Exhibit 10.1


 


SALES AGENCY AGREEMENT


 


SALES
AGENCY AGREEMENT, dated as of October 12, 2010 (this “Agreement”), by and between Venoco, Inc.,
a Delaware corporation (the “Company”),
and BMO Capital Markets Corp., a registered broker-dealer organized under the
laws of Delaware (the “Manager”).


 


W I T N E S S E T H:


 


WHEREAS,
the Company has authorized and proposes to issue and sell in the manner
contemplated by this Agreement Common Shares with an aggregate Sales Price of
up to $75,000,000 upon the terms and subject to the conditions contained
herein; and


 


WHEREAS,
the Manager has been appointed by the Company as its agent to sell the Common
Shares and agrees to use its commercially reasonable efforts consistent with
customary trading and sales practices to sell the Common Shares offered by the
Company upon the terms and subject to the conditions contained herein.


 


NOW
THEREFORE, in consideration of the premises, representations, warranties,
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound hereby, the parties hereto agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


1.01        Certain Definitions.  For purposes of this Agreement, capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in Appendix A.


 


ARTICLE II


 


ISSUANCE AND SALE OF COMMON STOCK


 


2.01        Issuance.


 


(a)           Commercially
Reasonable Efforts.  Upon the terms and subject to the conditions of
this Agreement, the Company may issue Common Shares through the Manager and the
Manager shall use its commercially reasonable efforts consistent with customary
trading and sales practices to sell Common Shares, with an aggregate Sales
Price of up to the Maximum Program Amount, based on and in accordance with such
number of Issuance Notices as the Company shall choose to deliver during the
Commitment Period until the aggregate Sales Price of the Common Shares sold
under this Agreement equals the Maximum Program Amount or this Agreement is
otherwise terminated.  Subject to the foregoing and the other terms and
conditions of this Agreement, upon the delivery of an Issuance Notice, and
unless the sale of the Issuance Shares described therein has been suspended,
cancelled or otherwise terminated in accordance with the terms of this
Agreement, the Manager will use its commercially reasonable efforts consistent
with customary trading and sales practices to sell such Issuance Shares up to
the amount specified in such Issuance Notice. 
The Manager will provide written confirmation to the 


 


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Company no later than the opening of the Trading Day
next following the Trading Day on which it has made sales of Issuance Shares
hereunder setting forth the portion of the Actual Sold Amount for such Trading
Day, the corresponding Sales Price and the Issuance Price payable to the
Company in respect thereof.  The Manager
may sell Issuance Shares in the manner described in Section 2.01(b) herein.
 The Company acknowledges and agrees that (i) there can be no
assurance that the Manager will be successful in selling Issuance Shares and (ii) the
Manager will incur no liability or obligation to the Company or any other
Person if it does not sell Issuance Shares for any reason other than a failure
by the Manager to use its commercially reasonable efforts consistent with
customary trading and sales practices to sell such Issuance Shares as required
under this Section 2.01.  Unless otherwise mutually agreed by the
parties, in acting hereunder, the Manager will be acting as agent for the
Company and not as principal.





 




(b)           Method
of Offer and Sale.  The Common Shares may be offered and sold in (1) privately
negotiated transactions (if and only if the parties hereto have so agreed in
writing), or (2) by any other method permitted by law deemed to be an “at
the market” offering as defined in Rule 415 of the Securities Act,
including sales made directly on the Principal Market or sales made to or
through a market maker or through an electronic communications network.
 Nothing in this Agreement shall be deemed to require either party to
agree to the method of offer and sale specified in clause (1) above, and
either party may withhold its consent thereto in such party’s sole discretion.


 


(c)           Issuances.
 Upon the terms and subject to the conditions set forth herein, on any
Trading Day as provided in Section 2.03(b) hereof during the
Commitment Period on which the conditions set forth in Sections 5.01 and
5.02 hereof have been satisfied, the Company may exercise an Issuance by
the delivery of an Issuance Notice, executed by the Chief Executive Officer or
the Chief Financial Officer of the Company, to the Manager.  The number of
Issuance Shares that the Manager shall use its commercially reasonable efforts
consistent with customary trading and sales practices to sell pursuant to such
Issuance shall have an aggregate Sales Price equal to the Issuance Amount. Each
Issuance will be settled on the applicable Settlement Date following the
Issuance Date.


 


2.02        Effectiveness.  The effectiveness of
this Agreement (the “Closing”)
shall be deemed to take place concurrently with the execution and delivery of
this Agreement by the parties hereto and the completion of the closing
transactions set forth in the immediately following sentence.  At the
Closing, the following closing transactions shall take place, each of which
shall be deemed to occur simultaneously with the Closing:


 


(a)           the
Company shall deliver to the Manager a certificate executed by the Secretary of
the Company, signing in such capacity, dated the Closing Date, (A) certifying
that attached thereto are true and complete copies of the resolutions duly
adopted by the Board of Directors of the Company authorizing the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby (including, without limitation, the issuance of the Common
Shares pursuant to this Agreement), which authorization shall be in full force
and effect on and as of the date of such certificate, (B) certifying and
attesting to the office, incumbency, due authority and specimen signatures of
each Person who executed the Agreement for or on behalf of the Company and (C) certifying
as to such additional matters as the Manager may reasonably request;


 


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(b)           the
Company shall deliver to the Manager a certificate executed by the Chief
Executive Officer, the President or any Senior Vice-President of the Company
and by the Chief Financial Officer of the Company, signing in such capacity,
dated the date of the Closing, confirming that the representations and
warranties of the Company contained in this Agreement are true and correct and
that the Company has performed all of its obligations hereunder to be performed
on or prior to the Closing Date and as to the matters set forth in Section 5.01(a) hereof;


 


(c)           Davis,
Graham & Stubbs LLP, counsel to the Company, shall deliver to the
Manager an opinion, dated the Closing Date and addressed to the Manager,
substantially in the form of Exhibit B attached hereto;


 


(d)           Mayer
Brown LLP, counsel to the Manager, shall deliver to the Manager an opinion,
dated the Closing Date and addressed to the Manager, in form and substance
reasonably satisfactory to the Manager;


 


(e)           DeGolyer &
McNaughton (“DeGolyer”) shall deliver to
the Manager a letter, dated the Closing Date and addressed to the Manager, (i) confirming
that as of the date of its reserve reports, it was an independent reserve
engineer of the Company and its subsidiaries and no information has come to its
attention that could reasonably be expected to cause it to withdraw its reserve
reports and (ii) otherwise in form and substance reasonably satisfactory
to the Manager;


 


(f)            each
of Ernst & Young LLP and Deloitte Touche LLP shall deliver to the
Manager a comfort letter, dated the Closing Date, in form and substance
reasonably satisfactory to the Manager; and


 


(g)           the
Company shall pay the expenses set forth in Section 9.02(ii), (iv) and
(viii) hereof by wire transfer to the account designated by the
Manager in writing promptly following the Closing.


 


2.03        Mechanics of Issuances.


 


(a)           Issuance
Notice.  On any Trading Day during the Commitment Period, the Company
may deliver an Issuance Notice to the Manager, subject to the satisfaction of
the conditions set forth in Sections 5.01 and 5.02;
provided, however, that (1) the Issuance Amount for each Issuance as designated
by the Company in the applicable Issuance Notice shall in no event exceed the Maximum
Program Amount and (2) notwithstanding anything in this Agreement to the
contrary, the Manager shall have no further obligations with respect to any
Issuance Notice if and to the extent the aggregate Sales Price of the Issuance
Shares sold pursuant thereto, together with the aggregate Sales Price of the
Common Shares previously sold under this Agreement, shall exceed the Maximum
Program Amount.


 


(b)           Delivery
of Issuance Notice.  An Issuance Notice shall be deemed delivered on
the Trading Day that it is received by e-mail, facsimile or any other written
form (and the Company confirms such delivery by telephone (including voicemail
message)) by the Manager.  No Issuance Notice may be delivered other than
on a Trading Day during the 


 


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Commitment Period, and no Issuance Notice may be
delivered with an Issuance Date prior to the date on which the Company files
with the Commission its Quarterly Report for the quarter ending September 30,
2010 without the Manager’s prior consent.





 




(c)           Floor
Price.  The Manager shall not sell
Common Shares below the Floor Price during any Selling Period and such Floor
Price may be adjusted by the Company at any time during any Selling Period upon
advance written notice (including email) to the Manager and confirmation of
such change by the Manager to the Company.


 


(d)           Determination
of Issuance Shares to be Sold.  The number of Issuance Shares to be
sold by the Manager with respect to any Issuance shall be the Actual Sold
Amount during the Selling Period.


 


(e)           Trading
Guidelines.  The Manager may, to the
extent permitted under the Securities Act and the Exchange Act and regulations
thereunder, purchase and sell Common Stock for its own account while this
Agreement is in effect provided that no such purchase or sale shall take place
while an Issuance Notice is in effect (except to the extent the Manager may
engage in sales of Issuance Shares purchased or deemed purchased from the
Company as a “riskless principal” or in a similar capacity). In addition, the
Company hereby acknowledges and agrees that the Manager and its Affiliates may
make markets in the Common Stock or other securities of the Company, in
connection with which they may buy and sell, as agent or principal, for long or
short account, shares of Common Stock or other securities of the Company, at
the same time that the Manager is acting as agent pursuant to this Agreement.


 


2.04        Settlements.  Subject to the
provisions of Article V, on or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Issuance
Shares being sold by crediting the Manager or its designee’s account at the
Depository Trust Company through its Deposit/Withdrawal At Custodian (DWAC)
System, or by such other means of delivery as may be mutually agreed upon by
the parties hereto and, upon receipt of such Issuance Shares, which in all
cases shall be freely tradeable, transferable, registered shares in good
deliverable form, the Manager will deliver the related Issuance Price in same
day funds delivered to an account designated by the Company prior to the
Settlement Date.  If the Company defaults in its obligation to deliver
Issuance Shares on a Settlement Date, the Company agrees that it will (i) hold
the Manager harmless against any loss, claim, damage or expense (including,
without limitation, penalties, interest and reasonable legal fees and
expenses), as incurred, arising out of or in connection with such default by
the Company, and (ii) pay to the Manager any Selling Commission to which
it would otherwise have been entitled absent such default. The parties
acknowledge and agree that, in performing its obligations under this Agreement,
the Manager may borrow shares of Common Stock from stock lenders, and may use
the Issuance Shares to settle or close out such borrowings.


 


2.05        Free Writing Prospectus.  The
Manager has not prepared, used, referred to or distributed, and will not
knowingly prepare, use, refer to or distribute, without the Company’s prior written
consent, any “written communication” which constitutes a “free writing
prospectus” as such terms are defined in Rule 405 under the Securities
Act.


 


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ARTICLE III


 


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


The
Company represents and warrants to, and agrees with, the Manager that as of the
Closing Date, as of each Issuance Date, as of each Settlement Date and as of
any time that the Registration Statement or the Prospectus shall be amended or
supplemented, including by means of an Annual Report on Form 10-K or a
Quarterly Report on Form 10-Q filed with the Commission under the Exchange
Act and incorporated or deemed to be incorporated by reference into the
Prospectus, but excluding the filing of a Current Report on Form 8-K
(other than a Current Report on Form 8-K related to the offering of the
Common Shares hereunder) or a prospectus supplement relating to securities
other than the Common Shares:


 


3.01        Registration.  The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act and is
currently listed and quoted on the Principal Market under the trading symbol “VQ”,
and the Common Shares have been listed on the Principal Market, subject to
notice of issuance.  The Company (i) meets the requirements for the
use of Form S-3 under the Securities Act and the rules and regulations
thereunder for the registration of the transactions contemplated by this
Agreement and (ii) has been subject to the requirements of Section 12
of the Exchange Act and has timely filed all the material required to be filed
pursuant to Sections 13 and 14 of the Exchange Act for a period of more than 12
calendar months.  The Company has filed with the Commission a registration
statement on Form S-3 (Registration No. 333-166361) which
registration statement, as the same may be amended, has been declared effective
by the Commission for the registration of up to $500,000,000 aggregate amount
of Common Shares and other securities on a primary basis (and up to 2,500,000
shares of Common Stock on a secondary basis) under the Securities Act (none of
which have been issued and sold prior to the date of this Agreement), and the
offering thereof from time to time pursuant to Rule 415 promulgated by the
Commission under the Securities Act.  Such registration statement (and any
further registration statements that may be filed by the Company for the
purpose of registering additional Common Shares to be sold pursuant to this
Agreement), including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A,
Rule 430B or Rule 430C under the Securities Act, and the prospectus
constituting a part of such registration statement, together with the
Prospectus Supplement (as defined in Section 5.01(k)) and any
pricing supplement relating to a particular issuance of the Issuance Shares
(each, an “Issuance Supplement”),
including all documents incorporated or deemed to be incorporated therein by
reference pursuant to Item 12 of Form S-3 under the Securities Act, in
each case, as from time to time amended or supplemented, are referred to herein
as the “Registration Statement”
and the “Prospectus,”
respectively, except that if any revised prospectus is provided to the Manager
by the Company for use in connection with the offering of the Common Shares
that is not required to be filed by the Company pursuant to Rule 424(b) promulgated
by the Commission under the Securities Act, the term “Prospectus” shall refer
to such revised prospectus from and after the time it is first provided to the
Manager for such use.  Promptly after the execution and delivery of this
Agreement, the Company will prepare and file the Prospectus Supplement relating
to the Issuance Shares pursuant to Rule 424(b) promulgated by the
Commission under the Securities Act, as contemplated by Section 5.01(k) of
this Agreement.  As used in this Agreement, the terms “amendment” or “supplement”
when applied to the Registration Statement or the Prospectus shall be deemed to
include the filing by the Company with the Commission of any 


 


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document under the Exchange Act after the date
hereof that is or is deemed to be incorporated therein by reference.





 




3.02        Incorporated Documents.  The
documents incorporated or deemed to be incorporated by reference in the
Registration Statement and the Prospectus pursuant to Item 12 of Form S-3
(collectively, the “Incorporated Documents”),
as of the date filed with the Commission under the Exchange Act, conformed and
will conform in all material respects to the requirements of the Exchange Act
and the rules and regulations of the Commission promulgated thereunder,
and none of such documents contained or will contain at such time an untrue
statement of a material fact or omitted or will omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.


 


3.03        Registration Statement; Prospectus.  No stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been initiated or, to the Company’s
knowledge, threatened by the Commission.  The Registration Statement, as
of each Effective Date, conformed or will conform in all material respects to
the requirements of the Securities Act, and the rules and regulations of
the Commission promulgated thereunder and, as of each Effective Date, does not
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus, as of its original issue date, as
of the date of any filing of an Issuance Supplement thereto pursuant to Rule 424(b) promulgated
by the Commission under the Securities Act, as of each Applicable Time and
Settlement Date and as of the date of any other amendment or supplement
thereto, including by means of an Annual Report on Form 10-K or a
Quarterly Report on Form 10-Q filed with the Commission under the Exchange
Act and incorporated or deemed to be incorporated by reference into the
Prospectus, but excluding the filing of a Current Report on Form 8-K
(other than a Current Report on Form 8-K related to the offering of the
Common Shares hereunder) or a prospectus supplement relating to securities
other than the Common Shares, conforms or will conform in all material respects
to the requirements of the Securities Act and the rules and regulations of
the Commission promulgated thereunder and, as of such respective dates, does
not and will not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Manager expressly for
use in the Prospectus as described in Section 6.02 hereof.  As
used herein, with respect to the Registration Statement, the term “Effective Date” means, as of a
specified time, (i) the date that the Registration Statement or the most
recent post-effective amendment thereto was or is declared effective by the
Commission under the Securities Act, (ii) the date that the Company’s
Annual Report on Form 10-K for its most recently completed fiscal year is
filed with the Commission under the Exchange Act, and (iii) any deemed
effective date with respect to the Manager and the Common Shares pursuant to Rule 430B(f)(2) under
the Securities Act.


 


3.04        Not an Ineligible Issuer; Free Writing
Prospectus.  The Company is not an “ineligible issuer” in
connection with the offering pursuant to Rules 164, 405 and 433 under the
Securities Act. The Company has not used, authorized, approved or referred to
any offer relating


 


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to the Common Shares that would constitute a free
writing prospectus other than any written communications furnished in advance
to, and consented to by, the Manager. Any such free writing prospectus (A) as
of its issue date and at all subsequent times through the completion of the
public offer and sale of the Common Shares to which it relates or until any
earlier date that the Company notified or notifies the Manager, (i) did
not and will not include any material information that conflicted, conflicts or
will conflict with the information contained in the Registration Statement or
the Prospectus, and (ii) did not and will not contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, (B) complied in all material respects with the
requirements of the Securities Act and the rules and regulations
thereunder, and (C) was timely filed with the Commission in accordance
with the Securities Act (to the extent required pursuant to Rule 433(d) thereunder).


 


3.05                        Changes.  The Company, together with its subsidiaries,
taken as whole, has not sustained since the date of the latest audited
financial statements included or incorporated by reference in the Prospectus
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Prospectus, there has not been any material
change in the capital stock  (other than
issuances of capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares, upon conversions of convertible
securities, upon grants or forfeitures of restricted stock or similar
transactions relating to the Company’s equity compensation programs,  in each case in the ordinary course of
business) or long-term debt of the Company or any of its subsidiaries (other
than changes in amounts borrowed under the Revolving Credit Agreement or the
Term Loan Facility or similar agreements in the ordinary course of business) or
any change that would reasonably be expected to have a Material Adverse Effect,
otherwise than as set forth or contemplated in the Prospectus.


 


3.06                        Organization.  The Company has been duly incorporated and is
existing and in good standing under the laws of the State of Delaware with
corporate power and authority to own its properties and conduct its business as
described in the Registration Statement and the Prospectus; and the Company is
duly qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the conduct
of its business requires such qualification, except, in each case, as would
not, individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), results of operation, stockholders’ equity,
business or properties of the Company and its subsidiaries taken as a whole (“Material Adverse Effect”).


 


3.07                        Subsidiaries.  Each subsidiary of the Company has been duly
formed or incorporated and is existing as a corporation, limited liability
company or limited partnership and in good standing under the laws of the
jurisdiction of its formation or incorporation, with organizational power and
authority to own its properties and conduct its business as described in the
Registration Statement and the Prospectus; and each subsidiary of the Company
is duly qualified to do business as a foreign corporation, limited liability
company or limited partnership in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business
requires such qualification, except, in each case, as would not, 


 


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individually or in the aggregate, have a Material
Adverse Effect; all of the issued and outstanding equity interests of each
subsidiary of the Company have been duly authorized and validly issued in
accordance with its applicable Organizational Documents (as defined herein)
and, in the case of subsidiaries that are corporations, are fully paid and
nonassessable; and, except for such liens, encumbrances or defects described in
the Registration Statement and the Prospectus as securing the Company’s
obligations under the Third Amended and Restated Credit Agreement, dated as of December 21,
2009, by and among the Company, the guarantors identified therein, the lenders
party thereto, Bank of Montreal, as Administrative Agent, BMO Capital Markets,
as Lead Arranger, The Bank of Nova Scotia and The Royal Bank of Scotland PLC,
as Co-Syndication Agents and Key Bank National Association and Union Bank,
N.A., as Co-Documentation Agents, as amended from time to time (the “Revolving Credit Agreement”), the
Term Loan Agreement, dated as of May 7, 2007, by and among the Company,
the guarantors identified therein, Credit Suisse, Cayman Islands Branch, as
Administrative Agent, and the lenders party thereto, as amended from time to
time (the “Term Loan Facility”), or
similar agreements or instruments disclosed in the Registration Statement and
the Prospectus, the equity interests of each subsidiary of the Company are
owned free from liens, encumbrances and defects.


 


3.08                        Power and
Authority.  The Company
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.


 


3.09                        Capitalization.  The Company has an authorized equity
capitalization as set forth in the Registration Statement and the Prospectus,
and all of the issued shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.


 


3.10                        Common Shares.  The Common Shares have been duly authorized
and, when issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance of such
Common Shares will not be subject to any preemptive or similar rights; and the
Common Shares will conform to the descriptions thereof in the Registration
Statement and the Prospectus.


 


3.11                        Authorization, Execution
and Delivery.  This
Agreement has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery by the Manager, constitutes
the valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors’ rights
and to general equity principles.


 


3.12                        No Brokerage
Commissions.  Except as
disclosed in the Registration Statement and the Prospectus, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Purchaser for a
brokerage commission, finder’s fee or other like payment in connection with
this offering.


 


3.13                        Consents.  No consent, approval, authorization, order,
registration or qualification with any person (including any governmental
agency or body or any court) is required for the consummation of the
transactions contemplated by this Agreement except for such consents,
approvals, authorizations, registrations or qualifications that have been
obtained or as may be 


 


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required under state securities or Blue Sky laws in
connection with the distribution of the Common Shares by the Manager.


 


3.14                        Properties.  The Company and each of its subsidiaries has (A) legal,
valid and defensible title to, or valid leasehold interests in, substantially
all of the interests in oil and gas properties underlying the estimates of its
net proved reserves contained in the Registration Statement and the Prospectus,
(B) good and marketable title to all other real property owned by the
Company and its subsidiaries and (C) good and marketable title to all
personal property owned by them, in each of (A), (B) and (C) free and
clear of all liens, encumbrances and defects except such as are described in
the Registration Statement and the Prospectus or such as do not materially
affect the value of the property of the Company and its subsidiaries, taken as
a whole, and do not materially interfere with the use made and proposed to be
made of such property by the Company or any of its subsidiaries; all real
property and buildings held under lease by the Company or any of its
subsidiaries are held by them under valid, subsisting and enforceable leases,
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property by the Company or any of its
subsidiaries.  The working interests
derived from oil, gas and mineral leases or mineral interests which constitute
a portion of the real property held or leased by the Company or any of its
subsidiaries reflect in all material respects the right of the Company and its
subsidiaries to explore, develop or produce hydrocarbons from such real
property as described in the Registration Statement and the Prospectus, and the
care taken by the Company and its subsidiaries with respect to acquiring or
otherwise procuring such leases, options to lease, drilling rights and
concessions or other property interests was generally consistent with standard
industry practices in the areas in which the Company or its subsidiaries
operate for acquiring or procuring leases and interests therein to explore,
develop or produce hydrocarbons.


 


3.15                        No Conflicts.  The execution, delivery and performance of
this Agreement and the issuance and sale of the Shares will not (a) result
in a breach or violation of any of the terms and provisions of, (b) constitute
a default under, or (c) result in the imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its subsidiaries
pursuant to, (i) the certificate of incorporation, certificate of
formation, certificate of limited partnership, bylaws, limited liability
company agreement, limited partnership agreement or other organizational
documents (collectively, the “Organizational Documents”)
of the Company or any of its subsidiaries, (ii) any statute, rule,
regulation or order of any governmental agency or body or any court, domestic
or foreign, having jurisdiction over the Company or any of its subsidiaries or
any of their properties, or (iii) any agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the properties of the Company or
any of its subsidiaries is subject, except, in the case of (ii) and (iii) above,
for any such breach or violation that would not have a Material Adverse Effect.


 


3.16                        No Defaults.  Neither the Company nor any of its
subsidiaries is in violation of its respective Organizational Documents or in
default (or with the giving of notice or lapse of time would be in default)
under any existing obligation, agreement, covenant or condition contained in
any note, debenture, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which any of them is a party or by which any
of them is bound or to which any of 


 


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the properties of any of them is subject, except
such defaults that would not, individually or in the aggregate, have a Material
Adverse Effect.


 


3.17                        Licenses and
Permits.  Except as disclosed in the
Registration Statement and the Prospectus, (a) the Company and its
subsidiaries possess, and are in compliance in all material respects with the
terms of, all certificates, authorizations, franchises, licenses and permits (“Licenses”) material to the
ownership or lease of the properties of the Company and its subsidiaries, taken
as a whole, or the conduct of the business of the Company and its subsidiaries,
taken as a whole, as now conducted or (except for Licenses applied for from
time to time in the ordinary course of business) proposed in the Registration
Statement and the Prospectus to be conducted by them, and (b) have not
received any notice of proceedings relating to the revocation or modification
of any Licenses that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; provided that Licenses required
or obtained by the Company or its subsidiaries under any Environmental Laws are
covered exclusively by Section 3.20 herein.


 


3.18                        Labor Matters.  Except as disclosed in the Registration
Statement and the Prospectus, no labor dispute with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the Company,
is imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or its subsidiaries’ principal
suppliers, contractors or customers, that, in any such case, would reasonably
be expected to have a Material Adverse Effect.


 


3.19                        Intellectual
Property.  Except as
disclosed in the Registration Statement and the Prospectus, the Company and
each of its subsidiaries own, possess or can acquire on reasonable terms,
adequate trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other intellectual property
(collectively, “intellectual property rights”)
necessary to conduct the business now operated by them, or presently employed
by them except where the lack thereof could not, individually or in the
aggregate, have a Material Adverse Effect, and have not received any notice of
infringement of or conflict with asserted rights of others with respect to any
intellectual property rights that would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.


 


3.20                        Environmental
Matters.  Except as disclosed in the
Registration Statement and the Prospectus, (A)(1) neither the Company nor
any of its subsidiaries is in violation of, or has any liability under, any
federal, state, local or non-U.S. statute, law, rule, regulation, ordinance,
code, other requirement or rule of law currently in effect (including
common law), or decision or order of any domestic or foreign governmental
agency, governmental body or court, relating to pollution, to the use,
handling, transportation, treatment, storage, discharge, disposal or release of
Hazardous Substances (as defined below), to the protection or restoration of
the environment or natural resources (including biota), to health and safety
including as such relates to exposure to Hazardous Substances, and to natural
resource damages (collectively, “Environmental Laws”),
(2) neither the Company nor any of its subsidiaries owns, occupies,
operates or uses any real property contaminated with Hazardous Substances in
violation of, or in a manner that could give rise to liability under, any
Environmental Laws, (3) neither the Company nor any of its subsidiaries is
conducting or funding any investigation, remediation, remedial action or
monitoring of actual or suspected Hazardous Substances into the environment, (4) neither
the 


 


10






















 


Company nor any of its subsidiaries is liable or
allegedly liable for any release or threatened release of Hazardous Substances,
including at any off-site treatment, storage or disposal site, (5) neither
the Company nor any of its subsidiaries is subject to any claim by any
governmental agency or governmental body or person relating to Environmental
Laws or Hazardous Substances, and (6) the Company and its subsidiaries
have received and are in compliance with all, and have no liability under any,
permits, licenses, authorizations, identification numbers or other approvals
required under applicable Environmental Laws to conduct their respective
businesses, except in each case covered by clauses (1) — (6) such as
would not, individually or in the aggregate, have a Material Adverse Effect; (B) to
the knowledge of the Company there are no facts or circumstances that would
reasonably be expected to result in a violation of, or liability under, or
claim pursuant to any Environmental Law that would have a Material Adverse
Effect; (C) to the knowledge of the Company there are no requirements
proposed for adoption or implementation under any Environmental Law that would
reasonably be expected to have a Material Adverse Effect; and (D) in the
ordinary course of its business, the Company periodically evaluates the effect,
including associated costs and liabilities, of Environmental Laws on the
business, properties, results of operations and financial condition of it and
its subsidiaries, and, on the basis of such evaluation, the Company has
reasonably concluded that, except as disclosed in the Registration Statement
and the Prospectus, compliance with such Environmental Laws as are currently in
effect would not reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect.  For purposes of
this subsection “Hazardous Substances”
means (x) petroleum and petroleum products, by-products or breakdown
products, radioactive materials, asbestos-containing materials, polychlorinated
biphenyls and mold, and (y) any other chemical, material or substance
defined or regulated as toxic or hazardous or as a pollutant, contaminant or
waste under Environmental Laws.


 


3.21                        Certain
Disclosures.  The
statements in the Registration Statement and the Prospectus under the headings “Description
of Capital Stock,” insofar as they purport to constitute a summary of the terms
of the Shares and the documents referred to therein, are accurate and fair
summaries of such legal matters and present the information required to be
shown.


 


3.22                        Statistical and
Market-Related Data.  Any
third-party statistical and market-related data included or incorporated by
reference in the Registration Statement and the Prospectus are based on or
derived from sources that the Company believes (without independent
investigation of any data received from third party sources) to be reliable and
accurate.


 


3.23                        Internal
Controls.  Except as
set forth in the Registration Statement and the Prospectus, the Company, its
subsidiaries and the Company’s Board of Directors (the “Board”)
are in compliance in all material respects with the provisions of the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”)
and rules of the New York Stock Exchange (the “Exchange
Rules”) that are currently applicable to them. The Company
maintains a system of internal controls, including, but not limited to,
disclosure controls and procedures, internal controls over accounting matters
and financial reporting and legal and regulatory compliance controls
(collectively, “Internal Controls”)
that are sufficient to provide reasonable assurances of the matters set forth
in Rule 13a-15(f) under the Securities Exchange Act of 1934 (the “Exchange Act”).  The Internal Controls are overseen by the
Audit Committee (the “Audit Committee”)
of 


 


11






















 


the Board in accordance with Exchange Rules.  Except as disclosed in the Registration
Statement and the Prospectus, since the date of the most recent audited
financial statements included or incorporated by reference in the Prospectus, (1) there
has been no change in the Company’s Internal Controls that has materially
affected, or is reasonably likely to materially affect, the Company’s Internal
Controls and (2) the Company has not reported to the Audit Committee or
the Board (a) any violation of, or failure to comply with, Sarbanes-Oxley,
the Act, the Exchange Act, the rules and regulations of the Commission,
the auditing principles, rules, standards and practices applicable to auditors
of “issuers” (as defined in Sarbanes-Oxley) promulgated or approved by the
Public Company Accounting Oversight Board and the Exchange Rules (collectively,
the “Securities Laws”), (b)(i) a
significant deficiency, material weakness or change in Internal Controls or (ii) fraud
involving management or other employees who have a significant role in Internal
Controls, which matter described in this clause (2), would reasonably be
expected to have a Material Adverse Effect.


 


3.24                        Litigation.  Except as disclosed in the Registration
Statement and the Prospectus, there are no pending actions, suits or proceedings
(including any inquiries or investigations by any court or governmental agency
or body, domestic or foreign) against or, to the Company’s knowledge, affecting
the Company, any of its subsidiaries or any of their respective properties that
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, or would materially and adversely affect the ability
of the Company to perform its obligations under the Operative Documents, or
which are otherwise material in the context of the sale of the Common Shares;
and no such actions, suits or proceedings (including any inquiries or
investigations by any court or governmental agency or body, domestic or
foreign) are, to the Company’s knowledge, threatened or contemplated.


 


3.25                        Financial
Statements.  The
historical financial statements included or incorporated by reference in the
Registration Statement and the Prospectus present fairly in all material
respects the financial position of the Company and its consolidated subsidiaries
as of the dates shown and their results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity
with U.S. generally accepted accounting principles applied on a consistent
basis, except as described in the notes thereto.


 


3.26                        Pro Forma
Financial Information.  The
pro forma financial statements included or incorporated by reference in the
Registration Statement and the Prospectus have been prepared on a basis
consistent with the historical financial statements of the Company and its
subsidiaries and give effect to assumptions used in the preparation thereof on
a reasonable basis and in good faith and present fairly the transactions
described therein; and such pro forma financial statements comply as to form in
all material respects with the applicable accounting requirements of Rule 11-02
of Regulation S-X of the Commission. The other pro forma financial and
statistical information and data included or incorporated by reference in the
Registration Statement and the Prospectus are, in all material respects,
accurately presented and, where applicable, except as described in the
Prospectus, prepared on a basis consistent with the pro forma financial
statements.


 


3.27                        Investment
Company Act.  Neither the
Company nor any of its subsidiaries is and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, neither the Company nor any of its subsidiaries will be an 


 


12






















 


“investment company” as defined in the Investment
Company Act of 1940 (the “Investment Company Act”).


 


3.28                        Registration
Rights.  There are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company, except as set
forth in the Registration Statement and the Prospectus, or to require the Company
to include such securities with the Shares registered pursuant to the
Registration Statement.


 


3.29                        Stabilization.  The Company has not taken, directly or
indirectly, any action that is designed to or that has constituted or
that would reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares.


 


3.30                        Money
Laundering Laws.  Except as
set forth in the Registration Statement and the Prospectus, the operations of
the Company and its subsidiaries are and have been conducted at all times in
compliance in all material respects with the applicable financial record
keeping and reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, the money laundering laws of all
jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before
any court of governmental agency, authority or body or any arbitrator involving
the Company or any of its subsidiaries with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company, threatened.


 


3.31                        Tax Matters.  Except as set forth in the Registration
Statement and the Prospectus, the Company and its subsidiaries have filed all
federal, state, local and non-U.S. tax returns that are required to be filed or
have requested extensions thereof (except in any case in which the failure so
to file would not have a Material Adverse Effect); and, except as set forth in
the Registration Statement and the Prospectus, the Company and its subsidiaries
have paid all taxes (including any assessments, fines or penalties) required to
be paid by them, except for any such taxes, assessments, fines or penalties
currently being contested in good faith or as would not, individually or in the
aggregate, have a Material Adverse Effect.


 


3.32                        Insurance.  The Company and its subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks for the
conduct of their business and the value of their respective properties as is
customary for similarly situated companies in the oil and gas industry, and,
except as set forth in the Registration Statement and the Prospectus, neither
the Company nor any of its subsidiaries has (A) received notice from any
insurer or agent of such insurer that any capital improvements or other
expenditures are required or necessary to be made in order to continue such
insurance or (B) any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage at reasonable cost from similar insurers as may be necessary
to continue its business, except in the case of (A) or (B) as would
not, individually or in the aggregate, have a Material Adverse Effect.


 


3.33                        Reserves.  The information underlying the estimates of
the proved reserves of the Company and each of its subsidiaries that was
supplied by the Company and/or its subsidiaries to





 


13






 














 


DeGolyer for the purposes of preparing the reports
of such petroleum engineers referenced in the Registration Statement and the
Prospectus (the “Reserve Reports”)
and estimates of the proved reserves of the Company and its subsidiaries
disclosed in the Registration Statement and the Prospectus, including,
production, costs of operation, and, to the Company’s knowledge, future
operations and sales of production, was true and correct in all material
respects on the dates such information was provided, and such information was
supplied and was prepared in accordance with customary industry practices; and
the estimates of such reserves and present value as described in the
Registration Statement and the Prospectus and reflected in the Reserve Reports
are in compliance with the applicable requirements of the rules under the
Securities Act in all material respects. 
Other than normal production of the reserves, product price
fluctuations, fluctuations of demand for such products, acquisitions,
dispositions and changes in operating, capital and other costs, and except as
disclosed in the Registration Statement and the Prospectus, the Company is not
aware of any facts or circumstances that would reasonably be expected to result
in a materially adverse change in the reserves in the aggregate, or the
aggregate present value of the future net cash flows therefrom as described in
the Registration Statement and the Prospectus and as reflected in the Reserve
Reports.


 


3.34        Independence.  DeGolyer has represented to the Company that
it is, and the Company believes it to be or to have been at the time a reserve
report referenced in the Registration Statement and the Prospectus was rendered
by such firm to the Company, as applicable, independent reserve engineers with
respect to the Company and its subsidiaries for the periods covered by its
Reserve Reports.


 


3.35        Auditors.  Except as set forth in the Registration
Statement and the Prospectus, (a) Ernst & Young LLP, which has
audited certain financial statements of the Company and its subsidiaries, was
an independent registered public accounting firm as required by the Exchange
Act and the rules and regulations of the Commission thereunder during the
periods covered by the financial statements on which it reported contained or
incorporated by reference in the Registration Statement and the Prospectus and (b) Deloitte &
Touche LLP, which has audited certain financial statements of the Company and
its subsidiaries, was an independent registered public accounting firm as
required by the Exchange Act and the rules and regulations of the
Commission thereunder during the periods covered by the financial statements on
which it reported contained or incorporated by reference in the Registration
Statement and the Prospectus.


 


3.36        Foreign Corrupt Practices Act.  Except as set forth in the Registration
Statement and the Prospectus, to the Company’s knowledge, neither the Company
nor any of its subsidiaries has violated any foreign, federal, state or local
law or regulation relating to any provisions of the Foreign Corrupt Practices
Act or the rules and regulations promulgated thereunder, except for such
violations which, individually or in the aggregate, would not have a Material
Adverse Effect.


 


3.37        Officer’s Certificate.  Any
certificate signed by any officer of the Company and delivered to the Manager
or to counsel for the Manager in connection with an Issuance or pursuant to or
in connection with this Agreement shall be deemed a representation and warranty
by the Company to the Manager as to the matters covered thereby on the date of
such certificate.


 


14






















 





ARTICLE IV


 


COVENANTS


 


The
Company covenants and agrees during the term of this Agreement with the Manager
as follows:


 


4.01        Registration Statement and Prospectus.


 


(a)           Before
amending or supplementing the Registration Statement or the Prospectus (in each
case, other than  by filing a document
incorporated by reference therein), (i) the Company will furnish to the
Manager a copy of each such proposed amendment or supplement within a
reasonable period of time before filing such amendment or supplement with the
Commission, and (ii) that the Company will not use or file any such
proposed amendment or supplement to which the Manager reasonably objects unless
the Company’s legal counsel has advised the Company that filing such disclosure
is required by law;


 


(b)           To
prepare, with respect to any Issuance Shares to be sold pursuant to this
Agreement, an Issuance Supplement with respect to such Common Shares in a form
previously approved by the Manager and to file such Issuance Supplement
pursuant to Rule 424(b) promulgated by the Commission under the
Securities Act within the time period required thereby and to deliver such
number of copies of each Issuance Supplement to each exchange or market on
which such sales were effected, in each case unless delivery and filing of such
an Issuance Supplement is not required by applicable law or by the rules and
regulations of the Commission;


 


(c)           To
file within the time periods required by the Exchange Act all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, and to advise the Manager, promptly after the Company
receives notice thereof, (i) of the time when any amendment to the
Registration Statement has been filed or has become effective or any supplement
to the Prospectus or any amended Prospectus has been filed with the Commission
(but excluding by means of an Annual Report on Form 10-K, a Quarterly
Report on Form 10-Q or a Current Report on Form 8-K (other than a
Current Report on Form 8-K related to the offering of the Common Shares
hereunder) filed with the Commission under the Exchange Act and incorporated or
deemed to be incorporated by reference into the Prospectus, or a prospectus
supplement relating to securities other than the Common Shares , (ii) of
the issuance by the Commission of any stop order or of any order preventing or
suspending the use of any prospectus relating to the Common Shares, (iii) of
the suspension of the qualification of the Common Shares for offering or sale
in any jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, (iv) of any request by the Commission for the amendment or
supplement of the Registration Statement or the Prospectus or for additional
information, or (v) the receipt of any comments from the Commission with
respect to Registration Statement or the Prospectus (including, without
limitation, any Incorporated Documents); and


 


(d)           In
the event of the issuance of any such stop order or of any such order
preventing or suspending the use of any such prospectus or suspending any such
qualification, to use promptly its commercially reasonable efforts to obtain
its withdrawal;


 


4.02        Blue Sky.  To use its
commercially reasonable efforts to cause the Common Shares to be listed on the
Principal Market and promptly from time to time to take such action as


 


15

















 


the Manager may reasonably request to cooperate with
the Manager in the qualification of the Common Shares for offering and sale
under the blue sky or securities laws of such jurisdictions within the United
States of America and its territories as the Manager may reasonably request and
to use its commercially reasonable efforts to comply with such laws so as to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the sale of the Common Shares; provided, however, that in
connection therewith the Company shall not be required to qualify as a foreign
corporation, to file a general consent to service of process or to subject
itself to taxation in respect of doing business in any jurisdiction;


 


4.03        Copies of Registration Statement and
Prospectus.  To furnish the Manager with copies (which
may be electronic copies) of the Registration Statement and each amendment
thereto, and with copies of the Prospectus and each amendment or supplement
thereto in the form in which it is filed with the Commission pursuant to the
Securities Act or Rule 424(b) promulgated by the Commission under the
Securities Act, both in such quantities as the Manager may reasonably request
from time to time; and, if the delivery of a prospectus is required under the
Securities Act (whether physically or through compliance with Rule 153 or Rule 172
under the Securities Act or any similar rule) or under the blue sky or
securities laws of any jurisdiction at any time on or prior to the applicable
Settlement Date for any Selling Period in connection with the offering or sale
of the Common Shares and if at such time any event has occurred as a result of
which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it is necessary during such same period to amend or
supplement the Prospectus in order to comply with the Securities Act or the
Exchange Act, to notify the Manager and request the Manager to suspend offers
to sell Common Shares (and, if so notified, the Manager shall cease such offers
as soon as practicable); and if the Company decides to amend or supplement the
Registration Statement or the Prospectus as then amended or supplemented, to
advise the Manager promptly by telephone (with confirmation in writing) and to
prepare and cause to be filed promptly with the Commission an amendment or
supplement to the Registration Statement or the Prospectus as then amended or
supplemented that will correct such statement or omission or effect such
compliance; provided, however, that if during such same period the Manager is
required to deliver a prospectus in respect of transactions in the Common
Shares, the Company shall promptly prepare and file with the Commission such an
amendment or supplement;


 


4.04        Rule 158.  To make generally
available to the holders of the Common Stock as soon as practicable, but in any
event not later than eighteen months after the effective date of the
Registration Statement (as defined in Rule 158(c) promulgated by the
Commission under the Securities Act), an earnings statement of the Company and
the Subsidiaries (which need not be audited) complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission
promulgated thereunder (including the option of the Company to file periodic
reports in order to make generally available such earnings statement, to the
extent that it is required to file such reports under Section 13 or Section 15(d) of
the Exchange Act, pursuant to Rule 158 promulgated by the Commission under
the Securities Act);


 


4.05        Information.  To furnish to the
Manager (in paper or electronic format) copies of all publicly available
reports or other communications (financial or other) furnished generally to


 


16

















 


stockholders and filed with the Commission pursuant
to the Exchange Act, and deliver to the Manager (in paper or electronic format)
(i) promptly after they are available, copies of any publicly available
reports and financial statements (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
Subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission) furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional publicly available information
concerning the business and financial condition of the Company as the Manager
may from time to time reasonably request; provided, however that,
notwithstanding the foregoing, the Company shall have no obligation to furnish
to the Manager under this Agreement any document or information required to be
delivered pursuant to this paragraph that has been filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
(EDGAR).


 


4.06        Representations and Warranties.  That
each delivery of an Issuance Notice and each delivery of Common Shares on a
Settlement Date shall be deemed to be (i) an affirmation to the Manager
that the representations and warranties of the Company contained in or made
pursuant to this Agreement are true and correct as of the date of such Issuance
Notice or of such Settlement Date, as the case may be, as though made at and as
of each such date, except as may be disclosed in the Prospectus (including any
documents incorporated by reference therein and any supplements thereto), and (ii) an
undertaking that the Company will advise the Manager if any of such
representations and warranties will not be true and correct as of the
Settlement Date for the Common Shares relating to such Issuance Notice, as
though made at and as of each such date (except that such representations and
warranties shall be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented relating to such Common Shares);


 


4.07        Opinions of Counsel.  That
each time the Registration Statement or the Prospectus is amended or
supplemented (other than by an Issuance Supplement or a Current Report on Form 8-K,
unless reasonably requested by the Manager within 30 days of the filing thereof
with the Commission), including by means of an Annual Report on Form 10-K
or a Quarterly Report on Form 10-Q filed with the Commission under the
Exchange Act and incorporated or deemed to be incorporated by reference into
the Prospectus, the Company shall as soon as practicable thereafter furnish or
cause to be furnished forthwith to the Manager the written opinion of Davis,
Graham & Stubbs LLP, counsel to the Company, dated the date of such
amendment, supplement or incorporation and in form and substance reasonably
satisfactory to the Manager, (i) if such counsel has previously furnished
an opinion to the effect set forth in Exhibit B hereto, to the effect
that the Manager may rely on such previously furnished opinion of such counsel
to the same extent as though it were dated the date of such letter authorizing
reliance (except that the statements in such last opinion shall be deemed to
relate to the Registration Statement and the Prospectus as amended and
supplemented to such date) or (ii) if such counsel has not previously
furnished an opinion to the effect set forth in Exhibit B hereto,
of the same tenor as such an opinion of such counsel but modified to relate to
the Registration Statement and the Prospectus as amended and supplemented to
such date;


 


4.08        Comfort Letters.  That
each time the Registration Statement or the Prospectus is amended or
supplemented, including by means of an Annual Report on Form 10-K, a
Quarterly Report on Form 10-Q or a Current Report on Form 8-K (but
only a Current Report on Form 8-K that contains financial statements of
the Company filed with the Commission under the


 


17

















 


Exchange Act and incorporated or deemed to be
incorporated by reference into the Prospectus), in any case to set forth
financial information included in or derived from the Company’s financial
statements or accounting records, the Company shall as soon as practicable
thereafter cause each independent registered public accounting firm that has
audited the financial statements of the Company included or incorporated by
reference in the Registration Statement forthwith to furnish to the Manager a
letter, dated the date of such amendment, supplement or incorporation, as the
case may be, in form and substance reasonably satisfactory to the Manager, of
the same tenor as the letter referred to in Section 5.01(h) hereof
but modified to relate to the Registration Statement and the Prospectus as
amended or supplemented to the date of such letter, with such changes as may be
necessary to reflect changes in the financial statements and other information
derived from the accounting records of the Company, to the extent such financial
statements and other information are available as of a date not more than five
business days prior to the date of such letter; provided, however, that, with
respect to any financial information or other matters, such letter may
reconfirm as true and correct at such date as though made at and as of such
date, rather than repeat, statements with respect to such financial information
or other matters made in the letter referred to in Section 5.01(h) hereof
that was last furnished to the Manager;


 


4.09        Officer’s Certificate.  That
each time the Registration Statement or the Prospectus is amended or
supplemented (other than by an Issuance Supplement or a Current Report on Form 8-K,
unless reasonably requested by the Manager within 30 days of the filing thereof
with the Commission), including by means of an Annual Report on Form 10-K
or a Quarterly Report on Form 10-Q filed with the Commission under the
Exchange Act and incorporated or deemed to be incorporated by reference into
the Prospectus, the Company shall as soon as practicable thereafter furnish or
cause to be furnished forthwith to the Manager a certificate, dated the date of
such supplement, amendment or incorporation, as the case may be, in such form
and executed by such officers of the Company as is reasonably satisfactory to
the Manager, of the same tenor as the certificate referred to in Section 2.02(b) but
modified to relate to the Registration Statement and the Prospectus as amended
and supplemented to such date;


 


4.10        Reserve Reports.  That each time the Registration Statement or
the Prospectus is amended or supplemented with a filing of a document
incorporated or deemed to be incorporated by reference into the Prospectus)
that includes information derived from a reserve report by DeGolyer (but only
if such information is different from information in a document as to which
DeGolyer has previously provided a letter pursuant to this Section 4.10),
the Company shall as soon as practicable thereafter furnish or cause to be
furnished forthwith to the Manager a letter from DeGolyer, dated the date of
such amendment, supplement or incorporation, as the case may be, in form
reasonably satisfactory to the Manager, of the same tenor as the letter
referred to in Section 2.02(e);


 


4.11        Reasonable Efforts.  The
Company will cooperate timely with any reasonable due diligence review
conducted by the Manager from time to time in connection with the transactions
contemplated hereby, including, without limitation, and upon reasonable notice
providing information and making available documents and appropriate corporate
officers, during regular business hours and at the Company’s principal offices,
as the Manager may reasonably request;


 


18

















 


4.12        Purchases by the Manager.  The
Company acknowledges and agrees that the Manager has informed the Company that
the Manager may, to the extent permitted under the Securities Act and Exchange
Act and regulations thereunder, purchase and sell shares of Common Stock for
its own account and for the account of its clients while this Agreement is in
effect;


 


4.13        NYSE Compliance.  In
connection with the offering and sale of the Shares, the Company will file with
the New York Stock Exchange all documents and notices, and make all certifications,
required by the New York Stock Exchange of companies that have securities that
are listed thereon; and


 


4.14        Market Activities.  The
Company will not, directly or indirectly, (i) take any action designed to
cause or result in, or that constitutes or might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Common Shares or (ii) sell,
bid for or purchase the Common Shares, or pay anyone any compensation for
soliciting purchases of the Common Shares other than the Manager.


 


ARTICLE V


 


CONDITIONS TO DELIVERY OF ISSUANCE 

NOTICES AND TO SETTLEMENT


 


5.01        Conditions Precedent to the Right of the
Company to Deliver an Issuance Notice and the Obligation of the Manager to Sell
Common Shares During the Selling Period(s).  The right of the
Company to deliver an Issuance Notice hereunder is subject to the satisfaction,
on the date of delivery of such Issuance Notice, and the obligation of the
Manager to sell Common Shares during the applicable Selling Period is subject
to the satisfaction, on the applicable Settlement Date, of each of the
following conditions:


 


(a)           Effective
Registration Statement and Authorizations.  The Registration Statement
shall remain effective and sales of all of the Common Shares (including all of
the Issuance Shares issued with respect to all prior Issuances and all of the
Issuance Shares expected to be issued in connection with the Issuance specified
by the current Issuance Notice) may be made by the Manager thereunder, and (i) no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose shall have been initiated
or threatened by the Commission; (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or Prospectus
shall exist; (iii) all requests for additional information on the part of
the Commission shall have been complied with to the reasonable satisfaction of
the Manager and (iv) no event specified in Section 4.03 hereof
shall have occurred and be continuing without the Company amending or
supplementing the Registration Statement or the Prospectus as provided in Section 4.03;


 


(b)           Accuracy
of the Company’s Representations and Warranties.  The representations
and warranties of the Company shall be true and correct as of the Closing Date,
and as of each Issuance Date, Applicable Date and Settlement Date as though
made at such time;


 


19

















 


(c)           Performance
by the Company.  The Company shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or
prior to such date;


 


(d)           No
Injunction.  No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby that prohibits or directly and materially adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or materially adversely
affecting any of the transactions contemplated by this Agreement;


 


(e)           Material
Adverse Changes.  Since the date of this Agreement, no event that had
or is reasonably likely to have a Material Adverse Effect or a material adverse
effect on the Company’s ability to consummate the transactions contemplated by,
or to perform its obligations under, this Agreement shall have occurred that
has not been disclosed in the Registration Statement or the Prospectus
(including the documents incorporated by reference therein and any supplements
thereto);


 


(f)            No
Suspension of Trading In or Delisting of Common Stock; Other Events.
 The trading of the Common Stock (including without limitation the
Issuance Shares) shall not have been suspended by the Commission, the Principal
Market or the Financial Industry Regulatory Authority since the immediately
preceding Settlement Date or, if there has been no Settlement Date, the Closing
Date, and the Common Shares (including without limitation the Issuance Shares)
shall not have been delisted from the Principal Market.  There shall not
have occurred (and be continuing in the case of occurrences under clause (i) and
(ii) below) any of the following: (i) if trading generally on the New
York Stock Exchange has been suspended or materially limited, or minimum and
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by such exchange or by order of the Commission, the Financial
Industry Regulatory Authority or any other governmental authority, or a
material disruption has occurred in commercial banking or securities settlement
or clearance services in the United States; (ii) a general moratorium on
commercial banking activities in New York declared by either federal or New York
state authorities; or (iii) any material adverse change in the financial
markets in the United States or in the international financial markets, any
outbreak or escalation of hostilities or other calamity or crisis involving the
United States or the declaration by the United States of a national emergency
or war or any change or development involving a prospective change in national
or international political, financial or economic conditions, if the effect of
any such event specified in this clause (iii) in the sole judgment of the
Manager makes it impracticable or inadvisable to proceed with the sale of
Common Shares of the Company;


 


(g)           NYSE
Approval.  Issuance Shares shall have received approval for listing on
the New York Stock Exchange prior to the Settlement Date pertaining to those
Issuance Shares;


 


(h)           Comfort
Letter.  On the Closing Date and on each applicable date referred to
in Section 4.08 hereof that is on or prior to such Issuance Date or
Settlement Date, as the case


 


20
















 


may be, the independent registered public accounting
firm who has audited the financial statements of the Company included or
incorporated by reference in the Registration Statement shall have furnished to
the Manager a letter, dated the Closing Date or such applicable date, as the
case may be, in form and substance reasonably satisfactory to the Manager to
the effect required by Section 4.08;


 


(i)            Trading
Cushion.  The Selling Period for any previous Issuance Notice shall
have expired;


 


(j)            Maximum
Issuance Amount.  The Company shall not have issued an Issuance Notice
to sell an Issuance Amount to the extent that the sum of (x) the Sales
Price of the requested Issuance Amount, plus (y) the aggregate Sales Price
of all Common Shares issued under all previous Issuances effected pursuant to
this Agreement, would exceed the Maximum Program Amount;


 


(k)           Prospectus
Supplement and Issuance Supplement.  (i) A
supplement to the prospectus included in the Registration Statement (the “Prospectus Supplement”), in form and
substance to be agreed upon by the parties, setting forth information regarding
this Agreement including, without limitation, the Maximum Program Amount, shall
have been filed with the Commission pursuant to Rule 424(b) promulgated
by the Commission under the Securities Act within the time period required
thereby and sufficient copies thereof delivered to the Manager on or prior to
the Issuance Date; (ii) to the extent required by Section 4.01(b),
an Issuance Supplement, in form and substance to be agreed upon by the parties,
shall have been filed with the Commission pursuant to Rule 424(b) promulgated
by the Commission under the Securities Act within the time period required
thereby and sufficient copies thereof delivered to the Manager on or prior to the
Issuance Date;


 


(l)            Counsel
Letters.  (i) Each counsel specified in Section 4.07,
or other counsel selected by the Company and reasonably satisfactory to the
Manager, shall have furnished to the Manager their written opinion, dated the
Closing Date and each applicable date referred to in Section 4.07
hereof that is on or prior to such Issuance Date or Settlement Date, as the
case may be, to the effect required by Section 4.07; and (ii) Mayer
Brown LLP, counsel to the Manager, shall have furnished to the Manager its
written opinion, dated the Closing Date and each applicable date referred to in
Section 4.07 that is on or prior to such Issuance Date or
Settlement Date, as the case may be, in form and substance reasonably
satisfactory to the Manager;


 


(m)          Officers’
Certificate.  The Company shall have furnished or caused to be
furnished to the Manager an officers’ certificate executed by the Chief
Executive Officer, the President or any Senior Vice President of the Company
and by the Chief Financial Officer of the Company, dated the Closing Date and
each applicable date referred to in Section 4.09 hereof that is on
or prior to such Issuance Date or Settlement Date, as the case may be, as to
the matters specified in Section 2.02(b);


 


(n)           Reserve
Reports.  The engineering firm
specified in Section 4.10, or other engineering firms selected by
the Company and reasonably satisfactory to the Manager, shall have furnished to
the Manager the letters, dated the Closing Date and each applicable date


 


21

















 


referred to in Section 4.10 hereof that
is on or prior to such Issuance Date or Settlement Date, as the case may be, to
the effect required by Section 4.10;


 


(o)           Other
Documents.  On the Closing Date and prior to each Issuance Date and
Settlement Date, the Manager and its counsel shall have been furnished with
such documents as they may reasonably require in order to evidence the accuracy
and completeness of any of the representations or warranties, and the
fulfillment of the conditions, herein contained; and all proceedings taken by
the Company in connection with the issuance and sale of the Common Shares as
herein contemplated shall be satisfactory in form and substance to the Manager
and its counsel;


 


5.02        Documents Required to be Delivered on each
Issuance Date.  The Manager’s
obligation to sell Common Shares pursuant to an Issuance hereunder shall
additionally be conditioned upon the delivery to the Manager on or before the
Issuance Date of a certificate in form and substance reasonably satisfactory to
the Manager, executed by the Chief Executive Officer or the Chief Financial
Officer of the Company, to the effect that all conditions to the delivery of
such Issuance Notice shall have been satisfied as at the date of such
certificate (which certificate shall not be required if the foregoing
representations shall be set forth in the Issuance Notice); and


 


5.03        Suspension of Sales.  The
Company or the Manager may, upon notice to the other party by email or
telephone (confirmed immediately by telephone, if notice is given by email, or
email, if notice is given by telephone), suspend any sale of Issuance Shares,
and the Selling Period shall immediately terminate; provided, however, that
such suspension and termination shall not affect or impair either party’s
obligations with respect to any Issuance Shares sold hereunder prior to the
receipt of such notice.  The Company agrees that no such notice shall be
effective against the Manager unless it is made to one of the individuals named
on Schedule 1 hereto, as such Schedule may be amended from time
to time.  The Manager agrees that no such
notice shall be effective against the Company unless it is made to one of the
individuals named on Schedule 1 annexed hereto, as such Schedule may
be amended from time to time.


 


ARTICLE VI


 


INDEMNIFICATION AND CONTRIBUTION


 


6.01        Indemnification by the Company.  The
Company agrees to indemnify and hold harmless the Manager, its officers,
directors, employees and agents, and each Person, if any, who controls the
Manager within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, together with each such Person’s respective officers,
directors, employees and agents (collectively, the “Controlling Persons”), from and against
any and all losses, claims, damages or liabilities, and any action or
proceeding in respect thereof, to which the Manager, its officers, directors,
employees and agents, and any such Controlling Person, may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus or any other prospectus relating to the Common Shares, or any
amendment or supplement thereto, or any preliminary prospectus, or arise out
of, or are based 


 


22

















 


upon, any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus or any amendment or
supplement thereto or any preliminary prospectus, in light of the circumstances
in which they were made) not misleading, except insofar as the same are made in
reliance upon and in conformity with information related to the Manager or its
plan of distribution furnished in writing to the Company by the Manager
expressly for use therein, and the Company shall reimburse the Manager, its
officers, directors, employees and agents, and each Controlling Person for any
reasonable legal fees and other expenses incurred thereby in investigating or
defending or preparing to defend against any such losses, claims, damages or
liabilities, or actions or proceedings in respect thereof, as such expenses are
incurred.


 


6.02        Indemnification by the Manager.  The Manager agrees to indemnify and hold
harmless the Company, its directors, its officers who signed the Registration
Statement and each Person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any losses, claims, damages or liabilities, and any
action or proceeding in respect thereof, to which the Company, its directors,
such officers and any such controlling Person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as losses, claims,
damages or liabilities (or action or proceeding in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, the Prospectus or any
other prospectus relating to the Common Shares, or any amendment or supplement
thereto, or any preliminary prospectus, or arise out of, or are based upon, any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus or any other prospectus relating to the Common Shares, or any
amendment or supplement thereto or any preliminary prospectus, in light of the
circumstances in which they were made) not misleading in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance upon and
in conformity with written information related to the Manager or its plan of
distribution furnished to the Company by the Manager expressly for use therein,
it being understood that such information consists solely of any statements
that the Manager may suspend the offering of the Common Shares at any time upon
proper notice to the Company.


 


6.03        Conduct of Indemnification Proceedings.  Promptly
after receipt by any Person (an “Indemnified
Party”) of notice of any claim or the commencement of any action
in respect of which indemnity may be sought pursuant to Section 6.01
or 6.02, the Indemnified Party shall, if a claim in respect thereof is
to be made against the Person against whom such indemnity may be sought (an “Indemnifying Party”), notify the
Indemnifying Party in writing of the claim or the commencement of such action.
 In the event an Indemnified Party shall fail to give such notice as
provided in this Section 6.03 and the Indemnifying Party to whom
notice was not given was unaware of the proceeding to which such notice would
have related and was materially prejudiced by the failure to give such notice,
the failure so to notify the Indemnifying Party will not relieve it from any
liability which it may have to the Indemnified Party under Sections 6.01
or 6.02 above except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure; provided, that the failure to notify the Indemnifying Party shall not
relieve it from any liability that it may have to an Indemnified Party
otherwise than under Sections 6.01 or 6.02.  If any
such claim or action shall be brought against 


 


23

















 


an Indemnified Party, the Indemnifying Party shall
be entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense thereof
with counsel reasonably satisfactory to the Indemnified Party.  After
notice from the Indemnifying Party to the Indemnified Party of the Indemnifying
Party’s election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation; provided
that the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party, but the fees and expenses of such counsel
shall be for the account of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) such Indemnified Party reasonably
concludes that representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicts of interest with the
Company, it being understood, however, that the Indemnifying Party shall not,
in connection with any one such claim or action or separate but substantially
similar or related claims or actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to local
counsel) at any time for all Indemnified Parties or for fees and expenses that
are not reasonable.   No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement of any claim or pending or threatened proceeding in respect of
which the Indemnified Party is or could have been a party and indemnification
could have been sought hereunder by such Indemnified Party unless such settlement
includes an unconditional release of each such Indemnified Party from all
losses, claims, damages or liabilities arising out of such claim or proceeding
and such settlement does not admit or constitute an admission of fault, guilt,
failure to act or culpability on the part of any such Indemnified Party.  Whether or not the defense of any cause or
action is assumed by an Indemnifying Party, such Indemnifying Party will not be
subject to any liability for any settlement made without its prior written
consent, which consent will not be unreasonably withheld, unless the
Indemnified Party has requested the Indemnifying Party to reimburse the
Indemnified Party for legal fees and expenses pursuant to this Article VI
and (i) such settlement is entered into more than 60 days after receipt by
such Indemnifying Party of the aforesaid request, and (ii) such
Indemnifying Party shall not have reimbursed the Indemnified Party in
accordance with such request prior to such settlement.


 


6.04        Contribution.  If for any reason the
indemnification provided for in this Article VI is unavailable to
the Indemnified Parties in respect of any losses, claims, damages or
liabilities referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities as between the Company, on the one hand, and the Manager, on the
other hand, in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Manager, on the
other hand, from the offering of the Common Shares to which such losses,
claims, damages or liabilities relate.  If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each Indemnifying Party shall contribute to such amount paid or
payable by such Indemnifying Party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and of the Manager in connection with such statements or omissions, as
well as any other relevant equitable considerations.  The relative
benefits received by the Company, on the one hand, and by the Manager, on the
other, shall be 


 


24

















 


deemed to be in the same proportion as the total net
proceeds from the sale of Common Shares (before deducting expenses) received by
the Company bear to the total commissions received by the Manager in respect
thereof.  The relative fault of the Company, on the one hand, and of the
Manager, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Manager, on the
other hand, and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.  The Company and the Manager agree that it
would not be just and equitable if contribution pursuant to this Section 6.04
were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages or liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such action or claim.  
Notwithstanding the provisions of this Section 6.04, the
Manager shall in no event be required to contribute any amount in excess of the
commissions received by it under this Agreement.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.  For purposes of this Section 6.04,
each officer, director, employee and agent of the Manager, and each Controlling
Person, shall have the same rights to contribution as the Manager, and each
director of the Company, each officer of the Company who signed the
Registration Statement, and each Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act shall have the same rights to contribution as the Company.
 The obligations of the Company and the Manager under this Article VI
shall be in addition to any liability that the Company and the Manager may
otherwise have.


 


ARTICLE VII


 


TERMINATION


 


7.01        Term.  Subject to the
provisions of this Article VII, the term of this Agreement shall
run until the end of the Commitment Period.


 


7.02        Termination by the Manager.  The Manager may terminate the right of the
Company to effect any Issuances under this Agreement upon one (1) Trading
Day’s notice if any of the following events shall occur:


 


(a)           The
Company or any Subsidiary shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee
for it or for all or substantially all of its property or business; or such a
receiver or trustee shall otherwise be appointed;


 


(b)           Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company or any of its Subsidiaries;


 


25

















 


(c)           The
Company shall fail to maintain the listing of the Common Stock on the Principal
Market;


 


(d)           Since
the Effective Date, there shall have occurred any event, development or state
of circumstances or facts that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or a material
adverse effect on the Company’s ability to consummate the transactions
contemplated by, or to perform its obligations under, this Agreement; or


 


(e)           the
Manager shall have given ten (10) days’ notice of its election to
terminate this Agreement, in its sole discretion, at any time.


 


7.03        Termination by the Company.  The
Company shall have the right, by giving thirty (30) days’ notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time.
 After delivery of such notice, the Company shall no longer have any right
to deliver any Issuance Notices hereunder.


 


7.04        Liability; Provisions that Survive
Termination.  If this Agreement is terminated pursuant to
this Article VII, such termination shall be without liability of
any party to any other party except as provided in Section 9.02 and
for the Company’s obligations in respect of all prior Issuance Notices, and
provided further that in any case the provisions of Article VI, Article VIII
and Article IX shall survive termination of this Agreement without
limitation.


 


ARTICLE VIII


 


REPRESENTATIONS AND WARRANTIES TO SURVIVE DELIVERY


 


All
representations and warranties of the Company herein or in certificates
delivered pursuant hereto shall remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of the Manager
and its officers, directors, employees and agents and any Controlling Persons, (ii) delivery
and acceptance of the Common Shares and payment therefor or (iii) any
termination of this Agreement.


 


ARTICLE IX


 


MISCELLANEOUS


 


9.01        Press Releases and Disclosure.  The
Company may issue a press release describing the material terms of the
transactions contemplated hereby as soon as practicable following the Closing
Date, and may file with the Commission a Current Report on Form 8-K
describing the material terms of the transactions contemplated hereby, and the
Company shall consult with the Manager prior to making such disclosures, and
the parties shall use all commercially reasonable efforts, acting in good
faith, to agree upon a text for such disclosures that is reasonably
satisfactory to all parties. No party hereto shall issue thereafter any press
release or like public statement (including, without limitation, any disclosure
required in reports filed with the Commission pursuant to the Exchange Act)
related to this Agreement or any of the transactions contemplated hereby
without the prior written approval of the other party hereto, except as may be
necessary or appropriate in the opinion of the party seeking to make disclosure



 


26

















 


to comply with the requirements of applicable law or
stock exchange rules.  If any such press release or like public statement
is so required, the party making such disclosure shall consult with the other
party prior to making such disclosure, and the parties shall use all
commercially reasonable efforts, acting in good faith, to agree upon a text for
such disclosure that is reasonably satisfactory to all parties; provided,
however, the Company shall not be required pursuant to this Section 9.01
to consult with the Manager with respect to disclosure contained in the Company’s
Form 10-K, annual proxy statement or Form 10-Q so long as such
disclosure is limited to the number of shares, selling price and proceeds of
the Common Shares sold pursuant to this Agreement and related disclosures in
the Management’s Discussion and Analysis of Financial Condition and Results of
Operations section of such filings regarding the Company’s liquidity and
capital resources.


 


9.02        Expenses.  The Company
covenants and agrees with the Manager that the Company shall pay or cause to be
paid the following: (i) the fees, disbursements and expenses of the
Company’s counsel and accountants in connection with the preparation, printing
and filing of the Registration Statement, the Prospectus and any Issuance
Supplements and all other amendments and supplements thereto and the mailing
and delivering of copies thereof to the Manager and the Principal Market; (ii) the
Manager’s reasonable documented out-of-pocket expenses, including the filing
fees and reasonable fees, disbursements and expenses of counsel for the Manager
relating to the qualification of the Common Shares for offering and sale under
state securities laws as provided in Section 4.02 hereof and in
connection with preparing any blue sky survey; (iii) the cost (other than
those expenses described in clause (ii) above) of printing, preparing or
reproducing this Agreement and any other documents in connection with the offering,
purchase, sale and delivery of the Common Shares; (iv) all filing fees and
expenses (other than those expenses described in clause (ii) above) in
connection with the qualification of the Common Shares for offering and sale
under state securities laws as provided in Section 4.02 hereof; (v) the
cost of preparing the Common Shares; (vi) the fees and expenses of any
transfer agent of the Company; (vii) the cost of providing any CUSIP or
other identification numbers for the Common Shares; (viii) the fees and
expenses incurred in connection with the listing or qualification of the Common
Shares on the Principal Market and any filing fees incident to any required
review by the Financial Industry Regulatory Authority of the terms of the sale
of the Common Shares in connection with this Agreement and the Registration
Statement (including the reasonable fees, disbursements and expenses of a
single counsel for the Manager relating to such filings), and (ix) all
other costs and expenses incident to the performance of the Company’s
obligations hereunder that are not otherwise specifically provided for in this Section 9.02.
 It is understood, however, that except as provided in this Section 9.02,
the Manager will pay all of its own costs and expenses, including the fees of
its counsel, transfer taxes on resale of any of the Common Shares by it, and
any advertising expenses connected with any offers it may make.  Promptly following the date hereof, the
Company shall reimburse the Manager for its attorneys’ fees incurred in
connection with establishing the offering contemplated hereby and, during the
term of this Agreement, the Company shall pay the Manager’s attorneys’ fees for
its quarterly due diligence and other services provided pursuant to this
Agreement (in an amount not to exceed $7,500 per quarter).


 


9.03        Notices.  Except as otherwise
provided herein, all notices, demands, requests, consents, approvals or other
communications required or permitted to be given hereunder or that are given
with respect to this Agreement shall be in writing and shall be personally
served or


 


27
















 


deposited
in the mail, registered or certified, return receipt requested, postage prepaid
or delivered by reputable air courier service with charges prepaid, or
transmitted by hand delivery, telegram, telex or facsimile, addressed as set
forth below, or to such other address as such party shall have specified most
recently by written notice.


 


(i)  If
to the Company, then to:


 


Venoco, Inc.


370
17th Street, Suite 3900


Denver,
Colorado


Attention:
Timothy A. Ficker


Telephone:
(303) 600-2846


Email:
tficker@venocoinc.com


Facsimile
No.: (303) 626-8300


 


(ii)  If
to the Manager, then to:


 


Phil
Winiecki


Managing
Director


Equity
Capital Markets


BMO
Capital Markets


3
Time Square


New
York, New York 10036


Telephone:  (212) 885-4110


Email: phil.winiecki@bmo.com


Facsimile:  (212) 885-4165


 


Except
as set forth in Section 5.03, notice shall be deemed given on the
date of service or transmission if personally served or transmitted by
telegram, telex or confirmed facsimile. Notice otherwise sent as provided
herein shall be deemed given on the third business day following the date
mailed or on the next business day following delivery of such notice to a
reputable air courier service for next day delivery.


 


9.04        Entire
Agreement.  This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, representations,
understandings, negotiations and discussions between the parties, whether oral
or written, with respect to the subject matter hereof.


 


9.05        Amendment and
Waiver.  This Agreement may not be amended, modified, supplemented,
restated or waived except by a writing executed by the party against which such
amendment, modification, supplement, restatement or waiver is sought to be
enforced. Waivers may be made in advance or after the right waived has arisen
or the breach or default waived has occurred. Any waiver may be conditional.
 No waiver of any breach of any agreement or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof nor of
any other agreement or provision herein contained.  No waiver or extension
of time for performance of any obligations or acts shall be deemed a waiver or
extension of the time for performance of any other obligations or acts.


 


28

















 


9.06        No Assignment;
No Third Party Beneficiaries.  This Agreement and
the rights, duties and obligations hereunder may not be assigned or delegated
by the Company or the Manager.  Any purported assignment or delegation of
rights, duties or obligations hereunder shall be void and of no effect.
 This Agreement and the provisions hereof shall be binding upon and shall
inure to the benefit of each of the parties and their respective successors
and, to the extent provided in Article VI, the controlling persons,
officers, directors, employees and agents referred to in Article VI.
This Agreement is not intended to confer any rights or benefits on any Persons
other than as set forth in Article VI or elsewhere in this
Agreement.


 


9.07        Severability.  This
Agreement shall be deemed severable, and the invalidity or unenforceability of
any term or provision hereof shall not affect the validity or enforceability of
this Agreement or of any other term or provision hereof.  Furthermore, in
lieu of any such invalid or unenforceable term or provision, the parties hereto
intend that there shall be added as a part of this Agreement a provision as
similar in terms to such invalid or unenforceable provision as may be possible,
valid and enforceable.


 


9.08        Further
Assurances.  Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge and
deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.


 


9.09        Titles and
Headings.  Titles, captions and headings of the
sections of this Agreement are for convenience of reference only and shall not
affect the construction of any provision of this Agreement.


 


9.10        Governing Law;
Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY, INTERPRETED
UNDER AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
 Any action, suit or proceeding to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in any federal court located
in the Southern District of the State of New York or any New York state court
located in the Borough of Manhattan, and the Company agrees to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
and each party waives (to the full extent permitted by law) any objection it
may have to the laying of venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding has been brought in an
inconvenient forum.


 


9.11        Waiver of Jury
Trial.  The Company and the Manager each hereby irrevocably waives any
right it may have to a trial by jury in respect of any claim based upon or
arising out of this Agreement or any transaction contemplated hereby.


 


9.12        Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and
the same instrument.  Delivery of an executed Agreement by one party to
the other may be made by facsimile transmission.


 


29

















 


9.13        Adjustments for
Stock Splits, etc.  The parties acknowledge and agree
that share related numbers contained in this Agreement (including the minimum
Floor Price) shall be equitably adjusted to reflect stock splits, stock
dividends, reverse stock splits, combinations and similar events.


 


9.14        No fiduciary
duty.  The Company acknowledges and agrees that the Manager is acting
solely in the capacity of an arm’s length contractual counterparty to the
Company with respect to the offering of Common Shares contemplated hereby
(including in connection with determining the terms of the offering) and not as
a financial advisor or a fiduciary to, or an agent of, the Company or any other
person and will not claim that the Manager is acting in such capacity in
connection with the offering of the Common Shares contemplated hereby.   Additionally, the Manager is not advising
the Company or any other person as to any legal, tax, investment, accounting or
regulatory matters in any jurisdiction with respect to the offering of Common
Shares contemplated hereby.  The Company shall consult with its own
advisors concerning such matters and shall be responsible for making their own
independent investigation and appraisal of the transactions contemplated
hereby, and the Manager shall have no responsibility or liability to the
Company with respect thereto.  Any review by the Manager of the Company,
the transactions contemplated hereby or other matters relating to such
transactions will be performed solely for the benefit of the Manager and shall
not be on behalf of the Company.


 


[Signature Page Follows]


 


30

















 


IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by the undersigned, thereunto duly authorized, as of the date first set forth
above.


 


 


	
   

  	
  VENOCO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy A. Marquez

  
	
   

  	
  Name:
  Timothy A. Marquez

  
	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BMO
  CAPITAL MARKETS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael P. Stuckey

  
	
   

  	
  Name:
  Michael P. Stuckey

  
	
   

  	
  Title:
  Managing Director

  



 


31

















 


APPENDIX A


 


DEFINITIONS


 


“Actual Sold Amount” shall mean the
number of Issuance Shares that the Manager has sold during the Selling Period.


 


“Affiliate” of a Person shall mean
another Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such first-
mentioned Person. The term “control” (including the terms “controlling,” “controlled
by” and “under common control with”) shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.


 


“Applicable Time” shall mean the time of
sale of any Common Shares pursuant to this Agreement.


 


“Closing Date” shall mean the date on
which the Closing occurs.


 


“Commission” shall mean the United
States Securities and Exchange Commission.


 


“Commitment Period” shall mean the
period commencing on the date of this Agreement and expiring on the earliest to
occur of (x) the date on which the Manager shall have sold the Maximum
Program Amount pursuant to this Agreement, (y) the date this Agreement is
terminated pursuant to Article VII and (z) the 18 month
anniversary of the date of this Agreement.


 


“Common Shares” shall mean shares of the
Company’s Common Stock issued or issuable pursuant to this Agreement.


 


“Common Stock” shall mean the Company’s
Common Stock, $0.01 par value per share.


 


“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.


 


“Floor Price” shall mean the minimum
price set by the Company in the Issuance Notice below which the Manager shall
not sell Common Shares during the Selling Period, which may be adjusted by the
Company at any time during the Selling Period and which in no event shall be
less than $1.00 without the prior written consent of the Manager, which may be
withheld in the Manager’s sole discretion.


 


“Issuance” shall mean each occasion the
Company elects to exercise its right to deliver an Issuance Notice requiring
the Manager to use its commercially reasonable efforts consistent with
customary trading and sales practices to sell the Common Shares as specified in
such Issuance Notice, subject to the terms and conditions of this Agreement.


 


“Issuance Amount” shall mean the
aggregate Sales Price of the Issuance Shares to be sold by the Manager with respect
to any Issuance.


 

















 


“Issuance Date” shall mean any Trading
Day during the Commitment Period that an Issuance Notice is deemed delivered
pursuant to Section 2.03(b) hereof.


 


“Issuance Notice” shall mean a written
notice to the Manager delivered in accordance with this Agreement in the form
attached hereto as Exhibit A.


 


“Issuance Price” shall mean the Sales
Price less the Selling Commission.


 


“Issuance Shares” shall mean all shares
of Common Stock issued or issuable pursuant to an Issuance that has occurred or
may occur in accordance with the terms and conditions of this Agreement.


 


“Maximum Program Amount” shall mean
Common Shares with an aggregate Sales Price of $75,000,000 (or, if less, the
aggregate amount of Common Shares registered under the Registration Statement).


 


“Person” shall mean an individual or a
corporation, partnership, limited liability company, trust, incorporated or
unincorporated association, joint venture, joint stock company, governmental
authority or other entity of any kind.


 


“Principal Market” shall mean the New
York Stock Exchange.


 


“Sales Price” shall mean the actual sale
execution price of each Common Share sold by the Manager on the Principal
Market hereunder in the case of ordinary brokers’ transactions, or as otherwise
agreed by the parties in other methods of sale.


 


“Securities Act” shall mean the
Securities Act of 1933, as amended.


 


“Selling Commission” shall mean 1.8% of
the Sales Price of Common Shares sold during a Selling Period.


 


“Selling Period” shall mean the period
of one to twenty consecutive Trading Days (as determined by the Company in the
Company’s sole discretion and specified in the applicable Issuance Notice)
following the Trading Day on which an Issuance Notice is delivered or deemed to
be delivered pursuant to Section 2.03(b) hereof.


 


“Settlement Date” shall mean the third
business day (or such earlier day as is industry practice for regular-way
trading) following each Trading Day during the Selling Period, when the Company
shall deliver to the Manager the amount of Common Shares sold on such Trading
Day and the Manager shall deliver to the Company the Issuance Price received on
such sales.


 


“Trading Day” shall mean any day which
is a trading day on the New York Stock Exchange, other than a day on which trading
is scheduled to close prior to its regular weekday closing time.


 

















 


EXHIBIT A


 


ISSUANCE NOTICE


 


[Date]


 


BMO
CAPITAL MARKETS CORP.


3
Time Square


New
York, New York 10036


Facsimile:
 (212) 885-4165


Attn:
Equity Capital Markets


 


Reference
is made to that certain Sales Agency Agreement, dated as of October 12,
2010 (the “Agreement”), by
and between Venoco, Inc. (the “Company”)
and BMO Capital Markets Corp.  The Company confirms that all conditions to
the delivery of this Issuance Notice are satisfied as of the date hereof.


 


Effective
Date of Delivery of Issuance Notice (determined pursuant to Section 2.03(b) of
the Agreement):


 


Number
of Days in Selling Period:


 


First
Date of Selling Period:


 


Last
Date of Selling Period:


 


Settlement
Date(s):


 


Issuance
Amount: $


 


Floor
Price Limitation (Adjustable by Company during the Selling Period): $
         per share


 


Comments:


 


 


	
   

  	
  VENOCO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:
  [CEO/CFO or Treasurer]