Pledge Agreement

EXHIBIT 10.10


PLEDGE AGREEMENT


("Aviva Overseas, Inc.")


THIS PLEDGE AGREEMENT (this "Agreement") is made as of May 31, 2000, by Aviva Overseas, Inc., a Delaware corporation (herein called "Debtor"), in favor of Crosby Capital, LLC, a Texas limited liability company ("Secured Party").


RECITALS:


1. Aviva Petroleum Inc., a Texas corporation ("Parent"), Aviva America, Inc., a Delaware corporation, ("Aviva America"), Aviva Operating Company, a Nevada Corporation ("Aviva Operating"), Argosy Energy Incorporated ("Argosy Energy"), Neo Energy, Inc., a Texas corporation ("Neo" or "Borrower"), Garnet Resources Corporation, a Delaware corporation ("Garnet") and Secured Party are parties to a Loan, Settlement and Acquisition Agreement (the "Loan Agreement") of even date herewith, pursuant to which Secured Party has agreed to renew and extend credit to Neo.


2. Neo has executed in favor of Secured Party that certain promissory note of even date herewith, payable to the order of Secured Party in the principal amount of $2,750,000 (such promissory note, as from time to time amended, and all promissory notes given in substitution, renewal or extension therefor or thereof, in whole or in part, being herein collectively called the "Amended and Restated Neo Note").


3. Aviva Operating, Garnet, Argosy Energy, Garnet PNG Corporation, a Delaware corporation ("Garnet PNG"), Aviva America, Aviva Delaware Inc., a Delaware corporation, Argosy Energy International, a Utah limited partnership ("Argosy International"), Neo, Parent, ING (U.S.) Capital Corporation, a Delaware corporation ("ING"), Chase Bank of Texas, National Association ("Chase"), the Overseas Private Investment Corporation, an agency of the United States of America ("OPIC") and ING, as Secured Party for the creditors ("Collateral Agent") are parties to a Joint Finance and Intercreditor Agreement (herein, as from time to time amended, supplemented or restated, called the "Intercreditor Agreement"), pursuant to which ING has agreed to act as Collateral Agent for the benefit of creditors.


4. Parent owns directly, or indirectly through one or more subsidiaries, one-hundred percent (100%) of the outstanding shares of common stock of Debtor and one-hundred percent (100%) of the outstanding shares of common stock of Neo.


5. Parent, Neo, Debtor, and the other direct and indirect subsidiaries of Parent are mutually dependent on each other in the conduct of their respective businesses under a holding company structure, with the credit needed from time to time by each often being provided by another or by means of financing obtained by one such affiliate with the support of the others for their mutual benefit and the ability of each to obtain such financing being dependent on the successful operations of the others.


6. To induce Secured Party to renew and extend credit to Neo and accept from Neo the Amended and Restated Neo Note, Debtor has agreed to execute and deliver to Secured Party this Pledge Agreement.


7. The board of directors of Debtor has determined that Debtor's execution, delivery and performance of this Pledge Agreement may reasonably be expected to benefit Debtor, directly or indirectly, is in the best interests of Debtor and is necessary or convenient to the conduct, promotion or attainment of the business of Debtor.


NOW, THEREFORE, in consideration of the premises, of the benefits which will inure to Debtor from the Secured Party's extension of credit under the Loan Agreement, and of other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, Debtor hereby agrees with the Secured Party as follows:


ARTICLE I - Definitions and References
--------------------------------------


Section 1.1. General Definitions. As used herein, the terms defined above
------------------- shall have the meanings indicated above, and the following terms shall have the following meanings:


"Borrowers" means Neo Energy, Inc.
---------


"Collateral" means all property, of whatever type, which is described in
---------- Section 2. 1 as being at any time subject to a security interest granted hereunder to Secured Party.


"Commitment" means any agreement or commitment by Secured Party to make
---------- loans or otherwise extend credit to Debtor under any Loan Document, and any other agreement, commitment, statement of terms or other document contemplating the making of loans or advances or other extension of credit by Secured Party to or for the account of Debtor which is now or at any time hereafter intended to be secured by the Collateral under this Agreement.


"Creditor" means Secured Party in its capacity as a Lender, its successors
-------- and any permitted assignees.


"Other Liable Party" means any Person, other than Debtor, but including
------------------ Borrower, who may now or may at any time hereafter be primarily or secondarily liable for any of the Secured Obligations or who may now or may at any time hereafter have granted to Secured Party a Lien upon any property as security for the Secured Obligations.


"Pledged Partnership Interest" has the meaning given it in Section 2.1(a).
----------------------------


"Secured Obligations" shall have the meaning given it in Section 2.2.
-------------------


"UCC" means the Uniform Commercial Code currently in effect in the State of
--- Texas as of the date hereof.


Section 1.2. Incorporation of Other Definitions. Reference is hereby made
---------------------------------- to the Loan Agreement for a statement of the terms thereof All capitalized terms used in this Agreement which are defined in the Loan Agreement and not otherwise defined herein shall have the same meanings herein as set forth therein. All terms used in this Agreement which are defined in the UCC and not otherwise defined herein or in the Loan Agreement shall have the same meanings herein as set forth therein, except where the context otherwise requires.


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Section 1.3. Attachments. All exhibits or schedules which may be attached
----------- to this Agreement are a part hereof for all purposes.


Section 1.4. Amendment of Defined Instruments. Unless the context otherwise
-------------------------------- requires or unless otherwise provided herein, references in this Agreement to a particular agreement, instrument or document (including, but not limited to, references in Section 2.1) also refer to and include all renewals, extensions, amendments, modifications, supplements or restatements of any such agreement, instrument or document, provided that nothing contained in this Section shall be construed to authorize any Person to execute or enter into any such renewal, extension, amendment, modification, supplement or restatement.


Section 1.5. References and Titles. All references in this Agreement to
--------------------- Exhibits, Articles, Sections, subsections, and other subdivisions refer to the Exhibits, Articles, Sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any subdivision are for convenience only and do not constitute any part of any such subdivision and shall be disregarded in construing the language contained in this Agreement. The words "this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Section" and "this subsection" and similar phrases refer only to the Sections or subsections hereof in which the phrase occurs. The word "or" is not exclusive, and the word "including" (in all of its forms) means "including without limitation". Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires.


ARTICLE II -- Security Interest
-------------------------------


Section 2.1. Grant of Security Interest. As collateral security for all of
-------------------------- the Secured Obligations, Debtor hereby pledges and assigns to Secured Party and grants to Secured Party a continuing security interest in and to all right, title and interest of the following:


(a) Pledged Partnership Interest. All of the following, whether now or
---------------------------- hereafter existing, which are owned by Debtor or in which Debtor otherwise has any rights: Debtor's interest in Argosy International (the "Partnership Interest") and any distribution of cash or other type of property with respect to the Partnership Interest.


(b) All proceeds of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Secured Party is the loss payee thereof) or under any indemnity, warranty or guaranty by reason of loss to or otherwise with respect to any of the foregoing Collateral.


In each case, the foregoing shall be covered by this Agreement, whether Debtor's ownership or other rights therein are presently held or hereafter acquired and however Debtor's interests therein may arise or appear (whether by ownership, security interest, claim or otherwise).


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Section 2.2. Secured Obligations Secured. The security interest created
--------------------------- hereby in the Collateral constitutes continuing collateral security for all of the following obligations, indebtedness and liabilities, whether now existing or hereafter incurred or arising:


(a) Loan Agreement Indebtedness. (i) The payment, as and when due and
--------------------------- payable, of all amounts from time to time owing under or in respect of the Amended and Restated Neo Note, and (ii) the due performance of all other obligations of any Aviva Party under or in respect of the Loan Agreement or the various Loan Documents, including the Guaranty dated of even date herewith made by Debtor in favor of the Secured Party; provided, however, that the obligations described in subsection (i) hereof or any Loan Documents shall no longer constitute Secured Obligations upon transfer of the Amended and Restated Neo Note to Parent.


(b) Renewals. All renewals, extensions, amendments, modifications,
-------- supplements, or restatements of or substitutions for any of the foregoing.


As used herein, the term "Secured Obligations" refers to all present and
------------------- future indebtedness, obligations, and liabilities of whatever type which are described above in this section, including any interest which accrues after the commencement of any case, proceeding, or other action relating to the bankruptcy, insolvency, or reorganization of the Debtor.


ARTICLE III -- Representations, Warranties and Covenants
--------------------------------------------------------


Section 3.1. Representations and Warranties. Debtor represents and warrants
------------------------------ to Secured Party as follows:


(a) Ownership Free of Liens. Debtor has good and marketable title to the
----------------------- Collateral free and clear of all Liens, encumbrances or adverse claims, except for the security interest created by this Agreement and the security interests and other encumbrances expressly permitted by the Loan Agreement and Intercreditor Agreement. No dispute, right of setoff, counterclaim or defense exists with respect to all or any part of the Collateral, except as provided for in the Loan Agreement and the Intercreditor Agreement. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office except any which have been filed or assigned in favor of Secured Party relating to this Agreement, or under the Loan Agreement or the Intercreditor Agreement.


(b) No Conflicts or Consents. Neither the ownership or the intended use of
------------------------ the Collateral by Debtor, nor the grant of the security interest by Debtor to Secured Party herein, nor the exercise by Secured Party of its rights or remedies hereunder, will (i) conflict with any provision of (a) any domestic or foreign law, statute, rule or regulation, (b) the articles or certificate of incorporation, charter or bylaws of Debtor, (c) any agreement, judgment, license, order or permit applicable to or binding upon Debtor or Argosy International, or (ii) result in or require the creation of any Lien, charge or encumbrance upon any assets or properties of Debtor or of Argosy International or Related Person except as expressly contemplated in the Loan Documents. Except as expressly contemplated in the Loan Documents, no consent, approval, authorization or order of and no notice to or filing with, any court, governmental authority, Issuer or third party is required in connection with the grant by Debtor of the security interest herein, or the exercise by Secured Party of its rights and remedies hereunder.


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(c) Security Interest. Debtor has and will have at all times full right,
----------------- power and authority to grant a security interest in the Collateral to Secured Party as provided herein, free and clear of any Lien, adverse claim, or encumbrance, except as provided for in the Loan Agreement and the Intercreditor Agreement. This Agreement creates a valid and binding security interest in favor of Secured Party in the Collateral, which security interest secures all of the Secured Obligations. The taking possession by Secured Party of all certificates, instruments and cash Collateral from time to time and the filing of the financing statements delivered concurrently herewith by Debtor to Secured Party will perfect and establish Secured Party's security interest hereunder in the Collateral securing the Secured Obligations. No further or subsequent filing, recording, registration, other public notice or other action is necessary or desirable to perfect or otherwise continue, preserve or protect such security interest except for continuation statements or filings described in Section 3.3(d).


(d) Location of Debtor and Records. As of the date hereof Debtor's chief
------------------------------ executive office and principal place of business and the office where the records concerning the Collateral are kept is located at its address set forth below.


Section 3.2. Affirmative Covenants. Unless each Secured Party shall
--------------------- otherwise consent in writing, Debtor will at all times comply with the covenants contained in this Section 3.2 from the date hereof and so long as any part of the Secured Obligations or any commitment of Secured Party to make loans is outstanding.


(a) Ownership and Liens. Debtor will maintain good and marketable title to
------------------- all Collateral free and clear of all Liens, encumbrances or adverse claims, except for the security interest created by this Agreement and the security interests and other encumbrances expressly permitted by the Intercreditor Agreement and Loan Agreement. Debtor will not permit any dispute, right of setoff, counterclaim or defense to exist with respect to all or any part of the Collateral. Debtor will cause to be terminated any financing statement or other registration or instrument similar in effect covering all or any part of the Collateral, except those filed under the Intercreditor Agreement and the Loan Agreement, and any which have been filed in favor of, or assigned to, Secured Party relating to this Agreement. Debtor will defend Secured Party's right, title and special property and security interest in and to the Collateral against the claims of any Person.


(b) Further Assurances. Debtor will, at its expense and at any time and
------------------ from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be reasonably necessary or desirable or that Secured Party may reasonably request in order (i) to perfect and protect the security interest created or purported to be created hereby; (ii) to enable Secured Party to exercise and enforce its rights and remedies hereunder in respect of the Collateral; or (iii) to otherwise effect the purposes of ...