PLEDGE AGREEMENT
This PLEDGE AGREEMENT, together with any amendments,
replacements and supplements hereafter entered into (the
"Pledge Agreement"), dated as of [ ], 1997, between XCL LTD.
(together with its successors and assigns, the "Pledgor"),
and Fleet National Bank (together with its successors and
assigns, the "Trustee"), is made for the benefit of the
Holders. As used herein, all capitalized terms not
otherwise defined herein shall have the meanings set forth
in the Indenture (together with all amendments and
supplements thereto, the "Indenture"), dated as of May 20,
1997, among the Pledgor and the Trustee, relating to the
Pledgor's 13.50% Senior Secured Notes due May 1, 2004,
Series A (the "Discount Notes") and the 13.50% Senior
Secured Notes due May 1, 2004, Series B ("Exchange Notes"
and, together with the Discount Notes, and the Private
Exchange Notes (as defined in the Indenture), the "Notes"),
as amended from time to time in accordance with the terms
thereof.
W I T N E S S E T H:
WHEREAS, the Pledgor has issued $75 million aggregate
principal amount of Notes pursuant to the Indenture; and
WHEREAS, the Pledgor is the legal and beneficial owner of
the issued and outstanding shares of capital stock set forth
on Schedule A attached hereto; and
WHEREAS, the Pledgor, XCL-China Ltd., a British Virgin
Islands company wholly owned by the Pledgor and each other
Subsidiary identified on Schedule A attached hereto (each a
"Subsidiary Guarantor"), have executed and delivered to the
Trustee a supplement to the Indenture dated of even date
herewith pursuant to which each Subsidiary Guarantor has
guaranteed the Company's Obligations under the Indenture and
the Notes; and
WHEREAS, in order to secure the payment and performance in
full of the Obligations of the Pledgor under the Indenture
and the Notes, the parties hereto desire to set forth their
mutual understanding and certain agreements regarding the
terms and conditions of the pledge of the Pledged Collateral
(as defined below) made by the Pledgor to the Trustee for
the ratable benefit of the Holders of the Notes.
NOW, THEREFORE, in consideration of the premises and other
benefits to the Pledgor, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. Pledge. As collateral security for the
indefeasible payment and performance in full of the
Indenture obligations of the Pledgor, the Pledgor hereby
pledges, assigns, transfers, sets over and delivers unto the
Trustee, and hereby grants unto the Trustee for the ratable
benefit of the Holders and unto their respective successors
and assigns, a continuing security interest in all of the
right, title and interest of the Pledgor in, to and under
any and all of the following described property, rights and
interests (collectively, the "Pledged Collateral"):
(a) all of the issued and outstanding shares of
Capital Stock identified on Schedule A attached hereto of
the Subsidiary Guarantors therein set forth (the "Pledged
Subsidiaries");
(b) all other shares of Capital Stock or other
equity securities issued by the Pledged Subsidiaries now or
hereafter owned or acquired by the Pledgor in any manner,
and the certificates representing such securities, and any
present or future options, warrants or other rights to
subscribe for or purchase any property described in Section
1(a) or any notes, bonds, debentures or other evidences of
indebtedness that are at any time convertible, exchangeable
or exercisable into Capital Stock or other equity securities
of the Pledged Subsidiaries or have or at any time could by
their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities,
certificates and instruments representing or evidencing
ownership of any of the property described in Section 1(a)
and Section 1(b) hereof;
(c) all shares of Capital Stock or other equity
securities of any entity issued to the Pledgor if, at the
time of issuance, the entity is or as a result of such
issuance becomes a Restricted Subsidiary under the Indenture
(the property described in Section 1(a), Section 1(b) and
Section 1(c) being referred to herein collectively as the
"Pledged Securities");
(d) any additional property of the kind or type
described in this Section 1 required to be supplied under
the terms of this Pledge Agreement; and
(e) all proceeds and products of the Pledged
Securities, including without limitation dividends,
distributions, cash, instruments and other property or
securities, now or hereafter at any time or from time to
time received or receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of
the Pledged Securities;
TO HAVE AND TO HOLD the Pledged Collateral, together with
all rights, titles, interests, powers, privileges and
preferences pertaining or incidental thereto, unto the
Trustee for the benefit of the Holders and unto their
respective successors and assigns.
Section 2. Representations, Warranties and
Covenants of the Pledgor. The Pledgor hereby represents and
warrants (as of the date of execution hereof as to the
Pledged Collateral existing on such date and as of the date
of acquisition as to the Pledged Collateral acquired
subsequently), covenants and agrees that:
(a) The Pledgor is the legal and beneficial
owner of the Pledged Collateral, holds the Pledged
Collateral free and clear of all Liens (except for the
security interest granted hereunder to the Trustee for the
ratable benefit of Holders of Notes and except for Liens for
taxes not yet payable), and has not made and will not make
any other pledge, assignment, mortgage, hypothecation or
transfer of the Pledged Collateral.
(b) The Pledged Securities have been duly
authorized and validly issued and are fully paid and non-
assessable.
(c) Upon delivery of physical certificates
evidencing the Pledged Securities to the Trustee, the
Trustee will have a perfected first priority security
interest in the Pledged Securities, securing the
indefeasible payment and performance in full of the
Indenture obligations of the Pledgor.
(d) The Pledgor has the requisite corporate
power and authority to pledge the Pledged Collateral in the
manner hereby done or contemplated and will defend its title
thereto against the lawful claims of all persons whomsoever
and shall maintain and preserve the security interest
granted hereunder with respect to the Pledged Collateral as
long as this Pledge Agreement shall remain in full force and
effect.
(e) Neither the execution and delivery of this
Pledge Agreement by the Pledgor, the performance by the
Pledgor of its obligations hereunder, nor the transactions
herein contemplated will violate the Pledgor's Certificate
of Incorporation or bylaws, each as currently in effect,
violate the terms of any agreement, indenture, mortgage,
deed of trust, equipment lease, instrument or other document
to which the Pledgor is a party, violate any law, order,
rule or regulation applicable to the Pledgor of any court or
any government, regulatory body or administrative agency or
other governmental body having jurisdiction over the Pledgor
or its properties, or result in or require the creation or
imposition of any Lien (other than the Lien contemplated
hereby), upon or with respect to any of the property now
owned or hereafter acquired by the Pledgor, which violation
or conflict would have a material adverse effect on the
financial condition, business, assets or liabilities of the
Pledgor and its Subsidiaries, taken as a whole, or on the
value of the Pledged Collateral or a material adverse effect
on the security interests hereunder; provided, however, that
a foreclosure by the Trustee with respect to the Pledged
Collateral may result in the triggering of a right of first
refusal in Apache Corporation as provided under that certain
agreement dated in March, 1994, by and between the Pledgor
and Apache Corporation (the "Apache Option") and require the
consent of the governmental authorities of the People's
Republic of China (the "Chinese Approval Requirement").
(f) The Pledged Securities include the issued
and outstanding shares of Capital Stock of the Pledged
Subsidiaries as described in Schedule A attached hereto, and
as of the date of execution hereof, except for the Apache
Option, there are no outstanding options, warrants or other
rights to subscribe for or purchase any property described
in Section 1(a) or any notes, bonds, debentures or other
evidences of indebtedness that are at any time convertible
into capital stock of the Pledged Subsidiaries or have or
at any time could by their terms have voting rights with
respect to any matters affecting the Pledged Subsidiaries.
(g) No consent or approval which has not been
obtained prior to the date hereof of any other person or
entity and no authorization, approval or other action (other
than delivery of physical certificates evidencing the
Pledged Securities) by, and no notice to or filing with any
governmental body (other than UCC filings), regulatory
authority or securities exchange, was or is necessary as a
condition to the validity of the pledge hereunder of the
Pledged Collateral, and such pledge is effective to vest in
the Trustee the rights of the Trustee in the Pledged
Collateral as set forth herein. Except for the Apache
Option and the Chinese Approval Requirement, there are no
restrictions on the transferability of any of the Pledged
Collateral transferred or delivered by the Pledgor hereunder
or, except for restrictions related to federal and state
securities laws governing the sale of "restricted stock" or
"control stock," with respect to the foreclosure, transfer
or disposition thereof by the Trustee.
(h) The Pledgor shall deliver to the Trustee
concurrently with the execution of this Pledge Agreement or,
to the extent acquired subsequent to the date of execution
hereof, immediately upon the Pledgor's acquisition thereof:
all certificates and instruments representing the Pledged
Securities, and each other item of Pledged Collateral
(including all certificates, instruments and notes
representing any such Pledged Collateral). Any and all
Pledged Securities delivered to the Trustee shall be
accompanied by undated duly executed powers in blank and by
such other instruments of transfer or documents as the
Trustee may reasonably request. The Trustee shall hold the
certificates representing the Pledged Securities delivered
to it in its own name or in the name of its nominee, all in
form and substance satisfactory to the Trustee. The Pledgor
hereby acknowledges that the Trustee may, in its discretion,
appoint one or more financial institutions to act as the
Trustee's agent in holding in custodial accounts instruments
or other financial assets in which the Trustee is granted a
security interest hereunder, including, without limitation,
certificates of deposit and other instruments evidencing
short term obligations.
(i) The Trustee shall at all times have full
and free access during normal business hours to all of the
books, correspondence and records of the Pledgor relating to
the Pledged Collateral (other than information that is
privileged and confidential) and the Trustee and its
representatives may examine the same, make abstracts
therefrom and make photocopies thereof, and the Pledgor
agrees to render to the Trustee, at the Pledgor's cost and
expense, such clerical and other assistance as may be
reasonably requested by the Trustee with regard thereto.
(j) The Pledgor shall not permit any of the
Pledged Subsidiaries or any other entity that is a
Restricted Subsidiary under the Indenture to issue any
securities of the type required to be pledged hereunder
unless such securities are promptly pledged and delivered
hereunder to the Trustee in accordance with Section 2(h).
(k) If, while this Pledge Agreement is in
effect, any stock dividend, stock split, reclassification,
readjustment, reorganization, merger, consolidation,
exchange offer, tender offer or other change in the capital
structure, including the creation of any subscription or
other rights relating to the Pledged Securities, is declared
or made, or proposed to be declared or made, by any of the
Pledged Subsidiaries or any other issuer of Pledged
Collateral, all substituted and additional securities or
interest issued with respect to the Pledged Collateral and
evidenced by certificates shall be endorsed in blank by the
Pledgor promptly upon receipt thereof or otherwise
appropriately transferred to the Trustee in negotiable form,
and all certificates or instruments evidencing such
securities shall be delivered to the Trustee to be held
under the terms of this Pledge Agreement in the same manner
as, and as a part of the Pledged Collateral. All Pledged
Securities shall be evidenced by one or more certificates.
Any securities that may be issued upon exercise of any
subscription or other rights relating to the Pledged
Securities shall be endorsed in blank and delivered to the
Trustee with any necessary powers.
(l) The Pledgor shall pay and discharge all
taxes, assessments and governmental charges or levies
against any Pledged Collateral prior to delinquency thereof
and shall keep all Pledged Collateral free of all unpaid
charges whatsoever, unless contested in good faith and
appropriate reserves have been set aside in accordance with
GAAP.
(m) The Pledgor has, independently and without
reliance on the Trustee or any Holder and based on such
documents and information as it deemed appropriate, made its
own credit analysis and decision to enter into this Pledge
Agreement.
(n) The Pledgor shall promptly notify the
Trustee of any material changes in any fact or circumstance
represented or warranted by the Pledgor with respect to any
material portion of the Pledged Collateral, of any material
impairment of the Pledged Collateral and of any claim,
action or proceeding affecting title to all or any of the
Pledged Collateral. On or prior to [ ] of each year
beginning in 1998, the Pledgor will deliver to the Trustee
an opinion of counsel (which can be in-house counsel) to the
effect that all actions have been taken that are necessary
to preserve and continue in full effect the perfection of
the liens and security interests created hereby through [ ]
of the following year, and on which opinion the Trustee is
entitled to rely. Such opinion may assume, unless such
counsel has reason to believe otherwise, the continued
possession of the Pledged Securities delivered to the
Trustee by the Pledgor.
(o) The chief executive office and principal
place of business of the Pledgor is located at 110 Rue Jean
Lafitte, Lafayette, Louisiana 70508. The Pledgor shall not
relocate its principal place of business or chief executive
office to another county or state unless the Pledgor gives
30 days' prior written notice to the Trustee, which notice
shall specify the county and state into which such
relocation is to be made.
(p) Upon any Subsidiary of the Pledgor becoming
a Restricted Subsidiary, the Pledgor shall amend Schedule A
attached hereto to include such Subsidiary and such
Subsidiary shall thenceforth be treated hereunder for all
purposes as a Pledged Subsidiary and all shares of capital
stock or other equity securities of such Subsidiary issued
to Pledgor shall be treated hereunder for all purposes as
Pledged Securities.
Section 3. Administration of the Pledged Collateral.
The Trustee shall administer the Pledged Collateral in
accordance with the provisions hereof and of the Indenture.
Section 4. Release and Substitution of Pledged
Collateral. The Pledged Collateral shall not be released
from the security interest created hereunder and no property
shall be substituted for any of the Pledged Collateral,
except in accordance with the provisions of Article Eleven
of the Indenture and in accordance with the provisions of
Section 18 hereof. The Trustee shall return the physical
certificates and related stock powers evidencing Pledged
Collateral in its possession when so permitted by the
Indenture or this Pledge Agreement.
Section 5. Voting Rights, Dividends, Etc.
(a) Until an Event of Default (as defined
below) shall have occurred and be continuing:
(i) except as otherwise provided in this
Pledge Agreement, the Pledgor shall be entitled to exercise
any and all voting or consensual rights and powers,
including subscription rights, accruing to an owner of the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Pledge Agreement or any
agreement giving rise to any of the Indenture obligations;
(ii) except as otherwise provided in this
Pledge Agreement, the Pledgor shall be entitled to retain
and use any and all dividends, distributions or other
payments which are permitted by the Indenture and paid in
cash or property (other than securities which are subject to
this Pledge Agreement) and the Trustee, upon receipt of any
of the foregoing, shall promptly pay or distribute the same
to the Pledgor; and
(iii) the Trustee shall execute and
deliver to the Pledgor or cause to be executed and delivered
to the Pledgor, all such proxies, powers of attorney,
dividend orders and other instruments as the Pledgor may
reasonably request for the purpose of enabling it to
exercise the voting or consensual rights and powers which
the Pledgor is entitled to exercise pursuant to the
foregoing Section 5(a)(i) or to receive the dividends,
distributions or other payments which the Pledgor is
authorized to retain pursuant to the foregoing Section
5(a)(ii).
(b) Upon the occurrence and during the
continuance of an Event of Default, all rights of the
Pledgor to exercise the voting or consensual rights and
powers which the Pledgor would otherwise be entitled to
exercise pursuant to Section 5(a)(i) and to receive the
dividends, distributions and other payments which the
Pledgor would otherwise be authorized to receive and retain
pursuant to Section 5(a)(ii) shall automatically cease, and
all such rights shall thereupon become vested in the
Trustee, which shall then have the sole and exclusive right
and authority to exercise, in its sole discretion, all such
voting and consensual rights and powers and to receive and
retain as Pledged Collateral all such dividends,
distributions and other payments.
(c) The Trustee shall have the sole and
exclusive right and authority to receive and retain as
Pledged Collateral all dividends, distributions and other
payments which are paid on the Pledged Collateral (other
than dividends, distributions or other payments permitted by
the Indenture and paid on the shares of common stock of the
Company) in cash or property. Any and all money and other
property paid over to or received by the Trustee pursuant to
the provisions of Section 5(b) or this Section 5(c) shall be
retained by the Trustee as additional Pledged Collateral
hereunder and shall be administered and applied in
accordance with the provisions of this Pledge Agreement and
the Indenture. All dividends and interest payments which
are received by the Pledgor contrary to the provisions of
Section 5(b) or this Section 5(c) shall be received in trust
for the benefit of the Trustee, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over
to the Trustee as Pledged Collateral in the same form as so
received (with any necessary endorsement).
Section 6. Default; Remedies.
(a) Defined. For purposes of this Pledge
Agreement, the terms "Default" and "Event of Default" shall
have the respective meanings provided in the Indenture.
(b) Exercise of Remedies Under the Pledge
Agreement. If an Event of Default shall have occurred and
be continuing to the actual knowledge of the Trustee, the
Trustee shall commence the taking of such actions (or
refrain from taking actions) toward collection or
enforcement of this Pledge Agreement and the Pledged
Collateral (or any portion thereof), including without
limitation action toward foreclosure upon any Pledged
Collateral, as it deems appropriate in its sole discretion
or as instructed by the Requisite Holders (as defined in
Section 6(f) below) to the extent allowed by law. If any
Event of Default that was the basis for the commencement of
such action shall have been cured or waived, and, in the
case where there has been an acceleration, rescission of
such acceleration shall have occurred, in each case in
accordance with the terms of the Indenture, any direction to
the Trustee to take any action in connection with the
aforementioned notice shall be deemed rescinded upon
notification by that percentage of Holders necessary to
effect such waiver with respect to such Event of Default as
provided for in the Indenture. The Trustee shall have no
obligation to take any collection or enforcement action
except upon satisfaction of the conditions set forth in
Section 7.01 and Section 7.02 of the Indenture applied to
this Security Agreement.
(c) Remedies Generally. If an Event of Default
shall have occurred and be continuing, the Trustee itself or
by its agents or attorneys may exercise any or all of its
rights and remedies hereunder or under the Indenture, or any
other instrument or agreement securing, evidencing or
relating to the Indenture obligations or under applicable
laws (including all of the rights and remedies of a secured
creditor under the Uniform Commercial Code then in effect in
the State of New York; the "NYUCC"), retain possession of
the Pledged Collateral or sell, assign, transfer, or
dispose of, endorse and deliver the whole or, from time to
time, any part of the Pledged Collateral at public or
private sale or sales, at any exchanges, brokers board or at
any of the Trustee's offices or elsewhere, for cash, upon
credit or for other property, for immediate or future
delivery, and, to the extent permitted by applicable law,
for such price or prices and on such other terms as the
Trustee may deem commercially reasonable. Upon consummation
of any such sale, the Trustee shall have the right to
assign, transfer, endorse and deliver to the purchaser or
purchasers thereof the Pledged Collateral so sold. Each
such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the
Pledgor, and the Pledgor hereby waives (to the full extent
permitted by law) all rights of redemption, stay or
appraisal which the Pledgor now has or may at any time in
the future have under any rule of law or statute now
existing or hereafter enacted. The Trustee shall give the
Pledgor ten (10) Business Days' written notice (which the
Pledgor agrees shall be deemed to be reasonable notification
within the meaning of Section 9-504(3) of the NYUCC) of the
Trustee's intention to make any such public or private sale.
Any such sale shall be held at such time or times and at
such place or places as the Trustee may fix. At any such
sale, the Pledged Collateral, or portion thereof to be sold,
may be sold as an entirety or in separate portions, as the
Trustee may, in its sole discretion, determine. The Trustee
shall not be obligated to make any sale of the Pledged
Collateral if it shall determine not to do so, regardless of
the fact that notice of sale of the Pledged Collateral may
have been given. The Trustee may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at
the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to
which the same was so adjourned. In case sale of all or any
part of the Pledged Collateral is made on credit for future
delivery, the Pledged Collateral so sold may be retained by
the Trustee until the sale price is paid by the purchaser or
purchasers thereof, but the Trustee shall not incur any
liability in case any such purchaser or purchasers shall
fail to take up and pay for the Pledged Collateral so sold
and, in case of any such failure, such Pledged Collateral
may be sold again upon like notice. As an alternative to
exercising the power of sale herein conferred upon it, the
Trustee may proceed by suit or suits at law or in equity to
exercise its remedies regarding the Pledged Collateral and
sell the Pledged Collateral or any portion thereof pursuant
to judgment or decree of a court or courts having competent
jurisdiction. If under mandatory requirements of applicable
law, the Trustee shall be required to make disposition of
the Pledged Collateral within a period of time that does not
permit the giving of notice to the Pledgor as hereinbefore
provided, the Trustee need give the Pledgor only such notice
of disposition as shall be reasonably practicable in view of
such mandatory requirements of law.
(d) Remedies; Obtaining the Pledged Collateral
Upon Default. The Pledgor agrees that if any Event of
Default shall have occurred and be continuing, then and in
every such case, and in addition to the rights and remedies
available to a secured party under any applicable provision
of the NYUCC, or any other applicable law, the Trustee may:
(i) personally, or by agents or attorneys,
immediately take possession of the Pledged Collateral or any
part thereof from the Pledgor or any other person who then
has possession of any part thereof, with or without notice
or process of law, and for that purpose may enter upon the
Pledgor's premises where any of the Pledged Collateral is
located and remove the same and use in connection with such
removal any and all services, supplies, aids and other
facilities of the Pledgor;
(ii) instruct the obligor or obligors on
any agreement, instrument or other obligation constituting
Pledged Collateral to make any payment or render any
performance required by the terms of such agreement,
instrument or obligation directly to the Trustee or its
designee;
(iii) sell or otherwise liquidate, or
direct the Pledgor to sell or otherwise liquidate, any or
all investments made in whole or in part with the Pledged
Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation; and
(iv) take possession of the Pledged
Collateral or any part thereof by directing the Pledgor in
writing to deliver the same to the Trustee at any place or
places designated by the Trustee, in which event the Pledgor
shall at its own expense:
(A) forthwith cause the same
to be moved to the place or places so designated
by the Trustee and there delivered to the Trustee;
(B) store and keep any
Pledged Collateral so delivered to the Trustee at
such place or places pending further action by the
Trustee as provided in this Section 6(d); and
(C) while any such Pledged
Collateral shall be so stored and kept, provide
such guard and maintenance services as shall be
necessary to protect the same and to preserve and
maintain such Pledged Collateral in good
condition;
it being understood that the Pledgor's obligation so to
deliver the Pledged Collateral is of the essence of this
Pledge Agreement and that, accordingly, upon application to
a court of equity having jurisdiction, the Trustee shall be
entitled to a decree requiring specific performance by the
Pledgor of such obligation.
(e) Preventing Impairment of the Pledged
Collateral. Regardless of whether or not there shall have
occurred any Default or Event of Default, the Trustee may
institute and maintain or cause in the name of the Pledgor
or of the Trustee, or any of them, to be instituted and
maintained, such suits and proceeds as the Trustee may be
advised by counsel shall be necessary or expedient to
prevent any impairment of the security interest in or
perfection of the Pledged Collateral in contravention of the
terms of the Indenture. The Pledgor agrees not to knowingly
take or permit to be taken any action which would impair the
Pledged Collateral or the Trustee's rights in the Pledged
Collateral.
(f) Requisite Holders. For purposes of this
Section 6, "Requisite Holders" means the Holder or Holders
of 25% of the aggregate principal amount of the outstanding
Notes.
Section 7. Trustee Appointed Attorney-in-Fact. The
Pledgor hereby constitutes and appoints the Trustee its
attorney-in-fact for the purpose of carrying out the
provisions, but subject to the terms and conditions, of this
Pledge Agreement and taking any action and executing any
instrument, including, without limitation, any financing
statement or continuation statement, and taking any other
action to maintain the validity, perfection, priority and
enforcement of the security interest intended to be created
hereunder, that the Trustee may reasonably deem necessary or
advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest;
provided, however, that nothing herein contained shall be
construed as requiring or obligating the Trustee to make any
commitment or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or
file any claim or notice, or to take any action with respect
to the Pledged Collateral or any part thereof or the monies
due or to become due in respect thereof or any property
covered thereby, and no action taken or omitted shall give
rise to any defense, counterclaim or right of action against
the Trustee, unless the Trustee actions are taken or omitted
to be taken with gross negligence or bad faith or constitute
willful misconduct.
Section 8. Purchase of Pledged Collateral by Trustee
or Holders. At any sale of the Pledged Collateral, whether
pursuant to power of sale or otherwise hereunder, the
Trustee or any Holder may, subject to the exercise of the
Apache Option and compliance with the Chinese Approval
Requirement, to the extent permitted by applicable law, bid
for and purchase, free from any right of redemption, stay or
appraisal (all such rights being hereby waived and released
by the Pledgor to the extent permitted by law), the Pledged
Collateral or any part thereof or an interest therein and
upon compliance with the terms of such sale may hold,
retain, exploit, resell or otherwise dispose of such
property without further accountability to the Pledgor for
the proceeds of such sale (except in the event that there is
a surplus of such proceeds in excess of the Indenture
obligations, in which case, the Trustee shall account to the
Pledgor for such surplus). The Pledgor will execute and
deliver or cause to be executed and delivered, such
instruments, endorsements, assignments, waivers,
certificates and other documents and take such further
action as the Trustee shall request in connection with any
such sale.
Section 9. Disposition of Proceeds. The proceeds of
any sale of the whole or any part of the Pledged Collateral,
together with any other monies held by the Trustee under the
provisions of this Pledge Agreement, shall be applied by the
Trustee in accordance with the provisions of the Indenture.
Section 10. Waiver of Claims. Except as otherwise
provided in this Pledge Agreement, THE PLEDGOR HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OF
JUDICIAL HEARING IN CONNECTION WITH THE TRUSTEE'S TAKING
POSSESSION OR THE TRUSTEE'S DISPOSITION OF ANY OF THE
PLEDGED COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND
ALL PRIOR NOTICES AND HEARINGS FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT THAT THE PLEDGOR WOULD OTHERWISE
HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE, and, to the full extent permitted by
applicable law, the Pledgor hereby further waives:
(a) all damages occasioned by such taking of
possession or disposition except any damages which are the
direct result of the Trustee's negligence, bad faith or
willful misconduct;
(b) all other requirements as to the time,
place and terms of sale or other requirements, with respect
to the enforcement of the Trustee's rights and powers
hereunder; and
(c) except as provided in Section 6(c) hereof,
all rights of redemption, appraisement, valuation, stay,
marshalling of assets, extension or moratorium, existing at
law or in equity, by statute or otherwise, now or hereafter
in force, in order to prevent or delay the enforcement of
this Pledge Agreement or the sale or other disposition of
the Pledged Collateral or any portion thereof, and the
Pledgor, for itself and all who may claim under it, insofar
as it now or hereafter lawfully may, hereby waives all such
rights.
Any sale of, or the exercise of any options to purchase, or
any other realization upon, any Pledged Collateral shall
operate to divest all right, title, interest, claim and
demand, at law or in equity, of the Pledgor therein and
thereto, and shall be a perpetual bar both at law and in
equity against the Pledgor and against any and all persons
claiming or attempting to claim the Pledged Collateral so
sold, optioned or realized upon, or any part thereof,
through and under the Pledgor.
Section 11. Remedies Cumulative; No Waiver. Each
right, power and remedy of the Trustee provided for herein
or in the Indenture or in another agreement pursuant to
which a Lien is created in favor of the Trustee for the
benefit of any Holder, or now or hereafter existing at law
or in equity, by statute or otherwise, shall be cumulative
and concurrent and shall be in addition to every other
right, power or remedy of the Trustee or any Holder provided
for herein or in the Indenture or in another agreement
pursuant to which a Lien is created in favor of the Trustee
for the benefit of any Holder or now or hereafter existing
at law or in equity, by statute or otherwise. No failure on
the part of the Trustee or any Holder to exercise, and no
delay in exercising, any right, power or remedy hereunder or
under the Indenture or under another agreement pursuant to
which a Lien is created in favor of the Trustee for the
benefit of any Holder or now or hereafter existing at law or
in equity, by statute or otherwise, shall operate as a
waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right,
power or remedy. No notice to or demand on the Pledgor
hereunder shall, of itself, entitle the Pledgor to any other
or further notice or demand in the same, similar or other
circumstances.
Section 12. Additional Pledged Collateral. Without
notice or consent of the Pledgor and without impairment of
the security interests and rights created by this Pledge
Agreement, the Trustee may accept from any Person or Persons
additional collateral or other security for the obligations
of the Subsidiary Guarantors or other Indenture Obligations.
Neither the creation of the security interests created
hereunder nor the acceptance of any such additional
collateral or security shall prevent the Trustee from
resorting to such additional collateral or security or to
the Pledged Collateral, in any order, without affecting the
Trustee's rights hereunder.
Section 13. Further Assurances. The Pledgor agrees
that it shall, at its own expense, promptly file or record
such notices, financing statements, continuation statements
or other documents and take all further action as may be
necessary to perfect, maintain and protect the perfection of
the security interests of the Trustee hereunder or to enable
the Trustee to exercise and enforce its rights and remedies
hereunder with respect to the Pledged Collateral, and as the
Trustee may reasonably request, such instruments to be in
form and substance satisfactory to the Trustee, and that it
shall, at its own expense, do such further acts and things
and execute and deliver to the Trustee such additional
conveyances, assignments, endorsements, agreements and
instruments as the Trustee may at any time reasonably
request in connection with the administration and
enforcement of this Pledge Agreement or relative to the
Pledged Collateral or any part thereof or in order to assure
and confirm unto the Trustee its rights, powers and remedies
hereunder.
Section 14. Indemnification and Expenses.
(a) The Pledgor agrees to indemnify the Trustee
from and against any and all claims, losses and liabilities
growing out of or resulting from this Pledge Agreement
(including, without limitation, enforcement of this Pledge
Agreement), except valid claims (as determined by a
nonappealable order of any court of competent jurisdiction)
arising out of a breach by the Trustee of this Agreement or
claims, losses or liabilities resulting from the Trustee's
negligence, bad faith, recklessness or willful misconduct,
as determined by a final judgment of a court of competent
jurisdiction. The indemnification of the Trustee set forth
in the immediately preceding sentence is cumulative and not
exclusive of any indemnity of the Trustee set forth in the
Indenture or provided for under the TIA.
(b) The Pledgor will pay upon demand to the
Trustee the amount of any and all reasonable out-of-pocket
expenses, including the reasonable fees and charges of its
counsel and of any experts and agents, that the Trustee may
incur in connection with the negotiation, execution and
enforcement of this Pledge Agreement, the custody,
preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the
Pledged Collateral, the exercise or enforcement of any of
the rights of the Trustee or the Holders hereunder or the
failure by the Pledgor to perform or observe any of the
provisions hereof, and all amounts so incurred by the
Trustee shall be entitled to the benefits of Section 7.7 of
the Indenture.
Section 15. Registration Rights, etc.
(a) If the Trustee determines that the
registration of any of the securities included in the
Pledged Collateral under, or other compliance with, the
Securities Act or any similar Federal or state law is
desirable, upon or at any time after an Event of Default and
acceleration of the Notes in accordance with Section 6.2 of
the Indenture, and the failure of Apache to exercise the
Apache Option, the Pledgor will use its best efforts to
cause such registration or compliance to be effectively
made, at no expense to the Trustee or to the Holders, and to
continue any such registration effective for such time as
may be reasonably necessary in the opinion of the Trustee.
The Pledgor will reimburse the Trustee upon demand for any
expenses incurred by the Trustee (including reasonable
attorneys' fees) incurred in connection therewith, which
obligation to pay such expenses shall be secured hereunder.
(b) If the Pledgor is unable to effect a public
sale of any or all of the Pledged Collateral or if the
Trustee determines that it is desirable to sell the Pledged
Collateral in one or more private sales, subject to the
provisions of the Apache Option, the Trustee may limit such
sales 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 distribution or resale. The Pledgor acknowledges
and agrees that any such private sale may result in prices
and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable
manner. Subject to the provisions of the Apache Option and
compliance with the Chinese Approval Requirement, the
Trustee shall be under no obligation to delay a sale of any
of the Pledged Collateral for the period of time necessary
to permit the issuer of such securities to register such
securities for public sale under the Securities Act or under
applicable state securities laws even if such issuer would
agree to do so.
(c) The Pledgor further agrees to do or use all
reasonable efforts to cause to be done, to the extent the
Pledgor may legally do so, all such other acts and things as
may be necessary to make such sale or sales of all or any
part of the Pledged Collateral valid and binding and in
compliance with any and all applicable laws, rules and
regulations and orders and decrees of any and all courts
having jurisdiction over such sales, all at the Pledgor's
expense. The Pledgor further agrees that a breach of any
of the covenants contained in this Pledge Agreement will
cause irreparable injury to the Trustee, as secured party,
for which the Trustee would have no adequate remedy at law
in respect of such breach and, as a consequence, agrees that
each and every covenant contained in this Section 15 shall
be specifically enforceable against the Pledgor and, to the
full extent permitted by applicable law, the Pledgor waives
and agrees not to assert as a defense against an action for
specific performance of such covenant that Pledgor's
failure to perform such covenants will not cause irreparable
injury to the Trustee or the Holders or the Trustee on
behalf of the Holders has an adequate remedy at law in
respect of such breach.
Section 16. Pledgor's Indenture Obligations
Absolute. The liability of the Pledgor under this Pledge
Agreement shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by: any change in the
time, place or manner of payment of all or any of the
Indenture obligations, or in any other term of the
Indenture, the Notes or any Subsidiary Guarantee, any
waiver, indulgence, renewal, extension, amendment or
modification of or addition, consent or supplement to or
deletion from or any other action or inaction under or in
respect of the Indenture, the Notes or any Subsidiary
Guarantee, or any assignment or transfer thereof; any lack
of validity or enforceability, in whole or in part, of the
Indenture, the Notes or any Subsidiary Guarantee; any
furnishing of any additional security for the Indenture
obligations or any acceptance thereof or any release or non-
perfection of any security interest in property; any
limitation on any party's liability or obligations under the
Indenture, the Notes or any Subsidiary Guarantee; any
bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like
proceeding relating to the Pledgor or any Person other than
the Pledgor, or any action taken with respect to this Pledge
Agreement by any trustee or receiver, or by any court, in
any such proceeding, whether or not the Pledgor shall have
notice or knowledge of any of the foregoing; or any
exchange, release or amendment or waiver of or consent to
departure from any other agreement pursuant to which a Lien
is created in favor of the Trustee for the benefit of the
Holder, pursuant to which a person other than the Pledgor
has granted a security interest.
Section 17. Waiver. To the extent permitted by
applicable law, the Pledgor hereby waives promptness,
diligence, notice of acceptance and any other notice with
respect to the Subsidiary Guarantees or any of the Indenture
obligations and this Pledge Agreement and any requirement
that the Trustee protect, secure, perfect or insure any
security interest or any property subject thereto or exhaust
any right or take any action against the Pledgor or any
other person or entity; provided, however, that the Trustee
shall in any event take such care in the handling of any
Pledged Securities in its possession as it takes with
respect to its own property of a similar nature in its
possession.
Section 18. Termination. Upon indefeasible payment
and performance in full and satisfaction of all of the
Indenture Obligations and all other amounts payable under
this Pledge Agreement, this Pledge Agreement shall terminate
and the Trustee shall assign and redeliver to the Pledgor
all of the Pledged Collateral hereunder that has not been
sold, disposed of, retained or applied by the Trustee in
accordance with the terms hereof and the Indenture. Such
reassignment and redelivery shall be without warranty by or
recourse to the Trustee, and shall be at the expense of the
Pledgor. At such time, this Pledge Agreement shall no
longer constitute a Lien upon or a grant of any security
interest in any of the Pledged Collateral, and the Trustee
shall, at the Pledgor's expense deliver to the Pledgor
written acknowledgment thereof and of cancellation of this
Pledge Agreement in a form reasonably requested by the
Pledgor; provided, however, that this Pledge Agreement shall
continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Indenture
Obligations is rescinded or must otherwise be returned upon
the insolvency, bankruptcy or reorganization of the Pledgor
all as though such payment had not been made; and provided,
further, however, this Pledge Agreement shall no longer
constitute a Lien upon or a grant of any security interest
in any of the Pledged Collateral that has been released in
accordance with the provisions of Article Eleven of the
Indenture.
Section 19. Notices. Any notices or other
communications required or permitted hereunder shall be in
writing, and shall be sufficiently given if made by hand
delivery, by telex, by facsimile or registered or certified
mail, postage prepaid, return receipt requested, addressed
as provided in Section 10.02 of the Indenture.
Any party hereto may by notice to the other party designate
such additional or different addresses as shall be furnished
in writing by such party. Any notice or communication to
any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if
faxed; and five (5) calendar days after mailing, if sent by
registered or certified mail (except that a notice of change
of address shall not be deemed to have been given until
actually received by the addressee). The Pledgor may give
notice to the Holders at the addresses set forth for them in
the register kept by the Registrar under the Indenture or
may request that the Trustee notify the Holders at such
addresses.
Section 20. Binding Agreement; Assignment. This
Pledge Agreement shall be binding upon and inure to the
benefit of the Trustee, the Pledgor and their respective
successors and permitted assigns. Neither this Pledge
Agreement nor any interest herein or in the Pledged
Collateral, or any part thereof, may be assigned by the
Pledgor without the prior written consent of the Trustee
(which consent shall not be unreasonably withheld), except
as expressly permitted herein or in the Indenture. This
Pledge Agreement shall be deemed to be automatically
assigned by the Trustee to any person who succeeds to the
Trustee in accordance with Section 7.08 or Section 7.09 of
the Indenture, and its assignee shall have all rights and
powers of, and act as, the Trustee hereunder.
Section 21. Governing Law. This Pledge Agreement
shall be construed in accordance with, and this Pledge
Agreement and the transactions described herein shall be
governed by, the laws of the State of New york as to all
issues, including (without limitation) issues of validity,
interpretation, effect, performance and remedies.
Section 22. Amendments. This Pledge Agreement may
not be amended or modified, except in accordance with
Article Nine of the Indenture.
Section 23. Severability. In the event that any
provisions contained in this Pledge Agreement shall for any
reason be held to be illegal or invalid under the laws of
any jurisdiction, such illegality or invalidity shall in now
way impair the effectiveness of any other provision hereof,
or of such provision under the laws of any other
jurisdiction; provided, that in the construction and
enforcement of such provision under the laws of the
jurisdiction in which such holding of illegality or
invalidity exists, and to the extent only of such illegality
or invalidity, this Pledge Agreement shall be construed and
enforced as though such illegal or invalid provision had not
been contained herein.
Section 24. Headings. Section headings used herein
are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this
Pledge Agreement.
Section 25. Counterparts. This Pledge Agreement may
be executed in any number of counterparts, each of which
when so executed and delivered shall be an original, and all
of which shall together constitute but one and the same
instrument. A complete set of counterparts shall be lodged
with the Trustee.
Section 26. Cooperation of Pledged Subsidiaries and
Subsidiary Guarantors. The Pledgor shall cause the Pledged
Subsidiaries to take all actions necessary to facilitate the
Pledgor's compliance with the terms hereof. If any entity
issues shares of Capital Stock or other equity securities to
a Pledged Subsidiary and, at the time of such issuance, the
entity is, or a result of such issuance becomes, a
Subsidiary Guarantor under the Indenture, the Pledgor shall
cause such Pledged Subsidiary to enter into a supplement
hereto, substantially in the form of this Pledge Agreement,
pursuant to which such Pledged Subsidiary shall pledge,
assign, transfer, set over and deliver unto the Trustee, and
grant unto the Trustee for the ratable benefit of the
Holders and their respective successors and assigns, a
continuing security interest in all of the right, title and
interest of the Pledged Subsidiary in, to and under any and
all of such Capital Stock or other equity securities as
collateral security for the indefeasible payment and
performance in full of the Indenture obligations of the
Pledgor and the Subsidiary Guarantors. Such Capital Stock
or equity security shall thereafter be included as "Pledged
Securities" hereunder, such Pledged Subsidiary shall
thereafter be included as a "Pledgor" hereunder, and such
entity shall thereafter be included as one of the "Pledged
Subsidiaries" hereunder.
Section 27. Confidentiality. The parties agree that
they and their employees have maintained and will maintain,
in confidence, all data, summaries, reports or information
of all kinds, whether oral or written, provided pursuant to
this Pledge Agreement or acquired or developed in any manner
from the other party's personnel or files (the "Confidential
Information"), and that they have not and will not reveal
the same to any persons not employed by the other party
except: at the written direction of such party; to
the extent necessary to comply with applicable law,
reporting requirements imposed by the Securities and
Exchange Commission, or the valid order of a court of
competent jurisdiction, in which event the disclosing party
shall so notify the other party as promptly as practicable
(and, if possible, prior to making any disclosure) and shall
seek confidential treatment of such information, or in
connection with any arbitration proceeding; as part of its
normal reporting or review procedure to its parent company,
its auditors and its attorneys, and such parent company,
auditors and attorneys agree to be bound by the provisions
of this Section; in order to enforce any of its rights
pursuant to, or in any other dispute with respect to, this
Agreement; if, at the time of disclosure to the recipient,
the Confidential Information is in the public domain; if,
after disclosure to the recipient, the Confidential
Information becomes part of the public domain by written
publication through no fault of the recipient; or to any
one or more Holders and their representatives and agents.
IN WITNESS WHEREOF, the Pledgor and the Trustee have caused
this Pledge Agreement to be duly executed and delivered by
its officer thereunto duly authorized as of the date first
above written.
XCL LTD.
By:____________________
Name:
Title:
FLEET NATIONAL BANK,
as Trustee
By:_____________________
Name:
Title: