Document:

Exhibit
10.3

DEVELOPMENT
AGREEMENT

This Development
Agreement (“Agreement”) is made effective as of August 29, 2006 (“Effective
Date”) by and between, VENOCO, INC., a Delaware corporation (“Venoco”), and
CARPINTERIA BLUFFS, LLC, a Colorado limited liability company (“Bluffs”).  Venoco and Bluffs are individually referred
to as a Party and collectively as Parties in this Agreement.

RECITALS

A.                                   Pursuant
to that certain Dividend Distribution Agreement, dated as of August 29, 2006 by
and among Timothy M. Marquez and Bernadette
B. Marquez, as trustees of the Marquez Trust, under Trust Agreement Dated
February 26, 2002, as amended (“Trust”) and the Parties (“Distribution
Agreement”), Bluffs has acquired from Venoco and now owns (i) an undivided one
hundred percent (100%) fee interest in that certain real property improved with
oil and gas processing facilities owned by Venoco (“Processing Facilities”),
located in the City of Carpinteria, County of Santa Barbara, consisting of
approximately forty six (46) acres, comprised of five (5) separate parcels
designated with APN(s) 001-170-003, 001-170-004, 001-170-022, 001-170-023, and
001-170-014 (collectively, “Facilities Parcels”), and (ii) an undivided fifty
percent (50%) fee interest (“Venoco Parking Parcel Interest”) in that certain
real property improved with parking and access facilities for the Casitas pier
(“Casitas Pier”), located in the City of Carpinteria, County of Santa Barbara,
consisting of approximately ten (10) acres, comprised of one (1) parcel
designated with APN 001-170-021 (“Parking Parcel”).  As used in this Agreement the term “Property”
(i) shall refer collectively to the Facilities Parcels and the Venoco Parking
Parcel Interest, and (ii) shall not include any of the improvements, Processing
Facilities (such improvements and Processing Facilities collectively, the “Reserved
Improvements”), oil and gas leases, or mineral interests located on, or
appurtenant to, or part of, the Facilities Parcels and the Venoco Parking
Parcel Interest.  The Property is further
described in the attached Exhibit A. 
ExxonMobil Corporation owns the other undivided fifty percent (50%)
interest in the Parking Parcel (“Exxon Parking Parcel Interest”).

B.                                     Venoco
is a party to that certain Purchase and Sale Agreement, dated as of November 4,
1998, by and among Chevron U.S.A. Inc., a Pennsylvania corporation (“CUSA”),
Chevron Pipe Line Company, a Delaware corporation (“CPL” and together with CUSA
“Chevron”), Ellwood Pipeline, Inc., a California corporation (“Ellwood”), and
Venoco, as amended by that certain First Amendment to Purchase and Sale
Agreement, dated as of January 13, 1999, by and among the same parties
described in this Recital B (collectively, “Purchase Agreement”) pursuant to
which Venoco acquired the Property from Chevron.

C.                                     Pursuant
to the Purchase Agreement, (i) Chevron and Venoco each have certain
environmental clean up and indemnity obligations with respect to the Property,
(ii) the

Property is subject to a
first priority deed of trust (“Chevron Deed of Trust”) in favor of Chevron
securing the performance of Venoco’s abandonment obligations under the Purchase
Agreement, and (iii) the Property is subject to certain transfer restrictions
and options to purchase in favor of Chevron.

D.                                    Pursuant
to the Distribution Agreement, Bluffs has an option to purchase from Venoco the
Exxon Parking Parcel Interest if such interest is first obtained by Venoco.

E.                                      Pursuant
to the Distribution Agreement, Venoco has reserved from the conveyance of the
Property to Bluffs: (i) all interests in the mineral rights in the Property
owned by Venoco (“Venoco Minerals”), with 
the right of surface entry to explore for, remove, extract, or otherwise
exploit such minerals, (ii) all interests in the mineral rights in the Property
owned by other parties and leased by Venoco (“Leased Minerals”), with the right
of surface entry to explore for, remove, extract, or otherwise exploit such
minerals, (iii) the lessor’s interest in all leases and all income received by
Venoco from any leases, including oil and gas leases, which encumber the
Property, and (iv) all Reserved Improvements located on or appurtenant to the
Property (collectively, “Property Reservations”).

F.                                      Pursuant
to the Distribution Agreement, Bluffs has accepted the conveyance of the
Property to Bluffs subject to the following, in addition to the Property
Reservations:  (i) the Chevron Deed of
Trust, (ii) obligations of Venoco under the Purchase Agreement respecting the
Property, and (iii) any other liens, encumbrances, leases, tenancies or other
rights of possession, oil and gas leases, reservations, exceptions, charges,
easements, rights, rights of way, covenants, conditions, and restrictions which
are (a) currently of record as reflected in the title report for the Property,
or (b) not of record but existing as encumbrances against the Property
resulting from Venoco’s use of the Property (collectively, “Property
Encumbrances”).

G.                                     The
Parties have entered into that certain Ground Lease, dated as of August 29,
2006 (“Ground Lease”), pursuant to which Bluffs leases the Property to Venoco
for use as the site for the Processing Facilities.

H.                                    The
Parties may desire for Venoco (i) to relocate and consolidate the Processing
Facilities (“Processing Facilities Relocation”) into and within an approximate
two (2) acre portion of the Property (“Relocation Parcel”), (ii) to have the
right to use approximately two (2) acres of the Parking Parcel as a parking and
access area for the Casitas Pier (“Access Parcel”), (iii) to have adequate
vehicular and utility rights-of-way, easements and access to the Relocation
Parcel and the Access Parcel (“Access and Utilities Easements”), and (iv) upon
completion of the Processing Facilities Relocation, to terminate the lease
agreement described in Recital G and enter into a new ground lease for the
Relocation Parcel and the Access Parcel.

I.                                         Bluffs
desires to amend the Local Coastal Plan (“LCP”) by amending the land use and
zoning designation for the Property, excluding the Relocation Parcel and the
Access

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Parcel, for new uses
selected by Bluffs and consistent with Venoco’s continued use of the Relocation
Parcel and the Access Parcel (“LCP Amendment”).

J.                                        The
Parties desire to mutually cooperate in the filing and processing of the
applications for all governmental entitlement approvals necessary to complete
the Processing Facilities Relocation and the LCP Amendment (collectively, “Property
Development”).

NOW, THEREFORE,
for the reasons set forth herein above, and in consideration of the mutual
promises and agreements of the Parties under the Distribution Agreement and as
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

1.                                       APPROVALS

(a)                                  Relocation
Project Approvals.  Either Party may
initiate at any time, and Venoco shall initiate if required pursuant to Section
2 below, and upon any such initiation both Parties shall mutually cooperate in
the filing and processing of the applications required to obtain all
governmental entitlement approvals necessary to complete the Processing
Facilities Relocation (“Relocation Project Approvals”).

(b)                                 Local
Coastal Plan Amendment.  Bluffs may
initiate at any time and shall thereafter file and diligently process the
applications required to obtain all governmental approvals necessary for the
LCP Amendment; provided, however, that such application for LCP Amendment shall
include an application for the Relocation Project Approvals.  Venoco shall cooperate with such applications
so long as the anticipated LCP Amendment is consistent with Venoco’s use of the
Relocation Parcel and the Access Parcel as described and contemplated in the
Processing Facilities Relocation.

(c)                                  Agreement
Upon Relocation Parcel and Access Parcel. 
Notwithstanding the foregoing provisions of this Section 1, prior to
either Party filing an application for Relocation Project Approvals or LCP
Amendment, the Parties shall first agree upon the configuration of the
Relocation Parcel and the Access Parcel as provided in Section 3(a).

2.                                       RELOCATION
OPTIONS

(a)                                                     First Option.  On any date which is within
sixty (60) days of the date which is two (2) years from the Effective Date,
Bluffs shall have the right to require Venoco to commence the Processing
Facilities Relocation by providing written notice to Venoco (“First Option
Notice”) of the exercise of Bluffs’s option rights pursuant to this Section
2(a) (“First Option”).  If Bluffs has
obtained the Relocation Project Approvals prior to the date of the First Option
Notice, Venoco shall complete the Processing Facilities Relocation by the date
which is one (1) year from the date of the First Option Notice.  If Bluffs has not obtained the Relocation
Project Approvals prior to the date of the First Option Notice, Venoco shall
(i) use commercially reasonable efforts to obtain the Relocation Project
Approvals within two (2) years from the date of the First Option Notice, and
(ii) complete

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the Processing Facilities Relocation within one (1) year from receipt
of the Relocation Project Approvals.  If
Venoco fails to complete the Processing Facilities Relocation within one (1)
year from the date of the First Option Notice or the date of receipt of the
Relocation Project Approvals, whichever date is later, or if Venoco is required
to obtain the Relocation Project Approvals and fails to do so within two (2)
years from the date of the First Option Notice, the rent under the Ground Lease
shall be adjusted as described in Section 4(a). 
Bluffs shall pay Venoco the sum of three million dollars ($3,000,000) in
the event and at the time Venoco completes the Processing Facilities Relocation
pursuant to the First Option.

(b)                                                    Second Option.  If Bluffs does not timely
exercise the First Option, then on any date which is within sixty (60) days of
the date which is three (3) years from the Effective Date, Bluffs shall have
the right to require Venoco to commence the Processing Facilities Relocation by
providing written notice to Venoco (“Second Option Notice”) of the exercise of
Bluffs’s option rights pursuant to this Section 2(b) (“Second Option”).  If Bluffs has obtained the Relocation Project
Approvals prior to the date of the Second Option Notice, Venoco shall complete
the Processing Facilities Relocation by the date which is one (1) year from the
date of the Second Option Notice.  If
Bluffs has not obtained the Relocation Project Approvals prior to the date of
the Second Option Notice, Venoco shall (i) use commercially reasonable efforts
to obtain the Relocation Project Approvals within two (2) years from the date
of the Second Option Notice, and (ii) complete the Processing Facilities
Relocation within one (1) year from receipt of the Relocation Project
Approvals.  If Venoco fails to complete
the Processing Facilities Relocation within one (1) year from the date of the
Second Option Notice, or the date of receipt of the Relocation Project
Approvals, whichever date is later, or if Venoco is required to obtain the
Relocation Project Approvals and fails to do so within two (2) years from the
date of the Second Option Notice the rent under the Ground Lease shall be
adjusted as described in Section 4(a). 
Bluffs shall pay Venoco the sum of two million dollars ($2,000,000) in
the event and at the time Venoco completes the Processing Facilities Relocation
pursuant to the Second Option.

(c)                                                     Third Option.  If Bluffs does not timely
exercise either the First Option or the Second Option, then at any time after
four (4) years from the Effective Date, Bluffs shall have the right to require
Venoco to commence the Processing Facilities Relocation by providing written
notice to Venoco (“Third Option Notice”) of the exercise of Bluffs’s option
rights pursuant to this Section 2(c) (“Third Option”).  If Bluffs has obtained the Relocation Project
Approvals prior to the date of the Third Option Notice, Venoco shall complete
the Processing Facilities Relocation by the date which is one (1) year from the
date of the Third Option Notice.  If
Bluffs has not obtained the Relocation Project Approvals prior to the date of
the Third Option Notice, Venoco shall (i) use commercially reasonable efforts
to obtain the Relocation Project Approvals within two (2) years from the date
of the Third Option Notice, and (ii) complete the Processing Facilities
Relocation within one (1) year from receipt of the Relocation Project
Approvals.  If Venoco fails to complete
the Processing Facilities Relocation within one (1) year from the date of the
Third Option Notice, or the date of receipt of the Relocation Project
Approvals, whichever date is later, or if Venoco is required to obtain the
Relocation Project Approvals and fails to do so within two (2) years from the
date of the Third Option Notice, the rent under the Ground Lease

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shall be adjusted as described in Section 4(a).  Bluffs shall not pay Venoco any amount in
consideration for the Third Option.

3.                                       RELOCATION
MECHANICS

(a)                                                     Configurations
of Relocation Parcel and Access Parcel. 
Upon the request of either Party, the Parties shall mutually agree upon
the location and configuration of the Relocation Parcel and the Access
Parcel.  Unless the Parties otherwise
agree, such parcels shall meet the following requirements:

(i)                 Each
such parcel shall be configured so as to be reasonably likely to be approved by
the applicable governmental entities as a separate legal parcel under the
existing zoning applicable to the Property at the date of this Agreement for
use by Venoco as contemplated by this Agreement.

(ii)              The
approximate locations and sizes of such parcels shall be as depicted on Exhibit
B attached hereto.

(iii)           Venoco
shall develop, in connection with the Parties reaching agreement on the
location and configuration of such parcels, sufficient Relocation
Specifications under Section 3(b) below so as to enable the Parties to
reasonably plan for the use and configuration of parcels.

(b)                                                    Relocation
Specifications.  Upon the exercise of
any option described in Section 2, Venoco shall develop all engineering and
construction plans necessary for the Processing Facilities Relocation (“Relocation
Specifications”) in a manner consistent with oil and gas industry
standards.  Bluffs shall have the right
to review and comment upon the Relocation Specifications.  Venoco shall consider good faith comments
from Bluffs regarding the Relocation Specifications which are consistent with
oil and gas industry standards.

(c)                                                     Relocation
Easements and Leases.  The Parties
acknowledge and recognize that in order for Venoco to (i) use the Relocation
Parcel as a site for Processing Facilities and (ii) use the Access Parcel as
described in Recital H, Venoco shall require further vehicular and utility
rights-of-way, easements, access and leasehold rights in accordance with the
Relocation Specifications.  Bluffs shall
fully cooperate with Venoco in order to grant all such rights as required by
the Relocation Specifications (“Relocation Easements”).

(d)                                                    Zoning.  Unless otherwise required by an applicable
governmental authority, the Relocation Parcel and the Access Parcel shall
retain the zoning designation on the Property as of the Effective Date and
shall not be part of the LCP Amendment.

(e)                                                     Costs.  Bluffs shall be responsible for all costs
associated with obtaining the LCP Amendment. 
Venoco shall be responsible for all costs associated with the

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Relocation Project Approvals, the Relocation Specifications and the
physical moving of its Processing Facilities to the Relocation Parcel.  The Parties shall equally share all costs
associated with the granting of the Relocation Easements.

 

(f)                                                       Assignment
of Certain Leases.  Upon completion
of (i) any part of the Processing Facilities Relocation and (ii) the transfer
of operation and control of any portion of the Property from Venoco to Bluffs,
Venoco shall assign to Bluffs all ground leases and subleases which encumber
the Property other than the Ground Lease. 
Such assignment shall not include the Venoco Minerals, the Leased
Minerals or any oil and gas leases which encumber the Property.

(g)                                                    Removal
of Encumbrances.  Upon completion of
(i) any part of the Processing Facilities Relocation and (ii) the transfer of
operation and control of any portion of the Property from Venoco to Bluffs, the
Parties shall cooperate to jointly remove such encumbrances on the Property as
are necessary in order for Bluffs to have merchantable title to the Property
subject to the terms and conditions of this Agreement and the Distribution
Agreement.

(h)                                                    Remaining
Reserved Improvements.  Upon
completion of (i) any phase of the Processing Facilities Relocation and (ii)
the transfer of operation and control of any portion of the Property from
Venoco to Bluffs upon completion of such phase of the Processing Facilities
Relocation, any Reserved Improvement which remains on such portion of the
Property now under the control of Bluffs shall be deemed transferred from
Venoco to Bluffs if Bluff retains such Reserved Improvement.

(i)                                                        Quitclaim
of Surface Rights.  Upon completion
of (i) any phase of the Processing Facilities Relocation and (ii) the transfer
of operation and control of any portion of the Property from Venoco to Bluffs
upon completion of such phase of the Processing Facilities Relocation, Venoco
shall quitclaim to Bluffs Venoco’s rights of surface entry to explore for,
remove, extract otherwise exploit the Venoco Minerals and the Leased Minerals
on such portion of the Property now under the control of Bluffs.  Notwithstanding the foregoing, Venoco shall
always retain rights of surface entry to explore for, remove, extract otherwise
exploit the Venoco Minerals and the Leased Minerals through the Relocation
Parcel, Access Parcel and the Access and Utilities Easements.

4.                                       GROUND
LEASE ADJUSTMENTS

(a)                                                     Rent Adjustment.  If Venoco fails to complete
the Processing Facilities Relocation within the time frames described in
Section 2 above, the rent payable to Bluffs pursuant to the Ground Lease shall
be adjusted to the fair rental value of the Property (“Fair Rental Value”)
effective for the remainder of the term of the Ground Lease until the
Processing Facilities Relocation is completed. 
Upon Bluffs’s notice to Venoco that Bluffs shall enforce the rent
adjustment described in this Section 4(a) (“Rent Adjustment Notice”) the
Parties shall meet to agree upon the Fair Rental Value.  If the Parties fail to agree upon the Fair
Rental Value within forty-five (45) days of the date of the Rent

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Adjustment Notice, each Party shall select their own arbitrator and
said arbitrators shall select a third arbitrator.  The three
arbitrators shall determine the Fair Rental Value (i) based on evidence and
relevant information submitted to the arbitrators by Venoco and Bluffs
including, without limitation, evidence and information concerning the size,
location and use of the portion of the Property used by Venoco and the existing
industrial use zoning designation of such portion of the Property, and (ii) pursuant
to the California Code of Civil Procedure
Sections 1280-1294.2.  Each arbitrator shall be an experienced
real estate professional (i.e., real estate broker, real estate attorney, real
estate developer, etc.) experienced with real property matters in the South
Coast of Santa Barbara County, California. 
The mutual decision of any two (2) arbitrators shall be final.  The arbitrators selected shall determine the
Fair Rental Value within ninety (90) days of the date of the Rent Adjustment
Notice.

 

(b)                                                    New
Ground Lease.  Upon completion of the Processing Facilities
Relocation, Bluffs shall lease to Venoco the Relocation Parcel and the Access
Parcel for (i) an initial term of twenty (20) years with options to extend such
term up to ninety-nine (99) years so long as (1) commercial oil or gas production
exists on Venoco’s onshore oil and gas leases in Carpinteria California or
Venoco’s offshore oil and gas leases in federal waters in the Santa Barbara
Channel, (2) the Casitas Pier is used to service oil and gas operations in the
Santa Barbara Channel, or (3) Venoco or Chevron continue to have abandonment
obligations under the Purchase Agreement with respect to the Relocation Parcel
or the Access Parcel; (ii) the yearly rent of one dollar ($1) with the
exception that (1) if the Relocation Parcel occupies a portion of the Property
in excess of two (2) acres the yearly rent of the portion of the Relocation
Parcel in excess of two (2) acres (“Relocation Parcel Excess”) shall be the
fair rental value of such Relocation Parcel Excess determined pursuant to the
requirements of Fair Rental Value described in Section 1(a) above, and (2)
Venoco shall not be responsible for rent on any portion of the Property which
shall be designated as a no development buffer zone by any governmental entity;
(iii) right to conduct drilling operations on the Relocation Parcel and to
obtain subsurface pass-through rights to the entire Property to access mineral
interests either owned or leased by Venoco; and (iv) upon the remaining terms
and conditions of the Ground Lease excluding any further obligations to
relocate the Processing Facilities (“New Ground Lease”).  The Parties shall mutually cooperate in order
to finalize the New Ground Lease and upon its commencement the Ground Lease
shall terminate.

5.                                       GENERAL
PROVISIONS

(a)                                                     Recitals.  The recitals set forth at the beginning of
this Agreement are true and correct.

(b)                                                    Exhibits
and Schedules.  Every exhibit,
schedule, and other appendix attached to and referred to in this Agreement is
incorporated in this Agreement by such reference.

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(c)                                                     Titles
and Headings.  The titles and
headings used in this Agreement are for convenience only, are not a part of
this Agreement, and shall have no effect upon its construction or
interpretation.

(d)                                                    No
Partnership or Joint Venture. 
Nothing contained in this Agreement is intended to create a relationship
of partnership or of joint venture or of any association among the Parties.

(e)                                                     Successors
and Assigns.  This Agreement binds,
and is for the benefit of, the Parties and their respective successors and
permitted assigns.

(f)                                                       Survival.  Except as otherwise expressly provided in
this Agreement, all covenants, representations and warranties, express or
implied, shall survive the execution and termination of this Agreement, the
Property Development and the other transactions contemplated hereby.

(g)                                                    Time.  Time is of the essence in the performance of
this Agreement.

(h)                                                    Attorneys’
Fees.  If any legal action,
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of any alleged dispute, breach, default or
misrepresentation in connection with this Agreement, then the Party, if any,
prevailing on the more substantial portion of its claims and defenses shall be
entitled to recover reasonable attorneys’ fees and other costs incurred in that
action or proceeding, and/or enforcing any judgment granted therein, in
addition to any other relief to which it may be entitled. Any judgment or order
entered in such action or proceeding shall contain a specific provision
providing for the recovery of attorneys’ fees and costs incurred in enforcing
such judgment.  This Section 5(h) shall
be applied pursuant to the provisions of
California Civil Code Section 1717.

(i)                                                        Modification.  Any extension, modification or amendment of
this Agreement must be in writing and signed by the Parties to be affected
thereby or their respective successors in interest.  The Parties hereby contemplate that this
Agreement may be modified prior to the completion of the Property Development.

(j)                                                        Partial
Invalidity and Severability.  Nothing
contained herein shall be construed as to require the commission of any act
contrary to law, and wherever there is any conflict between any provision
contained herein and any applicable statute, law, ordinance, or regulation, the
latter shall prevail, but the provisions of this Agreement affected shall be
limited only to the extent necessary to bring it within the requirements of
such law.   If any term, covenant,
condition or provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated thereby.

(k)                                                     Further
Actions.  Each Party shall, at its
own cost and expense, execute and deliver such further documents and
instruments, and shall take such other actions, as

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may be reasonably
required or appropriate to carry out the intent and purposes of this Agreement.

(l)                                                        Entire
Agreement.  Except as otherwise stated
in this Agreement, this Agreement contains the entire agreement between the
Parties hereto with respect to its subject matter.  All prior agreements, understandings,
representations or negotiations are hereby superseded, terminated and cancelled
in their entirety, and are of no further force or effect.  No promises, representations, warranties or
covenants not included in this Agreement, either oral or written, have been or
are relied upon by any Party.

(m)                                                  Gender
and Number.  Where appropriate in
this Agreement, words in the singular form shall include the plural and vice
versa, and words in the masculine shall include the feminine and neuter and
vice versa.

(n)                                                    Neutral
Construction.  In construing this
Agreement, no consideration shall be given to the fact or presumption that any
Party had a greater or lesser hand in the drafting of this Agreement.

(o)                                                    Applicable
Law and Venue.  This Agreement shall
in all respects be governed by the laws of the State of California.  Venue and jurisdiction shall be in the
Superior Court for Santa Barbara County.

(p)                                                    Separate
Counterparts.  This Agreement may be
executed in two or more separate counterparts, each of which when so executed
shall be deemed to be an original.  Such
counterparts shall, together, constitute and be one and the same instrument.

(Signature page follows)

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IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed by their duly authorized
representatives as of the Effective Date.

 

 

	
  VENOCO

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Venoco, Inc., a
  Delaware corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ William
  Schneider

  	
   

  	
   

  
	
   

  	
  William Schneider

  	
   

  
	
   

  	
  President

  	
   

  
					

 

 

	
  BLUFFS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Carpinteria
  Bluffs, LLC, a Colorado limited liability company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Timothy
  Marquez

  	
   

  	
   

  
	
   

  	
  Timothy Marquez

  	
   

  
	
   

  	
  Manager

  	
   

  
					

 

 10Exhibit
10.4

DIVIDEND
DISTRIBUTION AGREEMENT

This Dividend
Distribution (“Agreement”) is made effective as of August 29, 2006 (“Effective
Date”) by and between, VENOCO, INC., a Delaware corporation (“Venoco”), TIMOTHY
M. MARQUEZ AND BERNADETTE B. MARQUEZ, AS TRUSTEES OF THE MARQUEZ TRUST, UNDER
TRUST AGREEMENT DATED FEBRUARY 26, 2002, AS AMENDED (“Trust”), and CARPINTERIA
BLUFFS, LLC, a Colorado limited liability company (“Bluffs”).  Venoco, Trust and Bluffs are individually
referred to as a “Party” and collectively as “Parties” in this Agreement.  Trust and Bluffs are sometimes collectively
referred to as “Marquez” in this Agreement.

RECITALS

A.                                   Venoco
is a party to that certain Purchase and Sale Agreement, dated as of November 4,
1998, by and among Chevron U.S.A. Inc., a Pennsylvania corporation (“CUSA”),
Chevron Pipe Line Company, a Delaware corporation (“CPL” and together with CUSA
“Chevron”), Ellwood Pipeline, Inc., a California corporation (“Ellwood”), and
Venoco, as amended by that certain First Amendment to Purchase and Sale
Agreement, dated as of January 13, 1999, by and among the same parties
described in this Recital A (collectively, “Purchase Agreement”).

B.                                     Pursuant
to the Purchase Agreement, Venoco acquired and continues to own (i) an
undivided one hundred percent (100%) interest in that certain real property
improved with oil and gas processing facilities owned by Venoco (“Processing
Facilities”), located in the City of Carpinteria, County of Santa Barbara,
consisting of approximately forty six (46) acres, comprised of five (5)
separate parcels designated with APN(s) 001-170-003, 001-170-004, 001-170-022,
001-170-023, and 001-170-014 (collectively, “Facilities Parcels”), and (ii) an
undivided fifty percent (50%) interest (“Venoco Parking Parcel Interest”) in
that certain real property improved with parking and access facilities for the
Casitas pier (“Casitas Pier”), located in the City of Carpinteria, County of
Santa Barbara, consisting of approximately ten (10) acres, comprised of one (1)
parcel designated with APN 001-170-021 (“Parking Parcel”).  As used in this Agreement the term “Property”
(i) shall refer collectively to the Facilities Parcels and the Venoco Parking
Parcel Interest, and (ii) shall not include any of the improvements, Processing
Facilities (such improvements and Processing Facilities collectively, the “Reserved
Improvements”), oil and gas leases, or mineral interests located on, or
appurtenant to, or part of, the Facilities Parcels and the Venoco Parking
Parcel Interest.  The Property is further
described in the attached Exhibit A. 
ExxonMobil Corporation owns the other undivided fifty percent (50%)
interest in the Parking Parcel (“Exxon Parking Parcel Interest”).

C.                                     Pursuant
to the Purchase Agreement, Chevron and Venoco each have certain environmental
clean up and indemnity obligations with respect to the Property.

 1
 

 

D.                                    Pursuant
to the Purchase Agreement, the Property is subject to a first priority deed of
trust (“Chevron Deed of Trust”) in favor of Chevron securing the performance of
Venoco’s abandonment obligations under the Purchase Agreement.

 

E.                                      Pursuant
to the Purchase Agreement, the Property is subject to certain transfer
restrictions and options to purchase in favor of Chevron.

F.                                      The
Property is subject to three separate second priority deeds of trust (“BOM
Deeds of Trust”) in favor of the Bank of Montreal which secure indebtedness by
Venoco.

G.                                     Pursuant
to resolutions adopted July 24, 2006 and July 28, 2006, Venoco declared an
in-kind shareholder dividend (“Transfer”) to shareholders of record on July 28,
2006 and as of such record date the Trust was the sole shareholder of Venoco.

H.                                    Trust
shall not take record title to the Property upon the Transfer, and Trust
desires that Venoco convey the Property directly to Bluffs, a limited liability
company wholly owned by Trust.

I.                                         The
Parties desire for Bluffs to lease back the Property to Venoco immediately upon
the completion of the Transfer in order that Venoco continue to occupy and use
the Property as a site for the Processing Facilities.

J.                                        Marquez
may desire for Venoco (i) to relocate and consolidate the Processing Facilities
(“Processing Facilities Relocation”) into and within an approximate two (2)
acre portion of the Property (“Relocation Parcel”), (ii) to have the right to use
approximately two (2) acres of the Parking Parcel as a parking and access area
for the Casitas Pier (“Access Parcel”), (iii) to have adequate vehicular and
utility rights-of-way, easements and access to the Relocation Parcel and the
Access Parcel (“Access and Utilities Easements”), and (iv) upon completion of
the Processing Facilities Relocation, to terminate the lease agreement
described in Recital I and enter into a new ground lease for the Relocation
Parcel and the Access Parcel.

K.                                    The
Parties desire for Bluffs to have an option to purchase from Venoco the Exxon
Parking Parcel Interest if such interest is first obtained by Venoco.

L.                                      Venoco
desires to give Marquez certain indemnity protection with respect to the
Property.

NOW, THEREFORE,
for the reasons set forth herein above, and in consideration of the mutual
promises and agreements of the Parties hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

1.                                       CONVEYANCE
and CONDITION OF TITLE

Venoco hereby
agrees to convey the Property to Bluffs subject to the Property Reservations
and the Property Encumbrances described in this Section 1.

 2
 

 

a.                                       Property
Reservation.   Venoco shall reserve
from the conveyance of the Property to Bluffs: (i) all interests in the mineral
rights in the Property owned by Venoco (“Venoco Minerals”), with the right of
surface entry to explore for, remove, extract, or otherwise exploit such
minerals, (ii) all interests in the mineral rights in the Property owned by
other parties and leased by Venoco (“Leased Minerals”), with the right of
surface entry to explore for, remove, extract, or otherwise exploit such
minerals, (iii) the lessor’s interest in all leases and all income received by
Venoco from any leases, including oil and gas leases, which encumber the
Property, and (iv) all Reserved Improvements located on or appurtenant to the
Property (collectively, “Property Reservations”).

b.                                      Property
Encumbrances.  Venoco’s conveyance of
the Property to Bluffs shall be subject to the following, in addition to the
Property Reservations:  (i) the Chevron
Deed of Trust, (ii) obligations of Venoco under the Purchase Agreement
respecting the Property, and (iii) any other liens, encumbrances, leases,
tenancies or other rights of possession, oil and gas leases, reservations,
exceptions, charges, easements, rights, rights of way, covenants, conditions,
and restrictions which are (a) currently of record as reflected in the title
report for the Property, attached hereto as Exhibit B, but excluding the BOM
Deeds of Trust which are reflected as items 23, 28, 29, 30, 31, 51, 53, 54, 55
and 56 in same title report, or (b) not of record but existing as encumbrances
against the Property resulting from Venoco’s use of the Property (collectively,
“Property Encumbrances”).

2.                                       RESTRICTIONS

a.                                       Transfer
Restrictions.  Bluffs shall hold the
Property subject to a prohibition on any transfer of the Property or interest
therein or right thereto without the prior written consent of both (i) Chevron
until (1) the expiration of the remediation period described in Section 9.12 of
the Purchase Agreement, (2) the release and reconveyance of the Chevron Deed of
Trust, and (3) the release or expiration of Chevron’s repurchase rights under
Section 9.11 of the Purchase Agreement, and (ii) Venoco until the Processing
Facilities Relocation has been completed pursuant to the Development Agreement
described in Section 6(d) (collectively, “Transfer Restrictions”).

b.                                      Lease
Restrictions.  Bluffs and Venoco
hereby acknowledge that the term of the ground lease described in Recital I and
Section 6(c) shall continue until the termination of the Transfer Restrictions
described in Section 2(a).

c.                                       Notice.  Venoco shall provide Bluffs written notice of
the termination of each Transfer Restriction described in Section 2(a) within
thirty (30) days of the date of termination of such Transfer Restriction.

 3
 

 

3.                                       ESCROW

 

a.                                       Opening
of Escrow.  Within five (5) business
days of the execution of this Agreement, Venoco and Bluffs shall open an escrow
(“Escrow”) with Chicago Title
Company, 1225 Coast Village Road,
Montecito , CA 93108 (“Escrow
Holder”).

b.                                      Agreement and Escrow Instructions.  A copy of this Agreement shall be deposited
with the Escrow Holder and shall constitute the escrow instructions of Venoco
and Bluffs.  Venoco and Bluffs agree to
execute, deliver and be bound by any reasonable or customary supplemental
escrow instructions or other instruments reasonably required by Escrow Holder
to consummate the transaction contemplated by this Agreement; provided,
however, that no such instruments shall be inconsistent or in conflict with,
amend or supersede any portion of this Agreement.  If there is any conflict or inconsistency
between the terms of such instruments and the terms of this Agreement, then the
terms of this Agreement shall control.

c.                                       Closing.  Unless extended in accordance with this
Agreement, the escrow must close on or before September 8, 2006 (“Closing Date”). 
The Escrow Holder shall confirm the date Escrow is opened and the
Closing Date to Venoco and Bluffs in writing within (5) five calendar days the
date Escrow is opened.  As used in this
Agreement, “Close of Escrow”
shall mean the time the deeds have been recorded as described in Section 7(c).

4.                                       COVENANTS,
REPRESENTATIONS AND WARRANTIES

a.                                       Venoco.  Venoco hereby covenants with Marquez and
makes the following representations and warranties in favor of Marquez:

i.  Venoco shall, prior to the Closing Date,
obtain a release of the BOM Deeds of Trust and shall, on or prior to the
Closing Date, remove such items as an encumbrance upon the Property.

ii.  Venoco has title in fee simple to the
Property and has the legal right to convey title subject to the Property
Reservations and the Property Encumbrances, subject only to obtaining Chevron’s
consent to the Transfer pursuant to the Purchase Agreement.

iii.  Venoco is duly organized, validly existing
and in good standing under the laws of the State of Delaware, is duly qualified
as foreign corporation and is in good standing under the laws of the State of
California, and has the power and the authority to enter into this Agreement
and to consummate the transactions contemplated hereby.  Venoco and the individual parties signing
this Agreement on behalf of Venoco represent and warrant that the individuals
signing this Agreement on behalf of Venoco have the full legal power, authority
and right to execute and deliver this Agreement.

iv.  Neither the execution and delivery of this
Agreement, nor Venoco’s incurring of the obligations herein set forth, nor the
consummation of the transactions herein contemplated, nor compliance with the
terms of this Agreement, shall conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a

 4
 

 

default under, any judicial order, bond, note or other evidence of
indebtedness or any contract, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which Venoco is a party or
by which Venoco may be bound.  This
Agreement is, and all documents required hereby to be executed by Venoco shall
be,  when executed and delivered, valid,
legally binding obligations of, and enforceable against, Venoco in accordance
with the terms of the Agreement.

 

v.  Venoco is not the subject of any state or
federal receivership, insolvency or bankruptcy proceeding.

vi.  Venoco shall not, prior to the Closing Date,
without the prior written consent of Marquez, which shall not be unreasonably
withheld or delayed, (i) enter into any lease or easement with respect to the
Property, (ii) place any mortgage or other consensual encumbrance against
Property, (iii) change the zoning of, or otherwise voluntarily permit any
governmental restrictions to be placed against, the Property, or (iv) take any
other action, or enter into any agreement, with respect to or affecting the
Property which is reasonably likely to adversely affect or be inconsistent with
Bluffs’ intended use of the Property.

vii.  Venoco shall fully cooperate with Marquez in
order to finalize the Ground Lease and the Development Agreement as described
in Section 6.

viii.  Venoco is not a “Foreign Person” as defined
in Internal Revenue Code Section 1445 (f)(3).

ix.  Venoco has had the opportunity to consult
with and be advised by its attorney concerning the consequences and effect of
entering into this Agreement and has, in fact, consulted with and been advised
by its attorney.

b.                                      Marquez.  Trust or Bluffs, as applicable, hereby
covenant with Venoco and make the following representations and warranties in
favor of Venoco:

i.  Trust has the power and the authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.

ii.  Bluffs is duly organized, validly existing
and in good standing under the laws of the State of Colorado, is or by the
Closing Date shall be duly qualified as foreign limited liability company and
in good standing under the laws of the State of California, and has the power
and the authority to enter into this Agreement and to consummate the
transactions contemplated hereby.  Bluffs
and the individual parties signing this Agreement on behalf of Bluffs represent
and warrant that the individuals signing this Agreement on behalf of Bluffs
have the full legal power, authority and right to execute and deliver this
Agreement.

iii.  Neither the execution and delivery of this
Agreement, nor Trust’s incurring of the obligations herein set forth, nor the
consummation of the transactions

 5
 

 

herein contemplated, nor compliance with the terms of this Agreement,
shall conflict with or result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, any judicial order, bond, note or
other evidence of indebtedness or any contract, indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which Trust is a
party or by which Trust may be bound. 
This Agreement is, and all documents required hereby to be executed by
Trust shall be, when executed and delivered, valid, legally binding obligations
of, and enforceable against, Trust in accordance with the terms of the
Agreement.

 

iv.  Neither the execution and delivery of this
Agreement, nor Bluff’s incurring of the obligations herein set forth, nor the
consummation of the transactions herein contemplated, nor compliance with the
terms of this Agreement, shall conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, any
judicial order, bond, note or other evidence of indebtedness or any contract,
indenture, mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which Bluffs is a party or by which Bluffs may be bound.  This Agreement is, and all documents required
hereby to be executed by Bluffs shall be, when executed and delivered, valid,
legally binding obligations of, and enforceable against, Bluffs in accordance
with the terms of the Agreement.

v.  Trust is not the subject of any state or
federal receivership, insolvency or bankruptcy proceeding.

vi.  Bluffs is not the subject of any state or
federal receivership, insolvency or bankruptcy proceeding.

vii.  Marquez shall fully cooperate with Venoco in
order to finalize the Ground Lease and the Development Agreement as described
in Section 6.

viii.  Marquez has had the opportunity to consult
with and be advised by its attorney concerning the consequences and effect of
entering into this Agreement and has, in fact, consulted with and been advised
by its attorney.

5.                                       PROPERTY
ACQUIRED “AS IS”; INDEMNITY

a.                                       ‘As
Is’ Conveyance.  Marquez acknowledges
and agrees that (i) except as  expressly
set forth herein Bluffs is acquiring the Property in its “As Is” condition, with all faults, if any, and without any
warranty, express or implied, and (ii) neither Venoco nor any agents,
representatives, or employees of Venoco have made any representations or
warranties, direct or indirect, oral or written, express or implied, to Marquez
or any agents, representatives, or employees of Marquez with respect to the
condition of the Property, its fitness for any particular purpose, or its
compliance with any laws, and Marquez is not aware of and does not rely upon
any such representation.  Marquez
acknowledges and represents that Marquez is familiar with the Property and has
had ample opportunity prior to executing this Agreement to make such
investigation and inspections (or to have such investigation and inspections
made by others) as Marquez

 6
 

 

desires of the Property and of all factors relevant to Marquez’s
intended use, including, but not limited to, the condition of soils and
subsurfaces, the availability of sewer, water, utility, and road access to the
Property, and compliance with actual and proposed zoning, environmental, land
use and other laws and regulations.

 

b.                                      Hazardous
Substances.  Venoco discloses and
Marquez acknowledges that the Property has over the years been used as an oil
and gas processing facility which involves the handling of Hazardous
Substances, as defined below in this Section 5(b).  Marquez acknowledges the possible existence
on the Property of environmental contamination and releases of Hazardous
Substances, and Marquez acknowledges that Venoco, Venoco’s agents and
employees, and other persons acting on behalf of Venoco have made no
representation or warranty of any kind in connection with any matter relating
to the condition, value, fitness, contamination or use of the Property upon
which Marquez has relied directly or indirectly for any purpose.  In this Agreement, “Hazardous Substances”
means all substances, wastes and materials determined by any state, federal or
local government authority to be capable of posing a risk of injury to health,
safety, property, fish or wildlife, including, but not limited to, every ‘Hazardous
Substance’ as defined by Section 25316 of the California Health & Safety
Code, and petroleum, including crude oil or any fraction thereof.

c.                                       Indemnity.  Venoco shall indemnify and
defend Marquez, the employees and agents of Marquez and any other person
acting on behalf of Marquez against,
and shall hold each of them harmless from, any and all claims, demands,
liabilities, damages, costs, suits, actions, fines, penalties and expenses,
including reasonable attorneys’ fees, arising out of or relating to (i) the
environmental condition of the Property prior to and as of the date of the
completion of the Processing Facilities Relocation, (ii) the release or
existence of any Hazardous Substance at, upon, through or from the Property
prior to  and as of the date of the
completion of the Processing Facilities Relocation, (iii) any breach by Venoco
of any governmental laws, rules or regulations with respect to the
environmental condition of the Property, (iv) the use and ownership of the
Property by Venoco prior to the completion of the Transfer, (v) the use of the
Property prior to the completion of the Processing Facilities Relocation, (vi)
the use and operation of the Processing Facilities by Venoco subsequent to the
Transfer, (vii) the breach by Venoco of any of its obligations under the Purchase
Agreement, and (vii) the Chevron Deed of Trust and all obligations thereunder,
all of which Venoco hereby undertakes to perform.

6.                                       CLOSING
CONDITIONS.

The Parties’
obligations to consummate the Transfer are subject to the satisfaction of all
of the conditions set forth below which can only be waived by joint action by
the Parties.

a.                                       Chevron
Consent.  The consent of Chevron to
the Transfer (“Chevron Consent”), a form of which is attached hereto as Exhibit
C, which consent Venoco agrees to use its commercially reasonable efforts to
obtain.  The Parties hereby acknowledge
that without the Chevron Consent the Transfer can not be consummated.

 7
 

 

b.                                      BOM
Deeds of Trust.  Obtaining the
release of the BOM Deeds of Trust and removing such items as encumbrances upon
the Property.  Venoco shall obtain such
release and removal.

c.                                       Ground
Lease.  Venoco and Bluffs shall enter
into a ground lease, a form of which is attached as Exhibit D (“Ground Lease”),
pursuant to which Bluffs shall lease the Property to Venoco as described in
Recital I.

d.                                      Development
Agreement.  Venoco and Bluffs shall
enter into a development agreement, a form of which is attached as Exhibit E (“Development
Agreement”), pursuant to which the Parties shall complete the Processing
Facilities Relocation as described in Recital J.

e.                                       No
Default.  The Parties shall not be in
default in any of their obligations under the terms of this Agreement, and all
representations and warranties of the Parties contained herein shall be true
and correct in all material respects.

7.                                       CLOSING

a.                                       Venoco
Delivered Items.  At least one (1)
business day prior to the Closing Date, Venoco shall deposit or cause to be
deposited with Escrow Holder the following items, duly executed and, where
appropriate, acknowledged:

i.                                          Consent.  A copy of the fully executed Chevron Consent.

ii.                                       Deeds.  The grant deed for the Property in favor of
Bluffs (“Grant Deed”) in the form attached hereto as Exhibit F.

iii.                                    Ground
Lease.  The Ground Lease, as
finalized by the Parties, and a Memorandum of the Ground Lease (“Memorandum”),
both executed by Venoco.

iv.                                   Development
Agreement.  The Development
Agreement, as finalized by the Parties, executed by Venoco.

v.                                      Costs.  All costs and expenses to be borne by Venoco
pursuant to Section 7(c)(ii)(C).

vi.                                   Certificates.  Venoco’s certification of non-foreign status
in the form attached hereto as Exhibit G and Venoco’s real estate withholding
certificate in the form attached hereto as Exhibit H.

vii.                                Authority.  Such proof of Venoco’s authority and authorization
to enter into this Agreement and to consummate the transaction contemplated
hereby as may be reasonably requested by Bluffs or the Escrow Holder.

 8
 

 

viii.                             BOM
Deeds of Trust.  Unless the liens of
the BOM Deeds of Trust have been previously released from the Property,
reconveyances of the BOM Deeds of Trust.

b.                                      Bluffs
Delivered Items.  At least one (1)
business day prior to the Closing Date, Bluffs shall deposit or cause to be
deposited with Escrow Holder the following items, duly executed and, where appropriate,
acknowledged:

i.                                          Ground
Lease.  The Ground Lease, as
finalized by the Parties, and the Memorandum, both executed by Bluffs.

ii.                                       Development
Agreement.  The Development
Agreement, as finalized by the Parties, executed by Bluffs.

iii.                                    Costs.  All costs and expenses to be borne by Bluffs
pursuant to Section 7(c)(ii)(D).

iv.                                   Authority.  Such proof of Bluffs’ authority and
authorization to enter into this Agreement and to consummate the transaction
contemplated hereby as may be reasonably requested by Venoco or the Escrow
Holder.

c.                                       Escrow
Holder Instructions.

i.                                          Title
Insurance.  Escrow Holder is
authorized and directed to close the Escrow at such time as it is in receipt of
the funds and documents referred to in Sections 7(a) and 7(b) and the Escrow Holder
can issue standard California Land Title Association Owner’s Policy of Title
Insurance for the Property and insuring title to the Property in Bluffs (“Property
Title Insurance”) in the amount of Five Million Dollars ($5,000,000), subject
only to the Property Encumbrances and the Memorandum.

ii.                                       Recordation
and Distribution.  Upon satisfaction
of the requirements in Section 7(c)(i) above, the Escrow Holder shall:

A.  cause the Grant Deed and the Memorandum to be
recorded in the Office of the County Recorder of the County of Santa Barbara,
California;

B.  forward copies of the Chevron Consent, the
Ground Lease, the Memorandum and the Development Agreement to the Parties;

C.  from the funds contributed by Venoco, pay the
costs borne by Venoco pursuant to this Agreement which include the following:

1)  one-half of the Escrow Holder’s fee;

2)  all real property taxes and special
assessments against the Property;

 9
 

 

3)  all documentary transfer tax amounts;

4)  premiums for the Property Title Insurance.

D.  from the funds contributed by Bluffs, pay the
costs borne by Bluffs pursuant to this Agreement which include the following:

1)  one-half of the Escrow Holder’s fee;

2)  recording fees for the Grant Deeds.

d.                                      No
Prorations.  Pursuant to the Ground
Lease, Venoco shall continue to be responsible for all real and personal
property taxes, assessments, and special levies in the Property; therefore,
Escrow Holder shall not prorate any item customarily prorated in the County of
Santa Barbara, California.

8.                                       OPTION

a.                                       Option.  Bluffs
shall have the right to purchase from Venoco the Exxon Parking Parcel
Interest if Venoco acquires such interest for an amount equal to (i) the
purchase price paid by Venoco to ExxonMobil Corporation for acquiring the Exxon
Parking Parcel Interest (“Purchase Price”) and (ii) interest on the Purchase
Price calculated at a rate equal to the thirty day LIBOR in effect on the
closing date of Venoco’s acquisition of the Exxon Parking Parcel Interest (“Acquisition
Date”) plus 4.5% commencing on the Acquisition Date and ending on the closing
date of Bluffs’ acquisition of the Exxon Parking Parcel Interest (“Option
Payment”).  The option rights described
in this Section 8 shall terminate (i) if Bluffs does not provide written notice
to Venoco of its intent to exercise this option prior to the date which is
thirty (30) days from the date which is three (3) years from the Acquisition
Date, or (ii) if Bluffs has not delivered the Option Payment to Venoco prior to
the date which is three (3) years from the Acquisition Date.

b.                                      Notice.  Venoco shall provide Bluffs written notice of
the acquisition by Venoco of the Exxon Parking Parcel Interest within five (5)
days of the Acquisition Date.

9.                                       GENERAL
PROVISIONS

a.                                       Recitals.  The recitals set forth at the beginning of
this Agreement are true and correct.

b.                                      Exhibits
and Schedules.  Every exhibit,
schedule, and other appendix attached to and referred to in this Agreement is
incorporated in this Agreement by such reference.

 10
 

 

c.                                       Titles
and Headings.  The titles and
headings used in this Agreement are for convenience only, are not a part of
this Agreement, and shall have no effect upon its construction or
interpretation.

d.                                      No
Partnership or Joint Venture. 
Nothing contained in this Agreement is intended to create a relationship
of partnership or of joint venture or of any association among the Parties.

e.                                       Successors
and Assigns.  This Agreement binds,
and is for the benefit of, the Parties and their respective successors and
permitted assigns.

f.                                         Survival.  Except as otherwise expressly provided in
this Agreement, all options, indemnities, covenants, representations and
warranties, express or implied, shall survive the execution and termination of
this Agreement, the Close of Escrow and the other transactions contemplated
hereby.

g.                                      Time.  Time is of the essence in the performance of
this Agreement.

h.                                      Attorneys’
Fees.  If any legal action,
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of any alleged dispute, breach, default or
misrepresentation in connection with this Agreement, then the Party, if any,
prevailing on the more substantial portion of its claims and defenses shall be
entitled to recover reasonable attorneys’ fees and other costs incurred in that
action or proceeding, and/or enforcing any judgment granted therein, in
addition to any other relief to which it may be entitled.  Any judgment or order
entered in such action or proceeding shall contain a specific provision
providing for the recovery of attorneys’ fees and costs incurred in enforcing
such judgment.  This Section 9(h) shall
be applied pursuant to the provisions of
California Civil Code Section 1717.

i.                                          Modification.  Any extension, modification or amendment of
this Agreement must be in writing and signed by the Parties to be affected
thereby or their respective successors in interest.  The Parties hereby contemplate that the
various Exhibits to this Agreement, in particular the Ground Lease and the
Development Agreement, may be modified prior to the Close of Escrow.  Any modification of any Exhibit to this
Agreement must be in writing and signed by the Parties to be affected thereby.

j.                                          Partial
Invalidity and Severability.  Nothing
contained herein shall be construed as to require the commission of any act
contrary to law, and wherever there is any conflict between any provision
contained herein and any applicable statute, law, ordinance, or regulation, the
latter shall prevail, but the provisions of this Agreement affected shall be
limited only to the extent necessary to bring it within the requirements of
such law.   If any term, covenant,
condition or provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated thereby.

 11
 

 

k.                                       Further
Actions.  Each Party shall, at its
own cost and expense, execute and deliver such further documents and
instruments, and shall take such other actions, as may be reasonably required
or appropriate to carry out the intent and purposes of this Agreement.

l.                                          Entire
Agreement.  Except as otherwise
stated in this Agreement, this Agreement contains the entire agreement between
the Parties hereto with respect to its subject matter.  All prior agreements, understandings,
representations or negotiations are hereby superseded, terminated and cancelled
in their entirety, and are of no further force or effect.  No promises, representations, warranties or
covenants not included in this Agreement, either oral or written, have been or
are relied upon by any Party.

m.                                    Gender
and Number.  Where appropriate in
this Agreement, words in the singular form shall include the plural and vice
versa, and words in the masculine shall include the feminine and neuter and
vice versa.

n.                                      Neutral
Construction.  In construing this
Agreement, no consideration shall be given to the fact or presumption that any
Party had a greater or lesser hand in the drafting of this Agreement.

o.                                      Applicable
Law and Venue.  This Agreement shall
in all respects be governed by the laws of the State of California.  Venue and jurisdiction shall be in the
Superior Court for Santa Barbara County.

p.                                      Separate
Counterparts.  This Agreement may be
executed in two or more separate counterparts, each of which when so executed
shall be deemed to be an original.  Such
counterparts shall, together, constitute and be one and the same instrument.

(Signature page follows)

 12
 

 

 

IN
WITNESS WHEREOF, the Parties have executed this Agreement as
of the Effective Date written above.

 

	
  VENOCO

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Venoco, Inc., a
  Delaware corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ William
  Schneider

  	
   

  	
   

  
	
   

  	
  William Schneider

  	
   

  
	
   

  	
  President

  	
   

  
					

 

	
  BLUFFS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Carpinteria
  Bluffs, LLC, a Colorado limited liability company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Timothy
  Marquez

  	
   

  	
   

  
	
   

  	
  Timothy Marquez

  	
   

  
	
   

  	
  Manager

  	
   

  
					

 

TRUST

 

 

	
  /s/ Timothy M. Marquez

  	
   

  
	
  Timothy M.
  Marquez, as trustee of the Marquez Trust,

  
	
  under Trust
  Agreement dated February 26, 2002, as amended

  
	
   

  
	
   

  
	
  /s/ Bernadette B. Marquez

  	
   

  
	
  Bernadette B.
  Marquez, as trustee of the Marquez Trust,

  
	
  under Trust
  Agreement dated February 26, 2002, as amended

  

 

 13

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