Deed of Trust - China Lake Joint Venture

Exhibit 10.28


RECORDING REQUESTED BY:


WHEN RECORDED RETURN TO: The Law Offices of David E. Chanover 16776 Bernardo Center Drive Suite 110B San Diego, California 92128 Attention: David E. Chanover


- --------------------------------------------------------------------------------


CHINA LAKE JOINT VENTURE
(as Trustor)


to


CHICAGO TITLE INSURANCE COMPANY
(as Trustee)


for the use and benefit of


U.S. BANK TRUST NATIONAL ASSOCIATION
(as Beneficiary)


DEED OF TRUST, ASSIGNMENT OF RENTS,
FIXTURE FILING AND SECURITY AGREEMENT
(CLJV)


Dated: May 28, 1999


Location: County of Inyo,
State of California


DEED OF TRUST, ASSIGNMENT OF RENTS,
FIXTURE FILING AND SECURITY AGREEMENT
(CLJV)


THIS DEED OF TRUST, ASSIGNMENT OF RENTS, FIXTURE FILING AND SECURITY AGREEMENT (CLJV) (this "Deed of Trust") is made as of May 28, 1999, by CHINA LAKE JOINT VENTURE, a California general partnership whose address is c/o Caithness Energy, L.L.C., 1114 Avenue of the Americas, 41st Floor, New York, New York 10036, as trustor ("Trustor"), to CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation, whose address is 2425 West Shaw, Fresno, California 93711, as trustee ("Trustee"), in favor of U.S. Bank Trust National Association, whose address is One California Street, 4th Floor, San Francisco, California 94111, as beneficiary ("Beneficiary") not in its individual capacity but solely as trustee and collateral agent pursuant to the Indenture of even date herewith (the "Indenture") among Beneficiary, Caithness Coso Funding Corp., as issuer (the "Issuer"), Coso Energy Developers, ("CED"), Coso Finance Partners, a California general partnership ("CFP") and Coso Power Developers, a California general partnership ("CPD"), as guarantors. Unless otherwise defined herein, capitalized terms shall have the meanings set forth in the Indenture, which is hereby incorporated herein by this reference.


This Deed of Trust is given as additional security for the obligations of the Issuer, CED, CPD and CFP under the Indenture, the Guarantees and the other Financing Documents.


NOW, THEREFORE, in consideration of, and to secure the payment and performance of the Obligations (as hereinafter defined) which Obligations may increase, decrease and increase again from time to time and may be evidenced by one or more notes, Trustor has given, granted, bargained, sold, alienated, conveyed, confirmed and assigned, and by these presents does give, grant, bargain, sell, alienate, convey, confirm and assign unto Trustee, its successors and assigns, with general warranties of title as provided herein or under Civil Code Section 1113 (but subject to Permitted Liens), in trust with power of sale and right of entry and possession forever, for the benefit and security of Beneficiary as Collateral Agent, all right, title and interest of Trustor in and to the following property, assets, rights and interests, whether now owned or hereafter acquired (such property, assets, rights and interests being collectively referred to herein as the "Trust Property"):


(a) all of Trustor's right, title and interest in and to that certain
real property located in the County of Inyo, State of California, described
in Exhibit A attached hereto and by this reference incorporated herein (the
---------
"CLJV Property");


(b) all of Trustor's right, title and interest in and under that
certain agreement described in Exhibit B attached hereto and by this
---------
reference incorporated herein (the "Navy Contract"), together with all
renewals, extensions, supplements, amendments, cancellations or
terminations thereof and all credits, deposits, options, privileges and
rights thereunder;


(c) all of Trustor's right, title and interest in and under any
contracts, agreements and other documents for or relating to (i) the
acquisition, development, possession, use, exchange or disposition of
geothermal resources, steam, condensate,


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injectate or other fluids and/or (ii) the ownership or co-ownership (as the
case may be) of pipelines, wells and/or related improvements, equipment and
facilities, in any way belonging, relating or pertaining to or connected
with the CLJV Property and/or the Navy Contract, together with all
renewals, extensions, supplements, options, amendments, cancellations or
terminations thereof;


(d) all of Trustor's right, title and interest in and to any (i)
easements, rights-of-way, licenses and entry rights, (ii) gores of land,
(iii) roads, streets, ways, alleys or passages, (iv) interests in land
lying in the bed of any street, road or avenue, whether opened or proposed,
on, near or adjoining the CLJV Property or any part thereof, (v) sewer
rights, (vi) air rights, (vii) waters, water courses, water rights and
powers, (viii) profits-a-prendre, minerals, geothermal substances, oil, gas
and other hydrocarbon substances, (ix) exploration, development and
production rights, and (x) all other estates, rights, titles, interests,
privileges, franchises, liberties, tenements, hereditaments, consents,
options, appendages and appurtenances of any nature whatsoever, in any way
belonging, relating or pertaining to or connected with the CLJV Property,
the Navy Contract, the Improvements or any other of the Trust Property, or
any part thereof, together with all renewals, extensions, supplements or
amendments thereof;


(e) all leases (including oil, gas, geothermal and other mineral
leases), subleases, franchises, licenses, concessions, permits, power
purchase and other contracts and agreements affecting the use or occupancy
of the CLJV Property, the Navy Contract, the Improvements or any other of
the Trust Property, or any part thereof, now or hereafter entered into, and
any renewals or extensions thereof (hereinafter referred to as the
"Leases"); and the right to receive and apply the rents, issues, profits,
royalties, income, accounts receivable, revenues, deposits, security
deposits, receipts and other benefits of the Trust Property to the extent
of Trustor's interest therein, including, without limitation, the proceeds
of all hydrocarbons or other minerals produced from the Trust Property, all
delay royalties, rentals and bonuses from any oil, gas, geothermal or other
mineral lease, any revenues under any power purchase or sale contracts and
any amounts received from the U.S. Navy (collectively, hereinafter referred
to as the "Rents") to the payment of the Obligations;


(f) all of Trustor's right, title and interest in and to any and all
buildings, structures, improvements or fixtures of any kind, now or
hereafter erected or located on the CLJV Property or any part thereof (the
"Improvements");


(g) all facilities, machinery, equipment, apparatus, appliances,
fittings, goods, materials, supplies, and other items and property of every
kind and nature whatsoever owned by Trustor, or in which Trustor now or
hereafter has any right, title or interest, now or hereafter located in or
upon, or used in connection with the present or future development,
operation, occupancy or other utilization (whether temporarily or
permanently) of or activities on, the CLJV Property, any of the other Trust
Property or any part thereof, whether or not attached to or installed in
any Improvements, and all renewals, replacements and substitutions thereof
and additions thereto, including, without limitation, any and all (i)
wells, including production, injection, test, temperature gradient and
water wells, well casings, wellhead equipment, geothermal resource
gathering,


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injection and disposal systems, pipelines, pumps, sumps, test holes,
evaporation ponds and other facilities and equipment used to produce,
inject, store, transport or utilize geothermal substances or condensate,
(ii) overhead and underground electrical transmission, distribution and
collector lines and related systems, switchyards, substations,
transformers, energy storage facilities, conductors, separators, circuit
breakers, interconnection equipment, conduits, footings, towers, poles,
crossarms, guy lines, anchors and wires, (iii) overhead and underground
control, monitoring, communications and radio relay systems and
telecommunications equipment, (iv) roads, erosion control facilities,
dikes, signs and fences, (v) maps, plans, specifications, architectural,
engineering, construction or shop drawings, manuals or similar documents
and (vi) any other facilities, machinery, equipment, apparatus, fittings,
goods, materials, supplies, and other items and property associated with or
incidental to any of the foregoing or to the generation, conversion,
storage, switching, metering, step-up, step-down, transmission, conducting,
wheeling, sale or other use or conveyance of electricity (collectively, the
"Equipment"), as well as the right, title and interest of Trustor in and to
any of the Equipment which may be subject to any security agreements (as
defined in the Uniform Commercial Code of the State of California) superior
in lien to the lien of this Deed of Trust;


(h) all awards or payments, including interest thereon, and the right
to receive the same, which may be made with respect to the Trust Property,
whether from state fund sharing, from the exercise of the right of eminent
domain (including any transfer made in lieu of the exercise of said right),
from changes of grade of street or for any other injury to or decrease in
the value of the Trust Property now or hereafter located thereon, whether
direct or consequential, which said awards and payments are hereby assigned
to Beneficiary, and Beneficiary is hereby authorized to collect and receive
the proceeds thereof and to give proper receipts and acquittances therefor;


(i) all refunds or rebates of all taxes or charges in lieu of taxes,
assessments, water rates, sewer rents and other charges, including vault
charges and license or permit fees for the use of vaults, chutes and
similar areas on or adjoining the CLJV Property, now or hereafter levied or
assessed against the Trust Property (hereinafter referred to as the
"Taxes");


(j) all inventory, accounts, books, records and general intangibles
in whatever form and however stored, owned by Trustor, or in which Trustor
now or hereafter has any right, title or interest, now or hereafter located
upon, arising in connection with or concerning the Trust Property;


(k) all proceeds of and any unearned premiums on any insurance
policies now or hereafter covering the Trust Property, including, without
limitation, the right to receive the proceeds of any insurance, judgments
or settlements made in lieu thereof, for damage to the Trust Property or
for any defect in the title to the Trust Property or any part thereof;


(l) the right, in the name and on behalf of Trustor, to appear in and
defend any action or proceeding brought with respect to the Trust Property
and to commence any action or proceeding to protect the interest of
Beneficiary in the Trust Property;


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(m) all of Trustor's right, title and interest in and to all plans and
specifications prepared for or relating to the design, development,
construction, management and use of Improvements or Equipment or other
development of the Trust Property (including, without limitation, all
amendments, modifications, supplements, general conditions and addenda
thereof or thereto), and all studies, data and drawings related thereto,
and all contracts and agreements of Trustor relating to the aforesaid plans
and specifications or to the aforesaid studies, data and drawings or to the
design, development, construction, management and use of Improvements, the
Equipment or any of the other Trust Property;


(n) all contracts with property managers, surveyors, real estate
advisors, consultants and brokers, geothermal energy advisors and
consultants, engineers, and other like agents and professionals that relate
to any part of the Trust Property, including without limitation, any
Improvements constructed or to be constructed on the CLJV Property or any
part thereof or any Equipment to be placed, installed, used or stored on
the CLJV Property or any part thereof, and all maps, reports, surveys,
tests and studies of or relating to any of the Trust Property, owned by
Trustor or in which Trustor has or shall have an interest and now or
hereafter in the possession of Trustor or any such agent or professional;


(o) all present and future agreements, permits, licenses,
entitlements and approvals, as well as all modifications, supplements,
extensions and renewals thereof, now existing or hereafter made, in which
Trustor now or hereafter has an interest, relating to the use, development
and/or occupancy of the CLJV Property, the Improvements and/or the
Equipment;


(p) all the estate, right, title, interest, claim or demand of any
nature whatsoever of Trustor, either in law or in equity, in possession or
expectancy, in and to the Trust Property and in all replacements,
substitutes, renewals, betterments and extensions of and all additions to
any of the Improvements or Equipment, or any part thereof; and


(q) all products and proceeds of any of the Trust Property herein
described.


This Deed of Trust secures the following obligations which shall heretofore and hereinafter collectively be referred to as the "Obligations":


(i) The payment of all indebtedness and the performance of all
obligations of CED, CPD and CFP as evidenced in Section 9 of the Indenture
entitled "Guarantees" and as further evidenced by that certain Notation of
Guarantee of even date herewith executed by CED, CPD and CFP, including,
without limitation, the guarantee of payment of (1) $110,000,000 6.80%
Senior Secured Notes due in 2001 and (2) $303,000,000 9.05% Senior Secured
Notes due in 2009 (collectively, the "Senior Secured Notes") issued by the
Issuer (the "Guarantees"); and


(ii) The satisfaction and performance of all other debts, obligations,
covenants, agreements and liabilities of Trustor to Trustee, Beneficiary
or any of the other Secured


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Parties or of CED, CPD, CFP or the Issuer to Trustee, Beneficiary or any of
the other Secured Parties, arising out of, connected with or related to
this Deed of Trust, the Guarantees, any of the Financing Documents or any
other agreement now or hereafter executed by CED, CPD, CFP, the Issuer or
Trustor, and all amendments, extensions, and renewals of the foregoing
documents, whether now existing or hereafter arising, voluntary or
involuntary, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later
increased, created, or incurred.


To protect the security of this Deed of Trust, Trustor covenants with and represents and warrants to Trustee and Beneficiary as follows:


1. Warranty of Title. Trustor warrants its right, title or
----------------- interest, as applicable, in and to the CLJV Property, the Navy Contract, the Improvements, the Equipment and the balance of the Trust Property and the validity and priority of the lien of this Deed of Trust and the estate hereof against the claims and demands of all Persons whomsoever, other than with respect to Permitted Liens. Trustor also represents and warrants that (i) Trustor is now, and after giving effect to this Deed of Trust, will be, in a solvent condition, (ii) the execution and delivery of this Deed of Trust by Trustor does not constitute a "fraudulent conveyance" within the meaning of Title 11 of the United States Code (the "Bankruptcy Code") as now constituted or under any other applicable statute, and (iii) no bankruptcy or insolvency proceedings are pending or contemplated by or, to the best of Trustor's knowledge, against Trustor.


2. Notice. Trustor hereby requests that a copy of notice of default
------ and notice of sale be mailed to it at the address set forth below, and such address is also the mailing address of Trustor, as debtor, under the California Uniform Commercial Code. Trustor hereby covenants to cure any default within the time period required of the Issuer under the Financing Documents upon receipt of notice of such default. Beneficiary's address given below is the address for Beneficiary under the California Uniform Commercial Code. Any notice, request, demand, statement, authorization, approval or consent made hereunder shall be deemed given or furnished (i) when addressed to the party intended to receive the same at the address of such party set forth below, and delivered at such address or (ii) three (3) days after the same is deposited in the United States mail as first class certified mail, return receipt requested, postage prepaid:


If to Trustor:


China Lake Joint Venture
c/o Caithness Energy, L.L.C.
1114 Avenue of the Americas, 41st Floor
New York, New York 10036
Attention: President


If to Trustee:


Chicago Title Insurance Company
2425 West Shaw
Fresno, California 93711
Attention: Trust Department


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If to Beneficiary:


U.S. Bank Trust National Association
One California Street, Suite 400
San Francisco, California 94111
Attention: Trust Officer


3. Sale of Trust Property. This Deed of Trust hereby contains more
---------------------- than one power of sale and Beneficiary, in its sole discretion, may conduct one or multiple foreclosure sales in connection herewith. If this Deed of Trust is foreclosed, or the power of sale hereunder is exercised, the Trust Property, or any interest therein, may, at the discretion of Beneficiary, be sold in one or more parcels or in several interests or portions and in any order or manner.


4. No Credits on Account of the Obligations. Trustor will not claim
---------------------------------------- or demand or be entitled to any credit or credits on account of the Obligations for any part of the Taxes assessed against the Trust Property or any part thereof, and no deduction shall otherwise be made or claimed from the taxable value of the Trust Property, or any part thereof, by reason of this Deed of Trust or the Obligations.


5. Offset, Counterclaims and Defenses. Any assignee of this Deed of
---------------------------------- Trust and the Obligations secured hereby shall take the same free and clear of all offsets, counterclaims or defenses of any nature whatsoever which Trustor may have against any assignor of this Deed of Trust and the Obligations secured hereby, and no such offset, counterclaim or defense shall be interposed or asserted by Trustor in any action or proceeding brought by any such assignee upon this Deed of Trust or the Obligations secured hereby and any such right to interpose or assert any such offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Trustor.


6. Other Security for the Obligations. Trustor shall observe and
---------------------------------- perform all of the terms, covenants and provisions to be observed or performed by Trustor contained in this Deed of Trust or otherwise executed and delivered in connection with this Deed of Trust.


7. Preservation of Trust Property. Trustor shall do any and all
------------------------------ acts which, from the character or use of the Trust Property, may be reasonably necessary to protect and preserve the lien, the priority of the lien and the security of Beneficiary granted herein, the specific enumerations herein not excluding the general. Trustor shall maintain and preserve the Trust Property in accordance with the requirements of the Indenture. Further, with respect to the Navy Contract (the "Primary Rights"), Trustor hereby agrees as follows:


(a) not to amend, change, alter, cancel, surrender, release, waive, supplement, terminate or modify, nor permit the amendment, change, alteration, cancellation, surrender, release, waiver, supplement, termination, or modification (each, an "Amendment") of the Navy Contract or the estate or rights created thereby or any interest therein without the prior written consent of Beneficiary. Consent to one Amendment shall not be deemed to be a waiver of the right to require consent to other, future or successive Amendments. Any Amendment, whether oral or in writing, made without the prior written consent of Beneficiary, shall not be valid or effective;


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(b) to make all payments and to keep and perform promptly each and every covenant, obligation and agreement of the lessee, transferee, grantee, licensee or holder (as the case may be) in the Navy Contract, not to commit, suffer or permit any default thereunder and not to take any action or omit to take any action which would effect or permit the termination or cancellation of the Navy Contract. Trustor shall take all actions necessary to keep the rights under the Navy Contract unimpaired. Trustor shall promptly deliver to Beneficiary copies of all material notices, demands or complaints received by Trustor from the U.S. Navy, CED, CFP, CPD or any other third party in connection with the Navy Contract, and promptly notify Beneficiary in writing with respect to any default or alleged default by any party thereto (whether or not a notice of default has been issued under the Navy Contract) and deliver to Beneficiary within ten (10) business days of Trustor's receipt of any notice of default a certificate executed by Trustor describing the default, the actions Trustor intends to take to cure such default, the length of time Trustor expects to take to cure such default and the status of any actions taken to cure such default. Trustor shall also furnish to Beneficiary such other information as Beneficiary may reasonably request concerning Trustor's performance of its covenants, obligations and agreements under or with respect to the Navy Contract. Beneficiary shall have the option but not the obligation to cure any such default and to perform any or all of Trustor's obligations thereunder;


(c) that any subordination of the Navy Contract to any fee mortgage, to any lease, or to any other interest, either orally or in writing, made without the prior written consent of Beneficiary, shall not be valid or effective;


(d) that if the Navy Contract is terminated prior to the natural termination of its term by reason of default of Trustor thereunder, and if, pursuant to any provision of the Navy Contract, or otherwise, Beneficiary or its designee shall acquire from the U.S. Navy or any other third party, as the case may be, a new contract, lease or right-of-way, then Trustor shall not have any right, title or interest in or to such new contract, lease or right-of-way or the estate created thereby; and


(e) that the provisions hereof shall be deemed to be obligations of Trustor in addition to Trustor's obligations as lessee, grantee, transferee, licensee or holder, as the case may be, with respect to any similar matters contained in the Navy Contract, and the inclusion herein of any covenants and agreements relating to similar matters as to which Trustor is obligated under the Navy Contract shall not restrict or limit Trustor's duties and obligations to keep and perform promptly all of its covenants, agreements and obligations as lessee, grantee, transferee, licensee or holder, as the case may be, under the Navy Contract; provided, however, that nothing in this Deed of Trust shall be construed as requiring the taking of or the committing to take any action by Trustor or Beneficiary which would cause a default under the Navy Contract.


8. Further Transfer of Trust Property. Without the prior written
---------------------------------- consent of Beneficiary being first had and obtained, Trustor shall not (a) execute or deliver any pledge, security agreement, mortgage, deed of trust or other instrument of hypothecation covering all or any portion of the Trust Property or any interest therein or (b) sell, contract to sell, lease with option to purchase, convey, alienate, transfer, sublease or otherwise dispose of all or any portion of the Trust Property or any interest therein, in each case whether voluntarily or involuntarily, by


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operation of law or otherwise. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Beneficiary may grant or deny such consent in its sole discretion and, if consent should be given, any such transfer shall be subject to this Deed of Trust, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein and therein. Such assumption shall not, however, release Trustor from any liability under this Deed of Trust without the written consent of Beneficiary.


9. Eminent Domain. In the event that any proceeding or action be
-------------- commenced for the taking of the Trust Property, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, condemnation or otherwise, or if the same be taken or damaged by reason of any public improvement or condemnation proceedings, or in any other manner (collectively, a "Condemnation"), or should Trustor receive any notice or other information regarding such proceeding, action, taking or damage, Trustor shall give prompt written notice thereof to Beneficiary. Beneficiary shall be entitled to give or withhold its consent to any compromise or settlement in connection with such taking or damage. All compensation, awards, damages, rights of action and proceeds awarded to Trustor by reason of any such taking or damage (the "Condemnation Proceeds") are hereby absolutely and unconditionally assigned to Beneficiary, and Trustor agrees to execute such further assignments of the Condemnation Proceeds as Beneficiary or Trustee may require. All such Condemnation Proceeds shall be applied as provided in the Credit Agreements.


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