Exhibit 10.3

 

BASE

AGREEMENT

 

This Base Agreement dated as of December 1, 2007 is between Rock Energy
Partners, LP, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties,
LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC.

 

ARTICLE I

 

Definitions

 

The following terms, as used in this Agreement, shall have the meanings
indicated below unless the context otherwise requires:

 

1.1.         “APO Working Interest” shall mean the Working Interest after payout
is achieved in accordance with the Payout Computation Procedures.

 

1.2.         “Agreement” shall mean this agreement, all exhibits and schedules
attached hereto and referenced herein and any and all properly executed
amendments hereto that expressly provide that they are to supplement, amend or
revise this agreement.

 

1.3.         “AMI” shall mean the area of mutual interest described in
Section 11.1.

 

1.4.         “Approved Development Operations” shall mean the operations
(i) actually funded by the Carry Obligation, and (ii) that are described in
Exhibit A as same may in the future be amended by SMP based on operational
results.  SMP may amend Exhibit A provided that SMP’s estimate of the cost of
all substituted operations does not exceed by one hundred fifteen percent (115%)
SMP’s estimate of the cost of all replaced operations.

 

1.5.         “BPO Working Interest” shall mean the Working Interest before
payout is achieved in accordance with the Payout Computation Procedures.

 

1.6.         “Carry Obligation” shall mean the obligation of REP to pay one
hundred percent (100%) of the costs and expenses attributable to one hundred
percent (100%) of the Working Interest in the Orcutt Leases and the NW Casmalia
Leases with respect to (i) Approved Development Operations pursuant to this
Agreement and the Development Agreement, and (ii) any additional operations on
the Orcutt Leases and NW Casmalia Leases after performance of the Approved
Development Operations in the event that the actual ultimate cost of the
Approved Development Operations is less than $10,220,000.

 

1.7.         “Carry Obligation Beneficiaries” shall mean all Working Interest
owners of the Orcutt Leases and NW Casmalia Leases and their respective
assignees other than REP or its assignees.

 

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

 

1.8.         “Closing” shall mean the occurrence of the events necessary to
consummate a sale by Seller to Purchaser pursuant to one or more of the
Transaction Documents.

 

1.9.         “Closing Date” shall mean the date as of which a Closing actually
takes place pursuant to one or more of the Transaction Documents.

 

1.10.       “Confidentiality Agreement” shall mean the agreement between REP and
SMP dated November 21, 2005.

 

1.11.       “Development Committee” shall mean the committee provided for in
Section 7.2.

 

1.12.       “Development Agreement” shall mean an agreement in the form of
Exhibit B attached hereto.

 

1.13.       “Direct Cost” shall have the meaning ascribed to that term by COPAS
under the applicable Operating Agreement at the time in question.

 

1.14.       “Effective Date” (i) with respect to the purchase and sale of the
Initial Orcutt Interests shall mean 7:00 a.m. Pacific Time, December 1, 2007,
(ii) with respect to the purchase and sale of the Second Orcutt Interests shall
mean 7:00 a.m. Pacific Time, December 1, 2007, and (iii) with respect to any
conveyance pursuant to the Development Agreement or Purchase Option Agreement
shall be 7:00 a.m. Pacific Time on the dates specified therein.

 

1.15.       “Excluded Properties” shall mean the following, each of which are
expressly excepted and excluded from the Purchased Property, and reserved to
each Seller:

 

(i)            All rights and choses in action, arising, occurring or existing
in favor of such Seller prior to the Effective Date or arising out of the
operation of or production from the Purchased Property prior to the Effective
Date (including, but not limited to, any and all contract rights, claims,
receivables, revenues, recoupment rights, recovery rights, accounting
adjustments, mis-payments, erroneous payments or other claims of any nature in
favor of Seller and relating and accruing to any time period prior to the
Effective Date);

 

(ii)           All corporate, partnership, financial, tax and legal (other than
copies of title) records of Seller;

 

(iii)          All contracts of insurance or indemnity as to the Purchased
Property relating to periods prior to the Effective Date;

 

(iv)          All hydrocarbon production from or attributable to the Purchased
Property with respect to all periods prior to the Effective Date, and all
proceeds attributable thereto;

 

(v)           Any refund of costs, taxes or expenses borne by Seller
attributable to

 

2

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

 

the period prior to the Effective Date;

 

(vi)          All files, geological, geophysical and seismic data, documents,
reports, analyses and records;

 

(vii)         All deposits, cash, checks, funds, accounts payable and accounts
receivable or receivables attributable to such Seller’s interests in the
Purchased Property with respect to any period of time prior to the Effective
Date;

 

(viii)        All computer or communications software or intellectual property
(including tapes, data and program documentation and all tangible manifestations
and technical information relating thereto) licensed to Seller; and

 

(ix)          The Shell Lease.

 

1.16.       “GTL” shall mean Gitte-Ten, LLC.

 

1.17.       “GTL Adjustment ORRI” shall mean a .037478% of 100% overriding
royalty interest in the Orcutt GTL Leases (other than the Shell Lease)
proportionately reduced to the Orcutt GTL Purchased Interest.

 

1.18.       “Initial Orcutt GTL Interest” shall mean (i) a 1.65893% BPO Working
Interest and a 1.49304% APO Working Interest in the Orcutt GTL Leases, excluding
the Shell Lease, and (ii) a 1.496% BPO Working Interest and a 1.346% APO Working
Interest in the Orcutt GTL Property Rights.  The parties have intentionally
excluded the Shell Lease.  The Initial Orcutt GTL Interest shall be subject to
and burdened by the GTL Adjustment ORRI.

 

1.19.       “Initial Orcutt Interests” shall mean the Initial Orcutt PEL
Interest, Initial Orcutt GTL Interest and the Initial Orcutt OPL Interest.

 

1.20.       “Initial Orcutt OPL Interest” shall mean (i) a 1.496% BPO Working
Interest and a 1.346% APO Working Interest in the Orcutt OPL Leases, and (ii) a
1.496% BPO Working Interest and a 1.346% APO Working Interest in the Orcutt OPL
Property Rights.

 

1.21.       “Initial Orcutt PEL Interest” shall mean (i) a 1.496% BPO Working
Interest and a 1.346% APO Working Interest in the Orcutt PEL Leases, and (ii) a
1.496% BPO Working Interest and a 1.346% APO Working Interest in the Orcutt PEL
Property Rights.

 

1.22.       “Lands” means the lands covered by the Leases or included in Units
with which the Leases may have been pooled or unitized.

 

1.23.       “Leases” means the NW Casmalia Leases and the Orcutt Leases.

 

1.24.       “Net Revenue Interest” shall mean the fractional interest in
hydrocarbons produced from or allocated to a Well, Unit, or Lease that a working
interest owner is entitled

 

3

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

 

to receive, after deduction of all royalties, overriding royalties, production
payments, carried interests, reversionary interests, and other burdens upon and
payments out of production that burden the interest.

 

1.25.       “NW Casmalia Leases” shall mean the oil and gas leases described in
Exhibit C attached hereto.

 

1.26.       “NW Casmalia Operating Agreement” shall mean an agreement in the
form of Exhibit D designating SMP as operator.

 

1.27.       “NW Casmalia Property” shall mean the NW Casmalia Leases and the NW
Casmalia Property Rights with respect to the NW Casmalia Leases.

 

1.28.       “NW Casmalia Property Rights” shall mean the Subject Property Rights
with respect to the NW Casmalia Lease.

 

1.29.       “NWCP” shall mean NW Casmalia Properties, LLC.

 

1.30.       “OPL” shall mean Orcutt Properties, LLC.

 

1.31.       “Operating Agreements” shall mean the Orcutt Diatomite Operating
Agreement, the Orcutt Non-Diatomite Operating Agreements and the NW Casmalia
Operating Agreement.

 

1.32.       “Orcutt Diatomite Operating Agreement” shall mean an agreement in
the form of Exhibit E designating SMP as operator of the Orcutt OPL Leases.

 

1.33.       “Orcutt GTL Leases” shall mean the oil and gas leases described in
Exhibit F attached hereto.

 

1.34.       “Orcutt GTL Property” shall mean the Orcutt GTL Leases (excluding
the Shell Lease) and the Orcutt GTL Property Rights.

 

1.35.       “Orcutt GTL Property Rights” shall mean the Subject Property Rights
with respect to the Orcutt GTL Leases.

 

1.36.       “Orcutt GTL Purchased Interest” shall mean collectively the
(i) Initial Orcutt GTL Interest and the Second Orcutt GTL Interest, and (ii) any
additional interest in the Orcutt GTL Property acquired by REP from the SMP
Parties pursuant to the Transaction Documents.

 

1.37.       “Orcutt Leases” shall mean the Orcutt GTL Leases, the Orcutt PEL
Leases and the Orcutt OPL Leases.

 

1.38.       “Orcutt Non-Diatomite Operating Agreements” shall mean agreements in
the form of Exhibit G designating PEL as operator of the Orcutt PEL Leases and
Exhibit H

 

4

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

 

designating GTL as operator of the Orcutt GTL Leases.  It is understood that PEL
and GTL may after the Closings on the Initial Orcutt Interests and the Second
Orcutt Interests (i) consolidate operations into PEL, (ii) transfer operations
to SMP, or (iii) do one of the above and the other subsequently.  REP consents
to both the consolidation of operations into PEL and/or the substitution of SMP
as operator.

 

1.39.       “Orcutt OPL Leases” shall mean the oil and gas leases described in
Exhibit I attached hereto.

 

1.40.       “Orcutt OPL Property” shall mean the Orcutt OPL Leases and the
Orcutt OPL Property Rights.

 

1.41.       “Orcutt OPL Property Rights” shall mean the Subject Property Rights
with respect to the Orcutt OPL Leases.

 

1.42.       “Orcutt PEL Leases” shall mean the oil and gas leases described in
Exhibit J attached hereto.

 

1.43.       “Orcutt PEL Property” shall mean the Orcutt PEL Leases and the
Orcutt PEL Property Rights.

 

1.44.       “Orcutt PEL Property Rights” shall mean the Subject Property Rights
with respect to the Orcutt PEL Leases.

 

1.45.       “Orcutt Property” shall mean the Orcutt GTL Property, the Orcutt PEL
Property and the Orcutt OPL Property.

 

1.46.       “Pacific Time” shall mean either Pacific Standard Time or Pacific
Daylight Savings Time depending on which time is in effect on the date in
question.

 

1.47.       “Payout Computation Procedures” shall mean the procedures set forth
in Exhibit K.

 

1.48.       “PEL” shall mean Phoenix Energy, LLC.

 

1.49.       “Permitted Encumbrance” shall mean:

 

(i)            All assignments to REP subsequent to the assignments of the
Initial Orcutt GTL Interest, Initial Orcutt OPL Interest and Initial Orcutt PEL
Interest shall be subject to and encumbered by the Sector Mortgage Indebtedness;

 

(ii)           All agreements, instruments, documents, liens, encumbrances, and
other matters, and the terms and provisions thereof, described or referred to in
Exhibit L hereto, but limited in all respects to the Purchased Property to which
each applies;

 

5

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

 

(iii)          Any materialman’s, mechanics’, repairman’s, employees’,
contractors’, operators’, or other similar liens, security interests or charges
for liquidated amounts arising in the ordinary course of business incidental to
construction, maintenance, development, production or operation of the Purchased
Property, or the production or processing of hydrocarbons therefrom, that are
not delinquent at the particular time in question or, if delinquent, are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established by Seller;

 

(iv)          Production sales contracts; division orders; contracts for sale,
purchase, exchange, refining, processing or fractionating of hydrocarbons;
compression agreements; equipment leases; surface leases; unitization and
pooling designations, declarations, orders and agreements; processing
agreements; plant agreements; pipeline, gathering, and transportation
agreements; injection, repressuring, and recycling agreements; salt water or
other disposal agreements; seismic or geophysical permits or agreements; and any
and all other agreements which are ordinary and customary in the oil and gas
exploration, development, or extraction business, or in the business of
processing of gas and gas condensate production for the extraction of products
therefrom;

 

(v)           Any liens for taxes not yet delinquent at the particular time in
question or, if delinquent, that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established by
Seller;

 

(vi)          Any liens or security interests created by law or reserved in any
Leases for royalty, bonus or rental or for compliance with the terms of any
Purchased Property only to the extent such liens or security interests are
inchoate and the amounts secured thereby are not delinquent at the particular
time in question, or if delinquent, are being contested in good faith and for
which adequate reserves have been established by Seller;

 

(vii)         Any easements, rights-of-way, servitudes, permits, licenses,
surface leases and other rights with respect to surface operations, to the
extent such matters do not interfere in any material respect with Seller’s
operation of the portion of the Purchased Property burdened thereby;

 

(viii)        All royalties, overriding royalties, net profits interests,
carried interests, reversionary interests and other burdens, to the extent that
the net cumulative effect of such burdens, as to a particular Purchased
Property, does not operate to reduce the Net Revenue Interest of REP in such
Purchased Property per each one percent (1%) of Working Interest below that set
forth in Exhibit M;

 

(ix)          Conventional rights of reassignment arising upon surrender or
abandonment of any Purchased Property;

 

(x)           Rights reserved to or vested in any governmental authority to
control or regulate any of the Wells, Units or Leases included in the Purchased
Property pursuant to applicable valid and subsisting laws and all valid,
subsisting and applicable rules, regulations

 

6

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

 

and orders of such authorities so long as the same have not been applied to
reduce the Net Revenue Interest in such Purchased Property per each one percent
(1%) of Working Interest below that set forth in Exhibit M;

 

(xi)          Preferential rights to purchase and consents (A) the operation of
which is not triggered or which are otherwise not applicable to the transactions
contemplated hereby or (B) with respect to which waivers or consents have been
obtained from the appropriate owner or holder thereof or the appropriate time
period for asserting the right has expired without an exercise of the rights, in
each case, prior to the Closing;

 

(xii)         Any other defects and irregularities affecting the Purchased
Property which individually or in the aggregate are not such as to interfere
materially with the operation, value or use of the Purchased Property, taken as
a whole or reduce the Net Revenue Interest of REP in the Purchased Property per
each one percent (1%) Working Interest below that set forth in Exhibit M; and

 

(xiii)        All matters visible and apparent on the ground or that would be
revealed by a true and correct survey.

 

1.50.       “Prior Agreements” shall mean (i) the Option Agreement dated
April 24, 2007 between REP, NWCP and SMP with respect the NW Casmalia Project,
(ii) the Letter Agreement dated July 23, 2007 between REP, NWCP and SMP
superceding the April 24, 2007 Option Agreement with respect to the NW Casmalia
Project, (iii) Letter Agreement dated April 24, 2007 between REP, SMP, GTL, PEL
and OPL pertaining to the Orcutt Project, (iv) Letter Agreement dated May 4,
2007 between REP, GTL, PEL, OPL and SMP, (v) Letter Agreement dated July 23,
2007 between REP, SMP, GTL, PEL and OPL superceding the April 24, 2007 Letter
Agreement pertaining to the Orcutt Project, (vi) Non-Binding Letter of Intent
dated September 5, 2007 between REP and SMP, (vii) Letter Agreement dated
June 10, 2006 between REP and SMP with respect to future SMP Projects,
(viii) the Letter Agreement dated July 24, 2006 between REP and SMP amending the
June 10, 2006 Letter Agreement with respect to Future SMP Projects (ix) the
Letter Agreement dated June 10, 2006 between REP and SMP with respect to NW
Casmalia, (x) the Letter Agreement dated July 24, 2006 amending the June 10,
2006 Letter Agreement with respect to NW Casmalia, and (xi) any other agreement
between the SMP Parties and REP entered into prior to the date of this
Agreement.

 

1.51.       “Purchase Option Agreement” shall mean an Agreement in the form of
Exhibit N attached hereto.

 

1.52.       “Purchased Property” shall mean collectively, (i) the Initial Orcutt
Interests and the Second Orcutt Interests, and (ii) any additional Orcutt
Property and NW Casmalia Property, acquired by REP from the SMP Parties pursuant
to the terms of the Transaction Documents.

 

1.53.       “Release Agreement” shall mean an agreement in the form of
Exhibit O.

 

7

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

 

1.54.       “REP” shall mean Rock Energy Partners, LP and authorized assignees
of Rock Energy Partners, LP that comply with Section 13.6 of this Agreement.

 

1.55.       “Second Orcutt GTL Interest” shall mean (i) a 2.03374% BPO Working
Interest and a 1.83037% APO Working Interest in the Orcutt GTL Leases, other
than the Shell Lease, and (ii) a 1.834% BPO Working Interest and a 1.6506% APO
Working Interest in the Orcutt GTL Property Rights.  The parties have
intentionally excluded the Shell Lease.  The Second Orcutt GTL Interest shall be
subject to and burdened by the GTL Adjustment ORRI.

 

1.56.       “Second Orcutt Interests” shall mean the Second Orcutt GTL Interest,
the Second Orcutt PEL Interest and the Second Orcutt OPL Interest.

 

1.57.       “Second Orcutt OPL Interest” shall mean (i) a 1.834% BPO Working
Interest and a 1.6506% APO Working Interest in the Orcutt OPL Leases, and (ii) a
1.834% BPO Working Interest and a 1.6506% APO Working Interest in the Orcutt OPL
Property Rights.

 

1.58.       “Second Orcutt PEL Interest” shall mean (i) a 1.834% BPO Working
Interest and a 1.6506% APO Working Interest in the Orcutt PEL Leases, and (ii) a
1.834% BPO Working Interest and a 1.6506% APO Working Interest in the Orcutt PEL
Property Rights.

 

1.59.       “Sector Mortgage Indebtedness” shall mean the indebtedness of Seller
to Sector Capital Corporation for advances pursuant to a Loan Agreement dated
March 23, 2007, as amended.

 

1.60.       “Seller” shall mean (i) GTL or its assignee with respect to any
Orcutt GTL Property, (ii) PEL or its assignee with respect to any Orcutt PEL
Property, (iii) OPL or its assignee with respect to any Orcutt OPL Property, and
(iv) NWCP or its assignee with respect to any NW Casmalia Property.

 

1.61.       “Shell Lease” shall mean the oil and gas lease dated October 22,
1975, the short form of which was recorded May 21, 1976 in Book 2613, Page 1562
by and between Shell Oil Company, as Lessor, and Montara Petroleum, as Lessee,
in the Official Records of Santa Barbara County, California.

 

1.62.       “SMP” shall mean Santa Maria Pacific, LLC.

 

1.63.       “SMP Parties” shall mean SMP, GTL, PEL and OPL.

 

1.64.       “Subject Property Rights” shall mean the Purchased Property rights
and interests specified in subsections (i) through (vi) below, except for the
Excluded Properties.

 

(i)            All presently existing and valid oil, gas and/or mineral
unitization, pooling, and/or communalization agreements, declarations and/or
orders including, without limitation, all Units, to the extent that they relate
to the Leases;

 

8

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

 

(ii)           The Wells;

 

(iii)          Seller’s interest in all equipment, facilities, flow lines,
pipelines, gathering systems (other than gas plant gathering systems), Well
pads, tank batteries, improvements, fixtures, inventory, spare parts, tools,
abandoned property and junk and other personal property on the Lands or directly
used in developing or operating the Leases and Wells or producing, treating,
store, compressing, processing or transporting hydrocarbons on the Lands;

 

(iv)          To the extent assignable or transferable, Seller’s interest in all
easements, rights-of-way, licenses, permits, servitudes, surface leases, surface
use agreements, and similar rights and interests to the extent applicable to or
used in operating the Leases; and

 

(v)           To the extent assignable or transferable, Seller’s interest in all
agreements, contracts and contractual rights, obligations and interests insofar
only as they cover and are attributable to the property described in subsections
(i) through (v) above.

 

1.43        “Title Opinions” shall mean (i) the opinion dated June 25, 2007
prepared by Rod C. Reynolds with respect to the Orcutt PEL Leases, and (ii) the
opinion dated December 12, 2007 prepared by Rod C. Reynolds with respect to the
Orcutt GTL Leases.

 

1.44        “Transaction Documents” shall mean this Agreement, the Development
Agreement and the Purchase Option Agreement, together with all exhibits and
schedules attached to each and referenced therein and any and all properly
executed amendments to any thereof that expressly provide that they are to
supplement, amend or revise one or more of the Transaction Documents.

 

1.45        “Units” shall mean all unitization, communitization and pooling
agreements and orders covering the Lands and/or the Leases, or any portion
thereof, and the pooled, unitized, and/or communitized areas created thereby.

 

1.46        “Wells” shall mean all oil, gas and condensate wells (whether
producing, not producing or abandoned), water source, water injection and other
injection or disposal wells and systems located on the Leases or Lands unitized
or pooled with the Leases.

 

1.47        “Working Interest” shall mean the interest in a Well, Unit, or Lease
that is burdened with the obligation to bear a fractional share of the costs and
expenses associated with the exploration, development and operation of such
Well, Unit, or Lease.

 

Any term defined in other provisions of this Agreement shall have the meanings
set out therein unless the context requires otherwise.

 

9

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

 

ARTICLE II

 

Initial Purchase And Sale

 

2.1          Property Sold and Purchased.  Seller agrees to sell and REP agrees
to purchase the Initial Orcutt Interests for the consideration hereinafter set
forth and subject to the terms and provisions herein contained.

 

2.2          Purchase Price.  The purchase price for the Initial Orcutt
Interests shall be (i) the aggregate sum of all consideration paid by REP to the
SMP Parties as of November 1, 2007, pursuant to the Prior Agreements (which is
Four Million Seven Hundred Eighty Thousand and 00/100 Dollars ($4,780,000)), and
(ii) the contractual undertakings pursuant to the Transaction Documents.

 

2.3          Closing.  The Closing of the purchase and sale of the Initial
Orcutt Interests contemplated hereby shall take place in the office of SMP (2400
Professional Parkway, Suite 205, Santa Maria, California 93455-6814) on
December 14, 2007 at 10:00 a.m. Pacific Time.

 

2.4          Delivery at Closing.  At the Closing, the following events shall
occur, and each event shall be deemed to occur simultaneously with each other
event.

 

2.4.1       Delivery by REP to Seller.

 

(a)           The duly executed Orcutt Non-Diatomite Operating Agreement (GTL
operator).

 

(b)           The duly executed Orcutt Non-Diatomite Operating Agreement (PEL
operator).

 

(c)           The duly executed Orcutt Diatomite Operating Agreement.

 

(d)           The duly executed Release Agreement.

 

2.4.2       Delivery by Seller to REP.

 

(a)           An assignment of the Initial Orcutt GTL Interest executed by GTL.

 

(b)           An assignment of the Initial Orcutt PEL Interest executed by PEL.

 

(c)           An assignment of the Initial Orcutt OPL Interest executed by OPL.

 

(d)           The duly executed Release Agreement.

 

10

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

 

(e)           A duly executed partial release of the Sector Mortgage
Indebtedness solely as it relates to the Initial Orcutt Interests.

 

ARTICLE III

 

Second Purchase And Sale

 

3.1          Property Sold and Purchased.  Seller agrees to sell and REP agrees
to purchase the Second Orcutt Interests for the consideration hereinafter set
forth and subject to the terms and provisions herein contained.

 

3.2          Purchase Price.  The purchase price for the Second Orcutt Interests
shall be (i) the sum of One Million and 00/100 Dollars ($1,000,000.00), and
(ii) the contractual undertakings pursuant to this Agreement.

 

3.3          Closing.  The Closing of the purchase and sale of the Second Orcutt
Interests contemplated hereby shall take place in the office of SMP on
December 14, 2007 at 10:00 a.m. Pacific Time.

 

3.4          Delivery at Closing.

 

3.4.1       Delivery by REP to Seller.

 

(a)           REP shall deliver by transfer of immediately available funds to an
account designated by Seller One Million and 00/100 Dollars.

 

(b)           The duly executed Development Agreement.

 

(c)         The duly executed Purchase Option Agreement.

 

3.4.2       Delivery by Seller to REP.

 

(a)           An assignment of the Second Orcutt GTL Interest duly executed by
GTL.

 

(b)           An assignment of the Second Orcutt PEL Interest duly executed by
PEL.

 

(c)           An assignment of the Second Orcutt OPL Interest duly executed by
OPL.

 

(d)           The duly executed Development Agreement.

 

11

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

 

(e)           The duly executed Purchase Option Agreement.

 

3.5          Effect of Failure to Timely Close.  In the event that REP fails to
deliver the cash purchase price as provided in Section 3.4 on December 14, 2007,
all rights to acquire (i) the Second Orcutt Interests, (ii) any interest in the
Orcutt Property (other than as previously assigned), and (iii) any interest in
the NW Casmalia Property shall automatically terminate.

 

3.6          Application of Funds.  The $1,000,000 payment delivered to Seller
at Closing shall be dedicated to Direct Costs of Approved Development Operations
with respect to the Orcutt Leases in the manner set forth in Section 7.3.

 

ARTICLE IV

 

Representations And Warranties Applicable

To All Purchases And Sales

 

4.1          Reciprocal Representations and Warranties.  Seller and REP each
represent and warrant that the following statements are true and accurate as to
itself as of the (i) execution date of the Transaction Documents, and (ii) on
each Closing Date that the following statements are true and accurate as to
itself.

 

4.1.1       Authority. It is duly organized and in good standing under the laws
of the state of formation, is duly qualified to carry on its business in
California and has all the requisite power and authority to enter into and
perform the Transaction Documents.

 

4.1.2       Requisite Approvals. It has taken all necessary actions to fully
authorize the execution and delivery of the Transaction Documents.  It will have
taken prior to any Closing all necessary actions to fully authorize execution
and delivery of any transaction documents related to the Transaction Documents;
and (ii) the consummation of the transactions contemplated by the Transaction
Documents associated with such Closing.

 

4.1.3       Validity of Obligation. This Agreement and all other Transaction
Documents it is to execute and deliver under this Agreement on or before each
Closing Date (i) have been duly executed by its authorized representatives;
(ii) constitute its valid and legally binding obligations; and (iii) are
enforceable against it in accordance with their respective terms except as
enforceability may be limited by application of bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally.

 

4.1.4       No Violation of Contractual Restrictions. Its execution, delivery
and performance of the Transaction Documents and all other transaction documents
it is to execute on or before each Closing Date do not conflict with or violate
any agreement or instrument to which it is a party or by which it is bound. 
Notwithstanding the foregoing, at least one and perhaps more of the leases
contain a provision requiring consent to assignment.  Seller will endeavor in
good faith to obtain any required consent.  No representation is made as to

 

12

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

 

whether such consent will be obtained.

 

4.1.5       No Violation of Other Legal Restrictions.  Its execution, delivery
and performance of the Transaction Documents and all other transaction documents
it is to execute on or before each Closing Date do not violate any law, rule,
regulation, ordinance, judgment, decree or order to which it or the Purchased
Property is subject.

 

4.1.6       Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, or to its actual knowledge being contemplated by or,
threatened against it.

 

4.1.7       Brokers Fees. It has not incurred any obligation for brokers,
finders or similar fees for which the other party would be liable.

 

4.1.8       No Restraining Litigation. To its knowledge, other than as described
in Exhibit P, there is no action, suit, proceeding, claim or investigation by
any person, entity, administrative agency or governmental body pending or, to
its knowledge, threatened, against it before any court or governmental agency
that seeks substantial damages in connection with, or seeks to restrain, enjoin,
materially impair or prohibit the consummation of all or part of the
transactions contemplated in the Transaction Documents or associated with any
Closing provided for hereunder except as otherwise disclosed prior to the
applicable Closing Date.

 

4.1.9       Subject Claims.  There has been no assignment or conveyance, in
whole or in part of the Subject Claims.

 

4.2          Seller’s Representations and Warranties. Seller makes no warranty
as to its ownership of the Purchased Property, however, Seller agrees to defend
title to the Net Revenue Interest per Working Interest percentage in the
Purchased Property set forth in Exhibit M against the claims and demands (other
than the Permitted Encumbrances) of all persons claiming the same or any part
thereof by, through or under Seller but not otherwise.  It is understood that
any title failure not arising by, through or under Seller shall reduce the Net
Revenue Interest of REP on a proportionate basis.

 

4.3          Purchaser’s Representations and Warranties. By its execution of the
Transaction Documents, Purchaser represents and warrants to Seller that the
following statements are true and accurate, as of the execution date of the
Transaction Documents.  In addition, REP shall represent and warrant on each
Closing Date that the following statements are true and accurate.

 

4.3.1         Independent Evaluation. REP is an experienced and knowledgeable
investor in the oil and gas business. In making the decision to enter into the
Transaction Documents, REP has been advised by and has relied solely on its own
expertise and legal, tax, reservoir engineering and other professional counsel
concerning this transaction, the Purchased Property and the value thereof.

 

13

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

 

4.3.2         Securities Laws and REP’s Other Dealings. REP has complied with
all federal and state securities laws applicable to the purchase of the
Purchased Property and will comply with such laws if it subsequently disposes of
all or any part of the Purchased Property. REP is acquiring the Purchased
Property for its own account and not with a view to, or for offer of resale in
connection with, a distribution thereof, within the meaning of the Securities
Act of 1933, 15 U.S.C. § 77(a) et seq., and any other rules, regulations, and
laws pertaining to the distribution of securities.  REP has fully disclosed the
terms of this Agreement and the Prior Agreements to all partners, investors and
financial institutions.  REP has not disclosed to the SMP Parties the source of
REP’s funding for the purchase price of the Purchased Property.  REP has not
involved the SMP Parties in the process of providing information pertaining to
the Orcutt Property, NW Casmalia Property or any other oil and gas properties to
any partners, investors or financial institutions.  REP has not disclosed to the
SMP Parties the terms of any agreement between REP and any investor, partner or
financial institution.

 

4.3.3         Knowledge and Experience.  REP has (and had prior to negotiations
regarding the Purchased Property) such knowledge and experience in the ownership
and operation of oil and gas properties and financial and business matters as to
be able to evaluate the merits and risks of an investment in the Purchased
Property.  REP is able to bear the risks of an investment in the Purchased
Property and understand the risks of, and other considerations relating to, the
purchase of the type of assets that comprise the Purchased Property.

 

4.3.4         Opportunity to Verify Information.  As of each Closing Date, REP
has been furnished with materials relating to the Purchased Property requested
by REP under the Transaction Documents and has been afforded the opportunity to
ask questions of the Seller (or a person or persons acting on its behalf)
concerning the Purchased Property.  REP has made its own independent
investigation of the Purchased Property to the extent necessary to evaluate the
Purchased Property.  At Closing, REP shall be deemed to have knowledge of all
facts contained in all materials, documents and other information which REP has
been furnished or to which REP has been given access.

 

4.3.5       Merits and Risks of an Investment in the Purchased Property.  REP
understands and acknowledges that:  (i) an investment in the Purchased Property
involves certain risk; (ii) neither the United States Securities and Exchange
Commission nor any federal, state or foreign agency has passed upon the
Purchased Property or made any finding or determination as to the fairness of an
investment in the Purchased Property or the accuracy or adequacy of the
disclosures made to REP.

 

4.3.6       Equipment and Well Condition and Operations.  REP has been given the
opportunity to inspect the Wells, equipment and facilities on the Lands.  REP is
fully aware that (i) some of the equipment and facilities on the Lands need
immediate repair, (ii) the records for the Wells are incomplete and accordingly
it is not possible to predict what operations can be successfully performed
within any particular Well, (iii) it is not possible to determine with certainty
how much each Well produces due to lack of proper gauging and accordingly it is
not possible to determine with certainty whether a particular Well is economic
or non-economic, and (iv) an affiliate of Breitburn Energy has recently
indicated an interest in constructing

 

14

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

 

residential units on a portion of the Lands with the Orcutt Leases.

 

4.3.7       Environmental Matters. REP has inspected the property subject to the
Transaction Documents. REP is fully aware that (i) oil and gas operations have
been conducted upon the Orcutt Leases and Lands since approximately 1900, (ii) a
significant number of Wells may need to be plugged and abandoned,
(iii) significant environmental remediation will be required, (iv) the SMP
Parties alleged in litigation styled Phoenix Energy, Inc. v. Careaga
Hydrocarbons, Inc., under Case No. 1230506, in the Superior Court of California,
County of Santa Barbara, Cook Division, that the property was not operated in
compliance with all environmental regulations and statutes, and (v) significant
additional expenditures will in the future be required with respect to
environmental remediation which may affect the development potential of the
Purchased Property.

 

4.4          Notice of Changes. Prior to Closing, Seller and REP will each give
the other prompt written notice of any matter materially affecting any of their
representations or warranties under this Article IV or rendering any such
warranty or representation untrue or inaccurate.

 

4.5          Representations and Warranties Exclusive. All representations and
warranties contained in the Transaction Documents (including without limitation
those in this Article IV) are exclusive, and are given in lieu of all other
representations and warranties, express or implied.

 

4.6          Operating Agreements.  REP understands that (i) all operations will
be conducted pursuant to the terms of the applicable Operating Agreement,
(ii) it will be responsible for timely payment of it’s share of the expenses
pursuant to the terms of the applicable Operating Agreement, (iii) it’s interest
will be subject to an operator’s lien pursuant to the applicable Operating
Agreement, and (iv) nothing in the Transaction Documents alters or otherwise
impairs any operator’s lien rights.

 

ARTICLE V

 

Disclaimer Of Warranties Applicable

To All Purchases And Sales

 

5.1          TITLE AND ENCUMBRANCES. SELLER CONVEYS THE PURCHASED PROPERTY TO
REP SUBJECT TO THE PERMITTED ENCUMBRANCES WITHOUT WARRANTY OF TITLE, EXPRESS OR
IMPLIED. SPECIFICALLY WITH RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS
FOR THE PIPELINES COMPRISING A PART OF THE PURCHASED PROPERTY, SELLER EXPRESSLY
DISCLAIMS, AND REP HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT SELLER
OWNS THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND
EFFECT; THAT THEY MAY BE ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES
LIE WITHIN THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE
RIGHT

 

15

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

 

TO LAY, MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES.
SELLER EXPRESSLY DISCLAIMS, AND REP HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE
AND EFFECT WITH RESPECT TO THE PIPELINES.  NO DUTY IS OWED BY THE SMP PARTIES TO
REP WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET FORTH IN
ARTICLE VIII.  THE SMP PARTIES SHALL HAVE NO LIABILITY TO REP AS A RESULT OF ANY
DEFAULT BY THE SMP PARTIES WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OR
ANY ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A CONSEQUENCE OF SUCH DEFAULT.

 

5.2          CONDITION AND FITNESS OF THE PURCHASED PROPERTY. EXCEPT AS
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, SELLER CONVEYS THE PURCHASED
PROPERTY TO REP WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR
REPRESENTATION OF ANY KIND RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF
THE PURCHASED PROPERTY, OR (ii) THE FITNESS OF THE PURCHASED PROPERTY FOR A
PARTICULAR PURPOSE. REP HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL
HAVE BEEN GIVEN THE OPPORTUNITY TO INSPECT, THE PURCHASED PROPERTY AND IS
SATISFIED AS TO THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY AND
ENVIRONMENTAL CONDITION (BOTH SURFACE AND SUBSURFACE) OF THE PURCHASED PROPERTY
AND ACCEPTS THE PURCHASED PROPERTY “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS”
AND IN ITS PRESENT CONDITION AND STATE OF REPAIR. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO
(i) THE VALUE, QUALITY, QUANTITY, VOLUME OR DELIVERABILITY OF ANY OIL, GAS OR
OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER OR ATTRIBUTABLE TO THE PURCHASED
PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND
RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR OTHER REGULATORY
MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY OR
ENVIRONMENTAL CONDITION OF THE PURCHASED PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PURCHASED PROPERTY OR ANY VALUE THEREOF.

 

5.3          INFORMATION ABOUT THE PURCHASED PROPERTY. EXCEPT AS EXPRESSLY SET
FORTH IN THE TRANSACTION DOCUMENTS, THE SMP PARTIES DISCLAIM ALL LIABILITY AND
RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR COMMUNICATIONS
(ORALLY OR IN WRITING) TO REP (INCLUDING, BUT NOT LIMITED TO, ANY INFORMATION
CONTAINED IN ANY OPINION, INCLUDING THE TITLE OPINIONS, INFORMATION, OR ADVICE
THAT MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER,
DIRECTOR, AGENT, CONSULTANT, ENGINEER OR ENGINEERING FIRM, REPRESENTATIVE,
PARTNER, MEMBER, BENEFICIARY, STOCKHOLDER OR CONTRACTOR) WHEREVER AND HOWEVER
MADE WITH RESPECT TO THE

 

16

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

 

PURCHASED PROPERTY. THE SMP PARTIES MAKE NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA,
INFORMATION OR RECORDS FURNISHED TO REP IN CONNECTION WITH THE PURCHASED
PROPERTY. ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY THE SMP PARTIES
ARE PROVIDED TO REP AS A CONVENIENCE AND REP’S RELIANCE ON OR USE OF THE SAME IS
AT REP’S SOLE RISK.  REP RECOGNIZES AND AGREES THAT ALL MATERIALS, DOCUMENTS,
AND OTHER INFORMATION, MADE AVAILABLE TO IT AT ANY TIME IN CONNECTION WITH THE
TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO THIS
SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED OR STATUTORY,
AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, AND OTHER
INFORMATION.  REP EXPRESSLY AGREES THAT ANY RELIANCE UPON OR CONCLUSIONS DRAWN
THEREFROM SHALL BE AT REP’S RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW AND
SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST THE SMP PARTIES.  REP HEREBY
WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THE TRANSACTION DOCUMENTS, COMMON
LAW OR ANY STATUTE ARISING OUT OF ANY MATERIALS, DOCUMENTS OR INFORMATION
PROVIDED TO REP.

 

5.4          UNLEASED INTERESTS.  THERE ARE UNLEASED UNDIVIDED INTERESTS IN THE
LANDS COVERED BY THE ORCUTT GTL LEASES AND THE ORCUTT OPL LEASES.  ATTACHED AS
EXHIBIT Q IS A LIST OF THE UNLEASED INTERESTS.

 

5.5          LEASE EXPIRATION.  NO REPRESENTATION IS MADE BY THE SMP PARTIES AS
TO THE PERIOD OF TIME THAT THE ORCUTT LEASES AND NW CASMALIA LEASES WILL REMAIN
IN FORCE AND EFFECT SUBSEQUENT TO THE CLOSING WITH RESPECT TO THE SECOND ORCUTT
INTERESTS.  THE DEVELOPMENT AGREEMENT AND THE PURCHASE OPTION AGREEMENT SHALL
NOT BE APPLICABLE TO ANY LEASE WHICH TERMINATES PRIOR TO THE EXERCISE OF AN
OPTION THEREUNDER.

 

5.6          OPERATIONS.  NO REPRESENTATION EXPRESS OR IMPLIED IS MADE BY THE
SMP PARTIES AS TO (i) WHAT OPERATIONS WILL BE PERFORMED AND EXPENDITURES
INCURRED IN ADDITION TO THE APPROVED DEVELOPMENT OPERATIONS, (ii) THE TIME AT
WHICH OPERATIONS IN ADDITION TO THE APPROVED DEVELOPMENT OPERATIONS WILL BE
PERFORMED, (iii) WHETHER ALL APPROVED DEVELOPMENT OPERATIONS WILL BE PERFORMED,
OR (iv) THE ACTUAL ULTIMATE COST OF ANY OPERATION, INCLUDING THE APPROVED
DEVELOPMENT OPERATIONS.  REP UNDERSTANDS THAT THERE MAY BE SIGNIFICANT EXPENSES
IN EXCESS OF THE ESTIMATED COSTS OF OPERATIONS, INCLUDING WITH RESPECT TO THE
APPROVED DEVELOPMENT OPERATIONS WHICH WOULD RESULT IN REMAINING APPROVED
DEVELOPMENT

 

17

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

 

OPERATIONS NOT BEING PERFORMABLE WITHOUT FUNDS IN ADDITION TO THE CARRY
OBLIGATION.  THIS AGREEMENT DOES NOT LIMIT THE OPERATOR’S RIGHT TO PROPOSE AND
PERFORM OPERATIONS PURSUANT TO THE APPLICABLE OPERATING AGREEMENT THAT WILL
REQUIRE EXPENDITURES IN ADDITION TO THE CARRY OBLIGATION.

 

5.7          NORM. REP ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS
PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL. SCALE
FORMATION OR SLUDGE DEPOSITS CAN CONCENTRATE LOW LEVELS OF NORM ON EQUIPMENT,
MATERIALS AND OTHER PURCHASED PROPERTY. SOME OR ALL OF THE EQUIPMENT, MATERIALS
AND OTHER PURCHASED PROPERTY SUBJECT TO THE TRANSACTION DOCUMENTS MAY HAVE
LEVELS OF NORM ABOVE BACKGROUND LEVELS. A HEALTH HAZARD MAY EXIST IN CONNECTION
WITH THE EQUIPMENT, MATERIALS AND OTHER PURCHASED PROPERTY BY REASON THEREOF.
THEREFORE, REP MAY NEED TO FOLLOW SAFETY PROCEDURES WHEN HANDLING THE EQUIPMENT,
MATERIALS AND OTHER PURCHASED PROPERTY.

 

5.8          DISCLAIMERS DEEMED CONSPICUOUS. TO THE EXTENT REQUIRED TO BE
OPERATIVE, REP HEREBY AGREES THAT THE DISCLAIMERS OF WARRANTIES CONTAINED IN THE
TRANSACTION DOCUMENTS ARE CONSPICUOUS DISCLAIMERS FOR THE PURPOSE OF ANY
APPLICABLE LAW, RULE OR ORDER.

 

ARTICLE VI

 

Relation Of Parties And Acknowledgments

 

6.1          No Partnership.  The parties acknowledge that the Transaction
Documents, and the activities which may be under or pursuant hereto are not
intended, and shall not be construed, to create a partnership, a joint venture,
agency relationship, or other fiduciary relationship among the parties hereto
within the meaning of the federal common law nor under the applicable laws of
any state nor under the laws of the state of which either party is incorporated,
organized or conducting business.

 

6.2          Non-Affiliation.  The SMP Parties have no ownership interest in
REP.  REP has no ownership interest in the SMP Parties.  There is no agreement
pursuant to which any SMP Party would merge or consolidate with REP.  The
Transaction Documents, upon execution (and the agreements provided for herein),
will be the only agreements between the parties.

 

18

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

 

ARTICLE VII

 

Operations

 

7.1           Operating Agreement.  All operations will be conducted in
accordance with the applicable Operating Agreement.  REP consents to PEL or SMP
service as operator.

 

7.2           Development Committee.  A committee composed of representatives of
Seller and REP shall meet quarterly to discuss the status of operations.  The
purpose of the meeting shall be to share information.  All decisions with
respect to operations will be made pursuant to the terms of the applicable
Operating Agreement.

 

7.3           Carry Obligation.  The funds paid to Seller at the Closing
conducted with respect to the Purchase of the Second Orcutt Interests and each
subsequent Closing pursuant to the Development Agreement shall be applied to
satisfy the Carry Obligation. Any expenditure that is included in the Approved
Development Operations that is made by the Carry Obligation Beneficiaries in
advance of the receipt of the (i) payment pursuant to Section 3.2, or (ii) any
option exercise payments by REP pursuant to the Development Agreement shall be
repaid to the Carry Obligation Beneficiaries out of such funds upon receipt, so
long as such expenditures were made by the Carry Obligation Beneficiaries as
Direct Costs of Approved Development Operations out of funds owned and held by
the Carry Obligation Beneficiaries.

 

ARTICLE VIII

 

Partial Lien Release

 

REP may, at its option, cause the Sector Mortgage Indebtedness to be released as
to REP’s interest by payment to SMP of REP’s proportionate share of the Sector
Mortgage Indebtedness.  For purposes of calculating the amount of REP’s payment,
the Sector Mortgage Indebtedness will be fixed at the lesser of (i) $7,500,000,
and (ii) the outstanding balance thereof as of the partial release payment
date.  REP’s proportionate share shall be its Working Interest percentage in the
subject property (with respect to the Orcutt GTL Property using the Orcutt GTL
Property Rights Working Interest in place of the Orcutt GTL Lease Working
Interest).  Even though the Initial Orcutt Interests are not burdened by the
Sector Mortgage, following the Closing on the second purchase and sale in
accordance with Article III of this Agreement and prior to the exercise of any
option under the Development Agreement, REP’s proportionate share would
nonetheless be 3.333% of the Sector Mortgage Indebtedness, not to exceed
$250,000 (3.333% of $7,500,000).  The scope of the partial release would be
limited to the Initial Orcutt Interests and the Second Orcutt Interests.  Any
additional interest in the Orcutt Property acquired by REP after a partial
release payment shall be subject to and burdened by the Sector Mortgage
Indebtedness unless and until REP causes same to be released by payment of the
proportionate share of the Sector Mortgage Indebtedness attributable thereto. 
Upon SMP’s receipt of the partial release payment from REP, SMP will

 

19

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

 

deliver same to Sector Capital Corporation in exchange for the partial release.

 

ARTICLE IX

 

Indemnities

 

9.1           Definition of Claims. As used in this Article, the term “Claims”
means any and all losses, liabilities, damages, punitive damages, obligations,
expenses, fines, penalties, costs, claims, causes of action and judgments for:
(a) breaches of contract; (b) loss or damage to property, injury to or death of
persons (including illness and disease), and other tortious injury; and
(c) violations of applicable laws, rules, regulations, orders or any other legal
right or duty actionable at law or equity. The term “Claims” also includes
reasonable attorney’s fees, court costs, and other reasonable costs resulting
from the investigation or defense of any Claim within the scope of the
indemnities in this Agreement.

 

9.2           Application of Indemnities.

 

9.2.1        Covered Claims and Parties. All indemnities set forth in this
Agreement extend to the officers, directors, employees and affiliates of the
party indemnified. The indemnities set forth in this Agreement do not extend to
any party of an indemnified Claim that (a) is the result of the gross
negligence, willful misconduct or fraud of the indemnified party, (b) is the
result of the imposition of punitive damages on the indemnified party arising
from the acts or omissions of the indemnified party, or (c) is the result of the
imposition of civil or criminal fines or penalties by any court or regulatory
authority on the indemnified party due to the indemnified party’s failure to
comply with applicable laws, regulations or orders.

 

9.2.2        Express Negligence Disclosure. UNLESS THIS AGREEMENT EXPRESSLY
PROVIDES TO THE CONTRARY, THE INDEMNITY, RELEASE, WAIVER AND ASSUMPTION
PROVISIONS SET FORTH IN THIS AGREEMENT APPLY REGARDLESS OF WHETHER THE
INDEMNIFIED PARTY (OR ITS EMPLOYEES, AGENTS, CONTRACTORS, SUCCESSORS OR ASSIGNS)
CAUSES, IN WHOLE OR PART, AN INDEMNIFIED CLAIM, INCLUDING WITHOUT LIMITATION
INDEMNIFIED CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR IN PART, FROM, OUT
OF OR IN CONNECTION WITH THE CONDITION OF THE PURCHASED PROPERTY OR THE
INDEMNIFIED PARTY’S (OR ITS EMPLOYEES’, AGENTS’, REPRESENTATIVES’, CONTRACTORS’,
SUCCESSORS’ OR ASSIGNS’) SOLE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
FAULT. REP AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS
NEGLIGENCE RULE AND IS CONSPICUOUS.

 

9.2.3        Other Limitations. The indemnities in this Agreement do not relieve
the parties to this Agreement from any obligations to third parties. The
indemnities of the parties in this Agreement do not relieve the indemnified
party from any obligations of the indemnified party under the terms of any
operating agreement or other cost-sharing arrangement which is applicable. There
will be no upward or downward adjustment in the purchase price as a result

 

20

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

 

of any matter for which REP or Seller is indemnified under this Agreement.

 

9.3         REP Indemnity. REP SHALL INDEMNIFY, DEFEND AND HOLD THE SMP PARTIES
HARMLESS from and against any and all Claims caused by, resulting from or
incidental to:

 

9.3.1        Any obligations for brokerage or finder’s fee or commission
incurred by REP in connection with its acquisition of the Purchased Property;

 

9.3.2        Any violation by REP of state or federal securities laws or REP’s
dealings (including any dealings in breach of REP’s warranties and
representations in Sections 4.1 and 4.3) with its partners, investors, financial
institutions, or other third parties in connection with (i) the Prior
Agreements, (ii) the Transaction Documents, (iii) acquisition of the Purchased
Property, or (iv) any subsequent sale or other disposition of the Purchased
Property (or portion thereof) by REP, or its affiliates;

 

9.3.3        Any Claim by a partner, investor, financial institution or other
third party arising under or related to any agreement between REP and such
partner, investor, financial institution or other third party;

 

9.3.4        Any Claim by a partner, investor, financial institution or other
third party based upon a representation made by REP, directly or indirectly,
relating to the Prior Agreements, the Transaction Documents, the NW Casmalia
Property, the Orcutt Property, any other oil and gas property, or any
development operations with respect to any oil and gas property; or

 

9.3.5        Any Claim by a third party based upon a breach by REP of any
covenant, representation or warranty provided for in the Transaction Documents.

 

9.4           SMP Parties Indemnity.  The SMP Parties shall indemnify, defend
and hold harmless REP from any and all Claims caused by, resulting from or
incidental to:

 

9.4.1        Any obligation for brokerage or finder’s fee or commission incurred
by the SMP Parties in connection with the sale of the Purchased Property;

 

9.4.2        Any Claim by a third party based upon a breach of an SMP Party’s
covenant, representation or warranty provided for in the Transaction Documents;
or

 

9.4.3        Any lien or Claim with respect to the Sector Mortgage Indebtedness
solely as it relates to the Initial Orcutt Interests.

 

9.4.4        Any lien or Claim with respect to the Sector Mortgage Indebtedness
solely as it relates to the Initial Orcutt Interests or any interest as to which
a partial release has been purchased by REP in accordance with Article VIII.  In
other words, the indemnity pursuant to this provision is limited to REP’s
interest in the subject property

 

21

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

 

for which REP timely paid its proportionate share of the Sector Mortgage
Indebtedness in accordance with Article VIII.

 

9.5           Notices and Defense of Indemnified Claims. Each party shall
immediately notify the other party of any Claim of which it becomes aware and
for which it is entitled to indemnification from the other party under the
Transaction Documents. The indemnifying party shall be obligated to defend at
the indemnifying party’s sole expense any litigation or other administrative or
adversarial proceeding against the indemnified party relating to any Claim for
which the indemnifying party has agreed to indemnify and hold the indemnified
party harmless under the Transaction Documents. However, the indemnified party
shall have the right to participate with the indemnifying party in the defense
of any such Claim at its own expense.

 

ARTICLE X

 

Alterative Dispute Resolution

 

10.1         Alternative Dispute Resolution. This Article shall not be
applicable to enforcement of any provision of the Operating Agreements. The
rights of the parties under the Operating Agreements shall be enforced in
accordance with the terms of the Operating Agreements.  For the limited purpose
of this Article the term “Transaction Documents” shall not include the Operating
Agreements.  Compliance with this Article shall constitute a condition precedent
to either party seeking judicial enforcement of any provisions of the
Transaction Documents.  Any dispute concerning the Transaction Documents shall
be resolved under the mediation and binding arbitration procedures of this
Article X. Upon the occurrence of any dispute between REP and Seller in
connection ‘with their rights and obligations under the Transaction Documents,
REP and Seller will first attempt in good faith to resolve all disputes by
negotiations between management level persons who have authority to settle the
controversy. If either party believes further negotiations are futile, such
party may initiate the mediation process by so notifying the other party in
writing. Both parties shall then attempt in good faith to resolve the dispute by
mediation in Santa Maria, California, employing management level persons with
authority to settle the dispute, in accordance with the Center for Public
Resources Model Procedure for Mediation of Business Disputes, as such procedure
may be modified by agreement of the parties. The parties shall share the cost of
the mediator equally. If the dispute has not been resolved pursuant to mediation
within sixty (60) days after initiating the mediation process, the dispute shall
be finally resolved through binding arbitration, as follows:

 

(a)           If any dispute or controversy shall arise between the parties out
of the Transaction Documents, the alleged breach thereof or any tort in
connection therewith, or out of the refusal to perform the whole or any part
thereof, and the parties shall be unable to agree with respect to the matter or
matters in dispute or controversy, the same shall be submitted to arbitration
before a panel of arbitrators in accordance with the Federal Arbitration Act and
the Commercial Arbitration Rules of the American Arbitration Association, to the
extent that such Rules do not conflict with the terms of such Act or the terms
of the Transaction Documents.  The panel of arbitrators shall be chosen as
follows: Upon the written demand of either party

 

22

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

 

and within ten (10) working days from the date of such demand, each party shall
name an arbitrator and these two so named shall promptly thereafter choose a
third. If either party shall fail to name an arbitrator within ten (10) working
days from such demand, the other party shall name the second arbitrator as well
as the first, or if the two arbitrators shall fail within ten (10) working days
from their appointment to agree upon and appoint the third arbitrator, then upon
written application by either party such third arbitrator may be appointed by
the then presiding judge of the Superior Court of the State of California in and
for the County of Santa Barbara, acting as an individual.  The party making the
application shall give the other party ten (10) day’s notice of the
application.  All arbitrators selected to act hereunder shall be qualified by
education, experience, and training to pass upon the particular matter or
matters in dispute.  All arbitrators selected under the Transaction Documents
shall have at least fifteen (15) years professional experience in the oil and
gas exploration and development industry and shall not previously have been
employed by either party and shall not have a direct or indirect interest in
either party or the subject matter of the arbitration.

 

(b)           The panel of arbitrators so chosen shall proceed promptly to hear
and determine the matter or matters in dispute, after giving the parties due
notice of hearing.  Unless otherwise determined by the arbitrators, the hearing
and presentations of the parties shall not exceed five (5) days cumulative. The
location of all arbitration proceedings hereunder shall be Santa Barbara County,
California. The award of the panel of arbitrators or a majority thereof shall be
made within forty-five (45) days after the appointment of the third arbitrator,
subject to any reasonable delay due to unforeseen circumstances. In the event of
the panel or a majority thereof failing to make an award within sixty (60) days
after the appointment of the third arbitrator, new arbitrators may at the
election of either party be chosen in like manner as if none had been previously
selected.

 

(c)           The award of the arbitrators, or a majority thereof, shall be in
writing, determined in accordance with the substantive laws of the State of
California, and shall be final and binding on the parties as to the question or
questions submitted, and the parties shall abide by such award and perform the
conditions thereof. The award of the arbitrators shall be based on the
applicable law and facts, the merits of the parties’ positions in the
controversy or dispute, and the arbitrators’ assessment of the fairness and
reasonableness of any settlement proposal of any party. The award shall not
provide or create any rights or benefits in any person or entity which is not a
party to the Transaction Documents, as the Transaction Documents and any
arbitration thereunder shall not be construed as a third party beneficiary
contract. Unless otherwise determined by the arbitrators, all expenses in
connection with such arbitration shall be divided equally between the parties
thereto, except that the expenses of counsel, witnesses, and employees of each
party shall be borne solely by the party incurring them, and the compensation of
any arbitrator named by a party shall be borne solely by such party; provided
that if court proceedings to stay litigation or compel arbitration are
necessary, the party who unsuccessfully opposes such proceedings shall pay all
reasonable associated costs, expenses and attorney’s fees of such court
proceedings.

 

(d)         The arbitrators shall not be required to explain reasons for the
award. No transcript or other recording shall be made of the arbitration
proceedings. Except (i) in

 

23

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

 

connection with a suit for enforcement of the award, (ii) as required by law,
court order or regulation, (iii) when reasonably necessary to explain the terms
and conditions of the award to outside attorneys, auditors, and insurers, or
(iv) as part of good faith compliance with disclosure obligations under
applicable law, the arbitration proceedings, the award, and the parties’ actions
in connection with the arbitration are confidential and shall not be disclosed
to third parties, and no disclosure of or reference to the arbitration, the
award, or of the parties’ statements or actions in connection with the
arbitration shall be made to any third party. All offers, promises, conduct,
statements, and evidence, whether oral or written, made in the course of the
arbitration by any of the parties, their agents, employees, experts, or
attorneys are confidential. Such offers, promises, conduct, statements, and
evidence shall be considered inadmissible under Rule 408 of the Federal Rules of
Evidence and any similar state provisions, and shall be inadmissible for any
purpose, including impeachment. However, evidence that is otherwise admissible
shall not be rendered inadmissible as a result of its use in the arbitration.

 

(e)          The award of the panel of arbitrators and the obligation to abide
by same and perform the conditions thereof shall not be appealable and shall be
enforceable in any state district court for Santa Barbara County, California or
the federal court for the Central District of California having jurisdiction.
Each party shall bear its own attorneys’ fees in connection with any enforcement
of an arbitration award, or in any other court litigation arising out of the
Transaction Documents.

 

(f)          The provisions of Article X shall not limit the obligation of a
party to defend, indemnify or hold harmless the other party against Claims as
provided in Article IX .

 

ARTICLE XI

 

Area of Mutual Interest

 

11.1         Area.  REP and Seller agree to an AMI.  Up to December 14, 2009,
the AMI shall be Santa Barbara County, California.  During the period
December 14, 2009 through December 14, 2012, the AMI shall be limited to the
area within one half mile of the boundary of any oil and gas lease within the
pre-December 14, 2009 AMI, as to which both Seller and REP own a Working
Interest.

 

11.2         Notice.  If during the term of the AMI, any party should acquire by
purchase, assignment or otherwise an interest in any oil and gas lease, lease or
seismic option, mineral interests, royalty interests, farmout, or any other
interests in the mineral estate, including any contractual rights to acquire
such interest, which gives the owner thereof the right to explore, drill for,
and/or participate in the production of oil, gas or other hydrocarbons and
constitute elements thereof or produced there from (“Mineral Interests”), the
party acquiring the rights (“Acquiring Party”) shall within 5 Business Days
thereafter notify in writing the other parties hereto (“Offeree”) of such
acquisition.  Such notice shall include a copy of all instruments of acquisition
including, by way of example but not of limitation, copies of the leases,
assignments, subleases, farmouts, or other contracts affecting the Mineral
Interests, a plat of

 

24

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

 

the lands covered by the Mineral Interests, any title information and workpapers
available relevant to the acquisition, evidence of payments made (i.e., paid
drafts, brokers’ invoices, etc.) and an itemized statement of Leasehold
Acquisition Costs.  For purposes of this Article the term “Leasehold Acquisition
Costs” shall mean all direct costs incurred in connection with acquiring the
Mineral Interests, including, but not limited to, bonuses and other
consideration paid for such Mineral Interests and the expenses and per diems of
third parties excluding, however, costs and expenses of its own personnel.

 

11.3         Acquisition Right.  Each Offeree shall have the right but not the
obligation to acquire its share in the proportion to which its interest in the
AMI bears to the aggregate interest in the AMI of the Acquiring Party and all
other non-acquiring party(s) who have elected not to acquire an interest in the
Mineral Interests so offered.

 

11.4         Exercise Deadline.  Offeree shall have thirty (30) days after
receipt of such offer, or within five (5) days when there is a Well drilling in
the area which, in the opinion of the Acquiring Party could reasonably affect
the value of the Mineral Interests, within which to elect to purchase such
interest by notifying the Acquiring Party, in writing of its election to acquire
its percentage share of such Mineral Interests.  Failure of Offeree to notify
the Acquiring Party within such time period shall be deemed an election by
Offeree not to acquire an interest in such Mineral Interests.  If an Offeree
elects not to participate in the acquisition of Mineral Interests, then such
Offeree shall forfeit the right to participate in the renewal or extension of
such Mineral Interests.  Those party(s) which elect to acquire their
proportionate share of such Mineral Interests are hereinafter referred to as the
“Participating Party(s)”.

 

11.5         Payment and Default.  Promptly after the notice and election period
have expired, the Acquiring Party shall invoice each Participating Party for its
proportionate part of the Lease Acquisition Costs.  Each Participating Party
shall immediately reimburse the Acquiring Party for its share of the Lease
Acquisition Costs.  If the Acquiring Party does not receive the amount from the
Participating Party within ten (10) days after the receipt by such party of the
invoice for its share of the Lease Acquisition Costs, the Acquiring Party may,
at its election, give written demand notice to such delinquent party that the
failure of the Acquiring Party to receive the amount due within forty-eight (48)
hours after receipt of such demand notice by the delinquent Participating Party
shall constitute a withdrawal by the delinquent party of its former election to
acquire the Mineral Interests, and such delinquent Participating Party shall
forfeit the right to participate in the acquisition of the Mineral Interests.

 

11.6         Assignment.  Upon receipt of said payment, the Acquiring Party
shall execute and deliver to each Participating Party an appropriate
assignment.  The assignment will be on the same terms and with the same
effective date as that obtained by the Acquiring Party.  Acquiring Party shall
place no additional burdens against such lease other than those directly
associated with the acquisition of such Mineral Interests.  The assignment will
(to the extent permitted under the underlying documents) assign rights with
respect to warranties which Acquiring Party may have received.  No warranty of
title whether expressed or implied shall be made by Acquiring Party except by,
through and under it.

 

25

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

 

11.7         Operating Agreement.  SMP or its designee shall serve as operator
of any property acquired within the AMI.  The operating agreement will be in a
form that is identical to the NW Casmalia Operating Agreement insofar as
diatomite operations are concerned and identical to the Orcutt Non-Diatomite
Operating Agreement insofar as non-diatomite operations are concerned except for
the lands and parties subject to the agreement.

 

ARTICLE XII

 

Notices

 

12.1         Notices.  All notices and other communications required under the
Transaction Documents shall (unless otherwise specifically provided herein) be
in writing and be delivered personally, by recognized commercial courier or
delivery service which provides a receipt, by telecopier (with receipt
acknowledged), or by registered or certified mail (postage prepaid), at the
following addresses:

 

If to REP:                       Rock Energy Partners, L.P.

10375 Richmond Ave., Suite 2100

Houston, Texas  77042

Attention:  Rocky Emery

Phone:  (713) 954-3600

Fax:  (713) 954-3601

Email:  Emeryrocky1@aol.com

 

Rock Energy Partners, L.P.

10375 Richmond Ave., Suite 2100

Houston, Texas  77042

Attention:  Tom Elliott

Phone:  (713) 954-3600

Fax:  (713) 954-3601

Email:  tom.elliott@rockenergypartners.com

 

If to SMP:                      Santa Maria Pacific, LLC

Post Office Box 7202

Santa Maria, California  93456-7202

Phone:  (805) 938-3320

Fax:      (805) 938-3340

Email:  davidlpratt@sbcglobal.net

 

If to PEL:                        Phoenix Energy, LLC

Post Office Box 7202

Santa Maria, California  93456-7202

Phone:  (805) 938-3320

Fax:      (805) 938-3340

 

26

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

 

Email:  davidlpratt@sbcglobal.net

 

If to NWCP:                  NW Casmalia Properties, LLC

Post Office Box 7202

Santa Maria, California  93456-7202

Phone:  (805) 938-3320

Fax:      (805) 938-3340

Email:  davidlpratt@sbcglobal.net

 

 

If to OPL:                       Orcutt Properties, LLC

Post Office Box 7202

Santa Maria, California  93456-7202

Phone:  (805) 938-3320

Fax:      (805) 938-3340

Email:  davidlpratt@sbcglobal.net

 

If to GTL:                       Gitte-Ten, LLC

Post Office Box 7202

Santa Maria, California  93456-7202

Phone:  (805) 938-3320

Fax:      (805) 938-3340

Email:  davidlpratt@sbcglobal.net

 

or such other street address within the continental limits of the United States
as a party may designate for itself by giving notice to the other party, in the
manner provided in this Section, at least 10 days prior to the effective date of
such change of address.  All notices given by personal delivery, courier or mail
shall be effective on the date of actual receipt at the appropriate address as
provided above.  Notices given by telecopier, if receipt is confirmed by the
transmitting device, shall be effective upon actual receipt if received during
recipient’s normal business hours or at the beginning of the next business day
after receipt if received after the recipient’s normal business hours.  Delivery
by email shall not satisfy the formal notice requirements of the Transaction
Documents.

 

ARTICLE XIII

 

Miscellaneous

 

13.1         Form of Assignment.  All assignments to be delivered pursuant to
the Transaction Documents shall be substantially in the form of Exhibit R.

 

13.2         Further Assurances.  After the Closing, Seller shall execute and
deliver, and shall otherwise cause to be executed and delivered, from time to
time, such further instruments, notices, division orders, transfer orders and
other documents, and do such other and further acts and things, as may be
reasonably necessary to more fully and effectively grant, convey and assign the
Purchased Property to REP.

 

27

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

 

13.3         Survival of Representations and Warranties. All of the
representations and warranties made by the parties in this Agreement will
survive the Closing, the execution and delivery of the assignment documents and
other instruments under this Agreement, and the transfer of the Purchased
Property between the parties and they shall not be merged into or superseded by
the assignment documents or other documents delivered at Closing. A Claim by REP
based upon an alleged breach of a representation with respect to title to the
Initial Orcutt Interests and the Second Orcutt Interests is waived and released
unless REP notifies Seller of that Claim in writing on or before August 31,
2008.  A Claim by REP based upon an alleged breach of a representation with
respect to title to any interest acquired pursuant to the Development Agreement,
Purchase Option Agreement or Article XI (AMI) is waived and released unless REP
notifies Seller of that claim within 60 days of the applicable Closing Date.

 

13.4         No Sales Taxes.  No sales, transfer or similar tax will be
collected at Closing from REP in connection with this transaction.  If, however,
this transaction is later deemed to be subject to sales, transfer or similar
tax, for any reason, REP agrees to be solely responsible, and shall indemnify
and hold Seller (and its affiliates, and its and their directors, officers,
employees, attorneys, contractors and agents) harmless, for any and all sales,
transfer or other similar taxes (including related penalty, interest or legal
costs) due by virtue of this transaction on the Purchased Property transferred
pursuant hereto and REP shall remit such taxes at that time.  Seller and REP
agree to cooperate with each other in demonstrating that the requirements for
exemptions from such taxes have been met.

 

13.5         Entire Agreement and Amendment. The Transaction Documents, together
with any relevant Confidentiality Agreement and the exhibits thereto, and the
documents executed and delivered at each Closing constitute the entire
understanding between the parties, replacing and superseding all prior
negotiations, discussions, arrangements, agreements and understandings between
the parties regarding the subject transaction and subject matter hereof (whether
written or oral), excepting any written agreements that may be executed by the
parties concurrently or after the execution of the Transaction Documents that
expressly refer to one or more of the Transaction Documents. No other agreement,
statement, or promise made by any party, or to any employee, officer or agent of
any party, which is not contained in the Transaction Documents shall be binding
or valid. The Transaction Documents may be amended, modified, altered,
supplemented, or revoked only by written agreement expressly referring to one or
more of the Transaction Documents and providing for amendment or modification
thereof and signed by duly authorized representatives of the parties hereto.

 

13.6         Assignment Restriction.  REP is prohibited from assigning any right
under the Transaction Documents unless the proposed assignee executes and
delivers to the SMP Parties (i) a ratification of the Transaction Documents (in
a form acceptable to the SMP Parties), that specifically provide that the
proposed assignee on its own behalf makes the representations of the type
provided in Section 4.3, (ii) a release of the SMP Parties identical in form to
the release provided by REP in this Agreement, and (iii) an indemnity agreement
in favor of the SMP Parties identical in form to the indemnity provided by REP
in this Agreement.  REP is prohibited prior to December 14, 2009 from assigning
any Purchased Property unless the

 

28

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

 

proposed assignee executes and delivers to the SMP Parties (i) a ratification of
the Transaction Documents (in a form acceptable to the SMP Parties), that
specifically provide that the proposed assignee on its own behalf makes the
representations of the type provided in Section 4.3, (ii) a release of the SMP
Parties identical in form to the release provided by REP in this Agreement, and
(iii) an indemnity agreement in favor of the SMP Parties identical in form to
the indemnity provided by REP in this Agreement.  Any transfer in absence of
such consent shall be null and void and shall result in the automatic
termination of the assigning party’s, its successors and assigns then exercising
rights under the Transaction Documents.  This section shall be applicable to any
approved Assignee of REP.  The approved Assignee’s right to assign will be
restricted in the same manner as provided herein with respect to REP.

 

13.7         Successors and Assigns.  Subject to the limitation on assignment
contained in Section 13.6 above, the Transaction Documents shall be binding on
and inure to the benefit of the parties hereto and their respective successors
and assigns.

 

13.8         Third Party Beneficiaries. It is understood and agreed that there
shall be no third party beneficiary of the Parties with respect to the
Transaction Documents, and that the provisions hereof do not impart enforceable
benefits, rights, or remedies in anyone who is not a party or a successor of REP
as a party hereto.

 

13.9         Severability. If any provision of the Transaction Documents is
found by a court of competent jurisdiction to be invalid or unenforceable, that
provision will be deemed modified to the extent necessary to make it valid and
enforceable and if it cannot be so modified, it shall be deemed deleted and the
remainder of the Agreement shall continue and remain in full force and effect.

 

13.10       Time of Essence.  Time is of the essence in the Transaction
Documents.

 

13.11       Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which shall constitute one
document.

 

13.12       Governing Law and Venue. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCLUDING
ANY CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT APPLY THE LAW OF ANOTHER
JURISDICTION.  In the event that mandatory arbitration provided in Article X is
waived by the parties or is determined to be inapplicable, venue for any suit
relating directly or indirectly to the Transaction Documents or the Purchased
Property shall be in the State Court for Santa Barbara County, California or the
Federal District Court for the Central District of California.

 

13.13       Seller’s Obligations Several Not Joint.  Anything to the contrary
notwithstanding, the obligations and liability of each Seller, arising under and
in connection with the Transaction Documents shall be several and not joint. 
All representations, warranties, and covenants of “Seller” under the Transaction
Documents relating to the Purchased Property, are made by each party, severally
with respect only to the interest owned

 

29

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

 

by each, in the Purchased Property, if any.  The representations, warranties,
and covenants relating to the organization of “Seller”, are made individually by
each party only as to its business organization.

 

13.14       Exhibits. The Exhibits and Schedules attached to this Agreement are
incorporated into and made a part of this Agreement for all purposes. In the
event of a conflict or inconsistency between the provisions of the Exhibits,
Schedules or the executed assignment documents and the foregoing provisions of
this Agreement, the provisions of this Agreement shall take precedence. In the
event of a conflict or inconsistency between the provisions of the pro forma
assignment documents and other transaction documents attached to this Agreement
as Exhibits or Schedules and the assignment documents and other transaction
documents actually executed by the parties, the provisions of the executed
assignment documents and other executed transaction documents shall take
precedence.

 

13.15       Waiver of Consequential and Punitive Damages. NEITHER REP NOR SELLER
SHALL BE ENTITLED TO RECOVER FROM THE OTHER, RESPECTIVELY, AND EACH PARTY
RELEASES THE OTHER PARTY FROM, ANY LOSSES, COSTS, EXPENSES, OR DAMAGES ARISING
UNDER THE TRANSACTION DOCUMENTS OR IN CONNECTION WITH OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED IN THE TRANSACTION DOCUMENTS ANY AMOUNT IN EXCESS OF
THE ACTUAL COMPENSATORY DAMAGES, COURT COSTS AND REASONABLE ATTORNEY’S FEES,
SUFFERED BY SUCH PARTY. REP AND SELLER BOTH WAIVE, AND RELEASE THE OTHER FROM
ANY RIGHT TO RECOVER PUNITIVE, SPECIAL, EXEMPLARY AND CONSEQUENTIAL DAMAGES
ARISING IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN
THE TRANSACTION DOCUMENTS; PROVIDED, HOWEVER, ANY SUCH DAMAGES RECOVERED BY A
THIRD PARTY (OTHER THAN SUBSIDIARIES, AFFILIATES OR PARENTS OF A PARTY) FOR
WHICH A PARTY OWES THE OTHER PARTY AN INDEMNITY UNDER THIS ARTICLE VIII SHALL
NOT BE WAIVED. REP hereby fully and unconditionally releases Seller and their
affiliates and subsidiaries and their officer, directors and employees, from any
and all claims, causes of action or damages, if any, arising in favor of REP in
connection with its sale of the Purchased Property.

 

13.16       Waiver of Consumer Rights.  REP hereby waives it rights under the
Texas Deceptive Trade Practices — Consumer Protection Act, Section 17.41 et
seq., Business and Commerce Code, a law that gives consumers special rights and
protections, and any similar law in any other state to the extent such Act or
similar law would otherwise apply.  After consultation with an attorney of REP’s
own selection, REP voluntarily consents to this waiver.  To evidence REP’s
ability to grant such wavier, REP represents to Seller that it (a) is in the
business of seeking or acquiring, by purchase or lease, goods or services for
commercial or business use, (b) has knowledge and experience in financial and
business matters that enable it to evaluate the merits and risks of the
transactions contemplated hereby, (c) is not in a significantly disparate
bargaining position, and (d) has consulted with, and is represented by, an
attorney of REP’s own selection in connection with this transaction, and such
attorney was not directly or indirectly identified, suggested or selected by
Seller or an agent of Seller.

 

30

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

 

13.17       WAIVER OF RIGHT TO JURY TRIAL.  THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER
OR IN CONNECTION WITH THE TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY, AND CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK OR ENFORCE THE WAIVERS IN THIS PARAGRAPH.

 

13.18       Waiver of Agreement Terms. Any of the terms, provisions, covenants,
representations, warranties or conditions hereof may be waived only by a written
instrument executed by the party waiving compliance. Except as otherwise
expressly provided in the Transaction Documents, the failure of any party at any
time or times to require performance of any provision hereof shall in no manner
affect such party’s right to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant, representation or
warranty contained in the Transaction Documents, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition or of the breach of any other term, provision, covenant,
representation or warranty.

 

13.19       Interpretation. The parties stipulate and agree that the Transaction
Documents shall be deemed and considered for all purposes to have been jointly
prepared by the parties, and shall not be construed against any one party (nor
shall any inference or presumption be made) on the basis of who drafted the
Transaction Documents or any particular provision hereof, who supplied the form
of Agreement, or any other event of the negotiation, drafting or execution of
the Transaction Documents. Each party agrees that the Transaction Documents has
been purposefully drawn and correctly reflects its understanding of the
transaction that it contemplates. In construing the Transaction Documents, the
following principles will apply.

 

(a)           The omission of certain provisions of this Agreement from the
assignment documents does not constitute a conflict or inconsistency between
this Agreement and the assignment documents, and will not effect a merger of the
omitted provisions. To the fullest extent permitted by law, all provisions of
this Agreement are hereby deemed incorporated into the assignment documents by
reference.

 

(b)           The Articles, Sections, Exhibits and Schedules referenced in this
Agreement refer to the Articles, Sections, Exhibits and Schedules of this
Agreement. The headings and titles in this Agreement are for convenience only
and shall have no significance in interpreting or otherwise affect the meaning
of this Agreement.

 

31

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

 

(c)           The term “knowledge,” as applied to either party, shall mean the
actual knowledge of such party’s (i) general partners in the case of a limited
partnership, or (ii) managers in the case of a limited liability company.

 

IN WITNESS WHEREOF, the authorized representatives of the parties executing this
Agreement on the dates stated below.

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:      4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

/s/ Rocky V. Emery

 

 

Name:

Rocky V. Emery

 

 

Title:

Manager

 

 

Date:

12-12-07

 

 

 

 

 

 

 

 

SANTA MARIA PACIFIC, LLC

 

 

 

 

 

By:

/s/ David Pratt

 

 

Name:

David Pratt

 

 

Title:

Manager

 

 

Date:

12-12-07

 

 

 

 

GITTE-TEN, LLC

 

 

 

 

 

By:

/s/ David Pratt

 

 

Name:

David Pratt

 

 

Title:

Manager

 

 

Date:

12-12-07

 

 

 

 

 

 

 

 

 

 

NW CASMALIA PROPERTIES, LLC

 

 

 

By:

/s/ David Pratt

 

 

Name:

David Pratt

 

 

Title:

Manager

 

 

Date:

12-12-07

 

 

32

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

 

 

PHOENIX ENERGY, LLC

 

 

 

 

 

By:

/s/ David Pratt

 

 

Name:

David Pratt

 

 

Title:

Manager

 

 

Date:

12-12-07

 

 

 

 

 

 

ORCUTT PROPERTIES, LLC

 

 

 

 

 

By:

/s/ David Pratt

 

 

Name:

David Pratt

 

 

Title:

Manager

 

 

Date:

12-12-07

 

 

33

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

 

INDEX OF EXHIBITS

 

Exhibit A

 

Approved Development Operations

Exhibit B

 

Development Agreement

Exhibit C

 

NW Casmalia Leases

Exhibit D

 

NW Casmalia Operating Agreement

Exhibit E

 

Orcutt Diatomite Operating Agreement

Exhibit F

 

Orcutt GTL Leases

Exhibit G

 

Orcutt Non-Diatomite Operating Agreement (PEL)

Exhibit H

 

Orcutt Non-Diatomite Operating Agreement (GTL)

Exhibit I

 

Orcutt OPL Leases

Exhibit J

 

Orcutt PEL Leases

Exhibit K

 

Payout Computation Procedures

Exhibit L

 

Permitted Encumbrances

Exhibit M

 

Net Revenue Interest Per Working Interest Percentage

Exhibit N

 

Purchase Option Agreement

Exhibit O

 

Release Agreement

Exhibit P

 

Litigation

Exhibit Q

 

Unleased Interests

Exhibit R

 

Form of Assignment

 

34

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

 

Exhibit C

 

CONSENT LEASES

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
April 19, 2000, by and between Richard Maretti, as Lessor, and Fuller Oil
Company, as Lessee, recorded on October 25, 2000, as Document Number
2000-0065245, covering 289.45 acres, more or less, being the Northwest Quarter
of the Northeast Quarter, the Southeast Quarter of the Northeast Quarter and
Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast
Quarter of Section 4 all in Township 9 North, Range 35 West, S. B. B. & M.,
County of Santa Barbara, State of California and shown as Santa Barbara County
Assessor’s Parcel # APN 113-220-07; as Amended in that certain Amendment of Oil
and Gas Lease recorded on December 8, 2004, as Document Number 2004-0129189; and
as further amended in that certain unrecorded Amendment of Oil, Gas and Mineral
Lease executed October 26, 2006.

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 16, 2000, by and between Clarence Minetti Family Partnership, as Lessor, and
Fuller Oil Company, as Lessee, recorded on October 25, 2000, as Document Number
2000-0065244, covering 289.45 acres, more or less, being the Northwest Quarter
of the Northeast Quarter, the Southeast Quarter of the Northeast Quarter and
Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast
Quarter of Section 4 all in Township 9 North, Range 35 West, S. B. B. & M.,
County of Santa Barbara, State of California and shown as Santa Barbara County
Assessor’s Parcel # APN 113-220-07; as Amended in that certain Amendment of Oil
and Gas Lease recorded on December 8, 2004, as Document Number 2004-0129188; and
as further amended in that certain unrecorded Amendment of Oil, Gas and Mineral
Lease executed November 14, 2006.

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
June 2, 2000, by and between Marlene Torres, as Lessor, and Fuller Oil Company,
as Lessee, recorded on October 25, 2000, as Document Number 2000-0065246,
covering 289.45 acres, more or less, being the Northwest Quarter of the
Northeast Quarter, the Southeast Quarter of the Northeast Quarter and Lots 2, 3,
4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast Quarter of
Section 4 all in Township 9 North, Range 35 West, S. B. B. & M., County of Santa
Barbara, State of California and shown as Santa Barbara County Assessor’s Parcel
# APN 113-220-07; as Amended in that certain Amendment of Oil and Gas Lease
recorded on December 8, 2004, as Document Number 2004-0129190; and as further
amended in that certain unrecorded Amendment of Oil, Gas and Mineral Lease
executed October 31, 2006.

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Wilma R. Maretti, Trustee of the Wilma R. Maretti
Trust, as Lessor, and Fuller Oil Company, as Lessee, recorded on October 25,
2000, as Document Number 2000-0065243, covering 289.45 acres, more or less,
being the Northwest Quarter of the Northeast Quarter, the Southeast Quarter of
the Northeast Quarter and Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest
Quarter of the Southeast Quarter of Section 4 all in Township 9 North, Range 35
West, S. B. B. & M., County of Santa Barbara, State of California and shown as
Santa Barbara County Assessor’s Parcel # APN 113-220-07; as Amended in that
certain Amendment of Oil and Gas Lease recorded on December 8, 2004, as Document
Number 2004-0129186.

 

1

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

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Mark J. Maretti, as Lessor, and Fuller Oil Company,
as Lessee, recorded on October 25, 2000, as Document Number 2000-0065242,
covering 289.45 acres, more or less, being the Northwest Quarter of the
Northeast Quarter, the Southeast Quarter of the Northeast Quarter and Lots 2, 3,
4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast Quarter of
Section 4 all in Township 9 North, Range 35 West, S. B. B. & M., County of Santa
Barbara, State of California and shown as Santa Barbara County Assessor’s Parcel
# APN 113-220-07; as Amended in that certain Amendment of Oil and Gas Lease
recorded on December 8, 2004, as Document Number 2004-0129187.

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:   Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Charles Maretti, as Lessor, and Fuller Oil Company,
as Lessee, recorded on October 25, 2000, as Document Number 2000-0065241,
covering 289.45 acres, more or less, being the Northwest Quarter of the
Northeast Quarter, the Southeast Quarter of the Northeast Quarter and Lots 2, 3,
4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast Quarter of
Section 4 all in Township 9 North, Range 35 West, S. B. B. & M., County of Santa
Barbara, State of California and shown as Santa Barbara County Assessor’s Parcel
# APN 113-220-07; as Amended in that certain Amendment of Oil and Gas Lease
recorded on December 8, 2004, as Document Number 2004-0129185.

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Ruthanne M. Gamble, as Lessor, and Fuller Oil
Company, as Lessee, recorded on October 25, 2000, as Document Number
2000-0065240, covering 289.45 acres, more or less, being the Northwest Quarter
of the Northeast Quarter, the Southeast Quarter of the Northeast Quarter and
Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast
Quarter of Section 4 all in Township 9 North, Range 35 West, S. B. B. & M.,
County of Santa Barbara, State of California and shown as Santa Barbara County
Assessor’s Parcel # APN 113-220-07; as Amended in that certain Amendment of Oil
and Gas Lease recorded on December 8, 2004, as Document Number 2004-0129191.

 

•                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
March 23, 1998, effective March 30, 1999 and extended by Daystar Resources, Ltd.
letter dated January 17, 2000, by and between Ernest E. Righetti, II, Et Al, as
Lessor, and Viking Exploration, Inc., as Lessee, recorded on January 13, 2000,
as Document Number 2000-0005842, of the Official Records, County of Santa
Barbara, State of California, covering 2,928.28 acres, more or less, being
Unincorporated Subdivision Lots 121, 122, 123, and 124 of the Rancho Guadalupe,
as shown on the Subdivision Map filed in Book B at Page 422 of the Miscellaneous
Records in the office of the County Recorder of the County of Santa Barbara,
State of California and shown as Santa Barbara County Assessor’s Parcels # APN
113-200-07, APN 113-200-17, APN 113-200-06, APN 113-230-01, and APN 113-190-05;
Subdivision #13 and O. C. Field Parcel of the Rancho Punta De La Laguna as shown
on the Subdivision Map filed in Book 1 at Page 19 of the Miscellaneous Map
Records in the office of the County Recorder of the County of Santa Barbara,
State of California and shown as Santa Barbara County Assessor’s Parcels APN
113-230-07 and APN 113-200-08; as Amended by that Addenda To Oil, Gas and
Mineral Lease Agreement, dated September 30, 2000, adding 315.42 acres of land,
more or less, out of a 395.42 acre tract of the Rancho Punta De La Laguna as
shown on the Subdivision Map filed in Book 1 at Page 19 of the Miscellaneous Map
Records in the office of the County Recorder of Santa Barbara County,

 

2

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

 

California and shown as Santa Barbara County Assessor Parcel No. 113-230-06,
Less and Except that 80 acres under lease to Unocal; as Amended in that certain
Amendment of Oil and Gas Lease recorded on December 8, 2004, as Document Number
2004-0129192 of the Official Records, County of Santa Barbara, State of
California.

 

3

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

 

Exhibit K

 

PAYOUT COMPUTATION PROCEDURES

 

Section 1.  Application. Payout for purposes of the Transaction Documents and
all assignments by the SMP Parties to REP pursuant to the Transaction Documents
shall be computed in accordance with this Payout Computation Procedures.

 

Section 2.  Payout.  Payout with respect to the NW Casmalia Purchased Property
shall occur at the point in time that the total cumulative NW Casmalia Purchased
Property Gross Proceeds equals the total cumulative NW Casmalia Property
Debits.  Payout with respect to the Orcutt Purchased Property shall occur at the
point in time that the total cumulative Orcutt Purchased Property Gross Proceeds
equals the total cumulative Orcutt Property Debits.

 

Section 3.  Definitions. The definitions of the terms contained in the Base
Agreement are incorporated herein.  Unless otherwise defined herein, all terms
defined in the this Payout Computation Procedures shall have the meanings
assigned to them in the sections and subsections referred to below:

 

3.1          “Base Agreement” shall mean the Base Agreement by and between Rock
Energy Partners, LP, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia
Properties, LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC dated as of
December 1, 2007.

 

3.2          “Debits” shall mean the following:

 

(a)           All Direct Costs incurred after the relevant Effective Date and
actually paid by REP, including but not limited to the following:  (i) drilling,
completing, testing, equipping, plugging back, reworking, recompleting and
plugging and abandoning any well), whether or not such well is a producer or is
abandoned as a dry hole or junked, (ii) constructing gathering facilities, tanks
and other production and delivery facilities), (iii) for secondary recovery,
pressure maintenance, repressuring, recycling and other operations conducted for
the purpose of enhancing production), (iv) labor (including fringe benefits) and
other services necessary for developing, operating, producing, reworking and
maintaining, (v) dehydration, compression, separation, transportation and
marketing of the hydrocarbons, and (vi) materials, supplies, equipment and other
personal property and fixtures purchased for use on, or in connection with
operations;

 

(b)           All taxes (except income, transfer, inheritance, estate, franchise
and like taxes) incurred after the relevant Effective Date and actually paid by
REP, including without limitation production, severance, and/or excise and other
taxes assessed against, and/or measured by, the production of (or the proceeds
or value of production of) hydrocarbons, occupation taxes, sales and use taxes,
and ad valorem taxes assessed equipment located an any of the property;

 

(c)           All amounts incurred after the relevant Effective Date and
actually paid by REP and consisting of (i) rent and other consideration paid for
the use or damage to the surface and (ii) rentals, shut-in gas well royalties,
minimum royalties and similar

 

1

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

 

payments payable pursuant to the provisions of agreements in force and effect
before the Effective Date;

 

(d)           The Prior Agreements Payments; and

 

(e)           The Purchase Option Payments.

 

3.3          “Gross Proceeds” shall mean all consideration received, directly or
indirectly, for sales or other dispositions of hydrocarbons produced subsequent
to the relevant Effective Date.  If any proceeds are withheld from the Working
Interest owner for any reason (other than at its request or due to its
negligence), such proceeds shall not be considered to be Gross Proceeds until
such proceeds are actually received.  Gross Proceeds shall not include any
amounts for hydrocarbons unavoidably lost in production or used in conformity
with good oil field practices for development drilling and production operations
(including without limitation gas injection, fuel, secondary or tertiary
recovery, pressure maintenance, repressuring or recycling operations) conducted
solely for the purpose of producing hydrocarbons from the Subject Interest, but
only so long as such hydrocarbons are so used.

 

3.4          “NW Casmalia Carry Obligation Debits” shall mean Debits
attributable to (i) Working Interests in the NW Casmalia Leases that are not
owned by REP, and (ii) which were incurred by REP solely as a consequence of its
Carry Obligation under the Base Agreement.

 

3.5          “NW Casmalia Payout Account “ shall mean the accounting of NW
Casmalia Property Gross Proceeds and NW Casmalia Property Debits.

 

3.6          “NW Casmalia Property Debits” shall mean the sum of (i) NW Casmalia
Carry Obligation Debits, (ii) NW Casmalia Purchased Property Debits, and
(iii) fifty percent (50%) of the amount of any Purchase Option Payment.

 

3.7          “NW Casmalia Purchased Property Debits” shall mean Debits of the
type described in Section 3.2(a), (b) and (c) that are attributable to the NW
Casmalia Purchased Property.

 

3.8          “NW Casmalia Purchased Property Gross Proceeds” shall mean the
Gross Proceeds attributable to the NW Casmalia Purchased Property.

 

3.9          “NW Casmalia Purchased Property” shall mean any NW Casmalia
Property acquired by REP from the SMP Parties pursuant to the terms of the
Transaction Documents.

 

3.10        “Orcutt Carry Obligation Debits” shall mean Debits attributable to
(i) Working Interests in the Orcutt Leases that are not owned by REP, and
(ii) which were incurred by REP solely as a consequence of its Carry Obligation
under the Base Agreement.

 

2

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

 

3.11        “Orcutt Property Debits” shall mean the sum of (i) Orcutt Carry
Obligation Debits, (ii) Orcutt Purchased Property Debits, (iii) the Prior
Agreements Payments, and (iv) fifty percent (50%) of the amount of any Purchase
Option Payments.

 

3.12        “Orcutt Purchased Property” shall mean the Initial Orcutt Interests,
the Second Orcutt Interests and any additional Orcutt Property acquired by REP
from the SMP Parties pursuant to the terms of the Transaction Documents.

 

3.13        “Orcutt Purchased Property Debits” shall mean Debits of the type
described in Section 3.2(a), (b) and (c) that are attributable to the Orcutt
Purchased Property.

 

3.14        “Orcutt Purchased Property Gross Proceeds” shall mean the Gross
Proceeds attributable to the Orcutt Purchased Property.

 

3.14        “Prior Agreements Payments” shall mean the sum of Four Million Seven
Hundred Eighty Thousand and 00/100 ($4,780,000.00) paid by REP to the SMP
Parties pursuant to the Prior Agreements.

 

3.15        “Purchase Option Payments” shall mean the sum of payments (if any)
made by REP pursuant to the Purchase Option Agreement to exercise options
granted thereunder.

 

3.15        “REP” shall mean Rock Energy Partners, L.P. and its assignees.

 

3

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

 

EXHIBIT L

 

PERMITTED ENCUMBRANCES

 

·                                          The Sector Mortgage Indebtedness.

 

·                                          All agreements, instruments,
documents, liens, encumbrances, and other matters, and the terms and provisions
thereof described or referred to in the Title Opinions.

 

·                                          On November 13, 2007, Hunter Dos Tres
(“Hunter”) filed an action for declaratory relief against Orcutt Properties, LLC
et al in connection with Oil, Gas and Mineral Lease titled “Oil, Gas and Mineral
Lease; Hunter/CHI Careaga Version” dated November 1, 2003 by and between Hunter
Dos Tres Corporation and Careaga Hydrocarbons, Inc. recorded on November 6, 2003
as Document Number 2003-0153072 in the Official Records of the County of Santa
Barbara, State of California (the “Hunter Lease”).  Hunter alleges that the
Hunter Lease has terminated due to the defendants’ failure to produce
hydrocarbons in paying quantities as required by the Lease.  A response to the
complaint is due on or before December 19, 2007.  Orcutt Properties, LLC
disputes all claims and is in the process of negotiating a settlement with
Hunter, which includes a ratification of the Hunter Lease.

 

·                                          Orcutt Properties, LLC has received
notice of a potential default under that certain Oil, Gas and Mineral Lease
dated August 18, 2005 by and between Breitburn Energy Company, L.P.
(“Breitburn”) and Daystar Resources, Ltd. recorded on September 2, 2005 as
Document Number 2005-0086090 in the Official Records of the County of Santa
Barbara, State of California (“Breitburn Lease”).  Breitburn alleges that it was
not given the right to consent to the transfer of operating rights from Daystar
Resources, Ltd to Santa Maria Pacific, LLC as required by Section 23 of the
Breitburn Lease.  Orcutt Properties, LLC disputes this claim as notice was
provided to Breitburn and consent obtained in March 2007.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by Gitte-Ten, LLC:  Oil and Gas Lease dated October 22, 1975, the Short
Form of which was recorded May 21, 1976 in Book 2613, Page 1562 by and between
SHELL OIL COMPANY as Lessor, and MONTARA PETROLEUM COMPANY as Lessee, Official
Records of Santa Barbara County, California.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
April 19, 2000, by and between Richard Maretti, as Lessor, and Fuller Oil
Company, as Lessee, recorded on October 25, 2000, as Document Number
2000-0065245, covering 289.45 acres, more or less, being the Northwest Quarter
of the Northeast Quarter, the Southeast Quarter of the Northeast Quarter and
Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast
Quarter of Section 4 all in Township 9 North, Range 35 West, S. B. B. & M.,
County of Santa Barbara, State of California and shown as Santa Barbara County
Assessor’s Parcel # APN 113-220-07; as Amended in that certain Amendment of Oil
and Gas Lease recorded on December 8, 2004, as Document Number 2004-0129189; and
as further amended in that certain unrecorded Amendment of Oil, Gas and Mineral
Lease executed October 26, 2006.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 16, 2000, by and between Clarence Minetti Family Partnership, as Lessor, and
Fuller Oil

 

1

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

 

Company, as Lessee, recorded on October 25, 2000, as Document Number
2000-0065244, covering 289.45 acres, more or less, being the Northwest Quarter
of the Northeast Quarter, the Southeast Quarter of the Northeast Quarter and
Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast
Quarter of Section 4 all in Township 9 North, Range 35 West, S. B. B. & M.,
County of Santa Barbara, State of California and shown as Santa Barbara County
Assessor’s Parcel # APN 113-220-07; as Amended in that certain Amendment of Oil
and Gas Lease recorded on December 8, 2004, as Document Number 2004-0129188; and
as further amended in that certain unrecorded Amendment of Oil, Gas and Mineral
Lease executed November 14, 2006.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
June 2, 2000, by and between Marlene Torres, as Lessor, and Fuller Oil Company,
as Lessee, recorded on October 25, 2000, as Document Number 2000-0065246,
covering 289.45 acres, more or less, being the Northwest Quarter of the
Northeast Quarter, the Southeast Quarter of the Northeast Quarter and Lots 2, 3,
4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast Quarter of
Section 4 all in Township 9 North, Range 35 West, S. B. B. & M., County of Santa
Barbara, State of California and shown as Santa Barbara County Assessor’s Parcel
# APN 113-220-07; as Amended in that certain Amendment of Oil and Gas Lease
recorded on December 8, 2004, as Document Number 2004-0129190; and as further
amended in that certain unrecorded Amendment of Oil, Gas and Mineral Lease
executed October 31, 2006.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Wilma R. Maretti, Trustee of the Wilma R. Maretti
Trust, as Lessor, and Fuller Oil Company, as Lessee, recorded on October 25,
2000, as Document Number 2000-0065243, covering 289.45 acres, more or less,
being the Northwest Quarter of the Northeast Quarter, the Southeast Quarter of
the Northeast Quarter and Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest
Quarter of the Southeast Quarter of Section 4 all in Township 9 North, Range 35
West, S. B. B. & M., County of Santa Barbara, State of California and shown as
Santa Barbara County Assessor’s Parcel # APN 113-220-07; as Amended in that
certain Amendment of Oil and Gas Lease recorded on December 8, 2004, as Document
Number 2004-0129186.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Mark J. Maretti, as Lessor, and Fuller Oil Company,
as Lessee, recorded on October 25, 2000, as Document Number 2000-0065242,
covering 289.45 acres, more or less, being the Northwest Quarter of the
Northeast Quarter, the Southeast Quarter of the Northeast Quarter and Lots 2, 3,
4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast Quarter of
Section 4 all in Township 9 North, Range 35 West, S. B. B. & M., County of Santa
Barbara, State of California and shown as Santa Barbara County Assessor’s Parcel
# APN 113-220-07; as Amended in that certain Amendment of Oil and Gas Lease
recorded on December 8, 2004, as Document Number 2004-0129187.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:   Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Charles Maretti, as Lessor, and Fuller Oil Company,
as Lessee, recorded on October 25, 2000, as Document Number 2000-0065241,
covering 289.45 acres, more or less, being the Northwest Quarter of the
Northeast Quarter, the Southeast Quarter of the Northeast Quarter and Lots 2, 3,
4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast Quarter of
Section 4 all in Township 9 North, Range 35 West, S. B. B. & M., County

 

2

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

 

of Santa Barbara, State of California and shown as Santa Barbara County
Assessor’s Parcel # APN 113-220-07; as Amended in that certain Amendment of Oil
and Gas Lease recorded on December 8, 2004, as Document Number 2004-0129185.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
May 31, 2000, by and between Ruthanne M. Gamble, as Lessor, and Fuller Oil
Company, as Lessee, recorded on October 25, 2000, as Document Number
2000-0065240, covering 289.45 acres, more or less, being the Northwest Quarter
of the Northeast Quarter, the Southeast Quarter of the Northeast Quarter and
Lots 2, 3, 4, 5, 6, and 7 of Section 9; the Southwest Quarter of the Southeast
Quarter of Section 4 all in Township 9 North, Range 35 West, S. B. B. & M.,
County of Santa Barbara, State of California and shown as Santa Barbara County
Assessor’s Parcel # APN 113-220-07; as Amended in that certain Amendment of Oil
and Gas Lease recorded on December 8, 2004, as Document Number 2004-0129191.

 

·                                          The transfer of a working interest to
REP requires the prior consent of the lessor pursuant to the following lease
held by NW Casmalia, LLC Et Al:  Oil, Gas and Mineral Lease Agreement dated
March 23, 1998, effective March 30, 1999 and extended by Daystar Resources, Ltd.
letter dated January 17, 2000, by and between Ernest E. Righetti, II, Et Al, as
Lessor, and Viking Exploration, Inc., as Lessee, recorded on January 13, 2000,
as Document Number 2000-0005842, of the Official Records, County of Santa
Barbara, State of California, covering 2,928.28 acres, more or less, being
Unincorporated Subdivision Lots 121, 122, 123, and 124 of the Rancho Guadalupe,
as shown on the Subdivision Map filed in Book B at Page 422 of the Miscellaneous
Records in the office of the County Recorder of the County of Santa Barbara,
State of California and shown as Santa Barbara County Assessor’s Parcels # APN
113-200-07, APN 113-200-17, APN 113-200-06, APN 113-230-01, and APN 113-190-05;
Subdivision #13 and O. C. Field Parcel of the Rancho Punta De La Laguna as shown
on the Subdivision Map filed in Book 1 at Page 19 of the Miscellaneous Map
Records in the office of the County Recorder of the County of Santa Barbara,
State of California and shown as Santa Barbara County Assessor’s Parcels APN
113-230-07 and APN 113-200-08; as Amended by that Addenda To Oil, Gas and
Mineral Lease Agreement, dated September 30, 2000, adding 315.42 acres of land,
more or less, out of a 395.42 acre tract of the Rancho Punta De La Laguna as
shown on the Subdivision Map filed in Book 1 at Page 19 of the Miscellaneous Map
Records in the office of the County Recorder of Santa Barbara County, California
and shown as Santa Barbara County Assessor Parcel No. 113-230-06, Less and
Except that 80 acres under lease to Unocal; as Amended in that certain Amendment
of Oil and Gas Lease recorded on December 8, 2004, as Document Number
2004-0129192 of the Official Records, County of Santa Barbara, State of
California.

 

3

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

 

Exhibit O

 

RELEASE AGREEMENT

 

This Release Agreement (“Agreement”) is made as of December 14, 2007 by and
between Rock Energy Partners, LP, Rock Energy Partners Operating, LP, 4R Oil and
Gas, LLC, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC,
Phoenix Energy, LLC, and Orcutt Properties, LLC.

 

R E C I T A L S:

 

WHEREAS, certain of the Parties entered into the Prior Agreements (defined
below);

 

WHEREAS, disputes have arisen between the REP Parties (defined below) and the
SMP Parties (defined below) relating to the Prior Agreements;

 

WHEREAS, the Parties have entered into the Base Agreement (defined below);

 

WHEREAS, the Parties have consulted with their respective counsel and have been
informed of and understand the costs, burdens, risks, and uncertainties that
exist with respect to continued pursuit of their disputes;

 

WHEREAS, in order to avoid the costs, inconvenience, burdens, and uncertainties
associated with continuing these disputes, among other things, the Parties
desire to settle all claims and causes of action, whether known or unknown,
currently existing between them as set forth below;

 

NOW, THEREFORE, for and in consideration of the recitals set forth above and the
agreements, promises, releases, covenants, representations, and warranties made
by the Parties in this Agreement and the Base Agreement, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Parties hereby mutually agree as follows:

 

ARTICLE I

 

Definitions

 

The definitions of the terms contained in the Base Agreement are incorporated
herein.  All terms defined in the Base Agreement will have the same meaning when
employed in this Agreement.  The following additional terms as used in this
Agreement shall have the meanings indicated below unless the context otherwise
requires:

 

1.1.         “4R” shall mean 4R Oil & Gas, LLC.

 

1.2.         “Base Agreement” shall mean the Agreement dated December 1, 2007
between Rock Energy Partners, LP, Rock Energy Partners Operating, LP, 4R Oil and
Gas, LLC, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC,
Phoenix Energy, LLC, and Orcutt Properties, LLC.

 

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

 

1.3.         “Confidentiality Agreement” shall mean the agreement between REP
and SMP dated November 21, 2005.

 

1.4.         “GTL” shall mean Gitte-Ten, LLC.

 

1.5.         “Parties” shall mean collectively the SMP Parties and the REP
Parties.

 

1.6.         “PEL” shall mean Phoenix Energy, LLC.

 

1.7.         “Prior Agreements” shall mean (i) the Option Agreement dated
April 24, 2007 between REP, NWCP and SMP with respect the NW Casmalia Project,
(ii) the Letter Agreement dated July 23, 2007 between REP, NWCP and SMP
superceding the April 24, 2007 Option Agreement with respect to the NW Casmalia
Project, (iii) Letter Agreement dated April 24, 2007 between REP, SMP, GTL, PEL
and OPL pertaining to the Orcutt Project, (iv) Letter Agreement dated May 4,
2007 between REP, GTL, PEL, OPL and SMP, (v) Letter Agreement dated July 23,
2007 between REP, SMP, GTL, PEL and OPL superceding the April 24, 2007 Letter
Agreement pertaining to the Orcutt Project, (vi) Non-Binding Letter of Intent
dated September 5, 2007 between REP and SMP, (vii) Letter Agreement dated
June 10, 2006 between REP and SMP with respect to future SMP Projects,
(viii) the Letter Agreement dated July 24, 2006 between REP and SMP amending the
June 10, 2006 Letter Agreement with respect to Future SMP Projects (ix) the
Letter Agreement dated June 10, 2006 between REP and SMP with respect to NW
Casmalia, (x) the Letter Agreement dated July 24, 2006 amending the June 10,
2006 Letter Agreement with respect to NW Casmalia, and (xi) any other agreement
between the SMP Parties and the REP Parties entered into prior to the date of
this Agreement.

 

1.8.         “REP” shall mean Rock Energy Partners, LP.

 

1.9.         “REPO” shall mean Rock Energy Partners Operating, LP.

 

1.10.       “REP Parties” shall mean REP, REPO and 4R.

 

1.11.       “SMP” shall mean Santa Maria Pacific, LLC.

 

1.12.       “SMP Parties” shall mean SMP, GTL, PEL and OPL.

 

1.13.       “Subject Claims” shall mean any and all claims, demands, and causes
of action of whatever kind or character which the releasing party has or may
have in the future based on any actions, failure to act, or events that have
occurred prior to the date of this Agreement which in any way relates to or are
based upon any of the following:

 

(i)            The Prior Agreements;

 

(ii)           Any other transactions of any kind among the SMP Parties and the
REP Parties; or

 

(iii)          any actual or alleged negotiations, discussions, representations,
warranties,

 

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

 

provisions or other undertakings by any SMP Party or REP Party in connection
with any of the foregoing prior to the date of this Agreement.

 

ARTICLE II

 

Acknowledgement

 

The REP Parties acknowledge that (i) the REP Parties defaulted under the Prior
Agreements, (ii) the Prior Agreements were terminated by the SMP Parties,
(iii) based upon the REP Parties’ performance under the Prior Agreements, only a
1.496% Working Interest assignment in the Orcutt Property was earned by REP,
(iv) based upon the REP Parties’ performance under the Prior Agreements, no
interest was earned by REP in the NW Casmalia Property, (v) the SMP Parties
performed their respective obligations under the Prior Agreements, and (vi) the
SMP Parties have incurred additional project expenses and delays as a
consequence of the REP Parties’ non-performance.

 

ARTICLE III

 

Termination

 

All Prior Agreements except the Confidentiality Agreement are hereby terminated
and of no further force and effect.

 

ARTICLE IV

 

Release by REP Parties

 

The REP Parties on behalf of themselves and to the extent they are permitted by
law or otherwise on behalf of all partners, members, shareholders and investors
— hereby generally release and forever discharge the (i) SMP Parties, (ii) all
officers, partners, managers, members, employees, representatives, and agents of
the SMP Parties (expressly including, but not limited to, Ray Powell, Mark
Harrington, David Pratt, Jack Piedmont, Mike Prats, Bill Dell Orfano, Bill Boss,
Snow Fogel Spence LLP, and Ramon Elias), from any and all Subject Claims.  THIS
RELEASE IS TO BE CONSTRUED AS THE BROADEST TYPE OF GENERAL RELEASE AND COVERS
AND RELEASES ANY AND ALL SUBJECT CLAIMS, WHETHER KNOWN OR UNKNOWN, AND HOWEVER
OR WHENEVER ARISING, WHETHER BY CONTRACT OR AGREEMENT, AT LAW OR UNDER ANY
STATUTE (INCLUDING WITHOUT LIMITATION ANY LAW OR STATUTE PERTAINING TO
NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY, FRAUD, DECEPTIVE TRADE
PRACTICES, NEGLIGENT REPRESENTATION, SECURITIES VIOLATIONS, BREACH OF FIDUCIARY
DUTY, BREACH OF CONTRACT, TRADE REGULATION, REGULATION OF BUSINESS OR
COMPETITION, CONSPIRACY OR RACKETEERING), OR OTHERWISE ARISING, AND EXPRESSLY
INCLUDING ANY CLAIMS FOR PUNITIVE OR EXEMPLARY DAMAGES, ATTORNEYS’ FEES, OR
PENALTIES.  THE REP PARTIES CERTIFY THAT THEY HAVE READ, UNDERSTAND AND
EXPRESSLY WAIVE THE FOLLOWING PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542:

 

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

 

“A general release does not extend to claims which creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 

THE REP PARTIES UNDERSTAND AND ACKNOWLEDGE THAT THE SIGNIFICANCE AND CONSEQUENCE
OF THIS WAIVER OF CALIFORNIA CIVIC CODE SECTION 1542 IS THAT EVEN IF ONE OF THEM
SHOULD EVENTUALLY SUFFER ADDITIONAL DAMAGES OR LOSSES FROM THEIR PRIOR
INTERACTIONS, OR SHOULD THERE EXIST OTHER UNDISCLOSED OBLIGATIONS OR LIABILITIES
EXISTING BETWEEN THEM, INCLUDING THEIR ASSIGNEES, THE REP PARTIES WILL NOT BE
ABLE TO MAKE ANY CLAIM FOR THOSE DAMAGES, LOSSES OR OBLIGATIONS.  FURTHERMORE,
THE REP PARTIES ACKNOWLEDGE THAT THEY INTEND THESE CONSEQUENCES EVEN AS TO
CLAIMS FOR DAMAGES, LOSSES OR OBLIGATIONS THAT MAY EXIST AS OF THE DATE OF THIS
AGREEMENT BUT WHICH THE REP PARTIES DO NOT KNOW EXIST, AND WHICH, IF KNOWN,
WOULD MATERIALLY AFFECT THEIR DECISION, EITHER SINGULARLY OR COLLECTIVELY, TO
EXECUTE THIS AGREEMENT, REGARDLESS OF THE CAUSE OF THEIR LACK OF KNOWLEDGE.  IT
IS UNDERSTOOD THAT THIS RELEASE DOES NOT EXTEND TO THE OBLIGATIONS OF THE SMP
PARTIES UNDER THE BASE AGREEMENT AND THE TRANSACTION DOCUMENTS EXECUTED IN
CONNECTION THEREWITH.

 

ARTICLE V

 

Release by SMP Parties

 

The SMP Parties on behalf of themselves and to the extent they are permitted by
law or otherwise on behalf of all partners, members, shareholders and investors
— hereby generally release and forever discharge the (i) REP Parties, (ii) all
officers, partners, members, employees, representatives, and agents of the REP
Parties (expressly including, but not limited to, Rocky Emery, Tom Elliot and
Baker Hostetler, LLP), from any and all Subject Claims (except any claim based
on breach of the Confidentiality Agreement).  THIS RELEASE IS TO BE CONSTRUED AS
THE BROADEST TYPE OF GENERAL RELEASE AND COVERS AND RELEASES ANY AND ALL SUBJECT
CLAIMS, WHETHER KNOWN OR UNKNOWN, AND HOWEVER OR WHENEVER ARISING, WHETHER BY
CONTRACT OR AGREEMENT, AT LAW OR UNDER ANY STATUTE (INCLUDING WITHOUT LIMITATION
ANY LAW OR STATUTE PERTAINING TO NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY,
FRAUD, DECEPTIVE TRADE PRACTICES, NEGLIGENT REPRESENTATION, SECURITIES
VIOLATIONS, BREACH OF FIDUCIARY DUTY, BREACH OF CONTRACT, TRADE REGULATION,
REGULATION OF BUSINESS OR COMPETITION, CONSPIRACY OR RACKETEERING), OR OTHERWISE
ARISING, AND EXPRESSLY INCLUDING ANY CLAIMS FOR PUNITIVE OR EXEMPLARY DAMAGES,
ATTORNEYS’ FEES, OR PENALTIES.  THE SMP PARTIES CERTIFY THAT THEY HAVE READ,
UNDERSTAND AND EXPRESSLY WAIVE THE FOLLOWING PROVISIONS OF CALIFORNIA CIVIL CODE
SECTION 1542:

 

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

 

“A general release does not extend to claims which creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 

THE SMP PARTIES UNDERSTAND AND ACKNOWLEDGE THAT THE SIGNIFICANCE AND CONSEQUENCE
OF THIS WAIVER OF CALIFORNIA CIVIC CODE SECTION 1542 IS THAT EVEN IF ONE OF THEM
SHOULD EVENTUALLY SUFFER ADDITIONAL DAMAGES OR LOSSES FROM THEIR PRIOR
INTERACTIONS, OR SHOULD THERE EXIST OTHER UNDISCLOSED OBLIGATIONS OR LIABILITIES
EXISTING BETWEEN THEM, INCLUDING THEIR ASSIGNEES, THE SMP PARTIES WILL NOT BE
ABLE TO MAKE ANY CLAIM FOR THOSE DAMAGES, LOSSES OR OBLIGATIONS.  FURTHERMORE,
THE SMP PARTIES ACKNOWLEDGE THAT THEY INTEND THESE CONSEQUENCES EVEN AS TO
CLAIMS FOR DAMAGES, LOSSES OR OBLIGATIONS THAT MAY EXIST AS OF THE DATE OF THIS
AGREEMENT BUT WHICH THE REP PARTIES DO NOT KNOW EXIST, AND WHICH, IF KNOWN,
WOULD MATERIALLY AFFECT THEIR DECISION, EITHER SINGULARLY OR COLLECTIVELY, TO
EXECUTE THIS AGREEMENT, REGARDLESS OF THE CAUSE OF THEIR LACK OF KNOWLEDGE.  IT
IS UNDERSTOOD THAT THIS RELEASE DOES NOT EXTEND TO THE OBLIGATIONS OF THE REP
PARTIES UNDER THE BASE AGREEMENT AND THE INSTRUMENTS EXECUTED IN CONNECTION
THEREWITH.

 

ARTICLE VI

 

Miscellaneous

 

6.1.         The Parties expressly acknowledge and understand that they may
hereafter discover facts in addition to or different from those that they now
believe to be true with respect to the subject matter of the matters released
herein.  But the Parties expressly agree that they have taken these
possibilities into account in electing to execute this Agreement, and that the
releases set forth herein shall be and remain in effect as full and complete
releases notwithstanding the discovery or existence of any such additional or
different facts, as to which the Parties expressly assume the risk.

 

6.2.         The Parties each REPRESENT, WARRANT and ACKNOWLEDGE that they have
been given a reasonable period of time to consider this Agreement and that they
have thoroughly reviewed it and agreed to its terms with the advice and counsel
of their respective attorneys.  Each of the Parties warrants that in executing
this Agreement they did not rely, and have not relied upon, any representation
or statement made by any other party or their agents, employees, representatives
or attorneys, with regard to facts underlying the subject matter, basis or
effect of this Agreement or as to any other facts or issues which might be
deemed material to their decision to enter into this Agreement, other than as
specifically stated in this Agreement.  Each of the Parties further warrants and
recognizes that this paragraph is binding, as a matter of law and fact, and
shall preclude them from asserting that they were wrongfully induced to enter

 

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

 

into this Agreement by any representation, promise or agreement, or statement of
a past or existing fact, which is not found in the four corners of this
Agreement.

 

6.3.         None of the Parties is relying upon a legal duty, if one exists, on
the part of any other party (or their officers, directors, employees, agents,
representatives or attorneys, past or present) to disclose any information in
connection with the execution of this Agreement or its preparation (other than
as specifically stated in this Agreement), it being expressly understood that
none of the Parties shall ever assert any failure to disclose information on the
part of any other party as a ground for challenging this Agreement.

 

6.4.         Each of the Parties hereto represents and warrants that it has not
assigned or conveyed, in whole or in part, to any other person or entity any
claim, or part thereof, which such Party has or had against a released party or
which is released in this Agreement, and that it owns the claims released in
this Agreement and has the authority to execute this Agreement and grant the
releases herein.  Each person who is a signatory hereto warrants and represents
that such person is authorized to sign this Agreement and has full authority to
bind the Party on whose behalf such person has signed this Agreement.

 

6.5.         If any provision of this Agreement is held unenforceable, the
remaining provisions of this Agreement will nevertheless continue in full force
and effect without being impaired or invalidated in any way.

 

6.6.         It is expressly understood and agreed that the terms hereof are
contractual and not mere recitals.

 

6.7.         The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against any party, as all parties or their
attorneys participated in the preparation of this Agreement.

 

6.8.         No provision of this Agreement shall be deemed waived unless such
waiver is made expressly and in writing.

 

6.9.         This Agreement may be modified or amended only by a writing signed
by all Parties to this Agreement or their respective authorized representatives,
successors, or assigns.

 

6.10.       This Agreement is fully and voluntarily entered into by the Parties
hereto.  Each party states that it has read this Agreement, has obtained advice
of counsel if it so desired, understands all of this Agreement, and executes
this Agreement voluntarily and of its own free will and accord with full
knowledge of the legal significance and consequences of this Agreement. 
CAUTION: READ THIS DOCUMENT CAREFULLY BEFORE SIGNING IT.  IT IS A LEGAL AND
BINDING CONTRACT AND MATERIALLY AFFECTS YOUR LEGAL RIGHTS.  BY SIGNING THIS
AGREEMENT, YOU ACKNOWLEDGE THAT YOU HAVE READ THIS ENTIRE AGREEMENT AND THE
RELEASES CONTAINED HEREIN AND THAT YOU FULLY UNDERSTAND AND AGREE TO ALL TERMS
HEREIN.

 

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

 

6.11.       This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which shall constitute one document.

 

6.12.       The Arbitration provisions set forth in Article X of the Base
Agreement are incorporated herein.

 

6.13.       THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCLUDING ANY
CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT APPLY THE LAW OF ANOTHER
JURISDICTION.  In the event that mandatory arbitration provided in Article X of
the Base Agreement is waived by the Parties or is determined to be inapplicable,
venue for any suit relating directly or indirectly to this Agreement shall be in
the State Court for Santa Barbara County, California or the Federal District
Court for the Central District of California.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals, on this the 14th day of December, 2007.

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

ROCK ENERGY PARTNERS OPERATING, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

4R OIL AND GAS, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

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

 

 

SANTA MARIA PACIFIC, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

GITTE-TEN, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

NW CASMALIA PROPERTIES, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

PHOENIX ENERGY, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

ORCUTT PROPERTIES, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

Date:

 

 

 

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

 

EXHIBIT Q

 

UNLEASED INTEREST

 

·                                          Orcutt GTL Leases:

 

·                                          An unleased and open mineral interest
owned by Breitburn Energy Company, LP. representing an approximate 4.545454%
undivided interest out of the Gitte-Ten, LLC Leasehold acreage  The remaining
interests and the lands covered thereby are described in those certain Oil, Gas
and Mineral Lease Agreements and descriptions set forth in Exhibit F to the Base
Agreement.

 

·                                          Orcutt OPL Leases:

 

·                                          An unleased and open mineral interest
owned by Breitburn Energy Company, LP. representing an approximate 4.545454%
undivided interest out of the Northern 1,000 acres, more or less, of the Orcutt
Properties, LLC Leasehold acreage  The remaining interests and the lands covered
thereby are described in those certain Oil, Gas and Mineral Lease Agreements and
descriptions set forth in Exhibit I to the Base Agreement.

 

·                                          An unleased and open mineral interest
owned by the Raymond J. MacDonald Trust representing approximately 0.757576% of
the Orcutt Properties, LLC Leasehold acreage  The remaining interests and the
lands covered thereby are described in those certain Oil, Gas and Mineral Lease
Agreements and descriptions set forth in Exhibit I to the Base Agreement.

 

·                                          New Casmalia Leases:

 

·                                          An unleased and open mineral interest
owned by the California Polytechnic State University representing an approximate
10% undivided interest out of 426.41 acres, more or less.  The remaining
interests and the lands covered thereby are described in those certain Oil, Gas
and Mineral Lease Agreements and descriptions listed under the leases
attributable to the Testamentary Trust created under the Last Will and Testament
of Rosario Andrea Curletti, deceased set forth in Exhibit C to the Base
Agreement.

 

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

EXHIBIT R

 

ASSIGNMENT AND BILL OF SALE

 

STATE OF CALIFORNIA

§

 

§

COUNTY OF SANTA BARBARA

§

 

This Assignment and Bill of Sale is executed and delivered by
                                                         (“ASSIGNOR”) to Rock
Energy Partners, LP (“ASSIGNEE”) pursuant to the terms of the Base Agreement
dated December 1, 2007 between Rock Energy Partners, LP, Santa Maria Pacific,
LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC, and
Orcutt Properties, LLC (the “Base Agreement”).

 

ARTICLE 1. CONVEYANCE

 

1.1                               Capitalized Terms. Each capitalized term used
in this Assignment that is not otherwise defined herein shall have the meaning
for such capitalized term as defined in the Base Agreement, which terms are
incorporated herein by such reference.

 

1.2                               Description of the Property. Subject to the
terms of the Base Agreement and this Assignment, ASSIGNOR hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS to ASSIGNEE a                    percent
(       %) BPO Working Interest reducing to a                          percent
(      %) APO Working Interest in the following described property rights:

 

1.2.1                     The oil, gas and mineral lease(s), and any
ratifications or amendments to such leases described in Exhibit A, INSOFAR AND
ONLY INSOFAR AS those interests, rights and leases cover and include the lands,
depths and rights described in Exhibit A attached hereto and made a part hereof
for all purposes (the “Leases”);

 

1.2.2                     All presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communalizations agreements, declarations
and/or orders (including, without limitation, all Units to the extent that they
relate to the Leases;

 

1.2.3                     All oil, gas and condensate wells (whether producing,
not producing or abandoned), water source, water injection and other injection
or disposal wells and systems located on the Leases or lands unitized or pooled
with the Leases (the “Wells”);

 

1.2.4                     ASSIGNOR’S interest in all equipment, facilities, flow
lines, pipelines, gathering systems (other than gas plant gathering systems),
Well pads, tank batteries, improvements, fixtures, inventory, spare parts,
tools, abandoned property and junk and other personal property on the Leases or
directly used in developing or operating the Leases and Wells or producing,
treating, store, compressing, processing or transporting hydrocarbons on the
Leases or lands included in Units with which the Leases may have been pooled or
unitized;

 

1

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

 

1.2.5                     To the extent assignable or transferable, ASSIGNOR’S
interest in all easements, rights-of-way, licenses, permits, servitudes, surface
leases, surface use agreements, and similar rights and interests to the extent
applicable to or used in operating the Leases; and

 

1.2.6                     To the extent assignable or transferable, ASSIGNOR’S
interest in all agreements, contracts and contractual rights, obligations and
interests INSOFAR ONLY as they cover and are attributable to the property
described in Sections 1.2.1 through 1.2.5 above.

 

The                percent (       %) BPO Working Interest and
                         percent (      %) APO Working Interest in the
above-described property rights and interests which is hereby assigned is
hereafter referred to as the “Property”.

 

1.3                               Agreement. This Assignment is made and
accepted subject to all of the terms of the Base Agreement, which are hereby
deemed incorporated by reference into this Assignment to the fullest extent
permitted by law. In the event of a conflict between the provisions of this
Assignment and the provisions of the Base Agreement, the provisions of the Base
Agreement shall take precedence.

 

ARTICLE 2. DISCLAIMER OF WARRANTIES AND TITLE DEFENSE

 

2.1                               DISCLAIMER OF TITLE WARRANTY AND ENCUMBRANCES.
ASSIGNOR CONVEYS THE PURCHASED PROPERTY TO ASSIGNEE SUBJECT TO THE PERMITTED
ENCUMBRANCES WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED. SPECIFICALLY WITH
RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING
A PART OF THE PURCHASED PROPERTY, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE
HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE
EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT
THEY MAY BE ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN
THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY,
MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE
AND EFFECT WITH RESPECT TO THE PIPELINES.   NO DUTY IS OWED BY ASSIGNOR TO
ASSIGNEE WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET
FORTH IN ARTICLE VIII OF THE BASE AGREEMENT.  ASSIGNOR SHALL HAVE NO LIABILITY
TO ASSIGNEE AS A RESULT OF ANY DEFAULT BY ASSIGNOR WITH RESPECT TO THE SECTOR
MORTGAGE INDEBTEDNESS OR ANY ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A
CONSEQUENCE OF SUCH DEFAULT.

 

2

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

 

2.2                               Defense of Title.  To the limited extent
provided in the Base Agreement, ASSIGNOR agrees to defend title to the Property
against the claims and demands (other than the Permitted Encumbrances as defined
in the Base Agreement) of all persons claiming the same or any part thereof by,
through or under ASSIGNOR but not otherwise.  Any title failure not arising by
through or under ASSIGNOR shall reduce the Net Revenue Interest of ASSIGNEE on a
proportionate basis.

 

2.3                               CONDITION AND FITNESS OF THE PROPERTY.  EXCEPT
AS EXPRESSLY SET FORTH IN THE BASE AGREEMENT, ASSIGNOR CONVEYS THE PROPERTY TO
ASSIGNEE WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF
ANY KIND INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY
OF THE PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE.
ASSIGNEE HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN
THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH
SURFACE AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS” AND IN ITS PRESENT CONDITION AND STATE OF REPAIR.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY AS TO (i) THE VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF ANY OIL, GAS OR OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER
OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.

 

2.4                               INFORMATION ABOUT THE PROPERTY.  EXCEPT AS
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, ASSIGNOR DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR
COMMUNICATIONS (ORALLY OR IN WRITING) TO ASSIGNEE (INCLUDING, BUT NOT LIMITED
TO, ANY INFORMATION CONTAINED IN ANY OPINION, INFORMATION, OR ADVICE THAT
MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR,
AGENT, CONSULTANT, ENGINEER OR ENGINEERING FIRM, REPRESENTATIVE, PARTNER,
MEMBER, BENEFICIARY, STOCKHOLDER OR CONTRACTOR) WHEREVER AND HOWEVER MADE WITH
RESPECT TO THE PROPERTY. ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA,

 

3

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

 

INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH THE PROPERTY.
ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY ASSIGNOR ARE PROVIDED TO
ASSIGNEE AS A CONVENIENCE AND ASSIGNEE’S RELIANCE ON OR USE OF THE SAME IS AT
ASSIGNEE’S SOLE RISK.  ASSIGNEE RECOGNIZES AND AGREES THAT ALL MATERIALS,
DOCUMENTS, AND OTHER INFORMATION, MADE AVAILABLE TO IT AT ANY TIME IN CONNECTION
WITH THE TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO
THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND
WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED OR
STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, AND
OTHER INFORMATION.  ASSIGNEE EXPRESSLY AGREES THAT ANY RELIANCE UPON OR
CONCLUSIONS DRAWN THEREFROM SHALL BE AT ASSIGNEE’S RISK TO THE MAXIMUM EXTENT
PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST
ASSIGNOR.  ASSIGNEE HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THE BASE
AGREEMENT, THIS ASSIGNMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY
MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO ASSIGNEE.

 

2.5                               ASSIGNEE is prohibited from assigning any
interest in the Property except in accordance with the terms of the Base
Agreement.  Any purported transfer in contravention of the Base Agreement is
null and void.

 

ARTICLE 3. OTHER PROVISIONS

 

3.1                               Further Assurances. ASSIGNOR and ASSIGNEE will
do, execute, acknowledge and deliver all further acts, conveyances and
instruments as may be reasonably necessary or appropriate to carry out the
intent of this Assignment and to more fully and accurately assign and convey the
Property to ASSIGNEE.

 

3.2                               Successors and Assigns. The provisions of this
Assignment shall be covenants running with the land, and this Assignment shall
extend to, be binding upon, and inure to the benefit of ASSIGNOR and ASSIGNEE,
and their respective successors and assigns.

 

3.3                               Assumption of Obligations. By its acceptance
of this Assignment, ASSIGNEE shall comply with and do hereby assume and agree to
perform ASSIGNEE’S proportionate part of all express and implied covenants,
obligations and reservations contained in the Leases and to which the Property
is subject and shall bear its proportionate share of all existing burdens on the
Leases, all to the extent provided in the Base Agreement.

 

3.4                               Counterparts. This Assignment may be executed
in multiple counterparts, each of which shall for all purposes constitute one
and the same instrument; provided, that, to facilitate recordation, in any
particular counterpart portions of the Exhibits and Schedules attached hereto
which describe Property situated in states and counties other than the state and
county in which such counterpart is to be recorded may have been omitted.

 

4

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

 

3.5                               Alternate Dispute Resolution. It is agreed, as
a severable and independent arbitration agreement separately enforceable from
the remainder of this Assignment, that if the parties hereto are unable to
amicably resolve any dispute or difference arising under or out of, in relation
to or in any way connected with this Assignment (whether contractual, tortious,
equitable, statutory or otherwise), such matter shall be finally and exclusively
referred to and settled by mediation or arbitration in accordance with the
alternate dispute resolution provisions set forth in the Base Agreement, the
terms and provisions of which are incorporated by reference herein.

 

3.6                               Attachments. The Exhibits attached to this
Assignment to which reference is herein made are incorporated herein by
reference and made a part hereof for all purposes.

 

3.7                               Governing Law. This Assignment is governed by
and must be construed according to the laws of the State of California,
excluding any conflicts-of-law rule or principle that might apply the law of
another jurisdiction.

 

3.8                               Severability. If any provision of this
Assignment is found by a court of competent jurisdiction to be invalid or
unenforceable, that provision will be deemed modified to the extent necessary to
make it valid and enforceable and if it cannot be so modified, it shall be
deemed deleted and the remainder of the Assignment shall continue and remain in
full force and effect.

 

The authorized representatives of ASSIGNOR and ASSIGNEE execute this Assignment
on the dates set forth in their respective acknowledgements hereto, but this
Assignment shall be effective for all purposes as of
                                    , 200    , at 7:00 a.m. Pacific Time.

 

 

ASSIGNOR:

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Date:

 

 

 

 

ASSIGNEE:

 

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Date:

 

 

5

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

 

Corporate Acknowledgment:

 

THE STATE OF

§

 

§

COUNTY OF

§

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                                                     of
                                                                    , known to
me to be the person whose name is subscribed to the foregoing instrument, and
swore to me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
                                                                      .

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of
                             , 2007.

 

 

 

 

 

 

 

 

 

Notary Public in and for

 

 

 

the State of

 

 

 

 

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

 

 

 

6

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

 

Partnership Acknowledgment:

 

THE STATE OF

§

 

§

COUNTY OF

§

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                       partner on behalf of
                                                                    , a
partnership, known to me to be the person whose name is subscribed to the
foregoing instrument, and swore to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said
                                                                      , a
partnership.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of
                                  , 2007.

 

 

 

 

 

Notary Public in and for

 

the State of

 

 

 

 

My Commission expires:

 

 

 

 

 

 

 

7

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

 

ASSIGNMENT AND BILL OF SALE

(Initial Orcutt GTL Interest)

 

STATE OF CALIFORNIA

§

 

§

COUNTY OF SANTA BARBARA

§

 

This Assignment and Bill of Sale is executed and delivered by Gitte-Ten, LLC
(“ASSIGNOR”) to Rock Energy Partners, LP (“ASSIGNEE”) pursuant to the terms of
the Base Agreement dated December 1, 2007 between Rock Energy Partners, LP,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC, and Orcutt Properties, LLC (the “Base Agreement”).

 

ARTICLE 1. CONVEYANCE

 

1.1                               Capitalized Terms. Each capitalized term used
in this Assignment that is not otherwise defined herein shall have the meaning
for such capitalized term as defined in the Base Agreement, which terms are
incorporated herein by such reference.

 

1.2                               Description of the Property. Subject to the
terms of the Base Agreement and this Assignment, ASSIGNOR hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS to ASSIGNEE a 1.65893% BPO Working Interest
reducing to a 1.49304% APO Working Interest in the oil, gas and mineral
lease(s), and any ratifications or amendments to such leases described in
Exhibit A, INSOFAR AND ONLY INSOFAR AS those interests, rights and leases cover
and include the lands, depths and rights described in Exhibit A attached hereto
and made a part hereof for all purposes (the “Leases”).  In addition, subject to
the terms of the Base Agreement and this Assignment, Assignor hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS a 1.496% BPO Working Interest reducing to a
1.346% APO Working Interest in the following:

 

1.2.1                     All presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communalizations agreements, declarations
and/or orders (including, without limitation, all Units to the extent that they
relate to the Leases;

 

1.2.2                     All oil, gas and condensate wells (whether producing,
not producing or abandoned), water source, water injection and other injection
or disposal wells and systems located on the Leases or lands unitized or pooled
with the Leases (the “Wells”);

 

1.2.3                     ASSIGNOR’S interest in all equipment, facilities, flow
lines, pipelines, gathering systems (other than gas plant gathering systems),
Well pads, tank batteries, improvements, fixtures, inventory, spare parts,
tools, abandoned property and junk and other personal property on the Leases or
directly used in developing or operating the Leases and Wells or producing,
treating, store, compressing, processing or transporting hydrocarbons on the
Leases on lands included in Units with which the Leases may have been pooled or
unitized;

 

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

 

1.2.4                     To the extent assignable or transferable, ASSIGNOR’S
interest in all easements, rights-of-way, licenses, permits, servitudes, surface
leases, surface use agreements, and similar rights and interests to the extent
applicable to or used in operating the Leases; and

 

1.2.5                     To the extent assignable or transferable, ASSIGNOR’S
interest in all agreements, contracts and contractual rights, obligations and
interests INSOFAR ONLY as they cover and are attributable to the property
described in Sections 1.2.1 through 1.2.4 above.

 

The Working Interests hereby assigned are hereafter referred to as the
“Property”.

 

1.3          Agreement. This Assignment is made and accepted subject to all of
the terms of the Base Agreement, which are hereby deemed incorporated by
reference into this Assignment to the fullest extent permitted by law. In the
event of a conflict between the provisions of this Assignment and the provisions
of the Base Agreement, the provisions of the Base Agreement shall take
precedence.

 

ARTICLE 2. DISCLAIMER OF WARRANTIES AND TITLE DEFENSE

 

2.1                               DISCLAIMER OF TITLE WARRANTY AND ENCUMBRANCES.
ASSIGNOR CONVEYS THE PURCHASED PROPERTY TO ASSIGNEE SUBJECT TO THE PERMITTED
ENCUMBRANCES WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED. SPECIFICALLY WITH
RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING
A PART OF THE PURCHASED PROPERTY, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE
HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE
EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT
THEY MAY BE ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN
THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY,
MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE
AND EFFECT WITH RESPECT TO THE PIPELINES.   NO DUTY IS OWED BY ASSIGNOR TO
ASSIGNEE WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET
FORTH IN ARTICLE VIII OF THE BASE AGREEMENT.  ASSIGNOR SHALL HAVE NO LIABILITY
TO ASSIGNEE AS A RESULT OF ANY DEFAULT BY ASSIGNOR WITH RESPECT TO THE SECTOR
MORTGAGE INDEBTEDNESS OR ANY ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A
CONSEQUENCE OF SUCH DEFAULT.

 

2.2                               Defense of Title.  To the limited extent
provided in the Base Agreement, ASSIGNOR

 

2

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

 

agrees to defend title to the Property against the claims and demands (other
than the Permitted Encumbrances as defined in the Base Agreement) of all persons
claiming the same or any part thereof by, through or under ASSIGNOR but not
otherwise.  Any title failure not arising by through or under ASSIGNOR shall
reduce the Net Revenue Interest of ASSIGNEE on a proportionate basis.

 

2.3                               CONDITION AND FITNESS OF THE PROPERTY.  EXCEPT
AS EXPRESSLY SET FORTH IN THE BASE AGREEMENT, ASSIGNOR CONVEYS THE PROPERTY TO
ASSIGNEE WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF
ANY KIND INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY
OF THE PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE.
ASSIGNEE HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN
THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH
SURFACE AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS” AND IN ITS PRESENT CONDITION AND STATE OF REPAIR.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY AS TO (i) THE VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF ANY OIL, GAS OR OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER
OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.

 

2.4                               INFORMATION ABOUT THE PROPERTY.  EXCEPT AS
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, ASSIGNOR DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR
COMMUNICATIONS (ORALLY OR IN WRITING) TO ASSIGNEE (INCLUDING, BUT NOT LIMITED
TO, ANY INFORMATION CONTAINED IN ANY OPINION, INFORMATION, OR ADVICE THAT
MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR,
AGENT, CONSULTANT, ENGINEER OR ENGINEERING FIRM, REPRESENTATIVE, PARTNER,
MEMBER, BENEFICIARY, STOCKHOLDER OR CONTRACTOR) WHEREVER AND HOWEVER MADE WITH
RESPECT TO THE PROPERTY. ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA,
INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH THE PROPERTY.
ANY DATA, INFORMATION OR OTHER RECORDS

 

3

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

 

FURNISHED BY ASSIGNOR ARE PROVIDED TO ASSIGNEE AS A CONVENIENCE AND ASSIGNEE’S
RELIANCE ON OR USE OF THE SAME IS AT ASSIGNEE’S SOLE RISK.  ASSIGNEE RECOGNIZES
AND AGREES THAT ALL MATERIALS, DOCUMENTS, AND OTHER INFORMATION, MADE AVAILABLE
TO IT AT ANY TIME IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREBY,
WHETHER MADE AVAILABLE PURSUANT TO THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE
TO IT AS AN ACCOMMODATION, AND WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND,
WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF
SUCH MATERIALS, DOCUMENTS, AND OTHER INFORMATION.  ASSIGNEE EXPRESSLY AGREES
THAT ANY RELIANCE UPON OR CONCLUSIONS DRAWN THEREFROM SHALL BE AT ASSIGNEE’S
RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY
LIABILITY OF OR AGAINST ASSIGNOR.  ASSIGNEE HEREBY WAIVES AND RELEASES ANY
CLAIMS ARISING UNDER THE BASE AGREEMENT, THIS ASSIGNMENT, COMMON LAW OR ANY
STATUTE ARISING OUT OF ANY MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO
ASSIGNEE.

 

2.5                               ASSIGNEE is prohibited from assigning any
interest in the Property except in accordance with the terms of the Base
Agreement.  Any purported transfer in contravention of the Base Agreement is
null and void.

 

ARTICLE 3. OTHER PROVISIONS

 

3.1                               Retained Overriding Royalty Interest. 
Assignor retains and excludes from this Assignment an overriding royalty
interest equal to the GTL Adjustment ORRI.

 

3.2                               Further Assurances. ASSIGNOR and ASSIGNEE will
do, execute, acknowledge and deliver all further acts, conveyances and
instruments as may be reasonably necessary or appropriate to carry out the
intent of this Assignment and to more fully and accurately assign and convey the
Property to ASSIGNEE.

 

3.3                               Successors and Assigns. The provisions of this
Assignment shall be covenants running with the land, and this Assignment shall
extend to, be binding upon, and inure to the benefit of ASSIGNOR and ASSIGNEE,
and their respective successors and assigns.

 

3.4                               Assumption of Obligations. By its acceptance
of this Assignment, ASSIGNEE shall comply with and do hereby assume and agree to
perform ASSIGNEE’S proportionate part of all express and implied covenants,
obligations and reservations contained in the Leases and to which the Property
is subject and shall bear its proportionate share of all existing burdens on the
Leases, all to the extent provided in the Base Agreement.

 

3.5                               Counterparts. This Assignment may be executed
in multiple counterparts, each of which shall for all purposes constitute one
and the same instrument; provided, that, to facilitate recordation, in any
particular counterpart portions of the Exhibits and Schedules attached hereto
which describe Property situated in states and counties other than the state and
county in which such counterpart is to be recorded may have been

 

4

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

 

omitted.

 

3.6                               Alternate Dispute Resolution. It is agreed, as
a severable and independent arbitration agreement separately enforceable from
the remainder of this Assignment, that if the parties hereto are unable to
amicably resolve any dispute or difference arising under or out of, in relation
to or in any way connected with this Assignment (whether contractual, tortious,
equitable, statutory or otherwise), such matter shall be finally and exclusively
referred to and settled by mediation or arbitration in accordance with the
alternate dispute resolution provisions set forth in the Base Agreement, the
terms and provisions of which are incorporated by reference herein.

 

3.7                               Attachments. The Exhibits attached to this
Assignment to which reference is herein made are incorporated herein by
reference and made a part hereof for all purposes.

 

3.8                               Governing Law. This Assignment is governed by
and must be construed according to the laws of the State of California,
excluding any conflicts-of-law rule or principle that might apply the law of
another jurisdiction.

 

3.9                               Severability. If any provision of this
Assignment is found by a court of competent jurisdiction to be invalid or
unenforceable, that provision will be deemed modified to the extent necessary to
make it valid and enforceable and if it cannot be so modified, it shall be
deemed deleted and the remainder of the Assignment shall continue and remain in
full force and effect.

 

The authorized representatives of ASSIGNOR and ASSIGNEE execute this Assignment
on the dates set forth in their respective acknowledgements hereto, but this
Assignment shall be effective for all purposes as of December 1, 2007, at
7:00 a.m. Pacific Time.

 

 

ASSIGNOR:

 

 

 

GITTE-TEN, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

5

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

 

 

ASSIGNEE:

 

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

6

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

 

THE STATE OF CALIFORNIA

§

 

§

COUNTY OF SANTA BARBARA

§

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                                                     of
Gitte-Ten, LLC, known to me to be the person whose name is subscribed to the
foregoing instrument, and swore to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said limited liability company.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of California

 

 

My Commission expires:

 

 

 

 

 

 

 

 

7

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

 

THE STATE OF TEXAS

§

 

§

COUNTY OF HARRIS

§

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                          , the
                                                   of 4R Oil & Gas, LLC, the
general partner on behalf of Rock Energy Partners, LP, a partnership, known to
me to be the person whose name is subscribed to the foregoing instrument, and
swore to me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
partnership.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of Texas

 

 

My Commission expires:

 

 

 

 

 

 

 

8

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

 

ASSIGNMENT AND BILL OF SALE

(Initial Orcutt PEL Interest)

 

STATE OF CALIFORNIA

§

 

§

COUNTY OF SANTA BARBARA

§

 

This Assignment and Bill of Sale is executed and delivered by Phoenix Energy,
LLC (“ASSIGNOR”) to Rock Energy Partners, LP (“ASSIGNEE”) pursuant to the terms
of the Base Agreement dated December 1, 2007 between Rock Energy Partners, LP,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC, and Orcutt Properties, LLC (the “Base Agreement”).

 

ARTICLE 1. CONVEYANCE

 

1.1                               Capitalized Terms. Each capitalized term used
in this Assignment that is not otherwise defined herein shall have the meaning
for such capitalized term as defined in the Base Agreement, which terms are
incorporated herein by such reference.

 

1.2                               Description of the Property. Subject to the
terms of the Base Agreement and this Assignment, ASSIGNOR hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS to ASSIGNEE a 1.496% BPO Working Interest
reducing to a 1.346% APO Working Interest in the following described property
rights:

 

1.2.1                     The oil, gas and mineral lease(s), and any
ratifications or amendments to such leases described in Exhibit A, INSOFAR AND
ONLY INSOFAR AS those interests, rights and leases cover and include the lands,
depths and rights described in Exhibit A attached hereto and made a part hereof
for all purposes (the “Leases”);

 

1.2.2                     All presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communalizations agreements, declarations
and/or orders (including, without limitation, all Units to the extent that they
relate to the Leases;

 

1.2.3                     All oil, gas and condensate wells (whether producing,
not producing or abandoned), water source, water injection and other injection
or disposal wells and systems located on the Leases or lands unitized or pooled
with the Leases (the “Wells”);

 

1.2.4                     ASSIGNOR’S interest in all equipment, facilities, flow
lines, pipelines, gathering systems (other than gas plant gathering systems),
Well pads, tank batteries, improvements, fixtures, inventory, spare parts,
tools, abandoned property and junk and other personal property on the Leases or
directly used in developing or operating the Leases and Wells or producing,
treating, store, compressing, processing or transporting hydrocarbons on the
Leases or lands included in Units with which the Leases may have been pooled or
unitized;

 

1

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

 

1.2.5                     To the extent assignable or transferable, ASSIGNOR’S
interest in all easements, rights-of-way, licenses, permits, servitudes, surface
leases, surface use agreements, and similar rights and interests to the extent
applicable to or used in operating the Leases; and

 

1.2.6                     To the extent assignable or transferable, ASSIGNOR’S
interest in all agreements, contracts and contractual rights, obligations and
interests INSOFAR ONLY as they cover and are attributable to the property
described in Sections 1.2.1 through 1.2.5 above.

 

The 1.496% BPO Working Interest and 1.346% APO Working Interest in the
above-described property rights and interests which is hereby assigned is
hereafter referred to as the “Property”.

 

1.3          Agreement. This Assignment is made and accepted subject to all of
the terms of the Base Agreement, which are hereby deemed incorporated by
reference into this Assignment to the fullest extent permitted by law. In the
event of a conflict between the provisions of this Assignment and the provisions
of the Base Agreement, the provisions of the Base Agreement shall take
precedence.

 

ARTICLE 2. DISCLAIMER OF WARRANTIES AND TITLE DEFENSE

 

2.1                               DISCLAIMER OF TITLE WARRANTY AND ENCUMBRANCES.
ASSIGNOR CONVEYS THE PURCHASED PROPERTY TO ASSIGNEE SUBJECT TO THE PERMITTED
ENCUMBRANCES WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED. SPECIFICALLY WITH
RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING
A PART OF THE PURCHASED PROPERTY, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE
HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE
EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT
THEY MAY BE ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN
THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY,
MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE
AND EFFECT WITH RESPECT TO THE PIPELINES.   NO DUTY IS OWED BY ASSIGNOR TO
ASSIGNEE WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET
FORTH IN ARTICLE VIII OF THE BASE AGREEMENT.  ASSIGNOR SHALL HAVE NO LIABILITY
TO ASSIGNEE AS A RESULT OF ANY DEFAULT BY ASSIGNOR WITH RESPECT TO THE SECTOR
MORTGAGE INDEBTEDNESS OR ANY ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A
CONSEQUENCE OF SUCH DEFAULT.

 

2

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

 

2.2                               Defense of Title.  To the limited extent
provided in the Base Agreement, ASSIGNOR agrees to defend title to the Property
against the claims and demands (other than the Permitted Encumbrances as defined
in the Base Agreement) of all persons claiming the same or any part thereof by,
through or under ASSIGNOR but not otherwise.  Any title failure not arising by
through or under ASSIGNOR shall reduce the Net Revenue Interest of ASSIGNEE on a
proportionate basis.

 

2.3                               CONDITION AND FITNESS OF THE PROPERTY.  EXCEPT
AS EXPRESSLY SET FORTH IN THE BASE AGREEMENT, ASSIGNOR CONVEYS THE PROPERTY TO
ASSIGNEE WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF
ANY KIND INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY
OF THE PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE.
ASSIGNEE HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN
THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH
SURFACE AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS” AND IN ITS PRESENT CONDITION AND STATE OF REPAIR.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY AS TO (i) THE VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF ANY OIL, GAS OR OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER
OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.

 

2.4                               INFORMATION ABOUT THE PROPERTY.  EXCEPT AS
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, ASSIGNOR DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR
COMMUNICATIONS (ORALLY OR IN WRITING) TO ASSIGNEE (INCLUDING, BUT NOT LIMITED
TO, ANY INFORMATION CONTAINED IN ANY OPINION, INFORMATION, OR ADVICE THAT
MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR,
AGENT, CONSULTANT, ENGINEER OR ENGINEERING FIRM, REPRESENTATIVE, PARTNER,
MEMBER, BENEFICIARY, STOCKHOLDER OR CONTRACTOR) WHEREVER AND HOWEVER MADE WITH
RESPECT TO THE PROPERTY. ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA,

 

3

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

 

INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH THE PROPERTY.
ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY ASSIGNOR ARE PROVIDED TO
ASSIGNEE AS A CONVENIENCE AND ASSIGNEE’S RELIANCE ON OR USE OF THE SAME IS AT
ASSIGNEE’S SOLE RISK.  ASSIGNEE RECOGNIZES AND AGREES THAT ALL MATERIALS,
DOCUMENTS, AND OTHER INFORMATION, MADE AVAILABLE TO IT AT ANY TIME IN CONNECTION
WITH THE TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO
THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND
WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED OR
STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, AND
OTHER INFORMATION.  ASSIGNEE EXPRESSLY AGREES THAT ANY RELIANCE UPON OR
CONCLUSIONS DRAWN THEREFROM SHALL BE AT ASSIGNEE’S RISK TO THE MAXIMUM EXTENT
PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST
ASSIGNOR.  ASSIGNEE HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THE BASE
AGREEMENT, THIS ASSIGNMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY
MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO ASSIGNEE.

 

2.5                               ASSIGNEE is prohibited from assigning any
interest in the Property except in accordance with the terms of the Base
Agreement.  Any purported transfer in contravention of the Base Agreement is
null and void.

 

ARTICLE 3. OTHER PROVISIONS

 

3.1                               Further Assurances. ASSIGNOR and ASSIGNEE will
do, execute, acknowledge and deliver all further acts, conveyances and
instruments as may be reasonably necessary or appropriate to carry out the
intent of this Assignment and to more fully and accurately assign and convey the
Property to ASSIGNEE.

 

3.2                               Successors and Assigns. The provisions of this
Assignment shall be covenants running with the land, and this Assignment shall
extend to, be binding upon, and inure to the benefit of ASSIGNOR and ASSIGNEE,
and their respective successors and assigns.

 

3.3                               Assumption of Obligations. By its acceptance
of this Assignment, ASSIGNEE shall comply with and do hereby assume and agree to
perform ASSIGNEE’S proportionate part of all express and implied covenants,
obligations and reservations contained in the Leases and to which the Property
is subject and shall bear its proportionate share of all existing burdens on the
Leases, all to the extent provided in the Base Agreement.

 

3.4                               Counterparts. This Assignment may be executed
in multiple counterparts, each of which shall for all purposes constitute one
and the same instrument; provided, that, to facilitate recordation, in any
particular counterpart portions of the Exhibits and Schedules attached hereto
which describe Property situated in states and counties other than the state and
county in which such counterpart is to be recorded may have been omitted.

 

4

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

 

3.5                               Alternate Dispute Resolution. It is agreed, as
a severable and independent arbitration agreement separately enforceable from
the remainder of this Assignment, that if the parties hereto are unable to
amicably resolve any dispute or difference arising under or out of, in relation
to or in any way connected with this Assignment (whether contractual, tortious,
equitable, statutory or otherwise), such matter shall be finally and exclusively
referred to and settled by mediation or arbitration in accordance with the
alternate dispute resolution provisions set forth in the Base Agreement, the
terms and provisions of which are incorporated by reference herein.

 

3.6                               Attachments. The Exhibits attached to this
Assignment to which reference is herein made are incorporated herein by
reference and made a part hereof for all purposes.

 

3.7                               Governing Law. This Assignment is governed by
and must be construed according to the laws of the State of California,
excluding any conflicts-of-law rule or principle that might apply the law of
another jurisdiction.

 

3.8                               Severability. If any provision of this
Assignment is found by a court of competent jurisdiction to be invalid or
unenforceable, that provision will be deemed modified to the extent necessary to
make it valid and enforceable and if it cannot be so modified, it shall be
deemed deleted and the remainder of the Assignment shall continue and remain in
full force and effect.

 

The authorized representatives of ASSIGNOR and ASSIGNEE execute this Assignment
on the dates set forth in their respective acknowledgements hereto, but this
Assignment shall be effective for all purposes as of December 1, 2007, at
7:00 a.m. Pacific Time.

 

 

ASSIGNOR:

 

 

 

PHOENIX ENERGY, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

5

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

 

 

ASSIGNEE:

 

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

6

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

 

THE STATE OF CALIFORNIA

§

 

§

COUNTY OF SANTA BARBARA

§

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                                                     of Phoenix
Energy, LLC, known to me to be the person whose name is subscribed to the
foregoing instrument, and swore to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said limited liability company.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of California

 

 

My Commission expires:

 

 

 

 

 

 

 

7

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

 

THE STATE OF TEXAS

§

 

§

COUNTY OF HARRIS

§

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                          , the
                                                   of 4R Oil & Gas, LLC, the
general partner on behalf of Rock Energy Partners, LP, a partnership, known to
me to be the person whose name is subscribed to the foregoing instrument, and
swore to me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
partnership.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of Texas

 

 

My Commission expires:

 

 

 

 

 

 

 

8

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

 

ASSIGNMENT AND BILL OF SALE

(Initial Orcutt OPL Interest)

 

STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

This Assignment and Bill of Sale is executed and delivered by Orcutt Properties,
LLC (“ASSIGNOR”) to Rock Energy Partners, LP (“ASSIGNEE”) pursuant to the terms
of the Base Agreement dated December 1, 2007 between Rock Energy Partners, LP,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC, and Orcutt Properties, LLC (the “Base Agreement”).

 

ARTICLE 1. CONVEYANCE

 

1.1                               Capitalized Terms. Each capitalized term used
in this Assignment that is not otherwise defined herein shall have the meaning
for such capitalized term as defined in the Base Agreement, which terms are
incorporated herein by such reference.

 

1.2                               Description of the Property. Subject to the
terms of the Base Agreement and this Assignment, ASSIGNOR hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS to ASSIGNEE a 1.496% BPO Working Interest
reducing to a 1.346% APO Working Interest in the following described property
rights:

 

1.2.1                     The oil, gas and mineral lease(s), and any
ratifications or amendments to such leases described in Exhibit A, INSOFAR AND
ONLY INSOFAR AS those interests, rights and leases cover and include the lands,
depths and rights described in Exhibit A attached hereto and made a part hereof
for all purposes (the “Leases”);

 

1.2.2                     All presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communalizations agreements, declarations
and/or orders (including, without limitation, all Units to the extent that they
relate to the Leases;

 

1.2.3                     All oil, gas and condensate wells (whether producing,
not producing or abandoned), water source, water injection and other injection
or disposal wells and systems located on the Leases or lands unitized or pooled
with the Leases (the “Wells”);

 

1.2.4                     ASSIGNOR’S interest in all equipment, facilities, flow
lines, pipelines, gathering systems (other than gas plant gathering systems),
Well pads, tank batteries, improvements, fixtures, inventory, spare parts,
tools, abandoned property and junk and other personal property on the Leases or
directly used in developing or operating the Leases and Wells or producing,
treating, store, compressing, processing or transporting hydrocarbons on the
Leases or lands included in Units with which the Leases may have been pooled or
unitized;

 

1

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

 

1.2.5                     To the extent assignable or transferable, ASSIGNOR’S
interest in all easements, rights-of-way, licenses, permits, servitudes, surface
leases, surface use agreements, and similar rights and interests to the extent
applicable to or used in operating the Leases; and

 

1.2.6                     To the extent assignable or transferable, ASSIGNOR’S
interest in all agreements, contracts and contractual rights, obligations and
interests INSOFAR ONLY as they cover and are attributable to the property
described in Sections 1.2.1 through 1.2.5 above.

 

The 1.496% BPO Working Interest and 1.346% APO Working Interest in the
above-described property rights and interests which is hereby assigned is
hereafter referred to as the “Property”.

 

1.3                               Agreement. This Assignment is made and
accepted subject to all of the terms of the Base Agreement, which are hereby
deemed incorporated by reference into this Assignment to the fullest extent
permitted by law. In the event of a conflict between the provisions of this
Assignment and the provisions of the Base Agreement, the provisions of the Base
Agreement shall take precedence.

 

ARTICLE 2. DISCLAIMER OF WARRANTIES AND TITLE DEFENSE

 

2.1                               DISCLAIMER OF TITLE WARRANTY AND ENCUMBRANCES.
ASSIGNOR CONVEYS THE PURCHASED PROPERTY TO ASSIGNEE SUBJECT TO THE PERMITTED
ENCUMBRANCES WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED. SPECIFICALLY WITH
RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING
A PART OF THE PURCHASED PROPERTY, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE
HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE
EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT
THEY MAY BE ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN
THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY,
MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE
AND EFFECT WITH RESPECT TO THE PIPELINES. NO DUTY IS OWED BY ASSIGNOR TO
ASSIGNEE WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET
FORTH IN ARTICLE VIII OF THE BASE AGREEMENT. ASSIGNOR SHALL HAVE NO LIABILITY TO
ASSIGNEE AS A RESULT OF ANY DEFAULT BY ASSIGNOR WITH RESPECT TO THE SECTOR
MORTGAGE INDEBTEDNESS OR ANY ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A
CONSEQUENCE OF SUCH DEFAULT.

 

2

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

 

2.2                               Defense of Title. To the limited extent
provided in the Base Agreement, ASSIGNOR agrees to defend title to the Property
against the claims and demands (other than the Permitted Encumbrances as defined
in the Base Agreement) of all persons claiming the same or any part thereof by,
through or under ASSIGNOR but not otherwise. Any title failure not arising by
through or under ASSIGNOR shall reduce the Net Revenue Interest of ASSIGNEE on a
proportionate basis.

 

2.3                               CONDITION AND FITNESS OF THE PROPERTY. EXCEPT
AS EXPRESSLY SET FORTH IN THE BASE AGREEMENT, ASSIGNOR CONVEYS THE PROPERTY TO
ASSIGNEE WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF
ANY KIND INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY
OF THE PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE.
ASSIGNEE HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN
THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH
SURFACE AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS” AND IN ITS PRESENT CONDITION AND STATE OF REPAIR.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY AS TO (i) THE VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF ANY OIL, GAS OR OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER
OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.

 

2.4                               INFORMATION ABOUT THE PROPERTY. EXCEPT AS
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, ASSIGNOR DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR
COMMUNICATIONS (ORALLY OR IN WRITING) TO ASSIGNEE (INCLUDING, BUT NOT LIMITED
TO, ANY INFORMATION CONTAINED IN ANY OPINION, INFORMATION, OR ADVICE THAT
MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR,
AGENT, CONSULTANT, ENGINEER OR ENGINEERING FIRM, REPRESENTATIVE, PARTNER,
MEMBER, BENEFICIARY, STOCKHOLDER OR CONTRACTOR) WHEREVER AND HOWEVER MADE WITH
RESPECT TO THE PROPERTY. ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA,

 

3

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

 

INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH THE PROPERTY.
ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY ASSIGNOR ARE PROVIDED TO
ASSIGNEE AS A CONVENIENCE AND ASSIGNEE’S RELIANCE ON OR USE OF THE SAME IS AT
ASSIGNEE’S SOLE RISK. ASSIGNEE RECOGNIZES AND AGREES THAT ALL MATERIALS,
DOCUMENTS, AND OTHER INFORMATION, MADE AVAILABLE TO IT AT ANY TIME IN CONNECTION
WITH THE TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO
THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND
WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED OR
STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, AND
OTHER INFORMATION. ASSIGNEE EXPRESSLY AGREES THAT ANY RELIANCE UPON OR
CONCLUSIONS DRAWN THEREFROM SHALL BE AT ASSIGNEE’S RISK TO THE MAXIMUM EXTENT
PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST
ASSIGNOR. ASSIGNEE HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THE BASE
AGREEMENT, THIS ASSIGNMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY
MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO ASSIGNEE.

 

2.5                               ASSIGNEE is prohibited from assigning any
interest in the Property except in accordance with the terms of the Base
Agreement. Any purported transfer in contravention of the Base Agreement is null
and void.

 

ARTICLE 3. OTHER PROVISIONS

 

3.1                               Further Assurances. ASSIGNOR and ASSIGNEE will
do, execute, acknowledge and deliver all further acts, conveyances and
instruments as may be reasonably necessary or appropriate to carry out the
intent of this Assignment and to more fully and accurately assign and convey the
Property to ASSIGNEE.

 

3.2                               Successors and Assigns. The provisions of this
Assignment shall be covenants running with the land, and this Assignment shall
extend to, be binding upon, and inure to the benefit of ASSIGNOR and ASSIGNEE,
and their respective successors and assigns.

 

3.3                               Assumption of Obligations. By its acceptance
of this Assignment, ASSIGNEE shall comply with and do hereby assume and agree to
perform ASSIGNEE’S proportionate part of all express and implied covenants,
obligations and reservations contained in the Leases and to which the Property
is subject and shall bear its proportionate share of all existing burdens on the
Leases, all to the extent provided in the Base Agreement.

 

3.4                               Counterparts. This Assignment may be executed
in multiple counterparts, each of which shall for all purposes constitute one
and the same instrument; provided, that, to facilitate recordation, in any
particular counterpart portions of the Exhibits and Schedules attached hereto
which describe Property situated in states and counties other than the state and
county in which such counterpart is to be recorded may have been omitted.

 

4

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

 

3.5                               Alternate Dispute Resolution. It is agreed, as
a severable and independent arbitration agreement separately enforceable from
the remainder of this Assignment, that if the parties hereto are unable to
amicably resolve any dispute or difference arising under or out of, in relation
to or in any way connected with this Assignment (whether contractual, tortious,
equitable, statutory or otherwise), such matter shall be finally and exclusively
referred to and settled by mediation or arbitration in accordance with the
alternate dispute resolution provisions set forth in the Base Agreement, the
terms and provisions of which are incorporated by reference herein.

 

3.6                               Attachments. The Exhibits attached to this
Assignment to which reference is herein made are incorporated herein by
reference and made a part hereof for all purposes.

 

3.7                               Governing Law. This Assignment is governed by
and must be construed according to the laws of the State of California,
excluding any conflicts-of-law rule or principle that might apply the law of
another jurisdiction.

 

3.8                               Severability. If any provision of this
Assignment is found by a court of competent jurisdiction to be invalid or
unenforceable, that provision will be deemed modified to the extent necessary to
make it valid and enforceable and if it cannot be so modified, it shall be
deemed deleted and the remainder of the Assignment shall continue and remain in
full force and effect.

 

The authorized representatives of ASSIGNOR and ASSIGNEE execute this Assignment
on the dates set forth in their respective acknowledgements hereto, but this
Assignment shall be effective for all purposes as of December 1, 2007, at
7:00 a.m. Pacific Time.

 

 

ASSIGNOR:

 

 

 

ORCUTT PROPERTIES, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

5

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

 

 

ASSIGNEE:

 

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

6

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

 

THE STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                                                     of Orcutt
Properties, LLC, known to me to be the person whose name is subscribed to the
foregoing instrument, and swore to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said limited liability company.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

 

Notary Public in and for

 

the State of California

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

7

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

 

 

THE STATE OF TEXAS

§

 

 

§

 

COUNTY OF HARRIS

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                          , the
                                                   of 4R Oil & Gas, LLC, the
general partner on behalf of Rock Energy Partners, LP, a partnership, known to
me to be the person whose name is subscribed to the foregoing instrument, and
swore to me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
partnership.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

 

Notary Public in and for

 

the State of Texas

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

8

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

 

ASSIGNMENT AND BILL OF SALE

(Second Orcutt GTL Interest)

 

STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

This Assignment and Bill of Sale is executed and delivered by Gitte-Ten, LLC
(“ASSIGNOR”) to Rock Energy Partners, LP (“ASSIGNEE”) pursuant to the terms of
the Base Agreement dated December 1, 2007 between Rock Energy Partners, LP,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC, and Orcutt Properties, LLC (the “Base Agreement”).

 

ARTICLE 1. CONVEYANCE

 

1.1                               Capitalized Terms. Each capitalized term used
in this Assignment that is not otherwise defined herein shall have the meaning
for such capitalized term as defined in the Base Agreement, which terms are
incorporated herein by such reference.

 

1.2                               Description of the Property. Subject to the
terms of the Base Agreement and this Assignment, ASSIGNOR hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS to ASSIGNEE a 2.03374% BPO Working Interest
reducing to a 1.83037 % APO Working Interest in the oil, gas and mineral
lease(s), and any ratifications or amendments to such leases described in
Exhibit A, INSOFAR AND ONLY INSOFAR AS those interests, rights and leases cover
and include the lands, depths and rights described in Exhibit A attached hereto
and made a part hereof for all purposes (the “Leases”). In addition, subject to
the terms of the Base Agreement and this Assignment, Assignor hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS a 1.834% BPO Working Interest reducing to a
1.6506% APO Working Interest in the following:

 

1.2.1                     All presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communalizations agreements, declarations
and/or orders (including, without limitation, all Units to the extent that they
relate to the Leases;

 

1.2.2                     All oil, gas and condensate wells (whether producing,
not producing or abandoned), water source, water injection and other injection
or disposal wells and systems located on the Leases or lands unitized or pooled
with the Leases (the “Wells”);

 

1.2.3                     ASSIGNOR’S interest in all equipment, facilities, flow
lines, pipelines, gathering systems (other than gas plant gathering systems),
Well pads, tank batteries, improvements, fixtures, inventory, spare parts,
tools, abandoned property and junk and other personal property on the Leases or
directly used in developing or operating the Leases and Wells or producing,
treating, store, compressing, processing or transporting hydrocarbons on the
Leases on lands included in Units with which the Leases may have been pooled or
unitized;

 

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

 

1.2.4                     To the extent assignable or transferable, ASSIGNOR’S
interest in all easements, rights-of-way, licenses, permits, servitudes, surface
leases, surface use agreements, and similar rights and interests to the extent
applicable to or used in operating the Leases; and

 

1.2.5                     To the extent assignable or transferable, ASSIGNOR’S
interest in all agreements, contracts and contractual rights, obligations and
interests INSOFAR ONLY as they cover and are attributable to the property
described in Sections 1.2.1 through 1.2.4 above.

 

The Working Interests hereby assigned are hereafter referred to as the
“Property”.

 

1.3                               Agreement. This Assignment is made and
accepted subject to all of the terms of the Base Agreement, which are hereby
deemed incorporated by reference into this Assignment to the fullest extent
permitted by law. In the event of a conflict between the provisions of this
Assignment and the provisions of the Base Agreement, the provisions of the Base
Agreement shall take precedence.

 

ARTICLE 2. DISCLAIMER OF WARRANTIES AND TITLE DEFENSE

 

2.1                               DISCLAIMER OF TITLE WARRANTY AND ENCUMBRANCES.
ASSIGNOR CONVEYS THE PURCHASED PROPERTY TO ASSIGNEE SUBJECT TO THE PERMITTED
ENCUMBRANCES WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED. SPECIFICALLY WITH
RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING
A PART OF THE PURCHASED PROPERTY, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE
HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE
EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT
THEY MAY BE ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN
THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY,
MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE
AND EFFECT WITH RESPECT TO THE PIPELINES. NO DUTY IS OWED BY ASSIGNOR TO
ASSIGNEE WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET
FORTH IN ARTICLE VIII OF THE BASE AGREEMENT. ASSIGNOR SHALL HAVE NO LIABILITY TO
ASSIGNEE AS A RESULT OF ANY DEFAULT BY ASSIGNOR WITH RESPECT TO THE SECTOR
MORTGAGE INDEBTEDNESS OR ANY ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A
CONSEQUENCE OF SUCH DEFAULT.

 

2.2                               Defense of Title. To the limited extent
provided in the Base Agreement, ASSIGNOR

 

2

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

 

agrees to defend title to the Property against the claims and demands (other
than the Permitted Encumbrances as defined in the Base Agreement) of all persons
claiming the same or any part thereof by, through or under ASSIGNOR but not
otherwise. Any title failure not arising by through or under ASSIGNOR shall
reduce the Net Revenue Interest of ASSIGNEE on a proportionate basis.

 

2.3                               CONDITION AND FITNESS OF THE PROPERTY. EXCEPT
AS EXPRESSLY SET FORTH IN THE BASE AGREEMENT, ASSIGNOR CONVEYS THE PROPERTY TO
ASSIGNEE WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF
ANY KIND INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY
OF THE PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE.
ASSIGNEE HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN
THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH
SURFACE AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS” AND IN ITS PRESENT CONDITION AND STATE OF REPAIR.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY AS TO (i) THE VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF ANY OIL, GAS OR OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER
OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.

 

2.4                               INFORMATION ABOUT THE PROPERTY. EXCEPT AS
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, ASSIGNOR DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR
COMMUNICATIONS (ORALLY OR IN WRITING) TO ASSIGNEE (INCLUDING, BUT NOT LIMITED
TO, ANY INFORMATION CONTAINED IN ANY OPINION, INFORMATION, OR ADVICE THAT
MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR,
AGENT, CONSULTANT, ENGINEER OR ENGINEERING FIRM, REPRESENTATIVE, PARTNER,
MEMBER, BENEFICIARY, STOCKHOLDER OR CONTRACTOR) WHEREVER AND HOWEVER MADE WITH
RESPECT TO THE PROPERTY. ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA,
INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH THE PROPERTY.
ANY DATA, INFORMATION OR OTHER RECORDS

 

3

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

 

FURNISHED BY ASSIGNOR ARE PROVIDED TO ASSIGNEE AS A CONVENIENCE AND ASSIGNEE’S
RELIANCE ON OR USE OF THE SAME IS AT ASSIGNEE’S SOLE RISK. ASSIGNEE RECOGNIZES
AND AGREES THAT ALL MATERIALS, DOCUMENTS, AND OTHER INFORMATION, MADE AVAILABLE
TO IT AT ANY TIME IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREBY,
WHETHER MADE AVAILABLE PURSUANT TO THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE
TO IT AS AN ACCOMMODATION, AND WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND,
WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF
SUCH MATERIALS, DOCUMENTS, AND OTHER INFORMATION. ASSIGNEE EXPRESSLY AGREES THAT
ANY RELIANCE UPON OR CONCLUSIONS DRAWN THEREFROM SHALL BE AT ASSIGNEE’S RISK TO
THE MAXIMUM EXTENT PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF
OR AGAINST ASSIGNOR. ASSIGNEE HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING
UNDER THE BASE AGREEMENT, THIS ASSIGNMENT, COMMON LAW OR ANY STATUTE ARISING OUT
OF ANY MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO ASSIGNEE.

 

2.5                               ASSIGNEE is prohibited from assigning any
interest in the Property except in accordance with the terms of the Base
Agreement. Any purported transfer in contravention of the Base Agreement is null
and void.

 

ARTICLE 3. OTHER PROVISIONS

 

3.1                               Retained Overriding Royalty Interest. Assignor
retains and excludes from this Assignment an overriding royalty interest equal
to the GTL Adjustment ORRI.

 

3.2                               Further Assurances. ASSIGNOR and ASSIGNEE will
do, execute, acknowledge and deliver all further acts, conveyances and
instruments as may be reasonably necessary or appropriate to carry out the
intent of this Assignment and to more fully and accurately assign and convey the
Property to ASSIGNEE.

 

3.3                               Successors and Assigns. The provisions of this
Assignment shall be covenants running with the land, and this Assignment shall
extend to, be binding upon, and inure to the benefit of ASSIGNOR and ASSIGNEE,
and their respective successors and assigns.

 

3.4                               Assumption of Obligations. By its acceptance
of this Assignment, ASSIGNEE shall comply with and do hereby assume and agree to
perform ASSIGNEE’S proportionate part of all express and implied covenants,
obligations and reservations contained in the Leases and to which the Property
is subject and shall bear its proportionate share of all existing burdens on the
Leases, all to the extent provided in the Base Agreement.

 

3.5                               Counterparts. This Assignment may be executed
in multiple counterparts, each of which shall for all purposes constitute one
and the same instrument; provided, that, to facilitate recordation, in any
particular counterpart portions of the Exhibits and Schedules attached hereto
which describe Property situated in states and counties other than the state and
county in which such counterpart is to be recorded may have been

 

4

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

 

omitted.

 

3.6                               Alternate Dispute Resolution. It is agreed, as
a severable and independent arbitration agreement separately enforceable from
the remainder of this Assignment, that if the parties hereto are unable to
amicably resolve any dispute or difference arising under or out of, in relation
to or in any way connected with this Assignment (whether contractual, tortious,
equitable, statutory or otherwise), such matter shall be finally and exclusively
referred to and settled by mediation or arbitration in accordance with the
alternate dispute resolution provisions set forth in the Base Agreement, the
terms and provisions of which are incorporated by reference herein.

 

3.7                               Attachments. The Exhibits attached to this
Assignment to which reference is herein made are incorporated herein by
reference and made a part hereof for all purposes.

 

3.8                               Governing Law. This Assignment is governed by
and must be construed according to the laws of the State of California,
excluding any conflicts-of-law rule or principle that might apply the law of
another jurisdiction.

 

3.9                               Severability. If any provision of this
Assignment is found by a court of competent jurisdiction to be invalid or
unenforceable, that provision will be deemed modified to the extent necessary to
make it valid and enforceable and if it cannot be so modified, it shall be
deemed deleted and the remainder of the Assignment shall continue and remain in
full force and effect.

 

The authorized representatives of ASSIGNOR and ASSIGNEE execute this Assignment
on the dates set forth in their respective acknowledgements hereto, but this
Assignment shall be effective for all purposes as of December 1, 2007, at
7:00 a.m. Pacific Time.

 

 

ASSIGNOR:

 

 

 

GITTE-TEN, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

5

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

 

 

ASSIGNEE:

 

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

6

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

 

THE STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                                                     of
Gitte-Ten, LLC, known to me to be the person whose name is subscribed to the
foregoing instrument, and swore to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said limited liability company.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of California

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

7

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

 

THE STATE OF TEXAS

§

 

 

§

 

COUNTY OF HARRIS

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                          , the
                                                   of 4R Oil & Gas, LLC, the
general partner on behalf of Rock Energy Partners, LP, a partnership, known to
me to be the person whose name is subscribed to the foregoing instrument, and
swore to me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
partnership.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of Texas

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

8

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

 

ASSIGNMENT AND BILL OF SALE

(Second Orcutt PEL Interest)

 

STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

This Assignment and Bill of Sale is executed and delivered by Phoenix Energy,
LLC (“ASSIGNOR”) to Rock Energy Partners, LP (“ASSIGNEE”) pursuant to the terms
of the Base Agreement dated December 1, 2007 between Rock Energy Partners, LP,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC, and Orcutt Properties, LLC (the “Base Agreement”).

 

ARTICLE 1. CONVEYANCE

 

1.1                               Capitalized Terms. Each capitalized term used
in this Assignment that is not otherwise defined herein shall have the meaning
for such capitalized term as defined in the Base Agreement, which terms are
incorporated herein by such reference.

 

1.2                               Description of the Property. Subject to the
terms of the Base Agreement and this Assignment, ASSIGNOR hereby TRANSFERS,
GRANTS, SELLS, CONVEYS and ASSIGNS to ASSIGNEE a 1.834% BPO Working Interest
reducing to a 1.6506% APO Working Interest in the following described property
rights:

 

1.2.1                     The oil, gas and mineral lease(s), and any
ratifications or amendments to such leases described in Exhibit A, INSOFAR AND
ONLY INSOFAR AS those interests, rights and leases cover and include the lands,
depths and rights described in Exhibit A attached hereto and made a part hereof
for all purposes (the “Leases”);

 

1.2.2                     All presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communalizations agreements, declarations
and/or orders (including, without limitation, all Units to the extent that they
relate to the Leases;

 

1.2.3                     All oil, gas and condensate wells (whether producing,
not producing or abandoned), water source, water injection and other injection
or disposal wells and systems located on the Leases or lands unitized or pooled
with the Leases (the “Wells”);

 

1.2.4                     ASSIGNOR’S interest in all equipment, facilities, flow
lines, pipelines, gathering systems (other than gas plant gathering systems),
Well pads, tank batteries, improvements, fixtures, inventory, spare parts,
tools, abandoned property and junk and other personal property on the Leases or
directly used in developing or operating the Leases and Wells or producing,
treating, store, compressing, processing or transporting hydrocarbons on the
Leases or lands included in Units with which the Leases may have been pooled or
unitized;

 

1

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

 

1.2.5                     To the extent assignable or transferable, ASSIGNOR’S
interest in all easements, rights-of-way, licenses, permits, servitudes, surface
leases, surface use agreements, and similar rights and interests to the extent
applicable to or used in operating the Leases; and

 

1.2.6                     To the extent assignable or transferable, ASSIGNOR’S
interest in all agreements, contracts and contractual rights, obligations and
interests INSOFAR ONLY as they cover and are attributable to the property
described in Sections 1.2.1 through 1.2.5 above.

 

The 1.834% BPO Working Interest and 1.6506% APO Working Interest in the
above-described property rights and interests which is hereby assigned is
hereafter referred to as the “Property”.

 

1.3                               Agreement. This Assignment is made and
accepted subject to all of the terms of the Base Agreement, which are hereby
deemed incorporated by reference into this Assignment to the fullest extent
permitted by law. In the event of a conflict between the provisions of this
Assignment and the provisions of the Base Agreement, the provisions of the Base
Agreement shall take precedence.

 

ARTICLE 2. DISCLAIMER OF WARRANTIES AND TITLE DEFENSE

 

2.1                               DISCLAIMER OF TITLE WARRANTY AND ENCUMBRANCES.
ASSIGNOR CONVEYS THE PURCHASED PROPERTY TO ASSIGNEE SUBJECT TO THE PERMITTED
ENCUMBRANCES WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED. SPECIFICALLY WITH
RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING
A PART OF THE PURCHASED PROPERTY, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE
HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE
EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT
THEY MAY BE ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN
THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY,
MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE
AND EFFECT WITH RESPECT TO THE PIPELINES. NO DUTY IS OWED BY ASSIGNOR TO
ASSIGNEE WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET
FORTH IN ARTICLE VIII OF THE BASE AGREEMENT. ASSIGNOR SHALL HAVE NO LIABILITY TO
ASSIGNEE AS A RESULT OF ANY DEFAULT BY ASSIGNOR WITH RESPECT TO THE SECTOR
MORTGAGE INDEBTEDNESS OR ANY ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A
CONSEQUENCE OF SUCH DEFAULT.

 

2

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

 

2.2                               Defense of Title. To the limited extent
provided in the Base Agreement, ASSIGNOR agrees to defend title to the Property
against the claims and demands (other than the Permitted Encumbrances as defined
in the Base Agreement) of all persons claiming the same or any part thereof by,
through or under ASSIGNOR but not otherwise. Any title failure not arising by
through or under ASSIGNOR shall reduce the Net Revenue Interest of ASSIGNEE on a
proportionate basis.

 

2.3                               CONDITION AND FITNESS OF THE PROPERTY. EXCEPT
AS EXPRESSLY SET FORTH IN THE BASE AGREEMENT, ASSIGNOR CONVEYS THE PROPERTY TO
ASSIGNEE WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF
ANY KIND INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY
OF THE PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE.
ASSIGNEE HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN
THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH
SURFACE AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS” AND IN ITS PRESENT CONDITION AND STATE OF REPAIR.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY AS TO (i) THE VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF ANY OIL, GAS OR OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER
OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.

 

2.4                               INFORMATION ABOUT THE PROPERTY. EXCEPT AS
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, ASSIGNOR DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR
COMMUNICATIONS (ORALLY OR IN WRITING) TO ASSIGNEE (INCLUDING, BUT NOT LIMITED
TO, ANY INFORMATION CONTAINED IN ANY OPINION, INFORMATION, OR ADVICE THAT
MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR,
AGENT, CONSULTANT, ENGINEER OR ENGINEERING FIRM, REPRESENTATIVE, PARTNER,
MEMBER, BENEFICIARY, STOCKHOLDER OR CONTRACTOR) WHEREVER AND HOWEVER MADE WITH
RESPECT TO THE PROPERTY. ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA,

 

3

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

 

INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH THE PROPERTY.
ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY ASSIGNOR ARE PROVIDED TO
ASSIGNEE AS A CONVENIENCE AND ASSIGNEE’S RELIANCE ON OR USE OF THE SAME IS AT
ASSIGNEE’S SOLE RISK. ASSIGNEE RECOGNIZES AND AGREES THAT ALL MATERIALS,
DOCUMENTS, AND OTHER INFORMATION, MADE AVAILABLE TO IT AT ANY TIME IN CONNECTION
WITH THE TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO
THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND
WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED OR
STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, AND
OTHER INFORMATION. ASSIGNEE EXPRESSLY AGREES THAT ANY RELIANCE UPON OR
CONCLUSIONS DRAWN THEREFROM SHALL BE AT ASSIGNEE’S RISK TO THE MAXIMUM EXTENT
PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST
ASSIGNOR. ASSIGNEE HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THE BASE
AGREEMENT, THIS ASSIGNMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY
MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO ASSIGNEE.

 

2.5                               ASSIGNEE is prohibited from assigning any
interest in the Property except in accordance with the terms of the Base
Agreement. Any purported transfer in contravention of the Base Agreement is null
and void.

 

ARTICLE 3. OTHER PROVISIONS

 

3.1                               Further Assurances. ASSIGNOR and ASSIGNEE will
do, execute, acknowledge and deliver all further acts, conveyances and
instruments as may be reasonably necessary or appropriate to carry out the
intent of this Assignment and to more fully and accurately assign and convey the
Property to ASSIGNEE.

 

3.2                               Successors and Assigns. The provisions of this
Assignment shall be covenants running with the land, and this Assignment shall
extend to, be binding upon, and inure to the benefit of ASSIGNOR and ASSIGNEE,
and their respective successors and assigns.

 

3.3                               Assumption of Obligations. By its acceptance
of this Assignment, ASSIGNEE shall comply with and do hereby assume and agree to
perform ASSIGNEE’S proportionate part of all express and implied covenants,
obligations and reservations contained in the Leases and to which the Property
is subject and shall bear its proportionate share of all existing burdens on the
Leases, all to the extent provided in the Base Agreement.

 

3.4                               Counterparts. This Assignment may be executed
in multiple counterparts, each of which shall for all purposes constitute one
and the same instrument; provided, that, to facilitate recordation, in any
particular counterpart portions of the Exhibits and Schedules attached hereto
which describe Property situated in states and counties other than the state and
county in which such counterpart is to be recorded may have been omitted.

 

4

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

 

3.5                               Alternate Dispute Resolution. It is agreed, as
a severable and independent arbitration agreement separately enforceable from
the remainder of this Assignment, that if the parties hereto are unable to
amicably resolve any dispute or difference arising under or out of, in relation
to or in any way connected with this Assignment (whether contractual, tortious,
equitable, statutory or otherwise), such matter shall be finally and exclusively
referred to and settled by mediation or arbitration in accordance with the
alternate dispute resolution provisions set forth in the Base Agreement, the
terms and provisions of which are incorporated by reference herein.

 

3.6                               Attachments. The Exhibits attached to this
Assignment to which reference is herein made are incorporated herein by
reference and made a part hereof for all purposes.

 

3.7                               Governing Law. This Assignment is governed by
and must be construed according to the laws of the State of California,
excluding any conflicts-of-law rule or principle that might apply the law of
another jurisdiction.

 

3.8                               Severability. If any provision of this
Assignment is found by a court of competent jurisdiction to be invalid or
unenforceable, that provision will be deemed modified to the extent necessary to
make it valid and enforceable and if it cannot be so modified, it shall be
deemed deleted and the remainder of the Assignment shall continue and remain in
full force and effect.

 

The authorized representatives of ASSIGNOR and ASSIGNEE execute this Assignment
on the dates set forth in their respective acknowledgements hereto, but this
Assignment shall be effective for all purposes as of December 1, 2007, at
7:00 a.m. Pacific Time.

 

 

ASSIGNOR:

 

 

 

PHOENIX ENERGY, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

5

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

 

 

ASSIGNEE:

 

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

6

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

 

THE STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                                                     of Phoenix
Energy, LLC, known to me to be the person whose name is subscribed to the
foregoing instrument, and swore to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said limited liability company.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of California

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

7

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

 

THE STATE OF TEXAS

§

 

 

§

 

COUNTY OF HARRIS

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                          , the
                                                   of 4R Oil & Gas, LLC, the
general partner on behalf of Rock Energy Partners, LP, a partnership, known to
me to be the person whose name is subscribed to the foregoing instrument, and
swore to me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
partnership.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of Texas

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

8

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

 

ASSIGNMENT AND BILL OF SALE

(Second Orcutt OPL Interest)

 

STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

This Assignment and Bill of Sale is executed and delivered by Orcutt Properties,
LLC (“ASSIGNOR”) to Rock Energy Partners, LP (“ASSIGNEE”) pursuant to the terms
of the Base Agreement dated December 1, 2007 between Rock Energy Partners, LP,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC, and Orcutt Properties, LLC (the “Base Agreement”).

 

ARTICLE 1. CONVEYANCE

 

1.1          Capitalized Terms. Each capitalized term used in this Assignment
that is not otherwise defined herein shall have the meaning for such capitalized
term as defined in the Base Agreement, which terms are incorporated herein by
such reference.

 

1.2          Description of the Property. Subject to the terms of the Base
Agreement and this Assignment, ASSIGNOR hereby TRANSFERS, GRANTS, SELLS, CONVEYS
and ASSIGNS to ASSIGNEE a 1.834% BPO Working Interest reducing to a 1.6506% APO
Working Interest in the following described property rights:

 

1.2.1       The oil, gas and mineral lease(s), and any ratifications or
amendments to such leases described in Exhibit A, INSOFAR AND ONLY INSOFAR AS
those interests, rights and leases cover and include the lands, depths and
rights described in Exhibit A attached hereto and made a part hereof for all
purposes (the “Leases”);

 

1.2.2       All presently existing and valid oil, gas and/or mineral
unitization, pooling, and/or communalizations agreements, declarations and/or
orders (including, without limitation, all Units to the extent that they relate
to the Leases;

 

1.2.3       All oil, gas and condensate wells (whether producing, not producing
or abandoned), water source, water injection and other injection or disposal
wells and systems located on the Leases or lands unitized or pooled with the
Leases (the “Wells”);

 

1.2.4       ASSIGNOR’S interest in all equipment, facilities, flow lines,
pipelines, gathering systems (other than gas plant gathering systems), Well
pads, tank batteries, improvements, fixtures, inventory, spare parts, tools,
abandoned property and junk and other personal property on the Leases or
directly used in developing or operating the Leases and Wells or producing,
treating, store, compressing, processing or transporting hydrocarbons on the
Leases or lands included in Units with which the Leases may have been pooled or
unitized;

 

1

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

 

1.2.5       To the extent assignable or transferable, ASSIGNOR’S interest in all
easements, rights-of-way, licenses, permits, servitudes, surface leases, surface
use agreements, and similar rights and interests to the extent applicable to or
used in operating the Leases; and

 

1.2.6       To the extent assignable or transferable, ASSIGNOR’S interest in all
agreements, contracts and contractual rights, obligations and interests INSOFAR
ONLY as they cover and are attributable to the property described in Sections
1.2.1 through 1.2.5 above.

 

The 1.834% BPO Working Interest and 1.6506% APO Working Interest in the
above-described property rights and interests which is hereby assigned is
hereafter referred to as the “Property”.

 

1.3          Agreement. This Assignment is made and accepted subject to all of
the terms of the Base Agreement, which are hereby deemed incorporated by
reference into this Assignment to the fullest extent permitted by law. In the
event of a conflict between the provisions of this Assignment and the provisions
of the Base Agreement, the provisions of the Base Agreement shall take
precedence.

 

ARTICLE 2. DISCLAIMER OF WARRANTIES AND TITLE DEFENSE

 

2.1          DISCLAIMER OF TITLE WARRANTY AND ENCUMBRANCES. ASSIGNOR CONVEYS THE
PURCHASED PROPERTY TO ASSIGNEE SUBJECT TO THE PERMITTED ENCUMBRANCES WITHOUT
WARRANTY OF TITLE, EXPRESS OR IMPLIED. SPECIFICALLY WITH RESPECT TO THE
EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING A PART OF THE
PURCHASED PROPERTY, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES,
ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE EASEMENTS,
RIGHTS-OF-WAY AND PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT THEY MAY BE
ASSIGNED; THAT THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN THE EASEMENTS,
RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY, MAINTAIN,
REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR EXPRESSLY
DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT
THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE AND EFFECT WITH
RESPECT TO THE PIPELINES. NO DUTY IS OWED BY ASSIGNOR TO ASSIGNEE WITH RESPECT
TO THE SECTOR MORTGAGE INDEBTEDNESS OTHER THAN AS SET FORTH IN ARTICLE VIII OF
THE BASE AGREEMENT. ASSIGNOR SHALL HAVE NO LIABILITY TO ASSIGNEE AS A RESULT OF
ANY DEFAULT BY ASSIGNOR WITH RESPECT TO THE SECTOR MORTGAGE INDEBTEDNESS OR ANY
ACTION TAKEN BY SECTOR CAPITAL CORPORATION AS A CONSEQUENCE OF SUCH DEFAULT.

 

2

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

 

2.2          Defense of Title. To the limited extent provided in the Base
Agreement, ASSIGNOR agrees to defend title to the Property against the claims
and demands (other than the Permitted Encumbrances as defined in the Base
Agreement) of all persons claiming the same or any part thereof by, through or
under ASSIGNOR but not otherwise. Any title failure not arising by through or
under ASSIGNOR shall reduce the Net Revenue Interest of ASSIGNEE on a
proportionate basis.

 

2.3          CONDITION AND FITNESS OF THE PROPERTY. EXCEPT AS EXPRESSLY SET
FORTH IN THE BASE AGREEMENT, ASSIGNOR CONVEYS THE PROPERTY TO ASSIGNEE WITHOUT
ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF ANY KIND
INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF THE
PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE. ASSIGNEE
HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN THE
OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH
SURFACE AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS” AND IN ITS PRESENT CONDITION AND STATE OF REPAIR.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY AS TO (i) THE VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF ANY OIL, GAS OR OTHER. MINERALS OR RESERVES (IF ANY) IN, UNDER
OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OR DRILLING OPPORTUNITIES), (ii) ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, OR (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.

 

2.4          INFORMATION ABOUT THE PROPERTY. EXCEPT AS EXPRESSLY SET FORTH IN
THE TRANSACTION DOCUMENTS, ASSIGNOR DISCLAIMS ALL LIABILITY AND RESPONSIBILITY
FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR COMMUNICATIONS (ORALLY OR IN
WRITING) TO ASSIGNEE (INCLUDING, BUT NOT LIMITED TO, ANY INFORMATION CONTAINED
IN ANY OPINION, INFORMATION, OR ADVICE THAT MAY HAVE BEEN PROVIDED TO ANY SUCH
PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR, AGENT, CONSULTANT, ENGINEER OR
ENGINEERING FIRM, REPRESENTATIVE, PARTNER, MEMBER, BENEFICIARY, STOCKHOLDER OR
CONTRACTOR) WHEREVER AND HOWEVER MADE WITH RESPECT TO THE PROPERTY. ASSIGNOR
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE ACCURACY,
COMPLETENESS, OR MATERIALITY OF ANY DATA,

 

3

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

 

INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH THE PROPERTY.
ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY ASSIGNOR ARE PROVIDED TO
ASSIGNEE AS A CONVENIENCE AND ASSIGNEE’S RELIANCE ON OR USE OF THE SAME IS AT
ASSIGNEE’S SOLE RISK. ASSIGNEE RECOGNIZES AND AGREES THAT ALL MATERIALS,
DOCUMENTS, AND OTHER INFORMATION, MADE AVAILABLE TO IT AT ANY TIME IN CONNECTION
WITH THE TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO
THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND
WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED OR
STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, AND
OTHER INFORMATION. ASSIGNEE EXPRESSLY AGREES THAT ANY RELIANCE UPON OR
CONCLUSIONS DRAWN THEREFROM SHALL BE AT ASSIGNEE’S RISK TO THE MAXIMUM EXTENT
PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST
ASSIGNOR. ASSIGNEE HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THE BASE
AGREEMENT, THIS ASSIGNMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY
MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO ASSIGNEE.

 

2.5          ASSIGNEE is prohibited from assigning any interest in the Property
except in accordance with the terms of the Base Agreement. Any purported
transfer in contravention of the Base Agreement is null and void.

 

ARTICLE 3. OTHER PROVISIONS

 

3.1          Further Assurances. ASSIGNOR and ASSIGNEE will do, execute,
acknowledge and deliver all further acts, conveyances and instruments as may be
reasonably necessary or appropriate to carry out the intent of this Assignment
and to more fully and accurately assign and convey the Property to ASSIGNEE.

 

3.2          Successors and Assigns. The provisions of this Assignment shall be
covenants running with the land, and this Assignment shall extend to, be binding
upon, and inure to the benefit of ASSIGNOR and ASSIGNEE, and their respective
successors and assigns.

 

3.3          Assumption of Obligations. By its acceptance of this Assignment,
ASSIGNEE shall comply with and do hereby assume and agree to perform ASSIGNEE’S
proportionate part of all express and implied covenants, obligations and
reservations contained in the Leases and to which the Property is subject and
shall bear its proportionate share of all existing burdens on the Leases, all to
the extent provided in the Base Agreement.

 

3.4          Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall for all purposes constitute one and the same
instrument; provided, that, to facilitate recordation, in any particular
counterpart portions of the Exhibits and Schedules attached hereto which
describe Property situated in states and counties other than the state and
county in which such counterpart is to be recorded may have been omitted.

 

4

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

 

3.5          Alternate Dispute Resolution. It is agreed, as a severable and
independent arbitration agreement separately enforceable from the remainder of
this Assignment, that if the parties hereto are unable to amicably resolve any
dispute or difference arising under or out of, in relation to or in any way
connected with this Assignment (whether contractual, tortious, equitable,
statutory or otherwise), such matter shall be finally and exclusively referred
to and settled by mediation or arbitration in accordance with the alternate
dispute resolution provisions set forth in the Base Agreement, the terms and
provisions of which are incorporated by reference herein.

 

3.6          Attachments. The Exhibits attached to this Assignment to which
reference is herein made are incorporated herein by reference and made a part
hereof for all purposes.

 

3.7          Governing Law. This Assignment is governed by and must be construed
according to the laws of the State of California, excluding any conflicts-of-law
rule or principle that might apply the law of another jurisdiction.

 

3.8          Severability. If any provision of this Assignment is found by a
court of competent jurisdiction to be invalid or unenforceable, that provision
will be deemed modified to the extent necessary to make it valid and enforceable
and if it cannot be so modified, it shall be deemed deleted and the remainder of
the Assignment shall continue and remain in full force and effect.

 

The authorized representatives of ASSIGNOR and ASSIGNEE execute this Assignment
on the dates set forth in their respective acknowledgements hereto, but this
Assignment shall be effective for all purposes as of December 1, 2007, at 7:00
a.m. Pacific Time.

 

 

ASSIGNOR:

 

 

 

ORCUTT PROPERTIES, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

5

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

 

 

ASSIGNEE:

 

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

By:

4R Oil & Gas, LLC, its General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

6

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

 

THE STATE OF CALIFORNIA

§

 

 

§

 

COUNTY OF SANTA BARBARA

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                      , the
                                                                     of Orcutt
Properties, LLC, known to me to be the person whose name is subscribed to the
foregoing instrument, and swore to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said limited liability company.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of California

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

7

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

 

THE STATE OF TEXAS

§

 

 

§

 

COUNTY OF HARRIS

§

 

 

BEFORE ME, the undersigned authority, on this day personally appeared
                                                                          , the
                                                   of 4R Oil & Gas, LLC, the
general partner on behalf of Rock Energy Partners, LP, a partnership, known to
me to be the person whose name is subscribed to the foregoing instrument, and
swore to me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
partnership.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this              day of December, 2007.

 

 

 

 

 

 

Notary Public in and for

 

the State of Texas

 

 

My Commission expires:

 

 

 

 

 

 

 

 

 

8

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

 

REAFFIRMATION AND RELEASE

(SMP Parties)

 

This Reaffirmation and Release dated                               , 200     is
executed by Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties,
LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC (the “SMP Parties”).

 

WHEREAS, a Base Agreement dated December 1, 2007 was entered into by and between
the Rock Energy Partners, LP and the SMP Parties (“Base Agreement”). Rock Energy
Partners, LP, is hereinafter referred to as “REP”;

 

WHEREAS, pursuant to the terms of the Base Agreement, a Development/Earn-In
Agreement dated effective December 14, 2007 was entered into by and between REP
and the SMP Parties (“Development/Earn-In Agreement”);

 

WHEREAS, pursuant to the terms of the Base Agreement, a Purchase Option
Agreement dated effective December 14, 2007 was entered into by and between REP
and the SMP Parties (“Purchase Option Agreement”);

 

WHEREAS, the SMP Parties are tendering this Reaffirmation and Release in
connection with their exercise of Option        pursuant to the
                             Agreement to acquire the following interest: 
[INSERT DESCRIPTION OF INTEREST] (“Subject Interest”);

 

WHEREAS, this Reaffirmation and Release is executed as of the closing conducted
with respect to Option        pursuant to the                         
Agreement; and

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged:

 

1.             The definitions of the terms contained in the Base Agreement are
incorporated herein. All terms defined in the Base Agreement will have the same
meaning when employed in this Agreement.

 

2.             Seller hereby affirms that the representations set forth in
Section 4.1 of the Base Agreement are true and accurate as of the date hereof.

 

3.             The SMP Parties on behalf of themselves and, to the extent
permitted by law or otherwise, on behalf of all partners, members, shareholders
and investors, hereby waive and release claims based upon or arising out of
alleged (i) breach by REP of the Base Agreement during the period December     ,
2007 through the date hereof, (ii) breach by REP of the Development/Earn-In
Agreement during the period December     , 2007 through the date hereof, and
(iii) breach by REP of the Purchase Option Agreement during the period
December     , 2007 through the date hereof. THIS RELEASE COVERS CLAIMS BASED
UPON OR ARISING OUT OF THE THREE ITEMS LISTED IN THIS PARAGRAPH REGARDLESS OF
WHETHER KNOWN OR UNKNOWN, AND HOWEVER OR WHENEVER ARISING. THE SMP PARTIES
CERTIFY

 

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

 

THAT THEY HAVE READ, UNDERSTAND AND EXPRESSLY WAIVE THE FOLLOWING PROVISIONS OF
CALIFORNIA CIVIL CODE SECTION 1542:

 

“A general release does not extend to claims which creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 

THE SMP PARTIES UNDERSTAND AND ACKNOWLEDGE THAT THE SIGNIFICANCE AND CONSEQUENCE
OF THIS WAIVER OF CALIFORNIA CIVIL CODE SECTION 1542 IS THAT EVEN IF ONE OF THEM
SHOULD EVENTUALLY SUFFER ADDITIONAL DAMAGES OR LOSSES FROM THEIR PRIOR
INTERACTIONS, OR SHOULD THERE EXIST OTHER UNDISCLOSED OBLIGATIONS OR LIABILITIES
EXISTING BETWEEN THEM, INCLUDING THEIR ASSIGNEES, THE SMP PARTIES WILL NOT BE
ABLE TO MAKE ANY CLAIM FOR THOSE DAMAGES, LOSSES OR OBLIGATIONS. FURTHERMORE,
THE SMP PARTIES ACKNOWLEDGE THAT THEY INTEND THESE CONSEQUENCES, EVEN AS TO
CLAIMS FOR DAMAGES, LOSSES OR OBLIGATIONS THAT MAY EXIST AS OF THE DATE OF THIS
AGREEMENT, BUT WHICH THE SMP PARTIES DO NOT KNOW EXIST, AND WHICH, IF KNOWN,
WOULD MATERIALLY AFFECT THEIR DECISION, EITHER SINGULARLY OR COLLECTIVELY, TO
EXECUTE THIS AGREEMENT, REGARDLESS OF THE CAUSE OR THEIR LACK OF KNOWLEDGE. REP
IS NOT RELEASED HEREBY FROM (I) ANY OBLIGATION OR LIABILITY UNDER THE OPERATING
AGREEMENTS, OR (II) ANY CLAIMS BASED UPON A BREACH OF ANY REPRESENTATION WHICH
WAS AFFIRMED IN THE REP REAFFIRMATION AND RELEASE DATED
                                , 200      .

 

 

SANTA MARIA PACIFIC, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

GITTE-TEN, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

2

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

 

 

NW CASMALIA PROPERTIES, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

PHOENIX ENERGY, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

 

 

 

 

ORCUTT PROPERTIES, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

3

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

 

REAFFIRMATION AND RELEASE

(REP)

 

This Reaffirmation and Release is dated                   , 200     executed by
Rock Energy Partners, LP ( “REP”).

 

WHEREAS, a Base Agreement dated December 1, 2007 was entered into by and between
REP and Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC,
Phoenix Energy, LLC, and Orcutt Properties, LLC (the “Base Agreement”). Santa
Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy,
LLC, and Orcutt Properties, LLC are hereinafter referred to as the “SMP
Parties”;

 

WHEREAS, pursuant to the terms of the Base Agreement, a Development/Earn-In
Agreement dated effective December 14, 2007 was entered into by and between REP
and the SMP Parties (“Development/Earn-In Agreement”);

 

WHEREAS, pursuant to the terms of the Base Agreement, a Purchase Option
Agreement dated effective December 14, 2007 was entered into by and between REP
and the SMP Parties (“Purchase Option Agreement”);

 

WHEREAS, REP is tendering this Reaffirmation and Release in connection with its
exercise of Option        pursuant to the                              Agreement
to acquire the following interest:  [INSERT DESCRIPTION OF INTEREST] (“Subject
Interest”);

 

WHEREAS, this Reaffirmation and Release is executed as of the closing conducted
with respect to Option        pursuant to the                         
Agreement; and

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged:

 

1.             The definitions of the terms contained in the Base Agreement are
incorporated herein. All terms defined in the Base Agreement will have the same
meaning when employed in this Agreement.

 

2.             REP hereby affirms that the representations set forth in Sections
4.1 and 4.3 of the Base Agreement are true and accurate as of the date hereof.

 

3.             REP hereby affirms that the representations set forth in Sections
4.1 and 4.3 of the Base Agreement are true and accurate with respect to REP’s
acquisition of the Subject Interest.

 

4.             REP hereby ratifies and affirms the disclaimers contained in
Article V of the Base Agreement as of the date hereof with respect to
acquisition of the Subject Interest.

 

5.             REP on behalf of itself and, to the extent permitted by law or
otherwise, on behalf of all partners, members, shareholders and investors,
hereby waives and releases claims based upon or arising out of alleged
(i) breach of any duty as Operator under the applicable Operator

 

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

 

Agreement during the period December     , 2007 through the date hereof,
(ii) breach by an SMP Party of the Base Agreement during the period
December     , 2007 through the date hereof, (iii) breach by an SMP Party of the
Development/Earn-In Agreement during the period December     , 2007 through the
date hereof, and (iv) breach by an SMP Party of the Purchase Option Agreement
during the period December       , 2007 through the date hereof. THIS RELEASE
COVERS CLAIMS BASED UPON OR ARISING OUT OF THE FOUR ITEMS LISTED IN THIS
PARAGRAPH REGARDLESS OF WHETHER KNOWN OR UNKNOWN, AND HOWEVER OR WHENEVER
ARISING. REP CERTIFIES THAT THEY HAVE READ, UNDERSTAND AND EXPRESSLY WAIVE THE
FOLLOWING PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542:

 

“A general release does not extend to claims which creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 

REP UNDERSTANDS AND ACKNOWLEDGES THAT THE SIGNIFICANCE AND CONSEQUENCE OF THIS
WAIVER OF CALIFORNIA CIVIL CODE SECTION 1542 IS THAT EVEN IF IT SHOULD
EVENTUALLY SUFFER ADDITIONAL DAMAGES OR LOSSES FROM THEIR PRIOR INTERACTIONS, OR
SHOULD THERE EXIST OTHER UNDISCLOSED OBLIGATIONS OR LIABILITIES EXISTING BETWEEN
THEM, INCLUDING THEIR ASSIGNEES, REP WILL NOT BE ABLE TO MAKE ANY CLAIM FOR
THOSE DAMAGES, LOSSES OR OBLIGATIONS. FURTHERMORE, REP ACKNOWLEDGES THAT IT
INTENDS THESE CONSEQUENCES, EVEN AS TO CLAIMS FOR DAMAGES, LOSSES OR OBLIGATIONS
THAT MAY EXIST AS OF THE DATE OF THIS AGREEMENT, BUT WHICH REP DOES NOT KNOW
EXIST, AND WHICH, IF KNOWN, WOULD MATERIALLY AFFECT ITS DECISION, EITHER
SINGULARLY OR COLLECTIVELY, TO EXECUTE THIS AGREEMENT, REGARDLESS OF THE CAUSE
OR ITS LACK OF KNOWLEDGE. THE SMP PARTIES ARE NOT RELEASED FROM ANY CLAIMS BASED
UPON A BREACH OF ANY REPRESENTATION WHICH WAS AFFIRMED IN THE SMP PARTIES
REAFFIRMATION AND RELEASE DATED                                     , 200    .

 

 

ROCK ENERGY PARTNERS, L.P.

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

2

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