Exhibit 10.1

 

Execution Version

 

 

 

 

CONTRIBUTION AGREEMENT

 

Between

 

AMERICAN ENERGY OPERATIONS, INC.,

 

BREITBURN ENERGY PARTNERS L.P.,

 

and

 

BREITBURN OPERATING L.P.,

 

dated

 

November 21, 2012

 

 

 

 

TABLE OF CONTENTS

 

Article 1

CONTRIBUTION AND CONSIDERATION

 

Section 1.1 Contribution 1 Section 1.2 Assets 1 Section 1.3 Excluded Assets 3
Section 1.4 Closing; Effective Time; Proration of Costs and Revenues 3 Section
1.5 Delivery and Maintenance of Records 4

 

Article 2

CONSIDERATION

 

Section 2.1 Consideration 4 Section 2.2 Adjustments to Consideration 4 Section
2.3 Common Units Consideration 5 Section 2.4 Allocation of Consideration 5
Section 2.5 Closing Settlement Statement 5

 

Article 3

TITLE MATTERS

 

Section 3.1 AEO’s Title 5

 

Article 4

intentionally omitted

 

Article 5

REPRESENTATIONS AND WARRANTIES OF AEO

 

Section 5.1 Existence and Qualification 6 Section 5.2 Power 6 Section 5.3 Valid
Agreement 6 Section 5.4 Brokers 6 Section 5.5 Equipment 6 Section 5.6 Payments 7
Section 5.7 Imbalances 7 Section 5.8 Condemnation 7 Section 5.9 Rights of First
Refusal and Consents to Assign 7 Section 5.10 Contracts 7 Section 5.11 Legal
Proceedings 8 Section 5.12 Foreign Person 8

 

 

 

 

Section 5.13 Compliance with Laws 8 Section 5.14 Current Commitments 8 Section
5.15 Plugging and Abandonment Obligations 8 Section 5.16 No Prepayments 8
Section 5.17 Compliance with Permits 9 Section 5.18 Tax 9 Section 5.19
Environmental Matters 9 Section 5.20 Investment Representations 10

 

Article 6

REPRESENTATIONS AND WARRANTIES OF BREITBURN

 

Section 6.1 Corporate Authority 11 Section 6.2 Valid Agreement 11 Section 6.3
Governmental Approvals 11 Section 6.4 Brokers 12 Section 6.5 Parent SEC Reports;
Financial Statements 12 Section 6.6 Capitalization of Parent and Valid Issuance
of Common Units 12 Section 6.7 Tax 13 Section 6.8 Investment Company Status 13
Section 6.9 Offering 13

 

Article 7

COVENANTS

 

Section 7.1 Prior to Closing 13 Section 7.2 Tax Matters 14 Section 7.3 Further
Assurances 15 Section 7.4 Conduct of the Business 15 Section 7.5 Confirmation of
Information 15 Section 7.6 Preparation and Audit of Financial Statements 15
Section 7.7 Nasdaq Listing 16 Section 7.8 Filing of Parent SEC Documents 17
Section 7.9 Information 17

 

Article 8

CLOSING

 

Section 8.1 Conditions Precedent of AEO 17 Section 8.2 Conditions Precedent of
BreitBurn 18 Section 8.3 Closing 18

 

 

 

 

Article 9

POST-CLOSING OBLIGATIONS

 

Section 9.1 Final Settlement Statement 19 Section 9.2 Additional Payments
Received 20 Section 9.3 Revenue Processing 20

 

Article 10

 

OBLIGATIONS AND INDEMNITIES

 

Section 10.1 Retained Obligations 20 Section 10.2 Assumed Obligations 21 Section
10.3 Indemnification by AEO 21 Section 10.4 Indemnification by BreitBurn 23

 

Article 11

 

INDEPENDENT INVESTIGATION AND DISCLAIMER

 

Section 11.1 DISCLAIMER 25 Section 11.2 Independent Investigation 26

 

Article 12

 

DISPUTE RESOLUTION

 

Section 12.1 General 26 Section 12.2 Senior Management 26 Section 12.3 Dispute
Resolution by Independent Expert 27 Section 12.4 Limitation on Arbitration 27

 

Article 13

 

TERMINATION

 

Section 13.1 Events of Termination 27 Section 13.2 Effect of Termination 28

 

Article 14

 

MISCELLANEOUS

 

Section 14.1 Counterparts 28 Section 14.2 Notice 28 Section 14.3 Expenses 28
Section 14.4 Governing Law and Venue 29

 

 

 

 

Section 14.5 Captions 29 Section 14.6 Waivers 29 Section 14.7 Assignment 29
Section 14.8 Entire Agreement 29 Section 14.9 Amendment 29 Section 14.10 No
Third-Party Beneficiaries 29 Section 14.11 References 30 Section 14.12
Construction 30 Section 14.13 Limitation on Damages 30 Section 14.14 Timing 30
Section 14.15 Severance 30

 

EXHIBITS

Exhibit A - Lands

Exhibit B - Wells

Exhibit C - Contracts

Exhibit D – Easements

Exhibit E – Permits

Exhibit F – Equipment

Exhibit G – Not Used

Exhibit H – Not Used

Exhibit I – Closing Settlement Statement

Exhibit J – Consents

Exhibit K – Preferential Rights

Exhibit L – Compliance with Laws

Exhibit M – Current Commitments

Exhibit N –Required Consents

Exhibit O – Deed

Exhibit P –Assignment

 

 

 

 

CONTRIBUTION AGREEMENT

 

This Contribution Agreement (“Agreement”), is executed as of November 21, 2012,
by and between American Energy Operations, Inc., a California corporation
(“AEO”), BreitBurn Energy Partners L.P., a Delaware limited partnership
(“Parent”) and BreitBurn Operating L.P., a Delaware limited partnership
(“BreitBurn”). AEO, Parent and BreitBurn are sometimes hereinafter referred to
individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

AEO owns oil and gas properties including real and personal, tangible and
intangible interests described generally in Exhibits A through F attached hereto
and incorporated herein by reference for all purposes, which are more fully
defined below as “Assets.”

 

AEO desires to transfer to BreitBurn and BreitBurn desires to accept from AEO
the Assets in the manner and upon the terms and conditions hereinafter set
forth.

 

NOW, THEREFORE, in consideration of the premises and mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto, intending to be
legally bound by the terms hereof, agree as follows:

 

Article 1

CONTRIBUTION AND CONSIDERATION

 

Section 1.1 Contribution. Subject to and in accordance with the terms and
conditions of this Agreement, at Closing, AEO hereby agrees to contribute to
BreitBurn, and BreitBurn hereby agrees to acquire from AEO, the Assets in
exchange for Forty Million Dollars ($40,000,000) (the “Cash Consideration”) plus
3,013,561 common units representing limited partnership interests (“Common
Units”) in Parent (such units, the “Common Units Consideration”) (together with
the Cash Consideration, the “Consideration”), as adjusted in accordance with the
other terms of this Agreement.

 

Section 1.2 Assets. As used herein, Assets means all of AEO’s right, title and
interest in and to the properties, wells, rights, titles, working interests, net
revenue interests, and estates, whether real and/or personal, movable and/or
immovable, tangible and/or intangible, which are generally described or
referenced in Exhibits A, B, C, D, E, and F, including the following
(irrespective of whether AEO’s interest therein may be incorrectly or
incompletely described in, or omitted from, such Exhibit A, B, C, D, E or F, but
not including any of the “Excluded Assets” described below):

 

(a) Lands. Without limitation, all right, title and interest (of whatever kind
or character, whether legal or equitable, and whether vested or contingent) of
AEO in and to the lands described on Exhibit A (the “Lands”), and all oil, gas
and other minerals, including mineral interests, royalty interests, overriding
royalty interest, non-participation royalty interests, working interests, rights
of assignment and reassignment, net revenue interests, record title interests,
undeveloped locations and all other interests in and under the Lands, including
the rights to explore for and produce oil, gas or other minerals in and under
the Lands, or any portion thereof, whether or not described on Exhibit A;

 

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(b) Wells. All right, title and interest of AEO in and to all oil, gas, water or
injection wells located on the Lands, whether producing, shut-in, plugged and
abandoned, or temporarily abandoned, including the wells and well locations
described on Exhibit B (“Wells”);

 

(c) Rights in and to Production. All right, title and interest of AEO in and to
all oil, gas, condensate, and other minerals produced from or attributable to
the Lands and Wells from and after the Effective Time (as defined below);

 

(d) Contract Rights. All right, title and interest of AEO in and to the unit
agreements, pooling agreements, orders and decisions of courts or regulatory
authorities establishing or relating to units, unit operating agreements,
communitization agreements, gas purchase agreements, oil purchase agreements,
casinghead gas purchase agreements, gathering agreements, transportation
agreements, processing or treating agreements, farm-out agreements, farm-in
agreements, participation agreements, disposal agreements, surface agreements,
water purchase/sale agreements, electrical power/services agreements, licenses
(whether exclusive or non-exclusive), any other agreements relating to the
Assets, to include all rights in causes of action relative to any
representations and warranties or obligations related to such agreements,
described on Exhibit C (“Contracts”);

 

(e) Easements. All right, title and interest of AEO in and to any rights-of-way,
easements, licenses, and servitudes appurtenant to or used in connection with
the Assets and/or the Lands described in Exhibits A, B, C, E, or F, including
the Easements described on Exhibit D (“Easements”);

 

(f) Permits. All right, title and interest of AEO in the permits and licenses of
any nature owned, held or operated by AEO in connection with operations for the
exploration and production of oil, gas or other minerals to the extent the same
are used or obtained in connection with the Assets described on Exhibit E
(“Permits”);

 

(g) Equipment. All right, title and interest of AEO in all materials, supplies,
equipment, machinery, fixtures and other tangible personal property and
improvements located on the Assets or used or held for use in connection with
the ownership, operations, development and maintenance of the Assets including
any wells, tanks, boilers, buildings, fixtures, tubing, casing, wellheads,
valves, meters, separators, gates, cattleguards, fences, injection facilities,
saltwater disposal facilities, compression facilities, pumping units and
engines, platforms, flow lines, down-hole material and devices, pipelines,
gathering systems, gas and oil treating facilities, machinery, power lines,
telephone and telegraph lines, roads, maintenance rigs, rolling stock, vehicles,
and other appurtenances, improvements and facilities, including the South
Belridge Pipeline System, approximately four (4) miles in length, running from
the NW/4 of Section 12, T28S-R20E to the SE/4 of Section 19, T28S-R21E, Kern
County, California (the “Pipelines”), and that equipment and inventory
identified and described on Exhibit F (“Equipment”);

 

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(h) Files, Books, and Records. All files and records relating to the Assets,
leases, assignments, deeds, contracts, abstracts, title opinions, land surveys,
logs, maps, engineering data and reports, reserve studies and evaluations,
files, books, records, data, and accounting records, including copies of checks
and invoices, related solely to the Assets, or used or held for use primarily in
connection with the maintenance or operation thereof (“Information”); provided
that AEO shall have the right to retain copies, at its own expense, of any of
the Information; and

 

(i) Geophysical Data. All of AEO’s seismic, geophysical, geological, geochemical
and other geotechnical information and data relating to the Assets, to the
extent transfer thereof does not require consent; provided that AEO shall make
reasonable efforts, not involving the making of any payment, to obtain such
consent.

 

Section 1.3 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include, and there is excepted, reserved and excluded from the purchase and sale
contemplated hereby, the following (“Excluded Assets”):

 

(a) Receivables. All trade credits, accounts receivable, notes receivables and
other receivables attributable to AEO’s interests in the Assets with respect to
any period prior to the Effective Time; and

 

(b) Claims and Causes of Action. All claims and causes of action held by AEO
against other persons arising from breaches, acts, omissions or events or damage
to or destruction of property occurring prior to the Effective Time.

 

(c) Tax Refunds. Any refunds of Taxes attributable to periods ending prior to
the Effective Time.

 

Section 1.4 Closing; Effective Time; Proration of Costs and Revenues.

 

(a) Closing and Effective Time. The conveyance of the Assets to BreitBurn shall
be effective as of 7:00 A.M., local time, where the Assets are located, on
November 1, 2012 (“Effective Time”). Title thereto shall be delivered at the
closing, which shall take place on or before November 30, 2012 (“Closing” or
“Closing Date”) in the office of BreitBurn in Los Angeles, California, or such
other place as the parties so mutually agree. Possession of the Assets shall be
transferred from AEO to BreitBurn at the Closing, but certain financial benefits
and burdens of the Assets shall be transferred as of the Effective Time, as
described below.

 

(b) Proration of Costs and Revenues. BreitBurn shall be entitled to all
production from or attributable to the Lands, Wells, Units and other interests
among the Assets at and after the Effective Time (and all products and proceeds
attributable thereto), and to all other income, proceeds, receipts and credits
earned with respect to the Assets at or after the Effective Time, and shall be
responsible for (and entitled to any refunds with respect thereto) all Property
Costs (as defined below) incurred at and after the Effective Time, except to the
extent any Property Costs are related to matters subject to any indemnity by
AEO. The terms “earned” and “incurred,” as used in this Agreement, shall be
interpreted in accordance with generally accepted accounting principles (“GAAP”)
and Council of Petroleum Accountants Society (“COPAS”) standards. “Property
Costs” means all operating expenses incurred in the ordinary course of business
(including costs of insurance and Asset Taxes) and capital expenditures incurred
in the ownership and operation of the Assets including royalties and other
burdens upon, measured by or payable out of proceeds from production, rentals
and other lease maintenance payment, but excluding any costs or expenses of
litigation. AEO shall utilize reasonable interpolative procedures to arrive at
an allocation of production when exact meter readings or gauging and strapping
data is not available. AEO shall provide to BreitBurn, no later than five
Business Days prior to Closing, all data necessary to support any estimated
allocation, for purposes of establishing the adjustment to the Consideration
pursuant to Section 2.2 hereof that will be used to determine the Closing
Payment (as defined below). Taxes, right-of-way fees, insurance premiums and
other Property Costs that are paid periodically shall be prorated based on the
number of days in the applicable period falling before and the number of days in
the applicable period falling at or after the Effective Time, except that
production, severance and similar Taxes shall be prorated based on the number of
units actually produced, purchased or sold or proceeds of sale, as applicable,
before, and at or after, the Effective Time. In each case, BreitBurn shall be
responsible for the portion allocated to the period at and after the Effective
Time and AEO shall be responsible for the portion allocated to the period before
the Effective Time.

 

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Section 1.5 Delivery and Maintenance of Records.

 

(a) Within three days after execution of this Agreement, AEO shall deliver well
files, revenue decks, accounts payable vendor listings, production information,
and royalty owner information.

 

(b) AEO may retain copies of any of the Information that it needs for
litigation, tax, accounting, and auditing purposes and may use it only for those
purposes.

 

Article 2

CONSIDERATION

 

Section 2.1 Consideration. The consideration for the Assets under this Agreement
shall be the Cash Consideration and the Common Units Consideration (the Cash
Consideration and the Common Units Consideration together, the “Consideration”).
The Adjusted Cash Consideration shall be paid by BreitBurn in accordance with
Section 2.2 at Closing in U.S. Dollars by wire transfer in same day funds to one
or more bank accounts of AEO (the details of which shall be provided by AEO to
BreitBurn by written notice given at least three (3) Business Days prior to
Closing) or as otherwise provided in Section 2.2. The Common Units Consideration
shall be delivered by BreitBurn to AEO at Closing.

 

Section 2.2 Adjustments to Consideration. The Cash Consideration for the Assets
shall be adjusted as follows (the “Adjusted Cash Consideration”) with all such
amounts being determined in accordance with GAAP and COPAS standards:

 

(a) Reduced by the aggregate amount of the proceeds received by AEO between the
Effective Time and the Closing Date (the “Adjustment Period”) earned with
respect to the Assets during the Adjustment Period;

 

(b) Increased by the amount of all Property Costs attributable to the ownership
and operation of the Assets which are paid by AEO and incurred from and after
the Effective Time, except any Property Costs and other such costs already
deducted in the determination of proceeds in Section 2.2(a); and

 

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(c) Increased by $132,095, which is the value of all oil in stock tanks as of
the Effective Time that was produced from the Assets, above the connection
therefor and was not sold by AEO, determined by using the contract price at the
Effective Date for such oil by the purchaser thereof (the “Inventory”).

 

Section 2.3 Common Units Consideration. If Parent shall at any time prior to the
Closing subdivide its Common Units, by split-up or otherwise, or combine its
Common Units, or issue additional Common Units as a dividend or distribution
with respect to any Common Units, appropriate adjustments shall be made to the
number of Common Units issuable to AEO hereunder.

 

Section 2.4 Allocation of Consideration. To the extent required by Law,
BreitBurn and AEO shall agree prior to Closing upon an allocation of the
Consideration among each of the Assets, in compliance with the principles of
Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”). The
Parties agree that substantially all of the Consideration is properly allocated
to Class V assets. The Parties agree not to assert, and will cause their
respective affiliates not to assert, in connection with any audit or other
proceeding with respect to Taxes or in connection with the filing of any Tax
Return, any asset values or other items inconsistent with an agreed allocation
pursuant to this Section 2.4.

 

Section 2.5 Closing Settlement Statement. No later than five Business Days
before the Closing Date, AEO shall deliver to BreitBurn a draft settlement
statement setting forth its calculation of the Adjusted Cash Consideration (the
“Closing Settlement Statement”), which statement shall be substantially in the
form of Exhibit I and which shall reflect each adjustment made in accordance
with this Agreement as of the date of preparation of such Closing Settlement
Statement and the calculation of the adjustments used to determine such amount.

 

Article 3

TITLE MATTERS

 

Section 3.1 AEO’s Title. AEO makes no warranty of title with respect to the
Assets except for the “Special Warranty” included in the Deed.

 

Article 4

intentionally omitted

 

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Article 5

REPRESENTATIONS AND WARRANTIES OF AEO

 

As used in this Article 5, “knowledge” shall mean the actual present knowledge
(excluding any imputed or implied knowledge and without any obligation to make
additional inquiries or investigations) of any fact, circumstance or condition
by Lee Ross, Joe Grigg, Gregg Martin or Dennis Weese.

 

Except as set forth on the schedules of exceptions and disclosures delivered in
connection herewith (the “AEO Disclosure Schedule”) AEO represents and warrants
as follows:

 

Section 5.1 Existence and Qualification. AEO is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.

 

Section 5.2 Power. AEO has the corporate power to enter into and perform this
Agreement and consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement, and the performance of
the transactions contemplated hereby, have been duly and validly authorized by
all necessary action on the part of AEO. This Agreement has been duly executed
and delivered by AEO (and all documents required hereunder to be executed and
delivered by AEO at Closing will be duly executed and delivered by AEO), and at
the Closing such documents will constitute the valid and binding obligations of
AEO, enforceable in accordance with their terms except as such enforceability
may be limited by applicable bankruptcy or other similar laws affecting the
rights and remedies of creditors generally as well as to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

 

Section 5.3 Valid Agreement. All instruments required hereunder to be executed
and delivered by AEO shall be duly executed and delivered to BreitBurn and shall
constitute legal, valid and binding obligations of AEO. The execution and
delivery by AEO of this Agreement, the consummation of the transactions set
forth herein and the performance by AEO of AEO’s obligations hereunder shall be
duly and validly authorized by all requisite action on the part of AEO and will
not violate, conflict with or result in any violation or breach of any provision
of (i) any material agreement, contract, mortgage, lease, license or other
instrument to which AEO or the Assets are party or by which AEO or the Assets
are bound; (ii) any governmental franchise, license, permit or authorization or
any judgment or order of judicial or governmental body applicable to AEO or the
Assets; or (iii) any law, statute, decree, rule or regulation of any
jurisdiction in the United States to which AEO or the Assets are subject.

 

Section 5.4 Brokers. AEO has incurred no obligation or liability, contingent or
otherwise, for brokers’ or finders’ fees with respect for this transaction for
which BreitBurn shall have any obligation or liability.

 

Section 5.5 Equipment. All Wells and Equipment are, to AEO’s knowledge, in all
material respects, in a state of reasonable repair (subject to normal wear and
tear, maintenance and ongoing upgrades or replacement consistent with past
practice) so as to be adequate for present uses and operations. The Equipment
and Contracts, together with all other properties and assets included in the
Assets, are sufficient for the continued conduct of the operation of the Assets
after the Closing in substantially the same manner as conducted prior to the
Closing in all material respects and constitute all of the rights, property and
assets necessary to conduct the operation of the Assets as currently conducted.
The Parties agree that this representation and warranty shall only apply to
Equipment worth an estimated value of $25,000 or more.

 

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Section 5.6 Payments.

 

(a) All rentals, royalties, excess royalty, overriding royalty interests,
production payments, fees, and other payments due and/or payable by AEO or by
its predecessors in title to mineral and royalty holders and other interest
owners on or prior to the date hereof under or with respect to the Assets have
been paid;

 

(b) AEO is not obligated under any contract or agreement for the sale of oil or
gas from the Assets containing a take-or-pay, advance payment, prepayment, or
similar provision, or under any gathering, transmission, or any other contract
or agreement with respect to any of the Assets to gather, deliver, process, or
transport any gas without then or thereafter receiving full payment therefore;
and

 

(c) There are no suspended funds or unpaid royalties attributable to the Assets.

 

Section 5.7 Imbalances.

 

(a) No person is entitled to receive any portion of AEO’s production from the
Assets or to receive cash or other payments to “balance” any disproportionate
allocation of production from the Assets under any operating agreement, or oil
or gas balancing, storage agreement, processing or dehydration agreement,
transportation agreement, purchase agreement or other agreements;

 

(b) AEO is not obligated to deliver any quantities of gas or to pay any
penalties or other amounts, in connection with the violation of any of the terms
of any oil or gas contract or other agreement with shippers with respect to the
Assets; and

 

(c) AEO is not obligated to pay any penalties or other payments under any gas
transportation or other agreement as a result of the delivery of quantities of
gas from the Wells in excess of the contract requirements.

 

Section 5.8 Condemnation. To AEO’s knowledge, there is no actual or threatened
taking (whether permanent, temporary, whole or partial) of any part of the
Assets by reason of condemnation or the threat of condemnation.

 

Section 5.9 Rights of First Refusal and Consents to Assign. Any consent required
for the implementation of the conveyance contemplated by this Agreement is
listed on Exhibit J and has been obtained. Any right of first refusal preference
right or similar right applicable to the Assets or implicated by this Agreement
is listed on Exhibit K and have been waived.

 

Section 5.10 Contracts. Exhibit C lists each contract and agreement with regard
to the ownership and operation of the Assets. To AEO’s knowledge, AEO, is not
(nor will be with due notice, lapse of time or both) in default under any
Contract that is part of the Assets. To AEO’s Knowledge, all Contracts that are
part of the Assets are in full force and effect. No notice of default or breach
has been received or delivered by AEO under any Contract that is part of the
Assets, the resolution of which is currently outstanding.

 

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Section 5.11 Legal Proceedings. There are no proceedings, actions, claims or
suits, or to AEO’s knowledge, investigations or inquiries by or before any
arbitrator or Governmental Entity pending or, to AEO’s knowledge, threatened,
against or affecting the Assets (including any actions challenging or pertaining
to AEO’s title to any of the Assets), or affecting the execution and delivery of
this Agreement by AEO or the consummation of the transactions contemplated
hereby by AEO.

 

Section 5.12 Foreign Person. AEO is neither a “foreign person” nor a
“disregarded entity” within the meaning of Section 1445 of the Code and its
implementing Treasury Regulations.

 

Section 5.13 Compliance with Laws. Except as described in Exhibit L, AEO has not
received written notice that it is in violation of in any material respect of
any applicable Law or is under investigation by any Governmental Entity for
potential non-compliance in any material respect with any applicable Law. Except
for Laws requiring the obtaining or maintenance of a Permit, or for
Environmental matters that are the subject of Section 5.17 and 5.19,
respectively, AEO is in compliance in all material respects with all applicable
Laws with respect to its ownership and operation of the Assets.

 

Section 5.14 Current Commitments. Exhibit M sets forth as of the date of this
Agreement all commitments for capital expenditures (“AFEs”) in excess of $50,000
per individual AFE or series of related AFEs, in each case, received or issued
by AEO and relating to AEO’s interest in the Assets that are binding on AEO with
respect to the Assets and that AEO reasonably anticipates will individually
require expenditures by the owner of the Assets after the Effective Time in
excess of $50,000.

 

Section 5.15 Plugging and Abandonment Obligations. Except as contemplated by
AEO’s Plugging and Abandonment Plan, there are no Wells operated by AEO that (a)
relate or are subject to an order from any Governmental Authority requiring that
such Well be plugged and abandoned, (b) are not in use for purposes of
production or injection, nor suspended or temporarily abandoned, or, to AEO’s
knowledge, that have been plugged and abandoned, but have not been plugged or
abandoned in material compliance with all applicable requirements of each
Governmental Authority having jurisdiction over such Well, (c) to AEO’s
knowledge, are not properly permitted by the Governmental Authority having
jurisdiction thereover, or (d) have not been drilled and completed in compliance
with all applicable Laws.

 

Section 5.16 No Prepayments. AEO is not obligated by virtue of any prepayment
arrangement for the sale of hydrocarbons and/or any take or pay or other similar
provisions of a production payment or other arrangement, to deliver
hydrocarbons, or proceeds from the sale thereof, attributable to the Assets at
some future time without then or thereafter receiving full payment therefor.

 

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Section 5.17 Compliance with Permits. (a) AEO has obtained and is maintaining
all Permits that are necessary or required for the ownership, development and
operation of the Assets by AEO; (b) all such Permits are in full force and
effect; and (c) there are no proceedings pending or, to AEO’s knowledge,
threatened before any Governmental Authority that seek the revocation,
cancellation, suspension or adverse modification thereof.

 

Section 5.18 Tax.

 

(a) Each material Tax Return required to be filed by AEO or otherwise with
respect to the Assets has been timely and properly filed under applicable laws,
and all Taxes due and owed by AEO or otherwise relating to the Assets have been
timely and properly paid; 

 

(b) None of the Assets is subject to or deemed to be owned by any arrangement
properly treated as a partnership under Subchapter K of Chapter 1 of Subtitle A
of the Code; 

 

(c) The Assets are not subject to any lien for Taxes, other than for current
period Taxes not yet due and payable;

 

(d) AEO has not received notice of any pending claim with respect to the Assets
from any Taxing authority for assessment of Taxes, and there are no ongoing
audits, suits, proceedings, assessments, reassessments, deficiency claims or
other claims relating to any Taxes with respect to the Assets by any applicable
Taxing authority;

 

(e) AEO has not waived any statute of limitations in respect of any Taxes
relating to the Assets, nor has AEO or any of its affiliates agreed to any
extension of time with respect to any Tax assessment or deficiency relating to
the Assets; 

 

(f) All of the Assets have been properly listed and described on the property
tax rolls for all periods prior to and including the Closing Date and no portion
of the Assets constitutes omitted property for property tax purposes; and

 

(g) There are no Tax liabilities of AEO that could result in liability to
BreitBurn as a transferee or successor or otherwise attach to the Assets.

 

Section 5.19 Environmental Matters.

 

(a) With respect to the Assets, AEO has not entered into, and is not subject to,
any agreements, consents, orders, decrees, judgments, or other binding
consensual arrangements or commitments pursuant to Environmental Laws that
impose conditions that prevent the development or operation of any portion of
the Assets by AEO;

 

(b) AEO has not received notice from any person of any Release or threatened
Release of Hazardous Substances at or from any of the Assets or any liability of
AEO (with regard to the Assets) to any person or Governmental Entity pursuant to
any Environmental Law;

 

(c) AEO has made access available to BreitBurn complete and accurate copies of
all environmental assessment and audit reports and studies and all similar
documentation and correspondence in the possession of or control of AEO and
addressing potentially material Environmental Liabilities or obligations
relating to ownership or operation of the Assets;

 

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(d) With respect to the Assets and operations thereon, there are no material
uncured violations of any Environmental Law and no material Environmental
Liabilities;

 

(e) The Asset are not subject to any Environmental Condition; and

 

(f) AEO is not subject to any pending, written claim or, to the knowledge of
AEO, threatened, complaint or claim, related to any material noncompliance with,
or material liabilities arising under Environmental Laws with respect to the
Assets or the operation of the Assets.

 

Section 5.20 Investment Representations.

 

(a) Experience; Status.

 

(i) AEO is capable of evaluating the merits and risks of its investment in
Parent and has the capacity to protect its own interests. To the extent
necessary, AEO has retained, at its own expense, and relied upon, appropriate
professional advice regarding the investment, tax and legal merits and
consequences of an investment in the Common Units that AEO will receive at
Closing.

 

(ii) AEO is an “accredited investor” (as such term is used in Rule 501 under the
Securities Act of 1933, as amended (the “Securities Act”), is able to bear the
economic risk of its investment in the Common Units indefinitely and has
sufficient net worth to sustain a loss of its entire investment in Parent
without economic hardship if such loss should occur.

 

(b) Access to Information.

 

AEO has not received representations or warranties from Parent or BreitBurn, or
their employees, affiliates, attorneys, accountants or agents, except as set
forth in this Agreement, and has undertaken such due diligence pertaining to
Parent and BreitBurn as AEO deems adequate.

 

(c) Investment Purposes.

 

(i) AEO is acquiring the Common Units solely for investment for its own account,
not as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof in any transaction in violation of the federal or
state securities laws. AEO will hold the Common Units for its own account for
investment and not with a view to, or for sale or other disposition in
connection with, any distribution of all or any part thereof within the meaning
of the Securities Act, except in compliance with applicable federal and state
securities laws. AEO understands that the Common Units have not been registered
under the Securities Act or applicable state securities laws by reason of a
specific exemption from the registration provisions of the Securities Act and
applicable state securities laws, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
AEO’s representations as expressed herein. AEO understands that Parent is
relying, in part, upon the representations and warranties contained in this
Section 5.20 for the purpose of determining whether this transaction meets the
requirements for such exemption.

 

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(ii) AEO understands that at Closing the Common Units will be characterized as
“restricted securities” under federal securities laws and that under such laws
and applicable regulations the Common Units cannot be sold or otherwise disposed
of without registration under the Securities Act or an exemption therefrom.

 

Article 6

REPRESENTATIONS AND WARRANTIES OF BREITBURN

 

Parent and BreitBurn each represents and warrants to AEO at the Closing, as
follows:

 

Section 6.1 Corporate Authority. BreitBurn is a limited partnership duly
organized and in good standing under the laws of the State of Delaware, is duly
qualified and in good standing to carry on its business in the state where the
Assets are located and that it has all the requisite power and authority to
enter into and perform this Agreement and carry out the transactions
contemplated under this Agreement.

 

(a) BreitBurn shall deliver to AEO at the Closing written resolutions evidencing
BreitBurn’s authority to execute and deliver this Agreement and all related
documents and to perform its obligations hereunder.

 

(b) BreitBurn shall deliver to AEO a certificate of existence issued by the
State of Delaware dated no earlier than five Business Days prior to the Closing
Date.

 

Section 6.2 Valid Agreement. This Agreement constitutes the legal, valid and
binding agreement of BreitBurn, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar laws from time to time in
effect, as well as general principles of equity. All instruments required
hereunder to be executed and delivered by BreitBurn shall be duly executed and
delivered to AEO and shall constitute legal, valid and binding obligations of
BreitBurn. The execution and delivery by BreitBurn of this Agreement, the
consummation of the transactions set forth herein and the performance by
BreitBurn of BreitBurn’s obligations hereunder have been duly and validly
authorized by all requisite action on the part of BreitBurn and will not
conflict with or result in any violation of any provision of (i) any agreement,
partnership agreement, contract, mortgage, lease, license or other instrument to
which BreitBurn is a party or by which BreitBurn is bound; (ii) any governmental
franchise, license, permit or authorization or any judgment or order of judicial
or governmental body applicable to BreitBurn, or (iii) any law, statute, decree,
rule or regulation of any jurisdiction in the United States to which BreitBurn
is subject.

 

Section 6.3 Governmental Approvals. BreitBurn shall obtain all required local,
state, federal governmental and agency permissions, approvals, permits, bonds
and consents as required to assume AEO’s obligations and responsibilities
attributable to the Assets as assumed by BreitBurn under this Agreement.

 

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Section 6.4 Brokers. BreitBurn has incurred no obligation or liability,
contingent or otherwise, for brokers’ or finders’ fees with respect to this
transaction for which AEO shall have any obligation or liability.

 

Section 6.5 Parent SEC Reports; Financial Statements.

 

(a) Parent has filed all reports, schedules, forms, statements and other
documents (including exhibits and other information incorporated therein)
required to be filed by Parent with the Securities and Exchange Commission
(“SEC”) since January 1, 2012 (such documents being collectively referred to as
the “Parent SEC Reports”). Each Parent SEC Report (i) at the time filed or, if
amended, as of the date of such amendment, complied as to form in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Report and (ii) did not, at the time it
was filed (or, if amended or superseded by a filing or amendment prior to the
date hereof, then at the time of such filing or amendment) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

 

(b) The financial statements contained in the Parent SEC Reports (i) have been
prepared in accordance with GAAP, applied on a consistent basis throughout the
periods presented thereby (except as may be indicated in the notes thereto or,
in the case of unaudited financial statements, as permitted by Form 10-Q of the
SEC), and (ii) fairly present, in all material respects, the consolidated
financial position and operating results, equity and cash flows of Parent and
its Subsidiaries, on a consolidated basis, as of, and for the periods ended on,
the respective dates thereof, subject, however, in the case of unaudited
financial statements, to normal, recurring and year-end audit adjustments.

 

(c) Parent, and its Subsidiaries, have established and maintain disclosure
controls and procedures and internal control over financial reporting (as such
terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under
the Exchange Act) as required by Rule 13a-15 under the Exchange Act. Such
disclosure controls and procedures are reasonably designed to ensure that all
material information required to be disclosed by Parent and its subsidiaries in
the reports that it files or furnishes under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC, and that all such material information is
accumulated and communicated to Parent’s management as appropriate to allow
timely decisions regarding required disclosure and to make the certifications
required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”).

 

Section 6.6 Capitalization of Parent and Valid Issuance of Common Units.

 

(a) BreitBurn has made available to AEO a true and correct copy of the
Partnership Agreement, as amended through the date hereof. The Common Units
comprising the Common Units Consideration shall have those rights, preferences,
privileges and restrictions governing the Common Units as set forth in the
Partnership Agreement;

 

12

 

 

(b) The issuance of the Common Units comprising the Common Units Consideration
represented thereby has been duly authorized by Parent pursuant to the
Partnership Agreement and, when issued and delivered to AEO in accordance with
the terms of this Agreement, will be validly issued, fully paid (to the extent
required by applicable Law and the Partnership Agreement) and nonassessable
(except as such nonassessability may be affected by Sections 17-303, 17-607 and
17-804 of the Delaware LP Act) and will be free of any and all Liens and
restrictions on transfer, other than restrictions on transfer under the
Partnership Agreement, this Agreement and under applicable state and federal
securities Laws and other than such liens as are created by AEO; and

 

(c) Parent’s currently outstanding Common Units are quoted on The Nasdaq Global
Market and Parent has not received any notice of delisting.

 

Section 6.7 Tax. For United States federal Tax purposes (and state, local, and
foreign Tax purposes where applicable), BreitBurn is disregarded as an entity
separate from Parent. Parent is, and has only been, classified as either a
disregarded entity or a partnership for United States federal Tax purposes (and
state, local, and foreign Tax purposes where applicable). Parent does, and
reasonably expects to continue to, meet the gross income requirements of Section
7704(c)(2) of the Code, and Parent is not, and does not reasonably expect to be,
treated as a corporation under Section 7704(a) of the Code or Treasury
Regulations section 301.7701-2.

 

Section 6.8 Investment Company Status. Parent is not now, and after the issuance
of the Common Units comprising the Common Units Consideration will not be, and
is not controlled by or under common control with, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

Section 6.9 Offering. Assuming the accuracy of the representations and
warranties of AEO contained in Section 5.20 of this Agreement, the issuance of
the Common Units comprising the Common Units Consideration pursuant to this
Agreement is exempt from the registration requirements of the Securities Act,
and neither Parent nor any authorized representative acting on its behalf has
taken or will take any action hereafter that would cause the loss of such
exemption.

 

Article 7

COVENANTS

 

Section 7.1 Prior to Closing. BreitBurn agrees to indemnify, defend and hold
harmless AEO, its parent, subsidiary, affiliate corporations, directors,
officers, employees, agents and representatives from and against any and all
claims, causes of action, liabilities, damages, losses, costs and expenses
(including court costs, expenses of litigation and reasonable attorney’s fees)
in connection with personal injuries, including death or property damage to the
extent arising out of or relating to the access of BreitBurn, its officers,
employees, and representative to such properties and to the records and other
related information as permitted under this Agreement. AEO will provide
reasonable access to its officers, employees, and representative to such
properties and to the records and other related information to BreitBurn.

 

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Section 7.2 Tax Matters.

 

(a) From the Effective Date through the Closing Date, AEO shall be responsible
for filing with the Tax authorities the applicable Tax Returns for Asset Taxes
that are required to be filed on or before the Closing Date and paying all Asset
Taxes with respect to the Assets that are due and owing on or before the Closing
Date. BreitBurn shall be responsible for filing with the appropriate taxing
authorities the applicable Tax Returns for all Asset Taxes (other than Taxes
described in clause (i) of Section 7.2(b)) required to be filed after the
Closing Date and paying all Asset Taxes that become due and owing after the
Closing Date; provided, however, that in the event that AEO is required by
applicable Tax Law to file a Tax Return for Asset Taxes after the Closing Date,
AEO shall file such Tax Return and pay the Asset Taxes reflected on such Tax
Returns as due and owing.  In each case, the Parties may be entitled to
reimbursement for all or a portion of such Asset Taxes in accordance with the
principles of Sections 1.4(b) and 7.2(b).

 

(b) AEO shall indemnify and hold harmless BreitBurn with respect to (i) any and
all income Taxes, capital gains Taxes, franchise Taxes and similar Taxes imposed
by any applicable Laws on AEO or any of its affiliates, or any combined,
unitary, or consolidated group of which any of the foregoing is or was a member,
whether before or after the Closing Date, (ii) any Asset Taxes in respect of the
Assets for all Tax periods, or portions thereof, ending at or prior to the
Effective Time (including Taxes with respect to the Assets allocable to AEO
pursuant to Section 1.4(b)), (iii) any Taxes imposed on or with respect to the
ownership or operation of the Excluded Assets, whether before or after the
Closing Date.  BreitBurn shall indemnify and hold harmless AEO with respect to
any Asset Taxes for all Tax periods, or portions thereof, after the Effective
Time (including Taxes with respect to the Assets allocable to BreitBurn pursuant
to Section 1.4(b)) for which AEO is not responsible.

 

(c) All sales, use, transfer and similar Taxes and all recording fees incurred
by or imposed with respect to the transfer of the Assets to BreitBurn pursuant
to this Agreement (“Transfer Taxes”) shall be the responsibility of, and shall
be paid by, BreitBurn.

 

(d) The Parties acknowledge and agree that AEO’s transfer of the Assets pursuant
to this Agreement to BreitBurn is intended to be treated in part as a
contribution to Parent pursuant to Section 721 of the Code and in part as a sale
pursuant to Section 707 of the Code, and for purposes of determining the portion
of the Consideration treated as sale consideration and the portion of the Assets
treated as being sold for purposes of Section 707 of the Code, the Parties agree
to treat and report for United States federal income Tax purposes (and state,
local, and foreign Tax purposes where applicable) a portion of the Cash
Consideration as a reimbursement of “capital expenditures,” within the meaning
of Treasury Regulations section 1.707-4(d), to the extent AEO provides BreitBurn
with documentation prior to December 15, 2012 that is reasonably adequate to
support such treatment and allow for orderly preparation of tax calculations
regarding the Assets (including AEO’s adjusted tax basis in the Assets and AEO’s
pre-formation capital expenditures in respect of the Assets for the 24 months
prior to the Closing Date).

 

(e) Each Party shall cooperate fully, as and to the extent reasonably requested
by the other Party, in connection with the filing of Tax Returns and any audit,
litigation, or other proceeding with respect to Taxes relating to the Assets.
Such cooperation shall include the retention and (upon another Party’s request)
the provision of records and information that are relevant to any such Tax
Return or audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided under this Agreement. The Parties agree to retain all
books and records with respect to tax matters pertinent to the Assets relating
to any tax period beginning before the Effective Date until the expiration of
the statute of limitations of the respective tax periods and to abide by all
record retention agreements entered into with any Taxing authority.

 

14

 

 

Section 7.3 Further Assurances. After Closing, each of AEO and BreitBurn agrees
to take such further actions and to execute, acknowledge and deliver all such
further documents as are reasonably requested by the other party for carrying
out the purposes of this Agreement or of any document delivered pursuant to this
Agreement.

 

Section 7.4 Conduct of the Business. From the date hereof until Closing, AEO
will (a) operate the Assets in the ordinary course of business (including by
maintaining and repairing the Assets) and using commercially reasonable efforts
to maintain production at a level generally consistent with the values described
in the Ryder Scott 1P Reserve Report dated as of June 30, 2012 covering the same
period: (b) operate the Assets in material compliance with all Laws and all
Environmental Law and in material compliance with all material contracts binding
on AEO; (c) fulfill all material obligations under the material contracts
binding on AEO; and (d) promptly provide to BreitBurn daily drilling,
completion, and production reports and monthly lease operating statements.

 

Section 7.5 Confirmation of Information. On or before the Closing, AEO shall
supply to BreitBurn production and sales data evidencing production from the
Assets and operating expenses and capital expenditures from the Assets since
January 1, 2011. Such data shall substantially conform to production and expense
data previously supplied to BreitBurn and production reported to state
regulatory authorities.

 

Section 7.6 Preparation and Audit of Financial Statements.

 

(a) AEO agrees to prepare, at the sole cost and expense of BreitBurn, and
deliver prior to Closing, statements of revenues and direct operating expenses
and all notes thereto related to the Assets (the “Special Financial Statements”)
that will be required of Parent by the SEC, including any notes required to be
prepared in accordance with Financial Accounting Standards Board ASC Topic 932 –
“Extractive Activities – Oil and Gas”, in connection with any reports,
registration statements or other filings to be made by Parent or any of its
affiliates related to the transactions contemplated by this Agreement with the
SEC pursuant to the Securities Act, and the rules and regulations thereunder, or
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
rules and regulations thereunder, in such form that such statements and notes
thereto can be audited by AEO’s external audit firm (“AEO’s Auditor”) and
reviewed as may be required by AEO’s external independent petroleum reserve
engineering firm (“AEO’s Engineer”). The Special Financial Statements shall be
prepared (i) as of and for the year ended December 31, 2011 (the “Annual Special
Financial Statements”) and (ii) as of and for the nine months ended September
30, 2011 and 2012 (the “Interim Special Financial Statements”). AEO shall
cooperate with and permit BreitBurn to review and/or reasonably participate in
the preparation of the Special Financial Statements and shall provide BreitBurn
and its representatives with reasonable access to AEO’s personnel who engage in
the preparation of the Special Financial Statements. At least fifteen days prior
to Closing, AEO shall execute and deliver a letter to BreitBurn indicating that
(i) carve-out financial statements prepared in accordance with accounting
principles generally accepted in the United States and SEC rules and regulations
do not exist and (ii) it is not practicable for AEO to prepare such statements.

 

15

 

 

(b) AEO shall execute and deliver, or cause to be executed and delivered, to
AEO’s Auditor such representation letters, in form and substance customary for
representation letters provided to external audit firms by AEO (if the financial
statements are subject of an audit or are the subject of a review pursuant to
Statement of Accounting Standards 100 (Interim Financial Information)), as may
be reasonably requested by AEO’s Auditor, with respect to the Special Financial
Statements. BreitBurn agrees that (i) it shall indemnify and hold harmless AEO
and provide a defense for AEO (excluding, in each case, the negligence of AEO)
with regard to the execution, delivery or any other action related to the
provision of (A) any representation letter delivered by AEO to AEO’s Auditor,
(B) the Special Financial Statements, and (C) the Annual Special Financial
Statements, (ii) BreitBurn shall provide a customary representation letter to
AEO’s auditor, if reasonably requested, and (iii) BreitBurn’s and Parent’s
existing outside auditors shall provide a customary representation letter to
AEO’s auditor, if reasonably requested.

 

(c) AEO will engage AEO’s Auditor to perform an audit of the Annual Special
Financial Statements and shall use commercially reasonable efforts to cause
AEO’s Auditor to issue unqualified opinions with respect to the Annual Special
Financial Statements (the Annual Special Financial Statements and related audit
opinions being hereinafter referred to as the “Audited Special Financial
Statements”), and provide its written consent for the use of AEO’s audit reports
with respect to the Audited Special Financial Statements in reports,
registration statements, or other documents filed by Parent or any of its
affiliates under the Securities Act or the Exchange Act, and the rules and
regulations thereunder, as needed. AEO will also engage AEO’s Engineer as may be
required in connection with the preparation of the Annual Special Financial
Statements and shall use commercially reasonable efforts to cause AEO’s Engineer
to provide its written consent for the use of AEO’s reserve reports with respect
to the Audited Special Financial Statements or disclosure of AEO’s oil and gas
reserves in reports, registration statements, or other documents filed by Parent
or any of its affiliates under the Securities Act or the Exchange Act, and the
rules and regulations thereunder, as needed. BreitBurn shall promptly reimburse
AEO for all fees charged by AEO’s Auditor with respect to the preparation and
delivery by AEO’s Auditor to BreitBurn of the Audited Special Financial
Statements and any other fees charged by AEO’s Auditor and AEO’s Engineer to
facilitate Parent’s ongoing compliance with SEC rules and regulations. AEO shall
take all reasonable action as may be necessary to facilitate the completion of
such audit and delivery of the Audited Special Financial Statements and the
delivery of the Interim Special Financial Statements, to BreitBurn or any of its
affiliates as soon as reasonably practicable, but not later than the Closing
Date.

 

Section 7.7 Nasdaq Listing. The Common Units comprising the Common Units
Consideration will be issued in compliance with all applicable rules of The
Nasdaq Global Market. Prior to the Closing Date, Parent will submit to The
Nasdaq Global Market a Notification Form: Listing of Additional Common Units
with respect to the Common Units comprising the Common Units Consideration.

 

16

 

 

Section 7.8 Filing of Parent SEC Documents. Parent agrees that for a period of
12 months following the Closing Date it will file all reports required under
rule 144(c) under the Securities Act (“SEC Rule 144”) to be filed by Parent with
the SEC to permit AEO to be eligible for reliance on SEC Rule 144 in respect of
the resale of the Common Units.

 

Section 7.9 Information. Within two Business Days following the date hereof, AEO
shall supply to BreitBurn and assist in the transfer and transition of, well
file information, expense allocation decks, revenue deck information and
owner/vendor file information.

 

Article 8

CLOSING

 

Section 8.1 Conditions Precedent of AEO. The obligations of AEO under the
Agreement are subject, at the sole option of AEO, to the satisfaction, in AEO’s
sole opinion, at or prior to the Closing of the following conditions:

 

(a) Representation and Warranties True at Closing. The representations and
warranties of BreitBurn contained in the Agreement or in any certificate or
document delivered pursuant to the provisions thereof, or in connection with the
transactions contemplated hereby, were true and complete when made, and shall be
true and complete on and as of the Closing Date as though such representations
and warranties were made at and as of such date except as otherwise expressly
provided herein.

 

(b) Compliance with Agreement. On and as of the Closing Date, BreitBurn shall
have performed and complied with all agreements, covenants and conditions
required by the Agreement to be performed and complied with prior to or on the
Closing Date.

 

(c) Pending Matters. No suit, action or other proceeding shall be pending or
threatened that seeks to restrain, enjoin or otherwise prohibit the consummation
of the transactions contemplated by this Agreement.

 

(d) Receipt of Third Party Consents. All consents and approvals listed on
Exhibit N shall have been received without the imposition of any condition that
would be materially adverse to AEO.

 

(e) Delivery of Consideration. BreitBurn shall have delivered to AEO the
Consideration, as the same may be adjusted hereunder, in accordance with the
terms hereof.

 

(f) Execution and Delivery of the Closing Documents. BreitBurn shall have
executed, acknowledged and delivered, as appropriate, to AEO all closing
documents.

 

17

 

 

Section 8.2 Conditions Precedent of BreitBurn. The obligations of BreitBurn
under this Agreement are subject, at the option of BreitBurn, to the
satisfaction, in BreitBurn’s sole opinion, at or prior to the Closing of the
following conditions:

 

(a) Representation and Warranties True at Closing. The representations and
warranties of AEO contained in the Agreement or in any certificate or document
delivered pursuant to the provisions hereof, or in connection with the
transactions contemplated hereby, were true and complete when made, and shall be
true and complete on and as of the Closing Date as though such representations
and warranties were made at and as of such date except as otherwise expressly
provided herein.

 

(b) Compliance with Agreement. On and as of the Closing Date, AEO shall have
performed and complied with all agreements, covenants, and conditions required
by the Agreement to be performed and complied with prior to or on the Closing
Date.

 

(c) Consents. AEO shall have obtained consent to assign to BreitBurn those
Contracts listed on Exhibit N.

 

(d) Pending Matters. No suit, action or other proceeding shall be pending or
threatened that seeks to restrain, enjoin or otherwise prohibit the consummation
of the transactions contemplated by this Agreement.

 

(e) Execution and Delivery of the Closing Documents. BreitBurn shall have
executed, acknowledged and delivered, as appropriate, to AEO all closing
documents.

 

Section 8.3 Closing. At the Closing, upon the terms and subject to the
conditions of this Agreement, the parties shall perform, deliver or cause to
perform or be delivered to and for each other, among other things, the
following:

 

(a) BreitBurn and AEO shall agree upon a “Closing Settlement Statement,” which
shall include adjustments to the Cash Consideration, which are known as of the
Closing Date, as provided in Section 2.2.

 

(b) AEO shall execute and acknowledge (as applicable) and deliver the following:

 

(i) A deed for the fee properties that are part of the Assets in the form of
Exhibit O (“Deed”);

 

(ii) An Assignment and Bill of Sale in the form of Exhibit P (“Assignment”);

 

(iii) Letters-in-lieu of transfer orders and other instruments conveying title
to the Assets and the production therefrom to BreitBurn;

 

(iv) Consent to assign those Contracts listed on Exhibit N;

 

(v) Resolutions evidencing authority to execute and deliver this Agreement and
perform its obligations hereunder;

 

18

 

 

(vi) Certificates of existence;

 

(vii) Cross-receipt acknowledging the receipt of the Common Units;

 

(viii) Certification of the non-foreign status of AEO, in a form and manner
which complies with the requirements of Code Section 1445 and the Treasury
Regulations thereunder; and

 

(ix) an officer’s certificate dated as of the Closing Date, certifying that the
conditions set forth in Section 8.2 have been fulfilled.

 

(c) BreitBurn shall execute and acknowledge (as applicable) and deliver the
following:

 

(i) the Deed;

 

(ii) the Assignment;

 

(iii) the Consideration pursuant to the provisions of Section 2.1 and as
adjusted pursuant to Section 2.2, and resolutions evidencing its authority to
enter into this Agreement and the certificate of existence; and

 

(iv) an officer’s certificate dated as of the Closing Date, certifying that the
conditions set forth in Section 8.1 have been fulfilled

 

(d) The Parties shall execute and deliver any designations of operator required
by BreitBurn and any other instruments necessary to effectuate the transfer of
operations to BreitBurn.

 

(e) AEO shall deliver possession of the Assets.

 

Article 9

POST-CLOSING OBLIGATIONS

 

Section 9.1 Final Settlement Statement. Not more than 90 days after the Closing,
AEO shall prepare and deliver to BreitBurn, in accordance with this Agreement, a
“Final Settlement Statement” setting forth each adjustment or payment which was
not finally determined as of the Closing and showing the calculation of such
adjustments. As soon as practicable after receipt of the Final Settlement
Statement, BreitBurn shall deliver to AEO a written report containing any
changes which BreitBurn proposes be made to the Final Settlement Statement. The
Parties shall agree with respect to the amounts due pursuant to such
post-Closing adjustments no later than 120 days following the Closing. In the
event AEO and BreitBurn cannot reach agreement within the specified time frame,
all Parties agree to resolve the dispute in accordance with Article 12. The date
upon which such agreement is reached or upon which the final Consideration is
established shall be called the “Final Settlement Date.” In the event that (i)
the final Consideration is more than the consideration as determined at Closing,
BreitBurn shall pay to AEO in immediately available funds the amount of such
difference, or (ii) if the final Consideration is less than the consideration as
determined at Closing, AEO shall pay to BreitBurn in immediately available funds
the amount of such difference. Payment by BreitBurn or AEO to the other shall be
made within five Business Days of the Final Settlement Date.

 

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Section 9.2 Additional Payments Received. After the Final Settlement Date, each
Party covenants and agrees that it will within 48 hours transfer and deliver to
the other Party, from time to time as and when received by it, any cash, checks
with appropriate endorsements (using its reasonable efforts not to convert such
checks into cash) or other property that it receives which properly belong to
the other Party, and will account to such other Party for all such receipts.

 

Section 9.3 Revenue Processing. AEO shall continue to process, consistent with
past practices, revenue distributions for all production months through and
including the month of Closing.

 

Article 10

OBLIGATIONS AND INDEMNITIES

 

Section 10.1 Retained Obligations. Provided that the Closing occurs, AEO shall
retain all obligations and liabilities for, under, relating to or arising from:
(a) the payment or improper payment of royalties, rentals and other similar
payments set forth in Exhibit A to the extent attributable to pre-Effective Time
periods; (b) the Contracts listed in Exhibit C to the extent attributable to
pre-Effective Time periods; (c) any claim for personal injury or death relating
to the Assets or operation of the Assets to the extent arising out of or
attributable to the period prior to the Closing Date; (d) (i) any and all income
Taxes, franchise Taxes and similar Taxes imposed by any applicable Law on AEO
whether prior to or after the Effective Time, (ii) Asset Taxes allocable to AEO
pursuant to Section 1.4(b) taking into account, and without duplication of, such
Asset Taxes effectively born by AEO pursuant to Section 1.4(b), (iii) any Taxes
imposed on or with respect to the ownership or operation of the Excluded Assets
and (iv) and any all other Taxes imposed on or with respect to the ownership or
operation of the Assets for any tax period (or portion thereof) ending before
the Effective Time; (e) any litigation matters to the extent attributable to
pre-Effective Time periods; (f) any onsite or offsite disposal of Hazardous
Substances by AEO or its contractors, prior to the Effective Time; (g) AEO’s
employment relationship with its employees and AEO’s employee benefit plans
prior the Effective Time; (h) any breach by AEO of any of AEO’s representations
and warranties contained in Article 5 (or the corresponding representation and
warranty made by AEO in the certificate delivered pursuant to Section 8.3(b)(ix)
or its covenants hereunder); (i) the Excluded Assets; (j) liens, security
interests and similar charges against the Assets relating to amounts that are
being disputed in good faith by AEO as of the date hereof or the Closing Date,
as applicable; (k) the obligation to make all revenue distribution, including
the payment of all royalties and tax obligations related to the November 2012
production and sales; and (l) the Notice of Violation 5009404 issued by the San
Joaquin Valley Air Pollution Control District following a July 25, 2012
inspection (collectively, the “Retained Obligations”).

 

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Section 10.2 Assumed Obligations. Provided that the Closing occurs, BreitBurn
hereby assumes all duties, obligations and liabilities of every kind and
character with respect to the Assets or the ownership or operation thereof
(other than the Retained Obligations), attributable to the time periods after
the Effective Time, including those arising out of (a) the terms of the
agreements, instruments and obligations comprising part of the Assets, (b) Asset
Taxes allocable to BreitBurn pursuant to Section 7.2(a) taking into account, and
without duplication of, such Asset Taxes effectively born by BreitBurn under
Section 1.4(b), (c) the condition of the Assets occurring after the Effective
Time, (d) obligations to properly plug and abandon or re-plug or re-abandon or
remove wells, flowlines, gathering lines or other facilities, equipment or other
personal property or fixtures comprising part of the Assets; (e) obligations to
restore the surface of the lands comprising a part of the Assets and obligations
to remediate or bring the Assets into compliance with applicable Environmental
Laws (including conducting any remediation activities that may be required on or
otherwise in connection with activities on the lands comprising a part of the
Assets), to the extent that events giving rise to such obligations, arose,
occurred or accrued after the Effective Time; (f) the obligation to make all
revenue distribution, including the payment of all royalties and tax obligations
related to the December 2012 production and sales; and (g) all invoices from
December 1, 2012 forward (collectively, the “Assumed Obligations”).

 

Section 10.3 Indemnification by AEO.

 

(a) Subject to the further provisions hereof, upon Closing, AEO shall defend,
indemnify and hold harmless BreitBurn, its affiliates and its successors and
permitted assigns and their respective unitholders, members, partners (general
and limited), officers, directors, managers, employees, agents and
representatives (collectively, the “BreitBurn Indemnified Parties”), from and
against and in respect of any and all Damages, to the extent arising out of or
related to:

 

(i) The Excluded Assets and the Retained Obligations;

 

(ii) the ownership or operation of any of the Assets by AEO prior to the
Effective Date (“AEO’s Indemnification Period”);

 

(iii) any breach of any representation or warranty (other than any of AEO’s
Fundamental Representations and the representations and warranties in Section
5.18) made by AEO in Article 5 or in any certification in the certificate
delivered by AEO to BreitBurn at Closing pursuant to Section 8.3(b); provided
that for purposes of determining whether any representations and warranties have
been breached, all materiality qualifications contained in such representations
and warranties shall be disregarded;

 

(iv) any breach of any Fundamental Representation made by AEO or in any
certification in the certificate delivered by AEO to BreitBurn at Closing
pursuant to Section 8.3(b); provided that for purposes of determining whether
any representations and warranties have been breached, all materiality
qualifications contained in such representations and warranties shall be
disregarded;

 

(v) any breach of any representation or warranty in Section 5.18; and

 

21

 

 

(vi) any breach of any covenant, agreement or undertaking made by AEO in this
Agreement.

 

(b) Limitations on AEO’s Indemnity Obligations. The obligation to indemnify
BreitBurn Indemnified Parties set forth in Section 10.3(a) shall be subject to
each of the following limitations:

 

(i) AEO’s indemnification obligations under Section 10.3(a)(i), Section
10.3(a)(ii) and Section 10.3(a)(iv) shall survive without the limitation of
time.

 

(ii) AEO’s indemnification obligations under Section 10.3(a)(iii) shall survive
until the date that is eighteen months from the Closing Date;

 

(iii) AEO’s indemnification obligations under Section 10.3(a)(v) shall survive
until ninety days after the expiration of any statutes of limitations; and

 

(iv) AEO’s indemnification obligations under Section 10.3(a)(vi) shall survive
to the extent the covenants, agreements or undertakings referred to therein are
(A) performable on or prior to Closing, the indemnification obligations shall
survive until the date that is eighteen months following the Closing or (B)
performable after Closing, the indemnification obligations shall continue for
the period specified with respect to such covenant or, if no such period is
specified, until such covenant, agreement or undertaking is fully performed.

 

(v) Any individual indemnification claim for Damages asserted by BreitBurn or
any other BreitBurn Indemnified Parties under Section 10.3(a)(iii) must equal or
exceed the sum of $25,000 (damages below that amount shall be referred to as “De
Minimis BreitBurn Losses”); and any individual indemnification claim for Damages
asserted by BreitBurn or any BreitBurn Indemnified Parties that does not meet or
exceed the De Minimis BreitBurn Losses shall be excluded in their entirety, and
AEO, shall have no liability hereunder to BreitBurn or any other BreitBurn
Indemnified Parties for any such individual indemnification claim for Damages
that does not meet or exceed the De Minimis BreitBurn Losses;

 

(vi) To the extent that BreitBurn or BreitBurn Indemnified Parties timely assert
indemnification claims for Damages which individually meet or meet or exceed the
De Minimis BreitBurn Losses (each, a “Material Claim,” and, collectively, the
“Material Claims”), AEO shall have no indemnification, reimbursement or payment
obligations for any Damages pursuant to Section 10.3(a)(iii), unless and until
the cumulative aggregate amount of all Material Claims exceed an amount equal to
3% of the Consideration (the “AEO Basket”) in which case AEO shall be liable for
all such Material Claims up to an amount equal to 20% of the Consideration.

 

(c) Exclusive Remedy. The indemnities provided in this Section 10.3 shall
survive Closing, as contemplated in Sections 10.3(b)(i)-(vi). The indemnity
provided in this Section 10.3 and the special warranty in the Deed shall be the
sole and exclusive remedies of BreitBurn and any other BreitBurn Indemnified
Parties from and after Closing against AEO, at law, in equity or otherwise,
relating to this Agreement (including any alleged breach hereof) or the
transactions contemplated hereby.

 

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(d) Claim Procedure. BreitBurn shall give AEO prompt written notice of any third
party claim or other Damages claims which may give rise to any indemnity
obligation under this Section 10.3, together with the estimated amount of such
action or Damages, and AEO shall have the right to assume the defense of any
such action through counsel of its own choosing, by so notifying BreitBurn
within sixty days of receipt of BreitBurn’s written notice; provided, however,
that AEO’s counsel shall be reasonably satisfactory to BreitBurn. Failure to
give prompt notice shall not affect the indemnification obligations hereunder in
the absence of actual prejudice. If BreitBurn desires to participate in, but not
control, any such defense assumed by AEO, it may do so at its sole cost and
expense. If AEO declines to assume any such defense, it shall be liable for all
reasonable costs and expenses of defending such action incurred by BreitBurn,
including reasonable fees and disbursements of counsel in the event it is
ultimately determined that AEO is liable for such action pursuant to the terms
of this Agreement. If AEO has assumed any such defense, but thereafter AEO has
failed to diligently maintain such defense, then BreitBurn shall give AEO
written notice thereof and, if AEO does not take reasonable action to remedy
such failure within thirty days after receipt, then BreitBurn may assume such
defense and AEO shall continue to be liable for all reasonable costs and
expenses incurred in defending such actions, provided that BreitBurn thereafter
diligently maintains such defense and is commercially reasonable (given the size
and nature of the claim involved) in the manner of defense and the costs and
expenses incurred.

 

Section 10.4 Indemnification by BreitBurn.

 

(a) General Indemnity from BreitBurn; Assumed Obligations. Except to the extent
AEO has an indemnification obligation under Section 10.3, upon Closing,
BreitBurn shall defend, indemnify and hold harmless AEO, its affiliates and its
successors and permitted assigns and their respective shareholders, members,
partners (general and limited), officers, directors, managers, employees, agents
and representatives (collectively, the “AEO Indemnified Parties”), from and
against and in respect of any and all Damages to the extent arising out of or
related to:

 

(i) the ownership or operation of any of the Assets by BreitBurn on or after the
Closing Date and the Assumed Obligations in each case effective as of the
Effective Time (“BreitBurn’s Indemnification Period”);

 

(ii) any breach of any representation or warranty (other than any of BreitBurn’s
Fundamental Representations) made by BreitBurn in Article 6 or in any
certification in the certificate delivered by BreitBurn to AEO at Closing
pursuant to Section 8.3(c); provided that for purposes of determining whether
any representations and warranties have been breached, all materiality
qualifications contained in such representations and warranties shall be
disregarded;

 

(iii) any breach of any Fundamental Representation made by BreitBurn or in any
certification in the certificate delivered by BreitBurn to AEO at Closing
pursuant to Section 8.3(c); provided that for purposes of determining whether
any representations and warranties have been breached, all materiality
qualifications contained in such representations and warranties shall be
disregarded; and

 

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(iv) any breach of any covenant, agreement or undertaking made by BreitBurn in
this Agreement.

 

(b) Limitations on BreitBurn’s Indemnity Obligations. The obligation to
indemnify AEO Indemnified Parties set forth in Section 10.4(a) shall be subject
to each of the following limitations:

 

(i) BreitBurn’s indemnification obligations under Section 10.4(a)(i) and Section
10.4(a)(iii) shall survive without the limitation of time;

 

(ii) BreitBurn’s indemnification obligations under Section 10.4(a)(ii) shall
survive until the date that is eighteen months from the Closing Date;

 

(iii) BreitBurn’s indemnification obligations under Section 10.4(a)(iv) shall
survive to the extent the covenants, agreements or undertakings referred to
therein are (A) performable on or prior to Closing, the indemnification
obligations shall survive until the date that is eighteen months following the
Closing or (B) performable after Closing, the indemnification obligations shall
continue for the period specified with respect to such covenant or, if no such
period is specified, until such covenant, agreement or undertaking is fully
performed; and

 

(iv) To the extent that AEO or AEO Indemnified Parties timely assert
indemnification claims for Damages which individually meet or meet or exceed the
De Minimis AEO Losses (each, a “Material Claim,” and, collectively, the
“Material Claims”), BreitBurn shall have no indemnification, reimbursement or
payment obligations for any Damages pursuant to Section 10.4(a)(ii) (except with
regard to Section 6.5), in excess of an amount equal to 20% of the
Consideration.

 

(c) Exclusive Remedy. The indemnities provided in this Section 10.4 shall
survive Closing, as contemplated in Sections 10.4(b)(i)-(iv). The indemnity
provided in this Section 10.4 shall be the sole and exclusive remedies of AEO
and any other AEO Indemnified Parties from and after Closing against BreitBurn,
at law, in equity or otherwise, relating to this Agreement (including any
alleged breach hereof) or the transactions contemplated hereby.

 

(d) Claim Procedures. AEO shall give BreitBurn prompt written notice of any
third party action or other Damages claims which may give rise to any indemnity
obligation under this Section 10.4, together with the estimated amount of such
action or Damage, and BreitBurn shall have the right to assume the defense of
any such action through counsel of its own choosing, by so notifying AEO within
sixty days of receipt of AEO’s written notice; provided, however, that
BreitBurn’ counsel shall be reasonably satisfactory to AEO. Failure to give
prompt notice shall not affect the indemnification obligations hereunder in the
absence of actual prejudice. If AEO desires to participate in any such defense
assumed by BreitBurn it may do so at its sole cost and expense. If BreitBurn
declines to assume any such defense, it shall be liable for all reasonable costs
and expenses of defending such action incurred by AEO, including reasonable fees
and disbursements of counsel in the event it is ultimately determined that
BreitBurn is liable for such action pursuant to the terms of this Agreement. If
BreitBurn has assumed any such defense, but thereafter BreitBurn has failed to
diligently maintain such defense, then AEO shall give BreitBurn written notice
thereof and, if BreitBurn does not take reasonable action to remedy such failure
within thirty days after receipt, then AEO may assume such defense and BreitBurn
shall continue to be liable for all reasonable costs and expenses incurred in
defending such actions, provided that AEO diligently maintains such defense and
is commercially reasonable (given the size and nature of the claim involved) in
the manner of defense and the costs and expenses incurred. BreitBurn shall not,
without the written consent of a AEO Indemnified Party, settle any action or
claim against such AEO Indemnified Party or consent to the entry of any judgment
with respect thereto that (i) does not result in a final resolution of the AEO
Indemnified Party’s liability with respect to such action or claim (including,
in the case of a settlement, an unconditional written release of the AEO
Indemnified Party from all further liability in respect of such action or claim)
or (ii) would result in the imposition of a consent order, injunction or decree
which would materially and adversely restrict the future activity or conduct of
the AEO Indemnified Party, other than conduct which violates a Law.

 

24

 

 

Article 11

INDEPENDENT INVESTIGATION AND DISCLAIMER

 

The express representations of AEO set forth in this Agreement and the Deed are
exclusive and in lieu of any and all other representations. OTHER THAN AS
EXPRESSLY STATED TO THE CONTRARY HEREIN OR IN THE DEED:

 

Section 11.1 DISCLAIMER. AEO DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY
OTHER REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED
(ORALLY OR IN WRITING) TO BREITBURN, INCLUDING ANY STATEMENTS, REPRESENTATIONS,
OPINIONS, INFORMATION OR ADVICE WHICH MAY HAVE BEEN PROVIDED AS AN ACCOMMODATION
TO BREITBURN BY AN OFFICER, SHAREHOLDER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT
OR REPRESENTATIVE OF AEO, OR ANY ENGINEER OR ENGINEERING FIRM, OR ANY OTHER
AGENT, CONSULTANT, OR REPRESENTATIVE. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE DEED, OR THE
ASSIGNMENT, AEO MAKES ABSOLUTELY NO REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED
OR STATUTORY, AS TO (i) TITLE TO ANY OF THE SUBJECT PROPERTY; (ii) THE ABILITY
OF ANY COMPONENT OF THE SUBJECT PROPERTY TO PRODUCE ANY HYDROCARBONS; (iii) THE
AMOUNTS, QUALITY OR DELIVERABILITY OF HYDROCARBON RESERVES ATTRIBUTABLE TO THE
SUBJECT PROPERTY, OR ANY PART THEREOF; (iv) GEOLOGICAL GEOPHYSICAL OR OTHER
INTERPRETATION OF ANY ECONOMIC EVALUATION; (v) PRESENT OR FUTURE SALES PRICES,
OPERATING COSTS, OR OTHER ECONOMIC FACTORS; (vi) THE CONDITION OR STATE OF
REPAIR OF ANY WELL OR EQUIPMENT RELATING TO THE SUBJECT PROPERTY; AND (vii) THE
ENVIRONMENTAL CONDITION OF THE SUBJECT PROPERTY. BREITBURN ACKNOWLEDGES AND
AFFIRMS THAT IT HAS EXERCISED ITS RIGHT TO INSPECT THE SUBJECT PROPERTY AND EACH
COMPONENT THEREOF; HAS SATISFIED ITSELF AS TO ITS PHYSICAL AND ENVIRONMENTAL
CONDITIONS, BOTH SURFACE AND SUBSURFACE; AND FURTHER THAT BREITBURN HAS MADE ITS
OWN INDEPENDENT INVESTIGATION, ANALYSIS AND EVALUATION OF THE SUBJECT PROPERTY,
AND EACH COMPONENT THEREOF (INCLUDING BREITBURN’S OWN ESTIMATE AND APPRAISAL OF
THE EXTENT AND VALUE OF THE PETROLEUM, NATURAL GAS AND OTHER HYDROCARBON
RESERVES IF ANY RESPECTING EACH COMPONENT OF THE ASSET OR PROPERTY). THE
PERSONAL PROPERTY (SURFACE AND SUBSURFACE) CONVEYED AS PART OF THE SUBJECT
PROPERTY ARE SOLD HEREUNDER WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF ANY
KIND OR CHARACTER, EXPRESS OR IMPLIED OR STATUTORY, REGARDING THE CONDITION OR
STATE OF REPAIR OF ANY OF THE EQUIPMENT COMPRISING PART OF THE ASSETS. THE
FOREGOING DISCLAIMERS BY AEO SHALL NOT LIMIT ANY REPRESENTATION, WARRANTY, OR
INDEMNITY ELSEWHERE PROVIDED IN THIS AGREEMENT, THE ASSIGNMENT OR THE DEED.

 

25

 

 

Section 11.2 Independent Investigation. BreitBurn represents and acknowledges
that it is knowledgeable of the oil and gas business and of the usual and
customary practices of producers such as AEO and that it has had (or will have
prior to the Closing) access to the Assets, the officers and employees of AEO,
and the books, records and files of AEO relating to the Assets, and in making
the decision to enter into this Agreement and consummate the transactions
contemplated hereby, BreitBurn has relied solely on the basis of its own
independent due diligence investigation of the Assets and upon the
representations and warranties made in Article 5, and not on any other
representations or warranties of AEO or any other Person or entity.

 

Article 12

DISPUTE RESOLUTION

 

Section 12.1 General. Any and all claims, disputes, controversies or other
matters in question arising out of or relating to the calculation of the Final
Settlement Statement or revisions thereto (all of which are referred to herein
as “Disputes” which term shall not include any other disputes claims, disputes,
controversies or other matters in question arising under this Agreement) shall
be resolved in the manner prescribed by this Article 12.

 

Section 12.2 Senior Management. If a Dispute occurs that the senior
representatives of the Parties responsible for the transaction contemplated by
this Agreement have been unable to settle or agree upon within a period of
fifteen (15) days after such Dispute arose, AEO shall nominate and commit one of
its senior officers, and BreitBurn shall nominate and commit one of its senior
officers, to meet at a mutually agreed time and place not later than thirty (30)
days after the dispute has arisen to attempt to resolve same. If such senior
management have been unable to resolve such Dispute within a period of fifteen
(15) days after such meeting, or if such meeting has not occurred within
forty-five (45) days following such Dispute arising, then either Party shall
have the right, by written notice to the other, to resolve the Dispute through
the relevant Independent Expert pursuant to Section 12.3.

 

26

 

 

Section 12.3 Dispute Resolution by Independent Expert.

 

(a) Each Party shall have the right to submit disputes regarding calculation of
the Final Settlement Statement or revisions thereto, to an independent expert
appointed in accordance with this Section 12.3 (each, an “Independent Expert”),
who shall serve as sole arbitrator. The Independent Expert shall be appointed by
mutual agreement of the Parties from among candidates with experience and
expertise in the area that is the subject of such Dispute, and failing such
agreement, such Independent Expert for such Dispute shall be selected in
accordance with the Rules (as defined in Subsection (b) of this Section 12.3).

 

(b) Disputes to be resolved by an Independent Expert shall be resolved in
accordance with mutually agreed procedures and rules and failing such agreement,
in accordance with the Rules of the American Arbitration Association to the
extent such Rules do not conflict with applicable Law or the provisions of this
Agreement. The Independent Expert shall be instructed by the Parties to resolve
such Dispute as soon as reasonably practicable in light of the circumstances.
The decision and award of the Independent Expert shall be binding upon the
Parties as an award under the Federal Arbitration Act and final and
nonappealable to the maximum extent permitted by Law, and judgment thereon may
be entered in a court of competent jurisdiction and enforced by any Party as a
final judgment of such court.

 

(c) The charges and expenses of the arbitrator shall be shared equally by AEO
and BreitBurn.

 

(d) Any arbitration hearing held pursuant to this Section 12.3 shall be held in
Los Angeles, California.

 

Section 12.4 Limitation on Arbitration. ALL OTHER DISAGREEMENTS, DIFFERENCES, OR
DISPUTES ARISING BETWEEN AEO AND BREITBURN UNDER THE TERMS OF THIS AGREEMENT
(AND NOT COVERED BY SECTION 12.3) SHALL NOT BE SUBJECT TO ARBITRATION AND SHALL
BE DETERMINED BY A COURT OF COMPETENT JURISDICTION, UNLESS THE PARTIES OTHERWISE
MUTUALLY AGREE.

 

Article 13

TERMINATION

 

Section 13.1 Events of Termination.

 

This Agreement may be terminated:

 

(a) By mutual written consent of BreitBurn and AEO; or

 

(b) By either Party (other than through the failure of such Party to comply
fully with its obligations under this Agreement), if the Closing has not
occurred on or before December 31, 2012.

 

27

 

 

Section 13.2 Effect of Termination. A Party shall not have the right to
terminate this Agreement under Section 13.1 if it is then in breach of this
Agreement. If this Agreement is terminated in accordance with Section 13.1, such
termination shall be without liability to either Party, except with respect to a
Party who has willfully breached this Agreement.

 

Article 14

MISCELLANEOUS

 

Section 14.1 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original instrument, but all such counterparts
together shall constitute but one agreement.

 

Section 14.2 Notice. All notices which are required or may be given pursuant to
this Agreement shall be sufficient in all respects if given in writing and
delivered personally, by telecopy or by registered or certified mail, postage
prepaid, as follows:

 

If to AEO:American Energy Operations, Inc.

550 North Brand Boulevard
Suite 1960
Glendale, CA 91203
Attn: Joseph J. Grigg Jr.
Phone: (818)549-9993 (Ext. 13)
Fax: (818) 549-0147

 

With a copy to:Manatt, Phelps & Phillips, LLP

11355 W. Olympic Blvd.
Los Angeles, California, 90064
Attn: Craig Moyer & Gordon Bava
Phone: (310) 312-4000
Fax: (310) 312-4224

 

If to BreitBurn:BreitBurn Operating L.P.

515 S. Flower Street, Suite 4800
Los Angeles, California 90071
Attn: Gregory C. Brown, General Counsel
Phone: (213) 225-5900
Fax: (213) 225-5916

 

Any party may change its address for notice by notice to the other in the manner
set forth above. All notices shall be deemed to have been duly given at the time
of receipt by the party to which such notice is addressed.

 

Section 14.3 Expenses. All expenses incurred by a Party in connection with or
related to the authorization, preparation or execution of this Agreement, the
Deed, the Assignment and other instruments delivered hereunder and the Exhibits
and schedules hereto and thereto, and all other matters related to the Closing,
including all fees and expenses of counsel, accountants and financial advisers
employed by such Party, shall be borne solely and entirely by such Party.

 

28

 

 

Section 14.4 Governing Law and Venue. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS,  EXCEPT THAT THE PROVISIONS OF
THIS AGREEMENT RELATING TO THE COMMON UNITS (INCLUDING WITHOUT LIMITATION
SECTIONS 1.1, 2.1, 2.3, 2.4, 6.5, 6.6, 7.7 AND 7.8) AND THE INTERNAL AFFAIRS OF
BREITBURN AND PARENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES RELATING
THERETO SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
OTHERWISE APPLICABLE TO SUCH DETERMINATIONS. JURISDICTION AND VENUE WITH RESPECT
TO ANY DISPUTES ARISING HEREUNDER SHALL BE PROPER ONLY IN THE FEDERAL OR STATE
DISTRICT COURTS LOCATED IN CALIFORNIA.

 

Section 14.5 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.

 

Section 14.6 Waivers. Any failure by any party or parties to comply with any of
its or their obligations, agreements or conditions herein contained may be
waived in writing, but not in any other manner, by the party or parties to whom
such compliance is owed. No waiver of, or consent to a change in, any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of, or
consent to a change in, other provisions hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.

 

Section 14.7 Assignment. No party shall assign all or any part of this
Agreement, nor shall any party assign or delegate any of its rights or duties
hereunder, without the prior written consent of the other party and any
assignment or delegation made without such consent shall be void. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.

 

Section 14.8 Entire Agreement. This Agreement and the documents to be executed
hereunder, including the Assignment and the Deed, and the annexes, exhibits and
schedules attached hereto constitute the entire agreement between the parties
pertaining to the subject matter hereof, and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties pertaining to the subject matter hereof, including the Nondisclosure and
Confidentiality Agreement between BreitBurn Management Company, LLC and AEO
dated September 18, 2012.

 

Section 14.9 Amendment. This Agreement may be amended or modified only by an
agreement in writing executed by both parties. No waiver of any right under this
Agreement shall be binding unless executed in writing by the party to be bound
thereby.

 

Section 14.10 No Third-Party Beneficiaries. Nothing in this Agreement shall
entitle any person other than BreitBurn and AEO to any claims, remedy or right
of any kind, except as to those rights expressly provided to AEO Indemnitees and
BreitBurn Indemnitees.

 

29

 

 

Section 14.11 References. In this Agreement: references to any gender includes a
reference to all other genders; references to the singular includes the plural,
and vice versa; reference to any Article, Section or Paragraph means an Article,
Section or Paragraph of this Agreement; reference to any Exhibit or schedule
means an Exhibit or schedule to this Agreement, all of which are incorporated
into and made a part of this Agreement. Unless expressly provided to the
contrary, “hereunder,” “hereof’, “herein” and words of similar import are
references to this Agreement as a whole and not any particular Section or other
provision of this Agreement. “Include” and “including” shall mean include or
including without limiting the generality of the description preceding such
term; and the word “or” is not exclusive.

 

Section 14.12 Construction. BreitBurn is a party capable of making such
investigation, inspection, review and evaluation of the Assets as a prudent
purchaser would deem appropriate under the circumstances including with respect
to all matters relating to the Assets, their value, operation and suitability.
Each of AEO and BreitBurn has had substantial input into the drafting and
preparation of this Agreement and has had the opportunity to exercise business
discretion in relation to the negotiation of the details of the transaction
contemplated hereby. This Agreement is the result of arm’s-length negotiations
from equal bargaining positions. In the event of a dispute over the meaning or
application of this Agreement, it shall be construed fairly and reasonably and
neither more strongly for nor against either party.

 

Section 14.13 Limitation on Damages. NOTWITHSTANDING ANYTHING HEREIN WHICH MAY
APPEAR TO THE CONTRARY, NEITHER PARTY SHALL HAVE ANY OBLIGATIONS WITH RESPECT TO
THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY FOR ANY SPECIAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.

 

Section 14.14 Timing. Time is of the essence in this Agreement.

 

Section 14.15 Severance. If any provision of this Agreement is found to be
illegal or unenforceable, the other terms of this Agreement shall remain in
effect, and this Agreement shall be construed as if the illegal or unenforceable
provision had not been included.

 

(SEE SIGNATURE PAGE BELOW)

 

30

 

 

IN WITNESS WHEREOF, this Agreement has been signed by each of the parties hereto
on the date first above written.

 

AEO:   BREITBURN:         AMERICAN ENERGY OPERATIONS, INC.,
a California corporation   BREITBURN OPERATING L.P.,
a Delaware limited partnership           By:  /s/ Joseph J. Grigg, Jr.   By:
BREITBURN OPERATING GP, LLC,   Joseph J. Grigg, Jr.     a Delaware limited
liability company,   President     its General Partner               By:  /s/
Halbert S. Washburn       Halbert S. Washburn         Chief Executive Officer  
              PARENT:                 BREITBURN ENERGY PARTNERS L.P.,
a Delaware limited partnership                 By:     BREITBURN GP LLC,        
a Delaware limited liability company,         its, General Partner              
            By:  /s/ Halbert S. Washburn         Halbert S. Washburn        
Chief Executive Officer

 

Signature Page

 

 

 

Annex A

 

Definitions

 

For purposes of this Agreement, the following definitions shall apply:

 

(a) “Asset Taxes” means all ad valorem, property, excise, severance, sales, use,
production or similar Taxes (including any interest, fine, penalty or addition
to Tax imposed by a taxing authority in connection with such Taxes) based upon
operation or ownership of the Assets or the production of hydrocarbons therefrom
but excluding: (i) income, capital gains, franchise and similar Taxes and (b)
Transfer Taxes.

 

(b) “Business Day” means any day except Saturday, Sunday or any day on which
federally chartered banks in the United States are required to be closed.

 

(c) “Damages” shall mean any and all damages, incurred with respect to any and
all demands, claims, lawsuits, proceedings, arbitrations, investigations and
other actions, causes of action, judgments, injunctions, awards, settlements,
obligations, losses, liabilities, costs and expenses, including reasonable
attorney fees, court costs, investigative and preparation expenses incurred in
connection with any of the foregoing.

 

(d) “Environment” shall mean any soil, land surface or subsurface strata,
surface waters (including, navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), ground waters, drinking water supply, stream,
sediments, ambient air (including indoor air), plant and animal life (including
without any limitation any species identified as “threatened” or “endangered” or
similar designation under any Environmental Law), and any other natural resource
or medium related to the foregoing.

 

(e) “Environmental Condition” shall mean (a) a Release or threatened Release of
a Hazardous Substance at or from any of the Assets that exists as of the date
hereof that is or was required to be reported to a Governmental Authority
pursuant to Environmental Law or (b) the existence as of the date hereof, of any
Hazardous Substance in the Environment on or at the Assets or any environmental
pollution, contamination, degradation, damage or injury caused by or related to
the operation of any of the Assets that constitutes a violation, or for which
remedial or corrective action is presently required (or if known, would be
presently required), under Environmental Law.

 

(f) “Environmental Law” shall mean any and all federal, state, local, tribal and
foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health, pollution or protection of the Environment, conservation of resources
(including threatened or endangered species), natural resource damages, or
worker health and safety, including all of those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, emission, labeling, testing, processing, discharge, remediation,
Release, threatened Release, control or cleanup of any Hazardous Substances, as
such of the foregoing are enacted or in effect, prior to, on or after the date
hereof. The term “Environmental Law” includes without limitation (i) the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended (“CERCLA”), 42 USC Sections 9601, et seq., (ii) the federal Resource
Conservation and Recovery Act, as amended, 42 USC Sections 6901, et seq., (iii)
the federal Hazardous Materials Transportation Law, 49 USC Sections 5101 et
seq., and any regulations promulgated thereunder.

 

 

 

 

(g) “Environmental Liabilities” shall mean any and all liabilities,
responsibilities, obligations, claims, suits, losses, costs (including
remediation, removal, response, abatement, clean-up, investigative, and/or
monitoring costs and any other related costs and expenses), damages, natural
resource damages, settlements, consulting fees, expenses, assessments, liens,
penalties, fines, orphan share, prejudgment and post-judgment interest, court
costs, and attorney fees incurred or imposed (a) pursuant to any order, notice
of responsibility, directive (including requirements embodied in Environmental
Law), injunction, judgment or similar ruling or act (including settlements) by
any Governmental Entity which results in violation of, or a remedial obligation
under, any Environmental Law which is attributable to (or for which any
liability or responsibility is incurred or imposed as a result of) the ownership
or operation of the Assets, or (b) pursuant to any claim or cause of action by a
Governmental Entity or other person for personal injury, death, property damage,
damage to natural resources, remediation or response costs, or similar costs or
expenses to the extent arising out of ownership or operation of the Assets
including a release of Hazardous Substances or any violation of, or any
remediation obligation under, any Environmental Law. The term “Environmental
Liabilities” shall not include any requirement to plug and abandon wells or
equipment located on the Assets.

 

(h) “Fundamental Representations” shall mean, with regard to AEO, the
representations in Sections 5.1, 5.2, 5.3, 5.4 and 5.19, and with regard to
BreitBurn, the representations in Sections 6.1, 6.2 and 6.6.

 

(i) “Governmental Entity” shall mean any federal, state or local government or
any court of competent jurisdiction, regulatory or administrative agency or
commission or other governmental entity or instrumentality, in each case within
the United States of America.

 

(j) “Hazardous Substances” shall mean and include each substance, waste or
material regulated, designated, classified, defined, characterized or regulated
as a “hazardous substance,” “hazardous waste,” “hazardous material,” “toxic
substance,” “pollutant” or “contaminant” under any Environmental Law, including
any petroleum, petroleum by-products, natural gas or natural gas liquids
Released into the Environment, asbestos, or asbestos-containing material, urea
formaldehyde insulation, hydrogen sulfide or polychlorinated biphenyls.

 

(k) “Laws” means any and all applicable laws, statutes, ordinances, permits,
decrees, writs, injunctions, orders, codes, judgments, principles of common law,
rules or regulations that are promulgated, issued or enacted by a Governmental
Authority having jurisdiction (including any Environmental Law).

 

(l) “Partnership Agreement” shall mean the First Amended and Restated Limited
Partnership Agreement of BreitBurn Energy Partners L.P., dated as of October 10,
2006, as amended.

 

 

 

 

(m) “Release” shall mean any depositing, spilling, leaking, pumping, pouring,
placing, emitting, discarding, abandoning, emptying, discharging, migrating,
injecting, escaping, leaching, dumping, disposing or other release into the
Environment or the movement of any Hazardous Substances through the air, soil,
surface water or groundwater, whether intentional or unintentional.

 

(n) “Subsidiary” of any person shall mean any corporation, partnership, joint
venture or other legal entity of which such person (either alone or through or
together with any other Subsidiary), owns, directly or indirectly, 50% or more
of the stock or other equity interests the holder of which is generally entitled
to vote for the election of the board of directors or other governing body of
such corporation, partnership, joint venture or other legal entity.

 

(o) “Tax” or “Taxes” means (A) all taxes, assessments, fees, unclaimed property
and escheat obligations, and other charges of any kind whatsoever imposed by any
Taxing authority, including any federal, state, local and/or foreign income tax,
surtax, remittance tax, presumptive tax, net worth tax, special contribution
tax, production tax, value added tax, withholding tax, gross receipts tax,
windfall profits tax, profits tax, ad valorem tax, personal property tax, real
property tax, sales tax, goods and services tax, service tax, transfer tax, use
tax, excise tax, premium tax, stamp tax, motor vehicle tax, entertainment tax,
insurance tax, capital stock tax, franchise tax, occupation tax, payroll tax,
employment tax, unemployment tax, disability tax, alternative or add-on minimum
tax and estimated tax, (B) any interest, fine, penalty or additions to tax
imposed by a Taxing authority in connection with any item described in clause
(A), and (C) any liability in respect of any item described in clauses (A) or
(B) above, that arises by reason of a contract, assumption, transferee or
successor liability, operation of law (including by reason of participation in a
consolidated, combined or unitary Tax Return) or otherwise.

 

(p) “Tax Return” means any return (including any information return), report,
statement, schedule, notice, form, election, estimated Tax filing, claim for
refund or other document (including any attachments thereto and amendments
thereof) filed with or submitted to, or required to be filed with or submitted
to, any Taxing authority with respect to any Tax.