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EXHIBIT 10.19
STOCK PLEDGE AGREEMENT
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This Stock Pledge Agreement (this "AGREEMENT"), dated as of May
31,
2006, between Laurus Master Fund, Ltd. (the "PLEDGEE"), and
Carneros Acquisition
Corp., a Delaware corporation (the "PLEDGOR").
BACKGROUND
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Pledgor, Carneros Energy, Inc., a Delaware corporation
("CARNEROS"),
and Gotland Oil, Inc., a Texas corporation ("Gotland", and
collectively with
Pledgor and Carneros, the "COMPANIES" and each a "COMPANY"), have
entered into a
Securities Purchase Agreement with the Pledgee, dated as of the
date hereof (as
amended, modified, restated or supplemented from time to time, the
"SECURITIES
PURCHASE AGREEMENT"), pursuant to which the Pledgee provides or
will provide
certain financial accommodations to the Companies.
In order to induce the Pledgee to provide or continue to provide
the
financial accommodations described in the Securities Purchase
Agreement and to
secure the Companies' obligations and indebtedness to Pledgee,
Pledgor has
agreed to pledge and grant a security interest in the collateral
described
herein to the Pledgee on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and for other good
and
valuable consideration the receipt of which is hereby acknowledged,
the parties
hereto agree as follows:
1. DEFINED TERMS. All capitalized terms used herein which are
not
defined shall have the meanings given to them in the Securities
Purchase
Agreement.
2. PLEDGE AND GRANT OF SECURITY INTEREST. To secure the full
and
punctual payment and performance of (the following clauses (a) and
(b),
collectively, the "OBLIGATIONS") (a) the obligations under the
Securities
Purchase Agreement and the Related Agreements referred to in the
Securities
Purchase Agreement (the Securities Purchase Agreement and the
Related
Agreements, as each may be amended, restated, modified and/or
supplemented from
time to time, collectively, the "DOCUMENTS") and (b) all other
obligations and
liabilities of Carneros, Gotland and the Pledgor to the Pledgee
whether now
existing or hereafter arising, direct or indirect, liquidated or
unliquidated,
absolute or contingent, due or not due and whether under, pursuant
to or
evidenced by a note, agreement, guaranty, instrument or otherwise
(in each case,
irrespective of the genuineness, validity, regularity or
enforceability of such
Obligations, or of any instrument evidencing any of the Obligations
or of any
collateral therefor or of the existence or extent of such
collateral, and
irrespective of the allowability, allowance or disallowance of any
or all of
such in any case commenced by or against Carneros, Gotland and/or
the Pledgor
under Title 11, United States Code, including, without limitation,
obligations
of Carneros, Gotland and the Pledgor for post-petition interest,
fees, costs and
charges that would have accrued or been added to the Obligations
but for the
commencement of such case), the Pledgor hereby pledges, assigns,
hypothecates,
transfers and grants a security interest to Pledgee in all of the
following (the
"COLLATERAL"):
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(a) the shares of stock set forth on SCHEDULE A annexed hereto
and expressly made a part hereof (together with any additional
shares of stock
or other equity interests acquired by Pledgor, the "PLEDGED
STOCK"), the
certificates representing the Pledged Stock and all dividends,
cash, instruments
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 the Pledged
Stock;
(b) all additional shares of stock of any issuer (each, an
"ISSUER") of the Pledged Stock from time to time acquired by
Pledgor in any
manner, including, without limitation, stock dividends or a
distribution in
connection with any increase or reduction of capital,
reclassification, merger,
consolidation, sale of assets, combination of shares, stock split,
spin-off or
split-off (which shares shall be deemed to be part of the
Collateral), and the
certificates representing such additional shares, and all
dividends, cash,
instruments 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 shares; and
(c) all options and rights, whether as an addition to, in
substitution of or in exchange for any shares of any Pledged Stock
and all
dividends, cash, instruments and other property or proceeds from
time to time
received, receivable or otherwise distributed in respect of or in
exchange for
any or all such options and rights.
3. DELIVERY OF COLLATERAL. All certificates representing or
evidencing
the Pledged Stock shall be delivered to and held by or on behalf of
Pledgee
pursuant hereto and shall be accompanied by duly executed
instruments of
transfer or assignments in blank, all in form and substance
satisfactory to
Pledgee. Pledgor hereby authorizes the Issuer upon demand by the
Pledgee to
deliver any certificates, instruments or other distributions issued
in
connection with the Collateral directly to the Pledgee, in each
case to be held
by the Pledgee, subject to the terms hereof. Upon the occurrence
and during the
continuance of an Event of Default (as defined below), the Pledgee
shall have
the right, during such time in its discretion and without notice to
Pledgor, to
transfer to or to register in the name of the Pledgee or any of its
nominees any
or all of Pledged Stock. In addition, the Pledgee shall have the
right at such
time to exchange certificates or instruments representing or
evidencing Pledged
Stock for certificates or instruments of smaller or larger
denominations.
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR. Pledgor represents
and
warrants to the Pledgee (which representations and warranties shall
be deemed to
continue to be made until all of the Obligations have been paid in
full and each
Document and each agreement and instrument entered into in
connection therewith
has been irrevocably terminated) that:
(a) the execution, delivery and performance by Pledgor of this
Agreement and the pledge of the Collateral hereunder do not and
will not result
in any violation of any agreement, indenture, instrument, license,
judgment,
decree, order, law, statute, ordinance or other governmental rule
or regulation
applicable to Pledgor;
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(b) this Agreement constitutes the legal, valid, and binding
obligation of Pledgor enforceable against Pledgor in accordance
with its terms;
(c) (i) all Pledged Stock owned by Pledgor is set forth on
SCHEDULE A hereto and (ii) Pledgor is the direct and beneficial
owner of each
share of the Pledged Stock;
(d) all of the shares of the Pledged Stock have been duly
authorized, validly issued and are fully paid and
nonassessable;
(e) no consent or approval of any person, corporation,
governmental body, regulatory authority or other entity is or will
be necessary
for (i) the execution, delivery and performance of this Agreement,
(ii) the
exercise by the Pledgee of any rights with respect to the
Collateral or (iii)
the pledge and assignment of, and the grant of a security interest
in, the
Collateral hereunder;
(f) except as set forth on SCHEDULE B hereto, there are no
pending or, to the best of Pledgor's knowledge, threatened actions
or
proceedings before any court, judicial body, administrative agency
or arbitrator
which may materially adversely affect the Collateral;
(g) Pledgor has the requisite power and authority to enter
into this Agreement and to pledge and assign the Collateral to the
Pledgee in
accordance with the terms of this Agreement;
(h) Pledgor owns each item of the Collateral and, except for
the pledge and security interest granted to Pledgee hereunder, the
Collateral
shall be, immediately following the closing of the transactions
contemplated by
the Documents, free and clear of any other security interest,
pledge, claim,
lien, charge, hypothecation, assignment, offset or encumbrance
whatsoever
(collectively, "LIENS");
(i) there are no restrictions on transfer of the Pledged Stock
contained in the certificate of incorporation or by-laws (or
equivalent
organizational documents) of the Issuer or otherwise which have not
otherwise
been enforceably and legally waived by the necessary parties;
(j) none of the Pledged Stock has been issued or transferred
in violation of the securities registration, securities disclosure
or similar
laws of any jurisdiction to which such issuance or transfer may be
subject;
(k) the pledge and assignment of the Collateral and the grant
of a security interest under this Agreement vest in the Pledgee all
rights of
Pledgor in the Collateral as contemplated by this Agreement;
and
(l) The Pledged Stock constitutes one hundred percent (100%)
of the issued and outstanding shares of capital stock of each
Issuer.
5. COVENANTS. Pledgor jointly and severally covenants that, until
the
Obligations shall be indefeasibly satisfied in full and each
Document and each
agreement and instrument entered into in connection therewith is
irrevocably
terminated:
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(a) Pledgor will not sell, assign, transfer, convey, or
otherwise dispose of its rights in or to the Collateral or any
interest therein;
nor will Pledgor create, incur or permit to exist any Lien
whatsoever with
respect to any of the Collateral or the proceeds thereof other than
that created
hereby.
(b) Pledgor will, at its expense, defend Pledgee's right,
title and security interest in and to the Collateral against the
claims of any
other party.
(c) Pledgor shall at any time, and from time to time, upon the
written request of Pledgee, execute and deliver such further
documents and do
such further acts and things as Pledgee may reasonably request in
order to
effectuate the purposes of this Agreement including, but without
limitation,
delivering to Pledgee, upon the occurrence and during the
continuance of an
Event of Default, irrevocable proxies in respect of the Collateral
in form
satisfactory to Pledgee. Until receipt thereof, upon an Event of
Default that
has occurred and is continuing beyond any applicable grace period,
this
Agreement shall constitute Pledgor's proxy to Pledgee or its
nominee to vote all
shares of Collateral then registered in Pledgor's name.
(d) Pledgor will not consent to or approve the issuance of (i)
any additional shares of any class of capital stock or other equity
interests of
the Issuer; or (ii) any securities convertible either voluntarily
by the holder
thereof or automatically upon the occurrence or nonoccurrence of
any event or
condition into, or any securities exchangeable for, any such
shares, unless, in
either case, such shares are pledged as Collateral pursuant to this
Agreement.
6. VOTING RIGHTS AND DIVIDENDS. In addition to the Pledgee's rights
and
remedies set forth in Section 8 hereof, in case an Event of Default
shall have
occurred and be continuing beyond any applicable cure period, the
Pledgee shall
(i) be entitled to vote the Collateral, (ii) be entitled to give
consents,
waivers and ratifications in respect of the Collateral (each
Pledgor hereby
irrevocably constituting and appointing the Pledgee, with full
power of
substitution, the proxy and attorney-in-fact of Pledgor for such
purposes) and
(iii) be entitled to collect and receive for its own use cash
dividends paid on
the Collateral. Pledgor shall not be permitted to exercise or
refrain from
exercising any voting rights or other powers if, in the reasonable
judgment of
the Pledgee, such action would have a material adverse effect on
the value of
the Collateral or any part thereof; and, PROVIDED, FURTHER, that
Pledgor shall
give at least five (5) days' written notice of the manner in which
Pledgor
intends to exercise, or the reasons for refraining from exercising,
any voting
rights or other powers other than with respect to any election of
directors and
voting with respect to any incidental matters. Following the
occurrence and
during
