[EXECUTION COPY]
PLEDGE AGREEMENT AND IRREVOCABLE PROXY
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of December
29, 2003, is made by NATIONAL ENERGY GROUP, INC., a Delaware corporation (the
"Pledgor"), in favor of BANK OF TEXAS, N.A., as Collateral Agent (together with
its successor(s) and assign(s) thereto, the "Collateral Agent") for the Lender
Parties (as defined below).
WITNESSETH:
WHEREAS, pursuant to a Credit Agreement dated as of December 29, 2003
(together with all amendments, supplements, restatements and other
modifications, if any, from time to time thereafter made thereto, the "Credit
Agreement"), among NEG Operating LLC, a Delaware limited liability company (the
"Borrower"), Mizuho Corporate Bank, Ltd., as Administrative Agent, Bank of
Texas, N.A., and The Bank of Nova Scotia, as Co-Agents, Bank of Texas, N.A., as
Collateral Agent, and the Issuers and the Lenders from time to time parties
thereto, the Issuers and the Lenders have extended credit to the Borrower by way
of Loans and Letters of Credit;
WHEREAS, the Borrower and its Subsidiaries have entered into and/or may
enter into certain Hedging Agreements with certain Lender Parties, pursuant to
the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making or extension of the
initial Loans and Letters of Credit under the Credit Agreement and to the
extension of financial accommodations under the Hedging Agreements referred to
above, the Pledgor is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this
Pledge Agreement inasmuch as the Borrower is a subsidiary of the Pledgor and the
Pledgor will derive substantial direct and indirect benefits from the Loans from
time to time made to, and the Letters of Credit issued on behalf of, the
Borrower by the Lenders and the Issuers, as the case may be, pursuant to the
Credit Agreement and the extension of financial accommodations under the Hedging
Agreements referred to above.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in order to induce the Lenders
to make Loans (including the initial Loans) to, and to participate in Letters of
Credit for the benefit of, and to induce the Issuers to issue the Letters of
Credit (including the initial Letter of Credit) for the benefit of the Borrower
pursuant to the Credit Agreement and to induce certain Lender Parties to extend
financial accommodations pursuant to the Hedging Agreements, the Pledgor agrees,
for the benefit of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Distributions" means all cash dividends, stock dividends, liquidating
dividends, shares of stock resulting from (or in connection with the exercise
of) stock splits, reclassifications, warrants, options, non-cash dividends,
mergers and consolidations, and all cash distributions or other distributions
made in respect of the Pledged Interests, whether or not income, return of
capital or otherwise, and all other distributions (whether similar or dissimilar
to the foregoing) on or with respect to any Pledged Interests or other rights or
interests constituting Collateral.
"Indemnified Parties" is defined in Section 6.5.
"Lender Party" means, as the context may require, any Lender, any
Agent, any Issuer and any Affiliate of any Agent, any Issuer or any Lender, or
other Person that is a party to a Hedging Agreement and is a Lender or an
Affiliate thereof (but only during such time that such Person is a Lender or an
Affiliate of a Lender), and each of their respective successors, transferees and
assigns.
"Obligors" means, collectively, the Pledgor, the Borrower or any other
Person (other than any Agent, Issuer or Lender) obligated under any Loan
Document, including their permitted successors and assigns, and "Obligor" means
any one of them.
"Pledge Agreement" is defined in the preamble.
"Pledged Interest Issuer" means each Person identified in Attachment 1
hereto as the issuer of the Pledged Interests identified opposite the name of
such Person.
"Pledged Interests" means all Equity Interests of any Pledged Interest
Issuer; all Equity Interests issued by Pledgor's subsidiaries as identified in
Attachment 1 hereto; all registrations, certificates, articles or agreements
governing or representing any such interests; all options and other rights,
contractual or otherwise, at any time existing with respect to such interests;
and all distributions, cash, instruments and other property now or hereafter
received receivable or otherwise distributed in respect of or in exchange for
any or all of such interests.
2
"Pledged Property" means all Pledged Interests and all other pledged
partnership or membership interests or promissory notes, all other securities,
all assignments of any amounts due or to become due, and all other instruments
which are now being delivered by the Pledgor to the Collateral Agent or may from
time to time hereafter be delivered by the Pledgor to the Collateral Agent for
the purpose of pledge under this Pledge Agreement or any other Loan Document;
and all proceeds of any of the foregoing.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
New York, as the same may be amended from time to time.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge Agreement, including its preamble and recitals, with
such meanings.
ARTICLE II
PLEDGE
SECTION 2.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Lender
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of each of the Lender Parties, a continuing security interest in
all of the Pledgor's right, title and interest, whether now existing or
hereafter arising or acquired, in and to the following property (the
"Collateral"): (a) all Pledged Interests identified in Attachment 1 hereto; (b)
all other Pledged Interests issued from time to time; (c) all other Pledged
Property, whether now or hereafter delivered to the Collateral Agent in
connection with this Pledge Agreement; (d) all Distributions, interest, and
other payments and rights with respect to any Pledged Property; and (e) all
proceeds of any of the foregoing.
SECTION 2.2 Security for Obligations. This Pledge Agreement secures the
indefeasible payment in full and performance of all Obligations now or hereafter
existing under the Credit Agreement and each other Loan Document, whether for
principal, interest, costs, fees, expenses or otherwise, and all other
obligations of the Pledgor, the Borrower and each other Obligor to any Lender
Party, now or hereafter owing, howsoever created, arising or evidenced, whether
direct or indirect, primary or secondary, fixed or absolute or contingent, joint
or several, or now or hereinafter existing or due or to become due, and all
obligations of the Pledgor now or hereafter existing under this Pledge Agreement
and each other Loan Document to which it is or may become a party (all such
Obligations and other obligations of the Pledgor, the Borrower and each other
Obligor being the "Secured Obligations").
3
SECTION 2.3 Delivery of Pledged Property.
SECTION 2.3.1 All certificates or instruments representing or
evidencing any Collateral, including all Pledged Interests, shall be delivered
to and held by or on behalf of the Collateral Agent pursuant hereto, shall be in
suitable form for transfer by delivery, and shall be accompanied by all
necessary endorsements or instruments of transfer or assignment, duly executed
in blank.
SECTION 2.3.2 To the extent any of the Collateral constitutes a
"certificated security" (as defined in Section 8-102(a)(4) of the U.C.C.), an
"uncertificated security" (as defined in Section 8-102(a)(18) of the U.C.C.) or
a "security entitlement" (as defined in Section 8-102(a)(17) of the U.C.C.), the
Pledgor shall cause the issuer thereof or the securities intermediary thereof to
take all actions necessary or as requested by the Collateral Agent to grant
"control" (as defined in Section 8-106 of the U.C.C.) of such Collateral to the
Collateral Agent over such Collateral.
SECTION 2.4 Distributions on Pledged Interests. In the event that any
Distribution is to be paid on any Pledged Interests at a time when no Event of
Default has occurred and is continuing, such Distribution or payment shall be
paid directly to the Pledgor. If any such Event of Default has occurred and is
continuing, then any such Distribution or payment shall be paid directly to the
Collateral Agent, for its benefit and the ratable benefit of each of the Lender
Parties.
SECTION 2.5 Continuing Security Interest. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until indefeasible payment in full in cash of all Secured
Obligations, the termination or expiration of all Commitments and all other
commitments of the Lender Parties to the Pledgor, the Borrower and the other
Obligors pursuant to any Loan Document, and the termination or expiration of all
Letters of Credit; (b) be binding upon the Pledgor and its successors,
transferees and assigns; and (c) inure, together with the rights and remedies of
the Collateral Agent hereunder, to the benefit of the Collateral Agent and of
the other Lender Parties and their respective successors, transferees, and
assigns. Without limiting the generality of the foregoing clause (c), any Lender
may assign or otherwise transfer (in whole or in part) any Loan held by it as
provided in Section 10.12 of the Credit Agreement and any Lender Party may
assign or otherwise transfer (in whole or in part) its interest pursuant to any
Hedging Agreement, and any successor or assignee shall thereupon become vested
with all the rights and benefits in respect thereof granted to such Lender Party
under any Loan Document (including this Pledge Agreement), or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
as applicable to the provisions of Section 10.12 and Article IX of the Credit
Agreement, and, with respect to the Hedging Agreements, the limitation on rights
in collateral pursuant to the Security Documents. Upon the indefeasible payment
in full in cash of all Secured Obligations and the termination or expiration of
all Commitments and any other commitments of any Lender Party to the Borrower
and the termination or expiration of all Letters of Credit, the security
interest granted herein shall terminate and all rights to the Collateral shall
revert to the Pledgor. Upon any such payment and termination or expiration, the
Collateral Agent will, at the Pledgor's sole expense, deliver to the Pledgor,
without any representations, warranties or recourse of any kind whatsoever, all
certificates and instruments representing or evidencing all Pledged Shares,
together with all other
4
Collateral held by the Collateral Agent hereunder, and execute and deliver to
the Pledgor such documents as the Pledgor shall reasonably request to evidence
such termination.
SECTION 2.6 Security Interest Absolute. All rights of the Collateral
Agent and the other Lender Parties and the security interests granted to the
Collateral Agent and the other Lender Parties hereunder, and all obligations of
the Pledgor hereunder, shall be absolute and unconditional, irrespective of (a)
any lack of validity or enforceability of the Credit Agreement or any other Loan
Document; (b) the failure of any Lender Party (i) to assert any claim or demand
or to enforce any right or remedy against the Borrower, any other Obligor or any
other Person under the provisions of the Credit Agreement or any Loan Document
or otherwise, or (ii} to exercise any right or remedy against any other
guarantor of, or collateral securing, any Secured Obligations; (c) any change in
the time, manner or place of payment of, or in any other term of, all or any of
the Secured Obligations or any other extension, compromise or renewal of any
Secured Obligation; (d) any reduction, limitation, impairment or termination of
any Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting, any Secured Obligations; (e) any
amendment to, rescission, waiver, or other modification of, or any consent to
departure from, any of the terms of the Credit Agreement or any other Loan
Document; (f) any addition, exchange, release, surrender, or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for any of
the Secured Obligations; or (g) any other circumstances which might otherwise
constitute a defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any guarantor.
SECTION 2.7 Waiver of Subrogation. Until the indefeasible payment in
full of all Obligations and the termination or expiration of all Commitments and
the termination and expiration of all Letters of Credit, the Pledgor hereby
irrevocably waives any claim or other rights which it may now or hereafter
acquire against the Borrower or any other Obligor that arise from the existence,
payment, performance or enforcement of the Pledgor's obligations under this
Pledge Agreement or any other Loan Document, including any right of subrogation,
reimbursement, exoneration or indemnification, any right to participate in any
claim or remedy of any Lender Party against the Borrower or any other Obligor or
any collateral which any Lender Party now has or hereafter acquires, whether or
not such claim, remedy or right arises in equity, or under contract, statute or
common law, including the right to take or receive from the Borrower or any
other Obligor, directly or indirectly, in cash or other property or by set-off
or in any manner, payment or security on account of such claim or other rights.
If any amount shall be paid to the Pledgor in violation of the preceding
sentence and the Secured Obligations shall not have been indefeasibly paid in
full in cash and all Commitments and all other commitments by any Lender Party
to the Borrower have not been terminated or all Letters of Credit have not
terminated or expired, then such amount shall be deemed to have been paid to the
Pledgor for the benefit of, and held in trust for, the Collateral Agent (on
behalf of the Lender Parties), and shall forthwith be paid to the Collateral
Agent to be credited and applied upon the Secured Obligations, whether matured
or unmatured.
5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Warranties, etc. The Pledgor represents and warrants unto
each Lender Party as set forth in this Article III.
SECTION 3.2 Organization; Powers. The Pledgor is each a corporation,
partnership or limited liability company validly organized and existing and in
good standing under the laws of the State of its organization, incorporation or
formation. The Pledgor is duly qualified to do business and is in good standing
as a foreign entity in each jurisdiction where the nature of its business
requires such qualification. The Pledgor has full power and authority, and holds
all requisite governmental licenses, permits and other approvals, (a) to enter
into and perform its Obligations under this Pledge and each other Loan Document
to which it is a party, and (ii) to own and hold under lease its property and to
conduct its business substantially as currently conducted by it.
SECTION 3.3 Due Authorization; Enforceability. The Pledgor has all
necessary power and authority to execute, deliver and perform its obligations
under this Pledge Agreement and the other Loan Documents to which it is a party;
and the execution, delivery and performance by the Pledgor of this Pledge
Agreement and the other Loan Documents to which it is a party, have been duly
authorized by all necessary action on its part; and this Pledge Agreement and
the other Loan Documents constitute the legal, valid and binding obligations of
the Pledgor, enforceable in accordance with their terms, except to the extent
that enforcement may be subject to any applicable bankruptcy, insolvency or
similar laws generally affecting the enforcement of creditors' rights.
SECTION 3.4 No Conflict; Government Consent. Neither the execution and
delivery of this Pledge Agreement, nor compliance with the terms and provisions
hereof will conflict with or result in a breach of, or require any consent which
has not been obtained as of the Effective Date under, the Organic Documents of
the Pledgor, or any Governmental Rule or any material agreement or instrument to
which the Pledgor is a party or by which it is bound or to which it or its
Properties are subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of the Pledgor pursuant to the terms of any such agreement or
instrument other than the Liens created by the Loan Documents. No Governmental
Approvals or third party consents are necessary for the execution, delivery or
performance by the Pledgor of this Pledge Agreement or the other Loan Documents
or for the validity or enforceability thereof.
SECTION 3.5 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and valid title to (and has full right and
authority to pledge and assign) the Collateral, free and clear of all Liens,
security interests, options, or other charges or encumbrances, except any Lien
or security interest granted pursuant hereto in favor of the Collateral Agent
and except as permitted by the Credit Agreement.
SECTION 3.6 State of Incorporation; Name. (a) The first paragraph of
this Pledge Agreement lists the true legal name of the Pledgor as registered in
the jurisdiction in which the Pledgor is organized, formed or incorporated; (b)
the Pledgor's state of incorporation, formation
6
or organization, its organization identification number as designated by the
state of its incorporation, formation or organization, and its principal place
of business (or, if it has more than one place of business, its chief executive
office) are as set forth on Attachment 4 to this Pledge Agreement delivered by
the Pledgor; and (c) the Pledgor is not now and has not been known by any trade
name. The Pledgor has not been known by any legal name different from the one
set forth on the signature page hereto, nor has the Pledgor been the subject of
any merger or other corporate reorganization.
SECTION 3.7 Valid Security Interest. The delivery of the Collateral to
the Collateral Agent is effective to create a valid, perfected security interest
in such Collateral and all proceeds thereof and securing the Secured Obligations
and such security interest shall be a first priority security interest in the
Collateral. No filing or other action will be necessary to perfect or protect
such security interest. No real property owned by the Pledgor is encumbered by a
Lien except such real property as is encumbered by a Lien in favor of the
Collateral Agent for the benefit of the Lender Parties.
SECTION 3.8 As to Pledged Interests. All of the Pledged Interests
constitute one hundred percent (100%) of the Pledgor's interest, in the Pledged
Interests Issuer and the percentage of the total membership, partnership and/or
other equity interests in the Pledged Interests Issuer indicated on Attachment
1. The Pledgor has no Subsidiaries other than the Pledged Interests Issuers. The
Pledged Interests are duly registered in the permanent ownership records of the
Pledged Interests Issuer and clearly show the Collateral Agent's security
interest for the benefit of each Lender Party, and such registration is
maintained in the principal office of such Pledged Interests Issuer. Such
registration continues valid and genuine and has not been altered. All Pledged
Interests have been duly authorized and validly issued and registered, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights, if any, of any Person or of any agreement by which Pledgor or Borrower
is bound. All documentary, stamp or other taxes or fees owing in connection with
the registration, issuance, transfer or pledge of Collateral have been paid. No
restrictions or conditions exist with respect to the registration, transfer,
voting or capital of any Pledged Interests. The Pledged Interests constitute the
percentage of ownership as indicated on Attachment 1. The Pledgor has no
outstanding rights, rights to subscribe, options, warrants or convertible
securities outstanding or any other rights outstanding whereby any Person would
be entitled to acquire member interests or units of any Pledged Interest Issuer.
All requisite formalities for the granting of a security interest in the Pledged
Interests required pursuant to the organic documents of the Pledgor or of the
Pledged Interest Issuer have been complied with on or prior to the execution and
delivery of this Pledge Agreement.
SECTION 3.9 Authorization, Approval, etc. No authorization, approval or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either (a) for the pledge by
the Pledgor of any Collateral pursuant to this Pledge Agreement or for the
execution, delivery and performance of this Pledge Agreement by the Pledgor; or
(b) for the exercise by the Collateral Agent of the voting or other rights
provided for in this Pledge Agreement, or for the remedies in respect of the
Collateral pursuant to this Pledge Agreement, except as may be required in
connection with a disposition of Pledged Interests by laws and regulations
affecting the offering and sale of securities generally.
7
SECTION 3.10 Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every governmental authority, the noncompliance of which might materially
adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of the Pledgor or the value of the
Collateral or the worth of the Collateral as collateral security.
SECTION 3.11 Certificated Nature of Equity Interests. All membership,
partnership or other equity interest in each Pledged Interest Issuer that are
represented by certificates have been delivered to the Collateral Agent and are
held in its possession, together with transfer documents as required in this
Pledge Agreement (and the Pledgor covenants and agrees that any certificates or
instruments evidencing all membership, partnership or other equity interest in
each Pledged Interest Issuer hereafter received by the Pledgor with respect to
any of the Collateral will be held in trust for the Collateral Agent and
promptly delivered to the Collateral Agent).
SECTION 3.12 No Restricted Subsidiaries. No Subsidiary of the Pledgor
or the Borrower is a "Restricted Subsidiary" under and as defined in that
certain Indenture dated as of August 21, 1997 by and between the Pledgor and
Bank One, N.A., as amended, supplemented, restated or otherwise modified from
time to time.
SECTION 3.13 Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Pledgor or any
of its Subsidiaries in writing to the Administrative Agent, the Collateral
Agent, any Lender or the Issuers for purposes of or in connection with this
Pledge Agreement or any other Loan Document or any transaction contemplated
hereby or thereby is, and all other such factual information hereafter furnished
by or on behalf of any Obligor (except Xxxxxx) to the Administrative Agent, the
Collateral Agent, the Issuers or any Lender will be, true and accurate in every
material respect on the date as of which such information is dated or certified
and as of the date of execution and delivery of this Pledge Agreement to the
Administrative Agent, the Collateral Agent, the Issuers or such Lender, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.
There is no fact existing with respect to the Pledgor or any Subsidiary of the
Pledgor that could reasonably be expected to have a material adverse effect (a)
on the business, condition (financial or otherwise), operations or properties of
the Pledgor or the Pledgor and its Subsidiaries (taken as a whole), or (b) the
ability of the Pledgor or any of its Subsidiaries to pay and perform its
obligations under this Pledge Agreement or the other Loan Documents to which it
is a party or that purports to affect the legality, validity or enforceability
of this Pledge Agreement or any other Loan Documents to which it is a party or
in the future could reasonably be likely to have a material adverse effect on
the Pledgor or any other Obligor (except Xxxxxx) to pay and perform its
obligations under the Loan Documents to which they are a party and which has not
been set forth in this Pledge Agreement or the other documents, certificates and
statements furnished to the Administrative Agent by or on behalf of the Pledgor
or any Subsidiary of the Pledgor prior to, or on, the date hereof in connection
with the transactions contemplated hereby.
8
ARTICLE IV
COVENANTS
SECTION 4.1 Certain Covenants. The Pledgor covenants and agrees that,
so long as any portion of the Secured Obligations shall remain unpaid or any
Lender shall have any outstanding Commitment or any Lender Party shall have
outstanding any other commitment to any Obligor under any Loan Document or any
Letter of Credit shall remain outstanding, the Pledgor will, unless all of the
Required Lenders shall otherwise consent in writing, perform the obligations set
forth in this Section 4.1.
SECTION 4.1.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign (by operation of law or otherwise), transfer, pledge,
encumber in any other manner or otherwise dispose of the Collateral (except as
permitted by the Credit Agreement). The Pledgor will warrant and defend the
right and title herein granted to the Collateral Agent in and to the Collateral
(and all right, title, and interest represented by the Collateral) against the
claims and demands of all Persons whomsoever. The Pledgor agrees that at any
time, and from time to time, at the reasonable expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action that may be necessary or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
The Pledgor agrees that, without the prior written consent of the Collateral
Agent, in its sole and absolute discretion, it will not permit any Pledged
Interests Issuer, or vote its interest in the Pledged Interests in a way that
allows such Pledged Interests Issuer, to (a) make any amendments to the articles
of organization or operating agreement or partnership agreement or any other
organic agreement of the Pledged Interests Issuer, or (b) enter in any other
agreements which, in the opinion of the Collateral Agent, in its sole and
absolute discretion, will reduce the value of the Collateral. The Pledgor agrees
that, upon the acquisition after the date hereof by the Pledgor of any
Collateral, with respect to which the security interest granted hereunder is not
perfected automatically upon such acquisition, to take such actions with respect
to such Collateral or any part thereof as required by the Loan Documents.
SECTION 4.1.2 Certificates, etc.
(a) The Pledgor agrees that all certificates or other
instruments evidencing Pledged Interests delivered by the Pledgor
pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank transfer powers, in substantially the form attached
hereto as Attachment 3, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time
upon the reasonable request of the Collateral Agent, promptly deliver
to the Collateral Agent duly executed undated blank transfer powers in
substantially the form attached hereto as Attachment 3, instruments,
and similar documents, reasonably satisfactory in form and substance to
the Collateral Agent, with respect to the Collateral as the Collateral
Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of
Default, promptly transfer any Pledged Interests into the name of any
nominee designated by the Collateral Agent.
9
(b) The Pledgor agrees that (i) the Collateral Agent may
notify the Pledged Interest Issuer of the existence of this Pledge
Agreement by having the Pledged Interest Issuer acknowledge the Notice
of Pledge Agreement attached hereto as Attachment 2 immediately after
the execution and delivery of this Pledge Agreement and (ii) it will
keep, at its address so indicated below its signature hereto, all of
its records concerning the Collateral, which records will be of such
character as will enable the Collateral Agent or its designees to
determine at any time the status thereof.
SECTION 4.1.3 Continuous Pledge. Subject to Section 2.4, the Pledgor
will, at all times, keep pledged to the Collateral Agent pursuant hereto all
Pledged Interests and all other Collateral, all Distributions with respect
thereto, and all other Collateral and other securities, instruments, proceeds,
and rights from time to time received by or distributable to the Pledgor in
respect of any Collateral, free and clear of all Liens, security interests,
options, or other charges or encumbrances, except any Lien or security interest
granted pursuant hereto in favor of the Collateral Agent and except as permitted
by the Credit Agreement.
SECTION 4.1.4 Voting Rights; Distributions, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be
continuing, promptly upon receipt thereof by the Pledgor without any
request therefor by the Collateral Agent to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Distributions, all interest, all principal, all
other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral Agent as additional Collateral for use
in accordance with Section 6.4; and
(b) after any Event of Default shall have occurred and be
continuing and the Collateral Agent has notified the Pledgor of the
Collateral Agent's intention to exercise its voting power under this
Section 4.4 (i) the Collateral Agent may exercise (to the exclusion of
the Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Interests or other shares of
capital stock constituting Collateral, AND THE PLEDGOR HEREBY GRANTS
THE COLLATERAL AGENT AN IRREVOCABLE PROXY (WHICH IRREVOCABLE PROXY IS
COUPLED WITH AN INTEREST AND SHALL BE EFFECTIVE UNTIL SUCH TIME THAT
ALL SECURED OBLIGATIONS ARE REPAID IN FULL IN CASH, ALL COMMITMENTS OF
THE LENDER PARTIES SHALL HAVE EXPIRED OR TERMINATED, AND ALL LETTERS OF
CREDIT SHALL HAVE EXPIRED OR TERMINATED), EXERCISABLE UNDER SUCH
CIRCUMSTANCES, TO VOTE THE PLEDGED INTERESTS AND SUCH OTHER COLLATERAL,
and (ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the Collateral
Agent to exercise such voting power.
All Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that, unless an Event of Default shall have occurred and be continuing
and the Collateral Agent
10
shall have given the notice referred to in Section 4.1.4(b), the Pledgor shall
have the exclusive voting power with respect to any of the Pledged Interests
constituting Collateral, and the Collateral Agent shall, upon the written
request of the Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by the Pledgor which are necessary to
allow the Pledgor to exercise voting power with respect to any of the Pledged
Interests constituting Collateral; provided, however, that no vote shall be
cast, or consent, waiver, or ratification given, or action taken by the Pledgor
that would cause a Default, impair any Collateral or be inconsistent with or
violate any provision of the Credit Agreement or any other Loan Document
(including this Pledge Agreement).
SECTION 4.1.5 Status of Pledged Interests. The registration of the
Pledged Interests on the permanent ownership records of the Pledgor shall at all
times be valid and genuine and shall not be altered. The Pledged Interests at
all times shall be duly authorized, validly registered, fully paid, and
non-assessable, and shall not be registered in violation of the organic
documents of the Pledgor or the preemptive rights of any Person, if any, or of
any agreement by which Pledgor or any Pledged Interest Issuer is bound.
SECTION 4.1.6 Additional Undertakings. The Pledgor will not, without
the prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or
waiving any provision of any Pledged Interests (including the operating
agreement, partnership agreement, limited liability company agreement
or regulations to which such Pledged Interests relate) or compromising
or releasing or extending the time for payment of any obligation of the
maker thereof;
(b) take or omit to take any action the taking or the omission
of which would result in any impairment or alteration of any obligation
of the Pledgor in respect of any Pledged Interests constituting
Collateral or of the maker of any instrument constituting Collateral;
(c) cause or permit any change to be made in its name,
identity, corporate structure or state of incorporation or formation,
or any change to be made to a jurisdiction other than as represented in
(i) the location of any Collateral, (ii) the location of any records
concerning any Collateral or (iii) in the location of its place of
business (or, if it has more than one place of business, its chief
executive office), unless Pledgor shall have notified the Collateral
Agent of such change at least thirty (30) days prior to the effective
date of such change, and shall have first taken all action, if any,
reasonably required by the Collateral Agent for the purpose of further
perfecting or protecting the security interest in favor of the
Collateral Agent in the Collateral;
(d) permit the issuance of (i) any Equity Interests or units
of any class of member interests or units of any Pledged Interest
Issuer (unless immediately upon such issuance the same are pledged and
delivered to Lender pursuant to the terms hereof to the extent
necessary to give the Lender a security interest after such issue in at
least the same percentage of the Pledgors outstanding interests or
units as before such issue), (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the
11
occurrence or non-occurrence of any event or condition into, or
exchangeable for, any such member interests or units or shares, or
(iii) any warrants, options, contracts or other commitments entitling
any Person to purchase or otherwise acquire any such interests, units
or shares; or
(e) enter into any agreement creating, or otherwise permit to
exist, any restriction or condition upon the transfer, voting or
control of any Pledged Interests.
The Pledgor shall provide, or cause the relevant Pledged Interest Issuer to
provide, the Collateral Agent with a copy of any amendment or supplement to, or
modification or waiver of, any term or provision of any of the by-laws and other
Organic Documents of the Pledged Interest Issuers, provided that the Pledgor
shall not enter into any such amendment, supplement, modification or waiver
which could reasonably be expected to be adverse to the interests of the
Collateral Agent and the other Lender Parties. To the extent that any Pledged
Interests are uncertificated, the Pledgor further agrees that if requested by
the Collateral Agent, it will cause the relevant Pledged Interest Issuer to send
a notice to its shareholders, members or partners, as the case may be, giving
such shareholders, member or partners, respective, notice of the grant of
irrevocable proxy made herein (and in the case of a notice to shareholders, such
notice shall be given in compliance with the Texas Business Corporation Act).
SECTION 4.1.7 Tax Returns. Following the occurrence of an Default, at
the Collateral Agent's request, the Pledgor will promptly provide the Collateral
Agent with a copy of its most recently filed income tax returns certified by an
Authorized Officer of the Pledgor.
SECTION 4.1.8 State of Incorporation, Formation or Organization. The
Pledgor shall not change its state of incorporation, formation or organization
or its name, identity or corporate structure unless the Pledgor shall have (a)
given the Collateral Agent at least thirty (30) days' prior notice of such
change, (b) obtained the consent of the requisite Lender Parties, if such
consent is so required by the Loan Documents, and (c) taken all actions
necessary or as requested by the Collateral Agent to ensure that the Liens on
the Collateral granted in favor of the Collateral Agent for the benefit of the
Lender Parties remain perfected, first-priority Liens subject only to permitted
Liens.
SECTION 4.1.9 Filings. The Pledgor hereby authorizes the Collateral
Agent to file U.C.C. financing statements with respect to the Collateral
describing the collateral as "all equity interests" or words of similar import,
and to file U.C.C. financing statements, and continuations and amendments
thereto, and other similar documents with respect to the Collateral without its
signature (to the extent permitted by applicable law).
SECTION 4.1.10 Performance of Covenants in Loan Documents. The Pledgor
will perform, comply with, observe and fulfill, and will cause each of its
Subsidiaries to perform, comply with, observe and fulfill, each of the
covenants, agreements and obligations contained in the Credit Agreement and the
other Loan Documents pertaining to or otherwise applicable to the Pledgor or any
of its Subsidiaries.
12
ARTICLE V
THE LENDER
SECTION 5.1 Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent as the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, from time to time in the Collateral
Agent's discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or prudent to accomplish the purposes of
this Pledge Agreement, including without limitation: (a) to ask, demand,
collect, xxx for, recover, compromise, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments, documents
and chattel paper in connection with clause (a) above; (c) to file any claims or
take any action or institute any proceedings which the Collateral Agent may deem
necessary or prudent for the collection of any of the Collateral or otherwise to
enforce the rights of the Collateral Agent with respect to any of the
Collateral; and (d) to perform the affirmative obligations of the Pledgor
hereunder (including all obligations of the Pledgor pursuant to Section 4.1.1).
THE PLEDGOR HEREBY ACKNOWLEDGES, CONSENTS AND AGREES THAT THE POWER OF ATTORNEY
GRANTED PURSUANT TO THIS SECTION 5.1 IS IRREVOCABLE AND COUPLED WITH AN INTEREST
AND SHALL BE EFFECTIVE UNTIL SUCH TIME THAT ALL SECURED OBLIGATIONS ARE REPAID
IN FULL IN CASH, ALL COMMITMENTS SHALL HAVE TERMINATED OR EXPIRED, AND ALL
LETTERS OF CREDIT SHALL HAVE TERMINATED OR EXPIRED.
SECTION 5.2 Collateral Agent May Perform. If the Pledgor fails to
perform any agreement contained herein, then the Collateral Agent may itself
perform, or cause performance of, such agreement, and the reasonable expenses of
the Collateral Agent incurred in connection therewith shall be payable by the
Pledgor pursuant to Section 6.5, and the Collateral Agent may from time to time
take any other action which the Collateral Agent reasonably deems necessary for
the maintenance, preservation or protection of any of the Collateral or of its
security interest therein.
SECTION 5.3 Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for the exercise of reasonable care over any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Collateral Agent shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
SECTION 5.4 Reasonable Care. The Collateral Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral if it takes such action for that purpose as the
13
Pledgor reasonably requests in writing at times other than upon the occurrence
and during the continuance of any Event of Default, but failure of the
Collateral Agent to comply with any such request at any time shall not in itself
be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all of the rights and remedies of
a secured party on default under the U.C.C. (whether or nor the U.C.C.
applies to the affected Collateral) and also may, without notice except
as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Collateral
Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten (10) days' prior notice
to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) The Collateral Agent may (i) transfer all or any part of
the Collateral into the name of the Collateral Agent or its nominee,
with or without disclosing that such Collateral is subject to the lien
and security interest hereunder, (ii) notify the parties obligated on
any of the Collateral to make payment to the Collateral Agent of any
amount due or to become due thereunder, (iii) enforce collection of any
of the Collateral by suit or otherwise, and surrender, release or
exchange all or any part thereof; or compromise or extend or renew for
any period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto, (iv)
endorse any checks, drafts, or other writings in the Pledgor's name to
allow collection of the Collateral, (v) take control of any proceeds of
the Collateral, and (vi) execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other instruments
of conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2 Securities Laws. (a) If the Collateral Agent shall
determine to exercise its right to sell all or any of the Collateral pursuant to
Section 6.1, then the Pledgor agrees that, upon the reasonable request of the
Collateral Agent, the Pledgor will, at its own expense:
(i) execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the members, partners
and shareholders thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such
other acts and things, as may be necessary or, in the opinion
of the
14
Collateral Agent (acting reasonably), prudent to register such
Collateral under the provisions of the Securities Act of 1933,
as from time to time amended (the "Securities Act"), and to
cause the registration statement relating thereto to become
effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make
all amendments and supplements thereto and to the related
prospectus which, in the opinion of the Collateral Agent, are
necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission
applicable thereto; and
(ii) use its best efforts to qualify the Collateral
under the state securities or "Blue Sky" laws and to obtain
all necessary governmental approvals for the sale of the
Collateral, as requested by the Collateral Agent;
(b) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities Act; and
(c) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or any Lender Party by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section 6.2 and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, then it shall pay, as liquidated damages and not
as a penalty, an amount equal to the value (as determined by the Collateral
Agent) of the Collateral on the date the Collateral Agent shall demand
compliance with this Section.
SECTION 6.3 Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Collateral Agent is hereby authorized to comply
with any limitation or restriction in connection with such sale as it may be
advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to Persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any Governmental Authority, and the Pledgor further
agrees that such compliance shall not result in such sale being considered or
deemed not to have been made in a commercially reasonable manner, nor shall the
Collateral Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4 Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the
15
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent, for its benefit and the ratable benefit of the Lender Parties,
as additional collateral security for, or then or at any time thereafter be
applied (after payment of any amounts payable to the Collateral Agent pursuant
to the Credit Agreement or Section 6.5 hereof) in whole or in part by the
Collateral Agent, for its benefit and the ratable benefit of the Lender Parties,
against all or any part of the Secured Obligations in such order as the
Collateral Agent shall elect. Any surplus of such cash or cash proceeds held by
the Collateral Agent remaining after payment in full in cash of all of the
Secured Obligations, and the termination of all Commitments and all other
commitments by all Lender Parties to the Borrower and the Pledgor, and the
termination or expiration of all Letters of Credit, shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.5 Indemnity and Expenses.
(a) Without limiting the generality of the provisions of
Section 10.4 of the Credit Agreement, the Pledgor agrees to hold
harmless and indemnify the Collateral Agent, each other Lender Party
and each of their respective officers, directors, employees and agents
(the "Indemnified Parties") from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge
Agreement or any other Loan Document (including enforcement of this
Pledge Agreement), except claims, losses or liabilities resulting from
such Indemnified Party's gross negligence or willful misconduct;
PROVIDED, HOWEVER, THAT IT IS THE INTENTION OF THE PARTIES HERETO THAT
EACH INDEMNIFIED PARTY BE INDEMNIFIED IN THE CASE OF ITS OWN NEGLIGENCE
(OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE IS
SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL.
If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Pledgor hereby agrees to make the
maximum contribution to the payment and satisfaction of each of the
foregoing which is permissible under applicable law.
(b) The Pledgor will upon demand pay to the Collateral Agent
and any local counsel the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Collateral Agent and any local
counsel may incur in connection herewith, including without limitation,
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document; (b) the custody, preservation, use, or
operation of, or the sale of, collection from, or other realization
upon, any of the Collateral; (c) the exercise or enforcement of any of
the rights of the Collateral Agent and any local counsel or any of the
other Lender Parties hereunder; or (d) the failure by the Pledgor to
perform or observe any of the provisions hereof.
SECTION 6.6 Warranties. The Collateral Agent may sell the Collateral
without giving any warranties or representations as to the Collateral. The
Collateral Agent may disclaim any warranties of title or the like. This
procedure will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.
16
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2 Amendments; etc. No amendment to or waiver of any provision
of this Pledge Agreement nor consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 7.3 Notices. All notices and other communications provided to
any party hereto under this Pledge Agreement shall be in writing or by facsimile
and addressed, delivered or transmitted to such party at its address or
facsimile number set forth below its signature hereto or at such other address
or facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when transmitted and a receipt, demonstrating successful transmission, is
received by the sender. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Pledge Agreement shall be effective
as delivery of an original executed counterpart hereof.
SECTION 7.4 Headings. The various headings of this Pledge Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Pledge Agreement or any provisions hereof.
SECTION 7.5 Severability of Provisions. Any provision of this Pledge
Agreement which is prohibited, inoperative, invalid or unenforceable in any
jurisdiction shall, as to such provision and such jurisdiction, be ineffective
to the extent of such prohibition, non-operation, invalidity or unenforceability
without invalidating the remaining provisions of this Pledge Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 7.6 Execution in Counterparts, Effectiveness, etc. This Pledge
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one agreement, and any of the parties hereto may
execute this Pledge Agreement by signing any such counterpart. This Pledge
Agreement shall become effective when counterparts hereof executed on behalf of
the Pledgor and the Collateral Agent shall have been received by the Collateral
Agent.
SECTION 7.7 Collateral Agent; Exculpation. By accepting the benefits of
this Pledge Agreement, each Lender Party hereby appoints Bank of Texas, N.A. as
its Collateral Agent under and for purposes of this Pledge Agreement and each
other Security Document. Each Lender Party authorizes Bank of Texas, N.A. to act
on behalf of such Lender Party under this Pledge Agreement and each other
Security Document, to exercise such powers hereunder
17
and thereunder as are specifically delegated to or required of the Collateral
Agent by the terms hereof, together with such powers as may be reasonably
incidental thereto. Without limiting the provisions of Article IX of the Credit
Agreement, neither the Collateral Agent nor the directors, officers, employees
or agents thereof shall be liable to any Lender Party (and each Lender Party
will hold the Collateral Agent harmless) for any action taken or omitted to be
taken by it under this Pledge Agreement or any other Security Document, or in
connection herewith or therewith, except for the willful misconduct or gross
negligence of the Collateral Agent, or responsible for any recitals or
warranties herein or therein, or for the effectiveness, enforceability, validity
or due execution of this Pledge Agreement or any other Security Document, or for
the creation, perfection or priority of any Liens purported to be created by
this Pledge Agreement, or the validity, genuineness, enforceability, existence,
value or sufficiency of any collateral security, or to make any inquiry
respecting the performance by the Pledgor of its obligations hereunder.
SECTION 7.8 CHOICE OF LAW. THIS PLEDGE AGREEMENT SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER AND GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICT OF LAW, EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OR
PRIORITY OF THE 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.
SECTION 7.9 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PARTIES HERETO
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE COLLATERAL AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH PARTY HERETO EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH PARTY HERETO FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF
THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
18
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE PLEDGOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PLEDGOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY WITH RESPECT TO ITS OBLIGATIONS UNDER
THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 7.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS PLEDGE AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS PLEDGE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 7.11 NO ORAL AGREEMENTS. THIS WRITTEN PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
SECTION 7.12 Filing as a Financing Statement. At the option of the
Collateral Agent, this Pledge Agreement, or a carbon, photographic or other
reproduction of this Pledge Agreement or of any Uniform Commercial Code
financing statement, continuations and amendments thereto, covering all of the
Collateral or any portion thereof shall be sufficient as a Uniform Commercial
Code financing statement and may be filed as such without the signature of the
Pledgor where and to the full extent permitted by applicable law.
SECTION 7.13 Management Fee; Amendment with respect to NEG Management
Agreement. The Pledgor hereby agrees with the Collateral Agent that,
notwithstanding anything in the NEG Management Agreement to the contrary and
until the indefeasible payment in full in cash of all Secured Obligations and
the termination or expiration of all Commitments and the
19
termination or expiration of all Letters of Credit: (a) the Pledgor will not
accept any portion of the NEG Management Fee (i) during any Fiscal Quarter, to
the extent that such NEG Management Fee exceeds ten percent (10%) of the
quarterly gross revenues for the Borrower and its Consolidated Subsidiaries,
calculated in accordance with the financial statements delivered pursuant to
Section 7.1.1 of the Credit Agreement, and (ii) during any Fiscal Year, to the
extent that such NEG Management Fee exceeds ten percent (10%) of the annual
gross revenues for the Borrower and its Consolidated Subsidiaries, calculated in
accordance with the financial statements delivered pursuant to Section 7.1.1 of
the Credit Agreement; (b) until all Commitments have been terminated and all
Obligations have been paid and performed in full under the Loan Documents and
all Letters of Credit have expired or terminated, except for the amendment
pursuant to this Section 7.13, the Pledgor will not, and will not allow the
Borrower to amend, supplement, restate or otherwise modify the NEG Management
Agreement, and no such amendment, supplement, restated or modification will be
effective, without the prior written consent of the Administrative Agent and the
Required Lenders; and (c) the NEG Management Agreement shall terminate
immediately and without further action on the part of the Pledgor or the
Borrower if (i) one of the following events occur: (A) the Pledgor's insolvency
or general failure to pay, or admission of its inability or unwillingness to
pay, debts as they become due, (B) the Pledgor's general assignment for the
benefit of creditors, (C) the commencement of any bankruptcy, reorganization,
liquidation, debt arrangement or other case or proceeding under any bankruptcy
or insolvency or similar law, or any dissolution or winding up or liquidation
proceeding, (D) any default by the Pledgor of the NEG Management Agreement
(after giving effect to any applicable grace period), and (E) the occurrence and
continuation of an Event of Default, and (ii) only if an event described in
clauses (D) or (E) above has occurred, receipt of a notice by the Administrative
Agent addressed to the Pledgor and the Borrower informing them of the occurrence
of one or more of the events described in clauses (D) or (E) above. The Pledgor
hereby agrees that this Section 7.13 shall constitute and be deemed to be an
amendment of the NEG Management Agreement.
SECTION 7.14 Non-Recourse to Officers and Directors. This Pledge
Agreement is fully recourse to the Pledgor. Notwithstanding anything to the
contrary contained in this Pledge Agreement or in any other Loan Document, no
recourse under or upon any Secured Obligation, representation, warranty or
covenant shall be had against any of the officers, directors, employees, agents
or representatives of the Pledgor; provided, however, that nothing in this
Section 7.14 shall be deemed to constitute a waiver of any Secured Obligation
evidenced or secured by, or contained in, this Pledge Agreement or any other
Loan Document, or affect in any way the validity or enforceability of this
Pledge Agreement or any other Loan Document.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
20
IN WITNESS WHEREOF, each party hereto has caused this Pledge Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
day and year first above written.
PLEDGOR:
NATIONAL ENERGY GROUP, INC.
By: /s/ XXXXXX X. XXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Attorney-in-Fact
1400 One Energy Square
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
E-Mail: xxxxxxx@xxxx.xxx
National Energy Group, Inc.
Pledge Agreement
S-1
COLLATERAL AGENT:
BANK OF TEXAS, N.A.
By: /s/ XXXXXXX XXXXXX XXXXXXX
-----------------------------------------
Name: Xxxxxxx Xxxxxx Xxxxxxx
Title: Senior Vice President
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xx. Xxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
E-Mail: xxxxxxxx@xxxx.xxxx.xxx
National Energy Group, Inc.
Pledge Agreement
S-2
ACKNOWLEDGED AND AGREED:
BORROWER:
NEG OPERATING LLC
By: NEG Holding LLC, sole member
By: Xxxxxx Partners, managing member
By: Cigas Corp., managing general partner
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Attorney-in-Fact
1400 One Energy Square
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
E-Mail: xxxxxxx@xxxx.xxx
National Energy Group, Inc.
Pledge Agreement
S-3
ATTACHMENT 1
to
Pledge Agreement
Pledged Interests Issuer:
Authorized Outstanding
Interests Interests % of Interests Pledged
---------- ----------- ----------------------
NEG Holding LLC 100% of all of the
membership interests owned
by the Pledgor, being 50%
of the membership interests
of NEG Holding LLC
Attachment 1 - Page 1
Attachment 2
to
Pledge Agreement
FORM OF NOTICE OF PLEDGE AGREEMENT
TO: NEG Holding LLC
Notice is hereby given that, pursuant to a Pledge Agreement dated as of
December 29, 2003 (as amended, restated, supplemented or otherwise modified from
time to time, the "Pledge Agreement"), between NATIONAL ENERGY GROUP, INC., a
Delaware corporation (the "Pledgor"), and BANK OF TEXAS, N.A., as collateral
agent (together with all successors and assigns thereto, in such capacity, the
"Collateral Agent") for each of the Lender Parties (as defined in the Pledge
Agreement), the Pledgor has pledged and assigned to the Collateral Agent, and
granted to the Collateral Agent a continuing security interest in, all right,
title and interest of the Pledgor, whether now existing or hereafter arising or
acquired, in, to and under the Operating Agreement dated as of May 1, 2001 (the
"Operating Agreement"), of NEG Holding LLC (the "Company"), including, without
limitation:
The Pledgor's rights, now. existing or hereafter arising or
acquired, to receive from time to time its share of profits,
income, surplus, compensation, return of capital,
distributions and other reimbursements and payments from the
Company (including, without limitation, specific properties of
the Company upon dissolution and otherwise), in respect of any
and all of the following:
(1) All membership interests now owned or hereafter
acquired by the Pledgor in the Company as a result of exchange
offers, direct investments or contributions or otherwise;
(2) The Pledgor's accounts, general intangibles and
other rights to payment or reimbursement, now existing or
hereafter arising or acquired, from the Company, existing or
arising from loans, advances or other extensions of credit by
the Pledgor from time to time to or for the account of the
Company, or from services rendered by the Pledgor from time to
time to or for the account of the Company; and
(3) The proceeds of and from any and all of the
foregoing.
Pursuant to the Pledge Agreement, the Company is hereby authorized and
directed to (a) register the Pledgor's pledge to the Collateral Agent of the
Pledgor's membership interests on the Company's books, (b) to make direct
payment to the Collateral Agent of any amounts due or to become due the Pledgor
under the Operating Agreement, if so notified by the Collateral Agent, and (c)
permit the Collateral Agent to exercise (to the exclusion of the Pledgor) the
voting
Attachment 2 - Page 1
power and all other incidental rights of ownership with respect to membership
interests in accordance with the terms of the Pledge Agreement:
The Collateral Agent hereby requests the Company to indicate the
Company's acceptance of this Notice and consent to and confirmation of its terms
and provisions by signing a copy hereof and returning the same to the Collateral
Agent.
Dated: December 29, 0000 XXXX XX XXXXX, N.A.
By:
------------------------------
Name: Xxxxxxx Xxxxxx Xxxxxxx
Title:
Address:
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xx. Xxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
E-Mail: xxxxxxxx@xxxx.xxxx.xxx
Attachment 2 - Page 2
ACKNOWLEDGMENT
NEG HOLDING LLC (the "Company") hereby (a) acknowledges and consents to
the assignment by NATIONAL ENERGY GROUP, INC., a Delaware Corporation (the
"Pledgor"), of its right, title and interest in, to and under that certain
Operating Agreement dated as of May 1, 2001 (the "Operating Agreement"), of the
Company pursuant to the terms of the Pledge Agreement dated as of December 29,
2003 (as amended, restated, supplemented or otherwise modified from time to
time, the "Pledge Agreement"), made by the Pledgor for the benefit of BANK OF
TEXAS, N.A., as collateral agent (together with all successors and assigns
thereto, in such capacity, the "Collateral Agent") for each of the Lender
Parties (as defined in the Pledge Agreement), (b) confirms that the Company has
reviewed the Pledge Agreement and this notice of assignment and has not found
the terms thereof or the transactions described therein to be objectionable, (c)
has registered the Pledgor's pledge to the Collateral Agent of the Pledgor's
membership interests on the Company's books, and (d) upon notice from the
Collateral Agent the Company agrees to make direct payment to the Collateral
Agent of any amounts due or to become due the Pledgor under the Operating
Agreement.
Dated: December 29, 2003
NEG HOLDING LLC
By: Xxxxxx Partners, managing member
By: Cigas Corp., managing general partner
By:
----------------------------------
Name:
Title:
Attachment 2 - Page 3
Attachment 3
to
Pledge Agreement
TRANSFER POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________ (________________) membership
interests in NEG HOLDING LLC, a Delaware limited liability company, represented
by the attached Certificate No. __________________ herewith and do hereby
irrevocably constitute and appoint ______________________________ as attorney to
transfer the said membership interest on the books of _________________________
with full power of substitution in the premises.
DATED: , 200
------------- -- -
By:
---------------------------------
Name:
Title:
IN PRESENCE OF:
--------------------------------
Attachment 3 - Page 1
Attachment 4
to
Pledge Agreement
State of Organization, Formation or Incorporation, Etc.
State of Organization,
Formation or Principal Place of Business and/or
Name Incorporation Chief Executive Office
---- ---------------------- ----------------------------------
National Energy Group, Inc. Delaware 1400 One Energy Square
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attachment 4 - Page 1
