Exhibit 10.24
THIRD AMENDED AND RESTATED PLEDGE AGREEMENT
     THIS THIRD AMENDED AND RESTATED PLEDGE AGREEMENT (this “Pledge Agreement”),
dated as of December 23, 2005, is between PARALLEL, L.L.C. (the “Pledgor”), a
Delaware limited liability company whose address is 2215-B Renaissance Dr.,
Suite 5, Las Vegas, Nevada 89119, and CITIBANK TEXAS, N.A., a national banking
association whose address is 1004 N. Big Spring, Suite 121, Midland, Texas
79701, as Administrative Agent (in such capacity, the “Agent”), for the banks
and other financial institutions (the “Lenders”) from time to time parties to
that certain Third Amended and Restated Credit Agreement dated of even date
herewith, among Parallel Petroleum Corporation and Parallel, L.P. (collectively,
“Borrowers”), Pledgor, as Guarantor, Citibank Texas, N.A., as Joint Lead
Arranger and Administrative Agent, BNP Paribas, as Joint Lead Arranger and
Syndication Agent, and the Lenders (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”).
WITNESSETH:
     WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make loans to the Borrowers upon the terms and subject to the
conditions set forth therein, to be evidenced by the Notes issued by the
Borrowers thereunder; and
     WHEREAS, it is a condition precedent to the Agent and Lenders executing the
Credit Agreement that the Pledgor execute this Pledge Agreement to amend and
restate that certain Second Amended and Restated Pledge Agreement dated
September 27, 2004 by and between Agent and Pledgor (the “Original Pledge
Agreement”).
     NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Pledgor hereby agrees with the Agent, for the ratable
benefit of the Lenders, as follows:
     1. Defined Terms. Unless otherwise defined herein, terms which are defined
in the Credit Agreement and used herein are so used as so defined, and the
following terms shall have the following meanings:
     “Code” means the Uniform Commercial Code from time to time in effect in the
State of Texas.
     “Obligations” means the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
interest on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrowers or the Pledgor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Notes, the obligations
of the Pledgor to the Agent and Lenders pursuant to that certain Guaranty dated
of even date herewith executed by the Pledgor in favor of the Agent for the
benefit of the Lenders, and all other obligations and liabilities of any of the
Borrowers or the Pledgor to the Agent, to any Lender, or to any Affiliate

 

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of any Lender, whether direct or indirect, joint or several, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with the Credit Agreement, the Notes,
any other Loan Document, any other document made, delivered or given in
connection herewith or therewith or any Rate Management Transaction, including
all renewals, restatements, extensions, substitutions and rearrangements of any
of the aforementioned, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without limitation,
all fees and disbursements of counsel to the Agent or to the Lenders that are
required to be paid by the Borrowers or the Pledgor pursuant to the terms of the
Credit Agreement) or otherwise.
     “Partnership” means Parallel, L.P., a Texas limited partnership.
     “Pledge Agreement” means this Pledge Agreement, as amended, supplemented or
otherwise modified from time to time.
     “Pledged Property” means all (i) partnership interests now owned or
hereafter acquired by the Pledgor in the Partnership, including, without
limitation, the partnership interest evidenced by Certificate No. LP-1, (ii) all
rights to receive from time to time Pledgor’s share of profits, income, surplus,
compensation, return of capital, distributions and other reimbursements and
payments from the Partnership (including, without limitation, specific
properties of the Partnership upon dissolution, merger or otherwise) and
(iii) all Proceeds of and from any and all of the foregoing.
     “Proceeds” means all “proceeds” as such term is defined in
Section 9.102(a)(65) of the Code and, in any event, shall include, without
limitation, all dividends, distributions or other income from the Pledged
Property, and collections thereon or distributions with respect thereto.
     2. Pledge, Grant of Security Interest. The Pledgor hereby delivers to the
Agent, for the ratable benefit of the Lenders, all the Pledged Property and
hereby grants to the Agent, for the ratable benefit of the Lenders, a first and
prior security interest and Lien in the Pledged Property, as collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations.
     3. Stock/Partnership Powers. Concurrently with the delivery to the Agent of
each certificate representing the Pledged Property, the Pledgor shall deliver an
undated stock/ partnership power or assignment in blank covering such
certificate, duly executed in blank by the Pledgor with, if the Agent so
requests, signature guaranteed.
     4. Representations and Warranties. The Pledgor represents and warrants
that:
     (a) the Pledged Property constitutes 99% of the total issued and
outstanding partnership interests of the Partnership;
     (b) the Pledgor is the record and beneficial owner of, and has good and
marketable title to, the Pledged Property, free of any and all Liens or options
in favor of, or claims of, any other person, except Permitted Liens;

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     (c) upon delivery to the Agent of the certificates evidencing the Pledged
Property, the Lien granted pursuant to this Pledge Agreement will constitute a
valid, perfected first priority Lien on the Pledged Property, enforceable as
such against all creditors of the Pledgor and any Person purporting to purchase
any Pledged Property from the Pledgor;
     (d) with respect to the Pledged Property, the Pledgor has obtained from the
Partnership and has delivered to the Agent an Acknowledgment and Consent,
substantially in the form attached hereto as Annex 1, executed by the
Partnership;
     (e) no consent or authorization of, filing with or other act by or in
respect of any Person is required in connection with the execution, delivery or
validity of this Pledge Agreement.
     5. Covenants. The Pledgor covenants and agrees with the Agent and the
Lenders that, from and after the date of this Pledge Agreement until the
Obligations are paid in full and the Commitments are terminated:
     (a) If the Pledgor shall, as a result of its ownership of the Pledged
Property, become entitled to receive or shall receive any partnership interest
or other security, whether certificated or uncertificated, (including, without
limitation, any certificate representing a dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in exchange
for any portion of the Pledged Property, or otherwise in respect thereof, the
Pledgor shall accept the same as the agent of the Agent and the Lenders, hold
the same in trust for the Agent and the Lenders, and deliver the same forthwith
to the Agent in the exact form received, duly indorsed by the Pledgor to the
Agent, if required, together with an undated stock/ partnership power or
assignment in blank covering such certificate duly executed in blank by the
Pledgor and with, if the Agent so requests, signature guaranteed, to be held by
the Agent, subject to the terms hereof, as additional collateral security for
the Obligations. Any sums paid upon or in respect of the Pledged Property upon
the liquidation or dissolution of the Partnership shall be paid over to the
Agent to be held by it hereunder as additional collateral security for the
Obligations, and in case any distribution of capital shall be made on or in
respect of the Pledged Property or any property shall be distributed upon or
with respect to the Pledged Property pursuant to the recapitalization or
reclassification of the capital of the Partnership, or pursuant to the
reorganization thereof, the property so distributed shall be delivered to the
Agent to be held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or distributed in respect
of the Pledged Property shall be received by the Pledgor, the Pledgor shall,
until such money or property is paid or delivered to the Agent, hold such money
or property in trust for the Lenders, segregated from other funds of the
Pledgor, as additional collateral security for the Obligations.
     (b) Without the prior written consent of the Agent, the Pledgor will not
(i) vote to enable, or take any other action to permit, the Partnership to issue
any partnership interests or other securities of any nature or to issue any
other securities convertible into or granting the right to purchase or exchange
for any partnership interest, or other securities of any nature of the
Partnership, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with

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respect to, the Pledged Property, or (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person with respect to, any of
the Pledged Property, or any interest therein, except for Permitted Liens. The
Pledgor will defend the right, title and interest of the Agent and the Lenders
in and to the Pledged Property against the claims and demands of all Persons
whomsoever.
     (c) At any time and from time to time, upon the written request of the
Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and
duly execute and deliver such further instruments and documents and take such
further actions as the Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and of the
rights and powers herein granted. If any amount payable under or in connection
with any of the Pledged Property shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note, instrument or chattel paper
shall be immediately delivered to the Agent, duly endorsed in a manner
satisfactory to the Agent, to be held as Pledged Property pursuant to this
Pledge Agreement.
     (d) The Pledgor agrees to pay, and to save the Agent and the Lenders
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Pledged Property
or in connection with any of the transactions contemplated by this Pledge
Agreement.
     (e) The Agent shall have the right, without the consent or joinder of the
Pledgor, to execute and file with any governmental authority such financing
statements, financing statement amendments and continuation statements as may,
in the sole discretion of the Agent, be necessary or advisable to maintain,
perfect or otherwise evidence the Lien of the Lenders in and to any of the
Pledged Property. The Pledgor hereby expressly authorizes the Agent to file any
such financing statement without the signature of the Pledgor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Pledge Agreement shall be sufficient as a financing statement for filing in
any jurisdiction. In addition, and without limiting the foregoing, this Pledge
Agreement may be attached to and made a part of any financing statement filed by
the Agent.
     6. Cash Dividends and Distributions, Voting Rights. Unless an Event of
Default shall have occurred and be continuing and the Agent shall have given
notice to the Pledgor of the Agent’s intent to exercise its corresponding rights
pursuant to paragraph 7 below, the Pledgor shall be permitted to receive all
cash dividends and distributions paid in the normal course of business of the
Partnership, to the extent permitted in the Credit Agreement and the other Loan
Documents, in respect of the Pledged Property and to exercise all voting and
partnership rights with respect to the Pledged Property; provided, however, that
no vote shall be cast or partnership right exercised or other action taken
which, in the Agent’s reasonable judgment, would impair the Pledged Property or
which would be inconsistent with or result in any violation of any provision of
the Credit Agreement, the Notes, the Security Instruments, this Pledge Agreement
or the other Loan Documents.

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     7. Rights of the Lenders and the Agent.
     (a) If an Event of Default shall occur and be continuing and the Agent
shall give notice of its intent to exercise such rights to the Pledgor, (i) the
Agent shall have the right to receive any and all dividends and distributions
paid in respect of the Pledged Property and make application thereof to the
Obligations in such order as the Agent may determine and (ii) the Pledged
Property or portion thereof designated by the Agent shall be registered in the
name of the Agent or its nominee, and the Agent or its nominee may thereafter
exercise (A) all voting, partnership and other rights pertaining to the Pledged
Property at any meeting of partners of the Partnership or otherwise and (B) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to the Pledged Property as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Property upon the merger, conversion,
consolidation, reorganization, recapitalization or other fundamental change in
the entity structure of the Partnership , or upon the exercise by the Pledgor or
the Agent of any rights, privileges or options pertaining to the Pledged
Property, and in connection therewith, the right to deposit and deliver any and
all of the Pledged Property with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine) all without liability except to account for property actually
received by it, but the Agent shall have no duty to the Pledgor to exercise any
such right, privilege or option and shall not be responsible for any failure to
do so or delay in so doing.
     (b) The rights of the Agent and the Lenders hereunder shall not be
conditioned or contingent upon the pursuit by the Agent or any Lender of any
right or remedy against the Borrowers, any Guarantor or any other Person which
may be or become liable in respect of all or any part of the Obligations or
against any collateral security or guarantee therefor or right of offset with
respect thereto. Neither the Agent nor any Lender shall be liable for any
failure to demand, collect or realize upon all or any part of the Pledged
Property or for any delay in doing so, nor shall the Agent or any Lender be
under any obligation to sell or otherwise dispose of any Pledged Property upon
the request of the Pledgor or any other Person or to take any other action
whatsoever with regard to the Pledged Property or any part thereof.
     8. Remedies. If an Event of Default shall occur and be continuing, the
Agent, on behalf of the Lenders, may exercise, in addition to all other rights
and remedies granted in this Pledge Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the Code. Without limiting the generality of
the foregoing, the Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Pledgor, the Partnership or
any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived) may in such circumstances forthwith collect, receive,
appropriate and realize upon the Pledged Property, or any part thereof, and/or
may forthwith sell, assign, give option or options to purchase or otherwise
dispose of and deliver the Pledged Property or any part thereof (or contract to
do any of the foregoing), in one or more parcels at public or private sale or
sales, in the over-the-counter market, at any exchange, broker’s board or office
of the Agent or any Lender or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The Agent or any
Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to

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purchase the whole or any part of the Pledged Property so sold, free of any
right or equity of redemption in the Pledgor, which right or equity is hereby
waived and released. The Agent shall apply any Proceeds from time to time held
by it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Pledged Property or in any way relating to the Pledged
Property or the rights of the Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys’ fees and disbursements of counsel to
the Agent, to the payment in whole or in part of the Obligations, in such order
as the Agent may elect, and only after such application and after the payment by
the Agent of any other amount required by any provision of law, including,
without limitation, Section 9.615(a)(3) of the Code, need the Agent account for
the surplus, if any, to the Pledgor. To the extent permitted by applicable law,
the Pledgor waives all claims, damages and demands it may acquire against the
Agent or any Lender arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Pledged Property shall
be required by law, such notice shall be deemed reasonable and proper if given
at least 10 days before such sale or other disposition.
     9. Private Sales.
     (a) If the Agent shall determine to exercise its right to sell any or all
of the Pledged Property pursuant to paragraph 8 hereof, the Pledgor recognizes
that the Agent may be unable to effect a public sale of any or all the Pledged
Property, by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the “Securities Act”), and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable 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. The Agent shall be under no obligation
to delay a sale of any of the Pledged Property for the period of time necessary
to permit the Partnership to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if the
Partnership would agree to do so.
     (b) The Pledgor further agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Property pursuant to this paragraph 9 valid and
binding and in compliance with any and all other applicable requirements of law.
The Pledgor further agrees that a breach of any of the covenants contained in
this paragraph 9 will cause irreparable injury to the Agent and the Lenders,
that the Agent and the Lenders have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in this
paragraph 9 shall be specifically enforceable against the Pledgor, and the
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants, except for a defense that no Event
of Default has occurred under the Credit Agreement.
     10. Limitation on Duties Regarding Pledged Property. The Agent’s sole duty
with respect to the custody, safekeeping and physical preservation of the
Pledged Property in its possession, under

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Section 9.207 of the Code or otherwise, shall be to deal with it in the same
manner as the Agent deals with similar securities and property for its own
account. Neither the Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Pledged Property or for any delay in doing so or shall
be under any obligation to sell or otherwise dispose of any Pledged Property
upon the request of the Pledgor or otherwise.
     11. Powers Coupled with an Interest. All authorizations and agencies herein
contained with respect to the Pledged Property are irrevocable and powers
coupled with an interest.
     12. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
     13. Paragraph Headings. The paragraph headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
     14. No Waiver, Cumulative Remedies. Neither the Agent nor any Lender shall
by any act (except by a written instrument pursuant to paragraph 15 hereof) be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default under the Credit Agreement or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Agent
or such Lender would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
     15. Waivers and Amendments: Successors and Assigns: Governing Law. None of
the terms or provisions of this Pledge Agreement may be amended, supplemented or
otherwise modified, except by a written instrument executed by the Pledgor and
the Agent, provided that any provision of this Pledge Agreement may be waived by
the Agent in a letter or agreement executed by the Agent or by telex or
facsimile transmission from the Agent. This Pledge Agreement shall be binding
upon the permitted successors and assigns of the Pledgor and shall inure to the
benefit of the Agent and the Lenders and their respective successors and
assigns.
     THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
     16. Notices. Notices by the Agent to the Pledgor or the Partnership may be
given by mail, by telegraph or by facsimile transmission, addressed or
transmitted to the appropriate party at the Pledgor’s address set forth in the
preamble of this Pledge Agreement and shall be effective (a) in the case of
mail, three days after deposit in the postal system, postage prepaid, (b) in the
case of facsimile notices, when

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sent and (c) in the case of telegraphic notice, when delivered to the telegraph
company. The Pledgor and the Partnership may change their respective addresses
and transmission numbers by written notice to the Agent.
     17. Irrevocable Authorization and Instruction to Partnership. The Pledgor
hereby authorizes and instructs the Partnership to comply with any instruction
received by it from the Agent in writing that (a) states that an Event of
Default has occurred and (b) is otherwise in accordance with the terms of this
Pledge Agreement, without any other or further instructions from the Pledgor,
and the Pledgor agrees that the Partnership shall be fully protected in so
complying.
     18. Authority of Agent. The Pledgor acknowledges that the rights and
responsibilities of the Agent under this Pledge Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as between
the Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Agent and the Pledgor, the Agent shall be conclusively presumed
to be acting as agent for the Lenders with full and valid authority so to act or
refrain from acting, and neither the Pledgor nor the Partnership shall be under
any obligation, or entitlement, to make any inquiry respecting such authority.

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     19. Amendment and Restatement of Original Pledge Agreement. This Pledge
Agreement constitutes an amendment and restatement, but not a replacement, of
the Original Pledge Agreement in its entirety, and renews and extends all liens,
rights and security interests existing by virtue of the Original Pledge
Agreement without interruption or lapse.
     [THE REMAINDER OF THIS PAGE INTENTINALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be
duly executed and delivered as of the date first above written.

            PARALLEL, L.L.C.
      By:   /s/ Steven D. Foster         Steven D. Foster        Chief Financial
Officer        CITIBANK TEXAS, N.A., as
Administrative Agent and as a Lender
      By:   /s/ Frank K. Stowers         Frank K. Stowers        Senior Vice
President     

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ANNEX 1
ACKNOWLEDGMENT AND CONSENT
     The Partnership referred to in the foregoing Pledge Agreement hereby
(i) consents to the pledge of the Pledged Property and waives any and all
restrictions applicable thereto, (iii) acknowledges receipt of a copy of the
Pledge Agreement and (iii) agrees to be bound thereby and to comply with the
terms thereof insofar as such terms are applicable to it. The Partnership agrees
to notify the Agent promptly in writing of the occurrence of any of the events
described in paragraph 5(a) of the Pledge Agreement.

             
 
  PARALLEL,   L.P.    
 
  By:   Parallel Petroleum Corporation,    
 
      its general partner    
 
           
 
  By:        
 
     
 
Steven D. Foster    
 
      Chief Financial Officer    

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