Exhibit 10.3
Member Interest Pledge Agreement
     Member Interest Pledge Agreement (“Pledge Agreement”) dated as of
January 1, 2009 between Renegy Holdings, Inc., a Delaware corporation (the
“Pledgor”), and AZ Biomass LLC, a Delaware limited liability company
(“Pledgee”).
Recitals
     A. Pledgor and Pledgee have entered into that certain Member Interest
Purchase Agreement dated January 1, 2009 (the “Purchase Agreement”), pursuant to
which Pledgee has purchased all the outstanding Class A membership interests of
Snowflake White Mountain Power, LLC, an Arizona limited liability company
(“Snowflake” or the “Company”) and Pledgor remains the owner of all the
outstanding Class B membership interests of Snowflake, which membership
interests (the “Member Interest”) have the rights, preferences and privileges
set forth in the Amended and Restated Limited Liability Company Agreement of the
Company dated as of January 1, 2009 (the “Operating Agreement”).
     B. The Pledgor may have certain payment obligations to the Pledgee under
the terms of Section 11.01 of the Purchase Agreement. As security for due and
punctual performance of all such payment obligations to Pledgee under the terms
of the Purchase Agreement, the Pledgor has agreed to pledge the Member Interest
(and all of Pledgor’s rights, privileges, authority and power thereunder as a
member of the Company) to the Pledgee pursuant to the terms of this Pledge
Agreement.
     C. Pledgee is entering into the Purchase Agreement in reliance on the
execution and delivery by Pledgor of this Pledge Agreement.
     NOW THEREFORE, in consideration of the following premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Pledgee hereby agree as follows:
     1. The Pledgor hereby pledges and grants to the Pledgee a continuing lien
on and a perfected security interest in the Member Interest (and all of
Pledgor’s rights, privileges, authority and power as a member of the Company) as
security for the due and punctual performance of all its payment obligations to
Pledgee under the terms of Section 11.01 of the Purchase Agreement, including
any extensions, modifications, substitutions, amendments and renewals thereof,
which lien and security interest shall be subordinate, in all respects, to the
lien and security interest in the Member Interest granted to CoBank, ACB, as
Administrative Agent and Collateral Agent (“CoBank”) pursuant to that certain
Pledge Agreement dated as of October 1, 2007 between Pledgor and CoBank (as
amended, the “RH CoBank Pledge”), in accordance with the terms of that certain
Subordination Agreement dated as of January 1, 2009 among Pledgor, Pledgee and
CoBank (the “Subordination Agreement”).

 

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     2. The Pledgee hereby accepts the Pledgor’s pledge of the Member Interest
as security for the due and punctual performance of all Pledgor’s payment
obligations to Pledgee under the terms of Section 11.01 of the Purchase
Agreement.
     3. An “Event of Default” shall occur hereunder if the Pledgor fails to
perform any payment obligations of the Pledgor to the Pledgee when required
under Section 11.01 of the Purchase Agreement, and such failure continues for
10 days after the Pledgee delivers written notice of such failure to the
Pledgor. Unless and until there occurs an Event of Default that is continuing,
the Pledgor is entitled with respect to the Member Interest:
          (a) to (i) exercise any and all voting rights and powers relating or
pertaining to the Member Interest at meetings of members of the Company,
(ii) exercise any and all consensual rights and powers in respect of the Member
Interest and (iii) consent to, ratify or waive notice of meetings of the members
of the Company or otherwise take any action permitted by a member of the
Company; and
          (b) to receive, collect, have paid over and retain all distributions
to which it is entitled under the terms of the Operating Agreement (as then in
effect), except (i) distributions paid in the form of additional membership
interests (or similar securities) in the Company (or any subsidiary or Affiliate
thereof), including without limitation any such interests issued in a Split,
(ii) distributions in property other than cash, (iii) proceeds from a sale by or
on behalf of Pledgor of the Member Interest (or any portion thereof) and
(iv) liquidation dividends (either partial or complete) (collectively, “Excepted
Dividends”), and whether regular, special or made in connection with a partial
or total liquidation of the Company, and whether attributable to profits, the
return of any contribution or investment or otherwise attributable to the Member
Interest. All Excepted Dividends shall constitute additional security for the
Pledgee’s performance of its payment obligations to Pledgee under Section 11.01
of the Purchase Agreement and shall be pledged to Pledgee by the Pledgor. The
Pledgor shall have all of the same powers and rights with respect to all
Excepted Dividends as it has in respect of the Member Interest and such Excepted
Dividends shall be considered part of the Member Interest pledged hereunder. As
used in this Pledge Agreement, the term “Split” means any transfer (including,
without limitation, payment, issuance or other awarding) of any securities,
property or rights to any person or entity by virtue or in respect of its
ownership of Member Interests and shall include, without limitation, (i) payment
of dividends or other distributions in the form of units, debt instruments or
other property the value of which depends materially on the future results of
the Company’s operations, (ii) membership interests splits or reverse splits,
(iii) unit exchanges and (iv) transfers, payments, issuances and awards
resulting from any consolidation, reorganization, recapitalization, merger or
combination.
     4. During the term of this Pledge Agreement, (a) if any distributions in
the form of equity ownership interests in the Company, reclassification,
readjustment, or other change is declared or made in the capital structure of
the Company, or any subscription, warrant or other option is issued with respect
to the Member Interest (including without limitation any equity interest or
right issued in connection with a

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Split), all new, substituted, or additional interests or other securities issued
by reason of this change or option shall be considered as part of the Member
Interest; and (b) Pledgor shall not (i) subject the Member Interest (or any
portion thereof) to any lien, security interest, encumbrance, pledge, charge or
preferential arrangement, other than any lien that is herein created or
otherwise permitted by this Section 4 or (ii) transfer, assign or grant any
other person or entity any right or interest in the Member Interest (or any
portion thereof), including any option therein (other than as contemplated by
this Section 4). Pledgor represents that it has the full right, power and
authority to pledge the Member Interest to Pledgee hereunder and that it is the
sole legal, record and beneficial owner of the Member Interest free and clear of
any lien, right or option ( collectively, “Liens”) other than the security
interest granted herein, Liens under the Operating Agreement in favor of Pledgee
and arising by, through or under Pledgor, and Liens existing on or prior to the
date hereof, including without limitation all the Liens and rights granted to
CoBank and the Lenders (or any transferee thereof) as set forth or as
contemplated by the RH CoBank Pledge and the Subordination Agreement.
     5. Upon an Event of Default and during the continuance thereof, the Pledgee
may exercise all rights and remedies of a pledgee and secured party under New
York law, without presentment, demand, protest or notice of any kind, all of
which Pledgor hereby waives, but subject to the applicable terms and conditions
of the Subordination Agreement. The exercise of any such rights and remedies
shall not preclude Pledgee from exercising any other right or remedy it may have
against Pledgor under any other applicable law; provided that such exercise is
expressly permitted under the terms of the Subordination Agreement.
     6. The Pledgee agrees to notify the Pledgor of all notices it receives with
respect to the Member Interest.
     7. Pledgor will not hereafter suffer or allow any Liens to arise against or
with respect to the Member Interest in favor of any persons or entities other
than: (a) Liens existing on the Member Interest on or prior to the date hereof
(including without limitation the lien created by the RH CoBank Pledge);
(b) Liens in favor of Pledgee; and (c) Liens arising under the Operating
Agreement. Pledgor also agrees that it will promptly execute and deliver all
further instruments and documents, and take all further action that may be
reasonably requested by Pledgee in order to perfect, maintain and protect the
security interest and rights herein granted or to enable Pledgee to exercise and
enforce its rights and remedies hereunder with respect to the Member Interest.
Subject to the foregoing, and subject to all the rights of CoBank and the
Lenders as set forth or as contemplated by the RH CoBank Pledge and the
Subordination Agreement, Pledgor will at all times defend the Member Interest
against any and all claims of any person adverse to the interests of Pledgee.
     8. “Termination” of this Pledge Agreement shall occur upon the earlier to
occur (a) the performance in full by Pledgor of all its payment obligations
under Section 11.01 of the Purchase Agreement, including payment of all accrued
and unpaid interest thereunder and (b) the repurchase by Pledgor of the Class A
membership interests; provided, that if Pledgee has made any claims under
Section 11.01 of the Purchase

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Agreement prior to such repurchase, this Pledge Agreement shall continue in full
force and effect with respect to such claims, but only until they are finally
resolved or satisfied pursuant to the relevant provisions of the Purchase
Agreement (at which time Termination of this Pledge Agreement shall occur). Upon
Termination, as set forth herein, the security interest Pledgor pledged and
granted to and for the benefit of Pledgee pursuant to this Pledge Agreement
shall terminate and be of no further force and effect, and Pledgee shall return
the certificates, if any, representing the Member Interest and all other
collateral held pursuant to this Pledge Agreement to the Pledgor.
     9. All notices, demands or other communications required or permitted to be
given under this Pledge Agreement shall be in writing and shall be given by hand
delivery, reputable overnight courier (such as Federal Express), facsimile
transmission or certified mail, return receipt requested, to the parties at the
addresses set forth under the applicable party’s signature in this Pledge
Agreement, and shall be deemed given (a) upon delivery in the case of hand
delivery or delivery by overnight courier, (b) upon written confirmation of
transmission in the case of facsimile transmission if received during normal
business hours, otherwise the next business day and (c) three (3) days after
mailing in the case of certified mail. Any party may, by written notice to the
other party as provided in this section, change the place to which all further
notices to such party shall be sent.
     10. This Pledge Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any waiver on the
part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
     11. This Pledge Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors, legal representatives and permitted
assigns. This Pledge Agreement is not assignable by Pledgor except by operation
of law; provided that nothing in this sentence shall be construed to limit
Pledgor’s rights to assign the Member Interest pursuant to Section 10.3 of the
Operating Agreement. Pledgee may assign this Pledge Agreement to any person or
entity upon written notice to Pledgee; provided that concurrently therewith
Pledgee assigns to such person or entity all but not less than all of its
membership interests in the Company in accordance with Section 10.2 of the
Operating Agreement and any such assignee agrees to assume all of Pledgee’s
obligations under the Subordination Agreement.
     12. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS PRINCIPLES
REGARDING CONFLICT OF LAWS (OTHER THAN SECTION 5-1401 AND 1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW). EACH OF THE PARTIES HEREBY SUBMITS

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TO THE EXCLUSIVE JURISDICTION OF ANY OF THE COURTS OF THE STATE OF NEW YORK AND
THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND THE APPELLATE COURTS FROM ANY THEREOF AND FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN. THE PARTIES CONSENT TO PERSONAL JURISDICTION
IN THE COURTS DESCRIBED IN THIS SECTION FOR THE PURPOSE OF ALL ACTIONS AND WAIVE
ALL OBJECTIONS TO VENUE AND THE RIGHT TO ASSERT THAT A COURT CHOSEN UNDER THIS
SECTION IS IMPROPER BASED ON THE DOCTRINE OF FORUM NON CONVENIENS. TO THE EXTENT
THAT SUCH COURTS REFUSE TO EXERCISE JURISDICTION HEREUNDER, THE PARTIES AGREE
THAT JURISDICTION SHALL BE PROPER IN ANY COURT IN WHICH JURISDICTION MAY BE
OBTAINED.
     13. The paragraph headings of this Pledge Agreement have been used solely
for convenience, and are not intended to describe, interpret, define or limit
the scope of this Pledge Agreement. Conflicts or discrepancies, errors or
omissions in this Pledge Agreement will not be strictly construed against the
drafter of the contract language; rather they shall be resolved by applying the
most reasonable interpretation under the circumstances giving full consideration
to the intentions of the parties at the time of contracting. Capitalized terms
used herein without definition shall have the same meanings ascribed to them in
the Purchase Agreement.
     14. If any provision or portion of this Pledge Agreement is declared or
found by a court of competent jurisdiction to be unenforceable or null and void,
such provision or portion thereof shall be deemed stricken and severed from this
Pledge Agreement, the remaining provisions and portions thereof shall continue
in full force and effect and the unenforceable or null and void provision shall
be replaced by a valid and enforceable provision that comes closest to the
intent of the parties.
     15. This Pledge Agreement may be executed by facsimile signature and in
separate counterparts, each of which when so executed and delivered will be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
     16. This Pledge Agreement (together with the Subordination Agreement)
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes and replaces all previous verbal or written
agreements that the parties may have made with respect to such subject matter.
     17. In the event of any suit, action or other proceeding arising out of or
based on this Pledge Agreement, the prevailing party shall be entitled to
receive from the non-prevailing party all reasonable attorneys’ fees and court
costs incurred in connection therewith.

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     18. The obligations and duties of the Pledgor hereunder shall not
constitute a debt or obligation of any current or future shareholder of Pledgor,
or any direct or indirect member, shareholder or other owner of such shareholder
(each, a “Non-Recourse Person”). None of the Non-Recourse Persons shall be
liable for any amount due under this Pledge Agreement, the Purchase Agreement or
the Operating Agreement, and Pledgee shall not (a) assert or seek to assert any
claim against, (b) name in any civil action or proceeding or arbitration, or
(c) seek or obtain any judgment (including, without limitation, a deficiency or
personal judgment), order or decree against any Non-Recourse Person for payment
of the obligations evidenced by this Pledge Agreement, the Purchase Agreement or
the Operating Agreement, or damages in respect thereof. No property or assets of
a Non-Recourse Person (other than the Member Interest pledged hereunder) shall
be sold, levied upon or otherwise used to satisfy any judgment rendered in
connection with any action brought with respect to this Pledge Agreement, the
Purchase Agreement or the Operating Agreement.
     19. Notwithstanding the provisions of the preceding paragraph above to the
contrary, nothing contained in this Pledge Agreement shall be construed to
(a) impair or limit any of the obligations or duties of Pledgor or Pledgee under
the Purchase Agreement or the Operating Agreement; (b) impair or limit the
validity of the obligations set forth in this Pledge Agreement, the Purchase
Agreement or the Operating Agreement or prevent the taking of any action
permitted by law against Pledgor or Pledgee or their properties or assets or the
proceeds of such assets; or (c) prevent the commencement of any action, suit or
proceeding against any persons or entities (or prevent the service of papers
upon any persons or entities) solely for the purpose of obtaining jurisdiction
over Pledgor or Pledgee, as the case may be.
[signature page follows]

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     IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as of
the date first written above.

                              Pledgor:       Pledgee:     Renegy Holdings, Inc.
      AZ Biomass LLC    
 
                            By:   /s/ Robert M. Worsley       By:   Antrim  
Corporation                              
 
  Name:   Robert M. Worsley       Its:   Manager             Title:   Chief
Executive Officer  

By:   /s/ Francine E. Lyons                                
 
                  Name:   Francine E. Lyons    
 
                  Title:   Vice President    
 
                            Address for Notices:       Address for Notices:    
 
                            3418 North Val Vista Drive       AZ Biomass LLC    
Mesa, Arizona 85213       c/o State Street Bank and Trust Company,     Attn:
Robert M. Worsley       Energy Credit Investments     Facsimile: (480) 556-5500
      State Street Financial Center                     One Lincoln Street, SFC
12                     Boston, Massachusetts 02110-2900                    
Attn: Francine E. Lyons                     Facsimile: Fax:(617)-664-4850    

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