Document:

EXECUTION COPY

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                          PLEDGE AND SECURITY AGREEMENT

                          Dated as of February 13, 2004

                                 by and between

                              BRADY POWER PARTNERS,
                          a Nevada general partnership

                                       and

                         UNION BANK OF CALIFORNIA, N.A.,
                       in its capacity as Collateral Agent

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                          PLEDGE AND SECURITY AGREEMENT

          This PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
February 13, 2004, is made by and between BRADY POWER PARTNERS, a Nevada general
partnership (together with its permitted successors and assigns, the "Obligor"),
and UNION BANK OF CALIFORNIA, N.A., in its capacity as the Collateral Agent for
the Noteholders described below (in such capacity, the "Collateral Agent").

                                    RECITALS:

          A. Ormat Funding Corp., a Delaware corporation (the "Note Issuer"),
Union Bank of California, N.A., in its capacity as the Trustee, Obligor and ORNI
1 LLC, a Delaware limited liability company, ORNI 2 LLC, a Delaware limited
liability company, ORNI 7 LLC, a Delaware limited liability company, OrMammoth,
Inc., a Delaware corporation, Steamboat Development Corp., a Utah corporation,
Steamboat Geothermal LLC, a Delaware limited liability company (collectively
with Obligor, the "Subsidiary Guarantors"), and Ormesa LLC, a Delaware limited
liability company, have entered into the Indenture dated as of even date
herewith (the "Indenture"), pursuant to which the Note Issuer is issuing the
8.25% Senior Secured Notes (collectively, the "Notes"), and Union Bank of
California, N.A. has been appointed the Trustee on behalf of the holders of the
Notes (collectively, the "Noteholders").

          B. The Note Issuer has entered into that certain Note Purchase
Agreement dated as of February 6, 2004 among the Note Issuer, the Subsidiary
Guarantors and Lehman Brothers Inc. (as amended, supplemented or modified and in
effect from time to time, the "Note Purchase Agreement").

          C. It is a condition precedent to the issuance of the Notes by the
Note Issuer, that Obligor shall have executed and delivered this Agreement.

          D. Obligor will derive substantial direct and indirect benefit from
the issuance of the Notes.

          NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Obligor hereby agrees with Collateral Agent as follows:

                                    ARTICLE I
                                   DEFINITIONS

          Section 1.01. Certain Defined Terms.

               (a) Each capitalized term used and not otherwise defined herein
     shall have the meaning assigned to such term (whether directly or by
     reference to another agreement or document) in Article I of the Indenture.
     The Rules of Construction set forth in Section 1.04 of the Indenture are
     hereby incorporated by reference as if fully set forth herein.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

               (b) In addition to the terms defined in the Indenture, the
     preamble and the recitals, the following terms shall have the following
     respective meanings:

          "Account" has the meaning assigned to the term "account" in the
Uniform Commercial Code.

          "Bank" has the meaning assigned to the term "bank" in the Uniform
Commercial Code.

          "Capital Stock" of any Person shall mean any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interest in (however designated) the common or preferred
equity or equity or preference share capital of such Person, including, without
limitation, partnership interests and limited liability company membership
interests.

          "Certificated Security" has the meaning assigned to the term
"certificated security" in the Uniform Commercial Code.

          "Chattel Paper" has the meaning assigned to the term "chattel paper"
in the Uniform Commercial Code.

          "Collateral" has the meaning assigned to that term in Section 2.01.

          "Collateral Accounts" has the meaning assigned to that term in the
Depositary Agreement.

          "Commercial Tort Claim" has the meaning assigned to the term
"commercial tort claim" in the Uniform Commercial Code.

          "Control" with respect to Deposit Accounts, Investment Property,
Electronic Chattel Paper or Letter-of-Credit Rights, means "control" as such
term is used with respect to such types of Collateral in the Uniform Commercial
Code.

          "Copyright Collateral" shall mean all Copyrights, whether now owned or
hereafter acquired by Obligor.

          "Copyrights" shall mean, collectively, (a) all copyrights, copyright
registrations and applications for copyright registrations, (b) all renewals and
extensions of all copyrights, copyright registrations and applications for
copyright registration and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present or future infringements) now or hereafter due or
payable under or with respect to any of the foregoing, (ii) to sue for all past,
present and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world.

          "Deposit Account" has the meaning assigned to the term "deposit
account" in the Uniform Commercial Code.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

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          "Discharge Date" shall mean the date when the outstanding principal of
the Notes and other amounts payable to the Noteholders under the Indenture are
paid in full.

          "Document" has the meaning assigned to the term "document" in the
Uniform Commercial Code.

          "Electronic Chattel Paper" has the meaning assigned to the term
"electronic chattel paper" in the Uniform Commercial Code.

          "Equipment" has the meaning assigned to the term "equipment" in the
Uniform Commercial Code.

          "Fixtures" has the meaning assigned to the term "fixtures" in the
Uniform Commercial Code.

          "General Intangibles" has the meaning assigned to the term "general
intangibles" in the Uniform Commercial Code.

          "Goods" has the meaning assigned to the term "goods" in the Uniform
Commercial Code.

          "Instrument" has the meaning assigned to the term "instrument" in the
Uniform Commercial Code.

          "Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets; (b) all licenses or user or other agreements granted to Obligor
with respect to any of the foregoing, in each case whether now or hereafter
owned or used, (c) all information, customer lists, identification of suppliers,
data, plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and automatic
machinery software and programs; (d) all field repair data, sales data and other
information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all Governmental Approvals now held or hereafter
obtained by Obligor in respect of any of the foregoing; and (g) all causes of
action, claims and warranties now owned or hereafter acquired by Obligor in
respect of any of the foregoing. It is understood that Intellectual Property
shall include all of the foregoing owned or acquired by Obligor on a worldwide
basis.

          "Inventory" has the meaning assigned to the term "inventory" in the
Uniform Commercial Code.

          "Investment Property" has the meaning assigned to the term "investment
property" in the Uniform Commercial Code.

          "Letter-of-Credit Right" has the meaning assigned to the term
"letter-of-credit

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

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right" in the Uniform Commercial Code.

          "Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title to any such property is governed
by a certificate of title or ownership.

          "Ownership Collateral" has the meaning assigned to that term in
Section 2.01(a)(iii).

          "Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by Obligor.

          "Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part of all patents or patent applications and (c) all
rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.

          "Payment Intangible" has the meaning assigned to the term "payment
intangible" in the Uniform Commercial Code.

          "Pledged Ownership Interests" has the meaning assigned to that term in
Section 2.01(a)(i).

          "Proceeds" has the meaning assigned to the term "proceeds" in the
Uniform Commercial Code.

          "Secured Obligations" shall mean any and all indebtedness,
liabilities, and other obligations of the Note Issuer, Obligor and the
Subsidiary Guarantors (including, but not limited to, all such obligations in
respect of principal, interest (including post-petition interest), fees,
indemnities, costs and other expenses, whether due after acceleration or
otherwise and whether incurred before or after a bankruptcy of Obligor), of
whatever nature and however evidenced, owed to the Secured Parties under or
pursuant to the Indenture and each other Transaction Document, in each case,
direct or indirect, primary or secondary, fixed or contingent, now or hereafter
arising out of or relating to any such document.

          "Security" has the meaning assigned to the term "security" in the
Uniform Commercial Code.

          "Security Entitlement" has the meaning assigned to the term "security
entitlement" in the Uniform Commercial Code.

          "Securities Intermediary" has the meaning assigned to the term
"securities intermediary" in the Uniform Commercial Code.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

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          "Software" has the meaning assigned to the term "software" in the
Uniform Commercial Code.

          "Trademark Collateral" shall mean all Trademarks, whether now owned or
hereafter acquired by Obligor. Notwithstanding the foregoing, Trademark
Collateral shall not include any Trademark which would be rendered invalid,
abandoned, void or unenforceable by reason of its being included as part of the
Trademark Collateral.

          "Trademarks" shall mean, collectively, (a) all trade names, trademarks
and service marks, logos, trademark and service mark registrations and
applications for trademark and service mark registrations, (b) all renewals and
extensions of any of the foregoing and (c) all rights, now existing or hereafter
coming into existence, (i) to all income, royalties, damages and other payments
(including in respect of all past, present and future infringements) now or
hereafter due or payable under or with respect to any of the foregoing, (ii) to
sue for all past, present and future infringements with respect to any of the
foregoing and (iii) otherwise accruing under or pertaining to any of the
foregoing throughout the world, together, in each case, with the product lines
and goodwill of the business connected with the use of, or otherwise symbolized
by, each such trade name, trademark and service mark.

          "Uniform Commercial Code" shall mean the Uniform Commercial Code as
the same may, from time to time, be in effect in the State of New York;
provided, however, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of the security interest in
any Collateral (as hereinafter defined) is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of New York, the term
"UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.

                                   ARTICLE II
                                 THE COLLATERAL

          Section 2.01. Grant. As collateral security for the prompt payment in
full when due (whether at stated maturity, upon acceleration, on any optional or
mandatory prepayment date or otherwise) and performance of the Secured
Obligations, Obligor hereby pledges and grants to the Collateral Agent, for the
benefit of the Secured Parties, and subject to the rules and regulations of the
Bureau of Land Management, as applicable with respect to certain Geothermal
Resource Leases to which Obligor is a party, a security interest in all of
Obligor's right, title and interest in and to (subject to any Permitted Liens)
the following property, whether now owned or in the future acquired by Obligor
and whether now existing or in the future coming into existence (all of the
property, assets and revenues described in this Section 2.01 being collectively,
the "Collateral"):

               (a) (i) all of the Capital Stock in any Subsidiary identified in
          Annex 5 now or hereafter owned by Obligor, in each case together with
          all certificates (if any) evidencing the same (collectively, the
          "Pledged Ownership Interests");

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

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                    (ii) all shares, partnership interests, membership
          interests, Securities, moneys or property representing a dividend on
          any of the Pledged Ownership Interests, or representing a distribution
          or return of capital upon or in respect of the Pledged Ownership
          Interests, or resulting from a split-up, revision, reclassification or
          other like change of the Pledged Ownership Interests or otherwise
          received in exchange therefore, and any subscription warrants, rights
          or options issued to the holders of, or otherwise in respect of, the
          Pledged Ownership Interests;

                    (iii) without affecting the obligations of Obligor under any
          provision prohibiting that action under any Transaction Document, in
          the event of any consolidation or merger in which any Subsidiary
          Guarantor is not the surviving Person, all ownership interests of any
          class or character in the successor Person (unless that successor
          Person is Obligor itself) formed by or resulting from that
          consolidation or merger (collectively, and together with the property
          described in clauses (i) and (ii) above, the "Ownership Collateral");

               (b) all Accounts;

               (c) all Deposit Accounts;

               (d) all Documents;

               (e) all Chattel Paper, including Electronic Chattel Paper;

               (f) all Instruments (including each Instrument evidenced by an
          intercompany note listed in Annex 6);

               (g) all Equipment;

               (h) all Fixtures;

               (i) all Inventory;

               (j) all Goods not covered by the preceding clauses of this
          Section 2.01;

               (k) all Letter-of-Credit Rights;

               (l) all Intellectual Property;

               (m) all Investment Property;

               (n) all Commercial Tort Claims arising out of, relating to or in
     connection with all or any part of the Inventory, Equipment or Documents of
     Obligor,

               (o) all Payment Intangibles and Software not covered by the
     preceding clauses of this Section 2.01;

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

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               (p) to the extent assignable, all General Intangibles not covered
     by the preceding clauses of this Section 2.01;

               (q) all other tangible and intangible property of Obligor,
     including the assets comprising the Projects, including all rights of
     access to and inspection and use of all books, correspondence, credit
     files, records, invoices, tapes, cards, computer runs and other papers and
     documents in the possession or under the control of Obligor or any computer
     bureau or service company from time to time acting for Obligor;

               (r) all Collateral Accounts including any sub-accounts within
     such Collateral Accounts;

               (s) all Project Documents to which Obligor is a party (including
     the agreements and documents specified on the attached Annex 2) and, to the
     extent assignable, all other contracts, agreements, leases and other
     similar instruments related to any Project and all amounts payable to
     Obligor under any Project Documents;

               (t) all Governmental Approvals required or obtained in connection
     with the development and/or operation of any Project and/or in connection
     with any transaction contemplated by the Indenture (including the
     Governmental Approvals listed in Annex 3); and

               (u) the insurance policies maintained or required to be
     maintained by Obligor or any other Person (to the extent of Obligor's
     right, title and interest therein) under the Transaction Documents,
     including any such policies insuring against loss of revenues by reason of
     interruption of the operation of the applicable Project and all loss
     proceeds and other amounts payable to Obligor thereunder; and

               (v) all Proceeds and products in whatever form of all or any part
     of the other Collateral, including all rents, profits, income and benefits,
     substitutions and replacements of and to any of the Collateral and all
     proceeds of insurance and all condemnation awards and all other
     compensation for any event of loss with respect to all or any part of the
     other Collateral (together with all rights to recover and proceed with
     respect to the same), and all accessions to, substitutions for and
     replacements of all or any part of the other Collateral.

IT BEING UNDERSTOOD, HOWEVER, that (A) in the case of any of the foregoing that
consists of general or limited partnership interests in a general or limited
partnership, the security interest hereunder shall be deemed to be created only
to the maximum extent permitted under the applicable organizational instrument
pursuant to which such partnership is formed and (B) in no event shall the
security interest granted under this Section 2.01 attach to any lease, license,
contract, property rights or agreement to which any Obligor is a party or any
other part of the Collateral (or to any of its rights or interests thereunder)
if the grant of such security interest would constitute or result in either (i)
the abandonment, voiding, invalidation or unenforceability of any right, title
or interest of any Obligor therein or (ii) in a breach or termination pursuant
to the terms of, or a default under, any such lease, license, contract, property
rights or agreement

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

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(other than, to the extent that any such term would be rendered ineffective
pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial
Code).

Notwithstanding the foregoing, Collateral shall not include all Capital Stock of
any Subsidiary of Obligor other than the Pledged Ownership Interests. To the
extent that Obligor is permitted under Section 3.8 of the Depositary Agreement
to receive Restricted Payments, upon receipt by Obligor of such disbursements
made pursuant to Section 3.8 of the Depositary Agreement, such cash or other
property distributed to Obligor shall automatically be released, without any
further action by the Collateral Agent, from any security interest that may have
been created in such cash or other property pursuant to the foregoing grant
clause.

          Section 2.02. Obligations Unconditional. The obligations of Obligor in
this Agreement shall be continuing, irrevocable, primary, absolute and
unconditional irrespective of the value, genuineness, validity, regularity or
enforceability of any Financing Document or any other agreement or instrument
referred to therein, or any substitution, release or exchange of any guarantee
of or security for any of the Secured Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 2.02 that the
obligations of Obligor hereunder shall be absolute and unconditional under any
and all circumstances. Without limiting the generality of the foregoing, it is
agreed that the occurrence of any one or more of the following shall not alter
or impair the liability of Obligor hereunder, which shall remain absolute and
unconditional as described above without regard to and not be released,
discharged or in any way affected (whether in full or in part) by:

               (a) at any time or from time to time, without notice to Obligor,
     the time for any performance of or compliance with any of the Secured
     Obligations shall be extended, or such performance or compliance shall be
     waived;

               (b) any Financing Document shall be amended or modified or there
     shall be a departure from, or waiver of, any of the terms of any Financing
     Document;

               (c) the maturity of any of the Secured Obligations shall be
     accelerated, or any of the Secured Obligations shall be modified,
     supplemented or amended in any respect, or any right under any Financing
     Document or any other agreement or instrument referred to therein shall be
     waived or any guarantee of any of the Secured Obligations or any security
     therefore shall be released or exchanged in whole or in part or otherwise
     dealt with;

               (d) any lien granted to, or in favor of, the Collateral Agent as
     security for any of the Secured Obligations shall fail to be perfected; or

               (e) any proceeding, voluntary or involuntary, involving the
     bankruptcy, insolvency, receivership, reorganization, liquidation or
     arrangement of Obligor or the Note Issuer or by any defense which Obligor
     or the Note Issuer may have by reason of the order, decree or decision of
     any court or administrative body resulting from any such proceeding.
     Obligor acknowledges and agrees that the Secured Obligations include
     interest on the Secured Obligations at the applicable rate therefor

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       8

     under the Financing Documents which accrues after the commencement of any
     such proceeding (or, if interest on any portion of the Secured Obligations
     ceases to accrue by operation of law by reason of the commencement of said
     proceeding, such Secured Obligations includes the interest which would have
     accrued on such portion of the Secured Obligations if said proceedings had
     not been commenced), since it is the intention of the parties that the
     amount of the Secured Obligations secured pursuant to this Agreement should
     be determined without regard to any rule of law or order which may relieve
     Obligor or the Note Issuer of any portion of the Secured Obligations.
     Obligor will permit any trustee in bankruptcy, receiver, debtor in
     possession, assignee for the benefit of creditors or similar person to pay
     the Collateral Agent, or allow the claim of the Collateral Agent in respect
     of, interest which would have accrued after the date on which such
     proceeding is commenced. Notwithstanding the above, so long as any Secured
     Obligation shall remain outstanding, Obligor shall not, without the prior
     written consent of the Collateral Agent, commence or join with any other
     person in commencing any bankruptcy, reorganization or insolvency
     proceedings of or against the Note Issuer.

          Section 2.03. Waiver.

               (a) Obligor hereby expressly waives promptness, diligence,
     presentment, demand for payment or performance and protest; filing of
     claims with any court; any proceeding to enforce any provision of the
     Financing Documents; notice of acceptance of and reliance on this Agreement
     by the Secured Parties, notice of the creation of any Secured Obligations
     of the Note Issuer, and (except with respect to any notice required by the
     Transaction Documents) any other notice whatsoever; any requirement that
     the Collateral Agent exhausts any right, power or remedy or proceed or take
     any other action against Obligor or the Note Issuer under any Financing
     Document to which it is a party or any lien or encumbrance on, or any claim
     of payment against, any property of Obligor or the Note Issuer or any other
     agreement or instrument referred to therein, or any other Person under any
     guarantee of, or lien securing, or claim for payment of, any of the Secured
     Obligations; any right to require a proceeding by the Collateral Agent
     first against the Note Issuer whether to marshal any assets or to exhaust
     any right or take any action against the Note Issuer or any other Person or
     any collateral or otherwise, any diligence in collection or protection for
     realization upon any Secured Obligation; any obligation hereunder or any
     collateral security for any of the foregoing; any right of protest,
     presentment, notice or demand whatsoever, and any claims of waiver,
     release, surrender, alteration or compromise and all defenses, set-offs
     counterclaims, recoupments, reductions, limitations, impairments or
     terminations, whether arising hereunder or otherwise. Obligor further
     waives (i) any requirement that any other Person be joined as a party to
     any proceeding for the enforcement by the Collateral Agent of any Secured
     Obligation and (ii) the filing of claims by the Collateral Agent in the
     event of the receivership or bankruptcy of the Note Issuer. The Collateral
     Agent shall have the right to bring suit directly against Obligor with
     respect to the obligations owed to the Collateral Agent hereunder either
     prior to or concurrently with any lawsuit against, or without bringing any
     suit against Obligor, the Note Issuer or any other Person.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       9

               (b) The enforceability and effectiveness of this Agreement and
     the liability of Obligor, and the rights, remedies, powers and privileges
     of the Collateral Agent, under this Agreement shall not be affected,
     limited, reduced, discharged or terminated, and Obligor hereby expressly
     waives to the fullest extent permitted by law any defense now or in the
     future arising, by reason of:

                    (i) the illegality, invalidity or unenforceability of all or
          any part of the Secured Obligations, any Financing Document or any
          agreement, security document, guarantee or other instrument relating
          to all or any part of the Secured Obligations;

                    (ii) any disability or other defense with respect to all of
          any part of the Secured Obligations of Obligor, including the effect
          of any statute of limitations that may bar the enforcement of all or
          any part of the Secured Obligations;

                    (iii) the illegality, invalidity or unenforceability of any
          security or guarantee for all or any part of the Secured Obligations
          or the lack of perfection or continuing perfection or failure of the
          priority of any lien or encumbrance on any collateral for all or any
          part of the Secured Obligations;

                    (iv) the cessation, for any cause whatsoever, of the
          liability of any Person that is a guarantor of all or any part of the
          Secured Obligations (other than, subject to Section 2.05, by reason of
          the full payment and performance of all Secured Obligations);

                    (v) except as required by Section 5.01 hereof, any failure
          of the Collateral Agent to give notice of sale or other disposition of
          any collateral (including any notice of any judicial or nonjudicial
          foreclosure or sale of any interest in real property serving as
          collateral for all or any part of the Secured Obligations) for all or
          any part of the Secured Obligations to the Note Issuer, Obligor or any
          other Person or any defect in, or any failure by the Note Issuer,
          Obligor or any other Person to receive, any notice that may be given
          in connection with any sale or disposition of any collateral;

                    (vi) any failure of the Collateral Agent to comply with
          applicable laws in connection with the sale or other disposition of
          any collateral for all or any part of the Secured Obligations;

                    (vii) any judicial or nonjudicial foreclosure or sale of, or
          other election of remedies with respect to, any interest in real
          property or other Collateral serving as security for all or any part
          of the Secured Obligations, even though such foreclosure, sale or
          election of remedies may impair the subrogation rights of either the
          Note Issuer or Obligor or may preclude the Note Issuer or Obligor from
          obtaining reimbursement, contribution, indemnification or other
          recovery from the other Subsidiary Guarantors, the Note Issuer or any
          other

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       10

          Person and even though the Note Issuer or Obligor may not, as a result
          of such foreclosure, sale or election of remedies, be liable for any
          deficiency;

                    (viii) any act or omission of the Collateral Agent or any
          other Person (other than payment of the Secured Obligations) that
          directly or indirectly results in or aids the discharge or release of
          Obligor or any part of the Secured Obligations or any security or
          guarantee (including any letter of credit) for all or any part of the
          Secured Obligations by operation of law or otherwise;

                    (ix) any law which provides that the obligation of a surety
          or Obligor must neither be larger in amount nor in other respects more
          burdensome than that of the principal or which reduces a surety's or
          Obligor's obligation in proportion to the principal obligation;

                    (x) any counterclaim, set-off or other claim which Obligor
          has or alleges to have with respect to all or any part of the Secured
          Obligations;

                    (xi) any failure of the Collateral Agent to file or enforce
          a claim in any bankruptcy or other proceeding with respect to any
          Person;

                    (xii) the election by the Collateral Agent, in any
          bankruptcy proceeding of any Person, of the application or
          non-application of Section 1111(b)(2) of the United States Bankruptcy
          Code;

                    (xiii) any extension of credit or the grant of any lien or
          encumbrance under Section 364 of the United States Bankruptcy Code;

                    (xiv) any use of cash collateral under Section 363 of the
          United States Bankruptcy Code;

                    (xv) any agreement or stipulation with respect to the
          provision of adequate protection in any bankruptcy proceeding of any
          Person;

                    (xvi) the avoidance of any lien or encumbrance in favor of
          the Collateral Agent for any reason;

                    (xvii) any bankruptcy, insolvency, reorganization,
          arrangement, readjustment of debt, liquidation or dissolution
          proceeding commenced by or against any Person, including any discharge
          of, or bar or stay against collecting, all or any part of the Secured
          Obligations (or any interest on all or any part of the Secured
          Obligations) in or as a result of any such proceeding; or

                    (xviii) any action taken by the Collateral Agent that is
          authorized by this Section 2.03(b) or otherwise in this Agreement or
          by any other provision of any Financing Document or any omission to
          take any such action.

          Section 2.04. Reinstatement. The obligations of Obligor under this
Article II and the security interest in, and the lien on, the Collateral shall
be automatically reinstated if and

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       11

to the extent that for any reason any payment by or on behalf of Obligor in
respect of the Secured Obligations is rescinded or must be otherwise restored by
any holder of any of the Secured Obligations or if and to the extent that for
any reason any payment by or on behalf of the Note Issuer in respect of its
obligations under the Indenture and the Senior Secured Notes is rescinded or
must be otherwise restored by any Noteholder, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. Obligor agrees that it
will indemnify the Collateral Agent on demand for all reasonable and reasonably
documented costs and expenses (including reasonable and reasonably documented
fees of counsel) incurred by the Collateral Agent in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.

          Section 2.05. Subrogation. Obligor shall be subrogated to all rights
of the Collateral Agent and the Secured Parties in respect of any amounts paid
by Obligor pursuant to the terms of this Agreement; provided, however, that
Obligor hereby waives all rights of subrogation or contribution, whether arising
by contract or operation of law (including, without limitation, any such right
arising under any bankruptcy, insolvency or other similar law) or otherwise by
reason of any payment by it pursuant to the provisions of this Article II. If
any amount shall be paid to Obligor on account of such subrogation rights at any
time prior to the payment, discharge or performance in full of the Secured
Obligations, such amount shall be held in trust for the benefit of the
Collateral Agent (if applicable) and shall forthwith be paid to the Collateral
Agent to be credited and applied upon and against the Secured Obligations, to
the extent then matured, in accordance with the terms of the relevant Financing
Documents or, to the extent not then matured or existing, be held by the
Collateral Agent as collateral security for such Secured Obligations.

          Section 2.06. Remedies. Obligor agrees that, as between Obligor and
the Collateral Agent, any obligations of the Note Issuer to the Secured Parties
under any of the Financing Documents to which it is a party may be declared to
be forthwith due and payable notwithstanding any stay, injunction or other
prohibition (except any applicable prohibitions set forth in the Transaction
Documents) preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Note Issuer and that, in the event
of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations shall forthwith be deemed to
have become due and payable for purposes of this Agreement. For the avoidance of
doubt, it is understood and agreed that any amount paid pursuant to the
immediately preceding sentence is intended to be applied to the payment or
prepayment (as the case may be) of the related obligations of the Note Issuer.
Each of the obligations of Obligor under this Agreement is separate and
independent of each other obligation of Obligor hereunder and separate and
independent of the Secured Obligations, and Obligor agrees that a separate
action or actions may be brought and prosecuted by the Collateral Agent against
Obligor to enforce this Agreement, irrespective of whether any action is brought
by the Collateral Agent against the Note Issuer under any relevant Financing
Document or whether the Note Issuer is joined in any such action or actions.

          Section 2.07. Continuing Obligation. The obligation provided in this
Article II is a continuing obligation and shall apply to all Secured Obligations
whenever arising.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       12

          Section 2.08. [Intentionally Omitted].

          Section 2.09. Intellectual Property. For the purpose of enabling the
Collateral Agent to exercise its rights, remedies, powers and privileges under
Section 5.01 at that time or times as the Collateral Agent is lawfully entitled
to exercise those rights, remedies, powers and privileges, and for no other
purpose, Obligor hereby grants to the Collateral Agent, to the extent assignable
or licensable, an irrevocable, nonexclusive license (exercisable without payment
of royalty or other compensation to Obligor) to use, assign, license or
sublicense any of the Intellectual Property of Obligor, together with reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout of those
items.

          Section 2.10. Perfection. Obligor authorizes the Collateral Agent to
file such financing statements and continuation statements in such offices as
are or shall be necessary or as the Collateral Agent may determine to be
appropriate to create, perfect and establish the priority of the liens granted
by this Agreement in any and all of the Collateral, to preserve the validity,
perfection or priority of the liens granted by this Agreement in any and all of
the Collateral or to enable the Collateral Agent to exercise its remedies,
rights, powers and privileges under this Agreement. Concurrently with the
execution and delivery of this Agreement, Obligor shall (i) deliver to the
Collateral Agent any and all certificates for all Certificated Securities,
including those identified in Annex 5, duly endorsed in blank; (ii) with respect
to any part of the Ownership Collateral that constitutes an uncertificated
security Obligor shall cause any issuer thereof to register the Collateral Agent
as the registered owner of such security; (iii) deliver to the Collateral Agent
any and all Instruments, endorsed or accompanied by such instruments of
assignment and transfer in such form and substance as the Collateral Agent may
reasonably request; (iv) cooperate with the Collateral Agent in obtaining, and
take such other actions as are necessary or that the Collateral Agent may
reasonably request in order for them to obtain Control with respect to all
Deposit Accounts, Investment Property, Electronic Chattel Paper and
Letter-of-Credit Rights included in the Collateral, including (to the extent
reasonably requested by the Collateral Agent) (A) in the case of any Deposit
Account for which the Collateral Agent is not the Bank at which that Deposit
Account is maintained, using commercially reasonable efforts to cause the Bank
to enter into an agreement in such form as the Collateral Agent may in its
reasonable discretion accept and (B) in the case of any Security Entitlement,
using commercially reasonable efforts to cause the relevant Securities
Intermediary to enter into an agreement in such form as the Collateral Agent may
in its reasonable discretion accept; (v) cause the Collateral Agent (to the
extent requested by the Collateral Agent) to be listed as the lienholder on all
certificates of title or ownership relating to Motor Vehicles in the name of
Obligor and deliver to the Collateral Agent originals of all such certificates
of title or ownership for the Motor Vehicles together with the odometer
statements for each respective Motor Vehicle; (vi) cause the Collateral Agent to
be listed as the lienholder on any certificate of title or ownership for any
other Equipment covered by a certificate of title or ownership; and (vii) take
all such other actions, and authenticate or sign and file or record such other
records or instruments, as are necessary or as the Collateral Agent may
reasonably request to perfect and establish the priority of the liens granted by
this Agreement in any and all of the Collateral or to enable the Collateral
Agent to exercise its remedies, rights, powers and privileges under this
Agreement, including, without limitation, causing any or all of the Collateral
to be transferred of

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       13

record into the name of the Collateral Agent as such (and the Collateral Agent
agrees that if any Collateral is transferred into its name, the Collateral Agent
will thereafter promptly give to Obligor copies of any notices and
communications received by it with respect to the Collateral pledged by Obligor
hereunder).

          Section 2.11. Preservation and Protection of Security Interests.
Obligor shall:

               (a) upon the acquisition after the date of this Agreement by
     Obligor of any Certificated Securities, Instruments, Deposit Accounts,
     other Investment Property, Electronic Chattel Paper, Letter-of Credit
     Rights, Motor Vehicles or other Equipment covered by a certificate of title
     or ownership promptly (x) take such action with respect to that Collateral
     as is specified for that type of Collateral in Section 2.10 and (y) take
     all such other actions, and authenticate or sign and file or record such
     other records or instruments, as are necessary or as the Collateral Agent
     may reasonably request to create, perfect and establish the priority of the
     liens granted by this Agreement in any and all the Collateral, to preserve
     the validity, perfection or priority of the liens granted by this Agreement
     in any and all of the Collateral or to enable the Collateral Agent to
     exercise its remedies, rights, powers and privileges under this Agreement;

               (b) upon Obligor's acquiring, or otherwise becoming entitled to
     the benefits of, any Copyright (or copyrightable material), Patent (or
     patentable invention), Trademark (or associated goodwill) or other
     Intellectual Property or upon or prior to Obligor's filing, either directly
     or through the Collateral Agent, any licensee or any other designee, of any
     application with any governmental authority for any Copyright, Patent,
     Trademark or other Intellectual Property, in each case after the date of
     this Agreement, execute and deliver such contracts, agreements and other
     instruments as the Collateral Agent may reasonably request to create,
     perfect and establish the priority of the liens granted by this Agreement
     in that and any related Intellectual Property; and

               (c) whether with respect to Collateral as of the date of this
     Agreement or Collateral in which Obligor acquires rights in the future,
     authorize, give, authenticate, execute, deliver, file or record any and all
     financing statements, notices, contracts, agreements or other records or
     instruments, obtain any and all Governmental Approvals, and take all such
     other actions, as are necessary or as the Collateral Agent may reasonably
     request to create, perfect and establish the priority of the liens granted
     by this Agreement in any and all the Collateral, to preserve the validity,
     perfection or priority of the liens granted by this Agreement in any and
     all of the Collateral or to enable the Collateral Agent to exercise and
     enforce its remedies, rights, powers and privileges under this Agreement,
     including causing any or all of the Ownership Collateral to be transferred
     of record into the name of the Collateral Agent or its nominee (and the
     Collateral Agent agrees that if any Security is transferred into its name
     or the name of its nominee, the Collateral Agent shall thereafter promptly
     give to Obligor copies of any notices and communications received by it
     with respect to that Security); and

               (d) furnish to the Collateral Agent from time to time statements
     and schedules further identifying and describing the Collateral pledged by
     hereunder and such

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       14

     other reports in connection with the Collateral pledged by Obligor
     hereunder as the Collateral Agent may reasonably request, all in reasonable
     detail.

          Section 2.12. Attorney-in-Fact.

               (a) Subject to Obligor's rights under Sections 2.13 through 2.16,
     Obligor hereby irrevocably constitutes and appoints the Collateral Agent
     and any officer or agent thereof, with full power of substitution, as its
     true and lawful attorney-in-fact with full irrevocable power and authority
     in the place and stead of Obligor and in the name of Obligor or in its own
     name, for the purpose of carrying out the provisions of this Agreement upon
     the occurrence and during the continuation of an Event of Default, to (x)
     take any appropriate action and to execute any document or instrument that
     may be necessary or desirable to accomplish the purposes of this Agreement,
     (y) preserve the validity, perfection and priority of the liens granted by
     this Agreement and, (z) exercise its rights, remedies, powers and
     privileges under this Agreement. This appointment as attorney-in-fact is
     irrevocable and coupled with an interest. Without limiting the generality
     of the foregoing, Obligor hereby gives the Collateral Agent the power and
     right, on behalf of Obligor, without notice to or assent by Obligor, upon
     the occurrence and during the continuation of any Event of Default (i) to
     ask, demand, collect, sue for, recover, receive and give receipt and
     discharge for amounts due and to become due under and in respect of all or
     any part of the Collateral, (ii) to, in the name of Obligor or its own
     name, or otherwise, take possession of, receive and indorse and collect any
     check, Account, Chattel Paper, draft, note, acceptance or other Instrument
     for the payment of moneys due under any Account or General Intangible,
     (iii) to file any claims or take any action or proceeding that the
     Collateral Agent may deem necessary or advisable for the collection of all
     or any part of the Collateral, (iv) to execute, in connection with any sale
     or disposition of the Collateral under Article V, any endorsements,
     assignments, bills of sale or other instruments of conveyance or transfer
     with respect to all or any part of the Collateral, (v) in the case of any
     Intellectual Property, execute and deliver, and have recorded, any
     agreement, instrument, document or paper as the Collateral Agent may
     request to evidence the Collateral Agent's security interest in such
     Intellectual Property and the goodwill and General Intangibles of Obligor
     relating thereto or represented thereby, (vi) pay or discharge taxes and
     Liens levied or placed on or threatened against the Collateral (other than
     Permitted Liens), effect any repair or pay or discharge any insurance
     called for by the terms of this Agreement (including all or any part of the
     premiums therefor and the costs thereof), (vii) execute, in connection with
     any sale provided for in Article V, any endorsement, assignment or other
     instrument of conveyance or transfer with respect to the collateral; and
     (viii) (A) direct any party liable for any payment under any Collateral to
     make payment of any moneys due or to become due thereunder directly to the
     Collateral Agent or as the Collateral Agent shall direct, (B) ask or demand
     for, collect, and receive payment of and receipt for, any moneys, claims
     and other amounts due or to become due at any time in respect of or arising
     out of any Collateral, (C) sign and indorse any invoice, freight or express
     bill, bill of lading, storage or warehouse receipt, draft against debtors,
     assignment, verification, notice and other document in connection with any
     Collateral, (D) commence and prosecute any suit, action or proceeding at
     law or in equity in any court of competent jurisdiction to collect

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       15

     any Collateral and to enforce any other right in respect of any Collateral,
     (E) defend any suit, action or proceeding brought against Obligor with
     respect to any Collateral, (F) settle, compromise or adjust any such suit,
     action or proceeding and, in connection therewith, give such discharges or
     releases as the Collateral Agent may deem appropriate, (G) assign any
     Copyright, Patent or Trademark (along with the goodwill of the business to
     which any such Trademark pertains) throughout the world for such term or
     terms, on such conditions, and in such manner as the Collateral Agent shall
     in its sole discretion determine, including the execution and filing of any
     document necessary to effectuate or record such assignment and (H)
     generally, sell, transfer, pledge and make any agreement with respect to or
     otherwise deal with any Collateral as fully and completely as though the
     Collateral Agent were the absolute owner thereof for all purposes, and do,
     at the Collateral Agent's option and Obligor's expense, at any time, or
     from time to time, all acts and things that the Collateral Agent reasonably
     deems necessary to protect, preserve or realize upon the Collateral and the
     Collateral Agent's and the other Secured Parties' security interests
     therein and to effect the intent of this Agreement, all as fully and
     effectively as Obligor might do.

               (b) Without limiting the rights and powers of the Collateral
     Agent under Section 2.12(a), Obligor hereby appoints the Collateral Agent
     as its attorney-in-fact, effective the date of this Agreement and
     terminating upon the Discharge Date, for the purpose of, upon the
     occurrence and during the continuation of an Event of Default, (i)
     executing on behalf of Obligor title or ownership applications for filing
     with appropriate state agencies to enable Motor Vehicles now owned or in
     the future acquired by Obligor to be retitled and the Collateral Agent to
     be listed as lien holder as to those Motor Vehicles, (ii) filing such
     applications with such state agencies, and (iii) executing such other
     documents and instruments on behalf of, and taking such other action in the
     name of, Obligor as the Collateral Agent may deem necessary or advisable to
     accomplish the purposes of this Agreement (including the purpose of
     creating in favor of the Collateral Agent a perfected lien on the Motor
     Vehicles and exercising the rights, remedies, powers and privileges of the
     Collateral Agent under Section 5.01). This appointment as attorney-in-fact
     is irrevocable and coupled with an interest.

               (c) Without limiting the rights and powers of the Collateral
     Agent under Section 2.12(a), Obligor hereby appoints the Collateral Agent
     as its attorney-in-fact, effective the date of this Agreement and
     terminating upon the Discharge Date, at the Collateral Agent's option, but
     without any obligation so to do, for the purpose of performing, executing,
     and filing all such contracts, agreements and other documents as are
     contemplated by Section 2.11(b). This appointment as attorney-in-fact is
     irrevocable and coupled with an interest.

               (d) The expenses of the Collateral Agent incurred in connection
     with actions undertaken as provided in this Section 2.12, together with
     interest thereon at a rate per annum equal to the rate per annum at which
     interest would then be payable on past due Notes under the Indenture, from
     the date of payment by the Collateral Agent to the date reimbursed by
     Obligor, shall be payable by Obligor to the Collateral Agent on demand and
     shall constitute Secured Obligations and be secured by the Liens of the
     Collateral Documents.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       16

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

          Section 2.13. Special Provisions Relating to Securities.

               (a) So long as no Event of Default has occurred and is
     continuing, Obligor shall have the right to exercise all voting, consensual
     and other powers of ownership pertaining to all Ownership Collateral for
     all purposes not inconsistent with the terms of any Transaction Document,
     provided that Obligor shall not vote the Ownership Collateral in any manner
     that is inconsistent with the terms of any Transaction Document; and the
     Collateral Agent shall, at Obligor's expense, execute and deliver to
     Obligor or cause to be executed and delivered to Obligor all such proxies,
     powers of attorney, dividend and other orders and other instruments,
     without recourse, as Obligor may reasonably request for the purpose of
     enabling Obligor to exercise the rights and powers that it is entitled to
     exercise pursuant to this Section 2.13(a).

               (b) So long as no Event of Default has occurred and is
     continuing, Obligor shall be entitled to receive and retain any dividends
     on all Ownership Collateral paid in cash.

               (c) If any Event of Default has occurred and is continuing, and
     whether or not the Collateral Agent exercises any available right to
     declare any Secured Obligation due and payable or seeks or pursues any
     other right, remedy, power or privilege available to it under applicable
     law, this Agreement or any other Transaction Document, all dividends and
     other distributions on all Ownership Collateral shall be paid directly to
     an account designated by the Collateral Agent and retained by it in such
     account as part of the Collateral, subject to the terms of the Transaction
     Documents, and, if the Collateral Agent so requests, Obligor shall execute
     and deliver to the Collateral Agent appropriate additional dividend,
     distribution and other orders and instruments to that end, provided that if
     the applicable Event of Default is cured, any such dividend or distribution
     paid to the Collateral Agent prior to that cure shall, upon request of
     Obligor (except to the extent applied to the Secured Obligations), be
     returned by the Collateral Agent to Obligor.

          Section 2.14. Instruments. So long as no Event of Default has occurred
and is continuing, Obligor may retain for collection in the ordinary course of
business any Instruments obtained by it, and the Collateral Agent will, promptly
upon the request, and at the expense of, Obligor, make appropriate arrangements
for making any Instruments pledged by Obligor available to Obligor for purposes
of presentation, collection or renewal. Any such arrangement shall be effected,
to the extent deemed appropriate by the Collateral Agent, against a trust
receipt or like document.

          Section 2.15. Use of Collateral. So long as no Event of Default has
occurred and is continuing, Obligor shall be entitled to use and possess the
Collateral, subject to the rights, remedies, powers and privileges of the
Collateral Agent under Articles II and V.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       17

          Section 2.16. Rights and Obligations.

               (a) No reference in this Agreement to proceeds or to the sale or
     other disposition of Collateral shall authorize Obligor to pledge, sell or
     otherwise dispose of any Collateral except to the extent otherwise
     expressly permitted by the terms of any Transaction Document. The
     Collateral Agent shall not be required to take steps necessary to preserve
     any rights against prior parties to any part of the Collateral.

               (b) Obligor shall remain liable to perform its duties and
     obligations under the contracts and agreements included in the Collateral
     in accordance with their respective terms to the same extent as if this
     Agreement had not been executed and delivered. The exercise by the
     Collateral Agent of any right, remedy, power or privilege in respect of
     this Agreement shall not release Obligor from any of its duties and
     obligations under those contracts and agreements. The Collateral Agent
     shall not have any duty, obligation or liability under those contracts and
     agreements or in respect to any Governmental Approval included in the
     Collateral by reason of this Agreement or any other Transaction Document,
     nor shall the Collateral Agent be obligated to perform any of the duties or
     obligations of Obligor under any such contract or agreement or any such
     Governmental Approval or to take any action to collect or enforce any claim
     (for payment) under any such contract or agreement or Governmental
     Approval.

               (c) No lien granted by this Agreement in Obligor's right, title
     and interest in any contract, agreement or Governmental Approval shall be
     deemed to be a consent by the Collateral Agent to any such contract,
     agreement or Governmental Approval.

          Section 2.17. Release of Collateral. Upon the Discharge Date, or the
date of any sale or conveyance of a motor vehicle or any other portion of the
Collateral for which Obligor is entitled, pursuant to the terms and conditions
of the Indenture, to sell or otherwise convey free and clear of the Liens of the
Transaction Documents, and upon the request of, and at the expense of, Obligor,
the Collateral Agent will execute and deliver to Obligor such instruments as
Obligor reasonably requests to remove the notation of the Collateral Agent as
lienholder on any certificate of title for any Motor Vehicle or any other
certificate of title or other financing statement with respect to such
applicable portion of the Collateral; provided that in connection with such sale
or conveyance, any such instruments shall be delivered, and the release shall be
effective, only upon receipt by the Collateral Agent of a certificate from
Obligor stating that the Motor Vehicle or other such portion of the Collateral
the lien on which is to be released is to be sold or conveyed in accordance with
the terms and conditions of the Indenture.

          Section 2.18. Commercial Tort Claims. Obligor agrees that, if it shall
acquire any interest in any Commercial Tort Claim (whether from another Person
or because such Commercial Tort Claim shall have come into existence), (i)
Obligor shall, immediately upon such acquisition, deliver to the Collateral
Agent, in each case in form and substance satisfactory to the Collateral Agent,
a notice of the existence and nature of such Commercial Tort Claim and deliver a
supplement to Annex 4 containing a specific description of such Commercial Tort
Claim, certified by Obligor as true, correct and complete, (ii) the provisions
of Section 2.01 shall apply to such Commercial Tort Claim (and Obligor
authorizes the Collateral Agent to

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       18

supplement such annex with a description of such Commercial Tort Claim if
Obligor fails to deliver the supplement described in clause (i)), and (iii)
Obligor shall execute and deliver to the Collateral Agent, in each case in form
and substance satisfactory to the Collateral Agent, any certificate, agreement
and other document, and take all other action, deemed by the Collateral Agent to
be reasonably necessary or appropriate for the Collateral Agent to obtain, on
behalf of the Secured Parties, a first-priority, perfected security interest in
all such Commercial Tort Claims. Any supplement to Annex 4 delivered pursuant to
this Section 2.18 shall become part of such Annex 4 for all purposes hereunder.

          Section 2.19. Termination. Upon the occurrence of the Discharge Date,
all liens granted hereunder shall be deemed terminated, and the Collateral Agent
shall forthwith cause to be assigned, transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect of the Collateral, to or on the order
of Obligor. The Collateral Agent shall also execute and deliver to Obligor, at
Obligor's expense, upon the occurrence of the Discharge Date such Uniform
Commercial Code termination statements and other documentation as shall be
reasonably requested by Obligor to effect the termination and release of the
liens created under this Agreement. The security interest created hereby and the
other liens created by the Transaction Documents shall also be released with
respect to any portion of the Collateral that is sold, transferred or otherwise
disposed of in compliance with the terms and conditions of the Transaction
Documents.

                                   ARTICLE III
                                 REPRESENTATIONS

          As of the date hereof Obligor represents and warrants to the
Collateral Agent as follows:

          Section 3.01. Organization; Validity.

               (a) Annex 1 correctly sets forth Obligor's full and correct legal
     name, type of organization, jurisdiction of organization, organizational
     identification number (if applicable), chief executive office and mailing
     address as of the date of this Agreement.

               (b) Obligor has not (i) changed its location (as defined in
     Section 9-307 of the Uniform Commercial Code), (ii) previously changed its
     name except as set forth on Annex 1 and (iii) previously become a "new
     debtor" (as defined in the Uniform Commercial Code) with respect to a
     currently effective security agreement entered into by another Person
     except as set forth on Annex 1.

          Section 3.02. Title. Obligor is the sole beneficial owner of the
Collateral in which it purports to grant a lien pursuant to this Agreement, and
the Collateral is free and clear of all liens (subject to any Permitted Liens)
and the lien granted by this Agreement has attached and constitutes a perfected
security interest in all of the Collateral prior to all other liens and
encumbrances.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       19

          Section 3.03. Pledged Ownership Interests.

               (a) The Pledged Ownership Interests identified in Annex 5 are
     duly authorized, validly existing, fully paid and nonassessable, and none
     of the Pledged Ownership Interests is subject to any contractual
     restriction, or any restriction under the organizational documents of any
     Subsidiary Guarantor, upon the transfer of such Pledged Ownership Interests
     (except for any such restriction contained in any Transaction Document).
     Such Pledged Ownership Interests exist in a certificated form.

               (b) The Pledged Ownership Interests identified in Annex 5
     constitute all of the issued and outstanding membership interests or other
     interests of any class or character in any Subsidiary Guarantor owned by
     Obligor (whether or not registered in the name of Obligor), and Annex 5
     correctly identifies the issuer of such Pledged Ownership Interests and the
     respective number (and registered owners) of the interests identified in
     Annex 5.

               (c) No Person other than Obligor is the registered owner of the
     Pledged Ownership Interests.

          Section 3.04. Intercompany Notes. The intercompany notes identified in
Annex 6 constitute all of the outstanding intercompany notes payable to Obligor.

          Section 3.05. Confirmation. Obligor hereby makes the representations
and warranties specified to be applicable to Obligor in Section 2 of the Note
Purchase Agreement, and each such representation and warranty is hereby
incorporated by reference in this Agreement, mutatis mutandis, as a direct
representation and warranty of Obligor with respect to itself.

                                   ARTICLE IV
                                    COVENANTS

          Until the Discharge Date, Obligor agrees that, from time to time upon
the written request of the Collateral Agent, Obligor will execute and deliver
such further documents and do such other acts and things as the Collateral Agent
may reasonably request in order fully to effect the purposes of this Agreement.
Obligor agrees to observe and perform during the period commencing on the date
hereof and ending on the Discharge Date each of the covenants specified to be
applicable to Obligor in Article IV of the Indenture, and each such covenant and
agreement is hereby incorporated by reference in this Agreement, mutatis
mutandis, as a direct obligation, covenant and agreement of Obligor with respect
to itself.
                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       20

                                    ARTICLE V
                                    REMEDIES

          Section 5.01. Events of Default, Etc. Without limiting the rights,
powers and privileges of the Collateral Agent under Article II, if any Event of
Default shall have occurred and be continuing:

               (a) The Collateral Agent in its discretion may require Obligor
     to, and Obligor shall, assemble the Collateral owned by it at such place or
     places, reasonably convenient to both the Collateral Agent and Obligor,
     designated in the Collateral Agent's request;

               (b) The Collateral Agent in its discretion may make any
     reasonable compromise or settlement it deems desirable with respect to any
     of the Collateral and may extend the time of payment, arrange for payment
     in installments, or otherwise modify the terms of, all or any part of the
     Collateral;

               (c) The Collateral Agent in its discretion may, in its name or in
     the name of Obligor or otherwise, demand, sue for, collect or receive any
     money or property at any time payable or receivable on account of or in
     exchange for all or any part of the Collateral, but shall be under no
     obligation to do so;

               (d) The Collateral Agent in its discretion may, upon ten (10)
     Business Days' prior written notice to Obligor of the time and place, with
     respect to all or any part of the Collateral which shall then be or shall
     thereafter come into the possession, custody or control of the Collateral
     Agent or any of its agents, sell, lease or otherwise dispose of all or any
     part of such Collateral, at such place or places as the Collateral Agent
     deems best, for cash, for credit or for future delivery (without thereby
     assuming any credit risk) and at public or private sale, without demand of
     performance or notice of intention to effect any such disposition or of
     time or place of any such sale (except such notice as is required above or
     by applicable statute and cannot be waived), and the Collateral Agent or
     any other Person may be the purchaser, lessee or recipient of any or all of
     the Collateral so disposed of at any public sale (or, to the extent
     permitted by law, at any private sale) and thereafter hold the same
     absolutely, free from any claim or right of whatsoever kind, including any
     right or equity of redemption (statutory or otherwise), of Obligor, any
     such demand, notice and right or equity being hereby expressly waived and
     released. The Collateral Agent may, without notice or publication, adjourn
     any public or private sale or cause the same to be adjourned from time to
     time by announcement at the time and place fixed for the sale, and such
     sale may be made at any time or place to which the sale may be so
     adjourned;

               (e) The Collateral Agent shall have, and in its discretion may
     exercise, all of the rights, remedies, powers and privileges with respect
     to the Collateral of a secured party under the Uniform Commercial Code
     (whether or not the Uniform Commercial Code is in effect in the
     jurisdiction where such rights, remedies, powers and privileges are
     asserted) and such additional rights, remedies, powers and privileges to
     which a secured party is entitled under the laws in effect in any
     jurisdiction where any

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       21

     rights, remedies, powers and privileges in respect of this Agreement or the
     Collateral may be asserted, including the right, to the maximum extent
     permitted by law, to exercise all voting, consensual and other powers of
     ownership pertaining to the Collateral as if the Collateral Agent were the
     sole and absolute owner of the Collateral (and Obligor agrees to take all
     such action as may be appropriate to give effect to such right);

               (f) The Collateral Agent in its discretion may, to the full
     extent provided by law, have a court having jurisdiction appoint a
     receiver, which receiver shall take charge and possession of and protect,
     preserve, replace and repair the Collateral or any part thereof, and manage
     and operate the same, and receive and collect all rents, income, receipts,
     royalties, revenues, issues and profits therefrom. Obligor irrevocably
     consents and shall be deemed to have hereby irrevocably consented to the
     appointment thereof, and upon such appointment, Obligor shall immediately
     deliver possession of such Collateral to the receiver. Obligor also
     irrevocably consents to the entry of an order authorizing such receiver to
     invest upon interest any funds held or received by the receiver in
     connection with such receivership. The Collateral Agent shall be entitled
     to such appointment as a matter of right, if it shall so elect, without the
     giving of notice to any other party and without regard to the adequacy of
     the security of the Collateral; and

               (g) The Collateral Agent in its discretion may enforce one or
     more remedies hereunder, successively or concurrently, and such action
     shall not operate to estop or prevent the Collateral Agent from pursuing
     any other or further remedy which it may have hereunder or by law, and any
     repossession or retaking or sale of the Collateral pursuant to the terms
     hereof shall not operate to release Obligor until full and final payment of
     any deficiency has been made. Obligor shall reimburse the Collateral Agent
     upon demand for, or the Collateral Agent may apply any proceeds of
     Collateral to, the costs and expenses (including reasonable attorneys'
     fees, transfer taxes and any other charges) incurred by the Collateral
     Agent in connection with any sale, disposition, repair, replacement,
     alteration, addition, improvement or retention of any Collateral hereunder.

The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 shall be applied in accordance with
Section 5.04.

          Section 5.02. Deficiency. If the proceeds of, or other realization
upon, the Collateral by virtue of the exercise of remedies under Section 5.01
are insufficient to cover the costs and expenses of such exercise and the
payment in full of the Secured Obligations, Obligor shall remain liable for any
deficiency.

          Section 5.03. Private Sale.

               (a) The Collateral Agent shall not incur any liability as a
     result of the sale, lease or other disposition of all or any part of the
     Collateral at any private sale pursuant to Section 5.01 conducted in a
     commercially reasonable manner. Obligor hereby waives any claims against
     the Collateral Agent arising by reason of the fact that the price at which
     the Collateral may have been sold at such a private sale was less than the
     price which might have been obtained at a public sale or was less than the
     aggregate amount of the Secured Obligations, even if the Collateral Agent
     accepts the first offer received and does not offer the Collateral to more
     than one offeree.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       22

               (b) Obligor recognizes that, by reason of certain prohibitions
     contained in the Securities Act of 1933 and applicable state securities
     laws, the Collateral Agent may be compelled, with respect to any sale of
     all or any part of the Collateral, to limit purchasers to those who will
     agree, among other things, to acquire the Collateral for their own account,
     for investment and not with a view to distribution or resale. Obligor
     acknowledges that any such private sales may be at prices and on terms less
     favorable to the Collateral Agent than those obtainable through a public
     sale without such restrictions, and, notwithstanding such circumstances,
     agree that any such private sale shall be deemed to have been made in a
     commercially reasonable manner and that the Collateral Agent shall have no
     obligation to engage in public sales and no obligation to delay the sale of
     any Collateral for the period of time necessary to permit the respective
     issuer of such Collateral to register it for public sale.

          Section 5.04. Application of Proceeds. The Proceeds of, or other
     realization upon, all or any part of the Collateral by virtue of the
     exercise of remedies under Section 5.01, and any other cash at the time
     held by the Collateral Agent under this Article V, shall be applied by the
     Collateral Agent in accordance with the terms and provisions of the
     Collateral Agency Agreement.

                                   ARTICLE VI
                            MISCELLANEOUS PROVISIONS

          Section 6.01. Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing (which may be
by telecopier with confirmation of receipt) delivered to the intended recipient
at the address set forth in Section 10.02 of the Indenture or Annex 1, as
applicable; or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.

          Section 6.02. Amendments. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be amended or modified only
by an instrument in writing signed by Obligor and the Collateral Agent and
(except for this Section 6.02) any provision of this Agreement may be waived in
writing only by the Collateral Agent.

          Section 6.03. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns of the parties to this Agreement; provided,
however, that (a) Obligor may not assign or transfer any of its respective
rights or interest in or under this Agreement or delegate any of its obligations
under this Agreement without the prior written consent of the Collateral Agent
and (b) the Collateral Agent shall transfer or assign its rights under this
Agreement in connection with a resignation or removal of such Person from its
respective capacity in accordance with the terms of this Agreement.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       23

          Section 6.04. Survival. All agreements, statements, representations
and warranties made by Obligor herein or in any certificate or other instrument
delivered by Obligor or on its behalf under this Agreement shall be considered
to have been relied upon by the Collateral Agent and shall survive the execution
and delivery of this Agreement and the other Transaction Documents until the
earlier to occur of (i) termination thereof; and (ii) the Discharge Date, in
each case, regardless of any investigation made by or on behalf of the
Collateral Agent.

          Section 6.05. No Waiver; Remedies Cumulative. No failure or delay on
the part of the Collateral Agent in exercising any right, power or privilege
hereunder and no course of dealing between Obligor and the Collateral Agent
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Collateral Agent would
otherwise have.

          Section 6.06. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.

          Section 6.07. Captions. The headings of the several articles and
sections and sub sections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Agreement.

          Section 6.08. Severability. In case any provision contained 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.

          Section 6.09. Governing Law; Submission to Jurisdiction and Venue;
Waiver of Jury Trial.

               (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE.

               (b) Submission to Jurisdiction. Section 10.09 of the Indenture is
hereby incorporated by reference as if fully set forth in this Agreement, and
Obligor confirms its consent and submission to jurisdiction and venue.

               (c) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       24

NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

               (d) NO CLAIM MAY BE MADE BY ANY PARTY HERETO AGAINST ANY OTHER
PARTY HERETO OR ANY OF ITS SUCCESSORS IN INTEREST OR ITS AFFILIATES, DIRECTORS,
OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF ANY OF THEM FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH
OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATING TO, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER TRANSACTION DOCUMENTS, AND EACH PARTY HERETO HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT
ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

          Section 6.10. Entire Agreement. This Agreement, together with any
other agreement executed in connection with this Agreement, is intended by the
parties as a final expression of their agreement as to the matters covered by
this Agreement and is intended as a complete and exclusive statement of the
terms and conditions of such agreement.

          Section 6.11. Independent Obligations. Obligor's obligations under
this Agreement are independent of those of any other Person. The Collateral
Agent may bring a separate action against Obligor without first proceeding
against any other Person or any other security held by the Collateral Agent and
without pursuing any other remedy.

          Section 6.12. Expenses. Obligor agrees to pay or to reimburse the
Collateral Agent for all costs and expenses (including reasonable attorney's
fees and expenses) that may be incurred by the Collateral Agent in any effort to
enforce any of the provisions of Article II or Article V, or any of the
obligations of Obligor in respect of the Collateral or in connection with (a)
the preservation of the liens on, or the rights of the Collateral Agent to the
Collateral pursuant to this Agreement or (b) any actual or attempted sale,
lease, disposition, exchange, collection, compromise, settlement or other
realization in respect of, or care of, the Collateral, including all such costs
and expenses (and reasonable attorney's fees and expenses) incurred in any
bankruptcy, reorganization, workout or other similar proceeding.

                             [SIGNATURES TO FOLLOW]

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                       25

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective authorized officers as of the
date first written above.

                                        OBLIGOR:

                                        BRADY POWER PARTNERS,
                                        a Nevada general partnership

                                        By: ORNI 1 LLC,
                                            a Delaware limited liability company
                                            Its: General Partner

                                            By: ORMAT FUNDING CORP.,
                                                a Delaware corporation
                                                Its: Sole Member and Manager

                                                By: /s/ Yehudit Bronicki
                                                    ----------------------------
                                                    Name:
                                                    Title:

                                        By: ORNI 2 LLC,
                                            a Delaware limited liability company
                                            Its: General Partner

                                            By: ORMAT FUNDING CORP.,
                                                a Delaware corporation
                                                Its: Sole Member and Manager

                                                By: /s/ Yehudit Bronicki
                                                    ----------------------------
                                                    Name:
                                                    Title:

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                        COLLATERAL AGENT:

                                        UNION BANK OF CALIFORNIA, N.A.

                                        By: /s/ Sonia N. Flores
                                            ------------------------------------
                                            Name: Sonia N. Flores
                                            Title: Vice President

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                     ANNEX 1

               Organization and Chief Executive Office of Obligor

Obligor's Legal Name, Type and Jurisdiction of Organization, and Organizational
Identification Number:

Brady Power Partners, a Nevada general partnership, organizational ID#: N/A.

Obligor's Chief Executive Office and Mailing Address:

Brady Power Partners
980 Greg Street
Sparks, NV 89431
Facsimile: (775) 356-9039
Attention: President

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                     ANNEX 2

                                PROJECT DOCUMENTS

Brady-BLM Geothermal Resources Lease N-10922

Brady-BLM Geothermal Resources Lease N-40353

Brady-BLM Geothermal Resources Lease N-40355

Brady-BLM Geothermal Resources Lease N-46566

Brady/Desert Peak 1 Interconnection Agreement

Brady Operation and Maintenance Agreement

Brady Project Power Purchase Agreement

Brady Settlement Agreement

ConAgra Lease

Desert Peak Sublease

Fluid Supply Agreement

Grant of Easement between David P. Frase, Timothy Frase and Stacy Frace, and
James W. Roberts, Trustee of the James W. Roberts Revocable Trust, dated August
24, 1996, as grantor, and Obligor as grantee, dated March 27, 1998

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                     ANNEX 3

                             GOVERNMENTAL APPROVALS

      PERMIT                    NUMBER         ISSUER            DATE
      ------                    ------         ------            ----

1.    Class II Air Quality      AP4911-0229    Nevada            03/01/02
      Operating Permit                         Department of
                                               Conservation
                                               and Natural
                                               Resources

2.    Authorization to          UNEV87050      Nevada            03/11/99
      Inject / Discharge                       Division of       (modified 08/30/01)
                                               Environmental
                                               Protection

3.    Special License/Permit:   S 22502        Nevada            10/01/02
      Industrial Artificial                    Division of
      Pond Permit                              Wildlife

4.    Boiler/Pressure Vessel    02-0271        Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

5.    Boiler/Pressure Vessel    02-0272        Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

6.    Boiler/Pressure Vessel    02-0273        Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

7.    Boiler/Pressure Vessel    02-0274        Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

8.    Boiler/Pressure Vessel    02-0275        Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

9.    Boiler/Pressure Vessel    02-0276        Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

      PERMIT                    NUMBER         ISSUER            DATE
      ------                    ------         ------            ----
10.   Boiler/Pressure Vessel    02-0276A       Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

11.   Boiler/Pressure Vessel    02-0277        Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

12.   Boiler/Pressure Vessel    02-0277A       Nevada            07/29/02
      Operating Permit                         Department of
                                               Business &
                                               Industry

13.   Hazardous Materials       182-354        Nevada State      03/01/03
      Storage Permit                           Fire Marshal

14.   Business License          02158          County of         01/01/03
                                               Churchill

15.   Special Use Permit        None stated;   Churchill         01/22/91
                                APN 04-031-    County
                                01 and -13     Planning
                                               Commission

16.   Amendment to Special      342895         Churchill         04/18/02
      Use Permit                               County
                                               Planning
                                               Commission

17.   Certificate of            59711          State of Nevada   Priority:
      Appropriation of Water                                     06/20/91

18.   Certificate of            57238          State of Nevada   Priority:
      Appropriation of Water                                     08/18/83

19.   Certificate of            57239          State of Nevada   Priority:
      Appropriation of Water                                     01/03/85

20.   Certificate of            57240          State of Nevada   Priority:
      Appropriation of Water                                     01/03/85

21.   Certificate of            57241          State of Nevada   Priority:
      Appropriation of Water                                     06/25/86

22.   Certificate of            57243          State of Nevada   Priority:
      Appropriation of Water                                     06/25/86

23.   Certificate of            57245          State of Nevada   Priority:
      Appropriation of Water                                     06/25/86

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

      PERMIT                    NUMBER         ISSUER            DATE
      ------                    ------         ------            ----
24.   Certificate of            57289          State of Nevada   Priority:
      Appropriation of Water                                     03/12/92

25.   Certificate of            57297          State of Nevada   Priority:
      Appropriation of Water                                     03/12/92

26.   Certificate of            60930          State of Nevada   Priority:
      Appropriation of Water                                     06/25/86

27.   Certificate of            60931          State of Nevada   Priority:
      Appropriation of Water                                     03/12/92

28.   Certificate of            62118          State of Nevada   None Stated
      Appropriation of Water

29.   Certificate of            64485          State of Nevada   None Stated
      Appropriation of Water

30.   Certificate of            64486          State of Nevada   Priority:
      Appropriation of Water                                     03/12/92

31.   Certificate of            64487          State of Nevada   Priority:
      Appropriation of Water                                     03/12/92

32.   Certificate of            64488          State of Nevada   Priority:
      Appropriation of Water                                     03/12/92

33.   Class II Air Quality      AP4911-        Nevada            09/08/03
      Operating Permit          0503.01        Department of
                                               Conservation
                                               and Natural
                                               Resources

34.   Boiler/Pressure Vessel    85-5514        Nevada            09/05/02
      Operating Permit                         Department of
                                               Business and
                                               Industry

35.   Boiler/Pressure Vessel    85-5515        Nevada            10/29/02
      Operating Permit                         Department of
                                               Business and
                                               Industry

36.   Boiler/Pressure Vessel    85-5516        Nevada            09/05/02
      Operating Permit                         Department of
                                               Business and
                                               Industry

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

      PERMIT                    NUMBER         ISSUER            DATE
      ------                    ------         ------            ----
37.   Boiler/Pressure Vessel    85-5517        Nevada            09/05/02
      Operating Permit                         Department of
                                               Business and
                                               Industry

38.   Business License          02158          County of         01/01/03
                                               Churchill

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                     ANNEX 4

                             COMMERCIAL TORT CLAIMS

                                      None.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                     ANNEX 5

                           PLEDGED OWNERSHIP INTERESTS

                                      None.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)

                                     ANNEX 6

                               INTERCOMPANY NOTES

                                      None.

                                           PLEDGE AND SECURITY AGREEMENT (BRADY)EXECUTION COPY

================================================================================

                          PLEDGE AND SECURITY AGREEMENT

                          Dated as of February 13, 2004

                                 by and between

                            STEAMBOAT GEOTHERMAL LLC,
                      a Delaware limited liability company

                                       and

                         UNION BANK OF CALIFORNIA, N.A.,
                       in its capacity as Collateral Agent

================================================================================

                          PLEDGE AND SECURITY AGREEMENT

          This PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
February 13, 2004, is made by and between STEAMBOAT GEOTHERMAL LLC, a Delaware
limited liability company (together with its permitted successors and assigns,
the "Obligor"), and UNION BANK OF CALIFORNIA, N.A., in its capacity as the
Collateral Agent for the Noteholders described below (in such capacity, the
"Collateral Agent").

                                    RECITALS:

          A. Ormat Funding Corp., a Delaware corporation (the "Note Issuer"),
Union Bank of California, N.A., in its capacity as the Trustee, Obligor and ORNI
1 LLC, a Delaware limited liability company, ORNI 2 LLC, a Delaware limited
liability company, ORNI 7 LLC, a Delaware limited liability company, OrMammoth,
Inc., a Delaware corporation, Brady Power Partners, a Nevada general
partnership, Steamboat Development Corp., a Utah corporation (collectively with
Obligor, the "Subsidiary Guarantors"), and Ormesa LLC, a Delaware limited
liability company, have entered into the Indenture dated as of even date
herewith (the "Indenture"), pursuant to which the Note Issuer is issuing the
8.25% Senior Secured Notes (collectively, the "Notes"), and Union Bank of
California, N.A. has been appointed the Trustee on behalf of the holders of the
Notes (collectively, the "Noteholders").

          B. The Note Issuer has entered into that certain Note Purchase
Agreement dated as of February 6, 2004 among the Note Issuer, the Subsidiary
Guarantors and Lehman Brothers Inc. (as amended, supplemented or modified and in
effect from time to time, the "Note Purchase Agreement").

          C. It is a condition precedent to the issuance of the Notes by the
Note Issuer, that Obligor shall have executed and delivered this Agreement.

          D. Obligor will derive substantial direct and indirect benefit from
the issuance of the Notes.

          NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Obligor hereby agrees with Collateral Agent as follows:

                                    ARTICLE I
                                   DEFINITIONS

          Section 1.01. Certain Defined Terms.

               (a) Each capitalized term used and not otherwise defined herein
     shall have the meaning assigned to such term (whether directly or by
     reference to another agreement or document) in Article I of the Indenture.
     The Rules of Construction set forth in Section 1.04 of the Indenture are
     hereby incorporated by reference as if fully set forth herein.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

               (b) In addition to the terms defined in the Indenture, the
     preamble and the recitals, the following terms shall have the following
     respective meanings:

          "Account" has the meaning assigned to the term "account" in the
Uniform Commercial Code.

          "Bank" has the meaning assigned to the term "bank" in the Uniform
Commercial Code.

          "Capital Stock" of any Person shall mean any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interest in (however designated) the common or preferred
equity or equity or preference share capital of such Person, including, without
limitation, partnership interests and limited liability company membership
interests.

          "Certificated Security" has the meaning assigned to the term
"certificated security" in the Uniform Commercial Code.

          "Chattel Paper" has the meaning assigned to the term "chattel paper"
in the Uniform Commercial Code.

          "Collateral" has the meaning assigned to that term in Section 2.01.

          "Collateral Accounts" has the meaning assigned to that term in the
Depositary Agreement.

          "Commercial Tort Claim" has the meaning assigned to the term
"commercial tort claim" in the Uniform Commercial Code.

          "Control" with respect to Deposit Accounts, Investment Property,
Electronic Chattel Paper or Letter-of-Credit Rights, means "control" as such
term is used with respect to such types of Collateral in the Uniform Commercial
Code.

          "Copyright Collateral" shall mean all Copyrights, whether now owned or
hereafter acquired by Obligor.

          "Copyrights" shall mean, collectively, (a) all copyrights, copyright
registrations and applications for copyright registrations, (b) all renewals and
extensions of all copyrights, copyright registrations and applications for
copyright registration and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present or future infringements) now or hereafter due or
payable under or with respect to any of the foregoing, (ii) to sue for all past,
present and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world.

          "Deposit Account" has the meaning assigned to the term "deposit
account" in the Uniform Commercial Code.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       2

          "Discharge Date" shall mean the date when the outstanding principal of
the notes and other amounts payable to the Noteholders under the Indenture have
been paid in full.

          "Document" has the meaning assigned to the term "document" in the
Uniform Commercial Code.

          "Electronic Chattel Paper" has the meaning assigned to the term
"electronic chattel paper" in the Uniform Commercial Code.

          "Equipment" has the meaning assigned to the term "equipment" in the
Uniform Commercial Code.

          "Fixtures" has the meaning assigned to the term "fixtures" in the
Uniform Commercial Code.

          "General Intangibles" has the meaning assigned to the term "general
intangibles" in the Uniform Commercial Code.

          "Goods" has the meaning assigned to the term "goods" in the Uniform
Commercial Code.

          "Instrument" has the meaning assigned to the term "instrument" in the
Uniform Commercial Code.

          "Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets; (b) all licenses or user or other agreements granted to Obligor
with respect to any of the foregoing, in each case whether now or hereafter
owned or used, (c) all information, customer lists, identification of suppliers,
data, plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and automatic
machinery software and programs; (d) all field repair data, sales data and other
information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all Governmental Approvals now held or hereafter
obtained by Obligor in respect of any of the foregoing; and (g) all causes of
action, claims and warranties now owned or hereafter acquired by Obligor in
respect of any of the foregoing. It is understood that Intellectual Property
shall include all of the foregoing owned or acquired by Obligor on a worldwide
basis.

          "Inventory" has the meaning assigned to the term "inventory" in the
Uniform Commercial Code.

          "Investment Property" has the meaning assigned to the term "investment
property" in the Uniform Commercial Code.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       3

          "Letter-of-Credit Right" has the meaning assigned to the term
"letter-of-credit right" in the Uniform Commercial Code.

          "Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title to any such property is governed
by a certificate of title or ownership.

          "Ownership Collateral" has the meaning assigned to that term in
Section 2.01(a)(iii).

          "Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by Obligor.

          "Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part of all patents or patent applications and (c) all
rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.

          "Payment Intangible" has the meaning assigned to the term "payment
intangible" in the Uniform Commercial Code.

          "Pledged Ownership Interests" has the meaning assigned to that term in
Section 2.01(a)(i).

          "Proceeds" has the meaning assigned to the term "proceeds" in the
Uniform Commercial Code.

          "Secured Obligations" shall mean any and all indebtedness,
liabilities, and other obligations of the Note Issuer, Obligor and the
Subsidiary Guarantors (including, but not limited to, all such obligations in
respect of principal, interest (including post-petition interest), fees,
indemnities, costs and other expenses, whether due after acceleration or
otherwise and whether incurred before or after a bankruptcy of Obligor), of
whatever nature and however evidenced, owed to the Secured Parties under or
pursuant to the Indenture and each other Transaction Document, in each case,
direct or indirect, primary or secondary, fixed or contingent, now or hereafter
arising out of or relating to any such document.

          "Security" has the meaning assigned to the term "security" in the
Uniform Commercial Code.

          "Security Entitlement" has the meaning assigned to the term "security
entitlement" in the Uniform Commercial Code.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       4

          "Securities Intermediary" has the meaning assigned to the term
"securities intermediary" in the Uniform Commercial Code.

          "Software" has the meaning assigned to the term "software" in the
Uniform Commercial Code.

          "Trademark Collateral" shall mean all Trademarks, whether now owned or
hereafter acquired by Obligor. Notwithstanding the foregoing, Trademark
Collateral shall not include any Trademark which would be rendered invalid,
abandoned, void or unenforceable by reason of its being included as part of the
Trademark Collateral.

          "Trademarks" shall mean, collectively, (a) all trade names, trademarks
and service marks, logos, trademark and service mark registrations and
applications for trademark and service mark registrations, (b) all renewals and
extensions of any of the foregoing and (c) all rights, now existing or hereafter
coming into existence, (i) to all income, royalties, damages and other payments
(including in respect of all past, present and future infringements) now or
hereafter due or payable under or with respect to any of the foregoing, (ii) to
sue for all past, present and future infringements with respect to any of the
foregoing and (iii) otherwise accruing under or pertaining to any of the
foregoing throughout the world, together, in each case, with the product lines
and goodwill of the business connected with the use of, or otherwise symbolized
by, each such trade name, trademark and service mark.

          "Uniform Commercial Code" shall mean the Uniform Commercial Code as
the same may, from time to time, be in effect in the State of New York;
provided, however, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of the security interest in
any Collateral (as hereinafter defined) is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of New York, the term
"UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.

                                   ARTICLE II
                                 THE COLLATERAL

          Section 2.01. Grant. As collateral security for the prompt payment in
full when due (whether at stated maturity, upon acceleration, on any optional or
mandatory prepayment date or otherwise) and performance of the Secured
Obligations, Obligor hereby pledges and grants to the Collateral Agent, for the
benefit of the Secured Parties, and subject to the rules and regulations of the
Bureau of Land Management, as applicable with respect to certain Geothermal
Resource Leases to which Obligor is a party, a security interest in all of
Obligor's right, title and interest in and to (subject to any Permitted Liens)
the following property, whether now owned or in the future acquired by Obligor
and whether now existing or in the future coming into existence (all of the
property, assets and revenues described in this Section 2.01 being collectively,
the "Collateral"):

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       5

               (a) (i) all of the Capital Stock in any Subsidiary identified in
     Annex 5 now or hereafter owned by Obligor, in each case together with all
     certificates (if any) evidencing the same (collectively, the "Pledged
     Ownership Interests");

                    (ii) all shares, partnership interests, membership
     interests, Securities, moneys or property representing a dividend on any of
     the Pledged Ownership Interests, or representing a distribution or return
     of capital upon or in respect of the Pledged Ownership Interests, or
     resulting from a split-up, revision, reclassification or other like change
     of the Pledged Ownership Interests or otherwise received in exchange
     therefore, and any subscription warrants, rights or options issued to the
     holders of, or otherwise in respect of, the Pledged Ownership Interests;

                    (iii) without affecting the obligations of Obligor under any
     provision prohibiting that action under any Transaction Document, in the
     event of any consolidation or merger in which any Subsidiary Guarantor is
     not the surviving Person, all ownership interests of any class or character
     in the successor Person (unless that successor Person is Obligor itself)
     formed by or resulting from that consolidation or merger (collectively, and
     together with the property described in clauses (i) and (ii) above, the
     "Ownership Collateral");

               (b) all Accounts;

               (c) all Deposit Accounts;

               (d) all Documents;

               (e) all Chattel Paper, including Electronic Chattel Paper;

               (f) all Instruments (including each Instrument evidenced by an
     intercompany note listed in Annex 6);

               (g) all Equipment;

               (h) all Fixtures;

               (i) all Inventory;

               (j) all Goods not covered by the preceding clauses of this
     Section 2.01;

               (k) all Letter-of-Credit Rights;

               (l) all Intellectual Property;

               (m) all Investment Property;

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       6

               (n) all Commercial Tort Claims arising out of, relating to or in
     connection with all or any part of the Inventory, Equipment or Documents of
     Obligor,

               (o) all Payment Intangibles and Software not covered by the
     preceding clauses of this Section 2.01;

               (p) to the extent assignable, all General Intangibles not covered
     by the preceding clauses of this Section 2.01;

               (q) all other tangible and intangible property of Obligor,
     including the assets comprising the Projects, including all rights of
     access to and inspection and use of all books, correspondence, credit
     files, records, invoices, tapes, cards, computer runs and other papers and
     documents in the possession or under the control of Obligor or any computer
     bureau or service company from time to time acting for Obligor;

               (r) all Collateral Accounts including any sub-accounts within
such Collateral Accounts;

               (s) all Project Documents to which Obligor is a party (including
     the agreements and documents specified on the attached Annex 2) and, to the
     extent assignable, all other contracts, agreements, leases and other
     similar instruments related to any Project and all amounts payable to
     Obligor under any Project Documents;

               (t) all Governmental Approvals required or obtained in connection
     with the development and/or operation of any Project and/or in connection
     with any transaction contemplated by the Indenture (including the
     Governmental Approvals listed in Annex 3); and

               (u) the insurance policies maintained or required to be
     maintained by Obligor or any other Person (to the extent of Obligor's
     right, title and interest therein) under the Transaction Documents,
     including any such policies insuring against loss of revenues by reason of
     interruption of the operation of the applicable Project and all loss
     proceeds and other amounts payable to Obligor thereunder; and

               (v) all Proceeds and products in whatever form of all or any part
     of the other Collateral, including all rents, profits, income and benefits,
     substitutions and replacements of and to any of the Collateral and all
     proceeds of insurance and all condemnation awards and all other
     compensation for any event of loss with respect to all or any part of the
     other Collateral (together with all rights to recover and proceed with
     respect to the same), and all accessions to, substitutions for and
     replacements of all or any part of the other Collateral.

IT BEING UNDERSTOOD, HOWEVER, that (A) in the case of any of the foregoing that
consists of general or limited partnership interests in a general or limited
partnership, the security interest hereunder shall be deemed to be created only
to the maximum extent permitted under the applicable organizational instrument
pursuant to which such partnership is formed and (B) in no event shall the
security interest granted under this Section 2.01 attach to any lease, license,

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       7

contract, property rights or agreement to which any Obligor is a party or any
other part of the Collateral (or to any of its rights or interests thereunder)
if the grant of such security interest would constitute or result in either (i)
the abandonment, voiding, invalidation or unenforceability of any right, title
or interest of any Obligor therein or (ii) in a breach or termination pursuant
to the terms of, or a default under, any such lease, license, contract, property
rights or agreement (other than, to the extent that any such term would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the
Uniform Commercial Code).

Notwithstanding the foregoing, Collateral shall not include all Capital Stock of
any Subsidiary of Obligor other than the Pledged Ownership Interests. To the
extent that Obligor is permitted under Section 3.8 of the Depositary Agreement
to receive Restricted Payments, upon receipt by Obligor of such disbursements
made pursuant to Section 3.8 of the Depositary Agreement, such cash or other
property distributed to Obligor shall automatically be released, without any
further action by the Collateral Agent, from any security interest that may have
been created in such cash or other property pursuant to the foregoing grant
clause.

          Section 2.02. Obligations Unconditional. The obligations of Obligor in
this Agreement shall be continuing, irrevocable, primary, absolute and
unconditional irrespective of the value, genuineness, validity, regularity or
enforceability of any Financing Document or any other agreement or instrument
referred to therein, or any substitution, release or exchange of any guarantee
of or security for any of the Secured Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 2.02 that the
obligations of Obligor hereunder shall be absolute and unconditional under any
and all circumstances. Without limiting the generality of the foregoing, it is
agreed that the occurrence of any one or more of the following shall not alter
or impair the liability of Obligor hereunder, which shall remain absolute and
unconditional as described above without regard to and not be released,
discharged or in any way affected (whether in full or in part) by:

               (a) at any time or from time to time, without notice to Obligor,
     the time for any performance of or compliance with any of the Secured
     Obligations shall be extended, or such performance or compliance shall be
     waived;

               (b) any Financing Document shall be amended or modified or there
     shall be a departure from, or waiver of, any of the terms of any Financing
     Document;

               (c) the maturity of any of the Secured Obligations shall be
     accelerated, or any of the Secured Obligations shall be modified,
     supplemented or amended in any respect, or any right under any Financing
     Document or any other agreement or instrument referred to therein shall be
     waived or any guarantee of any of the Secured Obligations or any security
     therefore shall be released or exchanged in whole or in part or otherwise
     dealt with;

               (d) any lien granted to, or in favor of, the Collateral Agent as
     security for any of the Secured Obligations shall fail to be perfected; or

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       8

               (e) any proceeding, voluntary or involuntary, involving the
     bankruptcy, insolvency, receivership, reorganization, liquidation or
     arrangement of Obligor or the Note Issuer or by any defense which Obligor
     or the Note Issuer may have by reason of the order, decree or decision of
     any court or administrative body resulting from any such proceeding.
     Obligor acknowledges and agrees that the Secured Obligations include
     interest on the Secured Obligations at the applicable rate therefor under
     the Financing Documents which accrues after the commencement of any such
     proceeding (or, if interest on any portion of the Secured Obligations
     ceases to accrue by operation of law by reason of the commencement of said
     proceeding, such Secured Obligations includes the interest which would have
     accrued on such portion of the Secured Obligations if said proceedings had
     not been commenced), since it is the intention of the parties that the
     amount of the Secured Obligations secured pursuant to this Agreement should
     be determined without regard to any rule of law or order which may relieve
     Obligor or the Note Issuer of any portion of the Secured Obligations.
     Obligor will permit any trustee in bankruptcy, receiver, debtor in
     possession, assignee for the benefit of creditors or similar person to pay
     the Collateral Agent, or allow the claim of the Collateral Agent in respect
     of, interest which would have accrued after the date on which such
     proceeding is commenced. Notwithstanding the above, so long as any Secured
     Obligation shall remain outstanding, Obligor shall not, without the prior
     written consent of the Collateral Agent, commence or join with any other
     person in commencing any bankruptcy, reorganization or insolvency
     proceedings of or against the Note Issuer.

          Section 2.03. Waiver.

               (a) Obligor hereby expressly waives promptness, diligence,
     presentment, demand for payment or performance and protest; filing of
     claims with any court; any proceeding to enforce any provision of the
     Financing Documents; notice of acceptance of and reliance on this Agreement
     by the Secured Parties, notice of the creation of any Secured Obligations
     of the Note Issuer, and (except with respect to any notice required by the
     Transaction Documents) any other notice whatsoever; any requirement that
     the Collateral Agent exhausts any right, power or remedy or proceed or take
     any other action against Obligor or the Note Issuer under any Financing
     Document to which it is a party or any lien or encumbrance on, or any claim
     of payment against, any property of Obligor or the Note Issuer or any other
     agreement or instrument referred to therein, or any other Person under any
     guarantee of, or lien securing, or claim for payment of, any of the Secured
     Obligations; any right to require a proceeding by the Collateral Agent
     first against the Note Issuer whether to marshal any assets or to exhaust
     any right or take any action against the Note Issuer or any other Person or
     any collateral or otherwise, any diligence in collection or protection for
     realization upon any Secured Obligation; any obligation hereunder or any
     collateral security for any of the foregoing; any right of protest,
     presentment, notice or demand whatsoever, and any claims of waiver,
     release, surrender, alteration or compromise and all defenses, set-offs
     counterclaims, recoupments, reductions, limitations, impairments or
     terminations, whether arising hereunder or otherwise. Obligor further
     waives (i) any requirement that any other Person be joined as a party to
     any proceeding for the enforcement by the Collateral Agent of any Secured
     Obligation and (ii) the filing of claims by the Collateral

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       9

     Agent in the event of the receivership or bankruptcy of the Note Issuer.
     The Collateral Agent shall have the right to bring suit directly against
     Obligor with respect to the obligations owed to the Collateral Agent
     hereunder either prior to or concurrently with any lawsuit against, or
     without bringing any suit against Obligor, the Note Issuer or any other
     Person.

               (b) The enforceability and effectiveness of this Agreement and
     the liability of Obligor, and the rights, remedies, powers and privileges
     of the Collateral Agent, under this Agreement shall not be affected,
     limited, reduced, discharged or terminated, and Obligor hereby expressly
     waives to the fullest extent permitted by law any defense now or in the
     future arising, by reason of:

                    (i) the illegality, invalidity or unenforceability of all or
          any part of the Secured Obligations, any Financing Document or any
          agreement, security document, guarantee or other instrument relating
          to all or any part of the Secured Obligations;

                    (ii) any disability or other defense with respect to all of
          any part of the Secured Obligations of Obligor, including the effect
          of any statute of limitations that may bar the enforcement of all or
          any part of the Secured Obligations;

                    (iii) the illegality, invalidity or unenforceability of any
          security or guarantee for all or any part of the Secured Obligations
          or the lack of perfection or continuing perfection or failure of the
          priority of any lien or encumbrance on any collateral for all or any
          part of the Secured Obligations;

                    (iv) the cessation, for any cause whatsoever, of the
          liability of any Person that is a guarantor of all or any part of the
          Secured Obligations (other than, subject to Section 2.05, by reason of
          the full payment and performance of all Secured Obligations);

                    (v) except as required by Section 5.01 hereof, any failure
          of the Collateral Agent to give notice of sale or other disposition of
          any collateral (including any notice of any judicial or nonjudicial
          foreclosure or sale of any interest in real property serving as
          collateral for all or any part of the Secured Obligations) for all or
          any part of the Secured Obligations to the Note Issuer, Obligor or any
          other Person or any defect in, or any failure by the Note Issuer,
          Obligor or any other Person to receive, any notice that may be given
          in connection with any sale or disposition of any collateral;

                    (vi) any failure of the Collateral Agent to comply with
          applicable laws in connection with the sale or other disposition of
          any collateral for all or any part of the Secured Obligations;

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       10

                    (vii) any judicial or nonjudicial foreclosure or sale of, or
          other election of remedies with respect to, any interest in real
          property or other Collateral serving as security for all or any part
          of the Secured Obligations, even though such foreclosure, sale or
          election of remedies may impair the subrogation rights of either the
          Note Issuer or Obligor or may preclude the Note Issuer or Obligor from
          obtaining reimbursement, contribution, indemnification or other
          recovery from the other Subsidiary Guarantors, the Note Issuer or any
          other Person and even though the Note Issuer or Obligor may not, as a
          result of such foreclosure, sale or election of remedies, be liable
          for any deficiency;

                    (viii) any act or omission of the Collateral Agent or any
          other Person (other than payment of the Secured Obligations) that
          directly or indirectly results in or aids the discharge or release of
          Obligor or any part of the Secured Obligations or any security or
          guarantee (including any letter of credit) for all or any part of the
          Secured Obligations by operation of law or otherwise;

                    (ix) any law which provides that the obligation of a surety
          or Obligor must neither be larger in amount nor in other respects more
          burdensome than that of the principal or which reduces a surety's or
          Obligor's obligation in proportion to the principal obligation;

                    (x) any counterclaim, set-off or other claim which Obligor
          has or alleges to have with respect to all or any part of the Secured
          Obligations;

                    (xi) any failure of the Collateral Agent to file or enforce
          a claim in any bankruptcy or other proceeding with respect to any
          Person;

                    (xii) the election by the Collateral Agent, in any
          bankruptcy proceeding of any Person, of the application or
          non-application of Section 1111(b)(2) of the United States Bankruptcy
          Code;

                    (xiii) any extension of credit or the grant of any lien or
          encumbrance under Section 364 of the United States Bankruptcy Code;

                    (xiv) any use of cash collateral under Section 363 of the
          United States Bankruptcy Code;

                    (xv) any agreement or stipulation with respect to the
          provision of adequate protection in any bankruptcy proceeding of any
          Person;

                    (xvi) the avoidance of any lien or encumbrance in favor of
          the Collateral Agent for any reason;

                    (xvii) any bankruptcy, insolvency, reorganization,
          arrangement, readjustment of debt, liquidation or dissolution
          proceeding commenced by or against any Person, including any discharge
          of, or bar or stay against collecting,

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       11

          all or any part of the Secured Obligations (or any interest on all or
          any part of the Secured Obligations) in or as a result of any such
          proceeding; or

                    (xviii) any action taken by the Collateral Agent that is
          authorized by this Section 2.03(b) or otherwise in this Agreement or
          by any other provision of any Financing Document or any omission to
          take any such action.

          Section 2.04. Reinstatement. The obligations of Obligor under this
Article II and the security interest in, and the lien on, the Collateral shall
be automatically reinstated if and to the extent that for any reason any payment
by or on behalf of Obligor in respect of the Secured Obligations is rescinded or
must be otherwise restored by any holder of any of the Secured Obligations or if
and to the extent that for any reason any payment by or on behalf of the Note
Issuer in respect of its obligations under the Indenture and the Senior Secured
Notes is rescinded or must be otherwise restored by any Noteholder, whether as a
result of any proceedings in bankruptcy or reorganization or otherwise. Obligor
agrees that it will indemnify the Collateral Agent on demand for all reasonable
and reasonably documented costs and expenses (including reasonable and
reasonably documented fees of counsel) incurred by the Collateral Agent in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.

          Section 2.05. Subrogation. Obligor shall be subrogated to all rights
of the Collateral Agent and the Secured Parties in respect of any amounts paid
by Obligor pursuant to the terms of this Agreement; provided, however, that
Obligor hereby waives all rights of subrogation or contribution, whether arising
by contract or operation of law (including, without limitation, any such right
arising under any bankruptcy, insolvency or other similar law) or otherwise by
reason of any payment by it pursuant to the provisions of this Article II. If
any amount shall be paid to Obligor on account of such subrogation rights at any
time prior to the payment, discharge or performance in full of the Secured
Obligations, such amount shall be held in trust for the benefit of the
Collateral Agent (if applicable) and shall forthwith be paid to the Collateral
Agent to be credited and applied upon and against the Secured Obligations, to
the extent then matured, in accordance with the terms of the relevant Financing
Documents or, to the extent not then matured or existing, be held by the
Collateral Agent as collateral security for such Secured Obligations.

          Section 2.06. Remedies. Obligor agrees that, as between Obligor and
the Collateral Agent, any obligations of the Note Issuer to the Secured Parties
under any of the Financing Documents to which it is a party may be declared to
be forthwith due and payable notwithstanding any stay, injunction or other
prohibition (except any applicable prohibitions set forth in the Transaction
Documents) preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Note Issuer and that, in the event
of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations shall forthwith be deemed to
have become due and payable for purposes of this Agreement. For the avoidance of
doubt, it is understood and agreed that any amount paid pursuant to the
immediately preceding sentence is intended to be applied to the payment or
prepayment (as the case may be) of the related obligations of the Note Issuer.
Each of the

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       12

obligations of Obligor under this Agreement is separate and independent of each
other obligation of Obligor hereunder and separate and independent of the
Secured Obligations, and Obligor agrees that a separate action or actions may be
brought and prosecuted by the Collateral Agent against Obligor to enforce this
Agreement, irrespective of whether any action is brought by the Collateral Agent
against the Note Issuer under any relevant Financing Document or whether the
Note Issuer is joined in any such action or actions.

          Section 2.07. Continuing Obligation. The obligation provided in this
Article II is a continuing obligation and shall apply to all Secured Obligations
whenever arising.

          Section 2.08. [Intentionally Omitted].

          Section 2.09. Intellectual Property. For the purpose of enabling the
Collateral Agent to exercise its rights, remedies, powers and privileges under
Section 5.01 at that time or times as the Collateral Agent is lawfully entitled
to exercise those rights, remedies, powers and privileges, and for no other
purpose, Obligor hereby grants to the Collateral Agent, to the extent assignable
or licensable, an irrevocable, nonexclusive license (exercisable without payment
of royalty or other compensation to Obligor) to use, assign, license or
sublicense any of the Intellectual Property of Obligor, together with reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout of those
items.

          Section 2.10. Perfection. Obligor authorizes the Collateral Agent to
file such financing statements and continuation statements in such offices as
are or shall be necessary or as the Collateral Agent may determine to be
appropriate to create, perfect and establish the priority of the liens granted
by this Agreement in any and all of the Collateral, to preserve the validity,
perfection or priority of the liens granted by this Agreement in any and all of
the Collateral or to enable the Collateral Agent to exercise its remedies,
rights, powers and privileges under this Agreement. Concurrently with the
execution and delivery of this Agreement, Obligor shall (i) deliver to the
Collateral Agent any and all certificates for all Certificated Securities,
including those identified in Annex 5, duly endorsed in blank; (ii) with respect
to any part of the Ownership Collateral that constitutes an uncertificated
security Obligor shall cause any issuer thereof to register the Collateral Agent
as the registered owner of such security; (iii) deliver to the Collateral Agent
any and all Instruments, endorsed or accompanied by such instruments of
assignment and transfer in such form and substance as the Collateral Agent may
reasonably request; (iv) cooperate with the Collateral Agent in obtaining, and
take such other actions as are necessary or that the Collateral Agent may
reasonably request in order for them to obtain Control with respect to all
Deposit Accounts, Investment Property, Electronic Chattel Paper and
Letter-of-Credit Rights included in the Collateral, including (to the extent
reasonably requested by the Collateral Agent) (A) in the case of any Deposit
Account for which the Collateral Agent is not the Bank at which that Deposit
Account is maintained, using commercially reasonable efforts to cause the Bank
to enter into an agreement in such form as the Collateral Agent may in its
reasonable discretion accept and (B) in the case of any Security Entitlement,
using commercially reasonable efforts to cause the relevant Securities
Intermediary to enter into an agreement in such form as the Collateral Agent may
in its reasonable discretion accept; (v) cause the Collateral Agent (to the
extent requested by the Collateral Agent) to be

                                                   PLEDGE AND SECURITY AGREEMENT
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                                       13

listed as the lienholder on all certificates of title or ownership relating to
Motor Vehicles in the name of Obligor and deliver to the Collateral Agent
originals of all such certificates of title or ownership for the Motor Vehicles
together with the odometer statements for each respective Motor Vehicle; (vi)
cause the Collateral Agent to be listed as the lienholder on any certificate of
title or ownership for any other Equipment covered by a certificate of title or
ownership; and (vii) take all such other actions, and authenticate or sign and
file or record such other records or instruments, as are necessary or as the
Collateral Agent may reasonably request to perfect and establish the priority of
the liens granted by this Agreement in any and all of the Collateral or to
enable the Collateral Agent to exercise its remedies, rights, powers and
privileges under this Agreement, including, without limitation, causing any or
all of the Collateral to be transferred of record into the name of the
Collateral Agent as such (and the Collateral Agent agrees that if any Collateral
is transferred into its name, the Collateral Agent will thereafter promptly give
to Obligor copies of any notices and communications received by it with respect
to the Collateral pledged by Obligor hereunder).

          Section 2.11. Preservation and Protection of Security Interests.
Obligor shall:

               (a) upon the acquisition after the date of this Agreement by
     Obligor of any Certificated Securities, Instruments, Deposit Accounts,
     other Investment Property, Electronic Chattel Paper, Letter-of Credit
     Rights, Motor Vehicles or other Equipment covered by a certificate of title
     or ownership promptly (x) take such action with respect to that Collateral
     as is specified for that type of Collateral in Section 2.10 and (y) take
     all such other actions, and authenticate or sign and file or record such
     other records or instruments, as are necessary or as the Collateral Agent
     may reasonably request to create, perfect and establish the priority of the
     liens granted by this Agreement in any and all the Collateral, to preserve
     the validity, perfection or priority of the liens granted by this Agreement
     in any and all of the Collateral or to enable the Collateral Agent to
     exercise its remedies, rights, powers and privileges under this Agreement;

               (b) upon Obligor's acquiring, or otherwise becoming entitled to
     the benefits of, any Copyright (or copyrightable material), Patent (or
     patentable invention), Trademark (or associated goodwill) or other
     Intellectual Property or upon or prior to Obligor's filing, either directly
     or through the Collateral Agent, any licensee or any other designee, of any
     application with any governmental authority for any Copyright, Patent,
     Trademark or other Intellectual Property, in each case after the date of
     this Agreement, execute and deliver such contracts, agreements and other
     instruments as the Collateral Agent may reasonably request to create,
     perfect and establish the priority of the liens granted by this Agreement
     in that and any related Intellectual Property; and

               (c) whether with respect to Collateral as of the date of this
     Agreement or Collateral in which Obligor acquires rights in the future,
     authorize, give, authenticate, execute, deliver, file or record any and all
     financing statements, notices, contracts, agreements or other records or
     instruments, obtain any and all Governmental Approvals, and take all such
     other actions, as are necessary or as the Collateral Agent may reasonably
     request to create, perfect and establish the priority of the liens granted
     by this Agreement in any and all the Collateral, to preserve the validity,
     perfection or priority of

                                                   PLEDGE AND SECURITY AGREEMENT
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                                       14

     the liens granted by this Agreement in any and all of the Collateral or to
     enable the Collateral Agent to exercise and enforce its remedies, rights,
     powers and privileges under this Agreement, including causing any or all of
     the Ownership Collateral to be transferred of record into the name of the
     Collateral Agent or its nominee (and the Collateral Agent agrees that if
     any Security is transferred into its name or the name of its nominee, the
     Collateral Agent shall thereafter promptly give to Obligor copies of any
     notices and communications received by it with respect to that Security);
     and

               (d) furnish to the Collateral Agent from time to time statements
     and schedules further identifying and describing the Collateral pledged by
     hereunder and such other reports in connection with the Collateral pledged
     by Obligor hereunder as the Collateral Agent may reasonably request, all in
     reasonable detail.

          Section 2.12. Attorney-in-Fact.

               (a) Subject to Obligor's rights under Sections 2.13 through 2.16,
     Obligor hereby irrevocably constitutes and appoints the Collateral Agent
     and any officer or agent thereof, with full power of substitution, as its
     true and lawful attorney-in-fact with full irrevocable power and authority
     in the place and stead of Obligor and in the name of Obligor or in its own
     name, for the purpose of carrying out the provisions of this Agreement upon
     the occurrence and during the continuation of an Event of Default, to (x)
     take any appropriate action and to execute any document or instrument that
     may be necessary or desirable to accomplish the purposes of this Agreement,
     (y) preserve the validity, perfection and priority of the liens granted by
     this Agreement and, (z) exercise its rights, remedies, powers and
     privileges under this Agreement. This appointment as attorney-in-fact is
     irrevocable and coupled with an interest. Without limiting the generality
     of the foregoing, Obligor hereby gives the Collateral Agent the power and
     right, on behalf of Obligor, without notice to or assent by Obligor, upon
     the occurrence and during the continuation of any Event of Default (i) to
     ask, demand, collect, sue for, recover, receive and give receipt and
     discharge for amounts due and to become due under and in respect of all or
     any part of the Collateral, (ii) to, in the name of Obligor or its own
     name, or otherwise, take possession of, receive and indorse and collect any
     check, Account, Chattel Paper, draft, note, acceptance or other Instrument
     for the payment of moneys due under any Account or General Intangible,
     (iii) to file any claims or take any action or proceeding that the
     Collateral Agent may deem necessary or advisable for the collection of all
     or any part of the Collateral, (iv) to execute, in connection with any sale
     or disposition of the Collateral under Article V, any endorsements,
     assignments, bills of sale or other instruments of conveyance or transfer
     with respect to all or any part of the Collateral, (v) in the case of any
     Intellectual Property, execute and deliver, and have recorded, any
     agreement, instrument, document or paper as the Collateral Agent may
     request to evidence the Collateral Agent's security interest in such
     Intellectual Property and the goodwill and General Intangibles of Obligor
     relating thereto or represented thereby, (vi) pay or discharge taxes and
     Liens levied or placed on or threatened against the Collateral (other than
     Permitted Liens), effect any repair or pay or discharge any insurance
     called for by the terms of this Agreement (including all or any part of the
     premiums therefor and the costs thereof), (vii) execute, in connection with
     any sale

                                                   PLEDGE AND SECURITY AGREEMENT
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                                       15

     provided for in Article V, any endorsement, assignment or other instrument
     of conveyance or transfer with respect to the collateral; and (viii) (A)
     direct any party liable for any payment under any Collateral to make
     payment of any moneys due or to become due thereunder directly to the
     Collateral Agent or as the Collateral Agent shall direct, (B) ask or demand
     for, collect, and receive payment of and receipt for, any moneys, claims
     and other amounts due or to become due at any time in respect of or arising
     out of any Collateral, (C) sign and indorse any invoice, freight or express
     bill, bill of lading, storage or warehouse receipt, draft against debtors,
     assignment, verification, notice and other document in connection with any
     Collateral, (D) commence and prosecute any suit, action or proceeding at
     law or in equity in any court of competent jurisdiction to collect any
     Collateral and to enforce any other right in respect of any Collateral, (E)
     defend any suit, action or proceeding brought against Obligor with respect
     to any Collateral, (F) settle, compromise or adjust any such suit, action
     or proceeding and, in connection therewith, give such discharges or
     releases as the Collateral Agent may deem appropriate, (G) assign any
     Copyright, Patent or Trademark (along with the goodwill of the business to
     which any such Trademark pertains) throughout the world for such term or
     terms, on such conditions, and in such manner as the Collateral Agent shall
     in its sole discretion determine, including the execution and filing of any
     document necessary to effectuate or record such assignment and (H)
     generally, sell, transfer, pledge and make any agreement with respect to or
     otherwise deal with any Collateral as fully and completely as though the
     Collateral Agent were the absolute owner thereof for all purposes, and do,
     at the Collateral Agent's option and Obligor's expense, at any time, or
     from time to time, all acts and things that the Collateral Agent reasonably
     deems necessary to protect, preserve or realize upon the Collateral and the
     Collateral Agent's and the other Secured Parties' security interests
     therein and to effect the intent of this Agreement, all as fully and
     effectively as Obligor might do.

               (b) Without limiting the rights and powers of the Collateral
     Agent under Section 2.12(a), Obligor hereby appoints the Collateral Agent
     as its attorney-in-fact, effective the date of this Agreement and
     terminating upon the Discharge Date, for the purpose of, upon the
     occurrence and during the continuation of an Event of Default, (i)
     executing on behalf of Obligor title or ownership applications for filing
     with appropriate state agencies to enable Motor Vehicles now owned or in
     the future acquired by Obligor to be retitled and the Collateral Agent to
     be listed as lien holder as to those Motor Vehicles, (ii) filing such
     applications with such state agencies, and (iii) executing such other
     documents and instruments on behalf of, and taking such other action in the
     name of, Obligor as the Collateral Agent may deem necessary or advisable to
     accomplish the purposes of this Agreement (including the purpose of
     creating in favor of the Collateral Agent a perfected lien on the Motor
     Vehicles and exercising the rights, remedies, powers and privileges of the
     Collateral Agent under Section 5.01). This appointment as attorney-in-fact
     is irrevocable and coupled with an interest.

               (c) Without limiting the rights and powers of the Collateral
     Agent under Section 2.12(a), Obligor hereby appoints the Collateral Agent
     as its attorney-in-fact, effective the date of this Agreement and
     terminating upon the Discharge Date, at the Collateral Agent's option, but
     without any obligation so to do, for the purpose of

                                                   PLEDGE AND SECURITY AGREEMENT
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                                       16

     performing, executing, and filing all such contracts, agreements and other
     documents as are contemplated by Section 2.11(b). This appointment as
     attorney-in-fact is irrevocable and coupled with an interest.

               (d) The expenses of the Collateral Agent incurred in connection
     with actions undertaken as provided in this Section 2.12, together with
     interest thereon at a rate per annum equal to the rate per annum at which
     interest would then be payable on past due Notes under the Indenture, from
     the date of payment by the Collateral Agent to the date reimbursed by
     Obligor, shall be payable by Obligor to the Collateral Agent on demand and
     shall constitute Secured Obligations and be secured by the Liens of the
     Collateral Documents.

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

          Section 2.13. Special Provisions Relating to Securities.

               (a) So long as no Event of Default has occurred and is
     continuing, Obligor shall have the right to exercise all voting, consensual
     and other powers of ownership pertaining to all Ownership Collateral for
     all purposes not inconsistent with the terms of any Transaction Document,
     provided that Obligor shall not vote the Ownership Collateral in any manner
     that is inconsistent with the terms of any Transaction Document; and the
     Collateral Agent shall, at Obligor's expense, execute and deliver to
     Obligor or cause to be executed and delivered to Obligor all such proxies,
     powers of attorney, dividend and other orders and other instruments,
     without recourse, as Obligor may reasonably request for the purpose of
     enabling Obligor to exercise the rights and powers that it is entitled to
     exercise pursuant to this Section 2.13(a).

               (b) So long as no Event of Default has occurred and is
     continuing, Obligor shall be entitled to receive and retain any dividends
     on all Ownership Collateral paid in cash.

               (c) If any Event of Default has occurred and is continuing, and
     whether or not the Collateral Agent exercises any available right to
     declare any Secured Obligation due and payable or seeks or pursues any
     other right, remedy, power or privilege available to it under applicable
     law, this Agreement or any other Transaction Document, all dividends and
     other distributions on all Ownership Collateral shall be paid directly to
     an account designated by the Collateral Agent and retained by it in such
     account as part of the Collateral, subject to the terms of the Transaction
     Documents, and, if the Collateral Agent so requests, Obligor shall execute
     and deliver to the Collateral Agent appropriate additional dividend,
     distribution and other orders and instruments to that end, provided that if
     the applicable Event of Default is cured, any such dividend or distribution
     paid to the Collateral Agent prior to that cure shall, upon request of
     Obligor

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       17

     (except to the extent applied to the Secured Obligations), be returned by
     the Collateral Agent to Obligor.

          Section 2.14. Instruments. So long as no Event of Default has occurred
and is continuing, Obligor may retain for collection in the ordinary course of
business any Instruments obtained by it, and the Collateral Agent will, promptly
upon the request, and at the expense of, Obligor, make appropriate arrangements
for making any Instruments pledged by Obligor available to Obligor for purposes
of presentation, collection or renewal. Any such arrangement shall be effected,
to the extent deemed appropriate by the Collateral Agent, against a trust
receipt or like document.

          Section 2.15. Use of Collateral. So long as no Event of Default has
occurred and is continuing, Obligor shall be entitled to use and possess the
Collateral, subject to the rights, remedies, powers and privileges of the
Collateral Agent under Articles II and V.

          Section 2.16. Rights and Obligations.

               (a) No reference in this Agreement to proceeds or to the sale or
     other disposition of Collateral shall authorize Obligor to pledge, sell or
     otherwise dispose of any Collateral except to the extent otherwise
     expressly permitted by the terms of any Transaction Document. The
     Collateral Agent shall not be required to take steps necessary to preserve
     any rights against prior parties to any part of the Collateral.

               (b) Obligor shall remain liable to perform its duties and
     obligations under the contracts and agreements included in the Collateral
     in accordance with their respective terms to the same extent as if this
     Agreement had not been executed and delivered. The exercise by the
     Collateral Agent of any right, remedy, power or privilege in respect of
     this Agreement shall not release Obligor from any of its duties and
     obligations under those contracts and agreements. The Collateral Agent
     shall not have any duty, obligation or liability under those contracts and
     agreements or in respect to any Governmental Approval included in the
     Collateral by reason of this Agreement or any other Transaction Document,
     nor shall the Collateral Agent be obligated to perform any of the duties or
     obligations of Obligor under any such contract or agreement or any such
     Governmental Approval or to take any action to collect or enforce any claim
     (for payment) under any such contract or agreement or Governmental
     Approval.

               (c) No lien granted by this Agreement in Obligor's right, title
     and interest in any contract, agreement or Governmental Approval shall be
     deemed to be a consent by the Collateral Agent to any such contract,
     agreement or Governmental Approval.

          Section 2.17. Release of Collateral. Upon the Discharge Date, or the
date of any sale or conveyance of a motor vehicle or any other portion of the
Collateral for which Obligor is entitled, pursuant to the terms and conditions
of the Indenture, to sell or otherwise convey free and clear of the Liens of the
Transaction Documents, and upon the request of, and at the expense of, Obligor,
the Collateral Agent will execute and deliver to Obligor such

                                                   PLEDGE AND SECURITY AGREEMENT
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                                       18

instruments as Obligor reasonably requests to remove the notation of the
Collateral Agent as lienholder on any certificate of title for any Motor Vehicle
or any other certificate of title or other financing statement with respect to
such applicable portion of the Collateral; provided that in connection with such
sale or conveyance, any such instruments shall be delivered, and the release
shall be effective, only upon receipt by the Collateral Agent of a certificate
from Obligor stating that the Motor Vehicle or other such portion of the
Collateral the lien on which is to be released is to be sold or conveyed in
accordance with the terms and conditions of the Indenture.

          Section 2.18. Commercial Tort Claims. Obligor agrees that, if it shall
acquire any interest in any Commercial Tort Claim (whether from another Person
or because such Commercial Tort Claim shall have come into existence), (i)
Obligor shall, immediately upon such acquisition, deliver to the Collateral
Agent, in each case in form and substance satisfactory to the Collateral Agent,
a notice of the existence and nature of such Commercial Tort Claim and deliver a
supplement to Annex 4 containing a specific description of such Commercial Tort
Claim, certified by Obligor as true, correct and complete, (ii) the provisions
of Section 2.01 shall apply to such Commercial Tort Claim (and Obligor
authorizes the Collateral Agent to supplement such annex with a description of
such Commercial Tort Claim if Obligor fails to deliver the supplement described
in clause (i)), and (iii) Obligor shall execute and deliver to the Collateral
Agent, in each case in form and substance satisfactory to the Collateral Agent,
any certificate, agreement and other document, and take all other action, deemed
by the Collateral Agent to be reasonably necessary or appropriate for the
Collateral Agent to obtain, on behalf of the Secured Parties, a first-priority,
perfected security interest in all such Commercial Tort Claims. Any supplement
to Annex 4 delivered pursuant to this Section 2.18 shall become part of such
Annex 4 for all purposes hereunder.

          Section 2.19. Termination. Upon the occurrence of the Discharge Date,
all liens granted hereunder shall be deemed terminated, and the Collateral Agent
shall forthwith cause to be assigned, transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect of the Collateral, to or on the order
of Obligor. The Collateral Agent shall also execute and deliver to Obligor, at
Obligor's expense, upon the occurrence of the Discharge Date such Uniform
Commercial Code termination statements and other documentation as shall be
reasonably requested by Obligor to effect the termination and release of the
liens created under this Agreement. The security interest created hereby and the
other liens created by the Transaction Documents shall also be released with
respect to any portion of the Collateral that is sold, transferred or otherwise
disposed of in compliance with the terms and conditions of the Transaction
Documents.

                                   ARTICLE III
                                 REPRESENTATIONS

          As of the date hereof Obligor represents and warrants to the
Collateral Agent as follows:

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       19

          Section 3.01. Organization; Validity.

               (a) Annex 1 correctly sets forth Obligor's full and correct legal
     name, type of organization, jurisdiction of organization, organizational
     identification number (if applicable), chief executive office and mailing
     address as of the date of this Agreement.

               (b) Obligor has not (i) changed its location (as defined in
     Section 9-307 of the Uniform Commercial Code), (ii) previously changed its
     name except as set forth on Annex 1 and (iii) previously become a "new
     debtor" (as defined in the Uniform Commercial Code) with respect to a
     currently effective security agreement entered into by another Person
     except as set forth on Annex 1.

          Section 3.02. Title. Obligor is the sole beneficial owner of the
Collateral in which it purports to grant a lien pursuant to this Agreement, and
the Collateral is free and clear of all liens (subject to any Permitted Liens)
and the lien granted by this Agreement has attached and constitutes a perfected
security interest in all of the Collateral prior to all other liens and
encumbrances.

          Section 3.03. Pledged Ownership Interests.

               (a) The Pledged Ownership Interests identified in Annex 5 are
     duly authorized, validly existing, fully paid and nonassessable, and none
     of the Pledged Ownership Interests is subject to any contractual
     restriction, or any restriction under the organizational documents of any
     Subsidiary Guarantor, upon the transfer of such Pledged Ownership Interests
     (except for any such restriction contained in any Transaction Document).
     Such Pledged Ownership Interests exist in a certificated form.

               (b) The Pledged Ownership Interests identified in Annex 5
     constitute all of the issued and outstanding membership interests or other
     interests of any class or character in any Subsidiary Guarantor owned by
     Obligor (whether or not registered in the name of Obligor), and Annex 5
     correctly identifies the issuer of such Pledged Ownership Interests and the
     respective number (and registered owners) of the interests identified in
     Annex 5.

               (c) No Person other than Obligor is the registered owner of the
     Pledged Ownership Interests.

          Section 3.04. Intercompany Notes. The intercompany notes identified in
Annex 6 constitute all of the outstanding intercompany notes payable to Obligor.

          Section 3.05. Confirmation. Obligor hereby makes the representations
and warranties specified to be applicable to Obligor in Section 2 of the Note
Purchase Agreement, and each such representation and warranty is hereby
incorporated by reference in this Agreement, mutatis mutandis, as a direct
representation and warranty of Obligor with respect to itself.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       20

                                   ARTICLE IV
                                    COVENANTS

          Until the Discharge Date, Obligor agrees that, from time to time upon
the written request of the Collateral Agent, Obligor will execute and deliver
such further documents and do such other acts and things as the Collateral Agent
may reasonably request in order fully to effect the purposes of this Agreement.
Obligor agrees to observe and perform during the period commencing on the date
hereof and ending on the Discharge Date each of the covenants specified to be
applicable to Obligor in Article IV of the Indenture, and each such covenant and
agreement is hereby incorporated by reference in this Agreement, mutatis
mutandis, as a direct obligation, covenant and agreement of Obligor with respect
to itself.

                                    ARTICLE V
                                    REMEDIES

          Section 5.01. Events of Default, Etc. Without limiting the rights,
powers and privileges of the Collateral Agent under Article II, if any Event of
Default shall have occurred and be continuing:

               (a) The Collateral Agent in its discretion may require Obligor
     to, and Obligor shall, assemble the Collateral owned by it at such place or
     places, reasonably convenient to both the Collateral Agent and Obligor,
     designated in the Collateral Agent's request;

               (b) The Collateral Agent in its discretion may make any
     reasonable compromise or settlement it deems desirable with respect to any
     of the Collateral and may extend the time of payment, arrange for payment
     in installments, or otherwise modify the terms of, all or any part of the
     Collateral;

               (c) The Collateral Agent in its discretion may, in its name or in
     the name of Obligor or otherwise, demand, sue for, collect or receive any
     money or property at any time payable or receivable on account of or in
     exchange for all or any part of the Collateral, but shall be under no
     obligation to do so;

               (d) The Collateral Agent in its discretion may, upon ten (10)
     Business Days' prior written notice to Obligor of the time and place, with
     respect to all or any part of the Collateral which shall then be or shall
     thereafter come into the possession, custody or control of the Collateral
     Agent or any of its agents, sell, lease or otherwise dispose of all or any
     part of such Collateral, at such place or places as the Collateral Agent
     deems best, for cash, for credit or for future delivery (without thereby
     assuming any credit risk) and at public or private sale, without demand of
     performance or notice of intention to effect any such disposition or of
     time or place of any such sale (except such notice as is required above or
     by applicable statute and cannot be waived), and the Collateral Agent or
     any other Person may be the purchaser, lessee or recipient of any or all of
     the Collateral so disposed of at any public sale (or, to the extent
     permitted by law, at any private sale) and thereafter hold the same
     absolutely, free from any claim or right of

                                                   PLEDGE AND SECURITY AGREEMENT
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                                       21

     whatsoever kind, including any right or equity of redemption (statutory or
     otherwise), of Obligor, any such demand, notice and right or equity being
     hereby expressly waived and released. The Collateral Agent may, without
     notice or publication, adjourn any public or private sale or cause the same
     to be adjourned from time to time by announcement at the time and place
     fixed for the sale, and such sale may be made at any time or place to which
     the sale may be so adjourned;

               (e) The Collateral Agent shall have, and in its discretion may
     exercise, all of the rights, remedies, powers and privileges with respect
     to the Collateral of a secured party under the Uniform Commercial Code
     (whether or not the Uniform Commercial Code is in effect in the
     jurisdiction where such rights, remedies, powers and privileges are
     asserted) and such additional rights, remedies, powers and privileges to
     which a secured party is entitled under the laws in effect in any
     jurisdiction where any rights, remedies, powers and privileges in respect
     of this Agreement or the Collateral may be asserted, including the right,
     to the maximum extent permitted by law, to exercise all voting, consensual
     and other powers of ownership pertaining to the Collateral as if the
     Collateral Agent were the sole and absolute owner of the Collateral (and
     Obligor agrees to take all such action as may be appropriate to give effect
     to such right);

               (f) The Collateral Agent in its discretion may, to the full
     extent provided by law, have a court having jurisdiction appoint a
     receiver, which receiver shall take charge and possession of and protect,
     preserve, replace and repair the Collateral or any part thereof, and manage
     and operate the same, and receive and collect all rents, income, receipts,
     royalties, revenues, issues and profits therefrom. Obligor irrevocably
     consents and shall be deemed to have hereby irrevocably consented to the
     appointment thereof, and upon such appointment, Obligor shall immediately
     deliver possession of such Collateral to the receiver. Obligor also
     irrevocably consents to the entry of an order authorizing such receiver to
     invest upon interest any funds held or received by the receiver in
     connection with such receivership. The Collateral Agent shall be entitled
     to such appointment as a matter of right, if it shall so elect, without the
     giving of notice to any other party and without regard to the adequacy of
     the security of the Collateral; and

               (g) The Collateral Agent in its discretion may enforce one or
     more remedies hereunder, successively or concurrently, and such action
     shall not operate to estop or prevent the Collateral Agent from pursuing
     any other or further remedy which it may have hereunder or by law, and any
     repossession or retaking or sale of the Collateral pursuant to the terms
     hereof shall not operate to release Obligor until full and final payment of
     any deficiency has been made. Obligor shall reimburse the Collateral Agent
     upon demand for, or the Collateral Agent may apply any proceeds of
     Collateral to, the costs and expenses (including reasonable attorneys'
     fees, transfer taxes and any other charges) incurred by the Collateral
     Agent in connection with any sale, disposition, repair, replacement,
     alteration, addition, improvement or retention of any Collateral hereunder.

The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 shall be applied in accordance with
Section 5.04.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       22

          Section 5.02. Deficiency. If the proceeds of, or other realization
upon, the Collateral by virtue of the exercise of remedies under Section 5.01
are insufficient to cover the costs and expenses of such exercise and the
payment in full of the Secured Obligations, Obligor shall remain liable for any
deficiency.

          Section 5.03. Private Sale.

               (a) The Collateral Agent shall not incur any liability as a
     result of the sale, lease or other disposition of all or any part of the
     Collateral at any private sale pursuant to Section 5.01 conducted in a
     commercially reasonable manner. Obligor hereby waives any claims against
     the Collateral Agent arising by reason of the fact that the price at which
     the Collateral may have been sold at such a private sale was less than the
     price which might have been obtained at a public sale or was less than the
     aggregate amount of the Secured Obligations, even if the Collateral Agent
     accepts the first offer received and does not offer the Collateral to more
     than one offeree.

               (b) Obligor recognizes that, by reason of certain prohibitions
     contained in the Securities Act of 1933 and applicable state securities
     laws, the Collateral Agent may be compelled, with respect to any sale of
     all or any part of the Collateral, to limit purchasers to those who will
     agree, among other things, to acquire the Collateral for their own account,
     for investment and not with a view to distribution or resale. Obligor
     acknowledges that any such private sales may be at prices and on terms less
     favorable to the Collateral Agent than those obtainable through a public
     sale without such restrictions, and, notwithstanding such circumstances,
     agree that any such private sale shall be deemed to have been made in a
     commercially reasonable manner and that the Collateral Agent shall have no
     obligation to engage in public sales and no obligation to delay the sale of
     any Collateral for the period of time necessary to permit the respective
     issuer of such Collateral to register it for public sale.

          Section 5.04. Application of Proceeds. The Proceeds of, or other
     realization upon, all or any part of the Collateral by virtue of the
     exercise of remedies under Section 5.01, and any other cash at the time
     held by the Collateral Agent under this Article V, shall be applied by the
     Collateral Agent in accordance with the terms and provisions of the
     Collateral Agency Agreement.

                                   ARTICLE VI
                            MISCELLANEOUS PROVISIONS

          Section 6.01. Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing (which may be
by telecopier with confirmation of receipt) delivered to the intended recipient
at the address set forth in Section 10.02 of the Indenture or Annex 1, as
applicable; or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       23

          Section 6.02. Amendments. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be amended or modified only
by an instrument in writing signed by Obligor and the Collateral Agent and
(except for this Section 6.02) any provision of this Agreement may be waived in
writing only by the Collateral Agent.

          Section 6.03. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns of the parties to this Agreement; provided,
however, that (a) Obligor may not assign or transfer any of its respective
rights or interest in or under this Agreement or delegate any of its obligations
under this Agreement without the prior written consent of the Collateral Agent
and (b) the Collateral Agent shall transfer or assign its rights under this
Agreement in connection with a resignation or removal of such Person from its
respective capacity in accordance with the terms of this Agreement.

          Section 6.04. Survival. All agreements, statements, representations
and warranties made by Obligor herein or in any certificate or other instrument
delivered by Obligor or on its behalf under this Agreement shall be considered
to have been relied upon by the Collateral Agent and shall survive the execution
and delivery of this Agreement and the other Transaction Documents until the
earlier to occur of (i) termination thereof; and (ii) the Discharge Date, in
each case, regardless of any investigation made by or on behalf of the
Collateral Agent.

          Section 6.05. No Waiver; Remedies Cumulative. No failure or delay on
the part of the Collateral Agent in exercising any right, power or privilege
hereunder and no course of dealing between Obligor and the Collateral Agent
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Collateral Agent would
otherwise have.

          Section 6.06. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.

          Section 6.07. Captions. The headings of the several articles and
sections and sub sections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Agreement.

          Section 6.08. Severability. In case any provision contained 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.

          Section 6.09. Governing Law; Submission to Jurisdiction and Venue;
Waiver of Jury Trial.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       24

               (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE.

               (b) Submission to Jurisdiction. Section 10.09 of the Indenture is
hereby incorporated by reference as if fully set forth in this Agreement, and
Obligor confirms its consent and submission to jurisdiction and venue.

               (c) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

               (d) NO CLAIM MAY BE MADE BY ANY PARTY HERETO AGAINST ANY OTHER
PARTY HERETO OR ANY OF ITS SUCCESSORS IN INTEREST OR ITS AFFILIATES, DIRECTORS,
OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF ANY OF THEM FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH
OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATING TO, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER TRANSACTION DOCUMENTS, AND EACH PARTY HERETO HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT
ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

          Section 6.10. Entire Agreement. This Agreement, together with any
other agreement executed in connection with this Agreement, is intended by the
parties as a final expression of their agreement as to the matters covered by
this Agreement and is intended as a complete and exclusive statement of the
terms and conditions of such agreement.

          Section 6.11. Independent Obligations. Obligor's obligations under
this Agreement are independent of those of any other Person. The Collateral
Agent may bring a separate action against Obligor without first proceeding
against any other Person or any other security held by the Collateral Agent and
without pursuing any other remedy.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       25

          Section 6.12. Expenses. Obligor agrees to pay or to reimburse the
Collateral Agent for all costs and expenses (including reasonable attorney's
fees and expenses) that may be incurred by the Collateral Agent in any effort to
enforce any of the provisions of Article II or Article V, or any of the
obligations of Obligor in respect of the Collateral or in connection with (a)
the preservation of the liens on, or the rights of the Collateral Agent to the
Collateral pursuant to this Agreement or (b) any actual or attempted sale,
lease, disposition, exchange, collection, compromise, settlement or other
realization in respect of, or care of, the Collateral, including all such costs
and expenses (and reasonable attorney's fees and expenses) incurred in any
bankruptcy, reorganization, workout or other similar proceeding.

                             [SIGNATURES TO FOLLOW]

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                       26

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective authorized officers as of the
date first written above.

                                        OBLIGOR:

                                        STEAMBOAT GEOTHERMAL LLC,
                                        a Delaware limited liability company

                                        By: ORNI 7 LLC,
                                            a Delaware limited liability company
                                            Its: Sole Member and Manager

                                            By: ORMAT FUNDING CORP.,
                                                a Delaware corporation
                                                Its: Sole Member and Manager

                                                By: /s/ Yehudit Bronicki
                                                    ----------------------------
                                                    Name:
                                                    Title:

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                        COLLATERAL AGENT:

                                        UNION BANK OF CALIFORNIA, N.A.

                                        By: /s/ Sonia N. Flores
                                            ------------------------------------
                                            Name: Sonia N. Flores
                                            Title: Vice President

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                     ANNEX 1

               Organization and Chief Executive Office of Obligor

Obligor's Legal Name, Type and Jurisdiction of Organization, and Organizational
Identification Number:

Steamboat Geothermal LLC, a Delaware limited liability company, organizational
ID#: 2687773, f/k/a U.S. Energy Geothermal LLC, f/k/a Steamboat Envirosystems,
L.L.C.

Obligor's Chief Executive Office and Mailing Address:

Steamboat Geothermal LLC
980 Greg Street
Sparks, NV 89431
Facsimile: (775) 356-9039
Attention: President

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                     ANNEX 2

                                PROJECT DOCUMENTS

Steamboat 1 Plant Power Purchase Agreement

Steamboat 1A Plant Power Purchase Agreement

Steamboat Complex Operation and Maintenance Agreement

Steamboat 1/1A Interconnection Agreement

Sierra Pacific Geothermal Resources Lease

Location and Occupancy Agreement, dated December 31, 1985, between Sierra
Pacific Power Company and Obligor (as successor to Far West Hydroelectric Fund,
Ltd.)

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                     ANNEX 3

                             GOVERNMENTAL APPROVALS

     PLANT   TYPE OF APPROVAL       ISSUER                             NUMBER    DATE     EXPIRATION
     -----   ----------------       ------                             -------   ----     ----------

1.   SB1A    Permit to Operate an   Air Quality Management Division,   A01440A   None     12/31/04
             Air Pollution          Washoe County District Health                stated
             Emission Source        Department

2.   SBI     Permit to Operate an   Air Quality Management Division,   A01177A   None     12/31/04
             Air Pollution          Washoe County District                       stated
             Emission Source        Health Department

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                     ANNEX 4

                             COMMERCIAL TORT CLAIMS

                                      None.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                     ANNEX 5

                           PLEDGED OWNERSHIP INTERESTS

                                      None.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

                                     ANNEX 6

                               INTERCOMPANY NOTES

                                      None.

                                                   PLEDGE AND SECURITY AGREEMENT
                                                          (STEAMBOAT GEOTHERMAL)

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