EXHIBIT 10.2

EXECUTION VERSION

SHARE PLEDGE AGREEMENT

made by

U.S. ENERGY SYSTEMS, INC.,

as Pledgor

in favor of

SILVER POINT FINANCE L.L.C.,

as Collateral Agent

Dated as of May 31, 2007

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TABLE OF CONTENTS

 

          Page

ARTICLE I DEFINED TERMS

   1   

Section 1.1

  

Definitions

   1   

Section 1.2

  

Other Definitional Provisions

   3

ARTICLE II PLEDGE OF STOCK

   3

ARTICLE III REPRESENTATIONS AND WARRANTIES

   3   

Section 3.1

  

Title; No Other Liens

   3   

Section 3.2

  

Perfected First Priority Liens

   3   

Section 3.3

  

Pledged Stock

   4

ARTICLE IV COVENANTS

   4   

Section 4.1

  

Delivery of Instruments and Certificated Securities

   4   

Section 4.2

  

Payment of Obligations

   4   

Section 4.3

  

Maintenance of Perfected Security Interest; Further Documentation

   4   

Section 4.4

  

Changes in Name, etc

   4   

Section 4.5

  

Notices

   5   

Section 4.6

  

Pledged Stock

   5

ARTICLE V REMEDIAL PROVISIONS

   6   

Section 5.1

  

Pledged Stock

   6   

Section 5.2

  

Application of Proceeds

   6   

Section 5.3

  

Code and Other Remedies

   7   

Section 5.4

  

Private Sale

   7   

Section 5.5

  

Deficiency

   8

ARTICLE VI THE COLLATERAL AGENT

   8   

Section 6.1

  

Collateral Agent’s Appointment as Attorney-in-Fact, etc

   8   

Section 6.2

  

Duty of Collateral Agent

   9   

Section 6.3

  

Authorization to File Financing Statements

   10   

Section 6.4

  

Authority of Collateral Agent

   10

ARTICLE VII MISCELLANEOUS

   10   

Section 7.1

  

Amendments in Writing

   10   

Section 7.2

  

Notices

   10   

Section 7.3

  

No Waiver by Course of Conduct; Cumulative Remedies

   10   

Section 7.4

  

Successors and Assigns

   11   

Section 7.5

  

Counterparts

   11   

Section 7.6

  

Severability

   11   

Section 7.7

  

Section Headings

   11   

Section 7.8

  

Integration

   11   

Section 7.9

  

GOVERNING LAW

   11

 

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Section 7.10

  

Submission To Jurisdiction; Waivers

   11   

Section 7.11

  

Acknowledgements

   12   

Section 7.12

  

Releases

   12   

Section 7.13

  

WAIVER OF JURY TRIAL

   13

SCHEDULES

Schedule 1

  

Notice Address

Schedule 2

  

Pledged Stock

Schedule 3

  

Perfection Matters

 

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SHARE PLEDGE AGREEMENT

SHARE PLEDGE AGREEMENT, dated as of May 31, 2007, made by U.S. ENERGY SYSTEMS,
INC., a Delaware corporation (the “Pledgor”), in favor of SILVER POINT FINANCE
LLC, as collateral agent (in such capacity, the “Collateral Agent”) for the
banks and other financial institutions or entities (the “Lenders”) from time to
time party to the Credit and Guaranty Agreement, dated as of May 31, 2007 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among U.S. ENERGY BIOGAS CORP., a Delaware corporation (the
“Borrower”), certain Subsidiaries of U.S. ENERGY BIOGAS CORP., the Lenders and
SILVER POINT FINANCE, LLC, as administrative agent.

WITNESSETH:

WHEREAS, pursuant to the Credit Agreement, dated as of May 31, 2007, between the
Borrower, the Collateral Agent and the Lenders, the Lenders have agreed to make
extensions of credit to the Borrower upon the terms and subject to the
conditions set forth therein; and

WHEREAS, it is a condition precedent to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Credit Agreement
that the Pledgor shall have executed and delivered this Agreement to the
Collateral Agent;

NOW, THEREFORE, in consideration of the premises and to induce the Collateral
Agent and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make its respective extensions of credit to the Borrower thereunder,
the Pledgor hereby agrees with the Collateral Agent, as follows:

ARTICLE I

DEFINED TERMS

Section 1.1 Definitions. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement, and the following terms are used herein as defined in the New
York UCC (as defined herein): Certificated Security and Instruments.

The following terms shall have the following meanings:

“Agreement”: this Share Pledge Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

“Capital Stock”: any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation and any and
all warrants, rights or options to purchase any of the foregoing.

“Collateral”: as defined in Section 2.

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“Event of Default”: a Default as defined in the Credit Agreement.

“Issuer”: U.S. Energy Biogas Corp., a Delaware corporation.

“Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security interest or any
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement and any capital lease having substantially the same economic
effect as any of the foregoing).

“New York UCC”: the Uniform Commercial Code as from time to time in effect in
the State of New York.

“Obligations”: the collective reference to the unpaid principal of and interest
on the Loans and Obligations and all other obligations and liabilities of the
Borrower (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and Obligations and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy or
reorganization relating to the Borrower, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) to the Agents or any
Lender, whether direct or indirect, 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 NPI Agreement, this Agreement, the
other Credit Documents whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel that are required to be paid
by the Borrower pursuant to the terms of any of the foregoing agreements).

Pledge and Security Agreement: means that certain Pledge and Security Agreement,
dated as of May 31, 2007, by and among made by each of the Grantors, in favor of
the Collateral Agent for the banks and other financial institutions or entities.

“Pledged Stock”: as defined in Section 2.

“Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of
the New York UCC and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Stock, collections thereon or
distributions or payments with respect thereto.

“Requirement of Law”: as to any Person, the Certificate of Incorporation and By
Laws or other organizational or governing documents of such Person, and any law,
treaty, rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.

“Securities Act”: the Securities Act of 1933, as amended.

“Secured Parties”: the Lenders and the Collateral Agent (each a “Secured
Party”).

 

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Section 1.2 Other Definitional Provisions. The words “hereof,” “herein”,
“hereto” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.

The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms.

ARTICLE II

PLEDGE OF STOCK

As security for the payment or performance, as the case may be, in full of the
Obligations, the Pledgor hereby grants and pledges to the Collateral Agent, its
successors and assigns, a security interest in all of the Pledgor’s right, title
and interest in, to and under (a) all present and future Capital Stock of the
Issuer and any certificates representing all such Capital Stock, including,
without limitation, the certificates identified on Schedule 2 attached hereto,
(collectively, the “Pledged Stock”), (b) all payments of dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon the conversion of,
and all other proceeds received in respect of, the Pledged Stock; (c) all rights
and privileges of the Pledgor with respect to the Pledged Stock and other
property referred to in clause (b) above; and (d) all Proceeds of any of the
foregoing (the items referred to in clauses (a) through (d) above being
collectively referred to as the “Collateral”).

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce the Lenders to make their respective extensions of credit to the
Pledgor under the Credit Agreement, the Pledgor hereby represents and warrants
to the Secured Parties that:

Section 3.1 Title; No Other Liens. Except for the security interest granted to
the pursuant to this Agreement, the Pledgor owns the Collateral free and clear
of any and all Liens or claims of others. No financing statement or other public
notice with respect to all or any part of the Collateral is on file or of record
in any public office, except such as have been filed in favor of the Collateral
Agent or with respect to which the Pledgor has delivered an authorized
termination statement to terminate any such financing statement.

Section 3.2 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Collateral Agent in
completed and duly executed form) will constitute valid perfected security
interests in all of the Collateral in favor of the Collateral Agent, as
collateral security for the Obligations, enforceable in accordance with the
terms hereof against all creditors of the Pledgor and any Persons purporting to
purchase any Collateral from the Pledgor and (b) are prior to all other Liens on
the Collateral in existence on the date hereof.

 

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Section 3.3 Pledged Stock. The shares of Pledged Stock constitute all the issued
and outstanding shares of all classes of the Capital Stock of the Issuer.

All the shares of the Pledged Stock have been duly and validly issued and are
fully paid and nonassessable.

The Pledgor is the record and beneficial owner of, and has good and marketable
title to, the Pledged Stock, free of any and all Liens or options in favor of,
or claims of, any other Person, except the security interest created by this
Agreement.

ARTICLE IV

COVENANTS

The Pledgor covenants and agrees with the Collateral Agent that, from and after
the date of this Agreement until the Obligations shall have been paid in full:

Section 4.1 Delivery of Instruments and Certificated Securities. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Certificated Security, such Instrument or
Certificated Security shall be immediately delivered to the Collateral Agent,
duly indorsed in a manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Agreement.

Section 4.2 Payment of Obligations. The Pledgor shall pay, and save the
Collateral 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 (other than any Tax on the overall net income of such
Person) which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.

Section 4.3 Maintenance of Perfected Security Interest; Further Documentation.
The Pledgor shall maintain the security interest created by this Agreement as a
perfected first priority security interest and shall defend such security
interest against the claims and demands of all Persons whomsoever, subject to
the rights of the Pledgor under the Credit Agreement to dispose of the
Collateral.

At any time and from time to time, upon the written request of the Collateral
Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and
duly execute and deliver, and have recorded, such further instruments and
documents and take such further actions as the Collateral Agent may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein.

Section 4.4 Changes in Name, etc. The Pledgor will not, except upon 15 days’
prior written notice to the Collateral Agent and delivery to the Collateral
Agent of all additional financing statements and other documents reasonably
requested by the Collateral Agent to

 

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maintain the validity, perfection and priority of the security interests
provided for herein, (i) change its jurisdiction of organization or the location
of its chief executive office or sole place of business or principal residence
or (ii) change its name or corporate identity.

Section 4.5 Notices. The Pledgor will advise the Collateral Agent promptly, in
reasonable detail, of:

(a) any Lien (other than security interests created hereby or Liens permitted
under the Credit Agreement) on any of the Collateral which would adversely
affect the ability of the Collateral Agent to exercise any of its remedies
hereunder; and

(b) of the occurrence of any other event which could reasonably be expected to
have a material adverse effect on the aggregate value of the Collateral or on
the security interests created hereby.

Section 4.6 Pledged Stock. If the Pledgor shall become entitled to receive or
shall receive any certificate (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 in respect of the Capital
Stock of the Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, the Pledgor shall accept the same as the agent of the Collateral Agent,
hold the same in trust for the Collateral Agent and deliver the same forthwith
to the Collateral Agent in the exact form received, duly indorsed by the Pledgor
to the Collateral Agent together with an undated stock power covering such
certificate duly executed in blank by the Pledgor, to be held by the Collateral
Agent, subject to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of the Issuer shall be paid over to the Collateral
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 Stock or any property shall be distributed upon or with
respect to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Issuer or pursuant to the reorganization
thereof, the property so distributed shall be delivered to the Collateral 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 Stock shall be received by the Pledgor, the Pledgor shall, until
such money or property is paid or delivered to the Collateral Agent, hold such
money or property in trust for the Collateral Agent, segregated from other funds
of the Pledgor, as additional collateral security for the Obligations.

Without the prior written consent of the Collateral Agent, the Pledgor will not
(i) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Stock or Proceeds thereof (except pursuant
to a transaction expressly permitted by the Credit Agreement), (ii) 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 Stock or Proceeds thereof, or any
interest therein, except for the security interests created by this Agreement or
permitted by the Credit Agreement or (iii) enter into any agreement or
undertaking restricting the right or ability of the Pledgor or the Collateral
Agent to sell, assign or transfer any of the Pledged Stock or Proceeds thereof.

 

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ARTICLE V

REMEDIAL PROVISIONS

Section 5.1 Pledged Stock. Unless an Event of Default shall have occurred and be
continuing and the Collateral Agent shall have given notice to the Pledgor of
the Collateral Agent’s intent to exercise its corresponding rights pursuant to
Section 5.1(b), the Pledgor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock and utilize the same, in each case paid in
the normal course of business of the Issuer and consistent with past practice,
to the extent permitted in the Credit Agreement, and to exercise all voting and
corporate or other organizational rights with respect to the Pledged Stock;
provided, however, that no vote shall be cast or corporate or other
organizational right exercised or other action taken which, in the Collateral
Agent’s reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement or this Agreement.

If an Event of Default shall occur and be continuing and the Collateral Agent
shall give notice of its intent to exercise such rights to the Pledgor, (i) the
Collateral Agent shall have the right to receive, and the Pledgor shall turn
over to the Collateral Agent, any and all cash dividends, payments or other
Proceeds paid in respect of the Pledged Stock thereafter and make application
thereof to the Obligations in accordance with Section 5.5 of the Pledge and
Security Agreement, and (ii) any or all of the Pledged Stock shall be registered
in the name of the Collateral Agent or its nominee, and the Collateral Agent or
its nominee may thereafter exercise (x) all voting, corporate and other rights
pertaining to the Pledged Stock at any meeting of shareholders of the Issuer or
otherwise and (y) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to the Pledged Stock as
if it were the absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or other organizational structure of the Issuer, or upon the
exercise by the Pledgor or the Collateral Agent of any right, privilege or
option pertaining to the Pledged Stock, and in connection therewith, the right
to deposit and deliver any and all of the Pledged Stock with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Collateral Agent may determine), all without liability
except to account for property actually received by it, but the Collateral 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.

The Pledgor hereby authorizes and instructs the Issuer to (i) comply with any
instruction received by it from the Collateral Agent in writing that (x) states
that an Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying, and (ii) unless otherwise expressly permitted
hereby, pay any dividends or other payments with respect to the Pledged Stock
directly to the Collateral Agent if so directed by the Collateral Agent.

Section 5.2 Application of Proceeds. At such intervals as may be agreed upon by
the Borrower and the Collateral Agent, or, if an Event of Default shall have
occurred and be

 

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continuing, at any time at the Collateral Agent’s election, the Collateral Agent
may apply all or any part of Proceeds constituting Collateral in accordance with
the terms of the Pledge and Security Agreement

Section 5.3 Code and Other Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted to them in this
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 New York UCC or any other applicable law. Without limiting the generality of
the foregoing, the Collateral Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by applicable law) to or upon the Pledgor 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 Collateral, or any part thereof, and/or may forthwith sell,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker’s board or office of the Collateral Agent or any Secured Party 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 Collateral Agent or any Collateral Agent
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 purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby waived and released. The Collateral
Agent shall apply the net proceeds of any action taken by it pursuant to this
Section 5.3, after deducting all reasonable costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the rights of the
Secured Parties hereunder, including, without limitation, reasonable attorneys’
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Collateral Agent may elect, consistent with the Credit
Agreement, and only after such application and after the payment by the
Collateral Agent of any other amount required by any provision of law,
including, without limitation, Section 9-615(a)(3) of the New York UCC, need the
Collateral 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 Collateral Agent or any Secured Party arising out of
the exercise by them of any rights hereunder. If any notice of a proposed sale
or other disposition of Collateral 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.

Section 5.4 Private Sale.

The Pledgor recognizes that the Collateral Agent may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in 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

 

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sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Collateral Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if the Issuer would agree to do so.

The Pledgor 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 Stock pursuant to this Section 5.4 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
Section 5.4 will cause irreparable injury to the Collateral Agent, that the
Collateral Agent has no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this Section 5.4 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.

Section 5.5 Deficiency. The Pledgor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Obligations and the reasonable fees and disbursements of any
attorneys employed by the Collateral Agent to collect such deficiency.
Notwithstanding anything to the contrary in this Agreement, the liability of the
Pledgor hereunder shall be strictly and absolutely limited to the Collateral
pledged by the Pledgor hereunder and neither the Collateral Agent nor any
Secured party shall have recourse hereunder to Pledgor or any assets of Pledgor
other than the Collateral.

ARTICLE VI

THE COLLATERAL AGENT

Section 6.1 Collateral Agent’s Appointment as Attorney-in-Fact, etc. (a) The
Pledgor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Pledgor and in the name of the Pledgor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, the Pledgor hereby gives the
Collateral Agent the power and right, on behalf of the Pledgor, without notice
to or assent by the Pledgor, to do any or all of the following:

(i) in the name of the Pledgor or its own name, or otherwise, take possession of
and indorse and collect any checks, drafts, notes or other instruments for the
payment of moneys due under the Collateral and file any claim or take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Collateral Agent for the purpose of collecting any and all
such moneys due under the Collateral whenever payable;

 

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(ii) pay or discharge taxes and Liens levied or placed on or threatened against
the Collateral;

(iii) execute, in connection with any sale provided for in Section 5.3 or 5.4,
any indorsements, assignments or other instruments of transfer with respect to
the Collateral; and

(iv) generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and do, at
the Collateral Agent’s option and the Pledgor’s expense, at any time, or from
time to time, all acts and things which the Collateral Agent deems necessary to
protect, preserve or realize upon the Collateral and the Secured Parties’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as the Pledgor might do.

Anything in this Section 6.1(a) to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 6.1(a) unless an Event of Default shall have
occurred and be continuing.

(b) If the Pledgor fails to perform or comply with any of its agreements
contained herein, the Collateral Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.

(c) The reasonable expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 6.1, together with interest
thereon at a rate per annum equal to the highest rate per annum at which
interest would then be payable on any category of past due Loans under the
Credit Agreement, from the date of payment by the Collateral Agent to the date
reimbursed by the Pledgor, shall be payable by the Pledgor to the Collateral
Agent on demand.

(d) The Pledgor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.

Section 6.2 Duty of Collateral Agent. The Collateral Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it in the same manner as the Collateral Agent deals with similar
property for its own account. Neither the Collateral Agent nor any of its
respective officers, directors, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof. The
powers conferred on the Collateral Agent hereunder are solely to protect the
Secured Parties’ interests in the Collateral and shall not impose any duty upon
the Collateral Agent or any Secured Party to exercise any such powers. The
Secured Parties shall be accountable only for amounts that they actually receive
as a result of the exercise

 

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of such powers, and neither they nor any of their officers, directors, employees
or agents shall be responsible to the Pledgor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.

Section 6.3 Authorization to File Financing Statements. Pursuant to any
applicable law, the Pledgor authorizes the Collateral Agent to file or record
financing statements and other filing or recording documents or instruments with
respect to the Collateral without the signature of the Pledgor in such form and
in such jurisdictions and offices as the Collateral Agent determines appropriate
to perfect the security interests of the Secured Parties under this Agreement.
The Pledgor hereby ratifies and authorizes the filing by the Collateral Agent of
any financing statement with respect to the Collateral made prior to the date
hereof.

Section 6.4 Authority of Collateral Agent. The Pledgor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Collateral 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
Collateral Agent and the Pledgor, the Collateral 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 the Pledgor shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.

ARTICLE VII

MISCELLANEOUS

Section 7.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Collateral Agent, provided
that any provision of this Agreement may be waived by the Collateral Agent in a
written letter or agreement executed solely by the Collateral Agent or by
facsimile transmission by the Collateral Agent.

Section 7.2 Notices. All notices, requests and demands to or upon the Collateral
Agent or the Pledgor hereunder shall be effected in the manner provided for in
Section 4.6 of the Pledge and Security Agreement; provided that any such notice,
request or demand to or upon the Pledgor shall be addressed to the Pledgor at
its notice address set forth on Schedule 1.

Section 7.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Collateral Agent nor any Secured Party shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Secured Party, 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 Collateral Agent or any Secured Party of any right or
remedy hereunder on any one occasion shall not be

 

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construed as a bar to any right or remedy which the Collateral Agent or such
Secured Party 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.

Section 7.4 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Collateral Agent and its successors and assigns; provided that the Pledgor may
not assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Collateral Agent.

Section 7.5 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

Section 7.6 Severability. Any provision of this 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.

Section 7.7 Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.

Section 7.8 Integration. This Agreement represents the agreement of the Pledgor
and the Collateral Agent with respect to the subject matter hereof and thereof,
and there are no promises, undertakings, representations or warranties by the
Collateral Agent relative to subject matter hereof and thereof not expressly set
forth.

Section 7.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

Section 7.10 Submission To Jurisdiction; Waivers. The Pledgor hereby irrevocably
and unconditionally:

(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;

 

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agrees that service of process in any such action or proceeding may be effected
by mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to Pledgor at its address referred to in
Section 7.2 or at such other address of which the Collateral Agent shall have
been notified pursuant thereto;

(c) agrees that failure by a process agent to notify it of any process will not
invalidate the relevant proceedings;

(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have
to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.

Section 7.11 Acknowledgements. The Pledgor hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement to which it is a party;

(b) neither the Collateral Agent nor any Secured Party has any fiduciary
relationship with or duty to the Pledgor arising out of or in connection with
this Agreement, and the relationship between the Pledgor, on the one hand, and
the Collateral Agent for the benefit of the Secured Parties, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture is created hereby or otherwise exists by virtue of the
transactions contemplated hereby among the Secured Parties or among the Pledgor
and the Secured Parties.

Section 7.12 Releases. At such time as the Obligations shall have been paid in
full, the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Collateral Agent and the Pledgor hereunder shall terminate,
all without delivery of any instrument or performance of any act by any party,
and all rights to the Collateral shall revert to the Pledgor. At the request and
sole expense of the Pledgor following any such termination, the Collateral Agent
shall deliver to the Pledgor any Collateral held by or on behalf of the Secured
Parties hereunder, and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination, including,
without limitation, releases and authorization to terminate any financing
statement on file in any office in any jurisdiction naming the Pledgor as debtor
and the Secured Parties as secured party.

If any of the Collateral shall be sold, transferred or otherwise disposed of by
any Pledgor in a transaction permitted by the Credit Agreement, then the
Collateral Agent, at the request and sole expense of the Pledgor, shall execute
and deliver to the Pledgor all releases or other documents reasonably necessary
or desirable for the release of the Liens created hereby on such Collateral.

 

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Section 7.13 WAIVER OF JURY TRIAL. THE PLEDGOR AND, BY ACCEPTANCE HEREOF, THE
COLLATERAL AGENT, EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

 

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

 

U.S. ENERGY SYSTEMS, INC.,

as Pledgor

By:

 

 

Title:

 

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Acknowledged and accepted by:

 

SILVER POINT FINANCE L.L.C.,

as Collateral Agent

By:

 

 

Title:

 

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Schedule 1

NOTICE ADDRESS OF THE PLEDGOR

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Schedule 2

DESCRIPTION OF PLEDGED STOCK

Pledged Stock:

 

Issuer

   Class of Stock    Stock Certificate No.    No. of Shares   

Percentage of

Outstanding Shares

              100 %

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Schedule 3

FILINGS AND OTHER ACTIONS

REQUIRED TO PERFECT SECURITY INTERESTS

Other Actions

Delivery of certificate described in Schedule 2 to the Collateral Agent,

accompanied by an effective stock power indorsed in blank

Uniform Commercial Code Filings

Filing of UCC-1 in the Office of the Secretary of State of the State of
Delaware.,

naming the Pledgor as debtor and the Collateral Agent as Collateral Agent

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ACKNOWLEDGEMENT AND CONSENT

The undersigned hereby acknowledges receipt of a copy of the Share Pledge
Agreement dated as of                          , 2006 (the “Agreement”), made by
[PLEDGOR] for the benefit of [COLLATERAL AGENT]. The undersigned agrees with the
[COLLATERAL AGENT] as follows:

1. The undersigned will be bound by the terms of the Agreement and will comply
with such terms insofar as such terms are applicable to the undersigned.

2. The undersigned will notify the [COLLATERAL AGENT] promptly in writing of the
occurrence of any of the events described in Section 4.6(a) of the Agreement.

3. The terms of Sections 5.1(c) and 5.4 of the Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 5.1(c) or 5.4 of the Agreement.

 

[ISSUER OF THE PLEDGED SHARES]

By:

 

 

Name:

 

Title:

 

Address for Notices:

 

 

 

Fax: