PLEDGE AGREEMENT among AZ BIOMASS LLC, a Delaware limited liability company, as Pledgor SNOWFLAKE WHITE MOUNTAIN POWER, LLC, an Arizona limited liability company, as Borrower and COBANK, ACB, as Collateral Agent Dated as of January 1, 2009
Execution Version
Exhibit 10.8
among
AZ BIOMASS LLC,
a Delaware limited liability company,
as Pledgor
a Delaware limited liability company,
as Pledgor
SNOWFLAKE WHITE MOUNTAIN POWER, LLC,
an Arizona limited liability company,
as Borrower
an Arizona limited liability company,
as Borrower
and
COBANK, ACB,
as Collateral Agent
as Collateral Agent
Dated as of January 1, 2009
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE I. DEFINITIONS | 2 | |||||||
| 1.1 | Defined Terms |
2 | ||||||
| 1.2 | Credit Agreement and UCC Definitions |
3 | ||||||
| 1.3 | Rules of Interpretation |
3 | ||||||
| ARTICLE II. PLEDGE AND GRANT OF SECURITY INTEREST | 3 | |||||||
| 2.1 | Granting Clause |
3 | ||||||
| 2.2 | Retention of Certain Rights |
4 | ||||||
| ARTICLE III. OBLIGATIONS SECURED | 5 | |||||||
| ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PLEDGOR | 5 | |||||||
| 4.1 | Organization |
5 | ||||||
| 4.2 | Power and Authorization; Enforceable Obligations |
5 | ||||||
| 4.3 | No Legal Bar |
5 | ||||||
| 4.4 | Beneficial Ownership; Pledged Equity Interests |
6 | ||||||
| 4.5 | No Prior Assignment |
6 | ||||||
| 4.6 | No Other Financing Documents |
6 | ||||||
| 4.7 | Compliance with Law |
6 | ||||||
| 4.8 | No Litigation |
6 | ||||||
| 4.9 | Taxes |
6 | ||||||
| 4.10 | Investment Company Act; Federal Energy Laws |
6 | ||||||
| 4.11 | Name; Organizational Number |
6 | ||||||
| 4.12 | SWMP Information |
7 | ||||||
| 4.13 | Capital Adequacy, Etc |
7 | ||||||
| 4.14 | Perfection of Security Interest |
7 | ||||||
| 4.15 | After-Acquired Collateral |
7 | ||||||
| ARTICLE V. COVENANTS OF PLEDGOR | 8 | |||||||
| 5.1 | Compliance with Obligations |
8 | ||||||
| 5.2 | Defense of Collateral |
8 | ||||||
| 5.3 | Preservation of Value; Limitation of Liens |
8 | ||||||
| 5.4 | No Other Filings |
8 | ||||||
| 5.5 | No Sale of Collateral |
8 | ||||||
| 5.6 | Notice |
9 | ||||||
| 5.7 | Filing of Bankruptcy Proceedings |
9 | ||||||
| 5.8 | Distributions |
9 | ||||||
| 5.9 | Maintenance of Records |
9 | ||||||
| 5.10 | Name; Jurisdiction of Organization |
9 | ||||||
| 5.11 | Amendments to Organizational Documents |
9 | ||||||
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| Page | ||||||||
| 5.12 | Proceeds of Collateral |
10 | ||||||
| 5.13 | Collateral Secured by Possession |
10 | ||||||
| ARTICLE VI. EVENTS OF DEFAULT | 10 | |||||||
| ARTICLE VII. REMEDIES UPON EVENT OF DEFAULT | 10 | |||||||
| 7.1 | Remedies Upon an Event of Default |
10 | ||||||
| 7.2 | Minimum Notice Period |
11 | ||||||
| 7.3 | Right to Cure |
11 | ||||||
| 7.4 | Expenses; Interest |
11 | ||||||
| 7.5 | Sale of Collateral |
11 | ||||||
| 7.6 | Compliance With Limitations and Restrictions |
12 | ||||||
| 7.7 | No Impairment of Remedies |
12 | ||||||
| 7.8 | Foreclosure upon Class B Interests |
13 | ||||||
| ARTICLE VIII. MISCELLANEOUS | 13 | |||||||
| 8.1 | Remedies Cumulative; Delay Not Waiver |
13 | ||||||
| 8.2 | SWMP’s Consent and Covenant |
16 | ||||||
| 8.3 | Attorney-in-Fact |
16 | ||||||
| 8.4 | Perfection; Further Assurances |
17 | ||||||
| 8.5 | Payment of Taxes |
18 | ||||||
| 8.6 | Place of Business; Location of Records |
18 | ||||||
| 8.7 | Continuing Assignment and Security Interest; Transfer of Notes |
18 | ||||||
| 8.8 | Termination |
19 | ||||||
| 8.9 | Security Interest Absolute |
19 | ||||||
| 8.10 | Limitation on Duty of Collateral Agent with Respect to the Collateral |
20 | ||||||
| 8.11 | Amendments; Waivers; Consents |
20 | ||||||
| 8.12 | Notices |
20 | ||||||
| 8.13 | Modification of Obligations |
20 | ||||||
| 8.14 | Governing Law |
21 | ||||||
| 8.15 | Reinstatement |
21 | ||||||
| 8.16 | Severability |
22 | ||||||
| 8.17 | Survival of Provisions |
22 | ||||||
| 8.18 | Headings Descriptive |
22 | ||||||
| 8.19 | Entire Agreement |
22 | ||||||
| 8.20 | Time. Time is of the essence of this Agreement |
22 | ||||||
| 8.21 | Counterparts |
22 | ||||||
| 8.22 | Limitation of Liability |
22 | ||||||
| 8.23 | Submission to Jurisdiction |
23 | ||||||
| 8.24 | WAIVER OF JURY TRIAL |
23 | ||||||
| 8.25 | Knowledge and Attribution |
23 | ||||||
| 8.26 | Rights of Collateral Agent |
23 | ||||||
| 8.27 | Consent and Acknowledgement |
23 | ||||||
| 8.28 | Third Party Beneficiaries |
23 | ||||||
| 8.29 | Waiver of Transfer Restrictions |
24 | ||||||
| 8.30 | Scope of Liability |
24 | ||||||
ii
This PLEDGE AGREEMENT, dated as of January 1, 2009 (this “Agreement”), is entered into
by and among AZ BIOMASS LLC, a Delaware limited liability company (“Pledgor”), SNOWFLAKE
WHITE MOUNTAIN POWER, LLC, an Arizona limited liability company (“SWMP”) and COBANK, ACB,
in its capacity as collateral agent (together with its successors, designees and assigns in such
capacity, “Collateral Agent”).
A. In order to finance the development, construction, financing, ownership, operation and
maintenance of the approximately 24 MW biomass-fired power generation plant to be located near
Snowflake, Arizona (the “Project”), SWMP, Renegy, LLC, an Arizona limited liability company
(“Renegy”) and Renegy Trucking, LLC, an Arizona limited liability company (“Renegy
Trucking”, and together with SWMP and Renegy, “Borrowers”) entered into that certain
Credit Agreement, dated as of September 1, 2006, as amended and restated on the date hereof (as
further amended, amended and restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), among Borrowers, CoBank, ACB, as lead arranger, administrative agent
(in such capacity, “Administrative Agent”) and Collateral Agent, CoBank, ACB, as letter of
credit issuer (“LC Issuer”) and the financial institutions parties thereto
(“Lenders”), pursuant to which, among other things, Lenders have extended commitments to
make loans to, and for the benefit of, Borrowers.
B. It was a requirement of the Credit Agreement and the making of the advances of credit
contemplated thereby that Renegy Holdings, Inc., a Delaware corporation (“Renegy
Holdings”), upon becoming the sole member and manager of SWMP, enter into that certain Pledge
Agreement, dated as of October 1, 2007 (as amended on the date hereof, the “Renegy Pledge
Agreement”), with SWMP and Collateral Agent, pursuant to which Renegy Holdings pledged all of
the membership interests of SWMP to Collateral Agent.
C. Pursuant to (i) that certain Membership Interest Purchase Agreement, dated as of the date
hereof, between Pledgor and Renegy Holdings (the “Purchase Agreement”), and (ii) that
certain Amended and Restated Limited Liability Company Agreement of SWMP, dated as of the date
hereof (the “LLC Agreement”) between Renegy Holdings and Pledgor, Pledgor purchased the
Class A Interest (as defined in the LLC Agreement) in SWMP from Renegy Holdings and has become a
Member (as defined in the LLC Agreement) of SWMP (the “Transaction”).
D. In connection with the Transaction, and in order to preserve the security interest of
Collateral Agent for the benefit of the Secured Parties in SWMP, Pledgor has agreed to enter into
this Agreement.
other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor and SWMP hereby agree with Collateral Agent, as follows:
ARTICLE I.
DEFINITIONS
DEFINITIONS
1.1 Defined Terms. The following terms when used in this Agreement, including its
preamble and recitals, shall have the following meanings:“Administrative Agent” has the
meaning given in the recitals to this Agreement.
“Borrowers” has the meaning given in the preamble to this Agreement.
“Class A Interest” shall have the meaning given in the LLC Agreement.
“Collateral” has the meaning given in Section 2.1.
“Collateral Agent” has the meaning given in the preamble to this Agreement.
“Credit Agreement” has the meaning given in the recitals to this Agreement.
“Forbearance Agreement” means that certain Forbearance Agreement, dated as of the date
hereof, among Pledgor, SWMP and Collateral Agent.
“Governing Documents” means the LLC Agreement and Articles of Organization of SWMP (as
amended).
“LC Issuer” has the meaning given in the recitals to this Agreement.
“Lenders” has the meaning given in the recitals to this Agreement.
“LLC Agreement” has the meaning given in the recitals to this Agreement.
“Pledged Equity Interests” has the meaning given in Section 2.1.
“Pledgor” has the meaning given in the preamble to this Agreement.
“Project” has the meaning given in the recitals to this Agreement.
“Purchase Agreement” has the meaning given in the recitals to this Agreement.
“Renegy” has the meaning given in the recitals to this Agreement.
“Renegy Holdings” has the meaning given in the recitals to this Agreement.
“Renegy Pledge Agreement” has the meaning given in the recitals to this Agreement.
“Renegy Trucking” has the meaning given in the recitals to this Agreement.
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“Secured Parties” means Collateral Agent, Administrative Agent, LC Issuer, the Lenders
and each of their respective successors, transferees and assigns; provided, that no
Affiliate of any Borrower shall be a “Secured Party” under this Agreement.
“SWMP” has the meaning given in the recitals to this Agreement.
“Transaction” has the meaning given in the recitals to this Agreement.
“UCC” means the Uniform Commercial Code as the same may, from time to time, be in
effect in the State of New York; provided, however, that in the event that, by
reason of mandatory provisions of law, any or all of the perfection or priority of the security
interest in any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or priority and for purposes of definitions related to such provisions.
1.2 Credit Agreement and UCC Definitions. Unless otherwise defined herein, (i) all capitalized terms used in this Agreement shall have
the meanings provided in Exhibit A to the Credit Agreement or, if not defined therein, the
UCC, and (ii) all terms defined in the UCC and used herein shall have the same definitions herein
as specified therein. If a term is defined in Article 9 of the UCC differently than in another
Article of the UCC, the term has the meaning specified in Article 9.
1.3 Rules of Interpretation. Unless otherwise provided herein, the rules of interpretation set forth in Exhibit A
of the Credit Agreement shall apply to this Agreement, including its preamble and recitals, and are
incorporated herein by reference, mutatis mutandis.
ARTICLE II.
PLEDGE AND GRANT OF SECURITY INTEREST
PLEDGE AND GRANT OF SECURITY INTEREST
2.1 Granting Clause. Pledgor hereby assigns, grants and pledges to Collateral Agent for the benefit of the Secured
Parties a continuing first-priority security interest in all right, title and interest of Pledgor,
now owned or hereafter existing or acquired, in, to and under any and all of the following
(collectively, the “Collateral”):
(a) the Class A Interest in SWMP (the “Pledged Equity Interests”);
(b) all rights to receive income, gain, profit, dividends and other distributions allocated or
distributed to Pledgor in respect of or in exchange for all or any portion of the Pledged Equity
Interests;
(c) all of Pledgor’s capital or ownership interest, including capital accounts, in SWMP, and
all accounts, deposits or credits of any kind with SWMP;
(d) all of Pledgor’s voting rights in or rights to control or direct the affairs of SWMP;
3
(e) all of Pledgor’s rights, title and interest in, to or under any and all of SWMP’s assets
or properties;
(f) all other rights, title and interest in or to SWMP derived from the Pledged Equity
Interests;
(g) all indebtedness or other obligations of SWMP owed to Pledgor;
(h) all claims of Pledgor for damages arising out of, or for any breach or default relating
to, the Collateral;
(i) all rights of Pledgor to terminate, amend, supplement, modify, or cancel, the Governing
Documents of SWMP, to take all actions thereunder and to compel performance and otherwise exercise
all remedies thereunder;
(j) all securities, notes, certificates and other instruments representing or evidencing any
of the foregoing rights and interests or the ownership thereof and any interest of Pledgor
reflected in the books of any financial intermediary pertaining to such rights and interests and
all non-cash dividends, cash, options, warrants, stock splits, reclassifications, rights,
instruments or other investment property and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all of such rights and
interests; and
(k) to the extent not included in any of the foregoing, all proceeds of the foregoing
Collateral, whether cash or non-cash;
provided, however, that “Collateral” shall not include (i) any distribution,
repayment of subordinated debt or any other payments made by or on behalf of SWMP to Pledgor
expressly permitted pursuant to the terms of the Credit Documents, (ii) any amounts in the Deposit
Account (as defined in the Purchase Agreement) or any of Pledgor’s rights under the Security
Agreement or the Deposit Account Control Agreement (each as defined in the Purchase Agreement),
(iii) any rights of or any amounts payable to Pledgor under Section 2.02, 2.05 or 12.03 of the
Purchase Agreement, and (iv) any rights of, any amounts payable or any allocations to Pledgor under
Article 5, Sections 7.5, 7.6 7.7 and 8.10 of the LLC Agreement and Article 11 of the Purchase
Agreement, solely to the extent any such rights, amounts or allocations of such clause (iv) relate
to acts, omissions, allocations or matters arising prior to the time that Pledgor is divested of
ownership of the Class A Interest pursuant to this Agreement.
2.2 Retention of Certain Rights. So long as Collateral Agent has not exercised
remedies with respect to the Collateral under this Agreement or any other Credit Document upon the
occurrence of an Event of Default, Pledgor reserves the right to exercise all voting and other
rights with respect to the Collateral (except as limited by the Credit Documents and the
Forbearance Agreement) and to receive all income, dividends and other distributions from the
Collateral (except as limited by the Credit Documents); provided that no vote shall be
cast, right exercised or other action taken which could materially impair the Collateral.
4
ARTICLE III.
OBLIGATIONS SECURED
OBLIGATIONS SECURED
Without limiting the generality of the foregoing, this Agreement and all of the Collateral
secure the payment and performance when due of all Obligations. If enforcement of the liability of
Pledgor under this Agreement (not to exceed the value of the Collateral) would be an unlawful or
voidable transfer under any applicable fraudulent transfer law or any comparable law,
notwithstanding the representation and warranty set forth in Section 4.13 or anything to the
contrary herein, then the liability of Pledgor hereunder shall be reduced to the greater of (a) the
highest amount for which such liability may then be enforced without giving rise to an unlawful or
voidable transfer under any such law and (b) the value of the Collateral.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PLEDGOR
REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor represents and warrants to and in favor of Collateral Agent, as of the date hereof, as
follows:
4.1 Organization. Pledgor is (a) a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, (b) duly qualified as a
foreign limited liability company and in good standing, in each jurisdiction in which such
qualification is required by law, and (c) duly qualified, authorized to do business and in good
standing in each jurisdiction in which such qualification is necessary to execute, deliver and
perform this Agreement and each of the other Project Documents to which it is a party.
4.2 Power and Authorization; Enforceable Obligations. Pledgor has the full limited
liability company power and authority to execute, deliver and perform this Agreement and to take
all action as may be necessary to complete the transactions contemplated hereunder. Pledgor has
taken all necessary limited liability company action to authorize the execution, delivery and
performance of this Agreement and to complete the transactions contemplated hereby. No consent or
authorization of, filing with, or other act by or in respect of any other Person or governmental
authority is required in connection with the execution, delivery or performance by Pledgor, or the
validity or enforceability as to Pledgor, of this Agreement, except such consents or authorizations
or filings or other acts as have already been obtained or made. This Agreement has been duly
executed and delivered by Pledgor and constitutes a legal, valid and binding obligation of Pledgor
enforceable against it in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the right
of creditors generally and by general principles of equity.
4.3 No Legal Bar. The execution, delivery and performance by Pledgor of this
Agreement and the consummation of the transactions contemplated hereby (including the granting of
security interests hereunder) do or will not violate any applicable law or any material contractual
obligation of Pledgor and do or will not result in, or require, the creation or imposition of any
Lien (other than the Liens created pursuant to this Agreement) on any of the properties or revenues
of Pledgor pursuant to any applicable law or any such contractual obligation.
5
4.4 Beneficial Ownership; Pledged Equity Interests. Pledgor is the lawful and
beneficial owner of and has full right, title and interest in, to and under rights and interests
comprising the Collateral, subject to no Liens (other than the Lien in favor of the Collateral
Agent (on behalf of the Secured Parties)). The Pledged Equity Interests (a) have been duly
authorized and validly issued, (b) are fully paid and non-assessable and (c), together with the
Class B Interest (as defined in the LLC Agreement) held by Renegy Holdings and pledged to
Collateral Agent pursuant to the Renegy Pledge Agreement, constitute all of the outstanding
membership interests of SWMP. The Pledged Equity Interests are not securities governed by Article
8 of the New York Uniform Commercial Code, and are not certificated.
4.5 No Prior Assignment. Pledgor has not previously assigned any of its rights in, to
or under all or any portion of the Collateral.
4.6 No Other Financing Documents. Pledgor has not executed and is not aware of any
effective financing statement, security agreement or other instrument similar in effect covering
all or any part of the Collateral on file in any recording office, except such as may have been
filed pursuant to this Agreement and the other Credit Documents.
4.7 Compliance with Law. Pledgor is in compliance with all applicable laws, except
noncompliance which could not reasonably be expected to have a Material Adverse Effect, and no
written notices of any material violation of any law relating to the Project or any Project
Document have been received by Pledgor.
4.8 No Litigation. There are no pending or, to Pledgor’s knowledge, threatened in
writing actions, suits, proceedings or investigations of any kind, including actions or proceedings
of or before any governmental authority, relating to the Collateral or to which Pledgor is a party
or is subject, or by which it or its properties are bound that, if adversely determined to or
against Pledgor could reasonably be expected to have a Material Adverse Effect.
4.9 Taxes. Pledgor has timely filed all federal, state and local tax returns that it
is required to file (except where a failure to file such local tax return could not reasonably be
expected to have a Material Adverse Effect), has paid all taxes it is required to pay to the extent
due (other than those taxes that it is contesting in good faith and by appropriate proceedings,
with adequate reserves established for such taxes) and, to the extent such taxes are not due, has
established reserves that are adequate for the payment thereof to the extent required by GAAP.
4.10 Investment Company Act; Federal Energy Laws. Pledgor is not an “investment
company” or a company “controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended. No provision of the Federal Power Act or the Public Utility
Holding Company Act as to securities, rates or financial or organizational matters precludes
Pledgor from entering into and performing its obligations hereunder.
4.11 Name; Organizational Number. The name of Pledgor is “AZ Biomass LLC”, as
indicated in the public records of the State of Delaware, and Pledgor’s federal employee
identification number is 00-0000000 and Pledgor’s Delaware organizational number is 08110528.
6
4.12 SWMP Information. Pledgor has established adequate means of obtaining financial
and other information pertaining to the businesses, operations and condition (financial or
otherwise) of SWMP and its properties on a continuing basis, and Pledgor now is and hereafter will
be completely familiar with the businesses, operations and condition (financial or otherwise) of
SWMP and its properties. Pledgor hereby agrees that Collateral Agent shall not have any duty to
advise Pledgor of information known to Collateral Agent regarding such condition or any such
circumstances or of any changes or potential changes affecting the Collateral. In the event
Collateral Agent, in its respective discretion, undertakes at any time or from time to time to
provide any such information to Pledgor, Collateral Agent shall not be under any obligation (a) to
undertake any investigation not a part of its regular business routine, or reasonable commercial
lending practices or (b) to make any other or future disclosure of such information to Pledgor.
4.13 Capital Adequacy, Etc.
(a) After giving effect to the transactions contemplated by this Agreement and the contingent
obligations evidenced hereby, Pledgor is not, on either an unconsolidated basis or a consolidated
basis with any Person that directly or indirectly controls Pledgor, insolvent as such term is used
or defined in any applicable Bankruptcy Law, and Pledgor has and will have assets which, fairly
valued, exceed its indebtedness, liabilities or obligations.
(b) Pledgor is not executing this Agreement with any intention to hinder, delay or defraud any
present or future creditor or creditors of Pledgor.
(c) Pledgor is not engaged in any business or transaction which, after giving effect to the
transactions contemplated by this Agreement, will leave Pledgor with capital or assets which are
unreasonably small in relation to the business or transactions engaged by Pledgor, and Pledgor does
not intend to engage in any such business or transaction.
(d) Pledgor does not intend to incur, nor does Pledgor believe that it will incur, debts
beyond Pledgor’s ability to repay such debts as they mature.
4.14 Perfection of Security Interest. The security interest granted to Collateral
Agent pursuant to this Agreement constitutes as to personal property included in the Collateral a
valid lien. The security interest granted to Collateral Agent pursuant to this Agreement in the
Collateral consisting of personal property will be perfected (a) with respect to any property that
can be perfected by filing, upon the filing of financing statements in the proper filing offices
and (b) with respect to any property, if any, that can be perfected by possession, upon Collateral
Agent receiving possession thereof and, in each case, such security interest will be, as to
Collateral perfected under the UCC or otherwise as aforesaid, superior and prior to the rights of
all third Persons now existing or hereafter arising whether by way of mortgage, lien, security
interests, encumbrance, assignment or otherwise.
4.15 After-Acquired Collateral. It is understood and agreed that the foregoing
representations and warranties shall apply only to the Collateral pledged on the date hereof and
that, with respect to Collateral pledged thereafter, Pledgor shall, upon the written request of
Collateral Agent, be required to make representations and warranties in form and substance
7
substantially similar to the foregoing in supplements hereto and that such representations and
warranties contained in such supplements hereto shall be applicable to such Collateral hereafter
delivered.
ARTICLE V.
COVENANTS OF PLEDGOR
COVENANTS OF PLEDGOR
Pledgor covenants to and in favor of Collateral Agent as follows:
5.1 Compliance with Obligations. Pledgor shall perform and comply in all material
respects with all obligations and conditions on its part to be performed with respect to the
Collateral.
5.2 Defense of Collateral. Pledgor shall, until the payment in full in cash and
performance in full of all Obligations and the termination of all the Lender’s Commitments and all
other obligations to the Secured Parties under the Credit Documents (other than the Obligations
that are intended to survive the termination of the Credit Documents and return or expiration of
the Letter of Credit), defend its title to the Collateral and the interest of Collateral Agent in
the Collateral pledged hereunder against the claims and demands of all Persons.
5.3 Preservation of Value; Limitation of Liens. Pledgor shall not take or permit to
be taken any action in connection with the Collateral which would impair in any material respect
the value of the interests or rights of Pledgor therein or which would impair the interests or
rights of Collateral Agent therein or with respect thereto, except as expressly permitted by the
Credit Documents or the Forbearance Agreement; provided, however, that nothing in
this Agreement shall prevent Pledgor, prior to the exercise by Collateral Agent of any rights
pursuant to the terms hereof, from undertaking Pledgor’s operations in the ordinary course of
business in accordance with the Credit Documents. Pledgor shall not directly or indirectly create,
incur, assume or suffer to exist any Liens on or with respect to all or any part of the Collateral
(other than the Liens in favor of the Collateral Agent (on behalf of the Secured Parties)).
Pledgor shall at its own cost and expense promptly take such action as may be necessary to
discharge any such Liens.
5.4 No Other Filings. Pledgor shall not file or authorize or permit to be filed in
any jurisdiction any financing statements under the UCC or any like statement relating to the
Collateral in which Collateral Agent is not named as the sole secured party.
5.5 No Sale of Collateral. Pledgor shall not cause, suffer or permit the sale,
assignment, conveyance, pledge or other transfer of all or any portion of Pledgor’s ownership or
interest or any portion of the Collateral, except as provided in Sections 2.05, 12.03 or 13.09 of
the Purchase Agreement, or Article X of the LLC Agreement, provided that any such transferee
assumes Pledgor’s rights and obligations hereunder, under the Forbearance Agreement, the LLC
Agreement and the Purchase Agreement and executes such other documents as reasonably requested by
Collateral Agent to continue its first priority lien on the Collateral. Upon such assignment and
assumption, Pledgor shall have no liability or obligations under this Agreement with respect to
matters arising after the date of such assignment and assumption. As used herein, the transfer of
an ownership interest in the Collateral shall not include the direct or indirect sale,
8
assignment, pledge, hypothecation, transfer or other disposition (voluntarily or
involuntarily, by gift or otherwise, and whether as security or otherwise) of any equity interest
in Pledgor or in any Person that controls Pledgor.
5.6 Notice. Pledgor shall promptly, upon acquiring notice or giving notice, as the
case may be, or obtaining knowledge thereof, give written notice (with copies of any such
underlying notices) to Collateral Agent of any and all writings, documents or instruments
evidencing any additional Collateral or any Collateral which has been converted from one type of
Collateral into another type, including, without limitation, any Collateral with respect to which
possession is required or permitted for the Lien and security interest granted therein under this
Agreement to be perfected.
5.7 Filing of Bankruptcy Proceedings. To the extent it may so agree to do so under
applicable law, Pledgor, for itself, its successors and assigns, shall not cast any vote as an
owner in SWMP (a) in favor of the commencement of a voluntary case or other proceeding seeking
liquidation, reorganization, rehabilitation or other relief with respect to SWMP or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect in any jurisdiction or
seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of
the owners of SWMP or any substantial part of SWMP’s property, (b) to authorize SWMP to consent to
any such aforesaid relief or to the appointment of or taking possession by any such aforesaid
official in an involuntary case or other proceeding commenced against SWMP or (c) to authorize SWMP
to make a general assignment for the benefit of creditors.
5.8 Distributions. If Pledgor in its capacity as owner of SWMP receives any income,
dividend or other distribution of money or property of any kind from SWMP (other than as expressly
permitted by the Credit Documents), Pledgor shall hold such income or distribution as trustee for,
and shall promptly deliver the same to, Collateral Agent.
5.9 Maintenance of Records. Pledgor shall, at all times, keep accurate and complete
records of the Collateral. Pledgor shall permit representatives of Collateral Agent, upon
reasonable prior written notice, at any time during normal business hours of Pledgor to inspect and
make abstracts from Pledgor’s books and records pertaining to the Collateral. Upon the occurrence
and during the continuation of any Event of Default, at Collateral Agent’s written request, Pledgor
shall promptly deliver copies of any and all such records to Collateral Agent.
5.10 Name; Jurisdiction of Organization. Pledgor shall not change its name, its
jurisdiction of organization, the location of its principal place of business, its organization
identification number or its fiscal year without notice to Collateral Agent at least 30 days prior
to such change. In the event of such change, Pledgor shall at its expense or at the expense of
SWMP, as applicable execute and deliver such instruments and documents as may be reasonably
required by Collateral Agent or applicable law to maintain a prior perfected security interest in
the Collateral.
5.11 Amendments to Organizational Documents. Except as expressly permitted by this
Agreement or the other Credit Documents, Pledgor shall not terminate, amend, supplement or
otherwise modify, or cancel, the Governing Documents of SWMP without the prior written consent of
Collateral Agent.
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5.12 Proceeds of Collateral. Pledgor shall, at all times, keep pledged to Collateral
Agent pursuant hereto all Collateral and shall not consent to the issuance by SWMP of any
membership interests or other equity interests unless such membership interests or other equity
interests are immediately duly pledged to Collateral Agent hereunder on a first priority perfected
basis.
5.13 Collateral Secured by Possession. Pledgor shall, if requested by Collateral
Agent, properly deliver or cause to be delivered to Collateral Agent all Collateral in which the
Lien and security interest granted therein under this Agreement may be or is required to be
perfected by possession.
ARTICLE VI.
EVENTS OF DEFAULT
EVENTS OF DEFAULT
The occurrence of an Event of Default under, and as defined in, the Credit Agreement shall
constitute an Event of Default hereunder. Any such Event of Default shall be considered cured for
the purposes of this Agreement when it has been cured in accordance with the Credit Agreement.
ARTICLE VII.
REMEDIES UPON EVENT OF DEFAULT
REMEDIES UPON EVENT OF DEFAULT
7.1 Remedies Upon an Event of Default. Upon the occurrence and during the
continuation of an Event of Default, Collateral Agent, shall have the right, at its election (but
subject to the terms and conditions of the Forbearance Agreement), but not the obligation, to do
any of the following:
(a) vote or exercise any and all of Pledgor’s rights or powers incident to its ownership of
the Pledged Equity Interests, including any rights or powers to manage or control SWMP;
(b) demand, xxx for, collect or receive any money or property at any time payable to or
receivable by Pledgor on account of or in exchange for all or any part of the Collateral;
(c) cause any action at law or suit in equity or other proceeding to be instituted and
prosecuted to collect or enforce any obligation or right hereunder or included in the Collateral,
including specific enforcement of any covenant or agreement contained herein, or to foreclose or
enforce the security interest in all or any part of the Collateral granted herein, or to enforce
any other legal or equitable right vested in it by this Agreement or by applicable law;
(d) incur expenses, including reasonable attorneys’ fees, reasonable consultants’ fees, and
other costs appropriate to the exercise of any right or power under this Agreement;
(e) perform any obligation of Pledgor hereunder;
(f) if Pledgor is in default of any of its obligations under this Agreement, secure the
appointment of a receiver for Pledgor without notice to SWMP or Pledgor;
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(g) exercise any other or additional rights or remedies granted to Collateral Agent under any
other provision of this Agreement or any other Credit Document, or exercisable by a secured party
under the UCC, whether or not the UCC applies to the affected Collateral, or under any other
applicable law;
(h) take any other action which Collateral Agent deems necessary or desirable to protect or
realize upon its security interest in the Collateral or any part thereof, and Pledgor hereby
irrevocably appoints Collateral Agent as Pledgor’s attorney-in-fact (as set forth in Section 8.3)
to take any such action, including the execution and delivery of any and all documents or
instruments related to the Collateral or any part thereof in Pledgor’s name, and said appointment
shall create in Collateral Agent a power coupled with an interest which shall be irrevocable; or
(i) appoint another Person (who may be an employee, officer or other representative of
Collateral Agent) to do any of the foregoing, or take any other action permitted hereunder, as
agent for or representative of, and on behalf of, Collateral Agent.
7.2 Minimum Notice Period. If, pursuant to applicable law, prior notice of any action
described in Section 7.1 is required to be given to Pledgor or SWMP, Pledgor and SWMP hereby
acknowledge and agree that the minimum time required by such applicable law, or if no minimum is
specified, 10 Business Days, shall be deemed a reasonable notice period.
7.3 Right to Cure. In addition to the foregoing remedies, Collateral Agent may, but
shall not be obligated to, cure any Event of Default and incur reasonable fees, costs and expenses
in doing so, in which event SWMP shall reimburse Collateral Agent within five Business Days after
written demand for all such fees, costs and expenses, together with interest thereon at the Default
Rate from the date payable until the date repaid in full.
7.4 Expenses; Interest. All reasonable costs and expenses (including reasonable
attorneys’ fees and expenses) incurred by Collateral Agent in connection with exercising any
actions taken under Section 7.1, together with interest thereon (to the extent permitted by law)
computed at a rate per annum equal to the Default Rate or the maximum rate permitted by law,
whichever is less, from the date due to the date of payment thereof, shall be added to the
indebtedness secured by this Agreement and shall be paid by SWMP to Collateral Agent within 10
Business Days after written demand.
7.5 Sale of Collateral. In addition to exercising the foregoing rights, upon the
occurrence and during the continuation of an Event of Default, Collateral Agent may, subject to the
terms and conditions of the Forbearance Agreement and to the extent permitted by applicable law,
arrange for and conduct a sale of the Collateral at a public or private sale (as Collateral Agent
may elect) which sale may be conducted by an employee or representative of Collateral Agent,
without any demand of performance or notice of intention to sell or dispose of, or of time or place
of sale or disposition (except such notice as required by any applicable law), and any such sale
shall be considered or deemed to be a sale made in a commercially reasonable manner. Collateral
Agent may release, temporarily or otherwise, to Pledgor any item of Collateral of which Collateral
Agent has taken possession pursuant to any right granted to Collateral Agent by this Agreement
without waiving any rights granted to Collateral Agent under this Agreement, the
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Credit Agreement
or the other Credit Documents. Pledgor, in dealing with or disposing of the
Collateral or any part thereof, hereby waives all rights, legal and equitable, it may now or
hereafter have to require marshaling of assets or to require, upon foreclosure, sales of assets in
a particular order. Pledgor also waives its right to challenge the reasonableness of any
disclaimer of warranties, title and the like made by Collateral Agent in connection with a sale of
the Collateral. Each successor and assign of Pledgor, including a holder of a Lien subordinate to
the Lien created hereby (without implying that Pledgor has, except as expressly provided in the
Credit Documents, a right to grant an interest in, or a subordinate Lien on, any of the
Collateral), by acceptance of its interest or Lien agrees that it shall be bound by the above
waiver, to the same extent as if such holder gave the waiver itself. Pledgor also hereby waives,
to the full extent it may lawfully do so, the benefit of all laws providing for rights of
appraisal, valuation, stay or extension or of redemption after foreclosure now or hereafter in
force. If Collateral Agent sells any of the Collateral upon credit, Pledgor will be credited only
with payments actually made by the purchaser, received by Collateral Agent and applied to the
indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral,
Collateral Agent may resell the Collateral and Pledgor shall be credited with the proceeds of the
sale. In the event Collateral Agent shall bid at any foreclosure or trustee’s sale or at any
private sale permitted by law or this Agreement or any other Credit Document, Collateral Agent may
bid all or less than the amount of the Obligations. To the extent permitted by applicable law, the
amount of the successful bid at any such sale, whether Collateral Agent or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and
the difference between such bid amount and the remaining balance of the Obligations shall be
conclusively deemed to be the amount of the Obligations.
7.6 Compliance With Limitations and Restrictions. Pledgor hereby agrees that in
respect of any sale of any of the Collateral pursuant to the terms hereof, Collateral Agent is
hereby authorized to comply with any limitation or restriction in connection with such sale as
Collateral Agent may be advised by counsel is necessary in order to avoid any violation of
applicable law, or in order to obtain any required approval of the sale or of the purchaser by any
governmental authority or official, and Pledgor further agrees that such compliance shall not, in
and of itself, result in such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall Collateral Agent be liable or accountable to Pledgor for
any discount allowed by reason of the fact that such Collateral is sold in compliance with any such
limitation or restriction.
7.7 No Impairment of Remedies. If, in the exercise of any of its rights and remedies
under this Agreement, Collateral Agent shall forfeit any of its rights or remedies, whether because
of any applicable law pertaining to “election of remedies” or otherwise, Pledgor hereby consents to
such action by Collateral Agent and, to the extent permitted by applicable law, waives any claim
based upon such action, even if such action by Collateral Agent shall result in a full or partial
loss of any rights of subrogation, indemnification or reimbursement which Pledgor might otherwise
have had but for such action by Collateral Agent or the terms herein. Any election of remedies
which results in the denial or impairment of the right of Collateral Agent to seek a deficiency
judgment against SWMP shall not, to the extent permitted by applicable law, impair Pledgor’s
obligations hereunder.
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7.8 Foreclosure upon Class B Interests. Notwithstanding anything in the LLC Agreement
to the contrary, Pledgor hereby consents to any exercise by Collateral Agent of its
rights and remedies granted under the Renegy Pledge Agreement, including foreclosure upon the
Class B Interest (as defined in the LLC Agreement), and shall provide Collateral Agent with any
instruments, certificates or other documents reasonably requested by Collateral Agent in order to
evidence such foreclosure. Pledgor hereby acknowledges that, upon such foreclosure, neither the
Collateral Agent nor the transferee of the Class B Interest shall be bound by the obligations of
the Class B Member or Sponsor (each as defined in the LLC Agreement) under Sections 3.4 or 4.4 of
the LLC Agreement (provided that Sponsor shall continue to be bound by such provisions according to
their terms) and, with respect to any transfer by the Collateral Agent up to and including transfer
to the ultimate purchaser not affiliated with any Lender, Article X thereunder.
ARTICLE VIII.
MISCELLANEOUS
MISCELLANEOUS
8.1.1 Remedies Cumulative. No right, power or remedy herein conferred upon or
reserved to Collateral Agent is intended to be exclusive of any other right, power or remedy, and
every such right, power and remedy shall, to the extent permitted by applicable law, be cumulative
and in addition to every other right, power and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder
shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
Resort to any or all security now or hereafter held by Collateral Agent may be taken concurrently
or successively and in one or several consolidated or independent judicial actions or lawfully
taken nonjudicial proceedings, or both. If Collateral Agent may, under applicable law and in
accordance with the terms and conditions of the Forbearance Agreement, proceed to realize its
benefits under this Agreement or any other Credit Document giving Collateral Agent a Lien upon any
Collateral, whether owned by Pledgor or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Collateral Agent may, at its sole option, determine which of its
remedies or rights it may pursue without affecting any of the rights and remedies of Collateral
Agent under this Agreement.
8.1.2 No Waiver; Separate Causes of Action. No delay or omission to exercise any
right, power or remedy accruing to Collateral Agent upon the occurrence and during the continuance
of any Event of Default as aforesaid shall impair any such right, power or remedy of Collateral
Agent, nor shall it be construed to be a waiver of any such Event of Default or of any similar
breach or default thereafter occurring or an acquiescence therein, nor shall any waiver of any
other breach or default under this Agreement or any other Credit Document be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Each and every default by Pledgor in
payment hereunder shall give rise to a separate cause of action hereunder, and separate suits may
be brought hereunder as each cause of action arises and every power and remedy given by this
Agreement may be exercised from time to time, and as often as shall be deemed expedient, by
Collateral Agent.
8.1.3 Application of Proceeds. The proceeds of any sale of or other realization upon,
all or any part of the Collateral taken in accordance with this Agreement, shall be applied
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to the
repayment of the Loans and otherwise in accordance with the Credit Agreement. The Borrowers shall
remain liable for any deficiency.
8.1.4 Certain Waivers. Pledgor hereby waives and relinquishes, to the maximum extent
permitted by applicable law, all rights and remedies accorded to pledgors, sureties or guarantors
and agrees not to assert or take advantage of any such rights or remedies, including:
(a) any law limiting remedies, including recovery of a deficiency against the Borrowers, under
an obligation secured by a mortgage or deed of trust on real property if the real property is sold
under a power of sale contained in the mortgage or deed of trust, and all defenses based on any
loss whether as a result of any such sale or otherwise;
(b) any right to require Collateral Agent to proceed against the Borrowers or any other Person
or to proceed against or exhaust any security held by Collateral Agent at any time or to pursue any
other remedy in Collateral Agent’s power before proceeding against the Collateral;
(c) any defense that may arise by reason of the incapacity, lack of power or authority, death,
dissolution, merger, termination or disability of Pledgor, any Borrower or any other Person or the
failure of Collateral Agent or any Secured Party to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of Pledgor, any Borrower or any other Person;
(d) any right to enforce any remedy that Collateral Agent may have against any Borrower or any
other Person and any right to participate in any security held by Collateral Agent until the
Obligations have been paid and the covenants of the Credit Documents have been performed in full;
(e) any right to require Collateral Agent to give any notices of any kind, including, without
limitation, notices of nonpayment, nonperformance, protest, dishonor, default, delinquency or
acceleration, or to make any presentments, demands or protests, except as set forth herein or
expressly provided in the Credit Agreement or any of the Credit Documents;
(f) any right to assert the bankruptcy or insolvency of the Borrowers or any other Person as a
defense hereunder or as the basis for rescission hereof and any defense arising because of
Collateral Agent’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the
application of Section 1111(b)(2) of the Federal Bankruptcy Code;
(g) subject to Section 8.9, any right under any law purporting to reduce Pledgor’s obligations
hereunder if the Obligations are reduced other than as a result of payment of such Obligations;
(h) any defense based on the repudiation of the Credit Documents by any Borrower or any other
Person, the failure by Collateral Agent or any Secured Party to enforce any claim against Pledgor,
any Borrower or any other Person or the unenforceability in whole or in part of any Credit
Documents;
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(i) all suretyship and guarantor’s defenses generally;
(j) any right to insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets, redemption or
similar law, or exemption, whether now or at any time hereafter in force, which may delay, prevent
or otherwise affect the performance by Pledgor of its obligations under, or the enforcement by
Collateral Agent of, this Agreement;
(k) any requirement on the part of Collateral Agent to mitigate the damages resulting from any
default;
(l) any defense based upon an election of remedies by Collateral Agent, including an election
to proceed by non-judicial rather than judicial foreclosure, which destroys or otherwise impairs
the subrogation rights of Pledgor, the right of Pledgor to proceed against any Borrower or another
Person for reimbursement, or both;
(m) any defense based on any offset against any amounts which may be owed by any Person to
Pledgor for any reason whatsoever;
(n) any defense based on any act, failure to act, delay or omission whatsoever on the part of
any Borrower or any of their Affiliates or the failure by any Borrower or any of their Affiliates
to do any act or thing or to observe or perform any covenant, condition or agreement to be observed
or performed by it under the Credit Documents;
(o) any defense, setoff or counterclaim which may at any time be available to or asserted by
any Borrower or any of their Affiliates against Collateral Agent or any Secured Party or any other
Person under the Credit Documents;
(p) any duty on the part of Collateral Agent to disclose to Pledgor any facts Collateral Agent
may now or hereafter know about any Borrower or any of their Affiliates, regardless of whether
Collateral Agent has reason to believe that any such facts materially increase the risk beyond that
which Pledgor intends to assume, or have reason to believe that such facts are unknown to Pledgor,
or have a reasonable opportunity to communicate such facts to Pledgor;
(q) any defense based on any change in the time, manner or place of any payment under, or in
any other term of, the Credit Documents or any other amendment, renewal, extension, acceleration,
compromise or waiver of or any consent or departure from the terms of the Credit Documents; and
(r) any defense based upon any borrowing or grant of a security interest under Section 364 of
Title 11 of the United States Code.
8.1.5 Foreclosure Waiver. To the extent permitted by applicable law, Pledgor waives
the posting of any bond otherwise required of Collateral Agent in connection with any judicial
process or proceeding to obtain possession of, replevy, attach, or levy upon the Collateral, to
enforce any judgment or other security for the Obligations, to enforce any judgment or other court
order entered in favor of Collateral Agent, or to enforce by specific
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performance, temporary
restraining order, preliminary or permanent injunction, this Agreement or any other agreement or
document between Pledgor and Collateral Agent. Except as provided
in the Forbearance Agreement, Pledgor further agrees that upon the occurrence and during the
continuation of an Event of Default, Collateral Agent may elect to nonjudicially or judicially
foreclose against any real or personal property security it holds for the Obligations or any part
thereof, or to exercise any other remedy against any Borrower or any other Person, any security or
any guarantor, even if the effect of that action is to deprive Pledgor of the right to collect
reimbursement from any Borrower or any other Person for any sums paid by Pledgor to Collateral
Agent.
8.1.6 Waiver of Rights of Subrogation. Until the indefeasible payment in full in cash
of the Obligations and the termination of all the Lender’s Commitments and all other obligations to
the Secured Parties under the Credit Documents (other than the Obligations that are intended to
survive the termination of the Credit Documents), (a) Pledgor shall not have any right of
subrogation and waives all rights to enforce any remedy which Collateral Agent now have or may
hereafter have against SWMP or any of their Affiliates, and waives the benefit of, and all rights
to participate in, any security now or hereafter held by Collateral Agent from any Borrower or any
of their Affiliates and (b) Pledgor waives any claim, right or remedy which Pledgor may now have or
hereafter acquire against any Borrower or any of their Affiliates that arises hereunder and/or from
the performance by Pledgor hereunder, including any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or
remedy of Collateral Agent against any Borrower or any of their Affiliates, or any security which
Collateral Agent now have or hereafter acquire, whether or not such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise. Any amount paid to Pledgor
on account of any such subrogation rights prior to the payment in full in cash of the Obligations
and the termination of the Lender’s Commitments and all other obligations to the Secured Parties
under the Credit Documents (other than the Obligations that are intended to survive the termination
of the Credit Documents) shall be held in trust for the benefit of the Secured Parties and shall
immediately thereafter be paid to Collateral Agent, for the benefit of the Secured Parties.
8.2 SWMP’s Consent and Covenant. SWMP hereby consents to the assignment of and grant
of a security interest in the Collateral to Collateral Agent for the benefit of the Secured Parties
and to the exercise by Collateral Agent of all rights and powers assigned or delegated to
Collateral Agent by Pledgor hereunder, including the rights upon and during an Event of Default to
exercise Pledgor’s voting rights and other rights to manage or control SWMP, all in accordance with
the Credit Documents and the Forbearance Agreement.
8.3 Attorney-in-Fact. Pledgor hereby constitutes and appoints Collateral Agent,
acting for and on behalf of itself and each successor or assign of Collateral Agent the true and
lawful attorney-in-fact of Pledgor, with full power and authority in the place and stead of Pledgor
and in the name of Pledgor, Collateral Agent or otherwise, subject to the terms of the Credit
Agreement, this Agreement, the Forbearance Agreement and applicable law, to enforce all rights,
interests and remedies of Pledgor with respect to the Collateral, including the right:
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(a) to ask, require, demand, receive and give acquittance for any and all moneys and claims
for money due and to become due under or arising out of the Collateral, including any insurance
policies;
(b) to elect remedies under the Collateral and to endorse any checks or other instruments or
orders in connection therewith;
(c) to vote, demand, receive and enforce Pledgor’s rights with respect to the Collateral;
(d) to give appropriate receipts, releases and satisfactions for and on behalf of and in the
name of Pledgor or, at the option of Collateral Agent, in the name of Collateral Agent, with the
same force and effect as Pledgor could do if this Agreement had not been made;
(e) to file any claims or take any action or institute any proceedings in connection therewith
which Collateral Agent may reasonably deem to be necessary or advisable; and
(f) to pay, settle or compromise all bills and claims which may be or become Liens or security
interests against any or all of the Collateral, or any part thereof, unless a bond or other
security satisfactory to Collateral Agent has been provided;
provided, however, that Collateral Agent shall not exercise any of the
aforementioned rights unless an Event of Default has occurred and is continuing, Collateral Agent
has not waived its remedies with respect thereto in accordance with the Credit Documents and the
exercise of such rights is not restricted by the Forbearance Agreement. This power of attorney is
a power coupled with an interest and shall be irrevocable until the termination of this Agreement
in accordance with the terms hereof and the other Credit Documents; provided further,
however, that nothing in this Agreement shall prevent Pledgor from, prior to the exercise by
Collateral Agent of any of the aforementioned rights, undertaking Pledgor’s operations in the
ordinary course of business in accordance with the Collateral and the Credit Documents.
8.4.1 Perfection. Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor shall promptly execute and deliver all further instruments and documents, and take all
further action, that may be reasonably necessary, or that Collateral Agent may reasonably request,
in order to perfect, to ensure the continued perfection of, and to protect the assignment and
security interest granted or intended to be granted hereby or to enable Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, Pledgor shall (a) deliver the Collateral or any part
thereof to Collateral Agent, as Collateral Agent may reasonably request in accordance with this
Agreement, accompanied by such duly executed instruments of transfer or assignment as Collateral
Agent may reasonably request, and (b) authorize, execute and file such financing or continuation
statements, or amendments thereto, and such other instruments, endorsements or notices, as may be
reasonably necessary or desirable or as Collateral Agent may reasonably request, in order to
perfect and preserve the assignments and security interests granted or purported to be granted
hereby.
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8.4.2 Filing of Financing and Continuation Statements. Pledgor hereby authorizes the
filing of any financing statements or continuation statements, and amendments to financing
statements, or any similar document in any jurisdictions and with any filing offices as
Collateral Agent may reasonably determine are necessary or advisable to perfect the security
interest granted to Collateral Agent, for the benefit of the Secured Parties, herein. Such
financing statements may describe the Collateral in the same manner as described herein or may
contain an indication or description of the Collateral that describes such property in any other
manner as Collateral Agent may reasonably determine is necessary, advisable or prudent to ensure
the perfection of the security interest in the Collateral granted to Collateral Agent herein.
Copies of any such financing statements shall promptly be delivered to Pledgor.
8.4.3 Information Concerning Collateral. Pledgor shall, promptly upon receipt of
prior written request, provide to Collateral Agent all information and evidence it may reasonably
request concerning the Collateral to enable Collateral Agent to enforce the provisions of this
Agreement.
8.5 Payment of Taxes. Pledgor shall pay or cause to be paid, before any fine,
penalty, interest or cost attaches thereto, all taxes, assessments and other governmental or
non-governmental charges or levies (other than those taxes that it is contesting in good faith and
by appropriate proceedings, and in respect of which it has established adequate reserves for such
taxes) now or hereafter assessed or levied against the Collateral pledged by it hereunder (or
against the Collateral in which Pledgor has granted to Collateral Agent a security interest of
first priority) and shall retain copies of, and, upon written request, permit Collateral Agent to
examine receipts showing payment of any of the foregoing.
8.6 Place of Business; Location of Records. Unless Collateral Agent is otherwise
notified under Section 5.10, the chief executive office of Pledgor is, and all records of Pledgor
concerning the Collateral are and will be, located at the address set forth in Section 8.12.
8.7 Continuing Assignment and Security Interest; Transfer of Notes. This Agreement
shall create a continuing pledge and assignment of and security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full in cash and performance in full
of the Obligations (other than the Obligations that are intended to survive the termination of the
Credit Agreement) and as otherwise provided in Section 8.9; (b) be binding upon SWMP, Pledgor, and
their respective successors and assigns; and (c) inure, together with the rights and remedies of
Collateral Agent, to the benefit of the Secured Parties and their successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), Collateral Agent may assign
or otherwise transfer the Notes or other evidence of indebtedness held by it for the benefit of the
Secured Parties to any other Person to the extent permitted by and in accordance with the Credit
Agreement, and such other Person shall thereupon become vested with all or an appropriate part of
the benefits in respect thereof granted to Collateral Agent herein or otherwise. The release of
the security interest in any or all of the Collateral, the taking or acceptance of additional
security, or the resort by Collateral Agent to any security it may have in any order it may deem
appropriate, shall not affect the liability of any Person on the indebtedness secured hereby.
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8.8 Termination.
(a) Upon the payment in full in cash of all Obligations and the termination of all the
Lender’s Commitments (other than the obligations that are intended to survive the
termination of the Credit Documents and return or expiration of the Letter of Credit), this
Agreement and the security interest and all other rights granted hereby shall terminate and all
rights to the Collateral shall revert to Pledgor. Upon any such termination, Collateral Agent will
return all certificates previously delivered, if any, to Collateral Agent representing the Pledged
Equity Interests and, at Pledgor’s expense and upon its written direction, execute and deliver to
Pledgor such documents (including UCC-3 termination statements) as any Borrower or Pledgor shall
reasonably request to evidence such termination, to release all security interest on the Collateral
and to return such Collateral to Pledgor.
(b) Upon exercise by the Class A Equity Investor of its rescission right in accordance with
Section 12.03 of the Purchase Agreement and the assignment by the Class A Equity Investor of the
Collateral to Renegy Holdings, this Agreement shall be deemed terminated and the first priority
security interest of the Collateral Agent (on behalf of the Secured Parties) shall continue
pursuant to the terms and conditions of the Renegy Pledge Agreement. Upon such termination and
provided the Collateral Agent maintains such first priority security interest in the Collateral
pursuant to the Renegy Pledge Agreement, at Pledgor’s expense and upon its written direction,
Collateral Agent shall execute and deliver to Pledgor such documents (including UCC-3 termination
statements) as Pledgor shall reasonably request to evidence such termination.
If this Agreement shall be terminated or revoked by operation of law, Pledgor shall indemnify
and save Collateral Agent harmless from any loss (other than any loss arising out of the gross
negligence or willful misconduct of Collateral Agent) which may be suffered or incurred by
Collateral Agent in acting hereunder prior to the receipt by Collateral Agent, its successors,
transferees, or assigns of notice of such termination or revocation.
8.9 Security Interest Absolute. All rights of Collateral Agent and the security
interest hereunder, and all obligations of Pledgor hereunder, shall be unconditional irrespective
of: (a) any lack of validity or enforceability of the Credit Agreement, any other Credit Document
or any other agreement or instrument relating thereto; (b) the failure of Collateral Agent (i) to
assert any claim or demand or to enforce any right or remedy against any Borrower, any Affiliate of
any Borrower or any other Person under the provisions of any Credit Document or otherwise or (ii)
to exercise any right or remedy against any other guarantor of, or collateral securing, any of the
Obligations; (c) any change in the time, manner or place of payment of, or in any other term of the
Obligations (including any increase in the amount thereof), or any other amendment or waiver of or
any consent to any departure from the any Credit Document; (d) any reduction, limitation,
impairment or termination of any of the Obligations for any reason other than the written agreement
of the Secured Parties to terminate the Obligations in full, but including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to, and 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 Obligation of any
Borrower, any Affiliate of any Borrower or otherwise; (e) any amendment to, rescission, waiver, or
other modification of, or any consent to departure from, any of the terms of any Credit Document;
(f) any exchange, surrender, release or non-perfection of any Collateral, or
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any release, amendment
or waiver or addition of or consent to departure from any other security interest held by
Collateral Agent; (g) any bankruptcy or insolvency of any Borrower, Pledgor or
any other Person; or (h) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, Pledgor or any third party pledgor (other than the defense of
payment).
8.10 Limitation on Duty of Collateral Agent with Respect to the Collateral. The
powers conferred on Collateral Agent hereunder are solely to protect its interest in the Collateral
for the benefit of the Secured Parties and shall not impose any duty on Collateral Agent or any of
its designated agents to exercise any such powers. Except for the safe custody of any Collateral
in its possession and the accounting for monies actually received by it hereunder, and except to
the extent of any duties imposed by applicable law which have not been waived hereunder, Collateral
Agent shall have no duty with respect to any Collateral and no provision of this Agreement shall be
interpreted as giving rise to any implied duties or obligations on the part of Collateral Agent.
Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation
of the Collateral in its possession if the Collateral is accorded treatment that is substantially
equivalent to that which Collateral Agent accords its own property, it being expressly agreed, to
the maximum extent permitted by applicable law, that Collateral Agent shall have no responsibility
for (a) taking any necessary steps to preserve rights against any Persons with respect to any
Collateral, or (b) taking any action to protect against any diminution in value of the Collateral,
but, in each case, Collateral Agent may do so and all expenses reasonably incurred in connection
therewith shall be part of the Obligations.
8.11 Amendments; Waivers; Consents. This Agreement may not be amended, amended and
restated, supplemented or otherwise modified, except in a writing signed by each of the parties
hereto and otherwise in accordance with the provisions of Section 11.21 of the Credit Agreement.
8.12 Notices. All notices required or permitted under the terms and provisions hereof
shall be in writing, and any such notice shall become effective upon delivery in accordance with
Section 11.1 of the Credit Agreement. Notices to SWMP or Collateral Agent may be given at the
address set forth in Section 11.1 of the Credit Agreement. Notices to Pledgor may be given at the
following address (or such other address as notified by SWMP or Collateral Agent):
Pledgor:
|
AZ Biomass LLC | |
| x/x Xxxxx Xxxxxx Xxxx and Trust Company | ||
| Energy Credit Investments | ||
| State Street Financial Center | ||
| One Lincoln Street SFC 12 | ||
| Xxxxxx, Xxxxxxxxxxxxx 00000-0000 | ||
| Attn: Xxxxxxxx X. Xxxxx | ||
| Telecopy: (000) 000-0000 |
8.13 Modification of Obligations. If Collateral Agent shall at any time or from time
to time, with or without the consent of, or notice to, Pledgor:
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(a) change or extend the manner, place or terms of payment of, or renew or alter all or any
portion of, the Obligations;
(b) take any action under or in respect of the Credit Documents in the exercise of any remedy,
power or privilege contained therein or available at law, equity or otherwise, or waive or refrain
from exercising any such remedies, power or privileges;
(c) amend or modify, in any manner whatsoever, the Credit Documents;
(d) extend or waive the time for Pledgor’s, any Borrower’s or any other Person’s performance
of, or compliance with, any term, covenant or agreement on its part to be performed or observed
under the Credit Documents, or waive such performance or compliance or consent to a failure of, or
departure from, such performance or compliance;
(e) take and hold security or collateral for the payment of the Obligations, or sell,
exchange, release, dispose of, or otherwise deal with, any property pledged, mortgaged or conveyed,
or in which Collateral Agent has been granted a Lien, to secure any indebtedness of Pledgor, any
Borrower or any other Person party to a Credit Document to the Secured Parties;
(f) release or limit the liability of anyone who may be liable in any manner for the payment
of any amounts owed by Pledgor, any Borrower or any other Person party to a Credit Document to
Collateral Agent;
(g) modify or terminate the terms of any intercreditor or subordination agreement pursuant to
which claims of other creditors of Pledgor, any Borrower or any other Person party to a Credit
Document are subordinated to the claims of Collateral Agent; or
(h) apply any sums by whomever paid or however realized to any amounts owing by Pledgor or any
Borrower to the Secured Parties in such manner as Collateral Agent shall determine in its
discretion;
then, subject to Section 8.8, Collateral Agent shall not incur any liability to Pledgor pursuant
hereto as a result thereof and no such action shall impair or release the obligations of Pledgor
under this Agreement.
8.14 Governing Law. This Agreement, including all matters of construction, validity,
performance and the creation, validity, enforcement or priority of the Lien of, and security
interests created by, this Agreement in or upon the Collateral shall be governed by the laws of the
State of New York, without reference to conflicts of law (other than Section 5-1401 and Section
5-1402 of the New York General Obligations Law), except as required by mandatory provisions of law
and except to the extent that the validity or perfection or priority of the Lien and 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.
8.15 Reinstatement. This Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time any payment pursuant to this Agreement is rescinded
or must otherwise be restored or returned upon the insolvency, bankruptcy, reorganization,
liquidation of Pledgor, any Borrower or any other Person party to a Credit
21
Document or upon the
dissolution of, or appointment of any intervenor or conservator of, or trustee or similar official
for, Pledgor, any Borrower or any other Person party to a Credit Document or any substantial part
of Pledgor’s, any Borrower’s or any other such Person’s assets,
or otherwise, all as though such payments had not been made, and any Borrower shall pay
Collateral Agent on demand all reasonable costs and expenses (including reasonable fees of counsel)
incurred by Collateral Agent in connection with such rescission or restoration.
8.16 Severability. The provisions of this Agreement are severable, and if any clause
or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then
such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.
8.17 Survival of Provisions. All agreements, representations and warranties made
herein shall survive the execution and delivery of this Agreement and the Credit Agreement and the
making of the Loans and extensions of credit thereunder. Except as otherwise provided in this
Agreement or implied by law, the agreements, representations and warranties of Pledgor set forth
herein shall terminate at the same time as the security interest and other rights granted hereunder
shall terminate pursuant to Section 8.8.
8.18 Headings Descriptive. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement for any other purpose or be given
any substantive effect.
8.19 Entire Agreement. This Agreement, together with the Credit Documents and the
Forbearance Agreement (and in the event of any conflict between this Agreement and the Forbearance
Agreement, the Forbearance Agreement shall control the point in conflict), is intended by the
parties hereto as a final expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
8.20 Time. Time is of the essence of this Agreement.
8.21 Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute one and the same
agreement. Signature pages may be detached from multiple separate counterparts and attached to a
single counterpart so that all signature pages are physically attached to the same document.
8.22 Limitation of Liability. No claim shall be made by Pledgor or SWMP against
Collateral Agent or any of its Affiliates, directors, employees, attorneys or agents for any loss
of profits, business or anticipated savings, special or punitive damages or any indirect or
consequential loss whatsoever in respect of any breach or wrongful conduct (whether or not the
claim therefor is based on contract, tort or duty imposed by law), in connection with, arising out
of or in any way related to the transactions contemplated by this Agreement or the other Credit
Documents or any act or omission or event occurring in connection therewith; and Pledgor and SWMP
hereby waive, release and agree not to xxx upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in their favor.
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8.23 Submission to Jurisdiction. Collateral Agent, SWMP and Pledgor agree that any
legal action or proceeding by or against Pledgor or SWMP or with respect to or arising out of this
Agreement or any other Credit Document may be brought in or removed to the courts of the State of
New York, in and for the County of New York, or of the United States of America for the Southern
District of New York, as Collateral Agent may elect. By execution and delivery of this Agreement,
Collateral Agent, SWMP and Pledgor accept, for themselves and in respect of their property,
generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. Collateral
Agent, SWMP and Pledgor irrevocably consent to the service of process out of any of the
aforementioned courts in any manner permitted by law. Nothing herein shall affect the right of
Collateral Agent to bring legal action or proceedings in any other competent jurisdiction.
Collateral Agent, SWMP and Pledgor hereby waive any right to stay or dismiss any action or
proceeding under or in connection with this Agreement brought before the foregoing courts on the
basis of forum non-conveniens.
8.24 WAIVER OF JURY TRIAL. PLEDGOR, SWMP AND COLLATERAL AGENT HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE
RELATIONSHIP AMONG PLEDGOR, SWMP AND COLLATERAL AGENT THAT IS BEING ESTABLISHED. PLEDGOR, SWMP AND
COLLATERAL AGENT ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. PLEDGOR, SWMP AND
COLLATERAL AGENT FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
8.25 Knowledge and Attribution. Reference in this Agreement to the “knowledge”, “best
knowledge” or facts and circumstances “known to” Pledgor, and all like references, means facts or
circumstances of which a responsible officer of Pledgor has actual knowledge.
8.26 Rights of Collateral Agent. Collateral Agent shall be entitled to the rights,
protections, immunities and indemnities set forth in the Credit Agreement as if specifically set
forth herein.
8.27 Consent and Acknowledgement. Pledgor hereby acknowledges receiving copies of the
Credit Agreement and the other Credit Documents and consents to the terms and provisions of each.
8.28 Third Party Beneficiaries. Nothing in this Agreement, expressed or implied, is
intended or shall be construed to confer upon, or give to any Person, other than Pledgor, SWMP and
Collateral Agent, acting for the benefit of the Secured Parties, any security, rights, remedies or
claims, legal or equitable, under or by reason hereof, or any covenant or condition hereof. This
Agreement and the covenants and agreements herein contained are and shall be held to be
23
for the sole and exclusive benefit of Pledgor, SWMP and Collateral Agent, acting for the
benefit of the Secured Parties.
8.29 Waiver of Transfer Restrictions. Notwithstanding anything to the contrary
contained in the LLC Agreement, Pledgor hereby waives any requirement contained in the LLC
Agreement that it consent to a transfer of a membership interest in SWMP in connection with a
foreclosure on such membership interest under the Credit Documents.
8.30 Scope of Liability. Collateral Agent acknowledges the applicability of the terms
of Article 9 of the Credit Agreement.
[Remainder of this Page Intentionally Left Blank]
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| AZ BIOMASS LLC as Pledgor |
||||
| By: | Antrim Corporation, Its Manager | |||
| By: | /s/ Xxxxxxxx X. Xxxxx | |||
| Name: | Xxxxxxxx X. Xxxxx | |||
| Title: | Vice President | |||
| SNOWFLAKE WHITE MOUNTAIN POWER, LLC, an Arizona limited liability company |
||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||
| Xxxxxx X. Xxxxxxx | ||||
| [title] | ||||
| COBANK, ACB, as Collateral Agent |
||||
| By: | /s/ Xxxx Xxxxx | |||
| Xxxx Xxxxx | ||||
| Vice President, Energy Banking Group | ||||
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