Document:

AGREEMENT
                                   ---------

This Agreement, dated August 29, 2007, is between Enexco, Inc. ("Enexco"), 3131
Turtle Creek, Suite 1210, Dallas, Texas 75219 and Colony Energy, Inc.
("Colony"), 2100 West Loop South, Suite 900, Houston, Texas 77027,

WHEREAS; Enexco has purchased or contracted for the properties, more
particularly described in Exhibit "A" which is attached to this agreement and
made a part hereof and Colony has agreed to advance monies (Lease Bank) to
acquire these properties on the following terms and conditions:

     1.     The total consideration for the purchase of these properties amounts
            to the amount as shown on Exhibit A.
     2.     Enexco has asked and Colony has agreed to advance Sixty-Five Percent
            (65.00%) of these monies or $ Two Hundred Seventeen Thousand, Four
            Hundred and Twelve Dollars and Thirty-one Cents ($217,412.31) for
            the purchase of the prospect leases.
     3.     Enexco has agreed that Colony has the right but not the obligation
            to participate in all of the prospects for up to a Twenty-Five
            Percent (25.00%) promoted working interest.
     4.     Enexco agrees that it has built in certain cash profits in each
            prospect and agrees to share these profits on a Seventy-Five Percent
            (75.00%) basis to Enexco and a Twenty-Five Percent (25.00%) basis to
            Colony.
     5.     It is agreed that the Lease Bank money and the funds provided from
            Enexco will be paid on the same basis as funds were provided that is
            Colony will receive 65.00% and Enexco will receive 35.00% until all
            monies have been paid.
     6.     It is further agreed that both parties will expend their best
            efforts to raise the necessary funds to have the wells drilled
            before the end of the year 2007.  (See attached 2007 Enexco Drilling
            Schedule)
     7.     It is agreed that Enexco will hold title to the properties in their
            name on behalf of and for Colony and Enexco.

Should this be our agreement please sign in the space provided below.

Agreed to this 29th day of August, 2007.

Colony Energy, Inc.                         Enexco, Inc.

/s/ Jimmy D. Wright                         /s/ C. Noel Rather
-------------------                         ---------------------------
By: Jimmy D. Wright                         By: C. Noel RatherPROMISSORY NOTE

                                AUGUST 29, 2007

     The  undersigned,  Enexco,  Inc.,  a  Texas corporation (hereinafter called
"Maker"),  whose  address  for  purposes hereof is 3131 Turtle Creek Blvd, Suite
1210,  Dallas, Texas 75219, for value received, without grace, in the manner, on
the  dates and in the amounts herein stipulated, promises to pay to the order of
Colony  Energy,  Inc.,  a  Delaware corporation (hereinafter called "Payee"), at
Payee's  principal place of business located at 2100 West Loop South, Suite 900,
Houston,  Texas  77027, or at such other place as Payee may hereafter designate,
such  principal sum as shall be advanced pursuant hereto at the request of Maker
in  lawful  money  of  the United States of America (Payee's only obligation [if
any]  to  advance  any  amount pursuant hereto is set forth in the Agreement, as
defined  hereinafter).  Maker  hereby  agrees  that Payee may note on Schedule I
hereto  all  advances  of  principal  made  pursuant hereto, and all payments of
principal.

     The  unpaid  principal amount from time to time outstanding hereunder shall
bear no interest; provided, however, the agreement of even date herewith between
Maker  and  Payee  pursuant  to which the loan represented by this Note was made
(the  "Agreement")  provides for certain consideration for the making such loan.

          The  unpaid principal balance of this Note shall be due and payable in
full  on  or before August 29, 2008, the first annual anniversary of the date of
this  Note.  Notwithstanding  the  preceding,  partial  payments  of  the unpaid
principal  balance  of this Note in the amounts indicated in the table below (to
the  extent  then outstanding) shall be due and payable at the time indicated in
the  table  opposite  such  early  payment  amounts:

     AMOUNT  OF
     EARLY  PAYMENT     EVENT  GIVING  RISE  TO  EARLY  PAYMENT
     --------------     ---------------------------------------

     $  83,429.45     Commencement  of the construction of the drilling location
for  the  "Calvin"  prospect  described  in  an  exhibit  to  the  Agreement.

     $  45,468.80     Commencement  of the construction of the drilling location
for  the  "Skydancer"  prospect  described  in  an  exhibit  to  the  Agreement.

     $127,728.90     Commencement  of  the construction of the drilling location
for  the  "Waters/Menter"  prospect  described  in  an exhibit to the Agreement.

     $  80,466.75     Commencement  of the construction of the drilling location
for  the  "Hamilton"  prospect  described  in  an  exhibit  to  the  Agreement.

     If  this  Note is not paid at maturity and said Note is placed in the hands
of  an  attorney  for collection or if collection by suit or through the probate
court, bankruptcy court, or by any other legal or judicial proceeding is sought,
Maker agrees to pay all expenses incurred, including reasonable attorneys' fees,
all  of  which  shall  become  a  part  of  the  principal  hereof.

     Maker and each and all other liable parties expressly and specifically, (i)
severally  waive  grace,  presentment for payment, demand for payment, notice of
intent to accelerate and notice of acceleration, notice of dishonor, protest and
notice  of  protest,  notice  of  nonpayment, and any and all other notices, the
filing  of  suit  and  diligence in collecting this Note or enforcing any of the
security  herefor,  (ii)  severally  agree  to  any substitution, subordination,
exchange  or  release  of  any security held for the payment of this Note or any
other  obligation  to  Payee  and  release of any party primarily or secondarily
liable  hereon,  (iii) severally agree that Payee shall not be required first to
institute suit or exhaust Payee's remedies hereon against Maker or other parties
liable  hereon or to enforce Payee's rights against them or any security herefor
in  order  to  enforce  payment  of this Note by any of them, and (iv) severally
agree  to  any  extension or postponement of time of payment of this Note and to
any  other indulgence with respect hereto without notice thereof to any of them.

     The  invalidity,  or  unenforceability  in particular circumstances, of any
provision  of  this  Note  shall  not  extend  beyond  such  provision  or  such
circumstances  and  no  other  provision of this Note shall be affected thereby.

     This  Note  is  secured  by  a  security  interest in and general lien upon
certain  of  Maker's  assets, as such security interest in and general lien were
created  in  that  certain  Deed  of  Trust,  Assignment of Production, Security
Agreement  and  Financing  Statement  of even date herewith executed by Maker in
favor  of  Payee.

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE  STATE  OF  TEXAS  AND  THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

                                   ENEXCO,  INC.,
                                   a  Texas  corporation

                                   By:_________________________________

                                   Name:_______________________________

                                   Title:________________________________

                                     2 of 2

<PAGE>
                                   SCHEDULE I

                                NATURE OF EVENT
                                ---------------
      DATE OF ADVANCE     (ADVANCE OR     AMOUNT OF ADVANCE     CUMULATIVE
      ---------------     -----------     -----------------     ----------
                                    INITIALS
                                    --------
    OR PAYMENT     PAYMENT?)     OR PAYMENT     BALANCE     MAKER     PAYEE
    ----------     ---------     ----------     -------     -----     -----THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
          -----------------------------------------------------------

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

     THIS  DEED  OF  TRUST,  ASSIGNMENT  OF  PROCEEDS  OF  PRODUCTION,  SECURITY
AGREEMENT  AND FINANCING STATEMENT, dated as of August 29, 2007, is from Enexco,
Inc.,  a Texas corporation having its principal place of business at 3131 Turtle
Creek  Blvd,  Suite  1210,  Dallas,  Texas  75219  (referred  to  herein  as the
"Grantor"),  to  Randall  W.  Heinrich,  as  Trustee  (referred to herein as the
"Trustee"),  for  the  use  and  benefit  of  and  to  secure the payment of all
indebtedness  and the performance of all obligations as hereinafter described of
Grantor  owing  to  Colony  Energy,  Inc.,  a  Delaware  corporation  having its
principal  place  of business at 2100 West Loop South, Suite 900, Houston, Texas
77027  (referred  to  herein  as  the  "Holder"),  under  the  Promissory  Note
hereinafter  defined.

     WHEREAS,  the  Holder has loaned to the Grantor the sum of $337,094.00, and
the  Grantor  has  executed and delivered to the Holder its Promissory Note (the
"Promissory  Note") dated of even date herewith made payable to the order of the
Holder  in  the  original  principal  sum  of  $337,094.00  bearing interest and
containing  provisions  with  respect  to  the  payment  of  interest,  default,
acceleration  and  liability for costs and attorneys' fees, as therein provided;

     NOW THEREFORE, the Grantor, for and in consideration of the premises and of
the  debts  and  trusts  hereinafter  mentioned,  has  GRANTED, BARGAINED, SOLD,
WARRANTED,  MORTGAGED, ASSIGNED, TRANSFERRED AND CONVEYED, and by these presents
does  GRANT, BARGAIN, SELL, WARRANT, MORTGAGE, ASSIGN, TRANSFER AND) CONVEY unto
the  Trustee,  for  the  use and benefit of the Holder, all of the actual right,
title  and  interest of the Grantor, whether now owned or hereafter acquired, in
all  of  the  Mortgaged Properties (as defined in Article II hereof), and all of
its  rights  and  interests  in  connections therewith, subject, however, to the
rights  of any and all other persons in the Mortgaged Properties pursuant to any
agreement  existing  as  of  the  date  of  this  instrument;

     Subject,  however,  to  (i)  the  restrictions,  exceptions,  reservations,
conditions,  limitations,  interests  and  other  matters,  if any, set forth or
referred  to  in  the  specific descriptions of such properties and interests in
Exhibit  A  (including  all  presently existing royalties, overriding royalties,
payments  out  of  production  and  other  burdens  and  which  are  taken  into
consideration  in  computing  any decimal or fractional interest as set forth in
Exhibit  A),  and  (ii)  the  condition that neither the Trustee, nor the Holder
shall be liable in any respect for the performance of any covenant or obligation
of  the  Grantor  in  respect  of  the  Mortgaged  Properties.

     TO  HAVE  AND  TO  HOLD  the  Mortgaged  Properties  unto  the Trustee, his
successors and substitutes in trust, and assigns forever, in trust to secure the
payment  of  the  Secured  Indebtedness  and  to  secure  the performance of the
obligations  of  the  Grantor  herein  contained.

     The  Grantor,  in consideration of the premises and to induce the Holder to
make  the loan described above, hereby covenants and agrees with the Trustee and
the  Holder  as  follows:

                                   ARTICLE I
                                  Definitions
                                  -----------

     1.1  Definitions.  When  used in this instrument, the following terms shall
          -----------
have  the  respective  meanings  specified  herein  or in the section or recital
referred  to:

     "Collateral"  means  all rights, titles and interest now owned or hereafter
acquired by the Grantor in all Hydrocarbons, accounts, contract rights, fixtures
and  personal  property  of  any kind and character defined in or subject to the
applicable  provisions of the Uniform Commercial Code constituting a part of the
Mortgaged  Properties, including but not limited to, all rights now owned and at
any  time  hereafter  acquired  by  the  Grantor  in  the  following:

          (a)     All  Hydrocarbons  and  other  minerals  produced  from  the
Mortgaged  Properties;

          (b)     All  accounts, general intangibles, chattel paper, instruments
and  all  other  properties and interests arising in connection with the sale or
other  disposition  of  such  Hydrocarbons;

          (c)     All  inventory arising in connection with the operation of the
Mortgaged  Properties;

          (d)     All  rights  under  all  Product  Sale  Contracts,  contracts,
operating  agreements,  mineral  purchase agreements, division orders, contracts
for  drilling  of  wells,  gas processing agreements, transportation agreements,
surface  use  agreements,  rights-of-way,  easements,  surface  leases, permits,
licenses,  pooling  or  unitization agreements, pooling designations and pooling
orders  now or hereafter affecting any of the interests now or hereafter covered
hereby  or which are necessary or convenient in exploring or drilling for, or in
the  producing,  treating,  handling,  storing,  processing,  transporting  or
marketing  of,  Hydrocarbons  from  and  of  the  Lands  Described in Exhibit A;

          (e)     All Operating Equipment, other personal property, and fixtures
at  any  time  used on the Mortgaged Properties or in connection with production
therefrom  or  in  connection  with the leases, wells, and/or units described or
referred  to  on  Exhibit  A,  together  with  all  additions,  replacements and
substitutions  thereof;  and

          (f)     All  proceeds  and  products  of  the  foregoing.

     "Deed  of  Trust"  means  this  Deed  of  Trust,  Assignment of Proceeds of
Production,  Security  Agreement  and  Financing  Statement.

     "Grantor":  The  opening  paragraph.  If  more than one, the word "Grantor"
shall  mean  all  grantors  and  each  of  them  jointly  and  severally.

     "Grantor's Successors" means the heirs, executors, administrators, personal
representatives,  successors  and  assigns  of  the  Grantor.

     "Holder":  The  opening  paragraph.

     "Hydrocarbons"  means  oil,  gas,  casinghead gas, condensate and all other
liquid  or  gaseous  hydrocarbons.

     "Lands Described in Exhibit A" shall include the Oil and Gas Leases and the
lands  described  in  Exhibit  A, as the same shall be amended from time to time
hereafter,  and  any  Oil  and  Gas Leases or lands, the description of which is
incorporated  in  Exhibit  A by reference to another instrument or document, and
shall  also include any Oil and Gas Leases or lands now or hereafter unitized or
pooled  with Oil and Gas Leases or lands which are either described in Exhibit A
or  the  description  of  which  is  incorporated  in  Exhibit  A  by reference.

     "Mortgaged  Properties":  Article  II  hereof.

     "Oil  and  Gas  Leases"  shall  mean  all of the Grantor's right, title and
interest  in and to all oil, gas and mineral leases and subleases and assignment
of  operating  rights  now  owned  or  hereafter acquired by Grantor, including,
without  limitation,  those  oil,  gas  and  mineral  leases  and  subleases and
assignment of operating rights set forth on Exhibit A attached hereto and made a
part  hereof  for  all  purposes, as the same shall be amended from time to time
hereafter,  and  any instrument executed in amendment, correction, modification,
confirmation,  renewal  or  extension  of  any  of  the  leases,  agreements  or
instruments.

     "Operating  Equipment"  means  all  oil  wells,  gas  wells,  water  wells,
injection  wells,  other  wells and operating equipment including all surface or
subsurface machinery, equipment, oil field supplies and materials, facilities or
other properties of whatsoever kind or nature now or hereafter located on any of
the Lands Described in Exhibit A which are useful for the production, treatment,
storage,  processing, marketing or transportation of Hydrocarbons, and all other
materials  used in the drilling, operating, completing, maintaining or repairing
any  type  of  wells  or pipelines, including, but not by way of limitation, all
casing, tubing, rods, pumping units and engines, houses, jacks, Christmas trees,
derricks,  separators,  gun  barrels, flow lines, pipelines, cable lines, tanks,
gas  systems,  (for  gathering,  treating  and  compression)  water systems (for
creating,  disposal  and  injection),  power plants, poles, lines, transformers,
starters  and  controllers,  machine  shops, machinery, tools, storage yards and
equipment  stored  therein,  buildings and camps, telegraph, telephone and other
communication  systems,  roads,  loading  racks  and  shipping facilities, other
personal  property  and  fixtures  at  any  time  used on the Lands Described in
Exhibit  A  or in connection with production therefrom or in connection with the
Oil  and  Gas Leases, wells, and/or units described or referred to on Exhibit A.

     "Product  Sale  Contracts"  means  contracts  now  in effect, or here-after
entered  into by the Grantor, or the Grantor's predecessors in interest, for the
sale,  purchase, exchange or processing of Hydro-carbons produced from the Lands
Described  in  Exhibit  A.

     "Promissory  Note":  The  first  recital.

     "Secured  Indebtedness"  means  the  following  obligations of the Grantor:

          (a)     The  payment  of  all indebtedness is evidenced in part by the
Promissory  Note;  any  future  advances  under  the  Promissory  Note;  and all
renewals,  extensions  or amendments of such indebtedness or any part thereof or
any  such  future  advances.

          (b)     The payment of all sums advanced or expenses or costs incurred
by  the Holder that are made or incurred pursuant to, or permitted by, the terms
of  this  Deed  of  Trust,  plus  interest  thereon at the rate specified in the
Promissory  Note  for  past  due  payments,  from  the  date  of the advances or
incurring  of  such expenses or cost until reimbursed, such costs including, but
not limited to, all costs incurred by the Holder to obtain, administer, preserve
and  enforce  this Deed of Trust, collect the Secured Indebtedness, and maintain
and  preserve  the  Collateral,  including  without  limitation  all  taxes,
assessments,  reasonable  attorneys  fees  and  legal  expenses  of  sale.

          (c)     Any  and all other indebtedness or liability of the Grantor to
the Holder of every kind, nature and description, direct or indirect, primary or
secondary,  secured  or  unsecured  (including  overdrafts),  joint  or several,
absolute or contingent, due or to become due, now existing or hereafter arising,
regardless  of how it may be evidenced, and whether originally payable to Holder
or  to  a third party and subsequently acquired by the Holder, including without
limitation  all  future  advances,  whether or not presently contemplated by the
parties  hereto.  It is contemplated that the Holder may lend additional sums to
the  Grantor  from  time  to  time, but shall not be obligated to do so, and the
Grantor  agrees  that  this  Deed  of  Trust shall secure such additional loans.

          (d)     The  performance by the Grantor of all obligations under-taken
by  it  in accordance with the particular terms and provisions of the Promissory
Note.

          (e)     Any  extensions  or  renewals  of  all  of  such  indebtedness
described  in  Subparagraphs  (a)  through  (d) above whether or not the Grantor
executes  any  extension  agreement  or  renewal  instrument.

     "Trustee"  means the Trustee at the time serving as such under this Deed of
Trust.

     "Uniform  Commercial  Code"  means the Uniform Commercial Code in effect in
the  State  of  Texas  on  the  date  hereof.

                                   ARTICLE II
                              Mortgaged Properties
                              --------------------

     The  property  conveyed hereby (the "Mortgaged Properties") consists of all
right,  title  and  interest  of  the  Grantor  (whether  now owned or hereafter
acquired)  in  and to each of the following items of real and personal property:

          (a)     The  Lands Described in Exhibit A, and the Oil and Gas Leases,
and  the  fee, mineral, working, overriding royalty, royalty and other interests
which  are  specifically  described  in  Exhibit  A;

          (b)     All  rights  under  all  Product  Sale  Contracts,  contracts,
operating  agreements,  mineral  purchase agreements, division orders, contracts
for  drilling  of  wells,  gas processing agreements, transportation agreements,
surface  use  agreements,  rights-of-way,  easements,  surface  leases, permits,
licenses,  unitization and pooling agreements and the properties covered and the
units  created  thereby  (including  all units formed under orders, regulations,
rules  or other official acts of any federal, state or other governmental agency
having  jurisdiction),  pooling  designations  and  pooling orders and all other
titles,  rights  and  options  whatsoever  now or hereafter affecting any of the
Lands  Described  in  Exhibit  A, or which are useful or appropriate in drilling
for,  producing,  treating,  handling,  storing,  processing,  transporting  or
marketing  Hydrocarbons  or  other  minerals  from any of the Lands Described in
Exhibit  A;

          (c)     All Hydrocarbons and other minerals which are in, under, upon,
produced or to be produced from the Lands Described in Exhibit A and the Oil and
Gas  Leases,  and  all  proceeds, including receivables, now owned by Grantor or
hereafter  generated  from  the  sale  thereof;

          (d)     All  information  concerning  the lands Described in Exhibit A
including,  without  limitation,  abstracts of title, title opinions, geological
and  geophysical  information,  reserve  or  reservoir  studies  and  well logs;

          (e)     All  contract  rights  and  general  intangibles heretofore or
hereafter  generated  or  acquired in connection with, or which are necessary or
convenient  for,  the  exploration  for  or production, storage, transportation,
processing  or  marketing  of  Hydrocarbons  or other minerals produced from the
Lands  Described  in  Exhibit A, including, without limitation, all rights under
Product  Sale  Contracts,  division orders, contracts for drilling of wells, gas
processing  agreements,  transportation  agreements,  right  of  way agreements,
surface  use  agreements  and any and all other agreements in any way whatsoever
related  to  any  of  such  activities;

          (f)     All  Operating  Equipment  and  Collateral,  including  all
additions,  replacements or substitutions thereto or thereof hereafter acquired,
and  proceeds  from  the  sale  thereof;

together  with any and all corrections or amendments to, or renewals, extensions
or  ratification of, any of the same, or of any instrument relating thereto, and
all  rights-of-way,  franchises,  easements,  tenements,  hereditaments  and
appurtenances  now  existing or in the future obtained in connection with any of
the  aforesaid,  with  all  reversions,  remainders,  rents,  revenues,  issues,
proceeds,  earnings,  incomes, products and profits thereof, and all the estate,
title,  interests,  rights  and  claims whatsoever, at law as well as in equity,
which  the Grantor now has or may hereafter acquire in and to the aforesaid, and
all  other  interest of every kind and character in all of the real and personal
properties respectively above described or referred to which Grantor may now own
or  at  any time hereafter acquire (including, without limitation, all interests
which Grantor may now or at any time hereafter own in the Hydrocarbons and other
minerals  in and under the Oil and Gas Leases and leasehold estates covering the
Lands  Described  in  Exhibit  A),  and  all  other things of value and incident
thereto  which  the  Grantor  might  at any time have or be entitled to, all the
aforesaid  properties, rights and interests, together with any additions thereto
which  may  be  subjected to the lien of this instrument by means of supplements
hereto.

                                  ARTICLE III
                         Representations and Warranties
                         ------------------------------

     In  order  to  induce  the Holder to enter into the loan represented by the
Promissory Note, the Grantor, for Grantor and Grantor's Successors, hereby makes
the following representations and warranties to, and covenants with, the Trustee
and  the  Holder,  which representations, warranties and covenants shall survive
the  execution  and delivery hereof, and shall be deemed made for the benefit of
any  substitute or successor trustee or any successor or assignee of the Holder:

     3.1     Title.  Grantor  is  the  lawful  owner of all of, and has good and
             -----
marketable  title  to,  the  Mortgaged Properties to the extent of the interests
specified  in  Exhibit  A,  and  has  the  full  complete right and authority to
mortgage  and  convey  the  same.

     3.2     No  Liens.  The Mortgaged Properties are free from all encumbrances
             ---------
or  liens whatsoever, except as may be specifically set forth on Exhibit A or as
permitted  by  the  provisions  of  Section  4.2(f)  hereof.

     3.3     Validity  of  Oil and Gas Leases.  The Oil and Gas Leases described
             --------------------------------
in  Exhibit  A  attached hereto are valid and subsisting leases and are superior
and paramount to all other oil and gas leases respecting the properties to which
they  pertain.  The  Oil  and  Gas  Leases are in full force and effect, and all
payments,  rents,  royalties, covenants and conditions necessary to maintain the
same in full force and effect, and necessary to maintain the interest of Grantor
therein,  have  been timely paid to and accepted by the parties to whom same are
due  and have otherwise been fully performed.  No party in interest has asserted
that  any  of  such  Oil  and  Gas  Leases  has  terminated.

     3.4     Grantor  Entitled  to  Receive Revenues.  The Grantor, by virtue of
             ---------------------------------------
its  ownership  of the Mortgaged Properties, is entitled to receive from each of
the  Oil  and  Gas  Leases,  after  deducting  any and all royalties, overriding
royalties  and similar burdens on the Grantor's interest, at least that fraction
of  revenues  derived  from the sale of Hydrocarbons and other minerals produced
therefrom  as  is  set  forth  on  Exhibit  A  for  such  Oil  and  Gas  Lease.

     3.5     No  "Take  or Pay" Clause.  The Grantor is not obligated under, nor
             -------------------------
are the Mortgaged Properties subject to, any agreement providing for the sale of
Hydrocarbons  produced  from  the Oil and Gas Leases, which agreement contains a
"take  or  pay"  clause  or  a "market-out" clause or a "FERC-out" clause or any
similar  term  providing  for  the  delivery  of  Hydrocarbons produced from the
Mortgaged  Properties  at  some  future  time without Grantor then or thereafter
receiving  full  payment  therefor.

     3.6     Covenants.  All  covenants,  express  or  implied, binding upon the
             ---------
Grantor  with  respect  to the Oil and Gas Leases have been performed, except in
those  circumstances  where  (a)  a  reasonably  prudent  operator under similar
circumstances  and  in accordance with customary industry practice would deem it
prudent  not  to  so  perform  such  covenants,  and  (b)  such  non-performance
individually or in the aggregate is not such as to interfere materially with the
development,  operation  or  value  of  the  Mortgaged  Properties.

     3.7     Location of Operating Equipment.  The Operating Equipment forming a
             -------------------------------
part  of  the Mortgaged Properties is and will be located on the Lands Described
in  Exhibit  A.

     3.8     Wells  Drilled and Operated in Compliance with Laws.  All producing
             ---------------------------------------------------
wells  located  on the Mortgaged Properties or properties unitized therewith (a)
have  been  drilled  and  completed  and have been operated in compliance and in
conformity  with  all  applicable  laws,  rules,  regulations  and orders of all
regulatory  authorities  having jurisdiction, (b) are subject to no penalties on
account  of  past production, and (c) are bottomed under and are producing from,
and  the  well  bores  are wholly within, the Mortgaged Properties or properties
unitized  therewith.

     3.9     Producing  Wells.  Each  of  the  producing  wells  located  on the
             ----------------
Mortgaged  Properties is actually producing oil and/or gas in paying quantities,
is not shut-in, and is suitably equipped, in accordance with reasonable industry
standards,  to  continue  such  production.  No  event  known to the Grantor has
occurred  which  would adversely affect the anticipated future production of any
of  such  wells that has not been previously disclosed to the Holder in writing.

     3.10     Production Being Sold in Compliance With Law.  All production from
              --------------------------------------------
the  Mortgaged Properties has been sold and is being sold to purchasers entitled
to  purchase  the  same  at lawful prices in accordance with applicable laws and
administrative  rules  and  orders,  and no  substantial obligation exists or is
claimed  to  exist  to  refund  to  any purchaser, or otherwise, any part of the
amounts  heretofore received or now being received for oil and gas produced from
any  of  the  Mortgaged  Properties.

     3.11     Filings, Licenses and Approvals.  All reports, petitions and other
              -------------------------------
matters  required  to be filed with any governmental agency and certificates and
notices  required  to  be served on private parties have been filed or served as
required,  and  all  necessary  permits, licenses and other regulatory approvals
have  been  obtained,  to  conduct  all  operations which have been or are being
conducted  on the Mortgaged Properties and to collect any prices which have been
or  are  being  collected  for  production  marketed  therefrom.

     3.12     No Rights of Reversion, Etc.  Except as indicated on Exhibit A, or
              ----------------------------
as  may  have  been  otherwise previously disclosed to the Holder in writing, no
party  has  any  right of reversion, hack-in interest, or other right which will
terminate  or reduce the interest of the Grantor warranted in any of the Oil and
Gas Leases or other Mortgaged Properties so long as Hydrocarbons are produced in
paying  quantities from the wells presently located on the Mortgaged Properties.

     3.13     Taxes  and  Liabilities.  All taxes assessed against the Mortgaged
              -----------------------
Properties  or  any  production  therefrom,  including,  without  limitation, ad
valorem,  severance, windfall profit, production and similar taxes based upon or
measured  by  the  ownership  of  the  Mortgaged Properties, and all liabilities
incurred  by  Grantor  or any predecessor in title of Grantor to the operator or
otherwise  for  services rendered or material furnished on or in connection with
the  Mortgaged  Properties, or for repairs to any Operating Equipment, have been
paid  to  the  extent that the same have become due unless such payment is being
contested  as  otherwise  permitted  by  this  Deed  of  Trust.

     3.14     No Litigation Concerning Title or Liens.  No litigation is pending
              ---------------------------------------
or,  to  the  knowledge  of  Grantor,  threatened,  wherein  a claim of title is
asserted  to  any of the Mortgaged Properties adverse to the Grantor's title, or
wherein  any  lien  or  encumbrance is claimed against Grantor's interest in the
Mortgaged  Properties,  which lien or encumbrance is or could become superior to
the  lien  created  by  this  instrument.

                                   ARTICLE IV
                             Affirmative Covenants
                             ---------------------

     The  Grantor covenants and agrees that, so long as this Deed of Trust is in
effect  and  until all Secured Indebtedness of the Grantor to the Holder is paid
in  full, unless compliance shall have been waived in writing by the Holder, the
Grantor,  for  Grantor  and  Grantor's  Successors,  will  do  the  following:

     4.1     Payment  of  Secured  Indebtedness.  The  Grantor  shall  duly  and
             ----------------------------------
punctually  pay  the  Secured  Indebtedness  as  the same becomes due, and shall
faithfully  and punctually perform all of the obligations and liabilities of the
Secured  Indebtedness.

     4.2     Operation  of  Mortgaged  Properties. Whether or not the Grantor is
             ------------------------------------
the  operator  of  the Mortgaged Properties, the Grantor shall, at the Grantor's
sole  expense:

          (a)     Perform,  or  cause  to be performed, all covenants, terms and
conditions  imposed  upon  the  Grantor  or  its  predecessors  in  interest and
expressly contained in such Oil and Gas Leases (including without limitation the
payment of all delay rentals and other amounts necessary to keep the Oil and Gas
Leases  in  full force and effect), or expressly contained in any assignments or
farmouts,  under  or through which such Oil and Gas Leases or undivided interest
therein are now held, and perform or cause to be performed all implied covenants
and  obligations  imposed  upon  the  Grantor or its predecessors in interest in
connection  with  such  Oil  and  Gas Leases, insofar as such Oil and Gas Leases
cover the properties mortgaged hereby, except in those circumstances where (1) a
reasonably  prudent  operator under similar circumstances and in accordance with
customary  industry  practice  would  deem  it  prudent  not  to so perform such
covenants  or  conditions,  and  (2) such non-performance individually or in the
aggregate is not such as to interfere materially with the development, operation
or  value  of  the  Mortgaged  Properties;

          (b)     Keep, or cause to be kept, in full force and effect throughout
their  respective  terms as provided therein, the Oil and Gas Leases, insofar as
they  cover  properties  mortgaged  hereby, and not abandon any well or forfeit,
surrender,  release  or  permit to expire any Oil and Gas Lease or any rights in
the Mortgaged Properties, or any part thereof, or permit any of the foregoing to
occur,  except  in  those circumstances where (1) a reasonably' prudent operator
under similar circumstances in accordance with customary industry practice would
deem it prudent to do so, arid (2) such actions individually or in the aggregate
are not such as to interfere materially with the development, operation or value
of  the  Mortgaged  Properties;  provided that the foregoing exception shall not
                                 --------
apply  to  any Oil and Gas Lease or part thereof that may be maintained in force
by production of Hydrocarbons from existing wells capable of producing in paying
quantities,  or  by  payment of delay rentals or shut-in royalties, and provided
                                                                        --------
further that Grantor shall under no circumstances be obligated to drill any well
-------
to  keep  any  Oil  and  Gas  Lease  in  full  force  and  effect;

          (c)     Operate, or cause to be operated, in a good workmanlike manner
as  would  a prudent operator under similar circumstances and in accordance with
all  applicable  federal,  state  and  local  laws,  rules  and regulations, the
Mortgaged  Properties,  and continuously operate or cause to be operated for the
production  of  Hydrocarbons  in  a  good  workmanlike manner as would a prudent
operator  under  similar circumstances the wells now or hereafter drilled on the
Mortgaged  Properties;

          (d)     Pay,  or  cause  to  be  paid,  promptly  as  and when due and
payable,  all  rentals  and  royalties  payable  in  respect  of  the  Mortgaged
Properties  and  Grantor's  share  of  all costs and expenses incurred under any
joint  operating  agreement  affecting  the Mortgaged Properties, or any portion
thereof,  and  in  connection  therewith  furnish  to  the  Holder,  as and when
requested,  full  information  as  to the status of any joint account maintained
with others under any such operating agreement or other agreement constituting a
part  of  the  Mortgaged  Properties;

          (e)     Cause  the Operating Equipment to be maintained, preserved and
kept  in  good  and effective operating condition, and from time to time make or
cause  to  be  made  all  necessary  and proper repairs, renewals, replacements,
substitutions  and  improvements thereof or thereto necessary for the production
of  Hydrocarbons  from  the  Mortgaged  Properties  to  be  promptly  made;

          (f)     Cause  the  Mortgaged  Properties to be kept free and clear of
liens,  charges  and  encumbrances  of  every character, other than (1) the lien
hereof,  (2)  defects  and  irregularities  in  title,  and  liens,  charges  or
encumbrances,  which  are  not  such  as  to  interfere  materially  with  the
development,  operation  or value of the Mortgaged Properties and not such as to
affect  materially  title  thereto,  (3)  liens arising under standard operating
agreements  which  are  usual  and customary in accordance with routine industry
practice,  (4)  taxes constituting a lien but not due and payable, (5) those set
forth  or  referred  to  in  Exhibit A, (6) those arising from obligations being
contested  by  the  Grantor in good faith as permitted by Section 4.2(k) hereof,
(7)  those  consented  to  in  writing  by  the Holder, and (8) those arising in
connection  with workmen's compensation insurance, unemployment insurance or old
age  pension,  or  of  mechanics  and materialmen or operators for sums not due;

          (g)     Not  agree  to  any  amendment to the terms of any Oil and Gas
Lease  constituting  part  of  the  Mortgaged  Properties, or of any assignment,
farm-out,  or  other  instrument  that  affects Grantor's title to the Mortgaged
Properties;

          (h)     Not  take  any action to incur any liability or lien under any
operating  agreement,  or  enter  into  any new operating agreement or amend any
existing  operating  agreement  affecting  the  Mortgaged  Properties;

          (i)     Not  enter  into,  become  bound  by, or subject the Mortgaged
Properties to, any contract or agreement, including without limitation contracts
containing  a  "take  or  pay",  "market-out'  or  "FERC-out"  clause,  which is
burdensome  on  the Grantor or materially adversely affects the operation of the
Mortgaged  Properties;

          (j)     Use  the  Operating Equipment in the business or Grantor, and,
except  where under the control of an operator other than the Grantor, keep same
in  Grantor's  possession  or control at all times at Grantor's risk of loss and
keep  same  on  the  Mortgaged  Properties,  except for its temporary removal in
connection  with  its  ordinary  use  in  the ordinary course of business unless
Grantor  notifies  the  Holder  in writing and the Holder consents in writing in
advance  of  its  removal  to  another  location;

          (k)     Duly  pay  and  discharge,  or  cause  to  be  duly  paid  and
dis-charged, (1) before delinquent all gross ad valorem taxes, production taxes,
severance  taxes,  occupation  taxes, windfall profit taxes, or other charges of
every  kind  and character whatsoever in respect of the Mortgaged Properties, or
any  portion  thereof,  or  incident  to  or in connection with the operation or
development  of  the  Grantor's  interests  in  the  Mortgaged Properties or the
production  of Hydrocarbons and other minerals therefrom, as well as all federal
and  state  income  taxes  payable  generally by the Grantor regardless of their
relation  to  the  Mortgaged Properties; (2) all lawful claims in respect of the
Mortgaged  Properties,  whether  for  labor,  materials,  supplies,  services or
anything else, which might or could, if unpaid, become a lien or charge upon the
Mortgaged  Properties;  and  (3)  all  trade  bills  when due in accordance with
customary industry practice and in such manner so that the Mortgaged Properties,
business,  assets, condition (financial or otherwise) and the credit standing of
the Grantor are not materially and adversely affected; provided that the Grantor
                                                       -------------
shall  not  be  required  to  pay  or  cause  to  be  paid  such taxes, charges,
assessments,  claims or trade bills if the payment thereof is being contested in
good  faith  by  appropriate  proceedings  with  adequate  reserves with respect
thereto, determined in accordance with generally accepted accounting principles,
having  been  set  aside  on the Grantor's books. In the event the Grantor shall
fail  or  neglect  to  pay or cause to be paid any charges of any nature, except
with respect to charges not then due, which may or might become superior or pari
passu  to  the  lien created by this Deed of Trust, the Holder at its option may
pay  or  cause to be paid such charges or any part thereof, and the Grantor will
promptly  reimburse  the Holder therefor, and any and all sums so paid hereunder
shall  be  reimbursed  by  the  Grantor  to  the  Holder  upon  demand and stall
constitute  a  part of the Secured Indebtedness. In the event the payment of any
charges  of  any nature herein described is contested for any reason whatsoever,
the  Grantor will, if requested by the Holder, provide the Holder with a bond in
an  amount  and  with  surety  satisfactory  to the Holder to protect the Holder
against  any  and  all  coats, losses, damages or liabilities in connection with
contesting  such  charge;

          (l)     File  and  deliver,  or  cause  to be filed and delivered, all
necessary  reports, notices, petitions and certificates and obtain all necessary
regulatory  approvals  to  authorize  any  operation  conducted on the Mortgaged
Properties,  the  sale  of  production  therefrom,  and the collection of prices
charged  therefor;

          (m)     Permit the Holder and its agents, representatives, independent
accountants,  attorneys  and  employees,  at  all  times,  to  go upon, examine,
inspect,  test  and  remain  on  the Mortgaged Properties and any parts thereof,
including its books of account and other hooks and records, and to strap, gauge,
measure and inspect any and all tanks at any time on the Mortgaged Properties or
holding  Hydrocarbons  or other minerals therefrom, and Grantor will furnish the
Holder, upon request, all pertinent information in regard to the development and
operation and value of the Mortgaged Properties as well as any other information
which  the  Holder  may  from  time  to  time  request  concerning any matter in
connection  with  the  Grantor's  business  or  operations;  and

          (n)     Comply  with  and  perform,  or  cause to be complied with and
performed,  all  applicable laws, rules and regulations of the United States and
every  other governmental body having jurisdiction with respect to the operation
and  development  of  the  Mortgaged  Properties  and the production and sale of
Hydrocarbons  or  other  minerals  therefrom.

     As to any part of the Mortgaged Properties which is not a working interest,
Grantor agrees to take all such reasonable action and to exercise all rights and
remedies as are available to Grantor to cause the owner or owners of the working
interest  in  such  properties  to  comply  with  the  covenants  and agreements
contained  herein;  and  as  to  any part of the Mortgaged Properties which is a
working  interest  but  which is operated by a party other than Grantor, Grantor
agrees  to  take  all  such  reasonable  action  and  to exercise all rights and
remedies  as are available to Grantor (including, but not limited to, all rights
under  any  operating  agreement) to cause the party who is the operator of such
property  to  comply with the covenants and agreements contained herein. Grantor
will  immediately notify the Holder of any failure of the operator of any of the
Mortgaged Properties to perform any such obligation, and in cooperation with the
Holder, will take such steps as may be expedient to secure compliance therewith,
or  obtain  appointment  of  a  different  operator.

     4.3     Records, Statements and Reports. The Grantor will keep proper books
             -------------------------------
of  record and account in which complete and correct entries will be made of the
Grantor's  transactions  in  accordance  with  generally  accepted  accounting
principles  and will furnish or cause to be furnished to the Holder such reports
and  financial  information  that the Holder may reasonably request from time to
time.  The  office  where  the  records of Grantor with respect to the accounts,
contract  rights  and  other  general  intangibles  concerning  the  Mortgaged
Properties  are  kept  is located at the address shown opposite the signature of
Grantor  to  this Deed of Trust, and Grantor agrees that the place at which such
records  are  kept  will not be changed without the prior written consent of the
Holder.

     4.4     Monthly  Production  Reports.  Grantor  shall  deliver  monthly
             ----------------------------
production reports to Holder, in form acceptable to Holder, as soon as available
and  in  any event not later than the 20th day of each month. Such reports shall
show  for  each of the Mortgaged Properties all production of oil, gas and other
Hydrocarbons  therefrom during the preceding month, all proceeds received during
the  preceding month from sale of production from such Mortgaged Properties, all
expenses  incurred  during  the  preceding  month attributable to such Mortgaged
Properties, a description of all material operations conducted on such Mortgaged
Properties  since  the  last  monthly  report  and such other information as the
Holder  may  reasonably  request.

     4.5     Notice of Default. Forthwith upon the Grantor's obtaining knowledge
             -----------------
of the existence of an Event of Default, or of any fact, condition or event that
only  with  the giving of notice or the passage of time or both, could become an
Event  of  Default,  the  Grantor  shall  deliver  to  the  Holder a certificate
specifying  the  nature  thereof,  the  period of existence, and what action the
Grantor  proposes  to  take  with  respect  thereto.

     4.6     Pending  Claims  and  Litigation. Grantor shall promptly notify the
             --------------------------------
Holder  of

          (i)     the  filing  or  threatened  filing  of  any  suit,  claim  or
complaint  in  any  court  or administrative agency, or in any public record, or

          (ii)     the  commencement  of  any  investigation by any governmental
agency  or  officer,  or

          (iii)     the  existence  of  any  potential  claim  of  any  nature
whatsoever, whether or not there is any reason to believe that the person owning
such  claim  has  asserted  or  will  assert the same, or has knowledge thereof,

which  affects  or  might  affect  title to the Mortgaged Properties or any part
thereof,  the  validity  or priority of the lien created by this instrument, the
right of Grantor or Grantor's predecessors or successors to sell production from
the Mortgaged Properties or any part thereof to the persons who have received or
are  receiving  it, or to collect and retain the prices charged or being charged
therefor,  or  which  asserts any liability of Grantor or of the operator of any
Mortgaged Properties with respect to Grantor's interest therein, for any expense
incurred  in  connection with such property, any tax imposed or threatened to be
imposed  thereon  or  on  production  therefrom, any refund alleged to be due on
account  of  past  production,  or any penalty for violation of any law, rule or
order,  or  which  relates  in  any material respect to Grantor's business.  The
Grantor  shall  take  all necessary and proper steps for the defense of any such
claim  or  legal or administrative proceedings, including but not limited to the
employment  of counsel, the prosecution or defense of litigation and the release
or  discharge  of  all  adverse  claims.  If  the  Holder shall receive any such
information  or  notice  with  respect to any of the foregoing, whether from the
Grantor  pursuant  hereto  or  otherwise,  then:

          (a)     The Holder may intervene or participate in any negotiations or
proceedings  resulting  from any such claim, suit or investigation to any extent
that  the  Holder may deem necessary for the protection of its interest, and the
Grantor shall reimburse the Holder for all costs incurred by the Holder in doing
so,  including  reasonable  attorneys  fees of Holder's independent counsel; and
upon  demand  Grantor  agrees  to  pay to Holder all reasonable expenses paid or
incurred  by it in respect of any such claim, suit or investigation, and Grantor
will  indemnify  and hold Holder harmless from and against any and all costs and
expenses,  including,  but  not  limited  to,  any and all cost, loss, damage or
liability  which  the Holder may suffer or incur by reason of the failure of the
title to all or any part of the Mortgaged Properties, or by reason of any of the
other  matters  specified  in  the  first  sentence  hereof, or by reason of the
failure  or  inability  of  the  Grantor,  for any reason, to convey the rights,
titles  and  interests  which this Deed of Trust purports to mortgage or assign,
and all amounts at any time so payable by the Grantor hereunder shall constitute
a  part  of  the  Secured  Indebtedness  for  all  purposes  hereof.

          (b)     The  Holder  may demand that Grantor furnish evidence of title
thereto  satisfactory  to the Holder, including but not limited to an opinion of
an  attorney  acceptable to the Holder that the title of Grantor to any property
affected  thereby  is  good  and  indefeasible  and  that the lien of the Holder
thereon  is  valid,  first  and  superior.

          (c)     If  requested  by  the  Holder,  the Grantor shall provide the
Holder with a bond in an amount and with sureties reasonably satisfactory to the
Holder  to  secure  the  Holder  against  any cost, loss or damage in connection
therewith.

          (d)     The  Holder  may  defend  any  such  suit or proceeding in the
Grantor's  name  or compromise the same, as the Holder may, in its sole judgment
exercised  in  good faith, determine, and the Grantor shall reimburse the Holder
for all expenses, including reasonable attorneys fees, incurred in doing so, and
for  any amount paid or agreed to be paid by the Holder in settlement thereof or
of  any  final  order  or  judgment against Grantor, and all of such payments or
expenses  shall  constitute  Secured  Indebtedness  for  all  purposes  hereof.

     4.7     Title.  Grantor  covenants  and  agrees  and undertakes to protect,
             -----
warrant  and  defend  title to the Mortgaged Properties unto the Holder, and its
successors  and assigns, at the Grantor's expense against all persons whomsoever
lawfully  having  or  claiming an interest therein or a lien thereon or any part
thereof.  Grantor  further grants to the Holder, and its successors and assigns,
full power and right of substitution and subrogation in and to all covenants and
warranties  made  by others heretofore given or made in respect to the Mortgaged
Properties.  If  requested  by  the  Holder,  the  Grantor  will  cure  to  the
satisfaction  of the Holder any material defect in title to any of the Mortgaged
Properties  that comes to the attention of either party at any time while any of
the  Secured  Indebtedness  is  outstanding  and  unpaid  hereunder.

     4.8     Costs  and  Expenses.  The  Grantor  shall  pay all appraisal fees,
             --------------------
recording  fees,  taxes,  abstract  fees,  attorneys'  fees, and other costs and
expenses  of  every  character  incurred  by  Grantor  or  the  Holder:

          (a)     In  connection  with the closing of the transactions evidenced
by  the  Promissory Note, including the preparation, execution and recording and
keeping  current  of  this  instrument,  whether  at  the  original  closing  or
thereafter;

          (b)     In  supervising,  and  upon  the  occurrence  of  an  Event of
Default,  enforcing  compliance  with  all  warranties, covenants and conditions
herein  provided,  including,  but  not  limited  to,  enforcement  by  judicial
proceedings;

          (c)     In  collecting and accounting for the proceeds of runs paid to
the  Holder  pursuant  to  Article  VI  hereof;

          (d)     In  taking possession of, operating, preparing for the sale or
selling  the  Mortgaged  Properties  or  any  part  thereof;  and

          (e)     In releasing the liens created by this instrument or any other
lien  given  by  the  Grantor  in  connection herewith upon final payment of the
Secured  Indebtedness.

The  Grantor  will reimburse the Holder for all expenses incurred by it, and the
Grantor  hereby agrees to indemnify and hold harmless the Trustee and the Holder
from  and against all claims, demands, liabilities and causes of action asserted
against  either  of  them  on  account  of  any  act  performed or omitted to be
performed  hereunder  or  on account of any transaction arising out of or in any
way connected with the Mortgaged Properties or with this Deed of Trust or any of
the  Secured  Indebtedness,  save  and  except  for  their  willful  misconduct.

     4.9 Further Assurances. The Grantor will execute and deliver such other and
         ------------------
further instruments and will do such other and further acts as in the opinion of
the  Trustee  or  the  Holder  may  be  necessary or desirable to carry out more
effectually  the  purposes  of this instrument and to do all things necessary or
proper  to assure more fully to the Holder all of its respective rights intended
to  be  conveyed  and granted by this Deed of Trust, including, without limiting
the  generality  of the foregoing, (a) prompt correction of any defect which may
hereafter  be  discovered  in the title to any of the Mortgaged Properties or in
the  execution and acknowledgment of this instrument or the Promissory Note, and
(b)  prompt  execution  and delivery of all division or transfer orders which in
the  opinion  of  the  Holder  are  needed  to transfer effectually the assigned
proceeds  of  production  from  the  Mortgaged  Properties  to  the  Holder.

     4.10     Additional  Collateral.  Promptly  after  the  Grantor  enters any
              ----------------------
additional  Oil  and  Gas  Lease at any time or from time to time after the date
hereof,  Grantor  will execute and deliver such amendments to this Deed of Trust
(including  amendments  to  Exhibit  A  hereto)  and  such  other  and  further
instruments  and  will  do  such other and further acts as in the opinion of the
Trustee or the Holder may be necessary or desirable to cause such additional Oil
and Gas Lease to become part of the Mortgaged Properties hereunder to the extent
that  such  additional  Oil  and  Gas  Lease  have  not  already  done  so.

                                   ARTICLE V
                               Negative Covenants
                               ------------------

     The  Grantor covenants and agrees that, so long as this Deed of Trust is in
effect  and  until all Secured Indebtedness of the Grantor to the Holder is paid
in  full, unless compliance shall have been waived in writing by the Holder, the
Grantor,  for  Grantor  and  Grantor's  Successors,  will  not:

     5.1     No  Sales  or  Options. Sell or farm-out the interest of Grantor in
             ----------------------
the  Mortgaged  Properties  or any part thereof, or grant any option or right of
first  refusal  with respect thereto unless the net sales proceeds therefrom are
paid  to  the  Holder,  except  for  sales  of  (i)  the  current  production of
Hydrocarbons  under the terms of Article VI hereof, and (ii) Operating Equipment
in the ordinary course of business provided that simultaneously with or prior to
such  removal,  any  such  Operating  Equipment  shall  be  replaced  with other
Operating  Equipment  of  a value at least equal to that of the replaced or sold
Operating  Equipment and free from any security interest or other encumbrance or
from  any  reservation  of  title.

     5.2     Reduction  of  Prices.  Agree, either in settlement of any asserted
             ---------------------
violation  of  law,  rule  or  order,  or otherwise, to any reduction, direct or
indirect,  of  the  price  to  be received for the sale of Grantor's interest in
Hydrocarbons  produced  from  the  Mortgaged  Properties.

     5.3     Claims.  Settle or abandon any claim which Grantor may have or come
             ------
to have for damages to the Mortgaged Properties or part thereof, where the value
of  the  property  damaged  exceeds  $25,000  or  acknowledge,  in settlement or
otherwise,  the  validity  of any adverse claim of title to any of the Mortgaged
Properties  or  the  existence  or  priority  of any lien or encumbrance thereon
superior  or  which could become superior to the lien of this instrument, or the
existence  with  respect  to  the Mortgaged Properties or operations thereon, or
sales  of  production  therefrom,  of any violation of any law or administrative
rule  or  order.

     5.4     No  Change of Name. If Grantor is a "Utility" as defined in Section
             ------------------
35.01  of  the  Texas  Business  and  Commerce  Code,  change its name, merge or
consolidate  with  another  Person.

                                   ARTICLE VI
                      Assignment of Proceeds of Production
                      ------------------------------------

     6.1     Assignment.  As  further  security  for  the payment of the Secured
             ----------
Indebtedness,  Grantor  hereby  TRANSFERS,  ASSIGNS, WARRANTS and CONVEYS to the
Holder,  effective  as  of  7:00 o'clock AM on the date following the first date
written  above, all of the interest of the Grantor in all Hydrocarbons which are
thereafter produced from the Mortgaged Properties, or allocated thereto pursuant
to  pooling  or unitization of the Oil and Gas Leases or otherwise, all proceeds
from  the sale thereof (such proceeds being hereinafter sometimes referred to as
the  "proceeds  of  runs")  and all accounts, contract rights, and other general
intangibles  under  which  such  proceeds may arise. The foregoing assignment of
proceeds  of  runs  is  made  upon,  and  subject  to,  the  following terms and
conditions,  which  shall  be effective and available after, but only after, the
occurrence  of  any  Event  of  Default  (as  defined  hereinafter):

          (a)     The  Holder  shall  have the right, exercisable at any time at
its  sole  option,  to  give written or telegraphic notice to all of the parties
producing, purchasing, taking, processing or receiving any Hydrocarbons produced
or  to  be  produced from or allocated to the Mortgaged Properties, or having in
their possession any such Hydrocarbons belonging to Grantor or such proceeds for
which  they  or others are accountable to the Holder by virtue of the provisions
of this Section 6.1, to hold and dispose of such Hydrocarbons for the account of
the  Holder  and  to make payment of such proceeds directly to the Holder at its
principal  office,  and the Holder shall thereafter receive, collect and retain,
as  part of the Mortgaged Properties, all such Hydrocarbons, all for the benefit
and  further  security  of  the  Secured  Indebtedness.

          (b)     In  the  event  that,  for  its convenience, the Holder should
elect,  with  respect  to  particular  properties  or contracts constituting the
Mortgaged  Properties,  not to exercise immediately its right to receive payment
to  it directly of all or any portion of the assigned proceeds of runs, then the
oil  or  gas  purchasers,  or other persons obligated to make such payment shall
continue to make payment of such proceeds of runs to the Grantor until such time
as  they  are notified by the Holder that payment be thereafter made directly to
the  Holder.  Such failure to notify shall not in any way waive the right of the
Holder  to place such assignment into effect as to payments not theretofore paid
out  to  the  Grantor  before  the giving of such notice. In this regard, in the
event  payments  are made directly to the Holder and then, at the request of the
Holder,  payments are, for a period or periods of time, paid to the Grantor, the
Holder shall nevertheless have the right, effective upon notice, to require that
future  payments  be  again  made  to  it.

          (c)     All  parties  producing,  purchasing  or  receiving  any  such
Hydrocarbons,  or  having  such,  or proceeds therefrom, in their possession for
which  they  or others are accountable to the Holder by virtue of the provisions
of  this  Article, are authorized and directed to treat and regard the Holder as
the  assignee  and transferee of the Grantor and entitled in the Grantor's place
and  stead  to  receive  such  Hydrocarbons and all proceeds therefrom; and said
parties  and  each of them shall be fully protected in so treating and regarding
the  Holder,  and  shall be under no obligation to see to the application by the
Holder  of  any  such  proceeds  or  payments  received  by  it.

     6.2     Additional  Duties and Obligations. The Grantor agrees (i) to cause
             ----------------------------------
all  pipeline  companies  and other purchasers of the Hydrocarbons produced from
the  Mortgaged Properties to pay promptly to the Holder at its principal office,
the  Grantor's  interest  in  the  proceeds  derived  from  the  sale thereof in
accordance  with the terms of this assignment, and (ii) forthwith to execute and
deliver  any and all transfer orders, division orders and other instruments that
may  be  requested by the Holder or that may be required by any purchaser of the
production  from any of the Mortgaged Properties for the purpose of effectuating
payment  of  the  proceeds  of  runs  to the Holder; and the Holder shall not be
required  at  any  time,  as  a condition to its right to obtain the proceeds of
runs,  to  warrant  its  title  thereto  or  to make any guaranty whatsoever. In
addition,  and  without  limitation,  the  Grantor  covenants  and  agrees,  and
undertakes  hereby,  to  provide  to  the  Holder  the name and address of every
pipeline  company or other purchaser of Hydrocarbons and other minerals produced
from  the  Mortgaged  Properties  when  determined,  together  with  a  copy  of
applicable  Product  Sales  Contracts.  Grantor  shall promptly pay all expenses
incurred by the Holder in the collection of the said proceeds of runs.  If under
any  Product Sales Contracts, other than division orders or transfer orders, any
proceeds  of  runs  are  required to be paid by the purchaser to Grantor so that
under  such  existing agreements payment cannot be made of such proceeds of runs
to  the  Holder,  Grantor's  interest  in  all proceeds of runs under such sales
agreements and in all other proceeds of runs which for any reason may be paid to
Grantor  shall,  when  received  by Grantor, constitute trust funds in Grantor's
hands  and  shall  be  immediately  paid  over  to  the  Holder.

     6.3     Application  of  Proceeds.  All  payments  received  by  the Holder
             -------------------------
pursuant  to  Section  6.1  shall  be  applied to the outstanding balance on the
Promissory  Note.

     6.4     Failure  to  Make  Payment.  Should  any  person  now  or hereafter
             --------------------------
purchasing  or taking oil, gas, other Hydrocarbons or other minerals attri-buted
to  the  Mortgaged Properties fail to make payment promptly to the Holder of the
hereby assigned proceeds of runs after being notified to do so, the Holder shall
have  the  right  to make, or to require Grantor to make, a change of connection
and  the right to designate or approve the purchaser with whose facilities a new
connection  shall  be  male,  without  liability or responsibility in connection
therewith  so  long  as  ordinary  care  is  used  in  making  such designation.

     6.5     No  Liability  of  the  Holder  in Collecting. The Holder is hereby
             ---------------------------------------------
absolved from all liability for failure to enforce collection of any proceeds so
assigned  and  for  failure  to  exercise  diligence  in  the collection of such
proceeds  and  from all other responsibility in connection therewith, except for
responsibility  to  account  to  the  Grantor  for  funds  actually  received.

     6.6     No Effect on Obligation to Pay Secured Indebtedness. Nothing herein
             ---------------------------------------------------
contained  shall detract from or limit the absolute obligation of the Grantor to
make  payment  of  the  Secured  Indebtedness regardless of whether the proceeds
assigned  by  this  Article are sufficient to pay the same, and the rights under
this  Article  shall  be  in  addition  to  all  other security now or hereafter
existing  to  secure  the  payment  of  the  Secured  Indebtedness.

     6.7      Status of Assignment. Notwithstanding the other provisions of this
              --------------------
Article,  the  Holder,  the  Trustee  or  any  receiver  appointed  in  judicial
proceedings  for  the  enforcement  of  this  instrument shall have the right to
receive all of the Hydrocarbons herein assigned and the proceeds therefrom after
the  Promissory  Note  has  been declared due and payable in accordance with the
provisions  of  Section 7.2 hereof and to apply all of said proceeds as provided
in  Section  6.3  hereof.  Upon any sale of the Mortgaged Properties or any part
thereof  pursuant to Article VIII, the Hydrocarbons thereafter produced from the
property so sold, and the proceeds therefrom, shall be included in such sale and
shall  pass  to the purchaser free and clear of the assignment contained in this
Article.

     6.8     Indemnity.  The  Grantor  agrees  to  indemnify the Trustee and the
             ---------
Holder  against  all  claims, actions, liabilities, judgments, costs, attorneys'
fees  or  other  charges  of  whatsoever kind or nature (all hereinafter in this
Section  6.8 called "claims") made against or incurred by either or both of them
as a consequence of the assertion, either before or after the payment in full of
the  Secured  Indebtedness,  that  either  or both of them received Hydrocarbons
herein  assigned  or  the  proceeds  thereof  claimed  by third persons, and the
Trustee  and  the Holder shall have the right to defend against any such claims,
employing  attorneys  therefor,  and  unless furnished with reasonable indemnity
upon  request  therefor,  they  or either of them shall have the right to pay or
compromise and adjust all such claims. The Grantor will indemnify and pay to the
Trustee  and  the  Holder  any  and  all  such amounts as may be paid in respect
thereof  as  may  be successfully adjudged against the Trustee and the Holder or
either  of  them;  and  in  addition. to the rights to be indem-nified as herein
provided,  all  amounts  paid  by  the  Holder  in  compromise,  satisfaction or
discharge of any such claim, action or judgment, and all court costs, attorneys'
fees  or  other  expenses  of every character incurred by Holder pursuant to the
provisions  of  this  Article  shall  be a demand obligation owing by Grantor to
Holder  and  shall  bear  interest  from  date  of expenditure until paid at the
interest  rate  provided  for  in  the  Promissory Note and shall be part of the
Secured Indebtedness. The obligations of the Grantor as hereinabove set forth in
this  Section  6.8  shall  survive  the  release  of  this  instrument.

     6.9     Special  Power  of  Attorney.  Without  limitation  upon any of the
             ----------------------------
foregoing,  the  Grantor  hereby  constitutes and appoints Holder as its special
attorney  in  fact with full power of substitution, either generally or for such
periods  or purposes as the Holder may from time to time proscribe) in the name,
place  and  stead  of  the  Grantor to do any and every act and exercise any and
every  power  that  the  Grantor  might  or could do or exercise personally with
respect  to  all  Hydrocarbons  which  are  produced  from  or  allocated to the
Mortgaged  Properties  including proceeds of runs (the same having been assigned
by  the  Grantor  to  the  holder  pursuant  to  Section  6.1 hereof), expressly
inclusive,  but  not  limited  to,  the  right,  power  and  authority  to:

          (a)     Execute  and  deliver  any  and all, transfer orders, division
orders, certificates and other instruments of every nature that may be requested
or  required by any purchaser of production from any of the Mortgaged Properties
for the purpose of effectuating payment of the proceeds of runs to the holder or
which  the  Holder  may  otherwise  deem  necessary or appropriate to effect the
intent  and  purpose  of  the  assignment  contained  in  this  Article  VI; and

          (b)     If  under  any  Product  Sales  Agreements other than division
orders  or  transfer orders, any proceeds of runs are required to be paid by the
purchaser  to  the Grantor so that under such existing agreements payment cannot
be  made of such proceeds of runs to the Holder, to make, execute and enter into
such sales agreements or other agreements as are necessary to direct proceeds of
runs  to  be  payable  to  the  Holder;

giving  and  granting unto the said attorney in fact full power and authority to
do and perform any and every act and thing whatsoever necessary and requisite to
be  done as fully and to all intents and purposes, as the Grantor might or could
do  if  personally  present; and the Grantor shall be bound thereby as fully and
effectively  as  if  the  Grantor  had  personally  executed,  acknowledged  and
delivered  any  of  the foregoing certificates or documents. Holder may exercise
the  powers  and authorities herein conferred upon the Holder through any person
who, at the time of the execution of the particular instrument, is an officer of
the  Holder.  The  power  of  attorney  herein conferred is granted for valuable
consideration  and  hence is coupled with an interest and is irrevocable so long
as  the  Secured  Indebtedness,  or  any  part thereof, shall remain unpaid. All
persons  dealing  with the Holder or any substitute, shall be fully protected in
treating the powers and authorities conferred by this paragraph as continuing in
full  force  and  effect  until  advised  by  the  Holder  that  all the Secured
Indebtedness  is  fully  and  finally  paid.

                                  ARTICLE VII
                                    Default
                                    -------

     7.1     Events  of  Default.  The  occurrence of any of the following shall
             -------------------
constitute  an  event  of  default  (each  herein called an "Event of Default"):

          (a)     If any amount of the Secured Indebtedness is not paid when the
same  becomes  due,  as  originally  provided,  or pursuant to any provision for
demand  or  acceleration.

          (b)     If  any warranty or representation of Grantor to Holder either
herein  or  otherwise  made in connection with this transaction is untrue in any
material  respect.

          (c)     If  Grantor  fails  to  timely  and  properly observe, keep or
perform  any  covenant,  agreement  or condition herein required to be observed,
kept  or  performed.

     7.2     Acceleration.  Upon  the  occurrence of an Event of Default, Holder
             ------------
may,  without  any  prior  notice to Granter or to any other person, and without
making  any  demand  upon Grantor or upon any other person to cure such Event of
Default,  all  rights  to any such prior notice or demand being hereby expressly
waived,  exercise any rights or remedies permitted by this Deed of Trust, and/or
declare  the  entire  amount  of  the  Secured  Indebtedness  then  outstanding,
including  oil  interest  accrued  thereon,  to  be immediately due and payable,
whereupon  the  same  shall  become  immediately due and payable without demand,
presentment  for  payment,  notice  of  nonpayment,  protest, notice of protest,
notice  of  intent  to accelerate, notice of acceleration and all other notices,
all  of  which  the  Grantor  expressly  waives. Whether or not Holder elects to
accel-erate  as  herein  provided,  holder  may  simultaneously,  or thereafter,
without  any  further  notice  to  Grantor,  exercise  any other right or remedy
provided  in  this  instrument.

     7.3     Remedies  When  Secured Indebtedness Due and Unpaid. When any Event
             ---------------------------------------------------
of  Default has occurred hereunder and any amount of the Secured Indebtedness is
due,  by  reason of acceleration or otherwise and is unpaid, Holder may take any
one  or  more  of  the  following  actions:

          (a)     Direct  the  Trustee  to  sell the Mortgaged Properties or any
part  thereof  as  provided  in  Article  VIII  hereof.

          (b)     File  and prosecute suit against any person liable therefor to
collect  any  balance  of  the  Secured  Indebtedness  due  and  unpaid.

          (c)     File  and  prosecute suit for judicial foreclosure of any lien
or  security  interest  created  hereby.

          (d)     File and prosecute suit for appointment of a receiver pursuant
to  Section  8.8.

          (e)     Proceed  with  non-judicial  foreclosure  upon any part of the
Mortgaged  Properties  that  is personal property by any means authorized by the
applicable  provisions  of  the  Uniform  Commercial  Code.

          (f)     If  the  same  has not already been done as permitted by other
provisions  hereof, notify purchasers to pay proceeds of runs directly to Holder
pursuant  to  Section  6.1.

          (g)     Proceed with any other remedy for the collection of the amount
due  of Secured Indebtedness, or for the enforcement of any lien given to secure
the  same,  which  may  be  provided  in any other agreement between Grantor and
Holder,  or  between  Holder and any other party to the loan transaction secured
hereby,  or  by  law.

          (h)     Take  any  other  legal  action,  whether at law or in equity,
which  it  may  deem  necessary  or  appropriate.

Each  of  the  foregoing  remedies shall be cumulative of all the others, and no
resort  to  any  one remedy shall preclude simultaneous or subsequent pursuit of
any  other  remedy,  nor  shall  any  resort  to  any remedy exhaust the same or
preclude Holder from again pursuing the same remedy so long as any amount of the
Secured  Indebtedness  remains  due  and  unpaid.

                                  ARTICLE VIII
                            Remedies and Enforcement
                            ------------------------

     8.1     Power  of  Sale.  Upon  the  occurrence  of an Event of Default the
             ---------------
Trustee,  or  his  successor  or  substitute, is authorized and empowered and it
shall  be  his  special  duty at the request of the Holder to sell the Mortgaged
Properties  or  any  part  thereof  situated  within  the  State of Texas at the
courthouse  door  of  any  county in the State of Texas in which any part of the
Mortgaged Properties is situated, at public venue to the highest bidder for cash
between the hours of ten o clock AM, and four o'clock PM on the first Tuesday in
any month after having given notice of such sale in accordance with the statutes
of  the State of Texas then in force governing sales of real estate under powers
conferred  by deed of trust. Any sale made by the Trustee hereunder may be as an
entirety  or  in  such  parcels  as  the Holder may request, and any sale may be
adjourned  by announcement at the time and place appointed for such sale without
further notice except as may be required by law. The sale by the Trustee of less
than  the  whole  of the Mortgaged Properties shall not exhaust the power of the
sale  herein  granted,  and  the  Trustee  is  specifically  empowered  to  make
successive  sale  or  sales  under  such  power until the whole of the Mortgaged
Properties  shall  be  sold;  and  if the proceeds of such sale of less than the
whole  of  the  Mortgaged  Properties  shall  be  less than the aggregate of the
indebtedness  secured hereby and the expense of executing this trust as provided
herein,  this  Deed  of Trust and the lien hereof shall remain in full force and
effect  as  to  the unsold portion of the Mortgaged Properties just as though no
sale  had  been made; provided, however, that Grantor shall never have any right
to  require  the sale of less than the whole of the Mortgaged Properties but the
Holder  shall  have  the  right, at its sole election, to request the Trustee to
sell  less  than  the  whole  of  the Mortgaged Properties. After each sale, the
Trustee  shall  make  to  the  purchaser  or  purchasers  at  such sale good and
sufficient conveyances in the name of Grantor, conveying the property so sold to
the  purchaser  or  purchasers in fee simple with general warranty of title, and
shall  receive  the  proceeds of said sale or sales and apply the same as herein
provided.  The  power  of sale granted herein shall not be exhausted by any sale
held  hereunder by the Trustee or his substitute or successor, and such power of
sale may be exercised from time to time and as many times as the Holder may deem
necessary  until  all  of  the  Mortgaged Properties have been duly sold and all
Secured Indebtedness has been fully paid. In the event any sale hereunder is not
completed  or  is  defective  in  the opinion of the Holder, such sale shall not
exhaust the power of sale hereunder and the Holder shall have the right to cause
a  subsequent sale or sales to be made hereunder. Any and all statements of fact
or  other  recitals  made  in  any  deed  or  deeds  given by the Trustee or any
successor  or  substitute  appointed  hereunder  as to nonpayment of the Secured
Indebtedness  or having declared all of said indebtedness to be due and payable,
or  as  to the request to sell, or as to notice of time, place and terms of sale
and  the  properties  to  be  sold having been duly given, or as to the refusal,
failure  or  inability  to act of the Trustee, substitute or successor, shall be
taken  as  prima facie evidence of the truth of the facts so stated and recited.
The Trustee or his successor or substitute may appoint or delegate to the extent
permitted  by  law  any  one or more persons as agent to perform any act or acts
necessary  or incident to any sale held by the Trustee, including the posting of
notices  and  the conduct of sale, but in the name and on behalf of the Trustee,
his successor or substitute. If the Trustee or his successor or substitute shall
have  given  notice  of  sale  hereunder,  any  successor  or substitute Trustee
thereafter  appointed  may  complete the sale and the conveyance of the property
pursuant thereto as if such notice had been given by the successor or substitute
Trustee  conducting  the  sale.

     8.2     Judicial  Proceedings.  Upon the occurrence of an Event of De-fault
             ---------------------
and if such event shall be continuing, the Trustee, in lieu of or in addition to
exercising  the power of sale hereinabove given, may pro-ceed by a suit or suits
in equity or at law, whether for a foreclosure hereunder, or for the sale of the
Mortgaged  Properties,  or  for  the  spe-cific  performance  of any covenant or
agreement  herein  contained  or  in  aid  of  the execution of any power herein
granted,  or for the appointment of a receiver pending any foreclosure hereunder
or  the  sale  of  the Mortgaged Properties, or for the enforcement of any other
appropriate  legal  or  equitable  remedy.  In the event a foreclosure hereunder
shall  be  commenced  by the Trustee, or his substitute or successor, the Holder
may  at  any  time  before  the sale of the Mortgaged Properties direct the said
Trustee  to  abandon the sale, and may then institute suit for the collection of
the  Promissory  Note  and/or  any  other  Secured  Indebtedness,  and  for  the
foreclosure  of the lien of this Deed of Trust.  It is agreed that if the Holder
should  institute a suit for the collection of the Promissory Note and the other
Secured  Indebtedness and for the foreclosure of the lien of this Deed of Trust,
the  Holder  may  at  any time before the entry of a final judgment in said suit
dismiss  the  same, and require the Trustee, his substitute or successor to sell
the  property  in  accordance  with  the  provisions  of  this  Deed  of  Trust.

     8.3     Holder  as Purchaser. The Holder shall have the right to become the
             --------------------
purchaser  at  any  sale held by the Trustee or by any court, receiver or public
officer,  and  the  Holder shall have the right to credit upon the amount of the
bid  made  therefor, the amount of Secured Indebtedness payable to it out of the
net  proceeds  of  such  sale. The Holder, upon any such purchase, shall acquire
good  title to the Mortgaged Properties so purchased, free from the lien of this
Deed  of  Trust  and  free  of  all  rights  of  redemption in Grantor. Recitals
contained  in  any  conveyance  made to any purchaser at any sale made hereunder
shall  presumptively  establish  the  truth  and accuracy of the matters therein
stated,  including, without limiting the generality of the foregoing, nonpayment
of the unpaid principal sum of, and the interest accrued on, the Promissory Note
after  the  same have become due and payable, advertise-ment and conduct of such
sale  in  the  manner  provided  herein  or appointment of any successor Trustee
hereunder; and Grantor does hereby ratify and confirm any and all acts that said
Holder  or its successors may lawfully do in the premises by virtue of the terms
and  conditions  of  this  instrument.

     8.4     Receipt  to  Purchaser. Upon any sale, whether made under the power
             ----------------------
of  sale  herein granted and conferred or by virtue of judicial proceedings, the
receipt  of  the  Trustee,  or  of  the  officer  making  sale  under  judicial
proceedings, shall be sufficient discharge to the purchaser or purchasers at any
sale  for  his or their purchase money, and such purchaser or purchasers, his or
their assigns or personal representatives, shall not, after paying such purchase
money  and receiving much receipt of the Trustee or of such officer therefor, be
obliged  to  see  to  the  application  of such purchase money, or be in anywise
answerable  for  any  loss,  misapplication  or  nonapplication  thereof.

     8.5     Effect  of  Sale.  Any  sale  or sales of the Mortgaged Properties,
             ----------------
whether  under  the  power  of sale herein granted and conferred or by virtue of
judicial  proceedings, shall operate to divest all right, title, interest, claim
and  demand  whatsoever either at law or in equity, of the Grantor of, in and to
the  premises  and  the property sold, and shall be a perpetual bar, both at law
and  in  equity,  against  the Grantor, the Grantor's successors or assigns, and
against any and all persons claiming or who shall thereafter claim all or any of
the  property  sold  from,  through  or  under  the  Grantor,  or  the Grantor's
successors or assigns; nevertheless, the Grantor, if requested by the Trustee so
to  do,  shall  join  in  the  execution and delivery of all proper conveyances,
assignments  and  transfers  of  the  properties  so  sold.

     8.6     Application  of Proceeds. The Trustee shall receive the proceeds of
             ------------------------
any  sale  under this Article, and shall apply the same as follows: first to the
expenses of sale, including a commission not to exceed five percent (5%) of such
proceeds  to  himself;  then  to  the payment of the Secured Indebtedness in the
manner  as provided for in Section 6.3 hereof. Thereafter, any remaining balance
shall  be  paid  to  the  Grantor  or  its  successors  in  title.

     8.7     Remedies Under UCC. Upon the occurrence of an Event of Default, the
             ------------------
Holder  may  exercise  its  rights of enforcement with respect to the Collateral
under  the Uniform Commercial Code and in conjunction with, in addition to or in
substitution  for  those  rights  and  remedies:

          (a)     The  Holder  may  enter  upon  Grantor's  premises  to  take
possession  of,  assemble  and  collect  the  Collateral;  and

          (b)     The  Holder may require Grantor to assemble the Collateral and
make  it available at a place the Holder designates which is mutually convenient
to  allow  the  Holder  to  take  possession  or  dispose of the Collateral; and

          (c)     Written  notice  mailed to Grantor as provided herein at least
five (5) days prior to the date of public sale of the Collateral or prior to the
date  after  which  private sale of the Collateral will be made shall constitute
reasonable  notice;  and

          (d)     Any sale made pursuant to the provisions of this section shall
be  deemed  to  have  been  a public sale conducted in a commercially reasonable
manner  if  held contemporaneously with and upon the same notice as required for
the  sale  of  the  Collateral under power of sale as provided in Section 8.1 of
this  Deed  of  Trust;  and

          (e)     In  the  event  of  a  foreclosure  sale,  whether made by the
Trustee  under  the  terms  hereof, or under judgment of a court, the Collateral
may,  at  the  option  of  the  Holder,  be  sold  as  a  whole;  and

          (f)     It  shall not be necessary that the Holder take posses-sion of
the  Collateral  or any part thereof prior to the time that any sale pursuant to
the  provisions  of this section is conducted and it shall not be necessary that
the  Collateral or any part thereof be present at the location of such sale; and

          (g)     Prior  to  application  of  proceeds  of  disposition  of  the
Collateral  to  the  Secured Indebtedness, such proceeds shall be applied to the
reasonable  expenses of retaking, holding, preparing for sale or lease, selling,
leasing  and  the  like  and  the  reasonable attorneys' fees and legal expenses
incurred  by  the  Holder;  and

          (h)     Any  and  all statements of fact or other recitals made in any
bill  of  sale or assignment or other instrument evidencing any foreclosure sale
hereunder  as  to nonpayment of the Secured Indebtedness or as to the occurrence
of  any  Event  of Default, or to the Holder having declared all of such Secured
Indebtedness  to be due and payable, or as to notice of time, place and terms of
sale and of the properties to be sold having been duly done by the Holder, shall
be  taken  as  prima  facie  evidence  of  the  truth of the facts so stated and
recited;  and

          (i)     The  Holder may appoint or delegate any one or more persons as
agent  to  perform any act or acts necessary or incident to any sale held by the
Holder, including the sending of notices and the conduct of the sale, but in the
name  and  on  behalf  of  the  Holder.

     8.8     Appointment  of  Receiver. In addition to all other remedies herein
             -------------------------
provided for, Grantor agrees that upon the occurrence of an Event of Default the
Holder  shall  as a matter of right be entitled to the appointment of a receiver
or  receivers  for  all  or  any  part  of  the  Mortgaged Properties and/or the
Collateral,  whether such receivership be incident to a proposed sale (or sales)
of  such property or otherwise, and without regard to the value of the Mortgaged
Properties and/or the Collateral or the solvency of any person or persons liable
for  the  payment  of  the  indebtedness secured hereby, and Grantor does hereby
consent  to  the  appointment  of  such  receiver  or  receivers,  to the extent
permitted by law waives any and all defenses to such appointment, and agrees not
to  oppose  any  application  therefor  by  the  Holder  and  agrees  that  such
appointment  shall in no manner affect the rights of the Holder under Article VI
hereof.  Nothing  herein  is  to be construed to deprive the Holder of any other
right,  remedy  or  privilege  it may now have under the laws to have a receiver
appointed.  Any  money  advanced  by  the  Holder  in  connection  with any such
receivership  shall  be  a  demand obligation owing by Grantor to the Holder and
shall bear interest from the date of making such advancement by the Holder until
paid at the same rate as is provided in the Promissory Note for interest on past
due  principal  and  shall  be  a  part of the Secured Indebtedness and shall be
secured  by  this Deed of Trust and by any other instrument securing the Secured
Indebtedness.

     8.9     Grantor's  Waiver  of  Appraisement, Marshalling, Other Rights. The
             --------------------------------------------------------------
Grantor  agrees, to the full extent that the Grantor may lawfully so agree, that
Grantor  will  not  at  any  time insist upon or plead or in any manner whatever
claim  the benefit of any appraisement, valuation, stay, extension or redemption
law  now or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure  of this instrument or the absolute sale of the Mortgaged Properties
or  the  possession  thereof  by  any purchaser at any sale made pursuant to any
provision  hereof,  or  pursuant  to  the  decree  of  any  court  of  competent
jurisdiction;  but the Grantor, for the Grantor and all who may claim through or
under  the Grantor, so far as the Grantor or those claiming through or under the
Grantor  now  or  hereafter  lawfully may, hereby waives the benefit of all such
laws.  The  Grantor,  for the Grantor and all who may claim through or under the
Grantor,  waives, to the extent that the Grantor may lawfully do so, any and all
right  to  have  the Mortgaged Properties marshalled upon any foreclosure of the
lien hereof, or sold in inverse order of alienation, and agrees that the Trustee
or  any  court having jurisdiction to foreclose such lien may sell the Mortgaged
Properties  as  an  entirety.  If any law in this section referred to and now in
force,  of which the Grantor or the Grantor's successor or successors might take
advantage despite the provisions hereof, shall hereafter be repealed or cease to
be  in  force, such law shall not thereafter be deemed to constitute any part of
the contract herein contained or to preclude the operation or application of the
provisions  of  this  section.

     8.10     Costs  and  Expenses.  All costs and expenses (including attorneys
              --------------------
fees)  incurred  by  the  Trustee,  the  Holder or the Holders in protecting and
enforcing  their rights hereunder, shall constitute a demand obligation owing by
the  Grantor  to  the  party  incurring  such  costs and expenses and shall draw
interest  at  the  rate  set  forth  in  the Promissory Note, all of which shall
constitute  a  portion  of  the  Secured  Indebtedness.

     8.11     Operation  of  Property  by the Trustee. Upon the occurrence of an
              ---------------------------------------
Event  of  Default  and  in addition to all other rights herein conferred on the
Trustee,  the  Trustee  (or  any  person,  firm or corporation designated by the
Trustee)  shall  have  the right and power, but shall not be obligated, to enter
upon  and take possession of any of the Mortgaged Properties, and to exclude the
Grantor,  and  the  Grantor's agents or servants, wholly therefrom, and to hold,
use,  administer,  manage  and  operate  the same to the extent that the Grantor
shall  be  at  the time entitled and in his place and stead. The Trustee, or any
person,  firm  or  corporation  designated  by the Trustee, may operate the same
without  any liability to the Grantor in connection with such operations, except
to use ordinary care in the operation of said properties, and the Trustee or any
person, firm or corporation designated by them, shall have the right to collect,
receive and receipt for all Hydrocarbons produced and sold from said properties,
to make repairs, purchase machinery and equipment, conduct work-over operations,
drill  additional  wells and to exercise every power, right and privilege of the
Grantor  with  respect  to  the  Mortgaged  Properties.  All costs, expenses and
liabilities  of  every  character  incurred  by  the  Trustee  or  the Holder in
managing,  operating,  maintaining,  protecting  or  preserving such properties,
respectively,  shall  constitute  a  demand  obligation  owing by Grantor to the
Holder  and  shall bear interest from date of expenditure until paid at the same
rate  as  is provided in the Promissory Note for interest on past due principal,
all of which shall constitute a portion of the Secured Indebtedness and shall be
secured  by  this Deed of Trust and by any other instrument securing the Secured
Indebtedness.  If  necessary  to  obtain  the possession provided for above, the
Trustee  or  the  Holder, as the case may be, may invoke any and all remedies to
dispossess Grantor including specifically one or more actions for forcible entry
and  detainer,  trespass to try title and restitution.  When and if the expenses
of  such  operation  and  development (including costs of unsuccessful work-over
operations  or  additional  wells)  have  been paid and the Secured Indebtedness
paid,  the Mortgaged Properties shall, if there has been no sale or foreclosure,
be  returned  to  the  Grantor.

     8.12     Remedies  Regardless  of Secured Indebtedness Due and Unpaid. Upon
              ------------------------------------------------------------
the  occurrence  of any Event of Default hereunder, Holder shall hive the right,
but  not  the obligation, regardless of whether or not any amount of the Secured
Indebtedness  is then due and unpaid, and without the necessity of resorting to,
but  without to any extent waiving, any right of acceleration which may exist by
reason  of  such  Event  of  Default,  to:

          (a)     perform  any  act  required  to  be performed hereunder or any
party  to  the  loan  transaction  and which Grantor or such party has failed to
perform,  and in so doing, Holder shall have the right to enter upon and to take
possession  of  the  Mortgaged Properties or any part thereof, to such extent as
may  be  expedient.  Grantor shall reimburse Holder for all expenses incurred by
Holder  in  exercising  any such remedy and Grantor's obligation to so reimburse
Holder  shall  be  a  part  of  the  Secured  Indebtedness.

          (b)     File  and  prosecute  suit against Grantor or any other person
responsible  for  or  on  account  of such default to recover any actual damages
sustained  as a result of any breach of this instrument or to enforce compliance
herewith.

     8.13     Change  in  Laws.  If  any  statute now applicable in any state in
              ----------------
which  any  of  the  Mortgaged  Properties  is  now  located  provides, or shall
hereafter  be  amended  to  provide,  a different procedure for the sale of real
property  under  a power of sale in a deed of trust or mortgage, the Holder may,
in  its sole discretion, if same be permitted by applicable law, follow the sale
procedure  set forth in this Article VIII or that prescribed in such statute, as
amended.

                                   ARTICLE IX
                                 Miscellaneous
                                 -------------

     9.1     Concerning  the  Trustee.  The  Trustee may resign by instrument in
             ------------------------
writing  delivered  to the Holder, or Holder may remove the Trustee at any time,
for  any  reason  deemed  sufficient  by  Holder.  In  the  event  of the death,
resignation  or  removal  of  the  Trustee,  Holder  may appoint a substitute or
successor  Trustee  by instrument in writing or by an amendment or supplement to
this Deed of Trust. Such substitute or successor Trustee shall succeed to all of
the  interests, titles, rights and powers of the Trustee hereunder, and wherever
in  this instrument, including this section, the term "Trustee" or "the Trustee"
is  used,  such term includes any substitute or successor Trustee as well as the
original  Trustee.  The Trustee may designate an agent or agents who may perform
on behalf of, and in the name of, the Trustee any function required or permitted
to  be  performed  by the Trustee hereunder. The Trustee shall not be liable for
any  error of judgment or act done by the Trustee in good faith, or be otherwise
responsible  or  accountable  under  any  circumstances  whatsoever,  except for
Trustee's  gross  negligence  or  willful misconduct. The Trustee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any  action  taken  or proposed to be taken by him hereunder, believed by him in
good  faith to be genuine.  All moneys received by the Trustee shall, until used
or  applied as herein provided, be held in trust for the purposes for which they
were  received,  but  need not be segregated in any manner from any other moneys
(except  to  the  extent  required  by  law),  and the Trustee shall be under no
liability  for  interest on any moneys received by him hereunder. Grantor hereby
ratifies  and  confirms  any  and all acts which the herein named Trustee or his
successor  or  successors,  substitute  or  substitutes, in this trust, shall do
lawfully  by  virtue  hereof.  Grantor  will reimburse Trustee for, and save him
harmless  against, any and all liability and expense that may be incurred by him
in  the  performance  of  his  duties.

     9.2     Security Agreement and Special Filing as Financing Statement.  With
             ------------------------------------------------------------
respect  to all Collateral constituting a part of the Mortgaged Properties, this
Deed  of  Trust  shall  likewise  be  a  security  agreement,  and  for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
for  the  purpose  of  further  securing  payment and performance of the Secured
Indebtedness,  Grantor  hereby  grants to Holder a security interest and lien in
all  rights,  titles  and interest now owned or hereafter acquired by Grantor in
all  Collateral.  Grantor represents and warrants that, except for any financing
statement  filed  by Holder, no presently effective financing statement covering
the  Collateral or any part thereof, has been filed with any filing officer, and
no  other security interest has attached or has been perfected in the Collateral
or  any  part  thereof.  This  Deed  of  Trust shall be effective as a financing
statement filed as a fixture filing with respect to all fixtures included within
the definitions of Mortgaged Properties and Collateral. This Deed of Trust shall
also  be  effective  as  a  financing  statement  covering  minerals or the like
(including  oil and gas) and accounts subject to Subsection (e) of Section 9.103
of  the Uniform Commercial Code. A carbon, photographic or other reproduction of
this  Deed of Trust shall be suffi-cient as a financing statement. The following
information  is included for purposes of meeting the requirements of a financing
statement:

(a)     The  name  of  the  debtor  is:  Enexco,  Inc

(b)     The  name  of  the  secured  party  is:  Colony  Energy,  Inc.

          (c)     The  address  of  the  secured party is: 2100 West Loop South,
Suite  900,  Houston,  Texas  77027

          (d)     The  mailing address of the debtor is: 3131 Turtle Creek Blvd,
Suite  1210,  Dallas,  Texas  75219.

          (e)     This  financing  statement  covers  all  rights,  titles  and
interests  now  owned and at any time hereafter acquired by the debtor in all of
the  Collateral.  The  Collateral  includes (i) goods which are or are to become
fixtures  on  the  Lands Described in Exhibit A (or the Oil and Gas Leases), and
(ii)  minerals  or the like (including oil and gas) or the accounts which are to
be  financed  at  the  wellhead or minehead of the wells or mines located on the
Lands  Described  in  Exhibit  A  (or  the  Oil  and Gas Leases). This financing
statement is to be filed for record in the real estate records. Debtor does have
an  interest of record in the Lands Described in Exhibit A, and the names of the
additional record owners of the Lands Described in Exhibit A are listed thereon.

          (f)     Proceeds  and  products  of  Collateral  are  also  covered.

     9.3     No  Implied  Waiver. No failure of Holder to declare any default or
             -------------------
to  exercise any right or remedy herein provided in any one or more instances or
for  any  period  of time, and no acquiescence in or acceptance by Holder of any
late  or  defective notice or performance hereunder, shall be deemed a waiver or
an  agreement  to modify of any provision hereof. Holder shall at all times have
the  right,  notwithstanding any such prior acquiescence or forbearance, without
any prior notice or demand, to require strict performance of each and every term
and  provision  hereof.  At  any  time  when  any Event of Default is continuing
hereunder, Holder may, without any prior notice to Grantor except such notice as
may be herein otherwise required, exercise any right or remedy of Holder arising
by  reason  of  such  default,  notwithstanding the length of time such Event of
Default  has been continuing, or the occurrence in the past of similar events or
other  Events  of  Default  for  which  no  remedy  has  been  invoked.

     9.4     Notices.  All notices, requests, demands or other communications to
             -------
or upon the respective parties hereto shall be deemed to have been given or made
when  deposited  in  the  mails, postage prepaid, certified mail, return receipt
requested, or, in the case of telex, telegraphic or cable notice, when delivered
to  the  telex,  telegraph  or cable company or in the case of telex or telecopy
notice sent to a telex or telecopier owned or operated by a party hereto when so
sent,  addressed  to its address shown opposite its respective signature hereto.
Notwithstanding  the  foregoing,  notices  of  change  of  address  shall become
effective  only  upon  receipt.  Any  such  notice,  request,  demand  or  other
communication  (other than any notice of change of address) may be given or made
by  telephone (with prompt written confirmation thereof) and any such telephonic
notice,  request,  demand  or  other  communication shall be deemed to have been
given  or  made  when  received.

     9.5     Property to Revert. If the Secured Indebtedness shall be fully paid
             ------------------
and  the  covenants herein contained shall be well and truly performed, then all
of  the  Mortgaged Properties shall revert to the Grantor and the entire estate,
right,  title  and interest of the Trustee and the Holder shall thereupon cease;
and  the  Trustee  in  such  case  shall, upon the request of the Grantor and at
Grantor  a  cost  and  expense,  deliver  to  the  Grantor,  proper  instruments
acknowledging  satisfaction  of  this  instrument.

     9.6     Renewals;  Resort to Other Security. Renewals and extensions of the
             -----------------------------------
Secured  Indebtedness  may  be  given at any time, and amendments may be made to
agreements  relating  to  any part of such Secured Indebtedness or the Mortgaged
Properties,  and  the Holder may take or may hold other security for the Secured
Indebtedness  without  notice  to  or consent of the Grantor. The Trustee or the
Holder  may  resort first to such other security or any part thereof or first to
the security herein given or any part thereof, or from time to time to either or
both,  even  to the partial or complete abandonment of either security, and such
action  shall  not be a waiver of any rights conferred by this instrument, which
shall  continue  as  a  first  lien  upon the Mortgaged Properties not expressly
released  until  all  of  the  Secured  Indebtedness  is  fully  paid.

     9.7     Instrument  and Assignment, Etc. This instrument shall be deemed to
             -------------------------------
be  and  may  be  enforced from time to time as an assignment, chattel mortgage,
contract,  deed of trust, financing statement, real estate mortgage, or security
agreement,  and  from time to time as any one or more thereof. Should Grantor be
deemed  a "utility" as in the meaning of Section 35.01 of the Texas Business and
Commerce  Code, then this instrument shall also constitute a security instrument
executed  by  a  utility.

     9.8     Unenforceable  or  Inapplicable Provisions. If any provision hereof
             ------------------------------------------
or  of  the Promissory Note is invalid or unenforceable in any jurisdiction, the
other provisions hereof or of the Promissory Note shall remain in full force and
effect  in  such  jurisdiction,  and  the  remaining  provisions hereof shall be
liberally  construed  in  favor  of  the  Trustee  and  the  Holder  in order to
effectuate  the provisions hereof, and the invalidity of any provision hereof in
any  jurisdiction  shall  not  affect the validity or enforceability of any such
provision  in  any  other  jurisdiction.

     9.9     Rights  Cumulative.  Each  and every right, power and remedy herein
             ------------------
given  to  the Trustee, or the Holder shall be cumulative and not exclusive; and
the  Trustee  and the Holder shall, in addition to the remedies herein provided,
be  entitled  to  avail  themselves  of  all  such  other remedies as may now or
hereafter  exist at law or in equity for the collection of said indebtedness and
the  enforcement  of  the  covenants  herein  and  the  foreclosure of the liens
evidenced  hereby  and/or  the security interests evidenced hereby; and each and
every  right,  power  and  remedy whether specifically herein given or otherwise
existing  may  be  exercised from time to time and so often and in such order as
may  be  deemed  expedient by the Trustee or the Holder, as the case may be, and
the exercise, at the same time or thereafter any other right power or remedy. No
delay or omission by the Trustee, or by the Holder in the exercise of any right,
power  or  remedy  shall  impair any such right, power or remedy or operate as a
waiver  thereof  or  of  any  other  right,  power  or remedy then or thereafter
existing.

     9.10     Texas  Law  Controls.  This  instrument  shall  be governed by and
              --------------------
construed  in  accordance  with  the  law of the State of Texas. All obligations
hereunder  shall,  unless a different place is specified herein, be performed in
Houston,  Texas. Venue of any suit arising out of the transaction represented by
this  instrument  shall  lie  in Houston, Texas, except as otherwise required by
law.

     9.11     Integration.  This  instrument  and  the other documents exchanged
              -----------
between the parties of even date herewith constitute the entire agreement of the
parties  with respect to the subject matter hereof to the exclusion of any prior
agreement,  oral  or  written.

     9.12     Rules  of  Construction; Partial Invalidity. Wherever used in this
              -------------------------------------------
instrument  the singular number shall include the plural and vice versa, and all
pronouns  shall  include  masculine,  feminine  and neuter genders regardless of
gender  used.  Any  specific enumeration shall be deemed to be by way of example
and  not  exclusive  unless  otherwise  stated. Titles of articles, sections and
paragraphs  are  for  convenience  and  shall  not  limit the application of any
provision.  If  any provision of this instrument is invalid for any reason, such
invalidity  shall  not  affect  the  remainder of the instrument, which shall be
enforced  as  nearly  as  may  be  in  accordance  with  its  terms.

     9.13     Benefit.  This Deed of Trust shall be binding upon and shall inure
              -------
to  the  benefit  of  the  heirs, administrators, successors and assigns of each
party,  except  that  the  Grantor  may not transfer or assign any or all of its
rights or obligations hereunder without the prior written consent of the Holder.
All  agreements,  representations  and  warranties made herein shall survive the
execution  and  delivery  of the Promissory Note and this Deed of Trust, and the
extension  of  any  credit  in  connection  therewith.

                             [SIGNATURE TO FOLLOW]

<PAGE>
     IN  WITNESS  WHEREOF,  the  undersigned  have  executed  this instrument in
multiple  counterpart  originals to facilitate recordation on the day, month and
year  first  above  written.

"GRANTOR"

ENEXCO,  INC.,
a  Texas  corporation

By:_________________________________

Name:______________________________

Title:_______________________________

     The  Trustee  and  Holder join herein for the limited purposes of accepting
their  respective  obligations, rights, remedies and benefits under this Deed of
Trust.

"TRUSTEE

__________________________________________
     Randall  W.  Heinrich

"BENEFICIARY"

COLONY  ENERGY,  INC.,
a  Delaware  corporation

By:_________________________________

Name:______________________________

Title:_______________________________

<PAGE>
THE  STATE  OF  TEXAS

COUNTY  OF  DALLAS

     This  instrument  was  acknowledged  before  me  on  the  ____day  of
_________________,  2007,  by  ________________________,  in the capacity stated
above.

                         _____________________________________________
                         Notary  Public  in  and  for
                         the  State  of  T  E  X  A  S

                         Printed  Name:________________________________

                         My  Commission  Expires:_______________________

<PAGE>
     EXHIBIT  A

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