Exhibit 10.6
NET PROFITS INTEREST AGREEMENT
 
NEW CENTURY ENERGY CORP.
 
and
 
CENTURY RESOURCES, INC.
 
“WI Owners”
 
and
 
VALENS U.S. SPV I, LLC

 
and

 
VALENS OFFSHORE SPV II, CORP.

 
“Assignees”

 
Dated as of

 
November 30, 2007
 

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NET PROFITS INTEREST AGREEMENT
 
THIS NET PROFITS INTEREST AGREEMENT (“Agreement”) is made and entered into as of
this 30th day of November, 2007, and is between NEW CENTURY ENERGY CORP.
(“NCEC”), a Colorado corporation, and CENTURY RESOURCES, INC. (“CRI”), a
Delaware corporation (each a “WI Owner” and, collectively, “WI Owners”), and
VALENS U.S. SPV I, LLC, a Delaware limited liability company, and VALENS
OFFSHORE SPV II, CORP., a Delaware corporation (collectively, “Assignees”).
 
W I T N E S S E T H:
 
WHEREAS, WI Owners are the owners of various interests in the Leases; and
 
WHEREAS, NCEC desires to drill up to six (6) new Hydrocarbon wells and rework
two (2) other existing wells on the Leases, and to acquire two (2) additional
oil and gas leases, in each case financed, in part, by loans provided to NCEC by
the Creditor Parties pursuant to the Securities Purchase Agreement; and
 
WHEREAS, as a condition to the obligation of the Creditor Parties to make the
loans provided for in the Securities Purchase Agreement, WI Owners must convey
to Assignees a Net Profits Interest to be discharged out of Hydrocarbons
produced from the wells financed, in part, by the Creditor Parties pursuant to
the Securities Purchase Agreement.
 
NOW, THEREFORE, in consideration of the mutual benefits and obligations of the
Parties contained herein and the benefits to be received by Assignees pursuant
to the Securities Purchase Agreement, Assignees and WI Owners agree as follows:
 
ARTICLE 1.
 
DEFINITIONS
 
1.1           Defined Terms.  In addition to the terms defined in the
introductory paragraph and the Recitals of this Agreement, for purposes hereof,
the capitalized expressions and terms set forth in Schedule 1.1 shall have the
meanings set forth therein, unless expressly indicated otherwise.  Other terms
may be defined elsewhere in this Agreement and shall, for purposes hereof, have
the meanings so specified, unless expressly indicated otherwise.
 
1.2           References.  The words “hereby,” “herein,” “hereinabove,”
“hereinafter,” “hereinbelow,” “hereof,” “hereto,” “hereunder,” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular article, section, or provision of this
Agreement.  References in this Agreement to articles, sections, exhibits, or
schedules are to such articles, sections, exhibits, or schedules of this
Agreement unless otherwise specified.
 
1.3           Articles and Sections.  This Agreement, for convenience only, has
been divided into articles and sections.  The rights and other legal relations
of the Parties shall be determined from this Agreement as an entirety and
without regard to the aforesaid division into articles and sections and without
regard to headings prefixed to such articles and sections.
 
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1.4           Number and Gender.  Whenever the context requires, reference
herein made to a single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular.  Words
denoting sex shall be construed to include the masculine, feminine, and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.  Definitions of terms
defined in the singular or plural shall be equally applicable to the plural or
singular, as applicable, unless otherwise indicated.
 
ARTICLE 2.
 
CONVEYANCE OF NET PROFITS INTEREST
 
2.1           Initial NPI Conveyance.  Subject to and in accordance with the
terms hereof, in satisfaction of the terms of Section 3.2 of the Securities
Purchase Agreement, and in connection with the initial advance of funds by the
Creditor Parties to NCEC as contemplated in the Restricted Account Documents, WI
Owners agree to convey to Assignees, effective as of the Effective Date, the Net
Profits Interest in and with respect to the Initial Subject Interests.  The
specific terms and conditions applicable to the Net Profits Interest are set
forth in the Initial NPI Conveyance.  Concurrently with the execution of this
Agreement, (a) WI Owners and Assignees have executed, acknowledged, and
delivered counterparts of the Initial NPI Conveyance in sufficient numbers to
permit recording and filing in all relevant jurisdictions, and (b) WI Owners
have delivered to Assignees all consents, waivers, and other matters pertaining
to the Initial Subject Interests required to be obtained by WI Owners to cause
the representation and warranty contained in Section 3.1(g) to be true and
correct with respect to the Initial Subject Interests as of the date of
execution hereof.
 
2.2           Supplemental NPI Conveyance.  No later than two (2) Business Days
prior to the date on which the Creditor Parties make the second advance of funds
to NCEC in accordance with the terms of the Restricted Account Documents, WI
Owners shall execute and deliver to Assignees a supplement and amendment to the
Initial NPI Conveyance in form and substance satisfactory to Assignees (the
“Supplemental NPI Conveyance”), pursuant to which WI Owners will cause the
Supplemental Subject Interests identified by WI Owners and agreed upon by the
Creditor Parties to become subject to the terms of the Initial NPI Conveyance
and the Net Profits Interest.  From and after the execution and delivery by WI
Owners and Assignees of the Supplemental NPI Conveyance, the Net Profits
Interest shall constitute a single net profits overriding royalty interest
burdening both the Initial Subject Interests and the Supplemental Subject
Interests.  When requested to do so by the Creditor Parties in connection with
the making of the second advance of funds to NCEC in accordance with the
Restricted Account Documents, (a) WI Owners and Assignees shall execute and
deliver an amendment to this Agreement that amends (i) Exhibit A to include the
description of the Supplemental Subject Interests and (ii) the Schedules hereto
to the extent necessary to reflect any additional disclosures relating to the
Supplemental Subject Interests agreed upon by WI Owners and Assignees; (b) WI
Owners and Assignees shall execute, acknowledge, and deliver counterparts of the
Supplemental NPI Conveyance in sufficient numbers to permit recording and filing
in all relevant jurisdictions; and (c) WI Owners shall deliver to Assignees all
consents, waivers, and other matters pertaining to the Supplemental Subject
Interests required to be obtained by WI Owners to cause the representation and
warranty contained in Section 3.1(g) to be true and correct with respect to the
Supplemental Subject Interests as of the date of execution hereof.
 
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ARTICLE 3.
 
REPRESENTATIONS AND WARRANTIES OF WI OWNERS
 
3.1           Representations and Warranties of WI Owners.  As a principal cause
and material inducement to Assignees to execute this Agreement and the NPI
Conveyances and to consummate the transactions described herein and therein, WI
Owners have made the representations and warranties set forth below.  The
representations and warranties set forth in this Section 3.1 are made as of the
date of execution of this Agreement and the Initial NPI Conveyance and shall be
deemed to be made again as of the date of execution of the Supplemental NPI
Conveyance.  Unless expressly provided to the contrary, representations and
warranties made herein with respect to the Subject Interests (i) as of the date
of execution of this Agreement and the Initial NPI Conveyance, refer to the
Initial Subject Interests, subject to the matters disclosed in the Schedules to
this Agreement, and (ii) as of the date of execution of the Supplemental NPI
Conveyance, refer to the Supplemental Subject Interests, subject to the matters
disclosed in such Schedules as modified by the Parties with respect
thereto.  Subject to the forgoing, WI Owners hereby represent and warrant to
Assignees, as follows:
 
(a)           NCEC is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of Colorado.  CRI is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Delaware.  Each WI Owner is qualified to do business in, and is in good
standing under the Laws of, the State of Texas.  Each WI Owner has all requisite
legal right, power, and authority to own and operate its properties and to carry
on its business as now conducted.
 
(b)           Each WI Owner has full capacity, legal right, power, and authority
to enter into and perform this Agreement, the NPI Conveyances, and the
transactions contemplated herein and therein.  The execution, delivery, and
performance by each WI Owner of this Agreement, the NPI Conveyances, and the
transactions contemplated herein and therein have been duly and validly
authorized and approved by all necessary corporate action of each WI
Owner.  This Agreement and the Initial NPI Conveyance have been duly executed
and delivered by each WI Owner, and as of its date of execution, the
Supplemental NPI Conveyance will have been duly executed and delivered by each
WI Owner.  This Agreement and the Initial NPI Conveyance constitute, and as of
its date of execution, the Supplemental NPI Conveyance will constitute, the
legal, valid, and binding obligations of each WI Owner, enforceable against each
WI Owner in accordance with their respective terms, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium, and similar Laws, as well as
to principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
 
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(c)           The execution, delivery, and performance by each WI Owner of this
Agreement and the NPI Conveyances do not and will not (i) conflict with or
result in a breach of any of the provisions of the organizational and governing
documents of either WI Owner; (ii) violate any provision of any Law or any
order, writ, judgment, decree, or determination currently in effect having
applicability to either WI Owner; (iii) result in a breach of or constitute a
default under any indenture, bank loan, securities purchase agreement, credit
agreement, Lease, Property Agreement, Marketing Agreement, or other agreement or
instrument to which either WI Owner is a party or by which either of WI Owners
or the Subject Interests  may be currently bound or affected; or (iv) result in
or require the creation or imposition of any mortgage, lien, pledge, security
interest, charge, or other encumbrance upon any of the Subject Interests under
any such indenture, bank loan, securities purchase agreement, credit agreement,
Lease, Property Agreement, Marketing Agreement, or other agreement or
instrument.  Neither WI Owner is in default under any such order, writ,
judgment, decree, determination, indenture, agreement, or instrument in any way
that now or in the future will materially adversely affect the ability of either
WI Owner to perform its obligations under this Agreement or the NPI Conveyances.
 
(d)           Upon the due execution and delivery by WI Owners of the NPI
Conveyances, the Net Profits Interest will constitute an interest in real
property under the Laws of the State of Texas.
 
(e)           Except as set forth on Schedule 3.1(e), there is no suit, action,
Claim, investigation, or inquiry by any person or entity or by any
administrative agency or governmental body, and no legal, administrative, or
arbitration proceeding (including, without limitation, bankruptcy or
insolvency-related proceedings) pending or, to either WI Owner’s Knowledge,
threatened against either of WI Owners or the Subject Interests, or to which
either WI Owner is a party, that reasonably may be expected to (i) result in the
material impairment of either WI Owner’s title to any of the Subject Interests;
(ii) hinder or impede the operation of all or any portion of the Leases; (iii)
cause the Leases to be subject to reduced rates of production or other penalties
because of Hydrocarbon production in excess of applicable allowables or
otherwise; or (iv) otherwise have a Material Adverse Effect upon (A) the Subject
Interests, (B) the validity or enforceability of this Agreement or the NPI
Conveyances, (C) the ability of either WI Owner to consummate the transactions
contemplated in this Agreement or perform its obligations under the NPI
Conveyances, or (D) generally the business, properties, assets, or condition,
financial or otherwise, of WI Owners.
 
(f)           No authorization, consent, approval, exemption, franchise, permit,
or license of, or filing with, any Governmental Authority is required to
authorize, or is otherwise required in connection with, the valid execution,
delivery, and performance by WI Owners of this Agreement and the NPI
Conveyances.
 
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(g)           Except as set forth in Schedule 3.1(g), none of the Subject
Interests is subject to a preferential right to purchase, third Person consent
to assignment requirement, right of first refusal, right of first offer or
similar right or restriction, the operation of which is triggered by the
execution and delivery of this Agreement or the NPI Conveyances.  All consents
to assignment and waivers of preferential purchase or other rights necessary to
permit the valid conveyance to Assignees of the Net Profits Interest and the
execution and delivery of this Agreement and the NPI Conveyances have been
obtained or the time for giving such consents or waivers has expired following a
written request therefor.  All advance notifications to third Persons of the
transactions contemplated herein and in the NPI Conveyances necessary to permit
the valid conveyance to Assignees of the Net Profits Interest and the execution
and delivery of this Agreement and the NPI Conveyances have been timely and
properly given.
 
(h)           The Subject Interests are free and clear of any liens, mortgages,
deeds of trust, pledges, security interests, or other encumbrances, except as
set forth on Schedule 3.1(h).
 
(i)           All Taxes imposed or assessed with respect to, measured by,
charged against, or attributable to the Subject Interests have been duly paid.
 
(j)           Each Lease is in full force and effect, at a minimum, with respect
to the lands described in conjunction therewith on Exhibit A as comprising the
Subject Interests and with respect to the all subsurface intervals to be
included in the Subject Interests.  Neither WI Owner is in material breach or
material default, and there has occurred no event, fact, or circumstance that,
with the lapse of time or the giving of notice, or both, would constitute such a
breach or default by either WI Owner, with respect to any of its obligations
under any Lease, and, to each WI Owner’s Knowledge, no other Person owning any
interest in any Lease is in material breach or material default with respect to
any of its obligations thereunder.  No lessor under any Lease has given or, to
each WI Owner’s Knowledge, threatened to give notice of any action to terminate,
cancel, rescind, repudiate, or procure a judicial reformation of any Lease or
any provision thereof.
 
(k)           Each WI Owner has correctly made, or caused to be correctly made,
all payments, including, without limitation, royalties, rentals, shut-in well
payments, and other lease maintenance payments, due in respect of the Leases
thereunder.  All operations proposed to be conducted in connection with the
existing and proposed wells listed on Exhibit A will be conducted within the
subsurface intervals included in the Subject Interests.
 
(l)           Each Lease authorizes surface operations on the lands covered
thereby for the drilling, development, operation, and production of Hydrocarbon
wells, or for those Leases as to which surface operations are restricted or
impractical for operational or regulatory reasons, there exist Leases covering
contiguous acreage from which surface operations with respect to such
surface-restricted Leases may be conducted.
 
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(m)           There are no agreements, instruments, or documents affecting the
Subject Interests other than the Property Agreements and the Marketing
Agreements described on Schedule 3.1(m).  WI Owners have furnished or made
available to Assignees true and complete copies of all of the Property
Agreements and Marketing Agreements.  With respect to the Property Agreements
and Marketing Agreements:  (i) all of the Property Agreements and Marketing
Agreements are in full force and effect; (ii) neither WI Owner is in material
breach or material default, and there has occurred no event, fact, or
circumstance that, with the lapse of time or the giving of notice, or both,
would constitute such a breach or default by either WI Owner, with respect to
any of its obligations under any Property Agreement or Marketing Agreement;
(iii) to each WI Owner’s Knowledge, no other Person who is a party thereto is in
material breach or material default with respect to any of its obligations under
any Property Agreement or Marketing Agreement; and (iv) neither of WI Owners
nor, to either WI Owner’s Knowledge, any other party to any Property Agreement
or Marketing Agreement has given or threatened to give notice of any action to
terminate, cancel, rescind, or procure a judicial reformation of such Property
Agreement or Marketing Agreement or any provision thereof.
 
(n)           Except as set forth on Schedule 3.1(n), the Subject Interests are
not subject to any area of mutual interest provision, interest reversion or
conversion, or other contract or provision thereof under which WI Owners or
Assignees may be obligated to make assignments to third parties of interests in
any Subject Interest prior to the Effective Date.
 
(o)           All costs and expenses incurred in connection with the operation
of the Subject Interests for which WI Owners are responsible and have received
invoices from the operator(s) thereof have been paid, and there are no
outstanding calls or payments due from either WI Owner under the terms of the
Property Agreements or the Marketing Agreements.  Neither the Leases nor the
Property Agreements contain any expressed contractual obligations to drill
additional wells or to engage in other development operations, except for
obligations arising under offset well provisions and obligations arising under
Property Agreements that allow the parties thereto to elect whether to
participate.  There are no material operations on any Lease under any of the
Property Agreements with respect to which either of WI Owners or any other
Person has become a non-consenting party.
 
(p)           The Subject Interests are not subject to any regulatory refund
obligation, and, to each WI Owner’s Knowledge, there has occurred no event,
fact, or circumstance that, with the lapse of time or the giving of notice, or
both, would give rise to such a regulatory refund obligation.
 
(q)           No third party has any call, right of first refusal, or
preferential right to purchase any Hydrocarbons produced from or allocable to
the Subject Interests.
 
(r)           Except as set forth in Schedule 3.1(r), neither WI Owner is a
party to or bound by, and the Subject Interests and the Hydrocarbons
attributable thereto are not encumbered or affected by, any gas balancing,
deferred production, gas banking, or similar agreement or arrangement.  Except
as shown on Schedule 3.1(r), neither WI Owner is in an “overlift,”
“overproduced,” “underproduced”, or similar status under any such agreement or
arrangement.
 
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(s)           Neither the Subject Interests nor the Hydrocarbons attributable
thereto are subject to any contract, agreement, or arrangement (including,
without limitation, advance payment agreements, prepayments, take-or-pay makeup
obligations, or otherwise) whereby the owner of the Hydrocarbons or any part
thereof is not entitled to convey the Hydrocarbons or to market the Hydrocarbons
and to obtain the full market price or value of the same at the time of
delivery.
 
(t)           To each WI Owner’s Knowledge, no Casualty Event or Environmental
Liability adversely affecting any material portion of the Subject Interests or
the operation thereof, or adversely affecting the ability of either WI Owner to
perform its obligations under this Agreement or the NPI Conveyances, has
occurred or accrued.
 
(u)           Each WI Owner and, to each WI Owner’s Knowledge, the operators of
the Leases, have complied in all material respects with all Laws (including,
without limitation, Environmental Laws), licenses, and permits relating to the
Assets, other than violations that could not (either individually or
collectively) reasonably be expected to have a Material Adverse Effect on WI
Owners.  Each WI Owner and, to each WI Owner’s Knowledge, the operator(s) of the
Leases, as applicable, have all approvals, authorizations, consents, licenses,
and permits from Governmental Authorities required under applicable Laws
(including, without limitation, Environmental Laws) in connection with the
ownership and operation of the Leases, and have properly made all filings
necessary or appropriate to obtain such approvals, authorizations, consents,
licenses, and permits.  All of such licenses, permits, filings, approvals,
authorizations, and consents are in full force and effect.  Neither of WI Owners
nor, to each WI Owner’s Knowledge, any other Person has received notice from any
Governmental Authority having jurisdiction over the Leases that any such
applicable Law, permit, license, or filing has been violated or not complied
with by either WI Owner or any other Person.
 
(v)           Without limiting the representations and warranties contained in
Section 3.1(u), neither WI Owner has (i) received notice or otherwise learned of
any Environmental Liability in, on, affecting, or otherwise relating in any way
to any Lease that could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on either WI Owner arising in
connection with (A) any non-compliance with or violation of any Environmental
Law or (B) the Release (or threatened Release) of a Hazardous Substance, or (ii)
received notice or otherwise learned of any federal or state investigation
evaluating whether any remedial action is needed to respond to a Release (or
threatened Release) of a Hazardous Substance in, on, affecting, or otherwise
relating in any way to any Lease for which either WI Owner may be liable.  No
Release of Hazardous Substances by either WI Owner in, on, from, affecting, or
relating in any way to any Lease or any property of either WI Owner adjacent
thereto has occurred, and neither WI Owner has received any Environmental
Complaint.
 
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(w)           There are no bankruptcy, insolvency, reorganization, or
arrangement proceedings pending, being contemplated by, or to each WI Owner’s
Knowledge, threatened against either WI Owner or any Affiliate that controls
either WI Owner.
 
ARTICLE 4.
 
MISCELLANEOUS
 
4.1           Further Assurances.  WI Owners and Assignees agree to take all
such further actions and to execute, acknowledge, and deliver all such further
documents as are necessary or useful to effectuate the conveyance of the Net
Profits Interest and to carry out the purposes of this Agreement and the NPI
Conveyances.
 
4.2           Survival.  The representations, warranties, covenants, agreements,
and indemnities in this Agreement shall survive the execution and delivery of
the NPI Conveyances and the consummation of the transactions described herein
and therein.
 
4.3           Expenses; Taxes.  WI Owners shall bear and pay all fees, costs,
and expenses incurred by both WI Owners and Assignees in negotiating this
Agreement and the NPI Conveyances and consummating the transactions contemplated
herein and therein.  All required documentary, filing, and recording fees and
expenses incurred in connection with the filing and recording of the NPI
Conveyances, as well as all state sales and use taxes and real estate transfer
taxes (including any applicable interest or penalties) incurred or imposed with
respect to the transactions described in this Agreement and the NPI Conveyances,
shall be borne and paid by WI Owners.  Each Party shall assume responsibility
for, and shall bear and pay, all federal and state income, franchise, and other
similar taxes (including any applicable interest or penalties) incurred by or
imposed upon such Party with respect to the transactions described in this
Agreement.  Prior to the Effective Date, all Taxes based upon or measured by the
ownership of the Subject Interests, Hydrocarbon production therefrom, or the
receipt of proceeds thereof, shall be borne and paid by WI Owners, and after the
Effective Date, shall be allocated as set forth in the NPI Conveyance.
 
4.4           Notices.  All notices, requests, demands, instructions and other
communications required or permitted to be given hereunder shall be in writing
and shall be (a) delivered personally, (b) mailed by certified U.S. mail,
postage prepaid and return receipt requested, (c) sent by bonded courier, or (d)
sent by facsimile, as follows:
 
If to WI Owners:
 
New Century Energy Corp.
Century Resources, Inc.
5851 San Felipe, Suite 775
Houston, Texas  77057
Attention:  Chief Financial Officer
Facsimile No.:  (713) 266-4358
If to Assignees:
Valens U.S. SPV I, LLC
Valens Offshore SPV II, Corp.
c/o Valens Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York  10017
Attention:  Portfolio Services
Facsimile No.:  (212) 581-5037

 
 

 
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with a copy to:
 
David M. Loev, Esquire
The Loev Law Firm, PC
6300 West Loop South, Suite 280
Bellaire, Texas  77401
Facsimile No.:  (713) 524-4122
with a copy to:
 
Loeb & Loeb, LLP
345 Park Avenue
New York, New York  10154
Attention:  Scott J. Giordano, Esq.
Facsimile No.:  (212) 407-4990
     
and to:
 
Jackson Walker L.L.P.
1401 McKinney, Suite 1900
Houston, Texas  77010
Attention:  Michael P. Pearson, Esquire
Facsimile No.:  (713) 752-4221
   

or to such other place within the United States of America as either Party may
designate as to itself by written notice to the other.  All notices given by
personal delivery, courier, or mail shall be effective on the date of actual
receipt at the appropriate address.  Notice given by telecopier shall be
effective upon actual receipt if received during recipient’s normal business
hours or at the beginning of the next Business Day after receipt if received
after the recipient’s normal business hours.
 
4.5           Indemnification.
 
(a)           Notwithstanding the execution of the NPI Conveyances, regardless
of any investigation made at any time by or on behalf of Assignees or any
information Assignees may have, and regardless of the presence or absence of
insurance, WI Owners shall indemnify and hold harmless Assignees and Assignees’
respective successors, assigns, Affiliates, shareholders, partners, members,
directors, officers, managers, employees, agents, and representatives
(collectively, the “Indemnified Parties”) from and against any and all Claims
caused by, arising out of, resulting from, or relating in any way to, and shall
pay the Indemnified Parties any sum that the Indemnified Parties pay or become
obligated to pay on account of: (i) any breach or default in the performance by
either WI Owner of any covenant or agreement of WI Owners contained in this
Agreement or the NPI Conveyances; (ii) any breach of a warranty or an inaccurate
or erroneous representation made by either WI Owner in this Agreement or the NPI
Conveyances; and (iii) all liability or obligation to third Persons (including,
without limitation, liabilities resulting from injury to or death of any Person,
Persons, or other living things, or loss or destruction of or damage to
property, as well as Environmental Liabilities), whether arising in contract, in
tort, or by operation of Law, arising out of, resulting from, or relating in any
way to the ownership, use, possession, and operation of the Subject Interests
and the production, handling, and marketing of Hydrocarbons therefrom by WI
Owners; provided, however, that in no event shall the terms of this Section
4.5(a) be deemed to create personal liability on the part of WI Owners with
respect to the satisfaction or discharge of the Net Profits Interest.  IT IS THE
INTENT OF THE PARTIES THAT THE FOREGOING INDEMNITY BE WITHOUT REGARD TO THE
CAUSE OR CAUSES OF THE CLAIM TO BE INDEMNIFIED, INCLUDING, WITHOUT LIMITATION,
THE NEGLIGENCE OF ASSIGNEES, OR EITHER OF THEM, WHETHER SUCH NEGLIGENCE BE SOLE,
JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE, OR THE STRICT LIABILITY OF
ASSIGNEES, OR EITHER OF THEM.
 
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(b)           Assignees shall give to WI Owners prompt written notice and
particulars of any Claim for which indemnification is sought.  At their option,
WI Owners may:  (i) permit Assignees to respond to the Claim in the manner set
forth in its notice; or (ii) assume responsibility for and conduct the
negotiation, defense, or settlement of the Claim; provided, however, that
Assignees shall at all times have the right to participate in the defense
thereof and to be represented, at their sole expense, by counsel selected by
them.  No such Claim shall be compromised or settled by either WI Owners or
Assignees, as applicable, in any manner that might adversely affect the interest
of the other Party without the prior written consent of such other Party.
 
4.6           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ANY
CONFLICTS OF LAW PRINCIPLES.
 
4.7           Limitation on Damages.  For the breach or non-performance by any
Party of any representation, warranty, covenant, or agreement contained in this
Agreement, the liability of the obligor shall be limited to direct actual
damages only, except to the extent that the obligee is entitled to specific
performance or injunctive relief.  NEITHER WI OWNERS NOR ASSIGNEES SHALL BE
LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR
INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION DAMAGES, IN TORT,
IN CONTRACT, UNDER ANY INDEMNITY PROVISION, ARISING BY OPERATION OF LAW, OR
OTHERWISE AS TO ANY MATTER RELATING TO THIS AGREEMENT, THE NPI CONVEYANCES, OR
THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN.  Without limiting the
foregoing, if the NPI Conveyances or any Lease is rejected as an unexpired lease
or executory contract pursuant to any of the terms of Section 365 of the United
States Bankruptcy Code, the damages recoverable as a result of such rejection
shall equal the value as of the date of rejection of the future obligations
remaining under the NPI Conveyances at the time of the rejection, determined in
a commercially reasonably manner.
 
4.8           Successors and Assigns.
 
(a)           This Agreement shall be binding upon and, subject to the following
restriction, shall inure to the benefit of the Parties and their respective
permitted successors and assigns.  Nothing contained herein shall in any way
limit or restrict the right of Assignees, or Assignees’ successors and assigns,
to sell, convey, assign, transfer, mortgage, pledge, or create a lien or
security interest in their respective rights or obligations hereunder in whole
or in part; provided, however, that (i) any such transfer shall expressly be
made subject to the terms of this Agreement and the NPI Conveyances and (ii) the
prospective transferee from Assignees shall expressly agree to assume and
perform all of Assignees’ covenants and obligations under the terms of this
Agreement and the NPI Conveyances.  WI Owners shall not Transfer their rights or
obligations hereunder separately from the Subject Interests without the prior
written consent of Assignees.
 
-11-

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

 
(b)           Transfers by WI Owners, or either of them, of the Subject
Interests shall be subject to the terms of Section 7.2 of the Initial NPI
Conveyance.  In the event of a Transfer by WI Owners, or either of them, that
includes only the Subject Interests, or any portion thereof, and the Net Profits
Interest attributable thereto, WI Owners shall pay to Assignees, as
consideration for Assignees’ reconveyance to WI Owners of the Net Profits
Interest in advance of such Transfer as required under Section 7.2(b) of the
Initial NPI Conveyance, an amount equal to forty-nine percent (49%) of the total
purchase price (net of all applicable adjustments) to be paid by the prospective
transferee to WI Owners (or the WI Owner Transferring its interest) with respect
to the Subject Interests (including the Net Profits Interest) being Transferred
as part of the same transaction or series of transactions.
 
(c)           In the event of a Transfer by WI Owners, or either of them, that
includes the Subject Interests, or any portion thereof, and the Net Profits
Interest attributable thereto, as part of a larger transaction, WI Owners shall
pay to Assignees, as consideration for Assignees’ reconveyance to WI Owners of
the Net Profits Interest in advance of such Transfer as required under Section
7.2(b) of the Initial NPI Conveyance, an amount equal to forty-nine percent
(49%) of the portion of the total purchase price (net of all applicable
adjustments) to be paid by the prospective transferee to WI Owners (or the WI
Owner Transferring its interest) with respect to all properties, assets, and
interests of every kind and character being Transferred by WI Owners (or the WI
Owner Transferring its interest) to such prospective transferee as part of the
same transaction or series of related transactions that is allocable, under the
terms of the relevant acquisition document(s), to the Subject Interests, or the
portion thereof being Transferred, and the Net Profits Interest attributable
thereto.  Notwithstanding the preceding sentence of this Section 4.8(c) to the
contrary, in the absence of such an allocation of values to the individual
properties, assets, and interests being Transferred in the relevant acquisition
documents, or if Assignees determine, in the good faith exercise of their
business judgment, that the values allocated to the relevant Subject Interests
(including the Net Profits Interest) set forth in the acquisition documents are
not at least equivalent to the values established for such Subject Interests
(including the Net Profits Interest) in the most recent reserve report provided
by WI Owners to the Creditor Parties pursuant to Section 6.18 of the Securities
Purchase Agreement (adjusted to reflect production from or allocable to such
Subject Interests during the period from the effective date of such reserve
report through the effective date of the Transfer), the consideration payable to
Assignees for the reconveyance to WI Owners (or the WI Owner Transferring its
interest) of the Net Profits Interest, or relevant portion thereof, in advance
of such Transfer shall be an amount equal to forty-nine percent (49%) of the
values established for the Subject Interests being transferred (including the
Net Profits Interest) in such reserve report.
 
-12-

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4.9           Unenforceable or Inapplicable Provisions.  If any provision hereof
is invalid or unenforceable in any jurisdiction, the other provisions hereof
shall remain in full force and effect in such jurisdiction, and the remaining
provisions hereof shall be liberally construed in favor of Assignees, and their
successors and assigns, in order to effectuate the terms 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.
 
4.10           Execution in Counterparts. This Agreement has been executed in
several counterparts, each of which shall be deemed to be an original and all of
which are identical.  All of such counterparts together shall constitute but one
and the same agreement.  All of said documents are integral parts of one
consolidated transaction and are to be construed as a single transaction.
 
4.11           Entire Agreement.  This Agreement, together with the NPI
Conveyances, shall constitute the entire agreement between the Parties covering
the subject matter hereof, and there are no agreements, modifications,
conditions, or understandings, written or oral, expressed or implied, pertaining
to the subject matter hereof which are not contained herein or therein.
 
4.12           Amendment; Waiver.  This Agreement shall not be modified or
changed except in writing signed by all Parties.  No provision of this Agreement
shall be waived except in writing signed by the Party granting the waiver.  A
waiver of any breach or a failure to enforce any of the terms or conditions of
this Agreement shall not in any way affect, limit, or waive a Party’s rights
under this Agreement at any time to enforce strict compliance thereafter with
every term or condition of this Agreement.
 
EXECUTED on the date first set forth above.
 
WI OWNERS:

 

 
NEW CENTURY ENERGY CORP.

 
 
By: /s/ Edward R. DeStefano
  Edward R. DeStefano
  President and Chief Executive Officer
 

 
CENTURY RESOURCES, INC.
 

 
By: /s/ Edward R. DeStefano
  Edward R. DeStefano
  President and Chief Executive Officer
 

-13-

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

 
ASSIGNEES:
 

 
VALENS U.S. SPV I, LLC
 
By: Valens Capital Management, LLC, its Investment Manager

 

 
By: /s/ Patrick Regan
Name: Patrick Regan
          Authorized Signatory
 
 
VALENS OFFSHORE SPV II, CORP.

 
By: Valens Capital Management, LLC, its Investment Manager
 

 
By: /s/ Patrick Regan
Name: Patrick Regan
          Authorized Signatory
 
SCHEDULES
 
Schedule 1.1
-
Definitions
Schedule 3.1(e)
-
WI Owners’ Litigation
Schedule 3.1(g)
-
Preferential Purchase Rights; Required Third Person Consents to Assignment
Schedule 3.1(h)
-
Liens and Encumbrances
Schedule 3.1(m)
-
Property Agreements; Marketing Agreements
Schedule 3.1(n)
-
Future Assignment Obligations
Schedule 3.1(r)
-
Production Imbalances and Related Items
     

 
EXHIBITS
 
Exhibit A
-
Subject Interests
Exhibit B
-
Form of Conveyance of Net Profits Overriding Royalty Interest
     

 
 

 
-14-

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SCHEDULE 1.1
 

 
Definitions
 
“Affiliate” means, with respect to any person, any other person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with such person.  The term “control” (including, with
correlative meaning, the terms “controlled by” and “under common control with”)
as used with respect to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities, by
contract, or otherwise.
 
 “Business Day” means any day which is not a day on which national banking
institutions in New York, New York, are closed as authorized or required by Law.
 
“Casualty Event” means, with respect to all or any material portion of an Asset,
any destruction by fire, blowout, leak, explosion, or other casualty (above or
below ground) or any taking, or pending or threatened taking, in condemnation or
under the right of eminent domain, of any Lease or portion thereof.
 
“Central Time” means Central Standard Time or Central Daylight Savings Time, as
in effect in Houston, Texas, on the day in question.
 
“Claims” means any and all claims, demands, liens, notices of non-compliance or
violation, notices of liability or potential liability, investigations, actions
(whether judicial, administrative, or arbitrational), causes of action, suits,
controversies, losses, judgments, damages, liabilities, costs, expenses,
interest, penalties, taxes, fines, obligations, and deficiencies, including,
without limitation, reasonable attorneys’ fees and other costs and expenses of
the Party defending a claim incident to the investigation and defense thereof
that results in litigation or arbitration, or the settlement of any claim, or,
in the case of a claim subject to indemnification hereunder, the enforcement by
the Party receiving indemnification of the provisions of Section 4.5, as
applicable.
 
“Creditor Parties”, as defined in the Securities Purchase Agreement, means,
collectively, Assignees, as “Purchasers” under the terms of the Securities
Purchase Agreement, and LV Administrative Services, Inc., as administrative and
collateral agent for each Purchaser.
 
“Effective Date” means 7:00 A.M., Central Time, on the first Day of the Month
following the first to occur of (a) the payment in full by NCEC to Assignees of
all amounts (including principal and accrued interest) owed by NCEC under the
terms of the Notes, or (b) the “Maturity Date” of the Notes (as such term is
defined therein).
 
“Environmental Complaint” means any written or oral complaint, order, directive,
claim, citation, notice of environmental report or investigation, or other
notice by any governmental authority or any other Person with respect to (a) air
emissions, (b) spills, releases, or discharges to soils, any improvements
located thereon, surface water, groundwater, or the sewer, septic, waste
treatment, storage, or disposal systems servicing any Lease, (c) solid or liquid
waste disposal, (d) the use, generation, storage, transportation, or disposal of
any Hazardous Substance, or (e) other environmental, health, or safety matters
affecting any Lease or the business conducted thereon.
 
Schedule 1.1-i

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

“Environmental Laws” means (a) the following federal laws as they may be cited,
referenced, and amended from time to time:  the Clean Air Act, the Clean Water
Act, the Safe Drinking Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act, the
Superfund Amendments and Reauthorization Act, and the Toxic Substances Control
Act; (b) any and all equivalent environmental statutes of any state in which any
Lease is situated, as they may be cited, referenced and amended from time to
time; (c) any rules or regulations promulgated under or adopted pursuant to the
above federal and state laws; and (d) any other equivalent federal, state, or
local statute or any requirement, rule, regulation, code, ordinance, or order
adopted pursuant thereto, including those relating to the generation,
transportation, treatment, storage, recycling, disposal, handling, or Release of
Hazardous Substances.
 
“Environmental Liability”  means any claim, demand, obligation, cause of action,
accusation, allegation, order, violation, damage, injury, judgment, penalty or
fine, cost of enforcement, cost of remedial action, or any other cost or expense
whatsoever, including reasonable attorneys’ fees and disbursements, resulting
from the violation or alleged violation of any Environmental Law or the
imposition of any Environmental Lien.
 
“Environmental Lien” means a lien in favor of a Governmental Authority or other
Person for (a) any liability under an Environmental Law or (b) damages arising
from or costs incurred by such Governmental Authority or other Person in
response to a Release (or threatened Release) of Hazardous Substances into the
environment.
 
“Governmental Authority” means any governmental or quasi-governmental federal,
state, provincial, county, city, or other political subdivision of the United
States, any foreign country, or any department, bureau, agency, commission,
court, or other statutory or regulatory body or instrumentality thereof.
 
“Hazardous Substances” shall mean flammables, explosives, radioactive materials,
hazardous wastes, asbestos, or any material containing asbestos, polychlorinated
biphenyls (PCBs), toxic substances or related materials, petroleum, petroleum
products, associated oil or natural gas exploration, production, and development
wastes, or any substances defined as “hazardous substances,” “hazardous
materials,” “hazardous wastes,” or “toxic substances” under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the
Superfund Amendments and Reauthorization Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended, the Toxic Substances Control Act, as amended, or any other
Environmental Laws.
 
Schedule 1.1-ii

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“Hydrocarbons” shall have the meaning given that term in the Initial NPI
Conveyance.
 
The term “Indemnified Parties” is defined in Section 4.5(a).
 
“Initial NPI Conveyance” means the Conveyance of Net Profits Overriding Royalty
Interest to be executed by WI Owners in favor of Assignee concurrently with the
execution of this Agreement, creating the Net Profits Interest in and with
respect to the Initial Subject Interests, substantially in the form attached
hereto as Exhibit B.
 
“Initial Subject Interests” means:  (a) the undivided leasehold interests and
the associated net revenue interests of WI Owners described more particularly on
Exhibit A in and to the Leases and the other rights and interests described more
particularly in Exhibit A, INSOFAR ONLY AS the Leases cover and include the
lands identified in Exhibit A, which comprise the drill site locations for the
proposed wells listed on Exhibit A, all as provided in Exhibit A; (b) all
rights, titles, and interests of WI Owners in and to all Hydrocarbons produced,
saved, and marketed from or allocable to the proposed Hydrocarbon wells listed
on Exhibit A once such wells are drilled and completed, and any Hydrocarbon
wells drilled thereafter on the Leases, INSOFAR ONLY AS the Leases cover and
include the lands identified in Exhibit A, and any unit into which any such
Lease, INSOFAR ONLY AS such Lease covers and includes the lands identified in
Exhibit A, is pooled or unitized; and (c) any and all other rights, titles, and
interests of WI Owners in or with respect to all voluntary or compulsory pooling
or unitization agreements or orders, farmout agreements, farmin agreements,
operating agreements, Hydrocarbon purchase and sale agreements, licenses,
permits, and all other contracts of any kind whatsoever covering or affecting
the production or marketing of Hydrocarbons from the Leases, INSOFAR ONLY AS the
Leases cover and include the lands identified in Exhibit A, and any unit into
which any such Lease, INSOFAR ONLY AS such Lease covers and includes the lands
identified in Exhibit A, is pooled or unitized, and attributable to the
interests of WI Owners therein.
 
“Knowledge” means, for purposes of Article 3, (a) knowledge of those matters of
which a Person is charged with constructive notice under applicable Law, and (b)
actual knowledge.
 
“Laws” means all constitutions, laws, statutes, ordinances, rules,  and
regulations of the United States, any foreign country, or any domestic or
foreign state, and any local, state, or federal political subdivision or agency
thereof, as well as all decisions of courts having the effect of law in each
such jurisdiction.
 
“Leases” means the oil and gas leases, fee mineral interests, and other
interests described, referred to, or identified in Exhibit A (as Exhibit A may
be supplemented and amended pursuant to Section 2.2) as to all lands covered
thereby (or the applicable part or portion thereof if specifically limited in
depth and/or areal extent), together with, in the case of an oil and gas lease,
any renewal or extension of such lease (as to all or any part or portion
thereof), and any replacement lease taken upon or in anticipation of the
expiration or termination of such lease (if executed and delivered during the
term of or within one (1) year after expiration of the predecessor lease), as to
all lands and depths described in the predecessor lease (unless the predecessor
lease is specifically limited in depth or geographic extent, in which event only
such portion of such lease shall be considered a renewal or extension or a
replacement lease subject to this Agreement).
 
Schedule 1.1-iii

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

“Marketing Agreements” means the Hydrocarbon processing, sale, purchase,
exchange, gathering, transportation, and other marketing-related contracts,
agreements, and rights owned by WI Owners or to which either WI Owner is a party
and that are appurtenant to or affect the Subject Interests, described more
particularly on Schedule 3.1(m) (as such schedule may be amended in connection
with the addition of the Supplemental Subject Interests).
 
“Material Adverse Effect” shall have the meaning given to that term in the
Securities Purchase Agreement.
 
 “Net Profits Interest” means the net profits overriding royalty interest to be
conveyed by WI Owners to Assignee out of the Subject Interests as provided in
this Agreement, subject to and in accordance with the terms of the NPI
Conveyances.
 
“Notes” mean, collectively, (a) the Secured Term Note dated of even date
herewith, from NCEC to Valens U.S. SPV I, LLC, in the original principal amount
of $2,300,000.00, and (b) the Secured Term Note dated of even date herewith,
from NCEC to Valens Offshore SPV II, Corp., in the original principal amount of
$3,000,000.00.
 
“Parties” shall mean, collectively, WI Owners and Assignees.
 
“Permitted Encumbrances” shall have the meaning given that term in the Initial
NPI Conveyance.
 
“Person” means any individual, natural person, corporation, joint venture,
partnership, limited partnership, limited liability company, limited liability
partnership, trust, estate, business trust, association, governmental entity or
other entity.
 
“Property Agreements” means all of the operating agreements, unit operating
agreements, processing plant operating agreements, pooling and unitization
agreements, and other contracts, agreements, and rights owned by WI Owners, in
whole or in part, to the extent that they are appurtenant to or affect the
Subject Interests, described more particularly on Schedule 3.1(m) (as such
schedule may be amended in connection with the addition to this Agreement of the
Supplemental Subject Interests).
 
“Release of Hazardous Substances” means any emission, spill, release, disposal,
or discharge, except in accordance with a valid permit, license, certificate, or
approval of the relevant governmental authority, of any Hazardous Substance into
or upon (a) the air, (b) soils or any improvements located thereon, (c) surface
water or groundwater, or (d) the sewer or septic system, or the waste treatment,
storage, or disposal system servicing any Lease, with respect to which either WI
Owner is legally obligated to respond under applicable Environmental Laws by
notifying the relevant Governmental Authority, investigating, or undertaking
corrective action.
 
Schedule 1.1-iv

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

“Restricted Account Documents” means, collectively, (a) the Restricted Account
Agreement dated of even date herewith, among North Fork Bank, NCEC, and LV
Administrative Services, Inc., as administrative and collateral agent for the
“Purchasers” under the terms of the Securities Purchase Agreement, and (b) the
letter agreement regarding Restricted Account mechanics dated of even date
herewith, executed by NCEC and LV Administrative Services, Inc., as Agent.
 
“Securities Purchase Agreement” means the Securities Purchase Agreement dated of
even date herewith, between NCEC, the “Purchasers” from time to time a party
thereto, and LV Administrative Services, Inc., as administrative and collateral
agent for each Purchaser.
 
 “Subject Interests” means, collectively, the Initial Subject Interests and the
Supplemental Subject Interests.
 
“Supplemental NPI Conveyance” has the meaning given to that term in Section 2.2.
 
“Supplemental Subject Interests” means (a) the undivided leasehold interests,
the associated net revenue interests, and the other rights and interests of WI
Owners in and to the Leases to be described in Exhibit A to the Supplemental NPI
Conveyance, INSOFAR ONLY AS such Leases cover and include the lands identified
in Exhibit A to the Supplemental NPI Conveyance, which comprise the drill site
locations for the proposed wells agreed upon by WI Owners and the Creditor
Parties and listed on Exhibit A to the Supplemental NPI Conveyance; (b) all
rights, titles, and interests of WI Owners in and to all Hydrocarbons produced,
saved, and marketed from or allocable to the proposed Hydrocarbon wells listed
on Exhibit A to the Supplemental NPI Conveyance once such wells are drilled and
completed, and any Hydrocarbon wells drilled thereafter on such Leases, INSOFAR
ONLY AS such Leases cover and include the lands identified in Exhibit A to the
Supplemental NPI Conveyance, and any unit into which any such Lease, INSOFAR
ONLY AS such Lease covers and includes the lands identified in Exhibit A to the
Supplemental NPI Conveyance, is pooled or unitized; and (c) any and all other
rights, titles, and interests of WI Owners in or with respect to all voluntary
or compulsory pooling or unitization agreements or orders, farmout agreements,
farmin agreements, operating agreements, Hydrocarbon purchase and sale
agreements, licenses, permits, and all other contracts of any kind whatsoever
covering or affecting the production or marketing of Hydrocarbons from the
Leases described in Exhibit A to the Supplemental NPI Conveyance, INSOFAR ONLY
AS such Leases cover and include the lands identified in Exhibit A to the
Supplemental NPI Conveyance, and any unit into which any such Lease, INSOFAR
ONLY AS such Lease covers and includes the lands identified in Exhibit A to the
Supplemental NPI Conveyance, is pooled or unitized, and attributable to the
interests of WI Owners therein.
 
Schedule 1.1-v

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“Taxes” means all ad valorem, property, occupation, gathering, pipeline
regulating, windfall profit, severance, gross production, gross receipts, Btu,
energy, excise, and other taxes and governmental charges and assessments imposed
on the Subject Interests, the Net Profits Interest, the Hydrocarbons
attributable thereto, or the proceeds therefrom, other than income, franchise,
or similar taxes.
 
“Transfer” means, for purposes of Section 4.8, as applicable, (a) a sale,
exchange, assignment, conveyance, gift, bequest, devise, disposition, or other
direct transfer of title to an asset, (b) a transfer of the equity interests of
the Person owning the relevant asset or, in the case of an entity other than an
individual, the direct parent of such entity, or (c) a merger, consolidation,
reorganization, or other business combination of such Person or, in the case of
an entity other than an individual, the direct parent of such entity.
 

Schedule 1.1-vi

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

SCHEDULE 3.1(e)
WI OWNERS’ LITIGATION
 
None.
 

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

SCHEDULE 3.1(g)
 
PREFERENTIAL PURCHASE RIGHTS; REQUIRED THIRD
 
PERSON CONSENTS TO ASSIGNMENT
 
None.
 

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

SCHEDULE 3.1(h)

 
LIENS AND ENCUMBRANCES
 

1.
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment
of Production, from New Century Energy Corp. and Century Resources, Inc., as
Mortgagors, to Eugene Grin, as Trustee, for the benefit of Laurus Master Fund,
Ltd., as Mortgagee, dated June 30, 2005, filed and recorded as follows:
     
JURISDICTION
FILING DATA
       
TEXAS
         
Matagorda County
Filed on July 5, 2005, under Instrument No. 055103, Official Records
       
Wharton County
Filed on July 5, 2005, under Instrument No. 255765, Volume 614 Page 333,
Official Records

2.
UCC-1 Financing Statement reflecting New Century Energy Corp. and Century
Resources, Inc., as Debtors, and Laurus Master Fund, Ltd., as Secured Party,
relating to the Mortgage dated as of June 30, 2005, and covering fixtures and
as-extracted collateral, filed and recorded as follows:
       
JURISDICTION
FILING DATA
       
TEXAS
         
Matagorda County
Filed on July 5, 2005, under Instrument No. 055104, Official Records
       
Wharton County
Filed on July 5, 2005, under Instrument No. 255766, Volume 614 Page 358,
Official Records

Schedule 3.1(h)-i

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

3.
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment
of Production from New Century Energy Corp. and Century Resources, Inc., as
Mortgagors, to Eugene Grin, as Trustee, for the benefit of Laurus Master Fund,
Ltd., as Mortgagee, dated as of September 19, 2005, filed and recorded as
follows:
     
JURISDICTION
FILING DATA
       
TEXAS
         
Matagorda County
Filed on September 20, 2005, under Instrument No. 057328, Official Records
       
McMullen County
Filed on September 20, 2005, Volume 163 Page 276
       
Wharton County
Filed on September 21, 2005, under Instrument No. 257742, Volume 624 Page 304,
Official Records

4.
UCC-1 Financing Statement reflecting New Century Energy Corp. and Century
Resources, Inc., as Debtors, and Laurus Master Fund, Ltd., as Secured Party,
relating to the Mortgage dated as of September 19, 2005, and covering fixtures
and as-extracted collateral, filed and recorded as follows:
     
JURISDICTION
FILING DATA
       
TEXAS
         
Matagorda County
Filed on September 20, 2005, under Instrument No. 057329, Official Records
       
McMullen County
Filed on September 20, 2005, Volume 163 Page 308
       
Wharton County
Filed on September 21, 2005, under Instrument No. 257743, Volume 624 Page 330,
Official Records

Schedule 3.1(h)-ii

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

5.
Amended and Restated Mortgage, Deed of Trust, Security Agreement, Financing
Statement and Assignment of Production from New Century Energy Corp. and Century
Resources, Inc., as Mortgagors, to Eugene Grin, as Trustee, for the benefit of
Laurus Master Fund, Ltd., as Mortgagee, dated April 26, 2006, filed and recorded
as follows:
     
JURISDICTION
FILING DATA
       
TEXAS
         
Matagorda County
Filed on April 27, 2006, under Instrument No. 063043, Official Records
       
McMullen County
Filed on April 27, 2006, Volume 168 Page 336
       
Wharton County
Filed on April 27, 2006, under Instrument No. 263022, Volume 650 Page 320,
Official Records

 
6.
UCC-1 Financing Statement reflecting New Century Energy Corp. and Century
Resources, Inc., as Debtors, and Laurus Master Fund, Ltd., as Secured Party,
relating to the Mortgage dated April 26, 2006, and covering fixtures and
as-extracted collateral, filed and recorded as follows:
     
JURISDICTION
FILING DATA
       
TEXAS
         
Matagorda County
Filed on April 28, 2006, under Instrument No. 063108
       
McMullen County
Filed on April 28, 2006, Volume 168 Page 413
       
Wharton County
Filed on April 28, 2006, under Instrument No. 263056, Volume 650 Page 481,
Official Records

7.
UCC-1 Financing Statement reflecting New Century Energy Corp. and Century
Resources, Inc., as Debtors, and Laurus Master Fund, Ltd., as Secured Party,
covering fixtures and as-extracted collateral, filed and recorded as follows:
     
JURISDICTION
FILING DATA
       
TEXAS
         
Matagorda County
Filed on January 5, 2007, under Instrument No. 070109, Official Records
       
McMullen County
Filed on January 9, 2007, Volume 173 Page 13
       
Wharton County
Filed on January 5, 2007, under Instrument No. 269469, Volume 683 Page 99,
Official Records

Schedule 3.1(h)-iii

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

SCHEDULE 3.1(m)
 

 
PROPERTY AGREEMENTS; MARKETING AGREEMENTS
 
A.
Property Agreements

 
 
Operating Agreement dated March 1, 2004, among Century Resources, Inc., as
Operator, and Acquatic Cellulose International Corp., as Non-Operator, covering
certain leases, wells, and facilities in Wharton County, Texas.

 
B.
Marketing Agreements

 
 
1.
Base Contract for Sale and Purchase of Natural Gas dated as of July 17, 2002,
among Century Resources, Inc., as Seller, and Harvest Pipeline Company, as
Buyer, relating to the Subject Interests in Matagorda County, Texas.

 
2.
Crude Oil Purchase Agreement, Flint Hills Resources, LP Contact No. 4762, dated
August 7, 2007, among New Century Energy Corp., as Seller and Flint Hills
Resources, LP, as Buyer, relating to the Subject Interests in Wharton County,
Texas.

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

SCHEDULE 3.1(n)
FUTURE ASSIGNMENT OBLIGATIONS
 
None.
 

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

SCHEDULE 3.1(r)
PRODUCTION IMBALANCES AND RELATED ITEMS
 
None.
 

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

EXHIBIT A
 
Attached to and made a part of Net Profits Interest Agreement
dated as of November 30, 2007, between
New Century Energy Corp. and CenturyResources, Inc., as WI Owners, and
Valens U.S. SPV I, LLC, and Valens Offshore SPV II, Corp., as Assignees

 
SUBJECT INTERESTS
 
 
[CONFIDENTIAL INFORMATION REMOVED]

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

 
EXHIBIT B

 
Attached to and made a part of Net Profits Interest Agreement
dated as of November 30, 2007, between New Century Energy Corp. and
Century Resources, Inc., as WI Owners, and
Valens U.S. SPV I, LLC, and Valens Offshore SPV II, Corp., as Assignees
Form of Conveyance of Net Profits Overriding Royalty Interest
 

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