Exhibit 10.6


 


PLEDGE AGREEMENT


 


THIS PLEDGE AGREEMENT dated as of November 29,
2005 (this “Pledge Agreement”) is by and among CANO PETROLEUM, INC., a
Delaware corporation (“Borrower”), each subsidiary of the Borrower
signatory hereto (together with the Borrower, the “Pledgors” and
individually, each a “Pledgor”) and Union Bank of California, N.A. as
collateral trustee (in such capacity the “Collateral Trustee”) under the
Collateral Trust Agreement (as hereinafter defined), for its benefit and the
benefit of the Secured Parties (as hereinafter defined).


 


RECITALS


 


A.                                   The Borrower, the
lenders party thereto from time to time (the “Senior Lenders”), Union
Bank of California, N.A., as issuing lender (in such capacity, the “Issuing
Lender”) and as administrative agent for such Senior Lenders (in such
capacity, the “Senior Agent”), have entered into that certain Credit
Agreement dated of even date herewith (as it may be amended, restated,
supplemented or otherwise modified from time to time, the “Senior Credit
Agreement”).


 


B.                                     The Borrower, the
lenders party thereto from time to time (the “Subordinated Lenders”),
and Energy Components SPC EEP Energy Exploration and Production Segregated
Portfolio, as administrative agent for such Subordinated Lenders (in such
capacity, the “Subordinated Agent”) have entered into that certain
Subordinated Credit Agreement dated of even date herewith (as it may be
amended, restated, supplemented or otherwise modified from time to time, the “Subordinated
Credit Agreement”), and together with the Senior Credit Agreement, the “Master
Debt Agreements”).


 


C.                                     In connection with
the Master Debt Agreements, the Borrower or any of its subsidiaries may from
time to time enter into one or more Hedge Contracts (as defined in the Senior
Credit Agreement) with a Senior Lender or any of its affiliates (each such
counterparty, a “Swap Counterparty”, and together with the Collateral
Trustee, the Senior Agent, the Issuing Lender, the Senior Lenders, the
Subordinated Agent and the Subordinated Lenders, the “Secured Parties”).


 


D.                                    In
order to, among other things, appoint the Collateral Trustee as collateral
trustee for all of the Secured Parties under the security documents executed in
connection with the Master Debt Agreements, including this Pledge Agreement,
and to set forth the rights and remedies of the Secured Parties with respect
thereto, the Senior Agent, the Senior Lenders, the Subordinated Agent, the
Subordinated Lenders, the Collateral Trustee, the Borrower, and the other
parties thereto, have entered into that certain Collateral Trust and
Intercreditor Agreement dated of even date herewith (as it may be amended,
restated, supplemented or otherwise modified from time to time, the “Collateral
Trust Agreement”).


 


E.                                      It is a condition
precedent to the extension of credit to the Borrower under the Master Debt
Agreements that the Pledgors and the Collateral Trustee, on behalf of the
Secured Parties, execute and deliver this Pledge Agreement.


 


F.                                      Each Pledgor
(other than the Borrower) is a subsidiary of the Borrower, and therefore shall
derive direct and indirect benefits from the transactions contemplated by the
Master Debt Agreements.


 


1





















 


AGREEMENT


 


NOW, THEREFORE, in consideration of the
foregoing and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed, each Pledgor hereby
agrees with the Collateral Trustee for the benefit of the Secured Parties as
follows:


 


Section 1.  Definitions.  All capitalized terms not otherwise defined
in this Pledge Agreement that are defined in the Collateral Trust Agreement
shall have the meanings assigned to such terms by the Collateral Trust
Agreement.  Any terms used in this Pledge
Agreement that are defined in the Uniform Commercial Code in effect in the
State of Texas from time to time (the “UCC”) and not otherwise defined herein
or in the Collateral Trust Agreement, shall have the meanings assigned to those
terms by the UCC.  Any terms used in this
Pledge Agreement that are not otherwise defined herein, in the UCC or in the
Collateral Trust Agreement shall have the meanings assigned to those terms by
in the Senior Credit Agreement.  All
meanings to defined terms, unless otherwise indicated, are to be equally
applicable to both the singular and plural forms of the terms defined.  Article, Section, Schedule, and Exhibit references
are to Articles and Sections of and Schedules and Exhibits to this Pledge
Agreement, unless otherwise specified. 
All references to instruments, documents, contracts, and agreements are
references to such instruments, documents, contracts, and agreements as the
same may be amended, supplemented, and otherwise modified from time to time,
unless otherwise specified.  The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this Pledge
Agreement shall refer to this Pledge Agreement as a whole and not to any
particular provision of this Pledge Agreement. 
As used herein, the term “including” means “including, without limitation,”.
Paragraph headings have been inserted in this Pledge Agreement as a matter of
convenience for reference only and it is agreed that such paragraph headings
are not a part of this Pledge Agreement and shall not be used in the
interpretation of any provision of this Pledge Agreement.


 


Section 2.  Pledge.


 


2.01.                        Grant of Pledge.


 


(a)                                  Each Pledgor hereby
pledges to the Collateral Trustee, and grants to the Collateral Trustee, for
the benefit of the Secured Parties, a continuing security interest in, the
Pledged Collateral, as defined in Section 2.02 below.  This Pledge Agreement shall secure (i) all
Obligations (as defined in the Senior Credit Agreement) now or hereafter
existing. (ii) all Obligations (as defined in the Subordinated Credit Agreement)
now or hereafter existing, (iii) all other amounts now or hereafter owed
by the Borrower, any Pledgor, or any of their respective Subsidiaries under
this Pledge Agreement or the other Master Loan Documents to the Collateral
Trustee or any other Secured Party, and (iv) any increases, extensions,
modifications, substitutions, amendments, restatements and renewals of any of
the foregoing obligations, whether for principal, interest, fees, expenses,
indemnification or otherwise.  All such obligations shall be referred to in
this Pledge Agreement as the “Secured Obligations”.


 


2





















 


(b)                                 Notwithstanding
anything contained herein to the contrary, it is the intention of each Pledgor,
the Collateral Trustee and the Secured Parties that the amount of the Secured
Obligation secured by each Pledgor’s interests in any of its property or assets
(whether real or personal, or mixed, tangible or intangible) (“Property”)
shall be in, but not in excess of, the maximum amount permitted by fraudulent
conveyance, fraudulent transfer and other similar law, rule or regulation
of any Governmental Authority (as defined in the Senior Credit Agreement)
applicable to such Pledgor. Accordingly, notwithstanding anything to the
contrary contained in this Pledge Agreement or in any other agreement or
instrument executed in connection with the payment of any of the Secured
Obligations, the amount of the Secured Obligations secured by each Pledgor’s
interests in any of its Property pursuant to this Pledge Agreement shall be
limited to an aggregate amount equal to the largest amount that would not
render such Pledgor’s obligations hereunder or the liens and security interest
granted to the Collateral Trustee hereunder subject to avoidance under Section 548
of the United States Bankruptcy Code or any comparable provision of any other
applicable law.


 


2.02.                        Pledged Collateral.  “Pledged Collateral” shall mean all of
each Pledgor’s right, title, and interest in the following, whether now owned
or hereafter acquired:


 


(a)                                  (i) all of the
membership interests listed in the attached Schedule 2.02(a) issued
to such Pledgor and all such additional membership interests of any issuer of
such interests hereafter acquired by such Pledgor (the “Membership Interests”),
(ii) the certificates representing the Membership Interests, if any, and (iii) all
rights to money or Property which such Pledgor now has or hereafter acquires in
respect of the Membership Interests, 
including, without limitation, (A) any proceeds from a sale by or
on behalf of such Pledgor of any of the Membership Interests, and (B) any
distributions, dividends, cash, instruments and other property from
time-to-time received or otherwise distributed in respect of the Membership
Interests, whether regular, special or made in connection with the partial or
total liquidation of the issuer and whether attributable to profits, the return
of any contribution or investment or otherwise attributable to the Membership
Interests or the ownership thereof 
(collectively, the “Membership Interests Distributions”);


 


(b)                                 (i) all of the
general and limited partnership interests listed in the attached Schedule 2.02(b) issued
to such Pledgor and all such additional limited or general partnership
interests of any issuer of such interests hereafter acquired by such Pledgor
(the “Partnership Interests”), and (ii) all rights to money or
Property which such Pledgor now has or hereafter acquires in respect of the
Partnership Interests,  including,
without limitation, (A) any proceeds from a sale by or on behalf of such
Pledgor of any of the Partnership Interests, and (B) any distributions,
dividends, cash, instruments and other property from time-to-time received or
otherwise distributed in respect of the Partnership Interests, whether regular,
special or made in connection with the partial or total liquidation of the
issuer and whether attributable to profits, the return of any contribution or
investment or otherwise attributable to the Partnership Interests or the
ownership thereof  (collectively, the “Partnership
Interests Distributions”);


 


3





















 


(c)                                  (i) all of the
shares of stock listed in the attached Schedule 2.02(c) issued to
such Pledgor and all such additional shares of stock of any issuer of such
shares of stock hereafter issued to such Pledgor (the “Pledged Shares”),
(ii) the certificates representing the Pledged Shares, and (iii) all
rights to money or Property which such Pledgor now has or hereafter acquires in
respect of the Pledged Shares, including, without limitation, (A) any
proceeds from a sale by or on behalf of such Pledgor of any of the Pledged
Shares, and (B) any distributions, dividends, cash, instruments and other
property from time-to-time received or otherwise distributed in respect of the
Pledged Shares, whether regular, special or made in connection with the partial
or total liquidation of the issuer and whether attributable to profits, the
return of any contribution or investment or otherwise attributable to the Pledged
Shares or the ownership thereof (collectively, the “Pledged Shares
Distributions”; together with the Membership Interests Distributions and
the Partnership Interest Distributions, the “Distributions”); and


 


(d)                                 all proceeds from the
Pledged Collateral described in paragraphs (a), (b) and (c) of this Section 2.02.


 


2.03.                        Delivery of Pledged
Collateral.  All certificates or
instruments, if any, representing the Pledged Collateral shall be delivered to
the Collateral Trustee and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance reasonably satisfactory to the Collateral
Trustee.  After the occurrence and during
the continuance of an Event of Default, the Collateral Trustee shall have the
right, upon prior written notice to the applicable Pledgor, to transfer to or
to register in the name of the Collateral Trustee or any of its nominees any of
the Pledged Collateral, subject to the rights specified in Section 2.04.  In addition, after the occurrence and during
the continuance of an Event of Default, the Collateral Trustee shall have the
right at any time to exchange the certificates or instruments representing the
Pledged Collateral for certificates or instruments of smaller or larger
denominations.


 


2.04.                        Rights Retained by Pledgor.  Notwithstanding the pledge in Section 2.01,


 


(a)                                  so long as no Event
of Default shall have occurred and remain uncured or unwaived and except as
otherwise provided in the Master Debt Agreements, (i) each Pledgor shall
be entitled to receive and retain any dividends and other Distributions paid on
or in respect of the Pledged Collateral and the proceeds of any sale of the
Pledged Collateral; and (ii) each Pledgor shall be entitled to exercise
any voting and other consensual rights pertaining to its Pledged Collateral for
any purpose not inconsistent with the terms of this Pledge Agreement or the Master
Debt Agreements; provided, however, that no Pledgor shall
exercise nor shall it refrain from exercising any such right if such action or
inaction, as applicable, would have a materially adverse effect on the value of
the Pledged Collateral; and


 


(b)                                 if an Event of Default
shall have occurred and remain uncured or unwaived,


 


(i)                                     until
such time thereafter as the Collateral Trustee gives written notice of its
election to exercise such voting and other consensual rights pursuant 


 


4





















 


to Section 5.02
hereof, each Pledgor shall be entitled to exercise any voting and other
consensual rights pertaining to its Pledged Collateral for any purpose not
inconsistent with the terms of this Pledge Agreement or the Master Debt
Agreements; provided, however, that no Pledgor shall exercise nor
shall it refrain from exercising any such right if such action or inaction, as
applicable, would have a materially adverse effect on the value of the Pledged
Collateral; and


 


(ii)                                  at
and after such time as the Collateral Trustee gives written notice of its
election to exercise such voting and other consensual rights pursuant to Section 5.02
hereof, each Pledgor shall execute and deliver (or cause to be executed and
delivered) to the Collateral Trustee all proxies and other instruments as the Collateral
Trustee may reasonably request to enable the Collateral Trustee to (A) exercise
the voting and other rights which such Pledgor is entitled to exercise pursuant
to paragraph (a) or paragraph (b)(i) of this Section 2.04,
and (B) receive any Distributions and proceeds of sale of the Pledged
Collateral which such Pledgor is authorized to receive and retain pursuant to
paragraph (a)(i) of this Section 2.04.


 


Section 3.  Pledgor’s Representations and
Warranties.  Each Pledgor represents
and warrants to the Collateral Trustee and the Secured Parties as follows:


 


(a)                                  The Pledged
Collateral applicable to such Pledgor listed on the attached
Schedules 2.02(a), 2.02(b) and 2.02(c) have been duly authorized
and validly issued to such Pledgor and are fully paid and nonassessable.


 


(b)                                 Such Pledgor is the
legal and beneficial owner of the Pledged Collateral free and clear of any Lien
or option, except for (i) the security interest created by this Pledge
Agreement and (ii) other Liens permitted under the Master Debt Agreements
( the “Permitted Liens”).


 


(c)                                  No authorization,
authentication, approval, or other action by, and no notice to or filing with,
any Governmental Authority or regulatory body is required either (a) for
the pledge by such Pledgor of the Pledged Collateral pursuant to this Pledge
Agreement or for the execution, delivery, or performance of this Pledge
Agreement by such Pledgor or (b) for the exercise by the Collateral
Trustee or any Secured Party of the voting or other rights provided for in this
Pledge Agreement or the remedies in respect of the Pledged Collateral pursuant
to this Pledge Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities generally).


 


(d)                                 Such Pledgor has the
full right, power and authority to deliver, pledge, assign and transfer the
Pledged Collateral to the Collateral Trustee.


 


(e)                                  The Membership
Interests listed on the attached Schedule 2.02(a) constitute the
percentage of the issued and outstanding membership interests of the respective
issuer thereof set forth on Schedule 2.02(a) and all of the Equity
Interest in such issuer in which the Pledgor has any ownership interest.


 


5





















 


(f)                                    The Partnership
Interests listed on the attached Schedule 2.02(b) constitute the
percentage of the issued and outstanding general and limited partnership
interests of the respective issuer thereof set forth on Schedule 2.02(b) and
all of the Equity Interest in such issuer in which the Pledgor has any
ownership interest.


 


(g)                                 The Pledged Shares
list on the attached Schedule 2.02(c) constitute the percentage of
the issued and outstanding shares of capital stock of the respective issuer
thereof set forth on Schedule 2.02(c) and all of the Equity Interest
in such issuer in which the Pledgor has any ownership interest.


 


(h)                                 Schedule 3 sets
forth its sole jurisdiction of formation, type of organization, federal tax
identification number, the organizational number, and all names used by it
during the last five years prior to the date of this Pledge Agreement.


 


Section 4.  Pledgor’s Covenants.  During the term of this Pledge Agreement and
until all of the Secured Obligations (including all Letter of Credit
Obligations) have been fully and finally paid and discharged in full, the
termination of the Hedge Contracts with the Secured Parties, the Commitments
(as defined in the applicable Master Debt Agreement) under each Master Debt
Agreement have been terminated or expired, all Letters of Credit have
terminated or expired, and all obligations of the Issuing Lender and the Senior
Lenders in respect of Letters of Credit have been terminated, each Pledgor
covenants and agrees with the Collateral Trustee that:


 


4.01.                        Protect Collateral; Further
Assurances.  Each Pledgor will
warrant and defend the rights and title herein granted unto the Collateral
Trustee in and to the Pledged Collateral (and all right, title, and interest
represented by the Pledged Collateral) against the claims and demands of all
Persons whomsoever.  Each Pledgor agrees
that, at the expense of such Pledgor, such Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action,
that may be reasonably necessary and that the Collateral Trustee or any Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Collateral
Trustee or any Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.  Each Pledgor hereby authorizes the Collateral
Trustee to file any financing statements, amendments or continuations without
the signature of such Pledgor to the extent permitted by applicable law in
order to perfect or maintain the perfection of any security interest granted
under this Pledge Agreement.


 


4.02.                        Transfer, Other Liens, and
Additional Shares.  Each Pledgor
agrees that it will not (a) except as otherwise permitted by the Master
Debt Agreements, sell or otherwise dispose of, or grant any option with respect
to, any of the Pledged Collateral or (b) create or permit to exist any
Lien upon or with respect to any of the Pledged Collateral, except for
Permitted Liens.  Each Pledgor agrees
that it will (i) cause each issuer of the Pledged Collateral that is a
Subsidiary of such Pledgor not to issue any other Equity Interests in addition
to or in substitution for the Pledged Collateral issued by such issuer, except
to such Pledgor or any other Pledgor and (ii) pledge hereunder, immediately
upon its acquisition (directly or indirectly) thereof, any additional Equity
Interests of an issuer acquired by such Pledgor.  No Pledgor shall approve any amendment or
modification of any of the Pledged Collateral without the Collateral Trustee’s
prior written consent.


 


6





















 


4.03.                        Jurisdiction of Formation;
Name Change.  Each Pledgor shall give
the Collateral Trustee at least 30 days’ prior written notice before it (i) in
the case of a Pledgor that is not a “registered organization” (as defined in Section 9-102
of the UCC) changes the location of its principal place of business and chief
executive office, or (ii) uses a trade name other than its current name
used on the date hereof.  Other than as
permitted by Section 6.11 of the respective Master Debt Agreements, no
Pledgor shall amend, supplement, modify or restate its articles or certificate
of incorporation, bylaws, limited liability company agreements, or other
equivalent organizational documents, nor amend its name or change its
jurisdiction of incorporation, organization or formation.


 


Section 5.  Remedies upon Default.  If any Event of Default shall have occurred
and be continuing:


 


5.01.                        UCC Remedies.  To the extent permitted by law, the Collateral
Trustee may exercise in respect of the Pledged Collateral, in addition to other
rights and remedies provided for in this Pledge Agreement or otherwise
available to it, all the rights and remedies of a Collateral Trustee under the
UCC (whether or not the UCC applies to the affected Pledged Collateral).


 


5.02.                        Dividends and Other Rights.


 


(a)                                  All rights of the
Pledgors to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 2.04(a) may be
exercised by the Collateral Trustee if the Collateral Trustee so elects and
gives written notice of such election to the affected Pledgor and all rights of
the Pledgors to receive any Distributions on or in respect of the Pledged
Collateral and the proceeds of sale of the Pledged Collateral which it would
otherwise be authorized to receive and retain pursuant to Section 2.04(b) shall
cease.


 


(b)                                 All Distributions on
or in respect of the Pledged Collateral and the proceeds of sale of the Pledged
Collateral which are received by any Pledgor shall be received in trust for the
benefit of the Collateral Trustee, shall be segregated from other funds of such
Pledgor, and shall be promptly paid over to the Collateral Trustee as Pledged
Collateral in the same form as so received (with any necessary indorsement).


 


5.03.                        Sale of Pledged Collateral.
The Collateral Trustee may sell all or part of the Pledged Collateral at public
or private sale, at any of the Collateral Trustee’s offices or elsewhere, for
cash, on credit, or for future delivery, and upon such other terms as the Collateral
Trustee may deem commercially reasonable in accordance with applicable
laws.  Each Pledgor agrees that to the
extent permitted by law such sales may be made without notice.  If notice is required by law, each Pledgor
hereby deems 10 days’ advance notice of the time and place of any public sale
or the time after which any private sale is to be made reasonable notification,
recognizing that if the Pledged Collateral threatens to decline speedily in
value or is of a type customarily sold on a recognized market shorter notice
may be reasonable.  The Collateral
Trustee shall not be obligated to make any sale of the Pledged Collateral
regardless of notice of sale having been given. 
The Collateral Trustee may adjourn any public or private sale from
time-to-time by announcement at the time and place fixed therefor, and such
sale may, without 


 


7





















 


further
notice, be made at the time and place to which it was so adjourned.  Each Pledgor shall fully cooperate with Collateral
Trustee in selling or realizing upon all or any part of the Pledged
Collateral.  In addition, each Pledgor
shall fully comply with the securities laws of the United States, the State of
Texas, and other states and take such actions as may be necessary to permit Collateral
Trustee to sell or otherwise dispose of any securities representing the Pledged
Collateral in compliance with such laws.


 


5.04.                        Exempt Sale.  If, in the opinion of the Collateral Trustee,
there is any question that a public or semipublic sale or distribution of any
Pledged Collateral will violate any state or federal securities law, the Collateral
Trustee in its reasonable discretion (a) may offer and sell securities privately
to purchasers who will agree to take them for investment purposes and not with
a view to distribution and who will agree to imposition of restrictive legends
on the certificates representing the security, or (b) may sell such
securities in an intrastate offering under Section 3(a)(11) of the
Securities Act of 1933, as amended, and no sale so made in good faith by the Collateral
Trustee shall be deemed to be not “commercially reasonable” solely because so
made.  Each Pledgor shall cooperate fully
with the Collateral Trustee in selling or realizing upon all or any part of the
Pledged Collateral.


 


5.05.                        Application of Collateral.
The proceeds of any sale, or other realization (other than that received from a
sale or other realization permitted by the Master Debt Agreements) upon all or
any part of the Pledged Collateral pledged by the Pledgors shall be applied by
the Collateral Trustee as set forth in Section 4.4 of the Collateral Trust
Agreement.


 


5.06.                        Cumulative Remedies.  Each right, power and remedy herein
specifically granted to the Collateral Trustee or otherwise available to it
shall be cumulative, and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in
equity, or otherwise, 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 Collateral Trustee in its sole discretion. 
No failure on the part of the Collateral Trustee 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 rights, power or remedy preclude any other or
further exercise thereof or the exercise of any other right.


 


Section 6.  Collateral Trustee as
Attorney-in-Fact for Pledgor.


 


6.01.                        Collateral
Trustee Appointed Attorney-in-Fact. 
Each Pledgor hereby irrevocably appoints the Collateral Trustee as such
Pledgor’s attorney-in-fact, with full authority after the occurrence and during
the continuance of an Event of Default to act for such Pledgor and in the name
of such Pledgor, and, in the Collateral Trustee’s discretion, to take any
action and to execute any instrument which the Collateral Trustee may deem
reasonably necessary or advisable to accomplish the purposes of this Pledge
Agreement, including, without limitation, to receive, indorse, and collect all
instruments made payable to such Pledgor representing any dividend, or the
proceeds of the sale of the Pledged Collateral, or other distribution in
respect of the Pledged Collateral and to give full discharge for the same.  Each
Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an
interest.


 


8





















 


6.02.                        Collateral Trustee May Perform.
The Collateral Trustee may from time-to-time, at its option but at the Pledgors’
expense, perform any act which any Pledgor agrees hereunder to perform and
which such Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Event of Default and after notice
thereof by the Collateral Trustee to the affected Pledgor) and the Collateral
Trustee may from time-to-time take any other action which the Collateral
Trustee reasonably deems necessary for the maintenance, preservation or
protection of any of the Pledged Collateral or of its security interest
therein.  The Collateral Trustee shall
provide notice to the affected Pledgor of any action taken hereunder; provided
however, the failure to provide such notice shall not be construed as a waiver
of any rights of the Collateral Trustee provided under this Pledge Agreement or
under applicable law.


 


6.03.                        Collateral Trustee Has No
Duty.  The powers conferred on the Collateral
Trustee hereunder are solely to protect its interest in the Pledged Collateral
and shall not impose any duty on it to exercise any such powers.  Except for reasonable care of any Pledged
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Collateral Trustee shall have no duty as to any Pledged
Collateral or responsibility for taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Pledged Collateral.


 


6.04.                        Reasonable Care.  The Collateral Trustee shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Collateral Trustee accords its own
property, it being understood that the Collateral Trustee shall have no
responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders, or other matters relative
to any Pledged Collateral, whether or not the Collateral Trustee has or is
deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.


 


Section 7.  Miscellaneous.


 


7.01.                        Expenses.  The Pledgors will upon demand pay to the Collateral
Trustee for its benefit and the benefit of the other Secured Parties the amount
of any reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of its counsel and of any experts, which the Collateral Trustee
and the other Secured Parties may incur in connection with (a) the
custody, preservation, use, or operation of, or the sale, collection, or other
realization of, any of the Pledged Collateral, (b) the exercise or
enforcement of any of the rights of the Collateral Trustee or any Lender or any
other Secured Parties hereunder, and (c) the failure by any Pledgor to
perform or observe any of the provisions hereof.


 


7.02.                        Amendments, Etc.  No amendment or waiver of any provision of this
Pledge Agreement nor consent to any departure by any Pledgor herefrom shall be
effective unless made in writing and executed by the affected Pledgor and the
Collateral Trustee (acting upon the written direction of the Required
Percentage of each Class of Master Debt and given in accordance with the
Collateral Trust Agreement), and such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.


 


9





















 


7.03.                        Addresses for Notices.  All notices and other communications provided
for hereunder shall be in the manner and to the addresses set forth in the Collateral
Trust Agreement.


 


7.04.                        Continuing Security
Interest; Transfer of Interest.


 


(a)                                  This Pledge Agreement
shall create a continuing security interest in the Pledged Collateral and,
unless expressly released by the Collateral Trustee, shall (i) remain in
full force and effect until the indefeasible payment in full in cash of, and
termination of, the Secured Obligations and the termination of the Commitments
under each Master Debt Agreement, (ii) be binding upon the Pledgors, the
Collateral Trustee, the Secured Parties and their successors, and assigns, and (iii) inure,
together with the rights and remedies of the Collateral Trustee hereunder, to
the benefit of and be binding upon, the Collateral Trustee, and the Secured
Parties and their respective successors, transferees, and assigns, and to the
benefit of and be binding upon, the Swap Counterparties, and each of their
respective successors and assigns only to the extent such successors,
transferees, and assigns of a Swap Counterparty is a Senior Lender or an
Affiliate of a Senior Lender.  Without
limiting the generality of the foregoing clause, when any Secured Party assigns
or otherwise transfers any interest held by it under either Master Debt
Agreement or other Master Debt Document (other than an Interest Hedge Agreement
or a Hydrocarbon Hedge Agreement) to any other Person pursuant to the terms of
the applicable Master Debt Agreement or such other Master Debt Document, that
other Person shall thereupon become vested with all the benefits held by such
Secured Party under this Pledge Agreement. 
Furthermore, when any Swap Counterparty assigns or otherwise transfers
any interest held by it under an Interest Hedge Agreement or a Hydrocarbon
Hedge Agreement to any other Person pursuant to the terms of such agreement,
that other Person shall thereupon become vested with all the benefits held by
such Secured Party under this Pledge Agreement only if such Person is also then
a Senior Lender or an Affiliate of a Senior Lender.


 


(b)                                 Upon the indefeasible
payment in full and termination of the Secured Obligations and the termination
of all Commitments under each Master Debt Agreement, the security interest
granted hereby shall terminate and all rights to the Pledged Collateral shall
revert to the applicable Pledgor to the extent such Pledged Collateral shall
not have been sold or otherwise applied pursuant to the terms hereof.  Upon any such termination, the Collateral
Trustee will, at the Pledgors’ expense, deliver all Pledged Collateral to the
applicable Pledgor, execute and deliver to the applicable Pledgor such
documents as such Pledgor shall reasonably request and take any other actions
reasonably requested to evidence or effect such termination.


 


7.05.                        Waivers.  Each Pledgor hereby waives:


 


(a)                                  promptness,
diligence, notice of acceptance, and any other notice with respect to any of
the Secured Obligations and this Pledge Agreement;


 


(b)                                 any requirement that
the Collateral Trustee or any Secured Party protect, secure, perfect, or insure
any Lien or any Property subject thereto or exhaust any right or 


 


10





















 


take any action
against any Pledgor, any Guarantor, or any other Person or any collateral; and


 


(c)                                  any duty on the part
of the Collateral Trustee to disclose to any Pledgor any matter, fact, or thing
relating to the business, operation, or condition of any Pledgor, any Guarantor,
or any other Person and their respective assets now known or hereafter known by
such Person.


 


7.06.                        Severability.  Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.


 


7.07.                        Choice of Law.  This Pledge Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Texas,
except to the extent that the validity or perfection of the security interests
hereunder, or remedies hereunder, in respect of any particular Pledged
Collateral are governed by the laws of a jurisdiction other than the State of
Texas.


 


7.08.                        Counterparts.  The parties may execute this Pledge Agreement
in counterparts, each of which constitutes an original, and all of which,
collectively, constitute only one agreement. 
Delivery of an executed counterpart signature page by facsimile is
as effective as executing and delivering this Pledge Agreement in the presence
of the other parties to this Pledge Agreement. 
In proving this Pledge Agreement, a party must produce or account only
for the executed counterpart of the party to be charged.


 


7.09.                        Headings.  Paragraph headings have been inserted in this
Pledge Agreement as a matter of convenience for reference only and it is agreed
that such paragraph headings are not a part of this Pledge Agreement and shall
not be used in the interpretation of any provision of this Pledge Agreement.


 


7.10.                        Reinstatement.  If, at any time after payment in full of all
Secured Obligations and termination of the Collateral Trustee’s security
interest, any payments on the Secured Obligations previously made must be
disgorged by any Secured Party for any reason whatsoever, including, without
limitation, the insolvency, bankruptcy or reorganization of any Pledgor or any
other Person, this Pledge Agreement and the Collateral Trustee’s security
interests herein shall be reinstated as to all disgorged payments as though
such payments had not been made, and each Pledgor shall sign and deliver to the
Collateral Trustee all documents, and shall do such other acts and things, as
may be necessary to reinstate and perfect the Collateral Trustee’s security
interest.  EACH PLEDGOR SHALL DEFEND AND INDEMNIFY THE COLLATERAL TRUSTEE AND EACH
OTHER SECURED PARTY FROM AND AGAINST ANY CLAIM, DAMAGE, LOSS, LIABILITY, COST OR EXPENSE
UNDER THIS SECTION 7.10 (INCLUDING REASONABLE ATTORNEYS’ FEES AND
EXPENSES) IN THE DEFENSE OF ANY SUCH ACTION OR SUIT INCLUDING SUCH CLAIM, DAMAGE,
LOSS, LIABILITY, COST, OR EXPENSE ARISING AS A RESULT OF THE INDEMNIFIED SECURED PARTY’S OWN
NEGLIGENCE BUT EXCLUDING SUCH 


 


11





















 


CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS
FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION
TO HAVE RESULTED FROM SUCH INDEMNIFIED SECURED PARTY’S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.


 


7.11.                        Conflicts.  In the event of any explicit or implicit
conflict between any provisions of this Pledge Agreement and any provision of
the Senior Credit Agreement, the terms of the Senior Credit Agreement shall be
controlling.


 


7.12.                        Additional Pledgors.  Pursuant
to Section 6.15 of each Master Debt Agreement, certain Subsidiaries of the
Borrower that were not in existence on the date of the such Master Debt
Agreements are required to enter into this Pledge Agreement as Pledgors.  Upon execution and delivery after the date
hereof by the Collateral Trustee and such Subsidiary of an instrument in the form
of Annex 1, such Subsidiary shall become a Pledgor hereunder with the same
force and effect as if originally named as a Pledgor herein.  The execution and delivery of any instrument
adding an additional Pledgor as a party to this Pledge Agreement shall not
require the consent of any other Pledgor hereunder.  The rights and obligations of each Pledgor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Pledgor as a party to this Pledge Agreement.


 


7.13.                        Entire
Agreement.  THIS PLEDGE AGREEMENT, THE COLLATERAL TRUST AGREEMENT
AND THE OTHER MASTER DEBT DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.


 


THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES HERETO.


 


[SIGNATURE PAGES FOLLOW]


 


12





















 


The parties hereto have caused this Pledge Agreement to be duly
executed as of the date first above written.


 


	
   

  	
  PLEDGORS:

  
	
   

  	
   

  
	
   

  	
  CANO PETROLEUM, INC.,
  a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/ S. Jeffrey
  Johnson

  
	
   

  	
  Name:

  	
    S. Jeffrey Johnson

  
	
   

  	
  Title:

  	
     Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  W.O. ENERGY OF NEVADA, INC.,
  a Nevada

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/ S. Jeffrey
  Johnson

  
	
   

  	
  Name:

  	
    S. Jeffrey Johnson

  
	
   

  	
  Title:

  	
     President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WO ENERGY, INC., a
  Texas corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/ S. Jeffrey
  Johnson

  
	
   

  	
  Name:

  	
    S. Jeffrey Johnson

  
	
   

  	
  Title:

  	
     President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COLLATERAL TRUSTEE:

  
	
   

  	
   

  
	
   

  	
  UNION BANK OF CALIFORNIA, N.A.,
  as

  Collateral Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/ Ali Ahmed

  
	
   

  	
   

  	
  Ali Ahmed, Vice President

  
						



 


Signature page to Pledge
Agreement


 





















 


SCHEDULE 2.02(a)


 


PLEDGED
COLLATERAL


 


Attached to and forming a part of that certain Pledge Agreement dated November 29,
2005 by Cano Petroleum, Inc., W.O. Energy of Nevada, Inc. and WO
Energy, Inc. as Pledgors, to Union Bank of California, N.A., as Collateral
Trustee.


 


None.


 





















 


SCHEDULE 2.02(b)


 


PLEDGED
COLLATERAL


 


Attached to and forming a part of that certain Pledge Agreement dated November 29,
2005 by Cano Petroleum, Inc., W.O. Energy of Nevada, Inc. and WO
Energy, Inc. as Pledgors, to Union Bank of California, N.A., as Collateral
Trustee.


 


	
  Issuer

  	
   

  	
  Type of Partnership Interest

  	
   

  	
  % of Partnership Interest

  Owned

  
	
  W.O. Energy of Nevada, Inc.

  	
   

  	
  Limited Partnership Interest in W.O.
  Operating Company, Ltd. and W.O. Production Company, Ltd.

  	
   

  	
  95% Limited Partnership Interest

  



 


	
  Issuer

  	
   

  	
  Type of Partnership Interest

  	
   

  	
  % of Partnership Interest

  Owned

  
	
  WO Energy, Inc.

  	
   

  	
  General Partnership Interest in W.O.
  Operating Company, Ltd. and W.O. Production Company, Ltd.

  	
   

  	
  5% General Partnership Interest

  



 





















 


SCHEDULE 2.02(c)


 


PLEDGED
COLLATERAL


 


Attached to and forming a part of that certain Pledge Agreement dated November 29,
2005 by Cano Petroleum, Inc., W.O. Energy of Nevada, Inc. and WO
Energy, Inc. as Pledgors, to Union Bank of California, N.A., as Collateral
Trustee.


 


	
  Issuer

  	
   

  	
  Type of Shares

  	
   

  	
  Number of Shares

  	
   

  	
  % of Shares Owned

  	
   

  	
  Certificate No.

  
	
  Square One Energy, Inc.

  	
   

  	
  Common Stock

  Issued to Cano

  Petroleum, Inc.

  	
   

  	
  1,500

  	
   

  	
  100%

  	
   

  	
  4

  



 


	
  Issuer

  	
   

  	
  Type of Shares

  	
   

  	
  Number of Shares

  	
   

  	
  % of Shares Owned

  	
   

  	
  Certificate No.

  
	
  Ladder Companies, Inc.

  	
   

  	
  Common Stock

  Issued to Cano

  Petroleum, Inc.

  	
   

  	
  1,000

  	
   

  	
  100%

  	
   

  	
  7

  



 


	
  Issuer

  	
   

  	
  Type of Shares

  	
   

  	
  Number of Shares

  	
   

  	
  % of Shares Owned

  	
   

  	
  Certificate No.

  
	
  W.O. Energy of Nevada, Inc.

  	
   

  	
  Common Stock

  Issued to Cano

  Petroleum, Inc.

  	
   

  	
  1,200

  	
   

  	
  100%

  	
   

  	
  5

  



 


	
  Issuer

  	
   

  	
  Type of Shares

  	
   

  	
  Number of Shares

  	
   

  	
  % of Shares Owned

  	
   

  	
  Certificate No.

  
	
  WO Energy, Inc.

  	
   

  	
  Common Stock

  Issued to W.O.

  Energy of Nevada, Inc.

  	
   

  	
  1,100

  	
   

  	
  100%

  	
   

  	
  6

  



 





















 


SCHEDULE 3


 


PLEDGOR
INFORMATION


 


	
  Pledgor:

  	
  Cano Petroleum, Inc.

  
	
   

  	
   

  
	
  Sole Jurisdiction of Formation / Filing:

  	
  Delaware

  
	
   

  	
   

  
	
  Type of Organization: 

  	
  Corporation

  
	
   

  	
   

  
	
  Organizational Number:

  	
  3664494

  
	
   

  	
   

  
	
  Federal Tax Identification Number:

  	
  77-0635673

  
	
   

  	
   

  
	
  Prior Names: 

  	
  Huron Ventures, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Pledgor:

  	
  W.O. Energy of Nevada, Inc.

  
	
   

  	
   

  
	
  Sole Jurisdiction of Formation / Filing:

  	
  Nevada

  
	
   

  	
   

  
	
  Type of Organization: 

  	
  Corporation

  
	
   

  	
   

  
	
  Organizational Number:

  	
  C20757-1996-001

  
	
   

  	
   

  
	
  Federal Tax Identification Number:

  	
  88-0369151

  
	
   

  	
   

  
	
  Prior Names:

  	
  None.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Pledgor:

  	
  WO Energy, Inc.

  
	
   

  	
   

  
	
  Sole Jurisdiction of Formation / Filing:

  	
  Texas

  
	
   

  	
   

  
	
  Type of Organization:

  	
  Corporation

  
	
   

  	
   

  
	
  Organizational Number:

  	
  113518200

  
	
   

  	
   

  
	
  Federal Tax Identification Number:

  	
  75-2303966

  
	
   

  	
   

  
	
  Prior Names:

  	
  None.

  



 





















 


Annex 1 to the


Pledge Agreement


 


SUPPLEMENT NO. 
[            ]  dated as of
[               ]
(the “Supplement”), to the Pledge Agreement dated as of November 29,
2005 (as amended, supplemented or otherwise modified from time to time, the “Pledge
Agreement”) by and among CANO PETROLEUM, INC., a Delaware corporation (“Borrower”),
each other party signatory hereto (together with the Borrower, the “Pledgors”
and individually, each a “Pledgor”) and Union Bank of California, N.A.
as collateral trustee (in such capacity, the “Collateral Trustee”) under the
Collateral Trust Agreement (as hereinafter defined) for the benefit of the
Secured Parties (as hereinafter defined).


 


RECITALS


 


A.                                   Reference
is made to the following documents related to extension of credit to the
Borrower:


 


(i)                                     that certain
Credit Agreement dated as of November 29, 2005 (as it may be amended,
restated or otherwise modified from time to time, the “Senior Credit
Agreement”) by and among the Borrower, the lenders party thereto from time
to time (the “Senior Lenders”), and Union Bank of California, N.A., as
administrative agent for such Senior Lenders (the “Senior Agent”);


 


(ii)                                  that certain Subordinated
Credit Agreement dated as of November 29, 2005 (as it may be amended,
restated or otherwise modified from time to time, the “Subordinated Credit
Agreement”, and together with the Senior Credit Agreement, the “Master
Debt Agreements”), among the Borrower, the lenders party thereto from time
to time (the “Subordinated Lenders”), and Energy Components SPC EEP
Energy Exploration and Production Segregated Portfolio as administrative agent
for such Subordinated Lenders (in such capacity, the “Subordinated Agent”);
and


 


(iii)                               those
Hedge Contracts (as defined in the Senior Credit Agreement) that the Borrower or
any of its Subsidiaries may from time to time enter into one or more with a
Senior Lender or one of their Affiliates (a “Swap Counterparty”, and
together with the Collateral Trustee, the Senior Agent, the Issuing Lender, the
Senior Lenders, the Subordinated Agent, the Subordinated Lenders, the “Secured
Parties”).


 


B.                                     In
connection with the Master Debt Agreements, the Senior Agent, the Senior
Lenders, the Subordinated Loan Agent, the Subordinated Lenders, the Collateral
Trustee, the Borrower, and other parties thereto, have entered into that
certain Collateral Trust and Intercreditor Agreement dated as of even date
herewith (as it may be amended, restated, or otherwise modified from time to
time, the “Collateral Trust Agreement”), to among other things, appoint
the Collateral Trustee as collateral trustee for all of the Secured Parties
under the security documents executed in connection with the Master Debt
Agreements, including the Pledge Agreement, and set forth the rights and
remedies of the Secured Parties with respect thereto.


 


1





















 


C.                                     The
Pledgors have entered into the Pledge Agreement in order to induce the Senior Lenders
and the Subordinated Lenders to make loans and the Issuing Lender to issue letters
of credit under the Master Debt Agreements. 
Pursuant to Section 6.15 of the respective Master Debt Agreements,
each Subsidiary of the Borrower that was not in existence on the date of the
respective Master Debt Agreement is required to enter into the Pledge Agreement
as a Pledgor upon becoming a Subsidiary. 
Section 7.12 of the Pledge Agreement provides that additional
Subsidiaries of the Borrower may become Pledgors under the Pledge Agreement by
execution and delivery of an instrument in the form of this Supplement.  The undersigned Subsidiary of the Borrower
(the “New Pledgor”) is executing this Supplement in accordance with the
requirements of the Senior Credit Agreement to become a Pledgor under the
Pledge Agreement in order to induce the Senior Lenders to make additional loans
and the Issuing Lender to issue additional letters of credit and as
consideration for loans previously made and letters of credit previously
issued.


 


D.                                    Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Pledge Agreement and the Collateral Trust
Agreement.


 


Accordingly, the Collateral Trustee and the New Pledgor agree as
follows:


 


SECTION 1.                                In
accordance with Section 7.12 of the Pledge Agreement, the New Pledgor by its
signature below becomes a Pledgor under the Pledge Agreement with the same
force and effect as if originally named therein as a Pledgor and the New
Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof in all material
respects.  In furtherance of the
foregoing, the New Pledgor, as security for the payment and performance in full
of the Secured Obligations, does hereby create and grant to the Collateral
Trustee, its successors and assigns, for the benefit of the Secured Parties,
their successors and assigns, a continuing security interest in and lien on all
of the New Pledgor’s right, title and interest in and to the Pledged Collateral
of the New Pledgor.  Each reference to a “Pledgor”
in the Pledge Agreement shall be deemed to include the New Pledgor.  The Pledge Agreement is hereby incorporated
herein by reference.


 


SECTION 2.                                The
New Pledgor represents and warrants to the Collateral Trustee and the other Secured
Parties that this Supplement has been duly authorized, executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors’
rights generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).


 


SECTION 3.                                This
Supplement may be executed in counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.  This Supplement shall become
effective when the Collateral Trustee shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Pledgor
and the Collateral Trustee.  Delivery of
an executed signature page to this Supplement 


 


2





















 


by
facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.


 


SECTION 4.                                The
New Pledgor hereby represents and warrants that (a) set forth on Schedules
2.02(a), 2.02(b), and 2.02(c) attached hereto are true and correct
schedules of all its Membership Interests, Partnership Interests and Pledged
Shares, as each term is defined in the Pledge Agreement, and (b) set forth
on Schedule 3 attached hereto are its sole jurisdiction of formation, type
of organization, its federal tax identification number and the organizational
number, and all names used by it during the last five years prior to the date
of this Supplement.


 


SECTION 5.                                Except
as expressly supplemented hereby, the Pledge Agreement shall remain in full
force and effect.


 


SECTION 6.                                THIS
SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS.


 


SECTION 7.                                In
case any one or more of the provisions contained in this Supplement should be
held invalid, illegal or unenforceable in any respect, neither party hereto
shall be required to comply with such provision for so long as such provision
is held to be invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein and in the Pledge
Agreement shall not in any way be affected or impaired.  The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.


 


SECTION 8.                                All
communications and notices hereunder shall be in writing and given as provided
in the Pledge Agreement.  All
communications and notices hereunder to the New Pledgor shall be given to it at
the address set forth under its signature hereto.


 


SECTION 9.                                The
New Pledgor agrees to reimburse the Collateral Trustee for its reasonable
out-of-pocket expenses in connection with this Supplement, including the
reasonable fees, other charges and disbursements of counsel for the Collateral
Trustee.


 


THIS SUPPLEMENT, THE PLEDGE
AGREEMENT, THE COLLATERAL TRUST AGREEMENT AND THE OTHER MASTER DEBT DOCUMENTS REPRESENT
THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.


 


THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES HERETO.


 


[SIGNATURES PAGES FOLLOW]


 


3





















 


IN WITNESS WHEREOF, the New Pledgor and the Collateral
Trustee have duly executed this Supplement to the Pledge Agreement as of the
day and year first above written.


 


	
   

  	
  NEW PLEDGOR:

  
	
   

  	
   

  
	
   

  	
  [

  	
   

  	
  ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COLLATERAL TRUSTEE:

  
	
   

  	
   

  
	
   

  	
  UNION BANK OF CALIFORNIA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							



 


4





















 


Schedules


Supplement No.           


to the Pledge Agreement


 


Pledged
Collateral of the New Pledgor


 


SCHEDULE 2.02(a)


 


	
  Issuer

  	
   

  	
  Type of Membership

  Interest

  	
   

  	
  % of Membership Interest

  Owned

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


SCHEDULE 2.02(b)


 


	
  Issuer

  	
   

  	
  Type of Partnership Interest

  	
   

  	
  % of Partnership Interest

  Owned

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


SCHEDULE 2.02(c)


 


	
  Issuer

  	
   

  	
  Type of Shares

  	
   

  	
  Number of

  Shares

  	
   

  	
  % of Shares

  Owned

  	
   

  	
  Certificate No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


SCHEDULE 3


 


	
  New Pledgor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Sole Jurisdiction of Formation / Filing:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Type of Organization:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Organizational Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Federal Tax Identification Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Prior Names:

  	
   

  	
   

  



 


5