Cross Border Resources, Inc.: Exhibit 4.1 - Filed by newsfilecorp.com






PURE ENERGY GROUP, INC. 
AND
PURE GAS PARTNERS
II, L.P. 

as Issuer 

to

FIRST SECURITY BANK 

as
Trustee and Paying Agent

TRUST INDENTURE

Dated as of March 1, 2005

 

 

 

WITH RESPECT TO 
ISSUANCE OF 
$5,500,000 
7 1/2%
DEBENTURES
SERIES 2005

This Instrument Prepared by:

JACK, LYON & JONES, P.A.


425 West Capitol Avenue, Suite 3400 
Little Rock, Arkansas 72201

1




TABLE OF CONTENTS

(This Table of Contents is not a part of the Trust Indenture

and is only for convenience of reference.)

	Parties 	6 
	Recitals 	6 
	Granting
      Clauses 	7 
	 	  
	  ARTICLE I   
	 
	  DEFINITIONS     
	 	  	  
	Section 1.01. 	Definitions
      	9 
	Section 1.02. 	Interpretation 	14 
	 	  	  
	  ARTICLE II  
	 
	  THE DEBENTURES  
	 
	Section 2.01. 	Authorized Amount of the
      Debentures 	15 
	Section 2.02. 	Details of
      the Debentures 	15

	Section 2.03. 	Debenture Form 	15 
	Section 2.04. 	Payment
    	15

	Section 2.05. 	Execution 	16 
	Section 2.06. 	Unconditional Obligation 	16

	Section 2.07. 	Authentication 	16 
	Section 2.08. 	Delivery of
      the Debentures 	16

	Section 2.09. 	Mutilated, Destroyed or Lost
      Debentures 	17 
	Section 2.10. 	Negotiability, Registration and Transfer of the Debentures
      	17

	Section 2.11. 	Cancellation 	19 
	Section 2.12. 	Superior
      Obligations 	19

	Section 2.13. 	Superior Obligations
      Restricted 	20 
	Section 2.14. 	Parity
      Obligations 	20
	Section 2.15. 	Subordinate Obligations
    	21 
	Section 2.16. 	Prohibition
      Against Pledge of Accounts Receivable 	21

	Section 2.17. 	Book Entry Debentures
	22 
	 	  	  
	 
	  ARTICLE III     
	 
	  REDEMPTION   
	 
	Section 3.01. 	Privilege of
      Redemption and Redemption Prices 	23

	Section 3.02. 	Issuer’s Election to Redeem;
      Notice to Trustee 	23 


2





	Section 3.03. 	Selection by
      Trustee of Debentures To Be Redeemed; Sequential Redemptions 	23

	Section 3.04. 	Notice of Redemption 	24
	Section 3.05. 	Reserved
    	25

	Section 3.06. 	Effect of Notice of
      Redemption 	25 
	Section 3.07. 	Debentures
      Redeemed in Part 	26

	Section 3.08. 	Mandatory Sinking Fund
      Redemption 	26 
	Section 3.09. 	Extraordinary Optional Redemption of the Debentures
	27

	Section 3.10. 	Optional Redemption of the
      Debentures 	29 
	Section 3.11. 	Mandatory
      Redemption of Debentures from Excess Insurance or Condemnation Proceeds
      	29

	Section 3.12. 	Optional Redemption of the
      Debentures from Excess Funds 	30
	Section 3.13. 	Mandatory
      Redemption Upon Default Under Operating Line of Credit or Parity
      Obligation 	30

	 
	 
	  ARTICLE IV  
	 
	  GENERAL COVENANTS  
	 
	Section 4.01. 	Payment of Principal,
      Premium, if any, and Interest 	30
	Section 4.02. 	Performance
      of Covenants 	30
	Section 4.03. 	Instruments of Further
      Assurance 	31
	Section 4.04. 	Recordation
      and Filing 	31
	Section 4.05. 	Inspection of Books 	31
	Section 4.06. 	Rates and
      Charges 	31
	Section 4.07. 	Taxes, Charges and
      Assessments 	31
	Section 4.08. 	Encumbrances
      	31
	Section 4.09. 	Insurance 	32
	Section 4.10. 	Damage or
      Destruction; Condemnation 	32
	Section 4.11. 	Revenues To Be Used As
      Provided In Indenture 	33
	Section 4.12. 	Accounting;
      Continuing Disclosure 	33
	Section 4.13. 	Existence 	33
	Section 4.14. 	Operation
      and Maintenance of Facilities; Disposition of Assets 	34
	Section 4.15. 	 Notification to
      Operating Line of Credit Bank	 34
	Section 4.16. 	Certain
      Information Available Upon Transfer	 34
	 
	 
	  ARTICLE V  
	 
	  FUNDS AND DEPOSITS  
	 
	Section 5.01. 	Debenture Fund 	34 
	Section 5.02. 	Project Fund
      	35

	Section 5.03 	Disbursements from Project
      Fund 	35 
	Section 5.04 	Costs of
      Issuance Account 	37


3




ARTICLE VI

SECURITY FOR THE DEBENTURES

	Section 6.01. 	Security for
      the Debentures 	37

	 
	  ARTICLE VII     
	 
	  INVESTMENTS     
	 
	Section 7.01. 	Investment
      of Monies 	38

	Section 7.02. 	Investment Earnings 	38 
	Section 7.03. 	Valuation of
      Funds 	38

	Section 7.04. 	Responsibility of Trustee
      	39
	 	  	  
	  ARTICLE VIII  
	 	  	  
	  DISCHARGE OF LIEN  
	 	  	  
	Section 8.01. 	Discharge of Lien 	39 
	Section 8.02. 	Debentures
      Deemed Paid 	39

	Section 8.03. 	Non-Presentment of
      Debentures 	39 
	 
	  ARTICLE IX  
	 
	DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND
      DEBENTURE 
	  HOLDERS 
	 
	Section 9.01. 	Events of
      Default 	40

	Section 9.02. 	Acceleration 	41 
	Section 9.03. 	Other
      Remedies; Rights of Debenture Holders 	41

	Section 9.04. 	Right of Debenture Holders
      to Direct Proceedings 	42 
	Section 9.05. 	Appointment
      of Receiver 	42

	Section 9.06. 	Waiver 	42 
	Section 9.07. 	Application
      of Monies 	43
	Section 9.08. 	Remedies Vested in Trustee
      	44 
	Section 9.09. 	Rights and
      Remedies of Debenture Holders 	44

	Section 9.10. 	Termination of Proceedings
      	45 
	Section 9.11. 	Waivers of
      Events of Default 	45

	 
	  ARTICLE X   
	 
	  TRUSTEE AND PAYING
      AGENTS  
	 
	Section 10.01. 	Acceptance
      of Trusts 	45

	Section 10.02. 	Fees, Charges and Expenses
      of Trustee and Paying Agents; Trustee’s Prior Lien 	49 


4






	Section
      10.03. 	Notice
      to Debenture Holders of Default 	49
      
	Section
      10.04. 	Intervention
      by Trustee 	49
      
	Section
      10.05. 	Merger
      or Consolidation of Trustee 	50
	Section
      10.06. 	Resignation
      by Trustee 	50
	Section
      10.07. 	Removal
      of Trustee 	50
      
	Section
      10.08. 	Appointment
      of Successor Trustee 	50
      
	Section
      10.09. 	Concerning
      Any Successor Trustee 	50
      
	Section
      10.10. 	Reliance
      Upon Instruments 	51
      
	Section
      10.11. 	Appointment
      of Co-Trustee 	51
      
	Section
      10.12. 	Designation
      and Succession of Paying Agents 	52
      
	 
	  ARTICLE XI  
	 
	  SUPPLEMENTAL INDENTURES 
	 
	Section
      11.01. 	Supplemental
      Indentures Not Requiring Consent of Debenture Holders 	52
      
	Section
      11.02. 	Supplemental
      Indentures Requiring Consent of Debenture Holders 	53
      
	Section
      11.03. 	Effect
      of Supplemental Indentures 	54
      
	Section
      11.04. 	Execution
      of Supplemental Indenture 	54
      
	 
	  ARTICLE XII     
	 
	  MISCELLANEOUS     
	 
	Section
      12.01. 	Consents,
      etc. of Debenture Holders 	54
      
	Section
      12.02. 	Notices
      	55
      
	Section
      12.03. 	Limitation
      of Rights 	55
      
	Section
      12.04. 	Severability
      	56
      
	Section
      12.05. 	Consent
      to Jurisdiction; Applicable Provisions of Law; Forum Selection 	56
      
	Section
      12.06. 	Counterparts
      	56
      
	Section
      12.07. 	Successors
      and Assigns 	57
	Section
      12.08. 	Captions
      	57
	Section
      12.09. 	Photocopies
      and Reproductions 	57
	Section
      12.10. 	Debentures
      Owned by Issuer 	57
	Section
      12.11. 	Effectiveness
      of Indenture 	57
      
	 	  	  
	Signatures and Seals 
	Acknowledgments 
	 
	Exhibit
      A - Form of Debenture 	A-1
      
	Exhibit
      B - Form of Investor Letter 	B-1
      
	Exhibit
      B-1 - Form of Accredited Investor Questionnaire 	B-5
	Exhibit
      C - Trustee’s Fee Schedule 	C-1
      
	Exhibit D - Issuer’s Written Request 	D-1 


5




TRUST INDENTURE

     THIS TRUST INDENTURE
(“Indenture”), dated as of March 1, 2005, by and between Pure Energy Group
Inc. (“Corporation”), a Texas corporation, its operating subsidiary, Pure Gas
Partners II, L.P. (“Partnership”), a Texas limited partnership, each existing by
virtue of the laws of the State of Texas, as party of the first part
(collectively, Corporation and Partnership are referred to as “Issuer”); and
First Security Bank, not in its individual capacity but solely as trustee under
this Indenture between Issuer and First Security Bank (“Trustee”), a banking
corporation organized under and existing by virtue of the laws of the State of
Arkansas and the United States of America, as party of the second part.

W I T N E S S E T H:

     WHEREAS, in accordance
with the provisions of the Authorizing Instruments (defined herein), Issuer
proposes to issue its 7 1/2% Debentures, Series 2005 (“the Debentures”) in the
aggregate principal amount of $5,500,000, for the purpose of financing the final
payments of Corporation pursuant to Corporation’s Second Plan of Reorganization
approved by the United States Bankruptcy Court, Western District of Texas, San
Antonio Division, on December 2, 2002 (the “Court Case”); to pay off the
outstanding balance of the Operating Line of Credit (defined herein); to provide
working capital for Issuer; and to fund capitalized interest on the Debentures
through September 1, 2005(collectively, the "Project"). The Issuer will pay
certain costs related to issuance of the Debentures from sources other than the
proceeds of the Debentures; and 

     WHEREAS, Corporation is
authorized and empowered under the provisions of its Articles of Incorporation,
Bylaws and the laws of the State of Texas, including,
particularly, the Texas Business Corporation Act, and Partnership is
authorized and empowered under the provisions of its Certificate of Limited
Partnership, Agreement of Limited Partnership and the laws of the State of
Texas, including, particularly, the Texas Revised Uniform Limited
Partnership Act, pursuant to which the Debentures are issued (collectively, the
“Authorizing Instruments”), to issue and sell its Debentures and to expend the
proceeds thereof to finance or refinance the costs of acquisition, construction,
reconstruction, improvement, enlargement, betterment or extension of its
business and properties; and

     WHEREAS, Issuer has
determined to enter into this Indenture to authorize the issuance of and to
secure the Debentures by granting to Trustee a pledge and assignment of the
interests and other rights herein contained, and certain funds created hereby;
and

     WHEREAS, the Debentures
are to be dated, bear interest, mature and be subject to redemption as
hereinafter in this Indenture set forth in detail; and

     WHEREAS, the execution and
delivery of this Indenture and the issuance of the Debentures have been in all
respects duly and validly confirmed, authorized and approved by an Authorizing Resolution adopted and approved by
Corporation’s Board of Directors as of February 25, 2005, and a Joint
Authorizing Resolution adopted and approved by Corporation’s Board of Directors
and the General Partner of the Partnership as of February 25, 2005; and

6




     WHEREAS, all things
necessary to make the Debentures, when authenticated by Trustee and issued in
the State of Texas as in this Indenture provided, the valid, binding and legal
obligations of Issuer according to the import thereof, and to constitute this
Indenture a valid pledge of the Revenues (hereinafter defined) to the payment of
the principal of, premium, if any, and interest on the Debentures, to be secured
by the security interests hereinafter provided, as specified in and in
accordance with the provisions hereof, have been done and performed, and the
creation, execution and delivery of this Indenture and the creation, execution,
issuance and delivery of the Debentures, subject to the terms hereof, have in
all respects been duly authorized;

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

GRANTING CLAUSES

     That Issuer, in consideration of
the premises and the acceptance by Trustee of the trusts hereby created and of
the purchase and acceptance of the Debentures by the owners thereof, and of the
sum of One Dollar, lawful money of the United States of America, to it duly paid
by Trustee at or before the execution and delivery of these presents, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, in order to secure the payment of the principal of, interest on
and premium due with respect to the Debentures according to their tenor and
effect and to secure the performance and observance by Issuer of all the
covenants expressed or implied herein and in the Debentures, does hereby jointly
and severally transfer, pledge, assign, and hypothecate the following to
Trustee, and its successors in trust and assigns forever, for the securing of
the performance of the obligations of Issuer hereinafter set forth:

GRANTING CLAUSE FIRST

     All rights of Issuer in and to
the Revenues (defined herein) subject and subordinate only to the prior superior
lien of the Operating Line of Credit (defined herein). 

GRANTING CLAUSE SECOND

     All moneys and securities from
time to time held by Trustee in the Debenture Fund and Project Fund (as
hereinafter defined) established under the terms of this Indenture, including
moneys received from the investment of such Funds, except for moneys deposited
with or paid to Trustee for the redemption of Debentures, notice of the
redemption of which has been duly given.

7




GRANTING CLAUSE THIRD

     Any and all other property,
rights, and interests of every kind and nature from time to time hereafter by
delivery or by writing of any kind granted, alienated, demised, released,
conveyed, assigned, transferred, mortgaged, pledged, hypothecated, or otherwise
subjected hereto, as and for additional security herewith, by Issuer or any
other person on its behalf or with its written consent, to Trustee and Trustee
is hereby authorized to receive any and all property thereof at any and all
times and to hold and apply the same subject to the terms hereof.

     TO HAVE AND TO HOLD all and
singular the Trust Estate, whether now owned or hereafter acquired, unto Trustee
and its successors in said trust and assigns forever;

     IN TRUST NEVERTHELESS, upon the
terms and trusts herein set forth for the equal and proportionate benefit,
security, and protection of all present and future Owners of the Debentures,
from time to time, issued under and secured by this Indenture without privilege,
priority, or distinction as to the lien or otherwise of any of the Debentures
over any of the other Debentures;

     PROVIDED, HOWEVER, that if
Issuer, its successors or assigns, shall well and truly pay, or cause to be
paid, the principal of and interest on the Debentures due or to become due
thereon, at the times and in the manner set forth in the Debentures according to
the true intent and meaning thereof, and shall cause the payments to be made on
the Debentures as required under Article II hereof, or shall provide, as
permitted hereby, for the payment thereof by depositing with Trustee the entire
amount due or to become due thereon, and shall well and truly cause to be kept,
performed, and observed all of its covenants and conditions pursuant to the
terms of this Indenture, and shall pay or cause to be paid to Trustee all sums
of money due or to become due to it in accordance with the terms and provisions
hereof, then upon the final payment thereof this Indenture and the rights hereby
granted shall cease, determine, and be void; otherwise this Indenture shall
remain in full force and effect,

     THIS INDENTURE FURTHER
WITNESSETH, and it is expressly declared, that all Debentures issued and secured
hereunder are to be issued, authenticated, and delivered and all said property,
rights, and interests, and any other amounts hereby assigned and pledged are to
be dealt with and disposed of under, upon, and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses, and purposes as herein
expressed, and Issuer has agreed and covenanted, and does hereby agree and
covenant, with Trustee and with the Owners of the Debentures as follows:

[END OF RECITALS AND GRANTING CLAUSES]

8




ARTICLE I

DEFINITIONS

     Section 1.01. Definitions.
In addition to the words and terms elsewhere defined in this Indenture, the
following words and terms as used in this Indenture shall have the following
meanings:

     “Additional Debentures” means
debentures issued under this Indenture or any supplemental indenture hereto in
conformance with the provisions of Section 2.14 hereunder.

     “Annual Debt Service” means, with
respect to all or any particular amount of Debentures, Additional Debentures,
Superior Obligations, Parity Obligations, or Subordinate Obligations as the case
may be, the Debt Service for any particular Fiscal Year required to be paid or
set aside during such Fiscal Year, less the amount of such payment which
is provided from the proceeds of the sale of Debentures or Parity Obligations or
from sources other than Revenues.

     “Authorized Denominations” means
$25,000 and $5,000 increments in excess thereof.

     “Authorized Issuer
Representative” means the officer of Issuer appointed by the Board of Directors
of Issuer to be the executive officer of Issuer for all purposes of the Project
and this Indenture. The initial Authorized Issuer Representative is Larry B.
Cochran, Chief Executive Officer of Issuer.

     “Authorizing Instruments” means,
collectively, the Articles of Incorporation of Corporation originally dated
August 18, 1999, as amended, the Bylaws, the Authorizing Resolution of Issuer
dated as of February 25, 2005, the Texas Business Corporation Act, the
Certificate of Limited Partnership of the Partnership originally dated February
24, 2004, the Agreement of Limited Partnership of Partnership originally dated
February 27, 2004, the Texas Revised Uniform Limited Partnership Act and the
laws of the State of Texas, pursuant to which the Debentures are issued.

     “Business Day” means any day
other than (a) a Saturday or a Sunday, or (b) a day on which commercial banks in
the city where the Principal Office of Trustee is located, initially Searcy,
Arkansas, are authorized or required by law or executive order to close.

     “Closing Date” means the date
upon which there is an exchange of the Debentures for the proceeds representing
the purchase price for the Debentures by the original purchaser or purchasers
thereof.

     “Code” means the Internal Revenue
Code of 1986, as now or hereafter amended, and applicable regulations issued or
proposed thereunder.

9




     “Costs of Issuance” means all
costs paid or incurred by Issuer in connection with the issuance of the
Debentures.

     “Debenture Fund” means the fund
by that name created and established in Section 5.01 of this Indenture.

     “Debentures” means the 7 1/2%
Debentures issued by Issuer pursuant to this Indenture.

     “Debt Service” means, with
respect to all or any particular amount of the Debentures, Additional
Debentures, Superior Obligations, Parity Obligations, and/or Subordinate
Obligations as the case may be, the total as of any particular date of
computation and for any particular period of the scheduled amount of interest
and amortization of principal payable on such Debentures, Additional Debentures,
Superior Obligations, Parity Obligations, and/or Subordinate Obligations as the
case may be, excluding amounts scheduled during such period which relate to
principal which has been retired before the beginning of such period.

     “Event of Default” means any event of default specified in
Section 9.01 hereof.

     “Facilities” means land,
buildings, structures, machinery, equipment and all related or necessary
property, tangible or intangible, constituting Issuer’s Facilities, including,
but not limited to, all buildings, equipment and machinery thereon and the
fixtures attached thereto, and to which Issuer has right, title or ownership, in
whole or undivided part, and, if in undivided part, then to the extent of
Issuer’s right, title or ownership therein.

     “Fiscal Year” means the 12-month
period used, at any time, by Issuer for accounting purposes with respect to
Issuer, which may be the calendar year.

     “Government Securities” means:
(i) direct obligations of, or obligations the payment of the principal of and
interest on which is fully guaranteed by, the United States of America; (ii)
obligations issued or guaranteed by any instrumentality or agency of the United
States of America, whether now existing or hereafter organized, including but
not limited to those of the Federal Financing Bank, the members of the Farm
Credit System Financial Assistance Corporation, whether individually or
consolidated, Federal Home Loan Banks, the Export-Import Bank, Government
National Mortgage Association and the Tennessee Valley Authority, (iii)
evidences of ownership of proportionate interests in future interest or
principal payments on obligations specified in clause (i) of this definition
held by a bank or trust company as custodian, under which the owner of the
investment is the real party in interest and has the right to proceed directly
and individually against the obligor on the underlying obligations described in
clause (i) of this definition, and which underlying obligations are not
available to satisfy any claim of the custodian or any person claiming through
the custodian or to whom the custodian may be obligated; (iv) municipal
obligations, the payment of the principal of, interest on and redemption
premium, if any, on which are irrevocably secured by obligations described in
clause (i) of this definition and which obligations have been deposited in an escrow account which is irrevocably pledged to
the payment of the principal of, interest on and redemption premium, if any, on
such municipal obligations; (v) obligations issued by any state of the United
States; and (vi) municipal obligations the payment of the principal of and
interest on which are insured; provided, however, the obligations
described in clauses (v) and (vi) of this definition shall also be rated in one
of the top two highest rating categories (without regard to any gradation within
such category) by both Moody’s and S&P or, upon the discontinuance of either
or both of such services, any other nationally recognized rating service or
services.

10




     “Holder” or “Debenture Holder” or
“Owner” means the registered owner of any Debenture.

     “Indenture” means this Trust
Indenture dated as of March 1, 2005, between Issuer and Trustee, pursuant to
which the Debentures are issued, and any amendments and supplements hereto.

     “Interest Payment Date” and
“Payment Date” means: (a) March 1 and September 1 of each year, beginning
September 1, 2005; (b) for the Debentures subject to redemption in whole or in
part on any date, the date of such redemption; and (c) for all Debentures, any
date determined pursuant to Section 9.07 of this Indenture.

     “Investment Securities” means any
of the following obligations or securities: (i) Government Securities; (ii)
bankers acceptances, certificates of deposit or time deposits of any bank, trust
company or savings and loan association (including any investment in pools of
such bankers acceptances, certificates of deposit or time deposits), which to
the extent that such obligations are not insured by the Federal Deposit
Insurance Corporation are collateralized at all times in amounts and by
obligations as shall be permitted by State law; (iii) any repurchase, reverse
repurchase or investment agreement with any bank or trust company organized
under the laws of any state of the United States or any national banking
association, insurance company, or government bond dealer reporting to, trading
with, and recognized as a primary dealer by the Federal Reserve Bank of New York
and a member of the Security Investors Protection Corporation, which agreement
is secured by any one or more of the securities described in clauses (i), (ii)
or (iii) of the definition of Government Securities; provided,
that, Issuer has a perfected first security interest in the collateral
and that Issuer or its agent has possession of the collateral and that such
collateral is held free and clear of claims by third parties; (iv) Guaranteed
Investment Contracts; (v) any mutual fund(s) rated in the highest applicable
rating categories established by Moody’s or S&P consisting entirely of
Government Securities; or (vi) any other instrument or mutual fund specified in
Section 7.01. 

     “Investor Letter” means a written
instrument signed by each original purchaser of the Debentures and each
transferee of a Debenture in substantially the same form as that attached hereto
as Exhibit B.

     “Issuer” means, collectively,
Pure Energy Group, Inc., a corporation organized and existing under the laws of
the State of Texas, including, particularly, the Texas Business Corporation Act, and its operating subsidiary Pure Gas
Partners II, L.P., a limited partnership organized and existing under the laws
of the State of Texas, including, particularly, the Texas Revised
Uniform Limited Partnership Act.

11




     “Moody’s” means Moody’s Investors
Service, a corporation organized and existing under the laws of the State of
Delaware, its successors and their assigns, and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, “Moody’s” shall be deemed to refer to any other nationally
recognized securities rating agency designated by Issuer.

     “Net Revenues” means Revenues,
less those Operation and Maintenance Expenses that are allowable for
federal tax purposes in the calculation of taxable income and as reported by
Issuer on its federal tax returns, exclusive of depreciation and
amortization.

     “Operating Line of Credit” means
the existing $5,000,000 operating line of credit issued by Texas Capital Bank,
N.A., San Antonio, Texas, or its successor. The Operating Line of Credit is also
defined as the “Superior Obligations.” As of the Closing Date, the Operating
Line of Credit constitutes Issuer’s only Superior Obligation.

     “Operation and Maintenance
Expenses” means, for any period, all ordinary and necessary expenses of
operation, repair, maintenance and insuring of the Facilities under generally
accepted accounting principles, except that there shall not be included: (i) any
allowance for depreciation; or (ii) any deposits or transfers to the credit of
the Debenture Fund or any other fund or account created for the payment of debt
service on the Debentures or Subordinate Obligations secured by a pledge of
Revenues or Net Revenues as permitted under this Indenture.

     “Outstanding” means, when used
with reference to the Debentures, as of any particular date, the aggregate of
all Debentures authenticated and delivered under this Indenture except:

     Debentures cancelled at or prior to
such date or delivered to or acquired by Trustee at or prior to such date for
cancellation;

     Debentures deemed to be paid in
accordance with Article VIII of this Indenture; and

     Debentures in lieu of or in exchange
or substitution for which other Debentures shall have been authenticated and
delivered pursuant to this Indenture.

     “Parity Obligations” means
obligations of Issuer on a parity with the lien of the Debentures and this
Indenture, including Additional Debentures, issued or incurred in accordance
with Section 2.14 of this Indenture.

12




     “Paying Agent” means any bank or
trust company named by Issuer as the place at which the principal of and
premium, if any, and interest on the Debentures are payable. Until changed in
writing by Issuer, Trustee shall be the Paying Agent.

     “Permitted Encumbrances” means:
(i) the prior and superior lien of Texas Capital Bank, or its successor, related
to the Operating Line of Credit; (ii) any lien for the security of the
Debentures, or for the security of any subordinate indebtedness permitted
pursuant to Section 2.15; (iii) liens for taxes, assessments and other
governmental charges not then delinquent or which can be paid without penalty,
(iv) herefor, inchoate mechanics’ and materialmen’s liens; (v) workmen’s,
repairmen’s, warehousemen’s, and carriers’ liens and other similar liens, if
any, arising in the ordinary course of business; (vi) any easements,
restrictions, mineral, oil, gas and mining rights and reservations, zoning laws
and defects in title or other encumbrances to which Facilities may be subject
because of their acquisition, construction and installation as part of the
Project; and (vii) debt incurred in the ordinary course of business for the
purchase or lease of furniture, fixtures and other equipment (including
vehicles) for use by Issuer’s Facilities; provided, that, such debt shall
be subordinate to the provisions of this Indenture and may be secured only by a
purchase money security interest in the furniture, fixtures and equipment.

     “Principal Office” means with
respect to Issuer, the office of Issuer at 153 Treeline Park, San Antonio, Texas
78209; provided, that, for purposes of all activities related to
payments and registration on the Debentures, such office shall be c/o Trustee,
First Security Bank, 314 N. Spring Street, Searcy, Arkansas 72143,
Attention: Corporate Trust Administration.

     “Prior Obligation” means the
final payments of Issuer pursuant to Issuer’s Second Plan of Reorganization
approved by the United States Bankruptcy Court, Western District of Texas, San
Antonio Division, on December 2, 2002.

     “Project” means the retirement of
the Prior Obligation, the payment of the Operating Line of Credit to zero
($0.00) balance, the infusion of working capital into Issuer and the funding of
capitalized interest on the Debentures through September 1, 2005.

     “Qualified Accountant” means a
certified public accountant in the regular employ or hire of Issuer, including,
but not limited to, the chief financial officer, or an independent firm of
certified public accountants .

     “Record Date” means, with respect
to any Interest Payment Date or Payment Date of the Debentures, the fifteenth
(15th) day of the calendar month next preceding the month in which
such Interest Payment Date or Payment Date falls.

     “Revenues” means all gross
receipts, including sales, royalties, payments received in connection with net
royalty interests, fees, tolls, rates, rentals, and other charges levied and
collected in connection with, and all other income and receipts of whatever kind
or character derived by Issuer from the operation of their business and properties. Revenues shall specifically include, but shall not
be limited to: (i) revenues from all exploration and development contracts and
all other fees charged or revenues earned by Issuer to or from customers,
development partners, property operators or others, whether individual,
commercial or public, (ii) general fees and other charges levied or derived in
connection with Issuer’s oil and gas exploration and development business, (iii)
investment income on all funds held by Trustee pursuant to the provisions of the
Indenture, and (iv) investment income on all funds held by Issuer or any
depositories for Issuer.

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     “S&P” means Standard &
Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., its
successors and their assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, “S&P” shall be deemed to refer to any other nationally recognized
securities rating agency designated by Issuer.

     “Special Counsel” means Jack,
Lyon & Jones, P.A. or any other firm of nationally recognized municipal bond
counsel selected by Issuer and acceptable to Trustee.

     “State” means the State of Texas.

     “Subordinate Obligations” means
debt obligations of Issuer secured by a pledge of Revenues that is subordinate
to the lien thereon securing the payment of the Debentures, permitted by the
provisions of Section 2.15 of this Indenture.

     “Trustee” means the banking
corporation or association or trust company designated as trustee in this
Indenture, and its successor or successors as such trustee. The original Trustee
is First Security Bank, an Arkansas state bank, Searcy, Arkansas.

     “Trust Estate” means the property
described in the granting clauses of this Indenture.

     “Written Request” means any
written request, letter or similar document from Issuer to Trustee and signed by
the Authorized Issuer Representative, including, but not limited to, the initial
written closing and delivery instructions.

     Section 1.02.
Interpretation. The words “hereof,” “herein,” “hereunder” and
“hereto” and other words of similar import refer to this Indenture in its
entirety.

     The terms “agree” and
“agreements” contained herein are intended to include and mean “covenant” and
“covenants.”

     References to Articles, Sections
and other subdivisions of this Indenture are to the designated Articles,
Sections and other subdivisions of this Indenture.

     The headings of this Indenture
are for convenience only and shall not define or limit the provisions
hereof.

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     Any references made (a) in any
gender shall be deemed to have been made in all genders and (b) in the singular
or plural number shall be deemed to have been made, respectively, in the plural
or singular number as well.

     Any reference to particular
sections or subsections of the Code or the Act shall include any successor
provisions of law or regulations to the extent the same shall apply to the
Debentures.

ARTICLE II

THE DEBENTURES

     Section 2.01. Authorized
Amount of Debentures. No Debentures may be issued under the provisions of
this Indenture except in accordance with this Article II. The total principal
amount of the Debentures that may be issued is hereby expressly limited to
$5,500,000, except as provided in Section 2.09 and Section 2.12 hereof.

     Section 2.02. Details of
Debentures. The Debentures: (i) shall be designated “Pure Energy Group, Inc.
(and its subsidiary) 7 1/2% Debentures, Series 2005,” maturing on March 1, 2015;
(ii) shall be in the aggregate principal amount of $5,500,000; (iii) shall be
dated as of March 1, 2005; (iv) shall bear interest from such date at the rates
hereinafter provided until paid, with interest-only payments to be paid
semi-annually on March 1 and September 1, of each year, commencing September 1,
2005, and continuing through March 1, 2008, and interest and principal payment
to be paid semi-annually thereafter, commencing September 1, 2008; and (v) shall
be issued in denominations of $25,000 each, or in $5,000 integral multiples in
excess thereof.

     Section 2.03. Debenture
Form. The Debentures shall be issued as fully registered Debentures without
coupons. The Debentures and Trustee’s certificate of authentication to be
endorsed thereon shall be in substantially the form set forth in Exhibit A
hereto, with appropriate variations, insertions and omissions as permitted or
required by this Indenture. 

     Section 2.04. Payment.
Payments of principal of and interest on the Debentures will be made on the
date such payments are due and payable at the place and in the manner agreed
upon by Trustee and Issuer, typically not more than fifteen (15) calendar days
prior to each Payment Date. If the Debentures are in certificated form, the
principal of, interest on and premium, if any, of each Debenture will be payable
to the Owner thereof as specified on the records of Trustee on the Record Date
with respect to such Payment Date irrespective of the cancellation of such
Debenture upon any transfer or exchange thereof subsequent to such Record Date
and prior to such Payment Date, unless Issuer shall default in the payment of
interest due on such Payment Date. Each payment of principal of, interest on and
premium, if any, on each Debenture shall be paid: (a) by check or draft mailed
by first-class mail to such Owner on the Payment Date at his address as it
appears on the Debenture Register on the Record Date or, at the option of any
Owner of at least $1,000,000 in aggregate principal amount of Debentures, (b) by
wire transfer to an account within the United States designated in writing by such Owner at least fifteen (15)
calendar days prior to the Payment Date with an acknowledgment that the then
applicable wire fee of Trustee will be deducted from the wire, or (c) by
Automatic Clearinghouse Transfers at no cost to the Owner in next day funds if
such Owner shall have requested in writing a payment by such method and shall
have provided Trustee with an account number in a bank within the United States
and other necessary information for such purposes at least fifteen (15) calendar
days prior to the applicable Payment Date. In the event of any default in the
payment of principal of, interest on and premium, if any, such defaulted payment
shall be payable to the Owner of such Debenture on a Special Record Date for the
payment of such defaulted payment established by notice mailed by or on behalf
of Issuer to Owners.

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     Section 2.05. Execution.
The Debentures shall be executed on behalf of Issuer by the manual or facsimile
signatures of its Authorized Issuer Representatives delivered in the State of
Texas and shall have impressed or imprinted thereon the seal of Issuer. A
facsimile signature shall have the same force and effect as if manually signed.
In case any officer whose manual signature or a facsimile of whose signature
shall appear on the Debentures shall cease to be such officer before the
delivery of such Debentures, such signature or such facsimile shall nevertheless
be valid and sufficient for all purposes, the same as if such official had
remained in office until delivery.

     Section 2.06. Unconditional
Obligation. The Debentures, together with interest thereon, are joint and
several unconditional obligations of Issuer, secured by the Revenues, subject
and subordinate to the prior superior lien of the Operating Line of Credit. The
Revenues shall be, and hereby are, pledged and charged to such payment in
accordance with the provisions of this Indenture. The Debentures shall be
secured by such pledge and charge and by a lien on the Revenues, all in
accordance with and subject to the conditions and provisions of this
Indenture.

     Section 2.07. Authentication.
Only such Debentures as shall have endorsed thereon a certificate of
authentication substantially in the form set forth in Exhibit A attached hereto
duly executed by Trustee shall be entitled to any right or benefit under this
Indenture. No Debenture shall be valid and obligatory for any purpose unless and
until such certificate of authentication shall have been duly executed by manual
signature of Trustee, and such certificate of Trustee upon any such Debenture
shall be conclusive evidence that such Debenture has been authenticated and
delivered under this Indenture. Trustee’s certificate of authentication on any
Debenture shall be deemed to have been executed if signed by an authorized
officer of Trustee, but it shall not be necessary that the same officer sign the
certificate of authentication on all of the Debentures issued hereunder.

     Section 2.08. Delivery of the
Debentures. Issuer shall execute and deliver to Trustee, and Trustee shall
authenticate the Debentures and deliver said Debentures to the original
purchaser or purchasers thereof as may be directed in this Section 2.08, or in
any supplemental indenture. Prior to the delivery or original issuance by
Trustee of any authenticated Debentures, there shall be delivered to
Trustee at its principal corporate trust office in the State of Arkansas:

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      An
original executed counterpart of this Indenture;

     (b) A
Written Request to Trustee by Issuer to authenticate and deliver the Debentures
to the original purchaser or purchasers thereof upon payment to Trustee, but for
the account of Issuer, of a sum specified in such order plus accrued interest
thereon, if any, to the date of delivery;

     (c) A
copy, duly certified by the Authorized Issuer Representative, of the proceedings
of Issuer authorizing the issuance of the Debentures;

     (d) A
written opinion of Special Counsel approving the legality of the Debentures;

     (e) An
Accredited Investor Questionnaire (or a copy of the Qualified Institutional
Buyer Certification on file with or provided to Placement Agent) signed by each
of the original purchasers of the Debentures in substantially the same form as
that attached as Exhibit B-1 hereto; and

     (f) An
Investor Letter signed by each of the original purchasers of the Debentures in
substantially the same form as that attached hereto as Exhibit B.

     Section 2.09. Mutilated,
Destroyed or Lost Debentures. In case any Debenture issued hereunder shall
become mutilated or be destroyed or lost, Issuer shall, if not then prohibited
by law and if it has received no notice that such Debenture has been acquired by
a protected purchaser, cause to be executed and Trustee may authenticate and
deliver a new Debenture of like series, date, number, maturity and tenor in
exchange and substitution for and upon cancellation of such mutilated Debenture,
or in lieu of and in substitution for such Debenture destroyed or lost, upon the
holder’s paying the reasonable expenses and charges of Issuer and Trustee in
connection therewith, and, in the case of a Debenture destroyed or lost, filing
by the holder with Trustee evidence satisfactory to Trustee that such Debenture
was destroyed or lost, and of the holder’s ownership thereof, and furnishing
Issuer and Trustee with indemnity satisfactory to them. Trustee is hereby
authorized to authenticate any such new Debenture. In the event any such
Debenture shall have matured, instead of issuing a new Debenture, Issuer may pay
the same without the surrender thereof. Upon the issuance of a new Debenture
under this Section 2.09, Issuer may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of Trustee)
connected therewith.

     Section 2.10. Negotiability,
Registration and Transfer of Debentures. The Debentures shall be and shall
have all the qualities and incidents of negotiable instruments under the laws of
the State of Texas, and Debenture Holders, in accepting any Debentures, shall be
conclusively deemed to have agreed that the Debentures shall be and have all of
said qualities and incidents of negotiable instruments.

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Notwithstanding the foregoing, the Debentures shall be
transferable by the initial purchasers thereof in accordance with the provisions
of the Securities Act of 1933 and the laws of the several states.

     Issuer hereby constitutes and
appoints Trustee as Debenture registrar of Issuer, and as Debenture registrar
Trustee shall keep books for the registration and for the transfer of the
Debentures as provided in this Indenture at the Principal Office of Trustee. The
person in whose name any Debenture shall be registered shall be deemed and
regarded as the absolute owner thereof for all purposes and payment of or on
account of the principal of and interest on any such Debenture shall be made
only to or upon the order of the registered owner thereof, or the registered
owner’s legal representative, and neither Issuer, Trustee nor the Debenture
registrar shall be affected by any notice to the contrary, but such registration
may be changed as herein provided. All such payments shall be valid and
effectual to satisfy and discharge the liability upon such Debenture to the
extent of the sum or sums so paid.

     Debentures may be transferred on
the books of registration kept by Trustee by the registered owner in person or
by the owner’s duly authorized attorney, upon surrender thereof, together with a
written instrument of transfer duly executed by the registered owner or the
owner’s duly authorized attorney, and subject to the receipt of an Investor
Letter in substantially the same form as that attached hereto as Exhibit B, as
required below. Upon surrender for transfer of any Debenture at the Principal
Office of Trustee, Issuer shall execute and Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Debenture(s) in the
same aggregate principal amount and of any authorized denomination or
denominations.

     Debentures may be exchanged at
the Principal Office of Trustee in the State of Arkansas for an equal aggregate
principal amount of Debentures of any other authorized denomination or
denominations of the same series with corresponding maturities. Issuer shall
execute and Trustee shall authenticate and deliver the Debentures which the
Debenture Holder making the exchange is entitled to receive, bearing numbers not
contemporaneously then outstanding. The execution by Issuer of any Debenture of
any denomination shall constitute full and due authorization of such
denomination and Trustee shall thereby be authorized to authenticate and deliver
such Debenture.

     Such transfers of registration or
exchanges of Debentures shall be without charge to the holders of such
Debentures, but any taxes or other governmental charges required to be paid with
respect to the same shall be paid by the holder of the Debenture requesting such
transfer or exchange as a condition precedent to the exercise of such
privilege.

     Trustee shall not be required to
transfer or exchange any Debenture during the period from and including a Record
Date to the next succeeding Interest Payment Date of such Debenture nor to
transfer or exchange any Debenture after the mailing of notice calling such
Debenture for redemption has been made, and prior to such redemption.

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     REGISTRATION AND TRANSFER OF
THE DEBENTURES IS SUBJECT TO THE TRUSTEE’S PRIOR RECEIPT OF AN INVESTOR LETTER
FROM EACH PROSPECTIVE TRANSFEREE IN SUBSTANTIALLY THE SAME FORM OF THAT ATTACHED
HERETO AS EXHIBIT B, OR AN OPINION OF SPECIAL COUNSEL THAT SUCH INVESTOR LETTER
IS NO LONGER REQUIRED.

     FURTHERMORE, RESALES OF
THE DEBENTURES ARE RESTRICTED AND MAY BE MADE ONLY IN COMPLIANCE WITH RULE 144A
TO THE EXTENT APPLICABLE UNLESS OTHERWISE ALLOWABLE UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS. PARTICULARLY, RESALES MAY BE MADE ONLY TO QUALIFIED
INSTITUTIONAL BUYERS AS DEFINED BY RULE 144A UNLESS OTHERWISE ALLOWABLE UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS AT THE TIME OF SUCH RESALE.

     Notwithstanding anything
contained herein to the contrary, the Debentures and interests therein may not
be issued, sold or transferred to any Debenture Holder other than the initial
Debenture Holder, unless (i) the initial Debenture Holder and any subsequent
Debenture Holder shall have delivered to Trustee evidence satisfactory to
Trustee that the transferee is a Qualified Institutional Buyer, as such term is
defined under Rule 144A promulgated pursuant to the Securities Act of 1933 as
long as such rule is applicable, and otherwise in accordance with federal and
state securities laws applicable at such time, and (ii) Trustee obtained a
signed Investor Letter in the same form as attached to the Indenture as Exhibit
B and attached to the Debentures, or an opinion of Special Counsel that such
Investor Letter is no longer required. The Debentures shall bear legends stating
that they are subject to the transfer restrictions described in this Section
2.10 of the Indenture. By purchasing a Debenture, the initial Debenture Holder
and any subsequent Debenture Holder shall be deemed to have agreed to the
transfer requirements contained in this Section 2.10 of the Indenture.

     Section 2.11.
Cancellation. All Debentures surrendered for payment, redemption, transfer
or exchange, if surrendered to Trustee, shall be promptly cancelled by it, and,
if surrendered to any person other than Trustee, shall be delivered to Trustee
and, if not already cancelled, shall be promptly cancelled by it. Issuer may at
any time deliver to Trustee for cancellation any Debentures previously
authenticated and delivered hereunder, which Issuer may have acquired in any
manner whatsoever, and all Debentures so delivered shall be promptly cancelled
by Trustee. All cancelled Debentures held by Trustee shall be disposed of as
directed by Issuer. Whenever in this Indenture provision is made for the
cancellation by Trustee and the delivery to Issuer of any Debentures, Trustee
may, upon the written request of Issuer, in lieu of such cancellation and
delivery, destroy such Debentures in the presence of any officer of Issuer (but
only if Issuer shall so require), and deliver a certificate of such destruction
to Issuer.

     Section 2.12. Superior
Obligations. The Debentures shall create a lien on the Revenues of Issuer
that is subject and subordinate to the prior existing lien created by the
current $5,000,000 Operating Line of Credit issued by Texas Capital Bank, N.A.,
San Antonio, Texas, or its successor. Issuer may, in its sole discretion (but
subject to the restrictions contained in the Credit Agreement governing
the Operating Line of Credit) from time to time, draw upon the Operating Line of
Credit in a principal amount not to exceed $2,500,000 of the total $5,000,000
available credit line. Issuer may, in its sole discretion from time to time,
draw an additional $2,500,000 on the Operating Line of Credit over and above the
initial $2,500,000 (the “Additional Operating Line of Credit Draw”), so long
as Issuer maintains a debt service coverage ratio of three (3) times the
Annual Debt Service obligation on the Debentures, Additional Debentures, any
Parity Obligation, any Subordinate Obligations and the Operating Line of Credit; provided, that, before any Additional Operating Line of Credit
Draw is made, Issuer shall deliver to Trustee a statement by a Qualified
Accountant reciting the opinion that, based upon necessary investigation, (i)
the Net Revenues of Issuer for the two (2) Fiscal Years immediately preceding
the Fiscal Year in which such Additional Operating Line of Credit Draw is to be
issued or made were not less than three hundred percent (300%) of the average
Annual Debt Service on all then-Outstanding Debentures, Parity Obligations, the
Operating Line of Credit and Subordinate Obligations, plus the Additional
Operating Line of Credit Draw then proposed to be issued or made, or (ii) in the
event that the proceeds of the Additional Operating Line of Credit Draw will be
used to fund an acquisition, in whole or in part of an additional business, that
the Net Revenues of Issuer, together with the audited Net Revenues of the
business to be acquired, restated on a combined basis in accordance with GAAP
procedures, for the two (2) Fiscal Years immediately preceding the Fiscal Year
in which such Additional Operating Line of Credit Draw is to be made were not
less than three hundred percent (300%) of the average Annual Debt Service on all
then-Outstanding Debentures, Parity Obligations, the Operating Line of Credit
and Subordinate Obligations, plus the Additional Operating Line of Credit Draw
then proposed to be made.

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     No Additional Operating Line of
Credit Draw may be made unless there is no default under this Indenture at the
time such draw is to be made.

     Section 2.13. Additional
Superior Obligations Restricted. Subject to the preexisting and prior
superior lien of the Operating Line of Credit and the parity lien of any
properly issued Parity Obligations described below, from and after the issuance
of any of the Debentures and for so long as any of the Debentures are
Outstanding, Issuer shall not create or permit the creation of any lien or
indebtedness, or issue any notes, debentures, bonds, warrants, certificates or
other obligations or evidences of indebtedness payable in any manner from the
Revenues or otherwise from the Trust Estate which: (i) will in any way be
superior to or rank on a parity with the Debentures, or (ii) will in any way be
secured by a lien and charge on the Revenues prior to or equal with the lien,
pledge and charge created herein for the security of the Debentures and the
Operating Line of Credit, or (iii) will be payable prior to or equal with the
payments to be made from the Revenues into the Debenture Fund and from said
Debenture Fund for the payment of the Debentures.

     Section 2.14. Parity
Obligations. Issuer shall not be permitted to create or permit the creation
of indebtedness payable from the Revenues on an equal and parity basis with the
lien of this Indenture, except, with respect to Additional Debentures
issued in strict compliance with this Indenture or other permissible forms of
debt as set forth below (collectively, the “Permissible Parity Debt”).
Before any Permissible Parity Debt is issued or incurred, there shall be
delivered to Trustee the items required for the issuance of Debentures by
Section 2.08 of this Indenture, plus a statement by a Qualified Accountant
reciting the opinion, based upon necessary investigation, (i) that the Net
Revenues of Issuer for the two (2) Fiscal Years immediately preceding the Fiscal
Year in which such Permissible Parity Debt are to be issued or incurred were not
less than three hundred percent (300%) of the average Annual Debt Service on all
then-Outstanding Debentures, the Operating Line of Credit, any Parity Debt and
Subordinate Obligations, plus the Permissible Parity Debt then proposed to be
issued or incurred, or (ii) in the event that the proceeds of the Permissible
Parity Debt will be used to fund the acquisition, in whole or in part of an
additional business, that the Net Revenues of Issuer, together with the audited
Net Revenues of the business to be acquired, restated on a combined basis in
accordance with GAAP procedures, for the two (2) Fiscal Years immediately
preceding the Fiscal Year in which such Permissible Parity Debt are to be issued
or incurred were not less than three hundred percent (300%) of the average
Annual Debt Service on all then-Outstanding Debentures, the Operating Line of
Credit, any Parity Debt and Subordinate Obligations, plus the Permissible Parity
Debt then proposed to be issued or incurred.

20




     No Permissible Parity Debt shall
be issued or incurred unless there is no default at the time of issuance under
this Indenture or Operating Line of Credit.

     Section 2.15. Subordinate
Obligations. Nothing in this Indenture shall prevent Issuer from authorizing
and issuing notes, bonds, debentures, debenture anticipation notes, warrants,
certificates or other obligations or evidences of indebtedness, the payment of
the principal of and premium, if any, and interest on which shall be made from
Revenues or from a special fund to be established and maintained from Revenues;
provided, that, payments from Revenues or from a special fund to
be established and maintained from Revenues, and the lien and charge on such
Revenues, shall be made junior and subordinate to the lien, pledge and charge
created herein for the security and payment of the Debentures and other payments
under this Indenture, including, without limitation, the following payments out
of Revenues into the Debenture Fund. Nothing contained herein shall prohibit
Issuer from incurring debt in the ordinary course of business for the purchase
or lease of furniture, fixtures and other equipment (including vehicles) for use
by Issuer; provided, that, such debt shall be subordinate to the
provisions of this Indenture and may be secured only by a purchase money
security interest in the furniture, fixtures and equipment so acquired.

     Notwithstanding anything herein
to the contrary, no Subordinate Obligations shall be issued unless there is no
Event of Default at the time of issuance under this Indenture.

     Section 2.16. Prohibition
Against Pledge of Accounts Receivable. From and after the issuance of any of
the Debentures and for so long as any of the Debentures are Outstanding, Issuer
shall not create or permit the creation of any indebtedness, or issue any notes,
debentures, bonds, warrants, certificates or other obligations or evidences of
indebtedness payable in any manner from or make any hypothecation, pledge, assignment, sale or grant of Issuer’s
accounts receivable or any other source of Revenues.

21




     Section 2.17. Book Entry
Debentures. The Debentures shall initially be issued as book-entry
Debentures and shall be registered in the name of Cede & Co., as nominee of
The Depository Trust Company (“DTC”) and delivered to DTC in New York, New York,
prior to the Closing Date or maintained by Trustee under appropriate custodial
agreements with DTC, as the case may be. Trustee and Issuer acknowledge that
Issuer has executed and delivered a Blanket Letter of Representations with DTC.
All payments of principal of and redemption premium, if any, and interest on the
book entry Debentures and all notices with respect thereto, including notices of
full or partial redemption, shall be made and given at the times and in the
manner set out in the Letter of Representations. The terms and provisions of the
Letter of Representations shall govern in the event of any inconsistency between
the provisions of this Indenture and the Letter of Representations. The Letter
of Representations may be amended without Debenture Holder consent.

     The book-entry registration
system for all of the book entry Debentures may be terminated and certificates
delivered to and registered in the name of the Holders, under either of the
following circumstances:

(a) DTC notifies Issuer and Trustee
that it is no longer willing or able to act as Securities Depository for the
book entry Debentures and a successor Securities Depository for the book entry
Debentures is not appointed by Issuer prior to the effective date of such
discontinuation; or 

(b) Issuer determines that continuation
of the book-entry system through DTC (or a successor securities depository) is
not in the best interest of Issuer.

     In the event a successor
Securities Depository is appointed by Issuer, the book-entry Debentures will be
registered in the name of such successor Securities Depository or its nominee.
In the event certificates are required to be issued to Beneficial Owners,
Trustee and Issuer shall be fully protected in relying upon a certificate of DTC
or any DTC participant as to the identity of and the principal amount of book
entry Debentures held by such Beneficial Owners.

     Once registered in book-entry
only form, the Holders of the Debentures will not receive physical delivery of
Debentures, except as provided herein. For so long as there is a Securities
Depository for the Debentures, all of such Debentures shall be registered in the
name of the nominee of the Securities Depository, all transfers of beneficial
ownership interests in such Debentures will be made in accordance with the rules
of the Securities Depository, and no investor or other party purchasing,
selling, or otherwise transferring beneficial ownership of such Debentures is to
receive, hold, or deliver any physical evidence of any Debentures. Issuer and
Trustee shall have no responsibility or liability for transfers of beneficial
ownership interests in such Debentures.

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     Issuer and Trustee will recognize
the Securities Depository or its nominee as the Debenture Holder of book-entry
Debentures for all purposes, including receipt of payments, notices, and voting;
provided, Trustee may recognize votes by or on behalf of Beneficial
Owners as if such votes were made by Debenture Holders of a related portion of
the Debentures when such votes are received in compliance with an omnibus proxy
of the Securities Depository or otherwise pursuant to the rules of the
Securities Depository or the provisions of the Letter of Representations or
other comparable evidence delivered to Trustee by the Debenture Holders.

     With respect to book entry
Debentures, Issuer and Trustee shall be entitled to treat the Person in whose
name such Debenture is registered as the absolute owner of such Debenture for
all purposes of this Indenture, and neither Issuer nor Trustee shall have any
responsibility or obligation to any Beneficial Owner of such book entry
Debenture. Without limiting the immediately preceding sentence, neither Issuer
nor Trustee shall have any responsibility or obligation with respect to: (a) the
accuracy of the records of any Securities Depository or any of other Person with
respect to any ownership interest in book-entry Debentures, (b) the delivery to
any Person, other than a Debenture Holder, of any notice with respect to
book-entry Debentures, including any notice of redemption or refunding, (c) the
selection of the particular Debentures or portions thereof to be redeemed or
refunded in the event of a partial redemption or refunding of part of the
Debentures Outstanding, or (d) the payment to any Person, other than a Debenture
Holder, of any amount with respect to the principal of or redemption premium, if
any, or interest on book-entry Debentures.

ARTICLE III

REDEMPTION

     Section 3.01. Privilege of
Redemption and Redemption Prices. The Debentures shall be subject to
redemption prior to maturity in the manner provided in this Article III.

     Section 3.02. Issuer’s
Election to Redeem; Notice to Trustee. The Debentures shall be subject to
optional redemption by Issuer as set forth in Sections 3.08, 3.09, 3.10 and 3.12
hereof, which written direction shall be evidenced by a Written Request to
Trustee. In case of any such optional redemption, the Written Request of Issuer
shall, at least thirty (30) calendar days prior to the redemption date (unless a
shorter notice shall be satisfactory to Trustee), be delivered to Trustee
notifying Trustee of such redemption date and of the principal amount of the
Debentures to be redeemed and of the redemption price for the Debentures to be
redeemed.

     Section 3.03. Selection by Trustee of Debentures to Be
Redeemed; Sequential Redemptions. If less than all of the Outstanding
Debentures are to be redeemed, Trustee shall redeem the Debentures in inverse
order of maturity (and by lot or in such manner as Trustee shall deem fair and
appropriate within each maturity) in Authorized Denominations in amounts in
proportion to the principal amount of each maturity subject to the Mandatory Sinking Fund provisions of Section
3.08 of the Indenture (if applicable). After any partial redemption of the
Debentures which leaves the Debentures Outstanding in a principal amount of less
than $25,000, Trustee shall apply the next prepayment of principal (whether by
Extraordinary Optional Redemption, Optional Redemption, or Mandatory Sinking
Fund Redemption pursuant to Section 3.08, 3.09, 3.10 or 3.12 hereof) to the
Debentures until the principal of the Debentures shall be paid in full.
Notwithstanding the foregoing with respect to the selection of Debentures to be
redeemed in the event of a partial redemption, so long as DTC or its nominee is
the sole registered Owner of the Debentures, the Trustee shall follow the
procedure for redemption and notices as set forth in DTC’s operational
arrangements, as in effect at the time. 

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     For all purposes of this
Indenture, unless the context otherwise requires, all provisions relating to the
redemption of the Debentures shall relate, in the case of any Debenture redeemed
or to be redeemed only in part, to the portion of the principal of such
Debenture which has been or is to be redeemed.

     Section 3.04. Notice of
Redemption. When Trustee receives the Written Request from Issuer to redeem
any Debentures in accordance with the Indenture, identifying the Debentures or
portions thereof to be redeemed, Trustee will give notice of the redemption of
such Debentures, which is to be given by mailing a copy of the redemption notice
by first class mail, postage prepaid, or by overnight delivery service, within
five (5) Business Days of the receipt by Trustee of the Written Request of
Issuer pursuant to Section 3.02 to the registered Owner (Cede & Co., so long
as it is the registered owner in the book-entry system) of each Debenture to be
redeemed in whole or in part at the address shown on the registration books
maintained by Trustee. Each notice of redemption will state: (i) the maturities
of the Debentures to be redeemed, (ii) the redemption date, (iii) the place or
places where amounts due upon such redemption will be payable, (iv) if less than
all of the Debentures are to be redeemed, the letters and number or other
distinguishing marks of such Debentures so to be redeemed, (v) the CUSIP number
(if any), (vi) the date of such notice, (vii) the issuance date for the
Debentures to be redeemed, (viii) the interest rate of the Debentures to be
redeemed, (ix) the redemption price, (x) Trustee’s name and the address of
Trustee’s Principal Office, (xi) the complete official name of the Debentures,
and (xii) in the case of the Debentures to be redeemed in part, such notice will
also specify the respective portions of the principal amount thereof to be
redeemed. Such notice will further state that on such date there will become due
and payable upon each Debenture to be redeemed the redemption price thereof (or
the redemption price of the specified portions of the principal thereof in the
case of the Debentures to be redeemed in part only), together with interest
accrued to the redemption date, and that from and after such date interest
thereon will cease to accrue and be payable. A defect in, or failure to give,
notice of redemption with respect to any Debenture will not invalidate the
notice of redemption of any other Debenture(s) for which notice of redemption
has been properly given.

     The Trustee is also required to
send a copy of such notice by first class mail, by facsimile transmission or
overnight delivery service for receipt not less than thirty (30) calendar days before such redemption date to the following: The
Depository Trust Company, and Standard and Poor’s Called Note Record, 55 Water
Street - 45th Floor, New York, New York 10041; provided, however, that such mailing or transmission will not be a condition
precedent to such redemption of the Debentures. If the Debentures are no longer
in book entry form on the date of redemption, the Trustee also is to mail or
transmit a notice of redemption, in the manner and in the form described above,
to any Debenture Holder who has not delivered the Debentures for redemption
within sixty (60) calendar days after the redemption date.

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     So long as and at any time the
Debentures are in physical registered form Trustee also is to mail or transmit a
notice of redemption, in the manner and in the form described above, to any
Debenture Holder who has not delivered Debentures for redemption within sixty
(60) calendar days after the redemption date.

     Any notice mailed as provided
above will be conclusively presumed to have been duly given, whether or not the
Holder of such Debenture(s) or such other intended recipient receives such
notice.

     Unless the Debentures are to be
redeemed from the proceeds of refunding Debentures and except with respect to
the mandatory redemption of the Debentures as described in Section 3.11 hereof,
Issuer shall deposit with Trustee monies fully sufficient to pay the redemption
price (including any premium, if applicable) of the Debentures to be redeemed
plus accrued interest, if any, prior to giving notice of redemption, except in
the event of a notice that is subject to a conditional call of the Debentures to
be redeemed.

     Upon notice of redemption having
been duly given as aforesaid, and monies being held by Trustee for payment of
the redemption price of, plus accrued interest to the redemption date on the
Debentures to be redeemed, the Debentures (or portions thereof) so called for
redemption on the redemption date designated in such notice will become due and
payable at the redemption price, plus accrued interest thereon to the redemption
date, specified in such notice and interest on the Debentures so called for
redemption will cease to accrue. Said Debentures (or portions thereof) will
cease to be entitled to any benefit or security under the Indenture, and the
Holders of said Debentures will have no rights in respect thereof except to
receive payment of said redemption price, plus accrued interest to the
redemption date.

     Section 3.05. [Reserved.]

     Section 3.06. Effect of Notice
of Redemption. Notice having been given in the manner and under the
conditions hereinabove provided, and monies for payment of the redemption price
being held by Trustee as provided in Section 3.04 of this Indenture, (a) the
Debentures, or portions of the Debentures, so called for redemption shall, on
the date fixed for redemption designated in such notice, become due and payable
at the redemption price provided for redemption of such Debentures, or portions
of the Debentures, on such date and interest on the Debentures, or portions of
the Debentures, so called for redemption shall cease to accrue, (b) upon
surrender of the Debentures, or portions of the Debentures, so called for
redemption in accordance with such notice, such Debentures, or portions of the
Debentures, shall be paid at the applicable redemption price, (c) such
Debentures, or portions of the Debentures, shall cease to be entitled to any
lien, benefit or security under this Indenture, and (d) the Holders of said
Debentures, or portions of the Debentures, shall have no rights in respect
thereof except to receive payment of the redemption price thereof.

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     Section 3.07. Debentures
Redeemed in Part. Any Debenture which is to be redeemed only in part, except
by mandatory redemption pursuant to Section 3.11 hereof, shall be surrendered to
Trustee (with, if Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to Trustee duly executed by the
Holders thereof or his attorney duly authorized in writing) and the appropriate
officials of Issuer shall execute and Trustee shall authenticate and deliver to
the Holders of such Debenture, without service charge, a new Debenture or
Debentures, of any Authorized Denomination, having the same maturity and
interest rate, in an aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Debenture so surrendered. All partial
redemptions shall be effected in accordance with Section 3.03 hereof.

     Section 3.08. Mandatory
Sinking Fund Redemption. The Debentures are subject to mandatory sinking
fund redemption prior to maturity in part, with the Debentures to be redeemed
being selected by lot by the Trustee in such manner as the Trustee may
determine, at the redemption price of one hundred percent (100%) of the
principal amount thereof plus accrued interest to the date fixed for redemption,
without premium, in the amounts and on the dates as follows:

$5,500,000 Term Debenture due March 1, 2015


	Redemption Date 	Principal Amount 
	09/01/2008 	$195,000.00 
	03/01/2009 	200,000.00 
	09/01/2009 	245,000.00 
	03/01/2010 	245,000.00 
	09/01/2010 	300,000.00 
	03/01/2011 	300,000.00 
	09/01/2011 	360,000.00 
	03/01/2012 	360,000.00 
	09/01/2012 	470,000.00 
	03/01/2013 	475,000.00 
	09/01/2013 	545,000.00 
	03/01/2014 	545,000.00 
	09/01/2014 	630,000.00 
	03/01/2015 * 	630,000.00 
	* Maturity 	 



     At its option, to be exercised on
or before the thirtieth (30th) day next preceding any mandatory
sinking fund redemption date, Issuer (provided that no Event of Default shall
have occurred and be continuing), may: (i) deliver to Trustee for cancellation
the Debentures of the applicable maturity or portions thereof (in
Authorized Denominations) in any aggregate principal amount desired and (ii)
receive a credit in respect of its mandatory sinking fund redemption obligation
for any Debentures of the same maturity (in Authorized Denominations) which
prior to said date have been purchased or redeemed (otherwise than through
mandatory sinking fund redemption pursuant to this Section) and cancelled by
Trustee and not theretofore applied as a credit against any mandatory sinking
fund redemption obligation for the same maturity. Each such Debenture or portion
thereof so delivered or previously purchased or redeemed and cancelled by
Trustee shall be credited by Trustee at one hundred percent (100%) of the
principal amount thereof against the obligation to redeem Debentures of the same
maturity on such mandatory sinking fund redemption date, and any excess over
such amount shall be credited against future mandatory sinking fund redemption
obligations for the same maturity in chronological order, and the principal
amount of the Debentures of said maturity so to be redeemed shall be accordingly
reduced.

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     Issuer will, on or before the
thirtieth (30th) calendar day next preceding each such mandatory
sinking fund redemption date, furnish Trustee with its certificate indicating
whether and to what extent the provisions of (i) and (ii) of the preceding
paragraph are to be availed of with respect to such mandatory sinking fund
redemption payment.

     Section 3.09. Extraordinary
Optional Redemption of Debentures. The Debentures are subject to
extraordinary optional redemption (which redemption shall be mandatory in the
circumstances provided in subsection (d) below) as a whole or in part upon the
occurrence of any of the following events with respect to Issuer’s Facilities,
at a redemption price equal to the principal amount of the Debentures then
Outstanding to be so redeemed, plus accrued interest to the date fixed for such
redemption (which date shall be the earliest practicable date in accordance with
the Indenture) and without premium:

     (a) Any
one of Issuer’s production wells or other Facilities, or any part thereof, is so
demolished, destroyed or damaged that, in the commercially reasonable judgment
of Issuer, all or a portion of the well or facility cannot be restored or
rebuilt with available funds to a profitable condition within the term of
business interruption insurance covering the operations of Issuer and the net
proceeds resulting from such casualty are more than the lesser of $500,000 or
the Outstanding principal amount of all Debentures;

     (b) All
or a portion of Issuer’s production wells or other Facilities shall have been
taken under the exercise of the power of eminent domain by any governmental
authority or so much of Issuer’s wells or facilities is taken or is so
diminished in value that the remainder thereof cannot, in the judgment of
Issuer, continue to be operated profitably for the purpose for which it was
being used immediately prior to such taking or diminution and the proceeds
resulting from such condemnation are more than the lesser of $500,000 or the
Outstanding principal amount of all Debentures;

27




     (c) On
any date upon not less than ninety (90) calendar days’ prior written notice in
the event of the occurrence of a “Change in Control” of Issuer, unless waived by
Holders of not less than seventy-five percent (75%) of Debentures Outstanding.
The term "Change in Control" means the happening of any one or more of the
following events:

     (i)
Approval by the shareholders of Corporation or the partners of Partnership of
the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act"), excluding, for this purpose, the present shareholders or
partners of Issuer, individually or as a member of a group, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of fifty percent (50%) or more of either the then outstanding “Voting
Securities” (meaning, the shares of common stock of Issuer entitled to vote) or
the combined voting power of Issuer's then outstanding Voting Securities
entitled to vote generally in the election of the board of directors of Issuer
(“the Board"); 

     (ii)
Individuals who, as of the Effective Date, constitute the Board (herein called
the "Incumbent Board"), cease for any reason to constitute at least a majority
of the Board; provided, that, any person becoming a member of the
Board subsequent to the Effective Date whose election, or nomination for
election by shareholders of Corporation or the partners of Partnership, was
approved by a vote of at least a majority of the Voting Securities of Issuer
entitled to vote thereon (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Board, as such term is used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be,
considered as though such person were a member of the Incumbent Board; 

     (iii)
Approval by the shareholders of Corporation or the partners of Partnership of a
reorganization, merger or consolidation of Issuer, in each case, with respect to
which persons who were the shareholders or partners of Issuer immediately prior
to such reorganization, merger or consolidation do not, immediately thereafter,
own more than fifty percent (50%) of the Voting Securities or combined voting
power entitled to vote generally in the election of directors, as the case may
be, of the reorganized, merged or consolidated entity's then outstanding Voting
Securities; or 

     (iv)
Approval by the shareholders of Corporation or the partners of Partnership of
liquidation or dissolution of, or the sale, lease, exchange or other disposition
of all or substantially all of the assets of, Issuer.

     (d) If
any of the circumstances described in subsections (a), (b) and (c) above shall
occur within six (6) months of the final maturity of the Debentures, all
Debentures shall be redeemed on the earliest practicable date at a price
equal to the principal amount thereof plus interest accrued to the redemption
date.

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     Except as provided in subsection
(d) above, Issuer may exercise the option reserved in Section 3.09 of the
Indenture only within six (6) months following the date that a condition has
occurred which gives rise to a right of redemption under the Indenture.

     In the event that less than all
of the Debentures are redeemed by operation of the foregoing, the Debentures to
be redeemed shall be selected by Trustee in inverse order among the then
outstanding maturities (and by lot or in such manner as Trustee shall deem fair
and appropriate within each maturity) thereof according to the relationship
borne by the outstanding principal amount of each such maturity to the total
amount to be applied to redemption of the Debentures.

     Section 3.10. Optional
Redemption of the Debentures. At any time on or after March 1, 2008, the
Debentures are subject to redemption at the option of the Issuer, in part on any
Payment Date and in whole at any time, at a redemption price as set forth in the
table below, plus accrued interest to such date (less than all of such
Debentures to be selected as provided in Section 3.03 of the Indenture), which
date shall be the first day of the month, or Payment Date (as applicable),
succeeding such direction from the Issuer for which notice of redemption may be
given:


	Redemption Dates 	Price or Amount 
	March 1, 2008, through February 28, 2009 	103% 
	March 1, 2009, through February 28, 2010 	102% 
	March 1, 2010, through February 28, 2011 	101% 
	Including and
      After March 1, 2011 	Par 


     In case of any such optional
redemption, Issuer shall, at least thirty (30) calendar days prior to the
redemption date (unless a shorter notice shall be satisfactory to Trustee),
deliver a Written Request to Trustee notifying Trustee of such redemption date
and of the principal amount of Debentures to be redeemed.

     Section 3.11. Mandatory
Redemption of the Debentures from Excess Insurance or Condemnation Proceeds.
The Debentures are subject to mandatory redemption upon a Written Request from
Issuer to Trustee as a whole or in part at the principal amount thereof plus
accrued interest thereon to the date of redemption, but without premium, from
the net proceeds of any insurance policy or condemnation award remaining after
the repair, replacement, or improvement of all or any portion of the Facilities,
in the amount certified in the Written Request by Issuer to Trustee. The
redemption date shall be the earliest practicable date selected by Trustee at
the direction of Issuer. The Debentures shall be redeemed only in $25,000
increments in inverse order of all maturities of such Debentures subject to
mandatory redemption, as applicable in the priority set forth in the first
sentence of this Section. Any excess amount shall be used to pay principal on the Debentures, on the
first Principal Payment Date on or after said redemption date.

29




     Section 3.12. Optional
Redemption of the Debentures from Excess Funds. The Debentures are subject
to redemption at the option of Issuer, upon Written Request from Issuer to
Trustee, as a whole or in part at the principal amount thereof, plus accrued
interest thereon to the date of redemption, but without premium, from excess
funds in the Project Fund after payment of the Prior Obligation and pay off of
the outstanding balance of the Operating Line of Credit, in the event Issuer
determines not to apply such excess funds to working capital. The redemption
date shall be the earliest practicable date selected by Trustee at the direction
of Issuer. The Debentures shall be redeemed only in $25,000 increments across
all maturities of such Series subject to mandatory redemption, as applicable in
the priority set forth in this Trust Indenture. Any excess amount shall be used
to pay principal on the Debentures, on the first principal payment date on or
after said redemption date.

     Section 3.13. Mandatory
Redemption Upon Default Under Operating Line of Credit or Parity
Obligations. Upon the occurrence of an event of default under the Operating
Line of Credit or any Parity Obligations, if issued and Outstanding, the
Debentures shall be redeemed in whole from available monies in the Debenture
Fund, and, to the extent necessary, from the Revenues of Issuer, at a redemption
price equal to one hundred percent (100%) of the principal amount of the
Debentures being redeemed, plus accrued interest to the date of redemption, on
the earliest date for which notice of redemption can be given in accordance with
the provisions of this Indenture.

ARTICLE IV

GENERAL COVENANTS

     Section 4.01. Payment of
Principal, Premium, if any, and Interest. Issuer covenants that it will
promptly pay or cause to be paid the principal of and premium, if any, and
interest on every Debenture issued under this Indenture at the place, on the
dates and in the manner provided herein and in the Debentures according to the
true intent and meaning thereof. The principal, premium, if any, and interest
(except interest paid from the proceeds from the sale of the Debentures and
accrued interest) are general obligations of Issuer payable from the Trust
Estate, which is hereby specifically pledged to the payment thereof in the
manner and to the extent herein specified, and form any other funds or assets of
Issuer other than the Trust Estate.

     Section 4.02. Performance of
Covenants. Issuer covenants that it will faithfully perform at all times any
and all covenants, undertakings, stipulations and provisions contained in this
Indenture, in any and every Debenture executed, authenticated and delivered
hereunder, and in all ordinances pertaining hereto. Issuer covenants that it is
duly authorized under the Constitution and laws of the State of Texas,
including, particularly, and without limitation, the Authorizing
Instruments, to issue the Debentures authorized hereby and to execute this Indenture and to make the
pledge and covenants in the manner and to the extent herein set forth, that all
action on its part for the issuance of the Debentures and the execution and
delivery of this Indenture has been duly and effectively taken, and that the
Debentures in the hands of the holders and owners thereof are and will be valid
and enforceable obligations of Issuer according to the import thereof.

30




     Section 4.03. Instruments of
Further Assurance. Issuer covenants that it will do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and delivered, such
indenture or indentures supplemental hereto and such further acts, instruments
and transfers as Trustee may reasonably require for better assuring,
transferring, mortgaging, pledging, assigning and confirming unto Trustee the
Trust Estate.

     Section 4.04. Recordation and
Filing. Issuer authorizes Trustee to record and file this Indenture, such
security agreements, financing statements, and all supplements thereto and other
instruments as may be required from time to time to be kept, in such manner and
in such places as may be required by law in order to fully preserve and protect
the security of the owners of the Debentures and the rights of Trustee
hereunder, and to perfect the security interests created by this Indenture.

     Section 4.05. Inspection of
Books. All books and documents in the possession of Issuer relating to the
Project, the Facilities and the Revenues shall at all reasonable times be open
to inspection by such accountants or other agencies as Trustee may from time to
time designate and by the Qualified Accountant.

     Section 4.06. Rates and Charges. Issuer covenants
that:

     (a) It
will use its best efforts in a commercially reasonable manner to fix its rates
and charges at such a level so as to maintain Net Revenues, in a level
sufficient to pay the Debt Service on the Debentures, the Prior Obligation and
the Parity Obligations, including Additional Debentures; and

     (b) At
all times while the Debentures are Outstanding, it will levy its fees and
charges to customers.

     Section 4.07. Taxes, Charges
and Assessments. Issuer covenants that it will promptly pay all lawful
taxes, charges, assessments, imposts and governmental charges at any time levied
or assessed upon or against Issuer’s Facilities, its Revenues or any part
thereof; provided, however, that nothing contained in this Section
4.07 shall require Issuer to cause to be paid any such taxes, assessments,
imposts or charges so long as the validity thereof is being contested in good
faith and by appropriate legal proceedings.

     Section 4.08. Encumbrances.
Issuer covenants that it will not create or suffer to be created any lien or
charge upon the Facilities or any part thereof (other than Permitted
Encumbrances) or upon the Revenues, except in accordance with the provisions of
this Indenture, and that, from Revenues, it will pay or cause to be discharged, or will make adequate provision to satisfy and
discharge, within sixty (60) calendar days after the same shall accrue, all
lawful claims and demands for labor, materials, supplies or other objects which,
if unpaid, might by law become a lien upon the Facilities or any part thereof or
upon the Revenues; provided, however, that nothing in this Section
4.08 contained shall require Issuer to pay or cause to be discharged, or make
provision for, any such lien or charge so long as the validity thereof shall be
contested in good faith and by appropriate legal proceedings. Nothing contained
herein shall prohibit Issuer from incurring debt in the ordinary course of
business for the purchase of furniture, fixtures and other equipment for use by
Issuer’s Facilities; provided, that, such debt shall be subordinate to
the provisions of this Indenture and may be secured only by a purchase money
security interest in the furniture, fixtures and equipment.

31




     Section 4.09. Insurance.
Issuer covenants that, to the extent comparable protection is not otherwise
provided, it will keep the Facilities insured against loss or damage, and will
maintain public liability and property damage insurance against claims for
bodily injury or death and damage to property occurring upon, in, or about the
Facilities, in each case in an amount and against such risks as are usually
insured against in connection with similar facilities and undertakings as the
Facilities. Issuer further covenants, to the extent comparable protection is not
otherwise provided, that it will maintain adequate fidelity insurance or bonds
on all officers or employees responsible for handling funds of the Facilities.
All insurance required by this Section shall be effected with reputable
insurance companies selected by Issuer, which usually insure risks similar in
nature and monetary exposure. Policies of insurance provided for herein shall
name Trustee as a beneficiary to the extent of its interest under this
Indenture. Copies of certificates of the insurance provided for herein, or
summaries thereof, shall be placed on file with Trustee.

     Section 4.10. Damage or
Destruction; Condemnation. Issuer covenants and agrees that in the event of
damage to or destruction of the Facilities, or if all or any part of the
Facilities shall be taken under the exercise of eminent domain, it will
immediately notify Trustee.

     All insurance money paid or net
amounts awarded shall be paid to Issuer, and Issuer shall proceed to restore,
repair, replace or rebuild the Facilities as nearly as possible to the condition
they were in immediately prior to such damage or condemnation, to the extent
that the same may be feasible, subject to such alterations as Issuer may elect
to make. If the insurance money or net amounts awarded shall be insufficient to
pay all costs of the restoration, Issuer shall pay the deficiency and shall
nevertheless proceed to complete the restoration and pay the cost thereof. Any
balance of the insurance or condemnation proceeds remaining over and above the
cost of the restoration shall be considered Revenues of Issuer.

     Issuer’s obligations to make all
payments set forth herein and to perform all other covenants and agreements on
its part to be performed shall not be affected by any such damage or destruction
or condemnation.

32




     Notwithstanding the foregoing
provisions of this Section, Issuer shall not be required to repair, restore,
replace or rebuild the Facilities, or any part thereof, if Issuer shall elect
pursuant to Section 3.09 above to redeem prior to maturity on the next possible
redemption date all of the Debentures then Outstanding, together with accrued
interest to the redemption date, and to pay all charges, fees and expenses
necessarily incurred and required to be incurred in connection with such
redemption, and all other amounts then owing by Issuer. In that event, the
proceeds of all insurance or condemnation awards shall be placed in and become
part of the Debenture Fund. If there be any deficiency in the monies on deposit
in the Debenture Fund after the deposit of all such proceeds, Issuer shall
immediately deposit therein the amount of the deficiency.

     Section 4.11. Revenues to Be
Used As Provided In Indenture. Issuer covenants that no Revenues will be
used for any purpose other than as provided in this Indenture, and that no
contract or contracts will be entered into or any action taken by which the
rights of Trustee or of the Debenture Holders might be impaired or diminished.
Issuer further covenants that it will adopt such resolutions and such rules and
regulations as may be necessary or appropriate to carry out the obligations of
Issuer under the provisions of this Indenture and the Authorizing
Instruments.

     Section 4.12. Accounting;
Continuing Disclosure. Issuer covenants that it will keep the funds and
accounts created hereunder separate from all other funds and accounts of Issuer,
and that it will keep accurate records of all items of cost and of all
expenditures relating to the Facilities, and of the collection and application
of Revenues, in accordance with generally accepted accounting principles
consistently applied (“GAAP”). Such records and accounts shall be open to
inspection by Trustee under reasonable circumstances.

     Issuer further covenants that, at
the end of each Fiscal Year, it will cause its Financial Statements to be
prepared in accordance with its customary practices and in accordance with GAAP
for that Fiscal Year pertaining to the Facilities and Revenues by a Qualified
Accountant, and will provide its annual audited Financial Statements and such
other information as may be required by a separate disclosure agreement entered
into between Issuer and Trustee to the Debenture Holders.

     Section 4.13. Existence.
Issuer covenants that it will maintain the existence of the Corporation as a
corporation and the Partnership as a limited partnership and will not, without
the prior written consent of not less than seventy-five percent (75%) of the
Debenture Holders, sell all or substantially all of the assets of Issuer or
enter into any agreement to or consummate any merger, consolidation
reorganization, liquidation or other similar transaction of Issuer with any
other person or entity; provided, however, so long as any such
restructuring involves only the direct transfer of all of Issuer’s assets and
assumption of not less than one hundred percent (100%) of Issuer’s liabilities
and obligations, including the liabilities and obligations of Issuer hereunder,
Issuer shall only be required to provide notice to Trustee pursuant to other
provisions of this Indenture.

33




     Section 4.14. Operation and
Maintenance of Facilities; Disposition of Facilities Assets. Issuer
covenants that it will continuously operate the Facilities in a diligent fashion
in accordance with prudent practice and as a revenue-producing undertaking in
compliance with all applicable laws and regulations and all the covenants and
obligations under this Indenture.

     Issuer further covenants that it
will maintain the Facilities in sound condition and repair, that it will not
sell or otherwise dispose of any property necessary to the proper operation of
the Facilities or to the maintenance of Revenues, and that it will not enter
into any lease or agreement which will impair or impede the operation of the
Facilities or adversely affect the rights of the Debenture Holders.

     Section 4.15. Notification to
Operating Line of Credit Bank. Issuer covenants that it will provide written
notification prior to the Closing Date to Texas Capital Bank, N.A., San Antonio,
Texas, or its successor, that Issuer has agreed, as a term of this Indenture, to
seek an Additional Operating Line of Credit Draw from Texas Capital Bank or its
successor only upon compliance with the requirements of Section 2.12
herein.

     Section 4.16. Certain
Information Available Upon Transfer. Issuer covenants that the Holder of the
Debentures, and any prospective Qualified Institutional Buyer that may purchase
a Debenture from any Holder, may, upon request of the Holder, obtain from the
Issuer the following information: a very brief statement of the nature of the
business of Issuer and the products and services it offers; Issuer’s most recent
balance sheet and profit and loss and retained earnings statements. Presently
the Issuer’s financial statements are unaudited. Issuer covenants to comply with
the requirements of Rule 144A(d)(4).

ARTICLE V

FUNDS AND DEPOSITS

     Section 5.01. Debenture
Fund. There is hereby created and ordered established with Trustee a special
fund, in the name of Issuer, to be designated “Pure Energy Group, Inc. Debenture
Fund” (the “Debenture Fund”). From the proceeds of the sale of the Debentures,
the sum of approximately $25,208.33 (the exact amount to be set forth in the
final Written Request from Issuer to Trustee on the Closing Date) representing
accrued interest together with capitalized interest in the amount of $206,250.00
for the interest payment due September 1, 2005 shall be deposited into the
Debenture Fund and used to pay interest on the Debentures as it becomes due.

     It shall be the unconditional
obligation of Issuer to make payments into the Debenture Fund as follows:

     (a) On or
before the fifteenth (15th) calendar day of each February and August,
there shall be paid by Issuer into the Debenture Fund, beginning on the fifteenth (15th) calendar
day of February 2006 following the last Payment Date for which payment of
interest on the Debentures has been provided from sources other than Net
Revenues, and continuing on the fifteenth (15th) calendar day of each
February and September thereafter until all outstanding Debentures with interest
thereon have been paid in full, or provision made for such payment, a sum (to be
computed by Trustee) that shall be equal to the installment of interest coming
due on the Debentures (whether at maturity, upon mandatory redemption, or
otherwise) on the then next Payment Date, plus one-half (1/2) of Trustee’s and
Paying Agent’s annual fees for the Debentures.

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     (b) On or
before the fifteenth (15th) calendar day of each February and August,
there shall be paid by Issuer into the Debenture Fund, beginning on the
fifteenth (15th) calendar day of February 2008, the installment of
principal coming due on the Debentures (whether at maturity, upon mandatory
redemption, or otherwise) on the then next Payment Date, plus one-half (1/2) of
Trustee’s and Paying Agent’s annual fees for the Debentures (to the extent not
otherwise already paid by Issuer).

     All monies in the Debenture Fund
shall be used solely for the purpose of paying Annual Debt Service on the
Debentures or for any redemption of the Debentures, plus Trustee’s and Paying
Agent’s fees, except as herein specifically provided. Trustee shall withdraw
from the Debenture Fund, on the date of any principal or interest payment, an
amount equal to the amount of such payment for the sole purpose of paying the
same plus Trustee’s and Paying Agent’s fees, which direction Trustee hereby
accepts.

     Section 5.02. Project Fund.
There is hereby created and ordered established with Trustee a special fund
in the name of Issuer, designated “Pure Energy Group, Inc. Project Fund” (“the
Project Fund”). Within the Project Fund, there shall be created the Costs of
Issuance Account. From the proceeds of the sale of the Debentures, the sum of
approximately $4,667,190 (with the exact amount to be provided by Issuer to
Trustee in a Written Request delivered prior to the Closing Date) shall be
deposited into the Project Fund. From funds other than the proceeds of the
Debentures the Issuer shall deposit an additional sum into the Costs of Issuance
Account as provided in Section 5.09 below. The deposit of $4,667,190 into the
Project Fund will be used in part to finance the final payments of Issuer
pursuant to Issuer’s Second Plan of Reorganization approved by the United States
Bankruptcy Court, Western District of Texas, San Antonio Division, on December
2, 2002 (the “Court Case”), and to pay off the outstanding balance of the
Operating Line of Credit. Funds will be held in the Project Fund until the Prior
Obligation and Outstanding Line of Credit can be paid in full. Once the Prior
Obligation and the Outstanding Line of Credit are paid in full, the remainder
will be disbursed to Issuer to use as working capital, or applied to the
redemption of the Debentures, as set forth in Section 3.12 above.

     Section 5.03. Disbursements
from Project Fund. Payments from the Project Fund shall be made only in
accordance with the provisions of this section. Before any such payment shall be
made, there shall be filed with Trustee a requisition certificate in the form
attached hereto as Exhibit D. Each requisition shall specify:

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     (a) The
name of the person, firm or corporation to whom payment is to be made;

     (b) The amount
of the payment;

     (c) The
purpose of the payment;

     (d) That
the payment is for (i) refinancing a Prior Obligation, (ii) payment upon the
Operating Line of Credit, or (iii) for a working capital expenditure of Issuer,
with a copy of invoice, statement or other evidence attached as appropriate;

     (e) That
the disbursement shall not render inaccurate any of the representations or
covenants with respect thereto contained in this Indenture; and

     (f) That
the requisition has not been the basis of any previous disbursement from the
Project Fund.

     Upon receipt of each Written
Request and accompanying certificate, Trustee shall pay the obligations set
forth in the requisition out of money in the Project Fund, and each such
obligation shall be paid by check signed by one or more officers or employees of
Trustee designated for such purpose by Trustee or by wire transfer. In making
such payments, Trustee may rely upon such Written Request and accompanying
certificate and shall be indemnified and held harmless by Issuer for, from and
against any actions taken in accordance with said Written Request and
accompanying certificate. If for any reason Issuer should decide not to pay any
item in a requisition, it shall give written notice of such decision to Trustee
and if Trustee thereof has not already made payment, upon receipt of such notice
Trustee shall not make such payment.

     All Written Requests,
requisitions, certificates, and notices received by Trustee as conditions of
payment from the Project Fund may be relied upon by Trustee and shall be
retained by Trustee until six (6) years after payment of the last requisition,
subject at all reasonable times to examination by Issuer and the Owners.

     Upon delivery of a certificate of
the Authorized Issuer Representative stating that all costs and expenditures
from which monies in the Project Fund was derived have been paid, Trustee shall
transfer the balance of monies in the Project Fund to the Debenture Fund for use
in payment of interest on the Debentures on the next Interest Payment Date and
the Project Fund shall be closed. Notwithstanding the foregoing, in the event
that not all of the funds in the Project Fund have been expended upon the
written certificate of the Authorized Issuer Representative, as provided above,
within twelve (12) months of the Closing Date, Trustee shall transfer the
balance of monies in the Project Fund to the Debenture Fund for use in payment
of interest on the Debentures on the next Payment Date and the Project Fund
shall be closed.

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     Section 5.04. Costs of
Issuance Account. There is hereby created and established with Trustee a
special account within the Project Fund, in the name of Issuer, to be designated
“Pure Energy Group, Inc. Debenture Costs of Issuance Account” (the “Costs of
Issuance Account”).

     From funds provided by the
Issuer, the sum of approximately $[50,000.00] (the exact amount to be set forth
in the final Written Request from Issuer to Trustee on the Closing Date) to pay
the costs of issuance of the Debentures issued and delivered on that date and
such other amounts as shall be delivered by Issuer for deposit therein shall be
deposited into the Costs of Issuance Account. Monies at any time held in the
Costs of Issuance Account shall be used for and applied solely to pay costs of
issuance of the Debentures, including underwriting, consultants, legal,
printing, publication, trustee, paying agent and financial advisory fees and
expenses. Payments from the Costs of Issuance Account shall be made by Trustee,
upon receipt of a Written Request, signed by the Authorized Issuer
Representative. Upon receipt of each such Written Request, Trustee shall pay
each such item directly to the person or party entitled thereto as named in such
authorization, or, if directed by Issuer, shall deliver to Issuer a check, draft
or warrant in an amount sufficient for the payment thereof. Nothing in the
Section 5.04 or elsewhere in this Indenture shall be construed to prohibit the
Issuer from directly paying some or all of the Costs of Issuance without
utilizing the Costs of Issuance Account. 

     Upon delivery of a certificate of
the Authorized Issuer Representative stating that all costs of issuance of the
Debentures from which monies in the Costs of Issuance Account was derived have
been paid, Trustee shall transfer the balance of monies in the Costs of Issuance
Account to the Debenture Fund for use in payment of interest on the Debentures
on the next Interest Payment Date and the Costs of Issuance Account shall be
closed. Notwithstanding the foregoing, in the event that not all of the funds in
the Costs of Issuance Account have been expended upon the written certificate of
the Authorized Issuer Representative, as provided above, within six (6) months
of the Closing, Trustee shall transfer the balance of monies in the Costs of
Issuance Account to the Debenture Fund for use in payment of interest on the
Debentures on the next Interest Payment Date and the Costs of Issuance Account
shall be closed.

ARTICLE VI

SECURITY FOR THE DEBENTURES

     Section 6.01. Security for the
Debentures. The Debentures are joint and several general obligations of
Issuer, and are secured by the following: (a) all Revenues of Issuer, subject
and subordinate to the prior and superior lien of the Operating Line of Credit;
and (b) all money held in the funds and accounts created under this Indenture
(except the Costs of Issuance Account), together with investment earnings
thereon prior to disbursement in accordance with this Indenture (“the Trust
Estate”). The Debentures are not secured by a pledge of or a lien upon
any specific item of property, real or personal, of Issuer. The Debentures are specifically issued
subject and subordinate to the prior and superior lien of the $5,000,000
Operating Line of Credit.

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ARTICLE VII

INVESTMENTS

     Section 7.01. Investment of
Monies. Monies held for the credit of any fund or account established under
this Indenture and held by Trustee shall be invested and reinvested by Trustee
upon direction of Issuer in Investment Securities. Monies held for the credit of
any fund or account established under this Indenture and held by Trustee or any
other bank hereunder selected by Issuer shall be invested and reinvested by
Issuer in such manner as is permitted by the investment policies and procedures
of Issuer. All such investments shall mature, or be subject to redemption by the
holder thereof at the option of the holder, not later than the date or dates on
which the money held for credit of the particular fund shall be required for the
purposes intended. For all purposes hereunder, Issuer hereby instructs Trustee
to invest all monies held by it pursuant to this Indenture in a “government
money market account” until such time as Issuer provides alternate instruction
under this Section.

     Section 7.02. Investment
Earnings. Investment Securities or other investments purchased with monies
held in or attributable to any fund or account held by Trustee or any other bank
under the provisions of this Indenture shall be deemed at all times to be a part
of such fund or account and the income or interest earned, profits realized or
losses suffered by a fund or account due to the investment thereof shall be
retained in, credited or charged, as the case may be, to such fund or account
unless otherwise provided pursuant to this Indenture.

     Section 7.03. Valuation of
Funds. In determining the value of any fund or account held by Trustee under
this Indenture, Trustee shall credit Investment Securities at the fair market
value thereof, as determined by Trustee by any method selected by Trustee in its
reasonable discretion. No less frequently than annually, and in any event within
thirty (30) calendar days prior to the end of each Fiscal Year, Trustee shall
determine the value of each fund and account held by it hereunder and shall
report such determination to Issuer. To the extent that any loss or reduction in
value reduces the value of any fund or account to a level lower than ninety
percent (90%) of the level required under this Indenture, such loss or reduction
shall be made up as set forth in Article V hereof.

     Trustee shall sell or present for
redemption any Investment Securities as necessary in order to provide money for
the purpose of making any payment required hereunder, and Trustee shall not be
liable for any loss resulting from any such sale.

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     Section 7.04. Responsibility
of Trustee. Trustee shall not be responsible or liable for any loss suffered
in connection with any investment of monies made by it at the direction of
Issuer.

ARTICLE VIII

DISCHARGE OF LIEN

     Section 8.01. Discharge of
Lien. If Issuer shall pay or cause to be paid to the Owners of the
Debentures all of the principal, premium, if any, and interest to become due
thereon at the times and in the manner stipulated therein, and if Issuer shall
keep, perform and observe all and singular the covenants and promises in the
Debentures and in this Indenture expressed as to be kept, performed and observed
by it on its part, then these presents and the estate and rights hereby granted
shall cease, determine and be void, and thereupon Trustee shall cancel and
discharge the lien of this Indenture, and execute and deliver to Issuer such
instruments in writing as shall be requisite to satisfy the lien hereof, and
reconvey to Issuer the estate hereby conveyed, and assign and deliver to Issuer
any property at the time subject to the lien of this Indenture which may then be
in its possession, except monies or Government Securities held by it for the
payment of the principal of and premium, if any, and interest on the
Debentures.

     Section 8.02. Debentures
Deemed Paid. Any Debenture shall be deemed to be paid within the meaning of
this Article VIII when payment of the principal of and premium, if any, and
interest on such Debenture (whether at maturity or upon redemption as provided
in this Indenture, or otherwise), either: (i) shall have been made or caused to
be made in accordance with the terms thereof; or (ii) shall have been provided
for by irrevocably depositing with Trustee, in trust and irrevocably set aside
exclusively for such payment, (1) monies sufficient to make such payment or (2)
obligations described in subsection (i) of the definition of Government
Securities, maturing as to principal and interest in such amount and at such
times as will provide sufficient monies to make such payment, and all necessary
and proper fees, compensation and expenses of Trustee and any Paying Agent
pertaining to the Debentures with respect to which such deposit is made shall
have been paid or the payment thereof provided for to the satisfaction of
Trustee and any said Paying Agent. Any deposit of monies or obligations to be
irrevocably set aside for payment of the Debentures shall be accompanied by a
verification report prepared by a Qualified Accountant or other verification
agent satisfactory to Trustee and Issuer to the effect that the payment of the
principal of, premium, if any, and interest on the Debentures with respect to
which such deposit is being made has been provided for in the manner set forth
in this Indenture.

     Section 8.03. Non-Presentment
of Debentures. In the event any Debentures shall not be presented for
payment when the principal thereof becomes due, either at maturity or otherwise,
or at the date fixed for redemption thereof, if there shall have been deposited
with Trustee for that purpose, or left in trust if previously so deposited, funds sufficient to pay the principal thereof, and premium, if
any, together with all interest unpaid and due thereon, to the due date thereof,
for the benefit of the holder thereof, all liability of Issuer to the holder
thereof for the payment of the principal thereof, premium if any, and interest
thereon, shall forthwith cease, determine and be completely discharged, and
thereupon it shall be the duty of Trustee to hold, subject to applicable escheat
laws, such fund or funds, without liability for interest thereon, for the
benefit of the holder of such Debenture, who shall thereafter be restricted
exclusively to such fund or funds, for any claim of whatever nature on his part
under this Indenture or on, or with respect to, the Debenture.

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ARTICLE IX

     DEFAULT PROVISIONS AND REMEDIES

OF TRUSTEE AND DEBENTURE HOLDERS

     Section 9.01. Events of
Default. Each of the following is an “Event of Default” under the Indenture:


     (a)
Default in the due and punctual payment of any interest on any Debenture;

     (b)
Default in the due and punctual payment of the principal of or premium, if any,
on any Debenture, whether at the stated maturity thereof, or upon proceedings
for redemption thereof, or upon the maturity thereof by declaration;

     (c)
Default in the payment of any other amount required to be paid under this
Indenture;

     (d)
Default in compliance with Section 2.14 of this Indenture regarding the issuance
of Additional Debentures or in Section 2.12 of this Indenture regarding the
making of an Additional Line of Credit Draw; 

     (e)
Default in the performance or observance of any other of the material covenants,
agreements or conditions contained in the Indenture or in the Debentures issued
thereunder, or in the covenants, agreements or conditions of the Operating Line
of Credit or any Superior, Parity or Subordinate Obligations (except for debt
incurred in the ordinary course of business for the purchase or lease of
fixtures and other equipment (including vehicles) for use by the Issuer so long
as such debt shall be subordinate to the provisions of the Indenture and may be
secured only by a purchase money security interest in the fixtures and
equipment), if issued and Outstanding, and continuance thereof for a period of
ninety (90) calendar days (or such shorter period as may apply under the
covenants, agreements or conditions of the Operating Line of Credit or any
Superior, Parity or Subordinate Obligations) after written notice specifying
such failure and requesting that it be
remedied shall have been given to Issuer by Trustee, which shall give such
notice at the written request of Debenture Holders of not less than ten percent
(10%) in aggregate principal amount of the Debentures then Outstanding, unless
Holders of an aggregate principal amount of the Debentures not less than the
aggregate principal amount of the Debentures the Holders of which requested such
notice, as the case may be, shall agree in writing to an extension of such
period prior to its expiration; provided, however, if the failure
stated in the notice cannot be corrected within the applicable period, the
Holders will not unreasonably withhold its consent to an extension of such time
if corrective action is instituted by Issuer within such period and is being
diligently pursued;

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     (f) The
filing of any lien, other than those permitted by the Indenture, upon any assets
of Issuer, including the Facilities, or the filing of a petition in bankruptcy
by or against Issuer under the United States Bankruptcy Code or the commencement
of a proceeding by or against Issuer under any other law concerning insolvency,
reorganization or bankruptcy.

     The term “default” as used above
shall also mean and include any default by Issuer in the performance or
observance of any of the covenants, agreements or conditions on its part
contained in this Indenture, the Outstanding Debentures hereunder, and any
Superior, Parity or Subordinate Obligation (except for debt incurred in the
ordinary course of business for the purchase or lease of fixtures and other
equipment (including vehicles) for use by Issuer so long as such debt shall be
subordinate to the provisions of the Indenture and may be secured only by a
purchase money security interest in the fixtures and equipment), if issued and
Outstanding, exclusive of any period of grace required to constitute a default
an “Event of Default” as hereinabove provided.

     Section 9.02. Acceleration.
Upon the occurrence of an Event of Default, and upon the written request of
the Holders of twenty-five percent (25%) in aggregate principal amount of the
Debentures Outstanding hereunder, Trustee shall, by notice in writing delivered
to Issuer, declare the principal of all the Debentures then Outstanding,
together with any premium and the interest accrued thereon, immediately due and
payable, and such principal and interest shall thereupon become and be
immediately due and payable.

     Section 9.03. Other Remedies;
Rights of Debenture Holders. Upon the occurrence of an Event of Default,
Trustee may, as an alternative, pursue any available remedy by suit at law or in
equity, including, without limitation, mandamus to enforce the payment of the
principal of and premium, if any, and interest on the Debentures then
Outstanding hereunder.

     If an Event of Default shall have
occurred, and if it shall have been requested so to do by the Holders of
twenty-five percent (25%) in aggregate principal amount of the Debentures
Outstanding hereunder and if it shall have been indemnified as provided in
Section 10.01 hereof, Trustee shall be obligated to exercise such one or more of
the rights and powers conferred upon it by this Section 9.03 as
Trustee, being advised by counsel, shall deem most expedient in the interests of
the Debenture Holders.

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     No remedy by the terms of this
Indenture conferred upon or reserved to Trustee (or to the Debenture Holders) is
intended to be exclusive of any other remedy, but each and every such remedy
shall be cumulative and shall be in addition to any other remedy given hereunder
or now or hereafter existing at law or in equity or by statute.

     No delay or omission to exercise
any right or power accruing upon any default or Event of Default shall impair
any such right or power or shall be construed to be a waiver of any such default
or Event of Default or acquiescence therein; and every such right and power may
be exercised from time to time and as often as may be deemed expedient.

     No waiver of any default or Event
of Default hereunder, whether by Trustee or by the Debenture Holders, shall
extend to or shall affect any subsequent default or Event of Default or shall
impair any rights or remedies consequent thereon.

     Section 9.04. Right of
Debenture Holders to Direct Proceedings. Anything in this Indenture to the
contrary notwithstanding, the holders of a majority in aggregate principal
amount of the Debentures Outstanding hereunder shall have the right, at any
time, by an instrument or instruments in writing executed and delivered to
Trustee, to direct the method and place of conducting all proceedings to be
taken in connection with the enforcement of the terms and conditions of this
Indenture, or for the appointment of a receiver or any other proceeding
hereunder; provided, that, such direction shall not be otherwise
than in accordance with the provisions of law and of this Indenture.

     Section 9.05. Appointment of
Receiver. Upon the occurrence of an Event of Default, and upon the filing of
a suit or other commencement of judicial proceedings to enforce the rights of
Trustee and of the Debenture Holders under this Indenture, Trustee shall be
entitled to the appointment of a receiver or receivers of Issuer’s Facilities
and of the tolls, rents, revenues, issues, earnings, income, products and
profits thereof, including, without limitation, the Trust Estate, pending such
proceedings with such powers as the court making such appointment shall
confer.

     Section 9.06. Waiver. In
case of an Event of Default on its part, as aforesaid, to the extent that such
rights may then lawfully be waived, neither Issuer nor anyone claiming through
Issuer or under Issuer shall or will set up, claim or seek to take advantage of
any appraisement, valuation, stay, extension or redemption laws now or
thereafter in force, in order to prevent or hinder the enforcement of this
Indenture, but Issuer, for itself and all who may claim through or under it,
hereby waives, to the extent that it lawfully may do so, the benefit of all such
laws and all right of appraisement and redemption to which it may be entitled
under the laws of the State.

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     Section 9.07. Application of
Monies. Available monies remaining after discharge of costs, charges and
liens prior to this Indenture shall be applied by Trustee as follows:

     (a)
Unless the principal of all the Debentures shall have become or shall have been
declared due and payable, all such monies shall be applied:

     First: To the payment of any
fees and expenses of Trustee as may be due and owing or incurred by Trustee in
connection with the performance of its obligations hereunder;

     Second: To the payment to the
persons entitled thereto of all installments of interest then due, in the order
of the maturity of the installments of such interest, and, if the amount
available shall not be sufficient to pay in full any particular installment,
then to the payment ratably, according to the amounts due on such installment,
to the persons entitled thereto, without any discrimination or privilege;

     Third: To the payment to the
persons entitled thereto of the unpaid principal of any of the Debentures which
shall have become due (other than Debentures called for redemption for the
payment of which monies are held pursuant to the provisions of this Indenture),
in the order of their due dates, with interest on such Debentures from the
respective dates upon which they become due, and, if the amount available shall
not be sufficient to pay in full the Debentures due on any particular date,
together with such interest, then to the payment ratably, according to the
amount of principal due on such date, to the persons entitled thereto without
any discrimination or privilege of any Debenture over any other Debenture and
without preference or priority of principal over interest or of interest over
principal; and

     Fourth: To the payment of the
interest on and the principal of the Debentures, and to the redemption of
Debentures, all in accordance with the provisions of Article V of this
Indenture.

     (b) If
the principal of all the Debentures shall have become due or shall have been
declared due and payable, all such monies shall be applied first to the payment
of any fees and expenses of Trustee as may be due and owing or incurred by
Trustee in connection with the performance of its obligations hereunder, and
secondly to the payment of the interest then due and unpaid upon the Debentures,
and then to the payment of the principal then due and unpaid upon the
Debentures, in each case without preference or priority of any Debenture over
any other Debenture, ratably, according to the amounts due respectively for
principal and interest, to the person entitled thereto.

     (c) If
the principal of all the Debentures shall have been declared due and payable,
and if such declaration shall thereafter have been rescinded and annulled under the provisions of this
Article IX then, subject to the provisions of paragraph (b) of this Section
9.07, in the event that the principal of all the Debentures shall later become
due or be declared due and payable, the monies shall be applied in accordance
with the provisions of paragraph (a) of this Section 9.07.

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     Whenever monies are to be applied
by Trustee pursuant to the provisions of this Section 9.07, such monies shall be
applied by it at such times, and from time to time, as it shall determine,
having due regard to the amount of such monies available for application and the
likelihood of additional monies becoming available for such application in the
future. Whenever Trustee shall apply such funds, it shall fix the date (which
shall be an Interest Payment Date unless otherwise directed by a majority in
aggregate principal amount of the Debenture Holders upon which such application
is to be made and upon such date interest on the amounts of principal to be paid
on such dates shall cease to accrue. Trustee shall give such notice as it may
deem appropriate of the deposit with it of any such monies and of the fixing of
any such date and shall not be required to make payment to the holder of any
Debenture until such Debenture shall be presented to Trustee for appropriate
endorsement or for cancellation if fully paid.

     Section 9.08. Remedies Vested
in Trustee. All rights of action (including the right to file proof of
claim) under this Indenture or under any of the Debentures may be enforced by
Trustee without the possession of any of the Debentures or the production
thereof in any trial or other proceeding relating thereto, and any such suit or
proceeding instituted by Trustee shall be brought in its name as Trustee,
without the necessity of joining as plaintiffs or defendants any holders of the
Debentures hereby secured, and any recovery of judgment shall be for the equal
benefit of the holders of the Outstanding Debentures.

     Section 9.09. Rights and
Remedies of Debenture Holders. No holder of any Debenture shall have any
right to institute any suit, action or proceeding in equity or at law for the
enforcement of this Indenture or for the execution of any trust hereof or for
the appointment of a receiver or any other remedy hereunder, unless a default
has occurred of which Trustee has been notified as provided in subsection (g) of
Section 10.01, or of which by said subsection it is deemed to have notice, nor
unless such default shall have become an Event of Default and the holders of
twenty-five percent (25%) in aggregate principal amount of Debentures
Outstanding hereunder shall have made written request to Trustee and shall have
offered it reasonable opportunity either to proceed to exercise the powers
hereinbefore granted or to institute such action, suit or proceeding in its own
name, nor unless also they have offered to Trustee indemnity as provided in
Section 10.01, nor unless Trustee shall thereafter fail or refuse to exercise
the powers hereinbefore granted, or to institute such action, suit or proceeding
in its own name; and such notification, request and offer of indemnity are
hereby declared in every such case, at the option of Trustee, to be conditions
precedent to the execution of the powers and trusts of this Indenture, and to
any action or cause of action for the enforcement of this Indenture or for the
appointment of a receiver or for any other remedy hereunder; it being understood
and intended that no one or more holders of the Debentures shall have any right
in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture by action of
the holder or holders or to enforce any right hereunder except in the manner
herein provided, and that all proceedings at law or in equity shall be
instituted, held and maintained in the manner herein provided for the equal
benefit of the holders of all Debentures Outstanding hereunder. Nothing in this
Indenture contained shall, however, affect or impair the right of any Debenture
Holders to enforce the payment of the principal of and premium, if any, and
interest on any Debentures at and after the maturity thereof, or the obligation
of Issuer to pay the principal of and premium, if any, and interest on each of
the Debentures issued hereunder to the respective holders thereof at the time
and place in said Debentures expressed.

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     Section 9.10. Termination of
Proceedings. In case Trustee shall have proceeded to enforce any right under
this Indenture by the appointment of a receiver or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to Trustee, then and in every such case Issuer
and Trustee shall be restored to their former positions and rights hereunder
with respect to the property herein conveyed, and all rights, remedies and
powers of Trustee shall continue as if no such proceedings had been taken,
except to the extent Trustee is legally bound by such adverse determination.

     Section 9.11. Waivers of
Events of Default. Trustee may, and upon the written request of the
Debenture Holders of not less than twenty-five percent (25%) in principal amount
of all Debentures Outstanding hereunder shall, waive any Event of Default
hereunder and its consequences and rescind any declaration of maturity of
principal; provided, however, there shall not be waived any Event
of Default described in clause (a) or (b) of the first paragraph of Section 9.01
hereof, unless prior to such waiver or rescission all arrears of principal (due
otherwise than by declaration) and interest, and all expenses of Trustee and
Paying Agent, shall have been paid or provided for. In case of any such waiver
or rescission Issuer, Trustee and the Debenture Holders shall be restored to
their former positions and rights hereunder respectively, but no such waiver or
rescission shall extend to any subsequent or other default, or impair any right
subsequent thereon.

ARTICLE X

TRUSTEE AND PAYING AGENTS

     Section 10.01. Acceptance of
Trusts. Trustee hereby accepts the trust imposed upon it by this Indenture
and agrees to perform said trust, but only upon and subject to the following
expressed terms and conditions:

     (a)
Trustee may execute any of the trusts or powers hereof and perform any duties
required of it by or through attorneys, agents, receivers or employees, and
shall be entitled to advice of counsel concerning all matters of trusts hereof
and its duties hereunder, and may in all cases pay reasonable compensation to
all such attorneys, agents, receivers and employees as may reasonably be
employed in connection with the trusts hereof. Trustee may act upon the opinion or advice of any
attorney, surveyor, engineer or accountant selected by it in the exercise of
reasonable care, or, if selected or retained by Issuer prior to the occurrence
of a default of which Trustee has been notified as provided in subsection (g) of
this Section 10.01, or of which by said subsection Trustee is deemed to have
notice, approved by Trustee in the exercise of such care. Trustee shall not be
responsible for any loss or damage resulting from an action or non-action in
accordance with any such opinion or advice.

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     (b)
Trustee shall not be responsible for any recital herein, or in the Debentures
(except in respect to the certificate of Trustee endorsed on such Debentures),
or collecting any insurance monies, or for the validity of the execution by
Issuer of this Indenture or of any supplemental indentures or instruments of
further assurance, or for the sufficiency of the security, including, without
limitation, for the Debentures issued hereunder or intended to be secured
hereby, or otherwise as to the maintenance of the security hereof; except that
in the event Trustee enters into possession of a part or all of the property
herein conveyed pursuant to any provision of this Indenture, it shall use due
diligence in preserving such property; and Trustee shall not be bound to
ascertain or inquire as to the performance or observance of any covenants,
conditions and agreements aforesaid as to the condition of the property herein
conveyed.

     (c)
Trustee may become the owner of the Debentures secured hereby with the same
rights which it would have if Trustee.

     (d)
Trustee shall be protected in acting upon any notice, request, consent,
certificate, order, affidavit, letter, telegram or other paper or document
believed by it, in the exercise of reasonable care, to be genuine and correct
and to have been signed or sent by the proper person or persons. Any action
taken by Trustee pursuant to this Indenture upon the request or authority or
consent of the owner of any Debenture secured hereby, shall be conclusive and
binding upon all future owners of the same Debenture and upon the Debentures
issued in exchange therefor or in place thereof.

     (e) As to
the existence or nonexistence of any fact or as to the sufficiency or validity
of any instrument, paper or proceeding, Trustee shall be entitled to rely upon a
certificate of Issuer signed by its Chairman of the Board and attested by the
Authorized Issuer Representative as sufficient evidence of the facts therein
contained and prior to the occurrence of a default of which it has been notified
as provided in subsection (g) of this Section 10.01, or of which by that
subsection it is deemed to have notice, and shall also be at liberty to accept a
similar certificate to the effect that any particular dealing, transaction, or
action is necessary or expedient, but may at its discretion, at the reasonable
expense of Issuer, in every case secure such further evidence as it may think
necessary or advisable but shall in no case be bound to secure the same. Trustee
may accept a certificate of the Authorized Issuer Representative of Issuer under
its seal to the effect that a resolution in the form therein set forth has been
adopted by Issuer as conclusive evidence that such
resolution has been duly adopted, and is in full force and effect.

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     (f) The
permissive right of Trustee to do things enumerated in this Indenture shall not
be construed as a duty of Trustee, and Trustee shall be answerable only for its
own gross negligence or willful misconduct.

     (g)
Trustee shall not be required to take notice or be deemed to have notice of any
default hereunder unless Trustee shall be specifically notified in writing of
such default by Issuer or by the holders of at least ten percent (10%) in
aggregate principal amount of Debentures Outstanding hereunder and all notices
or other instruments required by this Indenture to be delivered to Trustee must,
in order to be effective, be delivered to the office of Trustee, and in the
absence of such notice so delivered, Trustee may conclusively assume there is no
such default except as aforesaid.

     (h)
Trustee shall not be personally liable for any debts contracted or for damages
to persons or to personal property injured or damaged, or for salaries or
non-fulfillment of contracts during any period in which it may be in the
possession of or managing the real and tangible personal property as in this
Indenture provided.

     (i) At
any and all reasonable times Trustee, and its duly authorized agents, attorneys,
experts, engineers, accountants and representatives, shall have the right fully
to inspect any and all of the property herein conveyed, including all books,
papers and records of Issuer pertaining to Issuer, its Facilities, the Project
and the Debentures, and to take such memoranda from and in regard thereto as may
be desired.

     (j)
Trustee shall not be required to give any bond or surety in respect of the
execution of the said trusts and powers or otherwise in respect of the
premises.

     (k)
Notwithstanding anything elsewhere in this Indenture contained, Trustee shall
have the right, but shall not be required, to demand, in respect of the
authentication of any Debentures, the withdrawal of any cash, the release of any
property, or any action whatsoever within the purview of this Indenture, any
showings, certificates, opinions, appraisals or other information, or corporate
action or evidence thereof, in addition to that by the terms hereof required as
a condition of such action by Trustee, deemed desirable for the purpose of
establishing the right of Issuer to the authentication of any Debentures, the
withdrawal of any cash, the release of any property, or the taking of any other
action by Trustee.

     (l)
Before taking any action hereunder, Trustee may require that it be furnished an
indemnity satisfactory to it for the reimbursement to it of all expenses to
which it may be put and to protect it against all liability, except liability which is adjudicated to have
resulted from the gross negligence or willful misconduct of Trustee, by reason
of any action so taken by Trustee, and Trustee shall have no obligation to take
any action hereunder unless it has received such indemnity.

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     (m) No
implied covenants or obligations shall be read into this Indenture against
Trustee.

     (n) In
case an Event of Default has occurred and is continuing, Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such person’s own affairs.

     (o) No
provision of this Indenture shall be construed to relieve Trustee from liability
for its own grossly negligent action, its own grossly negligent failure to act,
or its own willful misconduct, except that:

     (1)
Trustee shall not be liable for any error of judgment made in good faith by a
responsible officer of Trustee, unless it shall be proved that Trustee was
negligent in ascertaining the pertinent facts; and

     (2)
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of the Holders of the
Debentures in accordance with this Indenture, relating to the time, method, and
place of conducting any proceeding for any remedy available to Trustee, or
exercising any trust or power conferred upon Trustee, under this Indenture.

     (p)
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the eligibility of or affording protection
to Trustee shall be subject to the provisions of this Section.

     (q)
Trustee shall not be liable for interest on any money received by it except as
Trustee may agree with Issuer.

     (r) No
provision of this Indenture shall require Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. In determining that such repayment or indemnity is not reasonably assured to
it, Trustee must consider not only the likelihood of repayment or indemnity by
or on behalf of Issuer but also the likelihood of repayment or indemnity from
amounts payable to it from the Trust Estate pursuant to the terms hereof.

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     (s)
Trustee shall not be liable for any action it takes or omits to take in good
faith that it believes to be authorized or within its rights or powers.

     (t)
Trustee shall be entitled to the rights, immunities and protections set forth in
Article X hereof in the exercise or performance of its duties, rights and
obligations under the Applicable Documents.

     Section 10.02. Fees, Charges
and Expenses of Trustee and Paying Agents; Trustee’s Prior Lien. Trustee and
any Paying Agent shall be entitled to payment and/or reimbursement by Issuer for
reasonable fees for services rendered hereunder and all advances, counsel fees
and other expenses reasonably and necessarily made or incurred in and about the
execution of the trusts created by this Indenture. In this regard, it is
understood that Issuer pledges no funds or revenues other than the Revenues,
subject and subordinate to the prior superior lien of the Operating Line of
Credit, to the payment of any obligation of Issuer set forth in this Indenture,
including the obligations set forth in this Section 10.02, but nothing herein
shall be construed as prohibiting Issuer from using any other funds and revenues
for the payment of any of its obligations under this Indenture. Upon an Event of
Default by Issuer, but only upon an Event of Default, Trustee shall have a first
lien with right of payment prior to payment on account of principal or interest
of any Debenture issued hereunder upon the Trust Estate for such reasonable and
necessary fees, charges, and expenses incurred by Trustee.

    Trustee’s fee schedule shall be as set forth
in Exhibit C, attached hereto.

     Issuer agrees to indemnify
Trustee and its agents for, and to hold them harmless against, any loss,
liability, or expense incurred without gross negligence or bad faith on their
part, arising out of or in connection with the acceptance or administration of
this trust, including the reasonable costs and expenses of defending themselves
against any claim or liability in connection with the exercise or performance of
any of their powers or duties hereunder.

     Section 10.03. Notice to
Debenture Holders of Default. If a default occurs of which Trustee is
pursuant to the provisions of Section 10.01(g) deemed to have or is given
notice, Trustee shall give notice to each owner of Debentures then Outstanding
within ninety (90) calendar days of receipt of such notice.

     Section 10.04. Intervention by
Trustee. In any judicial proceeding to which Issuer is a party and which in
the opinion of Trustee and its counsel has a substantial bearing on the
interests of holders of Debentures issued hereunder, Trustee shall intervene on
behalf of Debenture Holders if requested in writing to do so by the holders of
at least ten percent (10%) of the aggregate principal amount of Debentures
Outstanding hereunder. The rights and obligations of Trustee under this Section
10.04 are subject to the approval of the court having jurisdiction in the
premises.

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     Section 10.05. Merger or
Consolidation of Trustee. Any bank or trust company to which Trustee may be
merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any bank or trust company resulting from any such sale, merger, consolidation
or transfer to which it is a party, ipso facto, shall be and become
successor trustee hereunder and vested with all of the title to the whole
property or Trust Estate and all the trusts, powers, discretions, immunities,
privileges and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act, deed, or conveyance on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that such successor trustee shall have capital
and surplus of at least $10 million.

     Section 10.06. Resignation by
Trustee. Trustee and any successor trustee may at any time resign from the
trusts hereby created by giving written notice to Issuer and the Debenture
Holders, and such resignation shall take effect upon the appointment of a
successor trustee by a court of competent jurisdiction, the Debenture Holders or
by Issuer. Such notice may be served personally or sent by registered mail (to
Issuer) or first class mail (to the Debenture Holders).

     Section 10.07. Removal of
Trustee. Trustee may be removed at any time by an instrument or concurrent
instruments in writing delivered to Trustee and to Issuer, and signed by the
holders of a majority in aggregate principal amount of Debentures Outstanding
hereunder.

     Section 10.08. Appointment of
Successor Trustee. In case Trustee hereunder shall resign or be removed, or
be dissolved, or shall be in course of dissolution or liquidation, or otherwise
become incapable of acting hereunder, or in case it shall be taken under the
control of any public officer or officers, or of a receiver appointed by the
court, a successor may be appointed by the holders of a majority in aggregate
principal amount of Debentures Outstanding hereunder, by an instrument or
concurrent instruments in writing signed by such Debenture Holders, or by their
attorneys in fact, duly authorized; provided, nevertheless, that
in case of such vacancy Issuer by an instrument executed and signed by its
Chairman of the Board and attested by its Authorized Issuer Representative under
its seal, shall appoint a temporary trustee to fill such vacancy until a
successor trustee shall be appointed by the Debenture Holders in the manner
above provided. Any such temporary trustee appointed by Issuer shall immediately
and without further act be superseded by the trustee appointed by such Debenture
Holders. Every such temporary trustee and every such successor trustee shall be
a trust company or bank in good standing, having capital and surplus of not less
than $10 million. In the event that Trustee has resigned and no successor has
been appointed hereunder, Trustee may, at the expense of Issuer, petition a
court of competent jurisdiction for the appointment of a successor.

     Section 10.09. Concerning Any
Successor Trustee. Every successor or temporary trustee appointed hereunder
shall execute, acknowledge and deliver to its predecessor and also to Issuer an
instrument in writing accepting such appointment hereunder, and thereupon such
successor or temporary trustee, without any further act or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its predecessor;
but such predecessor shall, nevertheless, on the written request of Issuer or of
its successor trustee, execute and deliver an instrument transferring to such
successor all the estate, properties, rights, powers and trusts of such
predecessor hereunder; and every predecessor trustee shall deliver all
securities, monies and any other property held by it as trustee hereunder to its
successor. Should any instrument in writing from Issuer be required by any
successor trustee for more fully and certainly vesting in such successor the
estates, rights, powers and duties hereby vested or intended to be vested in the
predecessor trustee, any and all such instruments in writing shall, on request,
be executed, acknowledged, and delivered by Issuer. The resignation of any
trustee and the instrument or instruments removing any trustee and appointing a
successor hereunder, together with all other instruments provided for in this
Article X shall, at the expense of Issuer, be forthwith filed and/or recorded by
the successor trustee in each recording office where the Indenture shall have
been filed and/or recorded.

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     Section 10.10. Reliance Upon
Instruments. The resolutions, opinions, certificates and other instruments
provided for in this Indenture may be accepted and relied upon by Trustee as
conclusive evidence of the facts and conclusions stated therein and shall be
full warrant, protection and authority to Trustee for its actions taken
hereunder.

     Section 10.11. Appointment of
Co-Trustee. Issuer and Trustee shall have power to appoint and, upon the
request of Trustee, Issuer shall for such purpose join with Trustee in the
execution of all instruments necessary or proper to appoint another corporation
or one or more persons approved by Trustee, either to act as co-trustee or
co-trustees jointly with Trustee of all or any of the property subject to the
lien hereof, with such powers as may be provided in the instrument of
appointment and to vest in such corporation or person or persons as such
co-trustee any property, title, right or power deemed necessary or desirable. In
the event that Issuer shall not have joined in such appointment within fifteen
(15) calendar days after the receipt by it of a request so to do, Trustee alone
shall have the power to make such appointment, and provide to Issuer in writing
notice of such appointment. Should any deed, conveyance or instrument in writing
from Issuer be required by the co-trustee so appointed for more fully and
certainly vesting in and confirming to such co-trustee such properties, rights,
powers, trusts, duties and obligations, any and all such deeds, conveyances and
instruments in writing shall, on request, be executed, acknowledged and
delivered by Issuer. Every such co-trustee shall, to the extent permitted by
law, be appointed subject to the following provisions and conditions,
namely:

     (a) The
Debentures shall be authenticated and delivered, and all powers, duties,
obligations and rights conferred upon Trustee in respect of the custody of all
money and securities pledged or deposited hereunder, shall be exercised solely
by Trustee; 

     (b)
Trustee, at any time by an instrument in writing, may remove any such separate
Trustee or co-trustee; and

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     (c) No
trustee hereunder shall be liable for the acts or omissions of any other trustee
appointed hereunder.

     Every instrument, other than this
Indenture, appointing any such co-trustee shall refer to this Indenture and the
conditions of this Article X expressed, and upon the acceptance in writing by
such co-trustee, the co-trustee shall be vested with the estate or property
specified in such instrument, jointly with Trustee (except insofar as local law
makes it necessary for any separate trustee to act alone), subject to all the
trusts, conditions and provisions of this Indenture. Any such co-trustee may at
any time, by an instrument in writing, constitute Trustee as the co-trustee’s
agent or attorney-in-fact with full power and authority, to the extent
authorized by law, to do all acts and things and exercise all discretion
authorized or permitted by the co-trustee, for and on behalf of the co-trustee
and in the co-trustee’s name. In case any co-trustee shall die, become incapable
of acting, resign or be removed, all the estate, properties, rights, powers,
trusts, duties and obligations of said co-trustee shall vest in and be exercised
by Trustee until the appointment of a new trustee or a successor to such
co-trustee.

     Section 10.12. Designation and
Succession of Paying Agents. Trustee and any other banks or trust companies
designated as Paying Agent or Paying Agents in any supplemental indenture or in
an instrument appointing a successor Trustee shall be the Paying Agent or Paying
Agents for the Debentures.

     Any bank or trust company with
which or into which any Paying Agent may be merged or consolidated, or to which
the assets and business of such Paying Agent may be sold, shall be deemed the
successor of such Paying Agent for the purposes of this Indenture. If the
position of Paying Agent shall become vacant for any reason, Issuer shall,
within thirty (30) calendar days thereafter, appoint such bank or trust company
as shall be specified by Issuer as such Paying Agent to fill such vacancy;
provided, however, that, if Issuer shall fail to appoint such
Paying Agent within said period, Trustee shall make such appointment.

     The Paying Agents shall enjoy the
same protective provisions in the performance of their duties hereunder as are
specified in Section 10.01 hereof with respect to Trustee insofar as such
provisions may be applicable.

ARTICLE XI

SUPPLEMENTAL INDENTURES

     Section 11.01. Supplemental
Indentures Not Requiring Consent of Debenture Holders. Issuer and Trustee
may, from time to time and at any time, without the consent of or notice to the
Debenture Holders, enter into supplemental indentures as follows:

     (a) to
cure any formal defect, omission, inconsistency or ambiguity in this
Indenture;

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     (b) to
grant to or confer or impose upon Trustee for the benefit of the Debenture
Holders any additional rights, remedies, powers, authority, security,
liabilities or duties which may lawfully be granted, conferred or imposed and
which are not contrary to or inconsistent with this Indenture as theretofore in
effect, provided that no such additional liabilities or duties shall be imposed
upon Trustee without its consent;

     (c) to
add to the covenants and agreements of, and limitations and restrictions upon,
Issuer in this Indenture other covenants, agreements, limitations and
restrictions to be observed by Issuer which are not contrary to or inconsistent
with this Indenture as theretofore in effect;

     (d) to
confirm, as further assurance, any pledge under, and the subjection to any
claim, lien or pledge created or to be created by, this Indenture, of the Trust
Estate or of any other monies, securities or funds;

     (e) to
comply with the requirements of the Trust Indenture Act of 1939, as from time to
time amended, if applicable;

     (f) to
authorize the issuance and sale of one or more series of additional Debentures,
provided that the same are Permissible Parity Debt or Subordinate Obligations;
or

     (g) to
modify, alter, amend or supplement this Indenture in any other respect which is
not materially adverse to the Debenture Holders and which does not involve a
change described in clause (a), (b), (c), (d), (e) or (f) of this Section 11.01
and which, in the judgment of Trustee, is not to the prejudice of Trustee.

     Section 11.02. Supplemental
Indentures Requiring Consent of Debenture Holders. Subject to the terms and
provisions contained in this Section, and not otherwise, the holders of not less
than two-thirds (2/3) in aggregate principal amount of the Debentures then
Outstanding shall have the right, from time to time, anything contained in this
Indenture to the contrary notwithstanding to consent to and approve the
execution by Issuer and Trustee of such indenture or indentures supplemental
hereto as shall be deemed necessary and desirable by Issuer for the purpose of
modifying, altering, amending, adding to, or rescinding, in any particular, any
of the terms or provisions contained in this Indenture or in any supplemental
indenture; provided, however, that nothing herein contained shall
permit or be construed as permitting (a) an extension of the maturity (or
mandatory redemption date) of the principal of or the interest on any Debenture
issued hereunder, or (b) a reduction in the principal amount of or redemption
premium or rate of interest on any Debenture issued hereunder, or (c) the
creation of any lien on the Trust Estate or any part thereof, except as
hereinbefore expressly permitted, or (d) a privilege or priority of any
Debenture(s) over any other Debenture(s), or (e) a reduction in the aggregate
principal amount of the Debentures required for consent to such supplemental
indenture, or (f) deprive the holder of any Debenture then Outstanding of the
lien hereby created on the Trust Estate. Nothing herein contained, however,
shall be construed as making necessary the approval of Debenture Holders of the execution of any
supplemental indenture as provided in Section 11.01 of this Article XI.

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     If, at any time, Issuer shall
request Trustee to enter into any supplemental indenture for any of the purposes
of this Section or Section 11.01, Trustee shall, at the expense of Issuer, cause
notice of the proposed execution of such supplemental indenture to be mailed by
first class mail to each registered owner of the Debentures. Such notice shall
briefly set forth the nature of the proposed supplemental indenture and shall
state that copies thereof are on file at the principal office of Trustee for
inspection by Debenture Holders. Trustee shall not, however, be subject to any
liability to any Debenture Holder by reason of its failure to mail such notice,
and any such failure shall not affect the validity of such supplemental
indenture when consented to and approved as provided in this Section 11.02. If
the holders of not less than two-thirds (2/3) in aggregate principal amount of
the Debentures Outstanding at the time of the execution of any such supplemental
indenture shall have consented to and approved the execution thereof as herein
provided, no holder of any Debenture shall have any right to object to any of
the terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or
restrain Trustee or Issuer from executing the same or from taking any action
pursuant to the provisions thereof.

     Section 11.03. Effect of
Supplemental Indentures. Upon the execution of any supplemental indenture
entered into pursuant to Section 11.01 or 11.02 hereof, this Indenture shall be
deemed to be modified and amended in accordance therewith.

     Section 11.04. Execution of
Supplemental Indenture. Prior to the execution of any amendment or
supplemental indenture hereunder, Trustee shall be entitled to receive and rely
upon an officer’s certificate of Issuer and an opinion of counsel to the effect
that the amendment or supplemental indenture conforms to and is permitted by the
terms of this Indenture and all conditions precedent thereto have been
satisfied.

ARTICLE XII

MISCELLANEOUS

     Section 12.01. Consents,
etc. of Debenture Holders. Any request, direction,
objection or other instrument required by this Indenture to be signed and
executed by the Debenture Holders may be in any number of concurrent writings of
similar tenor and may be signed or executed by such Debenture Holders in person
or by agent appointed in writing. Proof of the execution of any such request,
direction, objection or other instrument or of the writing appointing any such
agent and of the ownership of the Debentures, if made in the following manner,
shall be sufficient for any of the purposes of this Indenture, and shall be
conclusive in favor of Trustee with regard to any action taken by it under such
request or other instrument, namely:

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     (a) The
fact and date of the execution by any person of any such writing may be proved
by the certificate of any officer in any jurisdiction who by law has power to
take acknowledgments within such jurisdiction that the person signing such
writing acknowledged before such officer the execution thereof, or by an
affidavit of any witness to such execution.

     (b) The
fact of ownership of Debentures and the amount or amounts, numbers, and other
identification of such Debentures, and the date of holding the same shall be
proved by the registration books of Issuer maintained by Trustee as Debenture
registrar.

     Section 12.02. Notices.
Except as otherwise provided in this Indenture, all notices, certificates or
other communications shall be sufficiently given and shall be deemed given when
mailed by registered or certified mail, postage prepaid, to Issuer or Trustee.
Notices, certificates or other communications shall be sent to the following
addresses:

	 	 Issuer: 	Pure Energy Group, Inc. 
	 	 	153 Treeline Park 
	 	 	San Antonio, TX 78209 
	 	 	Attention: Mr. Larry Cochran 
	 	 	Telephone: (210) 226-6700 
	 	 	Facsimile: (210) 930-3967 
	 	 	 
	 	 	And: 
	 	 	 
	 	 	Pure Gas Partners II, L.P. 
	 	 	153 Treeline Park 
	 	 	San Antonio, TX 78209 
	 	 	Attention: Mr. Larry Cochran 
	 	 	Telephone: (210) 226-6700 
	 	 	Facsimile: (210) 930-3967 
	 	 	 
	 	 Trustee: 	First Security Bank 
	 	 	314 N. Spring Street 
	 	 	Searcy, AR 72143 
	 	 	Attention: Corporate Trust Dept. 
	 	 	Telephone: (501) 279-3420 
	 	 	Facsimile: (501) 278-2175 


Any of the foregoing may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or
other communications shall be sent.

     Section 12.03. Limitation of
Rights. With the exception of rights herein expressly conferred, nothing
expressed or mentioned in or to be implied from this Indenture, or the
Debentures issued hereunder, is intended or shall be construed to give to any person or company other than the parties hereto, and the
holders of the Debentures secured by this Indenture any legal or equitable
rights, remedy, or claim under or in respect to this Indenture or any covenants,
conditions, and provisions hereof being intended to be and being for the sole
exclusive benefit of the parties hereto and the holders of the Debentures hereby
secured as herein provided.

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     Section 12.04. Severability.
If any provisions of this Indenture shall be held or deemed to be or shall,
in fact, be inoperative or unenforceable as applied in any particular case in
any jurisdiction or jurisdictions or in all jurisdictions or in all cases
because it conflicts with any provisions or any constitution or statute or rule
of public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to any extent
whatever.

     The invalidity of any one or more
phrases, sentences, clauses or paragraphs in this Indenture contained shall not
affect the remaining portions of this Indenture or any part thereof.

     Section 12.05. Consent to
Jurisdiction; Applicable Provisions of Law; Forum Selection. Issuer hereby
requests, and the parties hereby agree, that this Indenture shall be governed by
the laws of the State of Texas applicable to agreements made and to be performed
wholly within that state, irrespective of such state’s choice-of-law principles,
and that all actions or proceedings arising in connection with this Indenture
shall be tried and litigated exclusively in the State and Federal courts located
in the State of Texas. This choice of venue is intended by the parties to be
mandatory and not permissive in nature, and to preclude the possibility of
litigation between the parties with respect to or arising out of this Indenture
in any jurisdiction other than that specified in this paragraph. Each party
hereby waives any right it may have to assert the doctrine of forum non
conveniens or similar doctrine or to object to venue with respect to any
proceeding brought in accordance with this paragraph, and stipulates that the
State and Federal courts located in the State of Texas, shall have in personal
jurisdiction and venue over each of them for the purpose of litigating any
dispute, controversy, or proceeding arising out of or related to this Indenture.
Each party hereby authorizes and accepts service of process sufficient for
personal jurisdiction in any action against it as contemplated by this Section
by registered or certified mail, return receipt requested, postage prepaid, to
its address for the giving of notices as set forth in this Indenture, or in the
manner set forth in Section 12.02 of this Indenture for the giving of notice.
Any final judgment rendered against a party in any action or proceeding shall be
conclusive as to the subject of such final judgment and may be enforced in other
jurisdictions in any manner provided by law.

     Section 12.06.
Counterparts. This Indenture may be executed in several counterparts, each
of which shall be an original and all of which shall constitute but one and the
same instrument.

56




     Section 12.07. Successors and
Assigns. All the covenants, stipulations, provisions, agreements, rights,
remedies and claims of the parties hereto in this Indenture contained shall bind
and inure to the benefit of their successors and assigns.

     Section 12.08. Captions.
The captions or headings in this Indenture are for convenience only and in no
way define, limit or describe the scope or intent of any provisions or sections
of this Indenture.

     Section 12.09. Photocopies and
Reproductions. A photocopy or other reproduction of this Indenture may be
filed as a financing statement pursuant to the Uniform Commercial Code, although
the signatures of Issuer and Trustee in such reproduction are not original
manual signatures.

     Section 12.10. Debentures
Owned by Issuer. In determining whether Debenture Holders of the requisite
aggregate principal amount of the Debentures have concurred in any direction,
consent or waiver under this Indenture, Debentures which are owned by Issuer
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination, except that, for the purpose of determining whether Trustee
shall be protected in relying on any such direction, consent or waiver, only
Debentures which Trustee knows are so owned shall be so disregarded. Debentures
so owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of Trustee the pledgee’s right so to
act with respect to such Debentures and that the pledgee is not Issuer. In case
of a dispute as to such right, any decision by Trustee taken upon the advice of
counsel shall be full protection to Trustee.

     Section 12.11. Effectiveness
of Indenture. This Indenture shall become effective only upon execution by
Trustee.

[Remainder of Page Left Intentionally Blank]

57




     IN WITNESS WHEREOF, Issuer has
caused these presents to be signed in its name and behalf by its President and
its corporate seal to be hereunto affixed and attested by its Secretary and, to
evidence its acceptance of the trust hereby created, Trustee has caused these
presents to be signed in its behalf by its duly authorized officers and its
corporate seal to be hereto affixed.

	 	PURE ENERGY GROUP, INC. 
	 	  
	 	           
             /s/ Larry B. Cochran 
	 	By:
__________________________________

	 	           
             Larry B. Cochran, C.E.O. and 
	 	           
             Authorized Issuer Representative  


                
/s/ David P. Crews

ATTEST_______________________________

             
           David P. Crews,
Chairman

               
(SEAL)

	 	PURE GAS PARTNERS II, L.P. 
	 	By: Pure Energy Group, Inc., General
      Partner 
	 	  
	 	           
             /s/ Larry B. Cochran 
	 	By:
___________________________________
  
	 	           
             Larry B. Cochran, C.E.O. 


                
/s/ David P. Crews

ATTEST_______________________________

             
           David P. Crews,
Chairman 

               
(SEAL)

[SIGNATURE PAGE TO TRUST INDENTURE]

58





	 	FIRST SECURITY BANK, not in its
      individual 
	 	capacity but solely as trustee under this

	 	Indenture dated as of March 1, 2005, between
  
	 	Pure Energy Group, Inc., Pure Gas Partners II,
    
	 	L.P. and First Security Bank. 
	 	  
	 	  
	 	          
      /s/ Frank Faust 
	 	By:  
      __________________________________ 
	 	Title: SVP & TO 


ATTEST:

         /s/ James
Stake

By: ______________________________

Title: SVP

[SIGNATURE PAGE TO TRUST INDENTURE]

59




ACKNOWLEDGMENT

	STATE OF ARKANSAS 	) 
	  	)ss. 
	COUNTY OF PULAKSI 	) 


     Before me a Notary Public, duly
commissioned, qualified and acting within and for the State and county
aforesaid, appeared in person the within named Larry B. Cochran and David P.
Crews of the Pure Energy Group, Inc., to me personally known, who stated that
they was duly authorized in their respective capacities to execute the foregoing
instrument for and in the name of Issuer, and further stated and acknowledged
that they had signed, executed and delivered the foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.

     IN TESTIMONY WHEREOF, I have
hereunto set my hand and official seal this ___ day of March, 2005.

	 	 
	 	Notary Public 


My Commission expires: 
______________________
(SEAL)

[ACKNOWLEDGMENT PAGE TO TRUST INDENTURE]

60




ACKNOWLEDGMENT

	STATE OF ARKANSAS 	) 
	  	)ss. 
	COUNTY OF PULASKI 	) 


     Before me a Notary Public, duly
commissioned, qualified and acting within and for the State and county
aforesaid, appeared in person the within named Larry B. Cochran and David P.
Crews of the Pure Energy Group, Inc., the General Partner of Pure Gas Partners
II, L.P., to me personally known, who stated that they was duly authorized in
their respective capacities to execute the foregoing instrument for and in the
name of Issuer, and further stated and acknowledged that they had signed,
executed and delivered the foregoing instrument for the consideration, uses and
purposes therein mentioned and set forth.

     IN TESTIMONY WHEREOF, I have
hereunto set my hand and official seal this ___ day of March, 2005.

	 	 
	 	Notary Public 


My Commission expires: 
______________________
(SEAL)

61




ACKNOWLEDGMENT

	STATE OF ARKANSAS 	) 
	  	)ss. 
	COUNTY OF PULASKI 	) 


     Before me a Notary Public, duly
commissioned, qualified and acting within and for the State and county
aforesaid, appeared in person the within named _______________and
_______________, the _______________and the 
_______________, respectively,
of First Security Bank, to me personally known, who stated that they were duly
authorized in their respective capacities to execute the foregoing instrument
for and in the name of the bank, and further stated and acknowledged that they
had signed, executed and delivered the foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.

     IN TESTIMONY WHEREOF, I have
hereunto set my hand and official seal this ___ day of March, 2005.

	 	 
	 	Notary Public 


My Commission expires

__________________________
(SEAL)

[ACKNOWLEDGMENT PAGE TO TRUST INDENTURE]

62




EXHIBIT A TO TRUST INDENTURE

Form of Debenture

THIS DEBENTURE HAS NOT BEEN REVIEWED,
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES DEPARTMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

     THIS DEBENTURE MAY BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF BY AN INVESTOR ONLY IN COMPLIANCE WITH
RULE 144A PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURTIES ACT OF 1933 AND OTHER FEDERAL AND STATE SECURITIES LAWS THAT MAY BE
APPLICABLE AT SUCH TIME. SPECIFICALLY, RESALES OF THIS DEBENTURE MAY ONLY BE
MADE TO QUALIFIED INSTITUTIONAL BUYERS AS SUCH TERM IS DEFINED BY RULE 144A AND
OTHERWISE AS ALLOWED UNDER APPLICABLE STATE OR FEDERAL SECURITIES LAWS AT SUCH
TIME.

     THIS DEBENTURE IS SUBJECT TO THE
TRANSFER RESTRICTIONS CONTAINED ON THE CONCLUSION HEREOF AND SET FORTH IN
SECTION 2.10 OF THE INDENTURE.

	No. R05-1 	$5,500,000.00 


UNITED STATES OF AMERICA 
STATE OF TEXAS
PURE
ENERGY GROUP, INC. 
(AND ITS SUBSIDIARY) 
7 1/2 %
DEBENTURES
SERIES 2005

	Interest Rate: 7.50% 	Maturity Date: March 1, 2015 
	Yield: 8.00% Price: 96.608% 	  
	Date of Debenture: March 1, 2005 	           
                   CUSIP: 74623F AA 6 
	Registered Owner: Cede & Co. 
	Principal Amount: Five Million, Five Hundred
      Thousand and No/100 Dollars 
	KNOW ALL MEN BY THESE PRESENTS:



     That PURE ENERGY GROUP, INC., a
Texas corporation (“Corporation”), and PURE GAS PARTNERS II, L.P., a Texas
limited partnership (“Partnership”), each organized and existing by virtue of
the laws of the State of Texas (collectively “Issuer”), for value received,
promise to pay to the registered owner shown above, or registered assigns, on
the maturity date shown above, but solely from the source and in the manner hereinafter set forth, the principal amount shown above,
and in like manner to pay interest on said amount from the date hereof until
payment of such principal amount has been made or duly provided for, at the rate
of interest per annum shown above, such interest to be payable semi-annually on
March 1 and September 1 of each year, commencing on September 1, 2005, with
principal and interest payable semiannually on each March 1 and September 1
commencing September 1, 2008, except as the provisions hereinafter set forth
with respect to redemption of this Debenture prior to maturity may become
applicable hereto. The principal of, interest on and premium, if any, on this
Debenture are payable in lawful money of the United States of America by the
principal corporate trust office of First Security Bank, Searcy, Arkansas, or
its successor or successors, as trustee (“Trustee”), to the registered owner of
this Debenture as shown on the Debenture register at the close of business on
the fifteenth (15th) day of the calendar month next preceding the
month in which such Payment Date shall fall, by check or draft mailed to each
registered owner at the owner’s address as it appears on the Debenture
registration books of Issuer kept by Trustee or at such other address as is
furnished to Trustee in writing by such registered owner. At the written request
to Trustee of any registered owner of Debentures (as defined below) in the
aggregate principal amount of at least $1,000,000, interest payments shall be
made by electronic wire transfer in immediately available funds to a bank in the
continental United States. Initially, the Debentures will be registered in the
name of Cede & Co., as nominee of the Depository Trust Company (“DTC”), New
York, New York, to which principal and interest payments on the Debentures will
be made so long as Cede & Co. is the registered owner of the Debentures.

A-1




     This Debenture, designated “Pure
Energy Group, Inc. (and its subsidiary), 7 1/2% Debentures Series 2005,” is one
of a series of Debentures in the aggregate original principal amount of
$5,500,000 (the “Debentures”), issued to finance the final payments of Issuer
pursuant to Issuer’s Second Plan of Reorganization approved by the United States
Bankruptcy Court, Western District of Texas, San Antonio Division, on December
2, 2002 (the “Court Case”); to pay off the outstanding balance of the Operating
Line of Credit; to provide working capital for Issuer; and to fund capitalized
interest on the Debentures through September 1, 2005 (the "Project"). The Issuer
will pay certain costs related to issuance of the Debentures from sources of
funds other than the proceeds of the Debentures. The Debentures are issued under
and are secured and entitled to the protection given by a Trust Indenture dated
as of March 1, 2005 (the “Indenture”), duly executed and delivered by Issuer to
Trustee. The Debentures issued under the Indenture are referred to collectively
hereinafter as “the Debentures.” Reference is hereby made to the Indenture and
all indentures supplemental thereto for the provisions, among others, with
respect to the nature and extent of the security, the rights, duties and
obligations of Issuer, Trustee and the registered owners of the Debentures, and
the terms upon which the Debentures are issued and secured.

     The Debentures are issued
pursuant to and in full compliance with the Constitution and laws of the State
of Texas, as well as the Articles of Incorporation and Bylaws of Corporation,
and the Texas Business Corporation Act, the Certificate of Limited Partnership
and Agreement of Limited Partnership of Partnership and the Texas Revised Uniform Limited Partnership Act (collectively, the
“Authorizing Instruments”), and pursuant to an Authorizing Resolution adopted
and approved by Corporation’s Board of Directors as of February 25, 2005, and a
Joint Authorizing Resolution adopted and approved by Corporation’s Board of
Directors and the General Partner of the Partnership as of February 25, 2005,
which authorized the execution and delivery of the Indenture.

A-2




     The Owners of the Debentures have
no security interest in any property or facilities of Issuer, but rather only a
security interest in (i) the Revenues of Issuer, subject and subordinate to the
prior superior lien of the existing $5,000,000 Operating Line of Credit, and
(ii) any property or funds transferred by us to and held by Trustee under the
Indenture; legal procedures connected with the exercise of remedies available
may cause delays in the collection of funds available for payment of debt
service on the Debentures.

     REFERENCE IS HEREBY MADE TO THE
ADDITIONAL PROVISIONS OF THIS DEBENTURE SET FORTH ON THE REVERSE SIDE HEREOF
WHICH FOR ALL PURPOSES SHALL HAVE THE SAME EFFECT AS IF SET FORTH HEREIN.

     IT IS HEREBY CERTIFIED, RECITED
AND DECLARED that all acts, conditions and things required to exist, happen and
be performed precedent to and in the issuance of the Debentures do exist, have
happened and have been performed in due time, form and manner as required by
law; and that the revenues pledged to the payment of the principal of and
premium, if any, and interest on the Debentures as the same become due and
payable will be sufficient in amount for that purpose. Interest will be
calculated on the basis of a 360 day year of twelve (12) thirty (30) day
months.

     This Debenture shall not be valid
or become obligatory for any purpose or be entitled to any security or benefit
under the Indenture until the Certificate of Authentication hereon shall have
been signed by Trustee.

A-3




     IN WITNESS WHEREOF, PURE ENERGY
GROUP, INC. and PURE GAS PARTNERS II, L.P. have caused this Debenture to be
executed by its Authorized Issuer Representative, thereunto duly authorized (by
their manual or facsimile signatures), and its corporate seal to be affixed or
imprinted hereon, all as of the date hereof shown above.

	 	PURE ENERGY GROUP, INC. 
	 	  
	 	  
	 	  
	 	By:
  
	 	       Larry B. Cochran,
      President and CEO 
	 	       Authorized Issuer
      Representative 


ATTEST

___________________________
David P. Crews, Chairman

             (S
E A L)

	 	PURE GAS PARTNERS II, L.P. 
	 	  
	 	By: Pure Energy Group, Inc., its General
      Partner 
	 	  
	 	  
	 	  
	 	By:
  
	 	       Larry B. Cochran,
      President and CEO 
	 	       Authorized Issuer
      Representative 


A-4




(Form of Trustee’s Certificate)

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

     This Debenture is one of the
Debentures of the issue described in and issued under the provisions of the
within mentioned Indenture.

	 	FIRST SECURITY BANK, not in its
      individual 
	 	capacity but solely as trustee under this
      Indenture 
	 	dated as of March 1, 2005, between Pure
      Energy 
	 	Group, Inc., Pure Gas Partners II, L.P., and
      First 
	 	Security Bank 
	 	  
	 	  
	 	  
	 	By:
  
	 	         
      Authorized Signature 


A-5




PURE ENERGY GROUP, INC. 
(and its subsidiary) 
7 1/2%
DEBENTURES
SERIES 2005 

(Reverse Side of Debenture) 

ADDITIONAL PROVISIONS

     The Debentures will be general
obligations of Issuer secured by: (i) all Revenues (defined in the Indenture) of
Issuer, subject and subordinate to the prior and superior lien of the Operating
Line of Credit (defined in the Indenture) and (ii) all money held in the funds
and accounts created under the Indenture (except the Costs of Issuance Account)
hereinafter called the “Security”), payable from the sources of revenue pledged
and assigned therefor by Issuer pursuant to the Indenture dated as of March 1,
2005 (the “Indenture”), between Issuer and Trustee.

     The Debentures will be issued to
finance the final payments of Issuer pursuant to Issuer’s Second Plan of
Reorganization approved by the United States Bankruptcy Court, Western District
of Texas, San Antonio Division, on December 2, 2002 (the “Court Case”); to pay
off the outstanding balance of the Operating Line of Credit; to provide working
capital for Issuer; and to fund capitalized interest on the Debentures through
September 1, 2005 (the "Project"). The Issuer will pay certain costs related to
issuance of the Debentures from sources of funds other than the proceeds of the
Debentures.

     Provision has been made in the
Indenture for the creation and maintenance of a Debenture Fund (and for the
payment into the Debenture Fund of sufficient amounts of Issuer Revenues to pay
the principal of and premium, if any, and interest on the Debentures when due).
Issuer covenants in the Indenture to use its best efforts in a commercially
reasonably manner to maintain rates and charges for Issuer’s Facilities’
services and operations, together with other sources of income which will
produce Revenues in each fiscal year sufficient to pay the Debt Service on all
outstanding indebtedness and subordinate obligations of Issuer secured by Issuer
Revenues in any fiscal year thereafter.

     The holder of this Debenture
shall have no right to enforce the provisions of the Indenture or to institute
action to enforce the covenants therein, or to take any action with respect to
any event of default under the Indenture, or to institute, appear in or defend
any suit or other proceeding with respect thereto, except as provided in the
Indenture. In certain events, on the conditions, in the manner and with the
effect set forth in the Indenture, the principal of all the Debentures issued
under the Indenture and then outstanding may be declared and may become due and
payable before the stated maturity thereof, together with accrued interest
thereon.

A-6




     Modifications or alterations of
the Indenture, or of any indenture supplemental thereto, may be made only to the
extent and in the circumstances permitted by the Indenture. The Debentures shall
be subject to redemption prior to maturity as follows:

     Extraordinary Optional
Redemption of Debentures. The Debentures are subject to extraordinary
optional redemption (which redemption shall be mandatory in the circumstances
provided in subsection (f) below) as a whole or in part upon the occurrence of
any of the following events with respect to Issuer’s Facilities, at a redemption
price equal to the principal amount of the Debentures then Outstanding to be so
redeemed, plus accrued interest to the date fixed for such redemption (which
date shall be the earliest practicable date in accordance with Section 3.04
hereof) and without premium:

     (a) Any
one of Issuer’s Facilities, or any part thereof, is so demolished, destroyed or
damaged that, in the commercially reasonable judgment of Issuer, all or a
portion of the Facility cannot be restored or rebuilt with available funds to a
profitable condition within the term of business interruption insurance covering
the operations of Issuer and the net proceeds resulting from such casualty are
more than the lesser of $500,000 or the Outstanding principal amount of all
Debentures;

     (b) All
or a portion of Issuer’s Facilities shall have been taken under the exercise of
the power of eminent domain by any governmental authority or so much of Issuer’s
Facilities is taken or is so diminished in value that the remainder thereof
cannot, in the judgment of Issuer, continue to be operated profitably for the
purpose for which it was being used immediately prior to such taking or
diminution and the proceeds resulting from such condemnation are more than the
lesser of $100,000 or the Outstanding principal amount of all Debentures; or

     (c) On
any date upon not less than ninety (90) calendar days’ prior written notice in
the event of the occurrence of a “Change in Control” of Issuer, unless waived by
Holders of not less than seventy-five percent (75%) of Debentures Outstanding.
The term "Change in Control" means the happening of any one or more of the
following events:

     (i)
Approval by the shareholders of Issuer (including the limited partners of Pure
Gas Partners II, L.P., the operating subsidiary of the Company), of the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), excluding, for this purpose, the present shareholders of Issuer,
individually or as a member of a group, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%)
or more of either the then outstanding “Voting Securities” (meaning, the shares
of common stock of Issuer entitled to vote) or the combined voting power of
Issuer's then outstanding Voting Securities entitled to vote generally in the
election of the board of directors of Issuer (“the Board"); 

A-7




     (ii)
Individuals who, as of the Effective Date, constitute the Board (herein called
the "Incumbent Board"), cease for any reason to constitute at least a majority
of the Board; provided, that, any person becoming a member of the
Board subsequent to the Effective Date whose election, or nomination for
election by Issuer's shareholders (including the limited partners of Pure Gas
Partners II, L.P., the operating subsidiary of Issuer), was approved by a vote
of at least a majority of the Voting Securities of Issuer entitled to vote
thereon (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Board, as such term is used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall be,
considered as though such person were a member of the Incumbent Board; 

     (iii)
Approval by the shareholders of Issuer (including the limited partners of Pure
Gas Partners II, L.P., the operating subsidiary of Issuer) of a reorganization,
merger or consolidation of Issuer, in each case, with respect to which persons
who were the shareholders of Issuer immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than fifty
percent (50%) of the Voting Securities or combined voting power entitled to vote
generally in the election of directors, as the case may be, of the reorganized,
merged or consolidated entity's then outstanding Voting Securities; or 

     (iv)
Approval by the shareholders of Issuer (including the limited partners of Pure
Gas Partners II, L.P., the operating subisidary of Issuer) of liquidation or
dissolution of, or the sale, lease, exchange or other disposition of all or
substantially all of the assets of, Issuer.

     (d) If
any of the circumstances described in subsections (a), (b) and (c) above shall
occur within six (6) months of the final maturity of the Debentures, all
Debentures shall be redeemed on the earliest practicable date at a price equal
to the principal amount thereof plus interest accrued to the redemption
date.

     Except as provided in subsection
(d) above, Issuer may exercise the option reserved in Section 3.09 of the
Indenture only within six (6) months following the date that a condition has
occurred which gives rise to a right of redemption under the Indenture.

     In the event that less than all
of the Debentures are redeemed by operation of the foregoing, the Debentures to
be redeemed shall be selected by Trustee in inverse order among the then
outstanding maturities (and by lot or in such manner as Trustee shall deem fair
and appropriate within each maturity) thereof according to the relationship
borne by the outstanding principal amount of each such maturity to the total
amount to be applied to redemption of the Debentures.

A-8




     Optional Redemption of the
Debentures. At any time on or after March 1, 2008, the Debentures are
subject to redemption at the option of Issuer, in part on any Payment Date and
in whole at any time, at a redemption price as set forth in the table below,
plus accrued interest to such date (less than all of such Debentures to be
selected as provided in Section 3.03 of the Trust Indenture), which date shall
be the first day of the month, or Payment Date (as applicable), succeeding such
direction from Issuer for which notice of redemption may be given:


	Redemption Dates 	Price or Amount 
	March 1, 2008, through February 28, 2009
	103% 
	March 1, 2009, through February 28, 2010
	102% 
	March 1, 2010, through February 28, 2011
	101% 
	Including and After March 1, 2011 	Par 


     In case of any such optional
redemption, Issuer shall, at least thirty (30) calendar days prior to the
redemption date (unless a shorter notice shall be satisfactory to Trustee),
deliver a Written Request to Trustee notifying Trustee of such redemption date
and of the principal amount of Debentures to be redeemed.

     Mandatory Sinking Fund
Redemption. The Debentures are subject to mandatory sinking fund redemption
prior to maturity in part, with the Debentures to be redeemed being selected by
lot by the Trustee in such manner as the Trustee may determine, at the
redemption price of one hundred percent (100%) of the principal amount thereof
plus accrued interest to the date fixed for redemption, without premium, in the
amounts and on the dates as follows:

$5,500,000 Term Debenture due March 1, 2015


	Redemption Date 	Principal Amount 
	09/01/2008 	$195,000.00 
	03/01/2009 	200,000.00 
	09/01/2009 	245,000.00 
	03/01/2010 	245,000.00 
	09/01/2010 	300,000.00 
	03/01/2011 	300,000.00 
	09/01/2011 	360,000.00 
	03/01/2012 	360,000.00 
	09/01/2012 	470,000.00 
	03/01/2013 	475,000.00 
	09/01/2013 	545,000.00 
	03/01/2014 	545,000.00 
	09/01/2014 	630,000.00 
	03/01/2015 * 	630,000.00 
	* Maturity 	  


A-9




     At its option, to be exercised on
or before the thirtieth (30th) day next preceding any mandatory
sinking fund redemption date, Issuer (provided that no Event of Default shall
have occurred and be continuing), may: (i) deliver to Trustee for cancellation
the Debentures of the applicable maturity or portions thereof (in Authorized
Denominations) in any aggregate principal amount desired and (ii) receive a
credit in respect of its mandatory sinking fund redemption obligation for any
Debentures of the same maturity (in Authorized Denominations) which prior to
said date have been purchased or redeemed (otherwise than through mandatory
sinking fund redemption pursuant to this Section) and cancelled by Trustee and
not theretofore applied as a credit against any mandatory sinking fund
redemption obligation for the same maturity. Each such Debenture or portion
thereof so delivered or previously purchased or redeemed and cancelled by
Trustee shall be credited by Trustee at one hundred percent (100%) of the
principal amount thereof against the obligation to redeem Debentures of the same
maturity on such mandatory sinking fund redemption date, and any excess over
such amount shall be credited against future mandatory sinking fund redemption
obligations for the same maturity in chronological order, and the principal
amount of the Debentures of said maturity so to be redeemed shall be accordingly
reduced.

     Issuer will, on or before the
thirtieth (30th) calendar day next preceding each such mandatory
sinking fund redemption date, furnish Trustee with its certificate indicating
whether and to what extent the provisions of (i) and (ii) of the preceding
paragraph are to be availed of with respect to such mandatory sinking fund
redemption payment.

     Mandatory Redemption of the
Debentures from Condemnation Proceeds. The Debentures are subject to
mandatory redemption upon a Written Request from Issuer to Trustee as a whole or
in part at the principal amount thereof plus accrued interest thereon to the
date of redemption, but without premium, from the net proceeds of any insurance
policy or condemnation award remaining after the repair, replacement, or
improvement of all or any portion of the Facilities, in the amount certified in
the Written Request by Issuer to Trustee. The redemption date shall be the
earliest practicable date selected by Trustee at the direction of Issuer. The
Debentures shall be redeemed only in $25,000 increments in inverse order of all
maturities of such Debentures subject to mandatory redemption, as applicable in
the priority set forth in the first sentence of this Section. Any excess amount
shall be used to pay principal on the Debentures, on the first Principal Payment
Date on or after said redemption date.

     Optional Redemption of the
Debentures from Excess Funds. The Debentures are subject to redemption at
the option of the Issuer, upon Written Request from Issuer to Trustee as a whole
or in part at the principal amount thereof, plus accrued interest thereon to the
date of redemption, but without premium, from excess funds in the Project Fund
after payment of the Prior Obligation and pay off of the outstanding balance of
the Operating Line of Credit, in the event the Issuer determines not to apply
such excess funds to working capital. The redemption date shall be the earliest
practicable date selected by Trustee at the direction of Issuer. The Debentures
shall be redeemed only in $25,000 increments across all maturities of such
Series subject to mandatory redemption, as applicable in the priority set forth
in this Trust Indenture. Any excess amount shall be used to pay principal on
the Debentures, on the first principal payment date on or after said redemption
date.

A-10




     Mandatory Redemption Upon
Default Under Operating Line of Credit or Parity Obligations. Upon the
occurrence of an event of default under the Operating Line of Credit or any
Parity Obligations, if issued and Outstanding, the Debentures shall be redeemed
in whole from available monies in the Debenture Fund, and, to the extent
necessary, from the Revenues of Issuer, at a redemption price equal to one
hundred percent (100%) of the principal amount of the Debentures being redeemed,
plus accrued interest to the date of redemption, on the earliest date for which
notice of redemption can be given in accordance with the provisions of this
Indenture.

     If less than all of the
Debentures of any one maturity shall be called for redemption, the particular
Debentures or portions of the Debentures of such maturity to be redeemed shall
be selected by lot by Trustee in such manner as Trustee in its discretion may
determine; provided, however, that the portion of any Debenture to
be redeemed shall be in the principal amount of $25,000 or integral multiples of
$5,000 in excess thereof and that, in selecting Debentures for redemption,
Trustee shall treat each Debenture as representing that number of Debentures
which is obtained by dividing the principal amount of each Debenture by $25,000.


     This Debenture may be transferred
on the books of registration kept by Trustee by the registered owner or by his
duly authorized attorney upon surrender hereof, together with a written
instrument of transfer duly executed by the registered owner or his duly
authorized attorney, together with an investor letter as described in the
Indenture.

     The Debentures are issuable as
fully-registered Debentures without coupons in denominations of $25,000 and any
integral multiple of $5,000 in excess thereof, and will be registered in the
name of Cede & Co., as nominee of the Depository Trust Company, New York,
New York, to which principal and interest payments on the Debentures will be
made so long as Cede & Co. is the registered owner of the Debentures.
Subject to the limitations and upon payment of the charges provided in the
Indenture, Debentures may be exchanged for a like aggregate principal amount of
Debentures of other authorized denominations.

     No recourse shall be had for the
payment of the principal of or premium, if any, or interest on any of the
Debentures, or for any claim based thereon or upon any obligation, covenant or
agreement contained in the Debentures or the Indenture against any past, present
or future director, officer or employee of Issuer, as such, either directly or
through Issuer or any successor of Issuer, under any rule of law or equity,
statute or constitution or by the enforcement of any assessment or penalty or
otherwise, and all such liability of any such director, officer or employee as
such is hereby expressly waived and released as a condition of and consideration
for the issuance of any of the Debentures.

A-11




     Each Debenture Holder or
Beneficial Owner, by acceptance of a Debenture, or, in the case of a Beneficial
Owner, a beneficial interest in a Debenture, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of Issuer or the Indenture Trustee on the Debentures or under the Indenture or
any certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee in its individual capacity or (ii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Indenture Trustee in its individual capacity, any holder of a beneficial
interest in the Indenture Trustee or of any successor or assign of the Indenture
Trustee in its individual capacity, except as any such Person may have expressly
agreed and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.

     This Debenture is issued with the
intent that the laws of the State of Texas will govern its construction.

     REGISTRATION AND TRANSFER OF
THIS DEBENTURE IS SUBJECT TO TRUSTEE’S PRIOR RECEIPT OF AN INVESTOR LETTER FROM
EACH PROSPECTIVE TRANSFEREE IN THE FORM OF THAT REQUIRED BY THE
INDENTURE.

     THIS DEBENTURE MAY BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF BY AN INVESTOR ONLY IN COMPLIANCE WITH
RULE 144A AND OTHER FEDERAL AND STATE SECURITIES LAWS THAT MAY BE APPLICABLE AT
SUCH TIME. SPECIFICALLY, RESALES OF THIS DEBENTURE MAY ONLY BE MADE TO QUALIFIED
INSTITUTIONAL BUYERS AS SUCH TERM IS DEFINED BY RULE 144A AND OTHERWISE AS
ALLOWED UNDER APPLICABLE STATE OR FEDERAL SECURITIES LAWS AT SUCH TIME.

     THE HOLDER OF THIS DEBENTURE,
AND ANY PROSPECTIVE QUALIFIED INSTITUTIONAL BUYER THAT MAY PURCHASE THIS
DEBENTURE FROM ANY HOLDER, MAY, UPON REQUEST OF THE HOLDER, OBTAIN FROM THE
ISSUER THE FOLLOWING INFORMATION: a very brief statement of the nature of
the business of Issuer and the products and services it offers; Issuer’s most
recent balance sheet and profit and loss and retained earnings statements.
Presently the Issuer’s financial statements are unaudited. Issuer covenants to
comply with the requirements of Rule 144A(d)(4).

     Notwithstanding anything
contained herein to the contrary, the Debentures and interests therein may not
be issued, sold or transferred to any Debenture Holder other than the initial
Debenture Holder, unless (i) the initial Debenture Holder and any subsequent
Debenture Holder shall have delivered to Trustee evidence satisfactory to
Trustee that the transferee is an Accredited Investor, as such term is defined
under Rule 501(a) of Regulation D promulgated pursuant to the Securities Act of
1933, and (ii) Trustee obtained a signed Investor Letter in the same form as
attached to the Indenture as Exhibit B and attached to the Debentures. The
Debentures shall bear legends stating that they are subject to the transfer
restriction described in Section 2.10 of the Indenture. By purchasing a
Debenture, the initial Debenture Holder and any subsequent Debenture Holder
shall be deemed to have agreed to the transfer requirements contained in Section
2.10 of the Indenture.

A-12




(Form of Assignment)

ASSIGNMENT

     The following abbreviations, when
used in the inscription on this Series 2005 Debenture or in the assignment
below, shall be construed as though they were written out in full according to
applicable laws or regulations:

	 	TEN COM 	- 	as tenants in common 
	 	TEN ENT 	- 	as tenants by the entireties 
	 	JT TEN 	- 	as joint tenants with right of survivorship and
      not as tenants in common and not as community property 
	 	  	
	 	UNIF TRANS 	  	 
	 	MIN ACT 	- 	________________Custodian
  ___________________
	 	  	  	(Custodian)                                   
                  (Minor)
    
	 	  	  	 
	 	  	under Uniform Transfer to Minors Act
    
	 	 	 ________________________________
	 	  	                          
      (State) 


Additional abbreviations may be used although not in the above
list.

     FOR VALUE RECEIVED, the
undersigned, _____________________________, hereby sells, assigns, and transfers unto
_____________________________(Tax Identification or Social Security No.
_____________________________) the within Debenture and all rights thereunder
and hereby irrevocably constitutes and appoints
__________________________________attorney to transfer the within Debenture on
the books kept for registration thereof, with full power of substitution in the
premises.

	 Dated: ________________	
	 	  Signature 
	 	  
	 	
	 	 Signature Guaranteed
  


NOTICE: Signature(s) must be guaranteed by an institution which
is a participant in the Securities Transfer Agent Medallion Program (“STAMP”) or
similar program.

__________________________________

NOTICE: The signature(s) to this assignment must correspond
with the name as it appears upon the face of the within Debenture in every
particular, without alteration or enlargement or any change whatsoever.

[END OF FORM OF SERIES 2005 DEBENTURE]

A-13




EXHIBIT B TO TRUST INDENTURE

FORM OF INVESTOR LETTER

March __, 2005


	Crews & Associates, Inc. 	Pure Energy Group, Inc. 
	Placement Agent 	Issuer 
	Little Rock, AR 	San Antonio, TX 
	  	  
	Pure Gas Partners II, L.P. 	Jack, Lyon & Jones, P.A. 
	Issuer 	Special Counsel 
	San Antonio, TX 	Little Rock, AR 
	  	  
	First Security Bank 	  
	Trustee 	  
	Searcy, AR 	  


Re: $5,500,000 7 1/2% Debentures Pure Energy Group, Inc. (and
its subsidiary), Series 2005 (“the Debentures”)

Ladies and Gentlemen:

     The undersigned,
___________________________(“the Purchaser”), has purchased a principal amount
of $_____of the Debentures. In connection with such purchase, Pure Energy Group
Inc., and its operating subsidiary Pure Gas Partners II, L.P. (collectively the
“Company”) and First Security Bank (the “Trustee”) require that the Purchaser
make certain representations as to the Purchaser’s willingness to accept the
risks of investing in the Debentures, the Purchaser’s investigation of such
risks, and such other matters. Accordingly, the Purchaser represents and
warrants to the Company, the Trustee, Crews & Associates, Inc., as Placement
Agent, and Jack, Lyon & Jones, P.A., as Special Counsel, as follows:

     A. QUALIFICATION. The
Purchaser is a person who, based upon such factors as financial sophistication,
net worth and knowledge and experience in financial matters, is capable of
evaluating the merits and risks of an investment such as the Debentures. The
Purchaser can bear the economic risk of the purchase of the Debentures and has
such knowledge and experience in business and financial matters, including the
analysis of the purchase of similar investments, as to be capable of evaluating
the merits and risks of an investment in the Debentures on the basis of the
information requested and reviewed by us and our review as described herein.
Purchaser has completed and provided to the Company and Trustee an Accredited
Investor Qualification Statement and hereby represents and warrants that
Purchaser is an Accredited Investor as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933 (the “Securities Act”) and
summarized in the attachment hereto or a Qualified Institutional Buyer as defined by Rule 144A
promulgated under the Securities Act. 

B-1




     B. NO REGISTRATION. The
Purchaser acknowledges that the Debentures are not currently required to be,
have not been, and are not intended to be, registered under the Securities Act
or registered or otherwise qualified under the securities laws of any state or
other jurisdiction, and that any sale or other transfer of the Debentures may be
made only in accordance with such laws. The Debentures are currently not rated
by any national security rating agency.

     C. RESTRICTED TRANSFER. We
acknowledge and agree that we will only sell the Debentures to Qualified
Institutional Buyers in strict compliance with Rule 144A promulgated under the
Securities Act, if applicable, and in any event only in strict compliance with
applicable state and federal laws regarding the sale of restricted securities in
effect on the date of such transfer, as applicable. The Purchaser will not sell,
exchange, gift or otherwise transfer or convey any of the Debentures without
requiring the transferee to deliver to the Trustee an investor letter to the
same effect as this Investor Letter, as is required under the Indenture.
Purchaser acknowledges that Purchaser’s interest may not be sold, transferred or
assigned except as provided for in the Indenture.

     D. PURCHASE FOR
INVESTMENT. The Debentures are being acquired by the Purchaser for
investment and not with a view to, or for resale in connection with, any
distribution of the Debentures, other than, if applicable, a transfer of the
Debentures to a custodial arrangement or a trust whose beneficiaries or
beneficial owners are each an “accredited investor” as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.

     E. INDEPENDENT EVALUATION.
The Purchaser has independently evaluated the factors associated with its
investment decision. The Purchaser has been given full and complete access to
and has been furnished with all information requested by the Purchaser regarding
the Debentures, as in the opinion of the Purchaser was necessary in connection
with its purchase of the Debentures. 

     F. DISCLOSURE STATEMENT.
We have carefully read the Prospectus and all attachments thereto relating
to the Debentures in its entirety and understand the risks described therein and
understand and acknowledge that there may be other risks in such an investment
that are not described therein. We acknowledge that the Debentures are a
speculative investment and that there is a high degree of risk in such
investment.

     G. SOPHISTICATION. The
Purchaser is sufficiently knowledgeable and experienced in financial and
business matters, including the purchase and ownership of oil and gas-related
securities and other obligations, to be able to evaluate the risks and merits of
the investment represented by the purchase of the Debentures, and it is capable
of and has made its own investigation of the Company, its business and facilities and the oil and gas industry in connection with its
decision to purchase the Debentures.

B-2




     H. LEGAL AUTHORIZATION.
The Purchaser is duly and legally authorized to purchase the Debentures, and
the Purchaser is duly and legally authorized to execute this Investor Letter.
The Purchaser has satisfied itself that the Debentures are a lawful investment
for it under all applicable laws.

     I. NATURE OF OBLIGATIONS.
The Purchaser understands that the Debentures are general obligations of the
Company payable from the revenues received by the Trustee from the Company, and
secured by a pledge of revenues of the company subject and subordinate to the
prior and superior lien of Texas Capital Bank, and any successor, with respect
to an operating line of credit in the maximum principal amount of $5,000,000.
The Purchaser understands that payment of the principal of, premium, if any, and
interest on the Debentures depends upon the general credit of the Company and
upon the net cash flow available from the Company.

     J. SURVIVAL. All
representations of the Purchaser contained herein shall survive the sale and
delivery of the Debentures to the Purchaser as representations of fact existing
as of the date of execution and delivery of this Investor Letter.

     K. DEFINED TERMS. The
initial capitalized terms not defined herein shall have the meaning ascribed to
such terms in the Trust Indenture which secures the payment of the
Debentures.

If the undersigned is an individual (i.e., not a
corporation, partnership, etc.): 

Please Print
Name:                 
_________________________________
        

Signature:                                 
_________________________________

Date:                                            _________________________________


If the undersigned is a corporation, partnership or other
legal entity:

Please Print Name of Entity:   
_________________________________

By (Please Print
Name):          
_________________________________

Signature:                                   
_________________________________

Title:                                             
_________________________________

Date:                                             
_________________________________


B-3




The Debentures will not be sold in violation of the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or
in violation of any securities laws of any state and then only in compliance
with Rule 144A under the Securities Act of 1933, to the extent applicable.
Specifically, resales may only be made to Qualified Institutional Buyers as such
term is defined in Rule 144A, or otherwise as allowed by applicable state and
federal securities laws at such time.

B-4




ACCREDITED INVESTOR CONFIRMATION

The categories of Accredited Investor include:

     (1) Any bank as defined in
section 3(a)(2) of the Act; or any savings and loan association or other
institution as defined in section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer registered pursuant to
section 15 of the Securities Exchange Act of 1934; any insurance company as
defined in section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;

     (2) Any private business
development company as defined in section 202(a)(22) of the Investment Advisers
Act of 1940; 

     (3) Any organization described in
section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts, or
similar business trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of $5,000,000;


     (4) Any director, executive
officer, or general partner of the issuer of the securities being offered or
sold, or any director, executive officer, or general partner of a general
partner of that issuer;

     (5) Any natural person whose
individual net worth, or joint net worth with that person's spouse, at the time
of his purchase exceeds $1,000,000;

     (6) Any natural person who had
individual income in excess of $200,000 in each of the two (2) most recent years
or joint income with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the
current year;

     (7) Any trust, with total assets
in excess of $5,000,000, not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a sophisticated person as
described in §230.506(b)(2)(ii); and

    (8) Any entity in which all of the equity
owners are accredited investors.
(provide separate certifications
from each equity owner).

B-5




QUALIFIED INSTITUTIONAL BUYER CONFIRMATION

QUALIFIED INSTITUTIONAL BUYER SHALL MEAN:

	A. 	
      ANY OF THE FOLLOWING ENTITIES, ACTING FOR ITS OWN ACCOUNT
      OR THE ACCOUNTS OF OTHER QUALIFIED INSTITUTIONAL BUYERS, THAT IN THE
      AGGREGATE OWNS AND INVESTS ON A DISCRETIONARY BASIS AT LEAST $100 MILLION
      IN SECURITIES OF ISSUERS THAT ARE NOT AFFILIATED WITH THE
ENTITY:

	 	 	 
		1. 	
      ANY INSURANCE COMPANY AS DEFINED IN SECTION
      2(A)(13) OF THE ACT;

	 	 	 
			
      NOTE: A PURCHASE BY AN INSURANCE COMPANY FOR ONE OR MORE
      OF ITS SEPARATE ACCOUNTS, AS DEFINED BY SECTION 2(A)(37) OF THE INVESTMENT
      COMPANY ACT OF 1940 (THE "INVESTMENT COMPANY ACT"), WHICH ARE NEITHER
      REGISTERED UNDER SECTION 8 OF THE INVESTMENT COMPANY ACT NOR REQUIRED TO
      BE SO REGISTERED, SHALL BE DEEMED TO BE A PURCHASE FOR THE ACCOUNT OF SUCH
      INSURANCE COMPANY.

	 	 	 
		2. 	
      ANY INVESTMENT COMPANY REGISTERED UNDER THE
      INVESTMENT COMPANY ACT OR ANY BUSINESS DEVELOPMENT COMPANY AS
      DEFINED IN SECTION 2(A)(48) OF THAT ACT;

	 	 	 
		3. 	
      ANY SMALL BUSINESS INVESTMENT COMPANY LICENSED BY
      THE U.S. SMALL BUSINESS ADMINISTRATION UNDER SECTION 301(C) OR (D) OF THE
      SMALL BUSINESS INVESTMENT ACT OF 1958;

	 	 	 
		4. 	
      ANY PLAN ESTABLISHED AND MAINTAINED BY A STATE,
      ITS POLITICAL SUBDIVISIONS, OR ANY AGENCY OR INSTRUMENTALITY OF A STATE OR
      ITS POLITICAL SUBDIVISIONS, FOR THE BENEFIT OF ITS EMPLOYEES;

	 	 	 
		5. 	
      ANY EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF
      TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974;

	 	 	 
		6. 	
      ANY TRUST FUND WHOSE TRUSTEE IS A BANK OR TRUST COMPANY
      AND WHOSE PARTICIPANTS ARE EXCLUSIVELY PLANS OF THE TYPES IDENTIFIED IN
      PARAGRAPH (A)(1)(I)(D) OR (E) OF THIS SECTION, EXCEPT TRUST FUNDS THAT
      INCLUDE AS PARTICIPANTS INDIVIDUAL RETIREMENT ACCOUNTS OR H.R. 10
      PLANS.

	 	 	 
		7. 	
      ANY BUSINESS DEVELOPMENT COMPANY AS DEFINED IN
      SECTION 202(A)(22) OF THE INVESTMENT ADVISERS ACT OF
  1940;



B-6





		8. 	
      ANY ORGANIZATION DESCRIBED IN SECTION 501(C) (3) OF THE
      INTERNAL REVENUE CODE, CORPORATION (OTHER THAN A BANK AS DEFINED IN
      SECTION 3(A)(2) OF THE ACT OR A SAVINGS AND LOAN ASSOCIATION OR OTHER
      INSTITUTION REFERENCED IN SECTION 3(A)(5)(A) OF THE ACT OR A FOREIGN BANK
      OR SAVINGS AND LOAN ASSOCIATION OR EQUIVALENT INSTITUTION), PARTNERSHIP,
      OR MASSACHUSETTS OR SIMILAR BUSINESS TRUST; AND

	 	 	 
		9. 	
      ANY INVESTMENT ADVISER REGISTERED UNDER THE
      INVESTMENT ADVISERS ACT.

	 	 	 
	B. 	
      ANY DEALER REGISTERED PURSUANT TO SECTION 15 OF
      THE EXCHANGE ACT, ACTING FOR ITS OWN ACCOUNT OR THE ACCOUNTS OF OTHER
      QUALIFIED INSTITUTIONAL BUYERS, THAT IN THE AGGREGATE OWNS AND INVESTS ON
      A DISCRETIONARY BASIS AT LEAST $10 MILLION OF SECURITIES OF ISSUERS THAT
      ARE NOT AFFILIATED WITH THE DEALER, PROVIDED, THAT SECURITIES
      CONSTITUTING THE WHOLE OR A PART OF AN UNSOLD ALLOTMENT TO OR SUBSCRIPTION
      BY A DEALER AS A PARTICIPANT IN A PUBLIC OFFERING SHALL NOT BE DEEMED TO
      BE OWNED BY SUCH DEALER;

	 	 	 
	C. 	
      ANY DEALER REGISTERED PURSUANT TO SECTION 15 OF
      THE EXCHANGE ACT ACTING IN A RISKLESS PRINCIPAL TRANSACTION ON BEHALF OF A
      QUALIFIED INSTITUTIONAL BUYER;



NOTE: A REGISTERED DEALER MAY ACT AS AGENT, ON A
NON-DISCRETIONARY BASIS, IN A TRANSACTION WITH A QUALIFIED INSTITUTIONAL BUYER
WITHOUT ITSELF HAVING TO BE A QUALIFIED INSTITUTIONAL BUYER.

	D. 	
      ANY INVESTMENT COMPANY REGISTERED UNDER THE INVESTMENT
      COMPANY ACT, ACTING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNTS OF OTHER
      QUALIFIED INSTITUTIONAL BUYERS, THAT IS PART OF A FAMILY OF INVESTMENT
      COMPANIES WHICH OWN IN THE AGGREGATE AT LEAST $100 MILLION IN SECURITIES
      OF ISSUERS, OTHER THAN ISSUERS THAT ARE AFFILIATED WITH THE INVESTMENT
      COMPANY OR ARE PART OF SUCH FAMILY OF INVESTMENT COMPANIES. FAMILY OF
      INVESTMENT COMPANIES MEANS ANY TWO OR MORE INVESTMENT COMPANIES
      REGISTERED UNDER THE INVESTMENT COMPANY ACT, EXCEPT FOR A UNIT INVESTMENT
      TRUST WHOSE ASSETS CONSIST SOLELY OF SHARES OF ONE OR MORE REGISTERED
      INVESTMENT COMPANIES, THAT HAVE THE SAME INVESTMENT ADVISER (OR, IN THE
      CASE OF UNIT INVESTMENT TRUSTS, THE SAME DEPOSITOR), PROVIDED THAT, FOR
      PURPOSES OF THIS SECTION:




	 	1. 	
      EACH SERIES OF A SERIES COMPANY (AS DEFINED IN RULE 18F-2
      UNDER THE INVESTMENT COMPANY ACT ) SHALL BE DEEMED TO BE A SEPARATE
      INVESTMENT COMPANY; AND



B-7





	 	2. 	
      INVESTMENT COMPANIES SHALL BE DEEMED TO HAVE THE SAME
      ADVISER (OR DEPOSITOR) IF THEIR ADVISERS (OR DEPOSITORS) ARE
      MAJORITY-OWNED SUBSIDIARIES OF THE SAME PARENT, OR IF ONE INVESTMENT
      COMPANY'S ADVISER (OR DEPOSITOR) IS A MAJORITY- OWNED SUBSIDIARY OF THE
      OTHER INVESTMENT COMPANY'S ADVISER (OR DEPOSITOR);

	 	 	 
	 	3. 	
      ANY ENTITY, ALL OF THE EQUITY OWNERS OF WHICH ARE
      QUALIFIED INSTITUTIONAL BUYERS, ACTING FOR ITS OWN ACCOUNT OR THE ACCOUNTS
      OF OTHER QUALIFIED INSTITUTIONAL BUYERS; AND

	 	 	 
	 	4. 	
      ANY BANK AS DEFINED IN SECTION 3(A)(2) OF THE ACT,
      ANY SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION AS REFERENCED IN
      SECTION 3(A)(5)(A) OF THE ACT, OR ANY FOREIGN BANK OR SAVINGS AND LOAN
      ASSOCIATION OR EQUIVALENT INSTITUTION, ACTING FOR ITS OWN ACCOUNT OR THE
      ACCOUNTS OF OTHER QUALIFIED INSTITUTIONAL BUYERS, THAT IN THE AGGREGATE
      OWNS AND INVESTS ON A DISCRETIONARY BASIS AT LEAST $100 MILLION IN
      SECURITIES OF ISSUERS THAT ARE NOT AFFILIATED WITH IT AND THAT HAS AN
      AUDITED NET WORTH OF AT LEAST $25 MILLION AS DEMONSTRATED IN ITS LATEST
      ANNUAL FINANCIAL STATEMENTS, AS OF A DATE NOT MORE THAN 16 MONTHS
      PRECEDING THE DATE OF SALE UNDER THE RULE IN THE CASE OF A U.S. BANK OR
      SAVINGS AND LOAN ASSOCIATION, AND NOT MORE THAN 18 MONTHS PRECEDING SUCH
      DATE OF SALE FOR A FOREIGN BANK OR SAVINGS AND LOAN ASSOCIATION OR
      EQUIVALENT INSTITUTION.



B-8




     The undersigned represents that
the foregoing information is true and correct in all material respects and
agrees that such information may be relied upon by Pure Energy, the Placement
Agent, and others in connection with an investment by the undersigned in the
Debentures. The undersigned agrees to furnish such additional information as is
reasonably necessary in order to verify the answers set forth below.

     The undersigned acknowledges that
in conjunction with an evaluation of the purchase of the Debentures, the
undersigned will receive certain confidential, nonpublic information regarding
Pure Energy, including without limitation, certain financial information and
information about its businesses and properties (the “Confidential
Information”). The undersigned agrees the Confidential Information will be kept
confidential and shall not, without the prior written consent of Pure Energy, be
disclosed by the undersigned, or by its agents, representatives or employees, in
any manner whatsoever, in whole or in part, to any person or entity other than
the agents, representatives or employees of the undersigned, and shall not be
used by the undersigned, its agents, representatives or employees, other than in
connection with the evaluation of a purchase of the Debentures. Moreover, the
undersigned agrees to reveal the Confidential Information only to its agents,
representatives and employees who need to know the Confidential Information for
the purpose of evaluating the purchase of the Debentures, who are informed by it
of the confidential nature of the Confidential Information and who agree to act
in accordance with the terms and conditions of this paragraph.

If the undersigned is an individual (i.e., not a
corporation, partnership, etc.): 

Please Print
Name:                    
_________________________________

Signature:                                    
_________________________________

Date:                                              
_________________________________


If the undersigned is a corporation, partnership or other
legal entity:

Please Print Name of Entity:    
_________________________________

By (Please Print
Name):            _________________________________

Signature:                                    
_________________________________

Title:                                             
_________________________________

Date:                                            
 _________________________________


B-9




     EXHIBIT C 

TRUSTEE’S FEE SCHEDULE 

$5,000 Initial Fee at Closing

$3,500 Annually each March 1st beginning March 1,
2006 (includes 10 free Debenture transfers per year; $25 per transfer
thereafter)

C-1




EXHIBIT D

ISSUER’S WRITTEN REQUEST

     $5,500,000 
7 1/2%
Debentures, 
Series 2005 
(“Debentures”) 
PURE ENERGY GROUP,
INC.
(and its subsidiary)

Written Request No. 1  

     The undersigned, Authorized Pure
Energy Group, Inc. and Pure Gas Partners II, L.P. Representative (collectively,
the “Company”), pursuant to Section 5.04 of the Trust Indenture (“Indenture”)
between Company and First Security Bank, Searcy, Arkansas Trustee (“Trustee”),
dated as of March 1, 2005, hereby requisitions funds from the Project Fund in
the amount of $__________and for the purposes set forth below pursuant to
Section 5.03 of the Indenture:


	AMOUNT: 	PAYEE (with payment
      address and instructions): 	PURPOSE: 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 



	 	PURE ENERGY GROUP, INC. 
	 	 
	 	 
	 	Larry B. Cochran, CEO 
	 	Date:  
      ____________________________


D-1





	 	PURE GAS PARTNERS II, L.P. 
	 	  
	 	By: Pure Energy Group, Inc., its General
      Partner 
	 	  
	 	  
	 	
	 	Larry B. Cochran, CEO and 
	 	Authorized Issuer Representative 
	 	Date:
  _____________________________


D-2