Document:

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                                                                   Exhibit 10.25

                                                                  EXECUTION COPY

                           COLLATERAL TRUST AGREEMENT

                            DATED AS OF JULY 16, 2003

                                      AMONG

                              CALPINE CORPORATION,

                         QUINTANA MINERALS (USA), INC.,

                                JOQ CANADA, INC.,

                          QUINTANA CANADA HOLDINGS LLC,

                            THE BANK OF NOVA SCOTIA,
                      AS AGENT UNDER THE CREDIT AGREEMENT,

                            WILMINGTON TRUST COMPANY,
                      AS TRUSTEE UNDER THE 2007 INDENTURE,

                            WILMINGTON TRUST COMPANY,
                      AS TRUSTEE UNDER THE 2010 INDENTURE,

                            WILMINGTON TRUST COMPANY,
                      AS TRUSTEE UNDER THE 2013 INDENTURE,

                       GOLDMAN SACHS CREDIT PARTNERS L.P.,
             AS ADMINISTRATIVE AGENT UNDER THE TERM LOAN AGREEMENT,

                                       AND

                              THE BANK OF NEW YORK,
                              AS COLLATERAL TRUSTEE

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                                TABLE OF CONTENTS

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ARTICLE 1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION...............................................................     2
           1.1. Defined Terms....................................................................................     2
           1.2. Rules of Interpretation..........................................................................    22

ARTICLE 2. THE TRUST ESTATE......................................................................................    23
           2.1. Declaration of Trust.............................................................................    23

ARTICLE 3. OBLIGATIONS AND POWERS OF COLLATERAL TRUSTEE..........................................................    24
           3.1. Undertaking of the Collateral Trustee............................................................    24
           3.2. Release or Subordination of Liens................................................................    25
           3.3. Remedies Upon Actionable Default.................................................................    25
           3.4. Application of Proceeds..........................................................................    26
           3.5. Powers of the Collateral Trustee.................................................................    27
           3.6. Documents and Communications.....................................................................    27
           3.7. For Sole and Exclusive Benefit of Holders of Secured Obligations.................................    27
           3.8. Additional Secured Debt..........................................................................    27

ARTICLE 4. OBLIGATIONS ENFORCEABLE BY THE COMPANY AND THE CANADIAN GUARANTORS....................................    29
           4.1. Release of Liens.................................................................................    29
           4.2. Delivery of Copies to Secured Debt Representatives...............................................    31
           4.3. Collateral Trustee not Required to Serve, File or Record.........................................    31

ARTICLE 5. IMMUNITIES OF THE COLLATERAL TRUSTEE..................................................................    31
           5.1. No Implied Duty..................................................................................    31
           5.2. Appointment of Agents and Advisors...............................................................    31
           5.3. Other Agreements.................................................................................    32
           5.4. Solicitation of Instructions.....................................................................    32
           5.5. Limitation of Liability..........................................................................    32
           5.6. Documents in Satisfactory Form...................................................................    32
           5.7. Entitled to Rely.................................................................................    32
           5.8. Secured Debt Default.............................................................................    33
           5.9. Actions by Collateral Trustee....................................................................    33
           5.10. Security or Indemnity in favor of the Collateral Trustee........................................    33
           5.11. Rights of the Collateral Trustee................................................................    33
           5.12. Limitations on Duty of Collateral Trustee in Respect of Collateral..............................    33
           5.13. Assumption of Rights, Not Assumption of Duties..................................................    34
           5.14. No Liability for Clean Up of Hazardous Materials................................................    34

ARTICLE 6. RESIGNATION AND REMOVAL OF THE COLLATERAL TRUSTEE.....................................................    34
           6.1. Resignation or Removal of Collateral Trustee.....................................................    34
           6.2. Appointment of Successor Collateral Trustee......................................................    35
           6.3. Succession.......................................................................................    35
           6.4. Limitation.......................................................................................    35

ARTICLE 7. MISCELLANEOUS PROVISIONS..............................................................................    35
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           7.1. Amendment........................................................................................    35
           7.2. Further Assurances...............................................................................    36
           7.3. Successors and Assigns...........................................................................    37
           7.4. Delay and Waiver.................................................................................    37
           7.5. Notices..........................................................................................    37
           7.6. Entire Agreement.................................................................................    39
           7.7. Compensation; Expenses...........................................................................    39
           7.8. Indemnity........................................................................................    40
           7.9. Severability.....................................................................................    41
           7.10. Headings........................................................................................    41
           7.11. Obligations Secured.............................................................................    41
           7.12. Governing Law...................................................................................    41
           7.13. Consent to Jurisdiction.........................................................................    41
           7.14. Waiver of Jury Trial............................................................................    41
           7.15. Counterparts....................................................................................    42
           7.16. Effectiveness...................................................................................    42
           7.17. Additional Obligors.............................................................................    42
           7.18. Appointment of Sub-Agent for Control Agreements.................................................    42
           7.19. Transfer of the Existing Security Documents.....................................................    43
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                         List of Exhibits and Schedules

         Exhibit A       Collateral Trust Joinder

         Exhibit B       Notice of Advance

         Schedule 1      Existing Security Documents

         Schedule 2      Instruments of Transfer for Existing Security Documents

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                           COLLATERAL TRUST AGREEMENT

                  This Collateral Trust Agreement, dated as of July 16, 2003
(this "Agreement"), is entered into by and among Calpine Corporation, a Delaware
corporation (the "Company"), Quintana Minerals (USA), Inc., a Delaware
corporation, JOQ Canada, Inc., a Delaware corporation, Quintana Canada Holdings
LLC, a Delaware limited liability company, The Bank of Nova Scotia, as Credit
Agreement Agent, Wilmington Trust Company, as Trustee under the 2007 Indenture,
Wilmington Trust Company, as Trustee under the 2010 Indenture, Wilmington Trust
Company, as Trustee under the 2013 Indenture, Goldman Sachs Credit Partners
L.P., as Term Loan Administrative Agent, and The Bank of New York, as Collateral
Trustee (together with its successors in such capacity, the "Collateral
Trustee").

                                    RECITALS

                  1.       The Company is party to a Credit Agreement dated as
of March 8, 2002 (as amended, the "Existing Credit Agreement") among, inter
alia, the Company, the Lenders referred to therein and The Bank of Nova Scotia,
as Administrative Agent, relating to (i) an approximately $570 million revolving
credit facility and (ii) a $1.0 billion term loan facility. The payment of the
principal of and interest on the loans and the payment of all other obligations
under the Existing Credit Agreement are secured by Liens held by The Bank of
Nova Scotia, as Agent under the Existing Credit Agreement (the "Existing
Collateral Agent") pursuant to the security documents listed on Schedule 1 (the
"Existing Security Documents"). All Obligations under the Existing Credit
Agreement (as defined therein) are guaranteed by each of the Canadian
Guarantors. The obligations of each of the Canadian Guarantors under their
respective Guarantees are limited to such Canadian Guarantor's ownership
interest in Calpine Canada Energy Ltd., a Nova Scotia limited liability company
("CCEC"), that has been pledged to the Existing Collateral Agent.

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

                  3.       The Company intends to (a) issue $500,000,000 in
aggregate principal amount of Second Priority Senior Secured Floating Rate Notes
due 2007 (the "2007 Notes") pursuant to the Indenture dated as of July 16, 2003
(the "2007 Indenture") between the Company and Wilmington Trust Company, as
Trustee (together with its successors in such capacity, the "2007 Trustee"), (b)
issue $1,150,000,000 in aggregate principal amount of 8.50% Second Priority
Senior Secured Notes due 2010 (the "2010 Notes") pursuant to the Indenture dated
as of July 16, 2003 (the "2010 Indenture") between the Company and Wilmington
Trust Company, as Trustee (together with its successors in such capacity, the
"2010 Trustee"), (c) issue $900,000,000 in aggregate principal amount of 8.75%
Second Priority Senior Secured Notes due 2013 (the "2013 Notes") pursuant to the
Indenture dated as of July 16, 2003 (the "2013

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Indenture") between the Company and Wilmington Trust Company, as Trustee
(together with its successors in such capacity, the "2013 Trustee"), and (d)
borrow $750,000,000 in Term Loans pursuant to a Credit Agreement dated as of
July 16, 2003 between the Company and Goldman Sachs Credit Partners L.P., as
Administrative Agent. The proceeds from the offering of the 2007 Notes, the 2010
Notes and the 2013 Notes and the borrowing of the Term Loans will be used, among
other things, to refinance the loans outstanding under the Existing Credit
Agreement.

                  4.       The Company intends to secure its Secured
Obligations, including its obligations under the Credit Agreement and any future
Priority Lien Debt, on a priority basis, and, subject to such priority, its
obligations under the 2007 Notes, 2010 Notes, 2013 Notes and Term Loans and any
future Parity Lien Debt equally and ratably, with security interests in all
present and future property of the Company, except Excluded Assets. The Canadian
Guarantors intend to Guarantee all Secured Obligations and to secure such
Guarantees by pledging 65% of the aggregate outstanding voting stock of CCEC.
The obligations of each of the Canadian Guarantors under their respective
Guarantees are limited to such Canadian Guarantor's ownership interest in CCEC
that has been pledged to the Collateral Trustee.

                  5.       This Agreement sets forth the terms on which the
Company has appointed the Collateral Trustee as trustee for the present and
future holders of the Secured Obligations to accept transfer of the Existing
Security Documents and to receive, hold, maintain, administer, enforce and
distribute the Security Documents, including all Guarantees granted thereunder,
at any time delivered to the Collateral Trustee and all interests, rights,
powers and remedies of the Collateral Trustee thereunder and the proceeds
thereof.

                  NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

         1.1.     DEFINED TERMS.

                  (a)      The following terms shall have the following
meanings:

                  "Act of Instructing Debtholders" means, as to any matter at
any time, a direction in writing delivered to the Collateral Trustee by or with
the written consent of the holders of Priority Lien Debt or Parity Lien Debt
holding more than 50% of the aggregate outstanding principal amount of all
Priority Lien Debt and Parity Lien Debt that is then due and payable, voting
together as a single class. For this purpose, Parity Lien Debt or Priority Lien
Debt registered in the name of, or beneficially owned by, the Company or any
Affiliate of the Company will be deemed not to be outstanding.

                  "Act of Secured Debtholders" means, as to any matter, a
direction in writing delivered to the Collateral Trustee by or with the written
consent of:

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    (1) the Required Parity Debtholders accompanied by written confirmation
from each Parity Debt Representative in respect of each Series of Parity Lien
Debt then outstanding (in form reasonably satisfactory to such Parity Debt
Representative and the Collateral Trustee) as to the principal amount of Parity
Lien Debt registered by that Parity Debt Representative as outstanding in the
name of any consenting holder of Parity Lien Debt who is a holder of such Series
of Parity Lien Debt; and

    (2) the Required Priority Debtholders.

                  "Actionable Default" means (1) the failure to pay any
principal of or interest on any Series of Secured Debt outstanding in the amount
of $50.0 million or more resulting in an event of default under the applicable
Series of Secured Debt after payment is due, including payments that are due (or
if any required offer had been timely made would be due) in respect of any
mandatory offer to purchase Secured Debt resulting in an event of default under
the applicable Series of Secured Debt, (2) the failure to pay in full, when due
and payable in full (whether at maturity, upon acceleration or otherwise), any
Series of Secured Debt outstanding in the amount of $50.0 million or more, (3)
the exercise by the Collateral Trustee or any of its co-trustees or agents
(including the Priority Lien Agent) of any right or power that is exercisable by
it only upon default to take sole and exclusive dominion and control over any
Collateral consisting of a deposit in a deposit account, commodity contract in a
commodity account or financial asset in a securities account constituting
Collateral or the delivery of any instructions to the Collateral Trustee
directing it to foreclose or otherwise enforce, or to distribute the proceeds of
enforcement of, any Lien upon any Collateral or (4) the occurrence of any event
of default under any indenture or agreement governing any Series of Secured Debt
arising from the commencement of any Bankruptcy Case or Insolvency Proceeding.

                  "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control," as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" have correlative meanings.

                  "Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction including any period
for which such lease has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a discount rate equal to
the rate of interest implicit in such transaction, determined in accordance with
GAAP; provided, that if such sale and leaseback transaction results in a Capital
Lease Obligation, the amount of Indebtedness represented thereby will be
determined in accordance with the definition of "Capital Lease Obligation."

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                  "Bankruptcy Case" means any case under Title 11 of the United
States Code or any successor bankruptcy law commenced voluntarily or
involuntarily against the Company or any other Obligor.

                  "Board of Directors" means:

    (1) with respect to a corporation, the Board of Directors of the corporation
or any committee thereof duly authorized to act on behalf of such board;

    (2) with respect to a partnership, the Board of Directors of the general
partner of the partnership;

    (3) with respect to a limited liability company, the managing member or
members or any controlling committee of managing members thereof; and

    (4) with respect to any other Person, the board or committee of such Person
serving a similar function.

                  "Canadian Guarantors" means Quintana Minerals (USA), Inc., a
Delaware corporation, JOQ Canada, Inc., a Delaware limited liability company and
Quintana Canada Holdings LLC, a Delaware limited liability company, and any
successor to any of the foregoing.

                  "Capital Lease Obligation" means, at the time any
determination is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be capitalized on a balance sheet
in accordance with GAAP, and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be prepaid by the lessee without payment of
a penalty.

                  "Capital Stock" means:

                  (1)      in the case of a corporation, corporate stock;

                  (2)      in the case of an association or business entity, any
    and all shares, interests, participations, rights or other equivalents
    (however designated) of corporate stock;

                  (3)      in the case of a partnership or limited liability
    company, partnership interests (whether general or limited) or membership
    interests; and

                  (4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person, but excluding from all of the
foregoing any debt securities convertible into Capital Stock, whether or not
such debt securities include any right of participation with Capital Stock.

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                  "Cash Equivalents" means:

         (1) the lawful currency of any country where the Company owns or
    operates a Facility;

         (2) securities issued or directly and fully guaranteed or insured by
    the United States government or any state thereof (or any agency or
    instrumentality thereof), by the Canadian government (or any agency or
    instrumentality thereof), or by the government of a member state of the
    European Union (or any agency or instrumentality thereof), in each case the
    payment of which is backed by the full faith and credit of the United
    States, Canada or the relevant member state of the European Union, as the
    case may be, and having maturities of not more than six months from the date
    of acquisition;

         (3) certificates of deposit and eurodollar time deposits with
    maturities of six months or less from the date of acquisition, bankers'
    acceptances with maturities not exceeding six months and overnight bank
    deposits, in each case, with any lender party to the Credit Agreement or
    with any domestic commercial bank having capital and surplus in excess of
    $500.0 million and a Thomson Bank Watch or successor rating agency rating of
    "B" or better;

         (4) repurchase obligations with a term of not more than seven days for
    underlying securities of the types described in clauses (2) and (3) above
    entered into with any financial institution meeting the qualifications
    specified in clause (3) above;

         (5) commercial paper having one of the two highest ratings obtainable
    from Moody's or S&P and maturing within six months after the date of
    acquisition; and

                  (6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1) through (5) of
this definition.

                  "Collateral" means all properties and assets at any time owned
or acquired by the Company, except the Excluded Assets, and the Canadian
Guarantors' ownership interest in 65% of the aggregate outstanding voting stock
of CCEC.

                  "Collateral Trust Joinder" means an agreement substantially in
the form of Exhibit A hereto.

                  "Consolidated Cash Flow" means, with respect to any specified
Person for any period, the Consolidated Net Income of such Person for such
period plus, without duplication:

         (1) an amount equal to any extraordinary loss plus any net loss
    realized by such Person or any of its Restricted Subsidiaries in connection
    with an Asset Sale, to the extent such losses were deducted in computing
    such Consolidated Net Income; plus

         (2) provision for taxes based on income or profits of such Person and
    its Restricted Subsidiaries for such period, to the extent that such
    provision for taxes was deducted in computing such Consolidated Net Income;
    plus

         (3) the Fixed Charges of such Person and its Restricted Subsidiaries
    for such period, to the extent that such Fixed Charges were deducted in
    computing such Consolidated Net Income; plus

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         (4) depreciation, amortization (including amortization of intangibles
    but excluding amortization of prepaid cash expenses that were paid in a
    prior period) and other non-cash expenses (excluding any such non-cash
    expense to the extent that it represents an accrual of or reserve for cash
    expenses in any future period or amortization of a prepaid cash expense that
    was paid in a prior period) of such Person and its Restricted Subsidiaries
    for such period to the extent that such depreciation, amortization and other
    non-cash expenses were deducted in computing such Consolidated Net Income;

minus non-cash items increasing such Consolidated Net Income for such period,
other than the accrual of revenue in the ordinary course of business;

                  in each case, on a consolidated basis and determined in
accordance with GAAP.

                  "Consolidated Net Income" means, with respect to any specified
Person for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided that:

                  (1) the Net Income (but not loss) of any Person that is not a
    Restricted Subsidiary or that is accounted for by the equity method of
    accounting will be included only to the extent of the amount of dividends or
    similar distributions paid in cash to the specified Person or a Restricted
    Subsidiary of the Person;

                  (2) the Net Income of any Restricted Subsidiary will be
    excluded to the extent that the declaration or payment of dividends or
    similar distributions by that Restricted Subsidiary of that Net Income is
    not at the date of determination permitted without any prior governmental
    approval (that has not been obtained) or, directly or indirectly, by
    operation of the terms of its charter or any agreement, instrument,
    judgment, decree, order, statute, rule or governmental regulation applicable
    to that Restricted Subsidiary or its stockholders; and

                  (3) the cumulative effect of a change in accounting principles
    will be excluded.

                  "Control Agreement" means an agreement granting control over a
deposit account or deposits therein, a commodity account or commodity contracts
carried therein or a securities account or financial assets credited thereto, as
security for any Secured Obligations.

                  "Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of July 16, 2003, by and among the Company and the
Credit Agreement Agent, providing for up to $500.0 million of revolving credit
and term loan borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, restated, modified, renewed, refunded, replaced or
refinanced (including by means of sales of debt securities to institutional
investors) in whole or in part from time to time.

                  "Credit Agreement Agent" means, at any time, the Person
serving at such time as the "Agent" or "Administrative Agent" under the Credit
Agreement or any other representative of the Lenders then most recently
designated by a majority of the Lenders, in a written notice

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delivered to each Parity Debt Representative and the Collateral Trustee, as the
Credit Agreement Agent for the purposes of each of the Parity Lien Debt
Documents.

                  "Credit Facilities" means one or more debt facilities
(including the Credit Agreement) with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced (including by means of sales of debt securities to
institutional investors) in whole or in part from time to time.

                  "Designated Assets" means all geothermal energy assets
(including any related extraction, processing or similar equipment and
geothermal power plants) and all natural gas assets (including any related
extraction, processing or similar equipment, other than natural gas power
plants) owned by the Company or any of its Restricted Subsidiaries from time to
time, including the equity interests of any Restricted Subsidiary owning any
Designated Assets, but excluding (i) any geothermal energy assets that are both
unproven and undeveloped and (ii) contracts for the purchase or sale of natural
gas and natural gas supplied under such contracts.

                  "Disqualified Stock" means, with respect to any indenture, any
Capital Stock that, by its terms (or by the terms of any security into which it
is convertible, or for which it is exchangeable, in each case at the option of
the holder of the Capital Stock), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the option of the holder of the Capital Stock, in whole or in
part, on or prior to the date that is 91 days after the date on which the notes
issued pursuant to such indenture mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital Stock have the right to require the Company
to repurchase such Capital Stock upon the occurrence of a change of control or
an asset sale will not constitute Disqualified Stock. The amount of Disqualified
Stock deemed to be outstanding at any time for purposes of the applicable
indenture will be the maximum amount that the Company and its Restricted
Subsidiaries may become obligated to pay upon the maturity of, or pursuant to
any mandatory redemption provisions of, such Disqualified Stock, exclusive of
accrued dividends.

                  "Environmental Laws" means all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards and
regulations, now or hereafter in effect, and any applicable judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing liability or
standards of conduct for or relating to the regulation and protection of human
health, safety, the environment and natural resources (including ambient air,
surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws include the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Hazardous Materials Transportation Authorization Act of 1994, the Federal
Insecticide, Fungicide, and Rodenticide Act, the Solid Waste Disposal Act, the
Toxic Substance Control Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Occupational Safety and Health Act and the Safe Drinking Water
Act, and any and all regulations promulgated thereunder, and all analogous
state, local and foreign counterparts or equivalents.

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                  "Environmental Liabilities" means, with respect to any Person,
all liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law arising under or related to
any Environmental Laws (including any permits or other authorizations required
under any Environmental Laws) or in connection with any Release or threatened
Release or presence of a Hazardous Material whether on, at, in, under, from or
about or in the vicinity of any real or personal property of the Company and its
Subsidiaries.

                  "equally and ratably" means, in reference to sharing of Liens
or proceeds thereof as between the holders of Parity Lien Obligations with
respect to each outstanding Series of Parity Lien Debt, that such Liens or
proceeds:

                  (1) shall be allocated and distributed first to each Parity
    Debt Representative for each outstanding series of Parity Lien Debt, for
    account of the holders of such Series of Parity Lien Debt, ratably in
    proportion to the principal of and interest and premium (if any) outstanding
    on each outstanding Series of Parity Lien Debt when the allocation or
    distribution is made, and thereafter

                  (2) shall be allocated and distributed (if any remain after
payment in full of all of the principal of and interest and premium (if any) on
all outstanding Parity Lien Debt) to each Parity Debt Representative for each
outstanding series of Parity Lien Debt, for account of the holders of any
remaining Parity Lien Obligations with respect to such outstanding Series of
Parity Lien Debt, ratably in proportion to the aggregate unpaid amount of such
remaining Parity Lien Obligations due and demanded (with written notice to the
applicable Parity Debt Representative and the Collateral Trustee) prior to the
date such distribution is made.

                  "Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).

                  "Excluded Assets" means (1) any lease of property other than
(i) a lease of a geothermal energy or natural gas interest or property, (ii) a
lease of real estate underlying a power generation property or (iii) a capital
lease;

        (2) all deposit accounts (as defined in Article 9 of the Uniform
    Commercial Code of any relevant jurisdiction) and deposits therein to the
    extent not exceeding $50.0 million in the aggregate, except for the
    Designated Assets Sale Proceeds Account (as defined in each of the 2007
    Indenture, the 2010 Indenture and the 2013 Indenture) and any deposit
    account and deposits therein holding amounts referred to in clause (7) of
    this definition;

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        (3) the fixtures and equipment relating to any pipeline if, to the
    extent that and for so long as (i) the ownership or operation of such
    pipeline is regulated by any federal or state regulatory authority and (ii)
    under the law applicable to such regulatory authority the grant of a
    security interest in such fixtures and equipment is prohibited or a security
    interest in such fixtures and equipment may be granted only after completion
    of a filing with, or receipt of consent from, such regulatory authority
    which has not been effectively completed or received; provided, that (a)
    such fixtures and equipment will be an Excluded Asset only to the extent and
    for so long as the conditions set forth in clauses (i) and (ii) in this
    clause (3) are and remain satisfied and to the extent such assets otherwise
    constitute Collateral, will cease to be an Excluded Asset, and will become
    subject to the security interests granted to the Collateral Trustee under
    the Security Documents immediately and automatically at such time as such
    conditions cease to exist, including by reason of the effective completion
    of any required filing or effective receipt of any required regulatory
    approval, and (b) unless prohibited by law, the proceeds of any sale, lease
    or other disposition of any such fixtures or equipment that are Excluded
    Assets shall not be an Excluded Asset and shall at all times be and remain
    subject to the security interests granted to the Collateral Trustee under
    the Security Documents, except as such proceeds are applied and used by the
    Company in the ordinary course of business and applied in accordance with
    the applicable terms and provisions of each of the Secured Debt Documents;

        (4) all easements, rights-of-way, licenses and other real property
    interests for or pertaining to the construction, operation, use or
    maintenance of any pipeline over, upon or under land owned by another
    Person;

        (5) with respect to personal property, any lease, license, permit,
    franchise, power, authority or right if, to the extent that and for so long
    as (i) the grant of a security interest therein constitutes or would result
    in the abandonment, invalidation or unenforceability of such lease, license,
    permit, franchise, power, authority or right or the termination of or a
    default under the instrument or agreement by which such lease, license,
    permit, franchise, power, authority or right is governed and (ii) such
    abandonment, invalidation, unenforceability, termination or default is not
    rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of
    the Uniform Commercial Code (or any successor provisions) of any relevant
    jurisdiction or any other applicable law (including the United States
    bankruptcy code); provided, that (a) such lease, license, permit, franchise,
    power, authority or right will be an Excluded Asset only to the extent and
    for so long as the conditions set forth in clauses (i) and (ii) of this
    clause (5) are and remain satisfied and to the extent that such assets
    otherwise constitute Collateral, will cease to be an Excluded Asset, and
    will become subject to the security interests granted to the Collateral
    Trustee under the Security Documents immediately and automatically at such
    time as such conditions cease to exist, including by reason of any waiver or
    consent under the applicable instrument or agreement, and (b) the proceeds
    of any sale, lease or other disposition of any such lease, license, permit,
    franchise, power, authority or right that is or becomes an Excluded Asset
    shall not be an Excluded Asset and shall at all times be and remain subject
    to the security interests granted to the Collateral Trustee under the
    Security Documents, except as such proceeds are applied and used by the
    Company in the ordinary course of business and applied in accordance with
    the applicable terms and provisions of each of the Secured Debt Documents;

                                        9

<PAGE>

        (6) with respect to any real property, any lease, license, permit,
    franchise, power, authority or right if, to the extent that and for so long
    as the grant of a security interest therein (i) requires a third party
    consent which has not been obtained or (ii) constitutes or would result in
    the abandonment, invalidation or unenforceability of such lease, license,
    permit, franchise, power, authority or right or the termination of or a
    default under the instrument or agreement by which such lease, license,
    permit, franchise, power, authority or right is governed; provided, that
    such lease, license, permit, franchise, power, authority or right will be an
    Excluded Asset only to the extent and for as long as the conditions set
    forth in clause (i) or (ii) of this clause (6) are and remain satisfied and
    to the extent such assets otherwise constitute Collateral, will cease to be
    an Excluded Asset, and will become subject to the security interests granted
    to the Collateral Trustee under the Security Documents immediately and
    automatically at such time as such conditions cease to exist, except as such
    proceeds are applied and used by the Company in the ordinary course of
    business and applied in accordance with the applicable terms and provisions
    of each of the Secured Debt Documents;

        (7) any cash proceeds (including any earnings thereon) of Priority Lien
    Debt that are pledged to cash collateralize letters of credit;

        (8) any turbines which serve as collateral pursuant to that certain
    General Agreement dated as of January 31, 2002 among the Company, various
    Subsidiaries of the Company and Siemens Westinghouse Power Corporation
    relating to various purchase contracts and letters of intent for gas turbine
    generators, steam turbine generators and related accessories;

        (9) proved oil and gas reserves located in Oklahoma and undeveloped
    reserves and unproven acreage located in California, Texas, Wyoming,
    Montana, Colorado, New Mexico and offshore Louisiana; provided that such
    reserves and acreage has a Fair Market Value not exceeding $20.0 million in
    the aggregate;

        (10) Capital Stock of Subsidiaries designated by the Company, but only
    for so long as (i) the Capital Stock of such Subsidiaries is not pledged to
    any Person (other than the Collateral Trustee on behalf of all holders of
    all Secured Debt) and (ii) such Subsidiaries collectively own less than 5.0%
    of the Company's total consolidated assets and collectively account for less
    than 5.0% of the Company's Consolidated Cash Flow; and

        (11) any other property in which a security interest cannot be perfected
    by the filing of a financing statement under the Uniform Commercial Code of
    the relevant jurisdiction; provided that such property has a Fair Market
    Value not exceeding $25.0 million in the aggregate.

                  "Facility" means a power generation facility or energy
producing facility, including any related fuel reserves.

                  "Fair Market Value" means the value that would be paid by a
    willing buyer to a willing seller in a transaction not involving distress or
    necessity of either party, determined

                                       10

<PAGE>

    in good faith by the Board of Directors of the Company (unless otherwise
    provided in the 2007 Indenture, the 2010 Indenture or the 2013 Indenture).

                  "Fixed Charges" means, with respect to any specified Person
for any period, the sum, without duplication, of:

        (1) the consolidated interest expense of such Person and its Restricted
    Subsidiaries for such period, whether paid or accrued, including
    amortization of debt issuance costs and original issue discount, non-cash
    interest payments, the interest component of any deferred payment
    obligations, the interest component of all payments associated with Capital
    Lease Obligations, commissions, discounts and other fees and charges
    incurred in respect of letter of credit or bankers' acceptance financings,
    and net of the effect of all payments made or received pursuant to Hedging
    Obligations in respect of interest rates, plus one-third of all payments
    with respect to operating leases; plus

        (2) the consolidated interest of such Person and its Restricted
    Subsidiaries that was capitalized during such period, except interest on
    Indebtedness incurred to finance the development or construction of a
    Facility; plus

        (3) any interest accruing on Indebtedness of another Person that is
    Guaranteed by such Person or one of its Restricted Subsidiaries or secured
    by a Lien on assets of such Person or one of its Restricted Subsidiaries,
    whether or not such Guarantee or Lien is called upon, but excluding any such
    Guarantee or Lien in effect on the date of the indentures unless the same is
    called upon; plus

        (4) the product of (a) all dividends, whether paid or accrued and
    whether or not in cash, on any series of preferred stock of such Person or
    any of its Restricted Subsidiaries, other than dividends on Equity Interests
    payable solely in Equity Interests of the Company (other than Disqualified
    Stock) or to the Company or a Restricted Subsidiary of the Company, times
    (b) a fraction, the numerator of which is one and the denominator of which
    is one minus the effective combined federal, state and local statutory tax
    rate of such Person for the immediately preceding fiscal year, expressed as
    a decimal, in each case, on a consolidated basis and in accordance with
    GAAP.

                  "GAAP" means generally accepted accounting principles set
    forth in the statements and pronouncements of the Financial Accounting
    Standards Board or in such other statements by such other entity as have
    been approved by a significant segment of the accounting profession, which
    are in effect and, to the extent optional, adopted by the Company, on the
    applicable date of determination.

                  "Guarantee" means a guarantee other than by endorsement of
    negotiable instruments for collection in the ordinary course of business,
    direct or indirect, in any manner including by way of a pledge of assets or
    through letters of credit or reimbursement agreements in respect thereof, of
    all or any part of any Indebtedness (whether arising by virtue of
    partnership arrangements, or by agreements to keep-well, to purchase assets,
    goods,

                                       11

<PAGE>

    securities or services, to take or pay or to maintain financial statement
    conditions or otherwise).

                   "Hazardous Material" means any substance, material or waste
that is regulated by, or forms the basis of liability now or hereafter under,
any Environmental Laws, including any material or substance that is (i) defined
as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, or (ii)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.

                  "Hedging Obligations" means, with respect to any specified
Person, the obligations of such Person under:

        (1) interest rate swap agreements (whether from fixed to floating or
    from floating to fixed), interest rate cap agreements and interest rate
    collar agreements;

        (2) other agreements or arrangements designed to manage interest rate
    risk; and

        (3) other agreements or arrangements designed to protect such Person
    against fluctuations in currency exchange rates or commodity prices.

                  "Indebtedness" means, with respect to any specified Person,
any indebtedness of such Person (excluding accrued expenses and trade payables),
whether or not contingent:

        (1) in respect of borrowed money;

        (2) evidenced by bonds, notes,  debentures or similar instruments or
    letters of credit (or reimbursement  agreements in respect thereof);

        (3) in respect of banker's acceptances;

        (4) representing Capital Lease Obligations or Attributable Debt in
    respect of sale and leaseback transactions;

        (5) representing the balance deferred and unpaid of the purchase price
    of any property or services due more than six months after such property is
    acquired or such services are completed; or

    (6) representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit,
Attributable Debt and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified Person prepared in accordance with GAAP. In
addition, the term "Indebtedness" includes all Indebtedness of others secured by
a Lien on any asset of the specified Person (whether or not such Indebtedness is
assumed by the specified Person) and, to the extent not otherwise included, the
Guarantee by the specified Person of any Indebtedness of any other Person.

                                       12

<PAGE>

    The amount of any Indebtedness outstanding as of any date will be:

        (1) the accreted value of the Indebtedness, in the case of any
    Indebtedness issued with original issue discount;

        (2) the principal amount of the Indebtedness, in the case of any other
    Indebtedness; and

        (3) in respect of Indebtedness of another Person secured by a Lien on
    the assets of the specified Person, the lesser of:

        (A) the Fair Market Value of such asset at such date of determination,
    and

    (B) the amount of the Indebtedness of such other Person.

    Notwithstanding anything to the contrary in this definition of Indebtedness,
with respect to any contingent obligations (other than with respect to
contractual obligations to repurchase goods sold or distributed, which shall be
included to the extent reflected on the balance sheet of such Person in
accordance with GAAP) of a Person, the maximum liability of such Indebtedness
shall be as determined by such Person's Board of Directors, in good faith, as,
in light of the facts and circumstances existing at the time, reasonably likely
to be incurred upon the occurrence of the contingency giving rise to such
obligation.

                  "Indemnified Liabilities" means any and all liabilities
(including all Environmental Liabilities), obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, performance,
administration or enforcement of this Agreement or any of the other Security
Documents, including any of the foregoing relating to the use of proceeds of any
Secured Debt or the violation of, noncompliance with or liability under, any law
(including Environmental Laws) applicable to or enforceable against the Company
or any of its Subsidiaries or any of the Collateral and all reasonable costs and
expenses (including reasonable fees and expenses of legal counsel selected by
the Indemnitee) incurred by any Indemnitee in connection with claim, action,
investigation or proceeding in any respect relating to any of the foregoing,
whether or not suit is brought.

                  "Indemnitee" has the meaning given in Section 7.8(a).

                  "Insolvency Proceeding" means:

        (1) any proceeding for the reorganization, recapitalization or
    adjustment or marshalling of the assets or liabilities of the Company or any
    other Obligor, any receivership or assignment for the benefit of creditors
    relating to the Company or any other Obligor or any similar case or
    proceeding relative to the Company or any other Obligor or its creditors, as
    such, in each case whether or not voluntary;

                                       13

<PAGE>

        (2) any liquidation, dissolution, marshalling of assets or liabilities
    or other winding up of or relating to the Company or any other Obligor, in
    each case whether or not voluntary and whether or not involving bankruptcy
    or insolvency; or

        (3) any other proceeding of any type or nature in which substantially
    all claims of creditors of the Company or any other Obligor are determined
    and any payment or distribution is or may be made on account of such claims.

                  "Lenders" means, at any time, the parties to the Credit
Agreement then holding (or committed to provide) loans, letters of credit or
other extensions of credit that constitute (or when provided will constitute)
Priority Lien Debt outstanding under the Credit Agreement.

                  "Lien" means, with respect to any asset, any mortgage, lien,
    pledge, charge, security interest or encumbrance of any kind in respect of
    such asset, whether or not filed, recorded or otherwise perfected under
    applicable law, including any conditional sale or other title retention
    agreement, any lease in the nature thereof, any option or other agreement to
    sell or give a security interest in and any filing of or agreement to give
    any financing statement under the Uniform Commercial Code (or equivalent
    statutes) of any jurisdiction.

                  "Moody's" means Moody's Investors Service, Inc. (or, if such
entity ceases to rate the applicable notes for reasons outside of the control of
the Company, the equivalent investment grade credit rating from any other
"nationally recognized statistical rating organization" (or successor concept)
within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act (or
successor provision) selected by the Company as a replacement agency).

                  "Net Income" means, with respect to any specified Person, the
net income (loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of preferred stock dividends, excluding, however,
without duplication:

        (1) any gain (but not loss), together with any related provision for
    taxes on such gain (but not loss), realized in connection with: (a) any
    Asset Sale; or (b) the disposition of any securities by such Person or any
    of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
    such Person or any of its Restricted Subsidiaries; and

        (2) any extraordinary gain (but not loss), together with any related
    provision for taxes on such extraordinary gain (but not loss).

                  "Net Proceeds" mean  the aggregate cash proceeds received by
    the Company or any of its Restricted Subsidiaries in respect of any Asset
    Sale (including any cash received upon the sale or other disposition of any
    non-cash consideration received in any Asset Sale), net of the direct costs
    relating to such Asset Sale, including legal, accounting and investment
    banking fees, and sales commissions, and any relocation expenses incurred as
    a result of the Asset Sale, taxes paid or payable as a result of the Asset
    Sale, in each case, after taking into account any available tax credits or
    deductions and any tax sharing arrangements, and amounts required to be
    applied to the repayment of Indebtedness, other than Priority Debt, secured
    by a Lien on the asset or assets that were the subject of such Asset Sale
    and any

                                       14

<PAGE>

    reserve for adjustment in respect of the sale price of such asset or assets
    established in accordance with GAAP.

                  "Non-Recourse Debt" means Indebtedness of any Restricted
    Subsidiary that is incurred to finance the exploration, drilling,
    development, construction or purchase of or by, or repairs, improvements or
    additions to, property or assets of the Company or any Restricted
    Subsidiary; provided that such Indebtedness is without recourse to the
    Company (except as permitted by clause (8) of the definition of Permitted
    Debt) or any Restricted Subsidiary or to any property or assets of the
    Company or any Restricted Subsidiary other than property or assets
    (including Capital Stock) of a Restricted Subsidiary subject to a Lien
    permitted pursuant to clause (8) of the definition of Permitted Liens or
    property or assets (including Capital Stock) of a Restricted Subsidiary
    subject to a Lien permitted pursuant to clause (19) of the definition of
    Permitted Liens.

                  "Note Documents" means each of the 2007 Indenture, the 2010
Indenture and the 2013 Indenture, each of the 2007 Notes, the 2010 Notes and the
2013 Notes, each Sharing Confirmation and the Security Documents.

                  "Notice of Actionable Default" means a written notice given to
the Collateral Trustee by the Required Parity Debtholders or any Parity Debt
Representative, or the Required Priority Debtholders, stating that an Actionable
Default has occurred and is continuing.

                  "Notice of Advance" means a written notice substantially in
the form of Exhibit B hereto.

                  "Obligations" means any principal, interest (including any
interest accruing at the then applicable rate provided in any applicable Secured
Debt Document after the maturity of the loans and reimbursement obligations
therein and interest accruing at the then applicable rate provided in any
applicable Secured Debt Document after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to the Company, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.

                  "Obligor" means the Company, the Canadian Guarantors and each
other Restricted Subsidiary of the Company (if any) that at any time guarantees
or provides collateral security or credit support for any Secured Obligations.

                   "Officer's Certificate" means a written certificate signed by
the Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice-President of the Company.

                  "Opinion of Company Counsel" means a written opinion from
independent legal counsel who is reasonably acceptable to the Collateral Trustee
or the Company's chief legal officer or deputy chief legal officer. The opinion
may include exceptions and qualifications

                                       15

<PAGE>

consistent with customary practice for written third party legal opinions
relating to the subject matter of the opinion.

                  "Parity Debt Representative" means:

        (1) in the case of the 2007 Notes, the 2007 Trustee; in the case of the
        2010 Notes, the 2010 Trustee; in the case of the 2013 Notes, the 2013
        Trustee;

        (2) in the case of the Term Loans, the Term Loan Administrative Agent;
    or

        (3) in the case of any other Series of Parity Debt, the trustee, agent
    or representative of the holders of such Series of Parity Lien Debt who
    maintains the transfer register for such Series of Parity Lien Debt and is
    appointed as a Parity Debt Representative (for purposes related to the
    administration of the security documents) pursuant to the indenture or other
    agreement governing such Series of Parity Lien Debt.

                  "Parity Lien" means a Lien granted by a Security Document to
the Collateral Trustee upon any property of the Company or any other Obligor to
secure Parity Lien Obligations.

                  "Parity Lien Debt" means:

    (1) the 2007 Notes, the 2010 Notes and the 2013 Notes;

    (2) the Term Loans; and

    (3) any other Indebtedness (including additional notes and Term Loans) that:

        (A) is permitted to be incurred by the covenant described in Section
    4.12 of each of the 2007 Indenture, the 2010 Indenture and the 2013
    Indenture; and

        (B) is permitted to be secured by Parity Liens by clause (2) of the
    definition of Permitted Liens set forth in each of the 2007 Indenture, the
    2010 Indenture and the 2013 Indenture;

provided, in the case of each issue or series of Indebtedness referred to in
this clause (3), that:

        (i) on or before the date on which such Indebtedness was incurred by the
    Company such Indebtedness is designated by the Company, in an officer's
    certificate delivered to each Parity Debt Representative and the Collateral
    Trustee on or before such date, as Parity Lien Debt for the purposes of each
    of the 2007 Indenture, the 2010 Indenture and the 2013 Indenture and this
    Agreement,

        (ii) such Indebtedness is governed by an indenture or other agreement
    that includes a Sharing Confirmation and

                                       16

<PAGE>

        (iii) all requirements set forth in this Agreement as to the
    confirmation, grant or perfection of the Collateral Trustee's Liens to
    secure such Indebtedness or Obligations in respect thereof are satisfied

(and the satisfaction of such requirements and the other provisions of this
clause (3) shall be conclusively established, for purposes of entitling the
holders of such Indebtedness to share equally and ratably with the other holders
of Parity Lien Debt in the benefits and proceeds of the Collateral Trustee's
Liens on the Collateral, if the Company complies with all of the provisions set
forth in Section 3.8 of this Agreement, and the holders of such Indebtedness and
Obligations in respect thereof will be entitled to rely conclusively thereon).

                  "Parity Lien Debt Documents" means, collectively, the Term
Loan Documents, the Note Documents, and the indenture or agreement governing
each other Series of Parity Lien Debt and all agreements binding on any Obligor
related thereto.

                  "Parity Lien Obligations" means Parity Lien Debt and all other
Obligations in respect thereof.

                  "Permitted Prior Liens" means (a) Liens securing Priority Lien
Obligations not exceeding the Priority Lien Cap, (b) Liens described in clauses
(5), (6), (10) or (11) of the definition of "Permitted Liens" (as defined in the
Parity Lien Debt Documents) and (c) Liens that arise by operation of law and are
not voluntarily granted, to the extent entitled by law to priority over the
security interests created by the Security Documents.

                  "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
limited liability company or government or other entity.

                  "Pledged Power Project" means the power generation property
and related equipment at each of the following locations:

    (1) the Goldendale Energy Center in Goldendale, Washington;

    (2) the Otay Mesa Energy Center near San Diego, California;

    (3) the Metcalf Energy Center near San Jose, California;

    (4) the Santa Rosa Energy Center in Santa Rosa County, Florida;

    (5) the Washington Parish Energy Center near Bogalusa, Louisiana;

    (6) the Deer Park Energy Center in Deer Park, Texas; and

    (7) the Augusta Energy Center in Augusta, Georgia.

                                       17

<PAGE>

                  "Priority Foreclosure Event" means the failure to pay at
maturity or upon acceleration of maturity all outstanding Priority Lien Debt at
any time when no Bankruptcy Case or Insolvency Proceeding is pending.

                  "Priority Lien" means a Lien granted by a Security Document to
the Collateral Trustee upon any property of the Company or any other Obligor to
secure Priority Lien Obligations not exceeding the Priority Lien Cap.

                  "Priority Lien Agent" means the Credit Agreement Agent or any
other agent for holders of Priority Lien Debt.

                  "Priority Lien Cap" means an amount equal to (a) the
Indebtedness outstanding under the Credit Agreement or any other Credit Facility
in an aggregate principal amount not exceeding the greater of (1) $500.0
million, less the amount of any Net Proceeds of a Sale of Designated Assets
applied to repay Priority Lien Debt and/or cash collateralize letters of credit
that constitute Priority Lien Debt and (2) the dollar amount that, on the date
of incurrence of such Indebtedness, is equal to 50% of the Company's
Consolidated Cash Flow for the then most recent four-quarter period for which
financial information is available, plus (b) any interest (including any
interest accruing at the then applicable rate provided in any applicable
Priority Lien Document after the maturity of the loans and reimbursement
obligations therein and interest accruing at the then applicable rate provided
in any applicable Priority Lien Document after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), penalties, premiums,
fees, costs, expenses or other Obligations in respect of such Indebtedness. For
purposes of this definition of Priority Lien Cap, all letters of credit shall be
valued at face amount, whether or not drawn, and all letters of credit
denominated in a currency other than U.S. dollars shall be valued at all times
at the Equivalent Amount (as defined in the Credit Agreement) thereof on the
date of issue thereof.

                  "Priority Lien Debt" means Indebtedness under (a) the Credit
Agreement or (b) any other Credit Facility that is secured by a Priority Lien
that was permitted to be incurred under clause (1) of the definition of
"Permitted Liens" but only if on or before the day on which such Indebtedness
under a Credit Facility described in clause (b) above is incurred by the Company
such Indebtedness is designated by the Company, in an officer's certificate
delivered to each Parity Debt Representative and the Collateral Trustee on or
before such date, as Priority Lien Debt for the purposes of each of the Parity
Lien Debt Documents and this Agreement.

                  "Priority Lien Documents" means the Credit Agreement or any
other Credit Facility pursuant to which any Priority Lien Debt is incurred and
all other agreements governing, securing or relating to any Priority Lien
Obligations.

                  "Priority Lien Obligations" means the Priority Lien Debt and
all other Obligations in respect of Priority Lien Debt.

                  "Release" means any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment,

                                       18

<PAGE>

including the movement of Hazardous Material through or in the air, soil,
surface water, ground water or property.

                  "Required Parity Debtholders" means, at any time in respect of
any action or matter, holders of a majority in aggregate outstanding principal
amount of all Parity Lien Debt then outstanding, voting together as a single
class. For this purpose, Parity Lien Debt registered in the name of, or
beneficially owned by, the Company or any Affiliate of the Company will be
deemed not to be outstanding.

                  "Required Priority Debtholders" means, at any time in respect
of any action or matter, (1) holders of the outstanding principal amount of, or
commitments with respect to, the applicable Priority Lien Debt then outstanding
required pursuant to the terms of the applicable Credit Facility, voting as a
single class, to approve such action or matter or (2) the Priority Lien Agent
acting upon the authorization or consent of the holders referred to in the
immediately preceding clause (1). For this purpose, Priority Lien Debt
registered in the name of, or beneficially owned by, the Company or any
Affiliate of the Company will be deemed not to be outstanding.

                  "Responsible Officer," means, with respect to the Collateral
Trustee, any officer within the corporate trust department of the Collateral
Trustee including any vice president, assistant vice president, assistant
treasurer, trust officer or any other officer of the Collateral Trustee who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such Person's knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Agreement.

                  "Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.

                  "S&P" means Standard & Poor's Ratings Group (or, if such
entity ceases to rate the applicable notes for reasons outside of the control of
the Company, the equivalent investment grade credit rating from any other
"nationally recognized statistical rating organization" (or successor concept)
within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act (or
successor provision) selected by the Company as a replacement agency).

                  "Sale of Designated Assets" means any Asset Sale involving a
sale or other disposition of Designated Assets.

                  "Secured Debt" means Parity Lien Debt and Priority Lien Debt.

                  "Secured Debt Default" means (i) the failure to pay any
Secured Debt at maturity or (ii) any event or condition which, under the terms
of any indenture or agreement governing any Series of Secured Debt causes, or
permits holders of Secured Debt outstanding thereunder (with or without the
giving of notice or lapse of time, or both, and whether or not notice has been
given or time has lapsed) to cause, the Secured Debt outstanding thereunder to
become immediately due and payable.

                                       19

<PAGE>

                  "Secured Debt Documents" means the Parity Lien Debt Documents
and the Priority Lien Documents.

                  "Secured Debtholder" means, at any time, a Person which then
is the holder of, or has any commitment with respect to, any Secured Debt.

                  "Secured Debt Representative" means each Parity Debt
Representative and the Priority Lien Agent.

                  "Secured Obligations" means the Parity Lien Obligations and
the Priority Lien Obligations.

                  "Security Documents" means this Agreement and one or more
security agreements, pledge agreements, collateral assignments, mortgages,
collateral agency agreements, deeds of trust or other grants or transfers for
security executed and delivered by the Company or any other Obligor creating (or
purporting to create) a Lien upon Collateral in favor of the Collateral Trustee
(including the Existing Security Documents, as assigned to the Collateral
Trustee), in each case, as amended, modified, renewed, restated or replaced, in
whole or in part, from time to time, in accordance with its terms.

                  "Series of Parity Lien Debt" means, severally, each of the
2007 Notes, the 2010 Notes, the 2013 Notes, the Term Loans and each other issue
or series of Parity Lien Debt for which a single transfer register is
maintained.

                  "Series of Secured Debt" means, severally, each of the 2007
Notes, the 2010 Notes, the 2013 Notes, the Term Loans, each other issue or
series of Parity Lien Debt for which a single transfer register is maintained
and each issue or series of Priority Lien Debt for which a single register is
maintained.

                  "Sharing Confirmation" means, as to any Series of Parity Lien
Debt, the written agreement of the holders of such Series of Parity Lien Debt,
as set forth in the indenture or agreement governing such Series of Parity Lien
Debt, for the enforceable benefit of all holders of each other existing and
future Series of Parity Lien Debt and each existing and future Parity Debt
Representative, that all Parity Lien Obligations shall be and are secured
equally and ratably by all Liens at any time granted by the Company or any other
Obligor to secure any Obligations in respect of such Series of Parity Lien Debt,
whether or not upon property otherwise constituting Collateral, that all such
Liens shall be enforceable by the Collateral Trustee for the benefit of all
holders of Parity Lien Obligations equally and ratably, and that the holders of
Obligations in respect of such Series of Parity Lien Debt are bound by the
provisions in this Agreement relating to the order of application of proceeds
from enforcement of the Collateral Trustee's Liens upon the Collateral, and
consent to and direct the Collateral Trustee to perform its obligations under
this Agreement.

                  "Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which the
payment of interest or principal was scheduled to be paid in the documentation
governing such Indebtedness as of the date of the

                                       20

<PAGE>

indenture, and will not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally scheduled
for the payment thereof.

                  "Subsidiary" means, as applied to any Person, any corporation,
limited or general partnership, trust, association or other business entity of
which an aggregate of at least 50% of the outstanding Voting Shares, or an
equivalent controlling interest therein, of such Person is, at the time,
directly or indirectly, owned by such Person and/or one or more Subsidiaries of
such Person.

                  "Term Loan Administrative Agent" means Goldman Sachs Credit
Partners L.P., as administrative agent under the Term Loan Agreement, together
with its successors in such capacity.

                  "Term Loan Agreement" means that certain Term Loan Agreement
dated the date hereof between the Company and the Term Loan Administrative
Agent, relating to $750.0 million in aggregate principal amount of Term Loans,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, as amended, modified, increased,
renewed, restated or replaced, in whole or in part, from time to time.

                  "Term Loan Documents" means the Term Loan Agreement, each
Sharing Confirmation and the Security Documents.

                  "Term Loans" means the principal of and interest and premium
(if any) on Indebtedness of the Company incurred under the Term Loan Agreement.

                  "Unrestricted Subsidiary" means any Subsidiary of the Company
that is designated by the Board of Directors as an Unrestricted Subsidiary (and
any subsidiary of an Unrestricted Subsidiary) pursuant to a Board Resolution
passed after the date of each of the 2007 Indenture, the 2010 Indenture and the
2013 Indenture, but only to the extent that such Subsidiary:

    (1) has no Indebtedness other than Non-Recourse Debt;

    (2) is not party to any agreement, contract, arrangement or understanding
        with the Company or any Restricted Subsidiary of the Company unless the
        terms of any such agreement, contract, arrangement or understanding are
        no less favorable to the Company or such Restricted Subsidiary than
        those that might be obtained at the time from Persons who are not
        Affiliates of the Company;

    (3) is a Person with respect to which neither the Company nor any of its
        Restricted Subsidiaries has any direct or indirect obligation (a) to
        subscribe for additional Equity Interests or (b) to maintain or preserve
        such Person's financial condition or to cause such Person to achieve any
        specified levels of operating results; and

    (4) has not guaranteed or otherwise directly or indirectly provided credit
        support for any Indebtedness of the Company or any of its Restricted
        Subsidiaries.

                                       21

<PAGE>

    Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
will be evidenced to the 2007 Trustee, the 2010 Trustee and the 2013 Trustee, as
applicable, by filing with the applicable trustee(s) a certified copy of the
Board Resolution giving effect to such designation and an officer's certificate
certifying that such designation complied with the preceding conditions and was
permitted by the covenant described under Section 4.07 of each of the 2007
Indenture, the 2010 Indenture and the 2013 Indenture. If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of the 2007 Indenture, the 2010 Indenture and the 2013
Indenture, as the case may be, and any Indebtedness of such Subsidiary will be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under Section 4.09 of each of the 2007 Indenture, the
2010 Indenture and the 2013 Indenture, the Company will be in default of such
covenant. The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if (1) such Indebtedness
is permitted under the covenant described under Section 4.09 of each of the 2007
Indenture, the 2010 Indenture and the 2013 Indenture calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period; and (2) no Default or Event of Default would be in existence
following such designation.

                           "Voting Stock" of any Person as of any date means the
Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.

                  (b)      All capitalized terms used in this Agreement that are
defined in Article 9 of the UCC, as in effect on the date of this Agreement in
the State of New York, and not otherwise defined herein shall have the meanings
therein set forth.

         1.2. RULES OF INTERPRETATION.

                  (a)      Any of the terms defined herein may, unless the
context otherwise requires, be used in the singular or the plural, depending on
the reference.

                  (b)      Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.

                  (c)      Unless otherwise indicated, any reference to any
agreement or instrument shall be deemed to include a reference to such agreement
or instrument as assigned, amended, amended and restated, supplemented,
otherwise modified from time to time or replaced in accordance with the terms of
this Agreement.

                  (d)      The use in this Agreement or any of the other
Security Documents of the word "include" or "including," when following any
general statement, term or matter, shall not be construed to limit such
statement, term or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not nonlimiting

                                       22

<PAGE>

language (such as "without limitation" or "but not limited to" or words of
similar import) is used with reference thereto, but rather shall be deemed to
refer to all other items or matters that fall within the broadest possible scope
of such general statement, term or matter. The word "will" shall be construed to
have the same meaning and effect as the word "shall."

                  (e)      References to "Sections" and "clauses" shall be to
Sections and clauses, respectively, of this Agreement unless otherwise
specifically provided.

                  (f)      References to "Articles" shall be to Articles of this
Agreement unless otherwise specifically provided.

                  (g)      References to "Exhibits" and "Schedules" shall be to
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided.

                  (h)      The use in this Agreement of the words "herein,"
"hereof," and "hereunder," and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof.

                  (i)      This Agreement, the other Security Documents and any
documents or instruments delivered pursuant hereto shall be construed without
regard to the identity of the party who drafted the various provisions of the
same. Each and every provision of this Agreement, the other Security Documents
and instruments and documents entered into and delivered in connection therewith
shall be construed as though the parties participated equally in the drafting of
the same. Consequently, each of the parties acknowledges and agrees that any
rule of construction that a document is to be construed against the drafting
party shall not be applicable either to this Agreement or the other Security
Documents and instruments and documents entered into and delivered in connection
therewith.

ARTICLE 2. THE TRUST ESTATE

         2.1.     DECLARATION OF TRUST.

                  To Secure the payment of the Secured Obligations and in
consideration of the premises and the mutual agreements set forth herein, each
of the Company and the Canadian Guarantors hereby grants to the Collateral
Trustee, and the Collateral Trustee hereby accepts and agrees to hold, in trust
under this Agreement for the benefit of all present and future holders of
Secured Obligations, all of the Collateral Trustee's right, title and interest
in, to and under the Existing Security Documents, as assigned to the Collateral
Trustee pursuant to Section 7.19, and all other Security Documents, including
all Guarantees thereunder, at any time delivered to the Collateral Trustee and
all interests, rights, powers and remedies of the Collateral Trustee thereunder
or in respect thereof and all cash and non-cash proceeds thereof (collectively,
the "Trust Estate"),

                  To Have and to Hold the Trust Estate unto the Collateral
Trustee and its successors and assigns in trust under this Agreement,

                                       23

<PAGE>

                  In Trust, Nevertheless, for the benefit solely and exclusively
of all present and future holders of Secured Obligations as security for the
payment of all present and future Secured Obligations,

                  Provided, that if at any time (i) all Liens granted by, and
all Guarantees made under, any of the Security Documents have been released as
provided in Section 4.1, (ii) the Collateral Trustee holds no other property in
trust as part of the Trust Estate, (iii) no monetary obligation is outstanding
and payable under this Agreement to the Collateral Trustee or any of its
co-trustees, agents or sub-agents (whether in an individual or representative
capacity) and (iv) the Company delivers to the Collateral Trustee an Officer's
Certificate stating that all Liens of, and all Guarantees made in favor of, the
Collateral Trustee have been released in compliance with all applicable
provisions of the Secured Debt Documents and that the Company and the Canadian
Guarantors are not required by any Secured Debt Document to grant any Lien upon
any property to secure, or make any Guarantee to support, the Secured
Obligations, then the trust arising hereunder shall terminate, except that,
notwithstanding such termination, all provisions set forth in Sections 7.7 and
7.8 hereof enforceable by the Collateral Trustee or any of its co-trustees,
agents or sub-agents (whether in an individual or representative capacity) shall
remain enforceable in accordance with their terms,

                  And the Parties Further Declare and Covenant that the Trust
Estate shall be held and distributed by the Collateral Trustee subject to the
further agreements herein.

ARTICLE 3. OBLIGATIONS AND POWERS OF COLLATERAL TRUSTEE

         3.1.     UNDERTAKING OF THE COLLATERAL TRUSTEE.

                  (a)      Subject to, and in accordance with, this Agreement,
the Collateral Trustee will, as trustee for the benefit solely and exclusively
of the present and future holders of Secured Obligations:

                           (i)      accept transfer of the Existing Security
         Documents and receive, accept, enter into, hold, maintain, administer
         and enforce all other Security Documents, including all Guarantees
         thereunder, at any time delivered to it and all security interests
         created thereunder, perform its obligations under the Security
         Documents and protect, exercise and enforce the interests, rights,
         powers and remedies granted or available to it under, pursuant to or in
         connection with the Security Documents;

                           (ii)     take all lawful and commercially reasonable
         actions permitted under the Security Documents that it may deem
         necessary or advisable to protect or preserve its interest in the
         Collateral and any such Guarantees and such interests, rights, powers
         and remedies;

                           (iii)    deliver and receive notices pursuant to the
         Security Documents;

                           (iv)     sell, assign, collect, assemble, foreclose
         on, institute legal proceedings with respect to, or otherwise exercise
         or enforce the rights and remedies of a secured party (including a
         mortgagee, trust deed beneficiary and insurance beneficiary or

                                       24

<PAGE>

         loss payee) with respect to the Collateral and any such Guarantees and
         its other interests, rights, powers and remedies;

                           (v)      remit as provided in Section 3.4 all cash
         proceeds received by the Collateral Trustee from the collection,
         foreclosure or enforcement of its interest in the Collateral or any
         such Guarantees or any of its other interests, rights, powers or
         remedies;

                           (vi)     execute and deliver amendments to the
         Security Documents as from time to time authorized by an Act of Secured
         Debtholders; and

                           (vii)    release any Lien granted to it by any
         Security Document upon any Collateral or release and terminate any
         Guarantee granted to it by any Security Document, in each case if and
         as required by Section 4.1(b).

                  (b) Each party to this Agreement acknowledges and consents to
the undertaking of the Collateral Trustee set forth in Section 3.1(a) and agrees
to each of the other provisions of this Agreement applicable to it.

                  (c) Notwithstanding anything to the contrary contained in this
Agreement, the Collateral Trustee shall not commence any exercise of remedies,
any foreclosure actions or otherwise take any action or proceeding against any
of the Collateral unless and until it shall have received a Notice of Actionable
Default or a Responsible Officer of the Collateral Trustee has actual knowledge
that an Actionable Default has occurred and is continuing and then only in
accordance with the provisions of this Agreement.

         3.2. RELEASE OR SUBORDINATION OF LIENS. The Collateral Trustee will not
release or subordinate any Lien of the Collateral Trustee or consent to the
release or subordination of any Lien of the Collateral Trustee, except (a) as
directed by an Act of Secured Debtholders, (b) as required by Article 4 or (c)
as ordered pursuant to applicable law by a court of competent jurisdiction.

         3.3. REMEDIES UPON ACTIONABLE DEFAULT. If the Collateral Trustee at any
time receives a Notice of Actionable Default or has actual knowledge that an
Actionable Default has occurred and is continuing, it will promptly deliver
written notice thereof to each Secured Debt Representative. Thereafter, the
Collateral Trustee may await direction by an Act of Instructing Debtholders and
will act, or decline to act, as directed by an Act of Instructing Debtholders,
in the exercise and enforcement of the Collateral Trustee's interests, rights,
powers and remedies in respect of the Collateral or under the Security Documents
or the Guarantees of the Canadian Guarantors or applicable law. Notwithstanding
the foregoing, at any time when a Priority Foreclosure Event is continuing, the
Collateral Trustee will act as directed in writing by the Required Priority
Debtholders to initiate the exercise of remedies in respect of the Collateral
and the Guarantees of the Canadian Guarantors and, following the initiation of
such exercise of remedies, the Collateral Trustee will act, or decline to act,
with respect to the manner of such exercise of remedies as directed by an Act of
Instructing Debtholders (provided that no Act of Instructing Debtholders shall
countermand the initiation of such exercise of remedies by the Required Priority
Debtholders). Unless it has been directed to the contrary by an Act of
Instructing Debtholders, the Collateral Trustee in any event may (but shall not
be obligated to)

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<PAGE>

take or refrain from taking such action with respect to any Actionable Default
as it may deem advisable and in the best interest of the holders of Secured
Obligations.

         3.4. APPLICATION OF PROCEEDS. (a) The Collateral Trustee shall apply
the proceeds of any collection, sale, foreclosure or other realization upon any
Collateral, or any realization upon any Guarantee of the Canadian Guarantors, in
the following order of application (the "Order of Application"):

    FIRST, to the payment of all amounts payable under this Agreement on account
of the Collateral Trustee's fees or any reasonable legal fees, costs and
expenses or other liabilities of any kind incurred by the collateral trustee or
any co-trustee or agent in connection with any Security Document;

    SECOND, to the Priority Lien Agent for application to the payment of
Priority Lien Obligations in an amount not to exceed the Priority Lien Cap, or
to be held by the Priority Lien Agent pending such application, until all
Priority Lien Obligations have been paid in full in cash or the cash amount held
by the Priority Lien Agent in respect of all Priority Lien Obligations is
sufficient to pay all Priority Lien Obligations in full in cash;

    THIRD, to the respective Parity Debt Representatives for application to the
Parity Lien Obligations equally and ratably until all Parity Lien Obligations
have been paid in full in cash; and

    FOURTH, any surplus remaining after the payment in full in cash of all of
the Secured Obligations shall be paid to the Company or the applicable Canadian
Guarantor, as the case may be, its successors or assigns, or to whomsoever may
be lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct.

                  For this purpose, "proceeds" of Collateral or any Guarantee of
the Canadian Guarantors includes any and all cash, securities and other property
realized from collection, foreclosure or enforcement of the Collateral Trustee's
Liens upon the Collateral (including distributions of Collateral in satisfaction
of any Secured Obligations) or any Guarantee of the Canadian Guarantors made in
favor of the Collateral Trustee.

                  (b) If any Parity Debt Representative or any holder of a
Parity Lien Obligation collects or receives any proceeds in respect of the
Parity Lien Obligations that should have been applied to the payment of the
Priority Lien Obligations in accordance with clause (a) above, whether after the
commencement of a Bankruptcy Case or otherwise, such Parity Debt Representative
or such holder of a Parity Lien Obligation, as the case may be, will forthwith
deliver the same to the Priority Lien Agent, for the account of the holders of
the Priority Lien Obligations, in the form received, duly indorsed to the
Priority Lien Agent, for the account of the holders of the Priority Lien
Obligations, if required, to be applied in accordance with clause (a) above.
Until so delivered, such proceeds will be held by such Parity Debt
Representative or such holder of a Parity Lien Obligation, as the case may be,
for the benefit of the holders of the Priority Lien Obligations and shall be
deemed to be held segregated from other funds and property held by such Parity
Debt Representative or such holder of a Parity Lien Obligation.

                                       26

<PAGE>

         3.5. POWERS OF THE COLLATERAL TRUSTEE.

                  (a) The Collateral Trustee is irrevocably authorized and
empowered to enter into and perform its obligations and protect, perfect,
exercise and enforce its interest, rights, powers and remedies under the
Security Documents, including any Guarantees thereunder, and applicable law and
to act as set forth in this Article 3 or as requested in any lawful directions
given to it from time to time in respect of any matter by an Act of Secured
Debtholders.

                  (b) Subject to Article 4 and Section 3.3, the Collateral
Trustee shall take direction only pursuant to an Act of Secured Debtholders.

                  (c) Each Secured Debt Representative has, and each future
Secured Debt Representative will, become party to this Agreement, solely to
confirm consent to the undertaking of the Collateral Trustee set forth in
Sections 2.1 and 3.1(a) and its acceptance of the rights granted to it by this
Agreement. No Secured Debt Representative, Secured Debtholder or other holder of
Secured Obligations shall have (i) any obligation or liability under or in
respect of this Agreement or any Act of Secured Debtholders to which it is not a
signatory party; (ii) any responsibility or duty whatsoever in respect of the
Collateral or Security Documents, including any Guarantee thereunder, or any
other interest, right, power or remedy granted to or enforceable by the
Collateral Trustee, it being understood and agreed by the Collateral Trustee and
by the Company and the Canadian Guarantors that only the Collateral Trustee
shall be bound by the obligations of the Collateral Trustee expressly set forth
in the Security Documents to which the Collateral Trustee is a party or (iii)
any liability whatsoever for any act or omission of the Collateral Trustee.

         3.6. DOCUMENTS AND COMMUNICATIONS. The Collateral Trustee will permit
each Secured Debt Representative and each Secured Debtholder upon reasonable
written notice or from time to time to inspect and copy any and all Security
Documents and other documents, notices, certificates, instructions or
communications received by the Collateral Trustee in its capacity as such.

         3.7. FOR SOLE AND EXCLUSIVE BENEFIT OF HOLDERS OF SECURED OBLIGATIONS.

                  The Collateral Trustee shall accept, hold, administer and
enforce all Liens at any time transferred or delivered to it and all other
interests, rights, powers and remedies at any time granted to or enforceable by
the Collateral Trustee and all other property of the Trust Estate solely and
exclusively for the benefit of the present and future holders of present and
future Secured Obligations, and shall distribute all cash proceeds received by
it in realization thereon or from enforcement thereof solely and exclusively to
the Secured Debt Representatives for the benefit of the Secured Debtholders and
to the Company pursuant to the provisions of Section 3.4.

         3.8. ADDITIONAL SECURED DEBT.

                  (a) The Collateral Trustee will, as trustee hereunder, perform
its undertakings set forth in Section 3.1(a) with respect to each future holder
of Secured Obligations that (i) is identified as a holder of Parity Lien Debt or
Priority Lien Debt in accordance with the procedures set forth in Section 3.8(b)
and (ii) signs, through its designated Secured Debt Representative identified
pursuant to Section 3.8(b), a Collateral Trust Joinder.

                                       27

<PAGE>

                  (b) The Company shall be permitted to designate as additional
Secured Debtholders hereunder each person who is, or who becomes, the registered
holder of Parity Lien Debt or the holder of Priority Lien Debt incurred by the
Company after the date of this Agreement. The Company may effect such
designation by delivering to the Collateral Trustee, with copies to each
previously identified Secured Debt Representative, each of the following:

                           (i) An Officer's Certificate stating that:

                                    (A) The Company intends to incur additional
Secured Debt ("New Secured Debt") which shall either

be (x) Priority Lien Debt permitted by each indenture or agreement governing
Secured Debt to be secured with a Priority Lien on a pari passu basis with all
previously existing Priority Lien Debt and which, when the principal amount
thereof is added to the principal amount of all previously existing Priority
Lien Debt, shall be in an aggregate principal amount that is permitted by the
terms of the Secured Debt Documents or (y) Parity Lien Debt permitted by each
indenture or agreement governing Secured Debt to be secured with a Parity Lien
on a pari passu basis with all previously existing Parity Lien Debt and which,
when incurred and after giving pro forma effect to the incurrence of such Parity
Lien Debt and the application of the proceeds therefrom, shall be in an amount
that is permitted by the terms of each Secured Debt Document;

                                    (B) After giving pro forma effect to the
incurrence of such New Secured Debt and the application of the proceeds
therefrom no Secured Debt Default shall have occurred and be continuing and, to
the best of the signatory's knowledge after due inquiry, no event or condition
shall have occurred which could reasonably be expected to result in a Secured
Debt Default;

                                    (C) If the incurrence of such New Secured
Debt provides, pursuant to the indenture or agreement governing such New Secured
Debt, that additional Collateral shall be required as security therefor, the
Company has duly authorized, executed and filed or recorded, as applicable, in
each appropriate governmental office financing statements and/or mortgages, as
applicable, creating in favor of the Collateral Trustee, in its capacity as
trustee hereunder, a valid and perfected first priority Lien on such additional
Collateral, subject to the provisions of Section 3.4 and any Permitted Prior
Liens; and

                                    (D) The Company has duly authorized,
executed and recorded in each appropriate governmental office a Notice of
Advance declaring that the New Secured Debt is secured by the Collateral;

                           (ii) an Opinion of Company Counsel stating that the
Officer's Certificate delivered pursuant to clause (i) above has been duly
authorized by the Board of Directors of the Company and has been duly executed
and delivered; and

                           (iii) a written notice specifying the name and
address of the Secured Debt Representative for such series of New Secured Debt
for purposes of Section 7.5.

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<PAGE>

ARTICLE 4. OBLIGATIONS ENFORCEABLE BY THE COMPANY AND THE CANADIAN GUARANTORS

         4.1. RELEASE OF LIENS.

                  (a) The Collateral Trustee's Liens upon the Collateral will be
released pursuant to Section 4.1(b) below:

        (1) in whole, upon (A) payment in full and discharge of all outstanding
    Secured Debt and all other Secured Obligations that are outstanding, due and
    payable at the time all of the Secured Debt is paid in full and discharged
    and (B) termination or expiration of all commitments to extend credit under
    all Credit Facilities the Indebtedness under which constitutes or would
    constitute Priority Lien Debt;

        (2) as to any Collateral, if consent to the release of such Collateral
    has been given by an Act of Secured Debtholders or, if such Collateral
    represents all or substantially all of the Collateral, consent to release of
    such Collateral has been given by the requisite percentage or number of
    holders of each Series of Secured Debt under the applicable Secured Debt
    Document and, in each case such release has become effective in accordance
    with such consent;

        (3) as to (i) any Collateral that is sold, transferred or otherwise
    disposed of or (ii) in the case where the release is to be granted in
    advance of any sales, transfers or other dispositions, any Collateral to be
    sold, transferred or otherwise disposed of, by the Company or any Canadian
    Guarantor in a transaction or other circumstance not prohibited by any of
    the Secured Debt Documents, at the time of such sale, transfer or other
    disposition or, in the case of any Collateral to be sold, transferred or
    otherwise disposed of, at the time specified for such release, to the extent
    of the interest sold, transferred or otherwise disposed of, or to be sold,
    transferred or otherwise disposed of; provided that, in the case where the
    release is to be granted in advance of any sales, transfers or other
    disposition, (x) such release will only become effective if such Collateral
    has a Fair Market Value of $5 million or less and the Fair Market Value of
    such Collateral, together with all other Collateral that has been subject to
    a release described in this proviso, does not exceed $25 million during any
    period of 12 consecutive months, (y) no Lien has or will be granted to any
    Person other than the Collateral Trustee in respect of such Collateral
    during the period between such release and the consummation of the sale,
    transfer or other disposition of such Collateral and (z) in the event that
    the consummation of the sale, transfer or other disposition of such
    Collateral does not take place (or a definitive binding agreement with
    respect to such sale, transfer or other disposition is not entered into)
    within 60 days of such release, the Lien of the Collateral Trustee will
    immediately and automatically be reinstated on such Collateral;

        (4) as to any Collateral consisting of a Pledged Power Project, if the
    Company's interest in such Pledged Power Project is transferred to a
    Restricted Subsidiary of the Company in a transaction not prohibited by any
    of the Secured Debt Documents;

        (5) as to any Collateral in connection with any abandonment, forfeiture,
    surrender or release of oil and gas assets, or a lease termination, not
    prohibited by any of the Secured Debt

                                       29

<PAGE>

    Documents; and

        (6) as to any Excluded Assets upon request of the Company.

                  In addition, in the case of a release of all Collateral owned
by any Canadian Guarantor pursuant to the foregoing provisions, the Guarantee of
such Canadian Guarantor will also be automatically released pursuant to the
Security Documents.

                  (b) The Collateral Trustee agrees for the benefit of the
Company and the Canadian Guarantors that if the Collateral Trustee at any time
receives:

                           (i)      An Officer's Certificate stating that:

                                    (A) (x) such officer has read Article 4 of
                  this Agreement and understands the provisions and the
                  definitions relating hereto, (y) such officer has made such
                  examination or investigation as is necessary to enable him or
                  her to express an informed opinion as to whether or not the
                  conditions precedent in this Agreement, if any, relating to
                  the release of the Collateral have been complied with and (z)
                  in the opinion of such officer, such conditions precedent, if
                  any, have been complied with;

                                    (B) no Secured Debt Default shall have
                  occurred or is continuing and, to the best of the signatory's
                  knowledge after due inquiry, no event or condition shall have
                  occurred which could reasonably be expected to result in a
                  Secured Debt Default or will result from the release of such
                  Lien and/or Guarantee, as applicable; and

                                    (C) for releases effected after the date of
                  this Agreement, as to any release of oil and gas assets
                  permitted pursuant to clause (3) or (5) of Section 4.1(a),
                  that such release shall not adversely affect or impair the
                  Lien of a Security Document with respect to any other portion
                  of the Collateral;

                           (ii) The proposed instrument or instruments releasing
such Lien as to such property and/or Guarantee, as applicable, in recordable
form, if applicable;

                           (iii) an Opinion of Company Counsel to the effect
that:

                                    (A) the conditions precedent, if any, in
                  Section 4.1 of this Agreement to be satisfied with respect to
                  the release of such Collateral have been complied with; and

                                    (B) with respect to all releases, that the
                  instrument or instruments proposed to be executed will be
                  effective solely to release the Lien of the Security Document
                  as to the property described in such Officer's Certificate
                  and/or the Guaranty described in such Officer's Certificate,
                  as applicable (without requiring the Collateral Trustee to
                  make any representation or warranty in respect thereof),
                  without releasing or satisfying any obligation secured by such
                  Lien

                                       30

<PAGE>

                  and/or guaranteed by such Guarantee, as applicable, and
                  without imposing any obligation or liability upon the
                  Collateral Trustee or any other Person;

                           (iv) for releases effected after the date of this
                  Agreement, the written confirmation of the Credit Agreement
                  Agent and, for so long as the Term Loans shall be outstanding,
                  the Term Loan Administrative Agent that, in its view, such
                  release is permitted by Section 4.1(a); provided that each of
                  the Credit Agreement Agent and the Term Loan Administrative
                  Agent agree that as soon as practicable after receipt of any
                  Officer's Certificate from the Company pursuant to Section 4.2
                  it will either provide (x) such written confirmation, (y) a
                  written statement that such release is not permitted by
                  Section 4.1(a) or (z) a request for further information
                  regarding the proposed release from the Company;

then the Collateral Trustee will execute (with such acknowledgements and/or
notarizations as are required) and deliver such release to the Company on or
before the later of (x) the date specified in such request for such release and
(y) the fifth Business Day after the date of receipt of the items required by
Section 4.1(b) by the Collateral Trustee.

         In the case of any release pursuant to clause (2) or (3) of Section
4.1(a), if the terms of any such sale, transfer or other disposition require the
payment of the purchase price to be contemporaneous with the delivery of the
applicable release, then, at the request of the Company, the Collateral Trustee
shall either be present at the closing of such transaction or shall deliver the
release under customary escrow arrangements that permit such contemporaneous
payment and delivery of the release.

         4.2. DELIVERY OF COPIES TO SECURED DEBT REPRESENTATIVES. The Company
will deliver to each Secured Debt Representative a copy of each Officer's
Certificate delivered to the Collateral Trustee pursuant to Section 4.1,
together with copies of all documents delivered to the Collateral Trustee with
such Officer's Certificate. The Secured Debt Representatives will not be
obligated to take notice thereof or to act thereon, subject to Section
4.1(b)(iv).

         4.3. COLLATERAL TRUSTEE NOT REQUIRED TO SERVE, FILE OR RECORD. The
Collateral Trustee is not required to serve, file, register or record any
instrument releasing or subordinating its security interest in any Collateral.

ARTICLE 5. IMMUNITIES OF THE COLLATERAL TRUSTEE.

         5.1. NO IMPLIED DUTY. The Collateral Trustee will not have any duties
or responsibilities except those expressly assumed by it in this Agreement and
the other Security Documents and shall not be required to take any action which
is contrary to applicable law or any provision of this Agreement or the other
Security Documents.

         5.2. APPOINTMENT OF AGENTS AND ADVISORS. The Collateral Trustee may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or thorough agents, attorneys, accountants, appraisers or
other experts or advisors as it may reasonably require and shall not be
responsible for any misconduct or negligence on the part of any of them.

                                       31

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         5.3. OTHER AGREEMENTS. The Collateral Trustee has accepted and is bound
by the Security Documents executed by the Collateral Trustee as of the date of
this Agreement and, subject to Article 4 and, as directed by an Act of Secured
Debtholders, the Collateral Trustee may execute additional Security Documents
delivered to it after the date of this Agreement, provided, however, that such
additional Security Documents do not adversely affect the rights, privileges,
benefits and immunities of the Collateral Trustee. The Collateral Trustee shall
not otherwise be bound by, or be held obligated by, the provisions of any
indenture or agreement governing Secured Debt.

         5.4. SOLICITATION OF INSTRUCTIONS.

                  (a) The Collateral Trustee may at any time solicit
confirmatory instructions, in the form of an Act of Secured Debtholders or an
order of a court of competent jurisdiction, as to any action which it may be
requested or required to take, or which it may propose to take, in the
performance of any of its obligations under this Agreement.

                  (b) No direction given to the Collateral Trustee by an Act of
Secured Debtholders which imposes, purports to impose or might reasonably be
expected to impose upon the Collateral Trustee any obligation or liability not
set forth in or arising under this Agreement and the other Security Documents
accepted by the Collateral Trustee shall be binding upon the Collateral Trustee
unless the Collateral Trustee elects, at its sole option, to accept such
direction.

         5.5. LIMITATION OF LIABILITY. The Collateral Trustee shall not be
responsible or liable for any action taken or omitted to be taken by it
hereunder or under any other Security Document, except for its own gross
negligence or willful misconduct.

         5.6. DOCUMENTS IN SATISFACTORY FORM. The Collateral Trustee shall be
entitled to require that all agreements, certificates, opinions, instruments and
other documents at any time submitted to it, including those expressly provided
for in this Agreement, be delivered to it in a form and upon substantive
provisions reasonably satisfactory to it.

         5.7. ENTITLED TO RELY. The Collateral Trustee may conclusively rely
upon any certificate, notice or other document (including any teletransmission)
reasonably believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons and need not investigate
any fact or matter stated in any such document. The Collateral Trustee may seek
and rely upon any judicial order or judgment, upon any advice, opinion or
statement of legal counsel, independent consultants and other experts selected
by it in good faith and upon any certification, instruction, notice or other
writing delivered to it by the Company in compliance with the provisions of this
Agreement or delivered to it by any Secured Debt Representative as to the
Secured Debtholders for whom it acts, without being required to determine the
authenticity thereof or the correctness of any fact stated therein or the
propriety or validity of service thereof. The Collateral Trustee may act in
reliance upon any instrument comporting with the provisions of this Agreement or
any signature reasonably believed by it to be genuine and may assume that any
Person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so. To the extent an Officer's Certificate or an Opinion of
Company Counsel is required or permitted under this Agreement to be delivered to
the Collateral Trustee

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<PAGE>

in respect of any matter, the Collateral Trustee may rely conclusively on such
Officer's Certificate or Opinion of Company Counsel as to such matter.

         5.8. SECURED DEBT DEFAULT. The Collateral Trustee shall not be required
to inquire as to the occurrence or absence of any Secured Debt Default and shall
not be affected by or required to act upon any notice or knowledge as to the
occurrence of any Secured Debt Default unless and until it receives a Notice of
an Actionable Default or a Responsible Officer of the Collateral Trustee has
actual knowledge that an Actionable Default has occurred and is continuing.

         5.9. ACTIONS BY COLLATERAL TRUSTEE. As to any matter not expressly
provided for by this Agreement, the Collateral Trustee shall act or refrain from
acting as directed by Act of Secured Debtholders and shall be fully protected if
it does so.

         5.10. SECURITY OR INDEMNITY IN FAVOR OF THE COLLATERAL TRUSTEE. The
Collateral Trustee shall not be required to advance or expend any funds or
otherwise incur any financial liability in the performance of its duties or the
exercise of its powers or rights hereunder unless it has been provided with
security or indemnity reasonably satisfactory to it against any and all
liability or expense which may be incurred by it by reason of taking or
continuing to take such action.

         5.11. RIGHTS OF THE COLLATERAL TRUSTEE.(a) Notwithstanding anything to
the contrary contained herein or in any of the other Security Documents, the
Collateral Trustee shall be under no obligation to take any action which in its
sole discretion, would subject the Collateral Trustee to personal or financial
liability.

                  (b) In the event there is any disagreement between the other
parties to this Agreement or any of the other Security Documents resulting in
adverse claims being made in connection with Collateral held by the Collateral
Trustee and the terms of this Agreement or any of the other Security Documents
do not unambiguously mandate the action the Collateral Trustee is to take or not
to take in connection therewith under the circumstances then existing, or the
Collateral Trustee is in doubt as to what action it is required to take or not
to take, it shall be entitled to refrain from taking any action until directed
otherwise in writing by a request signed jointly by the parties hereto entitled
to give such direction or by order of a court of competent jurisdiction.

         5.12. LIMITATIONS ON DUTY OF COLLATERAL TRUSTEE IN RESPECT OF
COLLATERAL.

                  (a) Beyond the exercise of reasonable care in the custody
thereof, the Collateral Trustee shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee or
any income thereon or as to preservation of rights against prior parties or any
other rights pertaining thereto and the Collateral Trustee shall not be
responsible for filing any financing or continuation statements or recording any
documents or instruments in any public office at any time or times or otherwise
perfecting or maintaining the perfection of any security interest in the
Collateral. The Collateral Trustee shall be deemed to have exercised reasonable
care in the custody of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own property
and shall not be liable or responsible for any loss or diminution in the value
of any of the Collateral, by reason of the act

                                       33

<PAGE>

or omission of any carrier, forwarding agency or other agent or bailee selected
by the Collateral Trustee in good faith.

                                    (b) The Collateral Trustee shall not be
responsible for the existence, genuineness or value of any of the Collateral or
for the validity, perfection, priority or enforceability of the Liens in any of
the Collateral, whether impaired by operation of law or by reason of any action
or omission to act on its part hereunder, except to the extent such action or
omission constitutes gross negligence, bad faith or willful misconduct on the
part of the Collateral Trustee, for the validity or sufficiency of the
Collateral or any agreement or assignment contained therein, for the validity of
the title of the Company to the Collateral, for insuring the Collateral or for
the payment of taxes, charges, assessments or Liens upon the Collateral or
otherwise as to the maintenance of the Collateral. The Collateral Trustee hereby
disclaims any representation or warranty to the present and future holders of
the Secured Obligations concerning the perfection of the Liens and security
interests granted hereunder or in the value of any of the Collateral.

         5.13. ASSUMPTION OF RIGHTS, NOT ASSUMPTION OF DUTIES. Anything herein
contained to the contrary notwithstanding, (a) each of the parties thereto shall
remain liable under each of the Security Documents to the extent set forth
therein to perform all of their respective duties and obligations thereunder to
the same extent as if this Agreement had not be executed, (b) the exercise by
the Collateral Trustee of any of its rights, remedies or powers hereunder shall
not release such parties from any of their respective duties or obligations
under the Security Documents and (c) the Collateral Trustee shall not be
obligated to perform any of the obligations or duties of any of the parties
thereunder.

         5.14. NO LIABILITY FOR CLEAN UP OF HAZARDOUS MATERIALS. In the event
that the Collateral Trustee is required to acquire title to an asset for any
reason, or take any managerial action of any kind in regard thereto, in order to
carry out any fiduciary or trust obligation for the benefit of another, which in
the Collateral Trustee's sole discretion may cause the Collateral Trustee to be
considered an "owner or operator" under the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C.
ss.9601, et seq., or otherwise cause the Collateral Trustee to incur liability
under CERCLA or any other federal, state or local law, the Collateral Trustee
reserves the right to, instead of taking such action, either resign as
Collateral Trustee or arrange for the transfer of the title or control of the
asset to a court appointed receiver. The Collateral Trustee shall not be liable
to any person for any environmental claims or contribution actions under any
federal, state or local law, rule or regulation by reason of the Collateral
Trustee's actions and conduct as authorized, empowered and directed hereunder or
relating to the discharge, release or threatened release of hazardous materials
into the environment.

ARTICLE 6. RESIGNATION AND REMOVAL OF THE COLLATERAL TRUSTEE.

         6.1. RESIGNATION OR REMOVAL OF COLLATERAL TRUSTEE. Subject to the
appointment of a successor Collateral Trustee as provided in Section 6.2 and the
acceptance of such appointment by the successor Collateral Trustee, (a) the
Collateral Trustee may resign at any time by giving not less than 30 days'
notice of resignation to each Secured Debt Representative and the

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<PAGE>

Company and (b) the Collateral Trustee may be removed at any time, with or
without cause, by an Act of Secured Debtholders.

         6.2. APPOINTMENT OF SUCCESSOR COLLATERAL TRUSTEE. Upon any such
resignation or removal, a successor Collateral Trustee may be appointed by the
Secured Debt Representatives, acting jointly, or by an Act of Secured
Debtholders. If no successor Collateral Trustee shall have been so appointed and
shall have accepted such appointment within 30 days after the predecessor
Collateral Trustee gave notice of resignation or was removed, the retiring
Collateral Trustee may (at the expense of the Company), at its option, appoint a
successor Collateral Trustee, or petition a court of competent jurisdiction for
appointment of a successor Collateral Trustee, which shall be a bank or trust
company (a) authorized to exercise corporate trust powers, (b) having a combined
capital and surplus of at least $50,000,000 and (c) maintaining an office in New
York, New York. The Collateral Trustee shall fulfill its obligations hereunder
until a successor Collateral Trustee meeting the requirements of this Section
6.2 has accepted its appointment as Collateral Trustee and the provisions of
Section 6.3 have been satisfied.

         6.3. SUCCESSION. When the Person so appointed as successor Collateral
Trustee accepts such appointment:

                  (i) such Person shall succeed to and become vested with all
the rights, powers, privileges and duties of the predecessor Collateral Trustee,
and the predecessor Collateral Trustee shall be discharged from its duties and
obligations hereunder, and

                  (ii) the predecessor Collateral Trustee shall promptly
transfer all Liens and collateral security and other property of the Trust
Estate within its possession or control to the possession or control of the
successor Collateral Trustee and shall execute instruments and assignments as
may be necessary or desirable or reasonably requested by the successor
Collateral Trustee to transfer to the successor Collateral Trustee all Liens,
interests, rights, powers and remedies of the predecessor Collateral Trustee in
respect of the Security Documents or the Trust Estate.

Thereafter the predecessor Collateral Trustee shall remain entitled to enforce
the immunities granted to it in Article 5 and the provisions of Sections 7.7 and
7.8.

         6.4. LIMITATION. The Collateral Trustee shall not be the same Person
as, or an Affiliate of, any Secured Debt Representative. If the Collateral
Trustee at any time becomes an Affiliate of any Secured Debt Representative, it
shall promptly resign subject to appointment of a successor Collateral Trustee
and acceptance of such appointment as provided in this Article 6.

ARTICLE 7. MISCELLANEOUS PROVISIONS.

         7.1. AMENDMENT.

         No amendment or supplement to the provisions of this Agreement or any
other Security Document (to which the Collateral Trustee is a party) will be
effective without the approval of the Collateral Trustee acting as directed by
an Act of Secured Debtholders and, in the case of this Agreement, the signature
of each other party to this Agreement, except that:

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<PAGE>

        (1) any amendment or supplement that has the effect solely of adding or
    maintaining Collateral, securing additional Secured Debt that was otherwise
    permitted by the terms of the Secured Debt Documents to be secured by the
    Collateral or preserving or perfecting the Liens thereon or the rights of
    the Collateral Trustee therein, or adding or maintaining any Guarantee, will
    become effective when executed and delivered by the Company or any other
    Obligor party thereto and the Collateral Trustee as directed by the Company
    or such other Obligor;

        (2) no amendment or supplement that reduces, impairs or adversely
    affects the right of any Secured Debtholder (A) to vote its outstanding
    Secured Debt as to any matter described as subject to an Act of Secured
    Debtholders, an Act of Instructing Debtholders, an act of the Required
    Priority Debtholders or an act of the Required Parity Debtholders (or amends
    the provisions of this clause (2) or the definition of "Act of Secured
    Debtholders," "Act of Instructing Debtholders," "Required Priority
    Debtholders," "Required Parity Debtholders," "Priority Foreclosure Event" or
    "Actionable Default"), (B) to share in the order of application described in
    Section 3.4 in the proceeds of enforcement of or realization on any
    Collateral or any Guarantee of the Canadian Guarantors, in each case that
    has not been released in accordance with the provisions described in Section
    4.1 or (C) to require that Liens securing Secured Obligations be released
    only as set forth in the provisions described in Section 4.1 will become
    effective without the additional consent of such holder; and

        (3) no amendment or supplement that imposes any obligation upon the
    Collateral Trustee or any Secured Debt Representative or adversely affects
    the rights of the Collateral Trustee or any Secured Debt Representative,
    respectively, in its individual capacity will become effective without the
    consent of the Collateral Trustee or such Secured Debt Representative,
    respectively.

         The Collateral Trustee shall not enter into any such amendment or
    supplement unless it shall have received an Officer's Certificate to the
    effect that such amendment or supplement will not result in a breach of any
    provision or covenant contained in any of the Secured Debt Documents. Prior
    to executing any amendment or supplement pursuant to this Section 7.1, the
    Collateral Trustee shall be entitled to receive an Opinion of Company
    Counsel to the effect that the execution of such document is authorized or
    permitted hereunder, and with respect to amendments adding Collateral, an
    Opinion of Company Counsel addressing customary perfection matters with
    respect to such additional Collateral.

                  Any amendment or supplement to the provisions of the Security
Documents that releases Collateral or any Guarantee of the Canadian Guarantors
will be effective only in accordance with the requirements set forth in Section
4.1.

         7.2. FURTHER ASSURANCES.

         The Company and each of the Canadian Guarantors will do or cause to be
done all acts and things which may be required, or which the Collateral Trustee
from time to time may reasonably request, to assure and confirm that the
Collateral Trustee holds, for the benefit of the holders of Secured Obligations,
duly created, enforceable and perfected Liens upon the Collateral, including
after-acquired Collateral, subject, in the case of Parity Lien Obligations,

                                       36

<PAGE>

only to Priority Liens securing Priority Lien Obligations up to the Priority
Lien Cap and other Permitted Prior Liens, and duly created and enforceable
Guarantees of the Canadian Guarantors, in each case as contemplated by the
Secured Debt Documents.

                  The Company and each of the Canadian Guarantors will promptly
execute, acknowledge and deliver such security documents, instruments,
certificates, notices and other documents, and take such other actions as shall
be reasonably required, or which the Collateral Trustee may reasonably request,
to create, perfect, protect, assure or enforce the Liens and benefits intended
to be conferred, and to create, protect, assure or enforce the Guarantees of the
Canadian Guarantors, in each case as contemplated by the Secured Debt Documents
for the benefit of the holders of Secured Obligations. Upon the filing of
continuation statements (which is expected to be five years from the date hereof
and in five year intervals thereafter), the Company shall promptly deliver to
the Collateral Trustee an Opinion of Company Counsel reasonably satisfactory to
the Collateral Trustee as to the continued perfection of the Liens and security
interests created by the Security documents under the Uniform Commercial Code of
the State of New York.

         7.3. SUCCESSORS AND ASSIGNS.

                  (a) Except as provided in Section 5.2, the Person acting as
Collateral Trustee may not, in its individual capacity, delegate any of its
duties or assign any of its rights hereunder, and any attempted delegation or
assignment of any such duties or rights shall be void. All obligations of the
Collateral Trustee hereunder shall inure to the sole and exclusive benefit of,
and be enforceable by, each Secured Debt Representative and each present and
future holder of Secured Obligations, each of whom shall be entitled to enforce
this Agreement as a third party beneficiary hereof, and all of their respective
successors and assigns.

                  (b) Neither the Company nor any of the Canadian Guarantors may
delegate any of its duties or assign any of its rights hereunder, and any
attempted delegation or assignment of any such duties or rights shall be void.
All obligations of the Company and the Canadian Guarantors hereunder shall inure
to the sole and exclusive benefit of, and be enforceable by, the Collateral
Trustee, each Secured Debt Representative and each present and future holder of
Secured Obligations, each of whom shall be entitled to enforce this Agreement as
a third party beneficiary hereof, and all of their respective successors and
assigns.

         7.4. DELAY AND WAIVER. No failure to exercise, no course of dealing
with respect to the exercise of, and no delay in exercising, any right, power or
remedy arising under this Agreement or any of the other Security Documents shall
impair any such right, power or remedy or operate as a waiver thereof. No single
or partial exercise of any such right, power or remedy shall preclude any other
or future exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

         7.5. NOTICES. Any communications, including notices and instructions,
between the parties hereto or notices provided herein to be given may be given
to the following addresses:

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<PAGE>

If to the Collateral Trustee:              The Bank of New York
                                           101 Barclay Street
                                           Floor 8 West
                                           New York, NY 10286
                                           Attention: Corporate Trust
                                           Administration

If to the Company or any Canadian
Guarantor:                                 Calpine Corporation
                                           50 West San Fernando Street
                                           San Jose, CA 95113
                                           Attention:  General Counsel

If to the Credit Agreement Agent:          Scotia Capital
                                           One Liberty Plaza
                                           New York, NY 10006
                                           Attention: Denis P. O'Meara

                                           With a copy to:

                                           The Bank of Nova Scotia
                                           600 Peachtree Street N.E.
                                           Suite 2700
                                           Atlanta, GA  30308
                                           Attention: Hilma Gabbidon

If to the 2007 Trustee:                    Wilmington Trust Company
                                           520 Madison Avenue, 33rd Floor
                                           New York, NY  10022
                                           Attention: James McGinley

If to the 2010 Trustee:                    Wilmington Trust Company
                                           520 Madison Avenue, 33rd Floor
                                           New York, NY  10022
                                           Attention: James McGinley

If to the 2013 Trustee:                    Wilmington Trust Company
                                           520 Madison Avenue, 33rd Floor
                                           New York, NY  10022
                                           Attention: James McGinley

                                       38

<PAGE>

If to the Term Loan Administrative Agent:  Goldman Sachs Credit Partners L.P.
                                           85 Broad Street
                                           New York, NY  10004
                                           Attention: Pedro Ramirez

                  and if to any other Secured Debt Representative, to such
address as it may specify by written notice to the parties named above.

                  Each notice hereunder shall be in writing and may be
personally served, telexed or sent by telefacsimile or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service and signed for against receipt thereof, upon receipt of
telefacsimile or telex, or three Business Days after depositing it in the United
States mail with postage prepaid and properly addressed. Each party may change
its address for notice hereunder to any other location within the continental
United States by giving written notice thereof to the other parties as set forth
in this Section 7.5.

         7.6. ENTIRE AGREEMENT. This Agreement states the complete agreement of
the parties relating to the undertaking of the Collateral Trustee set forth
herein and supersedes all oral negotiations and prior writings in respect of
such undertaking.

         7.7. COMPENSATION; EXPENSES. Whether or not the transactions
contemplated hereby shall be consummated, the Company agrees to pay, promptly
upon demand:

                  (i)      such compensation to the Collateral Trustee and its
         agents, co-agents and sub-agents as the Company and the Collateral
         Trustee shall agree in writing from time to time;

                  (ii)     all reasonable costs and expenses incurred in the
         preparation, execution, delivery, filing, recordation, administration
         or enforcement of this Agreement or any other Security Document or any
         consent, amendment, waiver or other modification relating thereto;

                  (iii)    all reasonable fees, expenses and disbursements of
         legal counsel and any auditors, accountants, consultants or appraisers
         or other professional advisors and agents engaged by the Collateral
         Trustee or any Secured Debt Representative incurred in connection with
         the negotiation, preparation, closing, administration, performance or
         enforcement of this Agreement and the other Security Documents or any
         consent, amendment, waiver or other modification relating thereto and
         any other document or matter requested by the Company;

                  (iv)     all reasonable costs and expenses of creating,
         perfecting, releasing or enforcing the Collateral Trustee's security
         interests in the Collateral, including filing and recording fees,
         expenses and taxes, stamp or documentary taxes, search fees, title
         insurance premiums;

                  (v)      all other reasonable costs and expenses incurred by
         the Collateral Trustee or any Secured Debt Representative in connection
         with the negotiation,

                                       39

<PAGE>

         preparation and execution of the Security Documents and any consents,
         amendments, waivers or other modifications thereto and the transactions
         contemplated thereby or the exercise of rights or performance of
         obligations by the Collateral Trustee thereunder; and

                  (vi)     after the occurrence of any Secured Debt Default, all
         reasonable costs and expenses incurred by the Collateral Trustee or any
         Secured Debt Representative in connection with the preservation,
         collection, foreclosure or enforcement of the Security Documents or any
         interest, right, power or remedy of the Collateral Trustee or in
         connection with the collection or enforcement of any of the Secured
         Obligations or the proof, protection, administration or resolution of
         any claim based upon the Secured Obligations in any Bankruptcy Case or
         Insolvency Proceeding, including all reasonable fees and disbursements
         of attorneys, accountants, auditors, consultants, appraisers and other
         professionals engaged by the Collateral Trustee or the Secured Debt
         Representatives.

The agreements in this Section 7.7 shall survive repayment of all other Secured
Obligations and the removal or resignation of the Collateral Trustee.

         7.8. INDEMNITY.

                  (a) Each of the Company and the Canadian Guarantors jointly
and severally agrees to defend (subject to Indemnitees' selection of counsel; it
being understood that the holders of Priority Lien Debt and the holders of all
Parity Lien Debt shall each be entitled to select a single transaction counsel
and local counsel), indemnify, pay and hold harmless, the Collateral Trustee,
each Secured Debt Representative, each Secured Debtholder and each of their
respective Affiliates and each and all of the directors, officers, partners,
trustees, employees, attorneys and agents, and (in each case) their respective
heirs, representatives, successors and assigns (each of the foregoing, an
"Indemnitee") from and against any and all Indemnified Liabilities; provided, no
Indemnitee shall be entitled to indemnification hereunder with respect to any
Indemnified Liability to the extent such Indemnified Liability is found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnitee.

                  (b) All amounts due under Section 7.8(a) shall be payable upon
demand.

                  (c) To the extent that the undertakings to defend, indemnify,
pay and hold harmless set forth in Section 7.8(a) may be unenforceable in whole
or in part because they are violative of any law or public policy, the Company
and the Canadian Guarantors shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of
them.

                  (d) Neither the Company nor any Canadian Guarantor shall ever
assert any claim against any Indemnitee, on any theory of liability, for any
lost profits or special, indirect or consequential damages or (to the fullest
extent a claim for punitive damages may lawfully be waived) any punitive damages
arising out of, in connection with, or as a result of, this Agreement or any
other Secured Debt Document or any agreement or instrument or transaction
contemplated hereby or relating in any respect to any Indemnified Liability, and
each of the

                                       40

<PAGE>

Company and the Canadian Guarantors hereby forever waives, releases and agrees
not to sue upon any claim for any such lost profits or special, indirect,
consequential or (to the fullest extent lawful) punitive damages, whether or not
accrued and whether or not known or suspected to exist in its favor.

                  (e) The agreements in this Section 7.8 shall survive repayment
of all other Secured Obligations and the removal or resignation of the
Collateral Trustee.

         7.9. SEVERABILITY. If any provision of this Agreement is invalid,
illegal or unenforceable in any respect or in any jurisdiction, the validity,
legality and enforceability of such provision in all other respects and of all
remaining provisions, and of such provision in all other jurisdictions, shall
not in any way be affected or impaired thereby.

         7.10. HEADINGS. Section headings herein are included herein for
convenience of reference only and shall not constitute a part hereof for any
other purpose or be given any substantive effect.

         7.11. OBLIGATIONS SECURED. All obligations of the Company and the
Canadian Guarantors set forth in or arising under this Agreement shall be
Secured Obligations and are secured by all Liens granted by the Security
Documents.

         7.12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES.

         7.13. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER SECURITY DOCUMENTS MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION 7.5; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PARTY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT; AND (e) AGREES EACH PARTY HERETO RETAIN THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST ANY PARTY IN THE COURTS OF ANY OTHER JURISDICTION.

         7.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE
INTENTS AND PURPOSES OF THE OTHER SECURITY DOCUMENTS. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER
SECURITY DOCUMENTS, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,

                                       41

<PAGE>

BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY
HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH PARTY HERETO HAS ALREADY RELIED ON THIS WAIVER
IN ENTERING INTO THIS AGREEMENT, AND THAT EACH PARTY HERETO WILL CONTINUE TO
RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 7.14 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF OR TO THIS AGREEMENT OR ANY OF THE
OTHER SECURITY DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
THERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

         7.15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.

         7.16. EFFECTIVENESS. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto and receipt by
each party of written or telephonic notification of such execution and
authorization of delivery thereof.

         7.17. ADDITIONAL OBLIGORS. The Company will cause each Subsidiary of
the Company that becomes an Obligor or is required by any Secured Debt Document
to become a party to this Agreement to become party to this Agreement, for all
purposes of this Agreement, by causing such Subsidiary to execute and deliver to
the parties hereto a Collateral Trust Joinder, whereupon such Subsidiary shall
be bound by the terms hereof to the same extent as if it had executed and
delivered this Agreement as of the date hereof.

         7.18. APPOINTMENT OF SUB-AGENT FOR CONTROL AGREEMENTS.

                  (a) The Collateral Trustee hereby appoints the Credit
Agreement Agent as the agent of the Collateral Trustee with power and authority
to accept, hold, administer and enforce, for the benefit and subject to the
direction of the Collateral Trustee, all interests, rights and remedies under
any and all existing and future Control Agreements maintained in the name of the
Credit Agreement Agent.

                  (b) The Credit Agreement Agent accepts its appointment as
agent for the Collateral Trustee in respect of all Control Agreements which the
Credit Agreement Agent may elect to maintain in its name, but without any
obligation whatsoever to accept or maintain any Control Agreement. The Credit
Agreement Agent may at any time resign as agent for the Collateral Trustee,
subject to delivery to the Collateral Trustee of an instrument sufficient, in
the reasonable judgment of the Collateral Trustee, to permit the Collateral
Trustee to enforce directly, in its own name, all Control Agreements then
maintained in the name of the Credit Agreement Agent.

                                       42

<PAGE>

                  (c) If the Company or any other Obligor at any time maintains
deposits in a deposit account that are not subject to a Control Agreement
maintained in the name of the Credit Agreement Agent while acting as agent for
the Collateral Trustee, the Company or such Obligor will cause the depositary
bank promptly to execute and deliver to the Collateral Trustee a Control
Agreement over such deposit account and deposits therein in customary form. No
such Control Agreement will in any event be required, however, as to deposits in
deposit accounts consisting of Excluded Assets.

                  (d) Neither the Company nor any other Obligor will be required
to deliver to the Collateral Trustee a Control Agreement for any commodity
account or commodity contracts carried therein or for any securities account or
financial assets credited thereto, so long as the Collateral Trustee's Liens in
such securities account and financial assets are and remain otherwise duly
perfected.

         7.19. TRANSFER OF THE EXISTING SECURITY DOCUMENTS. (a) The Existing
Collateral Agent hereby assigns and transfers to the Collateral Trustee,
unconditionally, irrevocably and forever, any and all of its Liens, claims,
interests, rights, powers and remedies under the Existing Security Documents,
effective without further act or condition immediately upon the execution and
delivery of this Agreement. Each transfer of Existing Security Documents is made
by the Existing Collateral Agent without any representation or warranty
whatsoever, except the warranty that it has not assigned or transferred whatever
interest or rights (if any) it may have been granted thereby.

                  (b)      Promptly upon execution of this Agreement, the
Existing Collateral Agent will execute and deliver (and if necessary acknowledge
in recordable form) each of the instruments of transfer for the Existing
Security Documents set forth on Schedule 2.

                           [Remainder of page intentionally left blank]

                  IN WITNESS WHEREOF, the parties hereto have caused this
Collateral Trust Agreement to be executed by their respective officers or
representatives hereunto duly authorized as of the day and year first above
written.

                                    THE COMPANY:

                                    CALPINE CORPORATION

                                    By:  /s/ Michael Thomas
                                      -----------------------------------------
                                      Name:  Michael Thomas
                                      Title:

                                       43

<PAGE>
                                    THE CANADIAN GUARANTORS:

                                    QUINTANA MINERALS (USA), INC.

                                    By:  /s/ Michael Thomas
                                      -----------------------------------------
                                      Name:  Michael Thomas
                                      Title:

                                    JOQ CANADA, INC.

                                    By:  /s/ Michael Thomas
                                      -----------------------------------------
                                      Name:  Michael Thomas
                                      Title:

                                    QUINTANA CANADA HOLDINGS LLC

                                    By:  /s/ Michael Thomas
                                      -----------------------------------------
                                      Name:  Michael Thomas
                                      Title:

                                       44

<PAGE>

                                    THE CREDIT AGREEMENT AGENT:

                                    THE BANK OF NOVA SCOTIA,
                                    as Agent under the Credit Agreement

                                    By:  /s/ Denis P. O'Meara
                                      -----------------------------------------
                                      Name: Denis P. O'Meara
                                      Title:  Managing Director

                                       45

<PAGE>

                                    THE 2007 TRUSTEE:

                                    WILMINGTON TRUST COMPANY,
                                    as Trustee

                                    By:  /s/ Michael W. Diaz
                                      -----------------------------------------
                                      Name: Michael W. Diaz
                                      Title:  Authorized Signer

                                    THE 2010 TRUSTEE:

                                    WILMINGTON TRUST COMPANY,
                                    as Trustee

                                    By:  /s/ Michael W. Diaz
                                      -----------------------------------------
                                      Name: Michael W. Diaz
                                      Title:  Authorized Signer

                                    THE 2013 TRUSTEE:

                                    WILMINGTON TRUST COMPANY,
                                    as Trustee

                                    By:  /s/ Michael W. Diaz
                                      -----------------------------------------
                                      Name: Michael W. Diaz
                                      Title:  Authorized Signer

                                       46

<PAGE>

                                    THE TERM LOAN ADMINISTRATIVE AGENT:

                                    GOLDMAN SACHS CREDIT PARTNERS L.P.,
                                    as Term Loan Administrative Agent

                                    By:  /s/ R. T. Wagner
                                      ------------------------------------------
                                      Name: Robert Wagner
                                      Title:  Authorized Signatory

                                       47

<PAGE>

                                    THE COLLATERAL TRUSTEE:

                                    THE BANK OF NEW YORK,
                                    as Collateral Trustee

                                    By:  /s/ Michael Pitfick
                                      -----------------------------------------
                                      Name: Michael Pitfick
                                      Title:  Assistant Vice President

                                       48
<PAGE>

                                                                       EXHIBIT A

                            COLLATERAL TRUST JOINDER

                  The undersigned, _____________________, a _______________,
hereby agrees to become party to the Collateral Trust Agreement dated as of
[______], 2003, by and among Calpine Corporation, a Delaware corporation,
[________________], as Collateral Agent under the Credit Agreement (as defined
therein), Wilmington Trust Company, as Trustee under the 2007 Indenture (as
defined therein), Wilmington Trust Company, as Trustee under the 2010 Indenture
(as defined therein), Wilmington Trust Company, as Trustee under the 2013
Indenture (as defined therein), Goldman Sachs Credit Partners L.P., as Term Loan
Administrative Agent under the Term Loan Agreement (as defined therein), and The
Bank of New York, as Collateral Trustee, for all purposes thereof on the terms
set forth therein, and to be bound by the terms of said Collateral Trust
Agreement as fully as if the undersigned had executed and delivered said
Collateral Trust Agreement as of the date thereof.

                  The provisions of Article 7 of said Collateral Trust Agreement
shall apply with like effect to this Joinder.

                  IN WITNESS WHEREOF, the undersigned has executed and delivered
this Joinder as of ___________________, 20____.

                                                 [_____________________________]

                                                 By:____________________________
                                                    Name:
                                                    Title:

<PAGE>

                                    EXHIBIT B

Recording requested by and
when recorded mail to:

The Bank of New York
101 Barclay Street, Floor 8 West
New York, New York 10286
Attn: Corporate Trust Administration

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

                          NOTICE OF ADDITIONAL ADVANCE

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

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

                                      [and

                            [Trustees, if applicable,
                                   as Trustee]

                                   in favor of

                              THE BANK OF NEW YORK,
                         (Taxpayer I.D. No. 13-5160382),
              in its capacity as Collateral Trustee, as Beneficiary

                           Dated as of [_______], 20__

                                       50
<PAGE>

         This NOTICE OF ADDITIONAL ADVANCE, dated as of [_______], 20__ (this
"Notice"), is made by CALPINE CORPORATION (the "Company"), a Delaware
corporation, whose address is 1000 Louisiana Street, Suite 800 Houston, TX
77002, as trustor or mortgagor, in favor of [Trustees, if applicable, as the
"Trustee", and] THE BANK OF NEW YORK, a national banking association whose
address is 101 Barclay Street, New York, New York 10286, as Collateral Trustee
under the Collateral Trust Agreement and as Beneficiary under the Mortgages, as
"Beneficiary" hereunder.

         This Notice relates to that certain [describe existing mortgages - will
need a Notice of Additional Advance to be recorded in each county in which the
prior mortgages were recorded] (as the same may have been, from time to time,
supplemented and/or amended, collectively the "Mortgages") by the Company in
favor of [the Trustee and] Beneficiary which (along with any supplements and/or
amendments and/or prior Notices of Additional Advance) has been recorded and
filed in the public records as set forth on Schedule I hereto. Capitalized terms
used, but not otherwise defined herein, shall have the meanings assigned to such
terms in the Collateral Trust Agreement dated as of July 16, 2003, among the
Company, Beneficiary and others (the "Collateral Trust Agreement"). The
Mortgages secure, among other things, (a) Priority Lien Debt pursuant to the
Amended and Restated Credit Agreement in an aggregate amount of up to
$700,000,000; (b) Parity Lien Debt pursuant to the 2007 Indenture, 2010
Indenture, 2013 Indenture and Term Loan Agreement in an aggregate amount of up
to $3,500,000,000, and (iii) any future debt constituting Priority Lien Debt or
Parity Lien Debt up to an aggregate amount of Secured Debt of $4,200,000,000.

         This Notice provides notice that the Company has agreed to issue or
incur New Secured Debt as either Priority Lien Debt or Parity Lien Debt. The
Company represents and warrants to each of the Secured Debtholders and the
Beneficiary that the additional debt, when issued, shall constitute New Secured
Debt and that the New Secured Debt, together will all of the obligations of the
Company under the Secured Debt Documents executed by the Company in connection
therewith, shall be secured in accordance with the terms of the Mortgages,
together with all other Secured Debt and obligations secured thereby, without
any preference, distinction or priority as to lien or otherwise of any New
Secured Debt over any other Secured Debt by reason of any priority in time of
the issuance, sale or negotiation thereof, or by reason of the purpose of the
issuance, sale or negotiation thereof, or otherwise, except as otherwise
expressly provided in the Mortgages.

         This Notice shall not constitute an amendment or modification of the
Mortgages or any other Secured Debt Document or the giving by the Beneficiary of
any consent, waiver or approval under the Mortgages or any other Secured Debt
Document, and no right of the holders of any Secured Debt shall be affected
hereby.

         The Company hereby affirms and agrees that the Mortgages secure the
full payment and performance of each and every obligation stated therein to be
secured thereby, and continues to be effective as, and to constitute, a first
and prior lien and charge on the Mortgaged Property to the full extent of all
obligations secured thereby in accordance with and subject to the terms thereof.
Solely for the purpose of such affirmation of the effect of the Mortgages, the
Company does hereby re-grant, re-bargain, re-sell, re-warrant, re-alienate,
re-remise, re-release, re-convey, re-assign, re-transfer, re-mortgage,
re-hypothecate, re-pledge, re-set over and re-confirm, WITH

<PAGE>

POWER OF SALE, [if applicable, to the Trustee] for the benefit and security of
the Beneficiary, the Mortgaged Property, in accordance with and subject to the
terms of the Mortgages.

         The Company agrees that this Notice shall not prejudice any present or
future rights, remedies, benefits or powers belonging or accruing to the
Beneficiary under the terms of the Mortgages.

         In the event of any conflict between the terms of the Mortgages and the
provisions of this Notice, the terms of the Mortgages shall control.

         All certifications, representations, warranties and covenants of the
Company herein shall apply to and bind the heirs, administrators, executors,
legal representatives, successors and assigns of the Company and inure to the
benefit of the successors in interest of the Beneficiary.

                                                                               2
<PAGE>

         IN WITNESS WHEREOF, the Company has executed this Notice effective as
of the date first set forth above.

                                    CALPINE CORPORATION, a Delaware corporation

                                    By: ________________________________________

                                    Title: _____________________________________

                                    Printed Name: ______________________________

ATTEST:

_________________________

Printed Name:

The name and mailing address of Mortgagor is:

Calpine Corporation
1000 Louisiana Street, Suite 800
 Houston, TX 77002

                                                                               3
<PAGE>

                                   SCHEDULE I

                                                                               4<PAGE>
                                                                   Exhibit 10.26

                                                                 MULTISTATE FORM

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

                              AMENDED AND RESTATED
                  MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
                AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING

                                      FROM

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

                                       TO

                             DENIS O'MEARA, Trustee

                                       AND

                             JAMES TRIMBLE, Trustee

                                       AND

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

                            Dated as of July 16, 2003

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

"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."

"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."

"THOSE PORTIONS OF THE MORTGAGED PROPERTY WHICH ARE AS-EXTRACTED COLLATERAL
(INCLUDING, WITHOUT LIMITATION, OIL AND GAS), AND THE ACCOUNTS RELATING THERETO,
WILL BE FINANCED AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES
DESCRIBED IN EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS TO BE FILED FOR
RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS."

<PAGE>

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

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

"A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW
THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT
IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE."

THIS INSTRUMENT WAS PREPARED BY AND
WHEN RECORDED AND/OR FILED
RETURN TO:

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

<PAGE>

                              AMENDED AND RESTATED
                  MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
                AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING

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

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

                                   ARTICLE I.

                            RECITALS AND DEFINITIONS

      1.1 Mortgagor has heretofore executed and delivered to The Bank of Nova
Scotia, for itself and as agent for the Lender Parties (together with its
successors in such capacity, the "CREDIT AGREEMENT AGENT") and John Quick (as
predecessor-in-interest to Denis O'Meara) and Kemp Leonard (as
predecessor-in-interest to James Trimble), as Trustees, that certain mortgage or
deed of trust, dated as of May 1, 2002, as supplemented and amended prior to the
date hereof (as so supplemented and amended, herein called the "EXISTING
MORTGAGE"), to secure (i) payment of indebtedness owed or to be owing to certain
institutional lenders (the "EXISTING 2002 LENDERS") pursuant to the terms of
that certain Credit Agreement, dated as of March 8, 2002 (herein, as the same
may be amended, modified or supplemented from time to time, called the "EXISTING
2002 CREDIT AGREEMENT") pursuant to which the Existing 2002 Lenders made loans
to Mortgagor and issued letters of credit for the benefit of Mortgagor (the
"EXISTING 2002 LETTERS OF CREDIT") in amounts not to exceed at any one time
outstanding $1,600,000,000, and Mortgagor, to evidence its indebtedness to the
Existing 2002 Lenders under the Existing 2002 Credit Agreement, has executed and
delivered to the Existing 2002 Lenders its secured promissory notes to mature
not later than May 24, 2003 (the "EXISTING 2002 LOAN NOTES"), the Existing 2002
Loan Notes being payable to the order of the Existing 2002 Lenders, bearing
interest as provided for therein, and containing provisions for payment of
attorneys' fees and acceleration of maturity in the event of default, as therein
set forth; and (ii) payment of indebtedness owed or to be owing to certain
institutional lenders (the "EXISTING 2000 LENDERS", and together with the
Existing 2002 Lenders, the "EXISTING LENDERS") pursuant to the terms

                                      -1-
<PAGE>

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

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

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

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

                                      -2-
<PAGE>

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

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

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

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

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

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

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

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

                                      -3-
<PAGE>

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

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

                  E. "Event of Default" means an Actionable Default.

                  F. "Environmental Laws" means any and all present and future
      Applicable Laws issued, promulgated or entered thereunder relating to
      pollution or protection of the environment, including laws relating to
      reclamation of land and waterways and laws relating to emissions,
      discharges, releases or threatened releases of pollutants, contaminants,
      chemicals, or industrial, toxic or hazardous substances or wastes into the
      environment (including, without limitation, ambient air, surface water,
      ground water, land surface or subsurface strata) or otherwise relating to
      the manufacture, processing, distribution, use, treatment, storage,
      disposal, transport or handling of pollutants, contaminants, chemicals, or
      industrial, toxic or hazardous substances or wastes.

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

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

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

                                      -4-
<PAGE>

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

                  K. "Indebtedness" shall have the meaning set forth in Section
      2.2 of this Mortgage.

                  L. "Indemnification Claim" is defined in Section 4.6(a) of
      this Mortgage.

                  M. "Indemnified Person" is defined in Section 3.10(c) of this
      Mortgage.

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

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

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

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

                                      -5-
<PAGE>

      restrictions, restrictive covenants or zoning, present and future, as the
      same may apply to the Mortgaged Property.

                  R. "Losses" is defined in Section 3.10(c) of this Mortgage.

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

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

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

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

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

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

                                      -6-
<PAGE>

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

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

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

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

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

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

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

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

                                      -7-
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                      -8-
<PAGE>

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

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

      1.8 Grant.

      Grant of Priority Lien

      NOW, THEREFORE, Mortgagor, to secure the full and timely payment of the
Priority Lien Indebtedness and the full and timely performance and discharge of
the Priority Lien Obligations, has granted, bargained, sold, warranted,
mortgaged, assigned, transferred and conveyed, and by these presents does grant,
bargain, sell, warrant, mortgage, assign, pledge and hypothecate, transfer and
convey unto Trustee, IN TRUST, WITH POWER OF SALE, for the use and benefit of
Beneficiary, all Mortgagor's right, title and interest, whether now owned or
hereafter acquired, in and to all of the hereinafter described properties,
rights and interests; and, insofar as such properties, rights and interests
consist of Equipment, General Intangibles, Accounts, As Extracted Collateral,
Contract Rights, Inventory, Fixtures, Proceeds of collateral or any other
personal property of a kind or character defined in, or subject to the
applicable provisions of, the Uniform Commercial Code (as in effect from time to
time in the appropriate jurisdiction with respect to each of said properties,
rights and interests), Mortgagor hereby grants to said Beneficiary, a security
interest therein to the full extent of Mortgagor's legal and beneficial interest
therein, now owned or hereafter acquired, namely:

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

                                      -9-
<PAGE>

            (b) the presently existing and (subject to the terms of Section 6.1
      hereof) hereafter arising unitization, unit operating, communitization and
      pooling agreements and the properties covered and the units created
      thereby (including, without limitation, all units formed under orders,
      regulations, rules, approvals, decisions or other official acts of any
      Governmental Authority) which are specifically described in Exhibit A or
      which relate to any of the properties and interests specifically described
      in Exhibit A,

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

            (d) the Production Sale Contracts,

            (e) the Joint Operating Agreements,

            (f) the Transportation Agreements,

            (g) the Operating Equipment,

            (h) the Permits,

            (i) the Water Rights,

            (j) the Hedging Agreements,

            (k) the Leases,

            (l) the Personalty,

            (m) the Rents and Revenues,

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

            (o) any and all liens and security interests in Hydrocarbons
      securing the payment of proceeds from the sale of Hydrocarbons, including
      but not limited to those liens and security interests provided for in
      Section 9.343 of the Texas Business and Commerce Code or similar statutes
      of other jurisdictions or any successor statutes,

together with any and all corrections or amendments to, or renewals, extensions
or ratifications of, or replacements or substitutions for, any of the same, or
any instrument relating thereto, and all accounts, contracts, contract rights,
options, nominee

                                      -10-
<PAGE>

agreements, unitization or pooling agreements, operating agreements and unit
operating agreements, processing agreements, farmin agreements, farmout
agreements, joint venture agreements, partnership agreements (including mining
partnerships), exploration agreements, bottom hole agreements, dry hole
agreements, support agreements, acreage contribution agreements, surface use and
surface damage agreements, net profits agreements, production payment
agreements, Hedging Agreements, insurance policies, title opinions, title
abstracts, title materials and information, files, records, writings, data
bases, information, systems, logs, well cores, fluid samples, production data
and reports, well testing data and reports, maps, seismic and geophysical,
geological and chemical data and information, interpretative and analytical
reports of any kind or nature (including, without limitation, reserve studies
and reserve evaluations), computer hardware and software and all documentation
therefor or relating thereto (including, without limitation, all licenses
relating to or covering such computer hardware, software and/or documentation),
trade secrets, trademarks, service marks and business names and the goodwill of
the business relating thereto, copyrights, copyright registrations, unpatented
inventions, patent applications and patents, rights-of-way, franchises, bonds,
easements, servitudes, surface leases, permits, licenses, tenements,
hereditaments, appurtenances, concessions, occupancy agreements, privileges,
development rights, condemnation awards, claims against third parties, general
intangibles, rents, royalties, issues, profits, products and proceeds, whether
now or hereafter existing or arising, used or useful in connection with,
covering, relating to, or arising from or in connection with, any of the
aforesaid items (a) through o), inclusive, in this granting clause mentioned,
and all other things of value and incident thereto (including, without
limitation, any and all liens, lien rights, security interests and other
properties, rights and interests) which Mortgagor might at any time have or be
entitled to, but excluding any data or contracts with respect to which
mortgaging or granting of a lien or a security interest is prohibited by
existing third party agreements,

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

      Grant of Parity Lien

      NOW, THEREFORE, Mortgagor, to secure the full and timely payment of the
Parity Lien Indebtedness and the full and timely performance and discharge of
the Parity Lien Obligations, has granted, bargained, sold, warranted, mortgaged,
assigned, transferred and conveyed, and by these presents does grant, bargain,
sell, warrant, mortgage, assign, pledge and hypothecate, transfer and convey
unto Trustee, IN TRUST, WITH POWER OF SALE, for the use and benefit of
Beneficiary, all Mortgagor's right, title and interest, whether now owned or
hereafter acquired, in and to all of the Mortgaged Property.

      Subject, however, in each case to (i) Permitted Encumbrances (including
without limitation all presently existing royalties, overriding royalties,
payments out of production and other burdens which are referred to in Exhibit A
and which are taken into consideration in computing any percentage, decimal or
fractional interest as set forth in

                                      -11-
<PAGE>

Exhibit A), (ii) the assignment of production contained in Article IV hereof,
but only insofar and so long as said assignment of production is not inoperative
under the provisions of Section 4.5 hereof, and (iii) the condition that none of
Trustee, Beneficiary nor any Secured Debtholder shall be liable in any respect
for the performance of any covenant or obligation (including, without
limitation, measures required to comply with Environmental Laws) of Mortgagor in
respect of the Mortgaged Property.

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

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

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

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

                                  ARTICLE II.

                              INDEBTEDNESS SECURED

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

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

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

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

                                      -12-
<PAGE>

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

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

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

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

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

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

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

                                      -13-
<PAGE>

                                  ARTICLE III.

                      PARTICULAR COVENANTS, REPRESENTATIONS
                           AND WARRANTIES OF MORTGAGOR

      3.1 Payment of the Indebtedness and Performance of Obligations. Mortgagor
will duly and punctually pay the Indebtedness, as and when called for in the
Secured Debt Documents and on or before the due dates thereof, and will timely
perform and discharge all of the Obligations in full and on or before the dates
same are to be performed and discharged.

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

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

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

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

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

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

                                      -14-
<PAGE>

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

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

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

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

      3.3 Further Assurances. Mortgagor will warrant and forever defend the
Mortgaged Property unto Trustee and Beneficiary, as the case may be, against
every person whomsoever lawfully claiming the same or any part thereof, subject
to Permitted Encumbrances, and Mortgagor will maintain and preserve the lien and
security interest hereby created so long as any of the Indebtedness remains
unpaid. Mortgagor will execute and deliver such other and further instruments
and will do such other and further acts as may be required pursuant to the
Collateral Trust Agreement and/or any Secured Debt Documents to carry out more
effectually the purposes of this Mortgage, including, without limiting the
generality of the foregoing, (i) prompt correction of any defect which may
hereafter be discovered in the title to the Mortgaged Property or in the
execution and acknowledgment of this Mortgage, the Secured Debt Documents, or
any other document executed in connection herewith, and (ii) at any time a
Secured Debt Representative may request and upon such request, promptly execute
all notices to

                                      -15-
<PAGE>

parties operating, purchasing or receiving proceeds of production of
Hydrocarbons from the Mortgaged Property, and all division orders or transfer
orders needed in order to transfer effectually or to assist in transferring
effectually to the Beneficiary the assigned proceeds of production from the
Mortgaged Property, which notices, division orders and transfer orders shall be
held by such Secured Debt Representative and delivered upon an Event of Default.

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

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

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

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

                                      -16-
<PAGE>

      due date of the respective item) except as to such matters which are being
      contested by Mortgagor in good faith;

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

            (e) Not, except as permitted under the Secured Debt Documents,
      create, place or permit to be created or placed, or through any act or
      failure to act, acquiesce in the placing of, or allow to remain, any
      mortgage, pledge, lien (statutory, constitutional or contractual),
      security interest, encumbrance or charge, or conditional sale or other
      title retention agreement, regardless of whether same are expressly
      subordinate to the liens of the Secured Debt Documents, with, respect to
      all or any portion of the Mortgaged Property, the Leases or the Rents and
      Revenues other than (1) the Permitted Encumbrances, (2) Taxes constituting
      a lien but not due and payable, (3) defects or irregularities in title,
      and liens, charges or encumbrances, which are customarily viewed in the
      industry as not interfering materially with the development, operation or
      value of the Mortgaged Property and not such as to affect materially title
      thereto, and (4) those being contested by Mortgagor in good faith in such
      manner as not to jeopardize Beneficiary's rights in and to the Mortgaged
      Property;

            (f) Carry with financially sound and reputable insurance companies
      and in amounts as is customary in the industry or as otherwise required
      pursuant to the Secured Debt Documents, the following insurance: (1)
      workmen's compensation insurance and public liability and property damage
      insurance in respect of all activities in which Mortgagor might incur
      personal liability for the death of or injury to an employee or third
      person, or damage to or destruction of another's property; and (2) to the
      extent such insurance is carried by similar companies engaged in similar
      undertakings in, the same general areas in which the Mortgaged Property,
      is located, insurance in respect of the Operating Equipment, against loss
      or damage by fire, lightning, hail, tornado, explosion and other similar
      risks, hazards, casualties and contingencies (including business
      interruption insurance covering loss of Rents and Revenues); provided,
      that any such insurance may be provided by way of self insurance to the
      extent that similar companies engaged in similar undertakings in the same
      general areas also self-insure. Each insurance policy issued in connection
      therewith shall provide by way of endorsements, riders or otherwise that
      (i) name Beneficiary as a loss payee on all property insurance policies
      and an additional insured on all liability insurance policies, and provide
      that proceeds from property insurance policies will be payable to
      Beneficiary as its interest may appear, which proceeds are hereby assigned
      to Beneficiary, it being agreed by Mortgagor that such payments shall be
      applied A) if there be no Event of Default existing or which would exist
      but for due notice or lapse of time, or both, to the restoration, repair

                                      -17-
<PAGE>

      or replacement of the Mortgaged Property, or B) if there be an Event of
      Default existing, or which would exist but for due notice or lapse of
      time, or both, in accordance with the provisions of the Collateral Trust
      Agreement, either for the above stated purpose or toward the payment of
      the Indebtedness; (ii) the coverage of Beneficiary shall not be
      terminated, reduced or affected in any manner regardless of any breach or
      violation by Mortgagor of any warranties, declarations or conditions in
      such policy; (iii) no such insurance policy shall be canceled, endorsed,
      altered or reissued to effect a change in coverage for any reason and to
      any extent whatsoever unless such insurer shall have first given
      Beneficiary and each Secured Debt Representative thirty (30) days prior
      written notice thereof; and (iv) Beneficiary may, but shall not be
      obligated to, make premium payments to prevent any cancellation,
      endorsement, alteration or re-issuance and such payments shall be accepted
      by the insurer to prevent the same. Beneficiary shall be furnished with a
      certificate evidencing such coverage in form and content comparable to
      coverage typically provided in the industry. All policies to be maintained
      under this Mortgage are to be issued on forms and by companies and with
      endorsements as are customary in the industry. Mortgagor shall maintain
      insurance in an amount sufficient to prevent Mortgagor from becoming a
      co-insurer under any policy required hereunder. If Mortgagor fails to
      maintain the level of insurance required under this Mortgage, then
      Mortgagor shall and hereby agrees to indemnify Beneficiary to the extent
      that a casualty occurs and insurance proceeds would have been available
      had such insurance been maintained;

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

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

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

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

                                      -18-
<PAGE>

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

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

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

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

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

                                      -19-
<PAGE>

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

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

      3.9 Right of Entry.

            (a) Upon at least twenty-four (24) hours notice to Mortgagor,
      Mortgagor will permit Beneficiary, each Secured Debt Representative and/or
      the agents of either of them, at the cost and expense of Mortgagor, to
      enter upon the Mortgaged Property and all parts thereof, for the purpose
      of investigating and inspecting the condition and operation thereof, and
      shall permit reasonable access to the field offices and other offices (to
      the fullest extent that Mortgagor

                                      -20-
<PAGE>

      may do so under the terms of the applicable Joint Operating Agreements and
      other applicable agreements affecting the Mortgaged Property), including
      the principal place of business, of Mortgagor to inspect and examine the
      Mortgaged Property and to inspect, review and reproduce as necessary any
      books, records, accounts, contracts or other documents of Mortgagor, it
      being understood that any non-public information obtained in connection
      therewith shall be subject to the relevant confidentiality provisions of
      the Secured Debt Documents then in effect.

            (b) Without limiting the generality of the foregoing, Beneficiary
      shall have the right (but shall not be obligated to), and each Secured
      Debt Representative and its agents shall have the right (to the fullest
      extent that Mortgagor may do so under the terms of the applicable Joint
      Operating Agreements and other applicable agreements affecting the
      Mortgaged Property), on twenty-four (24) hours prior notice to Mortgagor
      to enter the Mortgaged Property to conduct (at the cost and expense of
      Mortgagor), or to cause Mortgagor to conduct (at the cost and expense of
      Mortgagor), such tests and investigations as may be necessary to determine
      whether any hazardous materials or solid waste is being generated,
      transported, stored, or disposed of in accordance with applicable
      Environmental Laws. Such tests and investigations may include, without
      limitation, underground borings, ground water analyses and borings from
      the floors, ceilings and walls of any improvements located on the
      Mortgaged Property. This Section 3.9 shall not be construed to affect or
      limit the obligations of Mortgagor pursuant to Section 3.4 hereof.

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

                                      -21-
<PAGE>

      3.10 Environmental Laws.

            (a) Mortgagor represents and warrants, to the best of its knowledge
      after due inquiry that:

                  (i) except as permitted by the Secured Debt Documents, the
            Mortgaged Property is in compliance in all material respects with
            all applicable Environmental Laws and there are no conditions
            existing currently which would be likely to subject Mortgagor to
            damages, penalties, injunctive relief or cleanup costs under any
            Environmental Laws or assertions thereof, or which require or are
            likely to require cleanup, removal, remedial action or other
            response pursuant to Environmental Laws by Mortgagor; and all use,
            generation, manufacturing, release, discharge, storage, deposit,
            treatment, recycling or disposal of any materials on, under or at
            the Mortgaged Property or transported to or from the Mortgaged
            Property (or tanks or other facilities thereon containing such
            materials) are being and will be conducted in accordance, in all
            material respects, with applicable Environmental Laws including
            without limitation those requiring cleanup, removal or any other
            remedial action,

                  (ii) Mortgagor is not a party to any litigation or
            administrative proceedings, nor so far as is known by Mortgagor is
            any litigation or administrative proceeding threatened against it,
            which asserts or alleges that Mortgagor has violated or is violating
            Environmental Laws or that Mortgagor is required to clean up, remove
            or take remedial or other responsive action due to the disposal,
            depositing, discharge, leaking or other release of any hazardous
            substances or materials; neither the Mortgaged Property nor
            Mortgagor is subject to any judgment, decree, order or citation
            related to or arising out of Environmental Laws and neither has been
            named or listed as a potentially responsible party by any
            Governmental Authority in a matter arising under any Environmental
            Laws; and

                  (iii) Mortgagor has also obtained all Permits required under
            applicable Environmental Laws which are necessary for its current
            exploration, production, transportation, storage, use, and
            development activities at the Mortgaged Property.

            (b) Mortgagor shall not use or permit the Mortgaged Property or any
      part thereof to be used to generate, manufacture, refine, transport,
      treat, store, handle, dispose, transfer, produce or process any hazardous
      materials, except in material compliance with all applicable Environmental
      Laws, nor shall Mortgagor cause or permit, as a result of any intentional
      or unintentional act or omission on the part of Mortgagor or any tenant or
      subtenant, any material release of any hazardous materials onto the
      Mortgaged Property or onto any other property in material violation of any
      applicable Environmental Laws. Mortgagor shall comply, in all material
      respects, with all applicable Environmental Laws and shall

                                      -22-
<PAGE>

      obtain and comply, in all material respects. with any and all
      registrations or Permits required thereunder. To the extent any hazardous
      materials are released or discharged onto the Mortgaged Property on or
      after the date of this Mortgage, Mortgagor shall conduct and complete all
      investigations, studies, sampling, and testing, and all remedial, removal,
      and other actions necessary to clean up and remove all such hazardous
      materials on, from, or affecting the Mortgaged Property or any part
      thereof (i) in accordance, in all material respects, with all applicable
      Environmental Laws; and (ii) in accordance, in all material respects, with
      the orders and directives of all Governmental Authorities having
      jurisdiction over the Mortgaged Property. Mortgagor shall promptly notify
      Beneficiary and each Secured Debt Representative of its receipt of any
      notice of a violation of any Environmental Laws.

            (c) Regardless of whether any site assessments are conducted
      pursuant to this Mortgage, and without limiting the liability of Mortgagor
      for the breach of any warranty, representation or covenant contained
      herein or in any Secured Debt Document, and notwithstanding any limitation
      of liability contained in the Secured Debt Documents, Mortgagor hereby
      agrees to unconditionally and absolutely defend, indemnify and hold
      harmless Beneficiary, Secured Debtholders, Trustee and their respective
      employees, affiliates, agents and attorneys, under the Mortgage and any
      successors or substitute trustee under the Mortgage (any person to be
      indemnified being herein called the "Indemnified Person"), from and
      against, and be responsible for, any and all liabilities (including strict
      liability), actions, demands, penalties, fines, taxes, assessments, losses
      (including, without limitation, diminution in the value of the Mortgaged
      Property), costs and expenses (including, without limitation, attorneys',
      paralegals', accountants' and other experts' and consultants' fees and
      expenses, and remedial costs, including, without limitation, costs of
      monitoring), suits, damages, including, without limitation, punitive
      damages and foreseeable and unforeseeable consequential damages, costs of
      any settlement or judgment and claims (including, without limitation,
      third-party claims for personal injury or real or personal property
      damage) of any and every kind whatsoever (hereinafter, collectively,
      called the "Losses"), which may now or in the future (whether before or
      after the release, or other termination of the Mortgage and the other
      Secured Debt Documents) be paid, imposed upon, incurred or suffered by or
      asserted or awarded against any of the Indemnified Persons or the
      Mortgaged Property by any person or entity or Governmental Authority for,
      with respect to, arising out of, or as a direct or indirect result of, any
      one or more of the following: (i) the presence or suspected presence,
      release or suspected release of any hazardous materials at, upon, under,
      within, above, from, by or in connection with the Mortgaged Property or
      any portion thereof, or elsewhere in connection with the transportation of
      hazardous materials to or from the Mortgaged Property (including, without
      limitation, in the air, soil, groundwater or surface water), or the
      escape, seepage, leakage, spillage, discharge, emission or release from
      the Mortgaged Property of any hazardous materials; (ii) any violations of
      any Environmental Laws at, upon, under, within, from, by or in connection
      with the

                                      -23-
<PAGE>

      Mortgaged Property; (iii) the environmental condition of the Mortgaged
      Property; (iv) the imposition by any Governmental Authority of any lien or
      so-called "super priority lien" upon the Mortgaged Property as a result of
      the presence or release of hazardous materials, or any violation of any
      Environmental Laws, at, upon, under, within, from, by or connection with
      the Mortgaged Property; (v) obligations to remediate hazardous materials
      contamination, or to remediate any condition which constitutes a violation
      of any Environmental Laws; (vi) any site assessments of the Mortgaged
      Property; (vii) liability for personal injury or property damage or damage
      to the environment or fines, penalties and punitive damages, resulting
      from the presence or release of hazardous materials or any violations of
      any Environmental Laws, at, upon, under, within, from, by or in connection
      with the Mortgaged Property; and (viii) any environmental matter described
      in this Mortgage, including, without limitation, matters arising out of
      any breach of the covenants, representations and warranties set forth
      herein in each instance described in (i) through (viii) hereof regardless
      of whether any such Losses arise out of or result from any breach of the
      covenants, representations and warranties pertaining to environmental
      matters set forth in this Mortgage or the other Secured Debt Documents,
      and regardless of whether or not caused by or within the control of
      Mortgagor or any Indemnified Person; or whether any such matters arise
      before, during or after any foreclosure of the Mortgage or other taking of
      title to all or any portion of the Mortgaged Property or the enforcement
      of any other remedies under the Secured Debt Documents (if any such event
      occurs). WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
      INDEMNIFIED PERSON WITH RESPECT TO LOSSES WHICH IN WHOLE OR IN PART ARE
      CAUSED BY OR ARISE OUT OF THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE
      OR THE STRICT LIABILITY OF ANY SUCH INDEMNIFIED PERSON, BUT NOT THE GROSS
      NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SUCH INDEMNIFIED PERSON.

            (d) Notwithstanding the foregoing or any contrary provision hereof,
      Mortgagor's indemnification obligations set forth in this Section 3.10
      shall not extend to any such Losses which are attributable solely to
      contamination by hazardous materials first introduced to the Mortgaged
      Property after a foreclosure of this Mortgage or other taking of title to
      the Mortgaged Property by any of Indemnified Persons.

            (e) The indemnification provided in this Section 3.10 shall
      specifically apply to and include claims or actions brought by or on
      behalf of tenants or employees of Mortgagor. Mortgagor hereby expressly
      waives (with respect to any claims of any Indemnified Person arising under
      this Section 3.10) any immunity to which Mortgagor may otherwise be
      entitled under any industrial or worker's compensation laws.

                                      -24-
<PAGE>

            (f) In the event any of the Indemnified Persons shall suffer or
      incur any such Losses, Mortgagor shall pay to such Indemnified Persons the
      total of all such Losses suffered or incurred within ten (10) days after
      demand therefore.

            (g) Mortgagor agrees that the representations, covenants, warranties
      and indemnifications contained in this Mortgage shall survive the release
      of the Mortgage, the foreclosure or the taking of a deed in lieu of
      foreclosure, other termination of the lien of the Mortgage, or the
      exercise by Beneficiary of any other remedies under the Secured Debt
      Documents, the discharge of Mortgagor's Obligations under any of the other
      Secured Debt Documents, or any transfer of the Mortgaged Property, even if
      as a part of such foreclosure, deed in lieu of foreclosure or other
      enforcement action, the Indebtedness is satisfied in full.

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

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

                                  ARTICLE IV.

                            ASSIGNMENT OF PRODUCTION

      4.1 Assignment.

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

                                      -25-
<PAGE>

      Event of Default shall have occurred, Mortgagor shall be entitled to
      receive directly from such parties, and keep and retain, all such proceeds
      from the sale of such Hydrocarbons.

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

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

      4.3 No Liability of Beneficiary in Collecting. Beneficiary is hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned (and no such failure shall be deemed to be a waiver of any right of
Beneficiary under this Article IV) and from all other responsibility in
connection therewith, except the responsibility to account to Mortgagor for
funds actually received.

                                      -26-
<PAGE>

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

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

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

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

            (b) Mortgagor shall pay when due any judgments with respect to an
      Indemnification Claim against any of the Indemnified Persons and which are
      rendered by a final order or decree of a court of competent jurisdiction
      from which no further appeal may be taken or has been taken within the
      applicable appeal period. In the event that such payment is not made, any
      of the

                                      -27-
<PAGE>

      Indemnified Persons at its sole discretion may pay any such judgments, in
      whole or in part, and look to Mortgagor for reimbursement pursuant to this
      Mortgage, or may proceed to file suit against Mortgagor to compel such
      payment.

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

                                   ARTICLE V.

                           ENFORCEMENT OF THE SECURITY

      5.1 Title Examination. Upon the occurrence of an Event of Default and if
such Event of Default shall be continuing, Beneficiary shall have the right and
power to (but shall not be obligated to) cause to be brought down to date a
title examination and tax histories of the Mortgaged Property, procure title
opinions or title reports or, if necessary, procure new abstracts and tax
histories.

      5.2 Environmental Audit. Upon the occurrence of an Event of Default and if
such Event of Default shall be continuing, Beneficiary shall have the right and
power to (but shall not be obligated to) procure an updated or entirely new
environmental audit of the Mortgaged Property including the lands described in
Exhibit A, buildings, soil, ground water and subsurface investigations; have the
buildings inspected by an engineer or other qualified inspector; enter upon the
Mortgaged Property at any time and from time to time to show the Mortgaged
Property to potential purchasers and potential bidders at foreclosure sale; make
available to potential purchasers and potential bidders all information obtained
pursuant to the foregoing and any other information in the possession of
Beneficiary regarding the Mortgaged Property.

      5.3 Power of Sale of Real Property Constituting a Part of the Mortgaged
Property. Upon the occurrence of an Event of Default and if such Event of
Default shall be continuing, Trustee shall have the right and power to sell, to
the extent permitted by Applicable Law, at one or more sales, as an entirety or
in parcels, as they may elect, the real property constituting a part of the
Mortgaged Property, at such place or places and otherwise in such manner and
upon such notice as may be required by Applicable Law, or, in the absence of any
such requirement, as Trustee may deem appropriate, and to make conveyance to the
purchaser or purchasers; and Mortgagor shall warrant title to such real property
to such purchaser or purchasers. Trustee may postpone the sale of all or any
portion of such real property by public announcement at the time and place of
such sale, and from time to time thereafter may further postpone such sale by
public announcement made at the time of sale fixed by the preceding
postponement. The right of sale hereunder shall not be exhausted by one or any
sale, and Trustee may make other and successive sales until all of the trust
estate be legally sold. With respect to that portion, if any, of the Mortgaged
Property situated in the State of Wyoming, this Mortgage may be foreclosed by
advertisement and sale as provided by

                                      -28-
<PAGE>

applicable Wyoming statutes. With respect to that portion, if any, of the
Mortgaged Property situated in the State of Oklahoma, the Beneficiary shall have
the right and power to (but shall not be obligated to) declare the Indebtedness
secured hereby due and payable and to sell, or direct Trustee to sell, the "real
estate," as such term is defined under the provisions of 46 O.S. Supp. 1986,
Section 42, constituting a part of the Mortgaged Property, all under the terms
of 46 O.S. Supp. 1986, Section 40 et seq., and shall, to the extent permitted by
Applicable Law, have the other rights conferred on Trustee under the provisions
of this Mortgage.

      5.4 Rights of Beneficiary with Respect to Personal Property Constituting a
Part of the Mortgaged Property. Upon the occurrence of an Event of Default and
if such Event of Default shall be continuing, Beneficiary will have all rights
and remedies granted by Applicable Law, and particularly by the Uniform
Commercial Code, including, but not limited to, the right to take possession of
all personal property constituting a part of the Mortgaged Property, and for
this purpose Beneficiary may enter upon any premises on which any or all of such
personal property is situated and take possession of and operate such personal
property (or any portion thereof) or remove it therefrom. Beneficiary may
require Mortgagor to assemble such personal property and make it available to
Beneficiary at a place to be designated by Beneficiary which is reasonably
convenient to all parties. Unless such personal property is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Beneficiary will give Mortgagor reasonable notice of the time
and place of any public sale or of the time after which any private sale or
other disposition of such personal property is to be made. This requirement of
sending reasonable notice will be met if the notice is mailed by first-class
mail, postage prepaid, to Mortgagor at the address shown below the signatures at
the end of this Mortgage at least five (5) days before the time of the sale or
disposition.

      5.5 Rights with Respect to Fixtures Constituting a Part of the Mortgaged
Property. Upon the occurrence of an Event of Default and if such Event of
Default shall be continuing, Beneficiary may elect to treat the fixtures
constituting a part of the Mortgaged Property as either real property collateral
or personal property collateral and then proceed to exercise such rights as
apply to such type of collateral.

      5.6 Judicial Proceedings. Upon the occurrence of an Event of Default and
if such Event of Default shall be continuing, Trustee, in lieu of or in addition
to exercising any power of sale hereinabove given, may proceed by a suit or
suits in equity or at law, whether for a foreclosure hereunder for each or upon
credit in one or more parcels or portions under executory or ordinary process,
at Beneficiary's sole option, without appraisement (appraisement being expressly
waived), or for the sale of the Mortgaged Property, or for the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Mortgaged Property, or for
the enforcement of any other appropriate legal or equitable remedy. Mortgagor
hereby acknowledges the Indebtedness secured hereby, whether now existing or to
arise hereafter, and confesses judgment thereon in the full amount of the
Indebtedness

                                      -29-
<PAGE>

in favor of Beneficiary and any future holder or holders of Secured Debt if such
obligations are not paid at maturity.

      5.7 Possession of the Mortgaged Property. It shall not be necessary for
Trustee or Beneficiary to have physically present or constructively in their
possession at any sale held by Trustee or Beneficiary or by any court, receiver
or public officer any or all of the Mortgaged Property; and Mortgagor shall
deliver to the purchasers at such sale on the date of sale the Mortgaged
Property purchased by such purchasers at such sale, and if it should be
impossible or impracticable for any of such purchasers to take actual delivery
of the Mortgaged Property, then the title and right of possession to the
Mortgaged Property shall pass to such purchaser at such sale as completely as if
the same had been actually present and delivered.

      5.8 Certain Aspects of a Sale. Beneficiary shall have the right to (but
shall not be obligated to) become the purchaser at any sale held by Trustee,
Beneficiary or by any court, receiver or public officer, and Beneficiary shall
have the right to (but shall not be obligated to) credit upon the amount of the
bid made therefor the amount payable out of the net proceeds of such sale to it
Recitals contained in any conveyance made to any purchaser at any sale made
hereunder shall conclusively establish the truth and accuracy of the matters
therein stated, including, without limiting the generality of the foregoing,
nonpayment of the unpaid principal sum of, and the interest accrued on, Secured
Debt after the same have become due and payable, advertisement and conduct of
such sale in the manner provided herein or appointment of any successor Trustee
hereunder.

      5.9 Receipt to Purchaser. Upon any sale, whether made under the power of
sale herein granted and conferred or by virtue of judicial proceedings, the
receipt of Trustee, Beneficiary or of the officer making sale under judicial
proceedings, shall be sufficient discharge to the purchaser or purchasers at any
sale for his or their purchase money, and such purchaser or purchasers, or his
or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of Trustee, Beneficiary, or of such
officer therefor, be obliged to see to the application of such purchase money,
or be in anywise answerable for any loss, misapplication or nonapplication
thereof.

      5.10 Effect of Sale. Any sale or sales of the Mortgaged Property, whether
under the power of sale herein granted and conferred or by virtue of judicial
proceedings, shall operate to divest all right, title, interest, claim and
demand whatsoever either at law or in equity, of Mortgagor of, in and to the
premises and the property sold, and shall be a perpetual bar, both at law and in
equity, against Mortgagor, and Mortgagor's successors or assigns, and against
any and all persons claiming or who shall thereafter claim all or any of the
property sold from, through or under Mortgagor or Mortgagor's successors or
assigns. Nevertheless, Mortgagor, shall join in the execution and delivery of
all proper conveyances, assignments and transfers of the properties so sold.

                                      -30-
<PAGE>

      5.11 Application of Proceeds. The proceeds of any sale of, and the Rents
and Revenues and other amounts generated by the holding, leasing, operation or
other use of, the Mortgaged Property shall be applied in accordance with the
provisions of the Collateral Trust Agreement.

      5.12 Mortgagor's Waiver of Appraisement, Marshalling and Other Rights.
Mortgagor agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time insist upon or plead or in any manner whatever
claim the benefit of any appraisement, valuation, stay, extension or redemption
law now or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage or the absolute sale of the Mortgaged Property or
the possession thereof by any purchaser at any sale made pursuant to any
provision hereof, or pursuant to the decree of any court of competent
jurisdiction; but Mortgagor, for Mortgagor and all who may claim through or
under Mortgagor, so far as Mortgagor or those claiming through or under
Mortgagor now or hereafter lawfully may, hereby waives the benefit of all such
laws; provided, however, that appraisement of any of the Mortgaged Property
located in the State of Oklahoma is hereby expressly waived or not, at the
option of Beneficiary, such option to be exercised prior to or at the time the
judgment is rendered in any foreclosure hereof. Mortgagor, for Mortgagor and all
who may claim through or under Mortgagor, waives, to the extent that Mortgagor
may lawfully do so, any and all right to have the Mortgaged Property marshalled
upon any foreclosure of the lien hereof, or sold in inverse order of alienation,
and agrees that Trustee, Beneficiary or any court having jurisdiction to
foreclose such lien may sell the Mortgaged Property as an entirety. Mortgagor,
for Mortgagor and all who may claim through or under Mortgagor, further waives,
to the full extent that Mortgagor may lawfully do so, any requirement for
posting a receiver's bond or replevin bond or other similar type of bond if
Trustee or Beneficiary commence an action for appointment of a receiver or an
action for replevin to recover possession of any of the Mortgaged Property. If
any law in this paragraph referred to and now in force, of which Mortgagor or
Mortgagor's successor or successors might take advantage despite the provisions
hereof, shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to, constitute any part of the contract herein contained or
to preclude the operation or application of the provisions of this paragraph.
Pursuant to Section 39-5-19, New Mexico Statutes, Annotated, 1978 Comp., as
amended, Mortgagor agrees that as to the Mortgaged Property situated in the
State of New Mexico, the redemption period shall be shortened to one (1) month.
Mortgagor hereby waives all rights of appraisement, sale, homestead or
redemption allowed under any law or laws of the State of Arkansas, and
especially redemption under the Act of the General Assembly of the State of
Arkansas approved May 8, 1899, and acts amendatory thereto. If Mortgagor is an
individual, Mortgagor waives and releases all rights of dower, courtesy and
homestead in the Mortgaged Property insofar as such rights may in any way affect
the purposes of this Mortgage.

      5.13 Costs and Expenses. All costs and expenses (including attorneys'
fees) incurred by Trustee or Beneficiary in protecting and enforcing their
rights hereunder shall constitute a demand obligation owing by Mortgagor to the
party incurring such

                                      -31-
<PAGE>

costs and expenses and shall draw interest at Default Interest Rate, all of
which shall constitute a portion of the Indebtedness.

      5.14 Sale of the Mortgaged Property in Texas. If Secured Debt is not paid
when due, whether by acceleration or otherwise, Trustee is hereby authorized and
empowered to (but shall not be obligated to) sell any part of the Mortgaged
Property located in the State of Texas at public sale to the highest bidder for
cash in the area at the county courthouse of the county in Texas in which the
Texas portion of the Mortgaged Property or any part thereof is situated, as
herein described, designated by such county's commissioner's court for such
proceedings, or if no area is so designated, at the door of the county
courthouse of said county, at a time between the hours of 10:00 A.M. and 4:00
P.M. which is no later than three (3) hours after the time stated in the notice
described immediately below as the earliest time at which such sale would occur
on the first Tuesday of any month, after advertising the earliest time at which
said sale would occur, the place, and terms of said sale, and the portion of the
Mortgaged Property to be sold, by (a) posting (or by having some person or
persons acting for Trustee post) for at least twenty-one (21) days preceding the
date of the sale, written or printed notice of the proposed sale at the
courthouse door of said county in which the sale is to be made; and if such
portion of the Mortgaged Property lies in more than one county, one such notice
of sale shall be posted at the courthouse door of each county in which such part
of the Mortgaged Property is situated and such part of the Mortgaged Property
may be sold in the area at the county courthouse of any one of such counties
designated by such county's commissioner's court for such proceedings, or if no
area is so designated, at the courthouse door of such county, and the notice so
posted shall designate in which county such property shall be sold, and (b)
filing in the office of the county clerk of each county in which any part of the
Texas portion of the Mortgaged Property which is to be sold at such sale is
situated a copy of the notice posted in accordance with the preceding clause
(a). In addition to such posting and filing of notice, Beneficiary may or other
holder of the Indebtedness shall, at least twenty-one (21) days preceding the
date of sale, serve or cause to be served written notice of the proposed sale by
certified mail on Mortgagor and on each other debtor, if any, obligated to pay
the Indebtedness according to the records of Beneficiary or other holder of the
Indebtedness. Service of such notice shall be completed upon deposit of the
notice, enclosed in a postpaid wrapper properly addressed to Mortgagor and such
other debtors at their most recent address or addresses as shown by the records
of Beneficiary or other holder of the Indebtedness in a post office or official
depository under the care and custody of the United States Postal Service. The
affidavit of any person having knowledge of the facts to the effect that such a
service was completed shall be prima facie evidence of the fact of service.
Mortgagor agrees that no notice of any sale, other than as set out in this
Section, need be given by Trustee, Beneficiary or any other person, except as
may otherwise be required by Applicable Law. Mortgagor hereby designates as its
address for the purpose of such notice the address set out on the signature page
hereof; and agrees that such address shall be changed only by depositing notice
of such change enclosed in a postpaid wrapper in a post office or official
depository under the care and custody of the United States Postal Service,
certified mail, postage prepaid, return receipt requested, addressed to
Beneficiary or other holder of the Indebtedness at the address for Beneficiary
set out herein (or to such other address as Beneficiary or

                                      -32-
<PAGE>

other holder of the Indebtedness may have designated by notice given as above
provided to Mortgagor and such other debtors). Any such notice of change of
address of Mortgagor or other debtors or of Beneficiary or of other holder of
the Indebtedness shall be effective three (3) business days after such deposit
if such post office or official depository is located in the State of Texas,
otherwise to be effective upon receipt. Mortgagor authorizes and empowers
Trustee to sell the Texas portion of the Mortgaged Property in lots or parcels
or in its entirety as is customary in the industry or Trustee may elect; and to
execute and deliver to the purchaser or purchasers thereof good and sufficient
deeds of conveyance thereto by fee simple title, with evidence of general
warranty by Mortgagor, and the title of such purchaser or purchasers when so
made by Trustee, Mortgagor binds itself to warrant and forever defend. Where
portions of the Mortgaged Property lie in different counties, sales in such
counties may be conducted in any order that Trustee may deem expedient; and one
or more such sales may be conducted in the same month, or in successive or
different months. Notwithstanding anything to the contrary contained herein,
Trustee may postpone the sale provided for in this Section 5.14 at any time
without the necessity of a public announcement. The provisions hereof with
respect to the posting and giving of notices of sale are intended to comply with
the provisions of Section 51.002 of the Property Code of the State of Texas,
effective January 1, 1984, and in the event the requirements, or any notice,
under such Section 51.002 of the Property Code of the State of Texas shall be
eliminated or the prescribed manner of giving such notices modified by future
amendment to, or adoption of any statute superseding, Section 51.002 of the
Property Code of the State of Texas, the requirement for such particular notices
shall be deemed stricken from or modified in this Mortgage in conformity with
such amendment or superseding statute, effective as of the effective date
thereof.

      5.15 Fair Market Value. It is expressly agreed by Mortgagor that to the
extent Section 51.003 of the Texas Property Code, or any amendment thereto,
requires that the "fair market value" of the Mortgaged Property shall be
determined as of the foreclosure date in order to enforce a deficiency against
Mortgagor or any other party liable for repayment of the Indebtedness, the term
"fair market value" shall include those matters required by Applicable Law and
shall also include the additional factors set forth below:

            (a) The Mortgaged Property is to be valued "AS IS" and "WITH ALL
      FAULTS" and there shall be no assumption of restoration of or
      refurbishment of improvements, if any, after the date of the foreclosure;

            (b) An offset to the fair market value of the Mortgaged Property, as
      determined hereunder, shall be made by deducting from such value the
      reasonable estimated closing costs relating to the sale of the Mortgaged
      Property, including but not limited to brokerage commissions, title
      examination and curative expenses, tax prorations, escrow fees, and other
      common charges which are incurred by a seller of property; and

                                      -33-
<PAGE>

            (c) After consideration of the factors required by Applicable Law
      and those required above, an additional discount factor shall be
      calculated based upon the estimated time it will take to effectuate a sale
      of the Mortgaged Property so that the "fair market value" as so determined
      is discounted to be as of the date of the foreclosure sale of the
      Mortgaged Property.

            5.16 Operation of the Mortgaged Property by Beneficiary. Upon the
occurrence of an Event of Default and during the continuance of such Event of
Default and in addition to all other rights herein conferred on Beneficiary,
Beneficiary (or any person, firm or corporation designated by Beneficiary) shall
have the right and power, but shall not be obligated, to enter upon and take
possession of any of the Mortgaged Property, and to exclude Mortgagor, and
Mortgagor's agents or servants, wholly therefrom, and to hold, use, administer,
manage and operate the same to the extent that Mortgagor shall be at the time
entitled and in its place and stead. Beneficiary, or any person, firm or
corporation designated by Beneficiary, may operate the same without any
liability to Mortgagor in connection with such operations, except to use
ordinary care in the operation of such properties, and Beneficiary or any
person, firm or corporation designated by Beneficiary, shall have the right to
(but shall not be obligated to) collect, receive and receipt for all
Hydrocarbons produced and sold from said properties, to make repairs, purchase
machinery and equipment, conduct work-over operations, drill additional wells
and to exercise every power, right and privilege of Mortgagor with respect to
the Mortgaged Property. When and if the expenses of such operation and
development (including costs of unsuccessful work-over operations or additional
wells) paid by Beneficiary or attributable to Mortgagor's undivided interest
therein and withheld, or offset against, by an operator or other party have been
paid or reimbursed in full by Mortgagor and the Indebtedness paid, said
properties shall, if there has been no sale or foreclosure, be returned to
Mortgagor.

            5.17 Separate Sales. The Mortgaged Property may be sold in one or
more parcels and it being expressly understood and agreed that the right of sale
arising out of any Event of Default shall not be exhausted by any one or more
sales but other and successive sales may be made until all of the Mortgaged
Property has been sold or until the Indebtedness has been fully satisfied.

            5.18 Remedies Cumulative, Concurrent and Non-Exclusive. Beneficiary
shall have all rights, remedies and recourses granted in the Secured Debt
Documents and available at law or equity (including specifically those granted
by the Uniform Commercial Code in effect and applicable to the Mortgaged
Property, or any portion thereof), and the same (a) shall be cumulative and
concurrent, (b) may be pursued separately, successively or concurrently against
any one or more of Mortgagor, any Guarantor, or others obligated under the
Secured Debt Documents, or against the Mortgaged Property, pursuant to the
Collateral Trust Agreement and any Secured Debt Documents, (c) may be exercised
as often as occasion therefor shall arise, it being agreed by Mortgagor that the
exercise or failure to exercise any of same shall in no event be construed as a
waiver or release thereof or of any other right, remedy or recourse, and (d) are
intended to be, and shall be, non-exclusive.

                                      -34-
<PAGE>

      5.19 Release of and Resort to Collateral. Beneficiary may release,
regardless of consideration, any part of the Mortgaged Property without, as to
the remainder, in any way impairing, affecting, subordinating or releasing the
lien or security interests created in or evidenced by the Secured Debt Documents
or their stature as a first and prior lien and security interest in and to the
Mortgaged Property. For payment of the Indebtedness, Beneficiary may resort to
any other security therefor held in such order and manner as Beneficiary may
elect.

      5.20 Discontinuance of Proceedings. In case Beneficiary shall have
proceeded to invoke any right, remedy or recourse permitted under the Secured
Debt Documents and shall thereafter elect to discontinue or abandon same for any
reason, Beneficiary shall have the unqualified right so to do and, in such an
event, Mortgagor and Beneficiary shall be restored to their former positions
with respect to the Indebtedness, the Obligations, the Secured Debt Documents,
the Mortgaged Property and otherwise, and the rights, remedies, recourses and
powers of Beneficiary shall continue as if same had never been invoked.

      5.21 Uniform Commercial Code Remedies. Beneficiary shall have all the
rights, remedies and recourses with respect to the Personalty, Fixtures, Leases
and Rents and Revenues afforded a Secured Party by the aforesaid Uniform
Commercial Code (being Chapter 9 of the Texas Business and Commerce Code, as to
property within the scope thereof and situated in the State of Texas) in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded Beneficiary by the Secured Debt Documents.

      5.22 No Obligation of Trustee or Beneficiary. The assignment and security
interest herein granted shall not be deemed or construed (a) to constitute
Trustee or Beneficiary as a trustee in possession of the Mortgaged Property or,
(b) to obligate Trustee or Beneficiary to (i) lease the Mortgaged Property or
attempt to do same, (ii) take any action, (iii) incur any expenses or perform or
discharge any obligation, duty or liability whatsoever under any of the Leases
or otherwise.

                                  ARTICLE VI.

                            MISCELLANEOUS PROVISIONS

      6.1 Pooling and Unitization. Mortgagor shall have the right, and is hereby
authorized, to pool or unitize all or any part of the lands described in Exhibit
A, insofar as relates to the Mortgaged Property, with adjacent lands, leaseholds
and other interests, when, in the reasonable judgment of Mortgagor, it is
necessary or advisable to do so in order to form a drilling and/or production
unit to facilitate the orderly development of that part of the Mortgaged
Property affected thereby, or to comply with the requirements of any Applicable
Law or governmental order or regulation relating to the spacing of wells or
proration of the production therefrom; provided, however, that any unit so
formed for the production of oil shall not substantially exceed 160 acres, and
any unit so formed for the production of gas shall not substantially exceed 640
acres, unless a larger area is required to conform to an Applicable Law or
governmental order

                                      -35-
<PAGE>

or regulation relating to the spacing of wells or to obtain the maximum
allowable production under any Applicable Law or governmental order or
regulation relating to the proration of production therefrom; and further
provided that the Hydrocarbons produced from any unit so formed shall be
allocated among the separately owned tracts or interests comprising the unit in
a uniform manner consistently applied. Any unit so formed may relate to one or
more zones or horizons, and a unit formed for a particular zone or horizon need
not conform in area to any other unit relating to a different zone or horizon,
and a unit formed for the production of oil need not conform in area with any
unit formed for the production of gas. Promptly after formation of any such
unit, Mortgagor shall furnish to Beneficiary and each Secured Debt
Representative a true copy of the pooling agreement, declaration of pooling or
other instrument creating such unit. The interest in any such unit attributable
to the Mortgaged Property (or any part thereof) included therein shall become a
part of the Mortgaged Property and shall be subject to the lien hereof in the
same manner and with the same effect as though such unit and the interest of
Mortgagor therein were specifically described in Exhibit A. Mortgagor is further
authorized to amend, modify or terminate any pooling or unitization agreement or
order to which Mortgagor is a party or the Mortgaged Property is subject,
provided that such action does not conflict with the provisions of this
Mortgage, including this Section 6.1. Mortgagor may enter into, or amend, modify
or terminate, pooling or unitization agreements not hereinabove authorized only
as permitted under the Secured Debt Documents.

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

      6.3 Successor Trustee. Any Trustee may resign in writing addressed to
Beneficiary or may be removed at any time with or without cause by an instrument
in writing duly executed by Beneficiary. In case of the death, resignation or
removal of a Trustee, one or more successor Trustee may be appointed by
Beneficiary by instrument of substitution complying with any applicable
requirements of Applicable Law, and in the absence of any such requirement
without formality other than appointment and

                                      -36-
<PAGE>

designation in writing. Such appointment and designation shall be full evidence
of the right and authority to make the same and of all facts therein recited,
and upon the making of any such appointment and designation this conveyance
shall vest in the named successor Trustee or Trustee, all the estate and title
of the prior Trustee in all of the Mortgaged Property, and he or they shall
thereupon succeed to all the rights, powers, privileges, immunities and duties
hereby conferred upon the prior Trustee. All references herein to Trustee shall
be deemed to refer to Trustee from time to time acting hereunder.

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

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

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

                                      -37-
<PAGE>

      6.7 The Mortgaged Property to Revert; Release. If the Indebtedness shall
be fully paid and the covenants herein contained shall be well and truly
performed, then all of the Mortgaged Property shall revert to Mortgagor and the
entire estate, right, title and interest of Trustee and Beneficiary shall
thereupon cease; and Trustee and Beneficiary in such case shall, upon the
request of Mortgagor and at Mortgagor's cost and expense, deliver to Mortgagor
proper instruments acknowledging satisfaction of this Mortgage and the release
or reconveyance of the lien hereof in accordance with Applicable Law.
Notwithstanding anything contained herein to the contrary, the Mortgaged
Property, or any part thereof, shall, upon the written request of Mortgagor, be
released from the lien of this Mortgage, in accordance with the provisions of
the Collateral Trust Agreement, when such a release is permitted by the
Collateral Trust Agreement and the other Secured Debt Documents.

      6.8 Covenants Running with the Land. All Obligations contained in this
Mortgage are intended by the parties to be, and shall be construed as, covenants
running with the Mortgaged Property.

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

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

      6.11 Limitation on Interest. No provision of this Mortgage or the Secured
Debt Documents shall require the payment or permit the collection of interest in
excess of the Maximum Lawful Rate or which is otherwise contrary to Applicable
Law. If any excess of interest in such respect is in the Secured Debt Documents
or otherwise herein provided for, or shall be adjudicated to be so provided for
herein or in the Secured Debt Documents, Mortgagor shall not be obligated to pay
such excess.

      6.12 Severability. The Secured Debt Documents are intended to be performed
in accordance with, and only to the extent permitted by, all applicable Legal
Requirements. If any provision of any of the Secured Debt Documents or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, neither the remainder of the instrument
in which

                                      -38-
<PAGE>

such provision is contained nor the application of such provision to other
persons or circumstances nor the other instruments referred to hereinabove shall
be affected thereby, but rather shall be enforced to the greatest extent
permitted by Applicable Law. It is hereby expressly stipulated and agreed to be
the intent of Mortgagor and Beneficiary at all times to comply with the usury,
and all other, laws relating to the Secured Debt Documents. If, at any time, the
applicable Legal Requirements render usurious any amount called for in any
Security Document, then it is Mortgagor's, Trustee's and Secured Debtholders'
express intent that such document be immediately deemed reformed and the amounts
collectible reduced, without the necessity of the execution of any new document,
so as to comply with the then Applicable Law but so as to permit the recovery of
the fullest amount otherwise called for in such Secured Debt Documents.

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

      6.14 No Partnership. Nothing contained in this Mortgage is intended to, or
shall be construed as, creating to any extent and in any manner whatsoever, any
partnership, joint venture, or association among Mortgagor, Trustee, Beneficiary
and their respective Affiliates, or in any way as to make Beneficiary or
Trustee's co-principals with Mortgagor with reference to the Mortgaged Property,
and any inferences to the contrary are hereby expressly negated.

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

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

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

      6.18 Special Filing as Financing Statement. This Mortgage shall likewise
be a Security Agreement and a Financing Statement. This Mortgage shall be filed
for record, among other places, in the real estate records of each county or
parish in which any portion of the real property covered by the oil and gas
leases described in Exhibit A

                                      -39-
<PAGE>

hereto is situated, and, when filed in such counties or parishes shall be
effective as a financing statement covering Fixtures located on oil and gas
properties, which oil and gas properties (and accounts arising therefrom) are to
be financed at the wellheads of the wells located on the lands described in
Exhibit A. A carbon, photographic or other reproduction of this Mortgage or of
any financing statement covering the Mortgaged Property or any portion thereof
shall be sufficient as a financing statement and may be filed as such. Mortgagor
agrees that any Secured Debt Representative may, in such manner, on such terms
and at such times as may be elected by such Secured Debt Representative, and
without demand or notice to, or the consent or signature of, Mortgagor, file
and/or record such UCC financing statements, fixture filings, and/or amendments
to or continuations of any financing statements or fixture filings to evidence,
perfect and/or continue the perfection of, any security interests created or to
be created pursuant to this Mortgage or any of the other Secured Debt Documents.

      6.19 Notices. Except as otherwise required by Sections 5.4 and 5.14
hereof, any notice, request or demand which may be required or permitted to be
given or served upon Mortgagor shall be sufficiently given when given or made
pursuant to (a) the terms of the Collateral Trust Agreement, or (b) such other
means and manner of giving of notice as may be required by Applicable Law.

      6.20 Reliance. Notwithstanding any reference herein to the Secured Debt
Documents, no party shall have any obligation to inquire into the terms or
conditions of any such documents and all parties shall be fully authorized to
rely upon any statement, certificate, or affidavit of Beneficiary or any future
holder of any portion of the Indebtedness as to the occurrence of any event such
as the occurrence of any event of default.

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

      6.22 Applicable Law. As to any tract or parcel of land comprising a
portion of the Mortgaged Property, this Mortgage shall be governed by and
construed according to the Applicable Laws of the State where such tract or
parcel of land is situated.

      6.23 Subrogation. If any or all of the proceeds of Secured Debt have been
used to extinguish, extend or renew any indebtedness heretofore existing against
the Mortgaged Property, then, to the extent of such funds so used, the
Indebtedness and this Mortgage shall be subrogated to all of the rights, claims,
liens, titles and interests heretofore existing against the Mortgaged Property
to secure the indebtedness so extinguished, extended or renewed and the former
rights, claims, liens, titles and

                                      -40-
<PAGE>

interests, if any, are not waived but rather are continued in full force and
effect in favor of Beneficiary and are merged with the lien and security
interest created herein as cumulative security for the repayment of the
Indebtedness and the satisfaction of the Obligations.

      6.24 Fixture Filing. Portions of the Mortgaged Property are or are to
become fixtures relating to the above described real estate, and Mortgagor
herein expressly covenants and agrees that the filing of this Mortgage in the
Real Estate Records in the county where the Mortgaged Property is located shall
also operate from the time of filing therein as a financing statement filed as a
fixture filing in accordance with Section 9.502(c) of the Uniform Commercial
Code - Secured Transactions of the State of Texas.

                                      -41-
<PAGE>

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

                              MORTGAGOR AND DEBTOR

                                          CALPINE CORPORATION, a Delaware
                                          corporation

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

ATTEST:

_________________________________
Printed Name:

The name and mailing address of Mortgagor is:

Calpine Corporation
1000 Louisiana Street, Suite 800
Houston, TX 77002

                                                           [Multistate Mortgage]

                                      S-1
<PAGE>

STATE OF TEXAS     )
                   )  SECTION
COUNTY OF HARRIS   )

      BE IT REMEMBERED that I, Suzanne B. Snow, a Notary Public duly qualified,
commissioned, sworn and acting in and for the County and State aforesaid, hereby
certify that, on this 14th day of July, 2003, there appeared before me severally
each of the following persons, each being either a Trustee or else the
designated officer of the corporation or association set opposite his name, and
each such Trustee, corporation and association being a party to the foregoing
instrument:

      B.A. Berilgen, the Executive Vice President, and Michael H. Hickey, the
Vice President-Managing Counsel, of Calpine Corporation, a Delaware corporation,
which has no corporate seal whose address is 1000 Louisiana Street, Suite 800,
Houston, TX 77002.

ARKANSAS          Before me on this day appeared in person the aforementioned
                  persons, to me personally well known, who stated that they
                  held the offices in the corporation or association set forth
                  opposite their names above (or, in the case of the Trustees,
                  were validly appointed Trustees) and were duly authorized in
                  their respective capacities to execute the foregoing
                  instrument for and in the name and on behalf of said
                  corporation or association (or as Trustees, as the case may
                  be), and further stated and acknowledged that they had so
                  signed, executed and delivered said foregoing instrument for
                  the consideration, uses and purposes therein mentioned and set
                  forth.

COLORADO          The foregoing instrument was acknowledged before me this day
                  by each such person on behalf of said corporation or
                  association, or himself, as a Trustee, as the case may be.

KANSAS            On this day before me personally appeared the aforementioned
                  persons, who acknowledged themselves to hold the offices in
                  the corporation set forth opposite their names above (or, in
                  the case of the Trustees, were validly appointed Trustees) and
                  as such officers or Trustees, hereby authorized to do so,
                  executed the foregoing instrument for the purposes therein
                  contained.

MISSISSIPPI       Personally appeared before me, the undersigned authority in
                  and for the said county and state, on this 14th day of July,
                  2003, within my jurisdiction the within named B.A. Berilgen
                  who acknowledged that he is the Executive Vice President of
                  CALPINE CORPORATION, a Delaware corporation, and that for and
                  on behalf of said corporation and as its act and deed
                  (he)(she) executed the above and foregoing instrument after
                  first having been duly authorized by said

                                                           [Multistate Mortgage]

                                      S-2
<PAGE>

                  corporation so to do.

MONTANA           On this day before me personally appeared each such person,
                  each of whom is known to me to be the officer of the
                  corporation that executed the within instrument (or a Trustee,
                  as the case may be), and acknowledged to me that such
                  corporation (or Trustee, as the case may be) executed the
                  same.

NEBRASKA          The foregoing instrument was acknowledged before me this day
  and             by each such person as the designated officers of the
NEW MEXICO        corporation or association set opposite their names (or as
                  Trustees, as the case may be) on behalf of said corporation or
                  association, or himself as a Trustee, as the case may be.

OKLAHOMA          Before me on this day personally appeared the aforementioned
                  persons, to me known to be the identical persons who
                  subscribed the names of the respective makers thereof to the
                  foregoing instrument in the capacities set forth opposite the
                  names of such persons above, and each such person acknowledged
                  to me that he executed the same as his free and voluntary act
                  and deed and as the free and voluntary act and deed of the
                  corporation or association set opposite his name (or of
                  himself as Trustee, as the case may be) for the uses and
                  purposes therein set forth.

TEXAS             This instrument was acknowledged before me on this day by each
                  such person as the designated officer of the corporation or
                  association set opposite his name (or a Trustee, as the case
                  may be), on behalf of said corporation or association set
                  opposite his name (or of himself as Trustee, as the case may
                  be).

WYOMING           The foregoing instrument was acknowledged before me by the
                  above individuals on this day.

                       Witness my hand and official seal.

                                       _________________________________________
                                       Notary Public
                                       Residing at Houston, Harris County, Texas

My commission expires: 12/21/2006

                                                           [Multistate Mortgage]

<PAGE>

     EXHIBIT A To Amended and Restated Mortgage, Deed of Trust, Assignment,
        Security Agreement, Financing Statement and Fixture Filing, dated
                     July 16, 2003, from CALPINE CORPORATION
                       to Denis O'Meara and James Trimble
                            and THE BANK OF NEW YORK

                               List of Properties

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

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

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

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

[Do not detach this page]

                                     Ex.A-1
<PAGE>

                                   Schedule I

Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement and
Fixture Filing (Multi-State) from Calpine Corporation, a Delaware corporation,
Trustor and Mortgagor to Kemp Leonard, Trustee, John Quick, Trustee and The Bank
of Nova Scotia, for itself and as Agent, Beneficiary, filed as follows:

<TABLE>
<CAPTION>
         JURISDICTION                           FILE NO.                     FILE DATE
         ------------                           --------                     ---------
<S>                                       <C>                                <C>
Columbia County, AK                       Book 334, Page 327                 5/14/2002

Miller County, AK                         Book M-763, Page 58                5/15/2002

Jefferson Davis County, MS                      0201602                      5/16/2002
                                           Book 475, Page 39

Lawrence County, MS                        Book 386, Page 46                 5/14/2002

Marion County, MS                         Book 1375, Page 101                5/14/2002

Warren County, MS                               184385                       5/14/2002
                                          Book 1319, Page 727

Lewis & Clark County, MT                        3019331                      5/14/2002
                                          Book M26, Page 4622

Sheridan County, MT                       Book 602, Page 725                 5/14/2002

Beckham County, OK                               03252                       5/14/2002
                                         Book 1738, Page 0237

Caddo County, OK                               20023691                      5/15/2002
                                          Book 2387, Page 486

Canadian County, OK                       Book 2573, Page 378                5/28/2002

Custer County, OK                         Book 1166, Page 418                5/14/2002

Garvin County, OK                         Book 1632, Page 107                6/19/2002

Grady County, OK                                 6604                        5/15/2002
                                          Book 3378, Page 303

Harper County, OK                         Book 0575, Page 706                8/12/2002

Love County, OK                                  1116                        5/14/2002
                                          Book 562, Page 472
</TABLE>

                                      I-1
<PAGE>

<TABLE>
<CAPTION>
        JURISDICTION                                  FILE NO.                             FILE DATE
        ------------                                  --------                             ---------
<S>                                          <C>                                           <C>
Marshall County, OK                                 I2002-1427                             5/14/2002
                                                Book 735, Page 239

McClain County, OK                              Book 1613, Page 25                         5/14/2002

Oklahoma County, OK                                 2002085739                             6/06/2002
                                               Book 8459, Page 3-99

Roger Mills County, OK                               2002-2002                             5/14/2002
                                               Volume 1678, Page 20

Texas County, OK                                    2002-662297                            5/14/2002

Washita County, OK                           Book 941, Pages 961-1057                      5/14/2002

Woodward County, OK                                    6162                                5/14/2002
                                                Book 1824, Page 001

Woods County, OK                                Book 935, Page 557                         5/14/2002

Cameron County, TX                                    0026299                              5/15/2002
                                                Volume 8004, Page 1

Chambers County, TX                                 02-557-473                             5/15/2002

Duval County, TX                                      078197                               5/16/2002
                                               Volume 326, Page 787

Goliad County, TX                                    00100688                              5/15/2002
                                               Volume 00163, Page 1

Hansford County, TX                                    62490                               5/15/2002
                                               Volume 291, Page 748

Hardin County, TX                                    02-03596                              5/15/2002
                                               Volume 1319, Page 54

Harris County, TX                                     V803613                              5/15/2002

Hemphill County, TX                                   034626                               5/15/2002
                                              Volume 547, Page 000272

Houston County, TX                                 0200000002180                           5/15/2002

Jackson County, TX                             Volume 199, Page 623                        5/31/2002

Jefferson County, TX                                2002016585                             5/6/2002

Jim Hogg County, TX                                    67248                               5/14/2002
                                              Book 32, Pages 725-821
</TABLE>

                                      I-2
<PAGE>

<TABLE>
<CAPTION>
        JURISDICTION                                  FILE NO.                            FILE DATE
        ------------                                  --------                            ---------
<S>                                         <C>                                           <C>
Live Oak County, TX                              00155319, Vol. 413,                       5/7/2002
                                               Page 282 D/T Records

Matagorda County, TX                                  023187                               5/14/2002
                                               Volume 659, Page 658

Nueces County, TX                                   2002022435                             5/14/2002

Ochiltree County, TX                                   65164                               5/14/2002
                                               Volume 603, Page 772

Panola County, TX                                      77340                               5/14/2002
                                               Volume 1150, Page 490

Polk County, TX                                    2002-1266-186                           5/14/2002

San Jacinto County, TX                                02-3385                              5/14/2002

Webb County, TX                                       760758                               5/7/2002
                                               Volume 1210, Page 237

Wharton County, TX                                    223997                               5/14/2002
                                               Volume 458, Page 137

Zapata County, TX                                     125697                               5/7/2002
                                             Volume 668, Pages 001-126

Minerals Management Service                             n/a                                5/08/2002
Gulf of Mexico OCS Region
(Jefferson County, TX)

Sweetwater County, WY                                 1360525                              5/14/2002
                                               Book 0954, Page 1218

Washakie County, WY                                   493612                               5/16/2002
                                              Book 89, Page 1800-1902
</TABLE>

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

<TABLE>
<CAPTION>
        JURISDICTION                                  FILE NO.                              FILE DATE
        ------------                                  --------                              ---------
<S>                                                   <C>                                   <C>

Minerals Management Service                             n/a                                 5/13/2002
Gulf of Mexico OCS Region
(Jefferson County, TX)
</TABLE>

                                      I-3
<PAGE>

                                   Schedule II

First Supplemental Mortgage, Deed of Trust, Assignment, Security Agreement,
Financing Statement and Fixture Filing (Multi-State) from Calpine Corporation, a
Delaware corporation, Trustor and Mortgagor to Dennis O'Meara, Trustee, James
Trimble, Trustee and The Bank of Nova Scotia, for itself and as Agent,
Beneficiary, filed as follows:

<TABLE>

         JURISDICTION                           FILE NO.                      FILE DATE
         ------------                           --------                      ---------
<S>                                   <C>                                     <C>
Lewis & Clark County, MT                        3029268                       11/12/2002
                                          Book M27, Page 3822

Sheridan County, MT                       Book 603, Page 1464                 11/08/2002

Chambers County, TX                       8626-B; 02-585-663                   10/29/02

Webb County, TX                       778732; Vol. 1297, Pg. 544               10/30/02
</TABLE>

Second Supplemental Mortgage, Deed of Trust, Assignment, Security Agreement,
Financing Statement, and Fixture Filing (Multi-State) from Calpine Corporation
to Trustees and The Bank of Nova Scotia, filed as follows:

<TABLE>
<CAPTION>
                                  ORIGINAL              ORIGINAL              SUPPLEMENT            SUPPLEMENT
       JURISDICTION               FILE NO.             FILE DATE               FILE NO.              FILE DATE
       ------------               --------             ---------              ----------             ---------
<S>                          <C>                       <C>                  <C>                     <C>
Live Oak County, Texas           00155319;               5/7/02                 159329;                4/1/03
                             Vol. 413, Pg. 282                                 Vol. 430,
                                D/T Records                                     Pg. 55

Panola County, Texas         77340; Vol. 1150,          5/14/02                 84148;                 4/1/03
                                  Pg. 490                                     Vol. 1179,
                                                                                Pg. 691

Beckham County, Oklahoma     03252; Book 1738,          5/14/02             1-2003-003102;             4/2/03
                                  Pg. 0237                                    Book 1769,
                                                                                Pg. 646

Garvin County, Oklahoma      Book 1632, Pg. 107         6/19/02                 02267;                 4/1/03
                                                                              Book 1658,
                                                                                Pg. 100

Roger Mills County,              2002-2002;             5/14/02             1-2003-001454;             4/1/03
Oklahoma                     Vol. 1678, Pg. 20                                Book 1705,
                                                                                Pg. 466
</TABLE>

                                      II-1
<PAGE>

                                  Schedule III

Partial Release of Lien and Security Interest by The Bank of Nova Scotia in
favor of Calpine Corporation (Multi-State Mortgage-partial release) filed as
follows:

<TABLE>
<CAPTION>
                                                                                PARTIAL                PARTIAL
                                  ORIGINAL              ORIGINAL             RELEASE FILE           RELEASE FILE
       JURISDICTION               FILE NO.             FILE DATE                  NO.                   DATE
       ------------               --------             ---------             ------------           ------------
<S>                          <C>                       <C>                <C>                       <C>
Duval County, TX             078197; Vol. 326,          5/16/02            079243; Vol. 334,           9/26/02
(Guerra Prospect)                 Pg. 787                                       Pg. 800

Duval County, TX             078197; Vol. 326,          5/16/02            Vol. 335, Pg. 393           10/8/02
(IMPAC)                           Pg. 787

Webb County, TX                   760758;                5/7/02           776680; Vol. 1287,          10/10/02
(Guerra Prospect)            Vol. 1210, Pg. 237                                 Pg. 558

Webb County, TX                   760758;                5/7/02           Vol. 1285, Pg. 053           10/7/02
(IMPAC)                      Vol. 1210, Pg. 237
</TABLE>

                                     III-1

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