Document:

CAPITAL
        TEN PARTNERS, LLC

      116
        Village Boulevard

      Princeton,
        New Jersey 08540

      As
        of May
        21, 2008

      

      New
        Asia
        Partners China I Corporation

      1801-03,
        18F, One Lu Jia Zui

      68
        Yin
        Cheng Middle Rd.

      Pudong,
        Shanghai, 200120 China

      

      Re: Irrevocable
        Letter of Credit

      

      Ladies
        and Gentlemen:

      

      In
        connection with Payor’s initial public offering of securities of New
        Asia
        Partners China I Corporation
        (“Payor”) and in order to cover certain expenses related thereto, Capital TEN
        Partners, LLC (“Payee”) hereby establishes this Irrevocable Letter of Credit
        (the “Letter of Credit”) in favor of Payee. Payor acknowledges that no funds
        have been advanced by Payee to Payor as of the date hereof under this Letter
        of
        Credit.

       

      This
        Letter of Credit is for the benefit of Payor, all in accordance with the
        following terms and conditions:

       

      1. Expiration.
        This
        Letter of Credit automatically shall expire at the close of business on the
        earliest to occur of the following dates (the “Termination Date”):

       

      a. November
        30, 2008; and

       

      b. The
        date
        on which Payor consummates an initial public offering of its securities under
        the Securities Act of 1933, as amended.

       

      If
        such
        Termination Date is not a Business Day (as hereinafter defined), then this
        Letter of Credit shall expire on the next succeeding Business Day.

       

      2. Stated
        Amount.
        The
        maximum aggregate amount available under this Letter of Credit shall be $40,000,
        which amount may be reduced from time to time as provided in paragraph 3,
        and is
        hereinafter referred to as the “Stated Amount.” 

       

      3. Reductions
        in the Stated Amount.
        Upon
        the honoring of a demand for payment hereunder by Payee, the Stated Amount
        shall
        be reduced automatically by an amount equal to the amount of such demand
        for
        payment. Upon a reduction, Payee may require Payor to return this Letter
        of
        Credit and to accept in substitution hereof a substitute Letter of Credit
        for a
        Stated Amount reflecting such reduction, but otherwise identical in form
        and
        substance to this Letter of Credit.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      4. Documents
        To Be Presented.
        Funds
        under this Letter of Credit are available to Payor, against a certificate
        signed
        by Payor in the form of Schedule A hereto, appropriately completed. Multiple
        draws are permitted hereunder.

       

      5. Method
        and Notice of Presentment.
        The
        certificate referenced in paragraph 4 (a “Demand for Payment”) may be delivered
        to Payee in person, by mail, by an express delivery service, or by facsimile
        or
        email, at such number or numbers as Payee shall notify Payor from time to
        time
        in writing. A Demand for Payment shall be presented during Payee’s business
        hours on a Business Day prior to the expiration hereof at Payee’s office at 116
        Village Boulevard

       

      Princeton,
        New Jersey 08540, Attention: Elliot P. Friedman, or at such other address
        as
        Payee may notify Payor in writing from time to time. As used herein, “Business
        Day” means any day other than a Saturday, a Sunday or a day on which banks are
        authorized or required to remain closed in New York City.

       

      6. Time
        and Method for Payment.

       

      a. If
        Demand
        for Payment is made on a Business Day in conformity with the terms and
        conditions hereof, payment shall be made by Payee to Payor as promptly as
        practicable.

       

      b. Payment
        under this Letter of Credit shall be made by check or wire transfer in
        immediately available funds to Payor in accordance with the transfer
        instructions set forth in the Demand for Payment. 

       

      7. GOVERNING
        LAW.
        THIS
        LETTER OF CREDIT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
        YORK.

       

      8. Irrevocability.
        This
        Letter of Credit shall be irrevocable.

       

      9. No
        Negotiation.
        A
        Demand for Payment under this Letter of Credit shall be presented directly
        to
        Payee and shall not be negotiated to or by any third party.

       

      10. Complete
        Agreement.
        This
        Letter of Credit, including Schedule A hereto, sets forth in full the terms
        of
        our undertaking. Reference in this Letter of Credit to other documents or
        instruments is for identification purposes only and such reference shall
        not
        modify or affect the terms hereof or cause such documents or instruments
        to be
        deemed incorporated herein.

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      Payee
        hereby agrees with Payor to honor any Demand for Payment presented in compliance
        with the terms and conditions of this Letter of Credit.

      
        	 	 	 
	 	Very
                truly
                yours,
	 	 
	 	CAPITAL TEN PARTNERS, LLC
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name:

                Title:
                  

              

      

       

      

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

      SCHEDULE
        A

       

      CERTIFICATE
        FOR DRAWING

      

      Capital
        TEN Partners, LLC

      116
        Village Boulevard

      Princeton,
        New Jersey 08540

      

      
        	 	
                Re:

              	
                Irrevocable
                  Letter of Credit for the benefit of New
                  Asia Partners China I Corporation

              

      

      

      New
        Asia
        Partners China I Corporation (“Payor”)
        hereby certifies to Capital TEN Partners, LLC (“Payee”), with reference to
        Irrevocable Letter of Credit (the “Letter of Credit”; any capitalized term used
        herein and not defined shall have its respective meaning as set forth in
        the
        Letter of Credit) issued by Payee in favor of Payor that:

      

      1. Demand
        is
        hereby made under this Letter of Credit for $________ which amount
        does not exceed the Stated Amount in the Letter of Credit.

      

      2. Payment
        of this demand shall be made by check or by wire transfer in immediately
        available funds to the undersigned, attention: ___________________________,
        ABA#
        ______________, Reference:___________________.

      

      IN
        WITNESS WHEREOF, the undersigned has executed and delivered this Certificate
        as
        of the _____ day of __________, ____.

       

      
        	 	 	 
	 	NEW
                ASIA PARTNERS
                CHINA I CORPORATION
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name:

                Title:

              

      

       

      
        
          
          

        

        
          -4-THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
      NOT
      BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
      AN
      EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
      COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
      UNDER
      SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO
      RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
      BE
      PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
      ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
      CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTION 3(d) HEREOF. THE
      PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE AMOUNTS SET
      FORTH
      ON THE FACE HEREOF PURSUANT TO SECTION 3(d) HEREOF.

     

    SENIOR
      SECURED NOTE

     

    May
      22,
      2008

     

    
      	Note No.: SSN-002 	
              $1,000,000

            

    

     

    FOR
      VALUE RECEIVED, SONTERRA RESOURCES, INC. (f/k/a River Capital Group,
      Inc.), a
      Delaware corporation (the “Company”),
      hereby promises to pay to the order of The Longview Fund, L.P. or its permitted
      assigns (the “Holder”)
      the
      principal amount of One Million Dollars ($1,000,000) when due, whether upon
      maturity, acceleration, redemption or otherwise, and to pay interest
      (“Interest”)
      on the
      unpaid principal balance hereof on each Interest Payment Date (as defined in
      Section 2) and upon maturity, or earlier upon acceleration or prepayment
      pursuant to the terms hereof, at the Applicable Interest Rate (as defined in
      Section 2). Interest on this Note payable on each Interest Payment Date and
      upon
      maturity, or earlier upon acceleration or prepayment pursuant to the terms
      hereof, shall accrue from the Issuance Date (as defined in Section 2) and shall
      be computed on the basis of a 365-day year and actual days elapsed.

     

    (1)  Payments
      of Principal and Interest.
      All
      payments under this Note shall be made in lawful money of the United States
      of
      America by wire transfer of immediately available funds to such account as
      the
      Holder may from time to time designate by written notice in accordance with
      the
      provisions of this Note. Interest on the Principal shall be paid quarterly
      in
      arrears on each Interest Payment Date (as defined in Section 2). The Company
      has
      no right, but under certain circumstances has an obligation, to make payments
      of
      Principal of this Note prior to the Maturity Date (as defined in Section 2),
      except as set forth in Section 3 hereof. Whenever any amount expressed to be
      due
      by the terms of this Note is due on any day that is not a Business Day (as
      defined in Section 2), the same shall instead be due on the next succeeding
      day
      that is a Business Day. This Note and all Other Notes (as defined in Section
      2)
      issued by the Company pursuant to the Securities Exchange Agreement (as defined
      in Section 2) on the Exchange Closing Date and any Additional Closing Dates,
      and
      all notes issued in exchange or substitution therefor or replacement or addition
      thereof are collectively referred to in this Note as the “Notes.”
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2)  Certain
      Defined Terms.
      Each
      capitalized term used in this Note, and not otherwise defined, shall have the
      meaning ascribed thereto in the Securities Exchange and Additional Note Purchase
      Agreement, dated as of August 3, 2007, pursuant to which this Note was
      originally issued (as amended by the February 2008 Amendment Agreement, dated
      as
      of February 14, 2008, and as may be further amended, modified, restated or
      supplemented and in effect from time to time, the “Securities
      Exchange Agreement”).
      For
      purposes of this Note, the following terms shall have the following
      meanings:

     

    (a)  “3-Month
      LIBOR Rate”
means
      the London Interbank Offered Rate of LIBOR with respect to a three-month period
      for deposits of United States Dollars as reported by Bloomberg Financial Markets
      (or any successor thereto, “Bloomberg”)
      at
      approximately 10:00 a.m. (New York time) through its “LIBOR Rates” function
      (accessed by typing “LR” [GO] on a Bloomberg terminal, and looking at the row
      entitled “3 MONTH” and under the column entitled “DOLLAR LIBOR”) (or such other
      page as may replace that page on that service, or such other service as may
      be
      selected jointly by the Company and the holders of the Notes). If such rate
      appears on the Bloomberg LIBOR Rates page on any date of determination of the
      3-Month LIBOR Rate (a “LIBOR
      Determination Date”),
      the
      3-Month LIBOR Rate for such date of determination will be such rate. If on
      any
      LIBOR Determination Date such rate does not appear on the Bloomberg LIBOR Rates
      page, the Company and the holders of Notes representing at least two-thirds
      (2/3) of the aggregate principal amount of the Notes then outstanding will
      jointly request each of four major reference banks in the London interbank
      market, as selected jointly by the Company and such holders to provide the
      Company with its offered quotation for United States dollar deposits for the
      upcoming three-month period, to prime banks in the London interbank market
      at
      approximately 4:00 p.m., London time on any such LIBOR Determination Date and
      in
      a principal amount that is representative for a single transaction in United
      States Dollars in such market at such time. If at least two reference banks
      provide the Company with offered quotations, 3-Month LIBOR Rate on such LIBOR
      Determination Date will be the arithmetic mean of all such quotations. If on
      such LIBOR Determination Date fewer than two of the reference banks provide
      the
      Company with offered quotations, 3-Month LIBOR Rate on such LIBOR Determination
      Date will be the arithmetic mean of the offered per annum rates that three
      major
      banks in New York City selected jointly by the Company and the holders of Notes
      representing at least two-thirds (2/3) of the aggregate principal amount of
      the
      Notes then outstanding quote at approximately 11:00 A.M. in New York City on
      such LIBOR Determination Date for three-month United States dollar loans to
      leading European banks, in a principal amount that is representative for a
      single transaction in United States dollars in such market at such time. If
      these New York City quotes are not available, then the 3-Month LIBOR Rate
      determined on such LIBOR Determination Date will continue to be 3-Month LIBOR
      Rate as then currently in effect on such LIBOR Determination Date.

     

    (b)  “Applicable
      Interest Rate”
means
      the Interest Rate, or, for so long as an Event of Default shall have occurred
      and be continuing, the Default Rate. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c)  “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      the city of New York are authorized or required by law to remain
      closed.

     

    (d)  “Cash
      and Cash Equivalents”
means
      (I) cash, (II) certificates of deposit or time deposits, having in each case
      a
      tenor of not more than six (6) months, issued by any United States commercial
      bank or any branch or agency of a non-United States bank licensed to conduct
      business in the United States having combined capital and surplus of not less
      than $250,000,000, and (III) money market funds, provided that substantially
      all
      of the assets of such funds consist of securities of the type described in
      clauses (I) or (II) immediately above, all as determined in accordance with
      GAAP
      applied on a consistent basis.

     

    (e)  “Change
      of Control”
means
      (i) the consolidation, merger or other business combination of the Company
      with
      or into another Person (other than (A) a consolidation, merger or other business
      combination in which holders of the Company’s voting power immediately prior to
      the transaction continue after the transaction to hold, directly or indirectly,
      a majority of the combined voting power of the surviving entity or entities
      entitled to vote generally for the election of a majority of the members of
      the
      board of directors (or their equivalent if other than a corporation) of such
      entity or entities, or (B) pursuant to a migratory merger effected solely for
      the purpose of changing the jurisdiction of incorporation of the Company),
      (ii)
      the sale or transfer of all or substantially all of the Company’s assets
      (including, for the avoidance of doubt, the sale of all or substantially all
      of
      the assets of the Included Subsidiaries in the aggregate); or (iii) the
      consummation of a purchase, tender or exchange offer made to and accepted by
      the
      holders of more than the 50% of the outstanding RCGI Common Shares, provided
      that such shares include more than 50% of the outstanding RCGI Common Shares
      held by Persons other than the Holder and its Related Persons.

     

    (f)  “Collateral
      Agent”
shall
      have the meaning ascribed to such term in the Security Agreement.

     

    (g)  “Default
      Rate”
means
      the per annum interest rate equal to the sum of (i) the Interest Rate plus
      (ii)
      two percent (2.0%) (i.e., 200 basis points). 

     

    (h)  “Dollars”
or
      “$”
means
      United States Dollars.

     

    (i)  “Excluded
      Taxes”
means,
      with respect to the Holder, or any other recipient of payment to be made by
      or
      on account of any obligations of the Company or any of the Subsidiaries under
      the Notes, the Securities Exchange Agreement or under any other Transaction
      Document, income or franchise taxes imposed on (or measured by) such recipient’s
      net income by the United States of America or such other jurisdiction under
      the
      laws of which such recipient is organized or its principal offices are
      located.

     

     

    (j)  “Financial
      Covenant Test Failure”
      means
      that, as of any date of determination, (A) the Revenue from the sale of
      hydrocarbons and the provision of related services for the three-month period
      ending on such date is less than the Required Revenue as of such date, (B)
      the
      Total Proved Reserves as of such date are less than the Required Total Proved
      Reserves as of such date, or (C) the PRV Ratio as of such date is less than
      the
      Required PRV Ratio as of such date.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (k)  “Financial
      Covenant Test Failure Amount”
means
      that, in the event that there is a Financial Covenant Test Failure, as of the
      date of any determination, an amount equal to the sum of:

     

    (i) the
      product of (A) the result of (I) one (1) minus (II) the quotient of the Revenue
      for the three-month period ended on such date, divided by the Required Revenue
      for the three-month period ended on such date, multiplied by (B) the aggregate
      outstanding principal amount of all Notes then outstanding; plus

     

    (ii) the
      product of (A) the result of (I) one (1) minus (II) the quotient of the PRV
      Ratio as of such date, divided by the Required PRV Ratio as of such date,
      multiplied by (B) the aggregate outstanding principal amount of all Notes then
      outstanding; plus

     

    (iii) the
      product of (A) the result of (I) one (1) minus (II) the quotient of the Total
      Proved Reserves as of such date, divided by the Required Total Proved Reserves
      as of such date, multiplied by (B) the aggregate outstanding principal amount
      of
      all Notes then outstanding;

     

    provided,
      however,
      that
      solely for purposes of determining the Financial Covenant Test Failure Amount
      as
      of a determination date from and including March 31, 2008 through and including
      December 31, 2008, (X) the Required Revenue as of such date shall be deemed
      to
      be $50,000, (Y) the Required Total Proved Reserves as of such date shall be
      deemed to be 0.70 BCFE, and (Z) the Required PRV Ratio as of such date shall
      be
      deemed to be 0.75; and, provided, further, that, if any of the products
      calculated pursuant to clauses (i), (ii) and (iii) of this definition is less
      than zero (0), such product shall, for purposes of determining the Financial
      Covenant Test Failure Amount, be deemed to be zero (0).

     

    (l)  “Governmental
      Authority”
means
      the government of the United States of America or any other nation, or any
      political subdivision thereof, whether state, provincial 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 the
      Company, or any of their respective properties, assets or
      undertakings.

     

    (m)  “Indemnified
      Taxes”
means
      Taxes other than Excluded Taxes.

     

    (n)  “Interest
      Amount”
means
      as of any date, with respect to any Principal, all accrued and unpaid Interest
      (including any Interest at the Default Rate) on such Principal through and
      including such date.

     

    (o)  “Interest
      Payment Date”
means
      the first Business Day of each calendar quarter, beginning with the calendar
      quarter that commences on July 1, 2008, through and including the last calendar
      quarter that commences prior to the Maturity Date.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (p)  “Interest
      Rate”
shall
      initially mean the per annum interest rate equal to the sum of (a) the 3-Month
      LIBOR Rate in effect on the Issuance Date and (b) eight and one quarter of
      one
      percent (8.25%) (i.e., 825 basis points). Thereafter, the “Interest
      Rate”
shall
      adjust as of the first Business Day of each calendar quarter thereafter (or,
      if
      not a London Banking Day, then on the First London Banking Day thereafter)
      to
      equal the per annum interest rate equal to the sum of (x) the 3-Month LIBOR
      Rate
      in effect on such date and (y) eight and one quarter of one percent (8.25%)
      (i.e., 825 basis points). 

     

    (q)  “Issuance
      Date”
means
      the original date of issuance of this Note pursuant to the Securities Exchange
      Agreement, regardless of any exchange or replacement hereof.

     

    (r)  “London
      Banking Day”
means
      a
      day on which dealings in U.S. dollar deposits are transacted in the London
      interbank market.

     

    (s)  “Maturity
      Date”
means
      August 31, 2010, unless such date is not a Business Day, in which case “Maturity
      Date” shall mean the first Business Day following August 31, 2010.

     

    (t)  “Original
      Principal Amount”
means
      One Million Dollars ($1,000,000).

     

    (u)  “Other
      Notes”
means
      all of the senior secured notes, other than this Note, that have been issued
      by
      the Company pursuant to the Securities Exchange Agreement and all notes issued
      in exchange or substitution therefor, addition thereto or replacement
      thereof.

     

    (v)  “PDNP”
as
      of
      any date of determination, means the total proved developed
      non-producing reserves
      of the Company and the Included Subsidiaries, determined as of such date of
      determination in accordance with SEC guidelines based on an independent reserve
      report prepared in good faith by the Petroleum Engineer in accordance with
      the
      Petroleum Engineer Report Guidelines attached as Exhibit
      A
      hereto
      (an “Independent
      Reserve Report”);
      provided, however, that PDNP shall mean zero unless (A) it is based upon an
      Independent Reserve Report (or an update thereof prepared (but not certified)
      by
      the Petroleum Engineer, which update includes all material adjustments to the
      amounts set forth in the most recent Independent Reserve Report to reflect
      the
      Company’s and the Included Subsidiaries’ oil and gas drilling, exploration,
      development and production since the date of such Independent Reserve Report
      (a
“Reserve
      Update”))
      that
      was current as of a date within 92 days of such date of determination, (B)
      the
      Company has publicly disclosed the PDNP in a Periodic Report as of a date within
      274 days of such date of determination (based on an Independent Reserve Report
      that was current as of such date of determination), (C) the PDNP is based upon
      the same Independent Reserve Report or Reserve Update on which the PDP and
      PUD
      are based as of such date of determination, and (D) if the PDNP is not based
      upon an Independent Reserve Report (or a Reserve Update) that was current as
      of
      such date of determination, the Company reasonably believes, based upon its
      own
      analysis conducted in good faith and reflecting the Company’s and the Included
      Subsidiaries’ oil and gas drilling, exploration, development and production
      since the date of the Independent Reserve Report (or Reserve Update) on which
      the PDNP is based (the “Recent
      Production”)
      (and
      has certified to the Holder in the applicable Officer’s Certificate to the
      Holder that it so reasonably believes), that the PDP is not less than that
      disclosed in the Independent Reserve Report (or Reserve Update) on which the
      PDNP is based.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (w)  “PDP”
means
      the total proved developed producing reserves of the Company and the Included
      Subsidiaries, determined in accordance with SEC guidelines based on an
      Independent Reserve Report; provided, however, that PDP shall mean zero unless
      (A) it is based upon an Independent Reserve Report (or a Reserve Update) that
      was current as of a date within 92 days of such date of determination, (B)
      the
      Company has publicly disclosed the PDNP in a Periodic Report as of a date within
      274 days of such date of determination (based on an Independent Reserve Report
      that was current as of such date of determination), (C) the PDP is based upon
      the same Independent Reserve Report or Reserve Update on which the PDNP and
      PUD
      are based as of such date of determination, and (D) if the PDP is not based
      upon
      an Independent Reserve Report (or a Reserve Update) that was current as of
      such
      date of determination, the Company reasonably believes, based upon its own
      analysis conducted in good faith and reflecting the Recent Production (and
      has
      certified to the Holder in the applicable Officer’s Certificate that it so
      reasonably believes), that the PDP is not less than that disclosed in the
      Independent Reserve Report (or Reserve Update) on which the PDP is
      based.

     

    (x)  “Periodic
      Report”
means
      a
      quarterly report on Form 10-Q or 10-QSB, or an annual report on Form 10-K or
      10-KSB under the 1934 Act.

     

    (y)  “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization or a government or any
      department or agency thereof or any other legal entity.

     

    (z)  “Petroleum
      Engineer”
means
      a
      petroleum engineer selected and engaged by the Company and approved by the
      holders of Notes representing at least two-thirds (2/3) of the aggregate
      principal amount of the Notes then outstanding.

     

    (aa)  “Prepayment
      Notice”
means
      a
      written notice from the Company to Holder indicating the Company’s commitment to
      prepay a specified amount of Principal, together with the applicable Interest
      Amount and Prepayment Premium with respect thereto on the applicable Prepayment
      Date.

     

    (bb)  “Prepayment
      Premium”
means,
      with respect to any prepayment of Principal, (1) at any time during the period
      beginning on the Exchange Closing Date and ending on and including the day
      immediately preceding the first anniversary of the Exchange Closing Date, 3%
      of
      the amount of Principal so prepaid or required to be prepaid, (2) at any time
      during the period beginning on and including the first anniversary of the
      Exchange Closing Date and ending on and including the day immediately preceding
      the second anniversary of the Exchange Closing Date, 2% of the amount of
      Principal so prepaid or required to be prepaid, (3) at any time during the
      period beginning on and including the second anniversary of the Exchange Closing
      Date and ending on and including the day immediately preceding the Maturity
      Date, 1% of the amount of Principal so prepaid or required to be prepaid;
      provided, that (i) in respect of any prepayment of Principal occurring on or
      after the Company’s public announcement of a pending, proposed or intended
      Change of Control, but before the abandonment or termination thereof and public
      announcement of such abandonment or termination, or (ii) in respect of any
      prepayment of Principal pursuant to Section 4(b) occurring as a result of an
      Event of Default set forth in clause (i), (ii), (iii), (iv), (vii), (viii),
      (ix), (x), (xi), (xii), (xiii), (xiv) or (xv) of Section 4(a), “Prepayment
      Premium”
shall
      mean an amount equal to twenty percent (20%) of the amount of Principal so
      prepaid or required to be prepaid.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (cc)  “Principal”
means
      the outstanding principal amount of this Note as of any date. 

     

    (dd)  “Pro
      Rata Financial Covenant Test Failure Amount”
means,
      as of the date of any determination, an amount equal to the sum of (i) the
      product of (A) a fraction, of which the numerator is the outstanding Principal
      as of such date, and of which the denominator is the aggregate outstanding
      principal amount of all Notes as of such date, multiplied by (B) the Financial
      Covenant Test Failure Amount, and (ii) the Interest Amount with respect to
      such
      Principal as of the date such amount is paid to the Holder.

     

    (ee)  “PRV
      Ratio”
means,
      as of any date of determination, the quotient of:

     

    (I)
      the
      result of:

     

    (i)
      (A)
      the product of the aggregate actual PDP and PDNP mcfe of the Company’s and the
      Included Subsidiaries’ oil and gas properties and interests in which the holders
      of the Notes have a valid, first priority, perfected security interest as of
      such date of determination, multiplied by (B) the relevant hub spot price as
      of
      such date of determination multiplied by (C) 40%; plus

     

    (ii)
      the
      product of (A) the actual PUD mcfe of such properties multiplied by (B) relevant
      hub spot price multiplied by (C) 15%; plus

     

    (iii)
      the
      product of (A) the fair market value as of such date of determination of the
      pipeline systems and separation or tank farm facilities with respect to such
      properties that are owned by the Company or the Included Subsidiaries and in
      which the holders of the Notes have a valid, first priority, perfected security
      interest, as determined in good faith by a Qualified Appraiser, multiplied
      by
      (B) (1) on or prior to the one year anniversary of the Exchange Closing Date,
      40% or (2) after the one year anniversary of the Exchange Closing Date but
      on or
      prior to the two year anniversary of the Exchange Closing Date, 20% and (3)
      thereafter, 0%; plus

     

    (iv)
      the
      aggregate Cash and Cash Equivalents of the Company and the Included
      Subsidiaries, the aggregate hydrocarbon receivables of the Company and the
      Included Subsidiaries, and the market value of hedges of the Company and the
      Included Subsidiaries, each as of such date of determination, as set forth
      in
      the financial statements included in the Periodic Report for the fiscal quarter
      or year ended on such date of determination; minus

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (vii)
      the
      aggregate hedge margin collateral of the Company and the Included Subsidiaries,
      the aggregate hydrocarbon payables of the Company and the Included Subsidiaries,
      and the aggregate accrued cash expenses of the Company and the Included
      Subsidiaries, each as of such date of determination, as set forth in the
      financial statements included in the Periodic Report for the fiscal quarter
      or
      year ended on such date of determination; minus

     

    (x)
      the
      aggregate Indebtedness for borrowed money of the Company and the Subsidiaries
      due within one year (excluding the Notes), as of such date of determination,
      as
      set forth in the financial statements included in the Periodic Report for the
      fiscal quarter or year ended on such date of determination ;

     

    divided
      by

     

    
      	 	
              (II)
                

            	
              the
                aggregate outstanding principal amount of all
                Notes.

            

    

     

    (ff)  “PUD”
means
      the total proved undeveloped reserves of the Company and the Included
      Subsidiaries, determined in accordance with SEC guidelines based on an
      Independent Reserve Report; provided, however, that PUD shall mean zero unless
      (A) it is based upon an Independent Reserve Report (or a Reserve Update) that
      was current as of a date within 92 days of such date of determination, (B)
      the
      Company has publicly disclosed the PDNP in a Periodic Report as of a date within
      274 days of such date of determination (based on an Independent Reserve Report
      that was current as of such date of determination), (C) the PUD is based upon
      the same Independent Reserve Report or Reserve Update on which the PDNP and
      PDP
      are based as of such date of determination, and (D) if the PDNP is not based
      upon an Independent Reserve Report (or a Reserve Update) that was current as
      of
      such date of determination, the Company reasonably believes, based upon its
      own
      analysis conducted in good faith and reflecting the Recent Production (and
      has
      certified in the applicable Officer’s Certificate that it so reasonably
      believes), that the PUD is not less than that disclosed in the Independent
      Reserve Report (or Reserve Update) on which the PUD is based.

     

    (gg)  “Qualified
      Appraiser”
means
      a
      qualified, independent appraiser selected and engaged by the Company and
      approved by holders of Notes representing at least two-thirds (2/3) of the
      aggregate principal amount of the Notes then outstanding.

     

    (hh)  “Required
      PRV Ratio”
means,
      with respect to any date set forth below, the ratio set forth below opposite
      such date:

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              Date

            	
              Ratio

            
	 	 
	
              Exchange
                Closing Date (if prior to September 30, 2007)

            	
              1.00

            
	 	 
	
              September
                30, 2007

            	
              1.00

            
	 	 
	
              December
                31, 2007

            	
              1.25

            
	 	 
	
              March
                31, 2008

            	
              1.50

            
	 	 
	
              June
                30, 2008 and 

              the
                last day of each fiscal quarter thereafter

            	
              1.75

            

    

     

    (ii)  “Required
      Revenue”
means,
      with respect to any fiscal quarter (i) ending on or after September 30, 2007
      and
      prior to or on June 30, 2008, $300,000 and (ii) ending after June 30, 2008,
      $500,000.

     

    (jj)  “Required
      Total Proved Reserves”
means,
      with respect to any date set forth below, the amount set forth below opposite
      such date:

     

    
      	
              Date

            	
              Total
                Proved Reserves

            
	 	 
	
              Exchange
                Closing Date (if prior to September 30, 2007)

            	
              2.0
                BCFE

            
	 	 
	
              September
                30, 2007

            	
              2.0
                BCFE

            
	 	 
	
              December
                31, 2007

            	
              4.0
                BCFE

            
	 	 
	
              March
                31, 2008

            	
              5.0
                BCFE

            
	 	 
	
              June
                30, 2008 and the last day

              of
                each fiscal quarter thereafter

            	
              7.0
                BCFE

            

    

     

    (kk)  “Revenue”
means
      the consolidated revenues of the Company and the Included Subsidiaries
      determined in accordance with GAAP, consistently applied; provided, however,
      that revenues of an Included Subsidiary that is not a wholly-owned Subsidiary
      shall only be recognized in the percentage amount of the Company or its wholly
      owned Subsidiaries’ percentage ownership of the Capital Stock of such Included
      Subsidiary; provided, however, that in determining Revenue for any measurement
      period commencing prior to the Exchange Closing and ending after the Exchange
      Closing, Revenue shall include the revenues of Sonterra, determined in
      accordance with GAAP, consistently applied, from the first day of such
      measurement period through (but not including) the Exchange Closing
      Date.

     

    (ll)  “SEC”
means
      the U.S. Securities and Exchange Commission, or any successor
      thereto.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (mm)  “Total
      Proved Reserves”
means,
      as of any date of determination, the sum of the PUD, the PDNP and the PDP of
      the
      oil and gas properties and interests of the Company and the Included
      Subsidiaries in which the holder of the Notes have a valid, first priority,
      perfected security interest; provided, however, there shall be excluded, in
      making such calculation, such portion, if any, of the PUD in excess of the
      portion that would result in the PUD constituting 40% of such sum.

     

    (nn)  “U.S.”
means
      the United States of America.

     

    (3)  Principal
      Payments.
      

     

    (a)  Optional
      Principal Prepayments.

     

    (i)  General.
      The
      Company shall have the right at any time not less than ten (10) Business
      Days following
      the receipt by Holder of a Prepayment Notice from the Company, to voluntarily
      prepay this Note (an “Optional
      Prepayment”),
      in
      whole or in part, for an amount in cash equal to the sum of (A) the Principal
      then being prepaid pursuant to this Section 3(a), (B) the Interest Amount with
      respect to such Principal as of the applicable prepayment date (the
“Optional
      Prepayment Date”)
      and
      (C) the Prepayment Premium with respect to such Principal as of the Optional
      Prepayment Date (collectively, the “Required
      Prepayment Amount”);
      provided, however, that the Company may not take such action unless it
      simultaneously takes the same action with respect to the same percentage of
      the
      outstanding principal amount of each outstanding Other Note.

     

    (ii)  Mechanics
      of Optional Prepayments.
      If the
      Company has delivered a Prepayment Notice in accordance with Section 3(a)(i),
      then the Company shall pay to the Holder the Required Prepayment Amount in
      cash
      by wire transfer of immediately available funds to an account designated by
      the
      Holder. The delivery of a Prepayment Notice by the Company to the Holder shall
      be irrevocable, and the failure of the Company to prepay the Required Prepayment
      Amount set forth therein on the applicable Optional Prepayment Date shall
      constitute an Event of Default hereunder.

     

    (iii)  Condition
      to Optional Prepayment.
      Notwithstanding anything to the contrary contained in this Section 3(a), the
      Company shall not be permitted to deliver any Prepayment Notice or to effect
      any
      Optional Prepayment at any time after any Event of Default, or any event that
      with the passage of time or the giving of notice (or both) and without being
      cured would constitute an Event of Default, has occurred and is
      continuing.

     

    (b)  Mandatory
      Prepayment Upon Financial Covenant Test Failure. 

     

    (i)  On
      the
      second Business Day following each date that the Company files or is required
      to
      file a Periodic Report (which in each case shall disclose the Company’s Revenue
      for the three-month period ending on the last day of the period covered by
      such
      Periodic Report, and the Total Proved Reserves, the PRV Ratio and any Financial
      Covenant Test Failure Amount as of the last day of the period covered by such
      Periodic Report, and details of the calculations and components thereof), the
      Company shall deliver to the Holder, by facsimile or overnight courier, a
      certificate executed by its principal financial officer (an “Officer’s
      Certificate”)
      (1)
      certifying as to the accuracy of the Periodic Report and of the Total Proved
      Reserves, the PRV Ratio and any Financial Covenant Test Failure Amount disclosed
      therein, (2) if there is no Financial Covenant Test Failure disclosed therein,
      certifying that there was no Financial Covenant Test Failure as of the last
      day
      of the period covered by such Periodic Report, (3) if there was a Financial
      Covenant Test Failure as of the last day of the period covered by such Periodic
      Report, certifying as to the Holder’s Pro Rata Financial Covenant Test Failure
      Amount as of the last day of the period covered by such Periodic Report.
      Notwithstanding anything contained herein to the contrary, no Officer’s
      Certificate delivered by the Company to any Holder shall contain any material
      non-public information regarding the Company or any of the Subsidiaries. Upon
      the occurrence of any Financial Covenant Test Failure, the Company shall
      immediately prepay, without demand or notice by the Holder, by wire transfer
      of
      immediately available funds to such account as the Holder may from time to
      time
      designate, an amount equal to the Holder’s Pro Rata Financial Covenant Test
      Failure Amount. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (ii)  In
      the
      case of a bona fide dispute as to the determination of the Revenue, PUD, PDP,
      PDNP, or PRV Ratio or the arithmetic calculation of any Financial Covenant
      Test
      Failure Amount, the Company shall pay any amount that is not disputed and shall
      transmit an explanation of the disputed determinations or arithmetic
      calculations to the Holder via facsimile within two (2) Business Days of the
      occurrence of the dispute. If the Holder and the Company are unable to agree
      upon the determination of the Revenue, PUD, PDP, PDNP, or PRV Ratio or the
      arithmetic calculation of any Financial Covenant Test Failure Amount within
      two
      (2) Business Days of such disputed determination or arithmetic calculation
      being
      transmitted to the Holder, then the Company shall promptly (and in any event
      within two (2) Business Days) submit via facsimile (A) the disputed
      determination of the PUD, PDP, PDNP, or PRV Ratio to a qualified, independent
      petroleum engineer and/or a qualified, independent appraiser (other than the
      Petroleum Engineer and the Qualified Appraiser), as applicable, agreed to by
      the
      Company and the holders of the Notes representing at least two-thirds (2/3)
      of
      the aggregate principal amounts of the Notes then outstanding as to which such
      determination is being made, or (B) the disputed arithmetic calculation of
      the
      Revenue or such Financial Covenant Test Failure Amount to an independent,
      outside certified public accountant, agreed to by the Company and the holder
      of
      the Notes representing at least two-thirds (2/3) of the aggregate principal
      amounts of the Notes then outstanding as to which such determination is being
      made. The Company shall direct the petroleum engineer, the appraiser, or the
      accountant, as the case may be, to perform the determinations or calculations,
      at the Company’s expense, and notify the Company and the Holder of the results
      no later than two (2) Business Days from the time it receives the disputed
      determinations or calculations. Such petroleum engineer’s, appraiser’s, or
      accountant’s determination or calculation, as the case may be, shall be binding
      upon all parties absent manifest error.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (c)  Mandatory
      Payment by the Company on Maturity Date.
      If any
      Principal remains outstanding on the Maturity Date, then the Holder shall
      surrender this Note, duly endorsed for cancellation to the Company, and such
      Principal shall be redeemed by the Company as of the Maturity Date by payment
      on
      the Maturity Date to the Holder, by wire transfer of immediately available
      funds, of an amount equal to 100% of such Principal.

     

    (d)  Surrender
      of Note.
      Notwithstanding anything to the contrary set forth in this Note, upon any
      prepayment of this Note in accordance with its terms, the Holder shall not
      be
      required to physically surrender this Note to the Company unless all of the
      Principal is being repaid and the related Interest Amount and all other
      obligations payable under this Note (including any applicable Prepayment
      Premium) have been paid in full. The Holder and the Company shall maintain
      records showing the Principal repaid and the date(s) of such repayments or
      shall
      use such other method, reasonably satisfactory to the Holder and the Company,
      so
      as not to require physical surrender of this Note upon each such repayment.
      In
      the event of any dispute or discrepancy, such records of the Holder establishing
      the Principal to which the Holder is entitled shall be controlling and
      determinative in the absence of manifest error. The Holder and any assignee,
      by
      acceptance of this Note, acknowledge and agree that, by reason of the provisions
      of this paragraph, following partial repayment of any portion of this Note,
      the
      Principal of this Note may be less than the principal amount stated on the
      face
      hereof.

     

    (4)  Defaults
      and Remedies.

     

    (a)  Events
      of
      Default. An “Event
      of Default”
shall
      mean any of: (i) default in payment of any Principal, Required Prepayment
      Amount, or Pro Rata Financial Covenant Test Failure Amount under this Note
      or
      any Other Note when and as due; (ii) default in payment of any Interest or
      other
      amount due on this Note or any Other Note that is not included in an amount
      described in the immediately preceding clause (i) that is not cured within
      three
      Business Days from the date such or other amount was due; (iii) failure by
      the
      Company for 10 days to comply with any other provision of this Note in all
      material respects; (iv) any default in payment of at least $100,000,
      individually or in the aggregate, under or acceleration prior to maturity of,
      or
      any event or circumstances arising such that, any person is entitled, or could,
      with the giving of notice and/or lapse of time and/or the fulfillment of any
      condition and/or the making of any determination, become entitled, to require
      repayment before its stated maturity of, or to take any step to enforce any
      security for, any mortgage, indenture or instrument under which there may be
      issued or by which there may be secured or evidenced any
      indebtedness
      for
      money borrowed of at least $100,000 by the Company or any of the Subsidiaries,
      or for money borrowed the repayment of at least $100,000 of which is guaranteed
      by the Company or any of the Subsidiaries, whether such indebtedness or
      guarantee now exists or shall be created hereafter; (v) the Company or any
      of
      the Subsidiaries pursuant to or within the meaning of any Bankruptcy Law (as
      defined below); (A) commences a voluntary case or applies for a receiving order;
      (B) consents to the entry of an order for relief against it in an involuntary
      case or consents to any involuntary application for a receiving order; (C)
      consents to the appointment of a Custodian of it or any of the Subsidiaries
      for
      all or substantially all of its property; (D) makes a general assignment for
      the
      benefit of its creditors; or (E) admits in writing that it is generally unable
      to pay its debts as the same become due; (vi) an involuntary case or other
      proceeding is commenced directly against the Company or any of the Subsidiaries
      seeking liquidation, reorganization or other relief with respect to it or its
      Indebtedness under any Bankruptcy Law now or hereafter in effect or seeking
      the
      appointment of a trustee, receiver, liquidator, custodian or other similar
      official of it or any substantial part of its property, and such involuntary
      case or other Bankruptcy Law proceeding remains undismissed and unstayed for
      a
      period of 45 days, or an order of relief is entered against the Company as
      debtor under the Bankruptcy Laws as are now or hereafter in effect;
      (vii) the Company or any of the Subsidiaries breaches any covenant or other
      term or condition of the Security Documents; (viii) the Company or any of the
      Subsidiaries breaches any covenant or other term or condition of the Securities
      Exchange Agreement, the Warrants, this Note or any other Transaction Document,
      except, in the case of a breach of a covenant or other term that is curable,
      only if such breach continues for a period of at least 20 days; (ix) the Company
      breaches, or otherwise does not comply with, Section 4(u), or any of the
      provisions of Section 5, of
      the
      Securities Exchange Agreement; (x) one or more judgments, non-interlocutory
      orders or decrees shall be entered by a U.S. state or federal or a foreign
      court
      or administrative agency of competent jurisdiction against the Company or any
      of
      the Subsidiaries involving, in the aggregate, a liability (to the extent not
      covered by independent third-party insurance) as to any single or related series
      of transactions, incidents or conditions, of $100,000 or more, and the same
      shall remain unsatisfied, unvacated, unbonded or unstayed pending appeal for
      a
      period of 30 days after the entry thereof; (xi) there shall occur a Change
      of
      Control; (xii) any representation, warranty, certification or statement made
      by
      the Company or any of the Subsidiaries in the Securities Exchange Agreement,
      the
      Registration Rights Agreement, the Warrants, this Note, the Security Documents
      or any other Transaction Document or in any certificate, financial statement
      or
      other document delivered pursuant to any such Transaction Document is incorrect
      in any material respect when made (or deemed made); (xiii) any Lien created
      by
      any of the Security Documents shall at any time fail to constitute a valid
      and
      perfected Lien on all of the Collateral purported to be secured thereby, subject
      to no prior or equal Lien except Permitted Liens, or the Company or any of
      the
      Subsidiaries shall so assert, (xiv) the Company fails to file, or is determined
      to have failed to file, in a timely manner any Periodic Report or Current Report
      (other than a Current Report that is required solely pursuant to Item 1.01,
      1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a) or 5.02(e) of Form 8-K as in effect on
      the
      Issuance Date) required to be filed with the SEC pursuant to the 1934 Act
      (provided that any filing made within the time period permitted by Rule 12b-25
      under the 1934 Act and pursuant to a timely filed Form 12b-25 shall, for
      purposes of this clause (xiv), be deemed to be timely filed) or the Revenue,
      the
      Total Proved Reserves, the PRV Ratio or any Financial Covenant Test Failure
      Amount disclosed in any Periodic Report is not true and correct in all material
      respects; or (xv) the Company fails to deliver an Officer’s Certificate pursuant
      to Section 3(b)(i) within five (5) days after the date such Officer’s
      Certificate is required to be delivered pursuant to Section 3(b)(i), any
      Officer’s Certificate delivered to the Holder does not contain any of the
      information required to be included therein pursuant to Section 3(b)(i), or
      any
      of the information contained in any Officer’s Certificate delivered to the
      Holder is not true, correct and complete in all material respects. The term
      “Bankruptcy
      Law”
means
      Title 11, U.S. Code, or any similar U.S. federal or state law or law of any
      applicable foreign government or political subdivision thereof for the relief
      of
      debtors. The term “Custodian”
means
      any receiver, trustee, assignee, liquidator or similar official under any
      Bankruptcy Law. Within two Business Days after the occurrence of any Event
      of
      Default, the Company shall deliver written notice thereof to the
      Holder.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (b)  Remedies.
      If an
      Event of Default occurs and is continuing, the Holder may declare all or any
      portion of this Note, including any or all amounts due hereunder, to be due
      and
      payable immediately, except that in the case of an Event of Default arising
      from
      events described in clauses (v) and (vi) of Section 4(a) above, all amounts
      due
      hereunder shall immediately become due and payable without further action or
      notice. In addition to any remedy the Holder may have under this Note, the
      Security Documents and the other Transaction Documents, such unpaid amounts
      shall bear interest at the Default Rate, and any payment of Principal prior
      to
      the scheduled maturity thereof as a result of acceleration under this Section
      4(b) shall be accompanied by the Prepayment Premium in respect thereof. Nothing
      in this Section 4 shall limit any other rights the Holder may have under this
      Note, the Security Documents or the other Transaction Documents.

     

    (5)  Vote
      to Change the Terms of the Notes.
      The
      written consent of the Company and the Holder shall be required in order to
      affect any amendment, waiver or other modification of this Note.

     

    (6)  Lost
      or Stolen Notes.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of an indemnification undertaking by the Holder to the
      Company in customary form and reasonably satisfactory to the Company and, in
      the
      case of mutilation, upon surrender and cancellation of this Note, the Company
      shall execute and deliver a new Note of like tenor and date.

     

    (7)  Remedies,
      Characterizations, Other Obligations, Breaches and Injunctive
      Relief.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under the Securities Exchange Agreement, the Security
      Documents and the other Transaction Documents, at law or in equity (including
      a
      decree of specific performance and/or other injunctive relief), and no remedy
      contained herein shall be deemed a waiver of compliance with the provisions
      giving rise to such remedy, and nothing herein shall limit the Holder’s right to
      pursue actual damages for any failure by the Company to comply with the terms
      of
      this Note. The Company covenants to the Holder that there shall be no
      characterization concerning this instrument other than as expressly provided
      herein. Amounts set forth or provided for herein with respect to payments and
      the like (and the computation thereof) shall be the amounts to be received
      by
      the Holder and shall not, except as expressly provided herein, be subject to
      any
      other obligation of the Company (or the performance thereof). The Company
      acknowledges that a breach by it of its obligations hereunder will cause
      irreparable harm to the Holder and that the remedy at law for any such breach
      may be inadequate. The Company therefore agrees that, in the event of any such
      breach or threatened breach, the Holder shall be entitled, in addition to all
      other available remedies, to an injunction restraining any breach, without
      the
      necessity of showing economic loss and without any bond or other security being
      required.

     

    (8)  Specific
      Shall Not Limit General; Construction.
      No
      specific provision contained in this Note shall limit or modify any more general
      provision contained herein. This Note shall be deemed to be jointly drafted
      by
      the Company and the Buyers pursuant to the Securities Exchange Agreement and
      shall not be construed against any person as the drafter hereof.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (9)  Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude other or
      further exercise thereof or of any other right, power or privilege.

     

    (10)  Notice.
      Whenever notice is required to be given under this Note, unless otherwise
      provided herein, such notice shall be given in accordance with Section
      9(f) of
      the
      Securities Exchange Agreement.

     

    (11)  Transfer
      of this Note.
      The
      Holder may assign or transfer some or all of its rights hereunder, subject
      to
      compliance with applicable Securities Laws (if applicable) and the provisions
      of
      Section 2(f) of the Securities Exchange Agreement without the consent of the
      Company. Notwithstanding anything to the contrary contained in this Section
      11,
      each such assignee or transferee, upon becoming a Holder hereunder, acknowledges
      that it is bound by the terms and conditions of Section 5.12 of the Security
      Agreement and agrees to, promptly upon the request of the Collateral Agent,
      deliver to Collateral Agent a written Joinder to the Security Agreement and
      other Security Documents.

     

    (12)  Payment
      of Collection, Enforcement and Other Costs.
      Without
      limiting the provisions of the Securities Exchange Agreement, the Security
      Documents and the other Transaction Documents, if (a) this Note is placed in
      the
      hands of an attorney for collection or enforcement or is collected or enforced
      through any legal proceeding; or (b) an attorney is retained to represent the
      Holder in any bankruptcy, reorganization, receivership of the Company or other
      proceedings affecting Company creditors’ rights and involving a claim under this
      Note, then the Company shall pay the costs incurred by the Holder for such
      collection, enforcement or action, including reasonable attorneys’ fees and
      disbursements.

     

    (13)  Cancellation.
      After
      all principal and other amounts at any time owed under this Note have been
      paid
      in full in accordance with the terms hereof, this Note shall automatically
      be
      deemed canceled, shall be surrendered to the Company for cancellation and shall
      not be reissued.

     

    (14)  Note
      Exchangeable for Different Denominations.
      Subject
      to Section 3(d), in the event of an option, mandatory or scheduled payment
      of less than all of the Principal pursuant to the terms hereof, the Company
      shall, upon the request of Holder and tender of this Note promptly cause to
      be
      issued and delivered to the Holder, a new Note of like tenor representing the
      remaining Principal that has not been so repaid. This Note is exchangeable,
      upon
      the surrender hereof by the Holder at the principal office of the Company,
      for a
      new Note or Notes containing the same terms and conditions and representing
      in
      the aggregate the Principal, and each such new Note will represent such portion
      of such Principal as is designated by the Holder at the time of such surrender.
      The date the Company initially issued this Note shall be the “Issuance Date”
hereof regardless of the number of times a new Note shall be
      issued.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (15)  Taxes.
      

     

    (a)  Payments
      Free of Taxes.
      Any and
      all payments by or on account of any obligation of the Company or any of the
      Included Subsidiaries under this Note, the Securities Exchange Agreement, the
      Security Documents or any other Transaction Document shall be made without
      any
      set-off, counterclaim or deduction and free and clear of and without deduction
      for any Indemnified Taxes; provided that if the Company or any of the Included
      Subsidiaries shall be required to deduct any Indemnified Taxes from such
      payments, then (i) the sum payable shall be increased as necessary so that
      after
      making all required deductions (including deductions applicable to additional
      sums payable under this Section 15(a)), the Holder receives an amount equal
      to
      the sum it would have received had no such deductions been made, (ii) the
      Company or the applicable Included Subsidiary shall make such deductions and
      (iii) the Company or the applicable Included Subsidiary as applicable shall
      pay
      the full amount deducted to the relevant Governmental Authority in accordance
      with applicable law.

     

    (b)  Indemnification
      by the Company.
      The
      Company shall indemnify the Holder, within ten (10) days after written demand
      therefor, for the full amount of any Indemnified Taxes paid by the Holder,
      on or
      with respect to any payment by or on account of any obligation of the Company
      or
      any of the Included Subsidiaries under the Notes, the Securities Exchange
      Agreement, the Security Documents or any of the other Transaction Documents
      (including Indemnified Taxes imposed or asserted on or attributable to amounts
      payable under this Section 15) and any penalties, interest and reasonable
      expenses arising therefrom or with respect thereto, whether or not such
      Indemnified Taxes were correctly or legally imposed or asserted by the relevant
      Governmental Authority. A certificate of the Holder as to the amount of such
      payment or liability under this Section 15 shall be delivered to the Company
      and
      shall be conclusive absent manifest error. In addition, the Company shall
      promptly pay the fees, costs and expenses incurred thereby in connection with
      the engagement of the Petroleum Engineer and the Qualified Appraiser with
      respect to the determination of the PUD, the PDNP, the PDP, the PRV Ratio,
      the
      Revenue and the Financial Covenant Test Failure Amount.

     

    (16)  Waiver
      of Notice.
      To the
      extent permitted by law, the Company hereby waives demand, notice, protest
      and
      all other demands and notices in connection with the delivery, acceptance,
      performance, default or enforcement of this Note, the Security Documents, the
      Securities Exchange Agreement and the other Transaction Documents.

     

    (17)  Governing
      Law.
      This
      Note shall be construed and enforced in accordance with, and all questions
      concerning the construction, validity, interpretation and performance of this
      Note 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 country or jurisdiction) that would cause
      the application of the laws of any jurisdiction or country other than the State
      of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of the state and federal courts sitting in the City of New York, borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof by registered or certified U.S. mail, return receipt
      requested, or by a nationally recognized overnight delivery service, to such
      party at the address for such notices to it under this Note and agrees that
      such
      service shall constitute good and sufficient service of process and notice
      thereof. Nothing contained herein shall be deemed to limit in any way any right
      to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
      WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
      ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING
      OUT
      OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (18)  Further
      Assurances.
      The
      Company shall do and perform, or cause to be done and performed, all such
      further acts and things, and shall execute and deliver all such other
      agreements, certificates, instruments and documents, as the Holder may
      reasonably request in order to carry out the intent and accomplish the purposes
      of this Note and the consummation of the transactions contemplated
      hereby.

     

    (19)  Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to the Holder hereunder
      or
      the Holder enforces or exercises its rights hereunder, and such payment or
      payments or the proceeds of such enforcement or exercise or any part thereof
      are
      subsequently invalidated, declared to be fraudulent or preferential, set aside,
      recovered from, disgorged by or are required to be refunded, repaid or otherwise
      restored to the Company, by a trustee, receiver or any other person under any
      law (including any Bankruptcy Law, U.S. state or federal law, the laws of any
      foreign government or any political subdivision thereof, common law or equitable
      cause of action), then to the extent of any such restoration the obligation
      or
      part thereof originally intended to be satisfied shall be revived and continued
      in full force and effect as if such payment had not been made or such
      enforcement or setoff had not occurred.

     

    (20)  Interpretative
      Matters.
      Unless
      the context otherwise requires, (a) all references to Sections, Schedules or
      Exhibits are to Sections, Schedules or Exhibits contained in or attached to
      this
      Note, (b) words in the singular or plural include the singular and plural and
      pronouns stated in either the masculine, the feminine or neuter gender shall
      include the masculine, feminine and neuter and (d) the use of the word
“including” in this Note shall be by way of example rather than
      limitation.

     

    (21)  Signatures.
      In the
      event that any signature to this Note or any amendment hereto is delivered
      by
      facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
      signature shall create a valid and binding obligation of the party executing
      (or
      on whose behalf such signature is executed) with the same force and effect
      as if
      such facsimile or “.pdf” signature page were an original thereof.
      Notwithstanding the foregoing, the Company shall be required to deliver an
      originally executed Note to the Holder. At the request of any party each other
      party shall promptly re-execute an original form of this Note or any amendment
      hereto and deliver the same to the other party. No party hereto shall raise
      the
      use of a facsimile machine or e-mail delivery of a “.pdf” format data file to
      deliver a signature to this Note or any amendment hereto or the fact that such
      signature was transmitted or communicated through the use of a facsimile machine
      or e-mail delivery of a “.pdf” format data file as a defense to the formation or
      enforceability of a contract and each party hereto forever waives any such
      defense.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    [
      Remainder of Page Intentionally Left Blank; Signature Page Follows
      ]

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Note to be executed on its behalf by the undersigned
      as
      of the year and date first above written.

     

     

    
      	 	 	 
	 	SONTERRA
              RESOURCES, INC.,
              a
              Delaware corporation
	 
 	 
 	 
 
	 	By:  	/s/
              Michael J. Pawelek 
	 	
              
Name:
              Michael J. Pawelek 
              Title:  
                President and Chief Executive Officer

            
	 	 

    

     

    

    
      
        
        

      

      
        18

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