Document:

WHEN RECORDED, RETURN TO:

Dan W. Egan
Ballard Spahr Andrews & Ingersoll, LLP
201 South Main Street, Suite 600
Salt Lake City, Utah 84111-2221

                      DEED OF TRUST AND SECURITY AGREEMENT
                                  (Oil and Gas)

         THIS DEED OF TRUST AND  SECURITY  AGREEMENT  (this  "Deed of Trust") is
made as of this 15th day of October,  2003, by PANNONIAN ENERGY INC., a Delaware
corporation  whose  address is 14 Inverness  Drive East,  Building H, Suite 236,
Englewood,  Colorado 80112 ("Trustor"); in favor of DAN W. EGAN, a member of the
Utah State Bar,  whose address is Ballard  Spahr  Andrews & Ingersoll,  LLP, 201
South Main Street,  Suite 600, Salt Lake City, Utah 84111-2221,  and also to any
substitute  or  successor   Trustee  as   hereinafter   provided  (all  of  whom
collectively  are included within the term "Trustee" as used  hereinafter);  and
BFSUS SPECIAL  OPPORTUNITIES  TRUST PLC, a public limited company  registered in
England and Wales,  RENAISSANCE  CAPITAL GROWTH & INCOME FUND III, INC., a Texas
corporation,  and  RENAISSANCE  US GROWTH & INCOME  TRUST PLC, a public  limited
company  registered in England and Wales, the address of all three of which, for
purposes  of this  Deed  of  Trust,  is 8080  North  Central  Expressway,  Suite
210-LB59, Dallas, Texas 75206 (collectively, the "Beneficiary").

                                   WITNESSETH:

     Gasco  Energy,  Inc.  ("Gasco"),  a  Nevada  corporation  that is the  sole
shareholder  of Trustor,  has delivered to Trustee a Convertible  Loan Agreement
dated as of October 15, 2003 (the "Loan Agreement");

         Trustor has delivered to Renaissance Capital Group, Inc., acting in its
capacity as agent for the Beneficiary,  a Subsidiary Guaranty Agreement dated as
of October 15, 2003 (as amended,  restated,  or replaced from time to time,  the
"Subsidiary Guaranty"),  and terms which are defined in that Subsidiary Guaranty
shall have the same  meanings in this Deed of Trust,  unless  otherwise  defined
herein or unless the context otherwise requires; and

         Pursuant to the Subsidiary Guaranty, Trustor has guaranteed the payment
and performance of the Liabilities and, in order to collateralize the Subsidiary
Guaranty,  has agreed to grant to Trustee for the benefit of Beneficiary a first
priority  security  interest in and to certain  interests  in real and  personal
property owned and hereafter to be acquired by Trustor in the State of Utah.

         NOW,  THEREFORE,  in consideration of the premises and the indebtedness
and trusts  hereinafter  set forth and of the sum of Ten  Dollars,  cash in hand
paid, the receipt and sufficiency of which are hereby acknowledged, Trustor does
grant and convey unto Trustee,  in trust,  with power of sale,  all of Trustor's
interest  in the real  property  described  below,  as well as all of  Trustor's
interest in the property relating thereto and all appurtenances  belonging or in
anywise appertaining  thereto,  whether owned or hereafter acquired,  and all of
Trustor's rights,  titles and interests in and to and relating to such property,
and does assign and pledge to Beneficiary  and its  successors and assigns,  and

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does grant to Beneficiary  and its  successors  and assigns a security  interest
under the Uniform  Commercial  Code of Utah (the  "Code"),  in all of  Trustor's
personal  property  (including  fixtures and  improvements)  described below and
owned by Trustor,  as well as all of Trustor's property relating thereto and all
appurtenances  belonging or in anywise  appertaining  thereto,  whether owned or
hereafter acquired,  and all of Trustor's rights, titles and interests in and to
and relating to such  property,  and all products  thereof and proceeds  derived
therefrom,  including  proceeds of  insurance,  with all such real and  personal
property subject to this Deed of Trust sometimes  collectively called the "Trust
Estate," including, but not limited to, the following:

     (a)  all  oil and gas  wells  specifically  identified  in  Exhibit  1 (the
          "Wells"),  together with the oil, gas,  casinghead gas, drip gasoline,
          natural  gasoline  and  all  other  liquid  and  gaseous  hydrocarbons
          (collectively,  "oil and gas")  produced  through the wellbores of the
          Wells; and

     (b)  all oil and gas leases described in Exhibit 1 hereto attached and made
          a part hereof,  insofar and only insofar as the leases cover the lands
          described  in Exhibit 1 and then only to the extent  that such  leases
          are  necessary  to produce and operate  the Wells  (collectively,  the
          "Leases"), as executed in favor of, or as assigned, sublet, farmed-out
          or otherwise  transferred  to Trustor,  together  with all  easements,
          privileges,  surface  rights,  production and drilling  rights and all
          other rights, privileges,  titles and interests appurtenant thereto or
          relating  thereto,  but only to the extent  necessary  to produce  and
          operate the Wells; and

     (c)  all  currently  existing  unitization,   communitization  and  pooling
          agreements and the units created thereby (including without limitation
          all units formed under orders,  regulations,  rules or other  official
          acts of any federal, state or other governmental body or agency having
          jurisdiction)  relating  to the  Wells,  in each case  subject  to all
          segregation  agreements  which may now or hereafter be recorded in the
          applicable real property records,  provided,  however,  that the Trust
          Estate  shall not  include  any  interest  whatsoever,  even under the
          Leases, in new  communitization or pooling agreements which may now or
          hereafter  be  recorded  relating  to oil and gas wells other than the
          Wells; and

     (d)  all intangible  personal  property,  now owned or hereafter  acquired,
          such as chattel paper,  instruments,  documents,  general intangibles,
          accounts, accounts receivable, contract rights and other rights to the
          payment of moneys in  connection  with,  or relating to, the Wells and
          the production and  transportation of oil and gas therefrom,  together
          with all  operating  agreements,  drilling  agreements,  gas  purchase
          contracts,  oil purchase contracts,  standing purchase orders for oil,
          and other  agreements  relating  to the Wells and the  production  and
          transportation of oil and gas therefrom; and

     (e)  all  tangible  personal  property,  now owned or  hereafter  acquired,
          including without limitation inventory,  materials,  supplies,  tanks,
          boilers,  compressors,  tubing, casing, rods, line pipe,  connections,
          pumping  outfits,   derricks,  houses,  jacks,  tubing,  cable  lines,
          materials,  machinery,  equipment,  and  any and  all  other  property
          (including  fixtures and improvements) and appurtenances,  but only to
          the extent used in connection  with the Wells and the  production  and
          transportation  of  oil  and  gas  therefrom,  and  any  replacements,
          attachments  or  accessories  now  or  hereafter  attached,  added  or
          affixed; and

         Trustor  hereby  expressly  confirms  its  intention  to include in the
foregoing  definition of Trust Estate all of the real and personal  property now
owned by it which is required  to produce and operate its  interest in the Wells
and to receive its share of production and  production  proceeds from the Wells,
while  Beneficiary   confirms  its  intention  to  exclude  from  the  foregoing
definition of Trust Estate all of Trustor's real and personal  property required
to produce and operate Trustor's interest in all oil and gas wells, now existing

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or hereafter  drilled,  other than the Wells and to exclude  Trustor's  share of
production  and  production  proceeds from such other wells,  even if such other
wells are located on lands described in Exhibit 1.

         Without  in any  manner  limiting  the  generality  of any of the other
provisions hereof,  this instrument is a deed of trust of both real and personal
property,  a security agreement,  a financing  statement and an assignment,  and
also covers  proceeds and  fixtures.  This Deed of Trust shall be effective as a
financing  statement  filed as covering  minerals or the like (including oil and
gas) and accounts  subject to Subsection  (4) of ss.  9a-301 of the Code,  which
minerals or the like (including oil and gas) or accounts will be financed at the
wellhead located on the Trust Estate.

         TO HAVE AND TO HOLD the Trust Estate unto Trustee and its successors in
the trust forever.

         IN TRUST  NEVERTHELESS to secure  Trustor's  payment and performance of
the Guarantee Obligations,  including, without limitation, Trustor's guaranty of
the full  payment  by Gasco  of  Gasco's  aggregate  principal  indebtedness  of
$2,500,000 under three Debentures, each of which matures on October 15, 2008.

         As further  security  for  Trustor's  payment  and  performance  of the
Guarantee Obligations, and for the same consideration hereinabove set forth, and
cumulative  of any and all other rights and remedies  herein  provided,  Trustor
warrants,  grants, bargains,  conveys, sells, transfers and assigns unto Trustee
for the benefit of the  Beneficiary  all of  Trustor's  interest in the proceeds
(less severance,  production,  ad valorem and windfall profits taxes) of oil and
gas and other minerals  produced  through the wellbores of the Wells,  including
without limitation all right, title and interest of Trustor in, to and under any
contracts for the sale of minerals  produced  from and after the effective  date
hereof at 7:00 a.m.  local time from the Trust  Estate.  Upon actual  receipt of
written notice of the occurrence of an Event of Default, as that term is defined
in Section 5 of the Subsidiary Guaranty, purchasers of oil and gas produced from
the Wells are irrevocably authorized and directed to pay directly to Trustee for
the account of  Beneficiary  the interest of Trustor in the proceeds of the sale
of the oil and gas produced from the Wells,  and to continue such payments until
they have been furnished with release hereof, executed by Trustee in writing. No
production  purchaser  shall be  required  to see to the proper  application  by
Beneficiary  of such proceeds so paid to it, and Trustor  covenants (i) to cause
all production  purchasers to pay promptly to Trustee the interest of Trustor in
the proceeds of the sale  thereof and (ii) to execute and deliver such  transfer
orders or other documents as may be necessary or proper to effect such payments.
All proceeds of oil and gas production from the Wells shall, however, be paid by
each production  purchaser directly to Trustor until such time as the production
purchaser  has  actually  received  written  notice  from  the  Trustee  of  the
occurrence of an Event of Default.

         Beneficiary  and Trustee shall never be under any obligation to enforce
the collection of such proceeds so assigned hereunder,  nor shall either of them
ever be liable for failure to exercise diligence in the collection thereof,  but
they shall only be accountable for such sums as they shall actually receive.

     1.  Representations And Warranties.  Trustor hereby confirms and makes anew
to Beneficiary all of the  representations  and warranties that are set forth in
Section 11 of the Subsidiary  Guaranty,  intending that this confirmation  shall
have the same force and effect as if each of the  representations and warranties
contained  in Section 11 of the  Subsidiary  Guaranty  were set forth in full in
this Deed of Trust.

     2. Covenants.  Trustor hereby confirms and makes anew to Beneficiary all of
the  covenants  that  are set  forth  in  Sections  12 and 13 of the  Subsidiary
Guaranty,  intending that this confirmation shall have the same force and effect
as if each of the  covenants  contained in Sections 12 and 13 of the  Subsidiary
Guaranty were set forth in full in this Deed of Trust, and, in addition,  agrees
that:

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          (a)  Trustor  will  promptly  pay or cause  to be paid all  royalties,
     rentals,  and other obligations  accruing under, and perform or cause to be
     performed  every act or thing required by the Leases;  will keep the Leases
     in full force and effect; will not amend or modify, or permit the amendment
     or modification  of, the Leases,  if such amendment or  modification  would
     reduce any amounts payable to, or otherwise materially adversely affect any
     benefit  accruing to, or other  interest  of,  Trustor;  and will  promptly
     notify  Beneficiary  of any event,  occurrence or  transaction  which would
     result in the termination of any Lease.

          (b) Trustor will pay or cause to be paid when due all taxes,  charges,
     claims  and  assessments  which may be  assessed  or  levied by any  public
     authority  against or upon the Trust Estate,  and also any taxes,  charges,
     claims  (including  claims of mechanics and materialmen) or assessments for
     which  Trustor  may become  liable or which may by law become a lien on the
     Trust Estate  either  having  priority over the lien of this Deed of Trust;
     provided,  however,  that  Trustor  need  not pay any tax,  charge,  claim,
     assessment  or  liability  so long  as its  validity  or  amount  shall  be
     contested in good faith by appropriate proceedings duly prosecuted.

          (c) Except with the specific  written consent of Beneficiary,  Trustor
     will not sell, lease, transfer, mortgage, pledge, charge, grant a lien upon
     or security interest in, or otherwise dispose of or encumber, or permit any
     encumbrance to attach to, the Trust Estate or any part thereof,  other than
     Permitted Liens (as such term is defined in the Loan Agreement).

          (d) Trustor  represents and warrants that it has obtained,  and agrees
     that it will  obtain,  or shall  cause  to be  obtained,  all  permissions,
     licenses,  easements,  rights of way,  and all  local,  state  and  federal
     governmental  approvals,  authorizations,  consents and permits, as well as
     all  permissions  necessary to the ownership,  development and operation of
     the Trust  Estate,  all of which are,  and shall be kept in, full force and
     effect,  consistent  with the Drilling  Program (as such term is defined in
     the Loan Agreement).

          (e) Trustor will continuously  operate,  or cause to be operated,  the
     Trust Estate in good and  workmanlike  manner and in accordance  with sound
     and  approved  practices,   consistent  with  the  Drilling  Program;  will
     maintain,  or cause to be  maintained,  the Trust  Estate  in good  repair,
     working  order  and  condition;  will not  commit  or  permit  any waste or
     impairment of the Trust Estate; will not permit the Trust Estate to be used
     in  violation  of any statute or  regulation;  will  otherwise  protect and
     preserve,  or cause to be protected and  preserved,  the Trust Estate;  and
     will permit Beneficiary and its  representatives  and agents, or cause them
     to be permitted,  to inspect the Trust Estate during normal business hours.
     If and  when  any of the  Wells  ceases  producing  oil and  gas in  paying
     quantities  or is of no  further  use,  or  Trustor  or any  other  person,
     corporation  or other  entity is required to do so under any  agreement  or
     law,  Trustor  will plug and abandon or cause to be plugged and  abandoned,
     such  Well in  accordance  with  the  local,  state  and  federal  laws and
     regulations then in force.

          (f) Trustor shall,  whenever and so often as requested by Beneficiary,
     promptly execute and deliver or cause to be executed and delivered all such
     other and further instruments,  documents or assurances (including all such
     as may  from  time to time be  required  by  pipeline  companies  or  other
     purchasing  parties)  and  shall  promptly  do or cause to be done all such
     other and  further  things,  as may by  Beneficiary  be  deemed  necessary,
     expedient or  advisable in order to better and more fully  preserve or vest
     in it all rights,  interest,  powers,  benefits,  privileges and advantages
     conferred or intended to be conferred by this Deed of Trust or by any other
     instrument delivered simultaneously herewith or pursuant hereto.

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     3. Rights And Remedies  Upon  Default.  Upon the  occurrence of an Event of
Default,  as that  term is  defined  in  Section 5 of the  Subsidiary  Guaranty,
Trustee  may  by  written  notice  to  Trustor  declare  all  of  the  Guarantee
Obligations  immediately  due,  whereupon all such Guarantee  Obligations  shall
become immediately due. In addition, Beneficiary may exercise any one or more of
the following remedies:

          (a)  Without  notice  to or  demand on  Trustor  or any other  person,
     Beneficiary  may (i) forthwith  enter into and upon any or all of the Trust
     Estate,  either in person or by agent, and take possession of any or all of
     the Trust Estate without  process of law,  without  liability to Trustor or
     other owner or owners of the Trust Estate;  manage the Trust Estate, or any
     part thereof; collect and receive the rents, issues and profits thereof and
     apply the same to the  Guarantee  Obligations,  after first  deducting  the
     costs and expenses  incurred in managing the Trust  Estate;  or (ii) have a
     receiver  appointed  by any court  having  jurisdiction  to take charge and
     manage the Trust Estate.  Nothing herein  contained shall be construed as a
     substitute  for, or in derogation  of, the right to foreclose  this Deed of
     Trust or as imposing any duty or obligation upon Beneficiary to take charge
     of the Trust Estate, or to collect said rents,  issues or profit or to have
     a receiver appointed for such purposes.

          (b) If the power of sale is invoked, Trustee, upon the written request
     of  Beneficiary,  shall  execute a written  notice of the  occurrence of an
     Event of Default and of the  election to cause the Trust  Estate to be sold
     and shall  record such  notice in each county in which the Trust  Estate is
     located.  Beneficiary  or Trustee  shall mail  copies of such notice in the
     manner  prescribed  by  applicable  law to Trustor and to the other persons
     prescribed  by  applicable  law.  In the  event  Trustor  does not cure the
     default within the time  prescribed by applicable  law,  Trustee shall give
     public  notice of the sale to the persons and in the manner  prescribed  by
     applicable law. After the time required by applicable law, Trustee, without
     demand on  Trustor,  shall sell the Trust  Estate at public  auction to the
     highest bidder at the time and place and under the terms  designated in the
     notice  of  sale  in one or  more  parcels  and in the  order  the  Trustee
     determines,  but  subject to any  statutory  right the  Trustor may have to
     direct  the  order in which  the  Trust  Estate  is  sold.  Trustee  may in
     accordance  with  applicable law postpone sale of all or any portion of the
     Trust Estate by public announcement at the time and place of the previously
     scheduled  sale.  Beneficiary or its designee may purchase the Trust Estate
     at any such  sale.  Out of the  proceeds  of such sale  Trustee  shall pay,
     first,  the costs and expenses of executing  this trust,  including but not
     limited to reasonable Trustee's and attorneys' fees; second, to Beneficiary
     in the full amount  necessary to satisfy the  Guarantee  Obligations;  and,
     third, the balance, if any, to Trustor, its successors or assigns.

          (c) To the extent  that  Chapter 9a of the Code is  applicable  to the
     Trust  Estate,  Trustee  shall have the right to and may,  at the option of
     Beneficiary,  exercise  any or all of the rights and  remedies of a secured
     party  under the Code,  in  addition  to such  rights and  remedies  as are
     provided herein or in any of the Loan  Documents.  To assist Trustee in the
     exercise of such rights and remedies  Trustor shall,  at Trustee's  request
     and at Trustor's expense, assemble and prepare for removal at and to places
     to be  designated  by  Beneficiary  such  items of the Trust  Estate as are
     selected by Trustee.  Any requirement of law as to reasonable  notification
     of the time and place of any public  sale,  or of the time after  which any
     private  sale or other  intended  disposition  of the Trust Estate is to be
     made,  shall be met by giving  Trustor seven days' prior written  notice of
     the time and place of any such public sale or the time after which any such
     private sale or any other intended disposition is to be made.

          (d) The  provisions  hereof  with  respect to  foreclosure  under this
     instrument as a deed of trust are intended to comply with the provisions of
     the statutes of Utah relating to such  foreclosure,  as in force and effect
     on the  date  hereof,  and in the  event  the  statutory  requirements  for
     foreclosure  shall be modified by future  amendment,  the  requirements for
     foreclosure,  including  notice,  shall be  deemed to be  modified  in this
     instrument in conformity with such amendment.

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          (e) In the event of suit being brought to foreclose this Deed of Trust
     by reason of any default,  all costs of such suit  allowable by  applicable
     law shall be  included in any  judgment or decree as part of the  Guarantee
     Obligations  secured by this Deed of Trust,  and there  shall  likewise  be
     included in any such judgment or decree,  all sums paid out by  Beneficiary
     for stenographic fees and for outlays for documentary  evidence,  including
     cost of bringing  down to date all  abstracts of title or policies of title
     insurance  relating to the property covered hereby, and for the examination
     of and  rendering  of an  opinion  of  title  for the  purpose  of any such
     foreclosure.

          (f)  Beneficiary may have or take other security or guarantees for the
     Guarantee  Obligations  or for any part of the same,  although  neither the
     giving of this Deed of Trust nor the acceptance of any additional  security
     or guarantee shall operate to prevent or hinder  Beneficiary from resorting
     first to such other  security or first to the  security  herein  given,  or
     first from time to time to either or both; and Beneficiary may from time to
     time as it sees fit, in its sole 'and  uncontrolled  discretion,  resort to
     all or any part of the Trust Estate covered  hereby,  without  resorting to
     all or any other  security given to secure the Guarantee  Obligations;  and
     that such action on its part shall not in anywise be considered as a waiver
     of any of the benefits or rights conferred by the Deed of Trust.

          (g) The remedies  herein  provided are  cumulative  and that no remedy
     herein  conferred  is  intended  to be  exclusive  of any  other  remedy or
     remedies.  Beneficiary  may, in addition to the remedies  herein  provided,
     avail itself of such other remedy or remedies as may now or hereafter exist
     at law or in equity.  No delay or  omission  by Trustee or  Beneficiary  in
     exercising  or  enforcing  the  rights  and powers  herein  granted  and no
     exercise or enforcement  thereof shall be considered as a waiver thereof or
     be held to exhaust such rights and powers.

          (h) Any and all options or rights of election  herein provided for the
     benefit of Beneficiary shall be continuing;  and it is expressly understood
     and agreed that  failure to exercise  any of such options upon a particular
     default or breach or upon any  subsequent  default  or breach  shall not be
     construed  as waiving the right of such option or election  for any default
     or breach occurring thereafter.

     4.  Request for  Notices.  Trustor  requests  that copies of the notices of
default and sale be sent to the address specified for it in Section 9, below.

     5. Foreclosure  Commenced But Not Completed.  In the event that foreclosure
proceedings  are  instituted  hereunder  but are not  completed,  Trustor  shall
reimburse Trustee and Beneficiary for all costs and expenses incurred by them in
commencing such proceedings.

     6. Acts of Trustee.  Trustee may act in the  execution  of this trust,  and
Trustee is  authorized  to act by agent or  attorney  in the  execution  of this
trust.  It shall not be necessary for the Trustee to be present in person at any
foreclosure sale under this Deed of Trust.

     7.  Substitution Of Trustee.  Beneficiary may, at any time and from time to
time  hereafter,  without  notice,  appoint and  substitute  another  trustee or
trustees,  corporations  or  persons,  in place of the Trustee  herein  named to

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execute the trust herein created. Upon such appointment,  either with or without
a  conveyance  to said  substituted  trustee or trustees  by the Trustee  herein
named,  or by any  substituted  trustee in case the said right of appointment is
exercised  more than once, the new and  substituted  trustee or trustees in each
instance shall be vested with all the rights, titles, interests,  powers, duties
and trusts in the premises  which are vested in and  conferred  upon the Trustee
herein  named;  and  such  new and  substituted  trustee  or  trustees  shall be
considered  the  successors  and assigns of the Trustee who is named herein with
the meaning of this instrument, and substituted in his place and stead.

     8. Non-Waiver.  No failure of Beneficiary or Trustee to exercise any option
herein  contained  shall  constitute a waiver of any right or  privilege  herein
given or granted to  Beneficiary  or  Trustee,  and a waiver by  Beneficiary  or
Trustee of the right to  exercise  any option as to any breach or default  shall
not  constitute a waiver of the right to exercise the same option,  or any other
option herein contained, as to another or any continuing or subsequent breach of
default.

     9. Notices. Notices required by applicable law shall be given in accordance
with   applicable   law.  All  other  notices,   requests,   demands  and  other
communications  required or permitted to be given hereunder shall be deemed duly
given if in  writing  and  delivered  personally  or  mailed,  postage  prepaid,
registered or certified,  at the following addresses or at such other address as
a party may designate in the manner provided in this paragraph:

          If to Borrower:      Pannonian Energy Inc.
                               14 Inverness Drive East
                               Building H, Suite 236
                               Englewood, CO 80112
                               Attn:    Mark Erickson
                               Telephone:  (303) 483-0044
                               Telecopier:

          with a copy to:      Vinson & Elkins LLP
                               2300 First City Tower
                               1001 Fannin
                               Houston, TX 77002
                               Attn:    Michael P. Finch, Esq.
                               Telephone:  (713) 758-2128
                               Telecopier:  (713) 615-5282

          If to Beneficiary:   Renaissance Capital Growth & Income Fund III,Inc.
                               c/o Renaissance Capital Group, Inc.
                               8080 North Central Expressway, Suite 210-LB59
                               Dallas, TX 75206
                               Attn:    Russell Cleveland
                                        President and CEO
                               Telephone:  (214) 891-8294
                               Telecopier:  (214) 891-8291

                               Renaissance US Growth & Income Trust PLC
                               c/o Renaissance Capital Group, Inc.
                               8080 North Central Expressway, Suite 210-LB59
                               Dallas, TX 75206
                               Attn:    Russell Cleveland
                                        President and CEO
                               Telephone:  (214) 891-8294
                               Telecopier:  (214) 891-8291

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<PAGE>

                               BFSUS Special Opportunities Trust PLC
                               c/o Renaissance Capital Group, Inc.
                               8080 North Central Expressway, Suite 210-LB59
                               Dallas, TX 75206
                               Attn:    Russell Cleveland
                                        President and CEO
                               Telephone:  (214) 891-8294
                               Telecopier:  (214) 891-8291

          with a copy to:      Jackson Walker L.L.P.
                               901 Main Street, Suite 6000
                               Dallas, Texas 75202
                               Attn:    Jeffrey M. Sone
                               Telephone:  (214) 953-6107
                               Telecopier:  (214) 953-5822

          If to Trustee:       Dan W. Egan
                               Ballard Spahr Andrews & Ingersoll, LLP
                               201 South Main Street, Suite 600
                               Salt Lake City, Utah 84111-2221
                               Telephone:  (801) 531-3000
                               Telecopier:  (801) 531-3001

     10. Governing Law. This Deed of Trust shall be governed by Utah law.

     11. Successors and Assigns. All covenants, agreements,  representations and
warranties  contained  herein shall bind, and the benefits and advantages  shall
inure to, the respective successors and assigns of the parties hereto.

         IN WITNESS  WHEREOF,  Trustor  has caused this Deed of Trust to be duly
executed and delivered as of the date first above written.

                                   PANNONIAN ENERGY INC.

                                   By:
                                      -----------------------------
                                        Mark A. Erickson, President

                                       8
<PAGE>

STATE OF COLORADO )
                                    ) ss.
COUNTY OF ARAPAHOE         )

     The  foregoing  instrument  was  acknowledged  before me this  _____ day of
October,  2003, by Mark A.  Erickson,  as President of Pannonian  Energy Inc., a
Delaware corporation.

         Witness my hand and official seal.

         My commission expires:

                                  Notary Public

                                       9
<PAGE>

                                    Exhibit 1

               Deed of Trust and Security Agreement (Oil and Gas)

         The five following wells, together with the leases set forth below, but
only insofar as the leases cover the specific  quarter-quarter section described
below and only  insofar as they may be necessary to produce and operate the five
following wells, and not other wells:

         Well Name:                 Lytham Federal No. 22-22-9-19
         Lessor:                    United States of America
         Lessee:                    Pannonian Energy, Inc.
         Serial No.:                UTU - 78433
         Effective Date:            July 1, 1999
         Recorded:                  January 9, 2001, Book 748, page 495
         Description:               Township 9 South, Range 19 East
                                    -------------------------------
                                    Section 22:  SE/4 NW/4
                                    Uintah County, Utah

         Well Name:                 Federal No. 23-21-9-19
         Lessor:                    United States of America
         Lessee:                    Pannonian Energy, Inc.
         Serial No.:                UTU - 78433
         Effective Date:            July 1, 1999
         Recorded:                  January 9, 2001, Book 748, page 495
         Description:               Township 9 South, Range 19 East
                                    -------------------------------
                                    Section 21:  NE/4 SW/4
                                    Uintah County, Utah

         Well Name:                 Federal No. 32-31-9-19
         Lessor:                    United States of America
         Lessee:                    Retamco Operating, Inc.
         Serial No.:                UTU - 76489
         Effective Date:            July 1, 1997
         Recorded:                  January 9, 2001, Book 748, page 459
         Description:               Township 9 South, Range 19 East
                                    -------------------------------
                                    Section 31:  SW/4 NE/4
                                    Uintah County, Utah

                                       10
<PAGE>

         Well Name:                 Federal No. 23-29-9-19
         Lessor:                    United States of America
         Lessee:                    Medallion Exploration
         Serial No.:                UTU - 76262
         Effective Date:            April 1, 1997
         Recorded:                  December 21, 2001, Book 747, page 245
         Description:               Township 9 South, Range 19 East
                                    -------------------------------
                                    Section 29:  NE/4 SW/4
                                    Uintah County, Utah

         Well Name:                 Federal No. 42-29-9-19
         Lessor:                    United States of America
         Lessee:                    Medallion Exploration
         Serial No.:                UTU - 76262
         Effective Date:            April 1, 1997
         Recorded:                  December 21, 2001, Book 747, page 245
         Description:               Township 9 South, Range 19 East
                                    -------------------------------
                                    Section 29:  SE/4 NE/4
                                    Uintah County, Utah

              This is intended to be a wellbore deed of trust only.

                                       11
<PAGE>SUBSIDIARY GUARANTY AGREEMENT

         THIS SUBSIDIARY GUARANTY AGREEMENT (this "Subsidiary Guaranty"),  dated
as of  October  15,  2003,  is  made  by  Pannonian  Energy,  Inc.,  a  Delaware
corporation (the  "Guarantor") to the Lenders (as set forth in Exhibit A hereto)
under the  Debentures  (as  defined  herein)  (collectively  referred  to as the
"Lender")  and to Renn Capital  Group,  Inc.,  as the Agent for the Lenders (the
"Agent"). Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement (as hereinafter defined)

                              W I T N E S S E T H:

         WHEREAS, Gasco Energy, Inc., a Nevada corporation (the "Company"),  and
the Lender have entered into that certain Convertible Loan Agreement dated as of
October  15,  2003 (as from  time to time  amended,  supplemented  or  otherwise
modified, the "Loan Agreement"); and

         WHEREAS, the Guarantor is a wholly-owned  subsidiary of the Company and
will benefit from the  availability of credit to the Company under the terms and
conditions of the Loan Agreement and the Debentures; and

         WHEREAS,  contemporaneously  with its  execution  and  delivery of this
Subsidiary  Guaranty,  the  Guarantor has executed and delivered a Deed of Trust
and Security Agreement securing its performance under this Subsidiary Guaranty;

         NOW,  THEREFORE,  to induce the Lender to execute  and deliver the Loan
Agreement  and  perform  their  obligations  thereunder,  and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto hereby agree as follows:

1. GUARANTY. The Guarantor hereby unconditionally,  absolutely,  continually and
irrevocably  guarantees to the Lender the payment and performance in full of the
Liabilities  (as defined below).  For all purposes of this Subsidiary  Guaranty,
"Liabilities" means:

                  (a) the Company's prompt payment in full, when due or declared
                  due and at all such times,  of all  Obligations  and all other
                  amounts,  heretofore,  now or at any time or  times  hereafter
                  owing, arising, due or payable,  whether direct or contingent,
                  joint,  several or  independent  of the Company to the Lender,
                  including without limitation principal,  interest,  premium or
                  fee  (including,  but not  limited  to,  attorneys'  fees  and
                  expenses); and

                  (b) the  Company's  prompt,  full  and  faithful  performance,
                  observance   and  discharge  of  each  and  every   agreement,
                  undertaking,  covenant and provision to be performed, observed
                  or discharged by the Company under any  instrument,  agreement
                  or other document with or in favor of the Lender.

         The  Guarantor's  obligations  to  the  Lender  under  this  Subsidiary
Guaranty   are   hereinafter   collectively   referred  to  as  the   "Guarantee
Obligations."  The Guarantor agrees that it is directly and primarily liable for
the Guarantee  Obligations  and that there are no  conditions  whatsoever to the
effectiveness  of this Subsidiary  Guaranty or to its obligations to perform the
Guarantee Obligations.

                                       1
<PAGE>

2.  PAYMENT.  If the  Company  shall  default in payment or  performance  of any
Liabilities,  whether  principal,  interest,  premium,  fee (including,  but not
limited to,  attorneys' fees and expenses),  or otherwise,  when and as the same
shall become due,  whether  according to the terms of the  Debentures,  the Loan
Agreement  or the Loan  Documents by  acceleration,  or  otherwise,  or upon the
occurrence  of any other  Event of Default  (as  defined in the Loan  Agreement)
under the Loan  Agreement or the  Debentures  that has not been cured or waived,
then the  Guarantor,  upon  demand  thereof by the Lender or its  successors  or
assigns,  will, within three (3) business days of such demand,  fully pay to the
Lender an amount equal to all Guarantor's Obligations then due and owing.

3.  UNCONDITIONAL  OBLIGATIONS.  This  is a  guaranty  of  payment  and  not  of
collection.  The Guarantor's Obligations under this Subsidiary Guaranty shall be
absolute  and   unconditional   irrespective   of  the  validity,   legality  or
enforceability of the Debentures,  and shall not be affected by any action taken
under the Debentures or any other  agreement  between the Lender and the Company
or any other person, in the exercise of any right or power therein conferred, or
by any failure or omission to enforce  any right  conferred  thereby,  or by any
waiver of any covenant or condition therein provided,  or by any acceleration of
the maturity of any of the  Liabilities,  or any transfer or  disposition of any
assets of the Company or by any extension or renewal of the Debentures, in whole
or in part, or by any modification,  alteration,  amendment or addition of or to
the Debentures, or any other agreement between the Lender and the Company or any
other person, or by any other circumstance whatsoever (with or without notice to
or knowledge of the Guarantor) which may or might in any manner or to any extent
vary  the  risks of the  Guarantor,  or might  otherwise  constitute  a legal or
equitable discharge of a surety or guarantor; it being the purpose and intent of
the parties hereto that this Subsidiary Guaranty and the Guarantor's Obligations
hereunder shall be absolute and  unconditional  under any and all  circumstances
and  shall  not be  discharged  except  by  payment  as  herein  provided.  This
Subsidiary  Guaranty  shall  continue  in full  force and  effect and Lender may
continue  to  act  in  reliance  thereon   notwithstanding  the  termination  or
revocation  of  any  other  guaranty  of  Liability,   the  death,   disability,
incompetence or incapacity of the Guarantor, and shall be binding upon Guarantor
and Guarantor's  estate and the personal  representatives,  heirs and successors
and assigns of Guarantor, who shall, nevertheless, remain liable with respect to
Obligations and any renewals or extensions thereof or liabilities arising out of
same, and the Lender shall have all the rights herein provided for as if no such
event has occurred.

4.  CURRENCY AND FUNDS OF PAYMENT.  The  Guarantor  hereby  guarantees  that the
Guarantor's  Obligations will be paid in lawful currency of the United States of
America and in immediately available funds, regardless of any law, regulation or
decree  now or  hereafter  in  effect  that  might  in  any  manner  affect  the
Liabilities,  or the rights of the Lender  with  respect  thereto as against the
Company,  or cause or permit to be invoked any alteration in the time, amount or
manner of payment by the Company of any or all of the Company's Liabilities.

                                       2
<PAGE>

5. EVENTS OF DEFAULT. In the event that

     (a)  the  Guarantor  shall  file  a  petition  to  take  advantage  of  any
          insolvency statute,

     (b)  the Guarantor  shall  commence or suffer to exist a proceeding for the
          appointment of a receiver,  trustee,  liquidator or conservator of all
          of or substantially all of its property;

     (c)  the Guarantor  shall file a petition or answer seeking  reorganization
          or arrangement or similar relief under the Federal  bankruptcy laws or
          any other applicable law or statute of the United States of America or
          any state or similar law of any other country;

     (d)  a court of competent  jurisdiction  shall enter an order,  judgment or
          decree  appointing  a  custodian,  receiver,  trustee,  liquidator  or
          conservator  of  the  Guarantor  of all  or  substantially  all of its
          properties,  or approve a petition filed against the Guarantor seeking
          reorganization  or  arrangement  or similar  relief  under the Federal
          bankruptcy  laws or any other  applicable law or statute of the United
          States of America or any state or similar law of any other country, or
          if,  under the  provisions  of any other law for the  relief or aid of
          debtors,  a court of competent  jurisdiction  shall assume  custody or
          control of the Guarantor of all or substantially all of its properties
          and such  order,  judgment,  decree,  approval or  assumption  remains
          unstayed or undismissed for a period of thirty (30) days;

     (e)  there is commenced  against the Guarantor  any  proceeding or petition
          seeking  reorganization,  arrangement  or  similar  relief  under  the
          Federal  bankruptcy laws or any other applicable law or statute of the
          United  States of America or any state,  which  proceeding or petition
          remains unstayed or undismissed for a period of thirty (30) days;

     (f)  the  Company or the  Guarantor  shall fail to  perform  any  agreement
          herein or contained in the Loan  Documents,  including but not limited
          to the Mortgages,  and such failure  remains uncured or unwaived for a
          period of thirty (30) days;

     (g)  a default  occurs in the punctual  payment of any sum payable upon any
          of the Guarantee Obligations or the Liabilities;

     (h)  Except  as  specifically  permitted  in  the  Mortgages  or  the  Loan
          Agreement,  the  Guarantor  conveys any  interest or grants a security
          interest in any Collateral;

     (i)  entry of a  judgment  or  issuance  of a warrant of  attachment  or an
          injunction against, or against any of the property of the Guarantor;

     (j)  there shall occur an Event of Default under the  Debentures,  the Loan
          Agreement, or any Loan Document;

     (k)  any default shall occur in the payment of amounts due hereunder; or

     (l)  any other  default  shall occur  hereunder  which  remains  uncured or
          unwaived  for a period of thirty (30) days (each of the  foregoing  an
          "Event of  Default"  hereunder);  then at the  Lender's  election  and
          without  notice thereof or demand  therefor,  so long as such Event of
          Default  shall  be  continuing,   the  Guarantee   Obligations   shall
          immediately become due and payable.

                                       3
<PAGE>

6. SUITS. The Guarantor from time to time shall pay to Lender,  within three (3)
business  days of  demand  by the  Lender  therefor,  at the  Lender's  place of
business set forth in the Debentures,  the Guarantee  Obligations as they become
or are declared  due,  and in the event such payment is not so made,  the Lender
may proceed to suit against the Guarantor. At the Lender's election, one or more
and  successive or concurrent  suits may be brought hereon by the Lender against
the Guarantor,  whether or not suit has been commenced against the Company,  and
whether  or not the  Lender  has taken or  failed  to take any  other  action to
collect all or any portion of the Liabilities.

7.  SET-OFF AND WAIVER.  The  Guarantor  waives any right to assert  against the
Lender as a defense, counterclaim, set-off or cross claim, any defense (legal or
equitable) or other claim which such  Guarantor may now or at any time hereafter
have  against  the Company or the Lender.  If at any time  hereafter  the Lender
employs  counsel for advice or other  representation  to enforce  the  Guarantee
Obligations that arise out of an Event of Default, then, in any of the foregoing
events, all of the attorneys' fees and disbursements  arising from such services
and all expenses,  costs and charges in any way or respect arising in connection
therewith or relating  thereto shall be paid by the Guarantor to the Lender,  on
demand.

8. WAIVER; SUBROGATION.

          (a) The Guarantor  hereby  waives  notice of the  following  events or
     occurrences:

               (i) the Lender's acceptance of this Subsidiary Guaranty;

               (ii) the Lender  heretofore,  now or from time to time  hereafter
          loaning monies or giving or extending  credit to or for the benefit of
          the Company,  whether  pursuant to the  Debentures or any  amendments,
          modifications,  or supplements  thereto, or replacements or extensions
          thereof;

               (iii) the Lender or the  Company  heretofore,  now or at any time
          hereafter,  obtaining, amending,  substituting for, releasing, waiving
          or modifying the Debentures, the Loan Agreement or the Loan Documents;

               (iv)  presentment,   demand,  notices  of  default,  non-payment,
          partial  payment,  notice of dishonor,  suit,  protest or taking other
          action by the Lender;

               (v) the Lender heretofore,  now or at any time hereafter granting
          to the Company (or any other party  liable to the Lender on account of
          the  Liabilities)  any  indulgence or extensions of time of payment of
          the Liabilities;

                                       4
<PAGE>

               (vi)  any  agreement  among  any of  holders  of  the  Debentures
          relating to this Subsidiary Guarantee or any other matter; and

               (vi)  the  Lender  heretofore,  now  or  at  any  time  hereafter
          accepting from the Company or any other person, any partial payment or
          payments on account of the Liabilities or any collateral  securing the
          payment thereof or the Lender settling,  subordinating,  compromising,
          discharging or releasing the same.

     The  Guarantor  agrees that the Lender may  heretofore,  now or at any time
     hereafter do any or all of the  foregoing  in such manner,  upon such terms
     and at such times as the Lender, in its sole and absolute discretion, deems
     advisable, without in any way or respect impairing,  affecting, reducing or
     releasing such Guarantor from the Guarantee Obligations,  and the Guarantor
     hereby consents to each and all of the foregoing events or occurrences.

          (b) The Guarantor  hereby agrees that payment or  performance  by such
     Guarantor of the Guarantee  Obligations under this Subsidiary  Guaranty may
     be  enforced  by the Lender  upon  demand by the  Lender to such  Guarantor
     without the Lender being  required,  the  Guarantor  expressly  waiving any
     right it may have to require the Lender, to prosecute collection or seek to
     enforce or resort to any remedies  against the Company,  IT BEING EXPRESSLY
     UNDERSTOOD,  ACKNOWLEDGED  AND AGREED TO BY THE GUARANTOR THAT DEMAND UNDER
     THIS  SUBSIDIARY  GUARANTY  MAY BE MADE BY THE LENDER,  AND THE  PROVISIONS
     HEREOF ENFORCED BY THE LENDER,  EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF
     DEFAULT  OCCURS  AND IS  CONTINUING  UNDER THE  DEBENTURES.  The  Guarantee
     Obligations shall in no way be impaired,  affected, reduced, or released by
     reason of the  Lender's  failure or delay to do, take or enforce any of the
     acts,  actions or things described in this Subsidiary  Guaranty  including,
     without limiting the generality of the foregoing,  those acts,  actions and
     things described in this Section 8.

          (c) The  Guarantor  further  agrees  with  respect to this  Subsidiary
     Guaranty  that  such  Guarantor   shall  have  no  right  of   subrogation,
     reimbursement  or indemnity until such time as all of the Liabilities  have
     been fully, finally and indefeasibly paid in full.

9. EFFECTIVENESS; ENFORCEABILITY. This Subsidiary Guaranty shall be effective as
of the date  hereof,  and shall  continue  in full  force and  effect  until the
Liabilities  have  been  fully,  finally  and  indefeasibly  paid in full.  This
Subsidiary  Guaranty  shall be  binding  upon and  inure to the  benefit  of the
Guarantor  and  the  Lender  and  their   respective   successors  and  assigns.
Notwithstanding  the  foregoing,  Guarantor  may not,  without the prior written
consent  of the  Lender,  assign  any  rights,  powers,  duties  or  obligations
hereunder.  Any claim or claims that the Lender may at any time  hereafter  have
against the  Guarantor  under this  Subsidiary  Guaranty  may be asserted by the
Lender by written  notice  directed to the  Guarantor  at the address  specified
herein.

                                       5
<PAGE>

10. AGENT FOR LENDER.  Guarantor  recognizes and agrees that pursuant to Section
11.03 of the Loan Agreement,  Lender has designated and appointed Agent as agent
for Lender under the Loan Agreement and under this Subsidiary Guaranty with full
power to act for and on behalf of Lender,  and each of them, and to exercise all
of the rights and privileges of Lender,  and each of them, under this Subsidiary
Guaranty  and under each of the Loan  Agreements.  Guarantor  has  reviewed  the
provisions of the Loan Agreement and each of the Loan Documents,  including, but
not limited to the  provisions of Section 11.03 of the Loan Agreement and agrees
that any notice from or agreement of Agent taken in the capacity as the agent of
Lender,  shall be binding upon and constitute  the act of the Lender,  or any of
them and that in acting as agent of  Lender,  Agent  has not  assumed  nor shall
there be implied any obligation  toward or  relationship of agency or trust with
Guarantor or the Company or any of their  respective  affiliates.  In exercising
any rights or engaging in any transaction  contemplated  hereunder,  Agent shall
not be obligated to provide  Guarantor  with evidence of its authority to act as
the agent of Lender,  or any of them,  unless Lender,  acting on its own behalf,
shall have previously provided Guarantor with evidence that acting in accordance
with its rights,  Lender,  or any of them,  have revoked Agent's agency capacity
with regard to its affairs.

11.  REPRESENTATIONS  AND WARRANTIES.  The Guarantor  hereby makes the following
representations and warranties to the Lender:

     (a)  the Guarantor is duly authorized to execute,  deliver and perform this
          Subsidiary Guaranty;

     (b)  this  Subsidiary  Guaranty is legal,  valid,  binding and  enforceable
          against  such  Guarantor  in  accordance  with  its  terms  except  as
          enforceability    may   be   limited   by   bankruptcy,    insolvency,
          reorganization,  moratorium or similar laws affecting the  enforcement
          of creditors' rights generally and by general equitable principles;

     (c)  such   Guarantor's   execution,   delivery  and  performance  of  this
          Subsidiary  Guaranty  does not violate or  constitute  a breach of any
          agreement to which such Guarantor is a party, or any applicable laws;

     (d)  Guarantor makes each of the representations  and warranties  contained
          in Article III of the Loan Agreement as if set forth in their entirety
          herein with respect and reference to the Guarantor and this Subsidiary
          Guaranty;

     (e)  the financial  information of the Guarantor previously provided to the
          Lender is true and correct in all respects; and

     (f)  no representation or warranty made by the Guarantor in this Subsidiary
          Guaranty,  the Loan Agreement or any  Transaction  Document nor in any
          document,  written  information,   financial  statement,  certificate,
          schedule or exhibit  prepared  and  furnished  or to be  prepared  and
          furnished   by   Guarantor  in   connection   with  the   transactions
          contemplated hereby,  contains or will contain any untrue statement of
          a  material  fact,  or omits or will  omit to  state a  material  fact
          necessary to make the statements or facts contained  herein or therein
          not  misleading  in light of the  circumstances  under which they were
          furnished.

                                       6
<PAGE>

12. NEGATIVE COVENANTS. The Guarantor agrees that until the Debentures, together
with interest and all other  Obligations  of the Company or the Guarantor to the
Lender (whether under the Loan Agreement,  the Loan Documents, or otherwise) are
paid in full, the Guarantor shall not,  without the prior written consent of the
Lender:

     (a)  Create,  incur,  assume  or suffer to exist any lien upon or defect in
          title to or restriction  upon the use of any of the property or assets
          of the Guarantor of any character, whether owned at the date hereof or
          hereafter  acquired,  or hold or acquire any property or assets of any
          character  under  conditional  sales,  finance  lease or  other  title
          retention agreements, except for Permitted Liens and liens in favor of
          the Lender.

     (b)  Create,  incur, assume or suffer to exist,  contingently or otherwise,
          any indebtedness,  except for Permitted  Indebtedness and indebtedness
          to the Lender.

     (c)  Make or have any Investments not permitted by Section 6.03 of the Loan
          Agreement.

     (d)  Make any  prepayment  of  indebtedness  that is prohibited by the Loan
          Agreement.

     (e)  Enter into any agreement  which prohibits or limits the ability of the
          Guarantor to create,  incur,  assume or suffer to exist any lien, upon
          any  of its  property,  assets  or  revenues,  whether  now  owned  or
          hereafter acquired.

     (f)  Change the address of its principal  place of business  without giving
          30 days' prior written notice to the Lender.

13. AFFIRMATIVE  COVENANTS.  The Guarantor  covenants and agrees that, until the
Debentures  together with interest and all other  Liabilities of the Company and
the  Obligations  of the Guarantor to the Lender under the Loan  Agreement,  the
Debentures and the Loan Documents are otherwise paid in full:

     (a)  Comply with all statutes and governmental regulations if noncompliance
          therewith  would have a Material  Adverse  Effect on the Guarantor and
          pay all taxes,  assessments,  governmental charges,  claims for labor,
          supplies, rent and any other obligation which, if unpaid, might become
          a lien  against  any of its  properties,  except any of the  foregoing
          being  contested in good faith by appropriate  proceedings  diligently
          conducted and against which adequate reserves have been established;

     (b)  It will allow any  representative  of the Lender to visit and  inspect
          the books of account and other records and files of the Guarantor,  to
          make copies thereof and to discuss the affairs, business, finances and
          accounts of the  Company and the  Guarantor  with its  employees,  all
          during normal business hours and as often as the Lender may reasonably
          request;

                                       7
<PAGE>

     (c)  It will duly comply with all the terms and covenants  contained herein
          and in each of the  instruments  and documents  given to the Lender in
          connection  with or pursuant  to this  Subsidiary  Guaranty,  the Loan
          Agreement,  the  Debentures and the other Loan  Documents,  all at the
          times and places and in the manner set forth  herein or  therein,  and
          (ii) at all times maintain the liens and security  interests  provided
          for under or pursuant to this Subsidiary Guaranty,  the Loan Agreement
          , the Debentures and any  Transaction  Document as valid and perfected
          liens and security interests on the property covered thereby;

     (d)  It will keep all properties of the Guarantor,  whether real,  personal
          or mixed, free and clear of all liens,  other than the Permitted Liens
          and liens created by the Loan Documents.;

     (e)

          (i)  It will keep all of its insurable  properties  adequately insured
               at all times with responsible  insurance carriers against loss or
               damage  by fire and  other  hazards  as are  customarily  insured
               against by similar  businesses  owning such properties  similarly
               situated and

          (ii) maintain  general  public  liability  insurance at all times with
               responsible  insurance  carriers against  liability on account of
               damage to persons and property such  insurance  policies to be in
               form reasonably satisfactory to the Lender;

     (f)  It will keep or cause to be kept,  true books of record and account in
          which  full,  true  an  correct  entries  shall  be made of all of its
          dealings  and  transactions  in  accordance  with  customary  business
          practices; and

     (f)  Upon the  Guarantor  obtaining  knowledge of any  litigation  or other
          proceedings being instituted against the Guarantor, any of the Company
          or any subsidiary of the Company, or any attachment,  levy,  execution
          or other process being instituted  against any assets of the Guarantor
          or the Company or any subsidiary, in an aggregate amount in respect of
          all such proceedings and processes  greater than $50,000 not otherwise
          covered by insurance,  it will promptly  deliver to the Lender written
          notice  thereof  stating  the nature  and  status of such  litigation,
          dispute, proceeding, levy, execution or other process.

14. EXPENSES.  The Guarantor agrees to be liable for the payment of all fees and
expenses,  including  attorney's  fees and  expenses,  incurred by the Lender in
connection with the enforcement of this Subsidiary Guaranty.

15.  REINSTATEMENT.  The Guarantor  agrees that this  Subsidiary  Guaranty shall
continue  to be  effective  or be  reinstated,  as the case may be,  at any time
payment received by the Lender under the Debentures or this Subsidiary  Guaranty
is  rescinded  or must be restored for any reason.  The  execution  and delivery
hereafter  to Lender by  Guarantor  of a new  instrument  of guaranty  shall not
terminate,  supersede  or cancel  this  instrument,  unless  expressly  provided
therein, and all rights and remedies of Lender hereunder or under any instrument
of guaranty  hereafter  executed and  delivered to Lender by Guarantor  shall be
cumulative and may be exercised singly or concurrently.

                                       8
<PAGE>

16.  COUNTERPARTS.  This  Subsidiary  Guaranty  may be executed in any number of
counterparts,  each of which  shall be deemed to be an  original  as against any
party whose signature appears thereon, and all of which shall constitute one and
the same instrument.

17. RELIANCE. The Guarantor represents and warrants to Lender that:

          (a) such Guarantor has adequate means to obtain from the Company, on a
     continuing basis,  information concerning the Company's financial condition
     and  affairs  and has full and  complete  access  to  Company's  books  and
     records;

          (b) such  Guarantor is not relying on the Lender,  its agents or other
     representatives, to provide such information, now or in the future;

          (c) such Guarantor is executing this  Subsidiary  Guaranty  freely and
     deliberately, and understands the obligations and financial risk undertaken
     by providing this Subsidiary Guaranty;

          (d)  such  Guarantor  has  relied  solely  on  the   Guarantor's   own
     independent   investigation,   appraisal  and  analysis  of  the  Company's
     financial  condition  and affairs in deciding  to provide  this  Subsidiary
     Guaranty and is fully aware of the same; and

          (e) such  Guarantor  has not  depended  or relied on the  Lender,  its
     agents or other representatives,  for any information whatsoever concerning
     the Company's  financial condition and affairs or other matters material to
     such  Guarantor's  decision to provide this Subsidiary  Guaranty or for any
     counseling, guidance, or special consideration or any promise therefor with
     respect to such decision.  The Guarantor agrees that the Lender has no duty
     or  responsibility  whatsoever,  now or in the  future,  to  provide to the
     Guarantor any information  concerning the Company's financial condition and
     affairs,  other  than as  expressly  provided  herein,  and  that,  if such
     Guarantor  receives  any such  information  from the Lender,  its agents or
     other  representatives,   such  Guarantor  will  independently  verify  the
     information  and  will  not  rely  on  the  Lender,  its  agents  or  other
     representatives, with respect to such information.

18. COMPLETE  AGREEMENT.  This Subsidiary  Guaranty and the other Loan Documents
embody the whole  agreement of the parties with respect to the subject matter in
the Loan  Documents  and may not be  modified  unless in  writing  and signed by
Lender and no course of dealing between  Guarantor and Lender shall be effective
to  change  or  modify  or to  discharge  in  whole or in part  this  Subsidiary
Guaranty.  No Waiver of any right or power of Lender or  consent  by it shall be
valid unless in writing signed by an authorized officer.

19.  TERMINATION.  This Subsidiary Guaranty and all obligations of the Guarantor
hereunder shall terminate  without  delivery of any instrument or performance of
any act by any party on the date when all of the  Liabilities  have been  fully,
finally and indefeasibly paid in full.

                                       9
<PAGE>

20. GOVERNING LAW. THIS SUBSIDIARY  GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF COLORADO  APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

21. NOTICES. Any notice hereunder shall be in writing, and shall be delivered by
overnight courier service or by certified mail, postage prepaid,  return receipt
requested, addressed as follows: If to the Guarantor:
         Pannonian Energy, Inc.14 Inverness Drive
         EastBuilding H, Suite 236
         Englewood, CO 80112
         Attn:    Mark Erickson
         Telephone:        (303) 483-0044
         Telecopier:       (303) 483-0011

with a copy simultaneously transmitted by like means to:
         Vinson & Elkins L.L.P.
         2300First City Tower
         1001 Fannin
         Houston, Texas  77002
         Attn:    Michael Finch
         Telephone:        (713)-758 -2158
         Telecopier:       (713) 615-5282

                  If to the Lender,  to all of the addresses set forth under the
Lenders' names on the execution page to the Loan Agreement,  with a copy,  which
shall not constitute notice, simultaneously transmitted by like means to:
Jackson Walker L.L.P.
901 Main Street
Ste 6000
Dallas, Texas 75202
U.S.A. Facsimile: (214) 953-5822 Attn: Jeffrey M. Sone, Esq.

Notices sent by overnight  courier service shall be deemed delivered on the next
business  day, and notices  sent by  certified  mail,  postage  prepaid,  return
receipt requested, shall be deemed delivered two business days after the date of
mailing thereof.

                                       10
<PAGE>

         IN WITNESS  WHEREOF,  the parties have duly  executed  this  Subsidiary
Guaranty on the day and year first written above.

GUARANTOR:

_________________________________ INC.

By:________________________________
Name:
Title:

LENDER:

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.

By:__________________________________________

Name:
Title:

BFSUS SPECIAL OPPORTUNITIES TRUST PLC

By:__________________________________________
Name:
Title:

RENAISSANCE US GROWTH & INCOME TRUST PLC

By: __________________________________________

Name:
Title:

AGENT:

RENN CAPITAL GROUP, INC.

By:__________________________________________

Name:
Title:

                                       11
<PAGE>

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