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                                                                    EXHIBIT 4.37

                           TRANSTEXAS GAS CORPORATION
                          SECURITY AND PLEDGE AGREEMENT


                  This Security and Pledge Agreement (this "Agreement") is made
and entered into as of March 15, 2000 by and between TransTexas Gas Corporation,
a Delaware corporation (the "Company"), as debtor, and Firstar Bank, N.A., in
its capacity as indenture trustee (the "Trustee") for the benefit of Holders of
TransTexas Gas Corporation"s 15% Senior Secured Notes Due 2005 (the "Holders"),
(Trustee acting as agent for the benefit of the Holders shall be called the
"Secured Party").

                                    RECITALS

                  The Company, as issuer, Galveston Bay Pipeline Company and
Galveston Bay Processing Corporation, as guarantors, and the Trustee as the
indenture trustee for the benefit of the Holders have entered into that certain
Indenture dated as of March 15, 2000 (as amended, modified or supplemented from
time to time, the "Indenture");

                  Pursuant to and on the terms and conditions set forth in the
Indenture, Company is issuing to the Holders certain 15% senior secured notes
due 2005 in the aggregate principal amount of $200,000,000.00 (collectively, the
"Notes");

                  In order to secure the payment and performance in full of the
obligations of Company under the Indenture and the Notes, the parties hereto
desire to set forth their mutual understanding and certain agreements regarding
the terms and conditions of the grant of a security interest in Collateral (as
defined below);

                  NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Company and the
Secured Party hereby agree as follows:

         Section 1. Definitions.

                  (a) As used in this Agreement, capitalized terms not otherwise
         defined herein have the meanings set forth in the Indenture, and the
         following terms shall have the respective meanings set forth below
         (such meanings to be equally applicable to both the singular and plural
         forms of the terms defined):

                  "Collateral" shall mean, collectively, the Pledged Property
         and the Pledged Securities.

                  "Contract Rights" shall mean all contracts, operating
         agreements, mineral purchase agreements, rights of way, easements,
         surface leases, permits, licenses, pooling or unitization agreements,
         pooling designations and pooling orders and all other contracts or
         agreements

Security&Pledge Agmt - Indenture v.3

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         pertaining to or affecting the Collateral or which were executed in
         connection with the drilling for, producing, processing treating,
         handling, storing, transporting, or marketing oil, gas or other
         minerals from the Collateral or from any properties unitized or pooled
         therewith, including - but not limited to - the contracts listed on
         Schedule 1, Exhibit D attached hereto.

                  "Default" and "Event of Default" shall have the meanings
         assigned to those terms in Section 7(a) of this Agreement.

                  "Equipment" shall mean and include, as to any Person, all of
         such Person's now owned or hereafter acquired equipment (as such term
         in defined in the UCC), including, without limitation, Vehicles, crew
         quarters, drilling rigs, workover rigs, fracture stimulation equipment,
         compressors, rolling stock and related equipment and other assets
         accounted for as equipment by such Person on its financial statements,
         all proceeds thereof (from insurance or otherwise), and all documents
         of title, books, records, ledger cards, files, correspondence, and
         computer files, tapes, disks and related data processing software that
         at any time evidence or contain information relating to the foregoing.

                  "GAAP" means generally accepted accounting principles of the
         United States of America, consistently applied.

                  "General Intangibles" shall mean and include any and all of
         Company's now owned or hereafter acquired "general intangibles" as such
         term is defined in Article 9 of the UCC, including without limitation,
         all trademarks, tradenames, tradestyles, trade secrets, equipment
         formulation, manufacturing procedures, quality control procedures,
         product specifications, patents, patent applications, copyrights,
         registrations, contract rights, choses in action, causes of action,
         tort claims, payment intangibles, letter of credit rights, corporate or
         other business records, inventions, designs, goodwill, claims under
         guarantees, licenses, franchises, tax refunds, tax refund claims,
         computer programs, computer data bases, computer program flow diagrams,
         source codes, object codes and all other intangible property of every
         kind and nature.

                  "Hydrocarbons" shall mean oil, natural gas, condensate and
         natural gas liquids.

                  "Inventory" shall mean and include, as to any Person, such
         Person's now owned or hereafter acquired inventory (as such term is
         defined in the UCC), including, without limitation, casing, drill pipe
         and other supplies accounted for as inventory by the Company on its
         consolidated financial statements (excluding any Hydrocarbons), all
         proceeds thereof (from insurance or otherwise), and all document of
         title, books, records, ledger cards, files, correspondence, and
         computer files, tapes, disks and related data processing software that
         at any time evidence or contain information relating to the foregoing.

                  "Investment Property" shall mean and include all of Company's
         now owned or hereafter acquired "investment property" as such term is
         defined in Article 9 of the UCC.


Security&Pledge Agmt - Indenture v.3
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                  "Jefferies" means Jefferies Analytical Trading Group, Inc., a
         Delaware Corporation.

                  "Jefferies Documentation" shall mean the Mortgage, Deed of
         Trust, Assignment, Security Agreement and Financing Statement,
         effective December 31, 1998, made by Galveston Bay Processing
         Corporation in favor of Jefferies, the Promissory Note, dated December
         31, 1998 in the amount of $5,650,000, made by Company in favor of
         Jefferies; and any amendments or supplements to the foregoing as of the
         date hereof.

                  "Jefferies Lien" shall mean pledge of the stock of Galveston
         Bay Processing Corporation owned by Company in favor of Jefferies as
         security for Company"s obligations to Jefferies under the Jefferies
         Documentation.

                  "Lands" shall have the meaning set forth in the Mortgage.

                  "Leases" shall have the meaning set forth in the Mortgage.

                  "Mortgage" shall mean, collectively, those certain Mortgages,
         Deeds of Trust, Assignments of Production, Security and Financing
         Statements executed by Company for the benefit of Secured Party to
         grant a Lien on Company"s real property and/or Hydrocarbons, or any
         interest therein, to secure all of the Obligations.

                  "Obligations" shall mean and include (i) all obligations of
         Company to the Secured Party under the Notes, whether such obligations
         are now existing or hereafter arising, and all renewals, extensions,
         amendments, supplements and rearrangements thereof, and (ii) payment
         and performance of all covenants and conditions by Company contained
         herein and in the Indenture and each of the other Security Documents in
         each case whether for principal, interest, prepayment premium, taxes,
         costs, losses, compensation, reimbursements, fees, expenses or any
         other amount payable to the Secured Party under the terms of such
         documents and/or this Agreement and whether such obligations are now
         existing or hereafter arising.

                  "Oil and Gas Leases" shall include oil, gas and mineral leases
and shall also include subleases and assignments of operating rights.

                  "Pipelines" shall mean the Pipeline Assets and all pipelines
owned and/or operated by Company for the gathering, transmission or distribution
of Hydrocarbons, and any interests in real property relating thereto.

                  "Pipeline Assets" shall mean all parts or aspects of the gas
pipeline system of Company now or hereafter situated on any of the Lands, or the
Rights-of-Way and Franchises, and all fixtures, improvements, equipment, surface
or subsurface machinery, facilities, supplies, replacement parts, vehicles of
every description, all process control computer systems and equipment or other
property of whatsoever kind or nature, including, without limitation, all
buildings,

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structures, machinery, gas processing plants, Pipelines, stations, substations,
compression or dehydration equipment, pumps, pumping stations, meter houses,
metering stations, regulator houses, ponds, tanks, scrapers and scraper traps,
fittings, valves, connections, cathodic or electrical protection by-passes,
regulators, drips, meters, pumps, pumping units, pumping stations, storage or
tankage facilities, engines, pipes, gates, telephone and telegraph lines,
electric power lines, poles, wires, casings, radio towers, fixtures, mechanical
equipment, electrical equipment, computer equipment and software, machine shops
and other equipment, used or useful in connection therewith; together with all
of Company's liquid hydrocarbons, carbon dioxide, natural gas liquids, refined
petroleum products and other inventory fuels, carbon, chemicals, electric energy
and other consumable materials or products manufactured, processed, generated,
produced, transmitted, stored (whether above or below ground) or purchased by
Company for sale, exchange, distribution, consumption or transmission by
Company, including, without limitation, all system gas, drip gas and line fill.

                  "Production Sale Contracts" shall mean, except to the extent
that the same constitute Receivables, all contracts now or hereafter in effect,
including, without limitation, any gas sales contracts, entered into by Company,
or Company's predecessors in interest, for the production, sale, purchase,
exchange or processing of Subject Minerals (as defined in the Mortgage),
including - but not limited to - any of the foregoing contracts listed on
Schedule 1, Exhibit D, and the Contract Rights related thereto.

                  "Pledged Securities" shall have the meaning assigned to that
term in Section 2 of this Agreement.

                  "Receivables" shall mean and include, as to any person, any
and all of such Person's now owned or hereafter acquired Accounts, all products
and proceeds thereof, and all books, records, ledgers cards, files,
correspondence, and computer files, tapes, disks or software that at any time
evidence or contain information relating to such Person's Accounts.

                  "Rights-of-Way and Franchises" shall mean all leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or rights,
amendatory grants and interests in land for the installation, maintenance and
operation of the Pipelines or the Pipeline Assets or any portion thereof, now or
hereafter owned or held by Company, including, without limitation, those leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or rights,
amendatory grants and interests in land applicable to the Pipelines or the
Pipeline Assets owned or held by Company and those leases, leaseholds,
easements, rights-of-way, licenses, franchises, privileges, permits, ordinances,
grants, rights, consents, servitudes, surfaces leases or rights, amendatory
grants and interests in land owned or held by Company and described in the
Mortgage.

Security&Pledge Agmt - Indenture v.3

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                  "Subject Interests" shall mean each kind and character of
right, title, interest or estate, whether now owned or hereafter acquired, which
the Company has in, under or to the Leases and all right, title, interest or
estate, whether now owned or hereafter acquired, which the Company has in and to
the Lands, together with each kind and character of right, title, interest or
estate now or hereafter vested in the Company in and to any and all overriding
royalty interests, mineral interests, leasehold interests, mineral rights,
royalty interests, net profits interests, oil payments, production payments,
carried interests and all other properties or interests of every kind or
character which relate to any of the Lands or Leases, whether such right, title,
interest or estate be under and by virtue of a Lease, a unitization or pooling
agreement, a unitization or pooling order, a mineral deed, a royalty deed, an
operating agreement, a revenue sharing agreement, a division order, a transfer
order, a farmout agreement, a fee simple conveyance or any other type of
contract, conveyance or instrument or under any other type of claim or title,
legal or equitable, recorded or unrecorded, all as the same shall be enlarged by
the discharge of any payments out of production or by the removal of any charges
or encumbrances to which any of same are subject.

                  "UCC" means the Uniform Commercial Code as in effect in the
State of New York.

                  "UCC Collateral" shall have the meaning assigned to that term
in Section 2 of this Agreement.

                  "Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.

                  (b) All terms used in this Agreement which are defined in the
         UCC, other than those which are defined in the Indenture or
         specifically defined in Section 1(a) above, shall have the same meaning
         herein as in the UCC.

         Section 2. Grant of Security Interest.

                  (a) Company hereby grants to the Secured Party, to secure the
         payment and performance in full of the Obligations, a security interest
         in and a lien on and so pledges and assigns to the Secured Party all of
         Company's right, title and interest in, to and under any and all of the
         following described property, assets and rights, in each case, wherever
         located, whether now owned or hereafter acquired or arising, except to
         the extent the same constitutes Inventory or Receivables, all
         accessions and additions thereto, all substitutions and replacements
         therefor, and all proceeds and products thereof and assigns all rights
         in and to all collateral securing the following described property,
         assets and rights:

                           (i)   all Equipment;

                           (ii)  all General Intangibles;

                           (iii) all Investment Property;

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                           (iv) all Subject Interests, the Subject Minerals and
                  Hydrocarbons;

                           (v) all Contract Rights and Production Sale
                  Contracts;

                           (vi) all Leases and the Lands;

                           (vii) all Pipelines;

                           (viii) all Pipeline Assets;

                           (ix) all Rights-of-Way and Franchises;

                           (x) all unitization, communitization, operating
                  agreements, pooling agreements and declarations of pooled
                  units and the properties covered and the units created thereby
                  (including all units formed under orders, regulations, rules
                  or other official acts of any federal, state or other
                  governmental agency providing for pooling or unitization,
                  spacing orders or other well permits and other instruments)
                  which relate to or affect all or any portion of the Subject
                  Interests;

                           (xi) all contract rights, operating rights, general
                  intangibles, chattel paper, documents and instruments, whether
                  arising under any of the foregoing or otherwise, including
                  without limitation, the Production Sale Contracts and all
                  transmission contracts or other contracts now or hereafter in
                  effect with respect to the Pipelines or the Pipeline Assets;

                           (xii) all subleases, farmout agreements, assignments
                  of interests, assignments of operating rights, contracts,
                  operating agreements, bidding agreements, advance payment
                  agreements, rights-of-way, surface leases, franchises,
                  servitudes, privileges, permits, licenses, easements,
                  tenements, hereditaments, improvements, appurtenances and
                  benefits now existing or in the future obtained and incident
                  and appurtenant to any of the foregoing;

                           (xiii) all lease records, well records, production
                  records and accounting and other records and files which
                  relate to any of the foregoing, and all maps, data bases,
                  manuals, information and data which relate to any of the
                  foregoing, including without limitation engineering,
                  geological and geophysical data;

                           (xiv) all income, revenues, rents, profits and
                  proceeds arising out of the gathering, transportation,
                  processing or sale of Hydrocarbons through the Pipelines and
                  other accounts, contract rights, operating rights, general
                  intangibles, chattel paper, documents, investment property and
                  instruments arising under any of the foregoing;


Security&Pledge Agmt - Indenture v.3

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                           (xv) any liens and security interests in the Subject
                  Interests in favor of Company securing payment of proceeds
                  from the sale of the Subject Minerals including, but not
                  limited to, those liens and security interests provided for in
                  Tex. Bus. & Com. Code Ann. Section 9.319 (Tex. UCC)
                  (Vernon 1968), as amended;

                           (xvi) all other rights, titles and interests of
                  Company in, to and under or derived from the Lands, the
                  Leases, the Rights-of-Way and Franchises, the Production Sale
                  Contracts and/or other properties described in the Mortgage;

                           (xvii) any property that may from time to time
                  hereafter, by delivery or by writing of any kind executed by
                  or on behalf of Company, be subjected to the lien and security
                  interest hereof by Company or by anyone authorized on
                  Company's behalf, and Secured Party is hereby authorized to
                  receive the same as additional security;

                           (xviii) all other property of every nature and kind
                  and wheresoever situated, now owned or hereafter acquired by
                  Company or to which Company is now or may hereafter be
                  entitled at law or in equity; and

                           (xix) any and all proceeds, returns, rents,
                  royalties, issues, profits, products, revenues and other
                  income (other than Inventory or Receivables) arising from or
                  by virtue of the sale, lease or other disposition of, or from
                  any condemnation, eminent domain or insurance payable with
                  respect to damage, loss or destruction of, the items described
                  in subparagraphs (i) through (xviii) above;

         together with any and all increases, substitutions, replacements,
         renewals, additions, amendments and accessions of, to and for all of
         the foregoing property. All the aforesaid properties, rights and
         interests which are hereby subjected to the lien and/or security
         interest of this instrument, together with any additions thereto which
         may be subjected to the lien and/or security interest of this paragraph
         (a) by means of supplements hereto or otherwise shall hereinafter be
         referred to as the "UCC Collateral" (UCC Collateral excludes Inventory
         and Receivables).

                  (b) Company also pledges to the Secured Party, and grants to
         the Secured Party a security interest in all of Company's right, title
         and interest in, to and under any and all of the following described
         property, rights and interests, in each case, wherever located, whether
         now owned or hereafter acquired or arising, all accessions and
         additions thereto, all substitutions and replacements therefor, and all
         proceeds and products thereof (collectively, the "Pledged Securities"):

                           (i) all of the issued and outstanding shares of
                  common stock of any Subsidiary of Company organized in the
                  United States, whether such Subsidiary is


Security&Pledge Agmt - Indenture v.3

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                  presently existing or hereafter created or acquired
                  (collectively the "Pledged Subsidiaries"), including without
                  limitation, each of the Pledged Subsidiaries and shares of
                  common stock identified on Schedule 2(b) attached hereto.

                           (ii) all other shares of common stock or other equity
                  securities now or hereafter acquired by Company in any manner
                  issued by the Pledged Subsidiaries, and the certificates
                  representing such securities, and any present or future
                  options, warrants or other rights to subscribe for or purchase
                  any property described in Schedule 2(b) or any notes, bonds,
                  debentures or other evidences of indebtedness now or hereafter
                  owned or acquired by Company in any manner that (A) are at any
                  time convertible, exchangeable or exercisable into capital
                  stock or other equity securities of the Pledged Subsidiaries
                  or (B) have or at any time could by their terms have voting
                  rights with respect to any matter affecting the Pledged
                  Subsidiaries and all securities, certificates and instruments
                  representing or evidencing ownership of any of the property
                  described in Schedule 2(b) hereof; and

                           (iii) all proceeds and products of the foregoing and
                  distributions thereof or with respect thereto, including
                  without limitation dividends, distributions, cash, instruments
                  and other property or securities, now or hereafter at any time
                  or from time to time received or receivable or otherwise
                  distributed or distributable in respect of or in exchange for
                  any or all of the foregoing.

                  Subject to any Permitted Liens, Company has endorsed, assigned
         and delivered to the Secured Party or such other Person that the
         Secured Party has designated as its agent to hold for perfection
         purposes all negotiable or non-negotiable instruments (including
         certificated securities) and chattel paper pledged by it hereunder,
         together with instruments of transfer or assignment duly executed in
         blank as the Secured Party may have specified. In the event that
         Company shall, after the date of this Agreement, acquire any other
         negotiable or non-negotiable instruments (including certificated
         securities) or chattel paper to be pledged by it hereunder, Company
         shall, subject to any Permitted Liens, forthwith endorse, assign and
         deliver the same to the Secured Party, accompanied by such instruments
         of transfer or assignment duly executed in blank as the Secured Party
         may from time to time specify. To the extent that any securities are
         uncertificated, appropriate book-entry transfers reflecting the pledge
         of such securities created hereby have been or, in the case of
         uncertificated securities hereafter acquired by Company, will at the
         time of such acquisition be, duly made for the account of the Secured
         Party or one or more nominees of the Secured Party with the issuer of
         such securities or other appropriate book-entry facility or financial
         intermediary, with the Secured Party having at all times the right to
         obtain definitive certificates (in the Secured Party's name or in the
         name of one or more nominees of the Secured Party) where the issuer
         customarily or otherwise issues certificates, all to be held as
         Collateral hereunder. Company hereby acknowledges that the Secured
         Party may, in its discretion, appoint one or more financial
         institutions to act as the Secured Party's agent in holding in
         custodial accounts instruments or other financial assets, including
         securities, in which the Secured Party is


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         granted a security interest hereunder, including, without limitation,
         certificates of deposit and other instruments evidencing short term
         obligations.

                  (c) Without limiting the security interest granted hereby,
         Company hereby grants to Secured Party a limited license in Company's
         trade names, trademarks and service marks, together with Company's
         goodwill associated with such trade names, trademarks and service
         marks, for purposes of allowing Secured Party to use the same in
         connection with any foreclosure sale or any other disposition pursuant
         to the UCC or this Agreement.

                  (d) The inclusion of proceeds in this Agreement does not
         authorize Company to sell, dispose of or otherwise use the Collateral
         in any manner not specifically authorized hereby or under the
         Indenture.

                  (e) This Agreement secures the prompt and complete payment of
         all Obligations.

         Section 3. Representations and Warranties. Company represents and
warrants, as of the date hereof, to the Secured Party as follows:

                  (a) The chief executive office and principal place of business
         of Company is located at 1300 N. Sam Houston Parkway East, Suite 310,
         Houston, Harris County, Texas 77032. Any and all Collateral not
         delivered to the Secured Party or its designated agent is and will
         continue to be located only in the States of Texas, Louisiana, Alabama,
         Mississippi and North Dakota or other states wherein the security
         interests hereunder are perfected.

                  (b) Company is the legal and beneficial owner of all of the
         Collateral free and clear of any lien, security interest, charge or
         encumbrance of any kind or nature, except with respect to all
         Collateral other than the Pledged Securities for the lien and security
         interest created hereby and Permitted Liens and except with respect to
         the Pledged Securities, the lien and security interest created hereby,
         the lien and security interest granted to the Post-Confirmation Credit
         Facility Agent and the Jefferies Lien, and has not made any other
         pledge, assignment, mortgage, hypothecation or transfer of the
         Collateral except as permitted hereunder or under the Indenture. Except
         for such permitted liens, the Collateral taken as a whole is free from
         any material credit, deduction, allowance, defense, dispute, setoff or
         counterclaim and there is no material extension or indulgence with
         respect thereto. The Pledged Securities are not subject to any put,
         call, option or other right in favor of any other person whatsoever.

                  (c) The Pledged Securities are accurately described in
         Schedule 2(b) hereto and have been duly authorized and validly issued
         and are fully paid and non-assessable.

                  (d) This Agreement has been duly authorized, executed and
         delivered by Company and creates a valid and enforceable security
         interest in, and lien on, the Collateral securing the payment of the
         Obligations. Upon the delivery of physical certificates


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         evidencing the Pledged Securities to the Secured Party or its
         designated agent and the making of the filings and the taking of all
         other actions necessary to perfect the security interests created
         hereby, including, without limitation, those actions specified in
         Section 2(b) and Section 4, the security interests created by this
         Agreement are duly perfected security interests subject to no equal or
         prior lien, security interest or encumbrance of any kind or nature
         other than the Permitted Liens.

                  (e) Company has the requisite corporate power and authority to
         pledge the Collateral in the manner hereby done or contemplated and to
         defend its title thereto against the lawful claims of all persons
         whomsoever.

                  (f) Neither the execution and delivery of this Agreement by
         Company, the performance by Company of its obligations hereunder, nor
         the transactions herein contemplated will (i) violate Company's charter
         or bylaws, (ii) violate the terms of any agreement, indenture,
         mortgage, deed of trust, equipment lease, instrument or other document
         to which Company is a party, (iii) violate any law, order, rule or
         regulation applicable to Company of any court or any government,
         regulatory body or administrative agency or other governmental body
         having jurisdiction over Company or its properties, or (iv) result in
         or require the creation or imposition of any lien (other than the lien
         contemplated hereby), upon or with respect to any of the property now
         owned or hereafter acquired by Company, which violation or conflict
         would have a material adverse effect on the financial condition,
         business, assets or liabilities of Company or on the value of the
         Collateral or a material adverse effect on the security interests
         hereunder.

                  (g) The Pledged Securities includes the issued and outstanding
         shares of Common Stock of the Pledged Subsidiaries as described in
         Schedule 2(b) attached hereto, and as of the date of execution hereof,
         there are no outstanding options, warrants or other rights to subscribe
         for or purchase any property described in Schedule 2(b) or any notes,
         bonds, debentures or other evidences of indebtedness that (i) are at
         any time convertible into capital stock of the Pledged Subsidiaries or
         (ii) have or at any time could by their terms have voting rights with
         respect to any matters affecting the Pledged Subsidiaries.

                  (h) No consent or approval which has not been obtained prior
         to the date hereof of any other person or entity and no authorization,
         approval or other action (other than delivery of physical certificates
         evidencing the Pledged Securities) by, and no notice to or filing with
         any governmental body (other than UCC filings), regulatory authority or
         securities exchange, was or is necessary as a condition to the validity
         of the pledge hereunder of the Collateral, and such pledge is effective
         to vest in the Secured Party the rights of the Secured Party in the
         Collateral as set forth herein. There are no restrictions on the
         transferability of any of the Collateral transferred or delivered by
         Company hereunder or, except for restrictions related to federal and
         state securities laws governing the sale of "restricted stock" or
         "control stock," with respect to the foreclosure, transfer or
         disposition thereof by the Secured Party.


Security&Pledge Agmt - Indenture v.3

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                  (i) As of the date hereof, Galveston Bay Processing
         Corporation and Galveston Bay Pipeline Corporation are the only
         Material Subsidiaries of Company.

                  Section 4. Covenants. During the term of this Agreement and
         until all the Obligations have been fully and finally paid and
         discharged in full, Company covenants and agrees with the Secured Party
         that:

                  (a) Except as permitted by the Indenture or in the ordinary
         course of business, Company will not make any compromise or settlement
         with respect to the Collateral without notice to or consent of the
         Secured Party.

                  (b) Subject to the Permitted Liens, Company shall deliver to
         the Secured Party or its designated agent concurrently with the
         execution of this Agreement or, to the extent acquired subsequent to
         the date of execution hereof, including without limitation Pledged
         Securities issued by a newly created or acquired Pledged Subsidiary,
         immediately upon Company's creation or acquisition thereof: (i) all
         certificates and instruments representing the Pledged Securities and a
         revised Schedule 2(b), and (ii) all certificates and instruments
         representing each other item of Collateral (including all certificates,
         instruments and notes representing any such UCC Collateral). Any and
         all Pledged Securities delivered to the Secured Party or its designated
         agent shall be accompanied by undated duly executed powers in blank and
         by such other instruments of transfer or documents as the Secured Party
         may reasonably request. The Secured Party may hold the certificates
         representing the Pledged Securities delivered to it in its own name or
         in the name of its nominee, all in form and substance satisfactory to
         the Secured Party.

                  (c) From time to time, Company shall, at its own expense,
         promptly give, execute, deliver, file and/or otherwise formalize any
         such notice, statement, instrument, document, agreement or other
         papers, and do all such other acts and things, as may be necessary or
         desirable, or as the Secured Party may reasonably request, in order to
         create, evidence, preserve, perfect, validate or continue any lien or
         security interest created pursuant to this Agreement or to enable the
         Secured Party to exercise or enforce its rights hereunder with respect
         to such lien or security interest, or otherwise further to effect the
         purposes of this Agreement. Without limiting the generality of the
         foregoing, Company shall, at any time or from time to time upon the
         request of the Secured Party and at Company's own expense, execute,
         acknowledge, witness, deliver, file and/or record such financing and
         continuation statements, notices, additional assignments and other
         documents or instruments (all of which shall be in form and substance
         satisfactory to the Secured Party and its counsel) as the Secured Party
         may from time to time reasonably request for the perfection of the
         liens and security interests created hereby.

                  (d) Company shall promptly notify the Secured Party (i) of any
         material changes in any fact or circumstance represented or warranted
         by Company with respect to any


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                                       11
<PAGE>   12

         material portion of the Collateral, (ii) of any material impairment of
         the Collateral and (iii) of any claim, action or proceeding affecting
         title to all or any of the Collateral.

                  (e) Except for the liens and security interests created by
         this Agreement and the other Liens in the Collateral expressly
         permitted by this Agreement, Company shall at its own expense defend
         the Collateral against any and all liens, claims, security interests
         and other encumbrances or interests, howsoever arising and shall
         maintain and preserve the security interest granted hereunder with
         respect to the Collateral as long as this Agreement shall remain in
         full force and effect. Company shall not make any other pledge,
         assignment, mortgage, hypothecation or transfer of the Collateral
         except as permitted hereunder or under the Indenture.

                  (f) Company shall at all times keep accurate and complete
         records with respect to the Collateral, including, without limitation,
         records of all payments made, credit granted and proceeds received in
         connection therewith.

                  (g) Company shall not relocate its principal place of business
         or chief executive office to a county or state other than that
         specified in Section 3(a) of this Agreement unless Company gives 30
         days' prior written notice to the Secured Party, which notice shall
         specify the county and state into which such relocation is to be made.
         The Collateral, to the extent not delivered to the Secured Party
         pursuant to Section 2, will be kept at those locations listed in the
         Order of Furtherance of Confirmation, dated March 14, 2000, and filed
         with the Court, and Company will not remove the Collateral from such
         locations, without providing at least 30 days' prior written notice to
         the Secured Party.

                  (h) Company will keep the Collateral in good order and repair,
         except in situations where not to do so would not be material, and will
         not use the same in violation of law or any policy of insurance
         thereon. The Secured Party, or its designee, may inspect the Collateral
         at any reasonable time, wherever located.

                  (i) The Secured Party, or its representative, shall at all
         times have full and free access during normal business hours to all of
         the books, correspondence and records of Company relating to the
         Collateral (other than information that is privileged and confidential)
         and the Secured Party and its representatives may examine the same,
         make abstracts therefrom and make photocopies thereof, and Company
         agrees to render to the Secured Party, at Company's cost and expense,
         such clerical and other assistance as may be reasonably requested by
         the Secured Party with regard thereto.

                  (j) Company shall not permit any of the Pledged Subsidiaries
         to issue to Company or any other Person any securities of the type
         required to be pledged hereunder unless such securities are promptly
         pledged and delivered hereunder to the Secured Party or its designated
         agent in accordance with Section 2(b).



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                                       12
<PAGE>   13




                  (k) If, while this Agreement is in effect, any stock dividend,
         stock split, reclassification, readjustment, reorganization, merger,
         consolidation, exchange offer, tender offer or other change in the
         capital structure, including the creation of any subscription or other
         rights relating to the Pledged Securities, is declared or made, or
         proposed to be declared or made, by any of the Pledged Subsidiaries or
         any other issuer of the Collateral, all substituted and additional
         securities or interest issued with respect to the Collateral and
         evidenced by certificates shall be endorsed in blank by Company
         promptly upon receipt thereof or otherwise appropriately transferred to
         the Secured Party in negotiable form, and all certificates or
         instruments evidencing such securities shall be delivered to the
         Secured Party to be held under the terms of this Agreement in the same
         manner as, and as a part of, the Collateral. All Pledged Securities
         shall be evidenced by one or more certificates. Any securities that may
         be issued upon exercise of any subscription or other rights relating to
         the Pledged Securities shall be endorsed in blank and delivered to the
         Secured Party with any necessary powers.

         Section 5. Powers of the Secured Party.

                  (a) Company hereby irrevocably designates and appoints the
         Secured Party as its attorney-in-fact, with full power of substitution,
         for the purposes of carrying out the provisions of this Agreement and
         taking any action and executing any instrument, including, without
         limitation, any financing statement or continuation statement, and
         taking any other action to maintain the validity, perfection, priority
         and enforcement of the security interest intended to be created
         hereunder, that the Secured Party may reasonably deem necessary or
         advisable to accomplish the purposes hereof, which appointment as
         attorney-in-fact is irrevocable and coupled with an interest.

                  (b) Without limiting the generality of Section 5(a) hereof,
         Company hereby irrevocably authorizes and empowers the Secured Party,
         upon the occurrence and during the continuation of any Event of
         Default, at the expense of Company, either in the Secured Party"s own
         name or in the name of Company, at any time and from time to time:

                           (i) to ask, demand, receive, issue a receipt for,
                  give acquittance for, settle and compromise any and all monies
                  which may be or become due or payable or remain unpaid at any
                  time or times to Company, and any and all other property which
                  may be or become deliverable at any time or times to Company,
                  under or with respect to the Collateral;

                           (ii) to endorse any drafts, checks, orders or other
                  instruments for the payment of money payable to Company on
                  account of the Collateral (including any such draft, check,
                  order or instrument issued by any insurance company payable
                  jointly to Company and the Secured Party); and


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                                       13
<PAGE>   14

                           (iii) to settle, compromise, prosecute or defend any
                  action, claim or proceeding, or take any other action, all
                  either in its own name or in the name of Company or otherwise,
                  which the Secured Party may deem to be necessary or advisable
                  for the purpose of exercising and enforcing its powers and
                  rights under this Agreement or in furtherance of the purposes
                  hereof, including any action which by the terms of this
                  Agreement is to be taken by Company.

                  (c) Nothing in this Agreement shall be construed as requiring
         or obligating the Secured Party to make any commitment or to make any
         inquiry as to the nature or sufficiency of any payment received by it,
         or to present or file any claim or notice, or to take any other action
         with respect to any of the Collateral or any part thereof or the
         amounts due or to become due in respect thereof or any property covered
         thereby, or to collect or enforce the payment of any amounts assigned
         to it or to which it may otherwise be entitled hereunder at any time or
         times other than to account for amounts or Collateral received.

                  (d) The Secured Party shall be entitled at any time to file
         this Agreement, or a carbon, photographic or any other reproduction of
         this Agreement, as a financing statement, but the failure of the
         Secured Party to do so shall not impair the validity or enforceability
         of this Agreement. The Secured Party shall have no duty to comply with
         any recording, filing or other legal requirements necessary to
         establish or maintain the validity, priority or enforceability of, or
         the Secured Party's rights in or to, any of the Collateral.

                  (e) In its discretion, the Secured Party may discharge taxes
         and other encumbrances at any time levied or placed on any of the
         Collateral, make repairs thereto and pay any necessary filing fees.
         Company agrees to reimburse the Secured Party on demand for any and all
         reasonable expenditures so made with interest on unpaid amounts at the
         maximum rate permitted by law. The Secured Party shall have no
         obligation to Company to make any such expenditures, nor shall the
         making thereof relieve Company of any default.

                  (f) Anything herein to the contrary notwithstanding, Company
         shall remain liable under each contract or agreement comprised in the
         Collateral to be observed or performed by Company thereunder. The
         Secured Party shall not have any obligation or liability under any such
         contract or agreement by reason of or arising out of this Agreement or
         the receipt by the Secured Party of any payment relating to any of the
         Collateral, nor shall the Secured Party be obligated in any manner to
         perform any of the obligations of Company under or pursuant to any such
         contract or agreement, to make inquiry as to the nature or sufficiency
         of any payment received by the Secured Party in respect of the
         Collateral or as to the sufficiency of any performance by any party
         under any such contract or agreement, to present or file any claim, to
         take any action to enforce any performance or to collect the payment of
         any amounts which may have been assigned to the Secured Party or to
         which the Secured Party may be entitled at any time or times other than
         to account for amounts or Collateral received, and no action taken or
         omitted shall give rise to any defense, counterclaim or right of action
         against the Secured Party, unless the Secured Party"s actions are taken
         or omitted

Security&Pledge Agmt - Indenture v.3


                                       14
<PAGE>   15

         to be taken with gross negligence or bad faith or constitute willful
         misconduct. The Secured Party"s sole duty with respect to the custody,
         safe keeping and physical preservation of the Collateral in its
         possession, under Section 9-207 of the UCC or otherwise, shall be to
         deal with such Collateral in the same manner as the Secured Party deals
         with similar property for its own account.

                  (g) If an Event of Default has occurred and is continuing, the
         Secured Party may at any time, at its option, transfer to itself or any
         nominee any securities constituting the Pledged Securities, receive any
         income thereon and hold such income as additional Collateral or apply
         it to the Obligations. Regardless of whether any Obligations are due,
         the Secured Party may demand, sue for, collect, or make any settlement
         or compromise which it deems desirable with respect to the Collateral.
         Regardless of the adequacy of Collateral or any other security for the
         Obligations, any deposits or other sums at any time credited by or due
         from the Secured Party to Company may at any time be applied to or set
         off against any of the Obligations.

                  (h) If an Event of Default shall have occurred and be
         continuing, Company shall, at the request of the Secured Party, notify
         obligors on chattel paper and general intangibles of Company and
         obligors on instruments for which Company is an obligee of the security
         interest of the Secured Party in any chattel paper, general intangible
         or instrument and that payment thereof is to be made directly to the
         Secured Party or to any financial institution designated by the Secured
         Party as the Secured Party's agent therefor, and the Secured Party may
         itself, if an Event of Default shall have occurred and be continuing,
         without notice to or demand upon Company, so notify said obligors.
         After the making of such a request or the giving of any such
         notification, Company shall hold any proceeds of collection of chattel
         paper, general intangibles and instruments received by Company as
         trustee for the Secured Party without commingling the same with other
         funds of Company and shall turn the same over to the Secured Party in
         the identical form received, together with any necessary endorsements
         or assignments. The Secured Party shall apply the proceeds of
         collection of chattel paper, general intangibles and instruments
         received by the Secured Party to the Obligations, such proceeds to be
         immediately entered after final payment in cash of the items giving
         rise to them.

         Section 6. Voting Rights, Dividends, Etc.

                  (a) Until an Event of Default shall have occurred and be
         continuing:

                           (i) except as otherwise provided in this Agreement,
                  Company shall be entitled to exercise any and all voting or
                  consensual rights and powers, including subscription rights,
                  in relation to the Pledged Securities; provided, however, that
                  no vote shall be cast or consent, waiver or ratification given
                  or action taken which would materially impair the securities
                  or the value thereof or violate any provision of this
                  Agreement, the Indenture or any other ancillary document;


Security&Pledge Agmt - Indenture v.3


                                       15
<PAGE>   16

                           (ii) except as otherwise provided in this Agreement,
                  Company shall be entitled to receive and retain any and all
                  dividends, distributions or other payments in respect of the
                  Pledged Securities and the Secured Party, upon receipt of any
                  of the foregoing, shall promptly pay or distribute the same to
                  Company, and, to the extent so permitted, any distributions
                  received by Company and transferred to other persons shall
                  pass free and clear of the lien and security interest hereof;
                  and

                           (iii) the Secured Party shall execute and deliver to
                  Company or cause to be executed and delivered to Company, all
                  such proxies, powers of attorney, dividend orders and other
                  instruments as Company may reasonably request for the purpose
                  of enabling it to exercise the voting or consensual rights and
                  powers which Company is entitled to exercise pursuant to the
                  foregoing Section 6(a)(i) or to receive the dividends,
                  distributions or other payments which Company is authorized to
                  retain pursuant to the foregoing Section 6(a)(ii).

                  (b) Upon the occurrence and during the continuance of an Event
         of Default, all rights of Company to exercise the voting or consensual
         rights and powers which Company would otherwise be entitled to exercise
         pursuant to Section 6(a)(i) and to receive the dividends, distributions
         and other payments which the Pledgor would otherwise be authorized to
         receive and retain pursuant to Section 6(a)(ii) shall automatically
         cease, and all such rights shall thereupon become vested in the Secured
         Party, which shall then have the sole and exclusive right and authority
         to exercise, in its sole discretion, all such voting and consensual
         rights and powers and to receive and retain as Collateral all such
         dividends, distributions and other payments, subject, however, to the
         rights of the holders of Permitted Liens. Without limiting the
         foregoing, in such event the Secured Party may exercise all voting and
         corporate rights at any meeting of any corporation issuing any such
         securities and any and all rights of conversion, exchange, subscription
         or any other rights, privileges or options pertaining to any such
         securities as if it were the absolute owner thereof, including, without
         limitation, the rights to exchange at its discretion, any and all such
         securities upon the merger, consolidation, reorganization,
         recapitalization or other readjustment of any corporation issuing any
         such securities or upon the exercise by any such issuer or the Secured
         Party of any right, privilege or option pertaining to any such
         securities, and, in connection therewith, to deposit and deliver any
         and all securities with any committee, depository, transfer agent,
         registrar or other designated agency upon such terms and conditions as
         it may determine, all without liability except to account for the
         property actually received by it, but the Secured Party shall have no
         duty to exercise any of the aforesaid rights, privileges or options and
         the Secured Party shall not be responsible for any failure to do so or
         delay in so doing.


Security&Pledge Agmt - Indenture v.3


                                       16
<PAGE>   17

         Section 7. Default.

                  (a) It shall constitute a Default or an Event of Default under
         this Agreement if a "Default" or an "Event of Default" shall occur
         under the Indenture.

                  (b) If an Event of Default shall have occurred and is
         continuing and if the Obligations are accelerated under the provisions
         of the Indenture and the Security Documents, in addition to any other
         rights and remedies that may be available to the Secured Party under
         the UCC, the Indenture, or any other Security Documents or under
         Section 5(a) or 5(b) of this Agreement or otherwise under this
         Agreement or at law, the Secured Party shall also have the following
         rights and powers:

                           (i) The Secured Party may, without being required to
                  give any notice except as hereinafter provided, sell the
                  Collateral, or any part thereof, at public or private sale,
                  for cash, upon credit or for future delivery and at such price
                  or prices as the Secured Party deems satisfactory, and the
                  Secured Party and/or its collateral agent may be the purchaser
                  of any or all of the Collateral so sold and thereafter hold
                  the same absolutely free from any right or claim of whatsoever
                  kind, and the Obligations or any portion of the Obligations
                  may be applied as a credit against the purchase price.

                           (ii) Upon any such sale, the Secured Party shall have
                  the right to deliver, assign and transfer to the purchaser
                  thereof the Collateral so sold. Each purchaser at any such
                  sale shall hold the property sold absolutely free from any
                  claim or right of whatsoever kind by or on behalf of Company,
                  including any equity or rights of redemption of Company, and
                  Company hereby specifically waives, to the full extent
                  permitted by applicable law, all rights of redemption, stay or
                  appraisal which it has or may have under any rule or law or
                  statute now existing or hereafter adopted.

                           (iii) The Secured Party shall give Company ten (10)
                  business days' written notice (which Company agrees is
                  reasonable notification within the meaning of Section 9.504 of
                  the UCC) of its intention to make any such public or private
                  sale. Such notice, in case of public sale, shall state the
                  time and place fixed for such sale and, in case of a private
                  sale, shall state the date after which such sale is to be
                  made.

                           (iv) Any such public sale shall be held at such time
                  or times within ordinary business hours and at such places as
                  the Secured Party may fix in the notices of such sale. At any
                  such sale the Collateral may be sold in one lot as an entirety
                  or in separate parcels, as the Secured Party may, in its sole
                  discretion, determine.

                           (v) The Secured Party shall not be obligated to make
                  any sale of the Collateral of any part thereof if it shall
                  determine not to do so, regardless of the fact that notice of
                  sale of the Collateral may have been given. The Secured Party
                  may, without notice or publication, adjourn any public or
                  private sale or cause the same to be adjourned from time to
                  time by announcement at the time and place fixed for the

Security&Pledge Agmt - Indenture v.3


                                       17
<PAGE>   18

                  sale, and such sale may, without further notice, be made at
                  any time or place to which the same shall be so adjourned.

                           (vi) In case of any sale of all or any part of the
                  Collateral on credit or for future delivery, the Collateral so
                  sold may be retained by the Secured Party until the selling
                  price is paid by the purchaser thereof, but the Secured Party
                  shall not incur any liability in case of the failure of such
                  purchaser to take up and pay for the Collateral so sold and,
                  in case of any such failure, such Collateral may again be sold
                  upon like notice.


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                                       18
<PAGE>   19




                           (vii) The Secured Party, instead of exercising the
                  power of sale herein conferred upon it, may proceed by a suit
                  or suits at law or in equity to exercise its remedies
                  regarding the Collateral and sell the Collateral, or any
                  portion thereof, under a judgment or decree of a court or
                  courts of competent jurisdiction.

                           (viii) Company agrees that if any Event of Default
                  shall have occurred and be continuing, then the Secured Party
                  shall have the right to take possession of the Collateral, and
                  for that purpose the Secured Party may, so far as Company can
                  give authority therefor, enter upon any premises on which the
                  Collateral may be situated and remove the same therefrom with
                  or without notice or process of law. Company waives any and
                  all rights that it may have to a judicial hearing in advance
                  of the enforcement of any of the Secured Party's rights
                  hereunder, including, without limitation, its right following
                  an Event of Default to take immediate possession of the
                  Collateral and to exercise its rights with respect thereto. To
                  the extent that any of the Obligations are to be paid or
                  performed by a person other than Company, Company waives and
                  agrees not to assert any rights or privileges which it may
                  have under Section 9-112 of the UCC.

                           (ix) If under mandatory requirements of applicable
                  law, the Secured Party shall be required to make disposition
                  of the Collateral within a period of time that does not permit
                  the giving of notice to Company as hereinbefore provided, the
                  Secured Party need give Company only such notice of
                  disposition as shall be reasonably practicable in view of such
                  mandatory requirements of law.

                           (x) The Secured Party may instruct the obligor or
                  obligors on any agreement, instrument or other obligation
                  constituting the Collateral to make any payment or render any
                  performance required by the terms of such agreement,
                  instrument or obligation directly to the Secured Party or its
                  designee.

                  (c) The Secured Party shall incur no liability as a result of
         the sale of the Collateral, or any part thereof, at any private sale
         other than for its own gross negligence, willful misconduct or bad
         faith. Company hereby waives, to the maximum extent permitted by
         applicable law, any claims against the Secured Party arising by reason
         of the fact that the price at which the Collateral may have been sold
         at such private sale was less than the price which might have been
         obtained at a public sale or was less than the aggregate amount of the
         Obligations, even if the Secured Party accepts the first offer received
         and does not offer such Collateral to more than one offeree.

                  (d) The Secured Party shall not be obligated to pursue or
         exhaust its rights and remedies against any particular Collateral or
         other security for the Obligations before pursuing or enforcing its
         rights and remedies against any other Collateral or other security for
         the Obligations.


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                                       19
<PAGE>   20

                  (e) To the extent permitted by law, Company hereby waives (i)
         any rights to require the Secured Party to proceed first against any
         other Person, to exhaust its rights in the Collateral or other security
         for the Obligations or to pursue any other right that the Secured Party
         might have, (ii) with respect to the Notes, presentment and demand for
         payment, protest, notice of protest and nonpayment, notice of dishonor,
         notice of the intention to accelerate and notice of acceleration
         (except as otherwise set forth in the Indenture), and (iii) all rights
         of marshalling in respect of any and all of the Collateral.

                  (f) Without precluding any other methods of sale, Company
         acknowledges that the sale of the Collateral shall have been made in a
         commercially reasonable manner if conducted in conformity with
         reasonable commercial practices of institutional lenders disposing of
         similar property. The Secured Party shall not be liable for any
         depreciation in the value of the Collateral.

                  (g) Company agrees that its obligation to deliver the
         Collateral is of the essence of this Agreement and that accordingly,
         upon application to a court of equity having jurisdiction, the Secured
         Party shall be entitled to a decree requiring specific performance by
         Company of such obligation.

                  (h) Remedies of the Secured Party are cumulative and the
         exercise of any one or more of the remedies provided herein shall not
         be construed as a waiver of any of the other remedies of the Secured
         Party.

                  (i) If an Event of Default shall have occurred and be
         continuing, the proceeds of any sale of or other realization upon all
         or any part of the Collateral and any other amounts held by the Secured
         Party under this Agreement shall be applied by the Secured Party as
         provided in the Indenture.

                  Any amounts remaining after such applications and the payment
in full of the Notes with respect to the Obligations shall be remitted to
Company, its successors or assigns, or as a court of competent jurisdiction may
otherwise direct.

         Section 8. General Provisions.

                  (a) Continuing Security Interest; Binding Effect. This
         Agreement shall create a continuing security interest in the Collateral
         and shall (a) remain in full force and effect until termination of the
         obligations of Company under the Indenture and the indefeasible payment
         in full thereafter of the Obligations; (b) be binding upon Company and
         its successors and assigns; and (c) inure to the benefit of the Secured
         Party and its successors, transferees and assigns. Without limiting the
         generality of the foregoing clause (c), the Secured Party may assign or
         otherwise transfer any of its rights under this Agreement to any other
         Person, and such Person shall thereupon become vested with all the
         benefits in respect thereof granted herein or otherwise to the Secured
         Party. Upon the termination of the obligations of the


Security&Pledge Agmt - Indenture v.3

                                       20
<PAGE>   21
         Secured Party under the Indenture and the indefeasible payment in full
         thereafter of the Obligations, Company shall be entitled to the return,
         upon its request and at its expense, of such of the Collateral as is in
         the Secured Party's possession and as shall not have been sold or
         otherwise disposed of pursuant to the terms hereof.

                  (b) Security Interest Absolute. The lien and security interest
         created hereunder and Company's obligations hereunder and the Secured
         Party's rights hereunder shall not be released, diminished, impaired or
         adversely affected by the occurrence of any one or more of the
         following events:

                           (i) The taking or accepting of any other security or
                  assurance for any or all of the Obligations;

                           (ii) Any release, surrender, exchange, subordination
                  or loss of any security or assurance at any time existing in
                  connection with any or all of the Obligations;

                           (iii) The modification of, amendment to, or waiver of
                  compliance with any terms of the Indenture or the Notes;

                           (iv) Any renewal, extension and/or rearrangement of
                  the payment of any or all of the Obligations or any statement,
                  indulgence, forbearance or compromise that may be granted or
                  given by the Secured Party to Company or any other Person;

                           (v) any neglect, delay, omission, failure or refusal
                  of the Secured Party to take or prosecute any action in
                  connection with any agreement, document or other instrument
                  evidencing, securing or assuring the payment of any or all of
                  the Obligations;

                           (vi) the illegality, invalidity or unenforceability
                  of all or any part of the Indenture or the Notes; or

                           (vii) any other circumstance (other than payment in
                  full of the Obligations) that might otherwise constitute a
                  defense available to, or a discharge of, Company or any party
                  to any document in respect of the Obligations.

                  (c) Amendments. This Agreement or any term hereof may be
         amended or changed only by an instrument in writing executed jointly by
         Company and the Secured Party and in accordance with the Indenture.

                  (d) Remedies Cumulative. Each right, power and remedy herein
         specifically granted to the Secured Party or otherwise available to it
         or now or hereafter existing in law or in equity shall be cumulative
         and concurrent, and shall be in addition to every other right,

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                                       21
<PAGE>   22

         power and remedy herein specifically given or now or hereafter existing
         at law, in equity, or otherwise (including, without limitation, all
         rights, powers and remedies granted to a secured party under the UCC),
         and each such right, power and remedy, whether specifically granted
         herein or otherwise existing, may be exercised at any time and from
         time to time as often and in such order as may be deemed expedient by
         the Secured Party in its sole and complete discretion. The provisions
         of this Agreement may only be waived by an instrument in writing signed
         by the Secured Party, and no failure on the part of the Secured Party
         to exercise, and no delay in exercising, and no course of dealing with
         respect to, any such right, power or remedy, shall operate as a waiver
         thereof, nor shall any single or partial exercise of any such right,
         power or remedy preclude any other or further exercise thereof or the
         exercise of any other right. No notice to or demand on Company
         hereunder shall, of itself, entitle Company to any other or further
         notice or demand in the same or similar circumstances.

                  (e) Assignment. Neither this Agreement nor any interest herein
         or in the Collateral, or any part thereof, may be assigned by Company
         without the prior written consent of the Secured Party, except as
         expressly permitted herein or in the Indenture.

                  (f) Headings. The descriptive headings of the several sections
         of this Agreement are inserted for convenience only and shall not
         control or affect the meaning or construction of any of the provisions
         hereof.

                  (g) Severability. Any provision of this Agreement that 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
         or affecting the validity of enforceability or such provision in any
         other jurisdiction.

                  (h) Survival. All representations and warranties contained
         herein, in the Indenture or made in writing by Company in connection
         herewith or therewith, shall survive the execution and delivery of this
         Agreement, the Indenture and any documents executed in connection
         herewith or therewith.

                  (i) Counterparts and Facsimiles. This Agreement may be
         executed in any number of counterparts and by different parties in
         separate counterparts, each of which when so executed and delivered
         shall be deemed to be an original, but all of which when taken together
         shall constitute one and the same instrument. A complete set of
         counterparts shall be lodged with the Secured Party. Any signature
         delivered by fax shall be deemed an original signature hereto.

                  (j) Waiver. To the extent permitted by applicable law Company
         hereby waives promptness, diligence, notice of acceptance and any other
         notice with respect to any of the Indenture obligations and this
         Agreement and any requirement that the Secured Party protect, secure,
         perfect or insure any security interest or any property subject thereto
         or exhaust any


Security&Pledge Agmt - Indenture v.3


                                       22
<PAGE>   23

         right or take any action against Company or any other person or entity;
         provided however, that the Secured Party shall in any event take such
         care in the handling of any Collateral in its possession as it takes
         with respect to its own property of a similar nature in its possession.

                  (k) Notices. Any notices or other communications required or
         permitted hereunder shall be made in the manner provided in the
         Indenture.

                  (l) Conflicting Terms. In the event of any conflict or
         inconsistency between the terms, covenants, conditions and provisions
         set forth in this Agreement and the terms, covenants, conditions and
         provisions set forth in the Indenture, the terms, covenants, conditions
         and provisions of the Indenture shall prevail.

                  (m) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
         CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
         REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE
         NEW YORK GENERAL OBLIGATIONS LAW. THE COMPANY HEREBY IRREVOCABLY
         SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE
         BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT
         SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT
         OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
         AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
         PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
         COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
         EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION
         THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
         SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
         THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
         BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY IRREVOCABLY
         CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
         APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
         COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
         THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
         COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS
         AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
         SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
         TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
         IN ANY OTHER JURISDICTION.

                  IN WITNESS WHEREOF, Company and the Secured Party have
executed this Agreement as of the date first above written.

Security&Pledge Agmt - Indenture v.3


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<PAGE>   24

                                         TRANSTEXAS GAS CORPORATION


                                         By:
                                               ---------------------------------

                                         Name:
                                               ---------------------------------

                                         Title:
                                               ---------------------------------



                                         FIRSTAR BANK, N.A., as TRUSTEE



                                         By:
                                               ---------------------------------

                                         Name:
                                               ---------------------------------

                                         Title:
                                               ---------------------------------



Security&Pledge Agmt - Indenture v.3

                                       24