Exhibit 10.20
SECURITY AGREEMENT
(Governmental Approvals)
Dated as
of May 28, 1999
between
COSO OPERATING COMPANY LLC,
a Delaware limited liability company,
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
TABLE OF CONTENTS
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1. Definitions........................................................ 2
2. Assignment, Pledge and Grant of Security Interest.................. 2
3. Obligations Secured................................................ 3
4. Events of Default.................................................. 3
5. Remedies........................................................... 4
6. Remedies Cumulative; Delay Not Waiver.............................. 5
7. Covenants.......................................................... 6
8. Certain Consents and Waivers....................................... 6
9. Representations and Warranties..................................... 8
10. Notices............................................................ 9
11. Further Assurances................................................. 10
12. Place of Perfection; Records....................................... 11
13. Continuing Assignment and Security Interest; Transfer.............. 11
14. Attorneys' Fees.................................................... 11
15. Severability....................................................... 12
16. Time............................................................... 12
17. Agreement for Security Purposes.................................... 12
18. Governing Law...................................................... 12
i
19. Reinstatement...................................................... 12
20. WAIVER OF JURY TRIAL............................................... 12
21. Amendment.......................................................... 13
22. Duties and Liabilities of the Collateral Agent Generally........... 13
ii
SECURITY AGREEMENT
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This Security Agreement ("Agreement"), dated as of May 28, 1999, is entered
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into by and between COSO OPERATING COMPANY LLC, a Delaware limited liability
company ("Grantor"), and U.S. BANK TRUST NATIONAL ASSOCIATION, in its capacity
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as collateral agent ("Collateral Agent"), for the benefit of U.S. BANK TRUST
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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 Trustee, Coso Finance Partners, a
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California general partnership ("Navy I"), Coso Energy Developers, a California
general partnership ("BLM"), Coso Power Developers, a California general
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partnership ("Navy II"), and Caithness Coso Funding Corp., a Delaware
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corporation (the "Issuer") (such notes, the "Senior Secured Notes," and the
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holders thereof, the "Holders of the Senior Secured Notes") and all other
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Permitted Additional Senior Lenders (as defined in the Indenture).
PREFACE
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A. Issuer has, as of the date of this Security Agreement, issued
$413,000,000 of the Senior Secured Notes, the proceeds of which will be used to
make loans to the Coso Partnerships.
B. Pursuant to a Guarantee dated as of the date of this Security
Agreement (the "Guarantee") the Coso Partnerships have guaranteed to Trustee and
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the Holders of the Senior Secured Notes the payment and performance of Issuer's
obligations under the Senior Secured Notes and the Indenture.
C. The Grantor is party to the Amended and Restated Field Operation and
Maintenance Agreement dated as of May 28, 1999, by and between Navy II and the
Grantor (the "Field O&M Agreement"), and the Amended and Restated Plant
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Operation and Maintenance Agreement dated as of May 28, 1999, by and between
Navy II, FPL Energy Operating Services, Inc., a Florida corporation, and the
Grantor.
D. As a condition precedent to the sale of the Senior Secured Notes, the
Grantor is required to have executed this Security Agreement as security for the
payment and performance of the Navy II's obligations under the Guarantee.
E. As additional security for the payment and performance of Navy II's
obligations under the Guarantee, it is the intent of Grantor to grant to the
Collateral Agent, for the benefit of the 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 Navy II's obligations under the Guarantee.
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:
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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; and (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) all Governmental Approvals (as defined in the Indenture)
relating to the Navy II Project whether now existing or hereafter acquired,
excluding, however, any such Governmental Approvals and consents which by their
terms or by operation of law would become void solely by virtue of a security
interest being granted therein;
(ii) the proceeds of all of the foregoing (all of the collateral
described in clauses (i) and (ii) being herein collectively referred to as the
"Collateral"), including without limitation (1) all rights of Grantor to 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 Governmental Approvals 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 true and correct copy
of each of the Governmental Approvals. Grantor will deliver to Collateral Agent
a true and correct copy of any additional Governmental Approval, and material
amendments and supplements to the foregoing, included in the Collateral, as they
are obtained by Grantor.
(c) Anything herein contained to the contrary notwithstanding,
Grantor shall remain liable under each of the Governmental Approvals, to perform
all of the obligations undertaken by it thereunder, all in accordance with and
pursuant to the terms and provisions
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thereof, and the Collateral Agent shall have no obligation or liability under
any of such Governmental Approvals 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.
(d) 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 claims arising out of the
Governmental Approvals 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.
3. Obligations Secured. This Agreement and all of the Collateral
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secure the payment and performance of Grantor's (a) obligations under the
Guarantee, 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 Guarantee, 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 following shall constitute an Event of
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Default hereunder:
(a) The occurrence and continuance of an Event of Default under 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; and
(b) the failure on the part of Grantor to observe or perform any
covenant, condition or agreement on its part to be observed or performed under,
or the breach of any representation or warranty of Grantor contained in this
Agreement and such failure continues uncured for 30 or more days from the date a
Responsible Officer of Grantor receives notice thereof
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from the Collateral Agent; provided that if Grantor commences and diligently
pursues efforts to cure such default within such 30-day period, Grantor may
continue to effect such cure of the default and such default will not be deemed
an Event of Default for an additional 60 days so long as Grantor is diligently
pursuing such cure.
5. Remedies.
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(a) Subject to the terms of the Guarantee 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, and to enforce its 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
Governmental Approvals, 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 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 under this Agreement, 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 to do so, 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
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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 Collateral or any part
thereof (to the extent and in the manner provided by applicable law); or (ix)
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 Governmental Approvals pursuant to the terms of this
Agreement, 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
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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) 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.
(b) Not to make any other assignment (other than to Collateral Agent)
of its rights under the Governmental Approvals.
(c) To do all acts that may reasonably be necessary to maintain,
preserve and protect the Collateral.
(d) Not to use or permit any Collateral to be used unlawfully or in
material violation of any provision of applicable statute, regulation or
ordinance.
(e) To pay promptly when due all taxes, assessments, charges,
encumbrances and liens now or hereafter imposed upon or affecting any
Collateral.
(f) To procure, execute and deliver from time to time any
endorsements, assignments, financing statements and other writings reasonably
necessary to perfect, maintain and protect the Collateral Agent's security
interest hereunder and the priority thereof.
(g) To appear in and defend any action or proceeding that may affect
its title to or the Collateral Agent's interest in the Collateral.
(h) Not to sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest therein.
(i) To comply with all laws, regulations and ordinances relating to
the Collateral.
8. Certain Consents and Waivers.
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(a) Grantor hereby waives, to the maximum extent permitted by law (i)
all rights under any law limiting remedies, including recovery of a deficiency,
under an obligation secured by a deed of trust on real property if the real
property is sold under a power of sale contained in the deed of trust, and all
defenses based on any loss whether as a result of any such sale or otherwise, of
Grantor's right to recover any amount from Navy II, whether by right of
subrogation or otherwise; (ii) all rights under any law to require Collateral
Agent to pursue Navy II or any other Person, any security which Collateral Agent
may hold, or any other remedy before proceeding against Grantor; (iii) all
rights of reimbursement or subrogation, all rights to enforce any remedy that
Collateral Agent, the Trustee, the Holders of the Senior Secured Notes or the
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Permitted Additional Senior Lenders, if any, may have against Navy II, and all
rights to participate in any security held by Collateral Agent until the
Obligations have been paid and the covenants of the Indenture have been
performed in full; (iv) all rights to require Collateral Agent to give any
notices of any kind, including without limitation notices of nonpayment,
nonperformance, protest, dishonor, default, delinquency or acceleration, or to
make any presentments, demands or protests, except as expressly provided herein
and in the Indenture; (v) all rights to assert the bankruptcy or insolvency of
Navy II as a defense hereunder or as the basis for rescission hereof; (vi) all
rights under any law purporting to reduce Grantors' Obligations hereunder if
Navy II's Obligations are reduced; (vii) all defenses based on the disability or
lack of authority of Navy II or any Person, the repudiation of the Guarantees or
any related Financing Documents by Navy II or any Person, the failure by
Collateral Agent, the Trustee, the Holders of the Senior Secured Notes or any
Permitted Additional Senior Lender, if any, to enforce any claim against Navy
II, or the unenforceability in whole or in part of any Financing Document;
(viii) all suretyship and guarantor's defenses generally; (ix) all rights to
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets,
redemption or similar law, or exemption, whether now or at any time hereafter in
force, which may delay, prevent or otherwise affect the performance by Grantor
or its obligations under, or the enforcement by Collateral Agent of, this
Agreement; (x) any requirement on the part of Collateral Agent, Trustee, the
Holders of the Senior Secured Notes or any Permitted Additional Senior Lender,
if any, to mitigate the damages resulting from any default; and (xi) except as
otherwise specifically set forth herein, all rights of notice and hearing of any
kind prior to the exercise of rights by Collateral Agent upon the occurrence and
during the continuation of an Event of Default to repossess with judicial
process or to replevy, attach or levy upon the Collateral. To the extent
permitted by applicable law, Grantor waives the posting of any bond otherwise
required of Collateral Agent in connection with any judicial process or
proceeding to obtain possession of, replevy, attach, or levy upon the
Collateral, to enforce any judgment or other security for the Obligations, to
enforce any judgment or other court order entered in favor of Collateral Agent,
or to enforce by specific performance, temporary restraining order, preliminary
or permanent injunction, this Agreement or any other agreement or document
between Grantor, Collateral Agent, Trustee, the Holders of the Senior Secured
Notes or any Permitted Additional Senior Lender, if any. Grantor further agrees
that upon the occurrence and continuance of an Event of Default, Collateral
Agent may elect to nonjudicially or judicially foreclose against any real or
personal property security it holds for the Obligations or any part thereof, or
to exercise any other remedy against Navy II, any security or any guarantor,
even if the effect of that action is to deprive a Grantor of the right to
collect reimbursement from Navy II for any sums paid by Grantor to Collateral
Agent, Trustee or any Holder of the Senior Secured Notes or any Permitted
Additional Senior Lender, if any.
(b) If Collateral Agent may, under applicable law, proceed to realize
its benefits under any of the Financing Documents giving Collateral Agent a Lien
upon any Collateral, whether owned by any Navy II, Grantor or by any other
Person, either by judicial foreclosure or by nonjudicial sale or enforcement,
Collateral Agent may, at its sole option, determine which of its remedies or
rights it may pursue without affecting any of the rights and remedies of
Collateral Agent under this Agreement. In the event Collateral Agent shall bid
at any foreclosure or trustee's sale or at any private sale permitted by law or
the Financing Documents, Collateral Agent may bid all or less than the amount of
Obligations. To the extent permitted by applicable law, the amount of
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the successful bid at any such sale, whether Collateral Agent or any other party
is the successful bidder, shall be conclusively deemed to be the fair market
value of the Collateral and the difference between such bid amount and the
remaining balance of the Obligations shall be conclusively deemed to be the
amount of the Obligations.
9. 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 Governmental
Approvals except as specifically provided in this Agreement or as set forth in
the Indenture.
(c) Grantor will perform and comply, in all material respects, with
all obligations and conditions on its part to be performed hereunder, under the
Field O&M Agreement or with respect to the Collateral.
(d) Grantor (i) is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority under the laws of its state of
organization to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby, (ii) is duly
qualified, authorized to do business and in good standing in each jurisdiction
where the character of its properties or the nature of its activities makes such
qualification necessary, and (iii) has all requisite power and authority to
carry on its business as now being conducted and as proposed to be conducted by
it, (X) to execute, deliver and perform this Agreement, (Y) to take all action
as may be necessary to consummate the transactions contemplated hereunder, and
(Z) to grant liens and security interest provided for in this Agreement.
(e) Grantor has (i) taken all necessary action to authorize the
execution, delivery and performance of this Agreement; and (ii) duly executed
and delivered this Agreement. Neither Grantor's execution and delivery of this
Agreement nor its consummation of the transactions contemplated hereby nor its
compliance with the terms hereof (i) does or will contravene the documents of
formation of Grantor or any other requirements of law applicable to or binding
on such Grantor or any of its properties, (ii) does or will contravene or result
in any breach of or constitute any default under, or result in or require the
creation of any Lien (other than Permitted Liens) upon any of its property
under, any agreement or instrument to which it is a party or by which it or any
of its properties may be bound or affected or (iii) does or will require the
consent or approval of any Person which has not already been obtained.
(f) This Agreement is the legal, valid and binding obligation of such
Grantor, enforceable against such Grantor in accordance with its terms, except
to the extent the enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and subject to general equitable
principles.
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(g) Grantor is the lawful owner of and has full right, title and
interest in and to, the Collateral, subject to no mortgages, liens, charges, or
encumbrances of any kind and has full power and lawful authority to pledge,
assign and grant a security interest in the Collateral granted by it hereunder.
Grantor will, so long as any Obligations shall be outstanding, warrant and
defend its title to the Collateral against any claims and demands which may
affect to a material extent its title to, or the Collateral Agent's right or
interest in, such Collateral.
(h) Grantor will not directly or indirectly create, incur, assume or
suffer to exist any Liens on or with respect to any part of the Collateral other
than the rights and interests of the Collateral Agent, the Trustee, the Holders
of the Senior Secured Notes and the Permitted Additional Senior Lenders, if any,
hereunder. Grantor will at its own cost and expense promptly take such action
as may be necessary to discharge any such liens not so permitted.
(i) Any action or proceeding to enforce the rights granted or to
protect or preserve the Collateral under this Agreement may be taken by
Collateral Agent either in Grantor's name or in Collateral Agent's name, as
Collateral Agent may deem necessary.
(j) Grantor will, at all times, keep accurate and complete records of
the Collateral. Grantor shall, at all times on three (3) Business Days' notice,
permit representatives of Collateral Agent at any time during normal business
hours of such Grantor to inspect and make abstracts from such Grantor's books
and records pertaining to the Collateral. Upon the occurrence and continuance of
any Event of Default, at Collateral Agent's request, Grantor shall promptly
deliver any and all such records to Collateral Agent.
(k) Grantor will give prompt notice in writing to Collateral Agent of
any change in the location of the place of business where correspondence,
notices or proceeds in connection with the Collateral are received or located or
of any change in the location of the place of business where records concerning
Collateral are kept.
10. Notices. Any notice or communication by the Grantor or the Collateral
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Agent to the other is duly given if in writing and delivered in person or mailed
by first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Grantor:
Coso Operating Company
c/o Caithness Energy, L.L.C.
1114 Avenue of the Americas, 41st Floor
New York, New York 10036
Telecopier No.: (212) 921-9239
Attention: Christopher T. McCallion
With a copy to:
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Riordan & McKenzie
300 South Grand Avenue
Twenty-Ninth Floor
Los Angeles, Ca 90071
Telecopier No.: (213) 629-4824
Attention: Thomas L. Harnsberger, Esq.
If to the Collateral Agent:
U.S. Bank Trust National Association
One California Street
Fourth Floor
San Francisco, California 94111
Telecopier No.: (415) 273-4590
11. Further Assurances.
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(a) Grantor agrees that from time to time, at the 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. 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
10
otherwise provided in the Indenture) all federal, state, county and municipal
stamp taxes and 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.
12. Place of Perfection; Records. The location of Grantor's chief
----------------------------
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 and Kern 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.
13. Continuing Assignment and Security Interest; Transfer. This Agreement
-----------------------------------------------------
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 .
14. Attorneys' Fees. In the event any legal action or proceeding
---------------
(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.
11
15. Severability. Any provision of this Agreement which is prohibited or
------------
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.
----
17. Agreement for Security Purposes. This Agreement is for security
-------------------------------
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
Governmental Approvals).
18. Governing Law. This Agreement, including all matters of construction,
-------------
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 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.
19. Reinstatement. This Agreement shall continue to be effective or be
-------------
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 of the Coso Partnerships or upon the dissolution
of, or appointment of any intervenor or conservator of, or trustee or similar
official for, Grantor or any of the Coso Partnerships or any substantial part of
Grantor's or any of the Coso Partnership's assets, or otherwise, all as though
such payments had been made.
20. 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 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.
12
21. 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.
22. Duties and Liabilities of the Collateral Agent Generally.
--------------------------------------------------------
(a) The Collateral Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement. The Collateral
Agent shall not have any duties or responsibilities except those expressly set
forth in this Agreement or be a trustee for or have any fiduciary obligation to
any party hereto.
(b) The duties and obligations of the Collateral Agent shall be
determined solely by the express provisions of this Agreement, and the
Collateral Agent shall take such action with respect to this Agreement as it
shall be directed in writing by Trustee, and the Collateral Agent shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement and no implied covenants or obligations
shall be read into this Agreement against the Collateral Agent; and
(i) In the absence of bad faith on the part of the Collateral
Agent, the Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Collateral Agent which conform to the
requirements of this Agreement;
(ii) The Collateral Agent shall not be liable for any error of
judgment made in good faith by an officer or officers of the Collateral Agent,
unless it shall be conclusively determined by a court of competent jurisdiction
that the Collateral Agent was negligent in ascertaining the pertinent facts; and
(iii) The Collateral Agent shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
any direction of Trustee or Grantor given under this Agreement.
(c) None of the provisions of this Agreement shall require the
Collateral Agent to expend or risk its own funds or otherwise to incur any
liability, financial or otherwise, in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or indemnity
satisfactory to it against such risk or liability is not assured to it.
(d) The Collateral Agent may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties.
(e) Whenever in the administration of the provisions of this
Agreement the Collateral Agent shall deem it necessary or desirable that a
matter be proved or established
13
prior to taking or suffering any action to be taken hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Collateral
Agent, be deemed to be conclusively proved and established by a certificate
signed by a Responsible Officer of Trustee or Grantor as the case may be, and
delivered to the Collateral Agent and such certificate, in the absence of
negligence or bad faith on the part of the Collateral Agent, shall be full
warrant to the Collateral Agent for any action taken, suffered or omitted by it
under the provisions of this Agreement upon the faith thereof.
(f) The Collateral Agent may consult with counsel and the advice or
any opinion of counsel shall be full and complete authorization and protection
in respect of any action taken or omitted by it hereunder in good faith and in
accordance with such advice or opinion of counsel.
(g) The Collateral Agent shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, entitlement order,
approval or other paper or document.
(h) The Collateral Agent may execute any of the powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys,
custodians or nominees appointed with due care, and shall not be responsible for
any willful misconduct or negligence on the part of or for the supervision of,
any agent, attorney, custodian or nominee so appointed.
(i) Grantor covenants and agrees to pay to the Collateral Agent from
time to time, and the Collateral Agent shall be entitled to, the fees and
expenses agreed in writing between Grantor and the Collateral Agent, and will
further pay or reimburse the Collateral Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Collateral Agent in accordance with any of the provisions hereof or any other
documents executed in connection herewith (including the compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ). The obligations of Grantor under this Section 22(i) to compensate
the Collateral Agent and to pay or reimburse the Collateral Agent for reasonable
expenses, disbursements and advances shall survive the satisfaction and
discharge of this Agreement or the earlier resignation or removal of the
Collateral Agent.
(j) The Collateral Agent may at any time resign by giving 30 days
written notice of resignation to Trustee. Upon receiving such notice of
resignation, Grantor shall promptly appoint a successor and, upon the acceptance
by the successor of such appointment, release the resigning Collateral Agent
from its obligations hereunder by written instrument, a copy of which instrument
shall be delivered to each of Grantor and Trustee, the resigning Collateral
Agent and the successor. If no successor shall have been so appointed and have
accepted appointment within 45 days after the giving of such notice of
resignation, the resigning Collateral Agent may petition any court of competent
jurisdiction for the appointment of a successor.
14
(k) Any corporation into which the Collateral Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Collateral Agent shall
be a party, or any corporation succeeding to the business of the Collateral
Agent shall be the successor of the Collateral Agent hereunder without the
execution or filing of any paper with any party hereto or any further act on the
part of any of the parties hereto except where an instrument of transfer or
assignment is required by law to effect such succession, anything herein to the
contrary notwithstanding.
(l) Neither the Collateral Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted under this
Agreement or in connection therewith except to the extent caused by the
Collateral Agent's negligence or willful misconduct, as determined by the final
judgment of a court of competent jurisdiction, no longer subject to appeal or
review. The parties each (for itself and any person or entity claiming through
it) hereby releases, waives, discharges, exculpates and covenants not to sue the
Collateral Agent for any action taken or omitted under this Agreement except to
the extent caused by the Collateral Agent's negligence or willful misconduct.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Collateral Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Collateral Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action,
(m) Grantor shall indemnify, defend and hold harmless the Collateral
Agent and its officers, directors, employees, representatives and agents, from
and against and reimburse the Collateral Agent for any and all claims, expenses,
obligations, liabilities, losses, damages, injuries (to person, property, or
natural resources), penalties, stamp or other similar taxes, actions, suits,
judgments, reasonable costs and expenses (including reasonable attorney's and
agent's fees and expenses) of whatever kind or nature regardless of their merit,
demanded, asserted or claimed against the Collateral Agent directly or
indirectly relating to, or arising from, claims against the Collateral Agent by
reason of its participation in the transactions contemplated hereby, including
without limitation all reasonable costs required to be associated with claims
for damages to persons or property, and reasonable attorneys' and consultants'
fees and expenses and court costs except to the extent caused by the Collateral
Agent's negligence or willful misconduct. The provisions of this Section 22(m)
shall survive the termination of this Agreement or the earlier resignation or
removal of the Collateral Agent.
(n) The Collateral Agent shall not be responsible in any manner
whatsoever for the correctness of any recitals, statements, representations or
warranties contained herein or in the other Security Documents, except for those
made by the Collateral Agent, or for filing any financing statement,
continuation statement or any other perfection instrument or notice, or for
recording or re-recording any Security Document in any public office at any time
or for taking any other action to perfect or maintain the perfection, priority
or effectiveness of any interest on any of the Collateral or in any other
property granted to it hereunder or under any of the other Security Documents.
The Collateral Agent makes no representations as to the value or condition of
the Collateral or any part thereof, or as to the title of the Grantor thereto or
as to the security afforded by the Security Documents or this Agreement or as to
the validity,
15
execution, enforceability, legality or sufficiency of this Agreement, of any
other Security Document, of the Obligations secured hereby and thereby and the
Collateral Agent shall incur no liability or responsibility in respect of any
such matters. The Collateral Agent shall not be responsible for insuring the
Collateral or for the payment of taxes, charges, assessments or liens upon the
Collateral or for the maintenance of the Collateral, except that in the event
the Collateral Agent enters into possession of all or any part of the
Collateral, the Collateral Agent shall preserve the portion of the Collateral in
its possession.
(o) The Collateral Agent shall not be required to ascertain or
inquire as to the Grantor's performance of any of the covenants or agreements
contained herein or in any Security Document. Whenever it is necessary, or in
the opinion of the Collateral Agent advisable, for the Collateral Agent to
ascertain the amount of obligations then held by a Trustee, on behalf of the
Holders of the Senior Secured Notes, or Permitted Additional Senior Lender, the
Collateral Agent may conclusively rely on a certificate of such party as to such
amount.
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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:
- --------
COSO OPERATING COMPANY LLC,
a Delaware limited liability company
By: /s/ Christopher T. McCallion
--------------------------------------
Name: Christopher T. McCallion
its: Executive Vice President
COLLATERAL AGENT:
- -----------------
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ Judy P. Manansala
---------------------------
Name: Judy P. Manansala
its: Trust Officer
The undersigned consents and agrees to the foregoing:
COSO POWER DEVELOPERS,
a California general partnership
By: New CTC Company, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
------------------------------------
Christopher T. McCallion
Executive Vice President
By: Caithness Navy II Group, LLC,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
------------------------------------
Christopher T. McCallion
Executive Vice President