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 LONGVIEW
      MARQUIS MASTER FUND, L.P., a
      British
      Virgin Island limited partnership (“Marquis”)
      and
THE
      LONGVIEW FUND, L.P.,
      a
      California limited partnership (“Longview”;
      together with Marquis, collectively, “Holders”).

     

    WITNESSETH:

     

    WHEREAS,
      as of
      the date hereof, Holders have made loans and certain other financial
      accommodations (collectively, the “Loans”)
      to
SONTERRA
      RESOURCES, INC., a
      Delaware corporation (the “Company”),
      as
      evidenced by (i) that certain Subordinated Note of even date herewith in an
      original aggregate principal amount of $2,210,550.92 issued by the Company
      in
      favor of Longview (as the same may be amended, supplemented, restated or
      otherwise modified from time to time as permitted hereunder and including any
      notes issued in exchange or substitution therefor, collectively, the
“Longview
      Note”)
      and
      (ii) that certain Subordinated Note of even date herewith in an original
      aggregate principal amount of $9,440,000 issued by the Company in favor of
      Marquis (as the same may be amended, supplemented, restated or otherwise
      modified from time to time as permitted hereunder and including any notes issued
      in exchange or substitution therefor, collectively, the “Marquis
      Note”;
      Longview Note and Marquis Note, each a “Note”
and,
      together, “Notes”).

     

    WHEREAS,
      the
      Notes are being acquired by Holders pursuant to a Securities Exchange Agreement
      dated as of even date herewith among the Holders and the Company (as the same
      may be amended, restated, supplemented or otherwise modified from time to time,
      the “Exchange
      Agreement”)

     

    WHEREAS,
      the
      Guarantors are direct or indirect subsidiaries of the Company and, as such,
      will
      derive substantial benefit and advantage from the Loans, 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 Holders.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    NOW,
      THEREFORE,
      for and
      in consideration of the premises and in order to induce Holders 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 Notes 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 Holders, including, without
      limitation, all obligations, liabilities and indebtedness of every nature of
      the
      Company under 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 Holders, including, without
      limitation, all obligations, liabilities and indebtedness of every nature of
      the
      Guarantors under or in respect of this Guaranty, the Exchange Agreement, the
      Notes, the Loans, the Warrants 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.

     

    2. Guaranty
      of Payment.

     

    (a) Each
      Guarantor, jointly and severally, hereby unconditionally and irrevocably
      guarantees the full and prompt payment and performance to Holders, 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 Holders 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 Holder; or
      any other valuable consideration.

     

    
      
         

      

      
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    (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 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 and Holders agree that if this Guaranty
      would, but for the application of this sentence, constitute a Fraudulent
      Conveyance, this Guaranty shall be valid and enforceable only to the maximum
      extent that would not cause this Guaranty 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 Holder: (a) in enforcing this Guaranty,
      (b) in collecting any of the Obligations from the Company or any Guarantor,
      (c)
      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 Holder
      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 Holder 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.

     

    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, or other agreement held by
      Holders therefor or with respect thereto, whether or not furnished by a
      Guarantor. None of Holders 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
      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 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, Holders 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.

     

    
      
         

      

      
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    (b) 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
      Holders and promptly following receipt shall be paid over to Holders, 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 Holders. 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 Holder, the Guarantors,
      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 nor any Holder 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.

     

    (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 or any payment made pursuant hereto, 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 Holders 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;

     

    
      
         

      

      
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    (ii) 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 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;

     

    (iii) direct
      the enforcement of any and all endorsements and guaranties relating to the
      Obligations or any part thereof as Holders in their sole discretion may
      determine;

     

    (iv) 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 Holders might lawfully have elected to apply such
      payments to the Obligations or to amounts which are not covered by this
      Guaranty; and

     

    (v) accept
      or
      make or refrain from accepting or making any compositions or arrangements when
      and in such manner as Holders, in their 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; 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 any Holder, 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 Holders 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;

     

    (v) without
      requiring notice of acceptance hereof or assent hereto by any Holder;
      and

     

    
      
         

      

      
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    (vi) without
      requiring notice that any of the Obligations has been incurred, extended or
      continued or of the reliance by any Holder 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
      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 Holder in enforcing its claims against the
      Company;

     

    (ii) any
      release, settlement or compromise of any obligation of the Company, any other
      Guarantor or any other guarantor of the Obligations;

     

    (iii) the
      invalidity or unenforceability of any of the Obligations;

     

    (iv) 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;

     

    (v) 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;

     

    (vi) 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 Holder or the Company in connection herewith
      or
      any unrelated transaction;

     

    (vii) any
      Holder’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;

     

    (viii) any
      use
      of cash collateral, as debtor in possession, under sections 363 or 364 of the
      Bankruptcy Code;

     

    (ix) the
      disallowance of all or any portion of any of any Holder’s claims for repayment
      of the Obligations under sections 502 or 506 of the Bankruptcy
      Code;

     

    (x) 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


     

    (xi) 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 Holders 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 Holders 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 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 and (iii)
      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 any Holder under any
      of
      the Transaction Documents. Thereafter, but subject to the following, each Holder
      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 Holders on 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 Holder in reliance upon such payment, and any such contrary action
      so taken shall be without prejudice to any Holder’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 Holders under the Exchange Agreement, the Warrants and the Notes.
      Every provision for the benefit of Holders contained in this Guaranty shall
      apply to the guaranty of performance given in this paragraph.

     

    10. 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 Holder, whenever any Holder has the right to
      declare any of the Obligations to be immediately due and payable (whether or
      not
      it has been so declared), such Holder, 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
      Holder 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 Holder,
      or
      any affiliate of any Holder, whether for deposit or otherwise;

     

    whether
      or not the Obligations or the obligation to pay such moneys owed by any Holder
      is then due, and the applicable Holder 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 Holder’s records subsequent thereto. Each
      Holder 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 Holders and no act, delay
      or
      omission by Holders 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 Holder 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 Holders hereunder
      are cumulative.

     

    (d) This
      Guaranty shall inure to the benefit of the parties hereto and their respective
      successors and assigns.

     

    
      
         

      

      
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    (e) Each
      Holder may assign its rights hereunder without the consent of Guarantors, in
      which event such assignee shall be deemed to be a Holder hereunder with respect
      to such assigned rights; provided such assignment shall not relieve such Holder
      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 Holders has executed each of
      the
      Transaction Documents to be executed by it in the State of New
      York.

     

    (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 Exchange Agreement or, in the case of
      communications to the any Holder, directed to the notice address set forth
      in
      the Exchange Agreement; provided, that any communication shall be effective
      as
      to any Guarantor if made or sent to the Company in accordance with the
      foregoing.

     

    11. WAIVERS.

     

    (a) EACH
      GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND EXEMPTION
      LAWS.

     

    (b) EACH
      GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH
      RESPECT TO THIS TRANSACTION AND THIS GUARANTY.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

       

    

    (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 HOLDER. 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.

     

    12. Payments
      Free of Taxes.

     

    (a) Definitions.
      In this
Section
      12:

     

    (i) “Excluded
      Taxes”
means,
      with respect to the Holders, or any other recipient of any payment to be made
      by
      or on account of any obligations of any Guarantor under this Guaranty, 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 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
      12(b)),
      the
      Holders receive an amount equal to the sum they 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.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

       

    

    (c) Indemnification
      by the Guarantors.
      Each
      Guarantor shall indemnify the Holders, within ten (10) days after written demand
      therefor, for the full amount of any Indemnified Taxes paid by the Holders
      on or
      with respect to any payment by or on account of any obligation of such Guarantor
      under this Guaranty (including Indemnified Taxes or imposed or asserted on
      or
      attributable to amounts payable under this Section
      12)
      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 any Holder
      as to the amount of such payment or liability under this Section
      12
      shall be
      delivered to such Guarantor and shall be conclusive absent manifest
      error.

     

    13. 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.

     

    14. 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
      14
      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 none of the Guarantors
      shall exercise any right or remedy under this Section
      14
      against
      any other Guarantor until such Obligations have been paid in full in cash.
      For
      purposes of this Section
      14,
      (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
      14
      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]

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    


    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:

              	 	 	
              
	 	 


      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	
                VELOCITY
                  ENERGY PARTNERS LP,
                  a

                Delaware
                  limited partnership

              
	 	 
	
                By:

              	 	 	
              
	
                Name:

              	 	 	
              
	
                Title:

              	 	 	
              
	 	 
	
                VELOCITY
                  ENERGY INC.,
                  a
                  Delaware

                corporation

              
	 	 
	
                By:

              	 	 	
              
	
                Name:

              	 	 	
              
	
                Title:

              	 	 	
              


      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    EXHIBIT
      A

    


    Form
      of Joinder

    Joinder
      to Guaranty

    


    This
      Joinder Agreement is made by the undersigned, [__________] a [__________] (the
      “New
      Subsidiary”),
      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 LONGVIEW
      MARQUIS MASTER FUND, L.P., a British Virgin Island limited partnership
      (“Marquis”) and THE LONGVIEW FUND, L.P., a California limited partnership
      (“Longview”; together with Marquis, collectively, “Holders”), 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 Holders, 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.

     

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

     

    ___________________________