EXHIBIT 10.3
INTEREST PLEDGE AGREEMENT
THIS INTEREST PLEDGE AGREEMENT (the "Agreement"), dated February 26,
2004, is made and entered into by and among Xxxx Gas, LLC, a Delaware limited
liability company ("Pledgor"), and Continental Southern Resources, Inc., a
Nevada corporation (the "Secured Party").
WHEREAS, pursuant to that certain Interest Purchase Agreement, dated
as of even date herewith (the "Purchase Agreement"), by and between the Pledgor
and the Secured Party, the Pledgor purchased the Secured Party's ninety-nine
percent (99%) limited partnership interest (the "LP Interest") in Xxxx Miss.
Partners, L.P. ("Xxxx Miss") and the Secured Party's one percent (1%) membership
interest in Xxxx Miss., LLC ("Xxxx LLC"), the general partner in Xxxx Miss (the
"Membership Interest"; together with the LP Interest, the "Interests"), and
issued that certain Secured Promissory Note dated February 26, 2004 in the
principal amount of US $4,500,000 (the "Note"); and
WHEREAS, in order to secure the Pledgor's obligations under the Note,
the Secured Party has requested that the Pledgor pledge and grant a security
interest in and to the Interests of the Pledgor set forth on Schedule A hereto.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto hereby agree as follows:
1. Defined Terms.
(a) Except as otherwise expressly provided herein, capitalized
terms used in this Agreement shall have the respective meanings assigned to them
in the Purchase Agreement or the Note, as applicable. Where applicable and
except as otherwise expressly provided herein, terms used herein (whether or not
capitalized) shall have the respective meanings assigned to them in the Uniform
Commercial Code, as amended from time to time (the "Code").
(b) "Pledged Collateral" shall mean and include the following:
(i) the Interests listed on Schedule A attached hereto and made a part hereof,
and all rights and privileges pertaining thereto, including, without limitation,
all present and future securities and other ownership interests receivable in
respect of, or in exchange for, such Interests, all rights under operating
agreements, member agreements, security holder agreements and other similar
agreements relating to such Interests, all rights to subscribe for securities
and other ownership interests incident to or arising from ownership of such
Interests, all cash, interest, securities and other dividends or distributions
paid or payable on such Interests, and all books and records (whether paper,
electronic or any other medium) pertaining to the foregoing, including, without
limitation, all partnership record and transfer books, and (ii) whatever is
received when any of the foregoing is sold, exchanged, replaced or otherwise
disposed of, including all proceeds thereof, as such term is defined in the
Code.
2. Grant of Security Interest.
To secure the payment and performance of all obligations
and of all indebtedness of Pledgor under the Note (collectively, the "Secured
Obligations"), Pledgor hereby grants to the Secured Party a first priority
security interest in and hereby pledges to the Secured Party, all of such
Pledgor's now existing and hereafter acquired or arising right, title and
interest in, to and under the Pledged Collateral whether now or hereafter
existing and wherever located.
3. Further Assurances.
Prior to or concurrently with the execution of this
Agreement, and thereafter at any time and from time to time upon reasonable
request of the Secured Party, Pledgor shall execute and deliver to the Secured
Party all financing statements, continuation financing statements, assignments,
certificates and documents of title, affidavits, reports, notices, schedules of
account, letters of authority, further pledges, powers of attorney and all other
documents (collectively, the "Security Documents") which the Secured Party may
reasonably request, in form reasonably satisfactory to the Secured Party, and
take such other action which the Secured Party may reasonably request, to
perfect and continue perfected and to create and maintain the first priority
status of the Secured Party's security interest in the Pledged Collateral and to
fully consummate the transactions contemplated under this Agreement. Pledgor
hereby irrevocably makes, constitutes and appoints the Secured Party as
Pledgor's true and lawful attorney with power to sign the name of such Pledgor
on all or any of the documents which the Secured Party determines must be
executed, filed, recorded or sent in order to perfect or continue perfected the
Secured Party' security interest in the Pledged Collateral in any jurisdiction.
Such power, being coupled with an interest, is irrevocable until all of the
Secured Obligations have been indefeasibly full in paid and the Note have
terminated.
4. Representations and Warranties.
Pledgor hereby represents and warrants to the Secured Party
as follows:
(a) Pledgor has and will continue to have (or, in the case of
after-acquired Pledged Collateral, at the time such Pledgor acquires rights in
such Pledged Collateral, will have and will continue to have), title to the
Pledged Collateral, free and clear of all liens.
(b) The securities constituting the Pledged Collateral have
been duly authorized and validly issued to Pledgor (as set forth on Schedule A
hereto), and are fully paid and nonassessable.
(c) The security interests in the Pledged Collateral granted
hereunder are valid, perfected and of first priority, subject to the lien of no
other Person.
(d) Except as provided in the Limited Partnership Agreement of
Xxxx Miss (the "Limited Partnership Agreement") and the Operating Agreement of
Xxxx LLC, there are no restrictions upon the transfer of the Pledged Collateral
and Pledgor has the power and authority and right to transfer the Pledged
Collateral owned by Pledgor free of any encumbrances and without obtaining the
consent of any other Person.
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(e) Pledgor has all necessary power to execute, deliver and
perform this Agreement.
(f) There are no actions, suits, or proceedings pending or, to
Pledgor's best knowledge after due inquiry, threatened against or affecting
Pledgor with respect to the Pledged Collateral, at law or in equity or before or
by any governmental authority, and Pledgor is not in default with respect to any
judgment, writ, injunction, decree, rule or regulation which could adversely
affect Pledgor's performance hereunder.
(g) This Agreement has been duly executed and delivered and
constitutes the valid and legally binding obligation of Pledgor, enforceable in
accordance with its terms, except to the extent that enforceability of this
Agreement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights generally or limiting the right of specific performance.
(h) Neither the execution and delivery by Pledgor of this
Agreement, nor the compliance with the terms and provisions hereof, will violate
any provision of any law or conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree or
ruling of any governmental authority to which Pledgor is subject or any
provision of any agreement, understanding or arrangement to which Pledgor is a
party or by which Pledgor is bound.
(i) The address of Pledgor's chief executive office is as set
forth on the signature page hereto.
(j) All rights of Pledgor in connection with its ownership of
the Interests are evidenced and governed solely by the agreements, certificate
of partnership, Limited Partnership Agreement and other organizational documents
of Xxxx Miss and the agreements, certificate of organization, Operating
Agreement and other organizational documents of Xxxx LLC, and no shareholder or
other similar agreements are applicable to the Pledged Collateral.
5. General Covenants.
Pledgor hereby covenants and agrees as follows:
(a) Pledgor shall do all reasonable acts that may be necessary
and appropriate to maintain, preserve and protect the Pledged Collateral.
Pledgor shall be responsible for the risk of loss of, damage to, or destruction
of the Pledged Collateral owned by Pledgor, unless such loss is the result of
the gross negligence or willful misconduct of any Secured Party. Pledgor shall
notify the Secured Party in writing ten (10) days prior to any change in such
Pledgor's chief executive office address.
(b) Pledgor shall appear in and defend any action or
proceeding of which Pledgor is aware which could reasonably be expected to
affect Pledgor's title to, or the Secured Party's interest in, the Pledged
Collateral or the proceeds thereof; provided, however, that with the consent of
the Secured Party, Pledgor may settle such actions or proceedings with respect
to the Pledged Collateral, which consent shall not be unreasonably withheld or
delayed.
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(c) Pledgor shall, and shall cause Xxxx Miss and Xxxx LLC to,
keep separate, accurate and complete records of the Pledged Collateral,
disclosing the Secured Party's security interest hereunder.
(d) Pledgor shall comply with all laws applicable to the
Pledged Collateral unless any noncompliance would not individually or in the
aggregate materially impair the use or value of the Pledged Collateral or the
Secured Party's rights hereunder.
(e) Pledgor shall pay any and all taxes, duties, fees or
imposts of any nature imposed by any governmental authority on any of the
Pledged Collateral, except to the extent contested in good faith by appropriate
proceedings.
(f) To the extent, following the date hereof, Pledgor acquires
securities, shares, capital stock or other ownership interests described in the
definition of Pledged Collateral, in respect of, in exchange for, or upon the
conversion of, the Pledged Collateral, such securities, shares, capital stock or
ownership interests shall be subject to the terms hereof and, upon such
acquisition, shall be deemed to be hereby pledged to the Secured Party, and
Pledgor thereupon shall deliver all such securities, shares, capital stock, and
other ownership interests together with an updated Schedule A hereto, to the
Secured Party.
(g) Except as set forth in Section 15 hereof, during the term
of this Agreement, Pledgor shall not sell, assign, replace, retire, transfer or
otherwise dispose of its Pledged Collateral.
6. Other Rights With Respect to Pledged Collateral.
(a) In addition to the other rights with respect to the
Pledged Collateral granted to the Secured Party hereunder, at any time and from
time to time, after and during the continuation of any default under the Note,
the Secured Party, at its option and at the expense of the Pledgor, may (a)
transfer into the name of the Secured Party or into the name of its nominee, all
or any part of the Pledged Collateral, thereafter receiving all dividends,
income or other distributions upon the Pledged Collateral; (b) take control of
and manage all or any of the Pledged Collateral; (c) apply to the payment of any
of the Secured Obligations, whether any be due and payable or not, any moneys,
including cash dividends, distributions and income from any Pledged Collateral,
now or hereafter in the hands of the Secured Party, on deposit or otherwise,
belonging to Pledgor, as the Secured Party in its sole discretion shall
determine; and (d) do anything that Pledgor is required but fails to do
hereunder.
(b) In the event that upon the occurrence of any default under
the Note and while such default shall be continuing the Secured Party desires to
exercise any of its rights or remedies under this Agreement, it shall deliver
written notice (a "Default Notice") to the Pledgor, which notice shall be dated
and state that a default under the Note has occurred and is continuing, that it
desires to exercise certain of its rights and remedies hereunder and direct the
Pledgor to deliver the Pledged Collateral to the Secured Party. Unless the
Secured Party is notified in writing by the Pledgor within five (5) days from
the date of the Default Notice that the Pledgor disputes the Secured Party's
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right to exercise any of its rights or remedies hereunder, the Pledgor shall
promptly deliver the Pledged Collateral to the Secured Party. If the Secured
Party is notified in writing by the Pledgor within five (5) days from the date
of the Default Notice that the Pledgor in good faith contests the right of the
Secured Party to exercise its rights or remedies hereunder, then, and in that
event, the parties shall be permitted to submit the issues in dispute to
arbitration in accordance with the provisions of Section 17 of this Agreement.
7. Additional Remedies Upon Event of Default.
Upon the occurrence of any default under the Note and while
such default shall be continuing, the Secured Party shall have, in addition to
all rights and remedies of a secured party under the Code or other applicable
law, and in addition to its rights under Section 6 above, the Purchase Agreement
and the Note, the following rights and remedies:
(a) The Secured Party may, after ten (10) days' advance notice
to the Pledgor, sell, assign, give an option or options to purchase or otherwise
dispose of the Pledged Collateral or any part thereof at public or private sale,
at the Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Secured Party may deem commercially
reasonable. Pledgor agrees that ten (10) days' advance notice of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. The Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Pledgor recognizes that the Secured Party may be compelled to resort
to one or more private sales of the Pledged Collateral to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to the
distribution or resale thereof.
(b) The proceeds of any collection, sale or other disposition
of the Pledged Collateral, or any part thereof, shall, after the Secured Party
has made all deductions of expenses, including but not limited to, attorneys'
fees and other expenses incurred in connection with repossession, collection,
sale or disposition of such Pledged Collateral or in connection with the
enforcement of the Secured Party's rights with respect to the Pledged
Collateral, including in any insolvency, bankruptcy or reorganization
proceedings, be applied against the Secured Obligations, whether or not all the
same be then due and payable, as follows:
(i) first, to the Secured Obligations and to reimburse
the Secured Party for out-of-pocket costs, expenses and disbursements, including
without limitation reasonable attorneys' fees and legal expenses, incurred by
the Secured Party in connection with realizing on the Pledged Collateral
including expenses incurred by the Secured Party for the reasonable maintenance,
preservation, protection or enforcement of, or realization upon, the Pledged
Collateral, including without limitation advances for taxes, insurance, and the
like, and reasonable expenses incurred to sell or otherwise realize on, or
prepare for sale of or other realization on, any of the Pledged Collateral, in
such order as the Secured Party may determine in its discretion; and
(ii) the balance, if any, as required by law.
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8. Secured Party's Duties.
The powers conferred on the Secured Party hereunder are solely
to protect its interest in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any Pledged
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Secured Party shall have no duty as to any Pledged Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Collateral.
9. No Waiver; Cumulative Remedies.
No failure to exercise, and no delay in exercising, on the
part of any Secured Party, any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any further exercise thereof or the
exercise of any other right, power or privilege. The remedies herein provided
are cumulative and not exclusive of any remedies provided under the Note and the
Purchase Agreement or by law. Pledgor waives any right to require the Secured
Party to proceed against any other person or to exhaust any of the Pledged
Collateral or other security for the Secured Obligations or to pursue any remedy
in the Secured Party's power.
10. Assignment.
All rights and obligations of the parties under this Agreement
shall inure to the benefit of their respective successors and assigns.
11. Severability.
Any provision of this Agreement that shall be held invalid or
unenforceable shall be ineffective without invalidating the remaining provisions
hereof.
12. Governing Law.
This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Texas without regard to its
conflicts of law principles, except to the extent the validity or perfection of
the security interests or the remedies hereunder in respect of any Pledged
Collateral are governed by the law of a jurisdiction other than the State of
Texas.
13. Notices.
All notices, requests, demands, directions and other
communications (collectively, "notices") given to or made upon any party hereto
under the provisions of this Agreement shall be in writing (including telex or
facsimile communication) and shall be hand delivered, sent by a recognized
overnight courier or sent by telex or facsimile to the respective parties at the
addresses and numbers set forth in the signature page hereto or in accordance
with any subsequent unrevoked written direction from any party to the others.
All notices shall, except as otherwise expressly provided herein, be effective
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in the case of telex or facsimile, when received, or in the case of hand
delivered notice, when hand delivered or, in the case of overnight couriered
notice, the business day after deposit with such courier.
14. Specific Performance.
The parties acknowledge and agree that, in addition to the
other rights of the parties hereunder and under the Note, because a party's
remedies at law for failure of any other party to comply with the provisions
hereof would be inadequate and that any such failure would not be adequately
compensable in damages, the parties agree that each the provisions hereof may be
specifically enforced.
15. Voting Rights in Respect of the Pledged Collateral.
So long as no default shall occur and be continuing under the
Note, Pledgor may exercise any and all voting rights pertaining to the Pledged
Collateral.
16. Release of Pledged Collateral.
An agreement evidencing the Pledged Collateral shall be
released and delivered to Pledgor after full payment of all principal and
interest due under the Note is made to the Secured Party. In the event such full
payment of all principal and interest is not so received by the Secured Party,
the Secured Party shall be permitted to submit the issues in dispute to
arbitration in accordance with the provisions of Section 17 of this Agreement.
17. Arbitration.
If a dispute arises as to the interpretation of this
Agreement, it shall be decided in an arbitration proceeding conforming to the
Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in the Commonwealth of Pennsylvania. The decision of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. The
parties shall share equally the costs of the arbitration.
18. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements relating to a grant of a security interest in the Pledged Collateral
by Pledgor. This Agreement may not be amended or supplemented except by a
writing signed by the Secured Party and the Pledgor.
19. Counterparts.
This Agreement may be executed in any number of counterparts
and delivered via facsimile, and by different parties hereto in separate
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counterparts, each of which when so executed shall be deemed an original and all
of which taken together shall constitute but one and the same agreement.
20. Descriptive Headings.
The descriptive headings which are used in this Agreement are
for the convenience of the parties only and shall not affect the meaning of any
provision of this Agreement.
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SIGNATURE PAGE TO INTEREST PLEDGE AGREEMENT
IN WITNESS WHEREOF, and intending to be legally bound, the parties
hereto have caused this Agreement to be duly executed as of the date first above
written.
XXXX GAS, LLC
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President, FEQ Investments,
Managing Member
Address: 000 Xxxxxxxxxxxx Xxxx.
Xxxxx 000X
Xxxx Xxxxxx, XX 00000
CONTINENTAL SOUTHERN RESOURCES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxx
Co-Chief Executive Officer
Address: 000 Xxxxxxxxxxxx Xxxx.
Xxxxx 000X
Xxxx Xxxxxx, XX 00000
SCHEDULE A
TO
INTEREST PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED COLLATERAL
Pledgor Pledged Collateral
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Xxxx Gas, LLC The ninety-nine percent (99%) limited partnership interest
in Xxxx Miss Partners, L.P., which limited partnership
interest shall be released after payment in full of the
principal due under the Note in accordance with Section 16
of this Interest Pledge Agreement.
The one percent (1%) membership interest in Xxxx Miss, LLC,
the general partner in Xxxx Miss. Partners, L.P., which
membership interest shall be released after payment in full
of the principal due under the Note in accordance with
Section 16 of this Interest Pledge Agreement.
