GUARANTY
 
This GUARANTY (as amended, restated, supplemented, or otherwise modified and in
effect from time to time, this “Guaranty”) is made as of this 13th day of
November, 2008, jointly and severally, by NORTH TEXAS DRILLING SERVICES, INC., a
Texas corporation (“North Texas”), SONTERRA OPERATING, INC., a Delaware
corporation (“Operating”), VELOCITY ENERGY LIMITED LLC, a Texas limited
liability company (“Limited”), VELOCITY ENERGY INC., a Delaware corporation
(“Velocity”), VELOCITY ENERGY OFFSHORE LP, a Delaware limited partnership
(“Offshore”), VELOCITY ENERGY PARTNERS LP, a Delaware limited partnership
(“Onshore”; North Texas, Operating, Limited, Velocity, Offshore and Onshore,
together with each other person or entity who becomes a party to this Guaranty
by execution of a joinder in the form of Exhibit A attached hereto, is referred
to individually as a “Guarantor” and collectively as the “Guarantors”; provided,
that the parties hereto agree that, as of the date hereof, North Texas,
Operating, Limited, Velocity, Offshore and Onshore are the only Guarantors) in
favor of SUMMERLINE ASSET MANAGEMENT, LLC, a Delaware limited liability company
in its capacity as collateral agent (together with its successors and assigns in
such capacity, the “Collateral Agent”) for the benefit of the entities
identified on the Schedule of Buyers attached to the Purchase Agreement defined
below (together with their successors and assigns, the “Buyers”).
 
WITNESSETH:
 
WHEREAS, as of the date hereof, Buyers have made loans and certain other
financial accommodations (collectively, the “Loans”) to SONTERRA RESOURCES,
INC., a Delaware corporation (the “Company”), as evidenced by those certain
senior secured notes of even date herewith in an original aggregate principal
amount of $8,875,000 (such notes, together with any promissory notes or other
securities issued in exchange or substitution therefor or replacement thereof,
and as any of the same may be amended, supplemented, restated or modified and in
effect from time to time, the “Notes”);
 
WHEREAS, the Notes are being acquired by Buyers pursuant to a Securities
Purchase Agreement dated as of even date herewith among the Buyers and the
Company (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the “Purchase Agreement”);
 
WHEREAS, pursuant to a Pledge Agreement of even date herewith by the Company in
favor of the Collateral Agent, the Company has pledged a lien on and security
interest in all of the issued and outstanding Capital Stock of North Texas,
Limited, Velocity, Onshore, Offshore and Operating owned by the Company;
 
WHEREAS, pursuant to a Pledge Agreement of even date herewith by Limited in
favor of the Collateral Agent, Limited has pledged a lien on and security
interest in all of the issued and outstanding Capital Stock of Onshore and
Offshore owned by Limited;
 
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WHEREAS, pursuant to a Security Agreement of even date herewith (as the same may
be amended, restated, supplemented or otherwise modified and in effect from time
to time, the “Security Agreement”) by the “Debtors” (as defined therein) in
favor of the Collateral Agent, such Debtors have granted the Collateral Agent,
for its benefit and the benefit of the Buyers, a first priority security
interest in, lien upon and pledge of each of their rights in the Collateral (as
defined in the Security Agreement); and
 
WHEREAS, the Guarantors are direct or indirect subsidiaries of the Company and,
as such, will derive substantial benefit and advantage from the Loans and other
financial accommodations available to the Company set forth in the Purchase
Agreement, the Notes and the other Transaction Documents, and it will be to each
Guarantor’s direct interest and economic benefit to assist the Company in
procuring said Loans and other financial accommodations from Buyers.
 
NOW, THEREFORE, for and in consideration of the premises and in order to induce
Buyers to make the Loans, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby
jointly and severally agrees as follows:
 
1. Definitions: Capitalized terms used herein without definition and defined in
the Purchase Agreement are used herein as defined therein. In addition, as used
herein:
 
“Bankruptcy Code” shall mean the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. §101, et seq.), as amended and in effect from time to time thereunder.
 
“Obligations” shall mean (i) all obligations, liabilities and indebtedness of
every nature of the Company from time to time owed or owing to the Buyers and
Collateral Agent, including, without limitation, all obligations, liabilities
and indebtedness of every nature of the Company under the Security Documents,
the Purchase Agreement, the Notes, the Loans, the Warrants, and the other
Transaction Documents, including, without limitation, the principal amount of
all debts, claims and indebtedness, accrued and unpaid interest and all fees,
taxes, indemnities, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable, whether before or after the filing of a
bankruptcy, insolvency or similar proceeding under applicable federal, state,
foreign or other law and whether or not an allowed claim in any such proceeding,
and (ii) all obligations, liabilities and indebtedness of every nature of any
subsequent Guarantor from time to time owed or owing to the Buyers and/or
Collateral Agent, including, without limitation, all obligations, liabilities
and indebtedness of every nature of the Guarantors under or in respect of this
Guaranty, the Pledge Agreement, the Security Agreement, the Purchase Agreement,
the Notes, the Loans, the Warrants, the other Security Documents and the other
Transaction Documents, as the case may be, including, without limitation, the
principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, taxes, indemnities, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable, whether before or after the filing
of a bankruptcy, insolvency or similar proceeding under applicable federal,
state, foreign or other law and whether or not an allowed claim in any such
proceeding.
 
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2. Guaranty of Payment.
 
(a) Each Guarantor, jointly and severally, hereby unconditionally and
irrevocably guarantees the full and prompt payment and performance to Buyers and
Collateral Agent, on behalf of itself and in its capacity as agent for the
benefit of Buyers, when due, upon demand, at maturity or by reason of
acceleration or otherwise and at all times thereafter, of any and all of the
Obligations.
 
(b) Each Guarantor acknowledges that valuable consideration supports this
Guaranty, including, without limitation, the consideration set forth in the
recitals above, as well as any commitment to lend, extension of credit or other
financial accommodation, whether heretofore or hereafter made by Buyers to the
Company; any extension, renewal or replacement of any of the Obligations; any
forbearance with respect to any of the Obligations or otherwise; any
cancellation of an existing guaranty; any purchase of any of the Company’s
assets by any Buyer or Collateral Agent; or any other valuable consideration.
 
(c) Each Guarantor agrees that all payments under this Guaranty shall be made in
United States currency and in the same manner as provided for the Obligations.
 
(d) Notwithstanding any provision of this Guaranty to the contrary, it is
intended that this Guaranty, and any interests, liens and security interests
granted by Guarantors as security for this Guaranty, not constitute a
“Fraudulent Conveyance” (as defined below) in the event that this Guaranty or
such interest is subject to the Bankruptcy Code or any applicable fraudulent
conveyance or fraudulent transfer law or similar law of any state. Consequently,
Guarantors, Collateral Agent and Buyers agree that if this Guaranty, or any such
interests, liens or security interests securing this Guaranty, would, but for
the application of this sentence, constitute a Fraudulent Conveyance, this
Guaranty and each such lien and security interest shall be valid and enforceable
only to the maximum extent that would not cause this Guaranty or such interest,
lien or security interest to constitute a Fraudulent Conveyance, and this
Guaranty shall automatically be deemed to have been amended accordingly at all
relevant times. For purposes hereof, “Fraudulent Conveyance” means a fraudulent
conveyance under Section 548 of the Bankruptcy Code or a fraudulent conveyance
or fraudulent transfer under the provisions of any applicable fraudulent
conveyance or fraudulent transfer law or similar law of any state, as in effect
from time to time.
 
3. Costs and Expenses. Each Guarantor, jointly and severally, agrees to pay on
demand, all costs and expenses of every kind incurred by any Buyer or Collateral
Agent: (a) in enforcing this Guaranty, (b) in collecting any of the Obligations
from the Company or any Guarantor, (c) in realizing upon or protecting or
preserving any collateral for this Guaranty or for payment of any of the
Obligations, and (d) in connection with any amendment of, modification to,
waiver or forbearance granted under, or enforcement or administration of any
Transaction Document or for any other purpose in connection with any Transaction
Document, in each case, to the extent Buyer or Collateral Agent may take such
action pursuant to the terms and conditions of this Agreement. “Costs and
expenses” as used in the preceding sentence shall include, without limitation,
reasonable attorneys’ fees incurred by any Buyer or Collateral Agent in
retaining legal counsel for advice, suit, appeal, any insolvency or other
proceedings under the Bankruptcy Code or otherwise, or for any purpose specified
in the preceding sentence.
 
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4. Nature of Guaranty: Continuing, Absolute and Unconditional.
 
(a) This Guaranty is and is intended to be a continuing guaranty of payment of
the Obligations, and not of collectibility, and is intended to be independent of
and in addition to any other guaranty, endorsement, collateral or other
agreement held by Buyers or Collateral Agent therefor or with respect thereto,
whether or not furnished by a Guarantor. None of Buyers and Collateral Agent
shall be required to prosecute collection, enforcement or other remedies against
Company, any other Guarantor or guarantor of the Obligations or any other person
or entity, or to enforce or resort to any of the Collateral or other rights or
remedies pertaining thereto, before calling on a Guarantor for payment. The
obligations of each Guarantor to repay the Obligations hereunder shall be
unconditional. Guarantor shall have no right to exercise any right of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against the Company in connection with
this Guaranty until the termination of this Guaranty in accordance with Section
8 below, and hereby waives any benefit of, and any right to participate in, any
security or collateral given to Buyers to secure payment of the Obligations, and
each Guarantor agrees that it will not take any action to enforce any
obligations of the Company to such Guarantor prior to the Obligations being
finally paid in full in cash, provided that, in the event of the bankruptcy or
insolvency of the Company, to the extent the Obligations have not been finally
paid in full in cash, Collateral Agent, for the benefit of itself and Buyers,
and Buyers shall be entitled notwithstanding the foregoing, to file in the name
of any Guarantor or in its own name a claim for any and all indebtedness owing
to a Guarantor by the Company (exclusive of this Guaranty), vote such claim and
to apply the proceeds of any such claim to the Obligations.
 
(b) For the further security of Buyers and without in any way diminishing the
liability of the Guarantors, following the occurrence of an Event of Default,
all debts and liabilities, present or future of the Company to the Guarantors
and all monies received from the Company or for its account by the Guarantors in
respect thereof shall be received in trust for Buyers and Collateral Agent and
promptly following receipt shall be paid over to Collateral Agent, for its
benefit and in its capacity as collateral agent for the benefit of Buyers, until
all of the Obligations have been paid in full in cash.
 
(c) This Guaranty shall not be changed or affected by any representation, oral
agreement, act or thing whatsoever, except as herein provided. This Guaranty is
intended by the Guarantors to be the final, complete and exclusive expression of
the guaranty agreement between the Guarantors and Buyers. No modification or
amendment of any provision of this Guaranty shall be effective against any party
hereto unless in writing and signed by a duly authorized officer of such party.
This Agreement, together with the other Transaction Documents, supersedes all
other prior oral or written agreements between each Buyer, the Guarantors, the
Collateral Agent, the Subsidiaries, their Affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement,
together with the other Transaction Documents and the other instruments
referenced herein and therein, contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither any Guarantor, the Collateral
Agent nor any Buyer makes any representation, warranty, covenant or undertaking
with respect to such matters. As of the date of this Agreement, there are no
unwritten agreement between the parties with respect to the matters discussed
herein. No provision of this Agreement may be amended, modified or supplemented
other than by an instrument in writing signed by the parties hereto.
 
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(d) Each Guarantor hereby releases the Company from all, and agrees not to
assert or enforce (whether by or in a legal or equitable proceeding or
otherwise) any “claims” (as defined in Section 101(5) of the Bankruptcy Code),
whether arising under any law, ordinance, rule, regulation, order, policy or
other requirement of any domestic or foreign government or any instrumentality
or agency thereof, having jurisdiction over the conduct of its business or
assets or otherwise, to which the Guarantors are or would at any time be
entitled by virtue of its obligations hereunder, any payment made pursuant
hereto or the exercise by any Buyer or Collateral Agent of its rights with
respect to the Collateral, including any such claims to which such Guarantors
may be entitled as a result of any right of subrogation, exoneration or
reimbursement.
 
5. Certain Rights and Obligations.
 
(a) Each Guarantor acknowledges and agrees that Buyers and Collateral Agent, for
its benefit and as collateral agent for the benefit of Buyers, may, without
notice, demand or any reservation of rights against such Guarantor and without
affecting such Guarantor’s obligations hereunder, from time to time:
 
(i) renew, extend, increase, accelerate or otherwise change the time for payment
of, the terms of or the interest on the Obligations or any part thereof or grant
other indulgences to the Company or others;
 
(ii) accept from any person or entity and hold collateral for the payment of the
Obligations or any part thereof, and modify, exchange, enforce or refrain from
enforcing, or release, compromise, settle, waive, subordinate or surrender, with
or without consideration, such collateral or any part thereof;
 
(iii) accept and hold any endorsement or guaranty of payment of the Obligations
or any part thereof, and discharge, release or substitute any such obligation of
any such endorser or guarantor, or discharge, release or compromise any
Guarantor, or any other person or entity who has given any security interest in
any collateral as security for the payment of the Obligations or any part
thereof, or any other person or entity in any way obligated to pay the
Obligations or any part thereof, and enforce or refrain from enforcing, or
compromise or modify, the terms of any obligation of any such endorser,
guarantor, or person or entity;
 
(iv) dispose of any and all collateral securing the Obligations in any
commercially reasonable manner (to the extent required under applicable law) as
the Collateral Agent, in its reasonable discretion, may consider appropriate,
and direct the order or manner of such disposition and the enforcement of any
and all endorsements and guaranties relating to the Obligations or any part
thereof as Collateral Agent in its sole discretion may determine;
 
(v) subject to the terms of the Notes, determine the manner, amount and time of
application of payments and credits, if any, to be made on all or any part of
any component or components of the Obligations (whether principal, interest,
fees, costs, and expenses, or otherwise), including, without limitation, the
application of payments received from any source to the payment of indebtedness
other than the Obligations even though Buyers might lawfully have elected to
apply such payments to the Obligations or to amounts which are not covered by
this Guaranty; and
 
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(vi) take advantage or refrain from taking advantage of any security or accept
or make or refrain from accepting or making any compositions or arrangements
when and in such manner as Collateral Agent, in its sole discretion, may deem
appropriate;
 
and generally do or refrain from doing any act or thing which might otherwise,
at law or in equity, release the liability of such Guarantor as a guarantor or
surety in whole or in part, and in no case shall Buyers or Collateral Agent be
responsible or shall any Guarantor be released either in whole or in part for
any act or omission in connection with Buyers or Collateral Agent having sold
any security at less than its value; provided any such sale was conducted in a
commercially reasonable manner (to the extent required under applicable law).
 
(b) Following the occurrence and during the continuance of an Event of Default,
and upon demand by Collateral Agent, each Guarantor, jointly and severally,
hereby agrees to pay the Obligations to the extent hereinafter provided and to
the extent unpaid:
 
(i) without deduction by reason of any setoff, defense (other than payment) or
counterclaim of the Company or any other Guarantor;
 
(ii) without requiring presentment, protest or notice of nonpayment or notice of
default to any Guarantor, to the Company or to any other person or entity;
 
(iii) without demand for payment or proof of such demand or filing of claims
with a court in the event of receivership, bankruptcy or reorganization of the
Company or any other Guarantor;
 
(iv) without requiring Buyers or Collateral Agent to resort first to the Company
(this being a guaranty of payment and not of collection), to any other
Guarantor, or to any other guaranty or any collateral which Buyers or Collateral
Agent may hold;
 
(v) without requiring notice of acceptance hereof or assent hereto by any Buyer
or Collateral Agent; and
 
(vi) without requiring notice that any of the Obligations has been incurred,
extended or continued or of the reliance by any Buyer or Collateral Agent upon
this Guaranty;
 
all of which each Guarantor hereby waives.
 
(c) Each Guarantor’s obligation hereunder shall not be affected by any of the
following, all of which such Guarantor hereby waives:
 
(i) any failure to perfect or continue the perfection of any security interest
in or other lien on any collateral securing payment of any of the Obligations or
any Guarantor’s obligation hereunder;
 
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(ii) the invalidity, unenforceability, propriety of manner of enforcement of, or
loss or change in priority of any document or any such security interest or
other lien or guaranty of the Obligations;
 
(iii) any failure to protect, preserve or insure any such collateral;
 
(iv) failure of a Guarantor to receive notice of any intended disposition of
such collateral;
 
(v) any defense arising by reason of the cessation from any cause whatsoever of
liability of the Company including, without limitation, any failure, negligence
or omission by any Buyer or Collateral Agent in enforcing its claims against the
Company;
 
(vi) any release, settlement or compromise of any obligation of the Company, any
other Guarantor or any other guarantor of the Obligations;
 
(vii) the invalidity or unenforceability of any of the Obligations;
 
(viii) any change of ownership of the Company, any other Guarantor or any other
guarantor of the Obligations or the insolvency, bankruptcy or any other change
in the legal status of the Company, any other Guarantor or any other guarantor
of the Obligations;
 
(ix) any change in, or the imposition of, any law, decree, regulation or other
governmental act which does or might impair, delay or in any way affect the
validity, enforceability or the payment when due of the Obligations;
 
(x) the existence of any claim, setoff or other rights which the Guarantor,
Company, any other Guarantor or guarantor of the Obligations or any other person
or entity may have at any time against any Buyer, Collateral Agent or the
Company in connection herewith or any unrelated transaction;
 
(xi) any Buyer’s or Collateral Agent’s election in any case instituted under
chapter 11 of the Bankruptcy Code, of the application of section 1111(b)(2) of
the Bankruptcy Code;
 
(xii) any use of cash collateral, or grant of a security interest by the
Company, as debtor in possession, under sections 363 or 364 of the Bankruptcy
Code;
 
(xiii) the disallowance of all or any portion of any of any Buyer’s or
Collateral Agent’s claims for repayment of the Obligations under sections 502 or
506 of the Bankruptcy Code;
 
(xiv) any stay or extension of time for payment by the Company or any other
Guarantor resulting from any proceeding under the Bankruptcy Code or any similar
law; or
 
(xv) any other fact or circumstance which might otherwise constitute grounds at
law or equity for the discharge or release of a Guarantor from its obligations
hereunder, all whether or not such Guarantor shall have had notice or knowledge
of any act or omission referred to in the foregoing clauses (i) through (xiv) of
this Section 5(c).
 
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6. Representations and Warranties. Each Guarantor further represents and
warrants to Buyers and Collateral Agent that: (a) such Guarantor is a
corporation or other entity duly incorporated or organized, as applicable,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, as applicable, and has full power, authority and
legal right to own its property and assets and to transact the business in which
it is presently engaged; (b) such Guarantor has full power, authority and legal
right to execute and deliver, and to perform its obligations under, this
Guaranty, and has taken all necessary action to authorize the guarantee
hereunder on the terms and conditions of this Guaranty and to authorize the
execution, delivery and performance of this Guaranty; (c) this Guaranty has been
duly executed and delivered by such Guarantor and constitutes a legal, valid and
binding obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms, except to the extent that such enforceability is
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
enforcement of creditors’ rights generally, or the availability of equitable
remedies, which are subject to the discretion of the court before which an
action may be brought; and (d) the execution, delivery and performance by each
Guarantor of this Guaranty do not require any action by or in respect of, or
filing with, any governmental body, agency or official and do not violate,
conflict with or cause a breach or a default under any provision of (i)
applicable law or regulation, (ii) the organizational documents of any
Guarantor, (iii) any judgment, injunction, order, decree or other instrument
binding upon it, or (iv) any agreement binding upon it, to the extent, solely
with respect to this clause (iv), such violation could not reasonably be
expected to have a Material Adverse Effect.
 
7. Negative Covenants. Each Guarantor covenants with Buyers and Collateral Agent
that such Guarantor shall not grant any security interest in or permit any lien,
claim or encumbrance upon any of its assets in favor of any person or entity
other than liens and security interests in favor of Buyers and Collateral Agent
and Permitted Liens.
 
8. Termination. This Guaranty shall not terminate until such time, if any, as
(i) all Indebtedness under the Notes secured hereby shall be finally paid in
full in cash, (ii) no Notes shall remain outstanding, (iii) all commitments to
lend under the Purchase Agreement shall have terminated and (iv) there shall
exist no other outstanding payment or reimbursement obligations (other than
contingent indemnification obligations for which no claims shall have been
asserted) of the Borrower or the Guarantors to the Collateral Agent under any of
the Transaction Documents. Thereafter, but subject to the following, Collateral
Agent, on its behalf and as agent for Buyers, shall take such action and execute
such documents as the Guarantors may request (and at the Guarantors’ cost and
expense) in order to evidence the termination of this Guaranty. Each Guarantor
further agrees that, to the extent that the Company makes a payment or payments
to Buyers or Collateral Agent on the Obligations, or Buyers or Collateral Agent
receive any proceeds of collateral securing the Obligations or any other
payments with respect to the Obligations, which payment or receipt of proceeds
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be returned or repaid to the Company, its
estate, trustee, receiver, debtor in possession or any other person or entity,
including, without limitation, the Guarantors, under any insolvency or
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such payment, return or repayment, the obligation or part thereof
which has been paid, reduced or satisfied by such amount shall be reinstated and
continued in full force and effect as of the date when such initial payment,
reduction or satisfaction occurred, and this Guaranty shall continue in full
force notwithstanding any contrary action which may have been taken by any Buyer
or Collateral Agent in reliance upon such payment, and any such contrary action
so taken shall be without prejudice to any Buyer’s or Collateral Agent’s rights
under this Guaranty and shall be deemed to have been conditioned upon such
payment having become final.
 
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9. Guaranty of Performance. Each Guarantor also guarantees the full, prompt and
unconditional performance of all obligations and agreements of every kind owed
or hereafter to be owed by the Company to Buyers and Collateral Agent under the
Purchase Agreement, Registration Rights Agreement, the Warrants, Security
Documents and the Notes. Every provision for the benefit of Buyers and
Collateral Agent contained in this Guaranty shall apply to the guaranty of
performance given in this paragraph.
 
10. Assumption of Liens and Obligations. To the extent that a Guarantor has
received or shall hereafter receive distributions or transfers from the Company
of property or cash that are subject, at the time of such contribution, to liens
and security interests in favor of Buyers and/or the Collateral Agent in
accordance with the Notes, the Security Agreement or any other Security
Document, such Guarantor hereby expressly agrees that (i) it shall hold such
assets subject to such liens and security interests, and (ii) it shall be liable
for the payment of the Obligations secured thereby. Each Guarantor’s obligations
under this Section 10 shall be in addition to its obligations as set forth in
other sections of this Guaranty and not in substitution therefor or in lieu
thereof.
 
11. Miscellaneous.
 
(a) The terms “Company” and “Guarantor” as used in this Guaranty shall include:
(i) any successor individual or individuals, association, partnership, limited
liability company or corporation to which all or substantially all of the
business or assets of the Company or such Guarantor shall have been transferred
and (ii) any other association, partnership, limited liability company,
corporation or entity into or with which the Company or such Guarantor shall
have been merged, consolidated, reorganized, or absorbed.
 
(b) Without limiting any other right of any Buyer or Collateral Agent, whenever
any Buyer or Collateral Agent has the right to declare any of the Obligations to
be immediately due and payable (whether or not it has been so declared),
Collateral Agent, on its behalf and in its capacity as agent for the benefit of
Buyers, at its sole election without notice to the undersigned may appropriate
and set off against the Obligations:
 
(i) any and all indebtedness or other moneys due or to become due to any
Guarantor by any Buyer or Collateral Agent in any capacity; and
 
(ii) any credits or other property belonging to any Guarantor (including all
account balances, whether provisional or final and whether or not collected or
available) at any time held by or coming into the possession of any Buyer or
Collateral Agent, or any affiliate of any Buyer or Collateral Agent, whether for
deposit or otherwise;
 
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whether or not the Obligations or the obligation to pay such moneys owed by any
Buyer or Collateral Agent is then due, and the applicable Buyer or Collateral
Agent shall be deemed to have exercised such right of set off immediately at the
time of such election even though any charge therefor is made or entered on such
Buyer’s or Collateral Agent’s records subsequent thereto. Collateral Agent
agrees to notify such Guarantor in a reasonably practicable time of any such
set-off; however, failure to so notify such Guarantor shall not affect the
validity of any set-off.
 
(c) No course of dealing between the Company or any Guarantor and Buyers or
Collateral Agent and no act, delay or omission by Buyers or Collateral Agent in
exercising any right or remedy hereunder or with respect to any of the
Obligations shall operate as a waiver thereof or of any other right or remedy,
and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. Any Buyer or
Collateral Agent may remedy any default by the Company under any agreement with
the Company or with respect to any of the Obligations in any reasonable manner
without waiving the default remedied and without waiving any other prior or
subsequent default by the Company. All rights and remedies of Buyers and
Collateral Agent hereunder are cumulative.
 
(d) This Guaranty shall inure to the benefit of the parties hereto and their
respective successors and assigns.
 
(e) Collateral Agent may assign its rights hereunder without the consent of
Guarantors, in which event such assignee shall be deemed to be Collateral Agent
hereunder with respect to such assigned rights; provided such assignment shall
not relieve the Collateral Agent of any liability it may have to the Guarantor.
 
(f) Captions of the sections of this Guaranty are solely for the convenience of
the parties hereto, and are not an aid in the interpretation of this Guaranty
and do not constitute part of the agreement of the parties set forth herein.
 
(g) If any provision of this Guaranty is unenforceable in whole or in part for
any reason, the remaining provisions shall continue to be effective.
 
(h) All questions concerning the construction, validity, enforcement and
interpretation of this Guaranty shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York. Each Guarantor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each Guarantor hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The parties hereto acknowledge that each of the Buyers has executed each of the
Transaction Documents to be executed by it in the State of New York.
 
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(i) Notices. All notices, approvals, requests, demands and other communications
hereunder shall be delivered or made in the manner set forth in, and shall be
effective in accordance with the terms of, the Purchase Agreement or, in the
case of communications to the Collateral Agent, directed to the notice address
set forth in the Security Agreement; provided, that any communication shall be
effective as to any Guarantor if made or sent to the Company in accordance with
the foregoing.
 
12. WAIVERS.
 
(a) EACH GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND EXEMPTION
LAWS.
 
(b) UPON THE OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT, EACH GUARANTOR HEREBY
WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY ANY
BUYER OR COLLATERAL AGENT, ON ITS BEHALF AND IN ITS CAPACITY AS AGENT FOR THE
BENEFIT OF BUYERS, OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL
PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE
OR HEARING. EACH GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF
ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS GUARANTY.
 
(c) EACH GUARANTOR WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY ANY BUYER OR COLLATERAL AGENT. EACH GUARANTOR AGREES THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, EACH GUARANTOR FURTHER AGREES THAT ITS
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR ANY PROVISION
HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
 
13. Collateral Agent. The terms and provisions of Section 5.11 of the Security
Agreement which set forth the appointment of the Collateral Agent and the
indemnifications to which the Collateral Agent is entitled are hereby
incorporated by reference herein as if fully set forth therein.
 
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14. Payments Free of Taxes.
 
(a) Definitions. In this Section 14:
 
(i) “Excluded Taxes” means, with respect to the Collateral Agent or the Buyers,
or any other recipient of any payment to be made by or on account of any
obligations of any Guarantor under this Guaranty, or under any other Security
Document, income or franchise taxes imposed on (or measured by) its net income
by the United States of America or such other jurisdiction under the laws of
which such recipient is organized or in which its principal office is located.
 
(ii) “Governmental Authority” means the government of the United States of
America or any other nation, or any political subdivision thereof, whether state
or local, or any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government over the Company or any of its Subsidiaries, or any of their
respective properties, assets or undertakings.
 
(iii) “Indemnified Taxes” means Taxes other than Excluded Taxes.
 
(iv) “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
 
(b) Any and all payments by or on account of any obligation of any of the
Guarantors under this Guaranty or any other Security Document shall be made
without any set-off, counterclaim or deduction and free and clear of and without
deduction for any Indemnified Taxes; provided that if any Guarantor shall be
required to deduct any Indemnified Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 14(b)), the Collateral Agent or Buyers, as applicable, receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) such Guarantor shall make such deductions and (iii) such Guarantor shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
 
(c) Indemnification by the Guarantors. Each Guarantor shall indemnify the
Collateral Agent and the Buyers, within ten (10) days after written demand
therefor, for the full amount of any Indemnified Taxes paid by the Collateral
Agent or Buyers, as applicable, on or with respect to any payment by or on
account of any obligation of such Guarantor under this Guaranty and the other
Security Documents (including Indemnified Taxes or imposed or asserted on or
attributable to amounts payable under this Section 14) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate of the Collateral
Agent or any Buyer as to the amount of such payment or liability under this
Section 14 shall be delivered to such Guarantor and shall be conclusive absent
manifest error.
 
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15. Counterparts; Headings. This Guaranty may be executed in two or more
identical counterparts, all of which together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to each other party; provided that a facsimile, .pdf or
similar electronically transmitted signature shall be considered due execution
and shall be binding upon the signatory thereto with the same force and effect
as if the signature were an original signature. The headings in this Guaranty
are for convenience of reference only and shall not alter or otherwise affect
the meaning hereof.
 
16. Rights of Contribution. The Guarantors hereby agree as among themselves
that, if any Guarantor shall make an Excess Payment (as defined below), such
Guarantor shall have a right of contribution from each other Guarantor in an
amount equal to such other Guarantor’s Contribution Share (as defined below) of
such Excess Payment. The payment obligations of any Guarantor under this Section
16 shall be subordinate and subject in right of payment to the Obligations until
such time as the Obligations have been paid in full in cash and all commitments
to lend under the Purchase Agreement have expired or terminated, and none of the
Guarantors shall exercise any right or remedy under this Section 16 against any
other Guarantor until such Obligations have been paid in full in cash and all
commitments to lend under the Purchase Agreement have expired or terminated. For
purposes of this Section 16, (a) “Excess Payment” shall mean the amount paid by
any Guarantor in excess of its Ratable Share of any Obligations; (b) “Ratable
Share” shall mean, for any Guarantor in respect of any payment of Obligations,
the ratio (expressed as a percentage) as of the date of such payment of
Obligations of (i) the amount by which the aggregate present fair salable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of Company and Guarantors exceeds the amount
of all of the debts and liabilities (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of the
Guarantors hereunder) of the Company and Guarantors, provided, however, that,
for purposes of calculating the Ratable Shares of the Guarantors in respect of
any payment of Obligations, any Guarantor that became a Guarantor subsequent to
the date of any such payment shall be deemed to have been a Guarantor on the
date of such payment and the financial information for such Guarantor as of the
date such Guarantor became a Guarantor shall be utilized for such Guarantor in
connection with such payment; and (c) “Contribution Share” shall mean, for any
Guarantor in respect of any Excess Payment made by any other Guarantor, the
ratio (expressed as a percentage) as of the date of such Excess Payment of (i)
the amount by which the aggregate present fair salable value of all of its
assets and properties exceeds the amount of all debts and liabilities of such
Guarantor (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Loan Parties) of Company and
Guarantors other than the maker of such Excess Payment; provided, however, that,
for purposes of calculating the Contribution Shares of the Guarantors in respect
of any Excess Payment, any Guarantor that became a Guarantor subsequent to the
date of any such Excess Payment shall be deemed to have been a Guarantor on the
date of such Excess Payment and the financial information for such Guarantor as
of the date such Guarantor became a Guarantor shall be utilized for such
Guarantor in connection with such Excess Payment. This Section 16 shall not be
deemed to affect any right of subrogation, indemnity, reimbursement or
contribution that any Guarantor may have under law against the Company in
respect of any payment of Obligations.
 
[rest of page intentionally left blank; signature page follows]
 
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IN WITNESS WHEREOF, Guarantors have executed this Guaranty as of the date first
written above.
 
GUARANTORS:

NORTH TEXAS DRILLING SERVICES, a
Texas corporation

By:_______________________________
Name: ____________________________
Title: ____________________________

 
SONTERRA OPERATING, INC., a Delaware
corporation

By:_______________________________
Name: ____________________________
Title: ____________________________

 
VELOCITY ENERGY LIMITED LLC, a Texas
limited liability company

By:_______________________________
Name: ____________________________
Title: ____________________________

 
VELOCITY ENERGY INC., a Delaware
corporation

By:_______________________________
Name: ____________________________
Title: ____________________________

 
VELOCITY ENERGY OFFSHORE LP, a
Delaware limited partnership

By:_______________________________
Name: ____________________________
Title: ____________________________

 

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VELOCITY ENERGY PARTNERS LP, a
Delaware limited partnership

By:_______________________________
Name: ____________________________
Title: ____________________________
 

--------------------------------------------------------------------------------

VELOCITY ENERGY INC., a Delaware
corporation

By:_______________________________
Name: ____________________________
Title: ____________________________
 

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EXHIBIT A

Form of Joinder
Joinder to Guaranty

This Joinder Agreement is made between the undersigned, [__________] a
[__________], (the “New Subsidiary”) and SUMMERLINE ASSET MANAGEMENT, LLC, a
Delaware limited liability company, as collateral agent under that certain
Guaranty dated as of November 13, 2008 among NORTH TEXAS DRILLING SERVICES,
INC., a Texas corporation, SONTERRA OPERATING, INC., a Delaware corporation,
VELOCITY ENERGY LIMITED LLC, a Texas limited liability company, VELOCITY ENERGY
INC., a Delaware corporation, VELOCITY ENERGY OFFSHORE LP, a Delaware limited
partnership, VELOCITY ENERGY PARTNERS LP, a Delaware limited partnership, and
each other person or entity that becomes a Guarantor thereunder after the date
and pursuant to the terms thereof, to and in favor of SUMMERLINE ASSET
MANAGEMENT, LLC as amended, restated, supplemented or otherwise modified from
time to time (the “Guaranty”). Capitalized terms herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Guaranty.
 
1. The New Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the New Subsidiary will be deemed to be a party to
the Guaranty and a “Guarantor” for all purposes of the Guaranty, and shall have
all of the obligations of a Guarantor thereunder as if it had executed the
Guaranty. The New Subsidiary hereby ratifies, as of the date hereof, and agrees
to be bound by, all of the terms, provisions and conditions applicable to the
Guarantors contained in the Guaranty. Without limiting the generality of the
foregoing terms of this paragraph 1, the New Subsidiary hereby jointly and
severally together with the other Guarantors, guarantees to Summerline Asset
Management, LLC, as provided in the Guaranty, the prompt payment and performance
of the obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof.
 
2. The New Subsidiary represents and warrants that the representations and
warranties set forth in Section 6 of the Guaranty are, with respect to the
undersigned, true and correct as of the date hereof.
 
3. From and after the date hereof, each reference to a Guarantor in the Guaranty
shall be deemed to include the undersigned.
 
4. This Agreement may be executed in multiple counterparts, each of which shall
constitute an original but all of which when taken together shall constitute one
contract.
 
5. THIS AGREEMENT SHALL BE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
 

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In Witness Whereof, the undersigned has executed this Joinder this ___ day of
_________, 200_.
 
___________________________
 

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