<PAGE>
                                                                    EXHIBIT 10.2


                         THE PANNONIAN EMPLOYEE ROYALTY
                                 TRUST AGREEMENT

         THIS TRUST AGREEMENT is made and entered into the twenty fifth day of
March, 2001 by and between Pannonian Energy, Inc., a Delaware corporation whose
address is Englewood, Colorado 80112 ("Pannonian"), and James H. Porter
("Trustee") Attorney at Law, whose address is 4076 N. Lazy K Drive, Castle Rock,
Colorado 80104.

1. BACKGROUND. As an incentive for increased productivity, the Company wishes
its officers, directors and employees to have Overriding Royalties on production
from certain of its properties, especially its undeveloped properties, so that
these individuals may share in successful development of such properties. It
would not be practical for the Company to distribute undivided term or perpetual
Overriding Royalties to these individuals, but the Company's objectives can be
accomplished by the creation of this express trust to hold Overriding Royalties
for their benefit.

2. DEFINITIONS. As used herein, the following terms have the meanings indicated:

         2.1 "Affiliate" means, as to the party specified, any Person
controlling, controlled by, or under common control with such party, with the
concept of control in such context meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of another, whether through the ownership of voting securities, by
contract, or otherwise.

         2.2 "Annual Income Amount" for any Year means the sum of (a) the cash
received during the Year which is attributable to the Overriding Royalties as
defined in Section 2.10 hereof, (b) any cash available for distribution as a
result of the reduction or elimination during the Year of any existing cash
reserve created pursuant to Section 7.7 hereof, and (c) any other cash receipts
of the Trust during the Year, including without limitation any interest earned
pursuant to Section 7.7, such sum to be reduced by the sum of (x) the
liabilities of the Trust paid during the Year, and (y) the amount of any cash
used in the Year to establish or increase a cash reserve pursuant to Section 7.7
hereof. If the Annual Income Amount determined in accordance with the preceding
sentence shall for any Year be a negative number, then the amount distributed as
the Annual Income Amount shall be zero.

         2.3 "Board" means the Original Board of Directors of the Company as
follows: Marc Bruner, Mark Erickson, Tom Fails, Howard O. Sharpe, Dawne Meyer.

         2.4 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

         2.5 "Employee" means an officer or common law employee of the Company,
as well as an independent contractor specifically designated by the Board to
participate in the Plan.

         2.6 "Employee Participants" means the Employees and selected
independent contractors of Pannonian in the certificate described in Section
4.5.

         2.7 "Fixed Participants" means the former Employees of the Company who
were employed by (or, if outside directors, who served) the Company for three
continuous years up to the day of their death or retirement, and who either (i)
died or retired having had ten years of total employment or service (whether
continuous or non-continuous) with the Company or (ii) retired from the Company
after reaching the age of 65.

         2.8 "Founding Participants" means Marc A. Bruner, Mark A. Erickson,
Thomas G. Fails, Paul L. Hayes, Jr., Dawne F. Meyer, and Howard O. Sharpe,
together with their respective successors and assigns.

<PAGE>
         2.9 "Overriding Royalties" means the overriding royalty interests
conveyed by the Company to the Trustee.

         2.10 "Participant" means, as to a particular Year, a Founding
Participant, Fixed Participant or Annual Participant, and a permitted successor
or assign of such person.

         2.11 "Plan" means the Pannonian Employee Royalty Plan adopted by the
Company's Board of Directors on 25 March 2001.

         2.12 "Total Compensation" means the sum of the deemed compensation of
all Annual Participants and Fixed Participants during a particular Year.

         2.13 "Trust" means the express trust created by and administered under
the terms of this Trust Agreement and includes any ancillary trust created
pursuant to Section 8.10 hereof.

         2.14 "Trust Agreement" means this instrument as originally executed or,
if amended pursuant to the provisions of Section 11.2 or 11.3, as so amended.

         2.15 "Trust Estate" means all assets, however and whenever acquired,
which may belong to the Trust at any designated time, and shall include both
income and principal.

         2.16 "Trust Fund" has the meaning ascribed to such term in Section 3.2
of this Trust Agreement.

         2.17 "Trustee" means the initial Trustee under this instrument, each
ancillary Trustee which may be appointed pursuant to Section 8.10 hereof, or any
successor Trustee or successor ancillary Trustee, during the period each is
serving in such capacity.

         2.18 "Year" means a calendar year.

3. CREATION AND PURPOSE OF TRUST; ACQUISITION OF OVERRIDING ROYALTIES

         3.1 Creation of the Trust. There is hereby created an irrevocable trust
(the "Trust") for the benefit of the Participants, who initially will be the
Founding Participants. The Trust herein created shall be known as The Pannonian
Employee Royalty Trust (PERT), and the Trustee may conduct all affairs of the
Trust in such name.

         3.2 Purposes. The purposes of the Trust are:

               (a) to protect and conserve, for the benefit of the Participants,
the Overriding Royalties and other assets held by the Trust Estate;

               (b) to receive revenues attributable to the Overriding Royalties;

               (c) to pay or provide for the payment of any liabilities.

               The Company and the Trustee intend to create an express trust for
the benefit of the Participants, and a grantor trust for federal income tax
purposes of which the Company is the grantor. As set forth above and amplified
herein, the Trust is intended to be a passive entity whose activities are
limited to the receipt of revenues attributable to the Overriding Royalties and
the distribution to the Participants of such revenues, after payment of or
provision for Trust expenses and liabilities. It is neither the purpose nor the
intention of the parties hereto to create, and nothing in this Trust Agreement
shall be construed as creating, a partnership, joint venture, joint stock
company, or business association between


                                       2
<PAGE>
or among Participants hereunder, present or future, or among or between the
Participants, or any of them, and the Trustee.

         3.3 Trust Fund. The Trust Fund shall consist of the Overriding
Royalties and the revenues and proceeds of such Overriding Royalties as from
time to time shall be delivered to or held by the Trustee. The Overriding
Royalties identified in Schedule 1 shall constitute the initial Trust Estate of
the Trust. Neither Pannonian nor any Participant shall have any right to direct
the Trustee to return or divert any Trust assets attributable to a Participant
before the payment of all Trust obligations with respect to such Participant.
All of the Overriding Royalties granted to the Trust, all proceeds of such
Overriding Royalties, all investments and reinvestments of such proceeds, and
all earnings and profits thereon, less all payments and charges authorized
herein, are herein referred to as the Trust Fund. The Trust Fund shall be held
by the Trustee and shall be dealt with in accordance with the provisions of this
Trust Agreement.

         3.4 Contributions to The Trust. The Company shall from time to time
contribute such additional Overriding Royalties to the Trust as may be permitted
by the Plan and authorized by the Board. In addition, the Company may, but is
not obligated to, contribute cash to the Trust from time to time in order to
satisfy expenses and liabilities of the Trust.

4. PARTICIPANTS AND PARTICIPATING INTERESTS

         4.1 Classes of Participants. There are three classes of Participants in
the Plan: Founding Participants (33%), Fixed Participants, and Annual
Participants (share 67%).

         4.2 Founding Participants. Each Founding Participant shall have 6.6666%
Participating Interest in the Trust each Year. In other words one third of the
trust will be divided equally among the five "Founding Participants) each year.
Each Founding Participant may sell, assign or otherwise transfer all or any
portion of his or her Participating Interest at any time or from time to time.

         4.3 Fixed Participants. Each Fixed Participant shall have a
Participating Interest in the Trust each Year as may be determined by the Board
in accordance with this Section 4.3 and certified by the Board to the Trustee as
set forth in Section 4.5.

         The Participating Interest of a Fixed Participant for a particular Year
of active employment shall be based on compensation of such Fixed Participant
during such year as a percentage of the Total wages paid by the company for such
Year. Two thirds of the Trust will be shared by all Fixed and Annual
participants.

         The deemed compensation of a Fixed Participant shall, in respect of the
year of his or her death or retirement, be computed as 75% of the total amount
of wages, tips and other compensation paid to him by the Company during the last
year immediately preceding the year of his or her death or retirement; provided,
however, that if he or she was employed for a portion of the Year of his or her
death or retirement, and if the total amount of wages, tips and other
compensation paid to him or her by the Company during such portion of the Year
is greater than such 75% amount, then the total amount of wages, tips and other
compensation paid to him or her by the Company during such portion of the Year
shall instead be used as his or her deemed compensation for the Year. Without
regard to the foregoing, the deemed compensation of a Fixed Participant shall,
in respect of the first Year following the Year of his or her death or
retirement, be computed as 65% of the total amount of wages, tips and other
compensation paid to him or her by the Company during the last year immediately
preceding the Year of his death or retirement, and in the second through fifth
Years following the Year of his or her death or retirement, shall be computed as
55%, 45%, 35% and 25%, respectively, of the total amount of wages, tips and
other compensation paid to him by the Company during the last year immediately
preceding the Year of his death or retirement. In all subsequent Years that the
Trust remains in effect, his deemed compensation


                                       3
<PAGE>
shall be 25% of the total amount of wages, tips and other compensation paid to
him by the Company during the last year immediately preceding the Year of his
death or retirement, without any increase or adjustment with the passage of
time.

         4.4 Annual Participants. Each Annual Participant shall have a
Participating Interest in the Trust each Year as may be determined by the Board
in accordance with this Section 4.4 and certified by the Board to the Trustee as
set forth in Section 4.5.

         The Participating Interest of an Annual Participant for a particular
Year of active employment shall be based on compensation of such Annual
Participant during such year as a percentage of the Total wages paid by the
company for such Year. Two thirds of the Trust will be shared by all
participants.

         The deemed compensation of an Annual Participant shall the total amount
of wages, tips and other compensation paid by the Company (as would be shown in
Box 1 of IRS Form W-2, or such other location or form as may most nearly replace
the current reporting in Box I of Form W-2) to such person during the entire
concerned Year as shown by the payroll records of the Company, even if such
person was employed by the Company for only a portion of that Year. The deemed
compensation of an independent contractor selected as an Annual Participant by
the Board shall be the total amount paid to such independent contractor during
the entire concerned Year, but excluding reimbursements for out-of-pocket costs
and expenses.

         4.5 Certification. No later than January 15 of each Year, the Company
shall deliver to the Trustee a certificate, certified by the Company's
Secretary, setting forth the names, addresses, social security numbers, and
participating interests of the Participants for the preceding Year, as
determined by the Board in accordance with Sections 4.3 and 4.4, above. The
obligation of the Company, the Board and the Company's Secretary to deliver such
annual certificates shall terminate upon the delivery of the final certificate
described in Section 4.6 to the Trustee. Such final certificate shall also be
considered a certificate described in this Section 4.5 for purposes of this
Agreement.

         4.6 Final Certificate. No later than 30 days after the effective date
of a reorganization involving the Company under Section 368(A) of the Code in
which it is not the surviving corporation or under Section 368(B) of the Code in
which it is not the acquiring corporation, the Board shall finally certify to
the Trustee of the Trust the names, addresses and social security numbers of
each Participant, as well as their respective Participating Interests. The
Participating Interests of all Participants shall not, subject to permitted
transfers and assignments, change thereafter.

         In preparing this final certificate, the Participating Interest of the
Founding Participants shall not change, and shall continue to be a six point
sixth percent (6.666%) Participating Interest for each Founding Participant,
subject only to permitted assignments and transfers.

         The deemed compensation of each Fixed Participant shall be fixed at the
deemed compensation of such Fixed Participant as it would be calculated under
Section 4.3 for the year in which the sale or merger becomes effective, and
shall not be reduced thereafter.

         The deemed compensation of each Annual Participant shall be computed as
a percentage of his total wages, tips and other compensation during the calendar
year immediately preceding the year in which the sale or merger becomes
effective; provided, however, that no Employee shall be entitled to any
participating share under this fixed and final certification unless he or she is
employed by or, if an outside director, serving the Company on the clay
immediately preceding the effective date of the sale or merger. Thus, Employees
cannot be Annual Participants for purposes of this fixed and final certification
unless they were both (i) employed or serving the Company during the year
preceding the effective date of the sale or merger and (ii) employed or serving
the Company on the day immediately preceding the effective


                                       4
<PAGE>
date of the merger. For an Employee who is qualified to be an Annual Participant
for purposes of this fixed and final certification, the relevant percentage
shall be (i) 100%, if such person has been employed or served the Company for at
least 36 months (whether continuous or noncontinuous); (ii) two-thirds
(approximately 66.66667%), if such person has been employed or served the
Company for at least 24 months (whether continuous or noncontinuous) but less
than 36 months; and (iii) one-third (approximately 33.33333%) if such person has
been employed or served the Company for less than 24 months. Consequently, the
deemed compensation of a qualifying Annual Participant who has been employed by
the Company for 30 months shall, for purposes of this fixed and final
certification, be one-third of his total wages, tips and other compensation
during the calendar year immediately preceding the year in which the sale or
merger becomes effective.

         For purposes of the fixed and final certification, the deemed
compensation of a qualifying Annual Participant or Fixed Participant, as
described in the two preceding paragraphs, shall be divided by the sum of the
deemed compensation of all qualifying Annual Participants and Fixed Participants
in order to determine such Participant's Participating Interest in the remaining
66% of the total Participating Interest in the Trust.

         4.7 Reliance Upon Certificates. The Trustee may conclusively rely upon
each certificate delivered to the Trustee by the Company's Secretary for all
purposes relating to this Trust Agreement for the concerned Year.

         4.8 Assignment. Founding Participants and Fixed Participants may at any
time assign or transfer all or any portion of their Participating Interests in
the Trust in accordance with the requirements of this Section 4.8. Annual
Participants may not assign any portion of their Participating Interests prior
to the delivery to the Trustee of the final certificate described in Section
4.6, although they may do so after the delivery of such final certificate,
provided, however, that transfers directly resulting from the death of an Annual
Participant shall be permitted both before and after delivery of such final
certificate.

         No assignment or transfer of a Participating Interest shall be
recognized by the Company or the Trustee unless and until the Company (if the
assignment or transfer occurs prior to delivery of the final certificate
described in Section 4.6) or the Trustee (if the assignment or transfer occurs
after the delivery of the final certificate described in Section 4.6) has
received written notice of the assignment or transfer, together with a full and
accurate copy of the assignment or transfer instrument.

         4.9 Rights of Participants. A person who becomes a Participant by an
assignment permitted under Section 4.8 shall take and hold the Participating
Interest subject to all the terms and provisions of this Trust Agreement, which
shall be binding upon and inure to the benefit of the successors, assigns,
legatees, heirs, and personal representatives of such owner. By assignment or
transfer of all or a portion of the a Participating Interest, the assignor or
transferor shall part with (a) all of his rights in, to, and under such
transferred Participating Interest and (b) all of his interests, rights, arid
benefits under this Trust Agreement which are attributable to such transferred
Participating Interest, except as provided in Section 5.2 in the case of a
transfer after delivery of the certificate for such year pursuant to Section 4.5
and prior to the date of the corresponding distribution.

         4.10 Determination of Ownership of Participating Interests. In the
event of any disagreement between persons claiming to be the person entitled to
be the Participant with respect to any Participating Interest or claiming to be
the transferee of any Participant, the Trustee shall be entitled at its option
to refuse to recognize any such claims so long as such disagreement shall
continue. In so refusing, the Trustee may elect to make no delivery or other
disposition of the Participating Interest involved, or any part thereof, or of
any money accrued or accruing thereunder. In so doing, the Trustee shall not be
or become liable to any person for the failure or refusal of the Trustee to
comply with such conflicting claims, and the Trustee shall be entitled to
continue to refrain and refuse to act until (a) the rights of the


                                       5
<PAGE>
adverse claimants have been adjudicated by a final judgment of a court having
jurisdiction of the parties and the interest and money involved and the time
within which appellate relief may be requested has expired or final appellate
relief has been denied, or (b) all differences have been adjusted by valid
agreement between said parties and the Trustee shall have been notified thereof
in writing signed by all of the interested parties. In addition, the Trustee may
bring an interpleader action against the interested parties in an appropriate
court and ask such court for a declaration as to the resolution of such adverse
claims.

5. ACCOUNTING AND DISTRIBUTIONS

         5.1 Fiscal Year and Accounting Method. The Trust's fiscal Year shall be
the calendar Year. The Trustee shall maintain the books of the Trust on a cash
basis.

         5.2 Distributions. As soon as practicable, but no later than February
15 of each Year during the term of the Trust, the Trustee shall distribute the
Annual Income Amount for the preceding calendar Year to the Participants for
that Year. For example, the Annual Income Amount for 1999 will be distributed,
not later than February 15, 2000, to the 1999 Participants who are identified to
the Trustee by the Company in the certificate which is delivered to the Trustee
not later than January 15, 2000.

         5.3 Income Tax Reporting. For federal and state income tax purposes,
the Trustee shall file such returns and statements as in its judgment are
required to comply with applicable provisions of the Code and regulations
thereunder and any state laws arid regulations thereunder.

         5.4 Reports to Participants. No later than March 31 of each year, the
Trustee shall prepare and mail to each person who was a Participant for the
preceding calendar Year a report showing for such preceding calendar Year (i)
distributions of the Trust, (ii) revenues of the Trust, (iii) production
attributable to the Overriding Royalties, and (iv) the amount of any abandonment
losses from the Overriding Royalties.

         In addition, the Trustee shall prepare and mail to Participants any
financial or other reports and statements the Trustee is required to provide
Participants by law or governmental regulation.

6. MEETINGS OF PARTICIPANTS

         6.1 Purpose of Meetings. A meeting of the Participants may be called at
any time pursuant to the provisions of this Section 6 to act on any matter with
respect to which the Participants are authorized to act by the express terms of
this Trust Agreement.

         6.2 Call and Notice of Meetings. Any such meeting of Participants may
be called at any time by the Trustee in its discretion. In addition, the Trustee
shall call a meeting of the Participants within twenty days after receipt of a
written request which sets forth in reasonable detail the action proposed to be
taken at such meeting and is signed by Participants representing the ownership
of at least 10% of the Participating Interests as shown in the most recent
certificate delivered to the Trustee pursuant to Section 4.5. The Trustee shall
select the date, the time, and location in the greater Denver, Colorado
metropolitan area for the meeting, except as otherwise required by a stock
exchange upon which the Units are listed. The Trustee shall provide written
notice of every Participant's meeting, said written notice shall:

               (a)  be signed by the Trustee, which signature may be a
                    facsimile,

               (b)  be given not more than sixty nor less than twenty days
                    before such meeting is to be held,


                                       6
<PAGE>
               (c)  be given to each Participant of record on the voting record
                    date selected by the Trustee,

               (d)  set forth the date, time, and place of the meeting, and

               (e)  set forth in general terms the matters proposed to be acted
                    upon at such meeting.

         If such notice is given to any Participant by mail, it shall be
directed to him at his last address as shown by the records of the Trustee and
shall be deemed to be given when so addressed and deposited in the U.S. mail,
postage prepaid.

         No matter other than that stated in the notice shall be acted upon at
the meeting and the meeting shall be held at such time and place as the notice
of such meeting designates.

         6.3 Voting. Only a person identified as a Participant in the most
recent certificate delivered to the Trustee pursuant to Section 4.5 shall be
entitled to be present, speak, and vote at a meeting. A person appointed by an
instrument in writing as a proxy for such a Participant shall be entitled to
exercise at a meeting all rights exercisable by such Participant as if the
Participant exercised such rights in person, and all references to a Participant
for purposes of this Section 6 shall mean either such Participant or his duly
appointed proxy. In addition, any representative of the Company and of the
Trustee shall be entitled to be present, speak, and (except as to voting)
generally to participate in any meeting. At any meeting, the presence in person
or by proxy of Participants representing 80% of the Participating Interests as
shown in the most recent certificate delivered to the Trustee pursuant to
Section 4.5 shall constitute a quorum and, except as otherwise provided in this
Trust Agreement, any matter shall be deemed to have been approved if it is
approved by the affirmative vote of Participants holding 75% of the
Participating Interests as shown in the most recent certificate delivered to the
Trustee pursuant to Section 4.5. The Trustee, subject to applicable law, may
solicit from and vote proxies of Participants.

         6.4 Conduct of Meetings. The Trustee may make such reasonable
regulations as it deems advisable governing the conduct of any meeting
including, without limitation, provisions governing the appointment of proxies;
the appointment and duties of inspectors of votes; the submission and
examination of proxies, and other evidences of the right to vote; the use of the
most recent certificate delivered to the Trustee pursuant to Section 4.5; and
the appointment of a Chairman and Secretary of the meeting.

7. ADMINISTRATION OF TRUST AND POWERS OF THE TRUSTEE

         7.1 General Authority. Subject to the limitations set forth in this
Trust Agreement, the Trustee is authorized to and shall take such actions as in
its judgment are necessary, desirable, or advisable to achieve the purposes of
the Trust. This shall include the solicitation of proxies for voting at
Participant meetings and appropriate action to enforce the terms of the
Overriding Royalties, including the institution of any actions or proceedings at
law or in equity necessary to the foregoing.

         7.2 Limited Power to Dispose of the Overriding Royalties. The Trustee
may not sell or otherwise dispose of the Overriding Royalties. Notwithstanding
the above, the Trustee may (a) sell without a vote of the Participants all or
any part of the Overriding Royalties or any other Trust assets for such
consideration as it deems necessary to provide for specific liabilities of the
Trust due at the time of such sale, (b) sell or otherwise dispose of the
Overriding Royalty Interest and other Trust assets pursuant to Section 10.2
hereof, and (c) sell all or any part of the Overriding Royalties if such sale is
approved by the affirmative vote at a meeting of 85% of the Participating
Interests entitled to vote at such meeting.


                                       7
<PAGE>
         The Trustee shall distribute to the Participants the cash received as a
result of any such sale, subject to the need to pay liabilities or to establish
or increase cash reserves pursuant to Sections 7.7 and 10.2 hereof, as part of
the Annual Income Amount for such Year.

         7.3 No Power to Engage in Business or Make Investments. The Trustee
shall not, in its capacity as Trustee under the Trust, acquire any oil and gas
lease, royalty, or other mineral interest other than the Overriding Royalties,
nor engage in any business or investment activity of any kind whatsoever.
Nothing contained in this Section 7.3 shall prevent the Trustee from taking
those actions as are expressly permitted by other portions hereof or are
reasonably related thereto, including the dissolution of the Trust.

         7.4 Payment of Liabilities of Trust. The Trustee is authorized to and
shall use all money received by it for the payment of all liabilities of the
Trust, including but not limited to all expenses, taxes, and liabilities
incurred of all kinds, compensation to it for its services pursuant to Section
8.4 and 8.5 hereof, and compensation to such parties as may be consisted
pursuant to Section 8.6 hereof.

         7.5 Timing of Trust Expenses. The Trustee will use all reasonable
efforts to cause the Trust and the Participants to recognize income (including
any income from interest earned on reserves established pursuant to Section 7.7
hereof or any sale of the Overriding Royalties) and expenses on December 31 of
each Year. The Trustee will invoice the Trust for services rendered by the
Trustee during a Year not later than December 31 of such Year and shall cause
the Trust to pay any such invoices not later than December 31 of such Year. The
Trustee will use all reasonable efforts to cause all persons to whom the Trust
becomes liable during a Year to invoice the Trust for such liability on or
before December 31 of such Year and to cause the Trust to pay any such
liabilities on or before December 31 of such Year. Nothing in this Section 7.5
shall be construed as requiring the Trustee to cause payment to be made for
Trust liabilities on any date other than on such date as in its sole discretion
it shall deem to be in the best interests of the Participants.

         7.6 Limited Power to Borrow. If it any time the cash on hand is not
sufficient to pay liabilities of the Trust then due, the Trustee is authorized,
but not required, to borrow from itself in its capacity as Bank, or from another
person, on a secured or unsecured basis, such amounts as are required after use
of any available Trust funds to pay liabilities as have become due. The
borrowing costs to the Trust of any loan from the Bank shall not exceed the
borrowing costs on loans by the Bank to its most substantial and responsible
commercial borrowers on borrowings of similar magnitude and length of time.
Borrowings from any other person shall be on such terms as the Trustee shall
deem advisable. At no time shall the Trustee incur borrowings if the then
outstanding borrowings exceed 50 percent of the amount of revenues which the
Trustee estimates will be received by the Trust during the immediately following
six calendar months. The Trustee is prohibited from borrowing in its capacity as
Trustee except as provided in this Section 7.6. In the event of any borrowings,
no further Trust distributions shall be made until the indebtedness created by
such borrowing has been paid in full.

         7.7 Cash Reserves and Cash Held Pending Distribution. The Trustee in
its sole discretion may, but is not obligated to, establish a cash reserve if
(a)(i) a claim is asserted or is likely to be asserted against the Trust and the
Trust has received an opinion of counsel stating that the party or parties
asserting the claim or likely to assert the claim have a reasonable probability
of succeeding in such claim or (ii) a claim against the Trust has been
successful but such claim is not currently due and payable, and (b) the probable
amount of such potential or successful claim is such that it cannot be satisfied
out of the Annual Income Amount at the time it is reasonably probable the claim
will have to be paid. Any cash reserve established shall be placed in a
non-interest-bearing demand account in the Bank (unless otherwise required by
law, in which event the cash reserve shall be placed in a national bank, to be
selected by the Trustee, having capital, surplus, and undivided profits of at
least $100 million); provided however, that such cash reserves will be placed in
certificates of deposit (including certificates of deposit issued by the


                                       8
<PAGE>
Bank) or U.S. government securities maturing not later than December 31 of the
year in which such placement is made if, and only if, the Trustee has received
an opinion of counsel to the effect that such temporary investment of the
amounts in the reserve will not jeopardize the tax treatment of the Trust as a
trust and not as an association taxable as a corporation. The Trustee will make
reasonable efforts to obtain such an opinion. The Trustee may in its sole
discretion at any time decrease or eliminate any cash reserve previously
established in the Trust.

         The Trustee shall be under no obligation to invest and shall not invest
in any manner any cash being held by it for distribution other than cash which
is being held as a reserve for liabilities and is placed in certificates of
deposit or U.S. government securities in accordance with the conditions of the
first paragraph of this Section 7.7.

         7.8 Settlement of Claims. The Trustee is authorized to maintain,
defend, and settle in the Trust's name any claim or controversy by or against
the Trust without the Joinder or consent of any Participant or Participant.

         7.9 Income and Principal. The Trustee may, but shall not be required
to, keep separate accounts or records for income and principal. To the extent
that such separate accounts or records are kept, the Trustee may allocate the
receipts, disbursements, and reserves of the Trust between income and principal
in the discretion of the Trustee, and the Trustee's discretion need not accord
with the provisions of any requirement of applicable law which maybe lawfully
negated by this Trust Agreement. Regardless of any such characterization,
however, the Trustee shall not make any distribution, accumulate any funds, or
maintain any reserve except as expressly provided in this Trust Agreement. The
Trustee shall not maintain a reserve for depletion of the mineral assets
represented in the Trust corpus.

         7.10 Effect of Trustee's Powers on Trust Property. The powers granted
the Trustee under this Trust Agreement may be exercised upon such term as the
Trustee deems advisable and may affect Trust properties for any length of time
regardless of the duration of the Trust.

         7.11 No Requirement of Diversification. The Trustee shall be under no
obligation to diversify the Trust's assets or to dispose of any wasting assets.

8. RIGHTS AND LIABILITIES OF TRUSTEE.

         8.1 General Liability of Trustee. The Trustee is empowered to act in
its discretion and shall not be personally or individually liable for any act or
omission except in the case of negligence, bad faith, fraud, or any liability
the Trustee may have vis-a-vis the Participating Interest as provided in Section
8.2 hereof.

         8.2 Limitation of Liability of Participants. In engaging in any
activity or transaction which results or could result in any kind of liability,
the Trustee shall take all steps necessary to ensure that such liability shall
be satisfiable in all events (including the exhaustion of the Trust Estate) only
out of the Trust Estate, that such liability shall not be satisfiable out of any
amounts distributed to Participants or other assets owned by Participants, and
that no Participant shall have any personal liability therefor. In the event of
failure by the Trustee to take such steps, the Trustee shall be fully and
exclusively liable for any resulting liability (other than liability for state
and federal income taxes or liabilities for refunds, fines, penalties, or
interest relating to oil or gas pricing overcharges under state or federal price
controls) vis-a-vis the Participants; provided, however, that the Trustee shall
be entitled to be indemnified and reimbursed from the Trust Estate.

         8.3 Indemnification of Trustee. The Trustee shall be indemnified by,
and receive reimbursement from, the Trust Estate against and from any and all
liability, expense, claim, damage, or


                                       9
<PAGE>
loss incurred by it individually or as Trustee in the administration of the
Trust and the Trust Estate or any part or parts thereof, or in the doing of any
act done or performed or omission occurring on account of its being Trustee,
except (1) such liability, expense, claim, damage, or loss arising from its
negligence, bad faith, or fraud and (2) any loss resulting from Trustee's
expenses (direct or indirect) in carrying out the administrative tasks required
hereunder exceeding the compensation and reimbursement provided for pursuant to
Sections 8.4 and 8.5 hereof. The Trustee shall have a lien upon the Trust Estate
to secure it for such indemnification and reimbursement and for compensation to
be paid to the Trustee.

         Except as provided in Section 4.7, neither the Trustee nor any agent or
employee of the Trustee shall be entitled to any reimbursement or
indemnification from any Participant for any liability, expense, claim, damage,
or lass incurred by the Trustee or any such agent or employee; and the rights of
the Trustee or any employee or agent of the Trustee to reimbursement and
indemnification, if any, shall be limited solely to the Trust Estate, whether or
not such reimbursement and indemnification shall be insufficient fully to
reimburse or indemnify the Trustee or any such agent or employee.

         8.4 Compensation of Trustee--Services. The Trustee shall receive
compensation from the Trust for its services as Trustee, Transfer Agent, and
Registrar as set forth in a separate agreement. In the event the person serving
as Trustee is not also Transfer Agent and Registrar, the Trustee may allocate
such compensation as it determines. In the event of litigation involving the
Trust, unusual audits or inspections of the Trust records pertaining to
transactions affecting the Trust, or any other unusual or extraordinary services
rendered in connection with the administration of the Trust, the Trustee shall
be entitled to receive reasonable compensation from the Trust for the services
rendered.

         8.5 Compensation of Trustee--Expenses. The out-of-pocket costs incurred
by the Trustee such as travel, legal services, stationery, binders, envelopes,
ledger sheets, transfer sheets, checks, Certificate list sheets, disbursements
such as postage and insurance, filing fees, continuing listing fees, and fees
and expenses incurred for experts hired pursuant to Section 8.6 will be paid by
the Company. The initial organizational costs of the Trust, including the
printing of the initial Certificates, fees of legal counsel of the Trustee, and
the initial cost of listing the Units will be paid by the Company.

         8.6 Reliance on Experts. To perform any act required or permitted by
this Trust Agreement the Trustee may, but shall not be required to, consult with
counsel, including its own counsel, accountants, geologists, engineers, and
other parties deemed by the Trustee to be qualified as experts on the matters
submitted to them, who may be employees of the Trustee. The opinion of any such
parties on matter submitted to them by the Trustee shall be full and complete
authorization and protection in respect of any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such party. The
Trustee is authorized to make payments of all reasonable fees for services or
expenses thus incurred out of the Trust Estate.

         8.7 No Security Required. No bond or other security shall be required
of the Trustee.

         8.8 Transactions in Multiple Capacities. To the extent allowed by
applicable law, the Trustee shall not be prohibited in any way in exercising its
powers or from dealing with itself in any other capacity, fiduciary or
otherwise.

         8.9 Appointment of Ancillary Trustee. If at any time it becomes
necessary under the laws of any jurisdiction other than Colorado for a trustee
qualified under such laws to make any action with respect to assets held in the
Trust Estate, or if at any time in its discretion the Trustee determines it
would be useful or desirable in connection with the administration of the Trust
Estate, the Trust may appoint in writing an individual, bank, or trust company
legally qualified to act in such other jurisdiction to serve as ancillary Trust
for such purposes. Such ancillary Trust shall have all rights, privileges,
powers, responsibilities, and duties as are delegated in writing by the
appointing Trustee and consistent with the


                                       10
<PAGE>
provisions of this Trust Agreement. Such ancillary Trustee shall be responsible
to the Trustee for all assets with respect to which the ancillary Trustee is
empowered to act. To the extent permitted under the laws of such other
jurisdiction, the Trustee may remove an ancillary Trustee at any time, without
cause and without the necessity of any court proceeding, and may appoint a
successor ancillary Trustee from time to time and at any time.

9. OFFICE OF TRUSTEE.

         9.1 Removal of Trustee. The Trustee may be removed from the Trust by
the affirmative vote at a meeting of the Participants holding 75% of the
Participating Interest as shown on the most recent certificate delivered to the
Trustee pursuant to Section 4.5.

         9.2 Resignation of Trustee. The Trustee may resign at anytime, with or
without cause, by giving written notice ("Resigning Trustee Notice") by
registered mail to the Company and to each Participant of record at the time
such notice is given to the Company. Such resignation shall be effective as of
the date specified is such notice, which date shall be a day not less than one
hundred twenty days after the date on which the last such notice is mailed
("Resignation Notice Date"), unless a successor Trustee shall not have been
named pursuant to Section 9.3, in which case such resignation shall become
effective upon the appointment of such successor Trustee.

         The resigning Trustee shall account to its successor for the
administration of the Trust Estate as may be required by the successor Trustee.
All successors to such resigning Trustee shall be fully protected in relying
upon such accounting.

         9.3 Appointment of Successor Trustee. In the event the Trustee has
given notice of its intention to resign, a successor Trustee shall be appointed
by the resigning Trustee within sixty days of the Resignation Notice Date.
Notice of the appointment of a successor Trustee shall be given by the resigning
Trustee (within ten days of the appointment of the Successor Trustee) to each
Participant of record on the Resignation Notice Date. In the event a successor
Trustee has not been appointed within sixty days after the Resignation Notice
Date, or the occurrence of a vacancy in the position of Trustee, a successor
Trustee may be appointed by any Colorado or U.S. District Court holding terms in
Denver, Colorado, (a) upon the application of any Participant or (b) if no
Participant has applied within seventy-five days after the Resignation Notice
Date or occurrence of a vacancy, the Trustee will apply prior to the
eighty-fifth such day. In the event any such application is filed, the court may
appoint a temporary successor Trustee at any time after such application is
filed which shall, pending the final appointment of a successor Trustee, have
such powers and duties (consistent with the provisions of this Trust Agreement
as the court appointing such temporary Trustee shall provide in its order of
appointment. If the court deems it necessary, the court may appoint such
temporary successor Trustee or successor Trustee on such terms as to
compensation as the court deems necessary and reasonable, notwithstanding any
provision herein to the contrary.

         A Trustee appointed under the provisions of this Section 9.3 shall be a
national banking association domiciled in the United States which has capital,
surplus, and undivided profits of at least $20 million.

         9.4 Rights of Successor Trustee. Immediately upon the appointment of
any successor Trustee (including a temporary successor Trustee), all rights,
titles, duties, powers, and authority of the succeeded Trustee hereunder shall
be vested in and undertaken by the successor Trustee which shall be entitled to
receive from the Trustee which it succeeds, in addition to the accounting
referred to in Section 9.2, all of the Trust Estate held by it hereunder and all
records and files in connection therewith. No successor Trustee shall be
obligated to examine or seek alteration of any accounting of any preceding
Trustee, nor shall any successor Trustee be liable personally for failing to do
so or for any act or omission


                                       11
<PAGE>
of any preceding Trustee, The preceding sentence shall not prevent any successor
Trustee or anyone else from taking any action otherwise permissible in
connection with such accounting.

         9.5 Merger or Consolidation of Trustee. Neither a change of name of the
Trustee nor any merger or consolidation of its corporate powers with another
bank or with a trust company shall affect its right or capacity to act
hereunder.

10. TERM OF TRUST AND FINAL DISTRIBUTION.

         10.1 Termination. The Trust shall terminate upon the first to occur of
the following events or times:

               (a) A decision to terminate the Trust (i) by the affirmative vote
of the holders of 90% of the Founding Participants' Participating Interests,
(ii) by the affirmative vote of 75% of the holders of the Fixed Participants'
Participating Interests, and (iii) by the affirmative vote of 60% of the holders
of the Annual Participants' Participating Interests, with the holders and the
sizes of Participating Interests for purposes of such approval conclusively
determined by reference to the certificate most recently delivered to the
Trustee pursuant to Section 4.5, above; or

               (b) The termination of all leases burdened by the Overriding
Royalties, so that no leases remain in effect on which Overriding Royalties
could be due.

         10.2 Disposition and Distribution of Assets Upon Termination. Upon
termination of the Trust, the Trustee shall sell for cash in one or more sales
all the assets, other than cash, then held in the Trust Estate. In the event any
asset which the Trustee is required to sell is not sold at public auction to the
highest cash bidder, notice of such sale shall be mailed at least thirty days
prior to such sale to each Participant's last address as it appears on the
records of the Trustee.

         The Trustee shall as promptly as practicable distribute the proceeds of
any such sales and any other cash in the Trust Estate in proportion to the Units
held by each such Participant, after paying, satisfying, and discharging all the
existing liabilities of the Trust (including fees of the Trustee) and, if
necessary, setting up reserves in such amounts as the Trustee in its discretion
deems appropriate to provide for payment of contingent liabilities.

         For the purposes of liquidating and winding up the affairs of the Trust
at its termination, the Trustee shall continue to act as Trustee and may
exercise each power until its duties have been fully performed and the Trust
Estate has been finally distributed.

11. IRREVOCABILITY AND AMENABILITY.

         11.1 Irrevocability. This Trust Agreement and the Trust are intended to
be and are irrevocable. No person shall have the right or power to terminate,
revoke, alter, amend, or change this Trust Agreement or any provisions hereof
except as expressly provided in Section 10 or in this Section 11.

         11.2 Limited Amenability. Any provisions of this Trust Agreement may be
amended by the affirmative vote at a meeting of the Participants holding 75% of
the Participating Interests as shown on the most recent certificate delivered to
the Trustee pursuant to Section 4.5, but no such amendment shall be effective
unless and until consented to in writing by the Trustee (provided however that
the Trustee will so consent unless such amendment affects the Trustee's own
rights, duties, or immunities under this Trust Agreement or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, agree to
such amendment), and in no event may an amendment be made which would


                                       12
<PAGE>
               (a) Alter the rights of the Participants as against each other;

               (b) Reduce or delay the distributions to the Participants
provided for in Sections 5.2, 7.2, and 10.2 hereof;

               (c) Provide the Trustee with the power to engage in business or
investment activities, although this prohibition is not intended to limit the
authority of the Trustee specifically provided in Section 7.7 of this Trust
Agreement;

               (d) Adversely affect the characterization of the Trust as an
express trust and as a grantor trust for federal income tax purposes; or

               (e) Alter the voting requirements set forth in this Trust
Agreement;

unless such amendment is approved (i) by the affirmative vote of the holders of
90% of the Founding Participants' Participating Interests, (ii) by the
affirmative vote of 75% of the holders of the Fixed Participants' Participating
Interests, (iii) by the affirmative vote of 60% of the holders of the Annual
Participants' Participating Interests, and (iv) by the Trustee. The holders and
the sizes of Participating Interests for purposes of such approval shall
conclusively be determined by reference to the certificate most recently
delivered to the Trustee pursuant to Section 4.5, above.

         If any ruling has at any time been issued by the Service, or if any
opinion of counsel has been rendered with respect to the classification or
treatment of the Trust for federal income tax purposes, no amendment permitted
by this Section 11.2 shall be effective unless and until a ruling or opinion has
been obtained indicating that the proposed amendment shall not affect the
continued applicability of such existing ruling or opinion.

12. MISCELLANEOUS

         12.1 Inspection of Trustee's Books. Each Participant and his duly
authorized agents, attorneys, and auditors shall have the right during
reasonable business hours at their own cost and expense to examine, inspect, and
make audits of the Trust and records of the Trustee in reference thereto.

         12.2 Filing of Trust Agreement. Except as otherwise required by law,
neither this Trust Agreement nor any executed copy hereof need be filed in any
county or other jurisdiction in which any of the properties comprising the Trust
Estate are located, but the same may be filed for record in any county or other
jurisdiction by the Trustee. In order to avoid the necessity of filing this
Trust Agreement for record, the Trustee agrees that for the purposes of vesting
the record title in any successor to the Trustee, the retiring Trustee will,
upon appointment of any successor Trustee, execute and deliver to such successor
Trustee appropriate assignments or conveyances.

         12.3 Savings Clause. If any provision of this Trust Agreement or the
application thereof to any person, property, or circumstances shall be finally
determined by a court of proper jurisdiction to be illegal, invalid, or
unenforceable to any extent, the remainder of this Trust Agreement or the
application of such provision to persons, properties, or circumstances other
than those as to which it is held illegal, invalid, or unenforceable, shall not
be affected thereby, and every provision of this Trust Agreement shall be valid
and enforced to the fullest extent permitted by law.

         12.4 Notices. Any notice or demand which by any provision of this Trust
Agreement is required or permitted to be given or served upon the Trustee by any
Participant may be given or served by being deposited, postage prepaid and by
registered or certified mail, in a post office or letter box


                                       13
<PAGE>
addressed (until another address is designated by notice given by the Trustee to
the Participants and the Company) or by hand delivery to the Trustee at the
following address:

                                 James H. Porter
                                 Attorney at Law
                              4076 N. Lazy K Drive
                              Castle Rock, CO 80104

Any notice or other communication by the Trustee to any Participant shall be
deemed to have been sufficiently given, for all purposes, when deposited,
postage prepaid, in a post office or letter box addressed to said holder at its
last address as shown on the records of the Trustee.

         12.5 Notice and Reports to the Company. Whenever any notice,
communication, or report is given by the Trustee to Participants pursuant to the
provisions of this Trust Agreement or is otherwise required to be provided to
Participants pursuant to the provisions of this Trust Agreement or is required
to be provided to the Company, the Trustee shall provide, by in-hand delivery or
as set forth in Section 12.4 hereof, such notice, communication, or report to
the Company at the following address:

                  Pannonian Energy Inc.
                  14 Inverness Drive East, Suite H-236
                  Englewood, Colorado 80112

or at such other address as the Company may from time to time advise the Trustee
in writing.

         12.6 Situs of Trust. The situs of the Trust hereby created in Colorado,
and the laws of Colorado shall control with respect to the construction,
administration, and validity of the Trust.

         12.7 No Partition. No Participant shall have the right to seek or
secure any partition during the term of the Trust or during the period of
liquidation and winding up.

         12.8 Acceptance by Trustee. The Trustee, by joining in the execution of
this Trust Agreement, accepts the Trust herein created and provided for and
accepts all of the rights, powers, privileges, duties, and responsibilities of
the Trustee hereunder and agrees to exercise and perform the same in accordance
with the terms and provisions contained herein.


                                       14