Exhibit 10.3
 
DEED OF TRUST, SECURITY AGREEMENT, FINANCING
STATEMENT AND ASSIGNMENT OF PRODUCTION

(THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY)

FROM

LUCAS ENERGY, INC.
(Mortgagor and Debtor)

TO
 
Michael King, Trustee
for the benefit of

NORDIC OIL USA 1, LLLP
(Mortgagee and Secured Party)

The 13th day of October, 2011

For purposes of filing this Deed of Trust is a financing state­ment pursuant to
TEX. BUS. & COM. CODE ANN. §9.402 (Tex. UCC) (Vernon Supp. 1988), the mailing
address of Mortgagor is 3555 Timmons Lane, Suite 1550, Houston, Texas  77027;
the mailing address of Mortgagee is 3887 Pacific Street, Las Vegas,
Nevada  89121.

************************************

ATTENTION OF RECORDING OFFICER: This instrument is a mortgage of both real and
personal property and is, among other things, a Security Agreement and Financing
Statement under the Uniform Commercial Code. This instrument creates a lien on
rights in or relating to lands of Mortgagor which are described in Exhibit “A”
hereto.

RECORDED DOCUMENT SHOULD BE RETURNED TO:

Nordic Oil USA 1, LLLP
3887 Pacific Street
Las Vegas, Nevada  90121
Attention: Mr. Michael King

DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT
AND ASSIGNMENT OF PRODUCTION

 
 
 

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(THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY)

KNOW ALL MEN BY THESE PRESENTS:  That the undersigned LUCAS ENERGY, INC., a
Nevada corporation, acting herein by and through its proper officers who have
heretofore been duly authorized, and with its principal office located at 3555
Timmons Lane, Suite 1550, Houston, Texas  77027, ("Mortgagor"), and NORDIC OIL
USA 1, LLLP, a Delaware limited liability partnership, whose principal office
located at 3887 Pacific Street, Las Vegas, Nevada  89121  ("Mortgagee"), hereby
agree as follows:

ARTICLE I.

GRANT
A.           Lien.  Mortgagor, for valuable consideration, the receipt of which
is hereby acknowledged, and in consideration of the debt and trust hereinafter
mentioned, has granted, bargained, sold, conveyed, transferred and assigned, and
by these presents does grant, bargain, sell, convey, transfer and assign to
Michael King, Trustee, whose address is 3887 Pacific Street, Las Vegas,
Nevada  89121, and his successors and substitutes in trust, as hereinafter
provided, (the "Trustee"), for the benefit of Mortgagee, the following described
property:

Certain interests in oil, gas and mineral leases (the “Leases”) and oil, gas and
mineral estates in the premises covered by the Leases and lands pooled therewith
(the “Lands”) which Leases and Lands are more particularly described in the
schedule attached hereto, marked Exhibit “A” for identification, incorporated
herein and made a part hereof for all purposes.

B.           Security Interest.  For the same consideration, Mortgagor hereby
grants to Mortgagee, proportionate to Mortgagor’s interest in the Leases and
Lands described on Exhibit “A” hereto, a continuing security interest in the
improvements and the personal property of any kind or character defined in and
subject to the provisions of the Uniform Commercial Code, including the proceeds
and products from the improvements and personal property, now owned and
existing, and situated on any of the Leases and the Lands, including, but not
limited to, pipe, casing, tubing, rods, storage tanks, boilers, loading racks,
pumps, foundations, warehouses, and all other personal property and equipment of
every kind and character upon, incident, appurtenant or belonging to and used in
connection with Mortgagor's interest in the Leases and the Lands, including all
oil, gas and other minerals produced or to be produced to the account of
Mortgagor from the Leases and the Lands and the accounts receivable, general
intangibles and contract rights of Mortgagor in connection with the Lands or the
Leases, hereinafter defined, and all proceeds, products, substitutions and
exchanges thereof (the Lands, the Leases, hereinafter defined, and real and
personal property interests hereinabove described being the "Mortgaged
Property").

 
 
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C.           Assignment of Security. For the same consideration, Mortgagor
hereby grants to Mortgagee any and all rights of Mortgagor to liens and security
interests securing payment of proceeds from the sale of production from the
Mortgaged Property, including, but not limited to, those liens and security
interests provided for in TEX. BUS. & COM. CODE ANN. §9.319 (Tex. UCC) (Vernon
Supp. 1988).

D.           Habendum.  TO HAVE AND TO HOLD all and singular the Mortgaged
Property and all other property which, by the terms hereof, has become subject
to the lien and/or security interest of this Deed of Trust, Security Agreement,
Financing Statement and Assignment of Production (this "Deed of Trust"),
together with all rights, hereditaments and appurtenances in anywise belonging
to the Trustee or assigns forever.
 
ARTICLE II.

WARRANTIES

A.           Warranty of Title.  Mortgagor hereby binds itself, its successors
and assigns, to warrant and forever defend all and singular the above described
property, rights and interests constituting the Mortgaged Property to the
Trustee and to his assigns forever, against every person whomsoever lawfully
claiming or to claim the same or any part thereof.

B.           Additional Warranties.  For the same consideration, Mortgagor, for
itself, its successors and assigns, covenants, represents and warrants that:

(1)          Authority and Enforceability. The incurring by Mortgagor of the
indebtedness secured by this Deed of Trust and the execution and delivery by
Mortgagor  of the evidences of such indebtedness and this Deed of Trust and the
performance and observance by Mortgagor of the terms and provisions of such
evidence of indebtedness and this Deed of Trust have been duly authorized by any
necessary corporate proceedings and will not contravene any requirement of law
or any provision of Mortgagor's charter or by-laws or result in the breach or
termination of, or constitute a default under, any indenture or other agreement
or instrument to which Mortgagor is a party or by which it or any of its
property may be bound or affected.

(2)           Additional Authority. Mortgagor is the lawful owner of the
Mortgage Property and has good right and authority to pledge, mortgage, assign,
sell and convey the same.

(3)           Interests in Mortgaged Property. Mortgagor's interests in the
Mortgaged Property, as set forth in Exhibit “A” hereto, are true and correct.

(4)           Leases in Effect. All of the leases constituting all or part of
the Mortgaged Property (the "Leases") are in full force and effect and all
covenants, express or implied, in respect thereof, or of any assignment thereof
which may affect the validity of any of the Leases, have been performed insofar
as the Leases pertain to the Land.  The Leases are described on Exhibit “A”
hereto.

 
 
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(5)           Interests Free of Liens. Mortgagor's interest in the Leases is
free and clear of all liens, mortgages, oil payments, or other burdens or
encumbrances and all gross production taxes and other taxes as to which
non-payment could result in a lien against any of the Mortgaged Property have
been paid, except as specifically set forth in Exhibit “A” hereto.

(6)           Compliance with Laws. Mortgagor and the Mortgaged Property are in
compliance with all applicable laws and regulations, including, without
limitation, those relating to any flammables, explosives, radioactive materials,
hazardous wastes, friable asbestos or any material containing asbestos, toxic
substances or related materials, including, without limitation, substances
defined as "hazardous substances", "hazardous materials" or "toxic substances"
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Sec. 9601, et. seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Sec. 1801, et. seq. or the Resource Conservation
and Recovery Act, 42 U.S.C. Sec. 6901, et. seq. ("Hazardous Materials").

(7)           Gas Contracts. Except as set forth under the heading for this
provision in the schedule attached hereto, marked Exhibit “B” for
identification, incorporated herein and made a part hereof for all purposes,
Mortgagor (i) is not obligated in any material respect by virtue of any
prepayment made under any contract containing a "take or pay" or "prepayment"
provision, or under any similar agreement to deliver hydrocarbons produced from
or allocated to any of the Mortgaged Property at some future date without
receiving full payment therefor at the time of delivery and (ii) has not
produced gas, in any material amount, subject to, and neither Mortgagor nor any
of the Mortgaged Property is subject to, balancing rights of third parties or
subject to balancing duties under governmental requirements, except a to such
matters for which Mortgagor has established monetary reserves adequate in amount
to satisfy such obligations, and has segregated such reserves from other
accounts.

(8)           Refunds. Except as set forth under the heading for this provision
in the schedule attached hereto, marked Exhibit “B” for identification,
incorporated herein and made a part hereof for all purposes, there exist no
orders of, or proceedings pending before, or other governmental requirements of,
the Federal Energy Regulatory Commission, the Texas Railroad Commission or any
other similar state of federal regulatory body or governmental authority which
could result in Mortgagor being required to refund any material portion of the
proceeds received or to be received from the sale of hydrocarbons constituting
part of the Mortgaged Property.

ARTICLE III.

INDEBTEDNESS SECURED
 
This conveyance is made, IN TRUST, HOWEVER, to secure and enforce the payment of
the following indebtedness, obligations and liabilities:
 
 
 
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A.           Specific Obligation. The promissory note dated of even date
herewith executed by Mortgagor to the order of Mortgagee in the principal sum of
TWENTY-TWO MILLION AND NO/100 (USD) DOLLARS ($22,000,000.00) bearing interest
and payable as therein provided, with the final payment thereof due on or before
October 12, 2012, and containing the usual provisions in notes of this
character.

B.           "Indebtedness".  The word "Indebtedness" wherever used in this Deed
of Trust shall refer to all present and future debts, obligations and
liabilities described or referred to in this Article III or otherwise in this
Deed of Trust.
 
ARTICLE IV

COVENANTS OF MORTGAGOR

In consideration of the Indebtedness hereinabove described, Mortgagor, for
itself, its successors and assigns, covenants and agrees as follows:

A.           Title Curative.  Mortgagor will proceed with reasonable diligence
to correct any defect in the title to the Mortgaged Property should any such
defect be found to exist after the execution and delivery of this Deed of Trust;
and in this connection, should it be found, after the execution and delivery of
this Deed of Trust, that there exists upon the Mortgaged Property any lien or
encumbrance equal or superior in rank to the liens and security interests
created by this Deed of Trust, or should any such lien or encumbrance hereafter
arise, Mortgagor will promptly discharge and remove the same from the Mortgaged
Property.

B.           Further Assurances. Upon request of Mortgagee, Mortgagor will
promptly correct any defect which may be discovered after the execution and
delivery of this Deed of Trust in any other documents executed in connection
herewith, in the execution or acknowledgment hereof or thereof, or in the
description of the Mortgaged Property, and will execute, acknowledge, and
deliver such division orders, transfer orders and other assurances and
instruments as shall, in the opinion of Mortgagee, be necessary or proper to
convey and assign to the Trustee all of the Mortgaged Property herein conveyed
or assigned, or intended to be so.

C.           Notification of Loss. Mortgagor will notify Mortgagee of the
destruction, loss, termination or acquisition of any Mortgaged Property within
ten (10) business days thereof.

D.           Payment of Lienable Claims.  Mortgagor will pay all taxes now or
hereafter to accrue against any of the Mortgaged Property and all other taxes or
assessments, general or special, lawfully levied against it on such Mortgaged
Property which might become a lien thereon before such taxes become delinquent;
and it will during the life of this Deed of Trust keep the Mortgaged Property,
and each and every part thereof, free, clear and discharged from all liens,
charges, encumbrances, or assessments that might become superior, coordinate or
subordinate to the liens or security interests of this Deed of Trust.
 
 
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E.           Mortgagee's Payment of Lienable Claims. In the event Mortgagor
shall fail or neglect to pay any taxes, general or special, or shall fail or
neglect to relieve the Mortgaged Property from any lien which might become
superior or equal to the lien of this Deed of Trust, the Trustee, at his option,
or Mortgagee, at its option, may pay such taxes, liens, charges or encumbrances,
or any part thereof, and Mortgagor will promptly reimburse Trustee or Mortgagee,
as the case may be, therefore; and any and all such sums so paid hereunder shall
be paid by Mortgagor upon demand at Mortgagee's principal offices, and shall
constitute a part of the Indebtedness.

F.           Operation of Mortgaged Property. Mortgagor will operate or, to the
extent that the right of operation is vested in others, will exercise its best
efforts to require the operator to operate the Mortgaged Property and all wells
drilled thereon and that may hereafter be drilled thereon, continuously and in
good workmanlike manner in accordance with the best usage of the field and in
accordance with all laws of the State in which the Mortgaged Property is
situated and the United States of America, as well as all rules, regulations,
and laws of any governmental agency having jurisdiction to regulate the manner
in which the operation of the Mortgaged Property shall be carried on, and will
comply with all terms and conditions of the Leases it now holds, or any
assignment or contract obligating Mortgagor in any way with respect to the
Mortgaged Property; but nothing herein shall be construed to empower Mortgagor
to bind the Trustee or Mortgagee to any contract obligation, or render the
Trustee or Mortgagee in any way responsible or liable for bills or obligations
incurred by Mortgagor.

G.           Maintenance of Liability and Casualty Insurance. Mortgagor will
carry with standard insurance companies satisfactory to Mortgagee or holder of
the Indebtedness, public liability and property damage insurance, as well as
insurance against loss or damage to the Mortgaged Property by fire, lightning,
tornado and explosion, all in amounts satisfactory to Mortgagee; all such
policies shall be payable to Mortgagee, and the policies evidencing the same or
acceptable certificates thereof shall be held by Mortgagee.  Mortgagee shall
have the right to collect, and Mortgagor hereby assigns to Mortgagee, any and
all monies that may become payable under any policies of insurance by reason of
damage, loss or destruction of the Mortgaged Property or any part thereof and
Mortgagee shall apply all such sums or any part thereof, at its election, toward
the payment of the Indebtedness, whether the same be then due or not,
application to be made first to interest and then to principal, and shall
deliver to Mortgagor the balance, if any, after any application has been made.

H.           Compliance with Operating Agreements. Mortgagor agrees to promptly
pay all bills for labor and materials incurred in the operation of the Mortgaged
Property and will promptly pay its share of all costs and expenses incurred
under any joint operating agreement affecting the Mortgaged Property or any
portion thereof; will not take any action to incur any liability or lien
thereunder.  To the extent that Mortgagor is unable to consent to any proposed
operation with respect to any of the Mortgaged Property, prior to electing not
to participate in the proposed operation, Mortgagor will utilize its best
efforts, to the extent practicable once it is determined that it cannot so
participate, and to the extent allowed to do so under the relevant operating
agreement or other applicable contract, attempt to farmout to others acceptable
to Mortgagee, on the best terms obtainable, which terms shall be acceptable to
Mortgagee, the interest or relevant portion of the interest of Mortgagor in the
proposed operation.

 
 
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I.           Access to Mortgaged Property.  Mortgagor will permit Mortgagee and
its accredited agents, representatives, attorneys and employees at all times to
go upon, examine, inspect and remain on the Mortgaged Property, and to go upon
the derrick floor of any well at any time drilled or being drilled thereon, and
will furnish Mortgagee, upon request, all pertinent information regarding the
development and operation of the Mortgaged Property.

J.           Evidence of Title.  Promptly upon receipt of a request from
Mortgagee, Mortgagor will furnish and deliver, at the election of Mortgagee,
either (a) complete or supplemental abstracts of title, as the case may be,
prepared by competent abstractors or (b) title opinions prepared by competent
legal counsel and, in either event, covering title to the real property herein
mortgaged from the sovereignty of the soil to the latest practicable date, when
taken together with abstracts and/or title opinions previously furnished to
Mortgagee by Mortgagor. Should Mortgagor fail to furnish such abstracts upon
such request, Mortgagee may obtain such abstracts, and any and all costs
incurred thereby shall be payable by Mortgagor to Mortgagee upon demand at
Mortgagee's principal offices.  The abstracts shall be and constitute a part of
the Mortgaged Property as defined above.

K.           Notification of Legal Proceedings. Mortgagor will promptly notify
Mortgagee or other holder or holders of the Indebtedness, in writing, of the
commencement of any legal proceedings affecting the Mortgaged Property or any
part thereof, and will take such action as may be necessary to preserve its and
Mortgagee's rights affected thereby; and should Mortgagor fail or refuse to take
any such action, Mortgagee may at its election take such action on behalf and in
the name of Mortgagor and at Mortgagor's cost and expense.

L.           Maintenance of Existence.  If Mortgagor, is a corporation, it
will  maintain its corporate existence and will maintain and procure all
necessary corporate franchise and permits to the end that Mortgagor shall be and
continue to be a corporation in good standing in the state of its incorporation
and in the state wherein the Mortgaged Property is located, with full power and
authority to own and operate all of the Mortgaged Property as contemplated
herein until this Deed of Trust shall have been fully satisfied.

M.           Sales of Assets or Reorganization. While the Indebtedness, or any
portion thereof, remains unpaid, Mortgagor will not sell, lease transfer or
otherwise dispose of all or substantially all of the Mortgaged Property, or, if
Mortgagor is a corporation, consolidate or merge into any other corporation, or
permit another corporation to merge into it without the prior written consent of
Mortgagee.

N.           Compliance with Laws. Mortgagor will comply at all times with all
federal, state and local laws, regulations, and ordinances applicable to the
Mortgaged Property, including, without limitation, all environmental protection
and hazardous waste requirements, and in this regard:

 
 
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(1)           Natural or Environmental Resources Compliance.  Mortgagor will
comply with and all applicable local, state and federal laws, ordinances, rules,
regulations and orders (a) related to any natural or environmental resource or
media located on, above, within, in the vicinity of, related to or affected by
the Mortgaged Property, any property in which Mortgagee has a mortgage, security
or other interest or any other property of Mortgagor, or (b) required for the
performance or conduct of its operations.

(2)           Notification of Hazardous Materials Inquiries.   Mortgagor will
forthwith notify Mortgagee in writing of any request from any governmental
agency or other entity for information on releases of Hazardous Materials from,
affecting or related to the Mortgaged Property, any property in which Mortgagee
has a mortgage, security or other interest or any other property of Mortgagor;
notify Mortgagee of any actual, proposed or threatened testing or other
investigation by any governmental agency or other entity concerning the
environmental condition of or related to such property; provide to Mortgagee
such information as Mortgagee shall request concerning the generation, storage,
disposal, transportation or other management, if any, of any Hazardous
Materials.

(3)           Hazardous Materials Compliance and Indemnification.  Mortgagor
will at all times comply fully and in a timely manner with, and will cause all
employees, agents, contractors, sub-contractors and future lessees (pursuant to
appropriate lease provisions) of Mortgagor, while such persons are acting within
the scope of their relationship with Mortgagor, to so comply with, all
applicable federal, state and local laws, regulations, guidelines, codes and
ordinances applicable to the use, generation, handling, storage, treatment,
transport and disposal of any Hazardous Materials now or hereafter located or
present on or under the Mortgaged Property, and Mortgagor indemnifies and holds
Mortgagee harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, administrative and judicial proceedings
and orders, judgments, remedial actions, requirements and enforcement actions of
any kind, and all costs and expenses incurred in connection therewith
(including, without limitation, attorneys' fees and expenses), arising directly
or indirectly, in whole or in part, out of (a) the presence of any Hazardous
Materials on, under or from the Mortgaged Property, whether prior to or during
the term hereof, or (b) any activity carried on our undertaken on or off the
Mortgaged Property, whether prior to or during the term hereof, and whether by
Mortgagor our any predecessor in title or any employees, agents, contractors or
subcontractors of Mortgagor or any predecessor in title, or any third persons at
any time occupying or present on the Mortgaged Property, in connection with the
handling, treatment, removal, storage, decontamination, cleanup, transport or
disposal of any Hazardous Materials at any time located or present on or under
the Mortgaged Property, including, without limitation, any of the foregoing
arising, in whole or in part, form negligence on the part of Mortgagee, (the
foregoing indemnity being the "Hazardous Materials Indemnity").  The Hazardous
Materials Indemnity shall further apply to any residual contamination on or
under the Mortgaged Property, or affecting any natural resources, and to any
contamination of any property or natural resources arising in connection with
the generation, use, handling, storage, transport or disposal of any Hazardous
Materials, irrespective of whether any of such activities were or will be
undertaken in accordance with applicable laws, regulations, codes and
ordinances; and

 
 
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(4)           Survival of Indemnification.  The Hazardous Materials Indemnity
shall survive repayment of the indebtedness, provided that the claims and other
actions of any kind against Mortgagee which give rise to the hazardous Materials
Indemnity are not barred by the applicable statute of limitations at the time
such claims or actions are instituted.

O.           Performance of Gas Contracts.   Mortgagor will perform and observe
in all material respects each of the provisions of the contracts relating to the
sale of gas produced from or attributable to the Mortgaged Property to which
Mortgagor is a party on its part to be performed or observed prior to the
termination thereof and will give Mortgagee prior written notice of any change,
modification or amendment to or waiver of any of the terms or provisions of any
of such contracts or any action which will release any party form its
obligations or liabilities under any of such contracts, none of which shall be
done except in good faith and as the result of arm's length negotiations.

ARTICLE V.

DEFEASANCE, FORECLOSURE AND OTHER REMEDIES

A.           Defeasance.  Should Mortgagor make due and punctual payment of the
Indebtedness, as the same becomes due and payable, and duly observe and perform
all of the covenants, conditions and agreements herein provided to be observed
and performed by it, then the conveyance of the Mortgaged Property shall become
of no further force and effect, and the lien and security interest thereof shall
be released at the cost and expense of Mortgagor; otherwise, it shall remain in
full force and effect.

B.           Default Events, Acceleration and Exercise of Power of Sale. In case
any one or more of the following events of default shall happen:

(1)           Payment of Indebtedness. Default be made by Mortgagor in the due
and punctual payment of the Indebtedness, or any part thereof, principal or
interest, as the same becomes due and payable, whether by acceleration or
otherwise, or

(2)           Covenants and Warranties.  Default be made by Mortgagor in the due
observance or performance of any of the covenants, conditions or agreements
herein provided to be observed or performed by Mortgagor or any warranty of
Mortgagor herein made prove to be untrue or inaccurate in any material respect;
or

(3)           Failure of Title.  Mortgagor's title to the Mortgaged Property, or
any substantial part thereof, become the subject of actual or threatened
litigation which would or might, in Mortgagee's opinion, on final determination
result in substantial impairment or loss of the security provided for herein; or
 
(4)           Sale or Encumbrance. Mortgagor, without the prior written consent
of,Mortgagee shall not sell, assign, lease, transfer, mortgage, pledge,
hypothecate or otherwise dispose of or encumber all or any portion of the
Mortgaged Property or enter into any contractual arrangement to do so,
irrespective of whether or not the transfer, conveyance or encumbrance would or
might (i) diminish the value of any security for the Indebtedness, (ii) increase
the risk of default under this Deed of Trust, (iii)  increase the likelihood of
Mortgagee's having to resort to any security for the Indebtedness after default
or (iv) add or remove the liability of any person or entity for payment or
performance of the Indebtedness or any covenant or obligation under this Deed of
Trust; provided, however, the foregoing shall not apply to hydrocarbons produced
and sold in the ordinary course of business; or

 
 
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(5)           Involuntary Insolvency. ,An order, judgment or decree be entered
against Mortgagor by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise, granting
relief under Title 11 of the United States Code or under any bankruptcy,
insolvency, debtor's relief or other similar law of the United States or any
state approving a petition seeking reorganization or an arrangement of
Mortgagor's debts or appointing a receiver, trustee, conservator, custodian or
liquidator of mortgagor or all or any substantial part of Mortgagor's assets; or

(6)           Voluntary Insolvency. Mortgagor (i) discontinue its usual
business, or (ii) apply for or consent to the appointment of a receiver, trustee
or liquidator of Mortgagor or all or a substantial part of its assets, or (iii)
file a voluntary petition commencing a case under Title 11 of the United States
Code, seeking liquidation, reorganization or rearrangement, or taking advantage
of any bankruptcy, insolvency, debtor's relief or other similar law of the
United States or any state, or (iv) make a general assignment for the benefit of
creditors, or (v) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (vi) file an answer admitting the material
allegations of a petition filed against it in any case commence under Title 11
of the United States Code or any reorganization, insolvency, conservatorship or
similar proceeding under any bankruptcy, insolvency, debtor's relief or other
similar law of the United States or any state, or apply for relief under any
state or federal act for the relief of debtors; or

(7)           Contracts Relating to Indebtedness.  Default be made by Mortgagor
in the due observance or performance of any of the covenants, conditions or
agreements provided to be observed or performed by Mortgagor in any loan
agreement or other contract or agreement relating to any Indebtedness; or

(8)           Fraudulent Actions or Preference of Creditor.  Mortgagor conceal,
remove, or permit to be concealed or removed, any part of its property, with
intent to hinder, delay or defraud its creditors or any of them; or make or
suffer a transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or make any transfer of its
property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid amounts owing; or take any other action in
the nature of a fraud upon its creditors, or any of them; then, and in any such
event, the whole of the principal of the Indebtedness remaining unpaid, together
with all interest accrued thereon, may, at the option of the holder thereof,
without notice (including, but not limited to, notice of intention to accelerate
maturity and notice of acceleration of maturity) or demand, which are, to the
full extent permitted by applicable law, waived by Mortgagor for purposes of any
provision of this Deed of Trust or of the evidences of the Indebtedness, be
declared immediately due and payable; and thereupon, or at any time thereafter
while the Indebtedness or any part thereof remains unpaid, it shall be the duty
of the Trustee, on request of the holder of the Indebtedness (which request is
hereby presumed), to enforce this Trust; and after advertising the time and
place of the sale for at least 21 days prior to the day of sale, by posting or
causing to be posted a written or  printed notice thereof at the courthouse door
and by filing a copy of such notice in the office of the county clerk of each
county in which the Land or any part thereof may be situated, and serving
written notice of the proposed sale on each debtor obligated to pay the
Indebtedness according to the records of the holder of the Indebtedness, by
postage prepaid, certified United States mail, at the most recent address for
such debtor as shown by the records of the holder of the Indebtedness, at least
21 days prior to the day of sale, to sell the Mortgaged Property, either as a
whole or in parcels, as the Trustee may deem proper, at public venue at the
courthouse of the county in which the Mortgaged Property or any part thereof may
be situated (and being the county designated in the notice of sale) on the first
Tuesday of any month between the hours of 10:00 A.M. and 4:00 P.M., to the
highest  bidder for cash, and after such sale to make the purchaser or purchaser
good and sufficient deeds and assignments in the name of Mortgagor herein,
conveying such property so sold to the purchaser or purchasers with general
warranty of title.  The Trustee, or his successor or substitute, is hereby
authorized and empowered to appoint any one or more persons as his
attorney(s)-in-fact to act as Trustee under him and in his name, place and
stead, such appointment to be evidenced by a written instrument executed by the
Trustee, or his successor or substitute, to perform any one or more act or acts
necessary or incident to any sale and the execution and delivery of any
instruments conveying the Mortgaged Property as a result of the sale, but in the
name and on behalf of the Trustee, or his successor or substitute; and all acts
done or performed by such attorney(s)-in-fact shall be valid, lawful and binding
as if done or performed by the Trustee, or his successor or substitute.  No
single sale or series of sales by the Trustee shall extinguish the lien or
exhaust the power of sales by the Trustee shall extinguish the lien or exhaust
the power of sale hereunder except with respect to the times of property sold,
but such lien and power shall exist for so long as and may be exercised in any
manner by law or as herein provided as often as the circumstances require to
give Mortgagee full relief hereunder.  The purchaser at any such sale shall not
assume, nor shall his or its heirs, legal representatives, successors or
assigns, be deemed to have assumed, by reason of the acquisition of property or
rights mortgaged hereunder, any liability or obligation of any lessee or
operator of the Mortgaged Property, or any part thereof, arising by reason of
any occurrence taking place prior to such sale.  It shall not be necessary to
have present, or to exhibit at any such sale, any of the personal property
subject to the lien or security interest hereof.

 
 
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C.           Rights as Secured Party.   Upon the happening of any of the
above-enumerated events of default, Mortgagee shall be entitled to all of the
rights, powers and remedies afforded a secured party by the Uniform Commercial
Code with reference to the personal property and fixtures in which Mortgagee has
been granted a security interest hereby, or Mortgagee may proceed as to both the
real and personal property covered hereby.

D.           Application of Proceeds of Sale. The Trustee is authorized to
receive the proceeds of sale or sales and apply the same as follows:

FIRST:   to the payment of all necessary costs and expenses incident to the
execution of this Deed of Trust, including, but not limited to, a fee to the
Trustee of 2% to be estimated upon the amount realized at the sale;

SECOND:  to any and all Indebtedness then hereby secured, application to be made
in such order and in such manner as the holder of said Indebtedness may, in its
discretion, elect;

THIRD:  the balance, if any, to Mortgagor or its successors or assigns.

E.           Substitute Trustee. In the event of the death of the Trustee, or
his removal from the state of Texas, or his failure, refusal, or inability for
any reason to make any such sale or to perform any of the trusts herein
declared, or at any time, whether with or without cause, then the holder of the
Indebtedness may appoint, in writing, a substitute trustee who shall thereupon
succeed to all the estates, rights, powers, and trusts herein granted to and
vested in the Trustee.  In the same events as first above stated, and in the
same manner, successive substitute Trustees may thereafter be appointed.

F.           Statements by Trustee.  It is agreed that in any deed or deeds
given by any Trustee any and all statements of fact or other recitals therein
made as to the identity of the holder or holders of the Indebtedness, or as to
default in the payments thereof or any part thereof, or as to the breach of any
covenants herein contained, or as to the request to sell, notice of sale, time,
place, terms and manner of sale, and receipt, application, and distribution of
the money realized there from, or as to the due and proper appointment of a
substitute trustee, and,  without being limited by the foregoing, as to any
other or additional act or thing having been done by Mortgagee or by any other
holder of the Indebtedness or by the Trustee, shall be taken by all courts of
law and equity as prima facie evidence that the statements or recitals state
facts and are without further question to be so accepted; and Mortgagor does
hereby ratify and confirm any and all acts that the Trustee may lawfully do in
the premises by virtue of the terms and conditions of this instrument.

G.           Suit to Collect and Foreclose.  The holder of the Indebtedness may,
at its election, or the Trustee may, upon written request of the holder of the
Indebtedness, proceed may suit or suits, at law or inequity, to enforce the
payment of the Indebtedness in accordance with the terms hereof and of the note,
notes or guaranties evidencing it, and to foreclose the lien and/or security
interest of this Deed of Trust as against all or any portion of the Mortgaged
Property and to have such property sold under the judgment or decree of a court
of competent jurisdiction.

H.           Mortgagee as Purchaser.  It is expressly understood that the holder
of the Indebtedness, or the Trustee, may be a purchaser of the Mortgaged
Property, or of any part thereof, at any sale thereof, whether such sale be
under the power of sale hereinabove vested in the Trustee or upon any other
foreclosure of the lien and/or security interest hereof, or otherwise; and the
holder of the Indebtedness or the Trustee so purchasing shall, upon any such
purchase, acquire good title to the Mortgaged Property so purchased, free of the
lien and/or security interest of this Deed of Trust and free of all rights of
redemption in Mortgagor.

 
 
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I.           Remedies Cumulative and Non-Exclusive. The rights of entry, sale,
or suit, as hereinabove or hereinafter conferred, are cumulative of all other
rights and remedies herein or by law or in equity provided, and shall not be
deemed to deprive the holder of the Indebtedness or Trustee of any such other
legal or equitable rights or remedies, by judicial proceedings or otherwise,
appropriate to enforce the conditions, covenants and terms of this Deed of Trust
and of any note or guaranty reflecting the Indebtedness, and the employment of
any remedy hereunder, or otherwise, shall not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies.

ARTICLE VI.

ASSIGNMENT OF PRODUCTION

A.           Contingent Assignment. In addition to the conveyance to the Trustee
herein made, in the event of a default by Mortgagor (as described herein),
Mortgagor shall transfer, assign, deliver and convey unto Mortgagee, its
successors and assigns, all of the oil, gas and other minerals produced, saved
or sold from the Mortgaged Property and attributable to the interest of
Mortgagor therein, together with the proceeds of any sale thereof; and in such
event, Mortgagor shall direct any purchaser taking any production from the
Mortgaged Property to pay to Mortgagee such proceeds derived from the sale
thereof, and to continue to make payments directly to Mortgagee until notified
in writing by Mortgagee to discontinue the same; and the purchaser of any such
production shall not be required to see to the application of the proceeds
thereof by Mortgagee and payment made to Mortgagee shall be binding and
conclusive as between such purchaser and to execute all such further
assignments, transfer and division orders, and other instruments as may be
required or desired by Mortgagee or any other party to have such proceeds and
revenues so paid to Mortgagee.

B.           Application of Proceeds. In the event that Mortgagee takes
possession of all of the oil, gas and other minerals produced saved or sold from
the Mortgaged Property in accordance with A. immediately above, Mortgagor
authorizes and empowers Mortgagee to receive, hold and collect all sums of money
paid to Mortgagee in accordance with the Contingent Assignment, and to apply the
same as hereinafter provided, all without any liability or responsibility on the
part of Mortgagee, save and except as to good faith and proper business
practices in so receiving and applying such sums.  All payments provided for in
the Contingent Assignment shall be paid promptly to Mortgagee, and any
provisions contained in any note or notes evidencing the Indebtedness or any
part thereof to the contrary notwithstanding, Mortgagee may apply the same or so
much thereof as it elects to the payment of the Indebtedness, application to be
made in such manner as it may elect, regardless of whether the application so
made shall exceed the payments of principal and interest then due as provided in
the note or notes evidencing the Indebtedness.  After such application has been
so made by Mortgagee, the balance of any such payment or payments remaining
shall be paid to Mortgagor.

 
 
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C.           No Postponement of Installments on Indebtedness. It is understood
and agreed that should such payments provided for by the Contingent Assignment
be less than the sum or sums then due on the Indebtedness, such sum or sums then
due shall nevertheless be paid by Mortgagor in accordance with the provisions of
the note, notes, guaranty agreements or other instrument or instruments
evidencing the Indebtedness, and neither the Contingent Assignment nor any
provisions and provisions of such note, notes, guaranty agreements or other
instrument or instruments evidencing the Indebtedness.  Likewise, neither the
Contingent Assignment nor any provisions hereof shall in any manner be construed
to affect the liens, rights, title and remedies herein granted securing the
Indebtedness or Mortgagor's liability therefore.  The rights under the
Contingent Assignment are cumulative of all other rights, remedies, and powers
granted under this Deed of Trust, and are cumulative of any other security which
Mortgagee now holds or may hereafter hold to secure the payment of the
Indebtedness.

D.           Turnover to Mortgagee. Should Mortgagor receive any of the proceeds
of any sale of oil, gas or other minerals produced, saved or sold from the
Mortgaged Property, which under the terms of this Article VI. should have been
remitted to Mortgagee, Mortgagor will immediately remit same in full to
Mortgagee.

E.           Release of Proceeds Upon Payment of Indebtedness.  Upon payment in
full of all Indebtedness, the remainder of such proceeds held by Mortgagee, if
any, shall be paid over to Mortgagor upon demand, and a release of the interest
hereby assigned will be made by Mortgagee to Mortgagor at its request and its
expense.

F.           Duty of Mortgagee.  Mortgagee shall not be liable for any failure
to collect, or for any failure to exercise diligence in collecting, any funds
assigned hereunder.  Mortgagee shall be accountable only for funds actually
received.

ARTICLE VII.

ADDITIONAL REMEDIES

A.           Mortgagee's Remedying of Mortgagor's Failure to Comply.  If
Mortgagor should fail to comply with any of the covenants or obligations of
Mortgagor hereunder, then Mortgagee or the Trustee may perform the same for the
account and at the expense of mortgagor but shall not be obligated so to do, and
any and all expenses incurred or paid in so doing shall be payable by Mortgagor
to Mortgagee, with interest at the greater of (i) the rate of 10% per annum or
(ii) the rate agreed upon in any other document or instrument relating to the
Indebtedness or any part thereof from the date when same was so incurred or
paid, and the amount thereof shall be payable on demand and shall be secured by
and under this time when paid shall be fully established by the affidavit of
Mortgagee or any officer or agent thereof, or by the affidavit of any Trustee
acting hereunder; provided, however, that the exercise considered or constitute
a waiver of the right of Mortgagee upon the happening of an event of default
hereunder to declare the Indebtedness at once due and payable but shall be
cumulative of such right and all other rights herein given.

 
 
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B.           Entry and Operation.  In case any one or more of the events of
default shall happen, then in each and every such case the Trustee or Mortgagee
or any holder of the Indebtedness or any part hereof, whether or not the
Indebtedness shall have been declared due and payable, in addition to the other
rights and remedies hereunder, may exercise the following additional remedy, but
shall not be obligated so to do:  the Trustee, Mortgagee or possession of all or
any part of the Mortgaged Property and each and every part thereof and may
exclude Mortgagor, its agents and servants wholly there from and have, hold,
use, operate, manage and control the Mortgaged Property and each and every part
thereof and produce the oil, gas and other minerals there from and market the
same, all at the sole risk and expense of Mortgagor and at the expense of the
Mortgaged Property, applying the net proceeds so derived, first, to the cost of
maintenance and operation of such Mortgaged Property; second, to the payment of
all Indebtedness secured hereby, principal and interest, application to be made
first to interest and then to principal; and the balance thereof, if any, shall
be paid to Mortgagor.  Upon such payment of all such costs and Indebtedness, the
Mortgaged Property shall be returned to Mortgagor in its then condition and such
Trustee, Mortgagee or holder of the Indebtedness shall not be liable to
Mortgagor for any damage or injury to the Mortgaged Property except such as may
be caused through his, its or their fraud or willful misconduct.

C.           Power of Attorney to Mortgagee. Mortgagor does hereby designate
Mortgagee as Mortgagor's agent to act in the name, place and stead of Mortgagor
in the exercise of each and every remedy set forth herein and in conducting any
and all operations and taking any and all action reasonably necessary to do so,
recognizing such agency in favor of Mortgagee to be coupled with the interests
of Mortgagee under this Deed of Trust and, this, irrevocable.

ARTICLE VIII.

MISCELLANEOUS

A.           Interest. Any provision in any document that may be executed in
connection herewith to the contrary notwithstanding, the holder of the
Indebtedness shall in no event be entitle to receive or collect, nor shall any
amounts received hereunder be credited so that the holder of the Indebtedness
shall be paid as interest, a sum greater than that authorized by law.  If any
possible construction of this Deed of Trust or any instrument evidencing the
Indebtedness, or any or all other notes, guaranties or papers relating to the
Indebtedness, seems to indicate any possibility of a different power given to
the holder of the Indebtedness, or any authority to ask for, demand, or receive
any larger rate of interest, such as a mistake in calculation or wording, this
clause shall override and control, and proper adjustments shall be made
accordingly.

B.           Agreement as Entirety.  This Deed of Trust, for convenience only,
has been divided into Articles and paragraphs, and it is understood that the
rights, powers, privileges, duties and other legal relations of Mortgagor, the
Trustee, and Mortgagee or any holder of the Indebtedness, shall be determined
from this instrument as an entirety and without regard to the aforesaid division
into Articles and paragraphs and without regard to headings prefixed to such
Articles.

 
 
 
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C.           Number and Gender. The terms used to designate any of the parties
herein shall be deemed to include the heirs, successors and assigns of such
parties; the term "successor" shall include the heirs, trustees and legal
representatives; and the term "Mortgagee" shall also include any lawful owner,
holder or pledgee of any Indebtedness.  Whenever the context requires, reference
herein made to the single number shall be understood to include the plural and
the plural shall likewise be understood to include the singular.  Words denoting
sex shall be construed to include the masculine, feminine, and neuter when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative.

D.           Rights and Remedies Cumulative. Every right and remedy provided for
herein shall be cumulative of each and every other right or remedy of Mortgagee,
whether herein or otherwise conferred, and may be enforced concurrently
therewith, and the unenforceability or invalidity of any one or more provisions,
clauses, sentences or paragraphs of this instrument shall not render any other
provision, clause, sentence or paragraph unenforceable or invalid.  No security
theretofore, herewith or subsequently taken by Mortgagee shall in any manner
impair or affect the security given by this instrument or any security by
endorsement or otherwise presently or previously given, and all security given
by this instrument or any security by endorsement or otherwise presently or
previously given, and all security shall be taken, considered and held as
cumulative.

E.           Parties in Interest. This Deed of Trust shall be binding upon the
parties, their respective successors and assigns, and shall inure to the benefit
of the holder of the Indebtedness, and the covenants and agreements herein
contained shall constitute covenants running with the Land.

F.           Counterparts. This instrument is simultaneously executed in a
number of identical counterparts, each of which for all purposes shall be deemed
an original and shall be deemed, and may be enforced from time to time, as a
chattel mortgage, real estate mortgage, deed of trust, security agreement,
assignment or contract, or as one or more thereof.

G.           Fixtures, Minerals and Accounts.  Without in any manner limiting
the generality of any of the foregoing hereof, some portions of the personal
property described hereinabove are or are to become fixtures on the land
described herein or to which reference is made herein.  In addition, the
security interest created hereby under applicable provisions of the Uniform
Commercial Code attaches to minerals, including oil and gas, or accounts
resulting from the sale thereof, at the wellhead or mine head located on the
land describe or to which reference is made herein.

 
 
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H.           Financing Statement and Utility Security Instrument Filings.  This
Deed of Trust may file as provided in TEX. BUS. & COM. CODE ANN. Ch. 35 (Vernon
1987) relating to the granting of a security interest by utilities, and may also
be filed as provided in TEX. BUS. & COM. CODE ANN. Ch. 9 (Tex. UCC) (Vernon
Supp. 1988) relating to the granting of security interests by nonutilities to
assure that the security interests granted by this Deed of Trust are perfected
under Texas law.  In this connection, this instrument will be presented to a
filing officer under the Uniform Commercial Code to be filed in the real estate
records as a Financing Statement covering minerals and fixtures, pursuant to
TEX. BUS. & COM. CODE ANN. §§9.402(e) and 9.402(f) (Tex UCC) (Vernon Supp.
1988).  The filing of this Deed of Trust under the provisions of TEX. BUS. &
COM. CODE ANN. Ch. 35 (Vernon 1987) shall not constitute an admission by
Mortgagor that it is a utility for purposes of TEX. BUS. & COM. CODE ANN. Ch. 35
(Vernon 1987) or any other statute or rule or regulation of any governmental
authority or agency.

I.           Addresses. For purposes of filing this Deed of Trust as a financing
statement, the addresses for Mortgagor, as the debtor, and Mortgagee, as the
secured party, are as set forth hereinabove.

J.           Recording Counterparts. For the convenience of the parties, this
instrument may be executed in multiple counterparts.  For recording purposes,
various counterparts have been executed and there may be attached to each such
counterpart an Exhibit “A” containing only the description of the Mortgaged
Property, or portions thereof, which relates to the county or state in which the
particular counterpart is to be recorded.  A complete, original counterpart of
this instrument with a complete Exhibit “A” may be obtained from
Mortgagee.  Each of the counterparts hereof so executed shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.

K.           No Waiver by Mortgagee. The failure or delay of Mortgagee to file
or give any notice as to this instrument, or to exercise any right, remedy or
option to declare the maturity of the principal debt, or any other sums hereby
secured, or the payment by Mortgagee of any taxes, liens, charges or
assessments, shall not be taken or deemed a waiver of any rights to exercise
such right or option or to declare any such maturity as to any past or
subsequent violations of any of such covenants or stipulations, and shall not
waive or prejudice any right or lien hereunder.  Any election or failure by
Mortgagee to exercise any rights, remedies or options hereunder shall not
constitute a waiver or prejudice the exercise of other rights or remedies
existing hereunder.  All rights, powers, immunities, remedies and liens or
Mortgagee existing and to exist hereunder or under any other instruments, and
all other or additional security, and Mortgagee's rights at law and in equity,
shall be cumulative and not exclusive, each of the other; and Mortgagee shall in
addition to the remedies herein expressly provided, be entitled to such other
remedies as my now or hereafter exist at law or in equity for securing and
collecting the Indebtedness, for enforcing the covenants herein, and for
foreclosing the liens hereof.  Resort by Mortgagee to any remedy provided for
hereunder or at law or in equity shall not prevent concurrent or subsequent
resort to the same or any other remedy or remedies.

L.           Partial Releases.  On even date herewith, Mortgagor, as buyer, and
Mortgagee, as seller, entered into that certain Purchase and Sale Agreement (the
“PSA”) whereby the Leases and Lands (together with other property rights and
interests) were sold and conveyed including properties and interests described
in the PSA as the “Subject Properties” (and individually, as a “Subject
Property”).  Exhibit “B” to the PSA contains, among other provisions, specific
allocation of values for each Subject Property.  Any provision in this Deed of
Trust to the contrary notwithstanding, should there exist no outstanding Event
of Default at the time when Mortgagor makes any prepayment(s) (as provided by
the terms of the herein-described promissory note), from time to time while the
Deed of Trust is in force and effect Mortgagor may designate in writing to
Mortgagee a Subject Property or Subject Properties to be released from the lien
and security interest created hereby.  Any prepayment made by Mortgagor shall be
applied, in accordance with the terms of the promissory note, first to accrued
and outstanding unpaid interest, and the remainder to payment of principal.  In
the event of any prepayment made by Mortgagor, in an amount or amounts which are
in excess of all then-outstanding and accrued interest (an “Excess Principal
Payment”), such Excess Principal Payment may be utilized by Mortgagor to secure
the release of a Subject Property or Subject Properties, by applying an Excess
Principal Payment toward the allocated value(s) of a Subject Property or Subject
Properties.  Any Subject Property whose allocated value has been paid by
Mortgagor utilizing an Excess Principal Payment, shall be released from the lien
and security interest created hereby.  Mortgagor shall prepare any Partial
Releases of a Subject Property or Subject Properties to be released in
accordance with the terms of this paragraph L. and provide a copy of same to
Mortgagee for its execution and delivery to Mortgagor.  Mortgagor shall file for
record any such Partial Release and pay the filing fees for recordation of any
such Partial Release.
 
 
 
 
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EXECUTED on this the 13th day of October, 2011.
 

 
MORTGAGEE:
     
LUCAS ENERGY, INC.
             
By: /s/ William A. Sawyer
 
Printed Name:  William A. Sawyer
 
Title:  President and Chief Executive Officer

 
 
 
 
 
 

 
 
 
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