Unassociated Document


    Exhibit
      10.32

    
 

    PLEDGE
      AGREEMENT


     

    dated
      as of May 11, 2007


     

    between


     

    TEKOIL
      & GAS CORPORATION


     

    and


     

    J.
      ARON & COMPANY, as Agent,


     

    as
      the Secured Party


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    TABLE
      OF CONTENTS


     

    
      	 	 	
              Page

            
	
              SECTION
                1

            	
              DEFINITIONS

            	
              1

            
	 	 	 
	
              1.1

            	
              General
                Definitions

            	
              1

            
	 	 	 
	
              1.2

            	
              Definitions;
                Interpretation

            	
              2

            
	 	 	 
	
              SECTION
                2

            	
              GRANT
                OF SECURITY

            	
              3

            
	 	 	 
	
              SECTION
                3

            	
              SECURITY
                FOR OBLIGATIONS; GRANTOR REMAINS LIABLE

            	
              3

            
	 	 	 
	
              3.1

            	
              Security
                for Obligations

            	
              3

            
	 	 	 
	
              3.2

            	
              Continuing
                Liability Under Collateral

            	
              3

            
	 	 	 
	
              3.3

            	
              Limitation
                on Liability

            	
              3

            
	 	 	 
	
              SECTION
                4

            	
              REPRESENTATIONS
                AND WARRANTIES AND COVENANTS

            	
              4

            
	 	 	 
	
              4.1

            	
              Representations
                and Warranties

            	
              4

            
	 	 	 
	
              4.2

            	
              Covenants

            	
              6

            
	 	 	 
	
              4.3

            	
              Additional
                Covenants

            	
              7

            
	 	 	 
	
              4.4

            	
              Grantor's
                Consent

            	
              9

            
	 	 	 
	
              SECTION
                5

            	
              ACCESS;
                RIGHT OF INSPECTION AND FURTHER ASSURANCES

            	
              9

            
	 	 	 
	
              5.1

            	
              Access;
                Right of Inspection

            	
              9

            
	 	 	 
	
              5.2

            	
              Further
                Assurances

            	
              9

            
	 	 	 
	
              SECTION
                6

            	
              SECURED
                PARTY APPOINTED ATTORNEY-IN-FACT

            	
              10

            
	 	 	 
	
              6.1

            	
              Power
                of Attorney

            	
              10

            
	 	 	 
	
              6.2

            	
              No
                Duty on the Part of Secured Party or Beneficiaries

            	
              10

            
	 	 	 
	
              SECTION
                7

            	
              REMEDIES

            	
              11

            
	 	 	 
	
              7.1

            	
              Generally

            	
              11

            
	 	 	 
	
              7.2

            	
              Application
                of Proceeds

            	
              12

            
	 	 	 
	
              7.3

            	
              Sales
                on Credit

            	
              13

            
	 	 	 
	
              7.4

            	
              Pledged
                Membership Interests

            	
              13

            
	 	 	 
	
              7.5

            	
              Cash
                Proceeds

            	
              13

            
	 	 	 
	
              SECTION
                8

            	
              AGENT

            	
              14

            
	 	 	 
	
              SECTION
                9

            	
              CONTINUING
                SECURITY INTEREST; TRANSFER OF LOANS

            	
              14

            
	 	 	 
	
              SECTION
                10

            	
              STANDARD
                OF CARE; SECURED PARTY MAY PERFORM

            	
              15

            
	 	 	 
	
              SECTION
                11

            	
              MISCELLANEOUS

            	
              15

            


    

     

    
      
        
        

      

      
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    TABLE
      OF CONTENTS

     

    
      	SCHEDULES:	
              4.1
                — General Information

              
                4.3
                  — Pledged Membership Interests


              

            


    

     

    
      	EXHIBITS:	
              A
—
                Pledge Supplement

            


    

     

    
      
        
        

      

      
        -ii-

        
          

        

      

       

    


    PLEDGE
      AGREEMENT

     

    This
      PLEDGE
      AGREEMENT,
      dated
      May 11, 2007 (this "Agreement"),
      is
      entered into by and between TEKOIL
      & GAS CORPORATION, a
      Delaware corporation (the "Grantor"),
      and
J.
      ARON & COMPANY, as
      administrative agent for the Beneficiaries (as herein defined) (in such
      capacity, the "Secured
      Party").

     

    RECITALS:

     

    WHEREAS,
      reference is made to that certain Credit and Guaranty Agreement, dated May
      11,
      2007 (as it may be amended, restated, supplemented or otherwise modified, the
      "Credit
      Agreement"),
      by
      and among
      Tekoil and Gas Gulf Coast, LLC, a
      Delaware limited liability company ("Company"),
      Tekoil
      & Gas Corporation,
      a
      Delaware corporation, and
      the
      other guarantors party thereto, J.
      Aron & Company,
      individually and in its capacity as Administrative Agent (the "Agent")
      for
      the benefit the lenders from time to time parties thereto (the "Lenders"),
      and
      such Lenders;

     

    WHEREAS,
      in
      consideration of the extensions of credit and other accommodations of Lenders
      and Lender Counterparties as set forth in the Credit Agreement and the Hedging
      Contracts, respectively, the Grantor has agreed to secure Company's obligations
      under the Transaction Documents and the Hedging Contracts as set forth
      herein;

     

    WHEREAS,
      the
      Lenders have required the execution of this Agreement as a condition to entering
      into the Credit Agreement; and

     

    WHEREAS,
      the
      Grantor will receive benefit from Company entering into the Credit
      Agreement.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the agreements, provisions and covenants
      herein contained, the Grantor and the Secured Party agree as
      follows:

     

    SECTION
      1

    DEFINITIONS

     

    1.1 General
      Definitions.
      In this
      Agreement, the following terms shall have the following meanings:

     

    "Agreement"
      shall
      have the meaning set forth in the preamble.

     

    "Beneficiaries"
      shall
      mean the Agent, the Lenders and the Lender Counterparties and shall include,
      without limitation, all former Lenders and Lender Counterparties to the extent
      that any Obligations owing to such Persons were incurred while such Persons
      were
      Lenders or Lender Counterparties and such Obligations have not been paid or
      satisfied in full

     

    "Cash
      Proceeds"
      shall
      have the meaning assigned in Section 7.5.

     

    "Collateral"
      shall
      have the meaning assigned in Section 2.


    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    "Credit
      Agreement"
      shall
      have the meaning set forth in the recitals.

     

    "Grantor"
      shall
      have the meaning set forth in the preamble.

     

    "Lender"
      shall
      have the meaning set forth in the recitals.

     

    "Pledge
      Supplement"
      shall
      mean any supplement to this agreement in substantially the form of Exhibit
      A.

     

    "Pledged
      Membership Interests"
      shall
      mean all membership interest in Company, whether now outstanding or issued
      hereafter including as listed on Schedule 4.3 (as such schedule may be amended
      or supplemented from time to time) and the certificates, if any, representing
      such membership interests and any interest of the Grantor on the books and
      records of such limited liability company or on the books and records of any
      securities intermediary pertaining to such interest and all dividends,
      distributions, cash, warrants, rights, options, instruments, securities and
      other property or proceeds from time to time received, receivable or otherwise
      distributed in respect of or in exchange for any or all of such membership
      interests.

     

    "Proceeds"
      shall
      mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments
      or
      distributions made with respect to any Pledged Membership Interest and (iii)
      whatever is receivable or received when Collateral or proceeds are sold,
      exchanged, collected or otherwise disposed of, whether such disposition is
      voluntary or involuntary.

     

    "Record"
      shall
      have the meaning specified in Article 9 of the UCC.

     

    "Secured
      Obligations"
      shall
      have the meaning assigned in Section 3.1.

     

    "Secured
      Party"
      shall
      have the meaning set forth in the preamble.

     

    "UCC"
      shall
      mean the Uniform Commercial Code as in effect from time to time in the State
      of
      New York or, when the context implies, the Uniform Commercial Code as in effect
      from time to time in any other applicable jurisdiction.

     

    "United
      States"
      shall
      mean the United States of America.

     

    1.2 Definitions;
      Interpretation.
      All
      capitalized terms used herein (including the preamble and recitals hereto)
      and
      not otherwise defined herein shall have the meanings ascribed thereto in the
      Credit Agreement or, if not defined therein, in the UCC. References to
      "Sections," "Exhibits" and "Schedules" shall be to Sections, Exhibits and
      Schedules, as the case may be, of this Agreement unless otherwise specifically
      provided. Section headings in this Agreement are included herein for convenience
      of reference only and shall not constitute a part of this Agreement for any
      other purpose or be given any substantive effect. Any of the terms defined
      herein may, unless the context otherwise requires, be used in the singular
      or
      the plural, depending on the reference. The use herein of the word "include"
      or
      "including", when following any general statement, term or matter, shall not
      be
      construed to limit such statement, term or matter to the specific items or
      matters set forth immediately following such word or to similar items or
      matters, whether or not nonlimiting language (such as "without limitation"
      or
      "but not limited to" or words of similar import) is used with reference thereto,
      but rather shall be deemed to refer to all other items or matters that fall
      within the broadest possible scope of such general statement, term or matter.
      If
      any conflict or inconsistency exists between this Agreement and the Credit
      Agreement, the Credit Agreement shall govern. All references herein to
      provisions of the UCC shall include all successor provisions under any
      subsequent version or amendment to any Article of the UCC.

     

    
      
        
        

      

      
        -2-

        
          

        

      

       

    

     

    SECTION
      2

    GRANT
      OF SECURITY

     

    The
      Grantor hereby grants to the Secured Party a security interest and continuing
      lien on all of the Grantor's right, title and interest in, to and under the
      following, in each case whether now owned or existing or hereafter acquired
      or
      arising and wherever located (all of which being hereinafter collectively
      referred to as the "Collateral"):

     

    (a) Pledged
      Membership Interests; and

     

    (b) all
      Proceeds, products, accessions, and profits of or in respect of any of the
      foregoing.

     

    SECTION
      3

    SECURITY
      FOR OBLIGATIONS; GRANTOR REMAINS LIABLE

     

    3.1 Security
      for Obligations.
      This
      Agreement secures, and the Collateral is collateral security for, the prompt
      and
      complete payment or performance in full when due, whether at stated maturity,
      by
      required prepayment, declaration, acceleration, demand or otherwise (including
      the payment of amounts that would become due but for the operation of the
      automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
§362(a) (and any successor provision thereof)), of all Obligations (the
      "Secured
      Obligations").

     

    3.2 Continuing
      Liability Under Collateral.
      Notwithstanding anything herein to the contrary, (i) the Grantor shall remain
      liable for all obligations under this Agreement with respect to the Collateral
      owned by the Grantor and nothing contained herein is intended or shall be a
      delegation of duties to the Secured Party or any Beneficiary, (ii) the Grantor
      shall remain liable under each of the agreements included in the Collateral,
      including any agreements relating to the Pledged Membership Interests, to
      perform all of the obligations undertaken by him thereunder all in accordance
      with and pursuant to the terms and provisions thereof and neither the Secured
      Party nor any Beneficiary shall have any obligation or liability under any
      of
      such agreements by reason of or arising out of this Agreement or any other
      document related thereto nor shall the Secured Party or any Beneficiary have
      any
      obligation to make any inquiry as to the nature or sufficiency of any payment
      received by it or have any obligation to take any action to collect or enforce
      any rights under any agreement included in the Collateral, including any
      agreements relating to the Pledged Membership Interests, and (iii) the exercise
      by the Secured Party of any of its rights hereunder shall not release the
      Grantor from any of his duties or obligations under the contracts and agreements
      included in the Collateral.

     

    3.3 Limitation
      on Liability.
      Notwithstanding anything in this Agreement to the contrary, the liability of
      the
      Grantor for the Secured Obligations is limited to the interests of the Grantor
      in the Collateral and, upon the occurrence of an Event of Default, any
      obligations of the Grantor under this Agreement shall be satisfied by recourse
      only to the Collateral and not by recourse directly to the Grantor or any of
      its
      other assets or property. The Administrative Agent may join the Grantor as
      a
      defendant in any legal action it undertakes to enforce its rights and remedies
      under this Agreement, provided that, except as provided in the immediately
      succeeding sentence, any judgment against the Grantor in such action may be
      satisfied by recourse only to the Collateral and not by recourse directly to
      the
      Grantor or any of its other assets or property. The foregoing notwithstanding,
      the Administrative Agent shall have full recourse against the Grantor for the
      full payment of the amount of any loss suffered by the Administrative Agent
      or
      any other Beneficiary as a result of any gross negligence, willful misconduct
      or
      fraud by or on behalf of the Grantor. The provisions of this paragraph shall
      apply to this Agreement given by the Grantor only and shall not (a) apply to
      any
      Security Document given by any other Person, (b) be deemed to be a release
      or
      impairment of any part of the Obligations or of the liens and security interests
      created by the Security Documents, or (c) limit or otherwise prejudice in any
      way the rights of the Administrative Agent or any other Person to enforce any
      of
      its rights and remedies under any other Loan Documents.

     

    
      
        
        

      

      
        -3-

        
          

        

      

       

    

     

    SECTION
      4

    REPRESENTATIONS
      AND WARRANTIES AND COVENANTS

     

    4.1 Representations
      and Warranties.
      The
      Grantor hereby represents and warrants that:

     

    (a) the
      Grantor is the record and beneficial owner of the Pledged Membership Interests
      free of all Liens, rights or claims of other Persons and it owns all other
      Collateral purported to be owned by it or otherwise has the rights it purports
      to have in each item of Collateral and, as to all Collateral whether now
      existing or hereafter acquired, will continue to own or have such rights in
      each
      item of the Collateral, in each case free and clear of any and all Liens, rights
      or claims of all other Persons;

     

    (b) the
      Grantor has indicated on Schedule 4.1(A)(as such schedule may be amended or
      supplemented from time to time): (i) the type of organization of the Grantor,
      (ii) the jurisdiction of organization of the Grantor, (iii) its organizational
      identification number and (iv) the jurisdiction where its chief executive office
      or its sole place of business is, and for the one-year period preceding the
      date
      hereof has been, located;

     

    (c) the
      full
      legal name of the Grantor is as set forth on Schedule 4.1(A) and the Grantor
      has
      not done in the last five (5) years, and does not do, business under any other
      name (including any trade-name or fictitious business name) except for those
      names set forth on Schedule 4.1(B) (as such schedule may be amended or
      supplemented from time to time);

     

    (d) except
      as
      provided on Schedule 4.1(C), the Grantor has not changed its name, jurisdiction
      of organization, chief executive office or sole place of business or its
      corporate structure in any way (e.g., by merger, consolidation, change in
      corporate form or otherwise) within the past five (5) years;

     

    (e) upon
      the
      filing of all UCC financing statements naming the Grantor as "debtor" and
the
      Secured
      Party as "secured party" and describing the Collateral in the filing offices
      set
      forth opposite the Grantor's name on Schedule 4.1(D) hereof (as such schedule
      may be amended or supplemented from time to time) and other filings delivered
      by
      the Grantor, the security interests granted to the Secured Party hereunder
      constitute valid and perfected first priority Liens on all of the Collateral
      owned by the Grantor;

     

    
      
        
        

      

      
        -4-

        
          

        

      

       

    

     

    (f) all
      actions and consents relating to the Grantor, including all filings, notices,
      registrations and recordings necessary for the exercise by the Secured Party
      of
      the voting or other rights provided for in this Agreement
      or the
      exercise of remedies in respect of the Collateral owned by the Grantor have
      been
      made or obtained;

     

    (g) other
      than the financing statements filed in favor of the Secured Party, no effective
      UCC financing statement, fixture
      filing
      or other instrument similar in effect under any applicable law covering all
      or
      any part of the Collateral owned by the Grantor is on file in any filing or
      recording office except for financing statements for which proper termination
      statements have been delivered to the Secured Party for filing;

     

    (h) no
      authorization, approval or other action by, and no notice to or filing with,
      any
      Governmental Authority
      or
      regulatory body is required for either (i) the pledge or grant by the Grantor
      of
      the Liens purported to be created in favor of the Secured Party hereunder or
      (ii) the exercise by Secured Party of any rights or remedies in respect of
      any
      Collateral (whether specifically granted or created hereunder or created or
      provided for by applicable law), except (A) for the filings contemplated by
      Section 4.1(e) above and (B) as may be required, in connection with the
      disposition of any Pledged Membership Interests, by laws generally affecting
      the
      offering and sale of Securities; and

     

    (i) Schedule
      4.3 (as such schedule may be amended or supplemented from time to time) sets
      forth all of the Pledged Membership Interests owned by the Grantor and such
      Pledged Membership Interests constitute the percentage of issued and outstanding
      percentage of membership interests or percentage of beneficial interest of
      Company owned by the Grantor;

     

    (j) there
      are
      no outstanding warrants, options or other rights to purchase, or shareholder,
      voting trust or similar agreements outstanding with respect to, or property
      that
      is convertible into, or that requires the issuance or sale of, any Pledged
      Membership Interests;

     

    (k) without
      limiting any other provision hereof, no consent of any Person, including any
      other general or limited partner, any other member of a limited liability
      company, any other shareholder or any other trust beneficiary, is necessary
      or
      desirable in connection with the creation, perfection or first priority status
      of the security interest of the Secured Party in any Pledged Membership
      Interests owned by the Grantor or the exercise by the Secured Party of the
      voting or other rights provided for in this Agreement or the exercise of
      remedies in respect thereof; and

     

    (l) none
      of
      the Pledged Membership Interests owned by the Grantor are or represent interests
      in issuers that: (a) are registered as investment companies, (b) are dealt
      in or
      traded on securities exchanges or markets or (c) have opted to be treated as
      securities under the uniform commercial code of any jurisdiction

     

    
      
        
        

      

      
        -5-

        
          

        

      

       

    

     

    4.2 Covenants.
      The
      Grantor hereby covenants and agrees that:

     

    (a) except
      for the security interest created by this Agreement, the Grantor shall not
      create or suffer to exist any Lien upon or with respect to any of the Collateral
      owned by the Grantor and the Grantor shall defend the Collateral owned by the
      Grantor against all Persons at any time claiming any interest
      therein;

     

    (b) the
      Grantor shall not produce, use or permit any Collateral owned by the Grantor
      to
      be used unlawfully or in violation of any provision of this Agreement or any
      applicable statute, regulation or ordinance or any policy of insurance covering
      the Collateral owned by the Grantor;

     

    (c) the
      Grantor shall not take or permit any action which could reasonably be expected
      to impair the Secured Party's rights in the Collateral owned by the
      Grantor;

     

    (d) the
      Grantor shall keep and maintain at his own cost and expense satisfactory and
      complete records of the Collateral owned by the Grantor;

     

    (e) in
      the
      event the Grantor acquires rights in any Pledged Membership Interests after
      the
      date hereof, the Grantor shall deliver to the Secured Party a completed Pledge
      Supplement, substantially in the form of Exhibit A attached hereto, together
      with all Supplements to Schedules thereto, reflecting such new Pledged
      Membership Interests and all other Pledged Membership Interests. Notwithstanding
      the foregoing, it is understood and agreed that the security interest of the
      Secured Party shall attach to all Pledged Membership Interests immediately
      upon
      the Grantor's acquisition of rights therein and shall not be affected by the
      failure of the Grantor to deliver a supplement as required hereby;

     

    (f) except
      as
      provided in the next sentence, in the event the Grantor receives any dividends,
      interest or distributions on any Pledged Membership Interests, or any securities
      or other property upon the merger, consolidation, liquidation or dissolution
      of
      any issuer of any Pledged Membership Interests, then (i) such dividends,
      interest or distributions and securities or other property shall be included
      in
      the definition of Collateral without further action and (ii) the Grantor shall
      immediately take all steps, if any, necessary or advisable to ensure the
      validity, perfection, priority and, if applicable, control of the Secured Party
      over such Pledged Membership Interests (including delivery thereof to the
      Secured Party) and pending any such action the Grantor shall be deemed to hold
      such dividends, interest, distributions, securities or other property in trust
      for the benefit of the Secured Party and shall be segregated from all other
      property of the Grantor. Notwithstanding the foregoing, so long as no Event
      of
      Default shall have occurred and be continuing, the Secured Party authorizes
      the
      Grantor to retain all ordinary cash dividends and distributions permitted to
      be
      paid to the Grantor under the Credit Agreement (or the payment of which is
      not
      otherwise restricted by the Credit Agreement) and all scheduled payments of
      interest permitted to be paid to the Grantor under the Credit Agreement (or
      the
      payment of which is not otherwise restricted by the Credit
      Agreement);

     

    (g) without
      the prior written consent of the Secured Party, the Grantor shall not vote
      to
      enable or take any other action to: (i) amend or terminate any partnership
      agreement, limited liability company agreement, certificate of incorporation,
      by-laws or other organizational documents in any way that materially changes
      the
      rights of the Grantor with respect to any Pledged Membership Interests or
      adversely affects the validity, perfection or priority of the Secured Party's
      security interest, (ii) other than as allowed by the Credit Agreement, permit
      any issuer of any Pledged Membership Interests to issue any membership interests
      or other equity interests of any nature or to issue securities convertible
      into
      or granting the right of purchase or exchange for any membership interests
      or
      other equity interest of any nature of such issuer, (iii) other than as
      permitted under the Credit Agreement, permit any issuer of any Pledged
      Membership Interests to dispose of all or a material portion of their assets,
      (iv) waive any default under or breach of any terms of any organizational
      document relating to the issuer of any Pledged Membership Interests, or (v)
      cause any issuer of any Pledged Membership Interests that are not securities
      (for purposes of the UCC) on the date hereof to elect or otherwise take any
      action to cause such Pledged Membership Interests to be treated as securities
      for purposes of the UCC; provided, however, notwithstanding the foregoing,
      if
      any issuer of any Pledged Membership Interests takes any such action known
      to
      the Grantor in violation of the foregoing in this clause (v), the Grantor shall
      promptly notify the Secured Party in writing of any such election or action
      and,
      in such event, shall take all reasonable steps necessary or advisable within
      his
      power to establish the Secured Party's "control" thereof;

     

    
      
        
        

      

      
        -6-

        
          

        

      

       

    

     

    (h) the
      Grantor shall comply with all of his obligations under any limited liability
      company agreement relating to Pledged Membership Interests and shall enforce
      all
      of its rights with respect to any Pledged Membership Interests; and

     

    (i) the
      Grantor shall notify the Secured Party of any event, either in any case or
      in
      the aggregate, known to the Grantor that could reasonably be expected to cause
      a
      Material Adverse Effect.

     

    4.3 Additional
      Covenants.
      

     

    (a) Delivery
      and Control.
      The
      Grantor agrees that with respect to any Pledged Membership Interests in which
      the Grantor currently has rights, it shall comply with the provisions of this
      Section on or before the Closing Date and with respect to any Pledged Membership
      Interests hereafter acquired by the Grantor, it shall comply with the provisions
      of this Section immediately upon acquiring rights therein, in each case in
      form
      and substance satisfactory to the Secured Party. With respect to any Pledged
      Membership Interests that is represented by a certificate or that is an
      "instrument" (other than any Pledged Membership Interests credited to a
      Securities Account), the Grantor shall cause such certificate or instrument
      to
      be delivered to the Secured Party, indorsed in blank by an "effective
      indorsement" (as defined in Section 8-107 of the UCC), regardless of
      whether such certificate constitutes a "certificated security" for purposes
      of
      the UCC. With respect to any Pledged Membership Interests that is an
      "uncertificated security" for purposes of the UCC (other than any
      "uncertificated securities" credited to a Securities Account), the Grantor
      shall
      cause the issuer of such uncertificated security to either (i) register the
      Secured Party as the registered owner thereof on the books and records of the
      issuer or (ii) execute an agreement in form and substance satisfactory to the
      Secured Party, pursuant to which such issuer agrees to comply with the Secured
      Party's instructions with respect to such uncertificated security without
      further consent by the Grantor.

     

    
      
        
        

      

      
        -7-

        
          

        

      

       

    

     

    (b) Voting
      and Distributions.

     

    (i) So
      long
      as no Event of Default shall have occurred and be continuing:

     

    (A) except
      as
      otherwise provided under the covenants and agreements relating to Pledged
      Membership Interests in this Agreement or elsewhere herein or in the Credit
      Agreement, the Grantor shall be entitled to exercise or refrain from exercising
      any and all voting and other consensual rights pertaining to the Pledged
      Membership Interests or any part thereof for any purpose not inconsistent with
      the terms of this Agreement or the Credit Agreement; provided, the Grantor
      shall
      not exercise or refrain from exercising any such right if the Secured Party
      shall have notified the Grantor that, in the Secured Party's reasonable
      judgment, such action would have a Material Adverse Effect on the value of
      the
      Pledged Membership Interests or any part thereof; and provided further, the
      Grantor shall give the Secured Party at least five (5) Business Days prior
      written notice of the manner in which it intends to exercise, or the reasons
      for
      refraining from exercising, any such right; it being understood, however, that
      neither the voting by the Grantor of any Pledged Membership Interests for,
      or
      the Grantor's consent to, the election of managers (or similar governing body)
      at a regularly scheduled annual or other meeting of members or with respect
      to
      incidental matters at any such meeting, nor the Grantor's consent to or approval
      of any action otherwise permitted under this Agreement and the Credit Agreement,
      shall be deemed inconsistent with the terms of this Agreement or the Credit
      Agreement within the meaning of this Section, and no notice of any such voting
      or consent need be given to the Secured Party; and

     

    (B) the
      Secured Party shall promptly execute and deliver (or cause to be executed and
      delivered) to the Grantor all proxies, and other instruments as the Grantor
      may
      from time to time reasonably request for the purpose of enabling the Grantor
      to
      exercise the voting and other consensual rights when and to the extent which
      it
      is entitled to exercise pursuant to clause (1) above;

     

    (ii) Upon
      the
      occurrence and during the continuation of an Event of Default:

     

    (A) all
      rights of the Grantor to exercise or refrain from exercising the voting and
      other consensual rights that it would otherwise be entitled to exercise pursuant
      hereto shall cease and all such rights shall thereupon become vested in the
      Secured Party who shall thereupon have the sole right to exercise such voting
      and other consensual rights; and

     

    (B) in
      order
      to permit the Secured Party to exercise the voting and other consensual rights
      that it may be entitled to exercise pursuant hereto and to receive all dividends
      and other distributions that it may be entitled to receive hereunder: (1) the
      Grantor shall promptly execute and deliver (or cause to be executed and
      delivered) to the Secured Party all proxies, dividend payment orders and other
      instruments as the Secured Party may from time to time reasonably request and
      (2) the Grantor acknowledges that the Secured Party may utilize the power of
      attorney set forth in Section 6.

     

    
      
        
        

      

      
        -8-

        
          

        

      

       

    

     

    4.4 Grantor's
      Consent.
      The
      Grantor consents to the transfer of any Pledged Membership Interest to the
      Secured Party or its nominee following an Event of Default and to the
      substitution of the Secured Party or its nominee as a member in any limited
      liability company with all the rights and powers related thereto.

     

    SECTION
      5

    ACCESS;
      RIGHT OF INSPECTION AND FURTHER ASSURANCES

     

    5.1 Access;
      Right of Inspection.
      The
      Secured Party shall at all times have full and free access during normal
      business hours to all the books, correspondence and records of the Grantor,
      and
      the Secured Party and its representatives may examine the same, take extracts
      therefrom and make photocopies thereof,
      and
      the Grantor agrees to render to the Secured Party, at the Grantor's cost and
      expense, such clerical and other assistance as may be reasonably requested
      with
      regard thereto.

     

    5.2 Further
      Assurances.
      

     

    (a) The
      Grantor agrees that from time to time, at the expense of the Grantor, that
      it
      shall promptly execute and deliver all further instruments and documents, and
      take all further action that may be necessary or desirable, or that the Secured
      Party may reasonably request, in order to create and/or maintain the validity,
      perfection or priority of and protect any security interest granted or purported
      to be granted hereby or to enable the Secured Party to exercise and enforce
      its
      rights and remedies hereunder with respect to any Collateral owned by the
      Grantor. Without limiting the generality of the foregoing, the Grantor
      shall:

     

    (i) file
      such
      financing or continuation statements, or amendments thereto, and execute and
      deliver such other agreements, instruments, endorsements, powers of attorney
      or
      notices, as may be necessary or desirable, or as the Secured Party may
      reasonably request, in order to perfect and preserve the security interests
      granted or purported to be granted hereby; and

     

    (ii) at
      the
      Secured Party's request, appear in and defend any action or proceeding that
      may
      affect the Grantor's title to or the Secured Party's security interest in all
      or
      any part of the Collateral owned by the Grantor.

     

    (b) The
      Grantor hereby authorizes the Secured Party to file a Record or Records,
      including financing or continuation statements, and amendments thereto, in
      any
      jurisdictions and with any filing offices as the Secured Party may determine,
      in
      its sole discretion, are necessary or advisable to perfect the security interest
      granted to the Secured Party herein. Such financing statements may describe
      the
      Collateral in the same manner as described herein or may contain an indication
      or description of collateral that describes such property in any other manner
      as
      the Secured Party may determine is necessary, advisable or prudent to ensure
      the
      perfection of the security interest in the Collateral granted to the Secured
      Party herein.

     

    
      
        
        

      

      
        -9-

        
          

        

      

       

    

     

    SECTION
      6

    SECURED
      PARTY APPOINTED ATTORNEY-IN-FACT

     

    6.1 Power
      of Attorney.
      The
      Grantor hereby irrevocably appoints the Secured Party (such appointment being
      coupled with an interest) as the Grantor's attorney-in-fact, with full authority
      in the place and stead of the Grantor and in the name of the Grantor, the
      Secured Party or otherwise, from time to time in the Secured Party's discretion
      to take any action and to execute any instrument that the Secured Party may
      deem
      reasonably necessary or advisable to accomplish the purposes of this Agreement,
      including the following:

     

    (a) upon
      the
      occurrence and during the continuance of any Event of Default, to ask for,
      demand, collect, sue for, recover, compound, receive and give acquittance and
      receipts for moneys due and to become due under or in respect of any of the
      Collateral;

     

    (b) upon
      the
      occurrence and during the continuance of any Event of Default, to receive,
      endorse and collect any drafts or other instruments, documents and chattel
      paper
      in connection with clause (a) above;

     

    (c) upon
      the
      occurrence and during the continuance of any Event of Default, to file any
      claims or take any action or institute any proceedings that the Secured Party
      may deem necessary or desirable for the collection of any of the Collateral
      or
      otherwise to enforce the rights of the Secured Party with respect to any of
      the
      Collateral;

     

    (d) to
      prepare and file any UCC financing statements against the Grantor as debtor
      covering the Collateral;

     

    (e) to
      take
      or cause to be taken all actions necessary to perform or comply or cause
      performance or compliance with the terms of this Agreement, including access
      to
      pay or discharge taxes or Liens levied or placed upon or threatened against
      the
      Collateral, the legality or validity thereof and the amounts necessary to
      discharge the same to be determined by the Secured Party in its sole discretion,
      any such payments made by the Secured Party to become obligations of the Grantor
      to the Secured Party, due and payable immediately without demand;
      and

     

    (f) generally
      to sell, transfer, pledge, make any agreement with respect to or otherwise
      deal
      with any of the Collateral as fully and completely as though the Secured Party
      were the absolute owner thereof for all purposes, and to do, at the Secured
      Party's option and the Grantor's expense, at any time or from time to time,
      all
      acts and things that the Secured Party deems reasonably necessary to protect,
      preserve or realize upon the Collateral and the Secured Party's security
      interest therein in order to effect the intent of this Agreement, all as fully
      and effectively as the Grantor might do.

     

    6.2 No
      Duty on the Part of Secured Party or Beneficiaries.
      The
      powers conferred on the Secured Party hereunder are solely to protect the
      interests of the Beneficiaries in the Collateral and shall not impose any duty
      upon the Secured Party or any Beneficiary to exercise any such powers. The
      Secured Party and the Beneficiaries shall be accountable only for amounts that
      they actually receive as a result of the exercise of such powers, and neither
      they nor any of their officers, directors, employees or agents shall be
      responsible to any Grantor for any act or failure to act hereunder, except
      for
      their own gross negligence or willful misconduct.

     

    
      
        
        

      

      
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    SECTION
      7

    REMEDIES

     

    7.1 Generally.
      

     

    (a) If
      any
      Event of Default shall have occurred and be continuing, the Secured Party may
      exercise in respect of the Collateral, in addition to all other rights and
      remedies provided for herein or otherwise available to it at law or in equity,
      all the rights and remedies of the Secured Party on default under the UCC
      (whether or not the UCC applies to the affected Collateral) to collect, enforce
      or satisfy any Secured Obligations then owing, whether by acceleration or
      otherwise, and also may pursue any of the following separately, successively
      or
      simultaneously:

     

    (i) require
      the Grantor to, and the Grantor hereby agrees that it shall at its expense
      and
      promptly upon request of the Secured Party forthwith, assemble all or part
      of
      the Collateral owned by the Grantor as directed by the Secured Party and make
      it
      available to the Secured Party at a place to be designated by the Secured Party
      that is reasonably convenient to both parties;

     

    (ii) enter
      onto the property where any Collateral is located and take possession thereof
      with or without judicial process;

     

    (iii) prior
      to
      the disposition of the Collateral, store, process, repair or recondition the
      Collateral or otherwise prepare the Collateral for disposition in any manner
      to
      the extent the Secured Party deems appropriate; and

     

    (iv) without
      notice except as specified below or under the UCC, sell, assign, lease, license
      (on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral
      or any part thereof in one or more parcels at public or private sale, at any
      of
      the Secured Party's offices or elsewhere, for cash, on credit or for future
      delivery, at such time or times and at such price or prices and upon such other
      terms as the Secured Party may deem commercially reasonable.

     

    (b) The
      Secured Party or any Beneficiary may be the purchaser of any or all of the
      Collateral at any public or private sale (to the extent to portion of the
      Collateral being privately sold is of a kind that is customarily sold on a
      recognized market or the subject of widely distributed standard price
      quotations) in accordance with the UCC and the Secured Party, as collateral
      agent for and representative of the Beneficiaries, shall be entitled, for the
      purpose of bidding and making settlement or payment of the purchase price for
      all or any portion of the Collateral sold at any such sale made in accordance
      with the UCC, to use and apply any of the Secured Obligations as a credit on
      account of the purchase price for any Collateral payable by the Secured Party
      at
      such sale. Each purchaser at any such sale shall hold the property sold
      absolutely free from any claim or right on the part of the Grantor, and the
      Grantor hereby waives (to the extent permitted by applicable law) all rights
      of
      redemption, stay and/or appraisal which it now has or may at any time in the
      future have under any rule of law or statute now existing or hereafter enacted.
      The Grantor agrees that, to the extent notice of sale shall be required by
      law,
      at least ten (10) days notice to the Grantor of the time and place of any public
      sale or the time after which any private sale is to be made shall constitute
      reasonable notification. The Secured Party shall not be obligated to make any
      sale of Collateral regardless of notice of sale having been given. The Secured
      Party 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 further notice,
      be made at the time and place to which it was so adjourned. The Grantor agrees
      that it would not be commercially unreasonable for the Secured Party to dispose
      of the Collateral or any portion thereof by using Internet sites that provide
      for the auction of assets of the types included in the Collateral or that have
      the reasonable capability of doing so, or that match buyers and sellers of
      assets. The Grantor hereby waives any claims against the Secured Party arising
      by reason of the fact that the price at which any Collateral may have been
      sold
      at such a private sale was less than the price which might have been obtained
      at
      a public sale, even if the Secured Party accepts the first offer received and
      does not offer such Collateral to more than one offeree. The Grantor further
      agrees that a breach of any of the covenants contained in this Section will
      cause irreparable injury to the Secured Party, that the Secured Party has no
      adequate remedy at law in respect of such breach and, as a consequence, that
      each and every covenant contained in this Section shall be specifically
      enforceable against the Grantor, and the Grantor hereby waives and agrees not
      to
      assert any defenses against an action for specific performance of such covenants
      except for a defense that no default has occurred giving rise to the Secured
      Obligations becoming due and payable prior to their stated maturities or that
      Grantor is not liable because of the limitations on Grantor's liability as
      expressly provided in the Credit Agreement and this Agreement. Nothing in this
      Section shall in any way alter the rights of the Secured Party
      hereunder.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    (c) The
      Secured Party may sell the Collateral without giving any warranties as to the
      Collateral. The Secured Party may specifically disclaim or modify any warranties
      of title or the like. This procedure will not be considered to adversely affect
      the commercial reasonableness of any sale of the Collateral.

     

    (d) The
      Secured Party shall have no obligation to marshal any of the
      Collateral.

     

    7.2 Application
      of Proceeds.
      Except
      as expressly provided elsewhere in this Agreement, all proceeds received by
      the
      Secured Party in respect of any sale, any collection from, or other realization
      upon all or any part of the Collateral shall be applied in full or in part
      by
      the Secured Party against, the Secured Obligations in the following order of
      priority: first, to the payment of all costs and expenses of such sale,
      collection or other realization, including reasonable compensation to the
      Secured Party and its agents and counsel, and all other expenses, liabilities
      and advances made or incurred by the Secured Party in connection therewith,
      and
      all amounts for which the Secured Party is entitled to indemnification hereunder
      (in its capacity as the Secured Party and not as a Lender) and all advances
      made
      by the Secured Party hereunder for the account of the Grantor, and to the
      payment of all costs and expenses paid or incurred by the Secured Party in
      connection with the exercise of any right or remedy hereunder or under the
      Credit Agreement, all in accordance with the terms hereof or thereof; second,
      to
      the extent of any excess of such proceeds, to the payment of all other Secured
      Obligations for the ratable benefit of the Lenders and the Lender
      Counterparties; and third, to the extent of any excess of such proceeds, to
      the
      payment to or upon the order of the Grantor or to whosoever may be lawfully
      entitled to receive the same or as a court of competent jurisdiction may
      direct.

     

    
      
        
        

      

      
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    7.3 Sales
      on Credit.
      If the
      Secured Party sells any of the Collateral upon credit, the Grantor will be
      credited only with payments actually made by purchaser and received by the
      Secured Party and applied to indebtedness of the purchaser. In the event the
      purchaser fails to pay for the Collateral, the Secured Party may resell the
      Collateral and the Grantor shall be credited with proceeds of the
      sale.

     

    7.4 Pledged
      Membership Interests. The
      Grantor recognizes that, by reason of certain prohibitions contained in the
      Securities Act and applicable state securities laws, the Secured Party may
      be
      compelled, with respect to any sale of all or any part of the Pledged Membership
      Interests conducted without prior registration or qualification of such Pledged
      Membership Interests under the Securities Act and/or such state securities
      laws,
      to limit purchasers to those who will agree, among other things, to acquire
      the
      Pledged Membership Interests for their own account, for investment and not
      with
      a view to the distribution or resale thereof. The Grantor acknowledges that
      any
      such private sale may be at prices and on terms less favorable than those
      obtainable through a public sale without such restrictions (including a public
      offering made pursuant to a registration statement under the Securities Act)
      and, notwithstanding such circumstances, the Grantor agrees that any such
      private sale shall be deemed to have been made in a commercially reasonable
      manner and that the Secured Party shall have no obligation to engage in public
      sales and no obligation to delay the sale of any Pledged Membership Interests
      for the period of time necessary to permit the issuer thereof to register it
      for
      a form of public sale requiring registration under the Securities Act or under
      applicable state securities laws, even if such issuer would, or should, agree
      to
      so register it. If the Secured Party determines to exercise its right to sell
      any or all of the Pledged Membership Interests, upon written request, the
      Grantor shall and shall cause each issuer of any Pledged Membership Interests
      to
      be sold hereunder to furnish to the Secured Party all such information as the
      Secured Party may request in order to determine the number and nature of
      interest, shares or other instruments included in the Pledged Membership
      Interests that may be sold by the Secured Party in exempt transactions under
      the
      Securities Act and the rules and regulations of the Securities and Exchange
      Commission thereunder, as the same are from time to time in effect.

     

    7.5 Cash
      Proceeds.
      Except
      those dividends and distributions described in the second sentence of Section
      4.2(f) that are permitted to be retained prior to the occurrence and continuance
      of an Event of Default, all proceeds of any Collateral received by the Grantor
      consisting of cash, checks and other near-cash items (collectively,
      "Cash
      Proceeds")
      shall
      be held by the Grantor in trust for the Secured Party, segregated from other
      funds of the Grantor, and shall, forthwith upon receipt by the Grantor, be
      turned over to the Secured Party in the exact form received by the Grantor
      (duly
      indorsed by the Grantor to the Secured Party, if required) and held by the
      Secured Party. Any Cash Proceeds received by the Secured Party (whether from
      the
      Grantor or otherwise): (i) if no Event of Default shall have occurred and be
      continuing, shall be held by the Secured Party for the ratable benefit of the
      Beneficiaries, as collateral security for the Secured Obligations (whether
      matured or unmatured) and (ii) if an Event of Default shall have occurred and
      be
      continuing, may, in the sole discretion of the Secured Party, (A) be held by
      the
      Secured Party for the ratable benefit of the Beneficiaries, as collateral
      security for the Secured Obligations (whether matured or unmatured) and/or
      (B)
      then or at any time thereafter may be applied by the Secured Party against
      the
      Secured Obligations then due and owing.

     

    
      
        
        

      

      
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    SECTION
      8

    AGENT

     

    The
      Secured Party has been appointed to act as secured party hereunder by Lenders
      and, by their acceptance of the benefits hereof, the other Beneficiaries. The
      Secured Party shall be obligated, and shall have the right hereunder, to make
      demands, to give notices, to exercise or refrain from exercising any rights,
      and
      to take or refrain from taking any action (including the release or substitution
      of Collateral), solely in accordance with this Agreement and the Credit
      Agreement. In furtherance of the foregoing provisions of this Section, each
      Beneficiary, by its acceptance of the benefits hereof, agrees that it shall
      have
      no right individually to realize upon any of the Collateral hereunder, it being
      understood and agreed by such Beneficiary that all rights and remedies hereunder
      may be exercised solely by the Secured Party for the benefit of Lenders and
      Lender Counterparties in accordance with the terms of this Section. Secured
      Party may resign at any time by giving thirty (30) days' prior written notice
      thereof to Lenders and the Grantor, and Secured Party may be removed at any
      time
      with or without cause by an instrument or concurrent instruments in writing
      delivered to the Grantor and Secured Party signed by the Required Lenders.
      Upon
      any such notice of resignation or any such removal, Required Lenders shall
      have
      the right, upon five (5) Business Days' notice to the Secured Party, following
      receipt of the Grantor's consent (which shall not be unreasonable withheld
      or
      delayed and which shall not be required while an Event of Default exists),
      to
      appoint a successor Secured Party. Upon the acceptance of any appointment as
      Administrative Agent under the terms of the Credit Agreement by a successor
      Administrative Agent, that successor Administrative Agent shall thereby also
      be
      deemed the successor Secured Party and such successor Secured Party shall
      thereupon succeed to and become vested with all the rights, powers, privileges
      and duties of the retiring or removed Secured Party under this Agreement, and
      the retiring or removed Secured Party under this Agreement shall promptly
      (i) transfer to such successor Secured Party all sums, Pledged Membership
      Interests and other items of Collateral held hereunder, together with all
      records and other documents necessary or appropriate in connection with the
      performance of the duties of the successor Secured Party under this Agreement
      and (ii) execute and deliver to such successor Secured Party such
      amendments to financing statements, and take such other actions, as may be
      necessary or appropriate in connection with the assignment to such successor
      Secured Party of the security interests created hereunder, whereupon such
      retiring or removed Secured Party shall be discharged from its duties and
      obligations under this Agreement. After any retiring or removed Secured Party's
      resignation or removal hereunder as the Secured Party, the provisions of this
      Agreement shall inure to its benefit as to any actions taken or omitted to
      be
      taken by it under this Agreement while it was the Secured Party
      hereunder.

     

    SECTION
      9

    CONTINUING
      SECURITY INTEREST; TRANSFER OF LOANS

     

    This
      Agreement shall create a continuing security interest in the Collateral and
      shall remain in full force and effect until the payment in full of all Secured
      Obligations, the cancellation or termination of the Commitments, be binding
      upon
      the Grantor, its successors and assigns, and inure, together with the rights
      and
      remedies of the Secured Party hereunder, to the benefit of the Secured Party
      and
      its successors, transferees and assigns. Without limiting the generality of
      the
      foregoing, but subject to the terms of the Credit Agreement, any Lender may
      assign or otherwise transfer any Loans held by it to any other Person, and
      such
      other Person shall thereupon become vested with all the benefits in respect
      thereof granted to Lenders herein or otherwise. Upon the payment in full of
      all
      Secured Obligations and the cancellation or termination of the Commitments,
      the
      security interest granted hereby shall terminate hereunder and of record and
      all
      rights to the Collateral shall revert to the Grantor. Upon any such termination
      the Secured Party shall, at Grantor's expense, execute and deliver to the
      Grantor such documents as the Grantor shall reasonably request to evidence
      such
      termination.

     

    
      
        
        

      

      
        -14-

        
          

        

      

       

    


    SECTION
      10

    STANDARD
      OF CARE; SECURED PARTY MAY PERFORM

     

    Except
      for the exercise of reasonable care in the custody of any Collateral in its
      possession and the accounting for moneys actually received by it hereunder,
      the
      Secured Party shall have no duty as to any Collateral or as to the taking of
      any
      necessary steps to preserve rights against prior parties or any other rights
      pertaining to any Collateral. The Secured Party shall be deemed to have
      exercised reasonable care in the custody and preservation of Collateral in
      its
      possession if such Collateral is accorded treatment substantially equal to
      that
      which the Secured Party accords its own property. Neither the Secured Party
      nor
      any of its directors, officers, employees or agents shall be liable for failure
      to demand, collect or realize upon all or any part of the Collateral or for
      any
      delay in doing so or shall be under any obligation to sell or otherwise dispose
      of any Collateral upon the request of the Grantor or otherwise. If the Grantor
      fails to perform any agreement contained herein, the Secured Party may itself
      perform, or cause performance of, such agreement, and the expenses of the
      Secured Party incurred in connection therewith shall be payable by the Grantor
      under Section 10.2 of the Credit Agreement.

     

    SECTION
      11

    MISCELLANEOUS

     

    Any
      notice required or permitted to be given under this Agreement shall be given
      in
      accordance with Section 10.1 of the Credit Agreement. No failure or delay on
      the
      part of the Secured Party in the exercise of any power, right or privilege
      hereunder or under any other Transaction Document shall impair such power,
      right
      or privilege or be construed to be a waiver of any default or acquiescence
      therein, nor shall any single or partial exercise of any such power, right
      or
      privilege preclude other or further exercise thereof or of any other power,
      right or privilege. All rights and remedies existing under this Agreement and
      the other Transaction Documents are cumulative to, and not exclusive of, any
      rights or remedies otherwise available. In case any provision in or obligation
      under this Agreement shall be invalid, illegal or unenforceable in any
      jurisdiction, the validity, legality and enforceability of the remaining
      provisions or obligations, or of such provision or obligation in any other
      jurisdiction, shall not in any way be affected or impaired thereby. All
      covenants hereunder shall be given independent effect so that if a particular
      action or condition is not permitted by any of such covenants, the fact that
      it
      would be permitted by an exception to, or would otherwise be within the
      limitations of, another covenant shall not avoid the occurrence of a Default
      or
      an Event of Default if such action is taken or condition exists. This Agreement
      shall be binding upon and inure to the benefit of the Secured Party and the
      Grantor and their respective successors and assigns. The Grantor shall not,
      without the prior written consent of the Secured Party given in accordance
      with
      the Credit Agreement, assign any right, duty or obligation hereunder. This
      Agreement and the other Transaction Documents embody the entire agreement and
      understanding between the Grantor and the Secured Party and supersede all prior
      agreements and understandings between such parties relating to the subject
      matter hereof and thereof. Accordingly, the Transaction Documents may not be
      contradicted by evidence of prior, contemporaneous or subsequent oral agreements
      of the parties. There are no unwritten oral agreements between the parties.
      This
      Agreement may be executed in one or more counterparts and by different parties
      hereto in separate counterparts, each of which when so executed and delivered
      shall be deemed an original, but all such counterparts together shall constitute
      but one and the same instrument; signature pages may be detached from multiple
      separate counterparts and attached to a single counterpart so that all signature
      pages are physically attached to the same document.

     

    
      
        
        

      

      
        -15-

        
          

        

      

       

    

     

    THIS
      AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
      GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
      OF
      THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS (OTHER
      THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS
      LAW).

     

    [Remainder
      of page intentionally left blank.]


    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Grantor and the Secured Party have caused this Agreement
      to
      be duly executed and delivered as of the date first written above.

     

    
      	 	 	 
	 	
              GRANTOR:

              


              TEKOIL
                & GAS CORPORATION

            
	 
 	 
 	 
 
	
            	By:  /s/
              Mark
              Western 
	 	
              
                

              

              Name:
                Mark Western

            
	 	
              Title:
                CEO and Chairman of the Board of Directors

            


    

     

    Signature
      Page to Pledge Agreement



    
      
        
        

      

      
        
        

        
          

        

      

       

    

    
       

      
        	 	 	 
	 	
                
                  SECURED
                    PARTY:

                  


                  J.
                    ARON & COMPANY,
                    
as Administrative Agent

                

              
	 
 	 
 	 
 
	
              	By:  /s/
                Colleen
                Foster 
	 	
                
                  

                

                
                  Name:
                    Colleen Foster

                

              
	 	
                
                  Title:
                    Managing Director

                

              


      

      
Signature
        Page to Pledge Agreement

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    


    SCHEDULE
      4.1

    TO
      PLEDGE AGREEMENT

    


    GENERAL
      INFORMATION

     

    (A) Full
      Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive
      Office/Sole Place of Business and Organizational Identification Number of each
      Grantor:

     

    
      	
              Full

              Legal
                Name

            	 	
              Type
                of Organization

            	 	
              Jurisdiction
                of Organization

            	 	
              Chief
                Executive Office

            	 	
              Organization
                I.D.#

            
	
              Tekoil
                & Gas Corporation

            	 	
              Corporation

            	 	
              Delaware

            	 	
              25050
                I-45 North, Ste 525

              The
                Woodlands, TX 77380

            	 	
              4286069

            


    

    


    (B) Other
      Names (including any Trade-Name or Fictitious Business Name) under which the
      Grantor has conducted business for the past five (5) years:

     

    Trailridge
      Holdings, Inc., a Delaware corporation

    Glow
      Bench Systems International, Inc., a Delaware corporation

    Pexcon,
      Inc., a Delaware corporation

    


    (C) Changes
      in Name, Jurisdiction or Principal Residence within past five (5)
      years:

     

    Trailridge
      Holdings, Inc., a Delaware corporation

    Glow
      Bench Systems International, Inc., a Delaware corporation

    Pexcon,
      Inc., a Delaware corporation

     

    [1580
      Sawgrass Corporate Parkway

    Suite
      130

    Sunrise,
      Florida 33323

     

    9101
      W
      Sample Road

    Suite
      606

    Coral
      Springs, FL  33065

     

    5036
      Dr.
      Phillips Boulevard

    Suite
      232

    Orlando,
      Florida 32819

    


    (D) Filing
      Offices:

     

    
      	
              Name
                of Grantor

            	
              Filing
                Jurisdiction(s)

            
	
              Tekoil
                & Gas Corporation

            	
              Delaware

            


    

     

    
      
        
        

      

      
        -1-

        
          

        

      

       

    


    SCHEDULE
      4.3

    TO
      PLEDGE AGREEMENT

    


    PLEDGED
      MEMBERSHIP INTERESTS

     

    Pledged
      Membership Interests:

     

    
      	
              Grantor

            	 	
              Limited
                Liability Company

            	 	
              Certificated
                (Y/N)

            	 	
              Certificate
                No. (if any)

            	 	
              No.
                of Pledged Units

            	 	
              %
                of Outstanding Membership Interests of the Limited Liability
                Company

            
	
              Tekoil
                & Gas Corporation

            	 	
              Tekoil
                and Gas Gulf Coast, LLC

            	 	
              N

            	 	
              N/A

            	 	
              1

            	 	
              100%

            


    


    
      
        
        

      

      
        -1-

        
          

        

      

       

    


    EXHIBIT
      A

    TO
      PLEDGE AGREEMENT

    


    PLEDGE
      SUPPLEMENT

     

    This
      PLEDGE
      SUPPLEMENT,
      dated
      [mm/dd/yy],
      is
      delivered pursuant to the Pledge Agreement, dated as of May 11, 2007 (as it
      may
      be from time to time amended, restated, modified or supplemented, the
      "Security
      Agreement"),
      between TEKOIL
      & GAS CORPORATION,
      a
      Delaware corporation, as the Grantor, and J.
      ARON & COMPANY,
      as
      Agent, as the Secured Party. Capitalized terms used herein not otherwise defined
      herein shall have the meanings ascribed thereto in the Security
      Agreement.

     

    The
      Grantor hereby confirms the grant to the Secured Party set forth in the Security
      Agreement of, and does hereby grant to the Secured Party, a security interest
      in
      all of the Grantor's right, title and interest in and to all Collateral to
      secure the Secured Obligations, in each case whether now or hereafter existing
      or in which the Grantor now has or hereafter acquires an interest and wherever
      the same may be located. The Grantor represents and warrants that the attached
      Supplements to Schedules accurately and completely set forth all additional
      information required pursuant to the Security Agreement and hereby agrees that
      such Supplements to Schedules shall constitute part of the Schedules to the
      Security Agreement.

     

    IN
      WITNESS WHEREOF,
      the
      Grantor has caused this Pledge Supplement to be duly executed and delivered
      by
      its duly authorized officer as of [mm/dd/yy].

    
      
         

        
          	 	 	 
	 	
                  
                    
                      TEKOIL
                        & GAS CORPORATION

                    

                  

                
	 
 	 
 	 
 
	
                	By:  
	 	
                  
                    

                  

                  
                    Name:
                      

                  

                
	 	
                  
                    
                      

                    

                    Title:
                      

                  

                
	 	
                  
                    

                  

                


        

         

         

      

    

    Signature
      Page to Pledge Agreement

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    


    SUPPLEMENTS
      TO SCHEDULES

    TO
      PLEDGE AND SECURITY AGREEMENT

     

    [Insert
      Required Information]

     

    Signature
      Page to Pledge Agreement