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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
 
 
PURCHASE AND SALE AGREEMENT

between

BERRY PETROLEUM COMPANY,

as Seller,
 
 
and
 
 
VENOCO, INC.,

as Buyer,
 
 
Ventura County, California
 
 
 
Dated March 19, 2007

Effective January 1, 2007
 
 
CONFIDENTIAL
 

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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
TABLE OF CONTENTS
 

   
Page
 
TABLE OF CONTENTS
       
ARTICLE 1
PURCHASE AND SALE
1
     
1.1
Purchase and Sale
1
     
1.2
Assets
1
     
1.3
Effective Time
2
     
ARTICLE 2
PURCHASE PRICE
2
     
2.1
Purchase Price
2
     
2.2
Deposit
2
     
2.3
Adjustments to Purchase Price
3
     
2.4
Allocated Values
4
     
ARTICLE 3
DUE DILIGENCE INSPECTION
4
     
3.1
Access to Records
4
     
3.2
No Representation or Warranty
5
     
3.3
Access to the Assets and Indemnity
5
     
3.4
PRC 3314.1 LEASE
5
     
ARTICLE 4
TITLE MATTERS
5
     
4.1
Defensible Title
5
     
4.2
Permitted Encumbrances
6
     
4.3
Title Defect
7
     
4.4
Notice of Title Defects
7
     
4.5
Seller’s Right to Cure
7

 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
TABLE OF CONTENTS
(continued)
 

   
Page
     
4.6
Remedies for Title Defects
7
     
4.7
Title Thresholds
8
     
4.8
Title Dispute Resolution
8
     
4.9
Depletion and Depreciation of Personal Property
8
     
4.10
Consents
9
     
4.11
Casualty Loss
9
     
ARTICLE 5
ENVIRONMENTAL MATTERS
9
     
5.1
Definitions
9
     
5.2
Spills and NORM
10
     
5.3
Environmental Assessment
10
     
5.4
Notice of Environmental Defects
11
     
5.5
Remedies for Environmental Defects
11
     
5.6
Environmental Thresholds
12
     
5.7
Environmental Dispute Resolution
12
     
5.8
“As Is, Where Is” Purchase
12
     
5.9
Disposal of Materials, Substances and Wastes
13
     
5.10
Buyer’s Indemnity
13
     
5.11
Seller’s Indemnity
14
     
ARTICLE 6
SELLER’S REPRESENTATIONS AND WARRANTIES
14
     
6.1
Existence
14
     
6.2
Power
14
     
6.3
Authorization
15

 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
TABLE OF CONTENTS
(continued)
 

   
Page
     
6.4
Execution and Delivery
15
     
6.5
Liabilities for Brokers’ Fees
15
     
6.6
Liens
15
     
6.7
Taxes
15
     
6.8
Litigation
15
     
6.9
COMPLIANCE WITH LAWS
15
     
6.10
Contracts
15
     
6.11
Governmental Authorizations
16
     
6.12
Consents and Preference Rights
16
     
ARTICLE 7
BUYER’S REPRESENTATIONS AND WARRANTIES
17
     
7.1
Existence
17
     
7.2
Power and Authority
17
     
7.3
Authorization
17
     
7.4
Execution and Delivery
17
     
7.5
Liabilities for Brokers’ Fees
17
     
7.6
Litigation
17
     
7.7
Independent Evaluation
17
     
7.8
Qualification
18
     
7.9
Funds
18
     
ARTICLE 8
COVENANTS AND AGREEMENTS
18
     
8.1
Covenants and Agreements
18

 
iii

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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
TABLE OF CONTENTS
(continued)
 

   
Page
     
8.2
Financial Statements
19
     
ARTICLE 9
CONDITIONS TO CLOSING
20
     
9.1
Seller’s Conditions
20
     
9.2
Buyer’s Conditions
20
     
ARTICLE 10
RIGHT OF TERMINATION AND ABANDONMENT
21
     
10.1
Termination
21
     
10.2
Liabilities Upon Termination
21
     
ARTICLE 11
CLOSING
22
     
11.1
Date of Closing
22
     
11.2
Closing Obligations
22
     
ARTICLE 12
POST-CLOSING OBLIGATIONS
23
     
12.1
Post-Closing Adjustments
23
     
12.2
Suspense Accounts
23
     
12.3
Dispute Resolution
24
     
12.4
Records
24
     
12.5
Further Assurances
24
     
12.6
Disclaimers of Representations and Warranties
24
     
ARTICLE 13
TAXES
25
     
13.1
Apportionment of Ad Valorem and Property Taxes
25
     
13.2
Transfer Taxes and Recording Fees
25
     
13.3
Other Taxes
25
     
13.4
Tax Reports and Returns
25

 
iv

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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
TABLE OF CONTENTS
(continued)
 

   
Page
     
ARTICLE 14
ASSUMPTION AND RETENTION OF OBLIGATIONS; INDEMNIFICATION
26
     
14.1
Buyer’s Assumption of Liabilities and Obligations
26
     
14.2
Seller’s Retention of Liabilities and Obligations
26
     
14.3
Buyer’s Plugging and Abandonment Obligations
26
     
14.4
Indemnification
27
     
14.5
Procedure
27
     
14.6
No Insurance; Subrogation
29
     
14.7
Reservation as to Non-Parties
29
     
ARTICLE 15
MISCELLANEOUS
29
     
15.1
Exhibits
29
     
15.2
Expenses
29
     
15.3
Notices
29
     
15.4
Amendments
30
     
15.5
Assignment
30
     
15.6
Confidentiality
30
     
15.7
Press Releases
30
     
15.8
Headings
30
     
15.9
Counterparts
31
     
15.10
References
31
     
15.11
Governing Law
31
     
15.12
Removal of Signs
31

 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
TABLE OF CONTENTS
(continued)
 

   
Page
     
15.13
Binding Effect
31
     
15.14
Survival
31
     
15.15
No Third-Party Beneficiaries
31
     
15.16
Limitation on Damages
31
     
15.17
Severability
31
     
15.18
Knowledge
31
     
ARTICLE 16
EXCHANGE RIGHT
32
     
16.1
Exchange Cooperation
32

 
vi

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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
EXHIBITS

Exhibit/Schedule
Description
Section Where Defined
     
A-1
Leases and Lands
1.2.a
     
A-2
Wells
1.2.b
     
A-3
Rights-of-Way and Surface Leases
1.2.e
     
A-4
Equipment and Facilities
1.2.e
     
B
Material Agreements
1.2.d
     
C
Allocated Values
2.4
     
D
Temporary Access Agreement
3.3
     
E
Form of Assignment and Bill of Sale
11.2.a
     
F
Form of Assumption Agreement
11.2.a
     
G
Seller’s Wire Instructions
2.2
     
H
Seller’s Officer’s Certificate
11.2.e
     
I
Buyer’s Officer’s Certificate
11.2.f
     
J
Non-Foreign Affidavit
11.2.g
     
K
Suspense Accounts
12.2
     
6.12
Consents and Preference Rights
6.12

 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
PURCHASE AND SALE AGREEMENT
 
This PURCHASE AND SALE AGREEMENT (“Agreement”), dated March 19, 2007, is by and
between Berry Petroleum Company, a Delaware corporation, 5201 Truxtun Avenue,
Suite 300, Bakersfield, California 93309-0640 (“Seller”) and Venoco, Inc., a
Delaware corporation, whose address is 370 17th Street, Suite 3900, Denver,
Colorado 80202-1370 (“Buyer”).
 
RECITALS
 
A.    Seller owns and desires to sell certain real and personal property
interests located in Ventura County, California, as more fully described in
Section 1.2 below (the “Assets”).
 
B.    Buyer desires to purchase the Assets upon the terms and conditions set
forth in this Agreement.
 
AGREEMENT
 
In consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:
 
ARTICLE 1
PURCHASE AND SALE
 
1.1   Purchase and Sale. Seller agrees to sell and convey to Buyer, and Buyer
agrees to purchase and receive from Seller, all of Seller’s right, title and
interest in the Assets, pursuant to the terms and conditions of this Agreement.
 
1.2   Assets. The “Assets” are all of Seller’s right, title, and interest in and
to the following real and personal property interests located in Ventura County,
California:
 
a.   The oil and gas leases described on Exhibit A-1 (the “Leases”), insofar and
only insofar as the Leases cover the lands described on Exhibit A-1 (the
“Lands”); and the oil, gas and all other hydrocarbons (“Hydrocarbons”), in, on
or under or that may be produced from the Lands.
 
b.   The oil and gas wells located on the Leases and Lands, or lands pooled or
unitized therewith, including without limitation the oil and gas wells described
on Exhibit A-2 (the “Wells”), all injection and disposal wells on the Leases and
Lands, and all personal property and equipment associated with the Wells as of
the Effective Date.
 
c.   The rights, to the extent transferable, in and to all existing and
effective unitization, pooling and communitization agreements, declarations and
orders, to the extent that they relate to or affect any of the interests
described in Sections 1.2.a. and 1.2.b. or the post-Effective Time production of
Hydrocarbons from the Leases and Lands.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
d.   The rights, to the extent transferable, in and to Hydrocarbon, gathering
and processing contracts, operating agreements, balancing agreements, joint
venture agreements, partnership agreements, farmout agreements and other
contracts, agreements and instruments relating to the interests described in
Sections 1.2.a., 1.2.b. and 1.2.c, including without limitation the agreements
described on Exhibit B (the “Material Agreements”), but specifically excluding
any marketing or production sales agreements.
 
e.   All of the personal property, fixtures, improvements (including without
limitation the equipment and facilities described on Exhibit A-4) (the
“Equipment and Facilities”) and permits, licenses, approvals, servitudes,
rights-of-way, easements, surface leases (including without limitation the
rights-of-way easements and surface leases described on Exhibit A-3) and other
surface rights, tanks, boilers, buildings, improvements, injection facilities,
saltwater disposal facilities, other appurtenances and facilities located on and
used in connection with or otherwise related to the exploration for or
production, gathering, treatment, processing, storing, or transporting of
Hydrocarbons or water produced from the Assets described in Sections 1.2.a.
through 1.2.d.
 
f.   Seller’s Lease and well files; gas processing files; division order files;
abstracts; title opinions; land surveys; well logs; maps; engineering data and
reports; reserve studies and evaluations (insofar as they cover and exist within
the boundaries of the Lands), geological and geophysical data (including seismic
data) and all technical evaluations, interpretive data and technical data and
information relating to the Assets; provided, however, the foregoing shall not
include any files, records, data or information which is attorney work product
or subject to attorney client privilege or any files, data or information which
by agreement Seller is required to keep confidential except and to the extent a
waiver in writing is obtained of any such confidential requirements or any
files, data or information related to any events concerning or related to an oil
spill that occurred on the Assets in December 1993 (the “1993 Oil Spill”) (the
“Records”).
 
1.3   Effective Time. The purchase and sale of the Assets shall be effective as
of January 1, 2007 at 12:01 a.m., Pacific Time (the “Effective Time”).
 
ARTICLE 2
PURCHASE PRICE
 
2.1   Purchase Price. The purchase price for the Assets shall be SIXTY-THREE
MILLION DOLLARS ($63,000,000.00) (the “Purchase Price”). At Closing, Buyer shall
pay Seller the Purchase Price as adjusted pursuant to Sections 2.2 and 2.3 below
by wire transfer of immediately available funds to Seller or as directed by
Seller.
 
2.2   Deposit. Concurrently with the execution of this Agreement, Buyer shall
wire to Seller in immediately available funds the amount of Three Million
Dollars ($3,000,000.00) (the “Deposit”) as directed on Exhibit G. The Deposit
shall be held by Seller and, subject to the terms of Article 10 of this
Agreement, either (i) applied against the Purchase Price (without interest) in
the event the Closing is consummated, (ii) returned to Buyer with interest at
the rate of the average of the daily commercial paper overnight repurchase rate
as published in The Wall Street Journal for the period from the time the Deposit
is paid to Seller until it is returned to Buyer (“Interest”) if (x) Seller
refuses to close after all conditions specified in Section 9.1 have been
satisfied (or waived by Seller) and Buyer certifies to Seller in writing that it
is ready, willing and able to perform under Article 11 or (y) the conditions
specified in Section 9.2 have not been satisfied (or waived by Buyer), or (iii)
retained by Seller if all conditions specified in Section 9.2 have been
satisfied and Seller certifies to Buyer in writing that Seller is ready, willing
and able to perform under Article 11.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
2.3   Adjustments to Purchase Price. The Purchase Price shall be adjusted
according to this Section without duplication. For all adjustments known as of
Closing, the Purchase Price shall be adjusted at Closing pursuant to a
“Preliminary Settlement Statement” approved by Seller and Buyer on or before
Closing. A draft of the Preliminary Settlement Statement will be prepared by
Seller and provided to Buyer two (2) business days prior to Closing. The
Preliminary Settlement Statement shall set forth the Purchase Price as adjusted
as provided in this Section using the best information available at the Closing
Date which amount shall be paid at Closing and is referred to as the “Closing
Amount.” The Closing Amount shall be paid at Closing by wire transfer of
immediately available funds in accordance with the wiring instructions set forth
in Section 2.1. After Closing, final adjustments to the Purchase Price shall be
made pursuant to the Final Settlement Statement to be delivered pursuant to
Section 12.1. For the purposes of this Agreement, the term “Property Expenses”
shall mean all capital expenses, joint interest billings, lease operating
expenses, lease rental and maintenance costs, royalties, overriding royalties,
Taxes (as defined and apportioned as of the Effective Time pursuant to
Article 13), drilling expenses, workover expenses, geological, geophysical and
any other exploration or development expenditures chargeable under applicable
operating agreements or other agreements consistent with the standards
established by the Council of Petroleum Accountant Societies of North America
that are attributable to the maintenance and operation of the Assets during the
period in question.
 
a.   Upward Adjustments. The Purchase Price shall be adjusted upward by the
following:
 
(i)   An amount equal to all Property Expenses, including prepaid expenses,
attributable to the Assets after the Effective Time that were paid by Seller
(all to be apportioned as of the Effective Time except as otherwise provided),
including without limitation, prepaid utility charges, prepaid rentals and
royalties, including lease rentals, and prepaid drilling and completion costs
(to be apportioned as of the Effective Time based on drilling days).
 
(ii)   The proceeds of production attributable to the Assets occurring before
the Effective Time (including production from the Assets that occurred before
the Effective Time but, because such production is in pipelines or in
processing, had not been sold as of the Effective Time times the price for which
production from the Assets was sold immediately prior to the Effective Time) and
received by Buyer, net of royalties and taxes measured by production.
 
(iii)   To the extent that there are any pipeline imbalances, if the net of such
imbalances is an overdelivery imbalance (that is, at the Effective Time, Seller
has delivered more gas to the pipeline than the pipeline has redelivered for
Seller), the Purchase Price shall be adjusted upward by the product of the price
received by Seller times the net overdelivery imbalance in MMbtus.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
(iv)   An amount equal to Seller’s share of any oil or condensate in tanks or
storage facilities produced from or credited to the Leases and Lands prior to
the Effective Time based upon the quantities in oil or condensate tanks or
storage facilities as measured by and reflected in Seller’s records multiplied
by the price in effect for such inventory on the Closing Date; and
 
(v)    Any other amount provided in this Agreement or agreed upon by Seller and
Buyer.
 
b.   Downward Adjustments. The Purchase Price shall be adjusted downward by the
following:
 
(i)     An amount equal to the sum of all Title Purchase Price Adjustments as
defined in Section 4.7;
 
(ii)    An amount equal to Environmental Purchase Price Adjustment, as defined
in Section 5.6;
 
(iii)   The proceeds of production attributable to the Assets occurring on or
after the Effective Time and received by Seller, net of royalties and taxes
measured by production;
 
(iv)   To the extent that there are any pipelines imbalances, if the net of such
imbalances is an underdelivery imbalance (that is, at the Effective Time, Seller
has delivered less gas to the pipeline than the pipeline has redelivered for
Seller), the Purchase Price shall be adjusted downward by the product of the
price received by Seller times the net underdelivery balance in MMbtus.
 
(v)    An amount equal to the Seller Property Tax, as defined in Section 13.1;
 
(vi)   An amount equal to the Suspense Accounts, as defined in Section 12.2; and
 
(vii)      Any other amount provided in this Agreement or agreed upon by Seller
and Buyer.
 
2.4   Allocated Values. Seller and Buyer agree to allocate the Purchase Price
among the Assets as set forth in Exhibit C.
 
ARTICLE 3 
DUE DILIGENCE INSPECTION
 
3.1   Access to Records. Subject to the provisions of the Confidentiality
Agreement dated December 4, 2006 between Seller and Buyer, Seller will disclose
and make available to Buyer and its representatives at Seller’s offices and
during Seller’s normal business hours, all Records in Seller’s possession or
control relating to the Assets for the purpose of permitting Buyer to perform
its due diligence review including, but not limited to, all well, leasehold,
unit and title files and title opinions. Seller agrees to reasonably cooperate
with Buyer in Buyer’s efforts to obtain, at Buyer’s sole expense, such
additional information relating to the Assets as Buyer may reasonably desire.
Buyer may inspect the Records only to the extent it may so do without violating
any obligation, confidence or contractual commitment of Seller to a third party.
Seller shall use reasonable efforts to obtain the necessary consents to allow
Buyer’s examination of any confidential information that is material to this
transaction, but shall not be required to incur any costs or additional
liabilities to obtain any such consents.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
 
3.2   No Representation or Warranty. Seller makes no representation or warranty
as to the accuracy, completeness, or content of the Records maintained by Seller
and made available to Buyer, including, without limitation, any seismic,
geological, or geophysical data or interpretations, as well as any engineering
or reserve studies and evaluations.  Buyer agrees that any conclusions drawn
from the Records shall be the result of its own independent review and judgment.
Seller further makes no representations or warranties, express or implied, as to
the condition of the Assets, or their fitness for Buyer’s intended use or
operations.
 
3.3   Access to the Assets and Indemnity. Prior to Closing, Seller shall permit
Buyer, and the officers, employees, agents and advisors of Buyer access to the
Assets upon Buyer’s execution of a Temporary Access Agreement dated March 19,
2007 between Seller and Buyer (the “Temporary Access Agreement”) which is
attached as Exhibit D. 
 
3.4   PRC 3314.1 Lease. Buyer acknowledges that Seller has disclosed to Buyer
that in connection with certain of the Leases (PRC 3314.1) comprising a portion
of the Assets, Seller obtained drilling deferments from the California State
Lands Commission. The last deferment was granted by the California State Lands
Commission in 2001 and expired in 2002. Since that time, while outside of any
formally approved period of drilling deferment, Seller has worked with
California State Lands Commission staff to develop a drilling and production
program, and on June 26, 2006, the California State Lands Commission approved
Seller’s application to re-drill two idle onshore wells into the offshore lease.
Buyer acknowledges that it has been provided a copy of the approved drilling and
production program, together with related correspondence with the California
State Lands Commission in connection therewith, and Buyer further acknowledges
that operations must be undertaken on the lease in accordance with such drilling
and production program (or other programs that may be approved by the California
State Lands Commission) to ensure that operations are in compliance with the
terms of the lease.
 
ARTICLE 4
TITLE MATTERS
 
4.1   Defensible Title. The term “Defensible Title” means such title of Seller
in and to the Assets that, subject to and except for the Permitted Encumbrances:
(i) entitles Seller to receive not less than the net revenue interest described
on Exhibit A-2 (“NRI”); (ii) obligates Seller to bear costs and expenses
relating to the Assets in an amount not greater than the working interest
described on Exhibit A-2 (“WI”); and (iii) is free and clear of material liens,
taxes, encumbrances, mortgages, claims and production payments and any defects
that would create a material impairment of use and enjoyment of or loss of
interest in the affected Asset.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
4.2   Permitted Encumbrances. The term “Permitted Encumbrances” shall mean:
 
a.   Lessors’ royalties, overriding royalties, net profits interests, production
payments, reversionary interests and similar burdens if the net cumulative
effect of such burdens does not operate to reduce the NRIs below those set forth
on Exhibit A-2;
 
b.   Any required governmental or third-party consents to assignment of the
Assets and preferential purchase rights which are handled exclusively under
Sections 4.10, 4.11 and 9.2d below;
 
c.   Liens for taxes or assessments not yet due or not yet delinquent or, if
delinquent, that are being contested in good faith in the normal course of
business, provided, however, that Seller shall be responsible for the prompt
payment of all taxes attributable to the Assets for all pre-Effective Time
periods. This Section 4.2c does not change the apportionment of taxes under
Article 13 of this Agreement;
 
d.   Rights of reassignment, to the extent any exist as of the date of this
Agreement, prior to the surrender or expiration of any lease;
 
e.   Easements, rights-of-way, servitudes, permits, surface leases and other
rights with respect to surface operations, on, over or in respect of any of the
properties or any restriction on access thereto which are of record or which do
not materially interfere with the operation of the affected property;
 
f.   Materialmen’s, mechanics’, repairmen’s, employees’, contractors’,
operators’ or other similar liens or charges arising in the ordinary course of
business incidental to construction, maintenance or operation of the Assets
(i) if they have not been filed pursuant to law and the time for filing them has
expired, (ii) if filed, they have not yet become due and payable or payment is
being withheld as provided by law, or (iii) if their validity is being contested
in good faith by appropriate action. Provided, however, that it shall be
Seller’s responsibility to promptly discharge and remove all such liens or
charges at Seller’s sole expense;
 
g.   Rights reserved to or vested in any municipality or governmental,
statutory, or public authority to control or regulate any of the Assets in any
manner; and all applicable laws, rules, regulations and orders of general
applicability in the area;
 
h.   Liens for post-Effective Time operations arising under operating
agreements, unitization and pooling agreements securing amounts not yet accrued
or due or;
 
i.    The terms of the Material Agreements and any and all other agreements that
are ordinary and customary in the oil, gas, sulfur and other mineral
exploration, development or extraction business, or in the business of
processing of gas and gas condensate for the extraction of products therefrom.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
j.   Any encumbrance, encroachment, irregularity, defect in or objection to real
property title which would otherwise constitute a “Title Defect” under Section
4.3 below, but which is of record, or which is disclosed or reasonably
discernible by a review of the Records or an inspection of the Assets.
 
4.3   Title Defect. The term “Title Defect” means any encumbrance, encroachment,
irregularity, defect in or objection to real property title, excluding Permitted
Encumbrances, that alone or in combination with other defects:
 
a.   Renders title to an Asset less than Defensible Title;
 
b.   Reduces, impairs or prevents Buyer from receiving payment from the
purchasers of production from an Asset; and/or
 
c.   Restricts or extinguishes Buyer’s right to use an Asset as owner, lessee,
licensee or permittee, as applicable.
 
4.4   Notice of Title Defects. Buyer shall deliver to Seller a written “Notice
of Title Defects” on or before April 12, 2007, 5:00 p.m., Pacific Time. The
Notice of Title Defects shall (i) describe the Title Defect, (ii) describe the
basis of the Title Defect and (iii) describe Buyer’s good faith estimate of the
reduction in the Asset’s Allocated Value caused by the Title Defect (“Title
Defect Value”) and all calculations and documentation substantiating the
existence of the Title Defect. Buyer will be deemed to have conclusively waived
any Title Defect about which it fails to so notify Seller in writing prior to
April 12, 2007 at 5:00 p.m. Pacific Time. Seller may contest the Title Defect or
the Title Defect Value by so notifying Buyer. The agreement of Seller and Buyer
as to the Title Defect Value shall result in the “Actual Title Defect Value”.
 
4.5   Seller’s Right to Cure. Seller shall have the option, but not the
obligation, to attempt to cure any Title Defects. Seller shall notify Buyer
prior to Closing of its election to cure any Title Defect, and shall thereafter
provide to Buyer as soon as practicable prior to Closing evidence that any such
Title Defect is cured.
 
4.6   Remedies for Title Defects. In the event that any Title Defect is not
cured on or before Closing, Seller shall, at its sole election, elect one of the
following by so notifying Buyer not later than two (2) business days prior to
Closing:
 
a.   Subject to the specific limitations set forth in Section 4.7, indemnify
Buyer against all liability, loss, cost and expense resulting from such Title
Defect, but in an amount not to exceed the Allocated Value of the Asset that is
subject to such Title Defect, in which event the parties shall proceed to
Closing and the Asset that is subject to such Title Defect shall be conveyed by
Seller to Buyer subject to such Title Defect, with no payment or settlement at
Closing as a result of such Title Defect and no reduction or adjustment to the
Purchase Price;
 
b.   Subject to the specific limitations set forth in Section 4.7, credit Buyer
with the amount of the Actual Title Defect Value for an Asset (the “Title Defect
Adjustment”), in which event the parties shall proceed to Closing and the Asset
that is subject to such Title Defect shall be conveyed by Seller to Buyer
subject to such Title Defect and Buyer shall pay to Seller the Purchase Price as
so adjusted; or
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
c.   Retain the Asset subject to such Title Defect and reduce the Purchase Price
by an amount equal to the Allocated Value of such Asset, in which event the
parties shall proceed to Closing and the Asset that is subject to such Title
Defect shall be retained by Seller and Buyer shall pay to Seller the Purchase
Price as so adjusted.
 
4.7   Title Thresholds. Seller shall have no obligation under Section 4.6 and
there shall be no indemnification by Seller of Buyer under Section 4.6.a or
reduction to the Purchase Price under Sections 4.6.b or 4.6.c unless Seller’s
share of a proposed indemnity amount or reduction to the Purchase Price as to
any single incident exceeds *** (the “Single Title Incident Threshold Amount”).
For the purposes of application of the foregoing threshold, “single incident”
shall be on a lease-by-lease basis for all oil and gas leasehold interests. In
addition, there shall be no indemnity obligation under Section 4.6.a or
reduction to the Purchase Price under Sections 4.6.b or 4.6.c until such time as
the total of these excess amounts *** of the Purchase Price (the “Title
Threshold Amount”). If the Title Threshold Amount is exceeded, the Purchase
Price reduction shall include the Single Title Incident Threshold Amount for
those title Defects that exceed such threshold and are conveyed to Buyer under
Section 4.6.b and shall include the Allocated Value of those Assets with an
Allocated Value *** that are retained by Seller under Section 4.6.c. The total
of the Purchase Price reductions under Sections 4.6.b and 4.6.c is the “Title
Purchase Price Adjustment.”
 
4.8   Title Dispute Resolution. Seller and Buyer agree to resolve disputes
concerning the following matters pursuant to this Section: (i) the existence and
scope of a Title Defect, (ii) the Defect Value of that portion of the Asset
affected by a Title Defect, (iii) , the adequacy of Seller’s Title Defect
curative materials (the “Disputed Title Matters”). The parties agree to attempt
to initially resolve all Disputed Title Matters through good faith negotiations.
If the parties cannot resolve such disputes within fourteen (14) days prior to
Closing, the Disputed Title Matters shall be finally determined by a mutually
agreeable accounting, petroleum engineering, or law firm or consultant (the
“Title Arbiter”), taking into account the factors set forth in this Agreement.
On or before ten (10) days prior to Closing, Buyer and Seller shall present
their respective positions in writing to the Title Arbiter, together with such
evidence as each party deems appropriate. The Arbiter shall be instructed to
resolve the dispute through a final decision within five (5) days after
submission of the parties’ respective positions to the Title Arbiter. The costs
incurred in employing the Arbiter shall be borne equally by Seller and Buyer.
The Title Arbiter’s final decision may be filed with a court of competent
jurisdiction and entered as a judgment which shall be binding on the parties.
 
4.9   Depletion and Depreciation of Personal Property. Buyer shall assume all
risk of loss with respect to, and any change in the condition of, the Assets
from the Effective Time until Closing for production of oil, gas and/or other
hydrocarbons through depletion (including the watering-out of any well,
collapsed casing or sand infiltration of any well) and the depreciation of
personal property due to ordinary wear and tear.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
4.10   Consents. Seller and Buyer shall jointly use reasonable efforts to obtain
all required consents to assignment of leases and contracts. If Buyer discovers
properties for which consents to assign are applicable during the course of
Buyer’s due diligence activities, Buyer shall notify Seller immediately. Except
for consents and approvals which are customarily obtained post-Closing
(including without limitation certain federal or state or governmental
approvals) and those consents which would not invalidate the conveyance of the
Assets, if a necessary consent (with the exception of consents required from the
California State Lands Commission (the “SLC”) which is handled as a condition to
Closing under Section 9.2.c) to assign any Asset has not been obtained as of the
Closing, then (i) the portion of the Assets for which such consent has not been
obtained shall be included with the Assets at the Closing, and the Purchase
Price for that Asset shall be included in the Preliminary Settlement Statement,
(ii) Seller shall employ reasonable efforts to obtain such consent as promptly
as possible following Closing and (iii) if such consent has not been obtained as
of the Final Settlement Date (unless Seller and Buyer otherwise mutually agree
in writing), the Allocated Value of the Asset shall be a downward adjustment to
the Purchase Price on the Final Settlement Statement and Buyer shall reassign
such Asset to Seller, effective as of the Effective Time. Buyer shall reasonably
cooperate with Seller in obtaining any required consent including providing
assurances of reasonable financial conditions, plans of development or any other
information reasonably requested by the party whose consent is required.
 
4.11   Casualty Loss. Prior to Closing, if any of the Assets is destroyed by
fire or other casualty or any of the Assets is taken or threatened to be taken
in condemnation or under the right of eminent domain (“Casualty Loss”), Seller
shall promptly provide notice of the Casualty Loss to Buyer. Buyer shall not be
obligated to purchase an Asset that is the subject of a Casualty Loss if Buyer
provides written notice to Seller prior to Closing of Buyer’s election not to
purchase such Asset. If Buyer so elects not to purchase such Asset, the Purchase
Price shall be adjusted as agreed to by Buyer and Seller. If Buyer elects to
purchase such Asset, the Purchase Price shall be reduced by the estimated cost
to repair such Asset (with equipment of similar utility) as agreed to by Buyer
and Seller (the reduction being the “Net Casualty Loss”). The Net Casualty Loss
shall not, however, exceed the Allocated Value of such Asset. Seller, at its
sole option, may elect to cure such Casualty Loss. If Seller elects to cure such
Casualty Loss, Seller may replace any personal property that is the subject of a
Casualty Loss with equipment of similar grade and utility, or replace any real
property with real property of similar nature and kind if such property is
acceptable to Buyer. If Seller elects to cure the Casualty Loss to the
satisfaction of Buyer, the Asset subject to such Casualty Loss shall be
purchased by Buyer and there shall be no adjustment to the Purchase Price. If
Seller elects not to cure the Casualty Loss to the satisfaction of Buyer and the
Net Casualty Loss exceeds the amount of the Deposit, Buyer may, by written
notice to Seller, elect to terminate this Agreement and receive the Deposit.
 
ARTICLE 5
ENVIRONMENTAL MATTERS
 
5.1   Definitions. For the purposes of the Agreement, the following terms shall
have the following meanings:
 
“Environmental Defect” means a condition in, on or under the Assets (including,
without limitation, air, land, soil, surface and subsurface strata, surface
water, ground water, or sediments) that causes an Asset to be in material
violation of an Environmental Law or a condition that can reasonably be expected
to give rise to costs or liability under applicable Environmental Laws. NORM
(defined in Section 5.2) contaminated pipe, meters, tubing and wellheads shall
not be an Environmental Defect.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
“Environmental Defect Value” means the cost to Remediate an Environmental
Defect. The Environmental Defect Value shall be limited to the net present value
before federal income taxes, calculated using a ten percent discount rate
(PV10), of the most cost effective means to achieve the Remediation required by
applicable federal, state or local law or other governmental or judicial
directive and not for any other cost.
 
“Environmental Law” means any statute, rule, regulation, code or order, issued
by any federal, state, or local governmental entity in effect on or before the
Effective Time (collectively, “Laws”) relating to the protection of the
environment or the release or disposal of waste materials.
 
“Remediation” or “Remediate” means actions taken to correct an Environmental
Defect and “Remediation Costs” means the actual, or good faith estimates of the
costs to conduct such Remediation.
 
5.2   Spills and NORM. Buyer specifically acknowledges being advised of the 1993
Oil Spill. Buyer acknowledges that in the past there may have been other spills
of wastes, crude oil, condensate, produced water, or other materials (including,
without limitation, any toxic, hazardous or extremely hazardous substances) onto
the Lands. In addition, some production equipment may contain asbestos and/or
Naturally Occurring Radioactive Material (“NORM”). In this regard Buyer
expressly understands that NORM may affix or attach itself to the inside of
wells, materials and equipment as scale or in other forms, that said wells,
materials and equipment located on the Lands or included in the Assets described
herein may contain NORM and that NORM-containing material may have been buried
or otherwise disposed of on the Lands. Buyer also expressly understands that
special procedures may be required for the Remediation, removal, transportation
and disposal of asbestos or NORM from the Assets and Lands where such material
may be found and that Buyer assumes all liability for or in connection with the
assessment, containment, removal, Remediation, transportation and disposal of
any such materials, in accordance with all past, present or future applicable
laws, rules, regulations and other requirements of any governmental or judicial
entities having jurisdiction and also with the terms and conditions of all
applicable leases and other contracts.
 
5.3   Environmental Assessment. Prior to Closing, Buyer may conduct an on-site
inspection, environmental assessment and compliance audit of the Assets (an
“Environmental Assessment”) at Buyer’s cost and expense. Such Environmental
Assessment shall be conducted in accordance with the Temporary Access Agreement.
Seller shall provide Buyer with access to the Assets and to information in
Seller’s possession or control pertaining to the environmental condition of the
Assets, including, but not limited to, status or any environmental reports,
permits, records and assessments in Seller’s possession or control, and shall
make available to Buyer all present personnel who would reasonably be expected
to have knowledge or information regarding the environmental status or condition
of the Assets. Seller makes no representation or warranty as to the accuracy or
completeness of the records maintained by Seller and made available to Buyer.
Buyer shall provide Seller five (5) days prior written notice of any
environmental inspections and tests, including the scope of same, and Buyer
shall give Seller the opportunity to participate in all such inspections and
tests. Buyer shall promptly provide Seller, at no cost to Seller, all reports of
environmental inspections and tests, provided that all such reports shall be
deemed to be confidential between the parties and subject to the Confidentiality
Agreement dated December 4, 2006 between Seller and Buyer and the Temporary
Access Agreement. Buyer agrees to release, indemnify, defend, and hold harmless
Seller against all Losses (as defined in Section 14.4) arising from or related
to the activities of Buyer, its employees, agents, contractors and other
representatives in connection with Buyer’s Environmental Assessment regardless
of the negligence or strict liability of Seller.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
5.4   Notice of Environmental Defects. Buyer shall deliver to Seller a written
“Notice of Environmental Defects” on or before April 12, 2007, 5:00 p.m.,
Pacific Time. The Notice of Environmental Defects shall (i) describe the
Environmental Defect, (ii) provide evidence of the Environmental Defect and the
documentation in Buyer’s possession pertaining to such Environmental Defect,
and, (iii) describe Buyer’s good faith estimate of the Remediation Costs
associated with the Environmental Defect. Buyer will be deemed to have
conclusively waived any Environmental Defect for which it fails to provide
Seller a Notice of Environmental Defect prior to April 12, 2007 at 5:00 p.m.,
Pacific Time. Seller may contest the existence and scope of the Environmental
Defect or Environmental Defect Value by so notifying Buyer. The agreement of
Seller and Buyer as to the Environmental Defect Value shall result in the
“Actual Environmental Defect Value”.
 
5.5   Remedies for Environmental Defects. Upon the receipt by Seller of notice
from Buyer pursuant to Section 5.4 of any Environmental Defect, Seller shall
have the option, but not the obligation, to attempt to Remediate any
Environmental Defect. In the event that any such Environmental Defect has not
been Remediated by Seller such that the applicable Asset(s) will not be brought
into compliance with the applicable Environmental Laws on or before Closing,
Seller shall, at its sole election, elect one of the following by so notifying
Buyer not later than two (2) business days prior to Closing.
 
a.   Subject to the specific limitations set forth in Section 5.6, indemnify
Buyer against all liability, loss, cost and expense resulting from such
Environmental Defect in which event the parties shall proceed to Closing and the
Asset that is subject to such Environmental Defect shall be conveyed by Seller
to Buyer subject to such Environmental Defect, with no payment by Seller or
other settlement at Closing as a result of such Environmental Defect and no
reduction or adjustment to the Purchase Price;
 
b.   Subject to the specific limitations set forth in Section 5.6, credit Buyer
with the amount of the Actual Environmental Defect Value (the “Environmental
Defect Adjustment”), in which event the parties shall proceed to Closing and the
Asset that is subject to such Environmental Defect shall be conveyed by Seller
to Buyer subject to such Environmental Defect and Buyer shall pay to Seller the
Purchase Price as so adjusted; or
 
c.   Retain the Asset subject to such Environmental Defect and reduce the
Purchase Price by an amount equal to the Allocated Value of such Asset, in which
event the parties shall proceed to Closing and the Asset that is subject to such
Environmental Defect shall be retained by Seller and Buyer shall pay to Seller
the Purchase Price as so adjusted.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
5.6   Environmental Thresholds. Seller shall have no obligation under
Section 5.5 and there shall be no indemnification by Seller of Buyer under
Section 5.5.a or reduction to the Purchase Price under Sections 5.5.b or 5.5.c
unless Seller’s share of a proposed indemnity amount or reduction to the
Purchase Price as to any single incident *** (the “Single Environmental Incident
Threshold Amount”). For the purposes of application of the foregoing threshold,
“single incident” shall be applicable on a well by well or property by property
basis. In addition, if Seller’s share of the proposed indemnity amount under
Section 5.5.a or reduction to the Purchase Price under Sections 5.5.b or 5.5.c
as to any single incident exceeds ***, there shall be no indemnification by
Seller of Buyer under Section 5.5.a or reduction to the Purchase Price under
Sections 5.5.b or 5.5.c until such time as the total of these excess amounts ***
of the Purchase Price (the “Environmental Threshold Amount”). If the
Environmental Threshold Amount is exceeded, the Purchase Price reduction shall
include the Single Environmental Incident Threshold Amount for those
Environmental Defects that exceed such threshold and are conveyed to Buyer under
Section 5.5.b and shall include the Allocated Value of those Assets with an
Allocated Value in excess of *** that are retained by Seller under Section
5.5.c. The total of the Purchase Price reductions under Sections 5.5.b and 5.5.c
is the “Environmental Purchase Price Adjustment”.
 
5.7   Environmental Dispute Resolution. The parties agree to resolve disputes
concerning the following matters pursuant to this Section: (i) the existence and
scope of an Environmental Defect, (ii) Buyer’s estimate of Remediation Costs of
an Environmental Defect and (iii) the effectiveness of Seller’s Remediation (the
“Disputed Environmental Matters”). The parties agree to attempt to initially
resolve all Disputed Environmental Matters through good faith negotiations. If
the parties cannot resolve such disputes within fourteen (14) days prior to
Closing, the Disputed Environmental Matters shall be finally determined by a
mutually agreeable environmental consulting firm (the “Environmental Arbiter”),
taking into account the factors set forth in this Agreement. On or before ten
(10) days prior to Closing, Buyer and Seller shall present their respective
positions in writing to the Environmental Arbiter, together with such evidence
as each party deems appropriate. The Environmental Arbiter, shall be instructed
to resolve the dispute through a final decision within five (5) days after
submission of the parties’ respective positions to the Environmental Arbiter.
The costs incurred in employing the Environmental Arbiter shall be borne equally
by Seller and Buyer. The Environmental Arbiter’s final decision may be filed
with a court of competent jurisdiction and entered as a judgment which shall be
binding upon the parties.
 
5.8   “As Is, Where Is” Purchase. Buyer shall acquire the Assets (including
Assets for which a notice was given under Section 5.4 above) in an “AS IS, WHERE
IS” condition and shall assume all risks that the Assets may contain waste
materials (whether toxic, hazardous, extremely hazardous or otherwise) or other
adverse physical conditions, including, but not limited to, the presence of
unknown abandoned oil and gas wells, water wells, sumps, pits, pipelines or
other waste or spill sites which may not have been revealed by Buyer’s
investigation. With the exception of matters for which Seller indemnifies Buyer
under Section 5.5.a and except for the 1993 Oil Spill, on and after the
Effective Time, all responsibility and liability related to all such conditions,
whether known or unknown, fixed or contingent, whenever arising, will be
transferred from Seller to Buyer.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
5.9   Disposal of Materials, Substances and Wastes. Buyer shall properly handle,
remove, transport and dispose of any material, substance or waste (whether
toxic, hazardous, extremely hazardous or otherwise) from the Assets or Lands
(including, but not limited to, produced water, drilling fluids and other
associated wastes), whether present before or after the Effective Time, in
accordance with applicable local, state and federal laws and regulations. Buyer
shall keep records of the types, amounts and location of materials, substances
and wastes which are transported, handled, discharged, released or disposed
onsite and offsite. When and if any Lease is terminated, Buyer shall take
whatever additional testing, assessment, closure, reporting or remedial action
with respect to the Assets or Lands as is necessary to meet any local, state or
federal requirements directed at protecting human health or the environment in
effect at that time.
 
5.10    Buyer’s Indemnity.
 
a.   With the exception of (i) matters for which Seller indemnifies Buyer under
Section 5.5.a, (ii) the 1993 Oil Spill, and (iii) offsite disposal of hazardous
substances relating to the Assets prior to the Effective Time by Seller, its
employees and contractors only and not any such disposal by Seller’s
predecessors in title (“Seller’s Retained Environmental Obligations”), Buyer
shall indemnify, hold harmless, release and defend Seller from and against all
damages, losses, claims, demands, causes of action, judgments and other costs
(including but not limited to any civil fines, penalties, costs of assessment,
clean-up, removal and Remediation of pollution or contamination, and expenses
for the modification, repair or replacement of facilities on the Lands) brought
by any and all persons and any agency or other body of federal, state or local
government, on account of any personal injury, illness or death, any damage to,
destruction or loss of property, and any contamination or pollution of natural
resources (including soil, air, surface water or groundwater) to the extent any
of the foregoing directly or indirectly is caused by or otherwise involves any
environmental condition of the Assets or Lands, whether created or existing
before, on or after the Closing, including, but not limited to, the presence,
disposal or release of any material (whether hazardous, extremely hazardous,
toxic or otherwise) of any kind in, on or under the Assets or the Lands.
 
b.   Buyer’s indemnification obligations for environmental matters for which it
is responsible as described in Section 5.10.a., above, shall extend to and
include, but not be limited to (i) the negligence or other fault of Seller,
Buyer and third parties, whether such negligence is active or passive, gross,
joint, sole or concurrent, (ii) Seller’s or Buyer’s strict liability, and
(iii) Seller’s or Buyer’s liabilities or obligations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(42 U.S.C. §§ 9601 et seq.), the Resource Conservation and Recovery Act of 1976
(42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. §§ 466 et seq.), the
Safe Drinking Water Act (14 U.S.C. §§ 1401-1450), the Hazardous Materials
Transportation Act (49 U.S.C. §§ 1801 et seq.), the Toxic Substances Control Act
(15 U.S.C. §§ 2601-2629), the Clean Air Act (42 U.S.C. § 7401 et seq.) as
amended, the Clean Air Act Amendments of 1990 and all state and local laws and
any replacement or successor legislation or regulation thereto. Buyer’s
indemnification obligations for environmental matters for which it is
responsible as described in Section 5.10.a, above, however, shall not extend to
and include offsite disposal of hazardous substances relating to the Assets
prior to the Effective Time by Seller’s predecessors in title. This
indemnification shall be in addition to any other indemnity provisions contained
in this Agreement, and it is expressly understood and agreed that any terms of
this Section shall control over any conflicting or contradicting terms or
provisions contained in this Agreement.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
5.11   Seller’s Indemnity.
 
(a)   With respect to Seller’s Retained Environmental Obligations, Seller shall
indemnify, hold harmless, release and defend Buyer from and against all damages,
losses, claims, demands, causes of action, judgments and other costs (including
but not limited to any civil fines, penalties, costs of assessment, clean-up,
removal and Remediation of pollution or contamination, and expenses for the
modification, repair or replacement of facilities on the Lands) brought by any
and all persons and any agency or other body of federal, state or local
government, on account of any personal injury, illness or death, any damage to,
destruction or loss of property, and any contamination or pollution of natural
resources (including soil, air, surface water or groundwater) associated with
such retained obligations.
 
(b)   Seller’s indemnification obligations for environmental matters for which
it is responsible as described in Section 5.11.a., above, shall extend to and
include, but not be limited to (i) the negligence or other fault of Seller and
third parties, whether such negligence is active or passive, gross, joint, sole
or concurrent, (ii) Seller’s strict liability, and (iii) Seller’s liabilities or
obligations under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.), the Clean
Water Act (33 U.S.C. §§ 466 et seq.), the Safe Drinking Water Act (14 U.S.C.
§§ 1401-1450), the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801
et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601-2629), the Clean
Air Act (42 U.S.C. § 7401 et seq.) as amended, the Clean Air Act Amendments of
1990 and all state and local laws and any replacement or successor legislation
or regulation thereto. This indemnification shall be in addition to any other
indemnity provisions contained in this Agreement, and it is expressly understood
and agreed that any terms of this Section shall control over any conflicting or
contradicting terms or provisions contained in this Agreement.
 
ARTICLE 6
SELLER’S REPRESENTATIONS AND WARRANTIES
 
Seller makes the following representations and warranties as of the date of this
Agreement:
 
6.1   Existence. Seller is a corporation duly organized and validly existing
under the laws of the State of Delaware.
 
6.2   Power. Seller has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement and each of the
documents contemplated to be executed by Seller at Closing, and to perform its
obligations under this Agreement and under such documents. To Seller’s
knowledge, (except for any consents which are the subject of Section 4.10 or
which are customarily obtained after Closing) the consummation of the
transaction contemplated by this Agreement and each of the documents
contemplated to be executed by Seller at Closing will not violate, nor be in
conflict with, (i) any provision of Seller’s organizational or governing
documents, (ii) any agreement or instrument to which Seller is a party or is
bound, or (iii) any judgment, decree, order, statute, rule or regulation
applicable to Seller.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
6.3    Authorization. The execution, delivery and performance of this Agreement
and each of the documents contemplated to be executed by Seller at Closing and
the contemplated transaction has been duly and validly authorized by all
requisite corporate and shareholder action on the part of Seller.
 
6.4    Execution and Delivery. This Agreement has been duly executed and
delivered on behalf of Seller, and at the Closing all documents and instruments
required hereunder to be executed and delivered by Seller will be duly executed
and delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application with
respect to creditors, (ii) general principles of equity and (iii) the power of a
court to deny enforcement of remedies generally based upon public policy.
 
6.5    Liabilities for Brokers’ Fees. Seller has incurred no liability,
contingent or otherwise, for brokers’ or finders’ fees relating to the
transaction contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.
 
6.6    Liens. To Seller’s knowledge, except for the liens created by or arising
under joint operating agreements covering the Assets or applicable state
statutes, or which are disclosed of record, the Assets are free and clear of all
liens.
 
6.7    Taxes. To Seller’s knowledge, all taxes and assessments pertaining to the
Assets based on or measured by the ownership of property for all taxable periods
prior to the taxable period in which this Agreement is executed have been
properly paid. All income taxes and obligations relating thereto that could
result in a lien or other claim against any of the Assets have been properly
paid, unless contested in good-faith by appropriate proceeding. 
 
6.8    Litigation. There is no action, suit, proceeding, claim or, to Seller’s
knowledge, investigation by any person, entity, administrative agency or
governmental body, pending or, to Seller’s knowledge, threatened, against Seller
that (i) relates to the Assets, or (ii) impedes or is likely to impede Seller’s
ability to consummate the transaction contemplated by this Agreement and to
assume the abilities to be assumed by Seller under this Agreement.
 
6.9    Compliance with Laws. To Seller’s knowledge, Seller’s operation of the
Assets is in compliance in all material respects with the provisions and
requirements of all material laws, rules and regulations applicable to the
ownership, operation, development, maintenance, or use of the Assets.
 
6.10   Contracts. To Seller’s knowledge, the Material Agreements, Leases, and
instruments listed on Exhibit A-3 represent all of the following material
contracts, agreements, and commitments which are included in the Assets or by
which any of the Assets will be bound as of the Effective Time and/or following
the Closing: (i) any agreement with any affiliate; (ii) any agreement or
contract for the sale, exchange, or other disposition of hydrocarbons produced
from or attributable to Seller’s interest in the Assets or for the purchase,
processing or transportation of any hydrocarbons, in each case that is not
cancelable without penalty or other material payment on not more than 90 days
prior written notice, other than terms of operating agreements or gas balancing
agreements which permit an operator or other co owner to take or market
production of a non taking co owner; (iii) any agreement of or binding upon
Seller to sell, lease, farmout, or otherwise dispose of any interest in any of
the Assets after the date hereof, other than non consent penalties for
nonparticipation in operations under operating agreements, conventional rights
of reassignment arising in connection with Seller’s surrender or release of any
of the Assets, or agreements under clause (ii) above, (iv) any tax partnership
agreement of or binding upon Seller affecting any of the Assets (v) creates a
purchase option, right of first refusal, call or preferential purchase right on
any Hydrocarbons; (vi) creates any area of mutual interest or similar provision
with respect to the acquisition by Seller or its assigns of any interest in any
hydrocarbons, land or asset, or contains any restrictions on the ability of
Seller or its assigns to compete with any other person; (vii) is a
participation, partnership, joint venture, farmin or similar agreement; (viii)
evidences an obligation in excess of $75,000 to pay a deferred purchase price of
property, except accounts payable arising in the ordinary course of business;
and (ix) any lease or rental of any land, building or other improvements,
excluding Leases, or any other agreement that could reasonably be expected to
result in aggregate payments by Buyer with respect to the Assets of more than
$75,000 during the current or any subsequent year. To Seller’s knowledge, Seller
is not in default under any Material Agreement, except as disclosed on Exhibit
B.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
6.11   Governmental Authorizations. To Seller’s knowledge, Seller has obtained
and is maintaining all material federal, state and local governmental licenses,
permits, franchises, orders, exemptions, variances, waivers, authorizations,
certificates, consents, rights, privileges and applications therefor (the
“Governmental Authorizations”) that are presently necessary or required for the
ownership and operation of the Assets as currently owned and operated. To
Seller’s knowledge (i) Seller is operating the Assets in material compliance
with the conditions and provisions of all Governmental Authorizations that are
presently necessary or required for the ownership and operation of the Assets as
currently owned and operated, and (ii) no written notices of violation have been
received by Seller from a governmental body, and no proceedings are pending
(with service of process on Seller) or, to Seller’s knowledge, threatened (or
pending without service of process on Seller) that might result in any material
modification, revocation, termination or suspension of any such Governmental
Authorizations or which would require any corrective or remediation action by
Seller.
 
6.12   Consents and Preference Rights.  To Seller’s knowledge, except for
preference rights and transfer requirements as are set forth on Schedule 6.12,
none of the Assets, or any portion thereof, is subject to any preference right
or transfer requirement, which may be applicable to the transactions
contemplated by this Agreement.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
ARTICLE 7
BUYER’S REPRESENTATIONS AND WARRANTIES
 
Buyer makes the following representations and warranties as of the date of this
Agreement:
 
7.1    Existence. Buyer is a corporation, duly organized, validly existing and
formed under the laws of the State of Delaware, and Buyer by Closing will be
duly qualified and in good standing in the State of California.
 
7.2    Power and Authority. Buyer has all requisite power and authority to carry
on its business as presently conducted, to enter into this Agreement and each of
the documents contemplated to be executed by Buyer at Closing, and to perform
its obligations under this Agreement and under such documents. The consummation
of the transaction contemplated by this Agreement and each of the documents
contemplated to be executed by Buyer at Closing will not violate, nor be in
conflict with, (i) any provision of Buyer’s organizational or governing
documents, (ii) any agreement or instrument to which Buyer is a party or is
bound, or (iii) any judgment, decree, order, statute, rule or regulation
applicable to Buyer.
 
7.3    Authorization. The execution, delivery and performance of this Agreement
and each of the documents contemplated to be executed by Buyer at Closing and
the contemplated transaction has been duly and validly authorized by all
requisite action on the part of Buyer.
 
7.4    Execution and Delivery. This Agreement has been duly executed and
delivered on behalf of Buyer, and at the Closing all documents and instruments
required hereunder to be executed and delivered by Buyer will be duly executed
and delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer enforceable in
accordance with their terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application with
respect to creditors, (ii) general principles of equity and (iii) the power of a
court to deny enforcement of remedies generally based upon public policy.
 
7.5    Liabilities for Brokers’ Fees. Buyer has incurred no liability,
contingent or otherwise, for brokers’ or finders’ fees relating to the
transaction contemplated by this Agreement for which Seller shall have any
responsibility whatsoever.
 
7.6    Litigation. There is no action, suit, proceeding, claim or investigation
by any person, entity, administrative agency or governmental body pending or, to
Buyer’s knowledge, threatened in writing, against Buyer before any governmental
authority that impedes or is likely to impede Buyer’s ability to consummate the
transactions contemplated by this Agreement and to assume the liabilities to be
assumed by Buyer under this Agreement.
 
7.7    Independent Evaluation. Buyer is an experienced and knowledgeable
investor in the oil and gas business. Buyer has been advised by and has relied
solely upon its own expertise in legal, tax, reservoir engineering and other
professional counsel concerning this transaction, the Assets and the value
thereof.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
7.8    Qualification. Buyer is now or at closing will be and thereafter will
continue to be qualified to own and operate any federal or state oil and gas
lease that constitutes part of the Assets, including meeting all bonding
requirements. Completing the transactions set out in this Agreement will not
cause Buyer to be disqualified or to exceed any acreage limitation imposed by
law, statute or regulation.
 
7.9   Funds. Buyer has arranged to have available by the Closing Date sufficient
funds to enable Buyer to pay in full the Purchase Price and otherwise perform
its obligations under this Agreement.
 
ARTICLE 8
COVENANTS AND AGREEMENTS
 
8.1   Covenants and Agreements. As to the period of time from the execution
hereof until Closing, Seller and Buyer agree as follows:
 
a.   Operation Prior to Closing. Except as otherwise consented to in writing by
Buyer or provided in this Agreement, from the date of execution hereof to the
Closing, Seller shall use Seller’s commercially reasonable efforts to ensure
that the Assets are maintained and operated in a good and workmanlike manner.
Subject to the provisions of Section 2.3, Seller shall pay or cause to be paid
its proportionate share of all costs and expenses incurred in connection with
such operations. To the extent Seller receives written AFEs or actual notice of
such, Seller shall notify Buyer of ongoing activities and major capital
expenditures in excess of Twenty-five Thousand Dollars ($25,000.00) per activity
net to Seller’s interest conducted on the Assets and shall consult with Buyer
regarding all such matters and operations.
 
b.   Restriction on Operations. Subject to Section 8.1.a., unless Seller obtains
the prior written consent of Buyer to act otherwise, Seller will use good-faith
efforts within the constraints of the applicable operating agreements and other
applicable agreements not to (i) abandon any part of the Assets (except in the
ordinary course of business or the abandonment of leases upon the expiration of
their respective primary terms or if not capable of production in paying
quantities), (ii) except for capital projects which are deemed to be approved,
approve any operations on the Assets anticipated in any instance to cost the
owner of the Assets more than Twenty-five Thousand Dollars ($25,000) per
activity net to Seller’s interest (excepting emergency operations, operations
required under presently existing contractual obligations, ongoing commitments
under existing AFEs and operations undertaken to avoid a monetary penalty or
forfeiture provision of any applicable agreement or order), (iii) convey or
dispose of any material part of the Assets (other than replacement of equipment
or sale of oil, gas, and other liquid products produced from the Assets in the
regular course of business) or enter into any farmout, farmin or other similar
contract affecting the Assets (iv) let lapse any insurance now in force with
respect to the Assets, or (v) materially modify or terminate any contract
material to the operation of the Assets.
 
c.   Legal Status. Seller and Buyer shall use all reasonable efforts to maintain
their respective legal statuses from the date hereof until the Final Settlement
Date and to assure that as of the Closing Date they will not be under any
material corporate, legal or contractual restriction that would prohibit or
delay the timely consummation of the transaction contemplated hereby.
 
d.   Notices of Claims. Seller shall promptly notify Buyer and Buyer shall
promptly notify Seller, if, between the date hereof and the Closing Date, Seller
or Buyer, as the case may be, receives notice of any claim, suit, action or
other proceeding of the type referred to in Sections 6.8 and 7.6.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
e.    Compliance with Laws. During the period from the date of this Agreement to
the Closing Date, Seller shall attempt in good faith to comply in all material
respects with all applicable statutes, ordinances, rules, regulations and orders
relating to the ownership and operation of the Assets.
 
f.    Government Reviews and Filings. Before and after the Closing, Buyer and
Seller shall cooperate to provide requested information, make required filings
with, prepare applications to and conduct negotiations with each governmental
agency as required to consummate the transaction contemplated hereby. Each party
shall make any governmental filings occasioned by its ownership or structure.
Buyer shall make all filings after the Closing at its expense with governmental
agencies necessary to transfer title to the Assets or to comply with laws and
shall indemnify and hold harmless Seller from and against all claims, costs,
expenses, liabilities and actions arising out of Buyer’s holding of such title
after the Closing and prior to the securing of any necessary governmental
approvals of the transfer.
 
g.    Confidentiality. Confidentiality is governed by the terms of the
Confidentiality Agreement dated December 4, 2006 between Seller and Buyer and
Section 15.6 of this Agreement. The terms of the Confidentiality Agreement dated
December 4, 2006 between Seller and Buyer shall terminate at Closing or, if
Closing does not occur, survive for the term set forth in the Confidentiality
Agreement.
 
8.2   Financial Statements. Seller shall use its commercially reasonable efforts
to prepare, at the sole cost and expense of Buyer, either (i) if relief is
granted by the SEC, statements of revenues and direct operating expenses and all
notes thereto related to the Assets or (ii) if such relief is not granted by the
SEC, the financial statements required by the SEC (such financial statements set
forth in the foregoing clauses (i) and (ii), as applicable, the “Statements of
Revenues and Expenses”) in each case of clauses (i) and (ii), that will be
required of Buyer or any of its Affiliates in connection with reports,
registration statements and other filings to be made by Buyer or any of its
Affiliates related to the transactions contemplated by this Agreement with the
SEC pursuant to the Securities Act, or the Exchange Act, in such form that such
statements and the notes thereto can be audited. Seller (x) shall cooperate with
and permit Buyer to reasonably participate in the preparation of the Statements
of Revenues and Expenses and (y) shall provide Buyer and its representatives
with reasonable access to the personnel of Seller and its Affiliates who engage
in the preparation of the Statements of Revenues and Expenses. Promptly after
the date of this Agreement, Seller shall engage PricewaterhouseCoopers to
perform an audit of the Statements of Revenues and Expenses and shall use
commercially reasonable efforts to cause PricewaterhouseCoopers to issue
unqualified opinions with respect to Statements of Revenues and Expenses (the
Statements of Revenues and Expenses and related audit opinions being hereinafter
referred to as the “Audited Financial Statements”) and provide its written
consent for the use of its audit reports with respect to Statements of Revenues
and Expenses in reports filed by Buyer or any of its Affiliates under the
Exchange Act or the Securities Act, as needed. Buyer shall promptly reimburse
Seller for all fees charged by PricewaterhouseCoopers pursuant to such
engagement. Seller shall take all action as may be necessary to facilitate the
completion of such audit and delivery of the Audited Financial Statements to
Buyer or any of its Affiliates as soon as reasonably practicable, but no later
than five (5) days prior to the date that such Audited Financial Statements
would be required to be filed by Buyer or any of its Affiliates with a report on
Form 8-K or an amendment thereto under the Exchange Act. Seller shall provide to
Buyer a draft of the Audited Financial Statements no later than ten (10) days
prior to the date that such Audited Financial Statements would be required to be
filed by Buyer or any of its Affiliates with a report on Form 8-K or an
amendment thereto under the Exchange Act. Seller shall use its commercially
reasonable efforts to keep Buyer regularly informed regarding the progress of
such audit and also shall periodically provide Buyer with copies of drafts of
the Audited Financial Statements and related audit opinions.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
ARTICLE 9
CONDITIONS TO CLOSING
 
9.1   Seller’s Conditions. The obligations of Seller at the Closing are subject,
at the option of Seller, to the satisfaction at or prior to Closing of the
following conditions precedent:
 
a.    Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in Article 7 of this Agreement shall be true and
correct in all material respects on and as of the Closing, and Buyer shall have
performed and satisfied all covenants and agreements required by this Agreement
to be performed and satisfied by Buyer at or prior to the Closing in all
material respects;
 
b.    Closing Documents. Buyer shall have executed and delivered the documents
which are contemplated to be executed and delivered by it pursuant to Article 11
of this Agreement prior to or on the Closing Date;
 
c.    No Action. No order shall have been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by this
Agreement and which remains in effect at the time of Closing or seeks to recover
damages from Seller resulting therefrom.
 
9.2   Buyer’s Conditions. The obligations of Buyer at the Closing are subject,
at the option of Buyer, to the satisfaction on or prior to the Closing of the
following conditions precedent:
 
a.    Representations, Warranties and Covenants. The representations and
warranties of Seller contained in Article 6 of this Agreement shall be true and
correct in all material respects on and as of the Closing Date, and Seller shall
have performed and satisfied all covenants and agreements required by this
Agreement to be performed and satisfied by Buyer at or prior to the Closing in
all material respects;
 
b.    Closing Documents. Seller shall have executed and delivered the documents
which are contemplated to be executed and delivered by it pursuant to Article 11
of this Agreement prior to or on the Closing Date;
 
c.    SLC Consent. The SLC shall have given all consents necessary to transfer
the Assets to Buyer.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
d.    No Action. No order shall have been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by this
Agreement and which remains in effect at the time of Closing or seeks to recover
damages from Buyer resulting therefrom.
 
ARTICLE 10
RIGHT OF TERMINATION AND ABANDONMENT
 
10.1    Termination. This Agreement may be terminated in accordance with the
following provisions:
 
a.    by Seller if the conditions set forth in Section 9.1 are not satisfied,
through no fault of Seller, or waived by Seller in writing, as of the Closing
Date; or
 
b.    by Buyer if the conditions set forth in Section 9.2 are not satisfied,
through no fault of Buyer, or waived by Buyer in writing, as of the Closing
Date.
 
c.    by Seller or Buyer if the aggregate of Title Defect Adjustments and
Environmental Defect Adjustments ***.
 
d.    by Seller or Buyer if Closing does not occur on or before May 16, 2007, or
if the SLC consent necessary to transfer the Assets to Buyer has not been
obtained by such date, a date which is three business days after the next
scheduled meeting of the SLC.
 
10.2    Liabilities Upon Termination.
 
a.    Buyer’s Default. If the transactions contemplated by this Agreement are
not consummated on or before the date specified in Section 11.1 by reason of
Buyer’s wrongful failure to tender performance at Closing, and if Seller is not
in material default under the terms of this Agreement and is ready, willing and
able to Close, and Seller terminates this Agreement, Seller shall be entitled,
at Seller’s election, to (i) specific performance or (ii) retention of the
Deposit, and any accrued interest, as liquidated damages. If Seller does not
elect specific performance of this Agreement, Seller and Buyer agree that
Seller’s damages in the event Buyer fails to close are difficult to measure and
both Seller and Buyer agree that the amount of the Deposit bears a reasonable
relationship to and is a reasonable estimation of such damages.
 
b.    Seller’s Default. If the transactions contemplated by this Agreement are
not consummated on or before the date specified in Section 11.1 by reason of
Seller’s wrongful failure to tender performance at Closing and if Buyer is not
in material default under this Agreement and is ready, willing and able to
Close, and Buyer terminates this Agreement, Buyer shall be entitled, at Buyer’s
election (i) specific performance, or (ii) to a prompt refund of the Deposit
with interest accrued thereon.
 
c.    Other Termination. If Seller and Buyer agree to terminate this Agreement,
or if either party terminates the Agreement under Sections 10.1.c, then each
party shall release the other party from any and all liability for termination
of this Agreement, and Buyer shall be entitled to a refund of the Deposit with
accrued Interest.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
ARTICLE 11
CLOSING
 
11.1    Date of Closing. Subject to Seller’s and Buyer’s rights to terminate in
Article 10, the closing of the transaction contemplated by this Agreement
(“Closing” or “Closing Date”) shall be held on or before the later of May 1,
2007 or five (5) business days after Buyer’s condition to Closing set forth in
Section 9.2.c is satisfied or waived by Buyer, at Seller’s office in
Bakersfield, California, at 8:30 a.m. or at such other time and place as the
parties may agree in writing.
 
11.2    Closing Obligations. At Closing, the following events shall occur, each
being a condition precedent to the others and each being deemed to have occurred
simultaneously with the others:
 
a.    Assignment of Assets. Seller and Buyer shall execute, acknowledge and
deliver to Buyer an Assignment and Bill of Sale of the Assets effective as of
the Effective Time (in sufficient counterparts to facilitate filing and
recording) (i) substantially in the form of Exhibit E with a special warranty of
title by, through and under Seller but not otherwise; with no warranties,
express or implied, as to the personal property, fixtures or condition of the
Assets which are conveyed “as is, where is;” (ii) such other assignments, bills
of sale, or deeds necessary to transfer the Assets to Buyer, including without
limitation any conveyances on official forms and related documentation necessary
to transfer the Assets to Buyer in accordance with requirements of state and
federal governmental regulations; and (iii) an Assignment and Assumption
Agreement in the form of Exhibit F under which Seller assigns various
contractual interests included in the Assets and under which Buyer assumes the
obligations thereunder in accordance with the terms of this Agreement.
 
b.    Preliminary Settlement Statement. Seller shall deliver to Buyer and Seller
and Buyer shall execute and deliver the Preliminary Settlement Statement.
 
c.    Purchase Price. Buyer shall deliver to Seller the Closing Amount by wire
transfer of immediately available funds to Seller or as directed by Seller.
 
d.    Letters in Lieu. Seller and Buyer shall execute and deliver all necessary
letters in lieu of transfer orders directing all purchasers of production to pay
Buyer the proceeds attributable to production from the Assets from and after the
Effective Time.
 
e.    Seller’s Officer’s Certificate. Seller shall execute and deliver to Buyer
an officer’s certificate in form and substance similar to Exhibit H, stating
that all conditions precedent to Closing have been satisfied.
 
f.    Buyer’s Officer’s Certificate. Buyer shall execute and deliver to Seller
an officer’s certificate in form and substance similar to Exhibit I, stating
that all conditions precedent to Closing have been satisfied.
 
g.    Non-Foreign Affidavit. In compliance with Section 1445 of the United
States Internal Revenue Code, Seller shall execute and deliver to Buyer a
Non-Foreign Affidavit in the form of Exhibit J.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
ARTICLE 12
POST-CLOSING OBLIGATIONS
 
12.1   Post-Closing Adjustments. As soon as practicable after the Closing, but
on or before one hundred twenty (120) days after Closing, Seller, with the
assistance of Buyer’s staff and with access to such records as necessary, shall
prepare and deliver to Buyer a final settlement statement (the “Final Settlement
Statement”) setting forth each adjustment or payment that was not finally
determined as of the Closing and showing the calculation of such adjustment and
the resulting final purchase price (the “Final Purchase Price”). As soon as
practicable after receipt of Seller’s proposed Final Settlement Statement, but
on or before fifteen (15) days after receipt of Seller’s proposed Final
Settlement Statement, Buyer shall deliver to Seller a written report containing
any changes that Buyer proposes to make to the Final Settlement Statement.
Buyer’s failure to deliver to Seller a written report detailing changes to the
proposed Final Settlement Statement by that date shall be deemed an acceptance
by Buyer of the Final Settlement Statement as submitted by Seller. The parties
shall endeavor to agree with respect to the changes proposed by Buyer, if any,
no later than fifteen (15) days after receipt by Seller of Buyer’s comments to
the proposed Final Settlement Statement. The date upon which such agreement is
reached or upon which the Final Purchase Price is established for the
transaction shall be called the “Final Settlement Date.” If the Final Purchase
Price is more than the Closing Amount, Buyer shall pay Seller the amount of such
difference. If the Final Purchase Price is less than the Closing Amount, Seller
shall pay to Buyer the amount of such difference. Any payment by Buyer or Seller
shall be by wire transfer in immediately available funds. Any such payment shall
be within five (5) days of the Final Settlement Date.
 
12.2   Suspense Accounts. Seller currently maintains suspense accounts
pertaining to oil and gas heretofore produced comprising monies payable to
royalty owners, mineral owners and other persons with an interest in production
that Seller has been unable to pay because of title defects (the “Suspense
Accounts”). A preliminary listing of the Suspense Accounts is set forth in
Exhibit K. At Closing, a downward adjustment to the Purchase Price will be made
to convey the Suspense Accounts to Buyer and the Suspense Accounts will be
included in the Preliminary Settlement Statement, with an adjustment made in the
Final Settlement Statement, if necessary. Buyer will assume full and complete
responsibility and liability for proper payment of the funds comprising the
Suspense Accounts as set forth on the “Final Suspense Account Statement,” which
shall be provided by Seller to Buyer with the Final Settlement Statement
required in Section 12.1 (including any liability under any unclaimed property
law or escheat statute). Buyer agrees to indemnify, defend and hold Seller, its
parent, subsidiary and affiliated entities, together with their respective
officers, directors, employees, agents and their respective successors and
assigns, harmless from and against any and all liability, claims, demands,
penalties and expenses (including attorneys’ fees) arising out of or pertaining
to the proper payment and administration of the Suspense Accounts, limited,
however to the total amount of the Suspense Accounts.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
12.3   Dispute Resolution. If the parties are unable to resolve disputes
concerning the Final Settlement Statement or Final Purchase Price on or before
thirty (30) days after the Final Settlement Statement is received by Buyer, such
disputes shall be resolved in accordance with Section 14.5.d.
 
12.4   Records. Seller shall make the Records available for pick up by Buyer at
a mutually agreeable time within ten (10) days of Closing. At Seller’s request,
Buyer shall make the Records available to Seller for review and copying during
normal business hours. Buyer agrees not to destroy or otherwise dispose of the
Records for a period of six years after the Closing without giving Seller
reasonable notice and an opportunity to copy the Records.
 
12.5   Further Assurances. From time to time after Closing, Seller and Buyer
shall each execute, acknowledge and deliver to the other such further
instruments and take such other action as may be reasonably requested in order
more effectively to assure to the other the full beneficial use and enjoyment of
the Assets in accordance with the provisions of this Agreement and otherwise to
accomplish the purposes of the transaction contemplated by this Agreement.
 
12.6   Disclaimers of Representations and Warranties. The express
representations and warranties of Seller contained in this Agreement are
exclusive, are in lieu of all other representations and warranties, express,
implied or statutory, and the representations and warranties contained in
Sections 6.9 through and including 6.12 shall terminate upon and shall not
survive the Closing. BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER
HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES, ANY
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE RELATING TO (A) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE
RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE
RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS, (B) THE ACCURACY,
COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN
OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY OR ON BEHALF OF
SELLER, (C) THE ENVIRONMENTAL CONDITION OF THE ASSETS, THEIR COMPLIANCE WITH
ENVIRONMENTAL LAWS, AND THE PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS, (D) ANY IMPLIED OR EXPRESS WARRANTY
OF MERCHANTABILITY, (E) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (F) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS
OR SAMPLES OF MATERIALS, (G) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES
TO CLAIM DIMINUTION OF CONSIDERATION, (H) ANY CLAIMS BY BUYER FOR DAMAGES
BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN AS OF THE EFFECTIVE TIME OR THE
CLOSING DATE, AND (I) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE
LAW, IT BEING THE EXPRESS INTENTION OF BOTH BUYER AND SELLER THAT THE ASSETS
WILL BE CONVEYED TO BUYER IN THEIR PRESENT CONDITION AND STATE OF REPAIR, “AS
IS” AND “WHERE IS” WITH ALL FAULTS AND THAT BUYER HAS MADE OR CAUSED TO BE MADE
SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE. THE PARTIES AGREE THAT THIS
SECTION 12.5 CONSTITUTES A CONSPICUOUS LEGEND.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
ARTICLE 13
TAXES
 
13.1   Apportionment of Ad Valorem and Property Taxes. All ad valorem taxes,
real property taxes, personal property taxes and similar obligations (the
“Property Taxes”) attributable to the Assets with respect to the tax period in
which the Effective Time occurs shall be apportioned as of the Effective Time
between Seller and Buyer. Prior to Closing, Seller shall determine an estimate
of the portion of the Property Taxes (based on the latest information then
available), for the period in which the Effective Time occurs attributable to
the period prior to the Effective Time (the “Seller Property Tax”). Seller shall
credit to Buyer, through a downward adjustment to the Purchase Price, the amount
of the Seller Property Tax. Buyer shall file or cause to be filed all required
reports and returns incident to the Property Taxes and shall pay or cause to be
paid to the taxing authorities all Property Taxes relating to the tax period in
which the Effective Time occurs. If the Property Taxes used in determining the
Seller Property Tax are not the actual Property Taxes for the tax period in
which the Effective Time occurs, then upon the determination of the actual
Property Taxes for such period, the Seller Property Tax shall be recalculated
based upon such actual Property Taxes (the “Revised Seller Property Tax”) and
(i) if the Revised Seller Property Tax is greater than the Seller Property Tax,
Seller shall promptly pay the difference between such amounts or (ii) if the
Revised Seller Property Tax is less than the Seller Property Tax, Buyer shall
promptly pay Seller the difference between such amounts.
 
13.2   Transfer Taxes and Recording Fees. The Purchase Price excludes, and Buyer
shall be liable for any stamp, documentary, filing, licensing, processing,
recording authorization and similar fees and charges. Seller and Buyer shall
each bear one half of any sales or transfer taxes assessed in connection with
the transaction.
 
13.3   Other Taxes. All severance, production, excise, conservation and similar
taxes attributable to the Assets that are based upon or measured by the
production of Hydrocarbons (excluding Property Taxes which are addressed in
Section 13.1) shall be apportioned between the Seller and Buyer as of the
Effective Time. All such taxes that have accrued with respect to the period
prior to the Effective Time have been or will be properly paid or withheld by
Seller, and all statements, returns, and documents pertinent thereto have been
or will be properly filed. Buyer shall be responsible for paying or withholding
or causing to be paid or withheld all such taxes that have accrued after the
Effective Time and for filing all statements, returns, and documents incident
thereto.
 
13.4   Tax Reports and Returns. For tax periods in which the Effective Time
occurs, Seller agrees to immediately forward to Buyer copies of any tax reports
and returns received by Seller after Closing and provide Buyer with any
information Seller has that is necessary for Buyer to file any required tax
reports and returns related to the Assets. Buyer agrees to file all tax returns
and reports applicable to the Assets that Buyer is required to file after the
Closing.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
ARTICLE 14
ASSUMPTION AND RETENTION OF
OBLIGATIONS; INDEMNIFICATION
 
14.1    Buyer’s Assumption of Liabilities and Obligations. Upon Closing, Buyer
shall assume and pay, perform, fulfill and discharge all claims, costs,
expenses, liabilities and obligations (“Obligations”) accruing or relating to
(i) the owning, developing, exploring, operating or maintaining of the Assets or
the producing, transporting and marketing of Hydrocarbons from the Assets from
and after the Effective Time, including, without limitation, the payment of
Property Expenses, the obligation to plug and abandon all wells located on the
Lands and reclaim all well sites located on the Lands regardless of when the
plugging, abandonment and reclamation obligations arose, the make-up and
balancing obligations for overproduction of gas from the Wells, all liability
for royalty and overriding royalty payments made and Taxes paid with respect to
the Assets for periods after the Effective Time and (ii) the environmental
condition of the Assets except for any condition for which Buyer is indemnified
by Seller under Section 5.5.a, and (iii) all Obligations accruing or relating to
the ownership or operation of the Assets before the Effective Time for which
Seller is not liable pursuant to the provisions of Section 14.2 (collectively,
the “Assumed Liabilities”).
 
14.2    Seller’s Retention of Liabilities and Obligations. Upon Closing, Seller
shall retain and pay (i) all Property Expenses of Seller relating to the
ownership and operation of the Assets and the producing, transporting and
marketing of Hydrocarbons from the Assets prior to the Effective Time, but only
as to Claims asserted within two years after the Closing Date, (ii) all
liability for personal injury and employment claims related to the ownership and
operation of the Assets prior to the Effective Time (iii) all liability for
royalty and overriding royalty payments due, owing or made and Taxes due, owing
or paid prior to the Effective Time with respect to the Assets, (iv) any
liability arising directly out of the 1993 Oil Spill, and (v) any liability for
offsite disposal of hazardous substances relating to the Assets prior to the
Effective Time by Seller, its employees and contractors only and not any such
disposal by Seller’s predecessors in title (collectively, the “Retained
Liabilities”). 
 
14.3    Buyer’s Plugging and Abandonment Obligations. In addition to the Assumed
Liabilities, upon Closing Buyer assumes full responsibility and liability for
the following plugging and abandonment obligations related to the Assets
(“Buyer’s Plugging and Abandonment Obligations”), regardless of whether they are
attributable to the ownership or operation of the Assets before or after the
Effective Time. All operations by Buyer under this Section shall be conducted in
a good and workmanlike manner and in compliance with all applicable laws and
regulations.
 
a.    The necessary and proper plugging, replugging and abandonment of all wells
on the Assets;
 
b.    The necessary and proper removal, abandonment and disposal of all
structures, pipelines, equipment, abandoned property, trash, refuse and junk
located on or comprising part of the Assets;
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
c.    The necessary and proper capping and burying of all associated flow lines
located on or comprising part of the Assets;
 
d.    The necessary and proper restoration of the surface used for operation of
the Assets and subsurface to the condition required by applicable laws,
regulations or contract;
 
e.    All obligations relating to the items described in Section 14.3.a. through
Section 14.3.d. arising from contractual requirements and demands made by
courts, authorized regulatory bodies or parties claiming a vested interest in
the Assets; and
 
f.    Obtaining and maintaining all bonds, or supplemental or additional bonds,
that may be required contractually or by governmental authorities.
 
14.4    Indemnification. “Losses” shall mean any actual losses, costs, expenses
(including court costs, reasonable fees and expenses of attorneys, technical
experts and expert witnesses and the costs of investigation), liabilities,
damages, demands, suits, claims, and sanctions of every kind and character
(including civil fines) arising from, related to or reasonably incident to
matters indemnified against; excluding however any special, consequential,
punitive or exemplary damages, diminution of value of an Asset, loss of profits
incurred by a party hereto or Loss incurred as a result of the indemnified party
indemnifying a third party.
 
After the Closing, Buyer and Seller shall indemnify each other as follows:
 
a.    Seller’s Indemnification of Buyer. Seller assumes all risk, liability,
obligation and Losses in connection with, and shall defend, indemnify, and save
and hold harmless Buyer, its officers, directors, employees and agents, from and
against all Losses which arise from or in connection with (i) the Retained
Liabilities, (ii) any material breach of any representation or warranty made by
Seller other than those contained in Sections 6.9 through and including 6.12,
which shall terminate upon and not survive the Closing, (iii) matter for which
Seller has agreed to indemnify Buyer under this Agreement, and (iv) any material
breach by Seller of this Agreement.
 
b.    Buyer’s Indemnification of Seller. Buyer assumes all risk, liability,
obligation and Losses in connection with, and shall defend, indemnify, and save
and hold harmless Seller, Seller’s officers, directors, employees and agents,
from and against all Losses which arise from or in connection with (i) the
Assumed Liabilities, (ii) any material breach of any representation or warranty
made by Buyer, (iii) any matter for which Buyer has agreed to indemnify Seller
under this Agreement, and (iv) any material breach by Buyer of this Agreement.
 
14.5    Procedure. The indemnifications contained in Section 14.4 shall be
implemented as follows:
 
a.    Coverage. Such indemnity shall extend to all Losses suffered or incurred
by the Indemnified Party, as defined below.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
b.    Claim Notice. The party seeking indemnification under the terms of this
Agreement (“Indemnified Party”) shall submit a written “Claim Notice” to the
other party (“Indemnifying Party”) which, to be effective, must state: (i) the
amount of each payment claimed by an Indemnified Party to be owing, (ii) the
basis for such claim, with supporting documentation, and (iii) a list
identifying to the extent reasonably possible each separate item of Loss for
which payment is so claimed. The amount claimed shall be paid by the
Indemnifying Party to the extent required herein within ten (10) days after
receipt of the Claim Notice, or after the amount of such payment has been
finally established, whichever last occurs.
 
c.    Information. Within twenty (20) days after the Indemnified Party receives
notice of a claim or legal action that may result in a Loss for which
indemnification may be sought under this Article 14 (“Claim”), the Indemnified
Party shall give a Claim Notice to the Indemnifying Party. If the Indemnifying
Party or its counsel so requests, the Indemnified Party shall furnish the
Indemnifying Party with copies of all pleadings and other information with
respect to such Claim. At the election of the Indemnifying Party made within
sixty (60) days after receipt of the Claim Notice, the Indemnified Party shall
permit the Indemnifying Party to assume control of such Claim (to the extent
only that such Claim, legal action or other matter relates to a Loss for which
the Indemnifying Party is liable), including the determination of all
appropriate actions, the negotiation of settlements on behalf of the Indemnified
Party, and the conduct of litigation through attorneys of the Indemnifying
Party’s choice; provided, however, that no such settlement can result in any
liability or cost to the Indemnified Party for which it is entitled to be
indemnified hereunder without its consent. If the Indemnifying Party elects to
assume control, (i) any expense incurred by the Indemnified Party thereafter for
investigation or defense of the matter shall be borne by the Indemnified Party,
and (ii) the Indemnified Party shall give all reasonable information and
assistance, other than pecuniary, that the Indemnifying Party shall deem
necessary to the proper defense of such Claim, legal action, or other matter. In
the absence of such an election, the Indemnified Party will use its best efforts
to defend, at the Indemnifying Party’s expense, any claim, legal action or other
matter to which such other party’s indemnification under this Article 14 applies
until the Indemnifying Party assumes such defense, and, if the Indemnifying
Party fails to assume such defense within the time period provided above, settle
the same in the Indemnified Party’s reasonable discretion at the Indemnifying
Party’s expense. If such a Claim requires immediate action, both the Indemnified
Party and the Indemnifying Party will cooperate in good faith to take
appropriate action so as not to jeopardize defense of such Claim or either
party’s position with respect to such Claim.
 
d.    Dispute Resolution. If the existence of a valid Claim or amount to be paid
by an Indemnifying Party is in dispute, the parties agree to submit
determination of the existence of a valid Claim or the amount to be paid
pursuant to the Claim Notice to binding arbitration. The arbitration shall be
before a three person panel of neutral arbitrators, consisting of one person
each to be selected by Seller and Buyer, and the third to be selected by the
arbitrators selected by Seller and Buyer. The arbitrators shall conduct a
hearing no later than sixty (60) days after submission of the matter to
arbitration, and a written decision shall be rendered by the arbitrators within
thirty (30) days of the hearing. Any payment due pursuant to the arbitration
shall be made within fifteen (15) days of the arbitrators’ decision. This
Section excludes those matters addressed in Sections 4.8 and 5.7 of this
Agreement.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
14.6    No Insurance; Subrogation. The indemnifications provided in this
Article 14 shall not be construed as a form of insurance. Seller and Buyer waive
for themselves, their successors or assigns, including without limitation, any
insurers, any rights to subrogation for Losses for which each of them is
respectively liable or against which each respectively indemnifies the other,
and, if required by applicable policies, Seller and Buyer shall obtain waiver of
such subrogation from their respective insurers.
 
14.7   Reservation as to Non-Parties. Nothing in this Agreement is intended to
limit or otherwise waive any recourse Seller or Buyer may have against any
non-party for any obligations or liabilities that may be incurred with respect
to the Assets.
 
ARTICLE 15
MISCELLANEOUS
 
15.1   Exhibits. The Exhibits referred to in this Agreement are hereby
incorporated in this Agreement by reference and constitute a part of this
Agreement.
 
15.2   Expenses. Except as otherwise specifically provided, all fees, costs and
expenses incurred by Seller or Buyer in negotiating this Agreement or in
consummating the transaction contemplated by this Agreement shall be paid by the
party incurring same, including, without limitation, legal and accounting fees,
costs and expenses.
 
15.3   Notices. All notices and communications required or permitted under this
Agreement shall be in writing and addressed as follows:

 
If to Seller:
 
Berry Petroleum Company
       
5201 Truxtun Avenue, Suite 300
       
Bakersfield, California 93309
       
Attention:
Manager Land Department
       
Telephone:  
(661) 616-3900
       
Facsimile:
(661) 616-3886
                 
and
                 
Laura K. McAvoy, Esq.
       
Musick, Peeler & Garrett LLP
       
2801 Townsgate Road, Suite 200
       
Westlake Village, California 91361
       
Telephone:  
(805) 418-3115
       
Facsimile:
 
(805) 418-3101
 
 

 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.

 
If to Buyer:
 
Venoco, Inc.
       
370 17th Street, Suite 3900
       
Denver, Colorado 80202
       
Attention:
Terry Sherban
       
Telephone:   
(303) 626-8303
                 
and
                 
Venoco, Inc.
       
6267 Carpinteria Ave.
       
Carpinteria, CA 90313
       
Attention:
Terry Anderson
       
Telephone:   
(805) 745-2253
 

 
Any communication or delivery hereunder shall be deemed to have been duly made
and the receiving party charged with notice (i) if personally delivered, when
received, (ii) if faxed, when received if receipt is confirmed by telephone by
the sender, (iii) if mailed, certified mail, return receipt requested, on the
date set forth on the return receipt or (iv) if sent by overnight courier, one
day after sending. Any party may, by written notice so delivered to the other
party, change the address or individual to which delivery shall thereafter be
made.
 
15.4    Amendments. Except for waivers specifically provided for in this
Agreement, this Agreement may not be amended nor any rights hereunder waived
except by an instrument in writing signed by the party to be charged with such
amendment or waiver and delivered by such party to the party claiming the
benefit of such amendment or waiver.
 
15.5    Assignment. Prior to Closing, neither party shall assign all or any
portion of its respective rights or delegate all or any portion of its
respective duties hereunder without the prior written consent of the other
party. 
 
15.6    Confidentiality. Seller and Buyer agree the provisions of this Agreement
shall be kept confidential except as disclosure may be required by applicable
law, rules and regulations of governmental agencies or stock exchanges. Buyer
shall inform Seller of all such disclosures by Buyer.
 
15.7    Press Releases. In the event that either party wishes or is required to
make a press release or include such information in another document prior to
Closing, such party will endeavor to provide the other with a draft of a press
release or other document for review at least one business day before its
release, filing or delivery. The parties will attempt in good faith to
expeditiously reach agreement on such statement and the contents thereof.
Failure to provide comments back to the other party within one business day of
receipt of the press release or other document will be deemed consent to the
public disclosure of the press release or other document and the content
thereof.
 
15.8    Headings. The headings of the articles and sections of this Agreement
are for guidance and convenience of reference only and shall not limit or
otherwise affect any of the terms or provisions of this Agreement.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
15.9    Counterparts. This Agreement may be executed by Seller and Buyer in any
number of counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute one and the same instrument.
Execution can be evidenced by fax signatures with original signature pages to
follow in due course.
 
15.10   References. References made in this Agreement, including use of a
pronoun, shall be deemed to include, where applicable, masculine, feminine,
singular or plural, individuals, partnerships or corporations. As used in this
Agreement, “person” shall mean any natural person, corporation, partnership,
court, agency, government, board, commission, trust, estate or other entity or
authority.
 
15.11   Governing Law. This Agreement and the transactions contemplated hereby
shall be construed in accordance with, and governed by, the laws of the State of
California without regard to principles of conflicts of law. The validity of the
various conveyances affecting the title to real property Assets shall be
governed by and construed in accordance with the laws of the State of
California. 
 
15.12   Removal of Signs. Buyer shall remove all of Seller’s well and lease
signs within five (5) days of the Closing Date.
 
15.13   Binding Effect. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto, and their respective successors and assigns.
 
15.14   Survival. The following shall survive Closing: (i) all post-closing
obligations and indemnities of Seller and Buyer subject to the limitations set
forth herein, (ii) Seller’s representations and warranties in Article 6 and,
(iii) Buyer’s representations and warranties in Article 7.
 
15.15   No Third-Party Beneficiaries. This Agreement is intended only to benefit
the parties hereto and their respective permitted successors and assigns.
 
15.16   Limitation on Damages. Consistent with Article 14, the parties hereto
expressly waive any and all rights to consequential, special, incidental,
punitive or exemplary damages, or loss of profits resulting from breach of this
Agreement.
 
15.17   Severability. It is the intent of the parties that the provisions
contained in this Agreement shall be severable. Should any provisions, in whole
or in part, be held invalid as a matter of law, such holding shall not affect
the other portions of this Agreement, and such portions that are not invalid
shall be given effect without the invalid portion.
 
15.18   Knowledge. As used throughout this Agreement, the term “knowledge” or
“best knowledge” or “best of Seller’s knowledge,” whether or not such term is
written in lower or upper case, means the actual knowledge without investigation
of those officers and employees of Seller as of the Closing Date which are
involved at a supervisory or higher level of any fact, circumstance, or
condition.
 
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Confidential Portions Redacted and Filed with the Commission [***] Symbolizes
Language Omitted Pursuant to an Application For Confidential Treatment.
 
ARTICLE 16
EXCHANGE RIGHT
 
16.1    Exchange Cooperation. Buyer shall cooperate (at no cost or liability to
Buyer) with Seller so that Seller's transfer of the Assets to Buyer shall at
Seller's election, be accomplished in a manner enabling the transfer to qualify
as a part of a like-kind exchange of property by Seller within the meaning of
Section 1031 of the Internal Revenue Code. If Seller so elects, Buyer shall
reasonably cooperate with Seller to effect such like-kind exchange, which
cooperation shall include, without limitation, taking such actions as Seller
reasonably requests in order to pay the Deposit and the Purchase Price in a
manner which enables such transfer to qualify as part of a like-kind exchange of
property within the meaning of Section 1031 of the Code, and Buyer agrees that
Seller may assign its rights (but not its obligations) under this Agreement to a
qualified intermediary as defined in Treasury Regulations Section
1.1031(k)-1(g)(4)(iii) under United States Treasury Regulations, to qualify the
transfer of the Purchase Price as a part of a like-kind exchange of property
within the meaning of Sections 1031 of the Code.
 
Executed on the dates set forth in the acknowledgments below.
 

 
Seller:
   
BERRY PETROLEUM COMPANY
 
a Delaware corporation
         
By: 
 
     
Buyer:
   
VENOCO, INC. 
 
a Delaware corporation
         
By:
 

 
 
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