Document:

Exhibit 10.1

 

VENOCO, INC.

 

AMENDED AND RESTATED

2005 STOCK INCENTIVE PLAN

 

1.                                      PURPOSES.

 

(a)                                  Background. This Plan was adopted on October 13, 2005, and
approved by the Company’s stockholder effective December 12, 2005. This
Plan was amended and restated on May 9, 2006, and approved as amended and
restated by the Company’s stockholder on May 9, 2006.

 

(b)                                  Eligible Stock Award Recipients. The persons eligible to
receive Stock Awards are the Employees, Directors and Consultants of the
Company and its Affiliates.

 

(c)                                  Available Stock Awards. The purpose of the Plan is
to provide a means by which eligible recipients may be given an
opportunity to benefit from increases in value of the Common Stock through the
granting of the following:  (i) Incentive
Stock Options, (ii) Nonqualified Stock Options, (iii) rights to
acquire restricted stock, and (iv) stock appreciation rights.

 

(d)                                  General Purpose. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards,
to secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.

 

2.                                      DEFINITIONS.

 

(a)                                  “Affiliate” means any
entity that controls, is controlled by, or is under common control with the
Company.

 

(b)                                  “Board” means the
Board of Directors of the Company.

 

(c)                                  “Change of Control”
means:

 

(i)                                     Any person (as
such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (“Exchange Act”)) other than Timothy M.
Marquez, Bernadette B. Marquez, individually or as trustees of the Marquez
Trust under Trust Agreement dated February 26, 2002, as amended, their
respective legal representatives, and/or the issue of either of them (the “Marquez Family”)
becomes a “beneficial owner” (as defined in Rule 13d-3 under the
Securities Act), directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities;

 

(ii)                                  The
stockholders of the Company approve a merger or consolidation of the Company
with any other entity, other than (x) a merger or consolidation which would
result

 

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in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) more than fifty percent (50%) of the combined voting
power of the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger or consolidation or (y) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person (as such term is used in Section 13(d) and
14(d) of the Exchange Act) other than the Marquez Family acquires more
than fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities; or

 

(iii)                               The
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets. For purposes of this clause (iii),
the term “the sale or disposition by the Company of all or substantially all of
the Company’s assets” shall mean a sale or other disposition transaction or series of
related transactions involving assets of the Company or of any direct or
indirect subsidiary of the Company (including the stock of any direct or
indirect subsidiary of the Company) in which the value of the assets or stock
being sold or otherwise disposed of (as measured by the purchase price being
paid therefor or by such other method as the Board determines is appropriate in
a case where there is no readily ascertainable purchase price) constitutes more
than two-thirds of the “fair market value of the Company” (as hereinafter
defined). For purposes of the preceding sentence only, the “fair market value
of the Company” shall be the aggregate market value of the Company’s
outstanding common stock (on a fully diluted basis) plus the aggregate market
value of the Company’s other outstanding equity securities. The aggregate
market value of the Company’s equity securities shall be determined by multiplying
the number of shares of the Company’s Common Stock (on a fully diluted basis)
outstanding on the date of the execution and delivery of a definitive agreement
with respect to the transaction or series of related transactions (the “Transaction Date”) by
the average closing price of such security for the ten (10) trading days
immediately preceding the Transaction Date, or if not publicly traded, by such
other method as the Board shall determine is appropriate; or

 

(iv)                              The Marquez
Family is no longer the largest beneficial owner of the Company’s outstanding
equity securities and Timothy Marquez is no longer the Chief Executive Officer
or Chairman of the Board of Directors of the Company.

 

(d)                                  “Code” means the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.

 

(e)                                  “Committee” means a
pre-existing or newly formed committee of members of the Board appointed by the
Board in accordance with subsection 3(c).

 

(f)                                    “Common Stock” means
the Company’s common stock par value US$0.01 per share and other rights with
respect to such shares of common stock.

 

(g)                                 “Company” means Venoco, Inc.,
a Delaware corporation.

 

(h)                                 “Consultant” means any
person, including an advisor, (i) engaged by the Company or an Affiliate
to render consulting or advisory services and who is compensated for such
services or (ii) who is a member of the Board of Directors of an
Affiliate.

 

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(i)                                    “Continuous Service”
means that the Participant’s service with the Company or an Affiliate, whether
as an Employee, Director or Consultant, is not interrupted or terminated. Unless
otherwise provided in a Stock Award Agreement or Option Agreement, as
applicable, the Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant’s service to the Company or an Affiliate as an Employee, Director
or Consultant. For example, a change in status from an Employee of the Company
to a Consultant of an Affiliate may not constitute an interruption of
Continuous Service. The Board or the Committee, in its sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence, including sick leave, military leave or any other personal
leave.

 

(j)                                    “Covered Employee”
means the Company’s chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to
be reported to shareholders under the Exchange Act, as determined for purposes
of Section 162(m) of the Code.

 

(k)                                “Director” means a
member of the Board of Directors of the Company.

 

(l)                                    “Disability” means the
Participant’s inability, due to illness, accident, injury, physical or mental
incapacity or other disability, to carry out effectively the duties and
obligations to the Company and its Affiliates performed by such person
immediately prior to such disability for a period of at least six (6) months,
as determined in the good faith judgment of the Board.

 

(m)                              “Dollars” or “$” or “US$” means United
States dollars.

 

(n)                                 “Employee” means any
person employed by the Company or an Affiliate. Service as a Director or
payment of a director’s fee by the Company or an Affiliate alone shall not be
sufficient to constitute “employment” by the Company or an Affiliate.

 

(o)                                  “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

 

(p)                                  “Fair Market Value”
means, as of any date, the value of the Common Stock determined as follows:

 

(i)                                     If the Common
Stock is listed on any established share exchange, or traded on The Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of Common
Stock shall be the closing sales price for such share (or the closing bid, if
no sales were reported) as quoted on such exchange or market (or the exchange
or market with the greatest volume of trading in Common Stock if such shares
are traded on more than one such exchange or market) on the last market trading
day prior to the day of determination, as reported by such exchange or market
or such other source as the Board reasonably deems reliable.

 

(ii)                                  In the absence
of such markets for the Common Stock, the Fair Market Value shall be a value
determined by the Board in accordance with Section 422 of the Code for

 

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Incentive Stock Options and
in accordance with Section 409A of the Code for all other types of Stock
Awards.

 

(q)                                  “Incentive Stock Option”
means an Option designated as an incentive stock option in an Option Agreement
and that is granted in accordance with the requirements of, and that conforms
to the applicable provisions of, Section 422 of the Code.

 

(r)                                  “Independent Director”
means a Director (i) who satisfies the definition of Independent Director
or similar definition under the applicable stock exchange or Nasdaq rules and
regulations upon which the Common Stock is traded from time to time and (ii) who
either (A) is not a current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m)
of the Code), is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an “affiliated
corporation” at any time and is not currently receiving direct or indirect
remuneration from the Company or an “affiliated corporation” for services in
any capacity other than as a Director or (B) is otherwise considered an “outside
director” for purposes of Section 162(m) of the Code.

 

(s)                                  “Nonqualified Stock Option”
means an Option that is not designated in an Option Agreement as an Incentive
Stock Option or was not granted in accordance with the requirements of, and
does not conform to the applicable provisions of, Section 422 of the
Code.

 

(t)                                    “Officer” means a
person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.

 

(u)                                 “Option” means an
Incentive Stock Option or a Nonqualified Stock Option granted pursuant to the
Plan.

 

(v)                                   “Option Agreement”
means a written agreement between the Company and an Optionholder evidencing
the terms and conditions of an individual Option grant.

 

(w)                                “Optionholder” means a
person to whom an Option is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Option.

 

(x)                                  “Participant” means a
person to whom a Stock Award is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Stock Award.

 

(y)                                  “Plan” means this
Venoco, Inc. Amended and Restated 2005 Employee Stock Incentive Plan.

 

(z)                                  “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3,
as in effect from time to time.

 

(aa)                            “Securities Act” means
the Securities Act of 1933, as amended.

 

(bb)                            “Stock Award” means
any right granted under the Plan, including an Option, a right to acquire
restricted Common Stock, and a stock appreciation right.

 

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(cc)                            “Stock Award Agreement”
means a written agreement between the Company and a holder of a Stock Award
(other than an Option) evidencing the terms and conditions of an individual
Stock Award grant.

 

(dd)                            “Ten Percent Stockholder”
means a person who owns (or is deemed to own pursuant to Section 424(d) of
the Code) shares possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any parent corporation
or any subsidiary corporation, both as defined in Section 424 of the Code.

 

3.                                      ADMINISTRATION.

 

(a)                                  Administration by Board. The Board shall administer
the Plan unless and until the Board delegates administration to a Committee, as
provided in subsection 3(c). The Board may, at any time and for any reason
in its sole discretion, rescind some or all of such delegation.

 

(b)                                  Powers of Board. The Board shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:

 

(i)                                     To determine
from time to time which of the persons eligible under the Plan shall be granted
Stock Awards; when and how each Stock Award shall be granted; what type or
combination of types of Stock Award shall be granted; the provisions of each
Stock Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive Common Stock pursuant to a Stock
Award; and the number of shares of Common Stock with respect to which a Stock
Award shall be granted to each such person.

 

(ii)                                  To construe and
interpret the Plan, Stock Awards granted under it, Option Agreements and Stock
Award Agreements, and to establish, amend and revoke rules and regulations
for their administration. The Board, in the exercise of this power, may correct
any defect, omission or inconsistency in the Plan or in any Option Agreement or
Stock Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.

 

(iii)                               To amend the
Plan, a Stock Award, a Stock Award Agreement or an Option Agreement as provided
in Section 12.

 

(iv)                              Generally, to
exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in
conflict with the provisions of the Plan.

 

(c)                                  Delegation to Committee.

 

(i)                                    General. The Board may delegate administration of the
Plan and its powers and duties thereunder to a Committee or Committees, and the
term “Committee” shall apply to
any person or persons to whom such authority has been delegated. Upon such
delegation, the Committee shall have the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references
in this Plan to the Board shall thereafter be deemed to include the Committee
or subcommittee), subject, however, to such resolutions, not inconsistent

 

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with
the provisions of the Plan, as may be adopted from time to time by the
Board. In its absolute discretion but subject to the rules of any share
exchange or market on which the Company’s shares are listed or traded, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under this Plan, except respecting matters under Rule 16b-3
of the Exchange Act or Section 162(m) of the Code, or any rules or
regulations issued thereunder, which are required to be determined in the sole
discretion of the Committee.

 

(ii)                                Committee Composition. A Committee shall consist
solely of two or more Independent Directors. Within the scope of its authority
and subject to the rules of any share exchange or market on which the
Company’s shares are listed or traded, the Board or the Committee may (1) delegate
to a committee of one or more members of the Board who are not Independent
Directors the authority to grant Stock Awards to eligible persons who are
either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award
or (b) not persons with respect to whom the Company wishes to comply with Section 162(m)
of the Code, and/or (2) delegate to a committee of one or more members of
the Board who are not Independent Directors or to the Company’s Chief Executive
Officer the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act and with respect to whom
the Company does not wish to comply with Section 162(m) of the Code.

 

(d)                                  Effect of Board’s Decision; No Liability. All determinations,
interpretations and constructions made by the Board or the Committee in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons. No member of the Board or the Committee or any
person to whom duties hereunder have been delegated shall be liable for any
action, interpretation or determination made in good faith, and such persons
shall be entitled to full indemnification and reimbursement consistent with
applicable law and in the manner provided in the Company’s Certificate of
Incorporation, as the same may be amended from time to time, or as
otherwise provided in any agreement between any such member and the Company.

 

(e)                                  Conformance to Section 409A of the Code. If, at any
time, tax advisors to the Company determine that the terms of any outstanding
Stock Award result in additional tax or interest to the holder under Section 409A
of the Code, the Board or the Committee shall have the authority to enter into
an amendment of such Stock Award, consistent with this Plan, that is designed
to avoid such additional tax or interest. If any Stock Award constitutes
deferred compensation within the meaning of Section 409A of the Code, any
acceleration of the payment of such Stock Award upon a Change of Control as
provided under this Plan shall occur only if the Change of Control constitutes,
in the good-faith determination of the Board or the Committee, a change in the
ownership or effective control of the Company, or in the ownership of a
substantial portion of the assets of the Company, under Section 409A of
the Code. If any other payment under this Plan constitutes deferred
compensation within the meaning of Section 409A of the Code and if the
Plan fails to satisfy the requirements of Section 409A(2), (3) or (4) of
the Code with respect to such payment, such provision shall be operated in a
manner that, in the good-faith determination of the Board or the Committee,
seeks to bring the provision into compliance with those requirements while
preserving as closely as possible the original intent of the provision.

 

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(f)                                    No Guaranty of Favorable Tax Treatment. Although the Company intends
to administer the Plan so that Stock Awards will be exempt from, or will comply
with, the requirements of Section 409A of the Code, the Company does not
warrant that any Stock Award under the Plan will qualify for favorable tax
treatment under Section 409A of the Code or any other provision of
federal, state, local or foreign law. The Company shall not be liable to any
Participant for any tax, interest or penalties the Participant might owe as a
result of the grant, holding, vesting, exercise or payment of any Stock Award
under the Plan.

 

4.                                      STOCK SUBJECT TO THE PLAN.

 

(a)                                  Share Reserve. Subject to the provisions of Section 11
relating to adjustments upon changes in Common Stock, the Common Stock that may be
issued pursuant to Incentive Stock Options and other Stock Awards shall not
exceed a maximum aggregate of 1,700,000
shares of Common Stock. Stock appreciation rights provided for in Section 7(b) hereof
that are payable only in cash will not reduce the number of shares of Common
Stock available for Stock Awards granted under the Plan. Subject to the
provisions of Section 11 relating to adjustments upon changes in Common
Stock, the maximum aggregate number of shares of Common Stock for which Stock
Awards may be issued to any Participant under the Plan during any calendar
year from and after the date the Company is “publicly held” pursuant to Section 162(m)
of the Code shall not exceed 570,000 shares of Common Stock. The limitation set
forth in the preceding sentence shall be construed in accordance with Treasury
Regulations issued under Section 162(m) of the Code.

 

(b)                                  Reversion of Stock to the Share Reserve. If any Stock Award shall
for any reason expire, fail to vest or otherwise terminate, in whole or in
part, without having been exercised in full, the Common Stock not acquired
under such Stock Award, and any forfeited shares, shall revert to and again
become available for issuance under the Plan, except to the extent prohibited
by law or the terms of this Plan.

 

(c)                                  Source of Shares. The Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.

 

5.                                      ELIGIBILITY.

 

(a)                                  Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may be
granted to Employees, Directors and Consultants.

 

(b)                                  Ten Percent Stockholders. A Ten Percent Stockholder
shall not be granted an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock at the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of grant.

 

(c)                                  Consultants.

 

(i)                                     A Consultant
shall not be eligible for the grant of a Stock Award if, at the time of grant,
a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to
register a resale of the Company’s securities issued to such Consultant because
of

 

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the nature of the services
that the Consultant is providing to the Company, or because the Consultant is
not a natural person, or as otherwise provided by the rules governing the
use of Form S-8, unless the Board or the Committee determines both (i) that
such grant (A) shall be registered in another manner under the Securities
Act (e.g., on a Form S-3
Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.

 

(ii)                                  Form S-8
generally is available to Consultants only if (i) they are natural
persons; (ii) they provide bona fide services to the issuer, its parents,
its majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s
parent; and (iii) the services are not in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the issuer’s securities.

 

6.                                      OPTION PROVISIONS.

 

Each
Option Agreement shall be subject to the terms and conditions of this Plan. Each
Option and Option Agreement shall be in such form and shall contain such
terms and conditions as the Board or the Committee shall deem appropriate. All
Options shall be separately designated Incentive Stock Options or Nonqualified
Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for Common Stock purchased on
exercise of each type of Option. The provisions of separate Options need not be
identical.

 

(a)                                  Provisions Applicable to All Options.

 

(i)                                    Consideration. The purchase price of Common Stock acquired
pursuant to an Option shall be paid either (x) in cash in Dollars or (y) in the
discretion of the Board or the Committee with Common Stock based on the Fair
Market Value of such Common Stock, in either case at the time the Option is
exercised.

 

(ii)                                Term. Subject to the provisions of subsection 5(b) regarding
Ten Percent Stockholders, no Option shall be exercisable after the expiration
of ten (10) years from the date it was granted. Further, no grant of an
Option shall be made under this Plan more than ten (10) years after the
date the Plan is approved by the stockholders of the Company.

 

(iii)                            Vesting Generally. The total number of shares of Common Stock
subject to an Option may (A) vest, and therefore become exercisable,
in periodic installments that may, but need not, be equal, or (B) be fully
vested at the time of grant. The Option may be subject to such other terms
and conditions on the time or times when it may be exercised (which may be
based on performance or other criteria) as the Board or the Committee may deem
appropriate. The vesting provisions, if any, of individual Options may vary.
The provisions of this subsection 6(a)(ii) are subject to any Option
Agreement provisions governing the minimum number of shares of Common Stock as
to which an Option may be exercised.

 

(iv)                               Termination of Continuous Service. Unless otherwise provided in
the Option Agreement, in the event an Optionholder’s Continuous Service
terminates (other than upon the Optionholder’s death, Disability or as a result
of a Change of Control), all Options held by the Optionholder shall immediately
terminate; provided, however, if an Optionholder’s

 

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Continuous
Service is terminated by the Company for reasons other than for cause, all
vested Options held by such person shall continue to be exercisable until the
earlier of the expiration date of such Option or 180 days after the date of
such termination. All such vested Options not exercised within the period
described in the preceding sentence shall terminate.

 

(v)                                   Disability or Death of Optionholder. Unless otherwise provided in
the Option Agreement, in the event of an Optionholder’s Disability or death,
all unvested Options shall immediately terminate, and all vested Options held
by such person shall continue to be exercisable until twelve (12) months after
the date of such Disability or death. All such vested Options not exercised
within such 12—month period shall terminate.

 

(b)                                  Provisions Applicable to Incentive Stock Options.

 

(i)                                    Exercise Price of an Incentive Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the
exercise price of each Incentive Stock Option shall be not less than one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Option on the date the Option is granted. Notwithstanding the foregoing, an
Incentive Stock Option may be granted with an exercise price lower than
that set forth in the preceding sentence if such Option is granted pursuant to
an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.

 

(ii)                                Incentive Stock Option $100,000 Limitation. Notwithstanding
any other provision of the Plan or an Option Agreement, the aggregate Fair
Market Value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by an Optionholder in any calendar year,
under the Plan or any other option plan of the Company or its Affiliates, shall
not exceed $100,000. For this purpose, the Fair Market Value of the Common
Stock shall be determined as of the time an Option is granted. The Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonqualified Common Stock Options.

 

(iii)                            Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Option holder only by the
Option holder.

 

(c)                                  Provisions Applicable to Nonqualified Stock Options.

 

(i)                                    Exercise Price. The exercise price of each Nonqualified Stock
Option shall be not less than one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, a Nonqualified Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Sections 424(a) or
409A of the Code.

 

(ii)                                Limits on Exercise and Transfer. Unless otherwise expressly
provided in (or pursuant to) this subsection 6(c)(ii), applicable law or
the Option Agreement, as the same may be amended from time to time:  (x) all Nonqualified Stock Options are
non-transferable and will not be subject in any manner to sale, transfer,
alienation, assignment, pledge, encumbrance

 

9

 

or
charge; (y) Nonqualified Stock Options will be exercised only by the
Participant; and (z) amounts payable or shares issuable pursuant to a
Nonqualified Stock Option will be delivered only to (or for the account of) the
Participant. In addition, the shares shall be subject to any restrictions set
forth in the applicable Option Agreement. The exercise and transfer
restrictions in this subsection 6(c)(ii) will not apply to (A) transfers
to the Company or, with the express written approval of the Board or the
Committee, transfers by gift to “immediate family,” as that term is defined in
SEC Rule 16a-1(e) promulgated under the Exchange Act, (B) the
designation of a beneficiary to receive benefits if the Participant dies or, if
the Participant has died, transfers to or exercises by the Participant’s
beneficiary, or, in the absence of a validly designated beneficiary, transfers
by will or the laws of descent and distribution, or (C) if the Participant
has suffered a Disability, permitted transfers or exercises on behalf of the
Participant by the Participant’s duly authorized legal representative.

 

7.                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)                                  Restricted Stock Awards. Each restricted Stock Award
Agreement shall be in such form and shall contain such restrictions, terms
and conditions, if any, as the Board or the Committee shall deem appropriate
and shall be subject to the terms and conditions of this Plan. The terms and
conditions of restricted Stock Award Agreements may change from time to
time, and the terms and conditions of separate restricted Stock Award
Agreements need not be identical, but each restricted Stock Award Agreement
shall include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Consideration. A restricted Stock Award may be awarded
in consideration for past services actually rendered, or for future services to
be rendered, to the Company or an Affiliate for its benefit.

 

(ii)                                Vesting. Common Stock awarded under the restricted Stock
Award Agreement may (A) be subject to a vesting schedule to be
determined by the Board or the Committee, or (B) be fully vested at the
time of grant.

 

(iii)                            Termination of Participant’s Continuous Service. Unless
otherwise provided in the restricted Stock Award Agreement, in the event a
Participant’s Continuous Service terminates prior to a vesting date set forth
in the restricted Stock Award Agreement, any unvested restricted Stock Award
shall be forfeited and automatically transferred to and reacquired by the
Company at no cost to the Company, and neither the Participant nor his or her
heirs, executors, administrators or successors shall have any right or interest
in the restricted Stock Award. Notwithstanding the foregoing, unless otherwise
provided in the restricted Stock Award Agreement, in the event a Participant’s
Continuous Service terminates as a result of (w) being terminated by the
Company for reasons other than for cause, (x) death, (y) Disability, or (z) a
Change of Control (subject to the provisions of subsection 11(c) hereof),
then any unvested restricted Stock Award shall vest immediately upon such date.

 

(iv)                               Transferability. Rights to acquire Common Stock under the
restricted Stock Award Agreement shall be transferable by the Participant only
upon such terms and conditions as the Board or the Committee shall determine in
its discretion and set forth in the

 

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restricted
Stock Award Agreement; provided, however, that in all cases the Common Stock
awarded under the restricted Stock Award Agreement shall remain subject to the
terms of the restrictedStock Award Agreement.

 

(v)                                   Waiver of Restrictions. Subject to the specific
limitations on restricted Stock Awards contained in this Plan, the Board or the
Committee from time to time may authorize, generally or in specific cases
only, for the benefit of any Participant, any adjustment in the vesting schedule or
the restrictions upon or the term of, a restricted Stock Award granted under
this Plan by amendment, by substitution of any outstanding restricted Stock
Award, by waiver or by other legally valid means.

 

(b)                                  Grant of Stock Appreciation Rights. Stock appreciation rights
to receive Common Stock (or, at the discretion of the Board or the Committee,
an equivalent amount of cash) equal to the excess of the Fair Market Value of
Common Stock on the date the rights are surrendered over the Fair Market Value
of Common Stock on the date of grant may be granted to any Employee,
Director or Consultant selected by the Board or the Committee. A stock
appreciation right may be granted (i) in connection and
simultaneously with the grant of another Stock Award, (ii) with respect to
a previously granted Stock Award, or (iii) independent of another Stock
Award. A stock appreciation right shall be subject to such terms and conditions
not inconsistent with this Plan as the Board or the Committee shall impose and
shall be evidenced by a written stock appreciation right agreement, which shall
be executed by the Participant and an authorized officer of the Company. The
Board or the Committee, in its discretion, may determine whether a stock
appreciation right is to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code and stock appreciation right
agreements evidencing stock appreciation rights intended to so qualify shall
contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. The Board or the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a stock appreciation right that the
Participant surrender for cancellation some or all of the Stock Awards (if any)
previously granted to such person under this Plan or otherwise. A stock appreciation
right, the grant of which is conditioned upon such surrender, may have an
exercise price lower (or higher) than the exercise price of the surrendered
Stock Award, may contain such other terms as the Board or the Committee
deems appropriate, and shall be exercisable in accordance with its terms,
without regard to the number of shares, price, exercise period or any other
term or condition of such surrendered Stock Award.

 

8.                                      AVAILABILITY OF SHARES. During the terms of the
Stock Awards, the Company shall keep available at all times the number of
shares of Common Stock required to satisfy such Stock Awards.

 

9.                                      USE OF PROCEEDS FROM STOCK.

 

Proceeds
from the sale of Common Stock pursuant to Stock Awards shall constitute general
funds of the Company.

 

11

 

10.                               MISCELLANEOUS.

 

(a)                                  Exercise of Awards. Stock Awards shall be
exercisable at such times, or upon the occurrence of such event or events as
the Board or the Committee shall determine. Stock Awards may be exercised
in whole or in part. Common Stock purchased upon the exercise of a Stock Award
shall be paid for in full at the time of such purchase.

 

(b)                                  Acceleration of Exercisability and Vesting. The Board or
the Committee shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any
part thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.

 

(c)                                  Board Discretion. Notwithstanding the provisions of Section 6,
in the event of, or in anticipation of, a termination of employment or service
with the Company for any reason, other than a discharge for cause, the Board or
the Committee may accelerate the vesting and exercisability of all or a
portion of a Stock Award and/or, subject to the provisions of subsection 6(a)(ii),
extend the exercisability period of a Participant’s Option upon such terms as
the Board or the Committee determines as expressly set forth in or by amendment
to the Option Award; provided that, in the good faith determination of the
Board or the Committee, such acceleration or extension will not likely result
in the imposition of additional tax or interest under Section 409A of the
Code for the holder of the affected Stock Award.

 

(d)                                  Options in Substitution for Stock Options Granted by Other Corporations. Options may be
granted to Employees, Directors and Consultants under this Plan in substitution
for employee stock options granted by other entities, in connection with a
merger or reorganization by or with the granting entity or an affiliated
entity, or the acquisition by the Company, directly or indirectly, of all or a
substantial part of the stock or assets of the employing entity; provided
that, in the good faith determination of the Board or the Committee, the terms
of such substitution are not likely to result in the imposition of additional
tax or interest under Section 409A of the Code for the holder of the
affected Stock Award.

 

(e)                                  Stockholder Rights.

 

(i)                                    Options. Unless otherwise provided in and upon the terms and
conditions in the Option Agreement, no Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any Common
Stock subject to an Option unless and until such Participant has satisfied all
requirements for exercise of, and has exercised, the Option pursuant to its
terms.

 

(ii)                                Restricted Stock. Unless otherwise provided in and upon the
terms and conditions in the Stock Award Agreement governing an award of
restricted stock, a Participant shall have the right to receive all dividends
and other distributions paid or made respecting such restricted stock; provided,
however, no unvested restricted stock shall have any voting rights of a
stockholder respecting such unvested restricted stock unless and until such
unvested restricted stock becomes vested.

 

12

 

(f)                                    No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted, or any other
capacity, or shall affect the right of the Company or an Affiliate to terminate
with or without notice and with or without cause (i) the employment of an
Employee, (ii) the service of a Consultant to the Company or an Affiliate
or (iii) the service of a Director of the Company or an Affiliate.

 

(g)                                 Withholding Obligations. If the Company has or will
have a legal obligation to withhold the taxes related to the grant, vesting or
exercise of the Stock Award, such Stock Award may not be granted, vested
or exercised in whole or in part, unless such tax obligation is first satisfied
in a manner satisfactory to the Company. If permitted by the Committee, the
Participant may satisfy any federal, state or local tax withholding
obligation relating to the exercise or acquisition of Common Stock under a
Stock Award by any of the following means (in addition to the Company’s right
to withhold from any compensation paid to the Participant by the Company) or by
a combination of such means:  (i) tendering
a cash payment in Dollars; (ii) authorizing the Company to withhold Common
Stock from the Common Stock otherwise issuable to the Participant as a result
of the exercise or acquisition of Common Stock under the Stock Award; provided,
however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering
to the Company owned and unencumbered Common Stock.

 

(h)                                 Listing and Qualification of Shares. This Plan and grant and
exercise of Stock Awards hereunder, and the obligation of the Company to sell
and deliver shares of Common Stock under such Stock Awards, shall be subject to
all applicable United States federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be
required. The Company, in its discretion, may postpone the issuance or
delivery of Common Stock upon any exercise of a Stock Award until completion of
any stock exchange listing, or other qualification of such shares of Common
Stock under any United States federal or state law rule or regulation as
the Company may consider appropriate, and may require any individual
to whom a Stock Award is granted, such individual’s beneficiary or legal
representative, as applicable, to make such representations and furnish such
information as the Board or the Committee may consider necessary,
desirable or advisable in connection with the issuance or delivery of the
Common Stock in compliance with applicable laws, rules and regulations.

 

(i)                                    Non-Uniform Determinations. The Board’s or the Committee’s
determinations under this Plan (including, without limitation, determinations
of the persons to receive Stock Awards, the form, term, provisions, amount and
timing of the grant of such Stock Awards and of the agreements evidencing the
same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, Stock Awards under this Plan,
whether or not such persons are similarly situated.

 

11.                               ADJUSTMENTS
UPON CHANGES IN STOCK.

 

(a)                                  Capitalization Adjustments. In the event of any
reclassification, recapitalization, stock split (including in the form of
a stock dividend) or reverse stock split,

 

13

 

merger,
combination, consolidation or other reorganization of the Company, the Plan
will be appropriately adjusted with respect to the class(es) and maximum number
of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person and the outstanding
Stock Awards will be appropriately adjusted with respect to the class(es) and
number of securities and the exercise price per share of Common Stock subject
to such outstanding Stock Awards; provided, however, that subsection 11(b) shall
apply to any such transaction that constitutes a Change of Control; and
provided further that, in the good faith determination of the Board or the
Committee, the terms of such adjustment are not likely to result in the
imposition of additional tax or interest under Section 409A of the Code
for the holder of an affected Stock Award. The Board or the Committee shall
make such adjustments, and its determination shall be final, binding and
conclusive.

 

(b)                                  Change of Control. Except as otherwise set forth in an Option
Agreement or Stock Award Agreement, unless prior to a Change of Control the
Board or the Committee determines that, upon its occurrence, benefits under any
or all Options will not accelerate or determines that only certain or limited
benefits under any or all Options will be accelerated and the extent to which
they will be accelerated, and/or establishes a different time in respect of
such event for such acceleration, then upon (or, as may be necessary to
effectuate the purposes of this acceleration, immediately prior to) the
occurrence of a Change of Control each Option will become immediately vested
and exercisable. Any acceleration of an Option will comply with applicable
legal requirements and, if necessary to accomplish the purposes of the
acceleration or if the circumstances otherwise require, may be deemed by
the Board or the Committee to occur not more than thirty (30) days before or
only upon the consummation of the Change of Control.

 

(c)                                  Termination of Option. Without any limitation on
the Board’s or the Committee’s authority pursuant to the foregoing, if the
vesting of any Option has been fully accelerated as required or permitted
pursuant to the foregoing but is not exercised prior to (x) a dissolution of
the Corporation, (y) an event described in subsection 11(a) that the
Company does not survive or (z) the consummation of a Change of Control
approved by the Board or the Committee, the Option shall terminate, subject to
any provision that has been expressly made by the Board or the Committee for
the survival, substitution, assumption, exchange or other settlement of the
Option.

 

(d)                                  Possible Rescission of Acceleration. If the vesting of an
Option has been accelerated in anticipation of an event or upon stockholder approval
of an event and the Board or the Committee later determines that the event will
not occur, the Board or the Committee may rescind the effect of the
acceleration as to any then outstanding and unexercised or otherwise unvested
Option.

 

(e)                                  Alternative Settlement. In the event of any
transaction subject to subsection 11(a) or (b), the Board or the
Committee may make provision for a settlement by a cash payment or for the
substitution of any or all outstanding Stock Awards for cash, securities or
other property (or for other awards) based on the distribution or consideration
payable to holders of the Common Stock upon or in respect of such event;
provided that, in the good faith determination of the Board or the Committee,
the terms of such settlement or substitution are not likely to result in the
imposition of additional tax or interest under Section 409A of the Code to
the holder of an affected Stock Award.

 

14

 

12.                               AMENDMENT
OF THE PLAN AND STOCK AWARDS.

 

(a)                                  Amendment of Plan. The Board or the Committee at any time, and
from time to time, may amend the Plan. However, except as provided in Section 11
relating to adjustments upon changes in Common Stock, no amendment shall be
effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of Section 422
of the Code, Rule 16b-3 or any applicable Nasdaq or securities exchange
listing requirements.

 

(b)                                  Stockholder Approval. The Board or the Committee
may, in its sole discretion, submit any other amendment to the Plan for
stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.

 

(c)                                  Contemplated Amendments. It is expressly contemplated
that the Board or the Committee may amend the Plan in any respect the
Board or the Committee deems necessary or advisable to provide eligible
Employees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to Incentive
Stock Options and/or to bring the Plan and/or Incentive Stock Options granted
under it into compliance therewith.

 

(d)                                  No Impairment of Rights. Rights under any Stock Award
granted before amendment of the Plan shall not be impaired by any amendment of
the Plan unless the Participant consents in writing.

 

(e)                                  Amendment of Stock Awards. The Board or the Committee
at any time, and from time to time, may amend the terms of any one or more
Stock Awards; provided, however, that the rights under any Stock Award shall
not be impaired by any such amendment unless the applicable Participant
consents in writing.

 

(f)                                    Amendment to Conform to Law. Notwithstanding any other
provision of this Plan to the contrary, the Board may amend the Plan or a
Stock Award or Option Agreement, to take effect retroactively or otherwise, as
deemed necessary or advisable for the purpose of conforming the Plan or a Stock
Award or Option Agreement to any present or future law relating to plans of
this or similar nature ( including Section 409A of the Code), and to the
administrative regulations and rulings promulgated thereunder.

 

13.                               TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan Term. The Board or the Committee may suspend or
terminate the Plan at any time. Unless sooner terminated, the Plan shall
terminate on the day before the tenth (10th) anniversary of the date this
amended and restated Plan is adopted by the stockholders of the Company. No
Stock Awards may be granted under the Plan while the Plan is suspended or
after it is terminated.

 

15

 

(b)                                  No Impairment of Rights. Suspension or termination of
the Plan shall not impair rights and obligations under any Stock Award granted
while the Plan is in effect except with the written consent of the Participant.

 

(c)                                  Savings Clause. This Plan is intended to comply in all
aspects with applicable laws and regulations. In case any one or more of the
provisions of this Plan shall be held invalid, illegal or unenforceable in any
respect under applicable law or regulation, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and the invalid, illegal or unenforceable provision shall be
deemed null and void; however, to the extent permissible by law, any provision
which could be deemed null and void shall first be construed, interpreted or
revised retroactively to permit this Plan to be construed in compliance with
all applicable laws so as to foster the intent of this Plan.

 

14.                               EFFECTIVE
DATE OF PLAN.

 

The
Plan shall become effective as determined by the Board or the Committee, but no
Stock Award shall be exercised (or, in the case of a restricted Stock Award,
shall be granted) unless and until the Plan has been approved by the stockholders
of the Company, which approval shall be within twelve (12) months before or
after the date the Plan is adopted by the Board or the Committee.

 

15.                               CHOICE OF
LAW.

 

The
law of the Delaware shall govern all questions concerning the construction, validity
and interpretation of this Plan, without regard to such state’s conflict of
laws rules.

 

Stockholder Approval

 

The
undersigned, being the sole stockholder of Venoco, Inc., hereby approves
the Venoco, Inc. Amended and Restated 2005 Stock Incentive Plan as set
forth above.

 

 

	
  Dated:
  May 9, 2006

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Timothy M. Marquez

  	
   

  
	
   

  	
  Timothy
  M. Marquez, Trustee of the

  
	
   

  	
  Marquez
  Trust, under Trust Agreement

  
	
   

  	
  dated
  February 26, 2002, as amended

  

 

16Exhibit 10.2

 

VENOCO, INC.

 

AMENDED AND RESTATED

2005 STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

 

This Stock
Option Agreement (the “Agreement”), made as of the      day
of          , 200  , by
and between Venoco, Inc., a Delaware corporation (the “Company”), and                         
(the “Participant”).

 

RECITAL

 

The Company
desires to provide incentives for eligible Employees, Directors and Consultants
of the Company and its Affiliates to exert maximum efforts for the success of
the Company and its Affiliates, and enable the Participant to acquire a
proprietary interest in the Company through the ownership of the Company’s
common stock, par value $0.01 per share (the “Common Stock”), pursuant to the
terms and conditions of the Amended and Restated Venoco, Inc. 2005 Stock
Incentive Plan (the “Plan”) and this Agreement.

 

AGREEMENT

 

NOW,
THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the
parties agree as follows:

 

1.                                      DEFINITIONS.

 

(a)                                  For purposes of this
Agreement, all capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Plan.

 

(b)                                 Each of the following
terms is defined in the Section set forth opposite each term:

 

	
  Term

  	
   

  	
  Section

  
	
  Agreement

  	
   

  	
  Introduction

  
	
  Cashless
  Exercise

  	
   

  	
  6(b)(ii)

  
	
  Common Stock

  	
   

  	
  Recital

  
	
  Company

  	
   

  	
  Introduction

  
	
  Exercise
  Agreement

  	
   

  	
  6(a)(i)

  
	
  Exercise
  Price

  	
   

  	
  2

  
	
  Expiration
  Date

  	
   

  	
  3

  
	
  Option

  	
   

  	
  2

  
	
  Participant

  	
   

  	
  Introduction

  
	
  Plan

  	
   

  	
  Recital

  

 

 

2.                                      GRANT
OF OPTION. The Company hereby grants to the Participant a non-qualified
stock option (the “Option”) to purchase              
shares of Common Stock at the exercise price of $      
per share (the “Exercise Price”), subject to the terms and conditions of this Agreement
and the Plan. This Option shall be treated as a non-qualified stock option and
will not qualify as an incentive stock option within the meaning of Section 422
of the Code.

 

3.                                      OPTION
TERM. The Option granted hereby shall expire on                      
(the “Expiration Date”), unless sooner terminated or modified under the
provisions of this Agreement or the Plan. Except as otherwise set forth herein,
the Option may not be exercised after the Expiration Date.

 

4.                                      VESTING.
The Option shall vest and be exercisable by the Participant in accordance with
the following schedule:

 

	
  Date

  	
   

  	
  Number
  of 

  Options Vested

  
	
  Date of Grant

  	
   

  	
   

  
	
  First Anniversary

  	
   

  	
   

  
	
  Second Anniversary

  	
   

  	
   

  
	
  Third Anniversary

  	
   

  	
   

  
	
  Fourth Anniversary

  	
   

  	
   

  

 

5.                                      NON-ASSIGNABILITY.
Any attempted assignment, transfer, pledge, hypothecation or other disposition
of an Option not specifically permitted in the Plan shall be null and void and
without effect.

 

6.                                      MODE
OF EXERCISE.

 

(a)                                  The Option may be
exercised in whole or in part. The Option shall be exercisable by the delivery
to the Secretary of the Company of:

 

(i)                                     an executed Option
Exercise Agreement in substantially the form attached hereto as Exhibit A
or such other form as the Board or the Committee may require from
time to time (the “Exercise Agreement”);

 

(ii)                                  payment for the
Exercise Price as provided pursuant to Section 6(b) below;

 

(iii)                               satisfaction of the tax
withholding provisions of Section 10; and

 

(iv)                              any written statements or
agreements required by the Board or the Committee to be made by the Participant
pursuant to the Plan or this Agreement.

 

(b)                                 Payment for the shares
of Common Stock to be purchased pursuant to the Option may be made by any
of the following methods:

 

2

 

(i)                                     Participant may pay
by check or electronic funds transfer to the Company, subject to such specific
procedures or directions as the Board or the Committee may establish;

 

(ii)                                  Subject to the
requirements of applicable law, Participant may elect to receive upon
exercise of the Option the net number of shares of Common Stock determined
according to the following formula (a “Cashless Exercise”):

 

	
  Net Number

  	
   

  	
  =

  	
   

  	
  (A x B) - (A
  x C)

  
	
   

  	
   

  	
   

  	
   

  	
  B

  

 

For the purpose of this formula:

 

A  =   the
total number of shares with respect to which the Option is then being
exercised.

B  =   the
Fair Market Value (as defined in the Plan) per share of the Common Stock on the
date the Exercise Agreement is executed.

C  =   the
exercise price in effect for the shares with respect to which the Option is
being exercised.

 

7.                                      SECURITIES
LAW COMPLIANCE. Subject to Section 7(h), the Participant
acknowledges that the Option and the shares of Common Stock issued or delivered
upon exercise of the Option are not being registered under the Securities Act
or applicable state securities laws. The Participant, by executing this
Agreement, hereby makes the following representations to the Company and
acknowledges that the Company’s reliance on federal and state securities law
exemptions from registration and qualification is predicated, in substantial
part, upon the accuracy of these representations:

 

(a)                                  The Participant is
acquiring the Option and, if and when he/she exercises the Option, will acquire
the shares of Common Stock solely for the Participant’s own account, for
investment purposes only, and not with a view to or an intent to sell, or to
offer for resale in connection with any unregistered distribution, all or any
portion of the shares within the meaning of the Securities Act or applicable
state securities laws.

 

(b)                                 The Participant has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the Option and the restrictions imposed
on any shares of Common Stock acquired upon exercise of the Option. The
Participant has been furnished with, and/or has access to, such information as
he/she considers necessary or appropriate for deciding whether to exercise the
Option and acquire shares of Common Stock. However, in evaluating the merits
and risks of an investment in the Common Stock, the Participant has and will
rely upon the advice of his/her own legal counsel, tax advisors, and/or
investment advisors.

 

(c)                                  The Participant is
aware that the Option may be of no practical value, that any value it may have
depends on its vesting and exercisability as well as an increase in the value
of the underlying shares of Common Stock to an amount in excess of the Exercise
Price, and that any investment in common shares of a closely held entity such
as the Company is 

 

3

 

non-marketable, non-transferable and could require capital to be
invested for an indefinite period of time, possibly without return, and at
substantial risk of loss.

 

(d)                                 The Participant
understands that any shares of Common Stock acquired on exercise of the Option
will be characterized as “restricted securities” under the federal securities
laws, and that, under such laws and applicable regulations, such securities may be
resold without registration under the Securities Act only in certain limited
circumstances, including in accordance with the conditions of Rule 144
promulgated under the Securities Act, as presently in effect, with which the
Participant is familiar.

 

(e)                                  The Participant has
read and understands the restrictions and limitations set forth in the Plan and
this Option Agreement, which are imposed on the Option and any shares of Common
Stock which may be acquired upon exercise of the Option.

 

(f)                                    At no time was an
oral representation made to the Participant relating to the Option or the
acquisition of shares of Common Stock and the Participant was not presented
with or solicited by any promotional meeting or material relating to the Option
or the Common Stock.

 

(g)                                 All certificates
evidencing shares of Common Stock issued or delivered pursuant to the exercise
of the Option shall bear the following legend and/or any other appropriate or
required legends under applicable laws:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”),
NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY
STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION
STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE
IN ACCORDANCE WITH RULE 144 UNDER THE ACT OR, IN THE OPINION OF COUNSEL TO
THE CORPORATION, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH
TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.

 

(h)                                 Notwithstanding the
foregoing, this Section 7 shall apply only if and to the extent the Option
and the shares of Common Stock issued or delivered upon exercise of the Option
are not registered under the Securities Act and applicable state securities laws.

 

8.                                      PLAN
CONTROLLING. The Option and all rights of the Participant under this
Agreement are subject to, and the Participant agrees to be bound by, all of the
terms and conditions of the Plan, incorporated herein by this reference. In the
event of a conflict or inconsistency between this Agreement and the Plan, the
Plan shall govern. The Participant acknowledges receipt of a copy of the Plan
and agrees to be bound by the terms thereof and of 

 

4

 

this Agreement. The Participant acknowledges reading and understanding
the Plan and this Agreement. Unless otherwise expressly provided in other
sections of this Agreement, provisions of the Plan that confer discretionary
authority on the Board or the Committee do not and shall not be deemed to
create any rights in the Participant unless such rights are expressly set forth
herein or are otherwise in the sole discretion of the Board or the Committee so
conferred by appropriate action of the Board or the Committee under the Plan
after the date hereof.

 

9.                                      RIGHTS
PRIOR TO EXERCISE OF OPTION. The Participant shall not have any rights
as a stockholder with respect to any Common Stock subject to the Option prior
to the date on which he is recorded as the holder of such Common Stock on the
records of the Company.

 

10.                               WITHHOLDING
TAXES. If the Company has or will have a legal obligation to withhold
the taxes related to the Option, such Option may not be granted, vested or
exercised, in whole or in part, unless such tax obligation is first satisfied
in a manner satisfactory to the Company. If permitted by the Board or the
Committee, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of any Common
Stock under the Option by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: 
(a) tendering a cash payment in Dollars; (b) authorizing the
Company to withhold Common Stock from the Common Stock otherwise issuable to
the Participant as a result of the exercise or acquisition of Common Stock
under the Option; provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or (c) delivering to the Company unencumbered Common
Stock owned by the Participant.

 

11.                               SATISFACTION
OF ALL RIGHTS TO EQUITY. The Option is in complete satisfaction of any
and all rights that the Participant may have (under an employment,
consulting, or other written or oral agreement with the Company, or otherwise)
to receive (a) stock options or a restricted stock award with respect to
the Company’s securities, and/or (b) any other equity or derivative
security in or with respect to the Company. This Agreement supersedes the terms
of all prior understandings and agreements, written or oral, of the parties
with respect to such matters. The Participant shall have no further rights or
benefits under any prior agreement conveying any right with respect to any
security or derivative security in or with respect to the Company. The
foregoing notwithstanding, this Section 11 shall not adversely affect the
Participant’s rights under any prior option or restricted stock agreement under
the Plan (provided such agreement is expressly labeled as an option, restricted
stock, or award agreement under the Plan and is similar in form to this
Agreement, which has been signed by an authorized officer of the Company).

 

12.                               NO
LIABILITY OF BOARD COMMITTEE MEMBERS. No member of the Board or any
Committee or their designees shall be personally liable by reason of any
contract or other instrument executed by such member or on his behalf in his or
her capacity as a member of the Board or Committee, nor for any mistake of
judgment made in good faith.

 

13.                               AMENDMENT.
The Plan, this Agreement and the Exercise Agreement may be amended
pursuant to Section 12 of the Plan. Such amendment must be in writing and
signed by 

 

5

 

the Company. The Company may, however, unilaterally waive any provision
of the this Agreement in writing to the extent such waiver does not adversely
affect the interests of the Participant hereunder, but no such waiver shall
operate as or be construed to be a subsequent waiver of the same provision or a
waiver of any other provision hereof.

 

14.                               ARBITRATION.
Any dispute, controversy or claim arising out of or relating to this Agreement,
the Plan, and/or the Exercise Agreement, their enforcement or interpretation,
or because of an alleged breach, default, or misrepresentation in connection
with any of their provisions, will be determined exclusively by confidential,
final and binding arbitration in Denver, Colorado, pursuant to the Colorado
Arbitration Act and the rules of the American Arbitration Association. The
arbitration shall be before a single neutral arbitrator mutually agreed upon by
the parties or, if the parties are unable to agree upon an arbitrator, the
arbitrator shall be selected pursuant to C.R.S. Section 13-22-205. Disputes,
controversies or claims subject to final and binding arbitration under this
Agreement include, without limitation, all those that could otherwise be tried
in court to a judge or jury in the absence of this Section 14. The
Participant and the Company agree that they each expressly waive any rights to
have such matters heard or tried before judge or jury in another tribunal. The
arbitrator’s award will be final, binding, and conclusive upon the parties,
subject only to judicial review provided by statute, and a judgment rendered on
the arbitration award can be entered in any state or federal court having
jurisdiction thereof. Nothing in this Section 14, however, shall limit the
right of the parties to stipulate and agree to conduct the arbitration before
and pursuant to the then existing rules of any other agreed-upon
arbitration services provider.

 

15.                               NOTICE.
Any notice to be given under the Option Agreement shall be in writing and
addressed to the Company at its principal office in Denver, Colorado to the
attention of the Chief Executive Officer, with a copy addressed to the Company
at its principal office in Carpinteria, California to the attention of the
General Counsel, and to the Participant at the address reflected or last
reflected on the Company’s payroll records, or to such other address as is
provided by the Participant in writing. Any notice shall be delivered in person
or shall be enclosed in a properly, sealed envelope, addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification
fee prepaid) in a post office or branch post office regularly maintained by the
United States Government. Any such notice shall be given only when received,
but if the Participant is no longer an Employee, Director or Consultant, shall
be deemed to have been duly given as of the date mailed in accordance with this
provision.

 

16.                               GOVERNING
LAW. This Agreement and all rights arising hereunder shall be governed
by, and construed and interpreted in accordance with, the laws of the Delaware.

 

NEITHER THE PLAN NOR THIS AGREEMENT SHALL BE
CONSTRUED AS GIVING THE PARTICIPANT THE RIGHT TO BE RETAINED IN THE EMPLOY OR
SERVICE OF THE COMPANY OR ANY AFFILIATE THEREOF, NOR SHALL THEY INTERFERE IN
ANY WAY WITH THE RIGHT OF THE COMPANY OR ANY AFFILIATE THEREOF, AS APPLICABLE,
TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE AT ANY TIME WITH OR
WITHOUT CAUSE.

 

* * * * *

 

6

 

Executed as of
the day and year first above written.

 

	
   

  	
  VENOCO, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PARTICIPANT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

7

 

EXHIBIT A

 

VENOCO, INC.

AMENDED
AND RESTATED

2005
EMPLOYEE STOCK INCENTIVE PLAN

OPTION
EXERCISE AGREEMENT

 

The
undersigned (the “Purchaser”)
hereby irrevocably elects to exercise his/her right, evidenced by that certain
Non-qualified Stock Option Agreement dated as of                         
(the “Option Agreement”) under the
Venoco, Inc. Amended and Restated 2005 Employee Stock Incentive Plan (the “Plan”), to purchase                       
shares of Common Stock, par value $0.01 per share (the “Shares”), of Venoco, Inc., a Delaware
Company (the “Company”), at an exercise
price of                          
dollars per share. Capitalized terms used herein and not otherwise defined
shall have the meaning set forth in the Option Agreement, or if not contained
therein, in the Plan.

 

1.                                       Form of Exercise Price. The Purchaser
intends that payment of the Exercise Price shall be made as (check applicable
line):

 

	
  o

  	
  a cash exercise with respect to                              
  shares of Common Stock; and/or

  
	
   

  	
   

  
	
  o

  	
  a Cashless Exercise with respect to                              
  shares of Common Stock.

  

 

 

2.                                       Purchase Price. In the event the Purchaser
has elected a cash exercise with respect to some or all of the Shares to be
issued pursuant hereto, the Purchaser shall pay the exercise price of $                             
per share, for an aggregate exercise amount of $                             
to the Company in accordance with the terms of the Option Agreement.

 

3.                                       Delivery. The Company shall deliver a
certificate representing the Shares and registered in the name of the Purchaser
to:

 

 

4.                                       Investment Representations. The Purchaser
acknowledges that the sale of the Shares by the Purchaser is restricted by the
Securities Act and applicable state securities laws. The Purchaser hereby
affirms the representations made by the Purchaser in Section 7 of the
Option Agreement, effective as of the date of the Option Agreement and as of
the date hereof (subject to Section 7(h) of the Option Agreement). Such
representations are incorporated herein by this reference.

 

5.                                       Plan and Option Agreement. The Purchaser
acknowledges that all of his/her rights are subject to, and the Purchaser
agrees to be bound by, all of the terms and conditions of the Plan and the
Option Agreement, both of which are incorporated herein by this reference. If a

 

 

conflict or
inconsistency between the terms and conditions of this Exercise Agreement and
of the Plan and Option Agreement shall arise, the terms of the Plan and/or
Option Agreement shall govern. The Purchaser acknowledges receipt of a copy of
all documents referenced herein and acknowledges reading and understanding
these documents and having an opportunity to ask any questions that he/she may have
had about them. Any controversy or claim arising out of or relating to this
Exercise Agreement shall be submitted to arbitration in accordance with Section 14
of the Option Agreement, and Delaware law shall apply as provided in Section 16
of the Option Agreement.

 

7.                                       Entire Agreement. This Exercise Agreement,
the Option Agreement, and the Plan together constitute the entire agreement and
supersede all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. The Plan, the Option
Agreement and this Exercise Agreement may be amended pursuant to Section 12
of the Plan. Such amendment must be in writing and signed by the Company. The
Company may, however, unilaterally waive any provision hereof or of the Option
Agreement in writing to the extent such waiver does not adversely affect the
interests of the Participant hereunder, but no such waiver shall operate as or
be construed to be a subsequent waiver of the same provision or a wavier of any
other provision hereof.

 

	
  PURCHASER:  

  	
  ACCEPTED BY: 

  
	
   

  	
  VENOCO, INC. 

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  	
  Its: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print Name 

  	
   

  
	
   

  	
  (To be completed by the Company after the

  
	
   

  	
   

  	
  price (including applicable withholding

  
	
  Date

  	
  taxes), value (if applicable) and receipt
  of

  funds is verified.)

  
							

 

2

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