Exhibit 10.81
MANAGEMENT FEE SUBORDINATION AGREEMENT (BLM)
Dated as of May 28, 1999
between
NEW CHIP COMPANY, LLC,
a Delaware limited liability company,
CAITHNESS COSO HOLDINGS, LLC,
a Delaware limited liability company,
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
MANAGEMENT FEE SUBORDINATION AGREEMENT (BLM)
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This MANAGEMENT FEE SUBORDINATION AGREEMENT (this "Agreement") dated
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as of May 28, 1999, is entered into by and between NEW CHIP COMPANY, LLC, a
Delaware limited liability company ("New CHIP"), CAITHNESS COSO HOLDINGS, LLC, a
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Delaware limited liability company ("CCH") (New CHIP and CCH together the
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"Junior Claimant"), and U.S. BANK TRUST NATIONAL ASSOCIATION in its capacity as
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collateral agent ("Collateral Agent") for U.S. Bank Trust National Association
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as trustee ("Trustee") for the holders (the "Holders") of the senior secured
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notes (the "Senior Secured Notes") issued pursuant to that certain Indenture
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dated as of May 28, 1999 (the "Indenture"), among Trustee, Caithness Coso
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Funding Corp., a Delaware corporation (the "Issuer"), 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"), Coso Power Developers, a California general
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partnership ("Navy II," and together with Navy I and BLM, the "Coso
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Partnerships") and all other Permitted Additional Senior Lenders.
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PREFACE
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A. Pursuant to a Guarantee dated as of the date of this Agreement
(the "Guarantee") the Coso Partnerships have guaranteed to the Trustee and the
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Holders of the Senior Secured Notes (the Trustee and the Holders being
collectively referred to herein as the "Senior Claimants") the payment and
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performance of Issuer's obligations under the Senior Secured Notes and the
Indenture.
B. The Issuer, the Coso Partnerships, the Collateral Agent and U.S.
Bank Trust National Association, in its capacity as Depositary (the
"Depositary"), have entered into that certain Deposit and Disbursement
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Agreement, dated as of May 28, 1999 (the "Depositary Agreement").
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C. BLM has agreed to pay Junior Claimant or their representative,
pursuant to the Third Amended and Restated Partnership Agreement of BLM, dated
as of May 28, 1999, from time to time as set forth by resolution, document or
instrument of BLM (such resolution, document or instrument, a "Management Fee
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Agreement"), certain management fees (the "Subordinated Management Fees").
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D. The Senior Claimants have agreed to enter into the Indenture and
to consummate the purchase of the Senior Secured Notes only if Junior Claimant
shall join in this Agreement and Junior Claimant shall subordinate, to the
extent and in the manner hereinafter set forth, all claims and rights in respect
of the Subordinated Management Fees to all Senior Claims (as defined below) to
the extent set forth in this Agreement.
AGREEMENT
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NOW THEREFORE, in consideration of the premises herein and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Junior Claimant hereby agrees as follows:
1. Definitions. All capitalized terms used herein and not otherwise
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defined herein shall have their meanings given in the Indenture. As used in this
Agreement, the following terms shall have the following respective meanings:
"Proceeding" means any (a) insolvency, bankruptcy, receivership,
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liquidation, reorganization, readjustment, composition or other similar
proceeding relating to BLM, its property or its creditors as such, (b)
proceeding for any liquidation, dissolution or other winding-up of BLM,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings, (c) assignment of all or substantially all of the assets of BLM for
the benefit of creditors of BLM or (d) other marshaling of the assets of BLM.
"Senior Claims" means (a) the principal of, and premium, if any, and
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interest on the Senior Secured Notes issued pursuant to the Indenture
(including, without limitation, any interest accruing thereon at the legal rate
after the commencement of any Proceeding and any additional interest that would
have accrued thereon but for the commencement of such Proceeding); and (b) all
other Obligations of BLM to any Senior Claimants, whether now existing or
hereafter incurred or created, under or with respect to the Indenture, the other
Financing Documents and any related documents.
2. Certain Subordination Terms. Until all Senior Claims shall have
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been paid in full, notwithstanding anything in a Management Agreement to the
contrary:
2.1. Junior Claimant acknowledges that, notwithstanding anything
in any Management Fee Agreement to the contrary, BLM may pay to Junior Claimant
Subordinated Management Fee due and payable to Junior Claimant, solely to the
extent funds are available for such payment from amounts transferred to the
Operating and Maintenance Fees Account pursuant to subsection (vii) of Section
3.1(c) of the Deposit and Disbursement Agreement.
2.2. Except for the right to demand and accept payments set forth
in Section 2.1 hereof, Junior Claimant shall not demand, xxx for, or accept from
BLM any such payment or collateral, nor take any other action to enforce or
collect upon any such payment or to enforce its rights, in either case in
respect of the Subordinated Management Fees, nor set off against obligations
owed to BLM under a Management Fee Agreement or otherwise against any part of
the Subordinated Management Fees. Notwithstanding anything in a Management Fee
Agreement to the contrary, the failure by BLM to pay any Subordinated Management
Fees shall not under any circumstances, except when the funds are available
therefor and payment is permitted under Section 2.1 hereof, constitute a breach
or default under either of a Management Fee Agreement.
2.3. Neither BLM nor Junior Claimant shall otherwise take any
action prejudicial to or inconsistent with the Senior Claimants' priority
position over Junior Claimant created by this Agreement.
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2.4. Each negotiable instrument or promissory note, if any,
evidencing Subordinated Management Fees or a lien, if any, in respect thereof
shall bear a legend (or otherwise include provisions satisfactory to Collateral
Agent) providing that payment of the Subordinated Management Fees thereunder and
the priority of any such lien have been subordinated to prior payment of the
Senior Claims and the liens in respect thereof in the manner and to the extent
set forth in this Agreement.
2.5. Junior Claimant shall not commence or voluntarily permit BLM
to commence or join with any other creditor or creditors of BLM in commencing
any Proceeding against BLM; provided that Junior Claimant shall not be so
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restricted with respect to claims arising directly out of BLM's failure to
perform its obligations or make any payments of amounts due to Junior Claimant
under a Management Fee Agreement other than the Subordinated Management Fees. At
any general meeting of creditors of BLM or in the event of any Proceeding, if
all Senior Claims have not been paid in full at such time, Collateral Agent on
behalf of the Senior Claimants is hereby irrevocably authorized at any such
meeting or in any such Proceeding:
2.5.1. to enforce claims comprising the Subordinated
Management Fees in the name of Junior Claimant, by proof of debt, proof of
claim, suit or otherwise;
2.5.2. to collect any assets of BLM distributed, divided
or applied by way of dividend or payment as a result of a Proceeding, or such
securities issued, on account of the Subordinated Management Fees as a result
thereof and apply the same, or the proceeds of any realization upon the same
that the Senior Claimants in their discretion elect to effect, to Senior Claims
until all Senior Claims shall have been paid in full (the Senior Claimants
hereby agreeing to render any surplus as a court of competent jurisdiction may
direct);
2.5.3. other than voting claims comprising the
Subordinated Management Fees, to take generally any action in connection with
any such meeting or proceeding which Junior Claimant might otherwise take in
respect of the Subordinated Management Fees and claims relating thereto.
After the commencement of any such Proceeding, Junior Claimant may
inquire of Collateral Agent in writing whether Collateral Agent intends to
exercise the foregoing rights with respect to the Subordinated Management Fees.
Should Collateral Agent fail, within a reasonable time after receipt of such
inquiry, either to file a proof of claim with respect to the Subordinated
Management Fees and to furnish a copy thereof to Junior Claimant, or to inform
Junior Claimant in writing that the Senior Claimants intend to exercise their
rights to assert the Subordinated Management Fees in the manner hereinabove
provided, Junior Claimant may, but shall not be required to, proceed to file a
proof of claim with respect to the Subordinated Management Fees and take such
further steps with respect thereto, not inconsistent with this Agreement, as
Junior Claimant may deem proper.
3. Deposit and Disbursement Agreement. Junior Claimant acknowledges
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that it has been provided with a copy of the Depositary Agreement and has read
and is familiar with the provisions of the Depositary Agreement, including
without limitation Section 3.1(c) thereof.
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Junior Claimant hereby consents to the application of revenues and other
proceeds (including proceeds of investments) of BLM in the order of priority set
forth in the Depositary Agreement, including without limitation Section 3.1(c)
thereof, notwithstanding anything in a Management Fee Agreement to the contrary.
4. Time of Filing. Notwithstanding the time of filing, attachment or
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recording of any document or other instrument, it is agreed by Junior Claimant
that any liens arising under or pursuant to the Financing Documents shall be
senior to any liens arising in favor of Junior Claimant as part of or relating
to the Subordinated Management Fees.
5. Wrongful Collections. Should any payment on account of, or any
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collateral for any part of, the Subordinated Management Fees be received by
Junior Claimant in violation of this Agreement, such payment or collateral shall
be delivered forthwith to Collateral Agent on behalf of the Senior Claimants by
the recipient for application to Senior Claims, in the form received. Collateral
Agent is irrevocably authorized to supply any required endorsement or assignment
which may have been omitted. Until so delivered, any such payment or collateral
shall be held by the recipient in trust for the Senior Claimants and shall not
be commingled with other funds or property of the recipient.
6. Ownership of Subordinated Management Fees.
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6.1. Junior Claimant represents and warrants that it is the lawful
owner of the right to receive the Subordinated Management Fees and no part
thereof has been assigned to or subordinated or subjected to any other security
interest in favor of anyone other than the Senior Claimants. Junior Claimant
shall not assign all or any portion of the Subordinated Management Fees, its
commitment under, or any of its rights or remedies under, a Management Fee
Agreement without the prior written consent of Collateral Agent, which may be
granted or withheld in its sole discretion, and in any event only upon the
execution and delivery to Collateral Agent of an agreement by any such assignee
to be bound by the terms of this Agreement (including provisions relating to
assignment), in form and substance the same as this Agreement, or otherwise as
may be reasonably satisfactory to Collateral Agent.
7. Waivers. Collateral Agent and the Senior Claimants are hereby
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authorized to demand specific performance of this Agreement, whether or not BLM
shall have complied with the provisions hereof applicable to it, at any time
when Junior Claimant shall have failed to comply with any provision hereof
applicable to it. Junior Claimant hereby irrevocably waives any defense based
on the adequacy of a remedy at law which might be asserted as a bar to the
remedy of specific performance hereof in any action brought therefor by the
Senior Claimants. Junior Claimant further waives presentment, notice and
protest in connection with all negotiable instruments evidencing Senior Claims
or Subordinated Management Fees to which Junior Claimant may be a party, notice
of the acceptance of this Agreement by the Senior Claimants, notice of any loan
made, extension granted or other action taken in reliance hereon, and all
demands and notices of every kind in connection with this Agreement, Senior
Claims or time of payment of Senior Claims or Subordinated Management Fees.
Junior Claimant hereby assents to any renewal, extension or postponement of the
time of payment of Senior Claims or any other
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indulgence with respect thereto, to any increase in the amount of Senior Claims,
to any substitution, exchange or release of collateral therefor and to the
addition or release of any person primarily or secondarily liable thereon and
assents to the provisions of any instrument, security or other writing
evidencing Senior Claims.
8. Subrogation; No Impairment of BLM's Obligations. Subject to and from
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and after the indefeasible payment in full of all Senior Claims and the
irrevocable termination of Senior Claimants' commitments under the Financing
Documents, Junior Claimant shall be subrogated to the rights of the Senior
Claimants to receive payments or distributions of cash, property or securities
of BLM applicable to the Senior Claims until all amounts owing on the
Subordinated Management Fees shall be paid in full, it being understood that the
provisions of this Agreement are and are intended solely for the purpose of
defining the relative rights of Junior Claimant and the Senior Claimants;
provided that such rights of subrogation shall be nonexclusive, and shall be
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shared with any other subordinated creditor of the BLM which has entered into an
agreement with the Collateral Agent providing similar rights of subrogation.
Nothing contained in this Agreement is intended to or shall impair, as between
BLM, its creditors other than the Senior Claimants and Junior Claimant, the
obligation of BLM, which is absolute and unconditional, to pay to Junior
Claimant the principal of and the premium, if any, and the interest on the
Subordinated Management Fees as and when the same shall become due and payable
in accordance with the terms of this Agreement and a Management Fee Agreement,
or to affect the relative rights of Junior Claimant and creditors of BLM other
than the Senior Claimants.
9. Reinstatement. The obligations of Junior Claimant under this Agreement
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shall continue to be effective, or be reinstated, as the case may be, if at any
time any payment in respect of any Senior Claim, or any other payment to any
holder of any Senior Claim in its capacity as such, is rescinded or must
otherwise be restored or returned by the holder of such Senior Claims upon the
occurrence of any Proceeding, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, BLM
or any substantial part of its property, or otherwise, all as though such
payment had not been made.
10. Bankruptcy. This Agreement shall remain in full force and effect
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as between the Junior Claimant and Senior Claimant notwithstanding the
occurrence of any Proceeding affecting BLM.
11. Further Assurances. BLM and Junior Claimant shall execute and deliver
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to the Senior Claimants such further instruments and shall take such further
action as the Senior Claimants may at any time or times reasonably request in
order to carry out the provisions and intent of this Agreement.
12. Successors and Assigns. The rights granted to the Senior Claimants
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hereunder are solely for their protection and nothing herein contained shall
impose on the Senior Claimants any duties with respect to any property of BLM or
Junior Claimant received hereunder. The Senior Claimants shall have no duty to
preserve rights against prior parties in any property of any kind received
hereunder.
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13. Counterparts. This Agreement may be executed in any number of
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counterparts, but all such counterparts shall together constitute but one
agreement. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one counterpart signed by each of the parties
hereto.
13.1. Governing Law. This Agreement is intended to take effect as a
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sealed instrument, shall be binding upon the parties hereto and their respective
executors, administrators, other legal representatives, successors and assigns,
and shall inure to the benefit of the Senior Claimants, their respective
successors and assigns and shall be governed by the laws of the State of New
York without reference to principles of conflict of laws (other than Section 5-
1401 of the New York General Obligations Law). The parties hereto intend and
agree that this Agreement shall remain binding on such parties (other than BLM)
notwithstanding the termination (except upon the payment in full of Senior
Claims) or unenforceability of this Agreement as against BLM.
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IN WITNESS WHEREOF, the parties hereto have caused this Operating Fee
Subordination Agreement to be duly executed as of the date first above written.
NEW CHIP COMPANY, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Xxxxxxxxxxx X. XxXxxxxxx
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Xxxxxxxxxxx X. XxXxxxxxx
Executive Vice President
Caithness Coso Holdings, LLC,
a Delaware limited liability company,
its General Partner
By: /s/ Xxxxxxxxxxx X. XxXxxxxxx
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Xxxxxxxxxxx X. XxXxxxxxx
Executive Vice President
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ Xxxx X. Xxxxxxxxx
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Name: Xxxx X. Xxxxxxxxx
Title: Trust Officer
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The undersigned acknowledges and agrees to the foregoing:
COSO ENERGY DEVELOPERS,
a California general partnership
By: NEW CHIP COMPANY, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Xxxxxxxxxxx X. XxXxxxxxx
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Xxxxxxxxxxx X. XxXxxxxxx
Executive Vice President
By: Caithness Coso Holdings, LLC,
a Delaware limited liability company,
its General Partner
By: /s/ Xxxxxxxxxxx X. XxXxxxxxx
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Xxxxxxxxxxx X. XxXxxxxxx
Executive Vice President
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