Member Interest Pledge Agreement
Exhibit 10.3
Member Interest Pledge Agreement (“Pledge Agreement”) dated as of January 1, 2009 between
Renegy Holdings, Inc., a Delaware corporation (the “Pledgor”), and AZ Biomass LLC, a Delaware
limited liability company (“Pledgee”).
Recitals
A. Pledgor and Pledgee have entered into that certain Member Interest Purchase Agreement dated
January 1, 2009 (the “Purchase Agreement”), pursuant to which Pledgee has purchased all the
outstanding Class A membership interests of Snowflake White Mountain Power, LLC, an Arizona limited
liability company (“Snowflake” or the “Company”) and Pledgor remains the owner of all the
outstanding Class B membership interests of Snowflake, which membership interests (the “Member
Interest”) have the rights, preferences and privileges set forth in the Amended and Restated
Limited Liability Company Agreement of the Company dated as of January 1, 2009 (the “Operating
Agreement”).
B. The Pledgor may have certain payment obligations to the Pledgee under the terms of Section
11.01 of the Purchase Agreement. As security for due and punctual performance of all such payment
obligations to Pledgee under the terms of the Purchase Agreement, the Pledgor has agreed to pledge
the Member Interest (and all of Pledgor’s rights, privileges, authority and power thereunder as a
member of the Company) to the Pledgee pursuant to the terms of this Pledge Agreement.
C. Pledgee is entering into the Purchase Agreement in reliance on the execution and delivery
by Pledgor of this Pledge Agreement.
NOW THEREFORE, in consideration of the following premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Pledgee
hereby agree as follows:
1. The Pledgor hereby pledges and grants to the Pledgee a continuing lien on and a perfected
security interest in the Member Interest (and all of Pledgor’s rights, privileges, authority and
power as a member of the Company) as security for the due and punctual performance of all its
payment obligations to Pledgee under the terms of Section 11.01 of the Purchase Agreement,
including any extensions, modifications, substitutions, amendments and renewals thereof, which lien
and security interest shall be subordinate, in all respects, to the lien and security interest in
the Member Interest granted to CoBank, ACB, as Administrative Agent and Collateral Agent (“CoBank”)
pursuant to that certain Pledge Agreement dated as of October 1, 2007 between Pledgor and CoBank
(as amended, the “RH CoBank Pledge”), in accordance with the terms of that certain Subordination
Agreement dated as of January 1, 2009 among Pledgor, Pledgee and CoBank (the “Subordination
Agreement”).
2. The Pledgee hereby accepts the Pledgor’s pledge of the Member Interest as security for the
due and punctual performance of all Pledgor’s payment obligations to Pledgee under the terms of
Section 11.01 of the Purchase Agreement.
3. An “Event of Default” shall occur hereunder if the Pledgor fails to perform any payment
obligations of the Pledgor to the Pledgee when required under Section 11.01 of the Purchase
Agreement, and such failure continues for 10 days after the Pledgee delivers written notice of such
failure to the Pledgor. Unless and until there occurs an Event of Default that is continuing, the
Pledgor is entitled with respect to the Member Interest:
(a) to (i) exercise any and all voting rights and powers relating or pertaining to the Member
Interest at meetings of members of the Company, (ii) exercise any and all consensual rights and
powers in respect of the Member Interest and (iii) consent to, ratify or waive notice of meetings
of the members of the Company or otherwise take any action permitted by a member of the Company;
and
(b) to receive, collect, have paid over and retain all distributions to which it is entitled
under the terms of the Operating Agreement (as then in effect), except (i) distributions paid in
the form of additional membership interests (or similar securities) in the Company (or any
subsidiary or Affiliate thereof), including without limitation any such interests issued in a
Split, (ii) distributions in property other than cash, (iii) proceeds from a sale by or on behalf
of Pledgor of the Member Interest (or any portion thereof) and (iv) liquidation dividends (either
partial or complete) (collectively, “Excepted Dividends”), and whether regular, special or made in
connection with a partial or total liquidation of the Company, and whether attributable to profits,
the return of any contribution or investment or otherwise attributable to the Member Interest. All
Excepted Dividends shall constitute additional security for the Pledgee’s performance of its
payment obligations to Pledgee under Section 11.01 of the Purchase Agreement and shall be pledged
to Pledgee by the Pledgor. The Pledgor shall have all of the same powers and rights with respect
to all Excepted Dividends as it has in respect of the Member Interest and such Excepted Dividends
shall be considered part of the Member Interest pledged hereunder. As used in this Pledge
Agreement, the term “Split” means any transfer (including, without limitation, payment, issuance or
other awarding) of any securities, property or rights to any person or entity by virtue or in
respect of its ownership of Member Interests and shall include, without limitation, (i) payment of
dividends or other distributions in the form of units, debt instruments or other property the value
of which depends materially on the future results of the Company’s operations, (ii) membership
interests splits or reverse splits, (iii) unit exchanges and (iv) transfers, payments, issuances
and awards resulting from any consolidation, reorganization, recapitalization, merger or
combination.
4. During the term of this Pledge Agreement, (a) if any distributions in the form of equity
ownership interests in the Company, reclassification, readjustment, or other change is declared or
made in the capital structure of the Company, or any subscription, warrant or other option is
issued with respect to the Member Interest (including without limitation any equity interest or
right issued in connection with a
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Split), all new, substituted, or additional interests or other securities issued by reason of
this change or option shall be considered as part of the Member Interest; and (b) Pledgor shall not
(i) subject the Member Interest (or any portion thereof) to any lien, security interest,
encumbrance, pledge, charge or preferential arrangement, other than any lien that is herein created
or otherwise permitted by this Section 4 or (ii) transfer, assign or grant any other person or
entity any right or interest in the Member Interest (or any portion thereof), including any option
therein (other than as contemplated by this Section 4). Pledgor represents that it has the full
right, power and authority to pledge the Member Interest to Pledgee hereunder and that it is the
sole legal, record and beneficial owner of the Member Interest free and clear of any lien, right or
option ( collectively, “Liens”) other than the security interest granted herein, Liens under the
Operating Agreement in favor of Pledgee and arising by, through or under Pledgor, and Liens
existing on or prior to the date hereof, including without limitation all the Liens and rights
granted to CoBank and the Lenders (or any transferee thereof) as set forth or as contemplated by
the RH CoBank Pledge and the Subordination Agreement.
5. Upon an Event of Default and during the continuance thereof, the Pledgee may exercise all
rights and remedies of a pledgee and secured party under New York law, without presentment, demand,
protest or notice of any kind, all of which Pledgor hereby waives, but subject to the applicable
terms and conditions of the Subordination Agreement. The exercise of any such rights and remedies
shall not preclude Pledgee from exercising any other right or remedy it may have against Pledgor
under any other applicable law; provided that such exercise is expressly permitted under the terms
of the Subordination Agreement.
6. The Pledgee agrees to notify the Pledgor of all notices it receives with respect to the
Member Interest.
7. Pledgor will not hereafter suffer or allow any Liens to arise against or with respect to
the Member Interest in favor of any persons or entities other than: (a) Liens existing on the
Member Interest on or prior to the date hereof (including without limitation the lien created by
the RH CoBank Pledge); (b) Liens in favor of Pledgee; and (c) Liens arising under the Operating
Agreement. Pledgor also agrees that it will promptly execute and deliver all further instruments
and documents, and take all further action that may be reasonably requested by Pledgee in order to
perfect, maintain and protect the security interest and rights herein granted or to enable Pledgee
to exercise and enforce its rights and remedies hereunder with respect to the Member Interest.
Subject to the foregoing, and subject to all the rights of CoBank and the Lenders as set forth or
as contemplated by the RH CoBank Pledge and the Subordination Agreement, Pledgor will at all times
defend the Member Interest against any and all claims of any person adverse to the interests of
Pledgee.
8. “Termination” of this Pledge Agreement shall occur upon the earlier to occur (a) the
performance in full by Pledgor of all its payment obligations under Section 11.01 of the Purchase
Agreement, including payment of all accrued and unpaid interest thereunder and (b) the repurchase
by Pledgor of the Class A membership interests; provided, that if Pledgee has made any claims under
Section 11.01 of the Purchase
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Agreement prior to such repurchase, this Pledge Agreement shall continue in full force and
effect with respect to such claims, but only until they are finally resolved or satisfied pursuant
to the relevant provisions of the Purchase Agreement (at which time Termination of this Pledge
Agreement shall occur). Upon Termination, as set forth herein, the security interest Pledgor
pledged and granted to and for the benefit of Pledgee pursuant to this Pledge Agreement shall
terminate and be of no further force and effect, and Pledgee shall return the certificates, if any,
representing the Member Interest and all other collateral held pursuant to this Pledge Agreement to
the Pledgor.
9. All notices, demands or other communications required or permitted to be given under this
Pledge Agreement shall be in writing and shall be given by hand delivery, reputable overnight
courier (such as Federal Express), facsimile transmission or certified mail, return receipt
requested, to the parties at the addresses set forth under the applicable party’s signature in this
Pledge Agreement, and shall be deemed given (a) upon delivery in the case of hand delivery or
delivery by overnight courier, (b) upon written confirmation of transmission in the case of
facsimile transmission if received during normal business hours, otherwise the next business day
and (c) three (3) days after mailing in the case of certified mail. Any party may, by written
notice to the other party as provided in this section, change the place to which all further
notices to such party shall be sent.
10. This Pledge Agreement may be amended, superseded, canceled, renewed or extended, and the
terms hereof may be waived, only by a written instrument signed by the parties hereto or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on
the part of any party of any such right, power or privilege, nor any single or partial exercise of
any such right, power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at law or in equity.
11. This Pledge Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, legal representatives and permitted assigns. This Pledge Agreement is
not assignable by Pledgor except by operation of law; provided that nothing in this sentence shall
be construed to limit Pledgor’s rights to assign the Member Interest pursuant to Section 10.3 of
the Operating Agreement. Pledgee may assign this Pledge Agreement to any person or entity upon
written notice to Pledgee; provided that concurrently therewith Pledgee assigns to such person or
entity all but not less than all of its membership interests in the Company in accordance with
Section 10.2 of the Operating Agreement and any such assignee agrees to assume all of Pledgee’s
obligations under the Subordination Agreement.
12. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO ITS PRINCIPLES REGARDING CONFLICT OF LAWS (OTHER THAN
SECTION 5-1401 AND 1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). EACH OF THE PARTIES HEREBY
SUBMITS
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TO THE EXCLUSIVE JURISDICTION OF ANY OF THE COURTS OF THE STATE OF NEW YORK AND THE COURTS OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE APPELLATE COURTS FROM
ANY THEREOF AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS PLEDGE
AGREEMENT OR THE TRANSACTIONS PROVIDED FOR HEREIN. THE PARTIES CONSENT TO PERSONAL JURISDICTION IN
THE COURTS DESCRIBED IN THIS SECTION FOR THE PURPOSE OF ALL ACTIONS AND WAIVE ALL OBJECTIONS TO
VENUE AND THE RIGHT TO ASSERT THAT A COURT CHOSEN UNDER THIS SECTION IS IMPROPER BASED ON THE
DOCTRINE OF FORUM NON CONVENIENS. TO THE EXTENT THAT SUCH COURTS REFUSE TO EXERCISE JURISDICTION
HEREUNDER, THE PARTIES AGREE THAT JURISDICTION SHALL BE PROPER IN ANY COURT IN WHICH JURISDICTION
MAY BE OBTAINED.
13. The paragraph headings of this Pledge Agreement have been used solely for convenience, and
are not intended to describe, interpret, define or limit the scope of this Pledge Agreement.
Conflicts or discrepancies, errors or omissions in this Pledge Agreement will not be strictly
construed against the drafter of the contract language; rather they shall be resolved by applying
the most reasonable interpretation under the circumstances giving full consideration to the
intentions of the parties at the time of contracting. Capitalized terms used herein without
definition shall have the same meanings ascribed to them in the Purchase Agreement.
14. If any provision or portion of this Pledge Agreement is declared or found by a court of
competent jurisdiction to be unenforceable or null and void, such provision or portion thereof
shall be deemed stricken and severed from this Pledge Agreement, the remaining provisions and
portions thereof shall continue in full force and effect and the unenforceable or null and void
provision shall be replaced by a valid and enforceable provision that comes closest to the intent
of the parties.
15. This Pledge Agreement may be executed by facsimile signature and in separate counterparts,
each of which when so executed and delivered will be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist of a number of
copies hereof each signed by less than all, but together signed by all of the parties hereto.
16. This Pledge Agreement (together with the Subordination Agreement) constitutes the entire
agreement of the parties with respect to the subject matter hereof and supersedes and replaces all
previous verbal or written agreements that the parties may have made with respect to such subject
matter.
17. In the event of any suit, action or other proceeding arising out of or based on this
Pledge Agreement, the prevailing party shall be entitled to receive from the non-prevailing party
all reasonable attorneys’ fees and court costs incurred in connection therewith.
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18. The obligations and duties of the Pledgor hereunder shall not constitute a debt or
obligation of any current or future shareholder of Pledgor, or any direct or indirect member,
shareholder or other owner of such shareholder (each, a “Non-Recourse Person”). None of the
Non-Recourse Persons shall be liable for any amount due under this Pledge Agreement, the Purchase
Agreement or the Operating Agreement, and Pledgee shall not (a) assert or seek to assert any claim
against, (b) name in any civil action or proceeding or arbitration, or (c) seek or obtain any
judgment (including, without limitation, a deficiency or personal judgment), order or decree
against any Non-Recourse Person for payment of the obligations evidenced by this Pledge Agreement,
the Purchase Agreement or the Operating Agreement, or damages in respect thereof. No property or
assets of a Non-Recourse Person (other than the Member Interest pledged hereunder) shall be sold,
levied upon or otherwise used to satisfy any judgment rendered in connection with any action
brought with respect to this Pledge Agreement, the Purchase Agreement or the Operating Agreement.
19. Notwithstanding the provisions of the preceding paragraph above to the contrary, nothing
contained in this Pledge Agreement shall be construed to (a) impair or limit any of the obligations
or duties of Pledgor or Pledgee under the Purchase Agreement or the Operating Agreement; (b)
impair or limit the validity of the obligations set forth in this Pledge Agreement, the Purchase
Agreement or the Operating Agreement or prevent the taking of any action permitted by law against
Pledgor or Pledgee or their properties or assets or the proceeds of such assets; or (c) prevent
the commencement of any action, suit or proceeding against any persons or entities (or prevent the
service of papers upon any persons or entities) solely for the purpose of obtaining jurisdiction
over Pledgor or Pledgee, as the case may be.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as of the date first
written above.
| Pledgor: | Pledgee: | ||||||||||||||
| Renegy Holdings, Inc. | AZ Biomass LLC | ||||||||||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | By: | Antrim | Corporation | |||||||||||
| Name: | Xxxxxx X. Xxxxxxx | Its: | Manager | ||||||||||||
| Title: | Chief Executive Officer | By: |
/s/ Xxxxxxxx X. Xxxxx | ||||||||||||
| Name: | Xxxxxxxx X. Xxxxx | ||||||||||||||
| Title: | Vice President | ||||||||||||||
| Address for Notices: | Address for Notices: | ||||||||||||||
| 0000 Xxxxx Xxx Xxxxx Xxxxx | XX Biomass LLC | ||||||||||||||
| Xxxx, Xxxxxxx 00000 | c/o State Street Bank and Trust Company, | ||||||||||||||
| Attn: Xxxxxx X. Xxxxxxx | Energy Credit Investments | ||||||||||||||
| Facsimile: (000) 000-0000 | State Street Financial Center | ||||||||||||||
| One Lincoln Street, SFC 12 | |||||||||||||||
| Xxxxxx, Xxxxxxxxxxxxx 00000-0000 | |||||||||||||||
| Attn: Xxxxxxxx X. Xxxxx | |||||||||||||||
| Facsimile: Fax:(000)-000-0000 | |||||||||||||||
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