JUNE 2009 AMENDMENT AGREEMENT
 
THIS JUNE 2009 AMENDMENT AGREEMENT (this “Agreement”) is made as of June 17,
2009, among Velocity Energy Inc. (f/k/a Sonterra Resources, Inc.), a Delaware
corporation (the “Velocity”), Longview Marquis Master Fund, L.P., a British
Virgin Islands limited partnership (“Marquis”), 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 Offshore LP, a Delaware limited
partnership (“Offshore”), Velocity Energy Operating Inc., a Delaware corporation
(“Velocity Operating”), Velocity Energy Partners L.P., a Delaware limited
partnership (“Onshore”; North Texas, Operating, Limited, Velocity Operating,
Offshore and Onshore, each a “Velocity Sub” and, together, the “Velocity Subs”),
and, solely for the purpose of Section 20 hereof, Summerview Marquis Fund, L.P.,
a Delaware limited partnership (“Summerview”).  Each capitalized term used in
this letter agreement and not otherwise defined, shall have the meaning ascribed
thereto in the Purchase Agreement (as defined below).
 
W I T N E S S E T H:
 
WHEREAS, Velocity and Marquis entered into that certain Securities Purchase
Agreement dated as of November 13, 2008 (as amended, restated, supplemented, or
otherwise modified and in effect from time to time, the “Purchase Agreement”),
pursuant to which, among other things, Velocity issued in favor of Marquis that
certain Senior Secured Note (Note No.: SR-001), dated November 13, 2008, in the
original principal amount of $8,875,000 (as amended, restated, supplemented, or
otherwise modified from time to time, the “Senior Secured Note”).
 
WHEREAS, Velocity and Marquis entered into that certain letter agreement, dated
March 31, 2009, pursuant to which (i) Velocity made an Optional Prepayment (as
defined in the Senior Secured note) pursuant to Section 3(a) of the Senior
Secured Note, in the amount of $2,000,000 (the “Prepayment”), and (ii) the
outstanding principal of the Senior Secured Note was reduced by $2,192,500 upon
Marquis’ receipt of the Prepayment.
 
WHEREAS, upon such reduction, the outstanding principal of the Senior Secured
Note was $6,682,500.
 
WHEREAS, Marquis and Summerview entered into that certain letter agreement,
dated May 29, 2009, pursuant to which (i) Marquis transferred to Summerview and
Summerview acquired from Marquis, a portion of the Senior Secured Note, in the
principal amount of $1,679,748.02, including all of Marquis’ right, title and
interest, legal and equitable, therein and thereto (such transferred portion of
the Senior Secured Note, the “Summerview Secured Note” and the portion of the
Senior Secured Note not so transferred (i.e., continuing to be held by Marquis),
in the principal amount of $5,002,751.98, the “Marquis Secured Note”)), and (ii)
Marquis transferred and assigned to Summerview all of Marquis’ rights and
obligations under the Purchase Agreement and the Transaction Documents with
respect to the Transferred Securities and Summerview accepted such assignment of
rights and agreed to be bound by the provisions of the Securities Purchase
Agreement and the Transaction Documents as they relate to the Transferred
Securities; and Marquis and Summerview provided notice to Velocity of such
transfer.
 

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

 
WHEREAS, in connection with the transfer of the Transferred Securities from
Marquis to Summerview and in exchange for the Senior Secured Note, Velocity is
required to issue two new notes representing in aggregate the remaining unpaid
principal of the Senior Secured Note, each in the same form as the Senior
Secured Note: (i) one to Marquis in the principal amount of $5,002,751.98,
representing the Marquis Secured Note, and (ii) the other to Summerview in the
principal amount of $1,679,748.02, representing the Summerview Secured Note.
 
WHEREAS, Velocity and Marquis desire to amend the terms of the Marquis Secured
Note as provided herein.
 
NOW, THEREFORE, in consideration of the agreements, provisions and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Velocity and Marquis (and
Summerview with respect to Section 20 hereof) agree as follows:
 
1. Marquis Payment. On the date hereof, Marquis shall pay to Velocity cash in
the amount of $1,500,000 (such payment, the “Additional Payment”), by wire
transfer of immediately available funds into the Acquisition Account, in
accordance with the instructions set forth on Exhibit A hereto.
 
2. Increase of Principal of the Marquis Secured Note.  Notwithstanding any
prohibition or restriction in, or anything to the contrary in, the Marquis
Secured Note or the Purchase Agreement, effective immediately upon the receipt
by Velocity of the Additional Payment, the principal of the Marquis Secured Note
(the “Principal”) shall be increased by $1,644,375.  For the avoidance of doubt,
immediately upon the receipt by Velocity of the Additional Payment, the
Principal will be $6,647,126.98 (the “New Principal Amount”).  Velocity shall
promptly issue and deliver to Marquis a note representing the Marquis Secured
Note, in the same form as the Senior Secured Note, stating the Principal as
being the New Principal Amount effective as of the date hereof.
 
3. Use of Additional Payment Proceeds.  Velocity shall use the Additional
Payment proceeds solely to fund an Agreed Acquisition as provided in, and
subject to the terms and conditions of, Section 4(d) the Purchase Agreement, and
such proceeds shall be subject to all additional restrictions set forth in the
Purchase Agreement, the Supplemental Account Control Agreement and the other
Transaction Documents applicable to the Acquisition Account.
 
4. Representations and Warranties of Velocity.  Velocity and the Velocity Subs
jointly and severally represent and warrant to Marquis that:
 
a. Authorization; Enforcement; Validity. Each of Velocity and the Velocity Subs
has the requisite corporate, limited liability company, limited partnership or
other organizational power and authority to enter into and perform its
obligations under this Agreement, the Purchase Agreement, the Marquis Secured
Note (as amended hereby) and the other Transaction Documents.  The execution and
delivery of this Agreement by Velocity and the Velocity Subs and the
consummation of the transactions contemplated hereby, by the Marquis Secured
Note (as amended hereby) and by the other Transaction Documents have been duly
authorized by the respective boards of directors, managers, members or general
partners of Velocity and the Velocity Subs, as applicable, and no further
consent or authorization is required by Velocity, the Velocity Subs or any of
their respective boards of directors, managers, members, general partners or
shareholders.  This Agreement has been duly executed and delivered by Velocity
and each of the Velocity Subs, and each of this Agreement, the Purchase
Agreement, the Marquis Secured Note (as amended hereby) and the other
Transaction Documents constitutes a valid and binding obligation of each of
Velocity and the Velocity Subs (as applicable), enforceable against each of
Velocity and the Velocity Subs (as applicable) in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.
 
2

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

 
b. Issuance of Securities.  The amendment of the Marquis Secured Note in
accordance herewith is exempt from registration under the Securities Act of
1933, as amended, and applicable state securities laws, based upon the
representation made by Marquis herein that Marquis is an “accredited investor.”
 
c. No Conflicts.  The execution and delivery of this Agreement by each of
Velocity and the Velocity Subs, as applicable, the performance by each of
Velocity and the Velocity Subs (as applicable) of their respective obligations
hereunder, under the Purchase Agreement, under the Marquis Secured Note (as
amended hereby) and under the other Transaction Documents, and the consummation
by each of Velocity and the Velocity Subs (as applicable) of the transactions
contemplated hereby, by the Purchase Agreement, by the Marquis Secured Note (as
amended hereby) and by the other Transaction Documents will not (i) result in a
violation of the certificate of incorporation or the bylaws of Velocity or the
organizational documents of any Velocity Sub; (ii) conflict with, or constitute
a breach or default (or an event which, with the giving of notice or lapse of
time or both, constitutes or would constitute a breach or default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or other remedy with respect to, any agreement, indenture or instrument to
which Velocity or any of the Velocity Subs is a party; or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to Velocity or any
of the Velocity Subs or by which any property or asset of Velocity or any of the
Velocity Subs is bound or affected.  Neither Velocity nor any of the Velocity
Subs is required to obtain any consent, authorization or order of or, except as
required by Section 7 below, make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under, or contemplated by,
this Agreement, the Purchase Agreement, the Marquis Secured Note (as amended
hereby) and the other Transaction Documents.
 
d. No Breach or Default.  As of the date hereof, neither Velocity nor any
Velocity Subs is in material breach or violation of any representation,
warranty, covenant or other provision of, or in default under, the Purchase
Agreement, the Marquis Secured Note or any of the other Transaction Documents.
 
e. Outstanding Note.  As of the date hereof, the Marquis Secured Note and the
Summerview Secured Note are the only Notes outstanding.
 
3

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

 
f. Subsidiaries.  As of the date hereof, the Velocity Subs and the Excluded
Subsidiaries are the only Subsidiaries.
 
g. Other Representations.  The representations and warranties of Velocity and
each of the Velocity Subs (as applicable) in the Purchase Agreement and in the
other Transaction Documents are true and correct as of the date when made and as
of the date hereof as though made at that time (except for representations and
warranties that speak as of a specific date, which were true and correct as of
such date) and Velocity and each of the Velocity Subs (as applicable) has
performed, satisfied and complied with the covenants, agreements and conditions
required by the Purchase Agreement and the other Transaction Documents to be
performed, satisfied or complied with by Velocity at or prior to the date
hereof.
 
5. Representation and Warranties of Marquis.  Marquis represents and warrants to
Velocity that (i) Marquis is a validly existing limited partnership and has the
requisite limited partnership power and authority to enter into and perform its
obligations under this Agreement, (ii) this Agreement has been duly and validly
authorized, executed and delivered on behalf of Marquis and is a valid and
binding agreement of Marquis, enforceable against Marquis in accordance with its
terms, and (iii) Marquis is an “accredited investor,” as that term is defined in
Rule 501(a) of Regulation D.
 
6. Acknowledgment of Velocity and the Velocity Subs.  Velocity and each of the
Velocity Subs hereby irrevocably and unconditionally acknowledges, affirms and
covenants to Marquis that:
 
a. Marquis is not in default under any of the Transaction Documents and has not
otherwise breached any obligations to Velocity or any of the Velocity Subs; and
 
b. there are no offsets, counterclaims or defenses to the Liabilities (as
defined in the Security Agreement) or Obligations (as defined in the Guaranty),
including the liabilities and obligations of Velocity under the Marquis Secured
Note (as amended hereby), or to the rights, remedies or powers of Marquis in
respect of any of the Liabilities or Obligations or any of the Transaction
Documents, and Velocity and each of the Velocity Subs agree not to interpose
(and each does hereby waive and release) any such defense, set-off or
counterclaim in any action brought by Marquis with respect thereto.
 
7. Covenants. Prior to 5:30 p.m., New York time, on June 19, 2009, Velocity
shall file a current report on Form 8-K (the “Amendment Form 8-K”) with the
Securities and Exchange Commission (the “SEC”), describing the terms of this
Agreement and including this Agreement as an exhibit thereto, in the form
required by the 1934 Act.  From and after the filing of this Amendment Form 8-K
with the SEC, Marquis shall not be in possession of any material nonpublic
information received from Velocity or any of its affiliates, officers,
directors, employees or agents as a result of this Agreement or any of the
matters referred to herein.
 
8. Avoidance of Doubt.  The parties hereto hereby agree, for the avoidance of
doubt, that (a) the term “Notes” as used in the Purchase Agreement, the
Summerview Secured Note and Marquis Secured Note shall include the Marquis
Secured Note, as, and to the extent, amended by this Agreement, and (b) the
terms “Liabilities” and “Obligations” as used in the Transaction Documents shall
include all liabilities and obligations of Velocity and the Velocity Subs under
this Agreement, under the Marquis Secured Note (as amended hereby) and under the
other Transaction Documents, and this Agreement shall be included within the
meaning of the term “Transaction Documents,” and each of the parties hereto
agrees not to take any contrary positions.
 
4

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

 
9. Expenses.  Velocity hereby covenants and agrees to promptly reimburse Marquis
for all of its out-of-pocket fees, costs and expenses, including attorneys’ fees
and expenses, up to an aggregate of $5,000, incurred in connection with the
drafting, negotiation and execution of this Agreement and the consummation of
the transactions contemplated hereby, including by reimbursement of all of such
fees, costs and expenses incurred by Marquis through the date hereof within one
(1) Business Day after notification thereof.
 
10. Reservation of Rights.  Except as expressly set forth herein (and subject to
the terms and conditions hereof), Marquis has not hereby waived, or agreed to
waive, (i) any breach, default or Event of Default that may be continuing under
any of the Transaction Documents or (ii) any of Marquis’ rights or remedies
arising from any such breach, default or Event of Default or otherwise available
under the Transaction Documents or at law.  Marquis expressly reserves all such
rights and remedies.
 
11. Successors and Assigns.  This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.  The successors and assigns of such entities shall include
their respective receivers, trustees or debtors-in-possession.
 
12. Further Assurances.  Velocity and each of the Velocity Subs hereby agree
from time to time, as and when requested by Marquis, to execute and deliver or
cause to be executed and delivered, all such documents, instruments and
agreements, including secretary’s certificates, stock powers and irrevocable
transfer agent instructions, and to take or cause to be taken such further or
other action, as Marquis may reasonably deem necessary or desirable in order to
carry out the intent and purposes of this Agreement, the Purchase Agreement, the
Marquis Secured Note (as amended hereby) and the other Transaction Documents.
 
13. Governing Law; Jurisdiction; Jury Trial.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement 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 party 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 party 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 by
registered or certified U.S. mail, return receipt requested, or by a nationally
recognized overnight delivery service, to such party at the address for such
notices to it under the Marquis Secured Note (or, in the case of Summerview, the
Summerview Secured Note) 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.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
 
5

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

 
14. Counterparts.  This Agreement may be executed in two or more identical
counterparts, all of which 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.  In the event that any signature to this
Agreement or any amendment hereto is delivered by facsimile transmission or by
e-mail delivery of a “.pdf” format data file, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or
“.pdf” signature page were an original thereof.  No party hereto shall raise the
use of a facsimile machine or e-mail delivery of a “.pdf” format data file to
deliver a signature to this Agreement or any amendment hereto or the fact that
such signature was transmitted or communicated through the use of a facsimile
machine or e-mail delivery of a “.pdf” format data file as a defense to the
formation or enforceability of a contract, and each party hereto forever waives
any such defense.
 
15. Section Headings.  The section headings herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
 
16. No Strict Construction.  The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party.
 
17. Merger.  This Agreement, the Purchase Agreement, the Marquis Secured Note
(as amended hereby) and the other Transaction Documents represent the final
agreement of each of the parties hereto with respect to the matters contained
herein and may not be contradicted by evidence of prior or contemporaneous
agreements, or prior or subsequent oral agreements, among any of the parties
hereto.  Except as expressly set forth in this Agreement, the Purchase
Agreement, the Marquis Secured Note (as amended hereby) and the other
Transaction Documents, neither Velocity nor Marquis makes any representation,
warranty, covenant or undertaking with respect to such matters.
 
18. Interpretative Matters.  Unless the context otherwise requires, (i) all
references to Sections or Exhibits are to Sections or Exhibits contained in or
attached to this Agreement, (ii) words in the singular or plural include the
singular and plural and pronouns stated in either the masculine, the feminine or
neuter gender shall include the masculine, feminine and neuter, (iii) the words
“hereof,” “herein” and words of similar effect shall reference this Agreement in
its entirety, and (iv) the use of the word “including” in this Agreement shall
be by way of example rather than limitation.
 
6

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

 
19. Reaffirmation.  Each of Velocity and the Velocity Subs, as issuer, debtor,
grantor, pledgor, mortgagor, guarantor or assignor, or in other any other
similar capacity in which such Person grants liens or security interests in its
property or otherwise acts as accommodation party or guarantor, as the case may
be, hereby (i) acknowledges and agrees that it has reviewed this Agreement, (ii)
ratifies and reaffirms all of its obligations, contingent or otherwise, under
each of the Purchase Agreement, the Marquis Secured Note (as amended hereby) and
the other Transaction Documents to which it is a party (after giving effect
hereto), and (iii) to the extent such Person granted liens on or security
interests in any of its property pursuant to any such Transaction Document as
security for or otherwise guaranteed the Liabilities under or with respect to
the Transaction Documents, ratifies and reaffirms such guarantee and grant of
security interests and liens and confirms and agrees that such security
interests and liens hereafter secure all of the Liabilities (as amended
hereby).  Each of Velocity and the Velocity Subs hereby consents to this
Agreement and acknowledges that each of the Purchase Agreement, the Marquis
Secured Note (as amended hereby) and the other Transaction Documents, remains in
full force and effect and is hereby ratified and reaffirmed.
 
20. Consent of Summerview.  Summerview hereby consents to the amendment of the
Marquis Secured Note to increase the Principal thereof to the New Principal
Amount.  Furthermore, notwithstanding Section 9 of each of the Summerview
Secured Note and Marquis Secured Note, (i) Summerview and Velocity agree that
the Summerview Secured Note shall not be amended as a result of or in connection
with such amendment of the Marquis Secured Note, and (ii) Velocity, Marquis and
Summerview agree that such amendment of the Marquis Secured Note shall be
effective even though it does not apply to the Summerview Secured
Note.  Velocity shall promptly issue and deliver to Summerview a note
representing the Summerview Secured Note, in the same form as the Senior Secured
Note.
 
[Remainder of page intentionally left blank; Signature page follows]
 
7

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

 
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each
of the undersigned as of the date first above written.
 
 
VELOCITY ENERGY INC. (f/k/a Sonterra Resources, Inc.),
a Delaware corporation
   
By:
/s/ D.E. Vandenberg 
Name:
D.E. Vandenberg 
Title:
President        
LONGVIEW MARQUIS MASTER FUND, L.P.,
a British Virgin Islands limited partnership
   
By:
Summerline Asset Management, LLC
Its:
Investment Advisor
   
By:
/s/ Robert J. Brantman
Name:
Robert J. Brantman
Title:
Co-Managing Member
       
SUMMERVIEW MARQUIS FUND, L.P.,
a Delaware limited partnership (solely for purposes of Section 20)
   
By:
Summerline Asset Management, LLC
Its:
General Partner
   
By:
/s/ Robert J. Brantman 
Name:
Robert J. Brantman
Title:
Co-Managing Member
       
NORTH TEXAS DRILLING SERVICES, INC.,
a Texas corporation
   
By:
/s/ D.E. Vandenberg 
Name:
D.E. Vandenberg 
Title:
Vice President    

 

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

 

   
SONTERRA OPERATING, INC.,
a Delaware corporation
   
By:
/s/ D.E. Vandenberg 
Name:
D.E. Vandenberg 
Title:
Presdient        
VELOCITY ENERGY LIMITED LLC,
a Texas limited liability company
   
By:
/s/ D.E Vandenberg 
Name:
D.E. Vandenberg   
Title:
Presdient         
VELOCITY ENERGY OFFSHORE LP,
a Delaware limited partnership
   
By:
/s/ D.E Vandenberg 
Name:
D.E. Vandenberg  
Title:
Presdient         
VELOCITY ENERGY OPERATING INC.,
a Delaware corporation
   
By:
/s/ D.E. Vandenberg 
Name:
D.E. Vandenberg 
Title:
Presdient         
VELOCITY ENERGY PARTNERS L.P.,
a Delaware limited partnership
   
By:
/s/ D.E. Vandenberg 
Name:
D.E. Vandenberg  
Title:
Presdient