Document:

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                                                                   EXHIBIT 10.31

RECORDING REQUESTED BY AND
WHEN RECORDED AND/OR FILED
RETURN TO:

MAYER, BROWN, ROWE & MAW LLP
700 Louisiana Street
Suite 3600
Houston, Texas 77002
Attn: Kevin L. Shaw, Esq.

Instructions to County Recorder:

Index this document as:

(1) A deed of trust
(2) A fixture filing

                              AMENDED AND RESTATED
           DEED OF TRUST WITH POWER OF SALE, ASSIGNMENT OF PRODUCTION,
           SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING

                                      FROM

                              CALPINE CORPORATION,
                         a Delaware corporation, Trustor
                         (Taxpayer I.D. No. 77-0212977),

                                       TO

                         CHICAGO TITLE INSURANCE COMPANY
                                     Trustee

                                       AND

                              THE BANK OF NEW YORK,
        not in its individual capacity but solely as Collateral Trustee,
                         (Taxpayer I.D. No. 13-5160382)
                                 as Beneficiary

                            Dated as of July 16, 2003

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"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."

"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."

"OIL AND GAS INTERESTS AND AS-EXTRACTED COLLATERAL INCLUDED IN THE ENCUMBERED
PROPERTY WILL BE FINANCED AT THE WELLHEADS OF THE WELLS LOCATED ON THE
PROPERTIES DESCRIBED IN EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS TO BE
FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS."

"TRUSTOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED, WHICH IS
DESCRIBED IN EXHIBIT A HERETO."

"SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE ENCUMBERED PROPERTY
IS OR IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO AND THIS
FINANCING STATEMENT AND FIXTURE FILING IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS."

"THE SECURED PARTIES ARE NOT SELLERS OR PURCHASE MONEY LENDERS OF COLLATERAL."

"A POWER OF SALE HAS BEEN GRANTED IN THIS DEED OF TRUST. A POWER OF SALE MAY
ALLOW THE TRUSTEE TO TAKE THE ENCUMBERED PROPERTY AND SELL IT WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON DEFAULT BY TRUSTOR UNDER THIS DEED OF TRUST."

"NOTICE TO JUNIOR LIENHOLDERS: THE OBLIGATIONS SECURED HEREBY PROVIDE FOR THE
ACCRUAL OF INTEREST WHICH MAY RESULT IN INCREASES IN THE PRINCIPAL BALANCE ABOVE
THE FACE PRINCIPAL AMOUNT OF THE APPLICABLE NOTES."

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                              AMENDED AND RESTATED
           DEED OF TRUST WITH POWER OF SALE, ASSIGNMENT OF PRODUCTION,
           SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING

      THIS AMENDED AND RESTATED DEED OF TRUST WITH POWER OF SALE, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (this
"DEED OF TRUST"), dated as of July 16, 2003, is made by CALPINE CORPORATION, a
Delaware corporation ("TRUSTOR"), whose address is 50 West San Fernando Street,
San Jose, CA 95113, to CHICAGO TITLE INSURANCE COMPANY (whether one or more,
collectively called "TRUSTEE"), and THE BANK OF NEW YORK, a New York banking
corporation, not in its individual capacity but solely as Collateral Trustee
under the Collateral Trust Agreement dated July 16, 2003 (the "COLLATERAL TRUST
AGREEMENT") among Trustor, Beneficiary, the 2007 Trustee, the 2010 Trustee, the
2013 Trustee, Credit Agreement Agent and Term Loan Administrative Agent
("BENEFICIARY"), whose address is 101 Barclay Street, New York, New York 10286.
References to this "DEED OF TRUST" shall mean this instrument and any and all
renewals, modifications, amendments, supplements, extensions, consolidations,
substitutions, spreaders, restatements and replacements of this instrument.

      Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Collateral Trust Agreement.

                                   ARTICLE I.

                            RECITALS AND DEFINITIONS

      1.1 Trustor has heretofore executed and delivered to The Bank of Nova
Scotia, for itself and as agent for the Lender Parties (together with its
successors in such capacity, the "CREDIT AGREEMENT AGENT") and Chicago Title
Insurance Company, as Trustee, that certain mortgage or deed of trust, dated as
of May 1, 2002, as supplemented and amended prior to the date hereof (as so
supplemented and amended, herein called the "EXISTING MORTGAGE"), to secure (i)
payment of indebtedness owed or to be owing to certain institutional lenders
(the "EXISTING 2002 LENDERS") pursuant to the terms of that certain Credit
Agreement, dated as of March 8, 2002 (herein, as the same may be amended,
modified or supplemented from time to time, called the "EXISTING 2002 CREDIT
AGREEMENT") pursuant to which the Existing 2002 Lenders made loans to Trustor
and issued letters of credit for the benefit of Trustor (the "EXISTING 2002
LETTERS OF CREDIT") in amounts not to exceed at any one time outstanding
$1,600,000,000, and Trustor, to evidence its indebtedness to the Existing 2002
Lenders under the Existing 2002 Credit Agreement, has executed and delivered to
the Existing 2002 Lenders its secured promissory notes to mature not later than
May 24, 2003 (the "EXISTING 2002 LOAN NOTES"), the Existing 2002 Loan Notes
being payable to the order of the Existing 2002 Lenders, bearing interest as
provided for therein, and containing provisions for payment of attorneys' fees
and acceleration of maturity in the event of default, as therein set forth; and
(ii) payment of indebtedness

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owed or to be owing to certain institutional lenders (the "EXISTING 2000
LENDERS", and together with the Existing 2002 Lenders, the "EXISTING LENDERS")
pursuant to the terms of that certain Second Amended and Restated Credit
Agreement dated as of May 23, 2000 (herein, as the same may be amended,
modified, or supplemented from time to time, called the "EXISTING 2000 CREDIT
AGREEMENT" and together with the Existing 2002 Credit Agreement, collectively,
the "EXISTING CREDIT AGREEMENTS") pursuant to which the Existing 2000 Lenders
made loans to Trustor and issued letters of credit for the benefit of Trustor
(the "EXISTING 2000 LETTERS OF CREDIT") in amounts not to exceed at any one time
outstanding $400,000,000, and Trustor, to evidence its indebtedness to the
Existing 2000 Lenders under the Existing 2000 Credit Agreement, has executed and
delivered to the Existing 2000 Lenders its secured promissory notes to mature
not later than May 24, 2003 (the "EXISTING 2000 LOAN NOTES") (the Existing 2000
Loan Notes, together with the Existing 2002 Loan Notes, collectively, the
"EXISTING LOAN NOTES"), the Existing 2000 Loan Notes being payable to the order
of the Existing 2000 Lenders, bearing interest as provided for therein, and
containing provisions for payment of attorney's fees and acceleration of
maturity in the event of default, as therein set forth.

      1.2 The Existing Mortgage, together with other mortgages and deeds of
trust (a) have been filed and recorded, among other places, as set forth in
Schedule I hereto; (b) have been supplemented and amended by various instruments
that have been filed and recorded, among other places, as set forth in Schedule
II hereto; and (c) have been amended and certain items of property encumbered
thereby have been released by various instruments that have been filed and
recorded, among other places, as set forth in Schedule III hereto.

      1.3 Trustor, the Existing Lenders and the Credit Agreement Agent are (i)
terminating the commitments under the Existing 2000 Credit Agreement, and (ii)
amending and restating the Existing 2002 Credit Agreement (as so amended and
restated, and as the same may, from time to time hereafter, be amended,
supplemented, modified or amended and restated, the "AMENDED AND RESTATED CREDIT
AGREEMENT."

      1.4 Trustor is also (a) issuing $500,000,000 in aggregate principal amount
of Second Priority Senior Floating Rate Secured Notes due 2007 (the "2007
NOTES") pursuant to the Indenture dated as of July 16, 2003 (the "2007
INDENTURE") between Trustor and Wilmington Trust Company, as Trustee (together
with its successors in such capacity, the "2007 TRUSTEE"), (b) issuing
$1,150,000,000 in aggregate principal amount of 8.5% Second Priority Senior
Secured Fixed Rate Notes due 2010 (the "2010 NOTES") pursuant to the Indenture
dated as of July 16, 2003 (the "2010 INDENTURE") between Trustor and Wilmington
Trust Company, as Trustee (together with its successors in such capacity, the
"2010 TRUSTEE"), (c) issuing $900,000,000 in aggregate principal amount of 8.75%
Second Priority Senior Secured Fixed Rate Notes due 2013 (the "2013 NOTES")
pursuant to the Indenture dated as of July 16, 2003 (the "2013 INDENTURE")
between Trustor and Wilmington Trust Company, as Trustee (together with its
successors in such capacity, the "2013 TRUSTEE"), and (d) borrowing $750,000,000
in Term Loans (the "TERM LOANS") pursuant to a Term Loan Agreement dated as of
July 16, 2003 (the "TERM LOAN AGREEMENT") between Trustor and Goldman

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Sachs Credit Partners L.P., as Administrative Agent (together with its
successors in such capacity, the "TERM LOAN ADMINISTRATIVE AGENT"). The proceeds
from the issuance of the 2007 Notes, the 2010 Notes and the 2013 Notes and the
borrowing of the Term Loans will be used to refinance a portion of the loans and
other indebtedness outstanding under the Existing Credit Agreements.

      1.5 As permitted pursuant to the Secured Debt Documents, Trustor may incur
future debt which could, together with the obligations under the Amended and
Restated Credit Agreement, constitute Priority Lien Debt and Trustor may incur
future debt which could, together with the 2007 Notes, the 2010 Notes, the 2013
Notes and the Term Loans, constitute Parity Lien Debt, provided that the
aggregate amount of the Secured Debt to be secured hereby shall not exceed
$4,200,000,000. Trustor intends to secure the Indebtedness, including its
obligations (a) under the Amended and Restated Credit Agreement and any future
Priority Lien Debt, equally and ratably, on a priority basis, and, (b) subject
to such priority, under the 2007 Notes, 2010 Notes, 2013 Notes and Term Loans
and any future Parity Lien Debt, equally and ratably, with liens and security
interests in, among other collateral, the Encumbered Property under the Existing
Mortgage, as contemplated in the Collateral Trust Agreement.

      1.6 Pursuant to the Collateral Trust Agreement and that certain Assignment
of Liens of even date herewith, the Credit Agreement Agent has assigned to
Beneficiary, all of the Credit Agreement Agent's right, title and interest in
and to, and its interest as beneficiary under, the Existing Mortgage. This Deed
of Trust amends and restates the Existing Mortgage. The Collateral Trust
Agreement sets forth the terms on which the Beneficiary, as collateral trustee
for the present and future holders of the Indebtedness, will receive, hold,
maintain, administer, maintain, enforce and distribute this Deed of Trust and
all interests, rights, powers and remedies of the Collateral Trustee thereunder
and the proceeds thereof.

      1.7 For all purposes of this Deed of Trust, unless the context otherwise
requires:

            A. "Actionable Default" is defined in the Collateral Trust
      Agreement.

            B. "Affiliate" of any Person means any other Person which, directly
      or indirectly, controls, is controlled by or is under common control with
      such Person (excluding any trustee under, or any committee with
      responsibility for administering, any Plan (as defined under ERISA)). A
      Person shall be deemed to be "controlled by" any other Person if such
      other Person possesses, directly or indirectly, power

                  (a) to vote 10% or more of the securities (on a fully diluted
            basis) having ordinary voting power for the election of directors or
            managing general partners; or

                  (b) to direct or cause the direction of the management and
            policies of such Person whether by contract or otherwise.

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            C. "Applicable Law" means with respect to any Person or matter, any
      federal, state, regional, tribal or local statute, law, code, rule,
      treaty, convention, application, order, decree, consent decree,
      injunction, directive, determination or other requirement (whether or not
      having the force of law) relating to such Person or matter and, where
      applicable, any interpretation thereof by a Governmental Authority having
      jurisdiction with respect thereto or charged with the administration or
      interpretation thereof.

            D. "Default Interest Rate" means the lesser of (a) ten percent
      (10%), or (b) the Maximum Lawful Rate.

            E. "Encumbered Property" means the properties, rights and interests
      hereinafter described in Section 1.8 and defined as the Encumbered
      Property.

            F. "Environmental Laws" shall mean any and all present and future
      United States federal, tribal, state and local laws or regulations, codes,
      plans, orders, decrees, directives, judgments, injunctions and lawfully
      imposed requirements issued, promulgated or entered thereunder relating to
      pollution or protection of the environment, including laws relating to
      reclamation of land and waterways and laws relating to emissions,
      discharges, releases or threatened releases of pollutants, contaminants,
      chemicals, or industrial, toxic or hazardous substances or wastes into the
      environment (including, without limitation, ambient air, surface water,
      ground water, land surface or subsurface strata) or otherwise relating to
      the manufacture, processing, distribution, use, treatment, storage,
      disposal, transport or handling of pollutants, contaminants, chemicals, or
      industrial, toxic or hazardous substances or wastes.

            G. "Event of Default" means an Actionable Default as defined under
      the Collateral Trust Agreement.

            H. "Governmental Authority" means any and all courts, boards,
      agencies, commissions, offices or authorities of any nature whatsoever for
      any governmental unit (federal, state, county, district, municipal, city,
      tribe or otherwise) whether now or hereafter in existence charged with the
      administration, interpretation or enforcement of any Applicable Law.

            I. "Hedging Agreements" means: (a) interest rate swap agreements,
      basis swap agreements, interest rate cap agreements, forward rate
      agreements, interest rate floor agreements and interest rate collar
      agreements, and all other agreements or arrangements designed to protect
      such Person against fluctuations in interest rates or currency exchange
      rates, and (b) forward contracts, options, futures contracts, futures
      options, commodity swaps, commodity options, commodity collars, commodity
      caps, commodity floors and all other agreements or arrangements designed
      to protect such Person against fluctuations in the price of commodities.

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            J. "Hedging Obligations" means with respect to any Person, all
      liabilities (including without limitation obligations and liabilities
      arising in connection with or as a result of early or premature
      termination of a Hedging Agreement, whether or not occurring as a result
      of a default thereunder) of such Person under a Hedging Agreement.

            K. "Hydrocarbons" means collectively, oil, gas, casinghead gas, drip
      gasoline, natural gasoline, condensate, distillate and all other liquid or
      gaseous hydrocarbons and related minerals and all products therefrom, in
      each case whether in a natural or a processed state.

            L. "Indebtedness" shall have the meaning set forth in Section 2.2 of
      this Deed of Trust.

            M. "Indemnification Claim" is defined in Section 4.6(a) of this Deed
      of Trust.

            N. "Indemnified Person" means Trustee, Beneficiary and each of the
      Secured Debtholders, their respective employees, affiliates, agents and
      attorneys, and any other Person to be indemnified under this Deed of
      Trust.

            O. "Joint Operating Agreements" shall mean, with respect to the
      lands described in Exhibit A, the respective operating agreement burdening
      the lands described in Exhibit A.

            P. "lands described in Exhibit A" shall include the real property or
      other interest in any lands which are either described in Exhibit A
      attached hereto or the description of which is incorporated in Exhibit A
      by reference to an instrument or document containing in, or referring to,
      such a description, and shall also include any lands now or hereafter
      unitized or pooled with lands which are either described in Exhibit A or
      the description of which is incorporated in Exhibit A by reference and
      Fixtures and all rights, titles and interests appurtenant thereto.
      References to Exhibit A shall include, where applicable, Exhibit A-1 as
      well.

            Q. "Leases" means any and all leases (including without limitation
      oil and gas leases and oil, gas and other minerals leases), surface leases
      or easements, subleases, licenses, concessions, operating rights or other
      agreements (written or verbal, now or hereafter in effect) which grant a
      possessory interest in and to, or the right to explore, use, lease,
      license, possess, produce, process, store and transport Hydrocarbons from,
      operate from, or otherwise enjoy, the Encumbered Property, together with
      all amendments, modifications, extensions and renewals thereof.

            R. "Legal Requirements" means (i) any and all present and future
      judicial decisions, statutes, rulings, rules, regulations, licenses,
      decisions, orders, injunctions, decrees, permits, certificates or
      ordinances of any Governmental Authority in any way applicable to Trustor,
      or the Encumbered Property, including

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      the ownership, use, occupancy, operation, maintenance, repair or
      reconstruction thereof, and any other Applicable Law enacted by any
      Governmental Authority relating to health or the environment, (ii)
      Trustor's presently or subsequently effective Organic Documents, (iii) any
      and all Leases, (iv) any and all leases and other contracts (written or
      oral) of any nature to which Trustor, or the Encumbered Property may be
      bound and (v) any and all restrictions, restrictive covenants or zoning,
      present and future, as the same may apply to the Encumbered Property.

            S. "Maximum Lawful Rate" means the maximum nonusurious rate of
      interest that may be received, charged or contracted for under Applicable
      Law from time to time in effect.

            T. "Obligations" means any and all of the covenants, warranties,
      representations and other obligations (other than to repay the
      Indebtedness) made or undertaken by Trustor or others under any of the
      Secured Debt Documents.

            U. "oil and gas leases" shall include oil, gas and mineral leases,
      subleases and assignments thereof, operating rights, servitudes and shall
      also include subleases and assignments of operating rights.

            V. "Operating Equipment" means all surface or subsurface machinery,
      goods, equipment, fixtures, movable property attached to immovable
      property and other movable property, inventory, facilities, supplies or
      other property of whatsoever kind or nature (excluding drilling rigs,
      trucks, automotive equipment or other property taken to the premises to
      drill a well or for other similar temporary uses) now or hereafter located
      on or under any of the lands described in Exhibit A which are useful for
      the production, gathering, treatment, processing, storage or
      transportation of Hydrocarbons (together with all accessions, additions
      and attachments to any thereof), including, but not by way of limitation,
      all oil wells, gas wells, water wells, injection wells, casing, tubing,
      tubular goods, rods, pumping units and engines, christmas trees,
      platforms, derricks, separators, compressors, gun barrels, flow lines,
      tanks, gas systems (for gathering, treating and compression), pipelines
      (including gathering lines, laterals and trunklines), chemicals,
      solutions, water systems (for treating, disposal and injection), steam
      generation and injection equipment and systems, power plants, poles,
      lines, transformers, starters and controllers, supervisory control and
      data acquisition systems, machine shops, tools, storage yards and
      equipment stored therein, buildings and camps, telegraph, telephone and
      other communication systems, roads, loading docks, loading racks and
      shipping facilities.

            W. "Organic Documents" means the Articles of Incorporation,
      Certificate of Incorporation, limited liability company certificate of
      formation and regulations or operating agreement, partnership agreement,
      limited partnership agreement, joint venture agreement, trust agreement or
      other similar documents governing the organization and operation of a
      business association.

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            X. "Parity Lien Debt" is defined in the Collateral Trust Agreement.

            Y. "Parity Lien Documents" is defined in the Collateral Trust
      Agreement.

            Z. "Parity Lien Indebtedness" is defined in Section 2.2 of this Deed
      of Trust.

            AA. "Parity Lien Obligations" means any and all of the covenants,
      warranties, representations and other obligations (other than to repay the
      Indebtedness) made or undertaken by Trustor or others under any of the
      Parity Lien Documents.

            BB. "Permits" means all authorizations, approvals, permits,
      variances, land use entitlements, consents, licenses, franchises and
      agreements issued by or entered into with any Governmental Authority now
      or hereafter required for all stages of exploration, developing,
      operating, and plugging and abandoning oil and gas wells (including,
      without limitation, those shown on Exhibit A) on all or any part of the
      lands described in Exhibit A (or any other lands any production from
      which, or profits or proceeds from such production, is attributed to any
      interest in the lands described in Exhibit A).

            CC. "Permitted Encumbrances" means the outstanding liens, easements,
      restrictions, exceptions, reservations, conditions, limitations, security
      interests and other matters as permitted by and defined in the Secured
      Debt Documents.

            DD. "Person" means any natural person, corporation, partnership,
      limited liability company, firm, association, trust, government,
      governmental agency or any other entity, whether acting in an individual,
      fiduciary or other capacity.

            EE. "Personalty" means all of the right, title and interest of
      Trustor now owned or hereafter acquired in and to all furniture,
      furnishings, Equipment, machinery, Goods, General Intangibles, money,
      Accounts, receivables, Contract Rights, Inventory, all refundable,
      returnable or reimbursable fees, deposits or other funds or evidences of
      credit or indebtedness deposited by or on behalf of Trustor with any
      Governmental Authority, agencies, boards, corporations, providers of
      utility services, public or private, including specifically, but without
      limitation, all refundable, returnable or reimbursable tap fees, utility
      deposits, commitment fees and development costs, and all other personal
      property (other than the Fixtures) of any kind or character as defined in
      and subject to the provisions of Article 9 of the Uniform Commercial Code,
      now or hereafter located upon, within or about, or used in connection
      with, the lands described in Exhibit A together with all accessories,
      replacements and substitutions thereto or therefor and the Proceeds
      thereof.

            FF. "Priority Lien Debt" is defined in the Collateral Trust
      Agreement.

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            GG. "Priority Lien Documents" is defined in the Collateral Trust
      Agreement.

            HH. "Priority Lien Indebtedness" is defined in Section 2.2 of this
      Deed of Trust.

            II. "Priority Lien Obligations" means any and all of the covenants,
      warranties, representations and other obligations (other than to repay the
      Indebtedness) made or undertaken by Trustor or others under any of the
      Priority Lien Documents.

            JJ. "Production Sale Contracts" means contracts now in effect, or
      hereafter entered into by Trustor, or entered into by Trustor's
      predecessors in interest, for the sale, purchase, exchange, gathering,
      transportation, treating or processing of Hydrocarbons produced from the
      lands described in Exhibit A.

            KK. "Rents and Revenues" means all of the rents, revenues, income,
      proceeds, profits and other benefits paid or payable by parties to the
      Leases other than Trustor for using, leasing, licensing, possessing,
      operating, selling or otherwise enjoying the Encumbered Property,
      including the proceeds from the sale of Hydrocarbons.

            LL. "Secured Debt" is defined in the Collateral Trust Agreement.

            MM. "Secured Debtholder" is defined in the Collateral Trust
      Agreement.

            NN. "Secured Debt Documents" is defined in the Collateral Trust
      Agreement.

            OO. "Secured Debt Representative" is defined in the Collateral Trust
      Agreement.

            PP. "Taxes" means all real property and personal property taxes,
      production taxes, assessments, permit fees, water, gas, sewer, electricity
      and other utility rates and charges, charges for any easement, license or
      agreement maintained for the benefit of the Encumbered Property, and all
      other taxes, charges and assessments and any interest, costs or penalties
      with respect thereto, of any kind and nature whatsoever which at any time
      prior to or after the execution hereof may be charged, assessed, levied or
      imposed upon the Encumbered Property or the Rents and Revenues or the
      ownership, use, occupancy or enjoyment thereof.

            QQ. "Transportation Agreements" shall mean any contracts or
      agreements entered into from time to time by Trustor, or entered into by
      Trustor's predecessors in interest, relating to the transportation of
      Hydrocarbons, as any such agreement or contract may be amended,
      supplemented, restated or otherwise modified from time to time.

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            RR. "Uniform Commercial Code" means the Uniform Commercial Code as
      in effect from time to time in the State of California or any other
      applicable state, and the terms "Accounts," "Account Debtor, "As Extracted
      Collateral," "Chattel Paper," "Contract Rights," "Deposit Accounts,"
      "Documents," "Electronic Chattel Paper," "General Intangibles," "Goods,"
      "Equipment," "Fixtures," "Inventory," "Instruments," and "Proceeds" shall
      have the respective meanings assigned to such terms in the Uniform
      Commercial Code.

            SS. "Water Rights" means (including without limitation those
      described in Exhibit A hereto) all now or hereafter existing or acquired
      water and water rights, reservoirs and reservoir rights, ditches and ditch
      rights, wells and well rights, whether evidenced or initiated by permit,
      decree, well registration, appropriation not decreed, water court
      application, shares of stock or other interests in mutual ditch or
      reservoir companies or carrier ditch or reservoir companies or otherwise,
      appertaining or appurtenant to or beneficially used or useful in
      connection with the lands described in Exhibit A, together with all pumps,
      well casings, wellheads, electrical installations, pumphouses, meters,
      monitoring wells and systems, measuring devices, pipes, pipelines, and
      other structures or personal property which are or may be used to produce,
      regulate, measure, distribute, store, or use water from the said water and
      water rights, reservoirs and reservoir rights, ditches and ditch rights,
      wells and well rights.

      1.8 Grant.

      Grant of Priority Lien

      NOW, THEREFORE, Trustor, for and in consideration of the premises and of
the Priority Lien Indebtedness and trusts hereinafter mentioned, has granted,
bargained, sold, warranted, encumbered, assigned, transferred and conveyed, and
by these presents does grant, bargain, sell, warrant, encumber, assign, pledge
and hypothecate, transfer and convey unto Trustee, IN TRUST, WITH POWER OF SALE,
for the use and benefit of Beneficiary, all Trustor's right, title and interest,
whether now owned or hereafter acquired, in and to all of the hereinafter
described properties, rights and interests; and, insofar as such properties,
rights and interests consist of equipment, general intangibles, accounts, as
extracted collateral, chattel paper, contract rights, deposit accounts,
documents, goods, instruments, inventory, fixtures, proceeds of collateral or
any other personal property of a kind or character defined in, or subject to the
applicable provisions of the California Uniform Commercial Code, Trustor hereby
grants to said Beneficiary, a security interest therein to the full extent of
Trustor's legal and beneficial interest therein, now owned or hereafter
acquired, namely:

            (a) the lands described in Exhibit A, and Leases, profit a prendre,
      fee, mineral, overriding royalty, royalty and other interests which are
      described in Exhibit A,

            (b) the presently existing and (subject to the terms of Section 6.1
      hereof) hereafter arising unitization, unit operating, communitization and
      pooling

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      agreements and the properties covered and the units created thereby
      (including, without limitation, all units formed under orders,
      regulations, rules, approvals, decisions or other official acts of any
      Governmental Authority) which are specifically described in Exhibit A or
      which relate to any of the properties and interests specifically described
      in Exhibit A,

            (c) the Hydrocarbons which are in, under, upon, produced or to be
      produced from or which are attributed or allocated to the lands described
      in Exhibit A,

            (d) the Production Sale Contracts,

            (e) the Joint Operating Agreements,

            (f) the Transportation Agreements,

            (g) the Operating Equipment,

            (h) the Permits,

            (i) the Water Rights,

            (j) the Hedging Agreements,

            (k) the Leases,

            (l) the Personalty,

            (m) the Rents and Revenues,

            (n) without duplication of any other provision of this granting
      clause, Equipment, Fixtures and other Goods necessary or used in
      connection with, and Inventory, Accounts, As Extracted Collateral, General
      Intangibles, Contract Rights, Chattel Paper, Deposit Accounts, Documents,
      Electronic Chattel Paper, Instruments and Proceeds arising from, or
      relating to, the properties and other interests described in Exhibit A
      (including Exhibit A-1),

together with any and all corrections or amendments to, or renewals, extensions
or ratifications of, or replacements or substitutions for, any of the same, or
any instrument relating thereto, and all accounts, contracts, contract rights,
options, nominee agreements, unitization or pooling agreements, operating
agreements and unit operating agreements, processing agreements, farmin
agreements, farmout agreements, joint venture agreements, partnership agreements
(including mining partnerships), exploration agreements, bottom hole agreements,
dry hole agreements, support agreements, acreage contribution agreements,
surface use and surface damage agreements, net profits agreements, production
payment agreements, Hedging Agreements, insurance policies, title opinions,
title abstracts, title materials and information, files, records, writings, data
bases, information, systems, logs, well cores,

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<PAGE>

fluid samples, production data and reports, well testing data and reports, maps,
seismic and geophysical, geological and chemical data and information,
interpretative and analytical reports of any kind or nature (including, without
limitation, reserve studies and reserve evaluations), computer hardware and
software and all documentation therefor or relating thereto (including, without
limitation, all licenses relating to or covering such computer hardware,
software and/or documentation), trade secrets, trademarks, service marks and
business names and the goodwill of the business relating thereto, copyrights,
copyright registrations, unpatented inventions, patent applications and patents,
rights-of-way, franchises, bonds, easements, servitudes, surface leases,
permits, licenses, tenements, hereditaments, appurtenances, concessions,
occupancy agreements, privileges, development rights, condemnation awards,
claims against third parties, general intangibles, rents, royalties, issues,
profits, products and proceeds, whether now or hereafter existing or arising,
used or useful in connection with, covering, relating to, or arising from or in
connection with, any of the aforesaid items (a) through n), inclusive, in this
granting clause mentioned, and all other things of value and incident thereto
(including, without limitation, any and all liens, lien rights, security
interests and other properties, rights and interests) which Trustor might at any
time have or be entitled to, but excluding any data or contracts with respect to
which mortgaging or granting of a lien or a security interest is prohibited by
existing third party agreements,

all the aforesaid properties, rights and interests, together with any additions
thereto which may be subjected to the lien and security interest of this Deed of
Trust by means of supplements hereto, being hereinafter, collectively, called
the "Encumbered Property."

      Grant of Parity Lien

      NOW, THEREFORE, Trustor, for and in consideration of the premises and the
Parity Lien Obligations and trusts hereafter mentioned, has granted, bargained,
sold, warranted, encumbered, assigned, transferred and conveyed, and by these
presents does grant, bargain, sell, warrant, encumber, assign, pledge and
hypothecate, transfer and convey unto Trustee, IN TRUST, WITH POWER OF SALE, for
the use and benefit of Beneficiary, all Trustor's right, title and interest,
whether now owned or hereafter acquired, in and to all of the Encumbered
Property.

      Subject, however, in each case to (i) Permitted Encumbrances (including
without limitation all presently existing royalties, overriding royalties,
payments out of production and other burdens which are referred to in Exhibit A
and which are taken into consideration in computing any percentage, decimal or
fractional interest as set forth in Exhibit A), (ii) the assignment of
production contained in Article IV hereof, but only insofar and so long as said
assignment of production is not inoperative under the provisions of Section 4.5
hereof, and (iii) the condition that none of Trustee, Beneficiary nor any
Secured Debtholder shall be liable in any respect for the performance of any
covenant or obligation (including, without limitation, measures required to
comply with Environmental Laws) of Trustor in respect of the Encumbered
Property.

                                       11
<PAGE>

      TO HAVE AND TO HOLD the Encumbered Property for the benefit of
Beneficiary, and forever to secure the payment of the Indebtedness and to secure
the performance and discharge of the Obligations of Trustor herein and therein
contained.

      As set forth in the separate granting clauses above, it is the intent of
Trustor that such grants shall create two separate and distinct security
interests in all right, title and interest of Trustor in the Encumbered Property
in favor of (a) the Trustee for the benefit of the Beneficiary, for the benefit
of the holders of the Priority Lien Debt, and (b) the Trustee for the benefit of
the Beneficiary, for the benefit of the holders of the Parity Lien Debt.

      Notwithstanding (i) anything to the contrary contained in this instrument
or any other document, filing or agreement related to the creation, attachment,
perfection or existence of the liens and security interests granted herein, (ii)
the time, place, order or method of attachment or perfection of such liens or
security interests, (iii) the time or order of filing or recording of financing
statements or other documents filed or recorded to perfect such security
interests, and (iv) the rules for determining priority under any law governing
the relative priorities of secured creditors, the lien securing the Parity Lien
Indebtedness is subordinated and junior in priority to the lien securing the
Priority Lien Indebtedness.

      Trustor, in consideration of the Secured Debt as set forth above, hereby
covenants and agrees with each of Trustee and Beneficiary:

                                  ARTICLE II.

                              INDEBTEDNESS SECURED

      2.1 Items of Indebtedness Secured. The following items of indebtedness are
secured hereby:

            (a) The Priority Lien Debt (including future advances to be made
      with respect thereto), and all other Obligations of Trustor under the
      Priority Lien Documents;

            (b) The Parity Lien Debt (including future advances to be made with
      respect thereto), and all other Obligations of Trustor under the Parity
      Lien Documents;

            (c) All Obligations under any other Priority Lien Debt or Parity
      Lien Debt;

            (d) Any sums advanced or expenses or costs incurred by Trustee,
      Beneficiary or any Secured Debtholder, or by any receiver appointed
      hereunder, which are made or incurred pursuant to, or permitted by, the
      terms hereof, plus interest thereon at the rate herein specified or
      otherwise agreed upon, from the date of the advances or the incurring of
      such expenses or costs until reimbursed;

                                       12
<PAGE>

            (e) Any and all other indebtedness of Trustor or any Affiliate of
      Trustor to Beneficiary now or hereafter owing, whether direct or indirect,
      primary or secondary, fixed or contingent, joint or several, regardless of
      how evidenced or arising, where the indebtedness provides that it is
      secured hereby; and

            (f) Any extensions, refinancings, modifications or renewals of all
      such indebtedness described in subparagraphs (a) through (e) above,
      whether or not Trustor executes any extension agreement or renewal
      instrument.

      2.2 Indebtedness Defined. All the above items of indebtedness described in
subparagraphs (a) of Section 2.1 and subparagraphs (c) through (f) of Section
2.1 hereof in respect of the Priority Lien Debt, are hereinafter collectively
referred to as the "PRIORITY LIEN INDEBTEDNESS." And all the above items of
indebtedness described in subparagraphs (b) of Section 2.1 and subparagraphs (c)
through (f) of Section 2.1 hereof in respect of the Parity Lien Debt, are
hereinafter collectively referred to as the "PARITY LIEN INDEBTEDNESS"; the
Priority Lien Indebtedness and the Parity Lien Indebtedness are collectively
referred to as the "INDEBTEDNESS".

      2.3 Valid and Subsisting First Lien. Trustor hereby acknowledges and
agrees that, except as otherwise provided by the Secured Debt Documents, the
Existing Mortgage constitutes a valid and subsisting first lien on the portion
of the Encumbered Property encumbered thereby, and that none of the rights and
liens existing thereunder shall be impaired or released hereby, and that the
same as amended and restated hereby shall remain in full force and effect, and
all rights and liens existing and to exist thereunder are renewed, extended,
carried forward, and conveyed to secure all of the Indebtedness hereinabove
mentioned.

      2.4 Amended and Restated Deed of Trust. The Existing Mortgage is amended
and restated in full hereby in order to, among other things, secure all of the
Indebtedness herein described or referred to as if reference to such
Indebtedness were fully described in the Existing Mortgage. None of the rights,
titles, and interests, existing or to exist under the Existing Mortgage are
hereby released, diminished or impaired.

      2.5 No Impairment or Discharge of Liens. It is the express intention of
all parties hereto that the Secured Debtholders are subrogated to all of the
rights, powers, and equities of the original lenders and beneficiary under the
Existing Mortgage, that the liens created hereby shall relate back to and be
effective as of the effective date of the Existing Mortgage and that nothing
contained herein shall be construed to impair or discharge the liens and
security interests created thereby.

                                  ARTICLE III.

                      PARTICULAR COVENANTS, REPRESENTATIONS
                            AND WARRANTIES OF TRUSTOR

      3.1 Payment of the Indebtedness and Performance of Obligations. Trustor
will duly and punctually pay the Indebtedness, as and when called for in the
Secured

                                       13
<PAGE>

Debt Documents and on or before the due dates thereof, and will timely perform
and discharge all of the Obligations in full and on or before the dates same are
to be performed and discharged.

      3.2 Certain Representations and Warranties. Trustor represents and
warrants (and with respect to those matters set forth in the following
subsections (b) and (f), as to those portions of the Encumbered Property that
are operated by persons other than Trustor or a Subsidiary of Trustor, Trustor
makes such representation and warranty to the best of its knowledge) that

            (a) the oil and gas leases described in Exhibit A hereto are valid,
      subsisting leases, superior and paramount to all other oil and gas leases
      respecting the properties to which they pertain,

            (b) all producing wells located on the lands described in Exhibit A
      (including Exhibit A-1) have been drilled, operated and produced in
      conformity with all Applicable Laws of all Governmental Authorities having
      jurisdiction, and are subject to no penalties on account of past
      production, and such wells are in fact bottomed under and are producing
      from, and the well bores are wholly within, the lands described in Exhibit
      A or lands pooled or unitized therewith,

            (c) Trustor, to the extent of the interest specified in Exhibit A
      (including Exhibit A-1), has valid and indefeasible title to each property
      right or interest constituting the Encumbered Property described in
      Exhibit A (including Exhibit A-1) and has a good and legal right to grant
      and convey the same to Trustee; such interest entitles Trustor to receive
      not less than the share of Hydrocarbons from such property indicated as
      its net revenue interest or "NRI" share of such Hydrocarbons, and
      obligates Trustor to pay for not more than the share of operating and
      other costs, liabilities and expenses associated with such property
      indicated as its working interest or "Wl" share of such costs, liabilities
      and expenses,

            (d) excepting the Permitted Encumbrances, the Encumbered Property is
      free from all encumbrances or liens whatsoever,

            (e) Trustor is not obligated, by virtue of any prepayment under any
      contract providing for the sale by Trustor of Hydrocarbons which contains
      a "take or pay" clause or under any similar arrangement, to deliver
      Hydrocarbons at some future time without then or thereafter receiving full
      payment therefor,

            (f) the Encumbered Property is currently being operated, maintained
      and developed, in all material respects, in accordance with all applicable
      currently existing Permits, Legal Requirements and all Applicable Laws
      (including, without limitation, Environmental Laws),

            (g) the cover page to this Deed of Trust lists the correct legal
      name of Trustor and Trustor has not been known by any legal name different
      from the one set forth on the cover page of this Deed of Trust,

                                       14
<PAGE>

            (h) the execution, delivery, and performance by Trustor of this Deed
      of Trust (i) are within Trustor's corporate powers and have been duly
      authorized by Trustor's Board of Directors, shareholders and all other
      requisite corporate action, (ii) have received all (if any) requisite
      prior governmental approval and consent in order to be legally binding and
      enforceable in accordance with the terms thereof, and (iii) will not
      violate, be in conflict with, result in a breach or constitute (with due
      notice or lapse of time, or both) a default under, any Legal Requirement
      or result in the creation or imposition of any lien, charge or encumbrance
      of any nature whatsoever upon any of Trustor's property or assets, except
      as contemplated by the provisions of the Secured Debt Documents, and

            (i) except as permitted by the Secured Debt Documents, there are no
      actions, suits or proceedings pending, or to the knowledge of Trustor
      threatened, against or affecting Trustor or the Encumbered Property that
      could materially adversely affect Trustor or the Encumbered Property, or
      involving the validity or enforceability of this Deed of Trust or the
      priority of the liens and security interests created by the Secured Debt
      Documents, and no event has occurred (including specifically Trustor's
      execution of this Deed of Trust which will violate, be in conflict with,
      result in the breach of, or constitute (with due notice or lapse of time,
      or both) a material default under, any Legal Requirement or result in the
      creation or imposition of any lien, charge or encumbrance of any nature
      whatsoever upon any of Trustor's property other than the liens and
      security interests created by the Secured Debt Documents.

      3.3 Further Assurances. Trustor will warrant and forever defend the
Encumbered Property unto Trustee and Beneficiary, as the case may be, against
every person whomsoever lawfully claiming the same or any part thereof, subject
to Permitted Encumbrances, and Trustor will maintain and preserve the lien and
security interest hereby created so long as any of the Indebtedness remains
unpaid. Trustor will execute and deliver such other and further instruments and
will do such other and further acts as may be required pursuant to the
Collateral Trust Agreement and/or any Secured Debt Documents to carry out more
effectually the purposes of this Deed of Trust, including, without limiting the
generality of the foregoing, (i) prompt correction of any defect which may
hereafter be discovered in the title to the Encumbered Property or in the
execution and acknowledgment of this Deed of Trust, the Secured Debt Documents,
or any other document executed in connection herewith, and (ii) at any time a
Secured Debt Representative may request and upon such request, promptly execute
all notices to parties operating, purchasing or receiving proceeds of production
of Hydrocarbons from the Encumbered Property, and all division orders or
transfer orders needed in order to transfer effectually or to assist in
transferring effectually to the Beneficiary the assigned proceeds of production
from the Encumbered Property, which notices, division orders and transfer orders
shall be held by such Secured Debt Representative and delivered upon an Event of
Default.

      3.4 Operation of the Encumbered Property. So long as the Indebtedness or
any part thereof remains unpaid, and whether or not Trustor is the operator of
any particular part of the Encumbered Property, Trustor shall, at Trustor's own
expense:

                                       15
<PAGE>

            (a) Do all things necessary to keep unimpaired Trustor's rights in
      the Encumbered Property and not abandon any well or forfeit, surrender or
      release any Lease, except that Trustor may, in the ordinary course of
      business, (i) plug and abandon any well no longer capable of producing
      Hydrocarbons in paying quantities, (ii) surrender or release any Lease or
      a portion thereof so long as no well capable of producing Hydrocarbons in
      paying quantities is located on such Lease or a portion thereof or
      production from any such well is attributed to such Lease or a portion
      thereof, (iii) surrender or release any Lease or a portion thereof on
      which no producing well has ever been drilled or which has never been held
      by production from another well unless Proven Reserves (as defined in any
      Secured Debt Document) are attributed to such Lease or a portion thereof
      and (iv) abandon, forfeit, surrender or release any other portion of the
      Encumbered Property to the extent permitted under the then existing
      Secured Debt Documents;

            (b) Obtain and maintain all required Permits and cause the lands
      described in Exhibit A to be maintained, developed, protected against
      drainage, and operated for the production of Hydrocarbons in a good and
      workmanlike manner as would a prudent operator, and consistent with
      industry practices, Joint Operating Agreements, and all Applicable Laws,
      excepting those being contested in good faith; and plug and abandon wells
      no longer capable of producing Hydrocarbons in paying quantities in
      accordance with all Applicable Laws, Legal Requirements and the terms and
      conditions of applicable Leases; and remediate the lands described in
      Exhibit A and facilities located thereon in accordance with all Applicable
      Laws, Legal Requirements and the terms and conditions of applicable
      Leases;

            (c) Duly pay and discharge, or cause to be paId and discharged,
      promptly as and when due and payable, all rentals and royalties (including
      shut-in royalties) payable in respect of the Encumbered Property (other
      than rentals under Leases that are surrendered pursuant to the foregoing
      Section 3.4(a)), and all expenses incurred in or arising from the
      operation or development of the Encumbered Property not later than the due
      date thereof, or the day any fine, penalty, interest or cost may be added
      thereto or imposed, or the day any lien may be filed, for the non-payment
      thereof (if such day is used to determine the due date of the respective
      item) except as to such matters which are being contested by Trustor in
      good faith;

            (d) Cause the Operating Equipment to be kept in good and effective
      operating condition, ordinary wear and tear excepted, and all repairs,
      renewals, replacements, additions and improvements thereof or thereto,
      needful to the production of Hydrocarbons from the lands described in
      Exhibit A, to be promptly made;

            (e) Not, except as permitted under the Secured Debt Documents,
      create, place or permit to be created or placed, or through any act or
      failure to act, acquiesce in the placing of, or allow to remain, any
      mortgage, pledge, lien

                                       16
<PAGE>

      (statutory, constitutional or contractual), security interest, encumbrance
      or charge, or conditional sale or other title retention agreement,
      regardless of whether same are expressly subordinate to the liens of the
      Secured Debt Documents, with, respect to all or any portion of the
      Encumbered Property, the Leases or the Rents and Revenues other than (1)
      the Permitted Encumbrances, (2) Taxes constituting a lien but not due and
      payable, (3) defects or irregularities in title, and liens, charges or
      encumbrances, which are customarily viewed in the industry as not
      interfering materially with the development, operation or value of the
      Encumbered Property and not such as to affect materially title thereto,
      and (4) those being contested by Trustor in good faith in such manner as
      not to jeopardize Beneficiary's rights in and to the Encumbered Property;

            (f) Carry with financially sound and reputable insurance companies
      and in amounts as is customary in the industry or as otherwise required
      pursuant to the Secured Debt Documents, the following insurance: (1)
      workmen's compensation insurance and public liability and property damage
      insurance in respect of all activities in which Trustor might incur
      personal liability for the death of or injury to an employee or third
      person, or damage to or destruction of another's property; and (2) to the
      extent such insurance is carried by similar companies engaged in similar
      undertakings in, the same general areas in which the Encumbered Property,
      is located, insurance in respect of the Operating Equipment, against loss
      or damage by fire, lightning, hail, tornado, explosion and other similar
      risks, hazards, casualties and contingencies (including business
      interruption insurance covering loss of Rents and Revenues); provided,
      that any such insurance may be provided by way of self insurance to the
      extent that similar companies engaged in similar undertakings in the same
      general areas also self-insure. Each insurance policy issued in connection
      therewith shall provide by way of endorsements, riders or otherwise that
      (i) name Beneficiary as a loss payee on all property insurance policies
      and an additional insured on all liability insurance policies, and provide
      that proceeds from property insurance policies will be payable to
      Beneficiary as its interest may appear, which proceeds are hereby assigned
      to Beneficiary, it being agreed by Trustor that such payments shall be
      applied A) if there be no Event of Default existing or which would exist
      but for due notice or lapse of time, or both, to the restoration, repair
      or replacement of the Encumbered Property, or B) if there be an Event of
      Default existing, or which would exist but for due notice or lapse of
      time, or both, in accordance with the provisions of the Collateral Trust
      Agreement, either for the above stated purpose or toward the payment of
      the Indebtedness; (ii) the coverage of Beneficiary shall not be
      terminated, reduced or affected in any manner regardless of any breach or
      violation by Trustor of any warranties, declarations or conditions in such
      policy; (iii) no such insurance policy shall be canceled, endorsed,
      altered or reissued to effect a change in coverage for any reason and to
      any extent whatsoever unless such insurer shall have first given
      Beneficiary and each Secured Debt Representative thirty (30) days prior
      written notice thereof; and (iv) Beneficiary may, but shall not be
      obligated to, make premium payments to prevent any cancellation,
      endorsement, alteration or re-issuance and such payments shall be accepted
      by the insurer to prevent the

                                       17
<PAGE>

      same. Beneficiary and each Secured Debt Representative shall be furnished
      with a certificate evidencing such coverage in form and content comparable
      to coverage typically provided in the industry. All policies to be
      maintained under this Deed of Trust are to be issued on forms and by
      companies and with endorsements as are customary in the industry. Trustor
      shall maintain insurance in an amount sufficient to prevent Trustor from
      becoming a co-insurer under any policy required hereunder. If Trustor
      fails to maintain the level of insurance required under this Deed of
      Trust, then Trustor shall and hereby agrees to indemnify Beneficiary to
      the extent that a casualty occurs and insurance proceeds would have been
      available had such insurance been maintained;

            (g) Furnish to Beneficiary and each Secured Debt Representative, as
      soon as possible and in any event within five (5) days after the
      occurrence from time to time of any change in the address of Trustor's
      location (as described on the signature page hereto) or in the name of
      Trustor, notice in writing of such change;

            (h) Not initiate or acquiesce in any change in any material zoning
      or other land use or Water Rights classification now or hereafter in
      effect and affecting the Encumbered Property or any part thereof;

            (i) Notify Beneficiary and each Secured Debt Representative in
      writing, as soon as possible and in any event within five (5) days after
      it shall become aware of the occurrence of any Event of Default or any
      event which, with notice, the passage of time or both would be such an
      Event of Default;

            (j) Appear and defend, and hold Beneficiary and any Secured
      Debtholder harmless from, any action, proceeding or claim affecting the
      Encumbered Property or the rights and powers of Beneficiary or Secured
      Debtholders under the Secured Debt Documents, and all costs and expenses
      incurred by Beneficiary or any Secured Debtholder in protecting its
      interests hereunder in such an event (including all court costs and
      attorneys' fees) shall be borne by Trustor;

            (k) Subject to Trustor's right to contest the same, promptly pay all
      Taxes legally imposed upon this instrument or upon the Encumbered Property
      or upon the income and profits thereof, or upon the interest of
      Beneficiary therein; provided that Trustor shall not be liable for taxes
      accruing after a transfer of the Encumbered Property following a
      foreclosure;

            (l) Comply with, conform to and obey, in all material respects, all
      present and future Legal Requirements and not use, maintain, operate,
      occupy, or allow the use, maintenance, operation or occupancy of, the
      Encumbered Property in any manner which (a) violates any present and
      future Legal Requirement, (b) may be dangerous unless safeguarded as
      required by Applicable Law, (c) constitutes a public or private nuisance
      or (d) makes void,

                                       18
<PAGE>

      voidable or cancelable, or increases the premium of, any insurance then in
      force with respect thereto; and

            (m) Not, except as authorized under the Secured Debt Documents,
      permit any of the Fixtures or Personalty to be removed at any time from
      the lands described in Exhibit A unless (i) the removed item is removed
      temporarily for maintenance and repair, (ii) if removed permanently, is
      replaced by an article of equal suitability and value, owned by Trustor,
      free and clear of any lien or security interest or (iii) such Fixtures or
      Personalty are removed in connection with the plugging and abandoning of
      wells, or abandonment of other facilities, in each case as permitted by
      this Deed of Trust.

      3.5 Performance of Leases. Trustor will: (a) duly and punctually perform
and comply with any and all representations, warranties, covenants and
agreements expressed as binding upon it under each of the Leases; (b) subject to
the exceptions provided for in Section 3.4(a), not voluntarily terminate, cancel
or waive its rights or the obligations of any other party under any of the
Leases; (c) subject to the exceptions provided for in Section 3.4(a), use all
reasonable efforts to maintain each of the Leases in force and effect during the
full term thereof, and (d) appear in and defend (or cause its operator to appear
in and defend) any action or proceeding arising under or in any manner connected
with any of the Leases or the representations, warranties, covenants and
agreements of it or the other party or parties thereto.

      3.6 Recording, etc. Trustor will promptly, and at Trustor's expense,
record, register, deposit and file this and every other instrument in addition
or supplemental hereto in such offices and places and at such times and as often
as may be necessary to preserve, protect and renew the lien and security
interest hereof as a first lien on and prior perfected security interest in real
or personal property, as the case may be, and the rights and remedies of
Beneficiary and Secured Debtholders, and otherwise will do and observe all
things or matters necessary or expedient to be done or observed by reason of any
Applicable Law, for the purpose of effectively creating, maintaining and
preserving the lien and security interest hereof on and in the Encumbered
Property.

      3.7 Sale or Deed of Trust of the Encumbered Property. Except (a) as set
forth in Section 6.1 of this Deed of Trust; (b) for sales of severed
Hydrocarbons in the ordinary course of Trustor's business; (c) for sales of or
dispositions of surplus, obsolete or worn inventory or equipment; (d) for the
lien and security interest created by this Deed of Trust; (e) for Permitted
Encumbrances; and (f) for sales, exchanges or other dispositions of Encumbered
Property permitted under the Secured Debt Documents governing Priority Lien Debt
and permitted under the Secured Debt Documents governing Parity Lien Debt,
Trustor will not sell, convey, mortgage, pledge, hypothecate, pool, unitize or
otherwise dispose of or encumber the Encumbered Property nor any portion
thereof, nor any of Trustor's right, title or interest therein, and Trustor will
not enter into any arrangement with any gas pipeline company or other consumer
of Hydrocarbons regarding the Encumbered Property whereby said gas pipeline
company or consumer may set off any claim against Trustor by withholding payment
for any Hydrocarbons actually delivered.

                                       19
<PAGE>

      3.8 Records, Statements and Reports. Trustor will keep proper books of
record and account in which complete and correct entries will be made of
Trustor's transactions in accordance with generally accepted accounting
principles and will furnish or cause to be furnished to each Secured Debt
Representative such information concerning the business, affairs and financial
condition of Trustor as required under the Secured Debt Documents. Without
limiting the generality of the foregoing, Trustor shall furnish to Beneficiary
and each Secured Debt Representative, but not more than every six (6) months:
(a) reports prepared by a reputable national independent petroleum engineer
regularly engaged by Trustor or other engineering firm acceptable to the Credit
Agreement Agent concerning (1) the quantity of Hydrocarbons recoverable from the
Encumbered Property, (2) the projected income and expense attributable to the
Encumbered Property, and (3) the expediency of any change in methods of
treatment or operation of all or any wells productive of Hydrocarbons, any new
drilling or development, any method of secondary recovery by repressuring or
otherwise, or any other action with respect to the Encumbered Property, the
decision as to which may increase or reduce the quantity of Hydrocarbons
ultimately recoverable or the rate of production thereof, and (b) reports for
the prior period showing the gross proceeds from the sale of Hydrocarbons
produced from the lands described in Exhibit A (including any thereof taken by
Trustor for Trustor's own use), the quantity of such Hydrocarbons sold, the
severance, gross production, occupation, or gathering taxes deducted from or
paid out of such proceeds and the number of wells operated, drilled or
abandoned.

      3.9 Right of Entry.

            (a) Upon at least twenty-four (24) hours notice to Trustor, Trustor
      will permit Beneficiary, each Secured Debt Representative and/or the
      agents of either of them, at the cost and expense of Trustor, to enter
      upon the Encumbered Property and all parts thereof, for the purpose of
      investigating and inspecting the condition and operation thereof, and
      shall permit reasonable access to the field offices and other offices (to
      the fullest extent that Trustor may do so under the terms of the
      applicable Joint Operating Agreements and other applicable agreements
      affecting the Encumbered Property), including the principal place of
      business, of Trustor to inspect and examine the Encumbered Property and to
      inspect, review and reproduce as necessary any books, records, accounts,
      contracts or other documents of Trustor, it being understood that any
      non-public information obtained in connection therewith shall be subject
      to the relevant confidentiality provisions of the Secured Debt Documents
      then in effect.

            (b) Without limiting the generality of the foregoing, Beneficiary
      shall have the right (but shall not be obligated to), and each Secured
      Debt Representative and its agents shall have the right (to the fullest
      extent that Trustor may do so under the terms of the applicable Joint
      Operating Agreements and other applicable agreements affecting the
      Encumbered Property), on twenty-four (24) hours prior notice to Trustor to
      enter the Encumbered Property to conduct (at the cost and expense of
      Trustor), or to cause Trustor to conduct (at the cost and expense of
      Trustor), such tests and investigations as may be necessary to determine
      whether any hazardous materials or solid waste is being

                                       20
<PAGE>

      generated, transported, stored, or disposed of in accordance with
      applicable Environmental Laws. Such tests and investigations may include,
      without limitation, underground borings, ground water analyses and borings
      from the floors, ceilings and walls of any improvements located on the
      Encumbered Property. This Section 3.9 shall not be construed to affect or
      limit the obligations of Trustor pursuant to Section 3.4 hereof.

            (c) Neither Beneficiary nor any Secured Debt Representative shall
      have any duty to visit or observe the Encumbered Property, or to conduct
      tests, and no site visit, observation or testing by any such person (or
      its agents and independent contractors) shall impose any liability on any
      such person nor shall Trustor or any other obligor be entitled to rely on
      any such visit, observation or testing in any respect. Beneficiary or a
      Secured Debt Representative may, but shall not be obligated to, disclose
      to Trustor or, subject to the relevant confidentiality provisions of the
      Secured Debt Documents then in effect, any other Person, including any
      Governmental Authority, any report or finding made as a result of, or in
      connection with, any site visit, observation or testing. Trustor agrees
      that neither Beneficiary nor any Secured Debt Representative makes any
      warranty or representation to Trustor or any other obligor regarding the
      truth, accuracy or completeness of any such report or findings that may be
      so disclosed. Trustor also acknowledges that, depending upon the results
      of any site visit, observation or testing disclosed to Trustor, Trustor
      may have a legal obligation to notify one or more Governmental Authorities
      of such results, that such reporting requirements are site-specific, and
      are to be evaluated by Trustor without advice or assistance from
      Beneficiary or any Secured Debt Representative.

      3.10 Taxes. Subject to Trustor's right to contest the same, Trustor will
promptly pay all taxes, assessments and governmental charges legally imposed
upon this instrument or upon the Encumbered Property, or upon the interest of
Beneficiary therein, or upon the income and profits thereof.

      3.11 No Governmental Approvals. Trustor represents and warrants that (a)
no approval or consent of any regulatory or administrative commission or
authority, or of any other governmental body, is necessary to authorize the
execution and delivery of this Deed of Trust, or to authorize the observance or
performance by Trustor of the covenants herein, or that such approvals as are
required have been obtained or will be obtained promptly and (b) Trustor has
obtained all Permits which are necessary for the operation of the Encumbered
Property.

      3.12 Environmental Laws. Trustor represents and warrants, to the best of
its knowledge after due inquiry that, except as permitted by the Secured Debt
Documents, the Encumbered Property is in material compliance with all applicable
Environmental Laws; there are no conditions existing currently which would be
likely to subject Trustor to damages, penalties, injunctive relief or cleanup
costs under any Environmental Laws or assertions thereof, or which require or
are likely to require cleanup, removal, remedial action or other response
pursuant to Environmental Laws by Trustor; Trustor is not a

                                       21
<PAGE>

party to any litigation or administrative proceedings, nor so far as is known by
Trustor is any litigation or administrative proceeding threatened against it,
which asserts or alleges that Trustor has violated or is violating Environmental
Laws or that Trustor is required to clean up, remove or take remedial or other
responsive action due to the disposal, depositing, discharge, leaking or other
release of any hazardous substances or materials; neither the Encumbered
Property nor Trustor is subject to any judgment, decree, order or citation
related to or arising out of Environmental Laws and neither has been named or
listed as a potentially responsible party by any governmental body or agency in
a matter arising under any Environmental Laws. Trustor has also obtained all
permits, licenses or approvals required under applicable Environmental Laws
which are necessary for its current exploration, use, and development activities
at the Encumbered Property; and to Trustor's knowledge after reasonable
investigation all use, generation, manufacturing, release, discharge, storage,
deposit, treatment, recycling or disposal of any materials on, under or at the
Encumbered Property or transported to or from the Encumbered Property (or tanks
or other facilities thereon containing such materials) are being and will be
conducted in accordance, in all material respects, with applicable Environmental
Laws including without limitation those requiring cleanup, removal or any other
remedial action.

      3.13 Corporate Status. Trustor will continue to be duly qualified to
transact business in California and each state where the conduct of its business
requires it to be qualified, and will not, unless permitted pursuant to the
Secured Debt Documents, consolidate or merge with any other partnership,
company, corporation or other Person.

      3.14 Taxpayer I.D. Number. The taxpayer identification number of Trustor
is 77-0212977. The taxpayer identification number of Beneficiary is 13-5160382.

                                  ARTICLE IV.

                            ASSIGNMENT OF PRODUCTION

      4.1 Assignment.

            (a) Trustor hereby absolutely and irrevocably (a) transfers,
      assigns, warrants and conveys, to Beneficiary, effective as of July 1,
      2003, at 7:00 A.M., local time, all Hydrocarbons which are thereafter
      produced from and which accrue to the Encumbered Property, and all
      proceeds therefrom, and (b) gives to and confers upon Beneficiary the
      right, power and authority to collect such Hydrocarbons and proceeds.
      Subject to the terms of Section 4.1 (b), all parties producing, purchasing
      or receiving any such Hydrocarbons, or having such, or proceeds therefrom,
      in their possession for which they or others are accountable to
      Beneficiary by virtue of the provisions of this Article IV, are authorized
      and directed to treat and regard Beneficiary as the assignee and
      transferee of Trustor and entitled in Trustor's place and stead to receive
      such Hydrocarbons and all proceeds therefrom; and said parties and each of
      them shall be fully protected in so treating and regarding Beneficiary and
      shall be under no obligation to see to the application by Beneficiary of
      any such proceeds or payments received by it;

                                       22
<PAGE>

      provided, however, that, until Beneficiary or any Secured Debt
      Representative shall have instructed such parties that an Event of Default
      has occurred and to deliver such Hydrocarbons and all proceeds therefrom
      directly to Beneficiary, such parties shall be entitled to deliver such
      Hydrocarbons and all proceeds therefrom directly to Trustor. So long as no
      Event of Default has occurred, Trustor shall be entitled to receive
      directly from such parties, and keep and retain, all such proceeds from
      the sale of such Hydrocarbons.

            (b) Upon the occurrence of an Event of Default (provided that the
      Secured Debt Representative shall not give such instructions and notice
      under this Article IV unless such Event of Default shall then be
      continuing) any Secured Debt Representative may at any time (and from time
      to time) thereafter give notice thereof to any party producing, purchasing
      or receiving any such Hydrocarbons, or having such, or proceeds therefrom,
      in their possession for which they or others are accountable to
      Beneficiary, that said Hydrocarbons and products are to be delivered into
      pipelines connected with the oil and gas leases, or to the purchaser
      thereof, free and clear of all Taxes, and the proceeds from the sale of
      such Hydrocarbons paid directly to Beneficiary in accordance with Section
      4.5 of this Deed of Trust. Said parties producing, purchasing or receiving
      any such Hydrocarbons, or having such, or proceeds therefrom, in their
      possession for which they or others are accountable to Beneficiary by
      virtue of the provisions of this Article IV, shall be fully protected in
      relying on any such Secured Debt Representative's determination and notice
      of the occurrence of an Event of Default. Trustor agrees to perform all
      such acts, and to execute all such further assignments, transfers and
      division orders, and other instruments as may be required pursuant to the
      Collateral Trust Agreement or any of the Secured Debt Documents in order
      to have said revenues and proceeds so paid to Beneficiary, as and when
      provided in this Article IV. With respect to any funds received by
      Beneficiary, Beneficiary is fully authorized to (but shall not be
      obligated to) receive and give receipt for any such revenues and proceeds
      that are received by Beneficiary; to endorse and cash any and all checks
      and drafts payable to the order of Trustor or Beneficiary for the account
      of Trustor received from or in connection with said revenues or proceeds
      and apply the proceeds thereof in accordance with Section 4.2 hereof, and
      to execute transfer and division orders in the name of Trustor, or
      otherwise, with warranties binding Trustor. The assignment of the
      Hydrocarbons and proceeds in this Section 4.1 is intended to be an
      absolute assignment from Trustor to Beneficiary and not merely the passing
      of a security interest. Such Hydrocarbons and proceeds are hereby assigned
      absolutely by Trustor to Beneficiary.

      4.2 Application of Proceeds. All payments received by Beneficiary pursuant
to Section 4.1 hereof shall be placed in a cash collateral account to be applied
in accordance with the provisions of the Collateral Trust Agreement.

      4.3 No Liability of Beneficiary in Collecting. Beneficiary is hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned (and no such failure shall be deemed to be a waiver of any right of
Beneficiary under this Article

                                       23
<PAGE>

IV) and from all other responsibility in connection therewith, except the
responsibility to account to Trustor for funds actually received.

      4.4 Assignment Not a Restriction on Beneficiary's Rights. Nothing herein
contained shall detract from or limit the absolute obligation of Trustor to make
payment of the Indebtedness regardless of whether the proceeds assigned by this
Article IV are sufficient to pay the same, and the rights under this Article IV
shall be in addition to all other security now or hereafter existing to secure
the payment of the Indebtedness.

      4.5 Status of Assignment. Notwithstanding the other provisions of this
Article IV and in addition to the other rights hereunder, Beneficiary or any
receiver appointed in judicial proceedings for the enforcement of this Deed of
Trust shall have the right to receive all of the Hydrocarbons herein assigned
and the proceeds therefrom after the occurrence and during the continuance of
any Event of Default and to apply all of said proceeds as provided in Section
4.2 hereof. Upon any sale of the Encumbered Property or any part thereof
pursuant to Article V, the rents, issues, profits and Hydrocarbons thereafter
produced from the property so sold, and the proceeds therefrom, shall be
included in such sale and shall pass to the purchaser free and clear of the
assignment contained in this Article IV.

      4.6 Indemnification Obligation. The following provisions shall apply to,
and be deemed in each case to modify, each of the provisions of this Deed of
Trust (except those set forth in Section 3.10 hereof) and the other Secured Debt
Documents (except to the extent otherwise expressly provided therein) wherein
Trustor is obligated to indemnify each of the Indemnified Persons:

            (a) Trustor agrees to indemnify Beneficiary, the Secured
      Debtholders, Trustee and their respective employees, affiliates, agents
      and attorneys, under the Deed of Trust and any successors or substitute
      trustee under the Deed of Trust, against all legal and administrative
      proceedings for which a claim for indemnification may be made by the
      Indemnified Person (herein, collectively, called "Indemnification Claims")
      made against or incurred by them or any of them as a consequence of the
      assertion, either before or after the payment in full of the Indebtedness,
      that they or any of them received Hydrocarbons herein assigned or the
      proceeds thereof claimed by third persons and Beneficiary, Secured
      Debtholders, and Trustee shall have the right to defend against any such
      Indemnification Claims, employing attorneys therefor, and unless furnished
      with reasonable indemnity, they or any of them shall have the right to pay
      or compromise and adjust all such Indemnification Claims. Trustor will
      indemnify and pay to Beneficiary, Secured Debtholders and Trustee any and
      all such amounts as may be paid in respect thereof or as may be
      successfully adjudged against such persons. The obligations of Trustor as
      hereinabove set forth in this Section 4.6 shall survive the release
      termination, foreclosure or assignment of this Deed of Trust or any sale
      hereunder.

            (b) Trustor shall pay when due any judgments with respect to an
      Indemnification Claim against any of the Indemnified Persons and which are

                                       24
<PAGE>

      rendered by a final order or decree of a court of competent jurisdiction
      from which no further appeal may be taken or has been taken within the
      applicable appeal period. In the event that such payment is not made, any
      of the Indemnified Persons at its sole discretion may pay any such
      judgments, in whole or in part, and look to Trustor for reimbursement
      pursuant to this Deed of Trust, or may proceed to file suit against
      Trustor to compel such payment.

            (c) Any amount which Trustor is obligated to pay to or for the
      benefit of an Indemnified Person with respect to an Indemnification Claim,
      but which is not paid when due, shall bear interest at the applicable rate
      set forth under the Secured Debt Documents from the date such amount is
      due until such amount is paid.

                                   ARTICLE V.

                           ENFORCEMENT OF THE SECURITY

      5.1 REMEDIES. Upon the occurrence of an Event of Default, the Beneficiary
may:

            (a) Commence an action to foreclose this instrument as a mortgage,
      appoint a receiver, or specifically enforce any of the covenants hereof.

            (b) Exercise any or all of the remedies available to a secured party
      under the Uniform Commercial Code of the State of California, including,
      but not limited to:

                  (i) Either personally or by means of a court appointed
            receiver, take possession of all or any of the personal property
            constituting a part of the Encumbered Property and exclude therefrom
            the Trustor and all others claiming under the Trustor, and
            thereafter hold, store, use, operate, manage, maintain and control,
            make repairs, replacements, alterations, additions and improvements
            to and exercise all rights and powers of the Trustor in respect of
            such personal property or any part thereof. In the event the Secured
            Debt Representative demands or attempts to take possession of such
            personal property in the exercise of any rights under the Secured
            Debt Documents or any document executed in connection therewith, the
            Trustor promises and agrees promptly to turn over and deliver
            complete possession thereof to the Secured Debt Representative;

                  (ii) Without notice to or demand upon the Trustor, make such
            payments and do such acts as the Secured Debt Representative may
            deem necessary to protect its security interest in such personal
            property, including without limitation, paying, purchasing,
            contesting or compromising any encumbrance, charge or lien which is
            prior to or superior to the security interest granted hereunder, and
            in exercising any

                                       25
<PAGE>

            such powers or authority to pay all expenses incurred in connection
            therewith;

                  (iii) Require the Trustor to assemble such personal property
            or any portion thereof, at a place designated by the Secured Debt
            Representative and reasonably convenient to both parties, and
            promptly to deliver such personal property to the Secured Debt
            Representative, or an agent or representative designated by it. The
            Secured Debt Representative, and its agents and representatives
            shall have the right to enter upon any or all of the Trustor's
            premises and property to exercise the Secured Debt Representative's
            rights hereunder;

                  (iv) Elect to treat the fixtures constituting a part of the
            Encumbered Property as either real property collateral or personal
            property collateral and then proceed to exercise such rights as
            apply to such type of collateral; and

                  (v) Sell, lease or otherwise dispose of such personal property
            at public sale, with or without having such personal property at the
            place of sale, and upon such terms and in such manner as the Secured
            Debt Representative may determine, and the Secured Debt
            Representative may be a purchaser at any such sale.

      Unless such personal property is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Secured Debt Representative shall give the Trustor at least ten (10) days prior
written notice of the time and place of any public sale of such personal
property or other intended disposition thereof. Such notice may be mailed to the
Trustor at the address set forth on the signature page(s) of this instrument.

            (c) Deliver to the Trustee a written declaration of default and
      demand for sale, and a written notice of default and election to cause the
      Trustor's interest in the Encumbered Property to be sold, which notice the
      Trustee or the Secured Debt Representative shall cause to be duly filed
      for record in the Official Records of the county or counties in which the
      Encumbered Property is located.

            (d) Any other remedy permitted to be exercised by the beneficiary of
      a deed of trust or a secured party or both under the laws of the State of
      California.

      5.2 Foreclosure By Power of Sale. Should Beneficiary elect to foreclose by
exercise of the power of sale herein contained, Beneficiary shall notify Trustee
and shall deposit with Trustee this instrument and such receipts and evidence of
expenditures made and secured hereby as Trustee may require.

            (a) Upon receipt of such notice from Beneficiary, Trustee shall
      cause to be recorded, published and delivered to Trustor such Notice of
      Default and Election to Sell as then required by law and by this
      instrument. Trustee shall, without demand on Trustor, after lapse of such
      time as may then be required by

                                       26
<PAGE>

      law and after recordation of such Notice of Default and after Notice of
      Sale having been given as required by law, sell the Encumbered Property at
      the time and place of sale fixed by it in said Notice of Sale, either as a
      whole, or in separate lots or parcels or items as Trustee shall deem
      expedient, and in such order as it may determine, at public auction to the
      highest bidder for cash in lawful money of the United States payable at
      the time of sale. Trustee shall deliver to such purchaser or purchasers
      thereof its good and sufficient deed or deeds conveying the property so
      sold, but without any covenant or warranty, express or implied. The
      recitals in such deed of any matters or facts shall be conclusive proof of
      the truthfulness thereof. Any person, including, without limitation,
      Trustor, Trustee or Beneficiary, may purchase at such sale and Trustor
      hereby covenants to warrant and defend the title of such purchaser or
      purchasers.

            (b) After deducting all costs, fees and expenses of Trustee and of
      this Trust, including costs of evidence of title in connection with sale,
      Trustee shall apply the proceeds of sale to payment of: all sums expended
      under the terms hereof, not then repaid, with accrued interest at the
      highest rate of interest from time-to-time accruing under and as provided
      in the Secured Debt Documents; all other sums then secured hereby and the
      remainder, if any, to the person or persons legally entitled thereto.

            (c) Trustee may postpone sale of all or any portion of the
      Encumbered Property by public announcement at such time and place of sale,
      and from time to time thereafter may postpone such sale by public
      announcement at the time fixed by the preceding postponement or
      subsequently noticed sale, and without further notice make such sale at
      the time fixed by the last postponement, or may, in its discretion, give a
      new notice of sale.

      5.3 Appointment of Receiver. If an Event of Default shall have occurred
and be continuing, Beneficiary, as a matter of right and without notice to
Trustor or anyone claiming under Trustor, and without regard to the then value
of the Encumbered Property or the interest of Trustor therein, shall have the
right to (but shall not be obligated to) apply to any court having jurisdiction
to appoint a receiver or receivers of the Encumbered Property, and Trustor
hereby irrevocably consents to such appointment and waives notice of any
application therefor. Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases and all the powers and
duties of Beneficiary in case of entry as provided in Section 5.4 of this
instrument and shall continue as such and exercise all such powers until the
date of confirmation of sale of the Encumbered Property unless such receivership
is sooner terminated.

      5.4 Operation of the Encumbered Property by Beneficiary. If an Event of
Default shall have occurred and be continuing, and in addition to all other
rights herein conferred on Beneficiary, Beneficiary (or any person, firm or
corporation designated by Beneficiary) shall have the right and power, but shall
not be obligated, to enter upon and take possession of any of the Encumbered
Property, and to exclude Trustor, and

                                       27
<PAGE>

Trustor's agents or servants, wholly therefrom, and to hold, use, administer,
manage and operate the same to the extent that Trustor shall be at the time
entitled and in its place and stead. Beneficiary, or any person, firm or
corporation designated by Beneficiary, may operate the same without any
liability to Trustor in connection with such operations, except to use ordinary
care in the operation of such properties, and Beneficiary or any person, firm or
corporation designated by Beneficiary, shall have the right to (but shall not be
obligated to) collect, receive and receipt for all rents, issues, profits and
Hydrocarbons from said properties, to make repairs, purchase machinery and
equipment, conduct work-over operations, drill additional wells and to exercise
every power, right and privilege of Trustor with respect to the Encumbered
Property. When and if the expenses of such operation and development (including
costs of unsuccessful work-over operations or additional wells) have been paid
and the Indebtedness paid, said properties shall, if there has been no sale or
foreclosure, be returned to Trustor.

      5.5 Trustor's Waiver of Rights. Trustor waives the benefit of all laws now
existing or that hereafter may be enacted providing for (i) any appraisement
before sale of any portion of the Encumbered Property, and (ii) the benefit of
all laws that may be hereafter enacted in any way extending the time for the
enforcement of the collection of the Secured Debt or creating or extending a
period of redemption from any sale made in collecting said debt. To the full
extent Trustor may do so, Trustor agrees that Trustor will not at any time
insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension or
redemption, and Trustor, for Trustor, Trustor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Encumbered Property, to the extent permitted by
law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of election to mature or declare due the
whole of the secured indebtedness and marshalling in the event of foreclosure of
the liens hereby created. If any law referred to in this Section and now in
force, of which Trustor, Trustor's heirs, devisees, representatives, successors
and assigns or other person might take advantage despite this Section, shall
hereafter be repealed or cease to be in force, such law shall not thereafter be
deemed to preclude the application of this Section. Trustor expressly waives and
relinquishes any and all rights and remedies which Trustor may have or be able
to assert by reason of the laws of the State of California pertaining to the
rights and remedies of sureties.

      5.6 Remedies Not Exclusive. Trustee and Beneficiary, and each of them,
shall be entitled to enforce payment and performance of any Indebtedness or
obligations secured hereby and to exercise all rights and powers under this Deed
of Trust or under the Collateral Trust Agreement or any other Secured Debt
Document or any laws now or hereafter in force, notwithstanding some or all of
the Indebtedness and obligations secured hereby may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment
or otherwise. Neither the acceptance of this instrument nor its enforcement
whether by court action or pursuant to the power of sale or other powers herein
contained, shall prejudice or in any manner affect Trustee's or Beneficiary's
right to realize upon or enforce any other security now or

                                       28
<PAGE>

hereafter held by Trustee or Beneficiary, it being agreed that Trustee and
Beneficiary, and each of them, shall be entitled to enforce this instrument and
any other security now or hereafter held by Beneficiary or Trustee in such order
and manner as they or either of them may in their absolute discretion determine.
No remedy herein conferred upon or reserved to Trustee or Beneficiary is
intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute. Every power or remedy given by the Collateral Trust Agreement or any
other Secured Debt Document to Trustee or Beneficiary or to which either of them
may be otherwise entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Trustee or Beneficiary
and either of them may pursue inconsistent remedies.

                                  ARTICLE VI.

                            MISCELLANEOUS PROVISIONS

      6.1 Pooling and Unitization. Trustor shall have the right, and is hereby
authorized, to pool or unitize all or any part of the lands described in Exhibit
A, insofar as relates to the Encumbered Property, with adjacent lands,
leaseholds and other interests, when, in the reasonable judgment of Trustor, it
is necessary or advisable to do so in order to form a drilling and/or production
unit to facilitate the orderly development of that part of the Encumbered
Property affected thereby, or to comply with the requirements of any Applicable
Law or governmental order or regulation relating to the spacing of wells or
proration of the production therefrom; provided, however, that any unit so
formed for the production of oil shall not substantially exceed 160 acres, and
any unit so formed for the production of gas shall not substantially exceed 640
acres, unless a larger area is required to conform to an Applicable Law or
governmental order or regulation relating to the spacing of wells or to obtain
the maximum allowable production under any Applicable Law or governmental order
or regulation relating to the proration of production therefrom; and further
provided that the Hydrocarbons produced from any unit so formed shall be
allocated among the separately owned tracts or interests comprising the unit in
a uniform manner consistently applied; and further provided that all interests
owned by Trustor in such unit shall be included within the Encumbered Property.
Any unit so formed may relate to one or more zones or horizons, and a unit
formed for a particular zone or horizon need not conform in area to any other
unit relating to a different zone or horizon, and a unit formed for the
production of oil need not conform in area with any unit formed for the
production of gas. Promptly after formation of any such unit, Trustor shall
furnish to Beneficiary and each Secured Debt Representative a true copy of the
pooling agreement, declaration of pooling or other instrument creating such
unit. The interest in any such unit attributable to the Encumbered Property (or
any part thereof) included therein shall become a part of the Encumbered
Property and shall be subject to the lien hereof in the same manner and with the
same effect as though such unit and the interest of Trustor therein were
specifically described in Exhibit A. Trustor is further authorized to amend,
modify or terminate any pooling or unitization agreement or order to which
Trustor is a party or the Encumbered Property is subject, provided that such
action does not conflict with the

                                       29
<PAGE>

provisions of this Deed of Trust, including this Section 6.1. Trustor may enter
into, or amend, modify or terminate, pooling or unitization agreements not
hereinabove authorized only as permitted under the Secured Debt Documents.

      6.2 No Liability. None of Beneficiary, Trustee, any Secured Debt
Representative or any of their agents shall be liable for any error of judgment
or act done in good faith, or be otherwise responsible or accountable under any
circumstances whatsoever, except for their gross negligence or willful
misconduct. None of Beneficiary, Trustee, any Secured Debt Representative or any
of their agents shall be personally liable in case of entry by them, or anyone
entering by virtue of the powers herein granted them, upon the Encumbered
Property for debts contracted or liability or damages incurred in the management
or operation of the Encumbered Property. Such persons shall have the right to
rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by them hereunder, believed by them in good
faith to be genuine. Beneficiary, Trustee, any Secured Debt Representative or
any of their agents shall be entitled to reimbursement for expenses incurred by
them in the performance of their duties hereunder and to reasonable compensation
for such of their services hereunder as shall be rendered. Trustor will, from
time to time, pay the compensation due hereunder and reimburse such parties for,
and save them harmless against, any and all liability and expenses which may be
incurred by them in the performance of their duties.

      6.3 Successor Trustee. Any Trustee may resign in writing addressed to
Beneficiary or may be removed at any time with or without cause by an instrument
in writing duly executed by Beneficiary. In case of the death, resignation or
removal of a Trustee, one or more successor Trustee may be appointed by
Beneficiary by instrument of substitution complying with any applicable
requirements of Applicable Law, and in the absence of any such requirement
without formality other than appointment and designation in writing. Such
appointment and designation shall be full evidence of the right and authority to
make the same and of all facts therein recited, and upon the making of any such
appointment and designation this conveyance shall vest in the named successor
Trustee or Trustee, all the estate and title of the prior Trustee in all of the
Encumbered Property, and he or they shall thereupon succeed to all the rights,
powers, privileges, immunities and duties hereby conferred upon the prior
Trustee. All references herein to Trustee shall be deemed to refer to Trustee
from time to time acting hereunder.

      6.4 Actions or Advances by Beneficiary or Trustee. Each and every covenant
herein contained shall be performed and kept by Trustor solely at Trustor's
expense. If Trustor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this Deed of Trust, Beneficiary, or
Trustee or any receiver appointed hereunder or under Applicable Law, may, but
shall not be obligated to, take action and/or make advances to perform the same
in Trustor's behalf; provided, however, that concurrently with the taking of
such action or making such advances, Beneficiary, Trustee or any Secured Debt
Representative shall deliver notice to Trustor. Trustor hereby agrees to repay
the expense of such action and such advances upon demand plus interest at the
Default Interest Rate. No such advance or action by Beneficiary,

                                       30
<PAGE>

Trustee or any receiver appointed hereunder shall be deemed to relieve Trustor
from any default hereunder.

      6.5 No Waiver. Any failure by Trustee or Beneficiary to insist, or any
election by Trustee or Beneficiary not to insist, upon strict performance by
Trustor of any of the terms, provisions or conditions of the Collateral Trust
Agreement or any Secured Debt Documents shall not be deemed to be a waiver of
same or of any other term, provision or condition thereof, and Trustee and
Beneficiary shall have the right at any time or times thereafter to insist upon
strict performance by Trustor of any and all of such terms, provisions and
conditions.

      6.6 Defense of Claims. Trustor will notify Beneficiary and each Secured
Debt Representative, in writing, promptly of the commencement of any legal
proceedings affecting the lien or security interest hereof or the Encumbered
Property, or any part thereof, and will take such action, employing attorneys as
set forth in Section 3.4(j), as may be necessary or appropriate to preserve
Trustor's, the Trustee's or Beneficiary's rights affected thereby and/or to hold
harmless the Trustee and Beneficiary in respect of such proceedings; and should
Trustor fail or refuse to take any such action, Beneficiary may, upon giving
prior written notice thereof to Trustor, take such action in behalf and in the
name of Trustor and at Trustor's expense. Moreover, Beneficiary may take such
independent action in connection therewith as it may in its discretion deem
proper, Trustor hereby agreeing that all sums advanced or all expenses incurred
in such actions plus interest thereon at the Default Interest Rate, will, on
demand, be reimbursed, as appropriate, to Beneficiary or any receiver appointed
hereunder or under Applicable Law. The obligations of Trustor as hereinabove set
forth in this Section 6.6 shall survive the release, termination, foreclosure or
assignment of this Deed of Trust or any sale hereunder.

      6.7 Trustee's Powers. At any time, or from time to time, without liability
therefor and without notice, upon written request of Beneficiary and
presentation of this instrument and the Secured Debt secured hereby for
endorsement, and without affecting Trustor's personal liability or the effect of
this instrument upon the remainder of the Encumbered Property, Trustee may (a)
reconvey any part of the Encumbered Property, (b) consent in writing to the
making of any map or plat thereof, (c) join in granting any easement thereon, or
(d) join in any extension agreement or any agreement subordinating the lien or
security interest hereof.

      6.8 Beneficiary's Powers. Without affecting the liability of any other
person liable for the payment of the Indebtedness herein mentioned, and without
affecting perfection or priority of the lien or security interest of this
instrument against or in any portion of the Encumbered Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Beneficiary may, from time to time and without notice (a) release any person so
liable, (b) extend the maturity or alter any of the terms of any such
obligation, (c) grant other indulgences, (d) release or reconvey, or cause to be
released or reconveyed at any time at Beneficiary's option, any parcel, portion
or all of the Encumbered Property, (e) take or release any other or additional
security for any

                                       31
<PAGE>

obligation herein mentioned, or (f) make compositions or other arrangements with
debtors in relation thereto.

      6.9 Reconveyance by Trustee. Upon written request of Beneficiary stating
that all sums secured hereby have been paid, and upon surrender of this
instrument and the Secured Debt to Trustee for cancellation and retention and
upon payment by Trustor of Trustee's fees, Trustee shall reconvey to Trustor, or
the person or persons legally entitled thereto, without representation or
warranty, any portion of the Encumbered Property then held hereunder. The
recitals in such reconveyance of any matters or facts shall be conclusive proof
of the truthfulness thereof. The grantee in any reconveyance may be described as
"the person or persons legally entitled thereto".

      6.10 Effect of Partial Release or Reconveyance. If there is a partial
release or reconveyance by Trustee of any portion of the Encumbered Property,
Trustee and Beneficiary may look to the remainder of the Encumbered Property as
security for the full payment of the Secured Debt and all other Indebtedness
secured by this instrument.

      6.11 Subrogation. To the extent that proceeds of the Indebtedness are owed
to pay any outstanding lien, charge or prior encumbrance against the Encumbered
Property, such proceeds may be advanced by Beneficiary at Trustor's request and
Beneficiary may be subrogated to any and all rights and liens owed by any owner
or holder of such outstanding liens, charges and prior encumbrances,
irrespective of whether said liens, charges or encumbrances are released.

      6.12 No Merger. If both the lessor's and lessee's estates under any lease
or any portion thereof which constitutes a part of the Encumbered Property shall
at any time become vested in one owner, this instrument and the lien and
security interest created hereby shall not be destroyed or terminated by
application of the doctrine of merger and, in such event, Beneficiary shall
continue to have and enjoy all of the rights and privileges of Beneficiary as to
the separate estates. In addition, upon the foreclosure of the lien and security
interest created by this instrument on the Encumbered Property pursuant to the
provisions hereof, any leases or subleases then existing and created by Trustor
shall not be destroyed or terminated by application of the law of merger or as a
matter of law or as a result of such foreclosure unless Beneficiary or any
purchaser at any such foreclosure sale shall so elect. No act by or on behalf of
Beneficiary or any such purchaser shall constitute a termination of any lease or
sublease unless Beneficiary or such purchaser shall give written notice thereof
to such tenant or subtenant.

      6.13 The Encumbered Property to Revert; Release. If the Indebtedness shall
be fully paid and the covenants herein contained shall be well and truly
performed, then all of the Encumbered Property shall revert to Trustor and the
entire estate, right, title and interest of Trustee and Beneficiary shall
thereupon cease; and Trustee and Beneficiary in such case shall, upon the
request of Trustor and at Trustor's cost and expense, deliver to Trustor proper
instruments acknowledging satisfaction of this Deed of Trust and the release or
reconveyance of the lien hereof in accordance with Applicable Law.
Notwithstanding any provision herein to the contrary, the Encumbered

                                       32
<PAGE>

Property, or any part thereof, shall, upon the written request of Trustor, be
released from the lien of this Deed of Trust in accordance with the provisions
of the Collateral Trust Agreement, when such a release is permitted by the
Collateral Trust Agreement and the other Secured Debt Documents.

      6.14 Renewals, Amendments and Other Security. Renewals and extensions of
the Indebtedness and modifications of any kind of the Obligations may be given
at any time and amendments may be made to agreements with third parties relating
to any part of such Indebtedness or the Encumbered Property and Trustee and
Beneficiary may take or may now hold other security from others for the
Indebtedness, all without notice to or consent of Trustor. Beneficiary may
resort first to such other security or any part thereof or first to the security
herein given or any part thereof, or from time to time to either or both, even
to the partial or complete abandonment of either security, and such action shall
not be a waiver of any rights conferred by this Deed of Trust, which shall
continue as a first lien upon and prior perfected security interest in the
Encumbered Property not expressly released until the Secured Debt and all other
Indebtedness secured hereby are fully paid.

      6.15 Deed of Trust, Assignment, etc. This Deed of Trust shall be deemed to
be and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement, real estate mortgage, or security
agreement, and from time to time as any one or more thereof.

      6.16 Limitation on Interest. It is the intent of Trustor and Secured
Debtholders in the execution of this instrument and the Secured Debt Documents
to contract in strict compliance with the usury laws of the State of California
and any other jurisdiction whose laws may govern the Secured Debt. In
furtherance thereof, it is agreed that none of the terms and provisions
contained in the Collateral Trust Agreement or any other Secured Debt Document
shall ever be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate in excess of the
Maximum Lawful Rate. Trustor or any guarantor, endorser or other party now or
hereafter becoming liable for the payment of the Secured Debt shall never be
liable for unearned interest on the Secured Debt and shall never be required to
pay interest on the Secured Debt at a rate in excess of the Maximum Lawful Rate,
and the provisions of this Section shall control over all other provisions of
the Secured Debt and any other instrument executed in connection herewith which
may be in apparent conflict herewith. In the event any Secured Debtholder shall
collect monies which are deemed to constitute interest which would otherwise
increase the effective interest rate on the Secured Debt to a rate in excess of
Maximum Lawful Rate, all such sums deemed to constitute interest in excess of
the legal rate shall be immediately returned to Trustor upon such determination.

      6.17 Unenforceable Provisions. If any provision hereof or of the Secured
Debt Documents is invalid or unenforceable in the State of California or
otherwise, the other provisions hereof or of the Secured Debt Documents shall
remain in full force and effect, and the remaining provisions hereof shall be
liberally construed in favor of Trustee and Beneficiary in order to effectuate
the provisions hereof.

                                       33
<PAGE>

      6.18 Waiver by Trustee and Beneficiary. Any and all covenants in this Deed
of Trust may from time to time by instrument in writing signed by Trustee and
Beneficiary be waived to such extent and in such manner as Trustee and
Beneficiary may desire, but no such waiver shall ever affect or impair either
Trustee's or Beneficiary's rights or liens or security interests hereunder,
except to the extent specifically stated in such written instrument.

      6.19 Successors and Assigns. This Deed of Trust is binding upon Trustor,
Trustor's successors and assigns, and shall inure to the benefit of Beneficiary,
its successors and assigns, and the provisions hereof shall likewise be
covenants running with the land.

      6.20 Article and Section Headings. The article and section headings in
this Deed of Trust are inserted for convenience of reference and shall not be
considered a part of this Deed of Trust or used in its interpretation.

      6.21 Execution in Counterparts. This Deed of Trust may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an
original and all of which are identical, except that, to facilitate recordation
or filing, in any particular counterpart portions of Exhibit A hereto which
describe properties situated in counties other than the county in which such
counterpart is to be recorded or filed may have been omitted.

      6.22 Special Filing as Financing Statement. This Deed of Trust shall
likewise be a security agreement and a financing statement. This Deed of Trust
shall be filed for record, among other places, in the real estate records of
each county in which any part of the real property covered by the oil and gas
leases described in Exhibit A hereto is situated, and, when filed in such
counties shall be effective as a financing statement covering fixtures located
on oil and gas properties, which oil and gas properties (and accounts arising
therefrom) are to be financed at the wellheads of the wells located on the real
property described in Exhibit A, hereto. A portion of the goods encumbered
hereby are, or are to become, fixtures as that term is defined in Section 9313
of the Uniform Commercial Code of the State of California. A carbon,
photographic or other reproduction of this Deed of Trust or of any financing
statement covering the Encumbered Property or any portion thereof shall be
sufficient as a financing statement and may be filed as such. Trustor agrees
that any Secured Debt Representative may, in such manner, on such terms and at
such times as may be elected by such Secured Debt Representative, and without
demand or notice to, or the consent or signature of, Trustor, file and/or record
such UCC financing statements, fixture filings, and/or amendments to or
continuations of any financing statements or fixture filings to evidence,
perfect and/or continue the perfection of, any security interests created or to
be created pursuant to this Deed of Trust or any of the other Secured Debt
Documents.

      6.23 Notices. Except as otherwise required by Section 5.1 hereof, any
notice, request or demand which may be required or permitted to be given or
served upon Trustor shall be sufficiently given when given or made pursuant to
(a) the terms of the

                                       34
<PAGE>

Collateral Trust Agreement, or (b) such other means and manner of giving of
notice as may be required by Applicable Law.

      6.24 Request for Notice. Trustor hereby requests a copy of any notice of
default and that any notice of sale hereunder be mailed to it at the address set
forth on the signature page(s) of this instrument.

      6.25 Acceptance by the Trustee. The Trustee accepts this trust when this
instrument, duly executed and acknowledged, is made a public record as provided
by law.

      6.26 Release and Waiver. Trustor hereby waives and releases any and all
rights of contribution, reimbursement or indemnity it has or may hereafter have
against Trustee and/or Beneficiary arising from or relating to this instrument
and/or the Encumbered Property, including without limitation claims or
liabilities relating to Environmental Laws. Notwithstanding anything to the
contrary set forth in this instrument or any other Secured Debt Document, the
obligations and liabilities of Trustor under and pursuant to the Hazardous
Materials Undertaking and Unsecured Indemnity are not secured by this
instrument.

      6.27 No Partnership. Nothing contained in this instrument is intended to,
or shall be construed as, creating to any extent and in any manner whatsoever,
any partnership, mining partnership, joint venture, or association among
Trustor, Trustee and Beneficiary, or in any way as to make Beneficiary or
Trustee co-principals with Trustor with reference to the Encumbered Property,
and any inferences to the contrary are hereby expressly negated.

      6.28 Beneficiary as Agent for the Secured Debtholders. As described above,
certain Affiliates of Credit Agreement Agent and the Secured Debtholders are or
may become parties to certain Hedging Agreements with Trustor and/or Affiliates
of Trustor. This Deed of Trust secures the obligations of Trustor and such
Affiliates, as the case may be, under such Hedging Agreements, and the parties
acknowledge for all purposes that Beneficiary acts for itself and as agent on
behalf of such Affiliates of Credit Agreement Agent and the Secured Debtholders
which are so entitled to share in the rights and benefits accruing to
Beneficiary under this Deed of Trust in respect of the Encumbered Property.

                                       35
<PAGE>

      IN WITNESS WHEREOF, Trustor has executed or caused to be executed this
Amended and Restated Deed of Trust with Power of Sale, Assignment of Production,
Security Agreement, Financing Statement and Fixture Filing in the presence of
the undersigned Notary Public on this 14th day of July, 2003.

                                        TRUSTOR AND DEBTOR

                                        CALPINE CORPORATION, a Delaware
                                        corporation

                                        By: ____________________________________
                                        Title: Executive Vice President
                                        Printed Name: B.A. Berilgen

<PAGE>

                                   CALIFORNIA
                                 ACKNOWLEDGMENT

STATE OF TEXAS      )

COUNTY OF HARRIS    )

On July 14, 2003, before me, Suzanne B. Snow, a Notary Public in and for said
County and State, personally appeared B.A. Berilgen, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.

WITNESS my hand and office seal.

(SEAL)

      Signature: ______________________________
                 Suzanne B. Snow, Notary Public

                                      I-1
<PAGE>

                                   Schedule I

                                Existing Mortgage

Deed of Trust with Power of Sale, Assignment of Production, Security Agreement,
Financing Statement and Fixture Filing (California) from Calpine Corporation, a
Delaware corporation, Trustor to Chicago Title Insurance Company, Trustee and
The Bank of Nova Scotia, for itself and as Agent, Beneficiary, filed as follows:

<TABLE>
<CAPTION>
  JURISDICTION                       FILE NO.                FILE DATE
  ------------                       --------                ---------
<S>                            <C>                           <C>
Colusa County, CA                    02-2145                 5/17/2002
Contra Costa County, CA          2002-0170008-00             5/13/2002
Fresno County, CA                 2002-0085593               5/23/2002
Kern County, CA                    0202084536                5/24/2002
Kings County, CA                     0210874                 5/20/2002
Sacramento County, CA          Book 20020507, Page           5/7/2002
                                      0611
Solano County, CA                 2002-00058871              5/9/2002
Sutter County, CA                 2002-0009817               5/17/2002
Tulare County, CA                 2002-0045392               6/14/2002
Yolo County, CA                  2002-0019210-00             5/7/2002
</TABLE>

UCC-1 Financing Statement regarding California Deed of Trust, naming Calpine
Corporation as debtor and The Bank of Nova Scotia, as Agent, as secured party,
filed as follows:

<TABLE>
<CAPTION>
  JURISDICTION                       FILE NO.                FILE DATE
  ------------                       --------                ---------
<S>                            <C>                           <C>
Colusa County, CA                    02-2146                 5/17/2002
Contra Costa County, CA          2002-0170009-00             5/13/2002
Fresno County, CA                 2002-0085594               5/23/2002
Kern County, CA                    0202084537                5/24/2002
Kings County, CA                     0210875                 5/20/2002
Sacramento County, CA          Book 20020507, Page           5/7/2002
                                      0614
Solano County, CA                 2002-00058870              5/9/2002
Sutter County, CA                 2002-0009818               5/17/2002
Tulare County, CA                 2002-0045393               6/14/2002
Yolo County, CA                  2002-0019211-00             5/7/2002
</TABLE>

                                      I-2
<PAGE>

                                   Schedule II

                           Supplements and Amendments

                                       N/A

                                      II-1
<PAGE>

                                  Schedule III

                                Partial Releases

Substitution of Trustee and Partial Reconveyance by The Bank of Nova Scotia, as
Agent, in favor of Calpine Corporation (California-Deed of Trust) filed as
follows:

<TABLE>
<CAPTION>
  JURISDICTION         ORIGINAL       ORIGINAL         PARTIAL          PARTIAL
  ------------         FILE NO.      FILE DATE      RELEASE FILE     RELEASE FILE
                       --------      ---------           NO.             DATE
                                                         ---             ----
<S>                    <C>           <C>            <C>              <C>
Solano County,          2002-          5/9/02       2002-00127329      10/7/02
CA (Church 1-11)       00058871
</TABLE>

UCC-3 Financing Statement Amendment relating to the Partial Release-California
Deed of Trust naming Calpine Corporation as Debtor and The Bank of Nova Scotia,
as Agent, as Secured Party, filed as follows:

<TABLE>
<CAPTION>
  JURISDICTION         ORIGINAL       ORIGINAL         PARTIAL          PARTIAL
  ------------         FILE NO.      FILE DATE      RELEASE FILE     RELEASE FILE
                       --------      ---------           NO.             DATE
                                                         ---             ----
<S>                    <C>           <C>            <C>              <C>
Solano County,          2002-          5/9/02       2002-00132521      10/17/02
CA (Church 1-11)       00058870
</TABLE>

                                     III-1
<PAGE>

                                  EXHIBIT A To
             Amended and Restated Deed of Trust with Power of Sale,
                            Assignment of Production,
           Security Agreement, Financing Statement and Fixture Filing,
                            dated July 16, 2003, from
                        Calpine Corporation, As Trustor,
                                       to
                   Chicago Title Insurance Company, As Trustee
                    and The Bank of New York, As Beneficiary

                               List of Properties

1.    Depth limitations, unit designations, unit tract descriptions and
      descriptions (including percentages, decimals or fractions) of undivided
      leasehold interests, well names, "Operating Interests", "Working
      Interests" and "Net Revenue Interests" contained in this Exhibit A and the
      listing of any percentage, decimal or fractional interest in this Exhibit
      A shall not be deemed to limit or otherwise diminish the interests being
      subjected to the lien, security interest and encumbrance of this
      instrument.

2.    Some of the land descriptions in this Exhibit A may refer only to a
      portion of the land covered by a particular lease. This instrument is not
      limited to the land described in Exhibit A but is intended to cover the
      entire interest of Trustor in any lease described in Exhibit A even if
      such interest relates to land not described in Exhibit A. Reference is
      made to the land descriptions contained in the documents of title recorded
      as described in this Exhibit A. To the extent that the land descriptions
      in this Exhibit A are incomplete, incorrect or not legally sufficient, the
      land descriptions contained in the documents so recorded are incorporated
      herein by this reference.

3.    References in Exhibit A to instruments on file in the public records are
      made for all purposes. Unless provided otherwise, all recording references
      in Exhibit A are to the official real property records of the county or
      counties in which the encumbered property is located and in which records
      such documents are or in the past have been customarily recorded, whether
      Deed Records, Oil and Gas Records, Oil and Gas Lease Records, Official
      Records or other records.

4.    A statement herein that a certain interest described herein is subject to
      the terms of certain described or referred to agreements, instruments or
      other matters shall not operate to subject such interest to any such
      agreement, instrument or other matter except to the extent that such
      agreement, instrument or matter is otherwise valid and presently
      subsisting nor shall such statement be deemed to constitute a recognition
      by the parties hereto that any such agreement, instrument or other matter
      is valid and presently subsisting.

                                                       [Do not detach this page]

                                     III-2<PAGE>

                                                                   EXHIBIT 10.32

____________________SPACE ABOVE THIS LINE FOR RECORDER'S USE____________________

STATE OF _________________              AFTER RECORDING  RETURN TO:
                                        ANE C. PRIESTER
COUNTY OF ________________              LATHAM & WATKINS LLP
                                        633 W. 5TH STREET, SUITE 4000
                                        LOS ANGELES, CA  90071

--------------------------------------------------------------------------------

                    DEED TO SECURE DEBT, ASSIGNMENT OF RENTS
                             AND SECURITY AGREEMENT

                            DATED AS OF JULY 16, 2003

                                       BY

                              CALPINE CORPORATION,
                             A DELAWARE CORPORATION,
                                   AS GRANTOR
                                       TO
                              THE BANK OF NEW YORK,
                         A NEW YORK BANKING CORPORATION,
                                   AS GRANTEE

--------------------------------------------------------------------------------

PURSUANT TO O.C.G.A. SECTION 48-6-61, GEORGIA INTANGIBLE RECORDING TAX IN THE
MAXIMUM AMOUNT OF $25,000 IS BEING PAID WITH RESPECT TO THE SECURED OBLIGATIONS
UPON THE RECORDATION OF THIS SECURITY DEED.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      Page
                                                                                                      ----
<S>                                                                                                   <C>
ARTICLE 1 - DEFINITIONS ..........................................................................       5

   1.1   DEFINED TERMS ...........................................................................       5
   1.2   ACCOUNTING TERMS ........................................................................       7

ARTICLE 2 - GENERAL COVENANTS AND PROVISIONS .....................................................       7

   2.1   GRANTOR PERFORMANCE OF SECURED DEBT DOCUMENTS ...........................................       7
   2.2   GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES .......................................       7
   2.3   COMPLIANCE WITH LEGAL REQUIREMENTS ......................................................       7
   2.4   INSURANCE; APPLICATION OF INSURANCE PROCEEDS; APPLICATION OF EMINENT DOMAIN PROCEEDS ....       7
   2.5   ASSIGNMENT OF RENTS .....................................................................       8
   2.6   REJECTION OF GROUND LEASE BY LESSOR .....................................................       9
   2.7   EXPENSES ................................................................................       9
   2.8   GRANTEE ASSUMES NO OBLIGATIONS ..........................................................       9
   2.9   FURTHER ASSURANCES ......................................................................      10
   2.10  ACTS OF GRANTOR .........................................................................      10
   2.11  AFTER-ACQUIRED PROPERTY .................................................................      10
   2.12  MORTGAGED PROPERTY ......................................................................      11
   2.13  POWER OF ATTORNEY .......................................................................      13
   2.14  COVENANT TO PAY .........................................................................      13
   2.15  SECURITY AGREEMENT ......................................................................      14

ARTICLE 3 - REMEDIES .............................................................................      15

   3.1   PROTECTIVE ADVANCES .....................................................................      15
   3.2   INSTITUTION OF EQUITY PROCEEDINGS .......................................................      15
   3.3   GRANTEE'S POWER OF ENFORCEMENT ..........................................................      15
   3.4   GRANTEE'S RIGHT TO ENTER AND TAKE POSSESSION, OPERATE AND APPLY INCOME ..................      17
   3.5   SEPARATE SALES ..........................................................................      18
   3.6   WAIVER OF APPRAISEMENT, MORATORIUM, VALUATION, STAY, EXTENSION AND REDEMPTION LAWS ......      18
   3.7   RECEIVER ................................................................................      18
   3.8   SUITS TO PROTECT THE MORTGAGED PROPERTY .................................................      19
   3.9   PROOFS OF CLAIM .........................................................................      19
   3.10  GRANTOR TO PAY AMOUNTS SECURED HEREBY ON ANY DEFAULT IN PAYMENT; APPLICATION OF
         MONIES BY GRANTEE .......................................................................      19
   3.11  DELAY OR OMISSION; NO WAIVER ............................................................      20
   3.12  NO WAIVER OF ONE DEFAULT TO AFFECT ANOTHER ..............................................      20
   3.13  DISCONTINUANCE OF PROCEEDINGS; POSITION OF PARTIES RESTORED .............................      20
   3.14  REMEDIES CUMULATIVE .....................................................................      21
   3.15  INTEREST AFTER EVENT OF DEFAULT .........................................................      21
   3.16  FORECLOSURE; EXPENSES OF LITIGATION .....................................................      21
   3.17  DEFICIENCY JUDGMENTS ....................................................................      21
   3.18  WAIVER OF JURY TRIAL ....................................................................      22
   3.19  EXCULPATION OF GRANTEE ..................................................................      22

ARTICLE 4 - GENERAL ..............................................................................      22

   4.1   DISCHARGE ...............................................................................      22
   4.2   NO WAIVER ...............................................................................      22
   4.3   EXTENSION, REARRANGEMENT OR RENEWAL OF OBLIGATIONS ......................................      22
   4.4   FORCIBLE DETAINER .......................................................................      23
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                     <C>
   4.5   WAIVER OF STAY OR EXTENSION .............................................................      24
   4.6   NOTICES .................................................................................      23
   4.7   SEVERABILITY ............................................................................      23
   4.8   APPLICATION OF PAYMENTS .................................................................      23
   4.9   GOVERNING LAW ...........................................................................      24
   4.10  AMENDMENTS ..............................................................................      24
   4.11  SUCCESSORS AND ASSIGNS ..................................................................      24
   4.12  RENEWAL, ETC ............................................................................      24
   4.13  FUTURE ADVANCES .........................................................................      24
   4.14  LIABILITY ...............................................................................      25
   4.15  SEVERABILITY AND COMPLIANCE WITH USURY LAW ..............................................      25
   4.16  RELEASE OF COLLATERAL ...................................................................      26
   4.17  TIME OF THE ESSENCE .....................................................................      26
   4.18  COUNTERPART EXECUTION ...................................................................      26
   4.19  WAIVER OF GRANTOR'S RIGHTS ..............................................................      26
   4.20  ATTORNEYS' FEES .........................................................................      27
</TABLE>

                                       ii
<PAGE>

                                                                     AUGUSTA, GA

                              DEED TO SECURE DEBT,
                   ASSIGNMENT OF RENTS AND SECURITY AGREEMENT

      This DEED TO SECURE DEBT, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this
"Security Deed"), dated as of July 16, 2003, is made by CALPINE CORPORATION, a
Delaware corporation ("Grantor"), whose address is 50 West San Fernando Street,
San Jose, CA 95113, to THE BANK OF NEW YORK, a New York banking corporation, not
in its individual capacity but solely as Collateral Trustee under the Collateral
Trust Agreement dated July 16, 2003 (the "Collateral Trust Agreement") among
Grantor, Grantee, the 2007 Trustee, the 2010 Trustee, the 2013 Trustee, Credit
Agreement Agent and Term Loan Administrative Agent ("Grantee"), whose address is
101 Barclay Street, New York, New York 10286. References to this "Security Deed"
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders, restatements
and replacements of this instrument.

      Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Collateral Trust Agreement.

                                    Recitals

            A. Grantor has entered into an Amended and Restated Credit Agreement
dated as of July 16, 2003 (the "Credit Agreement") among, inter alia, Grantor,
the Lenders referred to therein and The Bank of Nova Scotia as Administrative
Agent, relating to a $500,000,000 senior secured credit facility made available
in the form of revolving loans and term loans, including letters of credit
issued thereunder.

            B. Grantor also intends to (a) issue $500,000,000 in aggregate
principal amount of Second Priority Senior Floating Rate Secured Notes due 2007
(the "2007 Notes"), with a maturity date of July 15, 2007, pursuant to the
Indenture dated as of July 16, 2003 (the "2007 Indenture") between Grantor and
Wilmington Trust Company, as Trustee (together with its successors in such
capacity, the "2007 Trustee"), (b) issue $1,150,000,000 in aggregate principal
amount of 8.50% Second Priority Senior Secured Fixed Rate Notes due 2010 (the
"2010 Notes"), with a maturity date of July 15, 2010, pursuant to the Indenture
dated as of July 16, 2003 (the "2010 Indenture") between Grantor and Wilmington
Trust Company, as Trustee (together with its successors in such capacity, the
"2010 Trustee"), (c) issue $900,000,000 in aggregate principal amount of 8.75%
Second Priority Senior Secured Fixed Rate Notes due 2013 (the "2013 Notes"),
with a maturity date of July 15, 2013, pursuant to the Indenture dated as of
July 16, 2003 (the "2013 Indenture") between Grantor and Wilmington Trust
Company, as Trustee (together with its successors in such capacity, the "2013
Trustee"), and (d) borrow $750,000,000 in Term Loans (the "Term Loans"), with a
maturity date of July 15, 2007, pursuant to a Term Loan Agreement dated as of
July 16, 2003 (the "Term Loan Agreement") between Grantor and Goldman Sachs
Credit

<PAGE>

Partners L.P., as Administrative Agent (together with its successors in such
capacity, the "Term Loan Administrative Agent").

            C. As permitted pursuant to the Secured Debt Documents, Grantor may
incur future debt which could, together with the obligations under the Credit
Agreement, constitute Priority Lien Debt and Grantor may incur future debt which
could, together with the 2007 Notes, the 2010 Notes, the 2013 Notes and the Term
Loans, constitute Parity Lien Debt, provided that the aggregate amount of the
Secured Debt to be secured hereby shall not exceed $4,200,000,000. Grantor
intends to secure the obligations, including the obligations (a) under the
Credit Agreement and any future Priority Lien Debt, equally and ratably, on a
priority basis, and, (b) subject to such priority, under the 2007 Notes, 2010
Notes, 2013 Notes and Term Loans and any future Parity Lien Debt, equally and
ratably, as contemplated in the Collateral Trust Agreement.

            D. Grantor (i) is the owner of the interests in the lands described
in Exhibit A attached hereto and (ii) owns, leases or otherwise has the right to
use all of the buildings, improvements, structures and fixtures located on the
lands described in Exhibit A and is executing and delivering this instrument in
order to secure its Obligations (as defined below).

                                    Agreement

      NOW, THEREFORE, to secure the prompt and complete payment and performance
when and as required, due and/or payable of all of the obligations and
liabilities of Grantor, by acceleration or otherwise, arising out of or in
connection with the Credit Agreement, the 2007 Indenture, the 2010 Indenture,
the 2013 Indenture, the Term Loan Agreement and other Secured Debt Documents,
and the obligations of Grantor set forth herein (collectively, the
"Obligations") and in consideration of the covenants herein and therein,
Grantor, intending to be legally bound, does hereby grant, bargain, sell,
convey, warrant, assign, transfer, pledge, set-over and confirm unto Grantee as
set forth in this Security Deed, for the use and benefit of Grantee, all of
Grantor's estate, right, title, interest, property, claim and demand, now or
hereinafter arising, in and to the following property and rights (herein
collectively called the "Mortgaged Property"):

            (a) Grantor's interest under the Ground Lease executed as of
      February 22, 2001, between DSM Chemicals North America, Inc. and Grantor,
      as amended by that First Amendment to Land Lease Agreement dated October
      16, 2001 (as modified, supplemented or amended from time to time, the
      "Ground Lease"), and the leasehold estate created thereby in and to the
      lands and premises more particularly described in Exhibit A hereto (the
      "Site");

            (b) any and all easements, leases, licenses, option rights,
      rights-of-way and other rights used in connection with the Site or as a
      means of access thereto (including, without limitation, all rights of
      Grantor to exercise any election or option, to make any determination or
      to give any notice, consent, waiver or approval, or to take any other
      action under the Ground Lease), all easements for ingress and egress and
      easements for water, natural gas and sewage pipelines, running in favor of
      Grantor, or appurtenant to the Site or arising out of the Ground Lease,
      and any and all sidewalks, alleys, strips and gores of land adjacent
      thereto or used in connection therewith together with all and singular the
      tenements,

                                       2
<PAGE>

      hereditaments and appurtenances thereto, and with any land lying within
      the right-of-way of any streets, open or proposed, adjoining the same
      (including, without limitation, the easements, leases, licenses and other
      instruments described in Exhibit B hereto) (collectively, the "Easements";
      and the Site and the Easements collectively referred to herein as the
      "Real Property");

            (c) all buildings, structures, fixtures and other improvements now
      or hereafter erected on the Real Property, including the Project
      (collectively, the "Improvements");

            (d) all machinery, apparatus, equipment, fittings, fixtures,
      boilers, turbines and other articles of personal property, including all
      goods and all goods which become fixtures, now owned or hereafter acquired
      by Grantor and now or hereafter located on, attached to or used in the
      operation of or in connection with the Real Property and/or the
      Improvements, and all replacements thereof, additions thereto and
      substitutions therefor, to the fullest extent permitted by applicable law
      (all of the foregoing being hereinafter collectively called the
      "Equipment");

            (e) all raw materials, work in process and other materials used or
      consumed in the construction of, or now or hereafter located on or used in
      connection with, the Real Property, the Improvements and/or the Equipment,
      (including, without limitation, fuel and fuel deposits, now or hereafter
      located on the Real Property or elsewhere or otherwise owned by Grantor)
      (the above items, together with the Equipment, being hereinafter
      collectively called the "Tangible Collateral");

            (f) all rights, powers, privileges and other benefits of Grantor (to
      the extent assignable) now or hereafter obtained by Grantor under the
      Ground Lease and/or from any Governmental Authority, including, without
      limitation, permits issued in the name of Grantor, governmental actions
      relating to the ownership, operation, management and use of the Real
      Property, Improvements, Equipment or Tangible Collateral, the development
      and financing of the Project, the Improvements and the Equipment, and any
      improvements, modifications or additions thereto;

            (g) any right of Grantor to elect to terminate the Ground Lease or
      remain in possession of the Real Property pursuant to 11 U.S.C. section
      365(h)(1) or any similar provision of applicable law and any possessory
      rights of Grantor in the Real Property pursuant to 11 U.S.C. section
      365(h)(2) or any other similar provision of applicable law;

            (h) all the lands and interests in lands, tenements and
      hereditaments hereafter acquired by Grantor in connection with or
      appurtenant to the Real Property and/or any other property or rights
      subject to the lien hereof, including (without limitation) all interests
      of Grantor, whether as lessor or lessee, in any leases of land hereafter
      made and all rights of Grantor thereunder;

            (i) any and all other property in any way associated or used in
      connection with or appurtenant to the Real Property, Improvements,
      Equipment or Tangible Collateral that

                                       3
<PAGE>

      may from time to time, by delivery or by writing of any kind, be subjected
      to the lien hereof by Grantor or by anyone on its behalf or with its
      consent, or which may come into the possession or be subject to the
      control of Grantee pursuant to this Security Deed, being hereby
      collaterally assigned to Grantee and subjected or added to the lien or
      estate created by this Security Deed forthwith upon the acquisition
      thereof by Grantor, as fully as if such property were now owned by Grantor
      and were specifically described in this Security Deed and subjected to the
      lien and security interest hereof; and Grantee is hereby authorized to
      receive any and all such property as and for additional security
      hereunder; and

            (j) all the remainder or remainders, reversion or reversions, rents,
      revenues, issues, profits, royalties, income and other benefits derived
      from any of the foregoing, all of which are hereby assigned to Grantee,
      who is hereby authorized to collect and receive the same, to give proper
      receipts and acquittances therefor and to apply the same in accordance
      with the provisions of this Security Deed.

      Notwithstanding any provision herein to the contrary, the Mortgaged
Property or any part thereof may be released from conveyance created by this
Security Deed in accordance with the provisions in the Collateral Trust
Agreement.

      TO HAVE AND TO HOLD the said Mortgaged Property, whether now owned or held
or hereafter acquired, unto Grantee, its successors and assigns, pursuant to the
provisions of this Security Deed.

      IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security
title, security interest or estate created by this Security Deed to secure the
payment of the Obligations, both present and future, shall be first, prior and
superior to any Lien, security interest, reservation of title or other interest
(other than superior Permitted Liens) heretofore, contemporaneously or
subsequently suffered or granted by Grantor, its legal representatives,
successors or assigns, except only those, if any, expressly hereinafter referred
to and that the Mortgaged Property is to be held, dealt with and disposed of by
Grantee, upon and subject to the terms, covenants, conditions, uses and
agreements set forth in this Security Deed.

      PROVIDED ALWAYS, that upon payment in full of the Obligations in
accordance with the terms and provisions hereof and of the other Secured Debt
Documents and the observance and performance by Grantor of its covenants and
agreements set forth herein and therein, then this Security Deed and the estate
hereby and therein granted shall be cancelled and surrendered and shall be
reconveyed as provided herein below.

      THIS CONVEYANCE is intended to operate and is to be construed as a deed
passing title to the Mortgaged Property to Grantee and is made under those
provisions of the existing laws of the State of Georgia relating to deeds to
secure debt, and not as a mortgage, and is given to secure the Obligations.

                                       4
<PAGE>

                            ARTICLE 1 - DEFINITIONS

      1.1 Defined Terms. 11 Capitalized terms used in this Security Deed and not
otherwise defined herein shall have the meanings assigned to them in the
Collateral Trust Agreement. Any term defined by reference to an agreement,
instrument or other document shall have the meaning so assigned to it whether or
not such document is in effect. In addition, for purposes of this Security Deed,
the following definitions shall apply:

      "Applicable Law" means with respect to any Person or matter, any federal,
state, regional, tribal or local statute, law, code, rule, treaty, convention,
application, order, decree, consent decree, injunction, directive, determination
or other requirement (whether or not having the force of law) relating to such
Person or matter and, where applicable, any interpretation thereof by a
Governmental Authority having jurisdiction with respect thereto or charged with
the administration or interpretation thereof.

            "Default Rate" has the meaning ascribed to it in the Secured Debt
Documents.

            "Easements" has the meaning ascribed to it in the Granting Clauses.

            "Equipment" has the meaning ascribed to it in the Granting Clauses.

            "Event of Default" means an Actionable Default as defined under the
Collateral Trust Agreement.

            "Governmental Authority" means any and all courts, boards, agencies,
commissions, offices or authorities of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city, tribe or
otherwise) whether now or hereafter in existence charged with the
administration, interpretation or enforcement of any Applicable Law.

            "Ground Lease" has the meaning ascribed to it in the Granting
Clauses.

            "Improvements" has the meaning ascribed to it in the Granting
Clauses.

            "Legal Requirements" means (i) any and all present and future
judicial decisions, statutes, rulings, rules, regulations, licenses, decisions,
orders, injunctions, decrees, permits, certificates or ordinances of any
Governmental Authority in any way applicable to Grantor, or the Mortgaged
Property, including the ownership, use, occupancy, operation, maintenance,
repair or reconstruction thereof, and any other Applicable Law enacted by any
Governmental Authority relating to health or the environment, (ii) Grantor's
presently or subsequently effective Organic Documents, (iii) any and all Leases,
(iv) any and all leases and other contracts (written or oral) of any nature to
which Grantor, or the Mortgaged Property may be bound and (v) any and all
restrictions, restrictive covenants or zoning, present and future, as the same
may apply to the Mortgaged Property.

            "Mortgaged Property" has the meaning ascribed to it in the Granting
Clauses.

                                       5
<PAGE>

            "Obligations" has the meaning ascribed to it in the Granting
Clauses.

            "Organic Documents" means the Articles of Incorporation, Certificate
of Incorporation, limited liability company certificate of formation and
regulations or operating agreement, partnership agreement, limited partnership
agreement, joint venture agreement, trust agreement or other similar documents
governing the organization and operation of a business association.

            "Permitted Lien" means the liens, easements, building lines,
restrictions, exceptions, reservations, conditions, limitations, security
interests and other matters (if any) as permitted in the Secured Debt Documents.

            "Person" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.
"Proceeds" has the meaning assigned to it under the UCC and, in any event, shall
include, without limitation, (i) any and all proceeds of any insurance
(including, without limitation, property casualty and title insurance),
indemnity, warranty or guaranty payable from time to time with respect to any of
the Mortgaged Property; (ii) any and all proceeds in the form of accounts (as
such term is defined in the UCC), security deposits, tax escrows (if any), down
payments (to the extent the same may be pledged under applicable law),
collections, contract rights, documents, instruments, letters of credit, chattel
paper, liens and security instruments, guaranties or general intangibles
relating in whole or in part to the Mortgaged Property and all rights and
remedies of whatever kind or nature Grantor may hold or acquire for the purpose
of securing or enforcing any obligation due Grantor thereunder.

            "Project" means that certain 500 MW (approximately) power generating
facility located on the Real Property.

            "Real Property" has the meaning ascribed to it in the Granting
Clauses.

            "Secured Debt Documents" has the meaning ascribed it in the
Collateral Trust Agreement.

            "Site" has the meaning ascribed to it in the Granting Clauses.

            "State" means that state in which the Site is located.

            "Tangible Collateral" has the meaning ascribed to it in the Granting
Clauses.

            "UCC" means the Uniform Commercial Code as in effect from time to
time in the State of Georgia, and the terms "Accounts," "Account Debtor, "As
Extracted Collateral," "Chattel Paper," "Contract Rights," "Deposit Accounts,"
"Documents," "Electronic Chattel Paper," "General

                                       6
<PAGE>

Intangibles," "Goods," "Equipment," "Fixtures," "Inventory," "Instruments," and
"Proceeds" shall have the respective meanings assigned to such terms in the
Uniform Commercial Code.

      1.2 Accounting Terms. As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not defined herein
shall have the respective meanings given to them under GAAP.

                  ARTICLE 2 - GENERAL COVENANTS AND PROVISIONS

      2.1 Grantor Performance of Secured Debt Documents. Grantor shall perform,
observe and comply with each and every provision hereof, and with each and every
provision contained in the Secured Debt Documents and shall promptly pay, when
payment shall become due, the principal with interest thereon and all other sums
required to be paid by Grantor under this Security Deed and the other Secured
Debt Documents at the time and in the manner provided in the Secured Debt
Documents.

      2.2 General Representations, Covenants and Warranties. Grantor, to the
best of its knowledge, represents, covenants and warrants that as of the date
hereof: (a) Grantor has good and marketable title to that portion of the Real
Property which constitutes real property interests including the Ground Lease
and the leasehold estate created thereby, free and clear of all encumbrances
except Permitted Liens with respect to the Site, the Ground Lease and other
matters which, individually and in the aggregate, do not have a materially
adverse effect upon the ownership or operation of the Site; (b) Grantor has the
right to hold, occupy and enjoy its interest in the Real Property on and subject
to the terms and conditions of the Ground Lease, and has good right, full power
and lawful authority to grant the same as provided herein, and Grantee may at
all times peaceably and quietly enter upon, hold, occupy and enjoy the Real
Property in accordance with the terms hereof; (c) except as otherwise disclosed
in the Secured Debt Documents, all costs arising from construction of any
improvements, the performance of any labor and the purchase of all Mortgaged
Property have been or shall be paid when due; (d) the Site has access for
ingress and egress to dedicated street(s); and (e) no material part of the
Mortgaged Property has been damaged, destroyed, condemned or abandoned.

      2.3 Compliance with Legal Requirements. Grantor shall promptly comply in
all material respects with all Legal Requirements relating to its use and
occupancy of the Mortgaged Property, whether or not such compliance requires
work or remedial measures that are ordinary or extraordinary, foreseen or
unforeseen, structural or nonstructural, or that interfere with the use or
enjoyment of the Mortgaged Property.

      2.4 Insurance; Application of Insurance Proceeds; Application of Eminent
Domain Proceeds.

            2.4.1 Grantor shall carry, with financially sound and reputable
insurance companies and in amounts as is customary in the industry or as
otherwise required pursuant to the Secured Debt Documents, the following
insurance: (1) workmen's compensation insurance and public liability and
property damage insurance in respect of all activities in which Grantor might
incur personal liability for the death of or injury to an employee or third
person, or damage

                                       7
<PAGE>

to or destruction of another's property; and (2) to the extent such insurance is
carried by similar companies engaged in similar undertakings in, the same
general areas in which the Mortgaged Property, is located, insurance in respect
of the Equipment, against loss or damage by fire, lightning, hail, tornado,
explosion and other similar risks, hazards, casualties and contingencies
(including business interruption insurance covering loss of revenues) with
limits and sublimits as appropriate; provided, that any such insurance may be
provided by way of self insurance to the extent that similar companies engaged
in similar undertakings in the same general areas also self-insure. Each
insurance policy issued in connection therewith shall provide by way of
endorsements, riders or otherwise that (i) name Grantee as a loss payee on all
property insurance policies and an additional insured on all liability insurance
policies, and provide that proceeds from property insurance policies will be
payable to Grantee as its interest may appear, which proceeds are hereby
assigned to Grantee, it being agreed by Grantor that such payments shall be
applied A) if there be no Event of Default existing or which would exist but for
due notice or lapse of time, or both, to the restoration, repair or replacement
of the Mortgaged Property, or B) if there be an Event of Default existing, or
which would exist but for due notice or lapse of time, or both, in accordance
with the provisions of the Collateral Trust Agreement, either for the above
stated purpose or toward the payment of the Indebtedness; (ii) the coverage of
Grantee shall not be terminated, reduced or affected in any manner regardless of
any breach or violation by Grantor of any warranties, declarations or conditions
in such policy; (iii) no such insurance policy shall be canceled, materially
endorsed, materially altered or reissued to effect a change in coverage for any
reason and to any extent whatsoever unless such insurer, their authorized
representative or Grantor shall have first given Grantee and each Secured Debt
Representative thirty (30) days prior written notice thereof; and (iv) Grantee
may, but shall not be obligated to, make premium payments to prevent any
cancellation, endorsement, alteration or re-issuance and such payments shall be
accepted by the insurer to prevent the same. Grantee shall be furnished with a
certificate evidencing such coverage in form and content as are customary in the
industry. All policies to be maintained under this Mortgage are to be issued on
forms and by companies and with endorsements as are customary in the industry.
Grantor shall maintain insurance in an amount sufficient to prevent Grantor from
becoming a co-insurer under any policy required hereunder. If Grantor fails to
maintain the level of insurance required under this Mortgage, then Grantor shall
and hereby agrees to indemnify Grantee to the extent that a casualty occurs and
insurance proceeds would have been available had such insurance been maintained;

            2.4.2 All insurance proceeds and all eminent domain proceeds shall
be paid and/or shall be applied in accordance with the provisions of the Secured
Debt Documents.

      2.5 Assignment of Rents. Grantor unconditionally and absolutely assigns to
Grantee all of Grantor's right, title and interest in and to: all leases,
subleases, occupancy agreements, licenses, rental contracts and other similar
agreements now or hereafter existing relating to the use or occupancy of the
Mortgaged Property, together with all guarantees, modifications, extensions and
renewals thereof; and all rents, issues, profits, income and proceeds due or to
become due from tenants of the Mortgaged Property (the "Leases"), including
rentals and all other payments of any kind under any leases now existing or
hereafter entered into, together with all deposits (including security deposits)
of tenants thereunder. This is an absolute assignment to Grantee and not an
assignment as security for the performance of the obligations under the Secured
Debt Documents, or any other indebtedness. Subject to the provisions of herein
below, Grantee shall have the right,

                                       8
<PAGE>

power and authority to, but shall not be obligated to: notify any person that
the Leases have been assigned to Grantee and that all rents and other
obligations are to be paid directly to Grantee, whether or not Grantee has
commenced or completed foreclosure or taken possession of the Mortgaged
Property; settle compromise, release, extend the time of payment of, and make
allowances, adjustments and discounts of any rents or other obligations under
the Leases; enforce payment of rents and other rights under the Leases,
prosecute any action or proceeding , and defend against any claim with respect
to rents and Leases; enter upon, take possession of and operate the Mortgaged
Property; lease all or any part of the Mortgaged Property; and/or perform any
and all obligations of Grantor under the Leases and exercise any and all rights
of Grantor therein contained to the full extent of Grantor's rights and
obligations thereunder, with or without the bringing of any action or the
appointment of a receiver. At Grantee's request, Grantor shall deliver a copy of
this Security Deed to each tenant under a Lease. Grantor irrevocably directs any
tenant, without any requirement for notice to or consent by Grantor, to comply
with all demands of Grantee under this Section 2.5 and to turn over to Grantee
on demand all rents which it receives. Grantee shall have the right, but not the
obligation, to use and apply all rents received hereunder in such order and such
manner as Grantee may determine in accordance with the Collateral Trust
Agreement. Notwithstanding that this is an absolute assignment of the rents and
Leases and not merely the collateral assignment of, or the grant of a lien or
security interest in the rents and Leases, Grantee grants to Grantor a revocable
license to collect and receive the rents and to retain, use and enjoy such
rents. Such license may be revoked by Grantee only upon the occurrence of any
Event of Default. Grantor shall apply any rents which it receives to the payment
due under the Obligations, taxes, assessments, water charges, sewer rents and
other governmental charges levied, assessed or imposed against the Mortgaged
Property, insurance premiums, and other obligations of lessor under the Leases
before using such proceeds for any other purpose.

      2.6 Rejection of Ground Lease by Lessor. To the extent applicable, if the
lessor under the Ground Lease rejects or disaffirms the Ground Lease or purports
or seeks to disaffirm the Ground Lease pursuant to any bankruptcy law, then:

            2.6.1 To the extent permitted by law, Grantor shall remain in
possession of the Real Property demised under the Ground Lease and shall perform
all acts reasonably necessary for Grantor to remain in such possession for the
unexpired term of such Ground Lease (including all renewals), whether the then
existing terms and provisions of such Ground Lease require such acts or
otherwise; and

            2.6.2 All the terms and provisions of this Security Deed and the
lien created by this Security Deed shall remain in full force and effect and
shall extend automatically to all of Grantor's rights and remedies arising at
any time under, or pursuant to, any bankruptcy or insolvency laws, including all
of Grantor's rights to remain in possession of the Real Property.

      2.7 Expenses. Grantor shall indemnify Grantee with respect to any
transaction or matter in any way connected with any portion of the Mortgaged
Property, or Grantor's use, occupancy, or operation of the Mortgaged Property in
accordance with the Collateral Trust Agreement.

      2.8 Grantee Assumes No Obligations. It is expressly agreed that, anything
herein contained to the contrary notwithstanding, Grantor shall remain obligated
under all agreements

                                       9
<PAGE>

which are included in the definition of "Mortgaged Property" and shall perform
all of its obligations thereunder in accordance with the provisions thereof, and
neither Grantee nor any of the Secured Debtholders shall have any obligation or
liability with respect to such obligations of Grantor, nor shall Grantee or any
of the Secured Debtholders be required or obligated in any manner to perform or
fulfill any obligations or duties of Grantor under such agreements, or to make
any payment or to make any inquiry as to the nature or sufficiency of any
payment received by it, or to present or file any claim or take any action to
collect or enforce the payment of any amounts which have been assigned to
Grantee hereunder or to which Grantee or the Secured Debtholders may be entitled
at any time or times.

      2.9 Further Assurances. Grantor shall, from time to time, at its expense,
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or that Grantee may reasonably request, in
order to perfect and continue the lien and security interest granted hereby and
to enable Grantee to obtain the full benefits of the lien and security interest
granted or intended to be granted hereby. Grantor shall keep the Mortgaged
Property free and clear of all Liens, other than Permitted Liens. Without
limiting the generality of the foregoing, Grantor shall execute and record or
file this Security Deed and each amendment hereto, and such financing or
continuation statements, or amendments thereto, and such other instruments,
endorsements or notices, as may be necessary, or as Grantee may reasonably
request, in order to perfect and preserve the lien and security interest granted
or purported to be granted hereby. Grantor hereby authorizes Grantee to file one
or more financing statements or continuation statements, and amendments thereto,
relative to all or any part of the Mortgaged Property necessary to preserve or
protect the lien and security interest granted hereby without the signature of
Grantor where permitted by law.

      2.10 Acts of Grantor. Except as provided in or permitted by the Secured
Debt Documents, Grantor hereby represents and warrants that it has not granted,
mortgaged, hypothecated, assigned or pledged and hereby covenants that it will
not grant, mortgage, hypothecate, assign or pledge, so long as this Security
Deed shall remain in effect, any of its right, title or interest in and to the
Mortgaged Property or any part thereof, other than Permitted Liens, to anyone
other than Grantee.

      2.11 After-Acquired Property. Any and all of the Mortgaged Property which
is hereafter acquired shall immediately, without any further conveyance,
assignment or act on the part of Grantor or Grantee, become and be subject to
the lien and security interest of this Security Deed as fully and completely as
though specifically described herein, but nothing contained in this Section 2.11
shall be deemed to modify or change the obligations of Grantor under Section 2.9
hereof. If and whenever from time to time Grantor shall hereafter acquire any
real property or interest therein which constitutes or is intended to constitute
part of the Mortgaged Property hereunder, Grantor shall promptly give notice
thereof to Grantee and Grantor shall forthwith execute, acknowledge and deliver
to Grantee a supplement to this Security Deed subjecting the property so
acquired to the lien of this Security Deed.

                                       10
<PAGE>

      2.12 Mortgaged Property.

            2.12.1 Grantor shall pay or cause to be paid all rent and other
charges required under the Ground Lease as and when the same are due and shall
promptly and faithfully perform or cause to be performed all other material
terms, obligations, covenants, conditions, agreements, indemnities and
liabilities of Grantor under the Ground Lease. Grantor shall observe all
applicable covenants, easements and other restrictions of record with respect to
the Site, the Easements or to any other part of the Mortgaged Property, in all
material respects.

            2.12.2 Grantor shall do, or cause to be done, all things necessary
to preserve and keep unimpaired all rights of Grantor as lessee under the Ground
Lease, and to prevent any default under the Ground Lease, or any termination,
surrender, cancellation, forfeiture, subordination or impairment thereof.
Grantor does hereby authorize and irrevocably appoint and constitute Grantee as
its true and lawful attorney-in-fact, which appointment is coupled with an
interest, in its name, place and stead, to take any and all actions deemed
necessary or desirable by Grantee to perform and comply with all the obligations
of Grantor under the Ground Lease, and to do and take upon the occurrence and
during continuation of an Event of Default, but without any obligation so to do
or take, any action which Grantee deems reasonably necessary to prevent or cure
any default by Grantor under the Ground Lease, to enter into and upon the Real
Property and Improvements or any part thereof as provided in the Secured Debt
Documents in order to prevent or cure any default of Grantor pursuant thereto,
to the end that the rights of Grantor in and to the leasehold estate created by
the Ground Lease shall be kept free from default.

            2.12.3 Grantor shall use all reasonable efforts to enforce the
obligations of the lessor under the Ground Lease in a commercially reasonable
manner.

            2.12.4 Grantor shall not voluntarily surrender its leasehold estate
and interest under the Ground Lease or modify, change, supplement, alter or
amend the Ground Lease or affirmatively waive any provisions thereof, either
orally or in writing, except as permitted in the Secured Debt Documents, and any
attempt on the part of Grantor to do any of the foregoing without the written
consent of Grantee shall be null and void.

            2.12.5 If any action or proceeding shall be instituted to evict
Grantor or to recover possession of the Mortgaged Property or any part thereof
or interest therein from Grantor or any action or proceeding otherwise affecting
the Mortgaged Property or this Security Deed shall be instituted, then Grantor
shall, immediately after receipt, deliver to Grantee a true and complete copy of
each petition, summons, complaint, notice of motion, order to show cause and all
other pleadings and papers, however designated, served in any such action or
proceeding.

            2.12.6 Grantor covenants and agrees that the fee title to the Real
Property and Improvements and the leasehold estate created under the Ground
Lease shall not merge but shall always remain separate and distinct,
notwithstanding the union of said estates either in Grantor or a third party by
purchase or otherwise and, in case Grantor acquires the fee title or any other
estate, title or interest in and to the Real Property and Improvements, the lien
of this Security Deed shall, without further conveyance, simultaneously with
such acquisition, be spread to cover

                                       11
<PAGE>

and attach to such acquired estate and as so spread and attached shall be prior
to the lien of any security deed placed on the acquired estate after the date of
this Security Deed.

            2.12.7 No release or forbearance of any of Grantor's obligations
under the Ground Lease by the lessor thereunder, shall release Grantor from any
of its obligations under this Security Deed.

            2.12.8 Grantor shall, within ten days after written demand from
Grantee, deliver to Grantee proof of payment of all items that are required to
be paid by Grantor under the Ground Lease, including, without limitation, rent,
taxes, operating expenses and other charges.

            2.12.9 The lien of this Security Deed shall attach to all of
Grantor's rights and remedies at any time arising under or pursuant to
bankruptcy or insolvency law, including, without limitation, all of Grantor's
rights to remain in possession of the Mortgaged Property. Grantor shall not
elect to treat the Ground Lease as terminated under bankruptcy or insolvency
law, and any such election shall be void.

                  2.12.9.1 If pursuant to bankruptcy or insolvency law, Grantor
shall seek to offset against the rent reserved in the Ground Lease the amount of
any damages caused by the nonperformance by the lessor or any other party of any
of their respective obligations thereunder after the rejection by the lessor or
such other party of the Ground Lease under any bankruptcy or insolvency law,
then Grantor shall, prior to effecting such offset, notify Grantee of its intent
to do so, setting forth the amount proposed to be so offset and the basis
therefor. Grantee shall have the right to object to all or any part of such
offset that, in the reasonable judgment of Grantee, would constitute a breach of
the Ground Lease, and in the event of such objection, Grantor shall not effect
any offset of the amounts found objectionable by Grantee. Neither Grantee's
failure to object as aforesaid nor any objection relating to such offset shall
constitute an approval of any such offset by Grantee.

                  2.12.9.2 If any action, proceeding, motion or notice shall be
commenced or filed in respect of the lessor under the Ground Lease or any other
party or in respect of the Ground Lease in connection with any case under any
bankruptcy or insolvency law, then Grantee shall have the option to intervene in
any such litigation with counsel of Grantee's choice. Grantee may proceed in its
own name in connection with any such litigation, and Grantor agrees to execute
any and all powers, authorizations, consents or other documents required by
Grantee in connection therewith.

                  2.12.9.3 Grantor shall, after obtaining knowledge thereof,
promptly notify Grantee of any filing by or against the lessor or other party
with an interest in the Mortgaged Property of a petition under any bankruptcy or
insolvency law. Grantor shall promptly deliver to Grantee, following receipt,
copies of any and all notices, summonses, pleadings, applications and other
documents received by Grantor in connection with any such petition and any
proceedings relating thereto.

                  2.12.9.4 If there shall be filed by or against Grantor a
petition under any bankruptcy or insolvency law, and Grantor, as lessee under
the Ground Lease, shall determine to

                                       12
<PAGE>

reject the Ground Lease pursuant to any bankruptcy or insolvency law, then
Grantor shall give Grantee a notice of the date on which Grantor shall apply to
the bankruptcy court for authority to reject the Ground Lease (such notice to be
no later than twenty (20) days prior to such date). Grantee shall have the
right, but not the obligation, to serve upon Grantor at any time prior to the
date on which Grantor shall so apply to the bankruptcy court a notice stating
that Grantee demands that Grantor assume and assign the Ground Lease to Grantee
pursuant to any bankruptcy or insolvency law. If Grantee shall serve upon
Grantor the notice described in the preceding sentence, to the extent permitted
by law or Governmental Authority, Grantor shall not seek to reject the Ground
Lease and shall comply with the demand provided for in the preceding sentence.
In addition, effective upon the entry of an order for relief with respect to
Grantor under any bankruptcy or insolvency law, Grantor hereby assigns and
transfers to Grantee a non-exclusive right to apply to the bankruptcy court
under any bankruptcy or insolvency law for an order extending the period during
which the Ground Lease may be rejected or assumed; and shall (a) promptly notify
Grantee of any default by Grantor in the performance or observance of any of the
terms, covenants or conditions on the part of Grantor to be performed or
observed under the Ground Lease and of the giving of any written notice by the
lessor thereunder to Grantor of any such default, and (b) promptly cause a copy
of each written notice given to Grantor by the lessor under the Ground Lease to
be delivered to Grantee. Grantee may rely on any notice received by it from any
such lessor of any default by Grantor under the Ground Lease and may take such
action as may be permitted by law or Governmental Authority to cure such default
even though the existence of such default or the nature thereof shall be
questioned or denied by Grantor or by any Person on its behalf.

      2.13 Power of Attorney. Grantor does hereby irrevocably constitute and
appoint Grantee, its true and lawful attorney (which appointment is coupled with
an interest), with full power of substitution, for Grantor and in the name,
place and stead of Grantor or in Grantee's own name, for so long as any of the
Obligations are outstanding, to ask, demand, collect, receive, receipt for and
sue for any and all rents, income and other sums which are assigned hereunder
with full power to endorse the name of Grantor on all instruments given in
payment or in part payment thereof, to settle, adjust or compromise any claims
thereunder as fully as Grantor itself could do and file any claim or take any
action or proceeding, either in its own name or in the name of Grantor or
otherwise, as are necessary or appropriate to protect and preserve the right,
title and interest of Grantee in and to such rents, income and other sums and
the security intended to be afforded hereby; provided that Grantee shall not
exercise such rights unless an Event of Default has occurred and is continuing.

      2.14 Covenant to Pay. If an Event of Default has occurred and is
continuing and such Event of Default could reasonably be expected to materially
and adversely affect Grantee's interest hereunder in the Mortgaged Property or
result in personal injury, then Grantee, among its other rights and remedies,
shall have the right, but not the obligation, to pay, observe or perform the
same, in whole or in part, and with such modifications as Grantee reasonably
shall deem advisable. To the extent provided in the Secured Debt Documents, all
sums, including, without limitation, reasonable attorneys fees, so expended or
incurred by Grantee by reason of the default of Grantor, or by reason of the
bankruptcy or insolvency of Grantor, as well as, without limitation, sums
expended or incurred to sustain the lien or estate of this Security Deed or its
priority, or to protect or enforce any rights of Grantee hereunder, or to
recover any of the Obligations, or to complete construction of the Project for
which the Secured Debt Documents are intended as financing, or for repairs,

                                       13
<PAGE>

maintenance, alterations, replacements or improvements thereto or for the
protection thereof, or for real estate taxes or other governmental assessments
or charges against any part of the Mortgaged Property, or premiums for insurance
of the Mortgaged Property, shall be entitled to the benefit of the lien on the
Mortgaged Property as of the date of the recording of this Security Deed, shall
be deemed to be added to and be part of the Obligations secured hereby, whether
or not the result thereof causes the total amount of the Obligations to exceed
the stated amount set forth in the second introductory paragraph of this
Security Deed, and shall be repaid by Grantor as provided in the Secured Debt
Documents.

      2.15 Security Agreement.

            2.15.1 This Security Deed shall also be a security agreement between
Grantor and Grantee covering the Mortgaged Property constituting personal
property or fixtures (hereinafter collectively called "UCC Collateral") governed
by the UCC in effect in the State as the same may be more specifically set forth
in any financing statement delivered in connection with this Security Deed, and
as further security for the payment and performance of the Obligations, Grantor
hereby grants to Grantee a security interest in such portion of the Mortgaged
Property to the full extent that the Mortgaged Property may be subject to the
UCC. In addition to Grantee's other rights hereunder, Grantee shall have all
rights of a secured party under the UCC. Grantor shall execute and deliver to
Grantee all financing statements and such further assurances that may be
required to establish, create, perfect (to the extent the same can be achieved
by the filing of a financing statement) and maintain the validity and priority
of Grantee's security interests, and Grantor shall bear all reasonable costs
thereof, including all UCC searches. Except as otherwise provided in the Secured
Debt Documents, if Grantee should dispose of any of the Mortgaged Property
comprising the UCC Collateral pursuant to the UCC, ten (10) days prior written
notice by Grantee to Grantor shall be deemed to be reasonable notice; provided,
however, Grantee may dispose of such property in accordance with the foreclosure
procedures of this Security Deed in lieu of proceeding under the UCC. Grantee
may, but shall not be obligated to, from time to time, execute and deliver at
Grantor's expense, all continuation statements, termination statements,
amendments, partial releases, or other instruments relating to all financing
statements by and between Grantor and Grantee. Except as otherwise provided in
the Secured Debt Documents, if an Event of Default shall occur and is
continuing, (a) Grantee, in addition to any other rights and remedies which it
may have, may exercise immediately and without demand to the extent permitted by
law, any and all rights and remedies granted to a secured party under the UCC
including, without limiting the generality of the foregoing, the right to take
possession of the UCC Collateral or any part thereof, and to take such other
measures as may be necessary for the care, protection and preservation of such
collateral and (b) upon request or demand of Grantee, Grantor shall at its
expense, assemble the UCC Collateral and make it available to Grantee at a
convenient place acceptable to Grantee. Grantor shall pay to Grantee on demand,
any and all expenses, including reasonable attorneys' fees and disbursements
incurred or paid by Grantee in protecting the interest in the UCC Collateral and
in enforcing the rights hereunder with respect to such UCC Collateral.

            2.15.2 Grantor agrees, to the extent permitted by law, that: (i) all
or a part of the Mortgaged Property are or are to become fixtures; and (ii) the
address of Grantor is as set forth on the first page of this Security Deed.

                                       14
<PAGE>

                              ARTICLE 3 - REMEDIES

      3.1 Protective Advances. If an Event of Default shall have occurred and is
continuing, then without thereby limiting Grantee's other rights or remedies,
waiving or releasing any of Grantor's obligations, or imposing any obligation on
Grantee, Grantee may, but shall not be obligated to, either advance any amount
owing or perform any or all actions as may be necessary or appropriate to cure
such default. All such advances shall constitute "Protective Advances." No sums
advanced or performance rendered by Grantee shall cure, or be deemed a waiver of
any Event of Default.

      3.2 Institution of Equity Proceedings. If an Event of Default occurs and
is continuing, Grantee may institute an action, suit or proceeding in equity for
specific performance of this Security Deed or any other Secured Debt Document,
all of which shall be specifically enforceable by injunction or other equitable
remedy.

      3.3 Grantee's Power of Enforcement.

            3.3.1 If an Event of Default shall have occurred, Grantee may, but
shall not be obligated to, sell the Mortgaged Property or any part of the
Mortgaged Property at public sale or sales before the door of the courthouse of
the county in which the Mortgaged Property or any part of the Mortgaged Property
is situated, to the highest bidder for cash, in order to pay the indebtedness
secured hereby and accrued interest thereon and insurance premiums, liens,
assessments, taxes and charges, including utility charges, if any, with accrued
interest thereon, and all expenses of the sale and of all proceedings in
connection therewith, including reasonable attorneys' fees actually incurred,
after advertising the time, place and terms of sale once a week for four (4)
weeks immediately preceding such sale (but without regard to the number of days)
in a newspaper in which Sheriff's sales are advertised in said county. At any
such public sale, Grantee may, but shall not be obligated to, execute and
deliver to the purchaser a conveyance of the Mortgaged Property or any part of
the Mortgaged Property in fee simple, with full warranties of title (or without
warranties if Grantee shall so elect) and to this end, Grantor hereby
constitutes and appoints Grantee the agent and attorney-in-fact of Grantor to
make such sale and conveyance, and thereby to divest Grantor of all right,
title, interest, equity and equity of redemption that Grantor may have in and to
the Mortgaged Property and to vest the same in the purchaser or purchasers at
such sale or sales, and all the acts and doings of said agent and
attorney-in-fact are hereby ratified and confirmed and any recitals in said
conveyance or conveyances as to facts essential to a valid sale shall be binding
upon Grantor. The aforesaid power of sale and agency hereby granted are coupled
with an interest and are irrevocable by dissolution, insolvency or otherwise,
are granted as cumulative of the other remedies provided hereby or by law for
collection of the indebtedness secured hereby and shall not be exhausted by one
exercise thereof but may be exercised until full payment of all indebtedness
secured hereby. In the event of any such foreclosure sale by Grantee, Grantor
shall be deemed a tenant holding over and shall forthwith deliver possession to
the purchaser or purchasers at such sale or be summarily dispossessed according
to provisions of law applicable to tenants holding over.

            3.3.2 Grantee may adjourn from time to time any sale by it to be
made under or by virtue of this Security Deed by announcement at the time and
place appointed for such sale or

                                       15
<PAGE>

for such adjourned sale or sales; and, except as otherwise provided by any
applicable provision of law, Grantee, without further notice or publication, may
make such sale at the time and place to which the same shall be so adjourned.

            3.3.3 Upon any sale made under or by virtue of this Section 3.3
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale),
Grantee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness the net sales price after deducting therefrom
the expenses of the sale and the costs of the action and any other sums which
Grantee is authorized to deduct under this Security Deed.

            3.3.4 No recovery of any judgment by Grantee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Grantor shall affect in any manner or to any extent, the lien and
title of this Security Deed upon the Mortgaged Property or any part thereof, or
any liens, titles, rights, powers or remedies of Grantee hereunder, but such
liens, titles, rights, powers and remedies of Grantee shall continue unimpaired
as before.

            3.3.5 Grantee is authorized, but shall not be obligated, to
foreclose this Security Deed subject to the rights of any tenants of the
Mortgaged Property, and the failure to make any such tenants parties to any such
foreclosure proceedings and to foreclose their rights will not be, nor be
asserted to be by Grantor, a defense to any proceedings instituted by Grantee to
collect the sums secured hereby.

            3.3.6 After deducting all costs, fees and expenses of Grantee and of
this Security Deed, including, without limitation, costs of evidence of title
and reasonable attorneys' fees of Grantee in connection with a sale, Grantee
shall apply the proceeds of such sale to payment of all sums expended under the
terms hereof not then repaid, with accrued interest at the Default Rate then to
the payment of all other sums then secured hereby and the remainder, if any, to
the person or persons legally entitled thereto.

            3.3.7 If any Event of Default occurs and is continuing, Grantee may,
either with or without entry or taking possession of the Mortgaged Property, and
without regard to whether or not the indebtedness and other sums secured hereby
shall be due and without prejudice to the right of Grantee thereafter to bring
an action or proceeding to foreclose or any other action for any default
existing at the time such earlier action was commenced, proceed by any
appropriate action or proceeding: (1) to enforce payment of the Obligations, to
the extent permitted by law, or the performance of any term hereof or any other
right; (2) to foreclose this Security Deed in any manner provided by law for the
foreclosure of mortgages or deeds of trust or deeds to secure debt on real
property and to sell, as an entirety or in separate lots or parcels, the
Mortgaged Property or any portion thereof pursuant to the laws of the State or
under the judgment or decree of a court or courts of competent jurisdiction, and
Grantee shall be entitled to recover in any such proceeding all costs and
expenses incident thereto, including reasonable attorneys' fees in such amount
as shall be awarded by the court; (3) to exercise any or all of the rights and
remedies available to it under the Secured Debt Documents; and (4) to pursue any
other remedy available

                                       16
<PAGE>

to it. Grantee may take action either by such proceedings or by the exercise of
its powers with respect to entry or taking possession, or both, as Grantee may
determine.

            3.3.8 The remedies described in this Section 3.3 may be exercised
with respect to all or any portion of the UCC Collateral, either simultaneously
with the sale of any real property encumbered hereby or independent thereof.
Grantee may at any time be permitted to proceed with respect to all or any
portion of the UCC Collateral in any manner permitted by the UCC. Grantor agrees
that Grantee's inclusion of all or any portion of the UCC Collateral in a sale
or other remedy exercised with respect to the real property encumbered hereby,
as permitted by the UCC, is a commercially reasonable disposition of such
property.

      3.4 Grantee's Right to Enter and Take Possession, Operate and Apply
Income.

            (a) If an Event of Default occurs and is continuing, Grantor, upon
demand of Grantee, shall forthwith surrender to Grantee the actual possession
and, if and to the extent permitted by law, Grantee itself, or by such officers
or agents as it may appoint, may enter and take possession of all of the
Mortgaged Property, including the Tangible Collateral, without liability for
trespass, damages or otherwise, and may exclude Grantor and its agents and
employees wholly therefrom and may have joint access with Grantor to the books,
papers and accounts of Grantor.

            (b) If an Event of Default has occurred and is continuing and
Grantor shall for any reason fail to surrender or deliver the Mortgaged Property
or any part thereof after Grantee's demand, Grantee may obtain a judgment or
decree conferring on Grantee the right to immediate possession or requiring
Grantor to deliver immediate possession of all or part of such property to
Grantee and Grantor hereby specifically consents to the entry of such judgment
or decree. Grantor shall pay to Grantee, upon demand, all costs and expenses of
obtaining such judgment or decree and reasonable compensation to Grantee, its
attorneys and agents, and all such costs, expenses and compensation shall, until
paid, be secured by the lien, security title and security interest of this
Security Deed.

            (c) Upon every such entering upon or taking of possession, Grantee
may hold, store, use, operate, manage and control the Mortgaged Property and
conduct the business thereof, and, from time to time and without being under any
duty to so act:

                  (1) make all necessary and proper maintenance, repairs,
renewals and replacements thereto and thereon, and all necessary additions,
betterments and improvements thereto and thereon and purchase or otherwise
acquire fixtures, personalty and other property in connection therewith;

                  (2) insure or keep the Mortgaged Property insured;

                  (3) manage and operate the Mortgaged Property and exercise all
the rights and powers of Grantor in their name or otherwise with respect to the
same;

                  (4) enter into agreements with others to exercise the powers
herein granted Grantee, all as Grantee from time to time may determine; and
shall apply the monies so received by Grantee in such priority as provided by
the Secured Debt Documents to (1) the payment

                                       17
<PAGE>

of interest and principal due and payable to the Grantee, (2) the deposits for
taxes and assessments and insurance premiums due, (3) the cost of insurance,
taxes, assessments and other proper charges upon the Mortgaged Property or any
part thereof; (4) the compensation, expenses and disbursements of the agents,
attorneys and other representatives of Grantee as allowed under this Security
Deed; and (5) any other charges or costs required to be paid by Grantor under
the terms of the Secured Debt Documents.

                  (5) rent or sublet the Mortgaged Property or any portion
thereof for any purpose permitted by this Security Deed.

            Grantee shall surrender possession of the Mortgaged Property to
Grantor (i) as may be required by law or court order, or (ii) when all amounts
under any of the terms of the Secured Debt Documents, including this Security
Deed, shall have been paid current and all Events of Default have been cured or
waived. The same right of taking possession, however, shall exist if any
subsequent Event of Default shall occur and be continuing.

      3.5 Separate Sales. To the extent permitted by law or Governmental Rule,
the Mortgaged Property may be sold in one or more parcels and in such manner and
order as Grantee, in its sole discretion, may elect, it being expressly
understood and agreed that the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.

      3.6 Waiver of Appraisement, Moratorium, Valuation, Stay, Extension and
Redemption Laws. Grantor agrees to the full extent permitted by law that if an
Event of Default occurs and is continuing, neither Grantor nor anyone claiming
through or under it shall or will set up, claim or seek to take advantage of any
appraisement, moratorium, valuation, stay, extension or redemption laws now or
hereafter in force, in order to prevent or hinder the enforcement or foreclosure
of this Security Deed or the absolute sale of the Mortgaged Property or any
portion thereof or the final and absolute putting into possession thereof,
immediately after such sale, of the purchasers thereof, and Grantor for itself
and all who may at any time claim through or under it, hereby waives, to the
full extent that it may lawfully so do, the benefit of all such laws, and any
and all right to have the assets comprising the Mortgaged Property marshaled
upon any foreclosure of the lien hereof and agrees that Grantee or any court
having jurisdiction to foreclose such lien may sell the Mortgaged Property in
part or as an entirety.

      3.7 Receiver. If an Event of Default occurs and is continuing, Grantee, to
the extent permitted by law, and without regard to the value, adequacy or
occupancy of the security for the indebtedness and other sums secured hereby,
shall be entitled as a matter of right, but shall not be obligated to, if it so
elects to the appointment of a receiver to enter upon and take possession of the
Mortgaged Property and to collect all earnings, revenues and receipts and apply
the same as the court may direct, and such receiver may be appointed by any
court of competent jurisdiction upon application by Grantee. To the extent
permitted by law, Grantee may have a receiver appointed without notice to
Grantor or any third party, and Grantee may waive any requirement that the
receiver post a bond. To the extent permitted by law, Grantee shall have the
power to designate and select the Person who shall serve as the receiver and to
negotiate all terms and conditions under which such receiver shall serve. To the
extent permitted by law, any receiver appointed on Grantee's behalf may be an
Affiliate of Grantee. The reasonable expenses, including receiver's

                                       18
<PAGE>

fees, reasonable attorneys' fees, costs and agents' compensation, incurred
pursuant to the powers herein contained shall be secured by this Security Deed.
The right to enter and take possession of and to manage and operate the
Mortgaged Property and to collect all earnings, revenues and receipts, whether
by a receiver or otherwise, shall be cumulative to any other right or remedy
available to Grantee under this Security Deed, the other Secured Debt Documents
or otherwise available to Grantee and may be exercised concurrently therewith or
independently thereof, but such rights shall be exercised in a manner which is
otherwise in accordance with and consistent with the Secured Debt Documents.
Grantee shall be liable to account only for such earnings, revenues and receipts
(including, without limitation, security deposits) actually received by Grantee,
whether received pursuant to this section or any other provision hereof.
Notwithstanding the appointment of any receiver or other custodian, Grantee
shall be entitled as pledgee to the possession and control of any cash,
deposits, or instruments at the time held by, or payable or deliverable under
the terms of this Security Deed to, Grantee.

      3.8 Suits to Protect the Mortgaged Property. Grantee shall have the power
and authority to institute and maintain any suits and proceedings as may be
advisable (a) to prevent any impairment of the Mortgaged Property by any acts
which may be unlawful or in violation of this Security Deed, (b) to preserve or
protect its interest in the Mortgaged Property, or (c) to restrain the
enforcement of or compliance with any legislation or other Legal Requirement
that may be unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order might impair the security
hereunder or be prejudicial to Grantee's interest

      3.9 Proofs of Claim. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceedings affecting Grantor, any Affiliate or any guarantor, co-maker
or endorser of any of Grantor's obligations, its creditors or its property,
Grantee, to the extent permitted by law, shall be entitled, but not obligated to
file such proofs of claim or other documents as may be necessary or advisable in
order to have its claims allowed in such proceedings for the entire amount due
and payable by Grantor under the Secured Debt Documents, at the date of the
institution of such proceedings, and for any additional amounts which may become
due and payable by Grantor after such date.

      3.10 Grantor to Pay Amounts Secured Hereby on Any Default in Payment;
Application of Monies by Grantee.

            (a) In case of a foreclosure sale of all or any part of the
Mortgaged Property and of the application of the proceeds of sale to the payment
of the sums secured hereby, to the extent permitted by law, the Secured
Debtholders shall be entitled to enforce payment from Grantor of any additional
amounts then remaining due and unpaid and to recover judgment against Grantor
for any portion thereof remaining unpaid, with interest at the Default Rate.

            (b) Grantor hereby agrees to the extent permitted by law, that no
recovery of any such judgment by the Secured Debtholders or other action by the
Secured Debtholders and no attachment or levy of any execution upon any of the
Mortgaged Property or any other property shall in any way affect the Lien and
security interest of this Security Deed upon the Mortgaged Property or any part
thereof or any Lien, rights, powers or remedies of Grantee hereunder, but such
Lien, rights, powers and remedies shall continue unimpaired as before.

                                       19
<PAGE>

            (c) Any monies collected or received by Grantee under this Section
3.10 shall be first applied to the payment of compensation, expenses and
disbursements of the agents, attorneys and other representatives of the Grantee
and the Secured Debtholders, and the balance remaining shall be applied as
provided in the Collateral Trustee Agreement.

      3.11 Delay or Omission; No Waiver. No delay or omission of Grantee or the
Secured Debtholders to exercise any right, power or remedy upon any Event of
Default shall exhaust or impair any such right, power or remedy or shall be
construed to waive any such Event of Default or to constitute acquiescence
therein. Every right, power and remedy given to Grantee whether contained herein
or in the other Secured Debt Documents or otherwise available to Grantee may be
exercised from time to time and as often as may be deemed expedient by Grantee.

      3.12 No Waiver of One Default to Affect Another. No waiver of any defaults
hereunder shall extend to or affect any subsequent or any other defaults then
existing, or impair any rights, powers or remedies consequent thereon. If
Grantee (a) grants forbearance or an extension of time for the payment of any
sums secured hereby; (b) takes other or additional security for the payment
thereof; (c) waives or does not exercise any right granted in this Security Deed
or any other Secured Debt Document; (d) releases any part of the Mortgaged
Property from the lien or security interest of this Security Deed or any other
instrument securing the Obligations; (e) consents to the filing of any map, plat
or replat of the Real Property or any part thereof; (f) consents to the granting
of any easement on the Real Property; or (g) makes or consents to any agreement
changing the terms of this Security Deed or any other Secured Debt Document
subordinating the lien or any charge hereof, no such act or omission shall
release, discharge, modify, change or affect the liability under this Security
Deed or any other Secured Debt Document or otherwise of Grantor, or any
subsequent purchaser of the Mortgaged Property or any part thereof or any maker,
co-signer, surety or guarantor with respect to any other matters not addressed
by such act or omission. No such act or omission shall preclude Grantee from
exercising any right, power or privilege herein granted or intended to be
granted in case of any Event of Default then existing or of any subsequent Event
of Default, nor, except as otherwise expressly provided in an instrument or
instruments executed by Grantee, shall the lien or security interest of this
Security Deed be altered thereby, except to the extent expressly provided in
such acts or omissions. In the event of the sale or transfer by operation of law
or otherwise of all or any part of the Mortgaged Property, Grantee, without
notice to any person, firm or corporation, is hereby authorized and empowered to
deal with any such vendee or transferee with reference to the Mortgaged Property
or the indebtedness secured hereby, or with reference to any of the terms or
conditions hereof, as fully and to the same extent as it might deal with the
original parties hereto and without in any way releasing or discharging any of
the liabilities or undertakings hereunder, or waiving its right to declare such
sale or transfer an Event of Default as provided herein. Notwithstanding
anything to the contrary contained in this Security Deed or any other Secured
Debt Document, (i) in the case of any non-monetary default, Grantee may continue
to accept payments due hereunder without thereby waiving the existence of such
or any other default and (ii) in the case of any monetary Event of Default,
Grantee may accept partial payments of any sums due hereunder without thereby
waiving the existence of such Event of Default if the partial payment is not
sufficient to completely cure such Event of Default.

      3.13 Discontinuance of Proceedings; Position of Parties Restored. If
Grantee shall have proceeded to enforce any right or remedy under this Security
Deed by foreclosure, entry of

                                       20
<PAGE>

judgment or otherwise and such proceedings shall have been discontinued or
abandoned for any reason, or such proceedings shall have resulted in a final
determination adverse to Grantee, then and in every such case Grantor and
Grantee shall be restored to their former positions and rights hereunder, and
all rights, powers and remedies of Grantee shall continue as if no such
proceedings had occurred or had been taken.

      3.14 Remedies Cumulative. Subject to the provisions of Section 4.15
hereof, no right, power or remedy, including without limitation remedies with
respect to any security for the Obligations, conferred upon or reserved to
Grantee by this Security Deed or any other Secured Debt Document is exclusive of
any other right, power or remedy, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or under any other Secured Debt
Document, now or hereafter existing at law, in equity or by statute, and Grantee
shall be entitled to resort to such rights, powers, remedies or security as
Grantee may deem advisable.

      3.15 Interest After Event of Default. If an Event of Default shall have
occurred and is continuing, all sums outstanding and unpaid under the Secured
Debt Documents, including this Security Deed, may bear interest at the Default
Rate until such Event of Default has been cured. Grantor's obligation to pay
such interest shall be secured by this Security Deed.

      3.16 Foreclosure; Expenses of Litigation. If Grantee forecloses,
reasonable attorneys' fees for services in the supervision of said foreclosure
proceeding shall be allowed to the Grantee as part of the foreclosure costs. In
the event of foreclosure of the lien hereof, there shall be allowed and included
as additional indebtedness all reasonable expenditures and expenses which may be
paid or incurred by or on behalf of Grantee for attorneys' fees, appraisers'
fees, outlays for documentary and expert evidence, stenographers' charges,
publication costs, and costs (which may be estimated as to items to be expended
after foreclosure sale or entry of the decree) of procuring all such abstracts
of title, title searches and examinations, title insurance policies and
guarantees, and similar data and assurances with respect to title as are
necessary either to prosecute such suit or to evidence to a bidder at any sale
which may be had pursuant to such decree the true condition of the title to or
the value of the Mortgaged Property or any portion thereof. All expenditures and
expenses of the nature in this section mentioned, and such expenses and fees as
may be incurred in the protection of the Mortgaged Property and the maintenance
of the lien and security interest of this Security Deed, including the
reasonable fees of any attorney employed by Grantee in any litigation or
proceeding affecting this Security Deed or any other Secured Debt Document, the
Mortgaged Property or any portion thereof, including, without limitation, civil,
probate, appellate and bankruptcy proceedings, or in preparation for the
commencement or defense of any proceeding or threatened suit or proceeding,
shall be immediately due and payable by Grantor, with interest thereon at the
Default Rate, and shall be secured by this Security Deed. Grantee waives its
right to any statutory fee in connection with any judicial or nonjudicial
foreclosure of the lien hereof and agrees to accept a reasonable fee for such
services.

      3.17 Deficiency Judgments. If after foreclosure of this Security Deed,
there shall remain any deficiency with respect to any amounts payable under the
Secured Debt Documents, including hereunder, or any amounts secured hereby, and
Grantee may institute any proceedings to recover such deficiency or
deficiencies, all such amounts shall continue to bear interest at the Default
Rate.

                                       21
<PAGE>

Grantor waives any defense to Grantee's recovery against Grantor of any
deficiency after any foreclosure sale of the Mortgaged Property. To the extent
permitted by law, Grantor expressly waives any defense or benefits that may be
derived from any statute granting Grantor any defense to any such recovery by
Grantee. In addition, Grantee shall be entitled to recovery of all of its
reasonable costs and expenditures (including without limitation any court
imposed costs) in connection with such proceedings, including their reasonable
attorneys' fees, appraisal fees and the other costs, fees and expenditures
referred to in Section 3.16 above. This provision shall survive any foreclosure
or sale of the Mortgaged Property, any portion thereof and/or the extinguishment
of the lien hereof.

      3.18 Waiver of Jury Trial. Grantee and Grantor each waive any right to
have a jury participate in resolving any dispute whether sounding in contract,
tort or otherwise arising out of, connected with, related to or incidental to
the relationship established between them in connection with this Security Deed
or any other Secured Debt Document. Any such disputes shall be resolved in a
bench trial without a jury.

      3.19 Exculpation of Grantee. The acceptance by Grantee of the assignment
contained herein with all of the rights, powers, privileges and authority
created hereby shall not, prior to entry upon and taking possession of the
Mortgaged Property by Grantee, be deemed or construed to make Grantee a
"mortgagee in possession"; nor thereafter or at any time or in any event
obligate Grantee to appear in or defend any action or proceeding relating to the
Mortgaged Property, nor shall Grantee, prior to such entry and taking, be liable
in any way for any injury or damage to person or property sustained by any
Person in or about the Mortgaged Property.

                               ARTICLE 4 - GENERAL

      4.1 Discharge. When all of the Obligations shall have been paid in full,
then this Security Deed and the lien and security interest created hereby shall
be of no further force and effect, Grantor shall be released from the covenants,
agreements and obligations of Grantor contained in this Security Deed and all
right, title and interest in and to the Mortgaged Property shall revert to
Grantor. Grantee, at the request and the expense of Grantor, shall promptly
execute a deed of reconveyance and such other documents as may be reasonably
requested by Grantor to evidence the discharge and satisfaction of this Security
Deed and the release of Grantor from its obligations hereunder.

      4.2 No Waiver. The exercise of the privileges granted in this Security
Deed to perform Grantor's obligations under the agreements which constitute the
Mortgaged Property shall in no event be considered or constitute a waiver of any
right which Grantee may have at any time, after an Event of Default shall have
occurred and be continuing, to declare the Obligations to be immediately due and
payable. No delay or omission to exercise any right, remedy or power accruing
upon any default shall impair any such right, remedy or power or shall be
construed to be a waiver of any such default or acquiescence therein; and every
such right, remedy and power may be exercised from time to time and as often as
may be deemed expedient.

      4.3 Extension, Rearrangement or Renewal of Obligations. It is expressly
agreed that any of the Obligations at any time secured hereby may be from time
to time extended for any

                                       22
<PAGE>

period, or with the consent of Grantor rearranged or renewed, and that any part
of the security herein described, or any other security for the Obligations, may
be waived or released, without altering, varying or diminishing the force,
effect or lien or security interest of this Security Deed; and the lien and
security interest granted by this Security Deed shall continue as a prior lien
and security interest on all of the Mortgaged Property not expressly so
released, until the Obligations are fully paid and this Security Deed is
terminated in accordance with the provisions hereof; and no other security now
existing or hereafter taken to secure the payment of the Obligations or any part
thereof or the performance of any obligation or liability of Grantor whatever
shall in any manner impair or affect the security given by this Security Deed;
and all security for the payment of the Obligations or any part thereof and the
performance of any obligation or liability shall be taken, considered and held
as cumulative.

      4.4 Forcible Detainer. Grantor agrees for itself and all Persons claiming
by, through or under it, that subsequent to foreclosure hereunder in accordance
with this Security Deed and applicable law if Grantor shall hold possession of
the Mortgaged Property or any part thereof, Grantor or the Persons so holding
possession shall be guilty of trespass; and any such Person (including Grantor)
failing or refusing to surrender possession upon demand shall be guilty of
forcible detainer and shall be liable to Grantee or any purchaser in
foreclosure, as applicable, for reasonable rental on said premises, and shall be
subject to eviction and removal in accordance with law.

      4.5 Waiver of Stay or Extension. To the extent permitted to be waived by
law, Grantor shall not at any time insist upon or plead or in any manner
whatever claim the benefit or advantage of any stay, extension or moratorium law
now or at any time hereafter in force in any locality where the Mortgaged
Property or any part thereof may or shall be situated, nor shall Grantor claim
any benefit or advantage from any law now or hereafter in force providing for
the valuation or appraisement of the Mortgaged Property or any part thereof
prior to any sale thereof to be made pursuant to any provision of this Security
Deed or to a decree of any court of competent jurisdiction, nor after any such
sale shall Grantor claim or exercise any right conferred by any law now or at
any time hereafter in force to redeem the Mortgaged Property so sold or any part
thereof; and Grantor hereby expressly waives all benefit or advantage of any
such law or laws and the appraisement of the Mortgaged Property or any part
thereof, and covenants that Grantor shall not hinder or delay the execution of
any power herein granted and delegated to Grantee but that Grantor shall permit
the execution of every such power as though no such law had been made.

      4.6 Notices. Except where certified or registered mail notice is required
by applicable law, any notice to Grantor or Grantee required or permitted
hereunder shall be deemed to be given when given in the manner prescribed in the
Collateral Trust Agreement.

      4.7 Severability. All rights, powers and remedies provided herein may be
exercised only to the extent that the exercise thereof does not violate any
applicable law, and are intended to be limited to the extent necessary so that
they will not render this Security Deed invalid, unenforceable or not entitled
to be recorded, registered or filed under any applicable law. In the event any
term or provision contained in this Security Deed is in conflict, or may
hereafter be held to be in conflict, with the laws of the State or of the United
States of America, this Security Deed

                                       23
<PAGE>

shall be affected only as to such particular term or provision, and shall in all
other respects remain in full force and effect.

      4.8 Application of Payments. In the event that any part of the Obligations
cannot lawfully be secured hereby, or in the event that the lien and security
interest hereof cannot be lawfully enforced to pay any part of the Obligations,
or in the event that the lien or security interest created by this Security Deed
shall be invalid or unenforceable as to any part of the Obligations, then all
payments on the Obligations shall be deemed to have been first applied to the
complete payment and liquidation of that part of the Obligations which is not
secured by this Security Deed and the unsecured portion of the Obligations shall
be completely paid and liquidated prior to the payment and liquidation of the
remaining secured portion of the Obligations.

      4.9 GOVERNING LAW. THIS SECURITY DEED IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.

      4.10 Amendments. This Security Deed may be amended, supplemented or
otherwise modified only by an instrument in writing signed by Grantor and
Grantee.

      4.11 Successors and Assigns. All terms of this Security Deed shall run
with the land and bind each of Grantor and Grantee and their respective
successors and assigns, and all Persons claiming under or through Grantor or
Grantee, as the case may be, or any such successor or assign, and shall inure to
the benefit of Grantee and Grantor, and their respective successors and assigns.

      4.12 Renewal, Etc. To the extent permitted under the other Secured Debt
Documents, Grantee may, but shall not be obligated to, at any time and from time
to time renew or extend this Security Deed, or alter or modify the same in any
way, or waive any of the terms, covenants or conditions hereof in whole or in
part and may release any portion of the Mortgaged Property or any other
security, and grant such extensions and indulgences in relation to the
Obligations as Grantee may determine, without the consent of any junior lienor
or encumbrancer and without any obligation to give notice of any kind thereto
and without in any manner affecting the priority of the lien and security
interest hereof on any part of the Mortgaged Property; provided that nothing in
this Section 4.12 shall grant Grantee the right to alter or modify the Security
Deed without the consent of the Grantor unless otherwise specifically permitted
in this Security Deed.

      4.13 Future Advances. It is understood and agreed that this Security Deed
secures, among other things, (i) the Priority Lien Debt (including future
advances to be made with respect thereto), and all other Obligations of Grantor
under the Priority Lien Documents; (ii) the Parity Lien Debt (including future
advances to be made with respect thereto), and all other Obligations of Grantor
under the Parity Lien Documents; (iii) all Obligations under any other Priority
Lien Debt or Parity Lien Debt; (iv) any sums advanced or expenses or costs
incurred by Grantee or any Secured Debtholder, or by any receiver appointed
hereunder, which are made or incurred pursuant to, or permitted by, the terms
hereof, plus interest thereon at the rate therein specified or otherwise agreed
upon, from the date of the advances or the incurring of such expenses or costs
until reimbursed; (v) any and all other indebtedness of Grantor to Grantee now
or hereafter owing, whether direct or indirect, primary or secondary, fixed or
contingent, joint or several, regardless of how evidenced or

                                       24
<PAGE>

arising, where the indebtedness provides that it is secured hereby; and (vi) any
extensions, refinancings, modifications or renewals of all such indebtedness
described in subparagraphs (i) through (iv) above, whether or not Grantor
executes any extension agreement or renewal instrument, and that the lien of any
such future advances shall relate to the date of this Security Deed.

      4.14 Liability. Notwithstanding any provision in this Security Deed to the
contrary, none of Grantee or any Secured Debt Representative or any of their
agents shall be liable for any error of judgment or act done in good faith, or
be otherwise responsible or accountable under any circumstances whatsoever. None
of Grantee or any Secured Debt Representative or any of their agents shall be
personally liable in case of entry by them, or anyone entering by virtue of the
powers herein granted them, upon the Mortgaged Property for debts contracted or
liability or damages incurred in the management or operation of the Mortgaged
Property. Such persons shall have the right to rely on any instrument, document
or signature authorizing or supporting any action taken or proposed to be taken
by them hereunder, believed by them in good faith to be genuine. Grantee or any
Secured Debt Representative or any of their agents shall be entitled to
reimbursement for expenses incurred by them in the performance of their duties
hereunder and to reasonable compensation for such of their services hereunder as
shall be rendered. Grantor will, from time to time, pay the compensation due
hereunder and reimburse such parties for, and save them harmless against, any
and all liability and expenses which may be incurred by them in the performance
of their duties.

      4.15 Severability and Compliance With Usury Law. The Secured Debt
Documents are intended to be performed in accordance with, and only to the
extent permitted by, all applicable Applicable Laws and Legal Requirements. If
any provision of any of the Secured Debt Documents or the application thereof to
any person or circumstance shall, for any reason and to any extent, be invalid
or unenforceable, neither the remainder of the instrument in which such
provision is contained, nor the application of such provision to other persons
or circumstances, nor the other instruments referred to hereinabove, shall be
affected thereby, but rather shall be enforceable to the greatest extent
permitted by law. It is expressly stipulated and agreed to be the intent of
Grantor at all times to comply with the applicable State law governing the
maximum rate or amount of interest payable on or in connection with the
Obligations. If the Applicable Law is ever judicially interpreted so as to
render usurious any amount called for under the Secured Debt Documents, or
contracted for, charged, taken, reserved or received with respect to the
extension of credit evidenced by the Secured Debt Documents or if acceleration
of the maturity of the Obligations or if any prepayment by Grantor results in
Grantor having paid any interest in excess of that permitted by law, then it is
Grantor's express intent that all excess amounts theretofore collected by
Grantee be credited on the principal balance due under the Secured Debt
Documents (or, if the Secured Debt Documents have been or would thereby be paid
in full, refunded to Grantor), and the provisions of the Secured Debt Documents
immediately be deemed reformed and the amounts thereafter collectible thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder. The right to accelerate
maturity of Obligations does not include the right to accelerate any interest
which has not otherwise accrued on the date of such acceleration, and Grantee
may not collect any unearned interest in the event of acceleration. All sums
paid or agreed to be paid to Grantee for the use, forbearance or detention of
the Obligations

                                       25
<PAGE>

may, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of the Obligations until payment
in full so that the rate or amount of interest on account of the Obligations
does not exceed the applicable usury ceiling.

      4.16 Release of Collateral. Notwithstanding any provision herein to the
contrary, the Mortgaged Property or any part thereof shall be released from the
security interest created by this Mortgage in accordance with the provisions of
the Collateral Trust Agreement.

      4.17 Time of the Essence. Grantor acknowledges that time is of the essence
in performing all of Grantor's obligations set forth herein.

      4.18 Counterpart Execution. This Security Deed may be executed by the
parties hereto in any number of counterparts (and be each of the parties hereof
on separate counterparts), each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.

      4.19 WAIVER OF GRANTOR'S RIGHTS. BY EXECUTION OF THIS SECURITY DEED AND BY
INITIALING THIS SECTION 4.19, GRANTOR EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT TO
ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE NOTES AND THE POWER OF ATTORNEY
GIVEN HEREIN TO GRANTEE TO SELL THE MORTGAGED PROPERTY BY NONJUDICIAL
FORECLOSURE UPON DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY
NOTICE (EXCEPT AS OTHERWISE PROVIDED HEREIN); (B) EXCEPT TO THE EXTENT PROVIDED
OTHERWISE HEREIN, WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE UNDER THE
CONSTITUTION OF THE UNITED STATES (INCLUDING THE FIFTH AND FOURTEENTH AMENDMENTS
THEREOF), THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR
BY REASON OF ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR
TO THE EXERCISE BY GRANTEE OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO GRANTEE;
(C) ACKNOWLEDGES THAT GRANTOR HAS READ THIS SECURITY DEED AND ITS PROVISIONS
HAVE BEEN EXPLAINED FULLY TO GRANTOR AND GRANTOR HAS CONSULTED WITH COUNSEL OF
GRANTOR'S CHOICE PRIOR TO EXECUTING THIS SECURITY DEED; AND (D) ACKNOWLEDGES
THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY,
INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART OF A BARGAINED FOR LOAN
TRANSACTION:

                              INITIALED BY GRANTOR:

                     ______________________________________

                        By:______________________________

                                       26
<PAGE>

      4.20 Attorneys' Fees. Notwithstanding anything contained herein to the
contrary, (i) "reasonable attorneys' fees" are not, and shall not be, statutory
attorneys' fees under the Official Code of Georgia Annotated ("O.C.G.A"), (ii)
if, under any circumstances Grantor is required hereunder to pay any or all of
Grantee's attorneys' fees and expenses, Grantor shall be responsible only for
actual legal fees and out of pocket expenses actually incurred by Grantee at
customary hourly rates for the work done, and (iii) Grantor shall not be liable
under any circumstances for additional attorneys' fees or expenses under the
O.C.G.A Section 13-1-11.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       27
<PAGE>

                                                                     AUGUSTA, GA

      IN WITNESS WHEREOF, Grantor has caused this Security Deed to be duly
executed under seal and delivered as of the day and year first above written.

Signed, sealed and delivered            GRANTOR:
in the presence of:

                                        CALPINE CORPORATION,
______________________________          a Delaware corporation
Witness

                                        By:   ___________________________
________________________                Name:
Notary Public                           Title:

My Commission Expires

________________________
[NOTARY SEAL]

[corporate seal]

<PAGE>

                                                                     AUGUSTA, GA

                                    EXHIBIT A

                               (LEGAL DESCRIPTION)

<PAGE>

                                                                     AUGUSTA, GA

                                   EXHIBIT B

                          (ACCESS EASEMENT DESCRIPTION)

      All that tract or parcel of land situate, lying in the 86th G.M.D. of
Richmond County, Georgia, designated as "INGRESS-EGRESS EASEMENT (0.99 AC.)" on
a plat dated June 15, 2000 (last revised on October 3, 2001) by Cranston,
Robertson & Whitehurst, P.C. for AUGUSTA ENERGY LLC, AUGUSTA ENERGY CENTER. Said
access easement has a uniform width of Fifty (50') feet and begins on the
Northern boundary of an UNNAMED ROAD (C.R. #1028-having a 60' Right of Way) as
much UNNAMED ROAD is extended in a Westerly direction from its intersection with
Columbia Nitrogen Drive to and over the property now or formerly of DSM
CHEMICALS NORTH AMERICA, INC. and from said Northern boundary extends in a
Southerly direction over said uniform width of Fifty feet to the intersection of
the Northern boundary of the property designated as "COGENERATION PLANT SITE
22.02 AC." on the aforesaid plat to which reference is made by incorporation
herein for a more accurate description of the metes bounds and location of the
said Easement.

                         LAYDOWN YARD "A" EASEMENT AREA
                              (GRAVEL AREA=4.16 AC)

      All that tract or parcel of land situate, lying and being in the 86th
G.M.D. of Richmond County, Georgia known and designated as "LAYDOWN YARD "A"
EASEMENT AREA" (GRAVEL AREA = 4.16 AC) on a plat dated June 15, 2000 (last
revised on October 3, 2001) by Cranston, Robertson & Whitehurst, P.C. for
AUGUSTA ENERGY LLC, AUGUSTA ENERGY CENTER, to which plat reference is made by
incorporation herein for a more accurate description of the metes, bounds and
location of said Easement.

                         LAYDOWN YARD "B" EASEMENT AREA
                            (GRAVEL AREA = 12.80 AC.)

      All that tract or parcel of land situate, lying and being in the 86th
G.M.D. of Richmond County, Georgia known and designated as "LAYDOWN YARD "B"
EASEMENT AREA" (GRAVEL AREA = 12.80 AC.) on a plat dated June 15, 2000 (last
revised on October 3, 2001) by Cranston, Robertson & Whitehurst, P.C. for
AUGUSTA ENERGY LLC, AUGUSTA ENERGY CENTER, to which plat reference is made by
incorporation herein for a more accurate description of the metes, bounds and
location of said Easement.

                             (30' GAS LINE EASEMENT)

      All that tract or parcel of land situate lying and being in the 86th
G.M.D. of Richmond County, Georgia known and designated as "Proposed 30' Gas
Line Easement" on a plat dated June 15, 2000 (last revised on October 3, 2001)
by Cranston, Robertson, & Whitehurst, P.C. to which plat reference is made by
incorporation herein for a more accurate description of the

                                       28
<PAGE>

metes, bounds and location of said Easement. Said Easement is located within the
bounds of that parcel of land shown on the aforesaid plat as "Lay Down Yard "B"
Easement Area" and extends from the southern boundary of the "90' Southern
Natural Gas Easement" in a southerly direction to its intersection with the
northern boundary of the "Cogeneration Plant site 22.02 Ac." all as shown on the
aforesaid plat. The purpose of this easement is to provide access to Natural Gas
supply and service from said pipeline to the Cogeneration Plant to be
constructed on said 22.02 acre tract.

                            (EASEMENT FOR PIPE RACK)

      All that tract or parcel of land situate, lying and being in the 86th
G.M.D. of Richmond County, Georgia, designated as "EASEMENT FOR PIPE RACK" on a
plat dated June 15, 2000 (last revised on October 3, 2001) by Cranston,
Robertson & Whitehurst, P.C. for AUGUSTA ENERGY LLC, AUGUSTA ENERGY CENTER. Said
Easement is 75 feet in width and begins on the Eastern Boundary of the
COGENERATION PLANT SITE-22.02 AC, as shown on the aforesaid plat and extents in
an Easterly Direction to the property of DSM CHEMICALS NORTH AMERICA, INC.
located on the Eastern right of way of. Columbia Nitrogen Drive. Reference is
made to the aforesaid plat which is incorporated herein for a more accurate
description of the metes, bounds and location of said Easement.

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