Exhibit 10.142

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR
STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED
FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S
LICENSE NUMBER.

DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT

AND ASSIGNMENT OF PRODUCTION

(Oil, Gas and Mineral Properties)

This instrument contains after-acquired property provisions

 

THE STATE OF TEXAS   |     

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   KNOW ALL MEN BY THESE PRESENTS: COUNTY OF WOOD  

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That the undersigned, ENERGYTEC, INC., a Nevada corporation, acting herein by
and through its proper officer who has heretofore been duly authorized, with its
principal office in Piano, Texas, and the mailing address for which is 4965
Preston Park Boulevard, Suite 270 East, Piano, Texas 75093 (AMortgagor”, whether
one or more), and Gladewater National Bank, the banking quarters for which are
at 678 North Main, Gladewater, Gregg County, Texas, and the mailing address for
which is Post Office Box 1749, Gladewater, Texas 75647-0027 (“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 Redonia
Harper, Trustee, whose address is Post Office Box 1749, Gladewater, Texas
75647-0027, and his successors and substitutes in trust, as hereinafter
provided, (the “Trustee”), for the benefit of Mortgagee, the following described
property:

Certain interest in oil, gas and mineral fee and leasehold estates in the
property more particularly described in the schedule attached hereto, marked
Exhibit “A” for identification, incorporated herein and made a part hereof for
all purposes (the “Land”).

B. Security Interest. For the same consideration, Mortgagor hereby grants to
Mortgagee a continuing security interest in all improvements and all 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 any and
all of such improvements and personal property, whether now owned and existing
or hereafter acquired or arising, and situated on any of the Land, 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 Land, including all
oil, gas and other minerals produced or to be produced to the account of
Mortgagor from the Land and all accounts receivable, general intangibles and
contract rights of Mortgagor in connection with the Land or the Leases,
hereinafter defined, and all proceeds, products, substitutions and exchanges
thereof (the Land, the Leases, hereinafter defined, and real and personal
property interests hereinabove described being the “Mortgaged Property”).

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. Sec. 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 or may hereafter 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.

 

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E. After Acquired Property. Any additional right, title or interest which
Mortgagor may hereafter acquire or become entitled to in the interests,
properties, Lands and premises aforesaid, or in the oil, gas or other minerals
in and under or produced from the Land and Leases shall inure to the benefit of
and be covered by this Deed of Trust and constitute “Mortgaged Property”, the
same as if expressly described and conveyed herein.

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 interest 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, the execution and delivery by Mortgagor
ENERGYTEC, INC. of the promissory note of $4,000,000.00, dated February 27,
2007, and the performance and observance by Mortgagor of the terms and
provisions of such promissory note 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 Mortgaged
Property and has good right and authority to pledge, mortgage, assign, sell and
convey the same.

(3) Interests in Mortgaged Property. Mortgagor’s interest 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 there-of
which may affect the validity of any of the Leases, have been performed insofar
as the Leases pertain to the Land.

(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 flammable, 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 as 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.

 

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(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:

(a) The promissory note dated February 27, 2007, executed by Mortgagor
ENERGYTEC, INC. to the order of Mortgagee in the principal sum of FOUR MILLION
AND NO/100 DOLLARS ($4,000,000.00) bearing interest and payable (in
installments) as therein provided, and containing the usual provisions in notes
of this character, together with any and all renewals, extensions,
rearrangements and increases thereof; (b) all additional indebtedness of
Mortgagor to Mortgagee arising pursuant to the provisions of this deed of trust;
(c) all loans and advances which Mortgagee may hereafter make to the Mortgagor;
(d) all other and additional debts, obligations, and liabilities of every kind
and character of Mortgagee to Mortgagor, now or hereafter existing, regardless
of whether such debts, obligations and liabilities be direct or indirect,
primary or secondary, joint or several, or joint and several, fixed or
contingent, and regardless of whether such present or future obligations are
payable to, or be or have been in favor of some other person or have been
acquired by Mortgagee in a transaction with one other than Mortgagor, including
but not limited to attorneys= fees and other expenses of collection and
enforcement of the Note, this deed of trust and other secured indebtedness;
(e) performance of all obligations of Mortgagor to Mortgagee hereunder, under
the Note, under any other instrument now or hereafter securing any indebtedness
of Mortgagor to Mortgagee and under any agreement arising from or relating to
any indebtedness of Mortgagor to Mortgagee; and (f) any and all renewals,
extensions, changes in form reamortizations and other modifications of such
debts, obligations and liabilities, or any part thereof.

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. Maintenance of Leases. Mortgagor will keep and continue all Leases, estates
and interests herein described and contracts and agreements relating thereto in
full force and effect in accordance with the terms thereof and will not permit
the same to lapse or otherwise become impaired for failure to comply with the
obligations thereof, whether express or implied. In this connection, Mortgagor
shall not release any of the Leases without the prior written consent of
Mortgagee.

 

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D. Maintenance of Equipment. Mortgagor will keep and maintain all improvements
and all personal property and equipment now or hereafter situated on the Land
and constituting a portion o the Mortgaged Property and used or obtained in
connection therewith in good state of repair and condition, ordinary wear and
tear excepted, and will not tear down or remove the same or permit the same to
be torn down or removed without the prior consent of Mortgagee, except in the
usual course of operations as might be required for replacement when otherwise
in compliance with this Deed of Trust.

E. Notification of Loss. Mortgagor will notify Mortgagee of the destruction,
loss, termination or acquisition of any Mortgaged Property within three business
days thereof.

F. Pooling or Unitization. Mortgagor will not, without the prior written consent
of Mortgagee, pool or unitize all or any part of the Mortgaged Property where
the pooling or unitization would result in the diminution of Mortgagor’s net
revenue interest in production from the pooled or unitized lands attributable to
the Mortgaged Property constituting a portion of such pooled or unitized lands.
Immediately after the formation of any pool or unit in accordance herewith,
Mortgagor will furnish to Mortgagee a conformed copy of the pooling agreement,
declaration of pooling, or other instrument creating the pooling or unit. The
interest of Mortgagor included in any pool or unit attributable to the Mortgaged
Property or any part thereof shall become a part of the Mortgaged Property and
shall be subject to liens and security interests hereof in the same manner and
with the same effect as though the pool or unit and the interest of Mortgagor
therein were specifically described in Exhibit “A” hereto. In the event any
proceedings of any governmental body which could result in pooling or unitizing
all or any part of the Mortgaged Property are commenced, Mortgagor shall give
immediate written notice thereof to Mortgagee.

G. 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.

H. Maintenance of Workmen’s Compensation Insurance. Mortgagor will at all times
maintain workmen’s compensation insurance with a responsible insurance company
where required by, and in accordance with, the laws of the state in which the
Mortgaged Property is located.

I. 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, or fail to carry such workmen’s
compensation or other insurance, the Trustee, at his option, or Mortgagee, at
its option, may pay such taxes, liens, charges or encumbrances, or any part
thereof, or effect such workmen’s compensation insurance, and Mortgagor will
promptly reimburse Trustee or Mortgagee, as the case may be, therefor; 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.

J. 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.

K. 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.

 

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L. 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 furnish Mortgagee, as and when requested, full information
as to the status of any joint account maintained with others under any such
operating agreement; will not take any action to incur any liability or lien
thereunder; and will not enter into any new operating agreement or amendment of
existing operating agreement affecting the Mortgaged Property without prior
written consent of Mortgagee. Furthermore, Mortgagor will not consent or agree
to participate in any proposed operation under any presently existing operating
agreement affecting the Mortgaged Property unless Mortgagor obtains the prior
written consent of Mortgagee and deposits either with the operator, where
Mortgagor is a non-operator, or with Mortgagee, where Mortgagor is a
non-operator or operator, Mortgagor’s share of the estimated cost of the
proposed operation prior to electing to participate in the operation. 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 use 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, 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.

M. 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.

N. Evidence of Title. Promptly upon receipt of a request from Mortgagee,
Mortgagor will furnish and deliver, a Title Opinion prepared by competent legal
counsel 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. Should
Mortgagor fail to furnish such Title Opinion upon such request, Mortgagee may
obtain such Title Opinion, and any and all costs incurred thereby shall be
payable by Mortgagor to Mortgagee upon demand at Mortgagee’s principal offices.
The Title Opinion shall be and constitute a part of the Mortgaged Property as
defined above.

O. 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.

P. 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.

Q. Waivers. Mortgagor hereby expressly waives any and all rights or privileges
of marshaling of assets, sale in inverse order of alienation, notices,
appraisements, redemption and any prerequisite to the full extent permitted by
applicable law, in the event of foreclosure of the lien or liens and/or security
interests created herein. Mortgagee at all times shall have the right to release
any part of the Mortgaged Property now or hereafter subject to the lien or
security interest of this Deed of Trust, any part the proceeds of production or
other income herein or hereafter assigned or pledged, or any other security it
now has or may hereafter have securing the Indebtedness, without releasing any
other part of the Mortgaged Property, proceeds or income, and without affecting
the liens or security interests hereof as to the part or parts thereof not so
released, or the right to receive future proceeds and income.

R. Payment of Mortgagee’s Expenses. Upon demand of Mortgagee, Mortgagor will
promptly pay all costs and expenses heretofore or hereafter incurred by
Mortgagee for legal, accounting, engineering or geological services rendered to
it in connection with the making of the initial or any future loan to Mortgagee
secured in whole or in part by the liens and security interests hereof or in the
enforcement of any of

 

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Mortgagee’s rights hereunder. The obligations of Mortgagor hereunder shall
survive the non-assumption of this Deed of Trust in a case commenced under Title
11 of the United States Code or other similar law of the United States of
America, the State of Texas or any other jurisdiction and be binding upon
Mortgagor, or a trustee, receiver, custodian or liquidator of Mortgagor
appointed in any such case.

S. Other Liens. Without prior approval and written consent of Mortgagee,
Mortgagor will not mortgage, pledge or otherwise encumber the Mortgaged Property
or any part thereof, regardless of whether the lien or encumbrance is senior,
coordinate, junior, inferior or subordinate to the lien and security interest
created hereby.

T. Transfer or Division Orders. Upon request of Mortgagee, Mortgagor will
execute and deliver written notices of assignments to any persons, corporations
or other entities owing or which may in the future owe to Mortgagor monies or
accounts arising in connection with any of the following matters: (a) any oil,
gas or mineral production from the Mortgaged Property; (b) any gas contracts,
processing contracts or other contracts relating to the Mortgaged Property; or
(c) the operation of or production from any part of the Mortgaged Property. The
notices of assignments shall advise the third parties that all of the monies or
accounts described above have been assigned to Mortgagee, and if required by
Mortgagee, shall also require and direct that future payments thereof, including
amounts then owing and unpaid, be paid directly to Mortgagee.

U. Effect of Violation. Any mortgage, pledge, encumbrance, unitization, pooling,
communitization or other action or instrument in violation of the prohibitions
contained in F. or S. above shall be of no force or effect against Mortgagee.

V. Sales of Assets or Reorganization. Without the prior written consent of
Mortgagee, Mortgagor will not sell, lease, transfer or otherwise dispose of all
or substantially all of its properties and assets, or, if Mortgagor is a
corporation, consolidate or merge into any other corporation, or permit another
corporation to merge into it.

W. 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:

(1) Natural or Environmental Resources Compliance. Mortgagor will comply with
any 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 hold 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 there-with (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 or undertaken on or off the Mortgaged Property, whether

 

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prior to or during the term hereof, and whether by Mortgagor or 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, decontaminations, 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, from 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

(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.

X. Uneconomic Wells. As to any oil and/or gas well forming part of the Mortgaged
Property, should there not be, for a period in excess of three consecutive
calendar months, proceeds from the sale of production from such well (net or
productions, severance and windfall profit taxes and royalties overriding
royalties and other payments out of or measured by production) in excess of the
expense of operation of the relevant well (including, but not limited to,
operator’s overhead, payments to contractors and suppliers and annual taxes
assessed on the basis of the value of the property prorated on a monthly basis,
but expressly excluding any portion of the cost of drilling or completing the
relevant well or the cost of non-routine workover or remedial operators) then,
upon receipt by Mortgagor or written notification from Mortgagee, Mortgagor will
(a) take all necessary steps to abandon the relevant well or (b) provide from
sources other than proceeds from the sale of production attributable to the
Mortgaged Property (i.e., through borrowings or contractual commitments obtained
from third parties not in violation of any provision of this Deed of Trust) any
funds required to pay Mortgagor’s share of the expenses associated with the
continuing operation of such well.

Y. 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 of 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 from 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.

Z. Transactions with Affiliates. Mortgagor will not, directly or indirectly,
enter into any sale, lease or exchange of any property or any contract for the
rendering of goods or services with respect to any of the Mortgaged Property
(including, but not limited to, operating agreements under which Mortgagor or an
affiliate serves as operator) with any affiliate of Mortgagor other than upon
fair and reasonable terms no less favorable than could be obtained in an arm’s
length transaction with a person not an affiliate of Mortgagor.

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 (and in all other
agreements with Mortgagee) 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 hereof 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

 

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(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 (Mortgagee having an absolute right to refuse to consent or to
condition its consent upon satisfaction of any one or more of the following
requirements: (a) that the interest rate on the Indebtedness be increased to a
rate acceptable to Mortgagee; (b) that a reasonable transfer fee, in an amount
determined by Mortgagee, be paid; (c) that a principal amount deemed appropriate
by Mortgagee be paid against the Indebtedness to reduce to a level acceptable to
Mortgagee the ratio that the outstanding balance of the Indebtedness bears to
the value of the Mortgaged Property as determined by Mortgagee; (d) that
Mortgagor and each proposed transferee execute such assumption agreements and
other instruments as Mortgagee shall reasonably require; (e) that the proposed
transferee’s creditworthiness and experience in owning and operating similar
properties be demonstrable and proven to Mortgagee’s reasonable satisfaction as
being at least as good as Mortgagor’s; (f) that the liability to Mortgagee of
Mortgagor and all other guarantors of all or any part of the Indebtedness will
be confirmed by them in writing to be unaffected and unimpaired by such
transfer, conveyance or encumbering; and (g) that any proposed junior mortgagee
expressly subordinate to all liens and security interests securing the
Indebtedness as to both lien and payment right priority), 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

(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 of 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, or (vi) file an answer admitting the material
allegations of a petition filed against it in any case commenced 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) Decline in Value of Collateral. The Mortgaged Property materially decline in
value in the determination of Mortgagee; or Mortgagee, in its sole discretion,
deem payment of the Indebtedness to be insecure; or

 

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(9) 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 purchasers 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 under the power of sale hereunder, including,
without limitation, the posting and filing of any notices, the conduct of the
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 sale
hereunder except with respect to the items 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.

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 said 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 5% 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.

 

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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 therefrom, 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 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 by suit or suits, at law or in equity, 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 hereof, 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.

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. Assignment. In addition to the conveyance to the Trustee herein made,
Mortgagor does hereby 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 subsequent to 7:00 a.m. on the 1 st day of the month in which
this Deed of Trust is executed, together with the proceeds of any sale thereof;
Mortgagor hereby directs any purchaser now or hereafter 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 Mortgagor. Mortgagor further agrees to
perform all such acts, 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 to paid to
Mortgagee.

B. Change of Purchaser. Should any purchaser taking the production from the
Mortgaged Property fail to make prompt payment to Mortgagee in accordance with
this Assignment, Mortgagee shall have the right at Mortgagor’s expense to demand
a change of connection and to designate another purchaser with whom a new
connection may be made, without any liability on the part of Mortgagee in making
such selection, so long as ordinary care is used in the making thereof; and
failure of Mortgagor to consent to and promptly effect such change of connection
shall constitute an event of default hereunder, and the whole Indebtedness may
be

 

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immediately declared due and payable, at the option of Mortgagee and without
demand, presentment or other notice (including, but not limited to notice of
intention to accelerate maturity and notice of acceleration of maturity), and
the Mortgaged Property shall become subject to the foreclosure proceedings and
power of sale hereunder.

C. Application of Proceeds. Mortgagor authorizes and empowers Mortgagee to
receive, hold and collect all sums of money paid to Mortgagee in accordance with
this 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 in so receiving and applying such sums. All payments provided for in this
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.

D. No Postponement of Installments on Indebtedness. It is understood and agreed
that should such payments provided for by this 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 this Assignment nor any provisions hereof shall in any
manner be construed to affect the terms and provisions of such note, notes,
guaranty agreements or other instrument or instruments evidencing the
Indebtedness. Likewise, neither this Assignment nor any provisions hereof shall
in any manner be construed to affect the liens, rights, title and remedies
herein 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.

E. 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 hereof should have been remitted to Mortgagee,
Mortgagor will immediately remit same in full to Mortgagee.

F. 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.

G. 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.

H. Power of Attorney to Mortgagee. Mortgagor does hereby designate Mortgagee as
Mortgagor’s agent to act in the name, place and stead of Mortgagor for the
purpose of taking any and all actions deemed by Mortgagee necessary for the
realization by Mortgagee of the benefits of the assignment of production
provided herein, recognizing such agency in favor of Mortgagee to be coupled
with the interests of Mortgagee under this Deed of Trust and, thus, irrevocable.

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 Deed of Trust, and the amount and nature of such expense and the
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 of the privileges granted in this paragraph
shall in nowise be 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.

B. Entry and Operation. In case any one or more of the events of default shall
happen, then in each and every such cases the Trustee or Mortgagee or any holder
of the Indebtedness or any part thereof, whether

 

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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 holder of
the Indebtedness may enter into and upon and take 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 therefrom 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 therefrom 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 to 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, thus, 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 entitled 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.

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 “successors” 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 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. Supplements. It is contemplated by the parties hereto that from time to time
additional interest and properties may or will be added to the interests and
properties in Exhibit A attached hereto by means of supplemental indentures
identifying this Deed of Trust and describing such interests and properties to
be so added and included, and upon the execution of any such supplemental
indenture, the lien, rights, titles and

 

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interests created herein shall immediately attach to and be effective in respect
to any such interests and properties so described, the same as if same had been
included originally in Exhibit “A” attached hereto, and the same being included
in the term “Mortgaged Property”, as used herein.

G. 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.

H. 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 attached to minerals, including oil and gas, or accounts resulting from the
sale thereof, at the wellhead or minehead located on the land described or to
which reference is made herein.

I. Financing Statement. This Deed of Trust may 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
interest 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.
Subsec. 9.402(e) and 9.402(f) (Tex. UCC) (Vernon Supp. 1988).

J. 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.

K. 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.

L. 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 pat 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 of Mortgagee existing and to exist hereunder or under any
other instrument, 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 may 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.

M. Purpose Provision. This Deed of Trust is given:

 

  1. to secure payment of the promissory note executed by Mortgagor ENERGYTEC,
INC., dated February 27, 2007, payable to the order of Mortgagee in the
principal amount of $4,000,000.00, by mortgaging the properties described in
Exhibit “A” attached hereto; and

 

  2. to renew, extend, and carry forward the Deed of Trust lien dated
February 27, 2006, in the original principal amount of $4,000,000.00, secured by
Deed of Trust of record in Volume 566, Page 146, Official Public Records of
Hopkins County, Texas, and Volume 2144, Page 97, Official Public Records of Wood
County, Texas; and further secured by Assignment to Trustee of Oil and Gas
Production of record in Volume 566, Page 209, Official Public Records of Hopkins
County, Texas, and Volume 2144, Page 160, Official Public Records of Wood
County, Texas.

 

DEED OF TRUST - Page 13

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EXECUTED this 29th day of March, 2007, EFFECTIVE as of the 27th day of February,
2007.

 

ENERGYTEC, INC. By:  

/s/ Don Lambert

  Don Lambert, President By:  

/s/ Dorothea Krempein

  Dorothea Krempein, Vice President

 

THE STATE OF TEXAS   |            |          COUNTY OF GREGG   |         

BEFORE ME, the undersigned authority, on this day personally appeared Don
Lambert, President of ENERGYTEC, INC., a Nevada corporation, and known to me to
be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and considerations
therein expressed, as the act and deed of such corporation, and in the capacity
therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this 29th day of March, 2007.

 

/s/ Gregory Allen Ball

Notary Public, State of Texas

 

THE STATE OF TEXAS   |   LOGO [g82794image003.jpg]  

|

  COUNTY OF GREGG  

|

         

BEFORE ME, the undersigned authority, on this day personally appeared Dorothea
Krempein, Vice President of ENERGYTEC, INC., a Nevada corporation, and known to
me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that she executed the same for the purposes and
considerations therein expressed, as the act and deed of such corporation, and
in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this 29th day of March, 2007.

 

/s/ Gregory Allen Ball

Notary Public, State of Texas

 

AFTER RECORDING RETURN TO:   LOGO [g82794image003.jpg]   ROBERT A. SHERMAN  
POST OFFICE BOX 351   CARTHAGE, TEXAS 75633  

 

DEED OF TRUST - Page 14

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Personal Property

All oil wells, pumping units, casing rods, production tubing, separators,
surface flowlines, wellheads, tanks and other equipment incidental to and used
in connection with the production, treating and storing of minerals or the like
(including oil and gas) from those certain oil, gas and mineral leases described
in this Exhibit AA@.

 

Signed for Identification:

/s/ Don Lambert

DON LAMBERT, PRESIDENT

/s/ Dorothea Krempein

DOROTHEA KREMPEIN, VICE PRESIDENT

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CUSTOMER: ENERGYTEC INC

                        FEBRUARY, 2007

 

 

                         EXHIBIT “A”

LEASE NAME

   COUNTY STATE    OPERATOR    WORKING
INTEREST    REVENUE
INTEREST    LPD ID # / API #    OIL/GAS
DISBURSER DRILLAR BOZEMAN 1    HOPKINS / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003383    SUNOCO COKER W H 2    HOPKINS
/TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003380    SUNOCO KENDRICK LAWYER 2   
HOPKINS / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003386    SUNOCO FORD SIMMS 2   
HOPKINS / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003382    SUNOCO FOSTER DERMOT 1   
HOPKINS / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003379    SUNOCO LIVINGSTON L H 1A   
HOPKINS / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003381    SUNOCO MORRIS J J 3   
HOPKINS / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003378    SUNOCO KENDRICK M L 1   
HOPKINS / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO05 003385    SUNOCO HOWLE 1    HOPKINS /
TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXG05 121295    SUNOCO COOK AB 1    HOPKINS /
TX    COMANCHE
WELL SERVICE    1.000    0.8000    TX005 002858    SUNOCO HOWLE A,B    HOPKINS /
TX    COMANCHE
WELL SERVICE    1.000    0.8000    SUMMARY    SUNOCO ISOM 1    HOPKINS / TX   
COMANCHE
WELL SERVICE    1.000    0.8000    TXO05 002859    SUNOCO GRICE W W NO. 22   
WOOD / TX    COMANCHE
WELL SERVICE    1.000    0.7995    TXO06 005074    SUNOCO BAILEY W F 1    WOOD /
TX    COMANCHE
WELL SERVICE    1.000    0.8000    TXO06 000869    SUNOCO TAYLOR PINKIE 1   
WOOD / TX    COMANCHE
WELL SERVICE    1.000    0.8000    TXO06 001350    SUNOCO

CLOVER HILL

SCHOOL 1

   WOOD / TX    COMANCHE
WELL SERVICE    1.000    0.7500    TXO06 000868    SUNOCO TAYLOR P B3    WOOD /
TX    COMANCHE
WELL SERVICE    1.000    0.8000    TXO06 001345    SUNOCO TAYLOR P A 1A    WOOD
/ TX    COMANCHE
WELL SERVICE    1.000    0.8000    TXO06 012837    SUNOCO STONE JOHNSON 1   
WOOD / TX    COMANCHE
WELL SERVICE    1.000    0.8000    TXO06 001342    SUNOCO CHRIETZBURG J C 1   
WOOD / TX    COMANCHE
WELL SERVICE    1.000    0.7300    TXO06 001338    SUNOCO

 

SIGNED FOR IDENTIFICATION:

/s/ Don Lambert

DON LAMBERT, PRESIDENT

/s/ Dorothea Krempein

DOROTHEA KREMPEIN, VICE PRESIDENT