested in it by this Agreement or by law; (iii) cause any action
at law or suit in equity or other proceeding to be instituted and prosecuted to
collect or enforce any Obligations or rights included in the Collateral, or to
foreclose or enforce any other agreement or other instrument by or under or
pursuant to which such Obligations are issued or secured, either in Grantor's
name or in Collateral Agent's name as Collateral Agent may deem necessary,
subject in each case to the provisions and requirements thereof; (iv) sell or
otherwise dispose of any or all of the Collateral or cause the Collateral to be
sold or otherwise disposed of in one or more sales or transactions, at such
prices as the Collateral Agent may deem commercially reasonable, and for cash or
on credit or for future delivery, without assumption of any credit risk, at any
broker's board or at public or private sale, without demand of performance or
notice of intention to sell or of time or place of sale (except such notice as
is required by applicable statute and cannot be waived or is contemplated herein
or by the other Financing Documents), it being agreed that the Collateral Agent
may be a purchaser on behalf of Trustee, the Holders of the Senior Secured
Notes, the Permitted Additional Senior Lenders, if any, or on its own behalf at
any such sale and that the Collateral Agent or anyone else who may be the
purchaser of any or all of the Collateral so sold shall thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
equity of redemption, of Grantor, any such demand, notice or right and equity
being hereby expressly waived and released to the extent permitted by law; (v)
incur reasonable expenses, including reasonable attorneys' fees, consultants'
fees, and other costs appropriate to the exercise of any right or power under
this Agreement; (vi) perform any obligation of Grantor hereunder or under any
other Financing Document, Project Document or Additional Project Document, and
make payments, purchase, contest or compromise any encumbrance, charge, or lien,
and pay taxes and expenses, without, however, any obligation so to do; (vii)
take possession of the Collateral and render it usable, and repair and renovate
the same, without, however, any obligation so to do, and enter upon the site
where the Project is located or any other location where the same may be located
for that purpose, control, manage, operate, rent and lease the Collateral,
either separately or in conjunction with the Project, collect all rents and
income from the Collateral and apply the same to reimburse the Holders of the
Senior Secured Notes or the Permitted Additional Senior Lenders, if any, for any
cost or expenses incurred hereunder or under any of the Financing Documents and
to the payment or performance of the Obligations, and apply the balance to
whomsoever is legally entitled thereto; (viii) secure the appointment of a
receiver of the Project or any part thereof and/or the Collateral or any part
thereof (to the extent and in the manner provided by applicable law); or (viii)
exercise any other or additional rights or remedies granted to a secured party
under the UCC. If, pursuant to applicable law, prior notice of any such action
is required to be given to Grantor, Grantor hereby acknowledges that the minimum
time required by such applicable law, or if no minimum is specified, ten (10)
Business Days, shall be deemed a reasonable notice period. Notwithstanding
anything herein to the contrary, any purchase price obtained by the Collateral
Agent in a foreclosure sale instituted and prosecuted in accordance with the
terms hereof shall be deemed binding and conclusive on the parties hereto and
the Trustee, the Holders of the Senior Secured Notes and the Permitted
Additional Senior Lenders, if any.
(b) All costs and expenses (including, but without being limited to,
reasonable attorneys' fees and expenses) incurred by the Collateral Agent in
connection with any such suit or proceeding, or in connection with the
performance by the Collateral Agent of any of Grantor's agreements contained
herein or in any exercise of Collateral Agent's rights or remedies hereunder,
including any of the Assigned Agreements pursuant to the terms of this
Agreement,
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together with interest thereon (to the extent permitted by law) computed at a
rate per annum equal to the "Prime Rate" of Bankers Trust Company, as such rate
is announced from time to time, plus one percent (1%), said rate to change when
and as the said Prime Rate changes, from the date on which such costs or
expenses are incurred to the date of payment thereof, shall constitute
additional indebtedness secured by this Agreement and shall be paid by Grantor
to the Trustee on demand.
6. Remedies Cumulative; Delay Not Waiver.
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(a) No right, power or remedy herein conferred upon or reserved to the
Collateral Agent is intended to be exclusive of any other right, power or
remedy, and every such right, power and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right, power and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy. Resort to any or all security now or hereafter held by the
Collateral Agent, may be taken concurrently or successively and in one or
several consolidated or independent judicial actions or lawfully taken
nonjudicial proceedings, or both.
(b) No delay or omission of the Collateral Agent to exercise any right
or power accruing upon the occurrence and during the continuance of any Event of
Default as aforesaid shall impair any such right or power or shall be construed
to be a waiver of any such Event of Default or an acquiescence therein; and
every power and remedy given by this Agreement may be exercised from time to
time, and as often as shall be deemed expedient, by the Collateral Agent.
(c) The net proceeds of any foreclosure, collection, recovery,
receipt, appropriation, realization or sale of the Collateral shall be applied
in the order of priority specified in Section 5.10 of the Indenture. If all
Obligations and any other amounts due under this Agreement have been
indefeasibly paid, satisfied and discharged in full, any surplus then remaining
shall be paid to Grantor, if it is lawfully entitled to receive the same, or
shall be paid to whomsoever a court of competent jurisdiction may direct.
7. Covenants. Grantor covenants as follows:
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(a) Grantor will duly and punctually pay all amounts payable to the
Collateral Agent, the Trustee, the Holders of the Senior Secured Notes and the
Permitted Additional Senior Lenders, in accordance with, and subject to, the
terms of the Indenture and such other instruments evidencing other Senior
Indebtedness, if any.
(b) Any action or proceeding to enforce this Agreement or any Assigned
Agreement may be taken by the Collateral Agent either in Grantor's name or in
the Collateral Agent's name, as the Collateral Agent may deem necessary.
(c) Grantor will not make any other assignment (other than to
Collateral Agent) of its rights under the Assigned Agreements.
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8. Representations and Warranties. Grantor represents and warrants as
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follows:
(a) No effective financing statement or other instrument similar in
effect covering all or any part of Grantor's interest in the Collateral is on
file in any recording office, except such as may have been filed pursuant to
this Agreement and the other Financing Documents or pursuant to the documents
evidencing Permitted Liens.
(b) Grantor has not assigned any of its rights under the Assigned
Agreements except as specifically provided in this Agreement or as set forth in
the Indenture.
9. Notices. Unless otherwise specifically herein provided, all notices
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required or permitted under the terms and provisions hereof shall be in writing
and any such notice shall become effective if given in accordance with Section
10.02 of the Indenture.
10. Further Assurances. (a) Grantor agrees that from time to time, at the
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expense of Grantor, Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
required, or that the Collateral Agent may reasonably request, in order to
perfect and protect the assignment and security interest granted or intended to
be granted hereby or to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor will: (i) if any Collateral shall be
evidenced by a promissory note or other instrument, deliver and pledge to the
Collateral Agent, for the benefit of Trustee, the Holders of Senior Secured
Notes and the Permitted Additional Senior Lenders, if any, such note or
instrument duly endorsed (without recourse) and accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory to
enable the Collateral Agent to enforce the provisions of this Agreement and the
security interests described herein; and (ii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments,
endorsement or notices, as may be necessary or required, or as the Collateral
Agent may reasonably request, in order to perfect and preserve the assignments
and security interests granted or purported to be granted hereby; it being
understood and agreed that the Collateral Agent shall have no obligation in
respect of the filing of such statements or in the perfection or preservation of
any such security interests.
(b) Grantor hereby authorizes the Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor where permitted by
law; provided that no such financing statement may be filed by Collateral Agent
in the State of Florida that would constitute a security agreement under the UCC
as in effect in such state. Copies of any such statement or amendment thereto
shall promptly be delivered to Grantor
(c) Grantor shall pay all filing, registration and recording fees or
refiling, re-registration and re-recording fees, and all expenses incident to
the execution and acknowledgment of this Agreement, any instruments of further
assurance, and (except as otherwise provided in the Indenture) all federal,
state, county and municipal stamp taxes and
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other taxes, duties, imports, assessments and charges arising out of or in
connection with the execution and delivery of this Agreement, any agreement
supplemental hereto and any instruments of further assurance.
11. Place of Perfection; Records. The location of Grantor's chief
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executive office is 1114 Avenue of the Americas, New York, New York, 10036-7790,
and the location of Grantor's place of business is Inyo County, California.
Grantor shall give the Collateral Agent at least forty-five (45) days prior
written notice before it changes the location of its chief executive office and
shall at the expense of Grantor execute and deliver such instruments and
documents as required to maintain a prior perfected security interest and as
requested by the Collateral Agent. Grantor will hold and preserve such records
and will permit representatives of the Collateral Agent upon reasonable notice
during normal business hours to inspect and make abstracts from such records.
12. Continuing Assignment and Security Interest; Transfer. This Agreement
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shall create a continuing assignment of and security interest in the Collateral
and shall (i) remain in full force and effect until payment in full of the
Obligations, (ii) be binding upon Grantor, its successors and assigns and (iii)
inure, together with the rights and remedies of the Collateral Agent, to the
benefit of the Trustee, the Holders of the Senior Secured Notes, the Permitted
Additional Senior Lenders, if any, and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (iii), but
subject to Section 2.06 of the Indenture, the Holders of the Senior Secured
Notes may assign or otherwise transfer their Senior Secured Notes to any other
Person, and such other Person shall thereupon become vested with all or an
appropriate part of the benefits in respect thereof granted to the Holders of
the Senior Secured Notes herein or otherwise. The release of the security
interest in any or all of the Collateral, the taking or acceptance of additional
security, or the resort by Collateral Agent to any security it may have in any
order it may deem appropriate, shall not affect the liability of any person on
the indebtedness secured hereby. Upon the payment in full of the Obligations,
the security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, the Collateral
Agent shall, at Grantor's expense, execute and deliver to Grantor such documents
as Grantor shall reasonably request to evidence such termination. If this
Agreement shall be terminated or revoked by operation of law, Grantor will
indemnify and save Collateral Agent, Trustee, the Holders of the Senior Secured
Notes and the Permitted Additional Senior Lenders, if any, harmless from any
loss which may be suffered or incurred by Collateral Agent, Trustee, the Holders
of the Senior Secured Notes and the Permitted Additional Senior Lenders, if any,
in acting hereunder prior to the receipt by Collateral Agent, its successors,
transferees, or assigns of written notice of such termination or revocation.
13. Release of Collateral.
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(a) Subject to paragraphs (b) and (c) of this Section 13, Collateral
may be released from the security interest created by this Agreement at any time
or from time to time upon the request of the Grantor pursuant to a certificate
of a Responsible Officer of the Grantor certifying that all terms for release
and conditions precedent under Section 4.4 of the Credit Agreement have been met
and that such Collateral is being, or has been, sold, leased or
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transferred, and specifying the identity of the Collateral to be released. Upon
receipt of such certificate, a Responsible Officer of the Collateral Agent shall
execute, deliver or acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Collateral
permitted to be released pursuant to this Agreement.
(b) No Collateral shall be released from the security interest created
hereunder unless there shall have been delivered to the Collateral Agent the
certificate required by this Section 13.
(c) The Collateral Agent may release Collateral from the security
interest created hereunder upon the sale or disposition of Collateral pursuant
to the Collateral Agent's powers, rights and duties with respect to remedies
provided herein.
14. Attorneys' Fees. In the event any legal action or proceeding
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(including without limitation any of the remedies provided for herein or at law)
is commenced to enforce or interpret this Agreement or any provision thereof,
the prevailing party shall be entitled to recover its reasonable attorneys' fees
and other reasonable costs and expenses incurred therein from the losing party,
and, if a judgment or award is entered in any such action or proceeding, such
attorneys' fees and other costs and expenses may be made a part of such judgment
or award.
15. Severability. Any provision of this Agreement which is prohibited or
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unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
16. Time. Time is of the essence of this Agreement.
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17. Agreement for Security Purposes. This Agreement is for security
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purposes only. Accordingly, the Collateral Agent shall not, pursuant to this
Agreement, enforce Grantor's rights with respect to the Collateral, including
the exercise of any rights granted under the Consents, until such time as an
Event of Default shall have occurred and is continuing at the time such
enforcement is sought, and after any required notice of such enforcement has
been given, and until such time, subject to the terms of the Indenture and the
other Financing Documents, Grantor reserves the right to exercise all of its
right, title and interest in, to and under the Collateral (including the
Assigned Agreements).
18. Liability. The obligations hereunder are subject to the limitations
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set forth in Section 6.11 of the Credit Agreement, the provisions of which are
hereby incorporated by reference.
19. Governing Law. This Agreement, including all matters of construction,
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validity, performance and the creation, validity, enforcement or priority of the
lien of, and security interests created by, this Agreement in or upon the
Collateral shall be governed by the
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laws of the State of New York, without reference to conflicts of law (other than
Section 5-1401 of the New York General Obligations Law), except as required by
mandatory provisions of law and except to the extent that the validity or
perfection of the lien and security interest hereunder, or remedies hereunder,
in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York.
20. Attorney-In-Fact. Grantor hereby constitutes and appoints Collateral
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Agent, acting for and on behalf of itself, Trustee, the Holders of the Senior
Secured Notes, the Permitted Additional Senior Lenders, if any, and each
successor or assign of Collateral Agent, Trustee, the Holders of the Senior
Secured Notes and the Permitted Additional Senior Lenders, if any, the true and
lawful attorney-in-fact of Grantor, with full power upon the occurrence and
during the continuance of an Event of Default (in the name of Grantor or
otherwise) to enforce all rights of Grantor with respect to the Collateral,
including, without limitation the right:
(a) to ask, require, demand, receive and give acquittance for any and
all moneys and claims for moneys due and to become due under or arising out of
the Assigned Agreements or any of the other Collateral;
(b) to elect remedies thereunder and to endorse any checks or other
instruments or orders in connection therewith;
(c) to file any claims or take any action or institute any proceedings
in connection therewith which Collateral Agent may reasonably deem to be
necessary or advisable to protect the Collateral;
(d) to pay, settle or compromise all bills and claims which may be or
become liens or security interests (other than Permitted Liens prior to
foreclosure by Collateral Agent) against any or all of the Collateral, or any
part thereof, unless a bond or other security satisfactory to Collateral Agent
has been provided; and
(e) in connection with any acceleration and foreclosure, to do any and
every act which Grantor may do on its behalf with respect to the Collateral or
any part thereof and to exercise any or all of Grantor's rights and remedies
under any or all of the Assigned Agreements.
21. Reinstatement. This Agreement shall continue to be effective or be
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reinstated, as the case may be, if at any time any amount received by Collateral
Agent in respect of the Obligations is rescinded or must otherwise be restored
or returned by Collateral Agent upon the insolvency, bankruptcy, reorganization,
liquidation of Grantor or any Partner or upon the dissolution of, or appointment
of any intervenor or conservator of, or trustee or similar official for, Grantor
or any Partner or any substantial part of Grantor's or any Partner's assets, or
otherwise, all as though such payments had been made.
22. WAIVER OF JURY TRIAL. GRANTOR AND COLLATERAL AGENT HEREBY KNOWINGLY,
--------------------
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION
10
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER FINANCING DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF COLLATERAL AGENT OR
GRANTOR. THIS PROVISION IS A MATERIAL INDUCEMENT FOR COLLATERAL AGENT TO ENTER
INTO THIS AGREEMENT.
23. Amendment. No modification or waiver of any of the provisions of this
---------
Agreement shall be binding on Collateral Agent, except as expressly set forth in
a writing duly signed and delivered by Collateral Agent and which is otherwise
in accordance with Article 8 of the Indenture.
24. Regarding the Collateral. The Collateral Agent shall be afforded
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all of the rights, powers, protections, immunities and indemnities set forth in
that certain Security Agreement, dated as of the date hereof, between Collateral
Agent and Navy I as if the same were specifically set forth herein.
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IN WITNESS WHEREOF, Grantor and Collateral Agent have caused this
Security Agreement to be duly executed by their partners and officers thereunto
duly authorized, as of the day and year first above written.
GRANTOR:
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CAITHNESS COSO FUNDING CORP.,
a Delaware corporation
By: /s/ Christopher T. McCallion
----------------------------------
Christopher T. McCallion
Executive Vice President
COLLATERAL AGENT:
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U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ Judy Manansala
----------------------------------
Name: Judy Manansala
Title: