EXECUTION
COPY

     

    SECURITY
AGREEMENT

     

    THIS
SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified
from time to time, this “Agreement”) dated as of
November 13, 2008 among SONTERRA RESOURCES, INC., a
Delaware corporation (the “Company”), 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”; the Company, North
Texas, Operating, Limited, Velocity, Offshore and Onshore, together with each
other Person who becomes a party to this Agreement by execution of a joinder in
the form of Exhibit
A attached hereto, is hereinafter sometimes referred to individually as a
“Debtor” and,
collectively, as the “Debtors”) and SUMMERLINE
ASSET MANAGEMENT, LLC, a Delaware limited liability company, in its
capacity as Collateral Agent (as set forth in Section 5.11 hereof, together with
its successors and assigns in such capacity, the “Secured Party”) for the
benefit of itself and each of the Buyers (as hereinafter defined).

     

    WITNESSETH:

     

    WHEREAS, on the date hereof,
Longview Marquis Master Fund, L.P., a British Virgin Island limited partnership
(“Marquis”; Marquis,
together with its successors and assigns and each other holder of a Note (as
defined below) and their respective successors and assigns, individually and
collectively, the “Buyers”), will purchase from
the Company certain senior secured notes in an original aggregate principal
amount of $8,875,000 (such notes, together with any promissory notes or other
securities issued in exchange or substitution therefor or replacement thereof,
and as any of the same may be amended, supplemented, restated or modified and in
effect from time to time, the “Notes”);

     

    AND WHEREAS, the Notes are being
acquired by Buyer and Buyer has made certain financial accommodations to the
Company pursuant to a Securities Purchase Agreement of even date herewith
between the Company and Buyers (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the “Purchase
Agreement”);

    


    AND WHEREAS, each Debtor
(other than the Company), from time to time, may be a party hereto is a direct
or indirect subsidiary of the Company and, as such, will derive substantial
benefit and advantage from the financial accommodations to the Company set forth
in the Purchase Agreement and the Notes, and it will be to each such Debtor’s
direct interest and economic benefit to assist the Company in procuring said
financial accommodations from Buyers;


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    AND WHEREAS, to induce Buyers
to enter into the Purchase Agreement and purchase the Notes, (i) each Debtor
(other than the Company) has agreed to guaranty the Liabilities (as hereinafter
defined) of the Company pursuant to the terms of a guarantee (such
guaranty(ies), as they may be amended, restated, modified or supplemented and in
effect from time to time, individually and collectively, the “Guaranty”) by each such Debtor
in favor of Secured Party (on its behalf and on behalf of the Buyers) and (ii)
each Debtor has agreed to pledge and grant a security interest in all of its
right, title and interest in and to the Collateral (as hereinafter defined) as
security for its Liabilities for the benefit of the Secured Party, Buyers and
their respective successors and assigns.

     

    NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     

    Section
1.  Definitions.  Capitalized
terms used herein without definition and defined in the Purchase Agreement are
used herein as defined therein.  In addition, as used
herein:

     

    “Accounts” means any “account,”
as such term is defined in the UCC, and, in any event, shall include, without
limitation, “supporting obligations” as defined in the UCC.

     

    “As-extracted Collateral” means
any “as-extracted collateral,” as such term is defined in the UCC.

     

    “Chattel Paper” means any
“chattel paper,” as such term is defined in the UCC.

     

    “Collateral” shall have the
meaning ascribed thereto in Section 3
hereof.

     

    “Commercial Tort Claims” means
“commercial tort claims”, as such term is defined in the UCC.

     

    “Contracts” means all
contracts, undertakings, or other agreements (other than rights evidenced by
Chattel Paper, Documents or Instruments) in or under which a Debtor may now or
hereafter have any right, title or interest, including, without limitation, with
respect to an Account, any agreement relating to the terms of payment or the
terms of performance thereof.

     

    “Copyrights” means any
copyrights, rights and interests in copyrights, works protectable by copyrights,
copyright registrations and copyright applications, including, without
limitation, the copyright registrations and applications listed on Schedule III attached
hereto (if any), and all renewals of any of the foregoing, all income,
royalties, damages and payments now and hereafter due and/or payable under or
with respect to any of the foregoing, including, without limitation, damages and
payments for past, present and future infringements of any of the foregoing and
the right to sue for past, present and future infringements of any of the
foregoing.


    
      
         


      

      
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    “Deposit Accounts” means all
“deposit accounts” as such term is defined in the UCC, now or hereafter held in
the name of a Debtor.

     

    “Documents” means any
“documents,” as such term is defined in the UCC, and shall include, without
limitation, all documents of title (as defined in the UCC), bills of lading or
other receipts evidencing or representing Inventory or Equipment.

     

    “Equipment” means any
“equipment,” as such term is defined in the UCC and, in any event, shall
include, Motor Vehicles.

     

    “Event of Default” shall have
the meaning set forth in the Notes.

     

     “General Intangibles” means any
“general intangibles,” as such term is defined in the UCC, and, in any event,
shall include, without limitation, all right, title and interest in or under any
Contract, models, drawings, materials and records, claims, literary rights,
goodwill, rights of performance, Copyrights, Trademarks, Patents, warranties,
rights under insurance policies and rights of indemnification.

     

    “Goods” means any “goods”, as
such term is defined in the UCC, including, without limitation, fixtures and
embedded Software to the extent included in “goods” as defined in the
UCC.

     

    “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 administration powers or
functions of or pertaining to government over any Debtor or any of its
Subsidiaries, or any of their respective properties, assets or
undertakings.

     

    “Instruments” means any
“instrument,” as such term is defined in the UCC, and shall include, without
limitation, promissory notes, drafts, bills of exchange, trade acceptances,
letters of credit, letter of credit rights (as defined in the UCC), and Chattel
Paper.

     

    “Inventory” means any
“inventory,” as such term is defined in the UCC.

     

    “Investment Property” means any
“investment property”, as such term is defined in the UCC.

     

    “Liabilities” means all
obligations, liabilities and indebtedness of every nature of Debtors from time
to time owed or owing under or in respect of this Agreement, the Purchase
Agreement, the Notes, the Warrants, the Guaranty, any of the other Security
Documents and any of 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, 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 or other law and whether or not an allowed claim in
any such proceeding.


    
      
         


      

      
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    “Lien” has the meaning set
forth in the Purchase Agreement.

     

    “Motor Vehicles” shall mean
motor vehicles, tractors, trailers and other like property, whether or not the
title thereto is governed by a certificate of title or ownership.  The
term “Motor Vehicles” shall specifically include mobile drilling
rigs.

     

    “Patents” means any patents and
patent applications, including, without limitation, the inventions and
improvements described and claimed therein, all patentable inventions and those
patents and patent applications listed on Schedule IV
attached hereto (if any), and the reissues, divisions, continuations, renewals,
extensions and continuations-in-part of any of the foregoing, and all income,
royalties, damages and payments now or hereafter due and/or payable under or
with respect to any of the foregoing, including, without limitation, damages and
payments for past, present and future infringements of any of the foregoing and
the right to sue for past, present and future infringements of any of the
foregoing.

     

    “Permitted Lien” has the
meaning set forth in the Purchase Agreement.

     

    “Proceeds” means “proceeds,” as
such term is defined in the UCC and, in any event, includes, without limitation,
(a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable from time to time in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental body, authority, bureau or agency (or
any person acting under color of governmental authority), and (c) any and all
other amounts from time to time paid or payable under, in respect of or in
connection with any of the Collateral.

     

    “Representative” means any
Person acting as agent, representative or trustee on behalf of the Secured Party
from time to time.

     

    “Requisite Buyers” means buyers
having more than 66 2/3% of the sum of the aggregate outstanding principal
balance of the Notes.

     

    “Software” means all “software”
as such term is defined in the UCC, now owned or hereafter acquired by a Debtor,
other than software embedded in any category of Goods, including, without
limitation, all computer programs and all supporting information provided in
connection with a transaction related to any program.


    
      
         


      

      
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    “Trademarks” means any
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos, other business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, the trademarks and
applications listed in Schedule V attached
hereto (if any) and renewals thereof, and all income, royalties, damages and
payments now or hereafter due and/or payable under or with respect to any of the
foregoing, including, without limitation, damages and payments for past, present
and future infringements of any of the foregoing and the right to sue for past,
present and future infringements of any of the foregoing.

     

    “UCC” shall mean the Uniform
Commercial Code as in effect from time to time in the State of New York;
provided, that to the extent that the Uniform Commercial Code is used to define
any term herein and such term is defined differently in different Articles or
Divisions of the Uniform Commercial Code, the definition of such term contained
in Article or Division 9 shall govern.

     

    Section
2.  Representations, Warranties
and Covenants of Debtors.  Each Debtor represents and warrants
to, and covenants with, the Secured Party as follows:

     

    (a)           Such
Debtor has or will have rights in and the power to transfer the Collateral in
which it purports to grant a security interest pursuant to Section 3 hereof
(subject, with respect to after acquired Collateral, to such Debtor acquiring
the same) and no Lien other than Permitted Liens exists or will exist upon such
Collateral at any time.

     

    (b)           This
Agreement is effective to create in favor of Secured Party a valid security
interest in and Lien upon all of such Debtor’s right, title and interest in and
to the Collateral, and upon (i) the filing of appropriate UCC financing
statements in the jurisdictions listed on Schedule I attached
hereto, (ii) each Deposit Account being subject to an Account Control Agreement
(as hereinafter defined) between the applicable Debtor and depository
institution and the Secured Party on behalf of Buyers, (iii) filings in the
United States Patent and Trademark Office, or United States Copyright Office
with respect to Collateral that is Patents and Trademarks, or Copyrights, as the
case may be, and (iv) the security interest created hereby being noted on each
certificate of title evidencing the ownership of any Motor Vehicle in accordance
with Section
4.1(d) hereof (other than, until the payment in full in cash of the FNBW
Note, the Motor Vehicles securing the FNBW Note on the date hereof (the “FNBW Vehicles”)), such
security interest will be a duly perfected first priority security interest in
all of the Collateral (other than Instruments not constituting Chattel Paper
and, until the payment in full in cash of the FNBW Note, the FNBW Vehicles), and
upon delivery of the Instruments to the Secured Party or its Representative,
duly endorsed by such Debtor or accompanied by appropriate instruments of
transfer duly executed by such Debtor, the security interest in the Instruments
will be duly perfected.


    
      
         


      

      
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    (c)           All
of the Equipment, Inventory and Goods owned by such Debtor is located at the
places as specified on Schedule I attached
hereto.  Except as disclosed on Schedule I, none of
the Collateral is in the possession of any bailee, warehousemen, processor or
consignee, other than oil and gas production in the possession of an operator or
a first purchaser of oil and gas production prior to the payment on account
thereof.  Schedule I discloses
such Debtor’s name as of the date hereof as it appears in official filings in
the state or province, as applicable, of its incorporation, formation or
organization, the type of entity of such Debtor (including corporation,
partnership, limited partnership or limited liability company), organizational
identification number issued by such Debtor’s state of incorporation, formation
or organization (or a statement that no such number has been issued), such
Debtor’s state or province, as applicable, of incorporation, formation or
organization and the chief place of business, chief executive officer and the
office where such Debtor keeps its books and records and the states in which
such Debtor conducts its business.  Such Debtor has only one state or
province, as applicable, of incorporation, formation or organization. Such
Debtor does not do business and has not done business during the past five (5)
years under any trade name or fictitious business name except as disclosed on
Schedule II
attached hereto.

     

    (d)           No
Copyrights, Patents or Trademarks listed on Schedules III, IV and
V, respectively, if any, have been adjudged invalid or unenforceable or
have been canceled, in whole or in part, or are not presently
subsisting.  Each of such Copyrights, Patents and Trademarks (if any)
is valid and enforceable.  Such Debtor is the sole and exclusive owner
of the entire and unencumbered right, title and interest in and to each of such
Copyrights, Patents and Trademarks, identified on Schedules III, IV and
V, as applicable, as being owned by such Debtor, free and clear of any
liens, charges and encumbrances, including without limitation licenses, shop
rights and covenants by such Debtor not to sue third persons.  Such
Debtor has adopted, used and is currently using, or has a current bona fide
intention to use, all of such Trademarks and Copyrights.  Such Debtor
has no notice of any suits or actions commenced or threatened with reference to
the Copyrights, Patents or Trademarks owned by it.

     

    (e)           Each
Debtor agrees to deliver to the Secured Party an updated Schedule I, II, III, IV
and/or V within five (5) Business Days of any change
thereto.

     

    (f)           All
depositary and other accounts including, without limitation, Deposit Accounts,
securities accounts, brokerage accounts and other similar accounts, maintained
by each Debtor are described on Schedule VI hereto,
which description includes for each such account the name of the Debtor
maintaining such account, the name, address and telephone and telecopy numbers
of the financial institution at which such account is maintained, the account
number and the account officer, if any, of such account.  No Debtor
shall open any new Deposit Accounts, securities accounts, brokerage accounts or
other accounts unless such Debtor shall have given Secured Party ten (10)
Business Days’ prior written notice of its intention to open any such new
accounts.  Each Debtor shall deliver to Secured Party a revised
version of Schedule
VI showing any changes thereto within five (5) Business Days of any such
change.  Each Debtor hereby authorizes the financial institutions at
which such Debtor maintains an account to provide Secured Party with such
information with respect to such account as Secured Party from time to time
reasonably may request, and each Debtor hereby consents to such information
being provided to Secured Party.  In addition, all of such Debtor’s
depositary, security, brokerage and other accounts including, without
limitation, Deposit Accounts shall be subject to the provisions of Section 4.5
hereof.


    
      
         


      

      
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    (g)           Such
Debtor does not own any Commercial Tort Claim except for those disclosed on
Schedule VII
hereto (if any).

     

    (h)           Such
Debtor does not have any interest in real property or mineral interests with
respect to real property except as disclosed on Schedule
VIII  (if any).  Each Debtor shall deliver to Secured
Party a revised version of Schedule VIII showing
any changes thereto within ten (10) Business Days of any such
change.  Except as otherwise agreed to by Secured Party, all such
interests in real property or mining rights with respect to such real property
are subject to a mortgage, deed of trust and assignment of production proceeds
(in form and substance satisfactory to Secured Party) in favor of Secured Party
(hereinafter, a “Mortgage”).

     

    (i)           Each
Debtor shall duly and properly record each interest in real property held
by such Debtor except with respect to easements, rights of way, access
agreements, surface damage agreements, surface use agreements or similar
agreements that such Debtor, using prudent customs and practices in the
industry in which it operates, does not believe are of material value or
material to the operation of such Debtor's business or, with respect to
state and federal rights of way, are not capable of being recorded as a matter
of state and federal law.

    


    (j)           All
Equipment (including, without limitation, Motor Vehicles) owned by a Debtor and
subject to a certificate of title or ownership statute is described on Schedule IX
hereto.

    


    Section
3.  Collateral.  As
collateral security for the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Liabilities, each Debtor hereby
pledges and grants to the Secured Party, for the benefit of itself and Buyers, a
Lien on and security interest in and to all of such Debtor’s right, title and
interest in the personal property and assets of such Debtor, whether now owned
by such Debtor or hereafter acquired and whether now existing or hereafter
coming into existence and wherever located (all being collectively referred to
herein as “Collateral”),
including, without limitation:

     

    (a)           all
Instruments, together with all payments thereon or thereunder:


    
      
         


      

      
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    (b)           all
Accounts;

     

    (c)           all
Inventory;

     

    (d)           all
General Intangibles (including payment intangibles (as defined in the UCC) and
Software);

     

    (e)           all
Equipment;

     

    (f)           all
Documents;

     

    (g)           all
Contracts;

     

    (h)           all
Goods;

     

    (i)           all
Investment Property;

     

    (j)           all
Deposit Accounts, including, without limitation, the balance from time to time
in all bank accounts maintained by such Debtor;

     

    (k)           all
Commercial Tort Claims specified on Schedule
VII;

     

    (l)           all
As-extracted Collateral;

     

    (m)           all
Trademarks, Patents and Copyrights; and

     

    (n)           all
other tangible and intangible property of such Debtor, including, without
limitation, all interests in real property, Proceeds, tort claims, products,
accessions, rents, profits, income, benefits, substitutions, additions and
replacements of and to any of the property of such Debtor described in the
preceding clauses of this Section 3 (including,
without limitation, any proceeds of insurance thereon, insurance claims and all
rights, claims and benefits against any Person relating thereto), other rights
to payments not otherwise included in the foregoing, and all books,
correspondence, files, records, invoices and other papers, including without
limitation all tapes, cards, computer runs, computer programs, computer files
and other papers, documents and records in the possession or under the control
of such Debtor, any computer bureau or service company from time to time acting
for such Debtor.

     

    Section
4.  Covenants;
Remedies.  In furtherance of the grant of the pledge and
security interest pursuant to Section 3 hereof,
each Debtor hereby agrees with the Secured Party as follows:

     

    
      
         


      

      
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    4.1.  Delivery and Other
Perfection; Maintenance, etc.

     

    (a)           Delivery of Instruments,
Documents, Etc.  Each Debtor shall deliver and pledge to the
Secured Party or its Representative any and all Instruments, negotiable
Documents, Chattel Paper and certificated securities (accompanied by stock
powers executed in blank) duly endorsed and/or accompanied by such instruments
of assignment and transfer executed by such Debtor in such form and substance as
the Secured Party or its Representative may request; provided, that so
long as no Event of Default shall have occurred and be continuing, each Debtor
may retain for collection in the ordinary course of business any Instruments,
negotiable Documents and Chattel Paper received by such Debtor in the ordinary
course of business, and the Secured Party or its Representative shall, promptly
upon request of a Debtor, make appropriate arrangements for making any other
Instruments, negotiable Documents and Chattel Paper pledged by such Debtor
available to such Debtor for purposes of presentation, collection or renewal
(any such arrangement to be effected, to the extent deemed appropriate by the
Secured Party or its Representative, against trust receipt or like document). If
a Debtor retains possession of any Chattel Paper, negotiable Documents or
Instruments pursuant to the terms hereof, such Chattel Paper, negotiable
Documents and Instruments shall be marked with the following legend: “This
writing and the obligations evidenced or secured hereby are subject to the
security interest of Summerline Asset Management, LLC, in its capacity as
collateral agent for the benefit of Buyers, as secured party.”

     

    (b)           Other Documents and
Actions.  Each Debtor shall give, execute, deliver, file and/or
record any financing statement, notice, instrument, document, agreement,
Mortgage or other papers that may be necessary or desirable (in the reasonable
judgment of the Secured Party or its Representative) to create, preserve,
perfect or validate the security interest granted pursuant hereto (or any
security interest or mortgage contemplated or required hereunder, including with
respect to Section
2(h) of this Agreement) or to enable the Secured Party or its
Representative to exercise and enforce the rights of the Secured Party hereunder
with respect to such pledge and security interest, provided that notices
to account debtors in respect of any Accounts or Instruments shall be subject to
the provisions of clause (e) below.  Notwithstanding the foregoing
each Debtor hereby irrevocably authorizes the Secured Party at any time and from
time to time to file in any filing office in any jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Collateral (i)
as all assets of such Debtor or words of similar effect, regardless of whether
any particular asset comprised in the Collateral falls within the scope of
Article 9 of the UCC, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) contain any other information required by part 5 of
Article 9 of the UCC for the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether such Debtor is an
organization, the type of organization and any organization identification
number issued to such Debtor, and (ii) in the case of a financing statement
filed as a fixture filing or indicating Collateral as As-extracted Collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates.  Each Debtor agrees to furnish any such
information to the Secured Party promptly upon request.  Each Debtor
also ratifies its authorization for the Secured Party to have filed in any
jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.


    
      
         


      

      
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    (c)           Books and
Records.  Each Debtor (or the Company on behalf of a Debtor)
shall maintain at its own cost and expense complete and accurate books and
records of the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
other dealings with the Collateral.  Upon the occurrence and during
the continuation of any Event of Default, each Debtor shall deliver and turn
over any such books and records (or true and correct copies thereof) to the
Secured Party or its Representative at any time on demand.  Each
Debtor shall permit any Representative of the Secured Party to inspect such
books and records at any time during reasonable business hours and will provide
photocopies thereof at such Debtor’s expense to the Secured Party upon request
of the Secured Party.

     

    (d)           Motor
Vehicles.  Each Debtor shall, promptly upon acquiring same,
cause the Secured Party to be listed as the lienholder on each certificate of
title or ownership covering any items of Equipment, including Motor Vehicles
(other than, until the payment in full in cash of the FNBW Note, the FNBW
Vehicles), having a value in excess of $50,000 in the aggregate for all such
items of Equipment of the Debtor, or otherwise comply with the certificate of
title or ownership laws of the relevant jurisdiction issuing such certificate of
title or ownership in order to properly evidence and perfect Secured Party’s
security interest in the assets represented by such certificate of title or
ownership, and, within five (5) Business Days of its receipt of such original
certificates of title or ownership listing the Secured Party as the lienholder,
deliver such original certificates of title or ownership to Secured
Party.  Notwithstanding the foregoing, with respect to items with
license numbers 23YVZP, 67XTGK and 30WTLZ, the Company shall, within sixty (60)
days of the date hereof, deliver to Secured Party an original certificate of
title or ownership from the applicable certificate of title or ownership
authority identifying the Company as the owner of such Equipment and listing
Secured Party as lienholder.

     

    (e)           Notice to Account Debtors;
Verification.  (i) Upon the occurrence and during the
continuance of any Event of Default (or if any rights of set-off (other than
set-offs against an Account arising under the Contract giving rise to the same
Account) or contra accounts may be asserted), upon request of the Secured Party
or its Representative, each Debtor shall promptly notify (and each Debtor hereby
authorizes the Secured Party and its Representative so to notify) each account
debtor in respect of any Accounts or Instruments or other Persons obligated on
the Collateral that such Collateral has been assigned to the Secured Party
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Secured Party, and (ii) the Secured
Party and its Representative shall have the right at any time or times to make
direct verification with the account debtors or other Persons obligated on the
Collateral of any and all of the Accounts or other such
Collateral.


    
      
         


      

      
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    (f)           Intellectual
Property.  Each Debtor represents and warrants that the
Copyrights, Patents and Trademarks listed on Schedules III, IV and
V, respectively (if any), constitute all of the registered Copyrights and
all of the Patents and Trademarks now owned by such Debtor.  If such
Debtor shall (i) obtain rights to any new patentable inventions, any registered
Copyrights or any Patents or Trademarks, or (ii) become entitled to the benefit
of any registered Copyrights or any Patents or Trademarks or any improvement on
any Patent, the provisions of this Agreement above shall automatically apply
thereto and such Debtor shall give to Secured Party prompt written notice
thereof.  Each Debtor hereby authorizes Secured Party to modify this
Agreement by amending Schedules III, IV and
V, as applicable, to include any such registered Copyrights or any such
Patents and Trademarks.  Each Debtor shall have the duty (i) to
prosecute diligently any patent, trademark, or service mark applications pending
as of the date hereof or hereafter, (ii) to make application on unpatented but
patentable inventions and on trademarks, copyrights and service marks, as
appropriate, (iii) to preserve and maintain all rights in the Copyrights,
Patents and Trademarks, to the extent material to the operations of the business
of such Debtor and (iv) to ensure that the Copyrights, Patents and Trademarks
are and remain enforceable, to the extent material to the operations of the
business of such Debtor.  Any expenses incurred in connection with
such Debtor’s obligations under this Section 4.1(f) shall
be borne by such Debtor.  Except for any such items that a Debtor
reasonably believes (using prudent industry customs and practices) are no longer
necessary for the on-going operations of its business, no Debtor shall abandon
any right to file a patent, trademark or service mark application, or abandon
any pending patent, trademark or service mark application or any other
Copyright, Patent or Trademark without the written consent of Secured Party,
which consent shall not be unreasonably withheld.

     

    (g)           Further Identification of
Collateral.  Each Debtor will, when and as often as requested
by the Secured Party or its Representative, furnish to the Secured Party or such
Representative, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Secured Party or its Representative may reasonably request, all in reasonable
detail.

     

    (h)           Investment
Property.  Each Debtor will take any and all actions required
or requested by the Secured Party, from time to time, to (i) cause the Secured
Party to obtain exclusive control of any Investment Property owned by such
Debtor in a manner acceptable to the Secured Party and (ii) obtain from any
issuers of Investment Property and such other Persons, for the benefit of the
Secured Party, written confirmation of the Secured Party’s control over such
Investment Property.  For purposes of this Section 4.1(h), the
Secured Party shall have exclusive control of Investment Property if (i) such
Investment Property consists of certificated securities and a Debtor delivers
such certificated securities to the Secured Party (with appropriate endorsements
if such certificated securities are in registered form); (ii) such Investment
Property consists of uncertificated securities and either (x) a Debtor delivers
such uncertificated securities to the Secured Party or (y) the issuer thereof
agrees, pursuant to documentation in form and substance satisfactory to the
Secured Party, that it will comply with instructions originated by the Secured
Party without further consent by such Debtor, and (iii) such Investment Property
consists of security entitlements and either (x) the Secured Party becomes the
entitlement holder thereof or (y) the appropriate securities intermediary
agrees, pursuant to the documentation in form and substance satisfactory to the
Secured Party, that it will comply with entitlement orders originated by the
Secured Party without further consent by any Debtor.


    
      
         


      

      
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              (i)

            	
              Reserved.

            


    

     

    (j)           Commercial Tort
Claims.  Each Debtor shall promptly notify Secured Party of any
Commercial Tort Claim acquired by it that concerns a claim in excess of $50,000
and unless otherwise consented to by Secured Party, such Debtor shall enter into
a supplement to this Agreement granting to Secured Party a Lien on and security
interest in such Commercial Tort Claim.

     

    4.2  Other
Liens.  Debtors will not create, permit or suffer to exist, and
will defend the Collateral against and take such other action as is necessary to
remove, any Lien on the Collateral except Permitted Liens, and will defend the
right, title and interest of the Secured Party in and to the Collateral and in
and to all Proceeds thereof against the claims and demands of all Persons
whatsoever.

     

    4.3  Preservation of
Rights.  Whether or not any Event of Default has occurred or is
continuing, the Secured Party and its Representative may, but shall not be
required to, take any steps the Secured Party or its Representative deems
necessary or appropriate to preserve any Collateral or any rights against third
parties to any of the Collateral, including obtaining insurance for the
Collateral at any time when such Debtor has failed to do so, and Debtors shall
promptly pay, or reimburse the Secured Party for, all expenses incurred in
connection therewith.

     

    4.4  Formation of Subsidiaries;
Name Change; Location; Bailees.

     

    (a)           No
Debtor shall form any subsidiary unless (i) such Debtor pledges all of the stock
or equity interest of such subsidiary to the Secured Party (in the case of
Company, pursuant to the existing pledge agreement by Company in favor of the
Secured Party or, with respect to a Debtor other than Company, pursuant to a
pledge agreement in form and substance reasonably acceptable to Secured Party),
(ii) such subsidiary becomes a party to this Agreement and all other applicable
Security Documents and (iii) the formation of such Subsidiary is not prohibited
by the terms of the Transaction Documents.

     

    (b)           No
Debtor shall (i) reincorporate or reorganize itself under the laws of any
jurisdiction other than the jurisdiction in which it is incorporated or
organized as of the date hereof, or (ii) otherwise change its name, identity or
corporate structure, in each case, without the prior written consent of Secured
Party, which consent will not be unreasonably withheld, conditioned or
delayed.  Each Debtor will notify Secured Party promptly in writing
prior to any such change in the proposed use by such Debtor of any tradename or
fictitious business name other than any such name set forth on Schedule II attached
hereto.


    
      
         


      

      
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    (c)           Except
for the sale of Inventory and As-extracted Collateral in the ordinary course of
business and other sales of assets expressly permitted by the terms of the
Purchase Agreement, each Debtor will keep the Collateral at the locations
specified in Schedule
I.  Each Debtor will give Secured Party thirty (30) day’s prior
written notice of any change in such Debtor’s chief place of business or of any
new location for any of the Collateral.

     

    (d)           If
any Collateral is at any time in the possession or control of any warehousemen,
bailee, consignee or processor, such Debtor shall, upon the request of Secured
Party or its Representative, notify such warehousemen, bailee, consignee or
processor of the Lien and security interest created hereby and shall instruct
such Person to hold all such Collateral for Secured Party’s account subject to
Secured Party’s instructions.

     

    (e)           Each
Debtor acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of Secured Party and agrees that it will not
do so without the prior written consent of Secured Party, subject to such
Debtor’s rights under Section 9-509(d)(2) to the UCC.

     

    (f)           No
Debtor shall enter into any Contract that restricts or prohibits the grant to
Secured Party of a security interest in Accounts, Chattel Paper, Instruments or
payment intangibles or the proceeds of the foregoing.

     

    4.5         Bank Accounts and Securities
Accounts.

     

    (a)           On
or prior to the date hereof, the Secured Party and each Debtor, as applicable,
shall enter into an account control agreement or securities account control
agreement, as applicable, (each an “Account Control Agreement”),
in a form specified by the Secured Party, with each financial institution with
which such Debtor maintains from time to time any Deposit Accounts (general or
special), securities accounts, brokerage accounts or other similar accounts,
which financial institutions are set forth on Schedule VI attached
hereto.  Pursuant to the Account Control Agreements and pursuant
hereto, each such Debtor grants and shall grant to the Secured Party a
continuing lien upon, and security interest in, all such accounts and all funds
at any time paid, deposited, credited or held in such accounts (whether for
collection, provisionally or otherwise) or otherwise in the possession of such
financial institutions, and each such financial institution shall act as the
Secured Party’s agent in connection therewith.  Following the Closing
Date, no Debtor shall establish any Deposit Account, securities account,
brokerage account or other similar account with any financial institution unless
prior thereto, the Secured Party and such Debtor shall have entered into an
Account Control Agreement with such financial institution which purports to
cover such account.  Each Debtor shall deposit and keep on deposit all
of its funds into a Deposit Account which is subject to an Account Control
Agreement.


    
      
         


      

      
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    (b)           Upon
the Secured Party’s request following the occurrence and during the continuance
of an Event of Default, each Debtor shall establish lock-box or blocked accounts
(collectively, “Blocked
Accounts”) in such Debtor’s name with such banks as are reasonably
acceptable to the Secured Party (“Collecting Banks”), subject to
irrevocable instructions in a form reasonably acceptable to the Secured Party,
to which the obligors of all Accounts shall directly remit all payments on
Accounts and in which such Debtor will immediately deposit all cash payments for
Inventory or other cash payments constituting proceeds of Collateral in the
identical form in which such payment was made, whether by cash or
check.  In addition, the Secured Party may establish one or more
depository accounts at each Collecting Bank or at a centrally located bank
(collectively, the “Depository
Account”).  All amounts held or deposited in the Blocked
Accounts held by such Collecting Bank shall be transferred to the Depository
Account without any further notice or action required by Secured
Party.  Subject to the foregoing, each Debtor hereby agrees that all
payments received by the Secured Party whether by cash, check, wire transfer or
any other instrument, made to such Blocked Accounts or otherwise received by the
Secured Party and whether in respect of the Accounts or as proceeds of other
Collateral or otherwise will be the sole and exclusive property of the Secured
Party.  Each Debtor, and any of its Affiliates, employees, agents and
other Persons acting for or in concert with such Debtor shall, acting as trustee
for the Secured Party, receive, as the sole and exclusive property of the
Secured Party, any moneys, checks, notes, drafts or other payments relating to
and/or proceeds of Accounts or other Collateral which come into the possession
or under the control of such Debtor or any Affiliates, employees, agent or other
Persons acting for or in concert with such Debtor, and immediately upon receipt
thereof, such Debtor or Persons shall deposit the same or cause the same to be
deposited in kind, in a Blocked Account.

     

    4.6  Events of Default,
Etc.  During the period during which an Event of Default shall
have occurred and be continuing:

     

    (a)           each
Debtor shall, at the request of the Secured Party or its Representative,
assemble the Collateral (other than gas production, which shall be available for
turnover in place at the wellhead or pipeline) and make it available to Secured
Party or its Representative at a place or places designated by the Secured Party
or its Representative which are reasonably convenient to Secured Party or its
Representative, as applicable, and such Debtor;

     

    (b)           the
Secured Party or its Representative may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Collateral;


    
      
         


      

      
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    (c)           the
Secured Party shall have all of the rights and remedies with respect to the
Collateral of a secured party under the UCC (whether or not said UCC is in
effect in the jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted, including, without limitation, the right, to the maximum extent
permitted by law, to: (i) exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if the Secured Party were the sole and
absolute owner thereof (and each Debtor agrees to take all such action as may be
appropriate to give effect to such right) and (ii) to the appointment of a
receiver or receivers for all or any part of the Collateral or business of a
Debtor, whether such receivership be incident to a proposed sale or sales of
such Collateral or otherwise and without regard to the value of the Collateral
or the solvency of any person or persons liable for the payment of the
Liabilities secured by such Collateral.  Each Debtor hereby consents
to the appointment of such receiver or receivers, waives any and all defenses to
such appointment and agrees that such appointment shall in no manner impair,
prejudice or otherwise affect the rights of Secured Party under this
Agreement.  Each Debtor hereby expressly waives notice of a hearing
for appointment of a receiver and the necessity for bond or an accounting by the
receiver;

     

    (d)           the
Secured Party or its Representative in their discretion may, in the name of the
Secured Party or in the name of a Debtor or otherwise, demand, sue for, collect
or receive any money or property at any time payable or receivable on account of
or in exchange for any of the Collateral, but shall be under no obligation to do
so;

     

    (e)          
the Secured Party or its Representative may take immediate possession and
occupancy of any premises owned, used or leased by a Debtor and exercise all
other rights and remedies which may be available to the Secured
Party;

     

    (f)           the
Secured Party may, upon ten (10) Business Days’ prior written notice to Debtors
of the time and place (which notice Debtors hereby agree is commercially
reasonable notification for purposes hereof), with respect to the Collateral or
any part thereof which shall then be or shall thereafter come into the
possession, custody or control of the Secured Party or its Representative, sell,
lease, license, assign or otherwise dispose of all or any part of such
Collateral, at such place or places as the Secured Party deems best, and for
cash or for credit or for future delivery (without thereby assuming any credit
risk), at public or private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or place thereof (except
such notice as is required above or by applicable statute and cannot be waived),
and the Secured Party or anyone else may be the purchaser, lessee, licensee,
assignee or recipient of any or all of the Collateral so disposed of at any
public sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of whatsoever
kind, including any right or equity of redemption (statutory or otherwise), of
Debtors, any such demand, notice and right or equity being hereby expressly
waived and released.  The Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the sale may be so
adjourned;

     

    
      
         


      

      
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    (g)           the
rights, remedies and powers conferred by this Section 4.6 are in addition to,
and not in substitution for, any other rights, remedies or powers that the
Secured Party may have under any Transaction Document, at law, in equity or by
or under the UCC or any other statute or agreement.  The Secured Party
may proceed by way of any action, suit or other proceeding at law or in equity
and no right, remedy or power of the Secured Party will be exclusive of or
dependent on any other.  The Secured Party may exercise any of its
rights, remedies or powers separately or in combination and at any
time.

     

    The
proceeds of each collection, sale or other disposition under this Section 4.6 shall be
applied in accordance with Section 4.9
hereof.

     

    4.7  Deficiency.  If
the proceeds of sale, collection or other realization of or upon the Collateral
are insufficient to cover the costs and expenses of such realization and the
payment in full of the Liabilities, Debtors shall remain liable for any
deficiency.

     

    4.8  Private
Sale.  Each Debtor recognizes that the Secured Party may be
unable to effect a public sale of any or all of the Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the “Act”), and applicable state
securities laws, but may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Collateral for their own account for investment
and not with a view to the distribution or resale thereof.  Each
Debtor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable to the seller than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable
manner.  The Secured Party shall be under no obligation to delay a
sale of any of the Collateral to permit a Debtor to register such Collateral for
public sale under the Act, or under applicable state securities laws, even if
Debtors would agree to do so.  The Secured Party shall not incur any
liability as a result of the sale of any such Collateral, or any part thereof,
at any private sale provided for in this Agreement conducted in a commercially
reasonable manner, and each Debtor hereby waives any claims against the Secured
Party arising by reason of the fact that the price at which the Collateral may
have been sold at such a private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate amount of the
Liabilities, even if the Secured Party accepts the first offer received and does
not offer the Collateral to more than one offeree.


    
      
         


      

      
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    Each
Debtor further agrees to do or cause to be done all such other acts and things
as may be necessary to make such sale or sales of any portion or all of any such
Collateral valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at such Debtor’s expense,
provided that
Debtors shall be under no obligation to take any action to enable any or all of
such Collateral to be registered under the provisions of the
Act.  Each Debtor further agrees that a breach of any of the covenants
contained in this Section 4.8 will
cause irreparable injury to the Secured Party, that the Secured Party has no
adequate remedy at law in respect of such breach and, as a consequence, agrees
that each and every covenant contained in this Section 4.8 shall be
specifically enforceable against Debtors, and each Debtor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred and is
continuing.

     

    4.9  Application of
Proceeds.  The proceeds of any collection, sale or other
realization of all or any part of the Collateral, and any other cash at the time
held by the Secured Party under this Agreement, shall be applied in the manner
set forth in the Notes (or, if not so set forth, in a manner acceptable to, and
at the election of, the Secured Party).

     

    4.10  Attorney-in-Fact.  Each
Debtor hereby irrevocably constitutes and appoints the Secured Party, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Debtor and in the
name of such Debtor or in its own name, from time to time in the discretion of
the Secured Party, for the purpose of carrying out the terms of this Agreement,
to take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to perfect or
protect any security interest granted hereunder or to maintain the perfection or
priority of any security interest granted hereunder, and, without limiting the
generality of the foregoing, hereby gives the Secured Party the power and right,
on behalf of such Debtor, without notice to or assent by such Debtor (to the
extent permitted by applicable law), to do the following upon the occurrence and
during the continuation of any Event of Default:

     

    (a)           to
take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Agreement;

     

    (b)           to
ask, demand, collect, receive and give acquittance and receipts for any and all
moneys due and to become due under any Collateral and, in the name of such
Debtor or its own name or otherwise, to take possession of and endorse and
collect any checks, drafts, notes, acceptances or other Instruments for the
payment of moneys due under any Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Secured Party for the purpose of collecting any and all such
moneys due under any Collateral whenever payable and to file any claim or to
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Secured Party for the purpose of collecting any and
all such moneys due under any Collateral whenever payable;


    
      
         


      

      
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    (c)           to
pay or discharge charges or liens levied or placed on or threatened against the
Collateral, to effect any insurance called for by the terms of this Agreement
and to pay all or any part of the premiums therefor;

     

    (d)           to
direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due, and to become due thereunder, directly to the
Secured Party or as the Secured Party shall direct, and to receive payment of
and receipt for any and all moneys, claims and other amounts due, and to become
due at any time, in respect of or arising out of any Collateral;

     

    (e)           to
sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other Documents
constituting or relating to the Collateral;

     

    (f)           to
commence and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any
Collateral;

     

    (g)           to
defend any suit, action or proceeding brought against a Debtor with respect to
any Collateral;

     

    (h)           to
settle, compromise or adjust any suit, action or proceeding described above and,
in connection therewith, to give such discharges or releases as the Secured
Party may deem appropriate;

     

    (i)           to
the extent that a Debtor’s authorization given in Section 4.1(b) of
this Agreement is not sufficient to file such financing statements with respect
to this Agreement, with or without such Debtor’s signature, or to file a
photocopy of this Agreement in substitution for a financing statement, as the
Secured Party may deem appropriate and to execute in such Debtor’s name such
financing statements and amendments thereto and continuation statements which
may require such Debtor’s signature; and

     

    (j)           generally
to sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Secured Party
were the absolute owners thereof for all purposes, and to do, at the Secured
Party’s option and at such Debtor’s expense, at any time, or from time to time,
all acts and things which the Secured Party reasonably deems necessary to
protect, preserve or realize upon the Collateral and the Secured Party’s lien
therein, in order to effect the intent of this Agreement, all as fully and
effectively as such Debtor might do.

     

    Each
Debtor hereby ratifies, to the extent permitted by law, all that such attorneys
lawfully do or cause to be done by virtue hereof.  The power of
attorney granted hereunder is a power coupled with an interest and shall be
irrevocable until the Liabilities are indefeasibly paid in full in cash and this
Agreement is terminated in accordance with Section 4.12
hereof.


    
      
         


      

      
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    Each
Debtor also authorizes the Secured Party, at any time from and after the
occurrence and during the continuation of any Event of Default, (x) to
communicate in its own name with any party to any Contract with regard to the
assignment of the right, title and interest of such Debtor in and under the
Contracts hereunder and other matters relating thereto and (y) to execute, in
connection with any sale of Collateral provided for in Section 4.6 hereof,
any endorsements, assignments or other instruments of conveyance or transfer
with respect to the Collateral.

     

    4.11  Perfection.  Prior
to or concurrently with the execution and delivery of this Agreement, each
Debtor shall:

     

    (a)           file
such financing statements, assignments for security and other documents in such
offices as may be necessary or as the Secured Party or the Representative may
request to perfect the security interests granted by Section 3 of this
Agreement; and

     

    (b)           at
Secured Party’s request, deliver to the Secured Party or its Representative the
originals of all Instruments together with, in the case of Instruments
constituting promissory notes, allonges attached thereto showing such promissory
notes to be payable to the order of a blank payee.

     

    (c)           deliver
to the Secured Party or its Representative the originals of all Motor Vehicle
Titles (other than, until the payment in full in cash of the FNBW Note, the
Motor Vehicles Titles of the FNBW Vehicles), duly endorsed indicating the
Secured Party’s interest therein as a lienholder, together with such other
documents as may be required consistent with Section 4.1(d) hereof
to perfect the security interest granted by Section 3 in all such Motor
Vehicles.

     

    4.12  Termination.  This
Agreement and the Liens and security interests granted hereunder shall not
terminate until the termination of the Notes and the full and complete
performance and indefeasible satisfaction of all the Liabilities (i) in respect
of the Notes (including, without limitation, the indefeasible payment in full in
cash of all such Liabilities) and (ii) with respect to which claims have been
asserted by Collateral Agent and/or Buyers, whereupon the Secured Party shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral to or on the order of Debtors.  The Secured Party shall
also execute and deliver to Debtors upon such termination and at Debtors’
expense such UCC termination statements, certificates for terminating the liens
on the Motor Vehicles (if any) and such other documentation as shall be
reasonably requested by Debtors to effect the termination and release of the
Liens and security interests in favor of the Secured Party affecting the
Collateral.


    
      
         


      

      
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    4.13  Further
Assurances.  At any time and from time to time, upon the
written request of the Secured Party or its Representative, and at the sole
expense of Debtors, Debtors will promptly and duly execute and deliver any and
all such further instruments, documents and agreements and take such further
actions as the Secured Party or its Representative may reasonably require in
order for the Secured Party to obtain the full benefits of this Agreement and of
the rights and powers herein granted in favor of the Secured Party, including,
without limitation, using Debtors’ best efforts to secure all consents and
approvals necessary or appropriate for the assignment to the Secured Party of
any Collateral held by Debtors or in which a Debtor has any rights not
heretofore assigned, the filing of any financing or continuation statements
under the UCC with respect to the liens and security interests granted hereby,
transferring Collateral to the Secured Party’s possession (if a security
interest in such Collateral can be perfected by possession), placing the
interest of the Secured Party as lienholder on the certificate of title of any
Motor Vehicle (other than, until the payment in full in cash of the FNBW Note,
the FNBW Vehicles) and obtaining waivers of liens from landlords and
mortgagees.  Each Debtor also hereby authorizes the Secured Party and
its Representative to file any such financing or continuation statement without
the signature of such Debtor to the extent permitted by applicable
law.

     

    4.14  Limitation on Duty of
Secured Party.  The powers conferred on the Secured Party under
this Agreement are solely to protect the Secured Party’s interest on behalf of
itself and Buyers in the Collateral and shall not impose any duty upon it to
exercise any such powers.  The Secured Party shall be accountable only
for amounts that it actually receives as a result of the exercise of such powers
and neither the Secured Party nor its Representative nor any of their respective
officers, directors, employees or agents shall be responsible to Debtors for any
act or failure to act, except for willful misconduct.  Without
limiting the foregoing, the Secured Party and any Representative shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral in their possession if such Collateral is accorded treatment
substantially equivalent to that which the relevant Secured Party or any
Representative, in its individual capacity, accords its own property consisting
of the type of Collateral involved, it being understood and agreed that neither
the Secured Party nor any Representative shall have any responsibility for
taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above) to preserve rights against any Person with
respect to any Collateral.

     

    Also
without limiting the generality of the foregoing, neither the Secured Party nor
any Representative shall have any obligation or liability under any Contract or
license by reason of or arising out of this Agreement or the granting to the
Secured Party of a security interest therein or assignment thereof or the
receipt by the Secured Party or any Representative of any payment relating to
any Contract or license pursuant hereto, nor shall the Secured Party or any
Representative be required or obligated in any manner to perform or fulfill any
of the obligations of Debtors under or pursuant to any Contract or license, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any party
under any Contract or license, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.

     

    
      
         


      

      
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    Section
5.  Miscellaneous.

     

    5.1  No
Waiver.  No failure on the part of the Secured Party or any of
its Representatives to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Secured Party or
any of its Representatives of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy.  The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.

     

    5.2  Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.

     

    5.3  Notices.  All
notices, approvals, requests, demands and other communications hereunder shall
be delivered or made in the manner set forth in, and shall be effective in
accordance with the terms of, the Purchase Agreement; provided, that, to the
extent any such communication (i) is being made or sent to a Debtor that is not
the Company, such communication shall be effective as to such Debtor if made or
sent to the Company in accordance with the foregoing or (ii) is being made or
sent to Collateral Agent, such communication shall be made to Collateral Agent
at the address set forth below  Collateral Agent’s signature
hereto.  Debtors and Collateral Agent may change their respective
notice addresses by written notice given to each other party five (5) days prior
to the effectiveness of such change.

     

    5.4  Amendments,
Etc.  The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Debtor sought to
be charged or benefited thereby and the Secured Party.  Any such
amendment or waiver shall be binding upon the Secured Party and the Debtor
sought to be charged or benefited thereby and their respective successors and
assigns.

     

    5.5  Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of each of the parties hereto,
provided, that
no Debtor shall assign or transfer its rights hereunder without the prior
written consent of the Secured Party.  Secured Party, in its capacity
as collateral agent, may assign its rights hereunder without the consent of
Debtors, in which event such assignee shall be deemed to be Secured Party
hereunder with respect to such assigned rights.

     

    5.6  Counterparts;
Headings.  This Agreement may be authenticated in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may authenticate this Agreement by
signing any such counterpart.  This Agreement may be authenticated by
manual signature or facsimile, .pdf or similar electronic signature, all of
which shall be equally valid. The headings in this Agreement are for convenience
of reference only and shall not alter or otherwise affect the meaning
hereof.

     

    
      
         


      

      
        21

        
          

        

      

      
         


      

    

     

    5.7  Severability.  If
any provision hereof is invalid and unenforceable in any jurisdiction, then, to
the fullest extent permitted by law, (a) the other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Secured Party and its Representative in order to carry
out the intentions of the parties hereto as nearly as may be possible and (b)
the invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.

     

    5.8  SUBMISSION TO JURISDICTION;
WAIVER OF VENUE; SERVICE OF PROCESS.

     

    EACH
DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK, BOROUGH
OF MANHATTAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND EACH DEBTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF
SECURED PARTY TO BRING PROCEEDINGS AGAINST ANY DEBTOR IN THE COURTS OF ANY OTHER
JURISDICTION.  ANY JUDICIAL PROCEEDING BY A DEBTOR AGAINST SECURED
PARTY, ANY BUYER OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTION WITH THIS AGREEMENT
SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK (AND SECURED PARTY AND
BUYERS HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT).  EACH PARTY
HERETO HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
PROCESS BEING SERVED IN ANY SUCH ACTION OR PROCEEDING BY MAILING A COPY THEREOF
TO SUCH PARTY AT THE ADDRESS FOR NOTICES TO IT IN ACCORDANCE WITH SECTION 5.3
OF  THIS AGREEMENT AND AGREES THAT SUCH NOTICE 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.

     

    
      
         


      

      
        22

        
          

        

      

      
         


      

    

     

    5.9  WAIVER OF RIGHT TO TRIAL BY
JURY.  EACH DEBTOR AND SECURED PARTY EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.   EACH DEBTOR AND
SECURED PARTY EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION  OF THIS SECTION 5.9 AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION
HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

     

    5.10           Joint and
Several.  The obligations, covenants and agreements of Debtors
hereunder shall be the joint and several obligations, covenants and agreements
of each Debtor, whether or not specifically stated herein without preferences or
distinction among them.

     

    5.11           Collateral Agent and Buyer
Indemnification.

     

     
(a)           Each Buyer
hereby irrevocably appoints and authorizes the Secured Party to act as
collateral agent (the “Collateral Agent”) on its
behalf under this Agreement and to enter into each of the instruments, documents
and agreements, including any pledge agreement, guaranty, financing statements,
mortgage, Account Control Agreement or any other Security Documents (the “Financing Documents”), to
which Secured Party is a party (including in its capacity as Collateral Agent)
on such Buyer’s behalf and to take such actions as Collateral Agent on such
Buyer’s behalf and to exercise such powers under the Financing Documents as are
delegated to Collateral Agent or Secured Party (as applicable) by the terms
thereof, together with all such powers as are reasonably incidental
thereto.  The Collateral Agent shall take such action under this
Agreement and/or any other Transaction Documents as the Collateral Agent shall
reasonably be directed by the Requisite Buyers in accordance with the terms of
the Transaction Documents.  Secured Party is authorized and empowered
to amend, modify, or waive any provisions of this Agreement or the other
Financing Documents only with the consent of the Requisite Buyers.

     

    
      
         


      

      
        23

        
          

        

      

      
         


      

    

     

    (b)           Whether
or not the transactions contemplated hereby shall be consummated, upon demand
therefor Buyers shall indemnify the Collateral Agent (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so), ratably from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind whatsoever, including, for purposes of
clarification, all Taxes, which may at any time (including at any time following
the payment in full of the Notes and the termination or resignation of the
Collateral Agent) be imposed on, incurred by or asserted against the Collateral
Agent in any way relating to or arising out of this Agreement, any other
Financing Document or any document contemplated hereby or referred to herein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Collateral Agent under or in connection with any of the foregoing; provided, however, that no
Buyer shall not be liable for the payment to the Collateral Agent of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Collateral Agent’s gross negligence or willful misconduct.  In
addition, each Buyer shall reimburse the Collateral Agent upon demand for its
ratable share of any costs or out-of-pocket expenses (including attorney costs)
incurred by the Collateral Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other
Transaction Document, or any document contemplated hereby or referred to herein
to the extent that the Collateral Agent is not reimbursed for such expenses by
or on behalf of the Company.  Without limiting the generality of the
foregoing, if any Governmental Authority of any jurisdiction asserts a claim
that the Collateral Agent did not properly withhold tax from amounts paid to or
for the account of any Buyer (because the appropriate form was not delivered,
was not properly executed, or because such Buyer failed to notify the Collateral
Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Buyer
shall indemnify the Collateral Agent fully for all amounts paid, directly or
indirectly, by the Collateral Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Collateral Agent under this Section 5.11(b),
together with all related costs and  expenses (including attorney
costs).  The obligation of Buyers in this Section 5.11(b) shall
survive the payment of all Liabilities hereunder.

     

    (c)           The
Collateral Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default or any event that with the giving of notice
or passage of time would constitute an Event of Default unless the Collateral
Agent shall have received written notice from a Buyer describing such Event of
Default or event that with the giving of notice or passage of time would
constitute an Event of Default and stating that such notice is a “notice of
default”.  Upon the occurrence and continuance of an Event of Default,
or an event that with the giving of notice or passage of time would constitute
an Event of Default, the Collateral Agent shall take such action under this
Agreement and/or any other Transaction Documents with respect to such Event of
Default or event that with the giving of notice or passage of time would
constitute an Event of Default as Collateral Agent shall reasonably be directed
by the Requisite Buyers in accordance with the terms of the Transaction
Documents, provided that unless and until the Collateral Agent shall have
received such directions, the Collateral Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect of such
Event of Default or event that with the giving of notice or passage of time
would constitute an Event of Default or as the Collateral Agent shall deem
advisable in the best interests of Buyers.  In taking such action or
refraining from taking such action without specific direction from the Requisite
Buyers, the Collateral Agent shall use the same degree of care and skill as a
prudent person would exercise or use under the circumstances in the conduct of
such person’s own affairs.

     

    
      
         


      

      
        24

        
          

        

      

      
         


      

    

     

    (d)           Nothing
in this Section
5.11 shall be deemed to limit or otherwise affect the rights of Secured
Party or Buyers to exercise any remedy provided in this Agreement or any other
Transaction Document.

     

    (e)           The
Collateral Agent may resign from the performance of all of its functions and
duties hereunder and/or under the other Financing Documents at any time by
giving thirty (30) Business Days prior written notice to Buyers.  Such
resignation shall take effect upon the appointment of a successor Collateral
Agent pursuant to clause (f) below or as otherwise provided below.

     

    (f)           Upon
(i) Buyers’ receipt of a notice of resignation by the Collateral Agent in
accordance with clause (e) above, or (ii) written notice by the Requisite Buyers
to Collateral Agent of the Requisite Buyers’ election to remove the existing
Collateral Agent and appoint a successor Collateral Agent, the Requisite Buyers
shall have the right to appoint a successor Collateral Agent.  Upon
the acceptance of a successor's appointment as Collateral Agent hereunder and
notice of such acceptance to the retiring Collateral Agent, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Collateral Agent, the retiring Collateral
Agent's resignation shall become immediately effective and the retiring
Collateral Agent shall be discharged from all of its duties and obligations
hereunder and under the other Financing Documents (if such resignation was not
already effective and such duties and obligations not already discharged, as
provided below in this paragraph).  If no such successor shall have
been so appointed by the Requisite Buyers and shall have accepted such
appointment within thirty (30) days after the retiring Collateral Agent gives
notice of its resignation or the Requisite Buyers give notice of their election
to replace the retiring Collateral Agent, then the retiring Collateral Agent
may, on behalf of Buyers (but without any obligation) appoint a successor
Collateral Agent without the consent of any Buyer.  From and following
the expiration of such thirty (30) day period, Collateral Agent shall have the
exclusive right without any Person's consent, upon one (1) Business Days' notice
to Buyers, to make its resignation or removal effective
immediately.  From and following the effectiveness of such notice,
(i) the retiring Collateral Agent shall be discharged from its duties and
obligations hereunder and under the other Financing Documents and (ii) all
actions, payments, communications and determinations provided to be made by, to
or through Collateral Agent shall instead be made by or to each Buyer directly,
until such time as the Requisite Buyers appoint a Collateral Agent as provided
for above in this paragraph.  The provisions of this Agreement shall
continue in effect for the benefit of any retiring Collateral Agent and its
sub-agents after the effectiveness of its resignation or removal hereunder and
under the other Financing Documents in respect of any actions taken or omitted
to be taken by any of them while the retiring Collateral Agent was acting or was
continuing to act as Collateral Agent.

     

    
      
         


      

      
        25

        
          

        

      

      
         


      

    

     

    5.12           No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

     

    5.13           ENTIRE
AGREEMENT; AMENDMENT.  THIS AGREEMENT, TOGETHER
WITH THE OTHER TRANSACTION DOCUMENTS, SUPERSEDES ALL OTHER PRIOR ORAL OR WRITTEN
AGREEMENTS BETWEEN SECURED PARTY, THE OBLIGORS, 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 THE SECURED PARTY NOR ANY
OBLIGOR 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 OBLIGORS AND
THE SECURED PARTY.

     

    -
Remainder of Page Intentionally Left Blank; Signature Page Follows
-


    
      
         


      

      
        26

        
          

        

      

      
         


      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered as of the day and year first above
written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            DEBTORS:

                                          
	 
      	 
      
	
                                            SONTERRA RESOURCES,
      INC., a Delaware

                                            corporation

                                          
	 
      	 
      
	
                                            By:  

                                          	
                                            /s/ D. E. Vandenberg

                                          
	
                                            Name:

                                          	
                                                
      D. E. Vandenberg

                                          
	
                                            Title:

                                          	
                                                
      President

                                          
	
                                            FEIN:  

                                          	
                                              26-0380344 

                                          
	 
      	 
      
	
                                            NORTH TEXAS DRILLING SERVICES,
      INC., a

                                            Texas
      corporation

                                          
	 
      	 
      
	
                                            By:

                                          	
                                            /s/ D. E. Vandenberg

                                          
	
                                            Name:

                                          	
                                                
      D. E. Vandenberg

                                          
	
                                            Title:

                                          	
                                                
      Director

                                          
	
                                            FEIN:  

                                          	 
      
	 
      	 
      
	
                                            SONTERRA OPERATING,
      INC., a Delaware

                                            corporation

                                          
	 
      	 
      
	
                                            By:

                                          	
                                            /s/ D. E. Vandenberg

                                          
	
                                            Name:

                                          	
                                                
      D. E. Vandenberg

                                          
	
                                            Title:

                                          	
                                                
      President

                                          
	
                                            FEIN:  

                                          	 
      
	 
      	 
      
	
                                            VELOCITY ENERGY LIMITED
      LLC, a Texas

                                            limited
      liability company

                                          
	 
      	 
      
	
                                            By:

                                          	
                                            /s/ D. E. Vandenberg

                                          
	
                                            Name:

                                          	
                                                
      D. E. Vandenberg

                                          
	
                                            Title:

                                          	
                                                
      President

                                          
	
                                            FEIN:  

                                          	 
      
	 
      	 
      
	
                                            VELOCITY ENERGY INC., a
      Delaware

                                            corporation

                                          
	 
      	 
      
	
                                            By:  

                                          	/s/ D. E. Vandenberg 
	
                                            Name:

                                          	
                                                
      D. E. Vandenberg

                                          
	
                                            Title:

                                          	
                                                
      President

                                          
	
                                            FEIN:  

                                          	 
      


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
       

      Security
Agreement

    

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                VELOCITY ENERGY OFFSHORE
      LP, a

                                Delaware
      limited partnership

                              
	 
      	 
      
	
                                By:
      Velocity Energy Limited LLC, its general partner

                              
	 
	
                                By:

                              	
                                /s/ D. E. Vandenberg

                              
	
                                Name:

                              	
                                    
      D. E. Vandenberg

                              
	
                                Title:

                              	
                                    
      President

                              
	
                                FEIN:  

                              	 
      
	 
      	 
      
	
                                VELOCITY ENERGY PARTNERS
      LP, a

                                Delaware
      limited partnership

                              
	 
      	 
      
	
                                By:
      Velocity Energy Limited LLC, its general partner

                              
	 
	
                                By:  

                              	
                                /s/ D. E. Vandenberg

                              
	
                                Name:

                              	
                                    
      D. E. Vandenberg

                              
	
                                Title:

                              	
                                    
      President

                              
	
                                FEIN: 

                              	 
      


                      

                    

                  

                

              

            

          

        

      

    

     

    Security Agreement

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      
        
          
            
              
                	
                        SECURED PARTY:

                      
	 
      
	
                        SUMMERLINE ASSET MANAGEMENT,
      LLC, a

                        Delaware
      limited liability company, in its capacity as

                        Collateral
      Agent for Buyers

                      
	 
      
	
                        By:

                      	
                        /s/ Robert J. Brantman

                      
	
                        Name:

                      	
                            
      Robert J. Brantman

                      
	
                        Title:

                      	
                            
      Co-Managing Member

                      
	 
      	 
      
	
                        Notice Address:

                      
	 
      	 
      
	
                        Summerline
      Asset Management, LLC

                      
	
                        70
      West Red Oak Lane, 4th Floor

                      
	
                        White
      Plains, New York  10604

                      
	
                        Attention:  Robert
      J. Brantman

                      
	
                        Telecopy:  (914)
      697-4767

                      


              

            

          

        

      

    

     

    Security Agreement

    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered as of the day and year first above
written.

    


    
      
        
          
            
              
                	
                        BUYER(S):

                      
	 
      
	
                        Solely
      for the purposes of Section
      5.11

                      
	 
      
	
                        LONGVIEW
      MARQUIS MASTER

                        FUND, L.P., a British
      Virgin Island limited

                        partnership,
      as a Buyer

                      
	 
      
	
                        By:
      Viking Asset Management, LLC

                      
	
                        Its:  Investment
      Adviser

                      
	 
      	 
      
	 
      	 
      
	
                        By:

                      	
                        /s/ Peter T. Benz

                      
	
                        Name:

                      	
                            
      Peter T. Benz

                      
	
                        Title:

                      	
                            
      Chairman

                      


              

            

          

        

      

    

     

    Security Agreement

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    EXHIBIT
A

    


    Form of
Joinder

    Joinder
to Security Agreement

    


    The
undersigned, ______________________________, hereby joins in the execution of
that certain Security Agreement dated as of November 13, 2008 (as amended,
restated, supplemented or otherwise modified from time to time, the “Security Agreement”) by
Sonterra Resources, Inc., a Delaware corporation, North Texas Drilling Services,
Inc., a Texas corporation, Buyers (as defined therein), and each other Person
that becomes a Debtor or a Buyer thereunder after the date thereof and hereof
and pursuant to the terms thereof, to and in favor of Summerline Asset
Management, LLC, in its capacity as Collateral Agent for Buyers.  By
executing this Joinder, the undersigned hereby agrees that it is a Debtor
thereunder and agrees to be bound by all of the terms and provisions of the
Security Agreement. The undersigned represents and warrants that the
representations and warranties set forth in the Security Agreement are, with
respect to the undersigned, true and correct as of the date hereof.

    


    The
undersigned represents and warrants to Secured Party that:

    


    (a)           all
of the Equipment, Inventory and Goods owned by such Debtor is located at the
places as specified on Schedule I and such
Debtor conducts business in the jurisdiction set forth on Schedule
I;

    


    (b)           except
as disclosed on Schedule I, none of
such Collateral is in the possession of any bailee, warehousemen, processor or
consignee;

    


    (c)           the
chief place of business, chief executive office and the office where such Debtor
keeps its books and records are located at the place specified on Schedule
I;

    


    (d)           such
Debtor (including any Person acquired by such Debtor) does not do business or
has not done business during the past five years under any tradename or
fictitious business name, except as disclosed on Schedule
II;

    


    (e)           all
Copyrights, Patents and Trademarks owned or licensed by the undersigned are
listed in Schedules
III, IV
and V,
respectively;

    


    (f)           all
Deposit Accounts, securities accounts, brokerage accounts and other similar
accounts maintained by such Debtor, and the financial institutions at which such
accounts are maintained, are listed on Schedule
VI;

    


    (g)           all
Commercial Tort Claims of such Debtor are listed on Schedule
VII;

    


    (h)           all
interests in real property and mining rights held by such Debtor are listed on
Schedule
VIII;


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

    


    (i)           all
Equipment (including Motor Vehicles) owned by such debtor are listed on Schedule
IX.

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          	 
      	
                                  ________________,
      a ________

                                
	 
      	 
      
	 
      	 
      
	 
      	
                                  By:

                                	 
      	 
	 
      	
                                  Title:

                                	 
      	
                                
	 
      	
                                  FEIN:

                                	 
      	
                                


                        

                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
        3

        
          

        

      

      
         


      

    

    


    Sonterra Resources,
Inc.

     

    Schedule
I

     

    UCC Financing Statements;
Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’
Legal Names; State of Incorporation; Organizational Identification Number; Chief
Executive Office.

     

    
      
        
          	
                  Legal
      Name

                	 	
                  Sonterra
      Resources, Inc.

                
	 
      	 	 
      
	
                  State
      of Incorporation

                	 	
                  Delaware

                
	 
      	 	 
      
	
                  Organizational
      ID Number

                	 	
                  3064484

                
	 
      	 	 
      
	
                  Chief
      Executive Office

                	 	
                  523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

                
	 
      	 	 
      
	
                  Location
      of Books and Records:

                	 	
                  523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

                
	 
      	 	 
      
	
                  Location
      of Equipment, Inventory and Goods

                	 	
                  523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

                
	 
      	 	 
      
	
                  Location
      of Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
      Processors (including names of such consignees, bailees,
    etc.)

                	 	
                  523
      North Sam Houston Parkway East, Suite 175, Houston, TX 77060

                   

                
	 
      	 	 
      
	
                  Jurisdiction
      for UCC Filings

                	 	
                  Delaware

                


        

      

    

     

    Schedule
II

     

    Tradenames and Fictitious
Names

    (Present and Past Five
Years)

     

    River
Capital Group, Inc.

     

    Sonterra
Oil & Gas, Inc.


    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    Schedule
III

     

    U.S. Copyright
Registrations; Foreign Copyright Registrations; U.S. Copyright Applications;
Foreign Copyright Applications; Copyright Licenses

     

    None

     

    Schedule
IV

     

    U.S. Patent Registrations;
Foreign Patent Registrations; U.S. Patent Applications; Foreign Patent
Applications; Patent Licenses

     

    None

     

    Schedule
V

     

    U.S. Trademark
Registrations; Foreign Trademark Registrations; U.S. Trademark Applications;
Foreign Trademark Applications; Trademark Licenses

     

    None

     

    Schedule
VI

     

    Depository Accounts and
Other Accounts

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  Name
      of Account

                                  Holder

                                	 	
                                  Bank

                                	 	
                                  Type
      of Account

                                  (with
      general

                                  description)

                                	 	
                                  Account
      Number

                                
	 
      	 	 
      	 	 
      	 	 
      
	
                                  Sonterra
      Resources, Inc.

                                	 	
                                  Sterling
      Bank

                                	 	
                                  Business
      Checking

                                	 	
                                  5000183843

                                
	 
      	 	 
      	 	 
      	 	 
      
	
                                  Sonterra
      Resources, Inc.

                                	 	
                                  Sterling
      Bank

                                	 	
                                  Sonterra/Velocity
      Acquisition Fund

                                	 	
                                  5000389794

                                


                        

                      

                    

                  

                

              

            

          

        

      

    

     

    Schedule
VII

     

    Commercial Tort
Claims

     

    None

     

    Schedule
VIII

     

    Interests in Real Property
and Mineral Interests


    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    Shark
Prospect

     

    
      	
               
      

            	
              1.

            	
              Oil
      and Gas Lease dated July 1, 2003, from the State of Texas, as Lessor, to
      Cinco Natural Resources Corporation, as Lessee, covering Oil and Gas Lease
      No. M-103194, being the South One-Half (S/2) of State Tract 150, Matagorda
      Bay, Calhoun County, Texas, containing approximately 320.0 acres, recorded
      in File No. 82095, Volume 349, Page 1 of the Official Records of Calhoun
      County, Texas.

            


    

     

    Lease
Interest:


     

    Surface
down to 9400' true vertical depth as seen in the Cockrell Corporation –
Aquamarine Unit Well No. 1 (API No. 42-057-31600).

     

    72.80 WI
/ 57.512% NRI

     

    Rights
between 9401' and 50' below the stratigraphic equivalent of the top of the 9800'
Sand, said top of the 9800' Sand being equal to 9790' TVD as seen on the
electric log for the Cockrell Corporation – Aquamarine Unit Well No. 1 (API No.
42-057-31600).

     

    30.30% WI
/ 23.55825% NRI

     

    Rights
below 50' below the stratigraphic equivalent of the top of the 9800' Sand, said
top of the 9800' Sand being equal to 9790' TVD as seen on the electric log for
the Cockrell Corporation – Aquamarine Unit Well No. 1 (API No.
42-057-31600).

     

    30.30% WI
/ 23.331% NRI

     

    Well
Interest:

     

    Flash –
State Tract 150 No. 1 Well, API No. 42-057-31770: 72.80% WI / 57.512% NRI
(Shut-In)

     

    Flash –
State Tract 150 No. 1 ST #1 Well, API No. 42-057-31770: 72.80% WI / 57.512% NRI
(Sidetrack well scheduled for 4th Quarter
2008)

     

    BOSS –
State Tract 150 No. 2 Well, API No. 42-057-31692:  30.30% WI /
23.55825% NRI (Current NRI)

     

    
      
         


      

      
        6

        
          

        

      

      
         


      

    

     

    Recompletion
of the State Tract 150 No. 2 Well, API No. 42-057-31692, scheduled in 2009 will
be drilled by shallow owners only and Sonterra’s WI and NRI percentages are as
follows:  72.8% WI / 57.512% NRI (before a negotiated NPI to
deep interest owners).

     

    Ray
Prospect

    


    
      	
               
      

            	
              2.

            	
              Oil
      and Gas Lease dated October 19, 2004, from the State of Texas, by and
      through the Commissioner of the General Land Office of the State of Texas,
      as Lessor, to Cinco Natural Resources Corporation, as Lessee, covering Oil
      and Gas Lease Number M-104265, being the South One-Half (S/2) of Tract
      175, Matagorda Bay, Matagorda and Calhoun Counties, Texas, containing
      approximately 320 acres as shown on the applicable Official Submerged Area
      Map on file in the Texas General Land Office, Austin, Texas, and recorded
      in the Official Records of Matagorda County, Texas, as File No. 050427,
      and recorded in the Official Records of Calhoun County, Texas, as File No.
      91879, Volume 400, Page 525.

            


    

    


    Lease
Interest:  30.30% WI / 22.04325% NRI

     

    
      	
               
      

            	
              3.

            	
              Oil
      and Gas Lease dated October 19, 2004, from the State of Texas, by and
      through the Commissioner of the General Land Office of the State of Texas,
      as Lessor, to Cinco Natural Resources Corporation, as Lessee, covering Oil
      and Gas Lease Number M-104266, being the South One-Half (S/2) of Tract
      178, Matagorda Bay, Matagorda County, Texas, containing approximately 320
      acres as shown on the applicable Official Submerged Area Map on file in
      the Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Matagorda County, Texas, as File No.
  050428.

            


    

     

    Lease
Interest:  30.30% WI / 22.04325% NRI

    


    
      	
               
      

            	
              4.

            	
              Oil
      and Gas Lease dated October 19, 2004, from the State of Texas, by and
      through the Commissioner of the General Land Office of the State of Texas,
      as Lessor, to Cinco Natural Resources Corporation, as Lessee, covering Oil
      and Gas Lease Number M-104267, being the North One-Half (N/2) of Tract
      179, Matagorda Bay, Matagorda County, Texas, containing approximately 320
      acres as shown on the applicable Official Submerged Area Map on file in
      the Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Matagorda County, Texas, as File No.
  050429.

            


    

     

    
      
         


      

      
        7

        
          

        

      

      
         


      

    

     

    Lease
Interest:  30.30% WI / 22.04325% NRI


     

    Starfish
Prospect

    


    
      	
               
      

            	
              5.

            	
              Oil
      and Gas Lease dated April 5, 2005, from the State of Texas, by and through
      the Commissioner of the General Land Office of the State of Texas, as
      Lessor, to Cinco Energy Corporation, as Lessee, covering Oil and Gas Lease
      Number M-104829, being the South One-Half (S/2) of Tract 96, Matagorda
      Bay, Calhoun County, Texas, containing approximately 320 acres as shown on
      the applicable Official Submerged Area Map on file in the Texas General
      Land Office, Austin, Texas, and recorded in the Official Records of
      Calhoun County, Texas, as File No. 92724, Volume 406, Page
    35.

            


    

    


    Lease
Interest:  30.30% WI / 22.422% NRI (to April 5, 2009)/ 21.6645%
NRI (after April 5, 2009)


     

    
      	
               
      

            	
              6.

            	
              Oil
      and Gas Lease dated July 19, 2005, from the State of Texas, by and through
      the Commissioner of the General Land Office of the State of Texas, as
      Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and Gas Lease
      Number M-105371, being the North One-Half (N/2) of Tract 104, Matagorda
      Bay, Calhoun County, Texas, containing approximately 320 acres as shown on
      the applicable Official Submerged Area Map on file in the Texas General
      Land Office, Austin, Texas, and recorded in the Official Records of
      Calhoun County, Texas, as File No. 96377, Volume 426, Page
      912.

            


    

    


    Lease
Interest: 36.2874% WI / 26.852676% NRI (to July 19, 2009) / 25.945491%
(after July 19, 2009)

    


    Barracuda
Prospect

    


    
      	
               
      

            	
              7.

            	
              Oil
      and Gas Lease dated April 5, 2005, from the State of Texas, by and through
      the Commissioner of the General Land Office of the State of Texas, as
      Lessor, to Cinco Energy Corporation, as Lessee, covering Oil and Gas Lease
      Number M-104827, being the North One-Half (N/2) of Tract 94, Matagorda
      Bay, Calhoun County, Texas, containing approximately 320 acres as shown on
      the applicable Official Submerged Area Map on file in the Texas General
      Land Office, Austin, Texas, and recorded in the Official Records of
      Calhoun County, Texas, as File No. 92722, Volume 406, Page
    21.

            


    

    


    Lease
Interest:  30.30% WI / 22.422% NRI (to April 5, 2009)/ 21.6645%
NRI (after April 5, 2009)

     

    
      	
               
      

            	
              8.

            	
              Oil
      and Gas Lease dated April 5, 2005, from the State of Texas, by and through
      the Commissioner of the General Land Office of the State of Texas, as
      Lessor, to Cinco Energy Corporation, as Lessee, covering Oil and Gas Lease
      Number M-104828, being the South One-Half (S/2) of Tract 94, Matagorda
      Bay, Calhoun County, Texas, containing approximately 320 acres as shown on
      the applicable Official Submerged Area Map on file in the Texas General
      Land Office, Austin, Texas, and recorded in the Official Records of
      Calhoun County, Texas, as File No. 92723, Volume 406, Page
    28.

            


    

     

    
      
         


      

      
        8

        
          

        

      

      
         


      

    

     

    Lease
Interest:  30.30% WI / 22.422% NRI (to April 5, 2009)/ 21.6645%
NRI (after April 5, 2009)

     

    Mackerel
Prospect

     

    
      	
               
      

            	
              9.

            	
              Oil
      and Gas Lease dated July 19, 2005, from the State of Texas, by and through
      the Commissioner of the General Land Office of the State of Texas, as
      Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and Gas Lease
      Number M-105373, being the North One-Half (N/2) of Tract 175, Matagorda
      Bay, Calhoun and Matagorda Counties, Texas, containing approximately 320
      acres as shown on the applicable Official Submerged Area Map on file in
      the Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Calhoun County, Texas, as File No. 96378, Volume 426, Page 919,
      and recorded in the Official Records of Matagorda County, Texas, as File
      No. 063722.

            


    

     

    Lease
Interest:  36.2874% WI / 26.852676% (to July 19, 2009) /
25.945491% (after July 19, 2009)

     

    
      
        	
              	
                10.

              	
                Oil
      and Gas Lease dated October 4, 2005, from the State of Texas, by and
      through the Commissioner of the General Land Office of the State of Texas,
      as Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and Gas Lease
      Number M-105679, being the North One-Half (N/2) of Tract 178, Matagorda
      Bay, Matagorda County, Texas, containing approximately 320 acres as shown
      on the applicable Official Submerged Area Map on file in the Texas General
      Land Office, Austin, Texas, and recorded in the Official Records of
      Matagorda County, Texas, as File No.
059741.

              


      

    

    


    Lease
Interest:  30.30% WI / 22.422% NRI (to October 4, 2009)/
21.6645% NRI (after October 4, 2009)

     

    
      
        	
              	
                11.

              	
                Oil
      and Gas Lease dated October 4, 2005, from the State of Texas, by and
      through the Commissioner of the General Land Office of the State of Texas,
      as Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and Gas Lease
      Number M-105678, being the South One-Half (S/2) of Tract 176, Matagorda
      Bay, Calhoun and Matagorda Counties, Texas, containing approximately 320
      acres as shown on the applicable Official Submerged Area Map on file in
      the Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Calhoun County, Texas, as File No. 96971, Volume 429, Page 918,
      and recorded in the Official Records of Matagorda County, Texas, as File
      No. 059740.

              


      

    


    
      
         


      

      
        9

        
          

        

      

      
         


      

    

     

    Lease
Interest:  30.30% WI / 22.422% NRI (to October 4, 2009)/
21.6645% NRI (after October 4, 2009)

     

    Sydney/150-Deep
Prospect

     

    
      	
                     12.

            	
              Oil
      and Gas Lease dated July 1, 2003, from the State of Texas, by and through
      the Commissioner of the General Land office of the State of Texas, as
      Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil and Gas
      Lease Number M-103190, being the North One-Half (N/2) of Tract 127,
      Matagorda Bay, Calhoun County, Texas, containing approximately 320 acres
      as shown on the applicable Official Submerged Area Map on file in the
      Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Calhoun County, Texas, as File No. 00081323, Volume 344, Page
      875.

            


    

    


    
      	
                      13.

            	
              Oil
      and Gas Lease dated July 1, 2003, from the State of Texas, by and through
      the Commissioner of the General Land office of the State of Texas, as
      Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil and Gas
      Lease Number M-103191, being the South One-Half (S/2) of Tract 127,
      Matagorda Bay, Calhoun County, Texas, containing approximately 320 acres
      as shown on the applicable Official Submerged Area Map on file in the
      Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Calhoun County, Texas, as File No.0081324, Volume 344, Page
      882.

            


    

    


    
      	
                     14.

            	
              Oil
      and Gas Lease dated July 1, 2003, from the State of Texas, as Lessor, to
      Cinco Natural Resources Corporation, as Lessee, covering Oil and Gas Lease
      No. M-103194, being the south one-half (S/2) of State Tract 150, Matagorda
      Bay, Calhoun County, Texas, containing approximately 320.0 acres, recorded
      in File No. 82095, Volume 349, Page 1 of the Official Records of Calhoun
      County, Texas.  (This tract is also in the Shark
      Prospect.)

            


    

     

    
      	
                     15.

            	
              Oil
      and Gas Lease dated July 1, 2003, from the State of Texas, by and through
      the Commissioner of the General Land office of the State of Texas, as
      Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil and Gas
      Lease Number M-103195, being the South One-Half (S/2) of Tract 151,
      Matagorda Bay, Calhoun County, Texas, containing approximately 320 acres
      as shown on the applicable Official Submerged  Area Map on file
      in the Texas General Land Office, Austin, Texas, and recorded in the
      Official Records of Calhoun County, Texas, as File No. 00081326, Volume
      344, Page 896.

            


    

     

    
      	
                     16.

            	
              Oil
      and Gas Lease dated July 1, 2003, from the State of Texas, by and through
      the Commissioner of the General Land office of the State of Texas, as
      Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil and Gas
      Lease Number M-103192, being the North One-Half (N/2) of Tract 128,
      Matagorda Bay, Calhoun County, Texas, containing approximately 320 acres
      as shown on the applicable Official Submerged Area Map on file in the
      Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Calhoun County, Texas, as File No. 00081325, Volume 344, Page
      889.

            


    


    
      
         


      

      
        10

        
          

        

      

      
         


      

    

     

    
      	
                     17.

            	
              Oil
      and Gas Lease dated July 6, 2004, from the State of Texas, by and through
      the Commissioner of the General Land office of the State of Texas, as
      Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil and Gas
      Lease Number M-104022, being the North One-Half (N/2) of Tract 150,
      Matagorda Bay, Calhoun County, Texas, containing approximately 320 acres
      as shown on the applicable Official Submerged Area Map on file in the
      Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Calhoun County, Texas, as File No. 00088242, Volume 381, Page
      433.

            


    

     

    
      	
                     18.

            	
              Oil
      and Gas Lease dated July 19, 2005, from the State of Texas, by and through
      the Commissioner of the General Land office of the State of Texas, as
      Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil and Gas
      Lease Number M-105372, being the South One-Half (S/2) of Tract 154,
      Matagorda Bay, Calhoun County, Texas, containing approximately 320 acres
      as shown on the applicable Official Submerged Area Map on file in the
      Texas General Land Office, Austin, Texas, and recorded in the Official
      Records of Calhoun County, Texas, as File No. 00095163, Volume 420, Page
      166.

            


    

     

    Lease
Interest: N/2 ST
150 (SAVE AND EXCEPT the portion excluded from the State Tract 127 No. 1 Unit,
being depths above the stratigraphic equivalent of 100’ below the base of the
9800’ Sand TVD as seen in the Cockrell Corporation Aquamarine Unit Well No. 1
(API No. 42-057-31600) and the S/2 of ST 154: 53.8 % WI / 39.6775 %
NRI

     

    Lease
Interest: INSOFAR
only as to that portion of the N/2 ST 150 excluded from the State Tract 127 No.
1 Unit, being depths above the stratigraphic equivalent of 100’ below the base
of the 9800’ Sand TVD as seen in the Cockrell Corporation Aquamarine Unit Well
No. 1 (API No. 42-057-31600):  74.8 % WI / 55.165% NRI

     

    Lease
Interest: S/2 and
the N/2 of ST 127; N/2 ST 128; and the S/2 of ST 151:

    53.8 % WI
/ 38.3325 % NRI

     

    Unit Well
Interest:

     

    Sonterra – State Tract 127 No. 1 Unit
#1 Well, API No. 42-057-31770:

     

    
      	
               
      

            	
              A.

            	
              3.558523%
      WI to Casing Point/ 5.113335% NRI to Casing
  Point;

            


    

    


    
      	
               
      

            	
              B.

            	
              7.025190%
      WI at Casing Point BPO of Raptor and Hayes non-consent WI and BPO Rainier
      4.5% WI / 5.113335% NRI;

            


    

    


    
      	
               
      

            	
              C.

            	
              6.571999%
      WI APO Rainier 4.5% WI and BPO Raptor and Hayes non-consent WI / 4.783477
      % NRI; and

            


    


    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    
      	
               
      

            	
              D.

            	
              11.359472%
      WI APO Raptor and Hayes non-consent (and simultaneous back-in to 25% of
      South Texas Oil’s WI/NRI **) / 8.268073 %
NRI

            


    

     

    Unit
Description:

     

    State of
Texas Tract 127 No. 1 Unit Well #1, covering 2,240 acres, consisting of oil and
gas leases covering the S/2 and the N/2 of State Tract 127; the N/2 of State
Tract 128; the S/2 of State Tract 151; the S/2 of State Tract 154;
the  S/2 ST 150, Save and Except depths above the stratigraphic
equivalent of 100' below the base of the 9800' Sand TVD as seen in the Cockrell
Corporation Aquamarine Unit Well No. 1 (API No. 42-057-31600); and the N/2 ST
150 North Half of State Tract 150, Save and Except  the depths above
the stratigraphic equivalent of 100 feet below the base
of the 9800’ Sand TVD as seen in the Cockrell Corporation Aquamarine Unit Well
No. 1 (API No. 42-057-31600) which shall be excluded from the Term Pooling
Agreement described below:

     

    Term
Pooling Agreement from the Commissioner of the General Land Office, as Lessor,
to Sonterra Resources, Inc., as Lessee, dated February 20, 2008, but effective
December 11, 2008, and filed of record on February 28, 2008 as Instrument No.
111111 in the Official Records of Calhoun County, Texas, forming a pooled unit
covering all depths, except from the surface to 10,000’ TVD on all of State
Lease M-103194 and that part of State Lease M-104022 shown on Exhibit “D”
attached thereto encompassing the S/2 of Tract 127 (M-103191);  N/2 of
Tract 127 (M-103190); N/2 of Tract 128 (M-103192); N/2 of Tract 150 (M-104022);
S/2 of Tract 151 (M-103195); and S/2 of Tract 154 (M-105372).

     

    Pipeline:

    An
undivided 100.0% interest in and to the seven (7) mile six-inch (6") S80 Gr B
pipeline connecting Matagorda Bay, Calhoun County, Texas State Tract 150 No. 1
line heater platform to the Keller Bay Facility onshore.

     

    Schedule
IX

     

    Titled
Equipment

     

    None


    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    North Texas Drilling
Services, Inc.

     

    Schedule
I

     

    UCC Financing Statements;
Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’
Legal Names; State of Incorporation; Organizational Identification Number; Chief
Executive Office.

     

    
      
        
          	
                  Legal
      Name

                	 	
                  North
      Texas Drilling Services, Inc.

                
	 
      	 	 
      
	
                  State
      of Incorporation

                	 	
                  Texas

                
	 
      	 	 
      
	
                  Organizational
      ID Number

                	 	
                  800814665

                
	 
      	 	 
      
	
                  Chief
      Executive Office

                	 	
                  1837
      Barnett Drive, Weatherford, Texas 76087

                   

                
	 
      	 	 
      
	
                  Location
      of Books and Records:

                	 	
                  1837
      Barnett Drive, Weatherford, Texas 76087

                   

                
	 
      	 	 
      
	
                  Location
      of Equipment, Inventory and Goods

                	 	
                  1837
      Barnett Drive, Weatherford, Texas 76087

                   

                
	 
      	 	 
      
	
                  Location
      of Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
      Processors (including names of such consignees, bailees,
    etc.)

                	 	
                  None

                   

                
	 
      	 	 
      
	
                  Jurisdiction
      for UCC Filings

                	 	
                  Texas

                


        

      

    

     

    Schedule
II

     

    Tradenames and Fictitious
Names

     

    (Present and Past Five
Years)

     

    None


    
      
         


      

      
        13

        
          

        

      

      
         


      

    

     

    Schedule
III

     

    U.S. Copyright
Registrations; Foreign Copyright Registrations; U.S. Copyright Applications;
Foreign Copyright Applications; Copyright Licenses

     

    None

     

    Schedule
IV

     

    U.S. Patent Registrations;
Foreign Patent Registrations; U.S. Patent Applications; Foreign Patent
Applications; Patent Licenses

     

    None

     

    Schedule
V

     

    U.S. Trademark
Registrations; Foreign Trademark Registrations; U.S. Trademark Applications;
Foreign Trademark Applications; Trademark Licenses

     

    None

     

    Schedule
VI

     

    Depository Accounts and
Other Accounts

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Name
      of Account

                                Holder

                              	 	
                                Bank

                              	 	
                                Type
      of Account

                                (with
      general

                                description)

                              	 	
                                Account
      Number

                              
	
                                North
      Texas Drilling Services, Inc.

                              	 	
                                First
      National Bank of Weatherford

                              	 	
                                Business
      Checking

                              	 	
                                0196287

                              


                      

                    

                  

                

              

            

          

        

      

    

     

    Schedule
VII

     

    Commercial Tort
Claims

     

    None

     

    Schedule
VIII

     

    Interests in Real Property
and Mineral Interests

     

    None


    
      
         


      

      
        14

        
          

        

      

      
         


      

    

     

    Schedule
IX

     

    Titled
Equipment

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Year/Make

                              	 	
                                VIN

                              	 	
                                License

                                Number

                              	 	
                                Title
      Number

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1988
      Mack

                              	 	
                                1M2N187Y9JW024157

                              	 	
                                2AR288

                              	 	
                                04200038924134922

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1980
      Kenworth

                              	 	
                                908374

                              	 	
                                2AX196

                              	 	
                                22031238750101055

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1981
      Auto Car

                              	 	
                                1WBRCCE3BU093178

                              	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                                1989
      Peterbilt

                              	 	
                                1XPCDR9X7KN274807

                              	 	
                                22RTS1

                              	 	
                                18430138252140804

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1978
      Peterbilt

                              	 	
                                100292P

                              	 	
                                2AX195

                              	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                                1997
      Ford F-250

                              	 	
                                1FTHX25F9VEC73648

                              	 	
                                33CWD1

                              	 	
                                04330338201132702

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1991
      Ford F-250

                              	 	
                                1FTHF25M8MKB06974

                              	 	
                                8RWZ73

                              	 	
                                22037237787113225

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1993
      Ford F-350

                              	 	
                                1FTJX35M3PKA42710

                              	 	
                                49VXK3

                              	 	
                                22036738787130414

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1993
      Ford F-350

                              	 	
                                2FTHF36M7PCA88299

                              	 	
                                33HYR3

                              	 	
                                22036938830121316

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                2000
      Ford F-350

                              	 	
                                1FTNW20F1YEB23468

                              	 	
                                3SYN34

                              	 	
                                02510036495154038

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1982
      Fontaine

                              	 	
                                1A1847296C1535898

                              	 	
                                W54041

                              	 	
                                18420239260134040

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1981
      Loadcraft

                              	 	
                                11852

                              	 	
                                W14577

                              	 	
                                04200038924140502

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                Trailking

                              	 	
                                SHOP
      BUILT

                              	 	
                                23YVZP

                              	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                                Trailmaster

                              	 	
                                5BEBU18221C117573

                              	 	
                                67XTGK

                              	 	
                                22037337800153125

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                22’L
      Utility Trailer

                              	 	
                                TR190442

                              	 	
                                30WTLZ

                              	 	
                                05745037767085839

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                2006
      Travel Trailer

                              	 	
                                5C1RL23216P009786

                              	 	
                                5GH319

                              	 	
                                18400039588120742

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1985
      5th
      Wheel Trailer

                              	 	
                                1TDJ28011FB061490

                              	 	
                                88460Y

                              	 	
                                18400039617104630

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1982
      Flatbed Trailer

                              	 	
                                TR198467

                              	 	
                                88461Y

                              	 	
                                18400039617104411

                              
	 
      	 	 
      	 	 
      	 	 
      
	
                                1946
      5th
      Wheel  Trailer

                              	 	
                                TR198465

                              	 	
                                88459Y

                              	 	
                                18400039617104505

                              


                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        15

        
          

        

      

      
         


      

    


    Sonterra Operating,
Inc.

     

    Schedule
I

     

    UCC Financing Statements;
Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’
Legal Names; State of Incorporation; Organizational Identification Number; Chief
Executive Office.

     

    
      
        
          	
                  Legal
      Name

                	 	
                  Sonterra
      Operating, Inc.

                
	 
      	 	 
      
	
                  State
      of Incorporation

                	 	
                  Delaware

                
	 
      	 	 
      
	
                  Organizational
      ID Number

                	 	
                  4417689

                
	 
      	 	 
      
	
                  Chief
      Executive Office

                	 	
                  523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

                
	 
      	 	 
      
	
                  Location
      of Books and Records:

                	 	
                  523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

                
	 
      	 	 
      
	
                  Location
      of Equipment, Inventory and Goods

                	 	
                  None

                
	 
      	 	 
      
	
                  Location
      of Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
      Processors (including names of such consignees, bailees,
    etc.)

                	 	
                  None

                
	 
      	 	 
      
	
                  Jurisdiction
      for UCC Filings

                	 	
                  Delaware

                


        

      

    

     

    Schedule
II

     

    Tradenames and Fictitious
Names

    (Present and Past Five
Years)

     

    None


    
      
         


      

      
        16

        
          

        

      

      
         


      

    

     

    Schedule
III

     

    U.S. Copyright
Registrations; Foreign Copyright Registrations; U.S. Copyright Applications;
Foreign Copyright Applications; Copyright Licenses

     

    None

     

    Schedule
IV

     

    U.S. Patent Registrations;
Foreign Patent Registrations; U.S. Patent Applications; Foreign Patent
Applications; Patent Licenses

     

    None

     

    Schedule
V

     

    U.S. Trademark
Registrations; Foreign Trademark Registrations; U.S. Trademark Applications;
Foreign Trademark Applications; Trademark Licenses

     

    None

     

    Schedule
VI

     

    Depository Accounts and
Other Accounts

     

    
      
        
          
            
              
                
                  
                    
                      	
                              Name
      of Account

                              Holder

                            	 	
                              Bank

                            	 	
                              Type
      of Account

                              (with
      general

                              description)

                            	 	
                              Account
      Number

                            
	
                              Sonterra
      Operating, Inc.

                            	 	
                              Sterling
      Bank

                            	 	
                              Business
      Checking

                            	 	
                              5000230884

                            


                    

                  

                

              

            

          

        

      

    

     

    Schedule
VII

     

    Commercial Tort
Claims

     

    None

     

    Schedule
VIII

     

    Interests in Real Property
and Mineral Interests

     

    None

     

    Schedule
IX

     

    Titled
Equipment


    None


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    Velocity Energy
Inc

     

    Schedule
I

     

    UCC Financing Statements;
Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’
Legal Names; State of Incorporation; Organizational Identification Number; Chief
Executive Office.

     

    
      
        	
                Legal
      Name

              	 	
                Velocity
      Energy Inc

              
	 
      	 	 
      
	
                State
      of Incorporation

              	 	
                Delaware

              
	 
      	 	 
      
	
                Organizational
      ID Number

              	 	
                4592204

              
	 
      	 	 
      
	
                Chief
      Executive Office

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Books and Records:

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Equipment, Inventory and Goods

              	 	
                None

              
	 
      	 	 
      
	
                Location
      of Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
      Processors (including names of such consignees, bailees,
    etc.)

              	 	
                None

              
	 
      	 	 
      
	
                Jurisdiction
      for UCC Filings

              	 	
                Delaware

              


      

    

     

    Schedule
II

     

    Tradenames and Fictitious
Names

    (Present and Past Five
Years)

     

    None

     

    
      
         


      

      
        18

        
          

        

      

      
         


      

    

     

    Schedule
III

     

    U.S. Copyright
Registrations; Foreign Copyright Registrations; U.S. Copyright Applications;
Foreign Copyright Applications; Copyright Licenses

     

    None

     

    Schedule
IV

     

    U.S. Patent Registrations;
Foreign Patent Registrations; U.S. Patent Applications; Foreign Patent
Applications; Patent Licenses

     

    None

     

    Schedule
V

     

    U.S. Trademark
Registrations; Foreign Trademark Registrations; U.S. Trademark Applications;
Foreign Trademark Applications; Trademark Licenses

     

    None

     

    Schedule
VI

     

    Depository Accounts and
Other Accounts

     

    None

     

    Schedule
VII

     

    Commercial Tort
Claims

     

    None

     

    Schedule
VIII

     

    Interests in Real Property
and Mineral Interests

     

    None

     

    Schedule
IX

     

    Titled
Equipment

     

    None


    
      
         


      

      
        19

        
          

        

      

      
         


      

    


    Velocity Energy Offshore
LP

     

    Schedule
I

     

    UCC Financing Statements;
Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’
Legal Names; State of Incorporation; Organizational Identification Number; Chief
Executive Office.

     

    
      
        	
                Legal
      Name

              	 	
                Velocity
      Energy Offshore LP

              
	 
      	 	 
      
	
                State
      of Incorporation

              	 	
                Delaware

              
	 
      	 	 
      
	
                Organizational
      ID Number

              	 	
                3964786

              
	 
      	 	 
      
	
                Chief
      Executive Office

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Books and Records:

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Equipment, Inventory and Goods

              	 	
                None

              
	 
      	 	 
      
	
                Location
      of Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
      Processors (including names of such consignees, bailees,
    etc.)

              	 	
                None

              
	 
      	 	 
      
	
                Jurisdiction
      for UCC Filings

              	 	
                Delaware

              


      

    

     

    Schedule
II

     

    Tradenames and Fictitious
Names

    (Present and Past Five
Years)

     

    None

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    Schedule
III

     

    U.S. Copyright
Registrations; Foreign Copyright Registrations; U.S. Copyright Applications;
Foreign Copyright Applications; Copyright Licenses

     

    None

     

    Schedule
IV

     

    U.S. Patent Registrations;
Foreign Patent Registrations; U.S. Patent Applications; Foreign Patent
Applications; Patent Licenses

     

    None

     

    Schedule
V

     

    U.S. Trademark
Registrations; Foreign Trademark Registrations; U.S. Trademark Applications;
Foreign Trademark Applications; Trademark Licenses

     

    None

     

    Schedule
VI

     

    Depository Accounts and
Other Accounts

     

    None

     

    Schedule
VII

     

    Commercial Tort
Claims

     

    None

     

    Schedule
VIII

     

    Interests in Real Property
and Mineral Interests

     

    None

     

    Schedule
IX

     

    Titled
Equipment

     

    None


    
      
         


      

      
        21

        
          

        

      

      
         


      

    


    Velocity Energy Partners
LP

     

    Schedule
I

     

    UCC Financing Statements;
Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’
Legal Names; State of Incorporation; Organizational Identification Number; Chief
Executive Office.

     

    
      
        	
                Legal
      Name

              	 	
                Velocity
      Energy Partners LP

              
	 
      	 	 
      
	
                State
      of Incorporation

              	 	
                Delaware

              
	 
      	 	 
      
	
                Organizational
      ID Number

              	 	
                3964789

              
	 
      	 	 
      
	
                Chief
      Executive Office

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Books and Records:

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Equipment, Inventory and Goods

              	 	
                None

              
	 
      	 	 
      
	
                Location
      of Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
      Processors (including names of such consignees, bailees,
    etc.)

              	 	
                None

              
	 
      	 	 
      
	
                Jurisdiction
      for UCC Filings

              	 	
                Delaware

              


      

    

     

    Schedule
II

     

    Tradenames and Fictitious
Names

    (Present and Past Five
Years)

     

    None

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    Schedule
III

     

    U.S. Copyright
Registrations; Foreign Copyright Registrations; U.S. Copyright Applications;
Foreign Copyright Applications; Copyright Licenses

     

    None

     

    Schedule
IV

     

    U.S. Patent Registrations;
Foreign Patent Registrations; U.S. Patent Applications; Foreign Patent
Applications; Patent Licenses

     

    None

     

    Schedule
V

     

    U.S. Trademark
Registrations; Foreign Trademark Registrations; U.S. Trademark Applications;
Foreign Trademark Applications; Trademark Licenses

     

    None

     

    Schedule
VI

     

    Depository Accounts and
Other Accounts

     

    None

     

    Schedule
VII

     

    Commercial Tort
Claims

     

    None

     

    Schedule
VIII

     

    Interests in Real Property
and Mineral Interests

     

    None

     

    Schedule
IX

     

    Titled
Equipment

     

    None


    
      
         


      

      
        23

        
          

        

      

      
         


      

    


    Velocity Energy Limited
LLC

     

    Schedule
I

     

    UCC Financing Statements;
Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’
Legal Names; State of Incorporation; Organizational Identification Number; Chief
Executive Office.

     

    
      
        	
                Legal
      Name

              	 	
                Velocity
      Energy  Limited LLC

              
	 
      	 	 
      
	
                State
      of Incorporation

              	 	
                Texas

              
	 
      	 	 
      
	
                Organizational
      ID Number

              	 	
                800488298

              
	 
      	 	 
      
	
                Chief
      Executive Office

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Books and Records:

              	 	
                523
      North Sam Houston Parkway East, Suite 175, Houston, TX
    77060

              
	 
      	 	 
      
	
                Location
      of Equipment, Inventory and Goods

              	 	
                None

              
	 
      	 	 
      
	
                Location
      of Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
      Processors (including names of such consignees, bailees,
    etc.)

              	 	
                None

              
	 
      	 	 
      
	
                Jurisdiction
      for UCC Filings

              	 	
                Texas

              


      

    

     

    Schedule
II

     

    Tradenames and Fictitious
Names

    (Present and Past Five
Years)

     

    None

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    Schedule
III

     

    U.S. Copyright
Registrations; Foreign Copyright Registrations; U.S. Copyright Applications;
Foreign Copyright Applications; Copyright Licenses

     

    None

     

    Schedule
IV

     

    U.S. Patent Registrations;
Foreign Patent Registrations; U.S. Patent Applications; Foreign Patent
Applications; Patent Licenses

     

    None

     

    Schedule
V

     

    U.S. Trademark
Registrations; Foreign Trademark Registrations; U.S. Trademark Applications;
Foreign Trademark Applications; Trademark Licenses

     

    None

     

    Schedule
VI

     

    Depository Accounts and
Other Accounts

     

    None

     

    Schedule
VII

     

    Commercial Tort
Claims

     

    None

     

    Schedule
VIII

     

    Interests in Real Property
and Mineral Interests

     

    None

     

    Schedule
IX

     

    Titled
Equipment

     

    None


    
      
         


      

      
        25