Exhibit 10.8
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, made as of this __ day of ____, 2007 (this
"Agreement"), is between SONTERRA RESOURCES, INC. (f/k/a River Capital Group,
Inc.), a Delaware corporation ("Pledgor"), and VIKING ASSET MANAGEMENT L.L.C., a
California limited liability company, in its capacity as collateral agent for
Buyer identified below (in such capacity, together with its successors and
assigns, the "Pledgee").
WHEREAS:
A. [__________] (f/k/a Sonterra Resources Inc.), a Delaware
corporation ("Sonterra"), The Longview Fund, L.P., a California limited
partnership ("Buyer") and certain officers of Sonterra are parties to that
certain Amended and Restated Securities Purchase Agreement, dated effective as
of July 9, 2007 (as amended, restated, supplemented, or otherwise modified from
time to time, the "Purchase Agreement"), pursuant to which Buyer purchased (i)
333 shares (the "New Sonterra Shares") of common stock, no par value, of
Sonterra ("Sonterra Common Stock"); for an aggregate amount of $9,990, which
shares constitute 100% of the issued and outstanding Capital Stock of Sonterra,
and (ii) a senior secured note of Sonterra in the initial principal amount of
$322,500 (the "Deposit Note").
B. Contemporaneously with the execution and delivery of that
certain Securities Exchange and Additional Note Purchase Agreement, dated as of
August 3, 2007 (as amended, restated, supplemented, or otherwise modified from
time to time, the "Exchange Agreement"), between Pledgor and Buyer), the
transactions contemplated by the Purchase Agreement to occur at the Equity
Closing (as defined in the Purchase Agreement) and the transactions contemplated
by the Cinco Purchase Agreement were consummated; without limiting the
foregoing, pursuant to the Purchase Agreement, Buyer purchased from Sonterra a
senior secured note of Sonterra in the initial principal amount of $5,990,010
(of which $322,500 represents refinancing of the Deposit Note, which is now
being surrendered to Sonterra) (as amended, restated, supplemented, or otherwise
modified from time to time, the "Sonterra Equity Note") and a warrant to
purchase 50 shares of Sonterra Common Stock (as amended, restated, supplemented,
or otherwise modified from time to time, the "Sonterra Warrants").
C. At the Flash Acquisition Closing (as defined in the Purchase
Agreement), the transactions contemplated by the Purchase Agreement to occur at
the Flash Acquisition Closing and the transactions contemplated by the Flash
Purchase Agreement will be consummated subject to the terms and conditions of
the Purchase Agreement; without limiting the foregoing, pursuant to the Purchase
Agreement, at the Flash Acquisition Closing Buyer will purchase an additional
senior secured note of Sonterra in the initial principal amount of $2,000,000
(as amended, restated, supplemented, or otherwise modified from time to time,
the "Sonterra Non-Equity Note").
D. At the Exchange Closing, subject to the terms and conditions
thereof, Buyer (i) is exchanging all of its Sonterra Common Stock and the
Sonterra Equity Note for common stock of Pledgor, par value $0.001 per share
(the common stock of Pledgor being referred to herein as "RCGI Common Stock";
and any shares thereof being referred to herein as "RCGI Common Shares") (the
RCGI Common Shares received by Buyer in such exchange being referred to as the
"New RCGI Common Shares"), (ii) will exchange the Sonterra Warrant for a warrant
(such warrant, together with any warrants or other securities issued in exchange
or substitution therefor or replacement thereof, and as any of the same may be
amended or modified and in effect from time to time, the "RCGI Warrant") to
purchase RCGI Common Shares (subject to adjustment to reflect the Reverse Stock
Split and any other stock split, stock dividend, stock combination or similar
transaction after the date thereof) (the "Warrant Shares"), which RCGI Warrant
shall have a term of five years and be exercisable into the Warrant Shares at a
price per Warrant Share (the "Warrant Exercise Price") equal to 110% of the
quotient of $6,000,000 divided by the number of New RCGI Common Shares issued to
Buyer at the Exchange Closing; and (iii) will exchange the Sonterra Non-Equity
Note, if issued, for a senior secured note of Pledgor in an initial principal
amount equal to the principal amount owing under the Sonterra Non-Equity Note on
the Exchange Closing Date (such note, together with any promissory notes or
other securities issued in exchange or substitution therefor or replacement
thereof, and as any of the same may be amended or modified from time to time,
the "Initial RCGI Note").
E. Subject to the terms and conditions set forth in the Exchange
Agreement, during the Additional Note Issuance Period (as defined therein),
Pledgor will have the option to sell, and if Pledgor exercises such option Buyer
shall be obligated to purchase, additional senior secured notes (including any
promissory notes or other securities issued in exchange or substitution for such
senior secured notes or replacement thereof, and as any of the same may be
amended, restated, modified or supplemented and in effect from time to time, the
"Additional RCGI Notes"; and, collectively with the Initial RCGI Note, the
"Notes"), each with a maturity date of August 31, 2010, in an original aggregate
principal amount of up to the result of $10,000,000 minus the original principal
amount of the Initial RCGI Note.
F. The Pledgor legally and beneficially owns one hundred percent
(100%) of the issued and outstanding shares of Capital Stock of Sonterra
(Sonterra and any other corporation or other entity, the stock or other equity
interests and securities of which are owned or acquired by Pledgor and described
on an addendum hereto from time to time executed by Pledgor in form and
substance satisfactory to Pledgee, is referred to herein as a "Pledge Entity"
and collectively as the "Pledge Entities"; provided that the parties hereto
agree that, as of the date hereof, Sonterra is the only Pledged Entity).
G. Pursuant to a Joinder Agreement dated as of the date hereof,
Pledgor has become a party to and a "Debtor" under that certain Security
Agreement dated July 9, 2007 between Sonterra and Pledgee, as amended by that
certain First Amendment to Security Agreement dated as of the date hereof
between Sonterra and Pledgee (as the same may be further amended, restated,
modified or supplement and in effect from time to time, the "Security
Agreement"), and Pledgor has granted Pledgee, for the benefit of Buyer, a first
priority security interest in, lien upon and pledge of its rights in the
Pledgor's Collateral (as defined in the Security Agreement).
H. To induce Buyer to make the Loans, and in order to secure the
payment and performance by Pledgor of the Liabilities (as defined in the
Security Agreement), Pledgor has agreed to pledge to Pledgee all of the capital
stock and other equity interests and securities of the Pledge Entities now or
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hereafter owned or acquired by Pledgor to secure the Liabilities (as defined in
the Security Agreement).
NOW, THEREFORE, in consideration of the premises and in order to induce
Buyer to purchase the Notes under the Exchange Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Pledgee as follows:
1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings given them in the Exchange
Agreement.
2. Pledge.
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(a) Pledgor hereby pledges, assigns, hypothecates,
delivers and grants to Pledgee, for the benefit of itself and Buyer, a first
lien on and first priority perfected security interest in (i) all of the Capital
Stock or other equity interests of the Pledge Entities now owned or hereafter
acquired by Pledgor (collectively, the "Pledged Shares"), (ii) all other
property hereafter delivered to, or in the possession or in the custody of,
Pledgee, in substitution for or in addition to the Pledged Shares, (iii) any
other property of Pledgor described in Section 4 below or otherwise, whether now
or hereafter delivered to, or in the possession or custody of Pledgor, and (iv)
all proceeds of the collateral described in the preceding clauses (i), (ii) and
(iii) (the collateral described in clauses (i) through (iv) of this Section 2
being collectively referred to as the "Pledged Collateral"), as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Liabilities (as
defined in the Security Agreement). All of the Pledged Shares now owned by
Pledgor which are presently represented by certificates are listed on Exhibit A
hereto, which certificates, with undated assignments separate from certificates
or stock powers duly executed in blank by Pledgor and irrevocable proxies, are
being delivered to Pledgee simultaneously herewith. Upon the creation or
acquisition of any new Pledged Shares, Pledgor shall execute an Addendum in the
form of Exhibit B attached hereto (a "Pledge Addendum"). Any Pledged Collateral
described in a Pledge Addendum executed by Pledgor shall thereafter be deemed to
be listed on Exhibit A hereto. Pledgee shall maintain possession and custody of
the certificates representing the Pledged Shares and any additional Pledged
Collateral.
(b) Pledgor shall cause each Pledged Share consisting of
either (i) a membership interest in a Person that is a limited liability company
or (ii) a partnership interest in a Person that is a partnership (if any) to be
"securities" governed by Article 8 of the UCC at all times. Pledgor shall cause
the applicable Persons to issue certificates evidencing such membership
interests or partnership interests (if any) to Pledgor. Pledgor shall not cause
and shall not permit any Pledged Entity which is not a corporation to "opt-out"
of Article 8 of the UCC. Pledgor shall not take, and shall not permit any
Pledged Entity which is not a corporation to take, any actions to cause the
capital stock, membership interests, partnership interests or similar equity
interests of such Pledged Entity to cease to be classified as "securities"
governed by Article 8 of the UCC.
3. Representations and Warranties of Pledgor. Pledgor represents
and warrants to Pledgee, and covenants with Pledgee, that:
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(a) Exhibit A sets forth (i) the authorized capital stock
or other equity interests of each Pledge Entity, (ii) the number of shares of
capital stock or other equity interests of each Pledge Entity that are issued
and outstanding as of the date hereof, and (iii) the percentage of the issued
and outstanding shares of capital stock or other equity interests of each Pledge
Entity held by Pledgor. Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Shares, and such shares are and will
remain free and clear of all pledges, liens, security interests and other
encumbrances and restrictions whatsoever, except the liens and security
interests in favor of Pledgee created by this Agreement;
(b) Except as set forth on Exhibit A, there are no
outstanding options, warrants or other similar agreements with respect to the
Pledged Shares or any of the other Pledged Collateral;
(c) this Agreement is the legal, valid and binding
obligation of Pledgor, enforceable against Pledgor in accordance with its terms
except to the extent that such enforceability is subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium
laws and other laws of general application affecting enforcement of creditors'
rights generally, or the availability of equitable remedies, which are subject
to the discretion of the court before which an action may be brought;
(d) the Pledged Shares have been duly and validly
authorized and issued, are fully paid and non-assessable, and the Pledged Shares
listed on Exhibit A constitute all of the issued and outstanding capital stock
or other equity interests of the Pledge Entities;
(e) no consent, approval or authorization of or
designation or filing with any governmental or regulatory authority on the part
of Pledgor is required in connection with the pledge and security interest
granted under this Agreement;
(f) the execution, delivery and performance of this
Agreement will not violate any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, which are applicable to Pledgor, or
of the articles or certificate of incorporation, bylaws or any other similar
organizational documents of Pledgor or any Pledge Entity or of any securities
issued by Pledgor or any Pledge Entity or of any mortgage, indenture, lease,
contract, or other agreement, instrument or undertaking to which Pledgor or any
Pledge Entity is a party or which is binding upon Pledgor or any Pledge Entity
or upon any of the assets of Pledgor or any Pledge Entity, and will not result
in the creation or imposition of any lien, charge or encumbrance on or security
interest in any of the assets of Pledgor or any Pledge Entity, except as
otherwise contemplated by this Agreement;
(g) assuming the Pledgee retains control of and holds all
certificates and executed stock powers for the Pledged Shares and the Pledged
Collateral, the pledge, assignment and delivery of the Pledged Shares and the
other Pledged Collateral pursuant to this Agreement creates a valid first lien
on and perfected first priority security interest in such Pledged Shares and
Pledged Collateral and the proceeds thereof in favor of Pledgee, subject to no
prior pledge, lien, mortgage, hypothecation, security interest, charge, option
or encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of Pledgor which would include the
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Pledged Shares or any other Pledged Collateral. Until this Agreement is
terminated pursuant to Section 11 hereof, Pledgor covenants and agrees that it
will defend, for the benefit of Pledgee, Pledgee's right, title and security
interest in and to the Pledged Shares, the other Pledged Collateral and the
proceeds thereof against the claims and demands of all other persons or
entities; and
(h) Neither Pledgor nor any Pledged Entity (i) will
become a person whose property or interests in property are blocked or subject
to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit or Support Terrorism (66 Fed. Reg. 49079(2001), (ii) will engage in
any dealings or transactions prohibited by Section 2 of such executive order, or
(iii) will otherwise become a person on the list of Specially Designated
Nationals and Blocked Persons or subject to the limitations or prohibitions
under any other Office of Foreign Asset Control regulation or executive order.
4. Dividends, Distributions, Etc. If, prior to irrevocable
repayment in full in cash of the Liabilities, Pledgor shall receive any
certificate (including, without limitation, any certificate representing a
dividend or a distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization, merger or
consolidation), or any options or rights, whether as an addition to, in
substitution for, or in exchange for any of the Pledged Shares or otherwise,
Pledgor agrees, in each case, to accept the same as Pledgee's agent and to hold
the same in trust for Pledgee, and to deliver the same promptly (but in any
event within five Business Days) to Pledgee in the exact form received, with the
endorsement of Pledgor when necessary and/or with appropriate undated
assignments separate from certificates or stock powers duly executed in blank,
to be held by Pledgee subject to the terms hereof, as additional Pledged
Collateral. Pledgor shall promptly deliver to Pledgee (i) a Pledge Addendum with
respect to such additional certificates, and (ii) any financing statements or
amendments to financing statements as requested by Pledgee in writing. Pledgor
hereby authorizes Pledgee to attach each such Pledge Addendum to this Agreement.
In case any distribution of capital shall be made on or in respect of the
Pledged Shares or any property shall be distributed upon or with respect to the
Pledged Shares pursuant to the recapitalization or reclassification of the
capital of the issuer thereof or pursuant to the reorganization thereof, the
property so distributed shall be delivered to Pledgee to be held by it as
additional Pledged Collateral. Except as provided in Section 5(b) below, all
sums of money and property so paid or distributed in respect of the Pledged
Shares which are received by Pledgor shall, until paid or delivered to Pledgee,
be held by Pledgor in trust as additional Pledged Collateral.
5. Voting Rights; Dividends; Certificates.
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(a) So long as no Event of Default (as defined in the
Notes) has occurred and is continuing, Pledgor shall be entitled (subject to the
other provisions hereof, including, without limitation, Section 8 below) to
exercise its voting and other consensual rights with respect to the Pledged
Shares and otherwise exercise the incidents of ownership thereof in any manner
not inconsistent with this Agreement or the Exchange Agreement and the other
Transaction Documents. Pledgor hereby grants to Pledgee or its nominee, an
irrevocable proxy to exercise all voting and corporate rights relating to the
Pledged Shares in any instance, which proxy shall be effective, at the
discretion of Pledgee, upon the occurrence and during the continuance of an
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Event of Default. Upon the request of Pledgee at any time, Pledgor agrees to
deliver to Pledgee such further evidence of such irrevocable proxy or such
further irrevocable proxies to vote the Pledged Shares as Pledgee may request.
(b) So long as no Event of Default shall have occurred
and be continuing, Pledgor shall be entitled to receive cash dividends or other
distributions made in respect of the Pledged Shares, to the extent permitted to
be made pursuant to the terms of the Notes. Upon the occurrence and during the
continuance of an Event of Default, in the event that Pledgor, as record and
beneficial owner of the Pledged Shares, shall have received or shall have become
entitled to receive, any cash dividends or other distributions in the ordinary
course, Pledgor shall deliver to Pledgee, and Pledgee shall be entitled to
receive and retain, for the benefit of Pledgee and Buyer, all such cash or other
distributions as additional security for the Liabilities.
(c) Subject to any sale or other disposition by Pledgee
of the Pledged Shares, any other Pledged Collateral or other property pursuant
to this Agreement, upon the indefeasible full payment in cash, satisfaction and
termination of all of the Liabilities and the termination of this Agreement
pursuant to Section 11 hereof and of the liens and security interests hereby
granted, the Pledged Shares, the other Pledged Collateral and any other property
then held as part of the Pledged Collateral in accordance with the provisions of
this Agreement shall be returned to Pledgor or to such other persons or entities
as shall be legally entitled thereto.
(d) Pledgor shall cause all Pledged Shares to be
certificated at all times while this Agreement is in effect.
6. Rights of Pledgee. Pledgee shall not be liable for failure to
collect or realize upon the Liabilities or any collateral security or guaranty
therefor, or any part thereof, or for any delay in so doing, nor shall Pledgee
be under any obligation to take any action whatsoever with regard thereto. Any
or all of the Pledged Shares held by Pledgee hereunder may, if an Event of
Default has occurred and is continuing, without notice, be registered in the
name of Pledgee or its nominee, and Pledgee or its nominee may thereafter
without notice exercise all voting and corporate rights at any meeting with
respect to any Pledge Entity and exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining to
any of the Pledged Shares as if it were the absolute owner thereof, including,
without limitation, the right to vote in favor of, and to exchange at its
discretion any and all of the Pledged Shares upon, the merger, consolidation,
reorganization, recapitalization or other readjustment with respect to any
Pledge Entity or upon the exercise by any Pledge Entity, Pledgor or Pledgee of
any right, privilege or option pertaining to any of the Pledged Shares, and in
connection therewith, to deposit and deliver any and all of the Pledged Shares
with any committee, depository, transfer agent, registrar or other designated
agency upon such terms and conditions as Pledgee may reasonably determine, all
without liability except to account for property actually received by Pledgee,
but Pledgee shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing.
7. Remedies. Upon the occurrence and during the continuance of an
Event of Default, Pledgee may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the Uniform
Commercial Code ("UCC") in effect in the State of New York from time to time,
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whether or not the UCC applies to the affected Pledged Collateral (or the
Uniform Commercial Code as in effect in any other relevant jurisdiction).
Pledgee also, without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon Pledgor or any other person or entity (all
and each of which demands, advertisements and/or notices are hereby expressly
waived), may upon the occurrence and during the continuance of an Event of
Default forthwith collect, receive, appropriate and realize upon the Pledged
Collateral, or any part thereof, and/or may forthwith date and otherwise fill in
the blanks on any assignments separate from certificates or stock power or
otherwise sell, assign, give an option or options to purchase, contract to sell
or otherwise dispose of and deliver said Pledged Collateral, or any part
thereof, in one or more portions at one or more public or private sales or
dispositions, at any exchange or broker's board or at any of Pledgee's offices
or elsewhere upon such terms and conditions as Pledgee may deem advisable and at
such prices as it may deem best, for any combination of cash and/or securities
or other property or on credit or for future delivery without assumption of any
credit risk, with the right to Pledgee upon any such sale, public or private, to
purchase the whole or any part of said Pledged Collateral so sold, free of any
right or equity of redemption in Pledgor, which right or equity is hereby
expressly waived or released. Pledgee shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization, sale or disposition,
after deducting all costs and expenses of every kind incurred therein or
incidental to the safekeeping of any and all of the Pledged Collateral or in any
way relating to the rights of Pledgee hereunder, including attorneys' fees and
legal expenses, to the payment, in whole or in part, of the Liabilities, in such
order as Pledgee may elect. Pledgor shall remain liable for any deficiency
remaining unpaid after such application. Only after so paying over such net
proceeds and after the payment by Pledgee of any other amount required by any
provision of law, including, without limitation, Section 9-608 of the UCC, need
Pledgee account for the surplus, if any, to Pledgor. Pledgor agrees that Pledgee
need not give more than ten (10) days' notice of the time and place of any
public sale or of the time after which a private sale or other intended
disposition is to take place and that such notice is reasonable notification of
such matters. No notification need be given to Pledgor if it has signed after
default a statement renouncing or modifying any right to notification of sale or
other intended disposition.
8. No Disposition, Etc. Until the irrevocable payment in full in
cash of the Liabilities, Pledgor agrees that it will not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Pledged Shares or any other Pledged Collateral, nor will Pledgor create, incur
or permit to exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrance with respect to any of the Pledged
Shares or any other Pledged Collateral, or any interest therein, or any proceeds
thereof, except for the lien and security interest of Pledgee provided for by
this Agreement and the Security Agreement and Permitted Liens, as defined in the
Exchange Agreement.
9. Sale of Pledged Shares.
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(a) Pledgor recognizes that Pledgee may be unable to
effect a public sale or disposition (including, without limitation, any
disposition in connection with a merger of a Pledge Entity) of any or all the
Pledged Shares by reason of certain prohibitions contained in the Securities Act
of 1933, as amended (the "1933 Act"), and applicable state securities laws, but
may be compelled to resort to one or more private sales or dispositions thereof
to a restricted group of purchasers who will be obliged to agree, among other
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things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. Pledgor acknowledges and
agrees that any such private sale or disposition may result in prices and other
terms (including the terms of any securities or other property received in
connection therewith) less favorable to the seller than if such sale or
disposition were a public sale or disposition and, notwithstanding such
circumstances, agrees that any such private sale or disposition shall be deemed
to be reasonable and affected in a commercially reasonable manner. Pledgee shall
be under no obligation to delay a sale or disposition of any of the Pledged
Shares in order to permit Pledgor or a Pledge Entity to register such securities
for public sale under the 1933 Act, or under applicable state securities laws,
even if Pledgor or a Pledge Entity would agree to do so.
(b) Pledgor further agrees to do or cause to be done all
such other acts and things as may be reasonably necessary to make such sales or
dispositions of the Pledged Shares valid and binding and in compliance with any
and all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sales or dispositions,
all at Pledgor's expense; provided that Pledgor shall not have any obligation to
register the Pledged Shares as securities under the 1933 Act or the applicable
state securities laws solely by virtue of this Section 9(b). Pledgor further
agrees that a breach of any of the covenants contained in Sections 4, 5(a),
5(b), 8, 9 and 24 will cause irreparable injury to Pledgee and that Pledgee has
no adequate remedy at law in respect of such breach and, as a consequence,
agrees, without limiting the right of Pledgee to seek and obtain specific
performance of other obligations of Pledgor contained in this Agreement, that
each and every covenant referenced above shall be specifically enforceable
against Pledgor, and Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants.
(c) Pledgor further agrees to indemnify and hold harmless
Buyer, Pledgee and their respective successors and assigns, their respective
officers, directors, employees, attorneys and agents, and any person or entity
in control of any thereof, from and against any loss, liability, claim, damage
and expense, including, without limitation, legal fees and expenses (in this
paragraph collectively called the "Indemnified Liabilities"), under federal and
state securities laws or otherwise insofar as such Indemnified Liability (i)
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in any registration statement, prospectus or
offering memorandum or in any preliminary prospectus or preliminary offering
memorandum or in any amendment or supplement to any thereof or in any other
writing prepared by Pledgor in connection with the offer, sale or resale of all
or any portion of the Pledged Collateral unless such untrue statement of
material fact was provided by Pledgee, in writing, specifically for inclusion
therein, or (ii) arises out of or is based upon any omission or alleged omission
to state therein a material fact required to be stated or necessary to make the
statements therein not misleading, such indemnification to remain operative
regardless of any investigation made by or on behalf of Pledgee or any successor
thereof, or any person or entity in control of any thereof. In connection with a
public sale or other distribution, Pledgor will provide customary
indemnification to any underwriters, their successors and assigns, officers and
directors and each person or entity who controls any such underwriter (within
the meaning of the 1933 Act). If and to the extent that the foregoing
undertakings in this paragraph may be unenforceable for any reason, Pledgor
agrees to make the maximum contribution to the payment and satisfaction of each
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of the Indemnified Liabilities which is permissible under applicable law. The
obligations of Pledgor under this paragraph (c) shall survive any termination of
this Agreement.
(d) Pledgor further agrees to waive any and all rights of
subrogation it may have against a Pledge Entity upon the sale or disposition of
all or any portion of the Pledged Collateral by Pledgee pursuant to the terms of
this Agreement until the termination of this Agreement in accordance with
Section 11 below.
10. No Waiver; Cumulative Remedies. Pledgee shall not by any act,
delay, omission or otherwise be deemed to have waived any of its remedies
hereunder, and no waiver by Pledgee shall be valid unless in writing and signed
by Pledgee, and then only to the extent therein set forth. A waiver by Pledgee
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which Pledgee would otherwise have on any further
occasion. No course of dealing between Pledgor and Pledgee and no failure to
exercise, nor any delay in exercising on the part of Pledgee or Buyer of, any
right, power or privilege hereunder or under the other Transaction Documents
shall impair such right or remedy or operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law or in the Exchange Agreement.
11. Termination. This Agreement and the liens and security
interests granted hereunder shall terminate and Pledgee shall return any Pledged
Shares or other Pledged Collateral then held by Pledgee in accordance with the
provisions of this Agreement to Pledgor upon the termination of the Notes and
the full and complete performance and indefeasible satisfaction of all of the
Liabilities (i) in respect of the Notes (including, without limitation, the
indefeasible payment in full in cash of all such Liabilities) and (ii) with
respect to which claims have been asserted by Pledgee and/or Buyer.
12. Possession of Collateral. Beyond the exercise of reasonable
care to assure the safe custody of the Pledged Shares in the physical possession
of Pledgee pursuant hereto, neither Pledgee, nor any nominee of Pledgee, shall
have any duty or liability to collect any sums due in respect thereof or to
protect, preserve or exercise any rights pertaining thereto (including any duty
to ascertain or take action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to the Pledged Collateral and any
duty to take any necessary steps to preserve rights against any parties with
respect to the Pledged Collateral), and shall be relieved of all responsibility
for the Pledged Collateral upon surrendering them to Pledgor. Pledgor assumes
the responsibility for being and keeping itself informed of the financial
condition of a Pledge Entity and of all other circumstances bearing upon the
risk of non-payment of the Liabilities, and Pledgee shall have no duty to advise
Pledgor of information known to Pledgee regarding such condition or any such
circumstance. Pledgee shall have no duty to inquire into the powers of a Pledge
Entity or its officers, directors, managers, members, partners or agents thereof
acting or purporting to act on its behalf.
9
13. Taxes and Expenses. Pledgor will upon demand pay to Pledgee,
(a) any taxes (excluding income taxes, franchise taxes or other taxes levied on
gross earnings, profits or the like of Pledgee) payable or ruled payable by any
Governmental Authority (as defined in the Security Agreement) in respect of this
Agreement, together with interest and penalties, if any, and (b) all expenses,
including the fees and expenses of counsel for Pledgee and of any experts and
agents that Pledgee may incur in connection with (i) the administration,
modification or amendment of this Agreement, (ii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
Pledgee hereunder, or (iv) the failure of Pledgor to perform or observe any of
the provisions hereof.
14. Pledgee Appointed Attorney-In-Fact. Pledgor hereby irrevocably
appoints Pledgee as Pledgor's attorney-in-fact, with full authority in the place
and stead of Pledgor and in the name of Pledgor or otherwise, from time to time
in Pledgee's discretion, to take any action and to execute any instrument that
Pledgee deems reasonably necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, to receive, endorse and collect
all instruments made payable to Pledgor representing any dividend, interest
payment or other distribution in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same, when and to the extent
permitted by this Agreement; provided that the power of attorney granted
hereunder shall only be exercised by Pledgee after the occurrence and during the
continuance of an Event of Default.
15. Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Notwithstanding the foregoing, the Pledgee may enforce its rights and remedies
in any other jurisdiction applicable to the Pledged Collateral. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
16. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
10
party and delivered to the other party; provided that a facsimile, .pdf or
similar electronically transmitted signature shall be considered due execution
and shall be binding upon the signatory thereto with the same force and effect
as if the signature were an original signature.
17. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
18. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
19. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between each Pledgor, Pledgee, Buyer and
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the Transaction Documents and
instruments referenced herein and therein contain the entire understanding of
the parties with respect to the matters covered herein and therein.
20. Notices. All notices, approvals, requests, demands and other
communications hereunder shall be delivered or made in the manner set forth in,
and shall be effective in accordance with the terms of, the Exchange Agreement,
in the case of communications to the Collateral Agent, directed to the notice
address set forth in the Security Agreement.
21. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Notes. Pledgor shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Pledgee. Pledgee may assign its rights hereunder without the consent
of Pledgor, in which event such assignee shall be deemed to be Pledgee hereunder
with respect to such assigned rights.
22. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person or entity.
23. Survival. All representations, warranties, covenants and
agreements of Pledgor and Pledgee shall survive the execution and delivery of
this Agreement.
24. Further Assurances. Pledgor agrees that at any time and from
time to time upon the written request of Pledgee, Pledgor will execute and
deliver all assignments separate from certificates or stock powers, financing
statements and such further documents and do such further acts and things as
Pledgee may reasonably request consistent with the provisions hereof in order to
carry out the intent and accomplish the purpose of this Agreement and the
consummation of the transactions contemplated hereby.
25. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
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26. Pledgee Authorized. Pledgor hereby authorizes Pledgee to file
one or more financing or continuation statements and amendments thereto (or
similar documents required by any laws of any applicable jurisdiction) relating
to all or any part of the Pledged Shares or other Pledged Collateral without the
signature of Pledgor.
27. Pledgee Acknowledgement. Pledgor acknowledges receipt of an
executed copy of this Agreement. The Pledgor waives the right to receive any
amount that it may now or hereafter be entitled to receive (whether by way of
damages, fine, penalty, or otherwise) by reason of the failure of the Pledgee to
deliver to the Pledgor a copy of any financing statement or any statement issued
by any registry that confirms registration of a financing statement relating to
this Agreement.
28. Collateral Agent. The terms and provisions of Section 5.12 of
the Security Agreement which set forth the appointment of the Collateral Agent
and the indemnifications to which the Collateral Agent is entitled are hereby
incorporated by reference herein as if fully set forth herein.
[Signature Page Follows]
12
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their duly authorized officers on
the date first above written.
PLEDGOR:
--------
SONTERRA RESOURCES, INC.
(f/k/a River Capital Group, Inc.),
a Delaware corporation
By:______________________________________
Name: ___________________________________
Title: __________________________________
13
PLEDGEE:
--------
VIKING ASSET MANAGEMENT L.L.C., a
California limited liability company, in
its capacity as collateral agent for
Buyer
By:______________________________________
Name:
Title:
14
ACKNOWLEDGEMENT
---------------
Each of the undersigned hereby (i) acknowledges receipt of a copy of
the foregoing Pledge Agreement, (ii) waives any rights or requirement at any
time hereafter to receive a copy of such Pledge Agreement in connection with the
registration of any Pledged Shares (as defined therein) in the name of Pledgee
or its nominee or the exercise of voting rights by Pledgee and (iii) agrees
promptly to note on its books and records the grant of the security interest in
the stock or other equity interests of the undersigned as provided in such
Pledge Agreement.
Dated: ____ __, 2007
[__________] (f/k/a Sonterra Resources,
Inc.), a Delaware corporation
By:______________________________________
Name: ___________________________________
Title: __________________________________
EXHIBIT A
---------
to Pledge Agreement
-------------------
DESCRIPTION OF CAPITAL STOCK OR EQUITY INTERESTS OF PLEDGE ENTITIES
-------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Percentage
Class of Stock or Authorized Issued and of Shares
Name of Other Equity No. of Outstanding or Units
Pledge Entity Interests Shares or Units Shares or Units Held by Pledgor
------------------------------------------------------------------------------------------------------------
[To be completed]
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
DESCRIPTION OF PLEDGED SHARES OR UNITS
--------------------------------------
------------------------------------------------------------------------------------------------------------
No. of Shares or Units
Name of Class of Stock or Other Stock or Unit Represented by
Pledge Entity Equity Interests Certificate No. Certificate
------------------------------------------------------------------------------------------------------------
[To be completed]
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
2
EXHIBIT B
---------
to Pledge Agreement
-------------------
Addendum to Pledge Agreement
----------------------------
The undersigned, being the Pledgor pursuant to that certain Pledge
Agreement dated as of ______ __, 2007 (as amended, restated, supplemented or
otherwise modified from time to time, the "Pledge Agreement") in favor of Viking
Asset Management, a California limited liability company, as Collateral Agent
("Pledgee"), by executing this Addendum, hereby acknowledges that Pledgor has
acquired and legally and beneficially owns all of the issued and outstanding [
shares of capital stock ] of [__________________, a _______ corporation ]
("Company") described below (the "Shares"). Pledgor hereby agrees and
acknowledges that the Shares shall be deemed Pledged Shares pursuant to the
Pledge Agreement. Pledgor hereby represents and warrants to Pledgee that (i) all
of the [ capital stock ] of the Company now owned by Pledgor is presently
represented by the certificates listed below, which certificates, with undated
assignments separate from certificate or stock powers duly executed in blank by
Pledgor, are being delivered to Pledgee, simultaneously herewith (or have been
previously delivered to Pledgee), and (ii) after giving effect to this addendum,
the representations and warranties set forth in Section 3 of the Pledge
Agreement are true, complete and correct as of the date hereof.
Pledged Shares
--------------
--------------------------------------------------------------------------------------------------------------
No. of Shares
Name of Represented by
the Company Class of Equity Interest Certificate No. Certificate
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
IN WITNESS WHEREOF, Pledgor has executed this Addendum this _____ day
of ______.
PLEDGOR:
--------
SONTERRA RESOURCES, INC. (f/k/a River
Capital Group, Inc.), a Delaware
corporation
By:______________________________________
Name: ___________________________________
Title: __________________________________
3
