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                               SECURITY AGREEMENT

     This SECURITY AGREEMENT (this "AGREEMENT") is dated as of March 22, 2002,
among DYNEGY MARKETING AND TRADE, a Colorado general partnership ("GRANTOR");
CHEVRON U.S.A. INC., a Pennsylvania corporation ("CUSA"); TEXACO EXPLORATION AND
PRODUCTION INC., a Delaware corporation ("TEPI"); TEXACO NATURAL GAS INC., a
Delaware corporation ("TNGI"); and CUSA as collateral agent for itself and for
TEPI, TNGI, and each other Person, if any, that becomes a "PRODUCER" under the
terms of the Gas Sales Agreement (as hereinafter defined) (in such capacity,
together with its successors in such capacity, the "COLLATERAL AGENT"). CUSA,
TEPI, TNGI, and each other Person, if any, so becoming such a Producer, are
hereinafter referred to as the "PRODUCERS," and CUSA, TEPI, TNGI, each such
other Producer, and the Collateral Agent are hereinafter referred to as the
"SECURED PARTIES."

                                    RECITALS:

     Reference is made to the Natural Gas Purchase and Sale Agreement dated as
of March 1, 2002, among Grantor and the Producers (as amended, supplemented or
otherwise modified from time to time, the "GAS SALES AGREEMENT").

     Pursuant to Section 7.8.2 of the Gas Sales Agreement, Grantor has agreed to
enter into this Agreement granting the Security Interest (as defined herein).

     Accordingly, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, Grantor and Secured Parties agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

     SECTION 1.1 DEFINITION OF TERMS USED HEREIN.

     (a)  Unless the context otherwise requires, all capitalized terms used
herein but not defined herein shall have the meanings set forth in the Gas Sales
Agreement.

     (b)  As used herein, the following terms shall have the following meanings:

     "ACCOUNT AGREEMENT" shall mean the Gas Deposit Account Agreement of even
date herewith among Grantor, the Collateral Agent and Bank or any similar
agreement entered into by Grantor and the Collateral Agent with any Bank and
approved in writing by the Collateral Agent (such approval not to be
unreasonably withheld or delayed).

     "ACCOUNT DEBTOR" shall mean any Person who is or who may become obligated
to Grantor under, with respect to or on account of a Gas Receivable Right.

     "ADDITIONAL SECURITY" shall mean, at any time, the sum of (i) the funds
then held in the Cash Collateral Account, and (ii) the aggregate undrawn and
available amount of all Qualifying Posted Security then held by the Collateral
Agent.

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     "AFFILIATE" shall mean, with respect to any Person, any other Person that
is in control or under the control of, or under common control with, such
Person. For purposes of the foregoing, "control", with respect to any Person,
means the ownership, directly or indirectly, of a majority of the capital stock,
partner interests, limited liability company interests, or other ownership or
equity interests of such Person, or the possession, directly or indirectly, of
the power to elect a majority of the board of directors or other governing body
of such Person, whether through ownership of voting securities or by contract or
otherwise, if in any such case the assets, liabilities and financial results of
such Person would be included in consolidated financial statements of the
controlling Person prepared in accordance with generally accepted accounting
principles.

     "ALTERNATE SECURITY ARRANGEMENT" shall mean the arrangement described in
Section 7.8.3 of the Gas Sales Agreement pursuant to which Grantor is required
to provide certain letters of credit and/or surety bonds in accordance with the
terms and conditions set forth therein.

     "BANK" shall mean Bank One, NA (Chicago), its successors and assigns and
any other banking institution designated by Grantor and approved in writing by
the Collateral Agent (such approval not to be unreasonably withheld or delayed).

     "BUSINESS DAY" shall mean a day (other than a Saturday or Sunday) on which
banks generally are open for the conduct of business in Houston, Texas, New
York, New York, and in the city where the Designated Gas Account and Cash
Collateral Account are maintained with the Bank.

     "CASH COLLATERAL ACCOUNT" shall mean the deposit account at Bank under the
dominion and control of the Collateral Agent as provided in Section 6.1(b) in
which funds may from time to time be on deposit as provided in Section 6.1(b).

     "CASH COLLATERAL ACCOUNT AGREEMENT" shall mean the Cash Collateral Account
Agreement of even date herewith among Grantor, the Collateral Agent and Bank or
any similar agreement entered into by Grantor and the Collateral Agent with any
Bank and approved in writing by the Collateral Agent (such approval not to be
unreasonably withheld or delayed).

     "CASH COLLATERAL ACCOUNT INVESTMENT PROPERTY" shall mean, collectively, all
rights, title and interests of Grantor in and to the following property in which
funds in the Cash Collateral Account may from time to time be invested pursuant
to the Sweep Agreement: (i) interests and accounts in mutual funds, (ii)
interests and accounts in U.S. dollar time deposits maintained at an offshore
branch of Bank, (iii) repurchase agreements in respect of government securities,
(iv) all other financial assets in which such funds may be invested from time to
time, and (v) each securities account and security entitlement associated with
any of the foregoing property (as the terms "financial assets", "securities
account" and "security entitlement" are defined in the UCC).

     "CASH COLLATERAL EVENT" shall have the meaning specified in Section 6.1.

     "COLLATERAL" shall mean, collectively, (a) all Gas Receivables and all
other Gas Receivable Rights, (b) the Gas Accounts, together with all funds and
other property from time to time held therein or credited thereto, (c) the
Lockbox Agreement (to the extent (but only to the extent) relating to any Gas
Account), (d) the Cash Collateral Account, together with all funds

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and other property from time to time held therein or credited thereto, (e) the
Cash Collateral Account Investment Property, (f) the Sweep Agreement, and (g)
Proceeds.

     "COLLATERAL AGENT" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.

     "COLLECTIONS" shall mean all cash, checks, notes, instruments and other
items of payment (including insurance proceeds, proceeds of cash sales and tax
refunds) in respect of any portions of the Collateral.

     "CUSA" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.

     "DESIGNATED GAS ACCOUNT" shall mean the deposit account at Bank that is
subject to the Account Agreement.

     "ELIGIBLE GAS RECEIVABLES" shall mean, at any time, that portion of the Gas
Receivables consisting of trade accounts receivable actually owing at such time
(including, without limitation, accounts receivable in respect of natural gas
that has been actually delivered at such time and will thereafter become due) to
the Grantor by its Qualifying Account Debtors at such time, provided that such
Gas Receivables are at such time subject to a duly perfected, first priority
security interest and lien in favor of the Collateral Agent, subject only to any
Permitted Liens, and after deducting therefrom (x) the portion thereof (but only
the portion thereof), if any, that is subject at such time to any dispute,
counterclaim, defense or right of setoff or deduction (including any discount or
allowance), and (y) any amounts owing that are subject to Liens at such time as
described in clause (b) of the definition of Permitted Liens as set forth herein
(other than any such Lien held by any Secured Party), but excluding, however, in
any event, any such Gas Receivable (except for any Gas Receivable owed by any
Producer or such Producer's Affiliate) or portion thereof:

          (i)   that is at such time more than 60 days past due or more than 90
     days past original invoice or other billing date;

          (ii)  that is owed by an Account Debtor from which the total Gas
     Receivables owed (in face amount) at such time represent more than 12% of
     all Gas Receivables at such time (but only to the extent of the Gas
     Receivables in excess of such percentage), unless the Collateral Agent
     consents (in its sole discretion) in writing to the inclusion of such
     excess;

          (iii) for which cash has been deposited in advance of delivery of the
     natural gas;

          (iv)  that at such time (a) is evidenced by any chattel paper or
     instrument of any kind unless (x) such chattel paper or instrument has been
     delivered to the Collateral Agent, duly endorsed "without recourse or
     warranty" as the same is required by Section 4.5 and (y) the Collateral
     Agent has consented (in its sole discretion) in writing to the inclusion
     thereof, or (b) has been reduced to judgment;

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          (v)   that is subject at such time to an agreement with the Account
     Debtor to extend the time of payment thereof beyond the period set forth in
     clause (i) of this definition;

          (vi)  that is owed by an Account Debtor organized or located outside
     the United States of America or any Province of Canada (but excluding the
     Province of Quebec), unless such Gas Receivable is supported by one or more
     letters of credit issued or confirmed by a bank acceptable to the
     Collateral Agent and that are in form and substance acceptable to the
     Collateral Agent and payable in the full amount of such Gas Receivable in
     freely convertible U.S. dollars at a place of payment within the United
     States and which constitute "supporting obligations" (within the meaning of
     the UCC) with respect to such Gas Receivable; or

          (vii) the Account Debtor with respect to which is the subject (as
     debtor) of any voluntary or involuntary case or proceeding under any
     bankruptcy, insolvency or other similar law or as to which a trustee,
     receiver, liquidator, custodian or other similar official has been
     appointed for it or for any substantial part of its property, unless such
     Gas Receivable is a post-petition account payable of an Account Debtor that
     is then the subject (as debtor) of any Chapter 11 proceeding under the
     Bankruptcy Code.

     "GAS ACCOUNTS" shall mean, collectively, the Designated Gas Account and any
other deposit accounts, whether maintained at any Bank or any other bank or
financial institution, into which the Grantor has expressly instructed any
Account Debtor to deposit any Collections.

     "GAS RECEIVABLE RIGHTS" shall mean all Gas Receivables, together with all
rights, title and interests of Grantor in any security and other "supporting
obligations" (as defined in the UCC) therefor, including guarantees, letters of
credit, and surety bonds with respect thereto, and including any rights of
stoppage in transit, replevin, reclamation and resale, and all related security
interests, liens and pledges, whether voluntary or involuntary, in any property
given as security therefor, in each case whether now existing or owned or
hereafter arising or acquired.

     "GAS RECEIVABLES" shall mean, at any time, any and all rights, title and
interests of Grantor to payment (other than payment from West Coast Power, L.P.
or any successor or assign thereof or wholly-owned subsidiary thereof) for sales
by Grantor of natural gas for physical delivery to an Account Debtor or to a
non-affiliated intermediary for delivery to an Account Debtor, together with
related products and services in respect of such sales, including but not
limited to, transportation fees, gathering fees and associated gas delivery
services, whether nor not earned by performance, including any such rights,
title and interests evidenced by chattel paper or any instrument of any kind, in
each case whether due or to become due, whether or not then subject to any
invoice or billing statement from Grantor, and whether now or hereafter acquired
or arising in the future, including any such payments due from Affiliates of
Grantor or any Secured Party.

     "GAS RECEIVABLES REPORT" shall have the meaning assigned to such term in
Section 4.10(a).

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     "GAS SALES AGREEMENT" shall have the meaning assigned to such term in the
recitals to this Agreement.

     "GOVERNMENTAL ENTITY" shall mean any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory body, agency,
department, commission, board, bureau, or other governmental authority or
instrumentality (domestic or foreign) with jurisdiction over the matter in
question.

     "GRANTOR" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.

     "GRANTOR REPORT DATE" shall mean the Scheduled Report Date, and the
effective date of any optional Gas Receivables Report submitted by Grantor
pursuant to Section 4.10(a), as the case may be.

     "LIEN" shall mean any mortgage, pledge, lien, encumbrance, charge, or other
security interest.

     "LOCKBOX AGREEMENT" shall mean the Service Agreement, dated January 26,
1998, between The First National Bank of Chicago (now known as Bank One, NA) and
Natural Gas Clearinghouse (referred to therein as NGC Corp.; now known as Dynegy
Holdings Inc.) and all "Subsidiaries" and "Affiliates" (as such terms are
defined therein).

     "MATERIAL COVENANT BREACH" shall mean, at any time, any breach or failure
by Grantor to perform or observe (i) any covenant or agreement in Section
4.1(a), 4.3(b), or 4.8, or (ii) any other covenant or agreement contained in
this Agreement (but excluding covenants in respect of delivery of Gas
Receivables Reports) where the Gas Receivables or portions thereof that are
Materially Affected in respect of such breach or failure exceed 5% of the
Eligible Gas Receivables at such time, and in the case of any such breach or
failure described in clause (i) or (ii), such breach or failure continues for a
period longer than 10 days after the Collateral Agent has given Grantor written
notice thereof.

     "MATERIAL REPRESENTATION BREACH" shall mean, as of any Representation Date,
(i) the failure of the representations and warranties in Section 3.1 and 3.2 to
be true and correct in all material respects or (ii) except as may be
specifically disclosed on any Gas Receivables Report delivered to the Collateral
Agent pursuant to Section 4.10, the failure of the representations and
warranties in Section 3.3, 3.4 or 3.5 to be true and correct where the Gas
Receivables or portions thereof that are Materially Affected in respect of such
failure exceed 5% of the Eligible Gas Receivables at such time.

     "MATERIALLY AFFECTED" shall mean with respect to a Gas Receivable or any
portion thereof, where as a result of any event, circumstance, condition,
obligation, requirement or restriction that is the subject of a representation,
warranty, covenant, or agreement hereunder, (i) such Gas Receivable or portion
thereof does not qualify as an Eligible Gas Receivable hereunder, (ii) the
Security Interest in such Gas Receivable or portion thereof is not a valid,
perfected Lien thereon, (iii) such Gas Receivable or portion thereof is subject
to any other Lien (excluding any Permitted Lien), (iv) such Gas Receivable or
portion thereof has been the subject of any actual or purported sale, transfer,
assignment or other disposition by Grantor (excluding

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any Permitted Lien), (v) the validity, enforceability, collectibility or value
of such Gas Receivable or portion thereof has been impaired, or (vi) such Gas
Receivable or portion thereof is not supported by Grantor's books and records.

     "MONTH" shall mean a calendar month.

     "NETTING AGREEMENT" shall mean any agreement between or among one or more
of Grantor and its Affiliates and one or more of the Producers and their
respective Affiliates, which agreement by its terms expressly provides that it
is to be deemed a "Netting Agreement" for purposes of this Agreement.

     "OBLIGATIONS" shall mean, collectively, without duplication:

          (i)   the Payment Obligations;

          (ii)  the obligations of Grantor to pay any other amounts due or to
     become due to any Secured Party under the Gas Sales Agreement; and

          (iii) the obligations of Grantor to pay to the Collateral Agent or any
     other Secured Party any amounts due under the terms of this Agreement or
     any other Security Document, in each case whenever existing or arising.

     "OTHER GRANTOR ACCOUNT" means the deposit account at such bank as Grantor
shall have designated to the Collateral Agent in writing for purposes of
Sections 6.1 and 6.4.

     "OUTSTANDING OBLIGATIONS" shall mean, at any time, without duplication, (i)
all Payment Obligations at such time and (ii) all Obligations within clauses
(ii) or (iii) of the definition thereof that are due and payable at such time.

     "PAYMENT OBLIGATIONS" shall mean, collectively, as of any time of
determination, without duplication, the obligations of Grantor to pay (i) any
amounts due at such time of determination to any Producer under Section 7.1, 7.2
or 7.3 of the Gas Sales Agreement in respect of sales of natural gas delivered
on and after April 1, 2002 (including, without limitation, all interest thereon
as provided in said Article VII, including interest accruing at the then
applicable rate after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization, or like proceeding, of Grantor,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding); and (ii) the amounts that will become due and payable under
such Section 7.2 thereafter based on sales of natural gas delivered on and after
April 1, 2002 but prior to such time of determination; PROVIDED, HOWEVER, that
the foregoing amounts shall be adjusted at such time of determination to reflect
any amounts that Grantor is entitled to deduct at such time of determination
from amounts owed by the respective Producers under the terms of any Netting
Agreement as in effect at such time of determination.

     "PERFECTION CERTIFICATE" shall mean a certificate substantially in the form
of Annex I hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by Grantor.

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     "PERMITTED LIENS" shall mean (a) Liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (b) any Liens arising under Section 9.343 of the UCC or similar
statutes of states other than Texas, including without limitation the Oklahoma
Oil and Gas Owner's Lien Act, Okla. Stat. Ann. tit. 52, Section 548.1, et. seq.
(1994); and the New Mexico Oil and Gas Products Lien Act, N.M. Stat. Ann.
Section 48-9-1 et seq. (Michie 1978), and (c) other Liens arising in the
ordinary course of business and not incurred in connection with the borrowing of
money (including, without limitation, setoff rights as described in Section
7.9).

     "PERSON" shall mean any domestic or foreign individual, corporation,
partnership, limited liability company, joint venture, association, joint-stock
company, trust, enterprise, unincorporated organization or Governmental Entity.

     "PROCEEDS" shall mean any consideration, whether cash or non-cash, and
whether in the form of chattel paper, instruments, general intangibles, natural
gas or other inventory or accounts (as such terms are defined in the UCC),
received from the sale, exchange, license, lease or other disposition of any
asset or property that constitutes Collateral, any value received as a
consequence of the possession of any Collateral and any payment received from
any insurer or other Person as a result of the destruction, loss, theft, damage
or other involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, EXCLUDING, in any such case, however, any funds
withdrawn from any Gas Account by Grantor to the extent permitted by the terms
of this Agreement, any funds remitted to the Other Grantor Account from the Cash
Collateral Account pursuant to Section 6.1, and any funds withdrawn from any Gas
Account by the Collateral Agent that have been remitted to Grantor pursuant to
Sections 6.3 or 6.4.

     "QUALIFYING ACCOUNT DEBTOR" shall mean, at any time, each Account Debtor,
but excluding any Account Debtor (other than any Producer or such Producer's
Affiliate):

          (i)   that is an Affiliate of Grantor;

          (ii)  having 20% or more of its Gas Receivables that at such time (x)
     are more than 60 days past due and/or 90 days past their respective
     original invoice dates and (y) are not subject to bona fide dispute;

          (iii) to which the Grantor has ceased to continue selling natural gas,
     or has notified such Account Debtor of its intent to cease selling it
     natural gas, in any event due to a dispute or a concern regarding such
     Account Debtor's creditworthiness or financial condition; or

          (iv)  with respect to which the Collateral Agent has given notice to
     the Grantor in writing at least 5 Business Days prior to such time that the
     Collateral Agent has determined, in the exercise of its reasonable credit
     judgment, that the collection of Gas Receivables from such Account Debtor
     has become insecure or payment thereof has become doubtful or will be
     delayed due to such Account Debtor's financial condition or the prospect of
     payment by such Account Debtor has become impaired.

     "QUALIFYING POSTED SECURITY" shall mean an executed irrevocable standby
letter of credit or letters of credit issued by a bank or banks acceptable to
the Collateral Agent or a surety bond

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or bonds issued by a surety company or companies acceptable to the Collateral
Agent, which letter(s) of credit and/or surety bond(s) shall be satisfactory in
form and substance to the Collateral Agent, or a combination of such letters of
credit or surety bonds, PROVIDED THAT, unless otherwise agreed in writing by the
Collateral Agent, (i) at the time of issuance and delivery to the Collateral
Agent thereof, the Receivables Ratio (as of a Report Date not more than 5
Business Days prior to such issuance and delivery) shall be not less than 1.10
to 1.00, or (ii) the obligations of Grantor or other account party or principal
in respect of such letter(s) of credit or surety bond(s) to the issuer(s)
thereof (x) shall not be secured by any assets or properties of Grantor or such
account party or principal, or (y) if such obligations are so secured, the
Collateral Agent shall have received an opinion of counsel to the Grantor,
subject to customary assumptions, acceptable to the Collateral Agent to the
effect that neither the delivery thereof nor any draw or payment thereunder will
be subject to avoidance as a preference or fraudulent conveyance in any
bankruptcy or other insolvency proceeding in respect of the Grantor or such
account party or principal.

     "RECEIVABLES RATIO" shall mean, as of any date, the ratio of (x) the
Eligible Gas Receivables on such date, to (y) the Payment Obligations on such
date.

     "RECEIVABLES SHORTFALL AMOUNT" shall mean, with respect to any Report Date,
(i) the amount, if any, by which the Eligible Gas Receivables on such Report
Date are insufficient to satisfy the Required Ratio or (ii) if there is no
insufficiency as of such Report Date, zero.

     "REPORT DATE" shall mean any Grantor Report Date or Special Report Date, as
the case may be.

     "REPRESENTATION DATE" shall mean the date of this Agreement and each Report
Date, as the case may be.

     "REQUIRED AMOUNT" shall mean, with respect to any Report Date, (i) the
Receivables Shortfall Amount, if any, with respect to such Report Date divided
by the Required Ratio or (ii) if the Receivables Shortfall Amount with respect
to such Report Date is zero, zero.

     "REQUIRED RATIO" shall mean (i) 2.00 to 1.00 with respect to any Grantor
Report Date, and (ii) 1.20 to 1.00 with respect to any Special Report Date.

     "SCHEDULED REPORT DATE" shall have the meaning assigned to such term in
Section 4.10(a).

     "SECURED PARTIES" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.

     "SECURITY DOCUMENTS" shall mean this Agreement, the Account Agreement, the
Cash Collateral Account Agreement, the Lockbox Agreement (to the extent (but
only to the extent) relating to any Gas Account) and each Gas Receivables
Report.

     "SECURITY INTEREST" shall have the meaning assigned to such term in Section
2.2.

     "SPECIAL REPORT DATE" shall have the meaning assigned to such term in
Section 4.10(b).

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     "SWEEP AGREEMENT" shall mean the service agreement dated March 22, 2002,
between Grantor and Bank providing for One Sweep(R) Investment Services in
respect of any funds from time to time on deposit in the Cash Collateral Account
pursuant to which such funds are to be invested on an overnight basis and
re-credited to the Cash Collateral Account at the beginning of the next banking
day, and any similar agreement entered into by Grantor and Bank and approved in
writing by the Collateral Agent (such approval not to be unreasonably withheld
or delayed).

     "TEPI" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.

     "TNGI" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.

     "TRIGGERING EVENT" shall mean:

          (i)   a failure by Grantor to pay any amount due to any Producer under
     Section 7.1, 7.2 or 7.3 of the Gas Sales Agreement that is not disputed by
     Grantor in good faith under the terms of Section 7.3 of the Gas Sales
     Agreement and the continuance of such failure for a period longer than 2
     Business Days after the giving by such Producer to Grantor of written
     notice of such non-payment; or

          (ii)  a dissolution or liquidation of Grantor (other than pursuant to
     a consolidation, acquisition, amalgamation, merger or other reorganization
     not arising from bankruptcy or insolvency proceedings, PROVIDED that the
     successor to Grantor's interests in the Collateral shall have executed and
     delivered to the Collateral Agent an assumption agreement in respect of
     this Agreement or a replacement security agreement in substantially the
     same form as this Agreement, in any event in form and substance
     satisfactory to the Collateral Agent and granting to the Collateral Agent a
     first priority perfected lien and security interest in all of the
     Collateral (subject to any Permitted Liens) without prejudice to the
     Collateral Agent's rights and remedies hereunder); or

          (iii) the institution by Grantor or against Grantor of a proceeding
     seeking a judgment of insolvency or bankruptcy or any other relief under
     any bankruptcy or insolvency law or similar law affecting creditors'
     rights, or the presentation of a petition for the winding up or liquidation
     of Grantor, and, in the case of any such proceeding or petition instituted
     against Grantor, such proceeding or petition remains undismissed for a
     period longer than sixty days, or otherwise results in a judgment of
     insolvency or bankruptcy or the entry of an order for Grantor's winding up
     or liquidation; or

          (iv)  the Gas Sales Agreement has been terminated and the Payment
     Obligations at the time of such termination or at any time thereafter
     exceed the Additional Security held by the Collateral Agent at such time;
     or

          (v)   a Cash Collateral Event or other event shall have occurred and
     shall have become a Triggering Event as provided in Section 6.1; PROVIDED,
     HOWEVER, that if any such Cash Collateral Event giving rise to a Triggering
     Event shall no longer be deemed continuing pursuant to the terms of Section
     6.1(a), and so long as the Gas Sales Agreement has not been terminated and
     the Collateral Agent has not commenced action

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     pursuant to Section 6.2 to foreclose on, sell or otherwise realize on the
     Collateral (excluding any actions taken pursuant to Section 6.1 or 6.4),
     such Triggering Event shall no longer be deemed to be continuing hereunder;
     and PROVIDED, FURTHER, that any such cessation of such Triggering Event
     shall not limit or otherwise affect in any manner (A) the exercise by the
     Collateral Agent of any rights or remedies during the continuation of such
     Triggering Event, or (B) the right of the Collateral Agent to continuing
     control of the Designated Gas Account during the 30-day period immediately
     succeeding such cessation as provided in Section 6.4(c).

     "UCC" shall mean the Uniform Commercial Code in effect in the State of
Texas as of the date hereof.

     SECTION 1.2 RULES OF INTERPRETATION. Unless the context of this Agreement
otherwise requires, the following rules of interpretation shall apply to this
Agreement:

     (a)  the singular shall include the plural, and the plural shall include
the singular;

     (b)  words of any gender shall include the other gender;

     (c)  the words "hereof," "herein," "hereby," "hereto," and similar words
refer to this entire Agreement and not to any particular Section or any other
subdivision of this Agreement;

     (d)  the words "include," "includes," and "including" will be deemed to be
followed by "without limitation";

     (e)  unless otherwise specified, a reference to any "Section", "Schedule,"
"Annex" or "Exhibit" is a reference to a specific Section of, or Schedule or
Exhibit to, this Agreement;

     (f)  a reference to any law, statute, regulation, notification or statutory
provision shall include any amendment, modification or re-enactment thereof, any
regulations promulgated thereunder from time to time, and any interpretations
thereof from time to time by any regulatory or administrative authority;

     (g)  a reference to any agreement, instrument, contract or other document
shall include any amendment, amendment and restatement, supplement or other
modification thereto;

     (h)  a reference to any Person shall include such Person's successors and
permitted assigns under any agreement, instrument, contract or other document;
and

     (i)  all accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in effect
from time to time in the United States of America, consistently applied.

                                   ARTICLE II

               APPOINTMENT OF COLLATERAL AGENT; SECURITY INTEREST

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     SECTION 2.1 APPOINTMENT OF COLLATERAL AGENT. Each of the Producers hereby
appoints the Collateral Agent to act as collateral agent on their behalf and, in
such capacity and not in its capacity as a Producer, (i) to receive, deposit and
distribute funds in accordance with this Agreement, and (ii) to accept the grant
of the Security Interest in the Collateral under Section 2.2 and to take all
actions it deems necessary and appropriate to enforce its rights with respect
thereto. The Collateral Agent hereby accepts such appointment. In performing its
functions and duties under this Agreement, the Collateral Agent shall act solely
as agent of the Producers and does not assume and shall not be deemed to have
assumed any obligations towards or relationship of agency or trust with or for
Grantor or any other Person.

     SECTION 2.2 SECURITY INTEREST. As security for the prompt payment in full
of the Obligations, Grantor hereby grants to the Collateral Agent, for the
benefit of the Secured Parties, a security interest in all of Grantor's rights,
title and interests in, to and under the Collateral, in each case whether now
existing or hereafter arising or acquired (the "SECURITY INTEREST"). The
Collateral Agent is hereby authorized to file one or more financing statements,
continuation statements or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest, without
the signature of Grantor, and naming Grantor as debtor and the Collateral Agent
as secured party.

     SECTION 2.3 NO ASSUMPTION OF LIABILITY. The Security Interest is granted as
security only and shall not subject any Secured Party to, or in any way alter or
modify, any obligation or liability of Grantor with respect to or arising out of
the Collateral. Grantor acknowledges and agrees, subject to Section 7.16(c),
that it will perform in all respects all obligations of Grantor, and will
satisfy and discharge any liabilities of Grantor, with respect to or arising out
of the Collateral.

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     Grantor represents and warrants to each Secured Party as of the date of
this Agreement and as of each Report Date as follows:

     SECTION 3.1 AUTHORITY; VALIDITY OF SECURITY INTEREST. Grantor has full
power and authority to grant the Security Interest pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained. The Security Interest is, as of
the date of this Agreement, a legal and valid security interest in the
Collateral securing the payment and performance of the Obligations.

     SECTION 3.2 FILINGS. The Perfection Certificate has been duly prepared,
completed and executed and the information set forth therein was correct and
complete in all respects as of the date of this Agreement. Fully completed UCC
financing statements or other appropriate filings, recordings or registrations
containing a description of the Collateral have been delivered to the Collateral
Agent for filing in each governmental, municipal or other office specified in
Schedule 5 to the Perfection Certificate, which are all the filings, recordings
and registrations that were necessary as of the date of this Agreement under the
UCC to publish notice of and to

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establish a legal, valid and perfected security interest in favor of each
Secured Party in respect of all Collateral in which the Security Interest may be
perfected by filing pursuant to the UCC.

     SECTION 3.3 PERFECTION OF SECURITY INTEREST. The Security Interest
constitutes, subject to the filings described in Section 3.2 above, a perfected
security interest in the Gas Receivables, Gas Receivables Rights, Gas Accounts
and all other Collateral, in each case in which a security interest may be
perfected by filing pursuant to the UCC.

     SECTION 3.4 TITLE; ABSENCE OF OTHER LIENS. The Collateral is owned by
Grantor free and clear of any Lien, except for Permitted Liens and the Liens
granted hereunder. Except with respect to the Liens granted hereunder, Grantor
has not filed or consented to the filing of (a) any financing statement or
analogous document under the UCC or any other applicable laws covering the
Collateral, or (b) any assignment in which Grantor assigns the Collateral or any
security agreement or similar instrument covering the Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect.

     SECTION 3.5 GAS RECEIVABLES. Except as may be specifically disclosed on any
Gas Receivables Report delivered to the Collateral Agent pursuant to Section
4.10, with respect to all Eligible Gas Receivables (or, as to clause (d), all
Gas Receivables) shown on such Gas Receivables Report, as of the effective date
of such Gas Receivables Report:

     (a)  Such Eligible Gas Receivables represent bona fide sales of natural gas
or related products or services to Account Debtors in the ordinary course of
Grantor's business and are not evidenced by a judgment, chattel paper, or
instrument of any kind (unless such chattel paper or instrument has been
delivered duly endorsed "without recourse or warranty" to the Collateral Agent
and accepted by the Collateral Agent as an Eligible Gas Receivable pursuant to
clause (iv) of the definition thereof);

     (b)  (i) With respect to the net amount of such Eligible Gas Receivables
shown on such Gas Receivables Report, there are no additional setoffs, claims or
disputes existing or asserted with respect thereto, (ii) Grantor has not made
any agreement with any Account Debtor for any extension of time for the payment
of such Eligible Gas Receivable beyond the period set forth in clause (i) of the
definition of Eligible Gas Receivables; and (iii) with respect to the net amount
of such Eligible Gas Receivables shown on such Gas Receivables Report, Grantor
has not made any agreement with any Account Debtor for any additional compromise
or settlement for less than such net amount, any further release of any Account
Debtor from liability therefor or any additional deduction therefrom;

     (c)  The net amounts shown on such Gas Receivables Report are actually and
absolutely owing (or, as a result of natural gas that has actually been
delivered at such time but which has not been invoiced, will thereafter become
owing) to Grantor as indicated thereon with respect to such Eligible Gas
Receivables and are not in any way contingent (other than for the passage of
time, as to any such delivered but uninvoiced gas);

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     (d)  No payments have been directed to be made in respect of such Gas
Receivables other than through the lockbox designated in the Lockbox Agreement
or the Designated Gas Account;

     (e)  Grantor has no actual knowledge that (x) any such Eligible Gas
Receivables are invalid or unenforceable in whole or in part, or (y) there has
occurred any material adverse change in the financial condition or
creditworthiness of any Account Debtors such that Grantor has determined in its
reasonable credit judgment that collection thereof is insecure or that payment
thereof is doubtful or will be delayed or that the prospect of payment has been
impaired; and

     (f)  Such Eligible Gas Receivables shown on such Gas Receivables Report
otherwise satisfy the requirements for "Eligible Gas Receivables" as provided
herein.

     SECTION 3.6 NO CONFLICT. Neither the execution, delivery and performance of
this Agreement or any other Security Document by Grantor nor the grant by
Grantor of the Security Interest in the Collateral as provided herein will
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Grantor, or conflict with any organizational document or
any contract or agreement binding on the Grantor or its assets which is material
to the consolidated financial condition or operations of the Grantor and its
subsidiaries, taken as a whole, or require any government approval except where
such violation, conflict or lack of approval would not have a material adverse
effect on (i) the business, property, financial condition or results of
operations of the Grantor and its subsidiaries, taken as a whole, or (ii) the
ability of the Grantor to perform its payment obligations under any of the
Security Documents or result in the creation or imposition of any Lien in, of or
on the property of the Grantor or any subsidiary pursuant to the terms of any
such contract or agreement binding on the Grantor or any subsidiary which is
material to the consolidated financial condition or operations of the Grantor
and its subsidiaries, taken as a whole.

                                   ARTICLE IV

                                    COVENANTS

     SECTION 4.1 CHANGE OF NAME OR LOCATION OF GRANTOR; RECORDS.

     (a)  Grantor agrees to give the Collateral Agent not less than 30 days
prior written notice of any change in (i) its partnership name, (ii) the
jurisdiction of its organization or location of its principal place of business
or chief executive office, (iii) its identity or organizational structure, or
(iv) its Federal Taxpayer Identification Number; PROVIDED, HOWEVER, that so long
as Grantor has complied with the immediately following sentence, Grantor's
failure to give timely notice as aforesaid shall not be deemed to result in a
Material Covenant Breach hereunder. Grantor agrees not to effect or permit any
change referred to in the preceding sentence unless all filings have been made
under the UCC or otherwise that are required in order for the Collateral Agent
to continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral to the extent
provided in Sections 3.3 and 3.4.

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<Page>

     (b)  Grantor agrees to maintain, at its own cost and expense, such complete
and accurate records with respect to the Collateral owned by it as are
consistent with its current practices and in accordance with prudent and
standard practices used in industries in which Grantor is engaged, but in any
event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Collateral.

     SECTION 4.2 PROTECTION OF SECURITY. Grantor shall, at its own cost and
expense, take any and all actions necessary to defend title to the Collateral
against all Persons other than holders of Permitted Liens and to defend the
Security Interest of the Collateral Agent in the Collateral and the priority
thereof against any Lien other than Permitted Liens.

     SECTION 4.3 PAYMENTS TO GAS ACCOUNT.

     (a)  To the extent Grantor has not already done so, Grantor shall direct
all Account Debtors to remit all Collections in respect of a Gas Receivable
Right to the Designated Gas Account or through the lockbox designated in the
Lockbox Agreement.

     (b)  Grantor shall not modify any payment or other instructions with
respect to Gas Receivables that would cause an Account Debtor to remit
Collections other than to the Designated Gas Account or through the lockbox
designated in the Lockbox Agreement.

     SECTION 4.4 USE AND DISPOSITION OF COLLATERAL. Grantor shall not make or
permit to be made any sale, transfer, assignment, pledge or hypothecation of the
Collateral, and shall not grant any other Lien in respect of the Collateral,
except for the Lien granted hereunder and in connection with Permitted Liens.

     SECTION 4.5 FURTHER ASSURANCES. Grantor agrees, at its own expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes payable to any Governmental Entity
required in connection with the execution and delivery of this Agreement, the
granting of the Security Interest and the filing of any financing statements or
other documents in connection herewith or therewith. If any amount payable to
Grantor under or in connection with any of the Collateral shall be or become
evidenced by any promissory note or other instrument, such note or instrument
shall be promptly pledged and delivered to the Collateral Agent, duly endorsed
"without recourse or warranty" to the Collateral Agent.

     SECTION 4.6 INSPECTION AND VERIFICATION. The Collateral Agent shall be
entitled to exercise the rights to audit Grantor's books and records (including
the records described in Section 4.1(b) above) in the same manner and at the
same times as granted to the Producers under Section 7.5 of the Gas Sales
Agreement, all to the extent necessary to determine compliance by Grantor with
the terms of this Agreement.

     SECTION 4.7 COLLATERAL ASSIGNMENT OF SECURITY INTEREST. If at any time
Grantor shall take a security interest in any property of an Account Debtor or
any other Person to secure payment and performance of a Gas Receivable Right
(other than cash deposits or advance payments for future gas sales), Grantor
shall promptly collaterally assign such security interest to

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the Collateral Agent (except to the extent constituting a "supporting
obligation" already included as a portion of the Collateral as provided herein).
Unless otherwise requested in writing by the Collateral Agent, such collateral
assignment need not be delivered to the Collateral Agent or filed of public
record unless necessary to continue the perfected status of the security
interest against creditors of and transferees from the Account Debtor or other
Person granting the security interest.

     SECTION 4.8 CONTINUING OBLIGATIONS OF GRANTOR. Grantor agrees to indemnify
and hold harmless each Secured Party from and against any and all liabilities or
damages arising from claims of third parties with respect to any of the
Collateral or the obligations of Grantor with respect thereto and any costs and
expenses (including reasonable attorneys' fees) with respect thereto, other than
any liabilities, damages, costs or expenses sustained through the Collateral
Agent's gross negligence or willful misconduct (as determined by a final
non-appealable judgment rendered by a court of competent jurisdiction).

     SECTION 4.9 LEGEND. Upon receipt of a written request by the Collateral
Agent, to the extent (but only to the extent) required to perfect the Security
Interest of the Collateral Agent in any Gas Receivable Rights, Grantor shall
legend, in form and manner reasonably satisfactory to the Collateral Agent, its
books, records and documents evidencing or pertaining to such Gas Receivable
Rights with an appropriate reference to the fact that the Collateral Agent has a
security interest therein.

     SECTION 4.10 GAS RECEIVABLES REPORT.

     (a)  Grantor shall deliver to the Collateral Agent each Month a gas
receivables report, effective as of the 13th day of such Month (the "SCHEDULED
REPORT DATE"), in the form attached as Exhibit A (the "GAS RECEIVABLES REPORT")
not later than 5 Business Days after the Scheduled Report Date. Grantor shall
also be entitled to deliver to the Collateral Agent, at Grantor's option at any
time, (i) an amended Gas Receivables Report in respect of a Gas Receivables
Report previously delivered to the Collateral Agent, and (ii) an additional Gas
Receivables Report with an effective date as indicated thereon (but not more
than 5 Business Days prior to the date of delivery). Each such Gas Receivables
Report shall be complete and accurate in all material respects and shall
include, without limitation, a calculation in reasonable detail as to the
Receivables Ratio as of the effective date of such Gas Receivables Report.

     (b)  Upon written request by the Collateral Agent, but not more often than
once a Month, Grantor shall also produce and deliver to the Collateral Agent a
special Gas Receivables Report effective as of the date specified by the
Collateral Agent in such request (such effective date (the "SPECIAL REPORT
DATE") to be not earlier than the next Business Day immediately following the
date such request is delivered to Grantor, or, if such request is not delivered
to Grantor on a Business Day, the first Business Day following such delivery to
Grantor). Such Gas Receivables Report shall be delivered to the Collateral Agent
not later than the fifth Business Day following the Special Report Date.

     (c)  Grantor shall provide promptly such additional information as the
Collateral Agent may reasonably request in order to verify the information set
forth on any Gas Receivables Report delivered pursuant to this Section 4.10.

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<Page>

                                    ARTICLE V

                                POWER OF ATTORNEY

     Grantor hereby makes, constitutes and appoints the Collateral Agent (and
all officers, employees or agents designated by the Collateral Agent) as
Grantor's true and lawful agent and attorney-in-fact, and in such capacity the
Collateral Agent shall have the right, with power of substitution for Grantor
and in Grantor's name or otherwise, for the use and benefit of the Collateral
Agent, to take any or all of the following actions, all as the Collateral Agent
may determine in its sole discretion, but in any event with such actions to be
taken only upon the occurrence and during the continuance of a Triggering Event:
(a) to receive, endorse, assign and/or deliver any and all notes, acceptances,
checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (b) to demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of the Collateral;
(c) to sign the name of Grantor on any invoice or bill of lading relating to any
of the Collateral; (d) to send verifications of Gas Receivable Rights to any
Account Debtor; (e) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (f) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to all or any of the
Collateral; and (g) to notify, or to require Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent in such manner as the
Collateral Agent may direct. It is understood and agreed that the appointment of
the Collateral Agent as the agent and attorney-in-fact of Grantor for the
purposes set forth above is coupled with an interest and is irrevocable. Grantor
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. The powers conferred hereunder are solely to protect the
interests of the Secured Parties in the Collateral and shall not impose any duty
on any of them to exercise any such powers. The Collateral Agent shall be
accountable only for amounts actually received by it as a result of the exercise
of such powers, and neither it nor any of its officers, directors, employees or
agents shall be responsible to Grantor for any act or failure to act, except for
its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction.

                                   ARTICLE VI

                                    REMEDIES

     SECTION 6.1 REMEDIES UPON CASH COLLATERAL EVENTS, OTHER EVENTS.

     (a)  Upon the occurrence of and during the continuation of any event
described in paragraphs (1) through (5) below (each a "Cash Collateral Event"),
but at no other time (unless a Triggering Event shall have occurred and be
continuing at such time), the Collateral Agent shall be entitled to deliver to
Bank a notice contemplated by Section 2 of the Account Agreement and to direct
Bank to transfer to the Cash Collateral Account all funds in the Designated Gas
Account at any time during such period. Following such notice, Grantor shall not
withdraw any funds from, or instruct Bank to transfer (other than to the Cash
Collateral Account) any funds in, the Designated Gas Account during the period
such Cash Collateral Event is continuing.

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<Page>

          (1)  Failure by Grantor to deliver a duly completed Gas Receivables
               Report on the date required by Section 4.10. Such Cash Collateral
               Event shall be deemed not to be continuing on the first date
               thereafter that Grantor has submitted the duly completed Gas
               Receivables Report for the required Report Date. If such Cash
               Collateral Event continues for a period longer than 15 days, a
               Triggering Event shall be deemed to have occurred hereunder.

          (2)  Delivery to the Collateral Agent of a duly completed Gas
               Receivables Report indicating that the Receivables Ratio as of
               the applicable Report Date for such Receivables Report is less
               than the Required Ratio for such Report Date, and the total
               Additional Security held by the Collateral Agent at the time of
               such delivery is less than the Required Amount as of such Report
               Date. Such Cash Collateral Event shall be deemed not to be
               continuing (x) on the first date thereafter that the total
               Additional Security then held by the Collateral Agent shall equal
               or exceed the Required Amount (based on a Required Ratio of 2.00
               to 1.00) as of the then-most recent Report Date, or (y) on the
               first Report Date thereafter that the Receivables Ratio shall be
               equal to or greater than 2.00 to 1.00. If such Cash Collateral
               Event continues for a period longer than 30 days, a Triggering
               Event shall be deemed to have occurred hereunder.

          (3)  The occurrence of any Material Representation Breach. Such Cash
               Collateral Event shall be deemed not to be continuing on the
               first Report Date thereafter on which, based on the duly
               completed Gas Receivables Report for such Report Date, no
               Material Representation Breach then exists. If such Cash
               Collateral Event continues for a period longer than 30 days, a
               Triggering Event shall be deemed to have occurred hereunder.

          (4)  The occurrence of any Material Covenant Breach. Such Cash
               Collateral Event shall be deemed not to be continuing (x) on the
               first date thereafter that any breach or failure described in
               clause (i) of the definition of Material Covenant Breach has been
               cured by Grantor, or (y) on the first Report Date thereafter on
               which, based on the duly completed Gas Receivables Report for
               such Report Date, no Material Covenant Breach then exists, as the
               case may be. If such Cash Collateral Event continues for a period
               longer than 30 days, a Triggering Event shall be deemed to have
               occurred hereunder.

          (5)  Termination of the Gas Sales Agreement by the Producers pursuant
               to Section 7.3 or 10.2 thereof. Such Cash Collateral Event shall
               be deemed not to be continuing on the first date thereafter that
               (i) the Gas Sales Agreement has been reinstated, (ii) the
               Outstanding Obligations as then determined shall have been paid
               in full, or (iii) the total Additional Security then held by the
               Collateral Agent equals or exceeds the Payment Obligations as
               then determined; PROVIDED, HOWEVER, that if at any time following
               the discontinuation of a Cash Collateral Event pursuant to this

                                       17
<Page>

               clause (iii), the Additional Security held by the Collateral
               Agent is less than the Payment Obligations at such time, a
               Triggering Event shall be deemed to have occurred hereunder.

     (b)  The Cash Collateral Account and all funds therein shall be under the
sole dominion and control of the Collateral Agent. The Collateral Agent shall
not apply such funds in payment of any Obligations except (i) as specified in
this Article VI upon and during the continuation of a Triggering Event, or (ii)
pursuant to written direction from Grantor for application against outstanding
Payment Obligations.

     (c)  At such time as any Cash Collateral Event shall cease to continue and
written notice of such cessation shall have been given by Grantor to the
Collateral Agent, then so long as (I) no other Cash Collateral Event shall have
occurred and then be continuing, and (II) no Triggering Event shall then exist
or be continuing or shall have existed at any time during the 30-day period
immediately preceding such time, the Collateral Agent shall take the following
actions within 2 Business Days after such cessation (and, in addition, (x) in
the case of a Cash Collateral Event referred to in clause (2)(A) below after
each subsequent delivery of a Gas Receivables Report, and (y) in the case of a
Cash Collateral Event referred to in clause (2)(B) below after each subsequent
payment of any Payment Obligations):

          (1)  deliver to Bank a notice contemplated by Section 2 of the Account
               Agreement to the effect that Bank may thereafter comply in
               accordance with instructions from Grantor as to disposition of
               funds then and thereafter in the Designated Gas Account (subject,
               however, to any subsequent notices to Bank pursuant to this
               Section 6.1 in respect of any other Cash Collateral Event or
               pursuant to Section 6.2 or 6.4 in respect of any Triggering
               Event); and

          (2)  (A) if such Cash Collateral Event is one described in paragraph
               (2) of Section 6.1(a), and if the Additional Security then held
               by the Collateral Agent exceeds the Required Amount (based on a
               Required Ratio of 2.00 to 1.00) as of the Report Date for such
               Gas Receivables Report, the Collateral Agent shall release a
               portion of such Additional Security equal to such excess (such
               release to be effected first by transferring funds from the Cash
               Collateral Account to the Other Grantor Account and then, if
               necessary, by releasing a portion of the Qualifying Posted
               Security in any remaining excess amount; at Grantor's request,
               the Collateral Agent shall permit Grantor to substitute like
               Qualifying Posted Security having an undrawn and available amount
               equal to the Required Amount so as to accommodate such release);

               (B) if such Cash Collateral Event is one described in paragraph
               (5) of Section 6.1(a) that has ceased to continue pursuant to
               clause (iii) of the second sentence thereof, and if the
               Additional Security then held by the Collateral Agent exceeds the
               outstanding Payment Obligations (after giving effect to any
               payment thereof at such time), the Collateral Agent shall release
               a portion of such Additional Security equal to such excess

                                       18
<Page>

               (such release to be effected first by transferring funds from the
               Cash Collateral Account to the Other Grantor Account and then, if
               necessary, by releasing a portion of the Qualifying Posted
               Security in any remaining excess amount; at Grantor's request,
               the Collateral Agent shall permit Grantor to substitute like
               Qualifying Posted Security having an undrawn and available amount
               equal to the outstanding Payment Obligations so as to accommodate
               such release); or

               (C) in the case of any other Cash Collateral Event, the
               Collateral Agent shall transfer all funds in the Cash Collateral
               Account to the Other Grantor Account and return to Grantor all
               Qualifying Posted Security then held by the Collateral Agent.

     (d)  If (i) any representation or warranty made by Grantor herein shall
prove to be false or misleading in any material respect, but does not constitute
a Material Representation Breach hereunder, or (ii) Grantor shall fail to
perform or observe any covenant or agreement herein for a period longer than 10
days after receipt of written notice thereof from the Collateral Agent, but such
failure does not constitute a Material Covenant Breach hereunder, then and in
any such case as described in clause (i) or (ii), a breach shall be deemed to
have occurred under the Gas Sale Agreement and any related dispute, controversy
or claim shall be subject to the dispute resolution procedures set forth in
Section 11.8 of the Gas Sales Agreement. If pursuant to such procedures Grantor
agrees or is ordered by the panel of arbitrators to take any action in
consequence of such breach, and fails to take such action as so agreed or so
ordered, a Triggering Event shall be deemed to have occurred hereunder.

     (e)  The Collateral Agent and Grantor acknowledge and agree that funds on
deposit from time to time in the Cash Collateral Account will be subject to
overnight investment as specified in the Sweep Agreement, and that the
Collateral Agent has, pursuant to the Cash Collateral Account Agreement, sole
right and authority to modify, terminate, or otherwise direct any actions in
respect of the services under the Sweep Agreement. Notwithstanding the
foregoing, the Collateral Agent agrees that it will not take any such actions
without Grantor's prior written consent, except (i) in connection with the
Collateral Agent's application of funds in satisfaction of the Outstanding
Obligations or a transfer of funds from the Cash Collateral Account, in either
case pursuant to Section 6.3 or 6.4, or (ii) to the extent the Collateral Agent
may determine that modification of investment instructions is advisable (x) in
order to assure continued perfection of the Security Interest therein or (y) due
to concern regarding the security of the principal of such investment in light
of the financial condition of Bank or other counterparty to such investment or
other risks inherent in such investment. The Collateral Agent shall give Grantor
prompt written notice of any such actions taken as described in clause (ii) of
the immediately preceding sentence. Grantor and the Collateral Agent acknowledge
and agree that all interest and other investment return accruing thereon or
resulting therefrom shall be for the account of Grantor, that Grantor shall be
solely responsible for all taxes in respect thereof, and that all such interest
and investment return shall be held by the Collateral Agent as additional
Collateral hereunder.

     SECTION 6.2 REMEDIES UPON TRIGGERING EVENT.

                                       19
<Page>

     (a)  During the continuance of a Triggering Event, Grantor agrees to
deliver each item of Collateral to the Collateral Agent on demand, and it is
agreed that the Collateral Agent shall have the right, with or without legal
process and with or without prior notice or demand for performance, to take
possession of the Collateral and without liability for trespass to enter any
premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and all
rights afforded to a secured party under the UCC or other applicable law,
including without limitation, Section 9.602 of the UCC. Without limiting the
generality of the foregoing, Grantor agrees that, during the continuance of a
Triggering Event, the Collateral Agent shall have the right, subject to the
mandatory requirements of applicable law, to sell or otherwise dispose of all or
any part of the Collateral, at public or private sale or at any broker's board
or on any securities exchange, for cash, upon credit or for future delivery as
the Collateral Agent shall deem appropriate. Each such purchaser at any such
sale shall hold the property sold absolutely, free from any claim or right on
the part of Grantor, and Grantor hereby waives (to the extent permitted by law)
all rights of redemption, stay and appraisal which Grantor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.

     (b)  The Collateral Agent shall give Grantor 10 days' written notice (which
Grantor agrees is notice within a reasonable time before the disposition under
Section 9.612 of the UCC) of the Collateral Agent's intention to make any sale
of Collateral. Such notice, in the case of a public sale, shall state the time
and place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice (if any) of such sale.
At any such sale, the Collateral, or portion thereof, to be sold may be sold in
one lot as an entirety or in separate parcels, as the Collateral Agent may (in
its sole and absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, the Collateral Agent may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to any Secured Party from Grantor as a credit against the
purchase price, and the Collateral Agent may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to Grantor therefor. As an alternative to exercising the power of sale herein
conferred upon it, the Collateral Agent may proceed by a suit or suits at law or
in equity to foreclose this Agreement and to sell the

                                       20
<Page>

Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.

     (c)  During the continuance of a Triggering Event, at the Collateral
Agent's written request, Grantor shall deliver to the Collateral Agent (i)
copies of all documents (including print-outs of electronic documents and
information) evidencing the agreements and transactions which gave rise to the
Gas Receivables and other Gas Receivable Rights, including all orders, invoices
and shipping receipts (and to the extent any such documents also relate to other
assets of Grantor, such copies may be redacted as to any information not
relating to the Collateral), and (ii) if the Collateral Agent has given the
notice referred to in Section 6.2(d), originals (to the extent available to
Grantor) of all documents described in the preceding clause (i). Upon payment in
full of all Obligations and termination of this Agreement, the Collateral Agent
shall return such documents to Grantor.

     (d)  At any time during the continuance of a Triggering Event, the
Collateral Agent may, upon written notice to Grantor, limit or terminate the
authority of Grantor to collect the Gas Receivables.

     (e)  At any time during the continuance of a Triggering Event, the
Collateral Agent in its own name or in the name of others may communicate with
Account Debtors to verify with them to the Collateral Agent's satisfaction the
existence, amount and terms of any Gas Receivable.

     (f)  At any time during the continuance of a Triggering Event, except for
(x) offsets in the ordinary course of business of accounts payable of Grantor or
an Affiliate of Grantor (regardless of whether arising from sales of natural
gas) against any Gas Receivable, and (y) other transactions in the ordinary
course of business consistent with Grantor's past practice, Grantor will not (i)
grant any extension of the time of payment of any Gas Receivable beyond the
period set forth in clause (i) of the definition of Eligible Gas Receivable,
(ii) compromise or settle any Gas Receivable for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the payment
of any Gas Receivable, (iv) allow any credit or discount on any Gas Receivable,
or (v) amend, supplement or modify any Gas Receivable in any manner that could
adversely affect the value thereof.

     SECTION 6.3 APPLICATION OF PROCEEDS. During the continuance of a Triggering
Event, the Collateral Agent shall apply the proceeds of any collection or sale
of the Collateral, as well as any Collateral consisting of cash (including any
funds then on deposit in the Cash Collateral Account or the Designated Gas
Account), as follows:

          FIRST, to the payment of all reasonable costs and expenses incurred by
     the Collateral Agent during the continuance of any Cash Collateral Event or
     Triggering Event in connection with such collection or sale or otherwise in
     connection with this Agreement or any of the Obligations, including all
     court costs and the reasonable fees and expenses of its agents and legal
     counsel and any other reasonable costs or expenses incurred during the
     continuance of any Cash Collateral Event or Triggering Event in connection
     with the exercise of any right or remedy hereunder or under the Account
     Agreement;

                                       21
<Page>

          SECOND, to the payment of all Outstanding Obligations; and

          THIRD, to Grantor, its successors or assigns or, to such other Person
     lawfully entitled thereto.

Upon any sale of the Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or any other
Secured Party or such officer or be answerable in any way for the misapplication
thereof.

     SECTION 6.4 NOTICES UNDER ACCOUNT AGREEMENT.

     (a)  During the continuance of a Triggering Event, the Collateral Agent
shall:

          (i)   have the right at any time to deliver to Bank a notice
     contemplated by Section 2 of the Account Agreement to the effect that Bank
     shall comply solely in accordance with instructions from the Collateral
     Agent as to the disposition of all funds then and thereafter in the
     Designated Gas Account;

          (ii)  at the time of delivery of the notice described in clause (i)
     above, instruct Bank to transfer to the Collateral Agent as soon as
     possible and on each Business Day thereafter any and all funds in the
     Designated Gas Account (with such funds, upon each such transfer, to be
     applied at such time against Outstanding Obligations or transferred by the
     Collateral Agent to the Cash Collateral Account or a separate account as
     provided in Section 6.4(c));

          (iii) after receipt by the Collateral Agent of (A) funds as provided
     in clause (ii) above, and/or (B) written notice from Grantor instructing
     the Collateral Agent to take the actions specified in this clause (iii) as
     to the funds then held in the Cash Collateral Account, then in any such
     case upon the determination by the Collateral Agent as to the current
     amount of Outstanding Obligations (which determination shall be made in a
     manner consistent with the provisions of Section 7.1 of the Gas Sales
     Agreement, and in any event not later than the third Business Day after
     receipt of such funds as provided in clause (ii) above or receipt of
     written notice from Grantor as provided in the preceding clause (B), as the
     case may be), take the following actions in respect of all funds
     transferred from the Designated Gas Account and all funds then in the Cash
     Collateral Account (except where such actions would be in violation of or
     contrary to any applicable legal prohibition or restriction, in which event
     such actions shall be taken promptly after such prohibition or restriction
     is no longer in effect):

               (x)   apply such funds in satisfaction of the Outstanding
          Obligations; and

               (y)   upon application by the Collateral Agent of such funds in
          satisfaction of all Outstanding Obligations, cause any remaining funds
          not so applied to be transferred to the Other Grantor Account.

                                       22
<Page>

If the Collateral Agent is unable to take such actions as a result of any
applicable legal prohibition or restriction, then all such funds shall continue
to be held by the Collateral Agent without application until such time as such
prohibition or restriction is no longer in effect; PROVIDED, HOWEVER, that if
the total amount of such funds then held by the Collateral Agent, but not
applied in satisfaction of the Outstanding Obligations, exceeds an amount equal
to 120% of the Outstanding Obligations, the Collateral Agent shall cause funds
in excess of such amount to be transferred to the Other Grantor Account. Grantor
agrees that the Collateral Agent shall in no event have any liability to Grantor
or any other Person for complying with the instructions set forth in Grantor's
written request pursuant to clause (iii)(B) above, and Grantor hereby
indemnifies and holds the Collateral Agent harmless from and against any loss,
claim, damage, cost or expense that may be sustained or incurred by the
Collateral Agent as a result of complying with such instructions.

     (b)  After the first Business Day that any Triggering Event ceases to exist
or continue and Grantor has given the Collateral Agent written notice of such
cessation, the Collateral Agent shall direct Bank (unless such direction has
previously been given) to transfer to the Cash Collateral Account all funds then
or thereafter deposited in the Designated Gas Account, and the Collateral Agent
shall comply with Grantor's written directions for application of any such funds
in the Cash Collateral Account against the Payment Obligations. Not later than
30 days after such first Business Day, then so long as (I) no Cash Collateral
Event shall have occurred and then be continuing, (II) no other Triggering Event
shall then exist or be continuing or shall have existed at any time during such
30-day period, and (III) the Gas Sales Agreement has not been terminated and the
Collateral Agent has not commenced action pursuant to Section 6.2 to foreclose
on, sell or otherwise realize on the Collateral (excluding any actions taken
pursuant to Section 6.1 or this Section 6.4), the Collateral Agent shall take
the following actions:

          (1)  deliver to Bank a notice contemplated by Section 2 of the Account
               Agreement to the effect that Bank may thereafter comply in
               accordance with instructions from Grantor as to disposition of
               funds then and thereafter in the Designated Gas Account (subject,
               however, to any other notices to Bank pursuant to this Section
               6.4 in respect of any Cash Collateral Event or pursuant to
               Section 6.2 or this Section 6.4 in respect of any other
               Triggering Event); and

          (2)  (A) if such Triggering Event has resulted from a Cash Collateral
               Event described in paragraph (2) of Section 6.1(a), or from a
               Cash Collateral Event described in paragraph (5) of Section
               6.1(a) that has ceased to continue pursuant to clause (iii) of
               the second sentence thereof, then Grantor shall be entitled to a
               release of a portion of any Additional Security then held by the
               Collateral Agent in the same amount and in the same manner as
               provided upon cessation of the corresponding Cash Collateral
               Event pursuant to the provisions of paragraph (2)(A) or (2)(B) of
               Section 6.1(c), as the case may be; or

               (B) in the case of any other Triggering Event, the Collateral
               Agent shall transfer all funds in the Cash Collateral Account to
               the Other Grantor

                                       23
<Page>

               Account and return to Grantor all Qualifying Posted Security then
               held by the Collateral Agent.

     (c)  If the Collateral Agent holds immediately available funds received
pursuant to its instructions to Bank as provided in Section 6.4(a)(ii), but is
unable at such time to apply all such funds in satisfaction of Outstanding
Obligations, the Collateral Agent shall (unless the Collateral Agent is unable
to do so by any applicable legal prohibition or restriction), transfer such
funds not so applied (other than any excess funds required to be transferred to
the Other Grantor Account pursuant to the penultimate sentence of Section
6.4(a), if applicable), at its sole option, either (i) to the Cash Collateral
Account, or (ii) to a separate account under the sole dominion and control of
the Collateral Agent. If the Collateral Agent makes such transfer to such a
separate account, the Collateral Agent shall use commercially reasonable efforts
to establish such separate account in a manner so as to provide interest or
other investment return on the funds therein reasonably comparable to the Sweep
Agreement. Prior to such time as the Collateral Agent applies such funds in
satisfaction of the Outstanding Obligations, all interest and investment return
accruing thereon or resulting therefrom shall be for the account of Grantor,
Grantor shall be solely responsible for all taxes in respect thereof and all
expenses of establishing and maintaining such account, and all such interest and
investment return shall be held by the Collateral Agent as additional Collateral
hereunder.

                                  ARTICLE VII

                                  MISCELLANEOUS

     SECTION 7.1 NOTICES. All communications and notices hereunder, including
notices given under the Gas Sales Agreement that, by their terms, pertain to
this Agreement, shall (except as otherwise expressly permitted herein) be in
writing and given (a) to the Collateral Agent on its behalf and on behalf of any
other Secured Party, as provided with respect to "Producer" in Section 13.1 of
the Gas Sales Agreement, and (b) to Grantor as provided with respect to "Dynegy"
in Section 13.1 of the Gas Sales Agreement, and also to:

                          Dynegy Marketing and Trade
                          1000 Louisiana, Suite 5800
                          Houston, Texas 77002
                          Attn:  Assistant Treasurer, Operations
                          Facsimile:  (713) 507-3786

                          and

                          Dynegy Marketing and Trade
                          1000 Louisiana, Suite 5800
                          Houston, Texas 77002
                          Attn:  General Counsel - Finance
                          Facsimile:  (713) 767-8816

     SECTION 7.2 SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by Grantor herein and in the certificates or
other instruments prepared or

                                       24
<Page>

delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by each Secured Party and shall survive the date hereof
and shall continue in full force and effect until this Agreement shall
terminate.

     SECTION 7.3 BINDING EFFECT; SEVERAL AGREEMENT. This Agreement shall become
effective as to Grantor when a counterpart hereof executed on behalf of Grantor
shall have been delivered to each Secured Party and a counterpart hereof shall
have been executed on behalf of each Secured Party, and thereafter this
Agreement shall be binding upon Grantor and each Secured Party and shall inure
to the benefit of Grantor and each Secured Party. Neither this Agreement nor any
obligation of a party under this Agreement is assignable without the express
written consent of the other parties (which consent may be withheld in the
discretion of such other parties for any reason), except that no such consent
shall be required for an assignment by any Secured Party that is a Producer to
an Affiliate of such Secured Party; PROVIDED, HOWEVER, that any assignment shall
not relieve the assigning party of responsibility for any of its obligations
under this Agreement.

     SECTION 7.4 SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and permitted assigns of such party; and all covenants, promises and
agreements by or on behalf of Grantor or any Secured Party in this Agreement
shall bind and inure to the benefit of their respective successors and permitted
assigns.

     SECTION 7.5 COLLATERAL AGENT'S FEES AND EXPENSES. Grantor agrees to pay
upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may incur upon
the occurrence and during the continuance of a Cash Collateral Event or a
Triggering Event in connection with the exercise, enforcement or protection of
any of the rights of any Secured Party hereunder. Any such amounts payable as
provided hereunder shall be additional Obligations secured hereby. The
provisions of this Section 7.5 shall remain operative and in full force and
effect regardless of the termination of this Agreement or the Gas Sales
Agreement, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or the Gas Sales
Agreement, or any investigation made by or on behalf of any Secured Party. All
amounts due under this Section 7.5 shall be payable on written demand therefor
and shall bear interest at the rate specified in Section 7.1 of the Gas Sales
Agreement.

     SECTION 7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

     SECTION 7.7 WAIVERS; AMENDMENT.

     (a)  No waiver by either party of any default of the other under this
Agreement shall operate as a waiver of any future default, whether of like or
different character or nature. The rights and remedies of any Secured Party
hereunder and of any Secured Party under the Gas Sales Agreement are cumulative
and are not exclusive of any rights or remedies that Secured Party would
otherwise have. No waiver of any provisions of this Agreement or the Account

                                       25
<Page>

Agreement shall in any event be effective unless the same shall be permitted by
Section 7.7(b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Grantor in any case shall entitle Grantor to any other or further
notice or demand in similar or other circumstances.

     (b)  This Agreement supersedes all prior agreements, oral or written, with
respect to the subject matter hereof, and neither this Agreement, the Account
Agreement (notwithstanding any provision thereof), nor any provision hereof or
thereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by each Secured Party and Grantor.

     SECTION 7.8 LIMITATION OF DAMAGES. In no event shall either party be liable
for punitive, exemplary, consequential or incidental damages arising from any
breach or default under this Agreement or from any act or omission under or in
connection with this Agreement.

     SECTION 7.9 ACKNOWLEDGMENT AND CONSENT TO OFFSETTING OF ACCOUNTS. Each
Secured Party hereby (a) acknowledges that during the term of this Agreement, in
the ordinary course of business, (i) Grantor will, and will take such action as
may be necessary to enable Grantor's Affiliates to, offset their respective
accounts payable (regardless of whether arising from sales of natural gas)
against Gas Receivables, and (ii) any Account Debtor may offset its accounts
payable owing to Grantor in respect of Gas Receivables against accounts
receivable (regardless of whether arising from sales of natural gas) owing to
such Account Debtor from Grantor or Grantor's Affiliates; and (b) consents to
any such offset; provided, however, that Grantor shall reflect the amounts of
all such setoffs in the current Gas Receivables Reports submitted to the
Collateral Agent by Grantor pursuant to the requirements of this Agreement.

     SECTION 7.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY
HERETO HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

     SECTION 7.11 SEVERABILITY. If any provision of this Agreement is determined
to be invalid, illegal or otherwise unenforceable for any reason by a court of
competent jurisdiction, the remaining terms and conditions of this Agreement
shall remain in full force and effect to the fullest extent permitted by law. In
such an event, the parties agree to make a good faith effort to replace the
affected provisions.

     SECTION 7.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall

                                       26
<Page>

constitute but one contract, and shall become effective as provided in Section
7.3. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.

     SECTION 7.13 HEADINGS. Article and Section headings used herein are for the
purpose of reference only, are not part of this Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.

     SECTION 7.14 JURISDICTION; CONSENT TO SERVICE OF PROCESS.

     (a)  Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
Texas State court or Federal court of the United States of America sitting in
Houston, Texas, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such Texas State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.

     (b)  Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any Texas
State court or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

     (c)  Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

     SECTION 7.15 TERMINATION; REINSTATEMENT UPON CERTAIN EVENTS.

     (a)  By providing written notice to the Collateral Agent, Grantor may
provide for the termination of this Agreement at any time after (i) Grantor has
complied with all its obligations then applicable under Section 7.8.3 of the Gas
Sales Agreement with respect to implementation of the Alternate Security
Arrangement, and (ii) Grantor has paid in full all Payment Obligations in
respect of purchases of natural gas delivered prior to the Transition Date as
described in said Section 7.8.3 of the Gas Sales Agreement.

     (b)  Except as otherwise provided in this Section 7.15, this Agreement and
the Security Interest shall terminate when (i) all Outstanding Obligations have
been paid in full, and (ii) the Gas Sales Agreement has been terminated or
expires.

     (c)  The Collateral Agent shall execute and deliver to Grantor, at
Grantor's expense, all UCC termination statements and similar documents that
Grantor shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents

                                       27
<Page>

pursuant to this Section 7.15 shall be without recourse to or warranty by any
Secured Party other than that the Collateral (other than any Collateral that
shall have been sold in accordance with Section 6.2) is not subject to any
interest granted by any Secured Party in favor of any other Person. Upon
termination of this Agreement, the Collateral Agent shall immediately (i)
deliver a notice to Bank terminating the Account Agreement and the Cash
Collateral Account Agreement in accordance with the terms thereof and (ii) cause
all funds in the Cash Collateral Account to be transferred to the Other Grantor
Account and return to the Grantor all Qualifying Posted Security then held by
the Collateral Agent. The Collateral Agent shall not deliver a notice to Bank
terminating the Account Agreement or the Cash Collateral Account Agreement
pursuant to the terms thereof except upon termination of this Agreement pursuant
to this Section 7.15 or otherwise with the prior written consent of Grantor.

     (d)  Notwithstanding the foregoing, this Agreement and the Security
Interests shall remain in full force and effect and continue to be effective
should any petition be filed by or against Grantor for liquidation or
reorganization, should Grantor become insolvent or make an assignment for the
benefit of any creditor or creditors, or should a receiver, trustee, custodian,
liquidator, or similar official be appointed for all or any substantial part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
portion thereof, is, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or portion thereof, is so
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.

     SECTION 7.16 OBLIGATIONS OF GRANTOR. (a) Anything herein to the contrary
notwithstanding, (i) Grantor shall remain liable (subject to Section 7.16(c))
under each of the Gas Receivables to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto; (ii) neither the Collateral
Agent nor any other Secured Party shall have any obligation or liability, and
Grantor shall not be released from any obligation or liability, under any
agreement giving rise to, or any instrument or document relating to, a Gas
Receivable by reason of or arising out of any provision of this Agreement or the
receipt by the Collateral Agent or any other Secured Party of payment relating
thereto or the exercise by the Collateral Agent of any rights assigned
hereunder; and (iii) neither the Collateral Agent nor any other Secured Party
shall be obligated in any manner to perform any of the obligations of Grantor
under or pursuant to any agreement giving rise to a Gas Receivable, to make any
payment, to make any commitment or inquiry as to the nature or the sufficiency
of any payment received by it or as to the sufficiency of any performance by any
party thereunder, to present or file any claim or notice, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times, and no
action taken or omitted to be taken by the Collateral Agent with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of Grantor or, other than for losses sustained through the
Collateral Agent's gross negligence or willful misconduct (as determined by a
final non-appealable judgment rendered by a court of competent jurisdiction), to
any claim or action against the Collateral Agent. The provisions of this Section
shall in no event relieve Grantor of any of its obligations hereunder with
respect to the Collateral or any part thereof or impose any

                                       28
<Page>

obligation on the Collateral Agent to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the exercise
by the Collateral Agent of any other or further right which it may have on the
date of this Agreement or hereafter, whether hereunder, by law or otherwise.

     (b)  If Grantor fails to perform or comply with any of its agreements
contained herein within 30 days after written notice thereof to Grantor, the
Collateral Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement. Any and all reasonable costs and expenses incurred by the Collateral
Agent in connection with the foregoing actions shall be for the account of
Grantor, shall be payable by Grantor on demand, and shall be included in the
Obligations as defined herein.

     (c)  Nothing herein shall impose any obligation on, or provide the
Collateral Agent any right to require, Grantor to sell any natural gas or to
observe or perform any condition or obligation under, or under any agreement
giving rise to, or any instrument or document relating to, any Gas Receivable,
any of which actions Grantor shall take or refrain from taking as Grantor shall
consider appropriate, based on Grantor's commercially reasonable business
judgment.

                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.

                                       29
<Page>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

                                    DYNEGY MARKETING AND TRADE

                                            By:
                                                   -----------------------------
                                            Name:
                                                   -----------------------------
                                            Title:
                                                   -----------------------------

                                    CHEVRON U.S.A. INC.

                                    By:
                                          --------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                          --------------------------------------

                                    TEXACO EXPLORATION AND PRODUCTION INC.

                                    By:
                                          --------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                          --------------------------------------

                                    TEXACO NATURAL GAS INC.

                                    By:
                                          --------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                          --------------------------------------

                                    CHEVRON U.S.A. INC., as the Collateral Agent

                                    By:
                                          --------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                          --------------------------------------

<Page>

                                                                  Annex I to the
                                                              Security Agreement

                             PERFECTION CERTIFICATE

     Reference is made to the Security Agreement dated as of March 22, 2002 (as
amended, supplemented or otherwise modified from time to time, the "SECURITY
AGREEMENT"), among DYNEGY MARKETING AND TRADE, a Colorado general partnership
("GRANTOR"); CHEVRON U.S.A. INC., a Pennsylvania corporation ("CUSA"); TEXACO
EXPLORATION AND PRODUCTION INC., a Delaware corporation ("TEPI"); TEXACO NATURAL
GAS INC., a Delaware corporation ("TNGI"); and CUSA as collateral agent (in such
capacity, together with its successors in such capacity, the "COLLATERAL
AGENT"). CUSA, TEPI, TNGI and the Collateral Agent are hereinafter referred to
as the "SECURED PARTIES." Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Security Agreement.

     The undersigned, being a duly authorized officer of the managing partner of
Grantor, hereby certifies to each Secured Party as follows:

     1.   NAME.

     (a)  The exact name of Grantor is Dynegy Marketing and Trade, which name is
designated in Section 1.02 of Grantor's partnership agreement.

     (b)  Set forth below is each other name Grantor has had in the past five
years, together with the date of the relevant change:

     Grantor was formerly known as Natural Gas Clearinghouse. The name change
was effected on July 7, 1998.

     (c)  The following is a list of all other names (including trade names or
similar appellations) used by Grantor or any of its divisions or other business
units in connection with the conduct of its business or the ownership of its
properties at any time during the past five years:

     None

     (d)  Set forth below is the Federal Taxpayer Identification Number of
Grantor:

     76-0522741

     2.   CURRENT LOCATIONS.

     (a)  The chief executive office of Grantor was at all times during the past
five years located in Harris County, Texas, at 1000 Louisiana Street, Houston,
Texas 77002.

     (b)  Set forth below are all the places of business of Grantor not
identified in paragraph (a) above:

<Page>

<Table>
<Caption>
Grantor        Mailing Address            County            State
-------        ---------------            ------            -----
<S>            <C>                        <C>               <C>
None
</Table>

     3.   FILE SEARCH REPORTS. Attached hereto as Schedule 3 are (i) true copies
of file search reports for Grantor from the Uniform Commercial Code filing
offices where filings described in Section 3.2 of the Security Agreement are to
be made, and (ii) a true copy of each financing statement or other filing
identified in such file search reports.

     4.   UCC FILINGS. Duly completed financing statements on Form UCC-1 in
substantially the form of Schedule 4 hereto have been prepared for filing in the
uniform commercial code filing office in the jurisdiction where Grantor is
located as identified in Section 2 hereof.

     5.   SCHEDULE OF FILINGS. Attached hereto as Schedule 5 is a schedule
setting forth, with respect to the filings described in Section 4 above, each
filing and the filing office in which such filing is to be made.

                REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.

                                        2
<Page>

     IN WITNESS WHEREOF, the undersigned has duly executed this certificate as
of the day and year first above written.

                                    DYNEGY MARKETING AND TRADE

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                        3
<Page>

                                   SCHEDULE 5

<Table>
<Caption>
UCC-1                                      FILING OFFICE
--------------------------------------------------------------------------------
<S>                                        <C>
Dynegy Marketing and Trade                 Texas Secretary of State

                                           Colorado Secretary of State
</Table>

                                        4<Page>

Exhibit 4.1.6

                                 MARCH 28, 2002

                           STRATUS SERVICES GROUP, INC

                                ARTISAN (UK) PLC

                             SUBSCRIPTION AGREEMENT

<Page>

                                    CONTENTS

<Table>
<Caption>
CLAUSE                                                                  PAGE
<S>     <C>                                                               <C>
1.      DEFINITIONS AND INTERPRETATION                                     1
2.      CONDITIONS PRECEDENT                                               2
3.      SUBSCRIPTION                                                       2
4.      WARRANTIES                                                         3
5.      APPLICATION                                                        3
6.      REGISTRATION RIGHTS                                                3
7.      FURTHER ASSURANCE                                                  3
8.      ENTIRE AGREEMENT                                                   3
9.      SEVERABILITY                                                       4
10.     WAIVER                                                             4
11.     VARIATION                                                          5
12.     NO PARTNERSHIP                                                     5
13.     CONFIDENTIALITY                                                    5
14.     ANNOUNCEMENTS                                                      6
15.     ASSIGNMENT                                                         7
16.     NOTICES                                                            7
17.     AGENT FOR SERVICE                                                  8
18.     COSTS AND EXPENSES                                                 9
19.     TIME OF THE ESSENCE                                                9
20.     RIGHTS OF THIRD PARTIES (EXCLUDING)                                9
21.     GOVERNING LAW AND JURISDICTION                                     9
SCHEDULE 1 - WARRANTIES                                                   11
SCHEDULE 2 - REGISTRATION RIGHTS                                          21
</Table>

<Page>

THIS AGREEMENT is made on March 28, 2002

BETWEEN:

(1)       STRATUS SERVICES GROUP, INC whose principal office is at 500 Craig
          Road, Suite 201, Manalapan, New Jersey 07726 ("Stratus"); and

(2)       ARTISAN (UK) PLC whose registered office is at Dean House, Sovereign
          Court, Huntingdon, Cambridgeshire, PE29 6XU TR United Kingdom
          ("Artisan")

RECITALS:-

(A)       Stratus wishes to raise up to US$4,700,000 of additional equity
          capital to finance the repayment of US$4,700,000 nominal of its Series
          A Preferred Stock and to pay outstanding dividends and interest.

(B)       Artisan wishes to subscribe up to US$4,700,000 for equity share
          capital of Stratus on the terms set out below.

IT IS AGREED as follows:-

1.        DEFINITIONS AND INTERPRETATION

1.1       In this agreement the following words and expressions shall
          respectively have the following meanings:-

          Market Value             The average closing market price per
                                   Stratus Common Stock shares over the five
                                   trading days immediately preceding that on
                                   which the relevant Stratus Common Stock
                                   shares are allotted and issued.

          Stratus Shares           Shares of Series C Preferred Stock of Stratus
                                   of US$0.01 par value.

1.2       References herein to the masculine gender, to an individual and to the
          singular number shall include references to the feminine gender, to a
          corporation and to the plural number respectively.

1.3       References to Clauses and Schedules are references respectively to
          Clauses of and Schedules to this Agreement. References to paragraphs
          are (unless otherwise stated) to paragraphs of the Clause in which the
          references appears.

<Page>

                                                                          PAGE 2

1.4       Words and phrases defined in the Companies Act 1985 shall (unless the
          context otherwise requires) have the same meanings herein.

1.5       The Schedules hereto shall form part of this Agreement as if the
          contents thereof were expressly set out herein.

1.6       The headings in this Agreement and the Schedules hereto have been
          inserted for convenience only and shall not affect its interpretation
          or construction in any way.

1.7       Where any provision of the Articles conflicts with the provisions
          hereof, the parties hereby agree that the provisions hereof shall
          prevail, to the intent that they shall if necessary in any case
          procure the amendment of the Articles to the extent required to enable
          the Company to be administered as provided herein

2.        CONDITIONS PRECEDENT

          This agreement is conditional on Stratus delivering to Artisan:

2.1       an opinion signed by Counsel satisfactory to Artisan and in a form
          satisfactory to Artisan as to the due incorporation, good standing and
          such other matters relating to Stratus and the due execution of this
          Agreement and the due authorisation and valid issue of the Stratus
          Shares as Artisan may require, including that registration under the
          1933 Act is not required;

2.2       certified copies of the constitutional documents of Stratus and of the
          documents constituting its Series A Preferred Stock dated June 26,
          2001 and its Series B Preferred Stock dated March 11, 2002;

2.3       a certified copy of the minutes of the meeting of the Board of Stratus
          approving this Agreement.

          If this condition shall not be satisfied on the date hereof (or such
          later date if any as the parties may agree) this agreement shall be
          void ab initio and neither party shall have any liability under it.

3.        SUBSCRIPTION

          Subject to the satisfaction of the conditions precedent referred to in
          clause 2 above, and subject to Stratus procuring shareholder approval,
          there shall be allotted and issued to Artisan Stratus Shares for
          subscription at US$100 per share, the aggregate of all of such Stratus
          Shares not exceeding US$4,700,000. The proceeds therefrom, as set
          forth in Paragraph 5 below, shall be used to redeem all existing
          Series A Preferred Shares.

<Page>

                                                                          PAGE 3

4.        WARRANTIES AND UNDERTAKINGS

4.1       In consideration of Artisan agreeing to subscribe for the Stratus
          Shares under this agreement, Stratus represents warrants and
          undertakes to Artisan, in the terms of the representations, warranties
          and undertakings set out in Part 2 of Schedule 1 to this agreement
          ("the Warranties") and so that the rights and remedies of Artisan in
          respect of the Warranties shall continue to subsist notwithstanding
          completion of the subscription for the Stratus Shares under this
          agreement.

4.2       Artisan makes the representations set out in Part 3 of Schedule 1.

4.3       Stratus shall give Artisan notice of each meeting of its Board of
          Directors, or any committee thereof, and shall provide copies of all
          materials provided to the directors in connection with such meetings;
          and Artisan shall be entitled to have one individual attend such
          meetings as an observer.

4.4       Board Membership. Stratus agrees that it will appoint one
          representative of Artisan to the Board of Directors of Stratus and
          Artisan agrees that it will appoint one representative of Stratus to
          the Board of Directors of Artisan.

5.        APPLICATION

          Stratus hereby undertakes to Artisan that the Subscription monies
          shall be applied in or towards the repayment of the Series A Preferred
          Stock and the balance of the monies will be used to pay outstanding
          interest/dividends.

6.        REGISTRATION RIGHTS

          Artisan and it successors in title to the Stratus Shares subscribed by
          it under this Agreement shall be entitled to the registration rights
          set out in Schedule 2 to this Agreement.

7.        FURTHER ASSURANCE

          Each party agrees to execute and deliver to the others or do as
          appropriate all such other documents, assurances and acts as may be
          reasonably necessary or desirable to fulfill the provisions of this
          Agreement or to carry into effect the intentions of the parties as
          expressed herein.

8.        ENTIRE AGREEMENT

          This Agreement constitutes the entire agreement between the parties
          with respect to its subject matter. It supersedes all previous
          agreements and understandings between the parties and each party
          acknowledges that, in entering into this Agreement, it does not do so
          on the

<Page>

                                                                          PAGE 4

          basis of or in reliance upon any representations, promises,
          undertakings, warranties or other statements (whether written or oral)
          of any nature whatsoever except as expressly provided in this
          Agreement and accordingly all conditions, warranties or other terms
          implied by statute or common law are hereby excluded to the fullest
          extent permitted by law.

9.        SEVERABILITY

9.1       If at any time any provision of this Agreement is or becomes illegal,
          invalid or unenforceable in any respect under the law of any
          jurisdiction, that shall not affect or impair:-

9.1.1     the legality, validity or enforceability in that jurisdiction of any
          other provision of this Agreement; or

9.1.2     the legality, validity or enforceability under the law of any other
          jurisdiction of that or any other provision of this Agreement.

9.2       Without prejudice to Clause 9.1, should any competent authority or
          court indicate that this Agreement will only be exempt from, or fall
          outside the scope of, any applicable laws or regulations if it is
          amended in certain respects or any provision of this Agreement be
          discovered or declared (whether formally or informally) by any
          competent authority or court to be legally void or unenforceable in
          whole or in part, then the parties shall meet with a view to reaching
          agreement upon amendments that are acceptable to the competent
          authority or court and most nearly achieve the object of the
          objectionable, allegedly void or unenforceable provision and upon such
          other amendments as may be appropriate, having regard to the changed
          nature of the Agreement.

10.       WAIVER

10.1      No delay, omission or forbearance by either party hereunder to
          exercise or enforce any right, power or remedy arising under or in
          connection with this Agreement shall operate as a waiver of that or
          any other right, power or remedy, and any single or partial exercise
          or enforcement thereof shall not preclude any other or further
          exercise or enforcement thereof or the exercise or enforcement of any
          right, power or other remedy.

10.2      A waiver of a breach of or default under any of the terms of this
          Agreement does not constitute a waiver of any other breach or default
          and shall not affect the other terms of this Agreement.

10.3      A waiver of a breach of or default under any of the terms of this
          Agreement will not prevent a party from subsequently requiring
          compliance with the waived obligation in respect of that breach or
          continued default.

<Page>

                                                                          PAGE 5

10.4      The rights, powers and remedies provided in this Agreement are
          cumulative and (subject as otherwise provided in this Agreement) are
          not exclusive of any right, power or remedy provided by law or by any
          other agreement or document.

11.       VARIATION

          This Agreement may not be released, discharged, supplemented, amended,
          varied or modified except by an instrument in writing signed by a duly
          authorized representative of each of the parties hereto.

12.       NO PARTNERSHIP

          It is acknowledged and agreed by each of the parties that neither the
          entry into nor the performance of the terms of this Agreement
          constitutes or shall constitute a partnership or joint venture between
          the parties.

13.       CONFIDENTIALITY

13.1      Each party undertakes to the other to keep secret and confidential all
          information (whether written, pictorial, in machine readable form or
          oral) and in whatever form received during the continuance of this
          Agreement or obtained as a result of entering into or performing this
          Agreement concerning the business or affairs of the other party
          including without limitation.

13.1.1    non-public information concerning the trade secrets, customers,
          suppliers or business associations of the other party; and

13.1.2    non-public information concerning the financial, operational,
          technical or commercial affairs of the other party

          all of which shall be the "Confidential Information".

13.2      Each party undertakes to the other not to use the Confidential
          Information of the other party except for the purposes of this
          Agreement and shall not (without the prior written consent of the
          other party) disclose the same to any person save to the extent
          necessary for the performance of this Agreement and except to the
          extent that such information:-

13.2.1    is required to be disclosed by the law of any relevant jurisdiction;

13.2.2    is required to be disclosed by any securities exchange or regulatory
          or governmental body to which either party is subject or submits,
          wherever situated, including (without limitation) the Securities and
          Exchange Commission, Nasdaq, the London Stock Exchange, the Financial
          Services Authority and the Panel on Takeovers and Mergers whether or
          not the requirement for information has the force of law, in which
          case the party concerned shall take all such

<Page>

                                                                          PAGE 6

          steps as may be reasonable and practicable in the circumstances to
          agree the contents of such announcement with the other party before
          making such announcement provided that, in any event, any such
          announcement shall be made only after notice to the other party;

13.2.3    is trivial or obvious;

13.2.4    is already in the public domain at the time of disclosure or
          thereafter shall fall into the public domain other than as a result of
          breach of this clause; or

13.2.5    is already in the disclosing party's possession (as evidenced by
          written records) otherwise than as a result of a breach of this
          clause; or

13.2.6    becomes known to the disclosing party from a source other than the
          other party otherwise than as a result of a breach of this clause;

13.2.7    was disclosed after the express prior written approval of the party to
          whom such information belongs and in any event subject to the
          disclosing party having notified the other in writing prior to making
          such disclosure.

13.3      Each of the parties undertakes to the other to take all such steps as
          shall from time to time be necessary to ensure compliance with the
          provisions of this clause 13 by its Group Companies, employees, agents
          and sub-contractors.

13.4      Notwithstanding anything contained elsewhere in this Agreement, the
          provisions of this clause 13 shall survive the termination or expiry
          of this Agreement.

14.       ANNOUNCEMENTS

14.1      Save as provided below, no public statement or announcement (or any
          statement or disclosure to any public or regulatory body or any other
          body which has an obligation to or which is likely to make public any
          such statement or disclosure) concerning the fact or subject matter of
          this Agreement or any ancillary matter shall be made by any party
          without the prior written approval of the other, such approval not to
          be unreasonably withheld or delayed.

14.2      Any party may make an announcement concerning the subject matter of
          this Agreement or any ancillary matter if required by:

14.2.1    the law of any relevant jurisdiction;

14.2.2    any securities, exchange or regulatory or governmental body to which
          that party is subject or submits, wherever situated, including
          (without limitation) the Securities and Exchange Commission, NASDAQ,
          the London Stock Exchange, the Financial Services Authority and

<Page>

                                                                          PAGE 7

          the Panel on Takeovers and Mergers, whether or not the requirement has
          the force of law, in which case the party concerned shall take all
          such steps as may be reasonable and practicable in the circumstances
          to agree the contents of such announcement with the other party before
          making such announcement provided that, in any event, any such
          announcement shall be made only after notice to the other party.

15.       ASSIGNMENT

15.1      Except as specifically provided in paragraph 7.4 of Schedule 2 to this
          Agreement Stratus may not without the prior written consent of Artisan
          assign or in any way dispose of to any third party its rights under
          this Agreement. Artisan may assign any of its rights to any person to
          whom or which it is transferring any of the Stratus Shares.

15.2      The assigning party shall promptly give notice to the other party of
          any permitted assignment under sub-clause 16.1 above and any purported
          assignment shall not be valid unless the assignee agrees in writing to
          be bound by the provisions of this Agreement.

16.       NOTICES

16.1      Any notice to be given hereunder shall be in writing (other than
          writing on the screen of a visual display unit or other similar device
          which shall not be treated as writing for the purposes of this clause
          unless receipt of the relevant communication is acknowledged by the
          relevant party either by electronic mail or by other written means)
          and delivered by hand or by pre-paid first class post or by facsimile
          letter or by electronic mail letter (and notices sent by facsimile or
          by electronic mail shall be confirmed immediately by pre-paid first
          class post) addressed and sent to the party to be served at the
          addresses provided in sub-clause 16.3.

16.2      Notices addressed as provided in sub-clause 16.3 shall be deemed to
          have been duly served:-

16.2.1    if sent by personal delivery, upon delivery at the address of the
          relevant party;

16.2.2    if sent by first class post, two business days after the date of
          posting if posted in the country of destination otherwise after seven
          days;

16.2.3    if sent by facsimile, when despatched provided that if any such notice
          would otherwise be deemed to be served outside working hours, such
          notice shall be deemed to be served at the start of working hours on
          the next business day; and

16.2.4    if sent by electronic mail, when receipt of the notice is acknowledged
          in accordance with Clause 15.1.

<Page>

                                                                          PAGE 8

16.3      The relevant addressee, address, electronic mail address and facsimile
          number of each party for the purpose of this Agreement are:-

<Table>
<Caption>
          NAME OF PARTY             ADDRESS AND E-MAIL ADDRESS           FACSIMILE NUMBER
          -------------             --------------------------           ----------------
          <S>                       <C>                                  <C>
          Stratus Services Group,   500 Craig Road,                      +1 732 294 1133
          Inc.                      Suite 201 Manalapan,
                                    New Jersey,
                                    USA 07726
                                    sberrios@stratusservices.com;
                                    joeraymond@stratusservices.com;
          Artisan (UK) plc          Dean House                           +44(0)1480-436-231
                                    Sovereign Court
                                    Huntingdon, Cambridgeshire,
                                    PE29 6XU TR
                                    United Kingdom
</Table>

          or such other address as any party may have previously notified to the
          other.

17.       AGENT FOR SERVICE

17.1      Stratus irrevocably agrees that any notice or process may be
          sufficiently and effectively served on it by service on its agent
          Corporation Service Company, if no replacement agent has been
          appointed and notified to the other party pursuant to Clause 17.5, or
          on the replacement agent if one has been appointed and notified to
          Artisan.

17.2      The relevant addressee, address, electronic mail address and facsimile
          number of _______________________ for the purpose of this Clause 17
          are:-

<Table>
<Caption>
          NAME OF PARTY             ADDRESS [AND E-MAIL ADDRESS]         FACSIMILE NUMBER
          <S>                       <C>                                  <C>

</Table>

17.3      Any notice or process served on ___________________ in accordance with
          this Clause 17 shall be deemed to have been duly served on Stratus
          according to the same times as those specified in Clause 16.2 above.

17.4      A copy of any notice or process served on an agent pursuant to this
          Clause 17 shall be sent by post to Stratus at its address for the time
          being for the service of notices under Clause 16, but no failure or
          delay in so doing shall prejudice the effectiveness of service of the
          relevant notice or process in accordance with Clause 17.1 above.

<Page>

                                                                          PAGE 9

17.5      If the agent referred to in Clause 17.1 (or any replacement agent
          appointed pursuant to this Clause 17.5) at any time ceases for any
          reason to act as such, Stratus shall appoint a replacement agent to
          accept service having an address for service in England and Wales and
          shall notify Artisan of the name and address of the replacement agent.
          Failing any such appointment and notification, Artisan shall be
          entitled by notice to Stratus to appoint such replacement agent to act
          on Stratus' behalf.

18.       COSTS AND EXPENSES

          Save as otherwise stated in any other provision of this Agreement,
          each party shall bear its own costs and expenses in relation to the
          negotiation, preparation, execution and carrying into effect of this
          Agreement and all other documents referred to in it.

19.       TIME OF THE ESSENCE

          It is agreed that time is of the essence of this Agreement with regard
          to the performance by Stratus of its obligations under this Agreement.

20.       RIGHTS OF THIRD PARTIES (EXCLUDING)

20.1      No person who is not a party to this Agreement shall have any right
          under the Contracts (Rights of Third Parties) Act 1999 to enforce any
          term of this Agreement.

20.2      Nothing contained in Clause 20.1 shall affect any right or remedy of
          any third party which exists or is available other than under the
          Contracts (Rights of Third Parties) Act 1999.

21.       GOVERNING LAW AND JURISDICTION

21.1      This Agreement is governed by and shall be construed in accordance
          with English law.

21.2      The courts of England have non-exclusive jurisdiction to hear and
          decide any suit, action or proceedings, and to settle any disputes,
          which may arise out of or in connection with this Agreement
          (respectively, "Proceedings" and "Disputes") and, for these purposes,
          each party hereby irrevocably submits to the jurisdiction of the
          courts of England.

21.3      Each party irrevocably waives any objection which it might at any time
          have to the courts of England being nominated as the forum to hear and
          decide any Proceedings and to settle any Disputes and agrees not to
          claim that the courts of England are not a convenient or appropriate
          forum.

21.4      Process by which any Proceedings are begun in England may be served in
          accordance with Clauses 15 and 17, provided that nothing contained in
          this sub-clause affects the right to serve process in another manner
          permitted by law.

<Page>

                                                                         PAGE 10

The common seal of                                     )
STRATUS SERVICES GROUP, INC)
was hereunto affixed presence of                       )

/s/ Joseph J. Raymond
--------------------------------------------------------
Joseph J. Raymond, Sr.
Chairman and Chief Executive Officer

/s/ Michael A. Maltzman
--------------------------------------------------------
Michael A. Maltzman
Executive Vice President and Chief Financial Officer

Executed and delivered as a deed by       )
ARTISAN  (UK) plc                         )
Acting by two directors/ a director and the             )
Secretary                                               )

/s/ Stephen Dean
------------------------------------------
Director

...........................................
Director/Secretary

<Page>

                                                                         PAGE 11

                                   SCHEDULE 1

                                   WARRANTIES

                                     PART 1

1.        DEFINITIONS

          As used in this Schedule 1, all capitalized terms not otherwise
          defined in this Agreement shall have the following meanings:

          "Affiliate"              means, as applied to any Person, (a) any
                                   other Person directly or indirectly
                                   controlling, controlled by or under common
                                   control with, that Person, (b) any other
                                   Person that owns or controls (i) 10% or more
                                   of any class of equity securities of that
                                   Person or any of its Affiliates or (ii) 10%
                                   or more of any class of equity securities
                                   (including any equity securities issuable
                                   upon the exercise of any option or
                                   convertible security) of that Person or any
                                   of its Affiliates, or (c) any director,
                                   partner, member, officer, manager, agent,
                                   employee or relative of such Person. For the
                                   purposes of this definition, "control"
                                   (including with correlative meanings, the
                                   terms "controlling", "controlled by", and
                                   "under common control with") as applied to
                                   any Person, means the possession, directly or
                                   indirectly, of the power to direct or cause
                                   the direction of the management and policies
                                   of that Person, whether through ownership of
                                   voting securities or by contract or
                                   otherwise.

          "Contract"               means any agreement (including licenses with
                                   non-governmental Persons), lease, evidence of
                                   indebtedness, mortgage, indenture, security
                                   agreement or other instrument or contract,
                                   whether written or oral.

          "Exchange Act"           means the Securities Exchange Act of
                                   1934, as amended, and the rules and
                                   regulations of the SEC thereunder.

<Page>

                                                                         PAGE 12

          "Encumbrance"            means any security interest, lien, pledge,
                                   claim, charge, escrow, encumbrance, option,
                                   right of first offer, right of first refusal,
                                   preemptive right, mortgage, indenture,
                                   security agreement or other similar
                                   agreement, arrangement, contract, commitment,
                                   understanding or obligation, whether written
                                   or oral and whether or not relating in any
                                   way to credit or the borrowing of money.

          "Governmental or         means any court, tribunal, arbitrator,
          Regulatory Authority"    authority, agency, commission, official
                                   or other instrumentality of the United
                                   States, any foreign country or any domestic
                                   or foreign state, county, city or other
                                   political subdivision.

          "Indebtedness"           means (a) all indebtedness of Stratus,
                                   including the principal of, and premium, if
                                   any, and interest (including interest
                                   accruing after the filing of a petition
                                   initiating any proceeding under any state,
                                   federal or foreign bankruptcy laws, whether
                                   or not allowable as a claim in such
                                   proceeding) on, all indebtedness, whether
                                   outstanding currently or hereafter created
                                   (i) for borrowed money, (ii) for money
                                   borrowed by others and guaranteed, directly
                                   or indirectly, by Stratus, (iii) for money
                                   borrowed by others for which Stratus provides
                                   security, (iv) constituting purchase money
                                   indebtedness the payment of which Stratus is
                                   directly or contingently liable, (v)
                                   constituting reimbursement obligations under
                                   bank letters of credit, (vi) under interest
                                   rate and currency swaps, caps, floors,
                                   collars or similar agreements or arrangements
                                   intended to protect Stratus against
                                   fluctuations in interest or currency exchange
                                   rates, (vii) under any lease of any real or
                                   personal property, which obligations are
                                   capitalised on Stratus' books in accordance
                                   with generally accepted accounting
                                   principles, or (viii) under any other
                                   arrangement under which obligations are
                                   recorded as indebtedness on Stratus' books in

<Page>

                                                                         PAGE 13

                                   accordance with generally accepted accounting
                                   principles, and (b) any modifications,
                                   refundings, deferrals, renewals or extensions
                                   of any such Indebtedness, or securities,
                                   notes or other evidences of indebtedness
                                   issued in exchange for such Indebtedness.

          "Law" or "Laws"          means all laws, statutes, rules, regulations,
                                   ordinances and other pronouncements having
                                   the effect of law of the United States, any
                                   foreign country or any domestic or foreign
                                   state, county, city or other political
                                   subdivision or of any Governmental or
                                   Regulatory Authority.

          "Material                means a material adverse effect on the
          Adverse Effect"          business or financial position of a Person
                                   and such Person's subsidiaries, taken as a
                                   whole.

          "Nasdaq"                 means the Nasdaq SmallCap Market.

          "OTC Bulletin Board"     means the NASD Over the Counter Bulletin
                                   Board.

          "Person"                 means any natural person, corporation,
                                   general partnership, limited partnership,
                                   limited liability company or partnership,
                                   proprietorship, other business organization,
                                   trust, union, association or Governmental or
                                   Regulatory Authority.

          "SEC"                    means the Securities and Exchange Commission.

          "Securities Act"         means the Securities Act of 1933, as
                                   amended, and the rules and regulations of the
                                   SEC thereunder.

          "Transfer"               means, directly or indirectly, any sale,
                                   transfer, assignment, hypothecation, pledge
                                   or other disposition of any securities of
                                   Stratus or any interests therein.

                                     PART 2

2.        REPRESENTATIONS AND WARRANTIES OF STRATUS

          Stratus hereby represents and warrants to Artisan that:

<Page>

                                                                         PAGE 14

2.1       ORGANIZATION AND QUALIFICATION.

          Stratus is a corporation duly organized, validly existing and in good
          standing under the Laws of the State of Delaware. Stratus is duly
          qualified and is authorized to do business and is in good standing as
          a foreign corporation in each state or jurisdiction where the nature
          of its business or the ownership of property make such qualification
          necessary, except where the failure of Stratus to be so qualified
          would not have a Material Adverse Effect on Stratus, and except for
          Massachusetts and New Hampshire, for which the Company has already
          made the requisite filings to obtain good standing but for which good
          standing certificates have not yet been issued.

2.2       AUTHORITY.

          Stratus has full power and authority to execute and deliver this
          Agreement, to perform its obligations hereunder and to consummate the
          transactions contemplated hereby (including the issuance, sale and
          delivery of the Stratus Shares being sold hereunder). The execution,
          delivery and performance by Stratus of this Agreement and the
          consummation by it of the transactions contemplated hereby (including
          the issuance, sale and delivery of the Stratus Shares being sold
          hereunder) have been duly and validly authorized by all necessary
          action by its Board of Directors, and no other action is necessary to
          authorise the execution, delivery and performance of this Agreement
          and the consummation by Stratus of the transactions contemplated
          hereby (including the issuance, sale and delivery of the Stratus
          Shares being sold hereunder, other than as set forth above regarding
          the shareholder approval required for the Subscription). This
          Agreement has been duly and validly executed and delivered by Stratus
          and constitutes a legal, valid and binding obligation of Stratus
          enforceable against Stratus in accordance with its terms, except as
          the enforceability thereof may be limited by bankruptcy, insolvency,
          reorganization, moratorium or other similar laws relating to the
          enforcement of creditors' rights generally and by general principles
          of equity.

2.3       VALID ISSUANCE OF STRATUS SHARES; CAPITALISATION.

          The Stratus Shares that are being purchased by Artisan hereunder, when
          issued, sold and delivered in accordance with the terms of this
          Agreement for the consideration expressed herein, will be duly and
          validly issued, fully paid, and nonassessable, and will be free of
          restrictions on transfer other than restrictions on transfer under
          this Agreement and under applicable federal and state securities laws.
          The Stratus Shares that are being purchased by Artisan hereunder will
          be quoted on Nasdaq or any other securities exchange that the Stratus
          Shares are then listed upon.

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                                                                         PAGE 15

          The authorized capital stock of Stratus consists of 30,000,000 shares,
          par value $.01 per share, of which 25,000,000 shares are common stock
          and 5,000,000 shares are preferred stock and may be issued from time
          to time in one or more series. As of the date of this Agreement,
          11,529,767 shares of common stock and 1,458,933 shares of Series A
          Preferred Stock and 263,300 shares of Series B Preferred Stock are
          issued and outstanding, and 4,264,167 shares of common stock are
          reserved for issuance upon the exercise of outstanding warrants and
          employee stock options. Except as designated in the prior sentence,
          there are no rights, subscriptions, warrants, options, conversion
          rights, calls or other agreements or commitments of any kind
          outstanding to purchase or otherwise acquire any shares of Stratus'
          stock, or any other interest or securities or obligations of any kind
          exchangeable for, or convertible into any shares of stock, of any
          class of or any other equity interest in Stratus or obligating Stratus
          to grant, extend or enter into any such agreement or commitment.

2.4       NO CONFLICTS.

          The execution and delivery by Stratus of this Agreement, the
          performance by Stratus of its obligations under this Agreement and the
          consummation of the transactions contemplated hereby (including the
          issuance, sale and delivery of the Stratus Shares being sold
          hereunder) do not and will not (i) conflict with, or constitute a
          default under, any Contract to which Stratus is a party, (ii) result
          in a violation of Stratus' organizational documents, or any order,
          judgment or decree of any court or Governmental or Regulatory
          Authority having jurisdiction over Stratus or any of its assets or
          properties or (iii) result in, or require, the creation or imposition
          of any Encumbrance upon any of the assets or properties of Stratus.

2.5       BROKERS.

          Except for Griffin Securities, Inc., who acted as an advisor and
          placement agent in this matter, no agent, broker, finder, investment
          banker, financial advisor or other similar Person will be entitled to
          any fee, commission or other compensation in connection with the
          transactions contemplated by this Agreement on the basis of any act or
          statement made or alleged to have been made by Stratus or any of its
          Affiliates.

2.6       EXEMPTION FROM REGISTRATION.

          Assuming the accuracy on the date hereof and on any other date Artisan
          purchases Stratus Shares under this Agreement of the representations
          and warranties of the Purchaser set forth in Section 3 of this
          Schedule 1, the issuance and sale of the Stratus Shares will be exempt
          from the registration requirements of the Securities Act.

2.7       LITIGATION.

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                                                                         PAGE 16

          There are no actions, suits, proceedings or investigations pending, or
          to the knowledge of Stratus, threatened, against or affecting Stratus,
          except for those that could not reasonably be expected to have either
          individually or in the aggregate a Material Adverse Effect on Stratus.
          Stratus is not in default with respect to any order, writ, injunction,
          judgment, decree or rule of any Governmental or Regulatory Authority,
          except for such defaults that could not reasonably be expected to have
          either individually or in the aggregate a Material Adverse Effect on
          Stratus.

2.8       NO DEFAULTS.

          Stratus is not in default, and no event has occurred and no condition
          exists which constitutes, or which with the passage of time or the
          giving of notice or both would constitute, a default in the payment of
          any material Indebtedness.

2.9       SEC REPORTS AND FINANCIAL STATEMENTS.

          (a)  Stratus has filed all forms, reports and documents required to be
               filed by it pursuant to Section 13 or Section 15(d) of the
               Exchange Act within the last 12 months on a timely basis or has
               received a valid extension of time for filing. Stratus has made
               available to the Purchaser Stratus' Annual Report on Form 10-K as
               amended by Form 10-K/A for the fiscal year ended September 30,
               2001 and its Quarterly Report on Form 10-Q for the quarter ended
               December 31, 2001 (the "SEC Reports"). Each SEC Report complied
               as to form in all material respects with the rules and
               regulations of the SEC under the Exchange Act on the date of
               filing and as of such date (or if amended or superseded by a
               filing prior to the date of this Agreement, on the date of such
               filing) did not contain any untrue statement of a material fact
               required to be stated therein or necessary to make the statements
               therein, in the light of the circumstances under which they were
               made, not misleading.

          (b)  Each of the consolidated financial statements (including, in each
               case, any related notes thereto) (the "Financial Statements")
               contained in the SEC Report (i) was prepared in accordance with
               generally accepted accounting principles ("GAAP") applied on a
               consistent basis throughout the periods involved (except as may
               be expressly described in the notes thereto) and (ii) fairly
               presents in all material respects the consolidated financial
               position of Stratus as at the respective dates thereof and the
               consolidated results of its operations and cash flows for the
               periods indicated.

2.10      EVENTS SUBSEQUENT TO THE DATE OF THE LAST FINANCIAL STATEMENT.

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                                                                         PAGE 17

          Since December 31, 2001 (the "Financial Statements Date"), Stratus has
          not (i) sold, assigned, transferred or granted any exclusive license
          with respect to any patent, trademark, trade name, service mark,
          copyright, trade secret or other intangible asset necessary for the
          operation of Stratus' business substantially as now conducted, (ii)
          suffered any loss of property that had a Material Adverse Effect on
          Stratus or waived any right of substantial value to Stratus other than
          in the ordinary course of business or (iii) entered into any
          commitment, obligation, understanding or other arrangement, contingent
          or otherwise, to effect, directly or indirectly, any of the foregoing
          except the sale of Stratus' engineering division, the details of which
          are set forth in Stratus Form 10-K/A filed with the Securities and
          Exchange Commission on March 5, 2002. Since the Financial Statements
          Date, no events have occurred which individually or collectively have
          had a Material Adverse Effect on Stratus.

2.11      ABSENCE OF UNDISCLOSED LIABILITIES.

          Since the Financial Statements Date, Stratus has not had any loss
          contingency (as defined in Statement of Financial Accounting Standards
          No. 5), whether matured or unmatured, fixed or contingent, that could
          have a Material Adverse Effect on Stratus, except (i) obligations to
          perform under commitments or other obligations incurred in the
          ordinary course of business and (ii) tax and related liabilities.

2.12      TITLE TO ASSETS, PROPERTIES AND RIGHTS.

          Stratus has good and marketable title (or a valid leasehold interest)
          to all of the assets (whether real, personal or mixed) necessary for
          the conduct of Stratus' business substantially as now conducted, free
          and clear of all Encumbrances, except for (i) liens for current taxes,
          assessments and other governmental charges not yet due and payable for
          which reserves have been established as required by generally accepted
          accounting principles; (ii) easements, covenants, conditions and
          restrictions (whether or not of record) as to which no material
          violation or encroachment exists or, if such violation or encroachment
          exists, as to which the cure of such violation or encroachment would
          not materially interfere with the conduct of Stratus' business; (iii)
          any Zoning or other governmentally established restrictions or
          encumbrances; (iv) workers or unemployment compensation liens arising
          in the ordinary course of business; or (v) mechanic's, materialman's,
          supplier's, vendor's or similar liens arising in the ordinary course
          of business securing amounts which are not delinquent. (The matters
          set forth in the foregoing clauses (i) through (v) being referred to
          herein as the "Permitted Encumbrances"). Such assets are in such
          operating condition and repair as is suitable for the uses for which
          they are used in Stratus' business, are not subject to any condition
          which materially interferes with the use thereof by Stratus, and
          constitute all

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                                                                         PAGE 18

          assets, properties, interests in properties and rights necessary to
          permit Stratus to carry on its business after the date of this
          Agreement substantially as conducted by Stratus prior thereto.

2.13      PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.

          Stratus (i) owns or possesses all the patents, trademarks, service
          marks, trade names, copyrights and licenses therefor necessary for the
          conduct of Stratus' business substantially as now conducted without
          any known conflict with the rights of others that are likely to have a
          Material Adverse Effect on Stratus and (ii) has allocated or licensed
          all such patents, trademarks, service marks, trade names, copyrights
          and licenses to Stratus for use by Stratus in its business. To the
          best knowledge of Stratus, Stratus has not interfered with, infringed
          upon or misappropriated any intellectual property rights of any Person
          or committed any acts of unfair competition with respect to the
          operation of Stratus' business, and Stratus has not received from any
          Person in the past five years (or since its inception, if shorter) any
          notice, charge, complaint, claim or assertion thereof, and no such
          claim is impliedly threatened by an offer to license from another
          Person under a claim of use. No activity, service or procedure
          currently conducted by Stratus violates in any material respect any
          Contract of Stratus with any third Person relating to any intellectual
          property rights.

2.14      GOVERNMENTAL CONSENTS.

          Stratus has, and is in good standing with respect to, all governmental
          consents, approvals, licenses, authoriSations, permits, certificates,
          inspections and franchises necessary to continue to conduct Stratus'
          business substantially as now conducted and to own or lease and
          operate the assets and properties necessary for the conduct by Stratus
          of its business substantially as now conducted except for such
          failures that could not reasonably be expected to have either
          individually or in the aggregate a Material Adverse Effect on Stratus.

2.15      NO CONSENT OR APPROVAL REQUIRED.

          No consent, approval or authorization of, or declaration to or filing
          with, any Person is required by Stratus for the valid authorization,
          execution and delivery by Stratus of this Agreement or its
          consummation of the transactions contemplated hereby (including the
          issuance, sale and delivery of the Stratus Shares being sold
          hereunder, other than those set forth above regarding the Subscription
          for which shareholder approval is required), other than those
          consents, approvals, authorizations, declarations or filings which
          have been obtained or made, as the case may be, required filings with
          the SEC and Nasdaq, and that the failure to obtain or make would not
          have a Material Adverse Effect on Stratus.

2.16      COMPLIANCE WITH LAWS.

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                                                                         PAGE 19

          Stratus has duly complied with, and the assets and properties,
          business operations and leaseholds used in connection with the
          business of Stratus are in compliance with, the provisions of all laws
          applicable to Stratus, its assets and properties or the conduct of its
          business and there have been no citations, notices or orders of
          non-compliance issued to Stratus under any such law, rule or
          regulation, except for such non-compliance which could not reasonably
          be expected to have either individually or in the aggregate a Material
          Adverse Effect on Stratus.

2.17      LABOUR RELATIONS.

          Stratus' employees are not subject to any collective bargaining
          agreement. There are no material grievances, disputes or controversies
          with any union or any other organization of Stratus' employees, or
          threats of strikes, work stoppages or any asserted pending demands for
          collective bargaining by any union or organization, that could have a
          Material Adverse Effect on Stratus.

                                     PART 3

3.        REPRESENTATIONS AND WARRANTIES OF ARTISAN

          Artisan hereby represents and warrants to Stratus that:

3.1       Artisan is acquiring the Stratus Shares for its own account as
          principal, for investment purposes only, and not for or with a view to
          the resale, distribution or granting of a participation therein, in
          whole or in part, in violation of the Securities Act.

3.2       Artisan acknowledges its understanding that the offering and sale of
          the Stratus Shares has not been registered under the Securities Act,
          on the basis of the exemption in Section 4(2) thereof relating to
          transactions not involving a public offering, or any state securities
          laws. Artisan understands that Stratus' reliance on the Section 4(2)
          exemption is based on the representations herein made by Artisan.
          Artisan is an "Accredited Investor" as that term is defined in
          Regulation D under the Securities Act.

3.3       Artisan acknowledges that it is familiar with the limitations which
          are imposed by the Securities Act on any Transfer of an interest in
          the Stratus Shares. Artisan understands and acknowledges that it may
          have to bear the economic risk of its investment in the Stratus Shares
          for an indefinite period of time unless the Stratus Shares are
          subsequently registered under the Securities Act or an exemption
          therefrom is available. Artisan hereby agrees that the Stratus Shares
          will not be Transferred other than (i) pursuant to a registration
          under the Securities Act or pursuant to an exemption therefrom and
          (ii) in compliance with any applicable state securities laws.

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                                                                         PAGE 20

3.4       Artisan has been given access to all information regarding Stratus and
          the business, condition and operations of Stratus that Artisan has
          requested in order to evaluate its investment in the Stratus Shares.
          Artisan has been given the opportunity to ask questions of, and to
          receive answers from, representatives of Stratus concerning the terms
          and conditions of the offering of the Stratus Shares and other matters
          pertaining to such Artisan's investment in the Stratus Shares.

3.5       Artisan understands that the Stratus Shares will initially bear the
          following legend:

          "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
          1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THIS SECURITY
          MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT PURSUANT TO (i) AN
          EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR
          (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER
          APPLICABLE STATE SECURITIES LAWS AS TO WHICH AN OPINION OF COUNSEL
          SATISFACTORY TO THE COMPANY SHALL HAVE BEEN DELIVERED TO STRATUS."

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                                                                         PAGE 21

                                   SCHEDULE 2

                               REGISTRATION RIGHTS

1.        DEFINITIONS

          As used in this Schedule 2, the following terms shall have the
          following meanings:

          "Common Stock"           shall mean the Company's Common Stock, par
                                   value $0.01 per share.

          "Company"                shall mean Stratus Services Group, Inc.

          "Investor"               shall mean Artisan and each of its affiliates
                                   or permitted transferees who is a subsequent
                                   holder of any Registrable Securities.

          "Prospectus"             shall mean the prospectus included in any
                                   Registration Statement, as amended or
                                   supplemented by any prospectus supplement,
                                   with respect to the terms of the offering of
                                   any portion of the Registrable Securities or
                                   Additional Registrable Securities covered by
                                   such Registration Statement and by all other
                                   amendments and supplements to the prospectus,
                                   including post-effective amendments and all
                                   material incorporated by reference in such
                                   prospectus.

          "Register," "registered" refer to a registration made by preparing
          and "registration"       and filing a registration statement or
                                   similar document in compliance with the
                                   1933 Act (as defined  below), and the
                                   declaration or ordering of effectiveness of
                                   such registration statement or document.

          "Registrable Securities" shall mean the Common Stock shares issuable
                                   to Artisan upon the conversion of Preferred
                                   Shares held by it, and any other securities
                                   issued or issuable with respect to or in
                                   exchange for Registrable Securities.

          "Registration Statement" shall mean any registration statement of the
                                   Company filed under the 1933 Act that covers
                                   the resale of any of the Registrable
                                   Securities, pursuant to the provisions of
                                   this agreement, amendments and

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                                                                         PAGE 22

                                   supplements to such Registration Statement,
                                   including post-effective amendments, all
                                   exhibits and all material incorporated by
                                   reference in such Registration Statement.

          "SEC"                    means the U.S. Securities and Exchange
                                   Commission.

          "1933 Act"               means the Securities Act of 1933, as amended,
                                   and the rules and regulations promulgated
                                   thereunder.

          "1934 Act"               means the Securities Exchange Act of 1934, as
                                   amended, and the rules and regulations
                                   promulgated thereunder.

2.        REGISTRATION.

2.1       Registration Statements.

2.1.1     Registrable Securities.

          Promptly on request of either of the Investor (but no later than
          thirty (30) days after such request), the Company shall prepare and
          file with the SEC one Registration Statement on Form S-3 (or, if Form
          S-3 is not then available to the Company, on such form of registration
          statement as is then available to effect a registration for resale of
          all of the Registrable Securities, subject to the Investor's consent),
          covering the resale of the Registrable Securities in an amount equal
          to the number of shares of Common Stock underlying the Preferred
          Shares held by the Investor. A second Registration Statement will be
          filed by Stratus when, and if, necessary to register the maximum
          number of shares which might be issued pursuant to clause 4 of this
          agreement. Such Registration Statements also shall cover, to the
          extent allowable under the 1933 Act and the Rules promulgated
          thereunder (including Rule 416), such indeterminate number of
          additional shares of Common Stock resulting from stock splits, stock
          dividends or similar transactions with respect to the Registrable
          Securities. No securities held by a third party shall be included in
          the Registration Statement without the consent of the Investor. The
          Registration Statement (and each amendment or supplement thereto, and
          each request for acceleration of effectiveness thereof) shall be
          provided in accordance with Section 3(c) to the Investor and its
          counsel prior to its filing or other submission.

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                                                                         PAGE 23

2.2       Expenses.

          The Company will pay all expenses associated with registration
          hereunder, including the Investor's reasonable expenses in connection
          with the registration but excluding discounts, commissions, fees of
          underwriters, selling brokers, dealer managers or similar securities
          industry professionals.

2.3       Effectiveness.

2.3.1     The Company shall use its best efforts to have each Registration
          Statement declared effective as soon as practicable. If (A) the
          Registration Statement covering Registrable Securities is not declared
          effective by the SEC within one hundred and twenty (120) days
          following a request (the "Registration Date"), (B) after a
          Registration Statement has been declared effective by the SEC, sales
          cannot be made pursuant to such Registration Statement for any reason
          (including without limitation by reason of a stop order, or the
          Company's failure to update the Registration Statement) but except as
          excused pursuant to subparagraph (ii) below, or (C) the Common Stock
          generally or the Registrable Securities specifically are not listed or
          included for quotation on the American Stock Exchange, the Nasdaq
          National Market System, the Nasdaq SmallCap Market, the OTC Bulletin
          Board or the New York Stock Exchange then the Company will make pro
          rata payments to each Investor, as liquidated damages and not as a
          penalty, in an amount equal to 2% of the aggregate amount paid by such
          Investor to the Company for shares of Common Stock still held by such
          Investor for any month or pro rata for any portion thereof following
          the Registration Date during which any of the events described in (A)
          or (B) or (C) above occurs and is continuing (the "Blackout Period").
          Each such payment shall be due and payable within five (5) days of the
          end of each month (or ending portion thereof) of the Blackout Period.
          Such payments shall be in partial compensation to the Investor, and
          shall not constitute the Investor's exclusive remedy for such events.
          The Blackout Period shall terminate upon (x) the effectiveness of the
          applicable Registration Statement (or in the case of (B), an
          amendment) in the case of (A) and (B) above; (y) listing or inclusion
          of the Common Stock on the American Stock Exchange, the Nasdaq
          National Market System, the Nasdaq Small Cap Market or the New York
          Stock Exchange in the case of (C) above; and (z) in the case of the
          events described in (A) or (B) above, the earlier termination of the
          Registration Period (as defined in Section 3(a) below). The amounts
          payable as liquidated damages pursuant to this paragraph shall be
          payable, at the option of the Investor, in lawful money of the United
          States or in shares of Common Stock at the Market Value and amounts
          payable as liquidated damages shall be paid monthly within two (2)
          business days of the last day of each month following the commencement
          of the Blackout Period until the termination of the Blackout

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                                                                         PAGE 24

          Period. Amounts payable as liquidated damages hereunder shall cease
          when an Investor no longer holds Registrable Securities.

2.3.2     For not more than ten (10) consecutive trading days or for a total of
          not more than twenty (20) trading days in any twelve (12) month
          period, the Company may delay updating the Registration Statement to
          disclose material non-public information concerning the Company, the
          disclosure of which at the time is not, in the good faith opinion of
          the Company, in the best interests of the Company (an "Allowed
          Delay"); provided, that the Company shall promptly (a) notify the
          Investor in writing of the existence of (but in no event, without the
          prior written consent of an Investor, shall the Company disclose to
          such Investor any of the facts or circumstances regarding) material
          non-public information giving rise to an Allowed Delay, and (b) advise
          the Investor in writing to cease all sales under the Registration
          Statement until the end of the Allowed Delay.

3.        COMPANY OBLIGATIONS

          The Company will use its best efforts to effect the registration of
          the Registrable Securities in accordance with the terms hereof, and
          pursuant thereto the Company will, as expeditiously as possible:

3.1       use its best efforts to cause such Registration Statement to become
          effective and to remain continuously effective for a period that will
          terminate upon the earlier of (i) the date on which all Registrable
          Securities covered by such Registration Statement, as amended from
          time to time, have been sold, and (ii) the date on which all
          Registrable Securities may be sold pursuant to Rule 144(k) (the
          "Registration Period");

3.2       prepare and file with the SEC such amendments and post-effective
          amendments to the Registration Statement and the Prospectus as may be
          necessary to keep the Registration Statement effective for the period
          specified in Section 3(a) and to comply with the provisions of the
          1933 Act and the 1934 Act with respect to the distribution of all
          Registrable Securities, Second Closing Registrable Securities and
          Additional Registrable Securities; provided that, at least five (5)
          business days prior to the filing of a Registration Statement or
          Prospectus, or any amendments or supplements thereto, the Company will
          furnish to the Investors copies of all documents proposed to be filed,
          which documents will be subject to the comments of the Investor, which
          must be received within such five (5) business day period;

3.3       permit counsel designated by the Investor to review each Registration
          Statement and all amendments and supplements thereto no fewer than
          seven (7) days prior to their filing with the SEC and not file any
          document to which such counsel reasonably objects;

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                                                                         PAGE 25

3.4       furnish to the Investor and their legal counsel (i) promptly after the
          same is prepared and publicly distributed, filed with the SEC, or
          received by the Company, one copy of any Registration Statement and
          any amendment thereto, each preliminary prospectus and Prospectus and
          each amendment or supplement thereto, and each letter written by or on
          behalf of the Company to the SEC or the staff of the SEC, and each
          item of correspondence from the SEC or the staff of the SEC, in each
          case relating to such Registration Statement (other than any portion
          of any thereof which contains information for which the Company has
          sought confidential treatment), and (ii) such number of copies of a
          Prospectus, including a preliminary prospectus, and all amendments and
          supplements thereto and such other documents as each Investor may
          reasonably request in order to facilitate the disposition of the
          Registrable Securities owned by such Investor;

3.5       in the event the Company selects an underwriter for the offering, the
          Company shall enter into and perform its reasonable obligations under
          an underwriting agreement, in usual and customary form, including,
          without limitation, customary indemnification and contribution
          obligations, with the underwriter of such offering;

3.6       if required by the underwriter, or if any Investor is described in the
          Registration Statement as an underwriter, the Company shall furnish,
          on the effective date of the Registration Statement, on the date that
          Registrable Securities are delivered to an underwriter, if any, for
          sale in connection with the Registration Statement and at periodic
          intervals thereafter from time to time on request, (i) an opinion,
          dated as of such date, from independent legal counsel representing the
          Company for purposes of such Registration Statement, in form, scope
          and substance as is customarily given in an underwritten public
          offering, addressed to the underwriter and the Investor and (ii) a
          letter, dated such date, from the Company's independent certified
          public accountants in form and substance as is customarily given by
          independent certified public accountants to underwriters in an
          underwritten public offering, addressed to the underwriter and the
          Investor;

3.7       make effort to prevent the issuance of any stop order or other
          suspension of effectiveness and, if such order is issued, obtain the
          withdrawal of any such order at the earliest possible moment;

3.8       furnish to each Investor at least five copies of the Registration
          Statement and any post-effective amendment thereto, including
          financial statements and schedules by air mail within two business
          days of the effective date thereof;

3.9       prior to any public offering of Registrable Securities use its
          reasonable best efforts to register or qualify or cooperate with the
          Investor and their counsel in connection with the registration or
          qualification of such Registrable Securities for offer and sale under
          the securities or blue

<Page>

                                                                         PAGE 26

          sky laws of such jurisdictions requested by the Investor and do any
          and all other reasonable acts or things necessary or advisable to
          enable the distribution in such jurisdictions of the Registrable
          Securities covered by the Registration Statement;

3.10      cause all Registrable Securities covered by a Registration Statement
          to be listed on each securities exchange, interdealer quotation system
          or other market on which similar securities issued by the Company are
          then listed;

3.11      immediately notify the Investor, at any time when a Prospectus
          relating to the Registrable Securities is required to be delivered
          under the Securities Act, upon discovery that, or upon the happening
          of any event as a result of which, the Prospectus included in such
          Registration Statement, as then in effect, includes an untrue
          statement of a material fact or omits to state any material fact
          required to be stated therein or necessary to make the statements
          therein not misleading in the light of the circumstances then
          existing, and at the request of any such holder, promptly prepare and
          furnish to such holder a reasonable number of copies of a supplement
          to or an amendment of such Prospectus as may be necessary so that, as
          thereafter delivered to the purchasers of such Registrable Securities
          such Prospectus shall not include an untrue statement of a material
          fact or omit to state a material fact required to be stated therein or
          necessary to make the statements therein not misleading in the light
          of the circumstances then existing; and

3.12      otherwise use its best efforts to comply with all applicable rules and
          regulations of the SEC under the 1933 Act and the 1934 Act, take such
          other actions as may be reasonably necessary to facilitate the
          registration of the Registrable Securities hereunder; and make
          available to its security holders, as soon as reasonably practicable,
          but not later than the Availability Date (as defined below), an
          earnings statement covering a period of at least twelve months,
          beginning after the effective date of each Registration Statement,
          which earnings statement shall satisfy the provisions of Section 11(a)
          of the 1933 Act (for the purpose of this subsection 3(l),
          "Availability Date" means the 45th day following the end of the fourth
          fiscal quarter that includes the effective date of such Registration
          Statement, except that, if such fourth fiscal quarter is the last
          quarter of the Company's fiscal year, "Availability Date" means the
          90th day after the end of such fourth fiscal quarter).

4.        DUE DILIGENCE REVIEW; INFORMATION

          The Company shall make available, during normal business hours, for
          inspection and review by the Investor, advisors to and representatives
          of the Investor (who may or may not be affiliated with the Investor
          and who are reasonably acceptable to the Company), any underwriter
          participating in any disposition of Common Stock on behalf of the
          Investor pursuant to the Registration Statement or amendments or
          supplements thereto or any blue

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                                                                         PAGE 27

          sky, NASD, OTC Bulletin Board or other filing, all financial and other
          records, all SEC Documents and other filings with the SEC, and all
          other corporate documents and properties of the Company as may be
          reasonably necessary for the purpose of such review, and cause the
          Company's officers, directors and employees, within a reasonable time
          period, to supply all such information reasonably requested by the
          Investor or any such representative, advisor or underwriter in
          connection with such Registration Statement (including, without
          limitation, in response to all questions and other inquiries
          reasonably made or submitted by any of them), prior to and from time
          to time after the filing and effectiveness of the Registration
          Statement for the sole purpose of enabling the Investor and such
          representatives, advisors and underwriters and their respective
          accountants and attorneys to conduct initial and ongoing due diligence
          with respect to the Company and the accuracy of the Registration
          Statement.

5.        OBLIGATIONS OF THE INVESTOR.

5.1       The Investor shall furnish in writing to the Company such information
          regarding itself, the Registrable Securities held by it and the
          intended method of disposition of the Registrable Securities held by
          it, as shall be reasonably required to effect the registration of such
          Registrable Securities and shall execute such documents in connection
          with such registration as the Company may reasonably request. At least
          fifteen (15) business days prior to the first anticipated filing date
          of any Registration Statement, the Company shall notify each Investor
          of the information the Company requires from such Investor if such
          Investor elects to have any of the Registrable Securities included in
          the Registration Statement. An Investor shall provide such information
          to the Company at least five (5) business days prior to the first
          anticipated filing date of such Registration Statement if such
          Investor elects to have any of the Registrable Securities included in
          the Registration Statement.

5.2       Each Investor, by its acceptance of the Registrable Securities, if
          any, agrees to cooperate with the Company as reasonably requested by
          the Company in connection with the preparation and filing of a
          Registration Statement hereunder, unless such Investor has notified
          the Company in writing of its election to exclude all of its
          Registrable Securities from the Registration Statement.

5.3       Each Investor agrees that, upon receipt of any notice from the Company
          of the happening of any event rendering a Registration Statement no
          longer effective, such Investor will immediately discontinue
          disposition of Registrable Securities, pursuant to the Registration
          Statement covering such Registrable Securities until the Investor's
          receipt of the copies of the supplemented or amended prospectus filed
          with the SEC and declared effective and, if so directed by the
          Company, the Investor shall deliver to the Company (at the expense of
          the Company) or destroy (and deliver to the Company a certificate of
          destruction) all copies in

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                                                                         PAGE 28

          the Investor's possession of the prospectus covering the Registrable
          Securities current at the time of receipt of such notice.

6.        INDEMNIFICATION

6.1       Indemnification by Company.

          The Company agrees to indemnify and hold harmless, to the fullest
          extent permitted by law, the Investor, each of its officers,
          directors, partners and employees each person who controls the
          Investor and each underwriter for the Investor (within the meaning of
          the 1933 Act) against all losses, claims, damages, liabilities, costs
          (including, without limitation, reasonable attorney's fees) and
          expenses imposed on such person caused by (i) any untrue or alleged
          untrue statement of a material fact contained in any Registration
          Statement, Prospectus or any preliminary prospectus or any amendment
          or supplement thereto or any omission or alleged omission to state
          therein a material fact required to be stated therein or necessary to
          make the statements therein not misleading, except insofar as the same
          are based upon any information furnished in writing to the Company by
          such Investor or such Underwriters as the case may be, expressly for
          use therein, or (ii) any violation by the Company of any federal,
          state or common law, rule or regulation applicable to the Company in
          connection with any Registration Statement, Prospectus or any
          preliminary prospectus, or any amendment or supplement thereto, and
          shall reimburse in accordance with subparagraph (c) below, each of the
          foregoing persons for any legal and any other expenses reasonably
          incurred in connection with investigating or defending any such
          claims. Indemnity under this Section 5(a) shall remain in full force
          and effect regardless of any investigation made by or on behalf of any
          indemnified party and shall survive the permitted transfer of the
          Registrable Securities.

6.2       Indemnification by Holder.

          In connection with any registration pursuant to the terms of this
          Agreement, each Investor will furnish to the Company in writing such
          information as the Company reasonably requests concerning the holders
          of Registrable Securities or the proposed manner of distribution for
          use in connection with any Registration Statement or Prospectus and
          agrees, severally but not jointly, to indemnify and hold harmless, to
          the fullest extent permitted by law, the Company, its directors,
          officers, employees, stockholders and each person who controls the
          Company (within the meaning of the 1933 Act) against any losses,
          claims, damages, liabilities and expense (including reasonable
          attorney's fees) resulting from any untrue statement of a material
          fact or any omission of a material fact required to be stated in the
          Registration Statement or Prospectus or preliminary prospectus or
          amendment or supplement thereto or necessary to make the statements
          therein not misleading, to the extent, but only to

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                                                                         PAGE 29

          the extent that such untrue statement or omission is contained in any
          information furnished in writing by such Investor to the Company
          specifically for inclusion in such Registration Statement or
          Prospectus or amendment or supplement thereto and that such
          information was substantially relied upon by the Company in
          preparation of the Registration Statement or Prospectus or any
          amendment or supplement thereto. In no event shall the liability of an
          Investor be greater in amount than the dollar amount of the proceeds
          (net of all expense paid by such Investor and the amount of any
          damages such holder has otherwise been required to pay by reason of
          such untrue statement or omission) received by such Investor upon the
          sale of the Registrable Securities, Second Closing Registrable
          Securities or Additional Registrable Securities included in the
          Registration Statement giving rise to such indemnification obligation.

6.3       Conduct of Indemnification Proceedings.

          Any person entitled to indemnification hereunder shall (i) give prompt
          notice to the indemnifying party of any claim with respect to which it
          seeks indemnification and (ii) permit such indemnifying party to
          assume the defense of such claim with counsel reasonably satisfactory
          to the indemnified party; PROVIDED that any person entitled to
          indemnification hereunder shall have the right to employ separate
          counsel and to participate in the defense of such claim, but the fees
          and expenses of such counsel shall be at the expense of such person
          unless (a) the indemnifying party has agreed to pay such fees or
          expenses, or (b) the indemnifying party shall have failed to assume
          the defense of such claim and employ counsel reasonably satisfactory
          to such person or (c) in the reasonable judgment of any such person,
          based upon written advice of its counsel, a conflict of interest
          exists between such person and the indemnifying party with respect to
          such claims (in which case, if the person notifies the indemnifying
          party in writing that such person elects to employ separate counsel at
          the expense of the indemnifying party, the indemnifying party shall
          not have the right to assume the defense of such claim on behalf of
          such person); and PROVIDED, FURTHER, that the failure of any
          indemnified party to give notice as provided herein shall not relieve
          the indemnifying party of its obligations hereunder, except to the
          extent that such failure to give notice shall materially adversely
          affect the indemnifying party in the defense of any such claim or
          litigation. It is understood that the indemnifying party shall not, in
          connection with any proceeding in the same jurisdiction, be liable for
          fees or expenses of more than one separate firm of attorneys at any
          time for all such indemnified parties. No indemnifying party will,
          except with the consent of the indemnified party, consent to entry of
          any judgment or enter into any settlement that does not include as an
          unconditional term thereof the giving by the claimant or plaintiff to
          such indemnified party of a release from all liability in respect of
          such claim or litigation.

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                                                                         PAGE 30

6.4       Contribution.

          If for any reason the indemnification provided for in the preceding
          paragraphs (a) and (b) is unavailable to an indemnified party or
          insufficient to hold it harmless, other than as expressly specified
          therein, then the indemnifying party shall contribute to the amount
          paid or payable by the indemnified party as a result of such loss,
          claim, damage or liability in such proportion as is appropriate to
          reflect the relative fault of the indemnified party and the
          indemnifying party, as well as any other relevant equitable
          considerations. No person guilty of fraudulent misrepresentation
          within the meaning of Section 11(f) of the 1933 Act shall be entitled
          to contribution from any person not guilty of such fraudulent
          misrepresentation. In no event shall the contribution obligation of a
          holder of Registrable Securities be greater in amount than the dollar
          amount of the proceeds (net of all expenses paid by such holder and
          the amount of any damages such holder has otherwise been required to
          pay by reason of such untrue or alleged untrue statement or omission
          or alleged omission) received by it upon the sale of the Registrable
          Securities giving rise to such contribution obligation.

7.        MISCELLANEOUS.

7.1       Amendments and Waivers.

          This Agreement may be amended only by a writing signed by the parties
          hereto. The Company may take any action herein prohibited, or omit to
          perform any act herein required to be performed by it, only if the
          Company shall have obtained the written consent to such amendment,
          action or omission to act, of each Investor.

7.2       Notices.

          All notices and other communications provided for or permitted
          hereunder shall be made as set forth in Section 7.4 of the Purchase
          Agreement.

7.3       Assignments and Transfers by Investor.

          This Agreement and all the rights and obligations of the Investor
          hereunder may not be assigned or transferred to any transferee or
          assignee except to an affiliate or permitted transferee of an Investor
          who is a subsequent holder of any Registrable Securities, Second
          Closing Registrable Securities or Additional Registrable Securities.

7.4       Assignments and Transfers by the Company.

          This Agreement may not be assigned by the Company without the prior
          written consent of each Investor, except that without the prior
          written consent of the Investor, but after notice duly given, the
          Company shall assign its rights and delegate its duties hereunder to
          any

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                                                                         PAGE 31

          successor-in-interest corporation, and such successor-in-interest
          shall assume such rights and duties, in the event of a merger or
          consolidation of the Company with or into another corporation or the
          sale of all or substantially all of the Company's assets.

7.5       Benefits of the Agreement.

          The terms and conditions of this Agreement shall inure to the benefit
          of and be binding upon the respective permitted successors and assigns
          of the parties. Nothing in this Agreement, express or implied, is
          intended to confer upon any party other than the Company and the
          Investor or their respective successors and assigns any rights,
          remedies, obligations, or liabilities under or by reason of this
          Agreement, except for right to indemnify and as otherwise expressly
          provided in this Agreement.

7.6       Counterparts.

          This Agreement may be executed in two or more counterparts, each of
          which shall be deemed an original, but all of which together shall
          constitute one and the same instrument.

7.7       Titles and Subtitles.

          The titles and subtitles used in this Agreement are used for
          convenience only and are not to be considered in construing or
          interpreting this Agreement.

7.8       Severability.

          If one or more provisions of this Agreement are held to be
          unenforceable under applicable law, such provision shall be excluded
          from this Agreement and the balance of this Agreement shall be
          interpreted as if such provision were so excluded and shall be
          enforceable in accordance with its terms to the fullest extent
          permitted by law.

7.9       Further Assurances.

          The parties shall execute and deliver all such further instruments and
          documents and take all such other actions as may reasonably be
          required to carry out the transactions contemplated hereby and to
          evidence the fulfilment of the agreements herein contained.

7.10      Entire Agreement.

          This Agreement is intended by the parties as a final expression of
          their agreement and intended to be a complete and exclusive statement
          of the agreement and understanding of the parties hereto in respect of
          the subject matter contained herein. This Agreement supersedes all
          prior agreements and understandings between the parties with respect
          to such subject matter.

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                                                                         PAGE 32

7.11      Applicable Law.

          The provision of this schedule shall be governed by, and construed in
          accordance with, the laws of the State of New Jersey without regard to
          principles of conflicts of law and the parties hereby submit to the
          non-exclusive jurisdiction of the courts of England and the courts of
          New Jersey.

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