Document:

Exhibi 10.2

 

PURCHASE AND SALE AGREEMENT

 

between

 

IMPERIAL
PETROLEUM, INC.

(Seller)

 

and

 

WHITTIER
ENERGY COMPANY and PREMIER NATURAL RESOURCES, LLC

(Buyer)

 

 

TABLE
OF CONTENTS

 

	
  1.

  	
  Property to be Sold and Purchased

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Purchase Price

  	
  2

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Representations of Seller

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Organization and Qualification

  	
  3

  
	
   

  	
  (b)

  	
  Due Authorization

  	
  3

  
	
   

  	
  (c)

  	
  Approvals

  	
  3

  
	
   

  	
  (d)

  	
  Valid, Binding and Enforceable

  	
  4

  
	
   

  	
  (e)

  	
  No Litigation

  	
  4

  
	
   

  	
  (f)

  	
  Warranty of Title

  	
  4

  
	
   

  	
  (g)

  	
  No AFE Items or Well Abandonments, No P&A Liabilities

  	
  5

  
	
   

  	
  (h)

  	
  Production Marketing

  	
  5

  
	
   

  	
  (i)

  	
  Gas Balancing, Take or Pay, Allowables

  	
  5

  
	
   

  	
  (j)

  	
  Taxes Paid

  	
  6

  
	
   

  	
  (k)

  	
  Hazardous Substances, Applicable Environmental Laws

  	
  6

  
	
   

  	
  (l)

  	
  Leases

  	
  6

  
	
   

  	
  (m)

  	
  Material Contracts; Operations

  	
  6

  
	
   

  	
  (m)

  	
  Permits

  	
  7

  
	
   

  	
  (n)

  	
  Compliance with Laws

  	
  7

  
	
   

  	
  (p)

  	
  Tax Partnerships

  	
  7

  
	
   

  	
  (q)

  	
  No Material Misstatement

  	
  8

  
	
   

  	
  (r)

  	
  Not a Foreign Person

  	
  8

  
	
   

  	
  (s)

  	
  Consents and Preferential Purchase Rights

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Representations of Buyer

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Organization and Qualification

  	
  8

  
	
   

  	
  (b)

  	
  Due Authorization

  	
  8

  
	
   

  	
  (c)

  	
  Approvals

  	
  8

  
	
   

  	
  (d)

  	
  Valid, Binding and Enforceable

  	
  8

  
	
   

  	
  (e)

  	
  No Litigation

  	
  8

  
	
   

  	
  (f)

  	
  Sufficient Funds

  	
  9

  
	
   

  	
  (g)

  	
  Regulatory

  	
  9

  
	
   

  	
  (h)

  	
  Independent Evaluation

  	
  9

  
	
   

  	
  (i)

  	
  Accredited Investor

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Certain Covenants of Seller Pending Closing

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Access by Buyer

  	
  9

  
	
   

  	
   

  	
  (i)

  	
  Records

  	
  9

  
	
   

  	
   

  	
  (ii)

  	
  Physical Inspection

  	
  10

  
							

 

i

 

	
   

  	
   

  	
  (iii)

  	
  Environmental Inspections

  	
  10

  
	
   

  	
   

  	
  (iv)

  	
  Coordination of Inspections

  	
   

  	
  10

  
	
   

  	
   

  	
  (v)

  	
  Copies of Reports

  	
  10

  
	
   

  	
   

  	
  (vi)

  	
  Restoration of Properties

  	
  11

  
	
   

  	
   

  	
  (vii)

  	
  Confidentiality Agreement

  	
  11

  
	
   

  	
  (b)

  	
  Interim Operation

  	
  11

  
	
   

  	
  (c)

  	
  Preferential Rights and Consents

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Due Diligence Reviews

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Review By Buyer

  	
  13

  
	
   

  	
   

  	
  i)

  	
  Determination of Defects

  	
  13

  
	
   

  	
   

  	
  (ii)

  	
  Defect Claim Threshold

  	
  13

  
	
   

  	
  (b)

  	
  Nature of Defects

  	
  14

  
	
   

  	
   

  	
  (i)

  	
  NRI or WI Variances

  	
  14

  
	
   

  	
   

  	
  (ii)

  	
  Liens

  	
  14

  
	
   

  	
   

  	
  (iii)

  	
  Imperfections in Title

  	
  14

  
	
   

  	
   

  	
  (iv)

  	
  Representation Untrue

  	
  14

  
	
   

  	
  (c)

  	
  Seller’s Response

  	
  14

  
	
   

  	
   

  	
  (i)

  	
  Cure

  	
  14

  
	
   

  	
   

  	
  (ii)

  	
  Postpone Closing

  	
  15

  
	
   

  	
   

  	
  (iii)

  	
  Adjustment

  	
  15

  
	
   

  	
   

  	
  (iv)

  	
  Dispute Resolution

  	
  15

  
	
   

  	
  (d)

  	
  Covered by Representations, Agreements

  	
  15

  
	
   

  	
  (e)

  	
  Definitions

  	
  15

  
	
   

  	
  (f)

  	
  Seller’s Title Benefit Notices

  	
  17

  
	
   

  	
  (g)

  	
  Remedies for Title Benefits

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Certain Price Adjustments

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Conditions Precedent to the Obligations of Buyer to Close

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Representations True and Correct

  	
  19

  
	
   

  	
  (b)

  	
  Compliance with Covenants and Agreements

  	
  19

  
	
   

  	
  (c)

  	
  Price Adjustment Limitations

  	
  19

  
	
   

  	
  (d)

  	
  Litigation

  	
  19

  
	
   

  	
  (e)

  	
  Material Adverse Change

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Conditions Precedent to the Obligations of Seller to Close

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Representations True and Correct

  	
  20

  
	
   

  	
  (b)

  	
  Compliance With Covenants and Agreements

  	
  21

  
	
   

  	
  (c)

  	
  Litigation

  	
  21

  
	
   

  	
  (d)

  	
  Price Adjustment Limitations

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Closing

  	
  22

  
							

 

ii

 

	
   

  	
  (a)

  	
  Actions At Closing

  	
  22

  
	
   

  	
   

  	
  (i)

  	
  Delivery of Conveyance

  	
  22

  
	
   

  	
   

  	
  (ii)

  	
  Federal and State Conveyance Forms

  	
  22

  
	
   

  	
   

  	
  (iii)

  	
  Letters in Lieu

  	
  22

  
	
   

  	
   

  	
  (iv)

  	
  Affiliate Contracts

  	
  22

  
	
   

  	
   

  	
  (v)

  	
  Turn Over Possession

  	
  22

  
	
   

  	
   

  	
  (vi)

  	
  Payment to Seller

  	
  22

  
	
   

  	
   

  	
  (vii)

  	
  Non Foreign Status Affidavit

  	
  23

  
	
   

  	
   

  	
  (viii)

  	
  Seller’s Loan Documents

  	
  23

  
	
   

  	
  (b)

  	
  Post-Closing Actions

  	
  23

  
	
   

  	
   

  	
  (i)

  	
  Transfer of Files

  	
  23

  
	
   

  	
   

  	
  (ii)

  	
  Certain Disbursements

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Certain Accounting Adjustments

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Adjustments for Revenues and Expenses

  	
  24

  
	
   

  	
  (b)

  	
  Initial Adjustment at Closing

  	
  25

  
	
   

  	
  (c)

  	
  Adjustment Post Closing

  	
  25

  
	
   

  	
   

  	
  (i)

  	
  Revised Closing Statement

  	
  25

  
	
   

  	
   

  	
  (ii)

  	
  Final Statement

  	
  25

  
	
   

  	
  (d)

  	
  Additional Adjustments

  	
  26

  
	
   

  	
  (e)

  	
  Accounting Arbitrator

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Assumption and Indemnification

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Indemnity by Buyer

  	
  26

  
	
   

  	
  (b)

  	
  Indemnity by Seller

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  No Commissions Owed

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Casualty Loss

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Oil and Gas Properties

  	
  27

  
	
   

  	
  (b)

  	
  Other Properties

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Notices

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  Survival of Provisions, Certain Limitation on Liabilities

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Miscellaneous Matters

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Further Assurances

  	
  29

  
	
   

  	
  (b)

  	
  Parties Bear Own Expenses, No Special Damages

  	
  29

  
	
   

  	
  (c)

  	
  No Sales Taxes

  	
  29

  
	
   

  	
  (d)

  	
  Entire Agreement

  	
  30

  
	
   

  	
  (e)

  	
  Amendments, Waivers

  	
  30

  

 

iii

 

	
   

  	
  (f)

  	
  Choice of Law

  	
  30

  
	
   

  	
  (g)

  	
  Headings, Time of Essence, etc

  	
  30

  
	
   

  	
  (h)

  	
  Assignment; Successors and Assigns

  	
  30

  
	
   

  	
  (i)

  	
  Counterpart Execution

  	
  30

  
	
   

  	
  (j)

  	
  No Press Releases

  	
  30

  
	
   

  	
  (k)

  	
  Disclaimer

  	
  31

  
	
   

  	
  (l)

  	
  Arbitration

  	
  32

  

 

iv

 

LIST
OF SCHEDULES AND EXHIBITS

 

Exhibits

 

	
  A

  	
   

  	
  –

  	
   

  	
  Property Descriptions

  
	
  B

  	
   

  	
  –

  	
   

  	
  Pulling Equipment

  
	
  C

  	
   

  	
  –

  	
   

  	
  Form of Post Closing Escrow Agreement

  
	
  D

  	
   

  	
  –

  	
   

  	
  Invoicing Report (Agreed Payables)

  

 

	
  Schedules

  	
   

  	
   

  
	
  I 

  	
   

  	
  –

  	
   

  	
  County/StateWells, Units, Lease or Drilling
  Locations; WI; NRI; Allocated Amounts

  
	
  II

  	
   

  	
  –

  	
   

  	
  Disclosure Schedule

  
	
   

  	
   

  	
   

  	
   

  	
  3(c)

  	
   

  	
  Approvals

  
	
   

  	
   

  	
   

  	
   

  	
  3(e)

  	
   

  	
  Litigation

  
	
   

  	
   

  	
   

  	
   

  	
  3(g)

  	
   

  	
  AFEs, Wells Abandonment, P&A
  Liabilities

  
	
   

  	
   

  	
   

  	
   

  	
  3(h)

  	
   

  	
  Production Marketing

  
	
   

  	
   

  	
   

  	
   

  	
  3(k)

  	
   

  	
  Hazardous Substances; Applicable
  Environmental Laws

  
	
   

  	
   

  	
   

  	
   

  	
  3(l)

  	
   

  	
  Leases

  
	
   

  	
   

  	
   

  	
   

  	
  3(m)

  	
   

  	
  Material Contracts; Operations

  
	
   

  	
   

  	
   

  	
   

  	
  3(r)

  	
   

  	
  Preferential Rights and Consents

  
	
   

  	
   

  	
   

  	
   

  	
  5(b)

  	
   

  	
  Interim Operations

  
	
  III

  	
   

  	
  –

  	
   

  	
  Form of Conveyance

  
									

 

v

 

PURCHASE AND SALE AGREEMENT

 

This Agreement
(“Agreement”)
dated April       , 2006, is between Imperial Petroleum, Inc., a Nevada
corporation (herein called “Seller”)
and Whittier Energy Company, a
Nevada corporation, and Premier Natural Resources, LLC, a Delaware limited
liability company (herein collectively called “Buyer”).

 

W I T N E S S
E T H:

 

1.             Property to be Sold and Purchased. Seller agrees to sell
and Buyer agrees to purchase, for the consideration hereinafter set forth, and
subject to the terms and provisions herein contained, the following described
properties, rights and interests:

 

(a)           all right, title and
interest of Seller in and to the oil and gas leases and other, interests, if
any, described on Exhibit A hereto (and any ratifications, amendments and
extensions thereof, whether or not the same are described on Exhibit A);

 

(b)           Without limitation of the foregoing,
all other right, title and interest (of whatever kind or character, whether
legal or equitable, and whether vested or contingent) of Seller in and to the
leases and other interests, if any, described on Exhibit A hereto and in and to
all lands described on Exhibit A or described or covered by such leases
or other interests (including, without limitation, interests in oil, gas and/or
mineral leases, overriding royalties, production payments, net profits
interests, fee mineral interests, fee royalty interests and other interests
insofar as they cover such lands), even though Seller’s interest therein may be
incorrectly described in, or omitted from, such Exhibit A; and

 

(c)           all rights, titles
and interests of Seller in and to, or otherwise derived from, all presently
existing and valid oil, gas and/or mineral unitization, pooling, and/or
communitization agreements, declarations, designations and/or orders
(including, without limitation, those described on Exhibit A hereto) and in and
to the properties covered and the units created thereby (including, without
limitation, all units formed under orders, rules, regulations, or other
official acts of any federal, state, or other authority having jurisdiction,
and voluntary unitization agreements, designations and/or declarations)
relating to the properties described in subsections (a) and (b) above;

 

(d)           to the extent
assignable, all rights, titles and interests of Seller in and to all presently
existing and valid production sales contracts, operating agreements, and other
agreements and contracts which relate to any of the properties described in
subsections (a), (b) and (c) above (the “Contracts”); and

 

(e)           all rights, titles
and interests of Seller in and to all materials, supplies, machinery, equipment,
improvements and other personal property and fixtures (including, but not by
way of limitation, all wells, wellhead equipment, pumping units, flowlines,
tanks, buildings, saltwater disposal facilities, injection facilities,
compression facilities, gathering systems, and other equipment) used in
connection with the exploration, development, operation or maintenance of the
properties described in subsections (a), (b) and (c) above, and, to the extent
assignable, in and to all permits and licenses (including, without limitation,
all environmental and other governmental permits, licenses and authorizations),
rights of way,

 

 

easements, and other rights of surface use,  water rights and other rights and interests
used in connection with the exploration, development, operation or maintenance
of the properties described in subsections (a), (b) and (c) above.

 

The properties, rights and
interests described in subsections (a) through (c) above are herein sometimes
called the “Oil and Gas Properties,” and the properties, rights and interests
described in subsections (a) through (e) above are herein sometimes called the “Properties.”  It is provided however, that Properties does
not include: (a) all of Seller’s corporate minute books, financial
records, and other business records that relate to Seller’s business generally
(including the ownership and operation of the Properties); (b) all trade
credits, all accounts, receivables and all other proceeds, income or revenues
attributable to the Properties with respect to any period of time prior to the
Effective Date (below defined); (c) all claims and causes of action of Seller
arising under or with respect to any Contracts that are attributable to periods
of time prior to the Effective Date (including claims for adjustments or
refunds); (d) all rights and interests of Seller (i) under any policy or
agreement of insurance or indemnity, (ii) under any bond or (iii) to any
insurance proceeds, arising, in each case, from acts, omissions or events, or
damage to or destruction of property (except as provided in Section 14
hereof); (e) all hydrocarbons produced and sold from the Properties with
respect to all periods prior to the Effective Date; (f) all claims of Seller
for refunds of or loss carry forwards with respect to (i) production or any
other taxes attributable to any period prior to the Effective Date, (ii) income
or franchise taxes or (iii) any taxes attributable to any period prior to the
Effective Date; (g) all office leases, office furniture, personal computers and
associated peripherals and all radio and telephone equipment not on the
Properties; (h) all of Seller’s proprietary computer software, patents, trade
secrets, copyrights, names, trademarks, logos and other intellectual property;
(i) all documents and instruments of Seller that may be protected by an
attorney-client privilege; (j) all data that cannot be disclosed to Buyer as a
result of confidentiality arrangements under agreements with third parties; (k)
all geophysical, and other seismic and related technical data and information
relating to the Properties to the extent not assignable without payment of fee
or penalty; (l) documents prepared or received by Seller with respect to (i)
lists of prospective purchasers for the Properties compiled by Seller, (ii)
bids submitted by other prospective purchasers of the Properties, (iii)
analyses by Seller of any bids submitted by any prospective purchaser, (iv)
correspondence between or among Seller, its respective representatives, and any
prospective purchaser other than Buyer and (v) correspondence between Seller or
any of its respective representatives with respect to any of the bids, the
prospective purchasers, or the transactions contemplated in this Agreement; (m)
all vehicles of Seller or its Affiliates (below defined), and (n) the pulling
equipment and workover rig described on Exhibit B.

 

2.             Purchase Price.

 

The purchase price for the Properties shall be Fifteen Million and
no/100 Dollars ($15,000,000.00) (such amount, unadjusted by any adjustments
provided for in this Agreement or agreed to by the parties, being herein called
the “Base
Purchase Price”). Such Base Purchase Price shall be adjusted as provided
in this Agreement (the Base Purchase Price, as so adjusted, and as the same may
otherwise be adjusted as provided in this Agreement, being herein called the “Purchase Price”). The Purchase Price
shall be paid as provided in Section  10(a)(vi). Additionally, as a part
of the consideration given to Seller for Buyer pursuant to this Agreement,
Buyer also agrees to assume Seller’s payables attributable to the period prior
to the Effective

 

2

 

Date as set forth on Seller’s Invoicing Report (a copy of which is
attached hereto as Exhibit D but not to exceed $414,607.67 (“Agreed Payables”) regardless of the
total amount shown on Exhibit D. To the extent that Seller satisfies any of the
Agreed Payables up to $414,607.67 before Closing (defined below), those amounts
shall be treated as amounts incurred after the Effective Date and to be borne
by Buyer under the provisions of Section 11(a)(i) below.

 

3.             Representations of Seller. Seller
represents to Buyer that:

 

(a)           Organization and Qualification. Seller
is a corporation duly organized and legally existing and in good standing under
the laws of the State of Nevada, and is qualified to do business and in good
standing in each of the states in which the Properties are located where the
laws of such state would require a corporation owning the Properties located in
such state to so qualify.

 

(b)           Due Authorization. Seller has full
power to enter into and perform its obligations under this Agreement and has
taken all proper action to authorize entering into this Agreement and
performance of its obligations hereunder.

 

(c)           Approvals. Other than requirements (if
any) that there be obtained consents to assignment (or waivers of preferential
rights to purchase) from third parties, and except for approvals (“Routine Governmental Approvals”)
required to be obtained from governmental entities that are customarily
obtained post-closing and except as described in the Disclosure Schedule (the “Disclosure Schedule”) attached
hereto as Schedule II, neither the execution and delivery of this Agreement by
Seller, nor the consummation of the transactions contemplated hereby by Seller,
nor the compliance by Seller with the terms hereof, will result in any default
under any agreement or instrument to which Seller is a party or by which any of
the Properties are bound, or violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Seller or to any of the Properties,
except (in each case) as could not be reasonably expected to have a Material
Adverse Effect. The term “Material Adverse
Effect” shall mean any change, circumstance, condition, effect,
event or fact that shall have occurred or been threatened that, when taken
together with other adverse changes, could reasonably be expected to have an
adverse economic effect on the value of the Properties (taken as a whole) to
Buyer greater than fifty thousand dollars ($50,000.00) or which prevent or
materially delay the performance by Seller of any of its obligations under this
Agreement or the consummation by Seller of the transactions contemplated by
this Agreement with an adverse economic effect on the value of the Properties
(taken as a whole) to Buyer greater than fifty thousand dollars ($50,000.00); provided,
however, in determining whether any changes, circumstances, conditions,
effects, events or facts, when taken together, meet the requisite fifty
thousand dollar ($50,000.00) threshold necessary to constitute a Material
Adverse Effect, as set forth above, no such individual change, circumstance,
condition, effect, event or fact, when taken alone, shall be considered for
purposes of valuing the adverse economic effect UNLESS the adverse economic
effect of each such individual change, circumstance, condition, effect, event
or fact, when taken alone, is no less than five thousand dollars ($5,000.00). Further
to the foregoing, and without limitation, no change, circumstance, condition,
effect, event or fact shall be deemed (individually or in the aggregate) to
constitute, nor shall any of the foregoing be taken into account in determining
whether there has been or may be, a Material Adverse Effect, to the extent that
such change, circumstance, condition, effect, event or fact results from or
arises out of (i) a general

 

3

 

deterioration
in the economy, an adverse change in U.S. or international capital markets or
changes in hydrocarbon prices or other changes affecting the oil and gas
industry generally; (ii) the outbreak or escalation of hostilities involving
the United States, the declaration by the United States of a national emergency
or war or the occurrence of any other calamity or crisis, including acts of
terrorism; (iii) the disclosure of the fact that Buyer is the prospective
acquirer of the Properties, (iv) the announcement or pendency of the
transactions contemplated by this Agreement; (v) any change in Laws (below
defined) after the date hereof or the interpretation thereof, (vi) actions
taken by Buyer or any of its Affiliates; (vii) the compliance with the terms
of, or taking of any action required by, this Agreement or any other document
delivered in connection herewith, or (viii) the failure to discover
hydrocarbons through the Seller’s drilling activities..

 

(d)           Valid, Binding and Enforceable. This
Agreement constitutes and the Conveyance provided for herein to be delivered at
Closing will, when executed and delivered, constitute, the legal, valid and
binding obligation of Seller, enforceable in accordance with its terms, except
as limited by bankruptcy or other laws applicable generally to creditor’s
rights and as limited by general equitable principles.

 

(e)           No Litigation. Except as described on
the Disclosure Schedule, there are no suits, actions, written claims,
governmental investigations, or proceedings pending, or to the Knowledge (as
hereinafter defined) of Seller, threatened, against or involving Seller and/or
which affect the Properties (including, without limitation, any actions
challenging or pertaining to Seller’s title to any of the Properties) or the
execution and delivery of this Agreement by Seller or the consummation by
Seller of the transactions contemplated hereby, and to the Knowledge of Seller,
no demands or threatened demands which might lead to the same have been made on
Seller. The term “Knowledge”
shall mean with respect to Seller, the actual knowledge of Seller’s current personnel at a
supervisory, or higher, level.

 

(f)            Warranty of Title. Seller has defensible title to the
Properties subject to the Permitted Encumbrances (as defined in subsection
(e)(i) of Section 6 below). For purposes of this Agreement, the term “Defensible
Title” means, with respect to a Property, such cumulative ownership by Seller
that (i) entitles Seller to receive, after giving effect to the Permitted
Encumbrances, a decimal share of the oil, gas and other hydrocarbons produced
from each well, unit, lease or Drilling Location listed on Schedule I (“Drilling Location”) hereto not less than
the decimal share set forth on Schedule I as the “Net Revenue Interest”
for such well, unit, lease or Drilling Location (herein called the “Net Revenue Interest”); (ii) causes Seller to be obligated to
bear a decimal share of the cost of operation of such well, unit, lease or
Drilling Location not greater than the decimal share set forth on Schedule I as
the “Working Interest” for such
well, unit, lease or Drilling Location (herein called the “Working Interest”); (iii) such shares of production which
Seller is entitled to receive, and shares of expenses which Seller is obligated
to bear, are not subject to change; and (iv) is free and clear of all liens,
security interests, encumbrances, and other burdens and defects in title. Seller
will not be in breach of the foregoing representation for any matter that would
otherwise cause such representation to be breached if such matter could
not reasonably be expected to have an adverse economic effect of more than five
thousand dollars ($5,000.00) on the value to Buyer of a single Property.

 

4

 

(g)           No AFE Items or Well Abandonments, No P&A
Liabilities. Except as described on the Disclosure Schedule, (i)
Seller has not incurred any material expenses, or made any commitments
to make material expenditures, in connection with (and no other obligations or
liabilities have been incurred with would have a material adverse effect on) the
ownership or operation of the Properties after the Effective Date, other than
routine expenses incurred in the normal operation of the producing wells
located on Properties, (ii) Seller has not abandoned, or agreed to
abandon, any wells included in the Properties (or removed any material items of
equipment which would be included in the Properties, except those which have
been obsolete and are no longer required for the operation of the Properties or
that are replaced by items of
equal suitability and value) since the Effective Date, (iii) no
proposals are currently outstanding (whether made by Seller or by any other
party) to deepen, plug back, rework or abandon any wells included in the
Properties, to conduct other operations with respect to the Properties for
which consent is required under the applicable operating agreement, or to
conduct any other operations with respect to the Properties other than routine
operation of the producing wells located on the Properties, and (iv) to Seller’s
Knowledge, there are no dry holes, or otherwise inactive wells located on the
Properties, other than wells that have been properly plugged and abandoned.

 

(h)           Production Marketing. The Properties
are not subject to any contractual or other arrangements for the sale,
processing or transportation of production, or otherwise relating to the
marketing of production, other than contracts or other arrangements which
either (i) will terminate in 92 days or less, or are subject to cancellation on
not more than 92 days’ notice, in each case without penalty or other detriment,
or (ii) are disclosed on the Disclosure Schedule. Except as disclosed on the
Disclosure Schedule, there exist no calls or other similar rights or options to
purchase production from the Properties.

 

(i)            Gas Balancing, Take or Pay, Allowables.
There is no well on the Properties with respect to which Seller has taken more
(referred to herein as “overproduced”) or less (referred to herein as “underproduced”)
production from such well than the ownership of Seller would entitle Seller
(absent any gas balancing agreement or arrangement) to receive. Seller has not
received prepayments (including, but not limited to, payments for gas not taken
pursuant to “take or pay” arrangements) for any oil or gas produced from the
Properties (or other properties) as a result of which the obligation exists to
deliver oil or gas produced from the Properties after the Effective Date
without then receiving payment (or without then receiving full payment) therefor
or to make repayments in cash (and Seller has not, since the Effective Date, so
delivered any oil or gas from the Properties or so made any such repayment in
cash). There exist no gas balancing arrangements or agreements whereby
production from a well included in the Properties can be used to balance
overproduction from another well (whether or not such other well is on the
Properties) nor do there exist any gas sales contracts, or other arrangements,
under which production from a well on the Properties can be used (or cash
payments by the owners of such a well can be required) to make up take or pay
(or other similar payments) made with respect to another well (whether or not
such other well is on the Properties). No well included in the Properties is
subject to having allowable production after the date hereof reduced below the
full and regular allowable (including the maximum permissible tolerance)
because of any overproduction during Seller’s ownership of such well (whether
or not the same was permissible at the time) prior to the date hereof (and no
such reduction has occurred with respect to any well on the Properties since
the Effective Date).

 

5

 

(j)            Taxes Paid. All taxes on or relating to
Properties, or on production or revenue attributable thereto (including,
without limitation, all production, severance and similar taxes), have been
paid, except for taxes not yet due and payable and except for ad valorem taxes
due and payable and attributable to the period prior to the Effective Date
(which ad valorem taxes shall be paid prior to Closing).

 

(k)           Hazardous Substances, Applicable Environmental Laws.
Except as described on the Disclosure
Schedule and as could not reasonably be expected to have a Material Adverse
Effect, the Properties (and the lands covered thereby) (i) are not and have not
been, a site (above or beneath ground level) for the use, generation,
manufacture, discharge, assembly, processing, storage, release, injection or
disposal (or the transportation thereto or therefrom) of any “Hazardous
Substances” (as defined in the Applicable Environmental Laws, below defined)
other than such Hazardous Substances in such
quantities as in each case may be necessary for the operation of the wells
located thereon and the production of oil, gas and other hydrocarbons from the
Properties and which have been handled and disposed of in accordance with
Applicable Environmental Laws; (ii) are in compliance with all applicable
federal, state and local laws, rules, orders and regulations pertaining to
health, safety or the environment (herein called the “Applicable Environmental Laws”), including, without
limitation, those relating to petroleum, petroleum products, natural gas,
exposure to Hazardous Substances, the labeling, storage and containment of
Hazardous Substances, and air, soil and subsurface ground and water conditions;
and (iii) do not have conditions present thereon that presently will result in
claims or other liabilities, under Applicable Environmental Laws, or under
common law, for damages to health, safety or the environment. Except as
described on the Disclosure Schedule and
as could not reasonably be expect to have a Material Adverse Effect, without
limitation of the foregoing or of Section 3(l) below, the Properties are in
compliance with all material obligations under the Basic Documents (as defined
below) concerning health, safety, and environment, including, but not limited
to, obligations to maintain the air, soil and subsurface, site clean-up and
other remediation requirements.

 

(l)            Leases. Seller has paid its
share of all royalties and other payments under the oil, gas and/or mineral
leases included in the Properties (the “Leases”), except for royalties held
in suspense in accordance with applicable Law. Except as described on the
Disclosure Schedule, to the Knowledge of Seller, neither Seller nor any lessor
is in breach or default and no situation exists which with the passing of time
or giving of notice would create a breach or default, of its obligations under
any Lease, except (in each case) as could not reasonably be expected to have a
Material Adverse Effect.

 

(m)          Material Contracts; Operations. Excluding
any Leases and any Seller Loan Document (below defined) and any contracts
entered into in connection with taking actions permitted under
Section 5(b) hereof, the Disclosure Schedule contains a list of all
Contracts of the type described below to which Seller is a party and that
relate to the Properties (collectively, all of such contracts, the “Material Contracts”):

 

(i)            any
Contract that can reasonably be expected to result in aggregate payments by
Seller of more than twenty-five thousand and no/100 Dollars ($25,000.00) during
the current or any subsequent fiscal year (based solely on the terms thereof
and without regard to any expected increase in volumes or revenues);

 

6

 

(ii)           any
Contract that can reasonably be expected to result in aggregate revenues to
Seller of more than twenty-five thousand and no/100 Dollars ($25,000.00) during
the current or any subsequent fiscal year (based solely on the terms thereof
and without regard to any expected increase in volumes or revenues);

 

(iii)          any
indenture, mortgage, loan, credit or sale-leaseback or similar contract that
can reasonably be expected to result in aggregate payments by Seller of more
than twenty-five thousand and no/100 Dollars ($25,000.00) during the current or
any subsequent fiscal year;

 

(iv)          any
Contract that constitutes a lease under which Seller is the lessor or the
lessee of real or personal property which lease (A) cannot be terminated by
Seller without penalty upon sixty (60) days or less notice and (B) involves an
annual base rental of more than twenty-five thousand and no/100 Dollars
($25,000.00);

 

(v)           any
hedge, swap or similar Contract; and

 

(vi)          any
Contract with any Affiliate of Seller that will not be terminated prior to
Closing.

 

To Seller’s
Knowledge, Seller is not in breach or default (and no situation exists which
with the passing of time or giving of notice would create a breach or default)
of its obligations under the Material Contracts or under any operating
agreements or unitization, pooling, and/or communitization agreements,
declarations, designations and/or orders relating to the Properties, except (in
each case) as could not reasonably be expected to have a Material Adverse
Effect. To Seller’s Knowledge, no breach or default by any third party (and no
situation which with the passing of time or giving of notice would create a
breach or default) exists, except (in each case) as could not reasonably be
expected to have a Material Adverse Effect.

 

(m)          Permits. Except as could not reasonably
be expected to have a Material Adverse Effect,Seller has all material governmental
licenses and permits necessary or appropriate to own and operate the Properties
as presently being owned and operated, and such licenses and permits are in
full force and effect and there have not been any violations with respect to
any such licenses or permits.

 

(n)           Compliance with Laws. Except as could
not reasonably be expected to have a Material Adverse Effect, Seller has owned
and operated the Properties in compliance with all laws, rules, regulations and
orders of all governmental agencies (collectively, “Laws”) having jurisdiction.

 

(o)           Tax Partnerships. None of the
Properties is subject to a tax partnership, including, without limitation, none
of such Properties are subject to any operating agreement or other arrangement
under which the parties thereto have not made an effective election pursuant to
Section 761 of the Internal Revenue Code of 1986 (herein called the “Internal Revenue Code”), and the
Treasury Regulations promulgated thereunder, to be excluded from the
application of Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue
Code.

 

7

 

(p)           No Material Misstatement. No representation or warranty made by
Seller in this Agreement, and no statement of Seller contained in any document,
certificate or other writing or other materials furnished or to be furnished by
or on behalf of Seller pursuant hereto or in connection herewith, contains or
will contain, at the time of delivery, any untrue statement of a material fact
or omits or will omit, at the time of delivery, to state any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading. To Seller’s Knowledge,
there is no matter which has not been disclosed to Buyer which materially and
adversely affects or, so far as Seller can now reasonably foresee, will
materially and adversely affect the Properties or the consummation of the
transactions contemplated hereby.

 

(q)           Not a Foreign Person. Seller is not a “foreign
person” within the meaning of Section 1445 (or similar provisions) of the
Internal Revenue Code (i.e., no
Seller is a non-resident alien, foreign corporation, foreign partnership,
foreign trust or foreign estate as those terms are defined in the Internal Revenue
Code and regulations promulgated thereunder).

 

(r)            Consents and Preferential Purchase Rights.
Except as set forth in the Disclosure Schedule, there are no Preferential
Rights (below defined) or Consents (below defined) of third parties, with
respect to any of the Properties that are applicable to the transactions
contemplated hereby, including the consummation of such transactions.

 

4.             Representations of Buyer. Buyer
represents to Seller that:

 

(a)           Organization and Qualification. Whittier
Energy Company is a Nevada corporation, duly organized and legally existing and
in good standing under the laws of the State of Nevada. Premier Natural
Resources, LLC, is a Delaware limited liability company, duly organized and
legally existing and in good standing under the laws of the State of Delaware.

 

(b)           Due Authorization. Buyer has full power
to enter into and perform its obligations under this Agreement and has taken
all proper action to authorize entering into this Agreement and performance of
its obligations hereunder.

 

(c)           Approvals. Neither the execution and
delivery of this Agreement by Buyer, nor the consummation of the transactions
contemplated hereby by Buyer, nor the compliance by Buyer with the terms
hereof, will result in any default under any agreement or instrument to which
Buyer is a party or violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Buyer. Buyer makes no representations in connection
with the transactions contemplated hereby with respect to approvals related to
the transfer by Seller of Properties, including, but not limited to, Routine
Governmental Approvals, consents to assign contained in leases and other
instruments, or preferential rights to purchase.

 

(d)           Valid, Binding and Enforceable. This
Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, except as limited by bankruptcy or
other laws applicable generally to creditor’s rights and as limited by general
equitable principles.

 

(e)           No Litigation. There are no pending
suits, actions, or other proceedings in which Buyer is a party (or, to Buyer’s
knowledge, which have been threatened to be instituted

 

8

 

against
Buyer), which affect the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.

 

(f)            Sufficient Funds. Buyer has sufficient
funds with which to pay the Purchase Price and consummate the transactions
contemplated by this Agreement.

 

(g)           Regulatory. Buyer is now (or will be as
of the date for Closing set forth in Section 10(a)), and hereafter (or
thereafter) shall continue to be, qualified to own and assume operatorship of
the Leases, and the consummation of the transactions contemplated in this Agreement
will not cause Buyer to be disqualified as such an owner or operator. To the
extent required by any applicable Laws, Buyer currently has (or will have as of
the date for Closing set forth in Section 10(a)), and will hereafter (or
thereafter) continue to maintain, lease bonds, area-wide bonds or any other
surety bonds as may be required by, and in accordance with, all applicable Laws
governing the ownership and operation of such Leases.

 

(h)           Independent Evaluation. Buyer is
sophisticated in the evaluation, purchase, ownership and operation of oil and
gas properties and related facilities. In making its decision to enter into
this Agreement and to consummate the transaction contemplated herein, except
for the express representations and warranties of Seller contained herein,
Buyer (i) has relied or shall rely solely on its own independent investigation
and evaluation of the Properties and the advice of its own legal, tax,
economic, environmental, engineering, geological and geophysical advisors and the
express provisions of this Agreement and not on any comments, statements,
projections or other materials made or given by any representatives or
consultants or advisors engaged by Seller, and (ii) has satisfied or shall
satisfy itself through its own due diligence as to the environmental and
physical condition of and contractual arrangements and other matters affecting
the Properties. Buyer has no knowledge of any fact that results in the material
breach of any representation, warranty or covenant of Seller given hereunder
with respect to which Buyer has not provided Seller written notice.

 

(i)            Accredited Investor. Buyer is an “accredited
investor,” as such term is defined in Regulation D of the Securities Act of
1933, as amended, and will acquire the Properties for its own account and not
with a view to a sale or distribution thereof in violation of the Securities
Act of 1933, as amended, and the rules and regulations thereunder, any
applicable state blue sky Laws or any other applicable securities Laws.

 

5.             Certain Covenants of Seller Pending Closing.
Between the date of this Agreement and the Closing Date:

 

(a)           Access by Buyer.

 

(i)            Records. During business
hours, Seller will give Buyer, and the authorized representatives of Buyer,
access to Seller’s files, records and data pertaining to the ownership and/or
operation of the Properties (including, without limitation, title records,
lease files, division order files, surveys and maps, contracts and contract
files, production marketing records, correspondence files, geological,
geophysical and seismic records, data and information, well files and
production records, production and severance tax records, ad valorem tax
records, production accounting records, 

 

9

 

environmental records and regulatory and regulatory compliance records).
Buyer may make copies of such records, at its cost, but shall, if Seller so
request, return (or if Buyer so elects, destroy) all copies so made if the
Closing does not occur. Notwithstanding the foregoing, Seller shall not be
obligated to provide Buyer with access to any records or data where such access
would breach a confidentiality agreement with a third party; provided that, if
requested by Buyer, Seller will use its reasonable best efforts to attempt to
obtain a release of such confidentiality restriction.

 

(ii)           Physical Inspection. Subject to the
other provisions of this Section 5(a), Seller shall provide Buyer and
Buyer’s authorized representatives, at all reasonable times before the Closing
Date and upon adequate notice to Seller, with physical access to the Properties
for the purpose of inspecting same; provided that such access shall be at Buyer’s
sole cost and liability. Buyer recognizes that some or all of the Properties
may be operated by parties other than Seller and that Seller’s ability to
obtain access to such properties, and the manner and extent of such access, is
subject to such third parties’ approval.

 

(iii)          Environmental Inspections. Buyer
shall be entitled to conduct environmental property assessments with respect to
the Properties. Seller or its designee shall have the right to accompany Buyer
and Buyer’s representatives whenever they are on site on the Properties and
also to collect split test samples if any are collected. Notwithstanding
anything herein to the contrary, Buyer shall not have access to, and shall not
be permitted to conduct any environmental due diligence with respect to any
Properties where Seller does not have the authority to grant access for such
due diligence (provided, however, Seller shall use its reasonable best efforts
to obtain permission from any applicable third party to allow Buyer and Buyer’s
representatives such access).

 

(iv)          Coordination of Inspections. Buyer
shall coordinate its environmental property assessments and physical
inspections of the Properties to minimize any inconvenience to or interruption
of the conduct of business by Seller and its co-owners of the Leases and other
lands included in the Properties. Buyer shall abide by Seller’s and any third
party operator’s safety rules, regulations, and operating policies while
conducting its due diligence evaluation of the Properties including any
environmental or other inspection or assessment of the Properties. Buyer hereby
defends, indemnifies and holds each of the operators of the Properties and
Seller Group (below defined) harmless from and against any and all Losses
(below defined) arising out of, resulting from or relating to any field visit,
environmental property assessment, or other due diligence activity conducted by
Buyer or any Buyer’s representative with respect to the Properties and Seller’s
records pertaining thereto, even if
such Losses arise out of or result from the sole, active, passive, concurrent
or comparative negligence, strict liability or other fault or violation of law
of or by a member of Seller Group, excepting only Losses actually resulting on
the account of the gross negligence or willful misconduct of a member of Seller
Group.

 

(v)           Copies of Reports. Buyer agrees to
promptly provide Seller, but in no less than five (5) days after receipt or
creation, copies of all final reports and test results, prepared by Buyer
and/or any of Buyer’s representatives and which contain data

 

10

 

collected or generated from Buyer’s due diligence with respect to the
Properties. Seller shall not be deemed by its receipt of said documents or
otherwise to have made representation or warranty, expressed, implied or
statutory, as to the condition to the Properties or to the accuracy of said
documents or the information contained therein.

 

(vi)          Restoration of Properties. Upon
completion of Buyer’s due diligence, Buyer shall at its sole cost and expense,
(A) close all bore holes from its environmental property assessment (B) repair
all damage done to the Properties in connection with Buyer’s due diligence, (C)
restore the Properties to the approximate same condition than it was prior to
commencement of Buyer’s due diligence and (D) remove all equipment, tools or
other property brought onto the Properties in connection with Buyer’s due
diligence. Any disturbance to the Properties (including, without limitation,
the real property associated with such Properties) resulting from Buyer’s due diligence
will be promptly corrected by Buyer.

 

(vii)         Confidentiality Agreement. Notwithstanding
the termination of this Agreement or any other provision of this Agreement to
the contrary but subject to the next sentence of this Section 5(a)(vii), the
terms of the Confidentiality Agreement dated January 23, 2006 between Buyer and
Seller (the “Confidentiality
Agreement” shall remain in full force and effect with respect to
information obtained by Buyer regarding the Properties. If Closing of the
transaction contemplated under the terms of this Agreement occurs, the
Confidentiality Agreement shall terminate (which termination shall be effective
as of Closing).

 

(b)           Interim Operation. Except as set forth
in the Disclosure Schedule and except as expressly contemplated by this
Agreement or as expressly consented to in writing by Buyer, Seller agrees that
from and after the date hereof until Closing, to (i) operate the Properties in
the usual, regular and ordinary manner consistent with past practice; (ii) not
transfer, sell, mortgage, pledge or dispose of any material portion of the
Properties other than the sale and/or disposal of hydrocarbons in the ordinary
course of business and sales of equipment that is no longer necessary in the
operation of the Properties or for which equivalent replacement equipment has
been obtained, and (iii) except in connection with emergency operations, make
or become liable for any capital expenditures with respect to the Properties
which individually or in the aggregate exceeds twenty-five thousand and no/100
Dollars ($25,000.00). Buyer acknowledges Seller owns undivided interests in
certain of the properties comprising the Properties that it is not the operator
thereof, and Buyer agrees that the acts or omissions of the other working
interests owners (including the operators) who are not Seller or any Affiliates
of Seller shall not constitute a breach of the provisions of this
Section 5(b), nor shall any action required by a vote of working interest
owners constitute such a breach so long as Seller has voted its interest in a
manner that complies with the provisions of this Section 5(b). Except for
those disclosed (including the authorities for expenditures) on the Disclosure
Schedule (with respect to which Seller may take the action or actions disclosed
in connection therewith on such Disclosure Schedule), Seller will not, without
Buyer’s consent (which consent will not be unreasonably withheld or delayed),
propose or conduct the drilling of any additional wells, or propose or conduct the
deepening, plugging back, reworking or abandoning of any existing wells, or
propose or conduct any other operations which require consent under the
applicable operating agreement where the cost thereof (with respect to Seller’s
interest) is reasonably expected to

 

11

 

exceed
twenty-five thousand and no/100 Dollars ($25,000.00). Except for those
disclosed (including the authorities for expenditures) on the Disclosure
Schedule (with respect to which Seller may take the action or actions disclosed
in connection therewith on such Disclosure Schedule), Seller will advise Buyer
of any such proposals made by other parties, and will consult with Buyer
concerning such proposals, and will respond in the manner required by Buyer;
provided that, if the period for responding to such a proposal extends beyond
the Closing Date, Seller will not respond to such proposal unless the Closing
does not occur prior to the next to last day allowed to respond (in which case
Seller shall respond in the manner required by Buyer). Seller will not modify
any Lease or any Material Contract included in or relating to the Properties or
enter into any new Material Contract relating to the Properties without Buyer’s
consent, other than production sales contracts, or other marketing related
agreements, which terminate, or can be terminated, (in each case without
penalty or other detriment) in thirty-one (31) days or less. Seller will remain
as operator of the Properties shown on the Disclosure Schedule as being
operated by Seller.

 

(c)           Preferential Rights and Consents. Seller
will use its reasonable best efforts to obtain from all parties holding either
(i) preferential rights to purchase (“Preferential Rights”) or (ii) rights
to consent (“Consents”) which
would be applicable to the transactions contemplated hereby (and in accordance
with the documents creating such rights) execution of waivers of such
Preferential Rights and Consents. If a party from whom a  waiver of a Preferential Right is requested
refuses to give such waiver and validly exercises its preferential purchase
right, then Seller will tender to such party the required interest in the
Property (at a price equal to the amount specified in Schedule I hereto for
such Property, reduced appropriately, as determined by mutual agreement of
Buyer and Seller, if less than the entire Property must be tendered), and such
interest in such Property will be excluded from the transaction contemplated
hereby and the Base Purchase Price will be adjusted downward by the amount of
the price at which it was so tendered; provided that if such a party who
exercises a Preferential Right fails to conclude its purchase of the applicable
interest pursuant to such exercise within ninety (90) days following the Closing,
then Seller shall notify Buyer and Buyer shall have thirty (30) days after
receipt of such notice to elect to acquire (but shall have no obligation to
acquire) such interest for the price at which such party was tendered the same,
as provided above, and otherwise on the same terms provided herein.

 

(d)           Covenants to Close. As promptly as
practicable after the execution of this Agreement, Seller shall use its
reasonable best efforts to (i) obtain the approval of the holders of a majority
of the outstanding shares of capital stock of Seller entitled to vote on
matters submitted to Seller’s stockholders authorizing the execution and
performance by Seller of this Agreement and the transactions contemplated
hereby; (ii) prepare and file with the Securities and Exchange Commission (the “SEC”)
a Preliminary Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) or if required by law to
obtain the approval contemplated in the foregoing clause (i), a Preliminary
Proxy Statement pursuant to Section 14(a) of the Exchange Act, providing notice
of and describing such approval in the manner required by the Exchange Act, the
Nevada Revised Statutes and the articles of incorporation and bylaws of Seller;
(iii) respond promptly to comments delivered by the SEC, if any, with respect
to the Information Statement or Proxy Statement, as the case may be; and (iv)
deliver the definitive Information Statement or Proxy Statement, as the case
may be, to every security holder of each class of equity security that is
entitled to vote or give an

 

12

 

authorization,
proxy or consent in regard to the execution and performance by Seller of this
Agreement and take such other actions as may be required by the Exchange Act,
Nevada law, and the articles of incorporation and bylaws of Seller to obtain
the approval of shareholders contemplated in the foregoing clause (i) as soon
as reasonably practicable.

 

6.             Due
Diligence Reviews.

 

(a)           Review By Buyer.

 

i)              Determination of Defects. Buyer may conduct, at its sole cost, such title examinations or
investigations, environmental assessments and other examinations and
investigations, as it may in its sole discretion choose to conduct with respect
to the Properties in order to determine whether Defects exist. Should, as a
result of such examinations and investigations, or otherwise, one or more
matters come to Buyer’s attention which would constitute a Defect, and should
there be one or more of such Defects which Buyer is unwilling to waive and
close the transaction contemplated hereby notwithstanding the fact that such
Defects exist, Buyer may notify Seller in writing of such Defects as soon as is
practicable but in any event no later than ten (10) days prior to Closing (such
Defects of which Buyer so provides notice are herein called “Asserted Defects” and
such time by which Buyer must notify Seller in writing, the “Defect Claim Date”). Such
notification shall include, for each Asserted Defect, (i) a description of
the Asserted Defect and the wells and/or units and/or Drilling Location or
other Property to which it relates, along with all supporting documentation
reasonably necessary to fully describe the basis for the Defect, (ii) for
each applicable well, unit, Drilling Location or other Property identified
pursuant to (i) above, the size of any variance from “Net Revenue Interest” or “Working
Interest” which does or could result from such Asserted Defect and
(iii) the amount by which Buyer reasonably would propose to adjust the
Base Purchase Price based upon the cost to cure or remediate such Asserted
Defect. Buyer shall also promptly furnish Seller with written notice of any
Title Benefit (below defined) that is discovered by any of Buyer’s or any of
its Affiliate’s employees, title attorneys, landmen or other title examiners
while conducting Buyer’s due diligence with respect to the Properties prior to
the Defect Claim Date. If a third party asserts a claim with respect to the
Properties, or otherwise alleges the existence of a matter which would be a
Defect, Seller shall notify Buyer of such fact promptly, and in any event on or
before the earlier of the Closing Date or five days after such assertion; any
such matter of which Buyer so receives, or should have received, notice of may
be asserted as an Asserted Defect at any time up to Closing.

 

(ii)           Defect Claim Threshold. Notwithstanding
any other provision herein, no adjustments to the Base Purchase Price shall be
made for Asserted Defects unless the aggregate values of all such Asserted
Defects , net of the values of all asserted Title Benefits (whether by Buyer or
Seller) equals more than Fifty Thousand and no/100 Dollars ($50,000.00) (“Threshold Amount”). If such
aggregate amount is less than the Threshold Amount, then no adjustment to the
Base Purchase Price or exclusion of Properties shall be made in any respect . If
such amount exceeds in the aggregate the Threshold Amount, the total value of
all Asserted Defects , including those below the Threshold Amount, may be
considered in all respects as concerns price adjustment.

 

13

 

Similarly, notwithstanding any other provision herein, no adjustments
to the Base Purchase Price shall be made for Title Benefits asserted by Seller
and/or Buyer unless the aggregate values of all such asserted Title Benefits
(net of the values of Title Benefits used to reduce the values of Defects as
provided above) equals more than the Threshold Amount. If such amount is less
than the Threshold Amount, then no adjustment to the Base Purchase Price shall
be made in any respect. If such amount exceeds the Threshold Amount, the total
value of all asserted Title Benefits (net of those Title Benefits used to
reduce the values of Defects as provided above), including those below the
Threshold Amount, may be considered in all respects as concerns price
adjustment.

 

(b)           Nature
of Defects. The term “Defect” as used in this Section
shall mean the following:

 

(i)            NRI or WI Variances. Seller’s
ownership of the Properties is such that, with respect to a well, unit, lease
or Drilling Location, it (A) entitles Seller to receive a decimal share of the
oil, gas and other hydrocarbons produced from such well, unit, lease or
Drilling Location, which is less than the decimal share set forth on Schedule I
in connection with such well, unit, lease or Drilling Location in the column
headed “Net Revenue Interest” or (B) causes Seller to be obligated to bear a
decimal share of the cost of operation of such well, unit, lease or Drilling
Location greater than the decimal share set forth on Schedule  I in
connection with such well, unit, lease or Drilling Location in the column
headed “Working Interest” (without at least a proportionate increase in the
share of production to which Seller is entitled to receive therefrom).

 

(ii)           Liens. Seller’s ownership of a
Property is subject to a lien or other encumbrance other than a Permitted
Encumbrance (below defined).

 

(iii)          Imperfections in Title. Seller’s ownership of a Property is subject
to an imperfection in title which, if asserted, would cause a Defect, as
defined in subparagraph (i) above, to exist, or would otherwise materially
interfere or restrict Buyer’s use, operation, ownership or benefit thereof (as
currently used, operated and owned).

 

(iv)          Representation Untrue. Any representation set forth in Section 3
above is not true and correct.

 

(v)           Consents.
Seller’s ownership of a Property is subject to a Consent which has not been waived.

 

Further, notwithstanding any other provisions herein, the term “Defect”
shall include only those matters which could reasonably be
expected to have an adverse economic effect of more than five thousand dollars
($5,000.00) on the value to Buyer of a single Property.

 

(c)           Seller’s
Response. In the event that Buyer timely notifies Seller of
Asserted Defects:

 

(i)            Cure. Seller may (but shall have no
obligation to) attempt to cure, prior to Closing, one or more Asserted Defects.

 

14

 

(ii)           Postpone Closing. Whether or not
Seller has then begun to, or ever begins to, cure one or more Asserted Defects
(and whether or not Seller has elected option (iii) below with respect to one
or more Asserted Defects), Seller may postpone the Closing by designating a new
Closing Date not later than June 30, 2006, so that it may attempt to cure one
or more Asserted Defects. Notwithstanding any such election to postpone
Closing, Seller shall still have no obligation to cure Asserted Defects.

 

(iii)          Adjustment. Notwithstanding any
other election made under this Section (without limitation, it being expressly
recognized that Seller may attempt to cure Asserted Defects while acting under
this election), Seller may elect to have one or more Asserted Defects handled
under Section  7 below.

 

(iv)          Dispute Resolution. If, prior to Closing, Seller provides
written notice to Buyer that Seller, in good faith, disputes that an Asserted
Defect is a Defect, Seller and Buyer shall attempt to resolve such dispute, by
negotiation among senior executives of their companies who have authority to
settle the controversy, within five (5) business days. If the parties are
unable to resolve the dispute in such time period, then it shall be submitted
to expedited binding arbitration in accordance with Section 17(l).

 

(d)           Covered by Representations, Agreements. Notwithstanding
the procedures set forth in this Section and any adjustments that may be made
to the Base Purchase Price or any exclusions of Properties (in each case) pursuant
to Section 7 below and notwithstanding anything in the Post-Closing Escrow
Agreement (below defined) to the contrary, to the extent that an Asserted
Defect or Post-Closing Asserted Defect (as defined in the Post Closing Escrow
Agreement) is covered by a representation or indemnification or other agreement
of Seller set forth in this Agreement, then such Asserted Defect and/or
Post-Closing Asserted Defect shall be deemed a disclosure and exception to such
representation or indemnification or other agreement. In no event shall either party be entitled
to duplicate compensation with respect to any Defect, Loss or any breach of
representation, warranty or agreement herein asserted under the terms of this
Agreement, even though such Defect, Loss or breach may be addressed by more
than one provision of this Agreement.

 

(e)           Definitions.

 

(i)            As
used in this Agreement the term “Permitted
Encumbrances” shall mean:

 

(A)          lessor’s
royalties, non-participating royalties, overriding royalties, reversionary
interests, and similar burdens upon, measured by, or payable out of production
if the net cumulative effect of such burdens does not (and will not under the
existing terms of the documents creating such burdens) operate to reduce the
Net Revenue Interest of Seller in any well, unit or Drilling Location to an
amount less than the Net Revenue Interest set forth on Schedule I for such
well, unit or Drilling Location and does not obligate Seller to bear a Working
Interest for such well unit or Drilling Location in any amount greater than the
Working Interest set forth on Schedule I for such well, unit or Drilling

 

15

 

Location (unless the Net Revenue Interest for such well, unit or
Drilling Location is greater than the Net Revenue Interest set forth on
Schedule I in the same proportion as any increase in such Working
Interest);

 

(B)           liens
for taxes or assessments not yet due or delinquent;

 

(C)           Routine
Governmental Approvals;

 

(D)          conventional
rights of reassignment;

 

(E)           such
Title Defects as Buyer may have waived;

 

(F)           all
applicable Laws, and rights reserved to or vested in any governmental authority
with respect to the Properties;

 

(G)           rights
of a common owner of any interest in rights-of-way or easements currently held
by Seller and such common owner as tenants in common or through common
ownership to the extent that the same does not materially impair the use or
operation of the Properties as currently used and operated;

 

(H)          easements,
conditions, covenants, restrictions, servitudes, permits, rights-of-way,
surface leases and other rights in the Properties for the purpose of surface
operations, roads, alleys, highways, railways, pipelines, transmission lines,
transportation lines, distribution lines, power lines, telephone lines, and
removal of timber, grazing, logging operations, canals, ditches, reservoirs,
and other like purposes, or for the joint or common use of real estate,
rights-of-way, facilities, and equipment which do not materially impair the
use, ownership or operation of the Properties as currently owned and operated;

 

(I)            vendors,
carriers, warehousemen’s, repairmen’s, mechanics, workmen’s, materialmen’s,
construction or other like liens arising by operation of Law in the ordinary
course of business or incident to the construction or improvement of any
property in respect of obligations which are not yet due;

 

(J)            liens
created under leases and/or operating agreements or by operation of Law in
respect of obligations that are not yet due;

 

(K)          any
encumbrance affecting the Properties which is discharged by Seller at or prior
to Closing (including any liens created by the Seller’s Loan Documents);

 

(L)           any
matters referenced on Exhibit A or Schedule I, as applicable, and all
litigation referenced in the Disclosure Schedule;

 

(M)         matters
that would otherwise be Asserted Defects but that do not meet the thresholds
set forth in Section 6(a)(ii);

 

16

 

(N)          the
Leases and all other liens, charges, encumbrances, Contracts, agreements,
instruments, obligations, defects, and irregularities affecting the Properties
that (1) individually or in the aggregate are not such as to materially
interfere with the ownership, operation or use of any of the Properties (as
currently owned and operated), do not operate to reduce the Net Revenue
Interest of Seller in any well, unit or Drilling Location to an amount less
than the Net Revenue Interest set forth on Schedule I
for such well, unit or Drilling Location, (2) do not obligate Seller to bear a
Working Interest for such well unit or Drilling Location in any amount greater
than the Working Interest set forth on Schedule I
for such well, unit or Drilling Location (unless the Net Revenue Interest for
such well, unit or Drilling Location is greater than the Net Revenue Interest
set forth on Schedule I in the same proportion as
any increase in such Working Interest), and (3) otherwise do not materially
affect Buyer’s use, ownership or operation of the Properties (as currently
used, owned and operated).

 

(ii)           The
term “Seller’s Loan Documents”
shall mean any and all indebtedness secured directly or indirectly by the
interest of Seller in the Properties including the following:

 

•That
certain Amended and Restated Credit Agreement dated January 15, 2004 by and
between Highbridge/Zwirn Special Opportunities Fund LP, as collateral agent and
administrative agent for Lenders and Imperial Petroleum, Inc. and subsidiaries,
as Borrower, including Amendments Number One and Two; and

 

•That
certain that Forbearance Agreement dated November 29, 2005 by and between D.B.
Zwirn/Highbridge, as agent for Lenders and Imperial Petroleum, Inc. and
subsidiaries, as Borrower, including the Waiver Agreement dated February 17,
2006.

 

(iii)          The
term “Title Benefit”
shall mean any right, circumstance or condition that operates to increase the
Net Revenue Interest of Seller in any well, unit or Drilling Location above
that shown for such well, unit or Drilling Location, to the extent the same
does not cause a greater than proportionate increase in Seller’s Working
Interest therein above that shown on Schedule I.

 

(iv)          The
term “Affiliate”
shall mean any person or entity that, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, another person or entity. The term “control” and its derivatives with
respect to any Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person or entity, whether through the ownership of voting securities, by
contract or otherwise.

 

(f)            Seller’s Title Benefit Notices. Seller
shall have the right, but not the obligation, to deliver to Buyer on or before
the Defect Claim Date with respect to each Title Benefit a notice (a “Title Benefit Notice”) including (i)
a description of the Title Benefit and the wells, units and/or Drilling
Locations or other Property to which it relates, along with all

 

17

 

supporting
documentation reasonably necessary to fully described the basis for the Title
Benefit, (ii) for each applicable well, unit, Drilling Location or other
Property identified pursuant to (i) above, the size of any variance from “Net
Revenue Interest” or Working Interest” which results from such Title Benefit,
and (iii) the amount by which Seller would propose in good faith to adjust the
Base Purchase Price. Subject to Buyer’s obligation under Section 6(a), Seller
shall be deemed to have waived all Title Benefits of which it has not given
notice on or before the Defect Claim Date.

 

(g)           Remedies for Title Benefits. Subject to
Section 6(a)(ii), with respect to each well, unit or Drilling Location
affected by a Title Benefit reported under Section 6(a)(i) or Section
6(f), the Base Purchase Price shall be increased by an amount equal to the
increase in the value set forth in Schedule 1 for such well, unit or
Drilling Location caused by such Title Benefits, as determined pursuant to
Section 7(a).

 

7.             Certain
Price Adjustments. In the event that, as a part of the due diligence
reviews provided for in Section 6 above, Asserted Defects are raised by
Buyer and Seller is unable (or unwilling) to cure such Asserted Defects prior
to Closing, or in the event that Seller or Buyer has asserted a Title Benefit,
or in the event that Seller has elected (pursuant to Section 14) to treat
an Oil and Gas Property affected by a casualty loss as if it was Property
affected by an Asserted Defect, then:

 

(a)           Buyer and Seller
shall, with respect to each Property affected by such matters, for a period of
five (5) business days, attempt, in good faith, to agree upon the existence of
any Asserted Defects and/or Title Benefits and, as applicable, an appropriate
downward (or upward, in the case of a Title Benefit) adjustment of the  Base Purchase Price to account for such
matters; provided that if (i) the Alleged Defect is an encumbrance or lien that
is undisputed and liquidated in amount, then the downward adjustment to the
Base Purchase Price shall be the amount necessary to be paid to remove the
Alleged Defect from the affected 
Property, (ii) the Alleged Defect represents a discrepancy between (A)
the Net Revenue Interest for any well, unit or Drilling Location and (B) the
Net Revenue Interest stated in Schedule I for such well, unit or Drilling
Location, then the downward adjustment to the Base Purchase Price shall be the
product of the amount set forth on Schedule I with respect to such well,
unit or Drilling Location multiplied by a fraction, the numerator of which is
the Net Revenue Interest decrease and the denominator of which is the Net
Revenue Interest stated in Schedule I and (iii) the Title Benefit
represents a discrepancy between (A) the Net Revenue Interest for any well,
unit or Drilling Location and (B) the Net Revenue Interest stated in
Schedule I for such well, unit or Drilling Location, then the upward
adjustment to the Base Purchase Price shall be the product of the amount set
forth on Schedule I with respect to such well, unit or Drilling Location
multiplied by a fraction, the numerator of which is the Net Revenue Interest
increase and the denominator of which is the Net Revenue Interest stated in
Schedule I; or

 

(b)           with respect to each
Property as to which Buyer and Seller are unable to agree upon the existence of
an Asserted Defect and/or Title Benefit and/or an appropriate adjustment with
respect to all such matters affecting such Property, then (unless Buyer elects
to waive all Asserted Defects with respect to such Property prior to Closing)
such Property will be excluded from the transaction contemplated hereby, and
the  Base Purchase Price will be reduced
(or increased in the case of a Title Benefit) by the amount set forth on
Schedule  I to the wells

 

18

 

and/or Drilling Locations plus the amount set forth on Schedule I to
the units in which such Property participates; and

 

(c)           notwithstanding
anything to the contrary in this Agreement, the aggregate downward adjustment
to the Base Purchase Price for any title Defect attributable to any Property
shall not exceed the amount set forth in Schedule I with respect to such
Property.

 

8.             Conditions Precedent to the Obligations of Buyer to
Close. The obligations of Buyer to consummate the transactions
contemplated by this Agreement are subject to each of the following conditions
being met:

 

(a)           Representations True and Correct. Each
and every representation of Seller under this Agreement shall be true and
accurate in all material respects as of the date when made and shall be deemed
to have been made again at and as of the time of Closing and shall at and as of
such time of Closing be true and accurate in all material respects except as to
changes specifically contemplated by this Agreement or consented to by Buyer;
PROVIDED, HOWEVER, IN THE EVENT LESS THAN ALL REPRESENTATIONS OF SELLER ARE
TRUE AND CORRECT IN ALL MATERIAL RESPECTS AT CLOSING, AND IF BUYER DOES NOT
WAIVE SUCH CLOSING REQUIREMENT, SELLER NONETHELESS MAY ELECT TO EXTEND THE
CLOSING DATE FOR UP TO THIRTY (30) DAYS (“EXTENDED CLOSING DATE”), DURING
WHICH TIME SELLER SHALL TAKE GOOD FAITH EFFORTS TO CURE SUCH FAILURE OF
REPRESENTATION SUCH THAT EACH AND EVERY REPRESENTATION OF SELLER UNDER THIS
AGREEMENT SHALL BE TRUE AND ACCURATE IN ALL MATERIAL RESPECTS AS OF SUCH
EXTENDED CLOSING DATE, AND IF NOT TRUE AT THE EXTENDED CLOSING DATE, BUYER MAY
DECLINE TO CLOSE.

 

(b)           Compliance with Covenants and Agreements.
Seller shall have performed and complied in all material respects with (or
compliance therewith shall have been waived by Buyer) each and every covenant
and agreement required by this Agreement to be performed or complied with by
Seller prior to or at the Closing.

 

(c)           Price Adjustment Limitations. The
aggregate downward adjustment (if any) of the 
Base Purchase Price which results from the procedures set forth in
Sections  5(c), 7 and 14 does not exceed fifteen percent (15%) of the Base
Purchase Price.

 

(d)           Litigation. No suit, action or other
proceedings shall, on the date of Closing, be pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or obtain material
damages or other material relief in connection with the consummation of the
transactions contemplated by this Agreement, other than litigation instituted
by Buyer or any Affiliate of Buyer.

 

(e)           Material Adverse Change. No material
portion of the Properties (taken as a whole) shall have been destroyed (or
damaged to the extent that their use or value is materially adversely affected)
by fire or other casualty.

 

(f)            Release of Seller’s Loan Documents. Without
limitation as to any other release or encumbrance to be furnished by Seller at
Closing, Seller shall deliver to Buyer at

 

19

 

Closing a full
release of Seller’s Loan Documents to the extent of any encumbrance or security
interest in the Property created by Seller’s Loan Documents.

 

(g)           Seller Shareholder Approval. Seller
shall have (i) obtained the approval of the holders of a majority of the
outstanding shares of capital stock of Seller entitled to vote on matters
submitted to Seller’s stockholders authorizing the execution and performance by
Seller of this Agreement and the transactions contemplated hereby; (ii)
prepared and filed with the Securities and Exchange Commission (the “SEC”) a
Preliminary Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) or if required by law to
obtain the approval contemplated in the foregoing clause (i), a Preliminary
Proxy Statement pursuant to Section 14(a) of the Exchange Act, providing notice
of and describing such approval in the manner required by the Exchange Act, the
Nevada Revised Statutes and the articles of incorporation and bylaws of Seller;
(iii) responded promptly to comments delivered by the SEC, if any, with respect
to the Information Statement or Proxy Statement, as the case may be; and (iv)
delivered the definitive Information Statement or Proxy Statement, as the case
may be, to every security holder of each class of equity security that is
entitled to vote or give an authorization, proxy or consent in regard to the
execution and performance by Seller of this Agreement and take such other
actions as may be required by the Exchange Act, Nevada law, and the articles of
incorporation and bylaws of Seller to obtain the approval of shareholders
contemplated in the foregoing clause (i) as soon as reasonably practicable.

 

If the condition
described above in Section 8(g) is not met as of the Closing Date, this
Agreement shall terminate on the Closing Date. In the event of such a
termination, the parties shall have no further obligations or liabilities to
one another hereunder or in connection with the transactions contemplated hereby
other than: (i) the obligation of Buyer to reimburse Seller for the costs as
provided in Section 9(f) of this Agreement and (ii) the obligations under the
Confidentiality Agreement and Section 13 hereof, which will survive such
termination.

 

Unless this Agreement
is terminated as a result of the condition in Section 8(g) not being met, if
any of the other conditions in this Section 8 is not met as of the Closing
Date, and if such condition (other than the condition set forth in Section 8(c)
above) could reasonably be expected to have an adverse economic effect on the
value of the Properties (taken as a whole) to Buyer greater than fifty thousand
dollars ($50,000.00) and Buyer is not in material breach of its obligations
hereunder in the absence of Seller being in breach of its obligations
hereunder, this Agreement may, at the option of Buyer, be terminated by written
notice to Seller. In the event such a termination a occurs, the parties shall
have no further obligations or liabilities to one another hereunder or in
connection with the transactions contemplated hereby (other than the
obligations under the Confidentiality Agreement and Section 13 hereof,
which will survive such termination).

 

9.             Conditions Precedent to the Obligations of Seller to
Close. The obligations of Seller to consummate the transactions
contemplated by this Agreement are subject to the each of the following
conditions being met:

 

(a)           Representations True and Correct. Each
and every representation of Buyer under this Agreement shall be true and
accurate in all material respects as of the date

 

20

 

when made and
shall be deemed to have been made again at and as of the time of Closing and
shall at and as of such time of Closing be true and accurate in all material
respects except as to changes specifically contemplated by this Agreement or
consented to by Seller.

 

(b)           Compliance With Covenants and Agreements.
Buyer shall have performed and complied in all material respects with (or
compliance therewith shall have been waived by Seller) each and every covenant
and agreement required by this Agreement to be performed or complied with by
Buyer prior to or at the Closing.

 

(c)           Litigation. No suit, action or other
proceedings shall, on the date of Closing, be pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or obtain material
damages or other material relief in connection with the consummation of the
transactions contemplated by this Agreement, other than litigation instituted
by Seller or any Affiliate of Seller.

 

(d)           Price Adjustment Limitations. The
aggregate downward adjustment (if any) of the 
Base Purchase Price which results from the procedures set forth in
Sections 5(c), 7 and 14 does not exceed fifteen percent (15%) of the Base
Purchase Price.

 

(e)           Seller Shareholder Approval. Seller
shall have (i) obtained the approval of the holders of a majority of the
outstanding shares of capital stock of Seller entitled to vote on matters
submitted to Seller’s stockholders authorizing the execution and performance by
Seller of this Agreement and the transactions contemplated hereby; (ii)
prepared and filed with the Securities and Exchange Commission (the “SEC”) a
Preliminary Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) or if required by law to
obtain the approval contemplated in the foregoing clause (i), a Preliminary
Proxy Statement pursuant to Section 14(a) of the Exchange Act, providing notice
of and describing such approval in the manner required by the Exchange Act, the
Nevada Revised Statutes and the articles of incorporation and bylaws of Seller;
(iii) responded promptly to comments delivered by the SEC, if any, with respect
to the Information Statement or Proxy Statement, as the case may be; and (iv)
delivered the definitive Information Statement or Proxy Statement, as the case
may be, to every security holder of each class of equity security that is
entitled to vote or give an authorization, proxy or consent in regard to the
execution and performance by Seller of this Agreement and take such other
actions as may be required by the Exchange Act, Nevada law, and the articles of
incorporation and bylaws of Seller to obtain the approval of shareholders
contemplated in the foregoing clause (i) as soon as reasonably practicable.

 

(f)            Reimbursement of Shareholder Approval Costs.
Buyer shall reimburse Seller at Closing for the costs incurred by Seller in
obtaining or attempting to obtain the shareholder approval recited in Sections
8(g) and 9(e) of this Agreement up to a maximum amount of twenty-five thousand
dollars ($25,000.00).

 

If the
condition described above in Section 9(e) is not met as of the Closing Date,
this Agreement shall terminate on the Closing Date. In the event of such a
termination, the parties shall have no further obligations or liabilities to
one another hereunder or in connection with the transactions contemplated
hereby other than: (i) the obligation of Buyer to reimburse Seller for the
costs as

 

21

 

provided in
Section 9(g) of this Agreement and (ii) the obligations under the
Confidentiality Agreement and Section 13 hereof, which will survive such
termination.

 

Unless this Agreement
is terminated as a result of the condition in Section 9(e) not being met, if
any such condition on the obligations of Seller under this Agreement is not met
as of the Closing Date, and Seller is not in material breach of its obligations
hereunder in the absence of Buyer being in breach of its obligations hereunder,
this Agreement may, at the option of Seller, be terminated by written notice to
Buyer. In the event such a termination occurs, the parties shall have no
further obligations or liabilities to one another hereunder or in connection
with the transactions contemplated hereby (other than the obligations under the
Confidentiality Agreement and under Section 13 hereof, which will survive
such termination).

 

10.           Closing.

 

(a)           Actions At Closing. The closing (herein
called the “Closing”) of the transaction contemplated hereby shall take place
in the offices of Vinson & Elkins L.L.P. located at First City Tower, 1001
Fannin Street, Suite 2300, Houston, Texas 77002 at 10:00 a.m. local time on
June 30, 2006 (“Closing Date”). The term Closing Date shall include such other
date and time (i) as Buyer and Seller may mutually agree upon or (ii) to which
the Closing may be postponed pursuant to Sections 6(c)(ii) or 8(a) above. At
the Closing:

 

(i)            Delivery
of Conveyance. Seller shall execute, acknowledge and deliver to
Whittier Energy Company a conveyance of the Properties designated to be
conveyed to Whittier Energy Company in Schedule I. Seller shall execute,
acknowledge and deliver to Premier Natural Resources, LLC a conveyance of the
Properties designated to be conveyed to Premier Natural Resources, LLC in
Schedule I. Each conveyance shall be 
effective as of 7 o’clock a.m., Central Standard Time on February 1,
2006 (herein called the “Effective Date”). The conveyance to each of Whittier
Energy Company and Premier Natural Resources, LLC shall be made on the form
attached hereto as Schedule III (“Conveyance”).

 

(ii)           Federal
and State Conveyance Forms. Seller shall execute (and, where
required, acknowledge) and deliver to Buyer forms of conveyance or assignment
as required by the applicable authorities for transfers of interests in state
or federal leases included in the Properties.

 

(iii)          Letters
in Lieu. Seller shall execute and deliver to Buyer letters in lieu
of transfer orders (or similar documentation), in form acceptable to both
parties.

 

(iv)          Affiliate
Contracts. Seller will terminate any contracts which Seller has
with its Affiliates.

 

(v)           Turn
Over Possession. Seller shall, to the extent Seller can do so,
turn over possession of the Properties.

 

(vi)          Payment
to Seller. Buyer shall deliver to the Seller, by wire transfer
of immediately available funds to a single account designated by Seller in a
bank located in the United States, an amount equal to ninety percent (90%) of
the Purchase

 

22

 

Price. The
remaining ten percent (10%) of the Purchase Price shall be delivered by Buyer,
by wire transfer of immediately available funds, to that certain escrow account
(“Escrow Account”) established by and between Seller, Buyer and Compass Bank,
2001 Kirby Drive, Houston, Texas 77019, Attention: Thomas Cleveland, Tel.:
713-831-5795, Facsimile: 713-831-5750, as Escrow Agent pursuant to the
post-closing escrow agreement executed at Closing by Seller, Buyer and such
Escrow Agent (“Post-Closing Escrow Agreement”). The Post-Closing Escrow
Agreement shall provide that some or all of the amounts in the Escrow Account
may, at or before termination of the Escrow Account, according to the terms of
the Post-Closing Escrow Agreement, be disbursed to Buyer  as further outlined in the Post-Closing
Escrow Agreement.,  The
Post-Closing Escrow Agreement shall be executed at the Closing by the parties
in the form attached hereto as Exhibit C. The Escrow Account will be distributed to Buyer and/or Seller, as
appropriate, in accordance with the terms of the Escrow Agreement.

 

(vii)         Non
Foreign Status Affidavit. Seller will execute and deliver to
Buyer an affidavit or other certification (as permitted by such code) that such
party is not a “foreign person” within the meaning of Section 1445 (or similar
provisions) of the Internal Revenue Code of 1986 as amended (i.e., such party is not a
non resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in such code and regulations
promulgated thereunder).

 

(viii)        Seller’s Loan Documents. Seller
shall obtain releases of all mortgages and liens affecting the Properties
arising out of Seller’s Loan Documents.

 

(ix)           Opinion of Seller’s Counsel. Seller
shall provide an
opinion of its legal counsel, satisfactory to Buyer in its reasonable
discretion, that (i) the affirmative vote of the holders of a majority of the
outstanding shares of Seller’s common stock entitled to vote hereon is the only
vote of any class of capital stock of the Company required by Nevada law or the
certificate of incorporation or the bylaws of the Seller to authorize the execution
and performance by Seller of this Agreement; and (ii) Seller has full corporate authority under Nevada law to
consummate the transactions contemplated in this Agreement.

 

(b)           Post-Closing
Actions.

 

(i)            Transfer
of Files. Seller will deliver to Buyer, within five (5) business
days after Closing, all of Seller’s files, records and data pertaining to the
ownership and/or operation of the Properties (including, without limitation,
title records, lease files, division order files, surveys and maps, contracts
and contract files, production marketing records, correspondence files,
geological, geophysical and seismic records, data and information, well files
and production records, production and severance tax records, ad valorem tax
records, production accounting records, environmental records and regulatory and
regulatory compliance records), other than those which Seller cannot provide to
Buyer without breaching confidentiality agreements with third parties (provided
that Seller will reasonably cooperate with Buyer to obtain a release of such
restriction or otherwise obtain access). Seller may, at its election, and at
its expense, make and retain copies of any or all such files.

 

23

 

(ii)           Certain
Disbursements. With
respect to each Oil and Gas Property with respect to which Seller is disbursing
proceeds of production attributable to other parties entitled thereto, (i)
Seller shall continue to collect proceeds of production remitted to it up to
the end of the month in which Closing occurs and shall be responsible for
making disbursements, in accordance with its past practices of such proceeds of
production so collected to the parties entitled to same, with any proceeds of
production thereafter collected by Seller to be promptly forwarded to Buyer and
(ii) Seller shall, as promptly as possible after Closing, deliver to Buyer (A)
a copy of its “pay list” for each such Property and (B) a list of all parties
for whom it is holding in suspense proceeds of production and (C) an amount
equal to such proceeds so held in suspense.

 

11.           Certain Accounting Adjustments.

 

(a)           Adjustments for Revenues and Expenses. Adjustments
shall be made between Buyer and Seller so that (i) Buyer will bear all expenses
which are incurred in the operation of the Properties from and after the
Effective Date, including, without limitation, all drilling costs, all capital
expenditures, and all overhead charges due third party operators under
applicable operating agreements and Buyer will receive all proceeds (net of
applicable production, severance, and similar taxes) from sales of oil, gas
and/or other minerals which are produced from (or attributable to) the
Properties from and after the Effective Date, and (ii) Seller will bear all
expenses which are incurred in the operation of the Properties before the
Effective Date (provided, however, that Seller shall not be liable for the
Agreed Payables), and Seller will receive all proceeds (net of applicable
production, severance, and similar taxes) from the sale of oil, gas and/or
other minerals which were produced from (or attributable to) the Properties and
which were produced before the Effective Date. It is agreed that in
making such adjustments, the
Base Purchase Price shall be adjusted upward by an amount equal to the value of
all oil, gas and natural gas liquids attributable to the Oil and Gas Properties
that were in storage or pipelines as of the Effective Date and such value shall
be based on the price Seller received for such production in February of
2006 if sold, or, in the case where such production was not sold during that
month, such production shall be valued at a value based upon the average market
price posted in the area for oil, gas or natural gas liquids of similar quality
and grade in effect as of the Effective Date less all applicable royalties,
taxes, gravity adjustments and transportation expenses necessary to market such
production. It is further agreed that in making such adjustments, (A) ad valorem and similar taxes
assessed for periods prior to the Effective Date shall be borne by Seller and
ad valorem taxes assessed for periods on or after the Effective Date shall be
borne by Buyer, (B) ad valorem and similar taxes assessed with respect to a
period which the Effective Date splits shall be prorated based on the number of
days in such period which fall on each side of the Effective Date (with the day
on which the Effective Date falls being counted in the period after the
Effective Date), (C) for the period
between the Effective Date and Closing, Buyer shall bear only those expenses
which are chargeable under the applicable operating agreement as direct costs
or as third party operator overhead charges (or, in the absence of such an
agreement, under the AAPL 610 Form (1989) Operating Agreement, with the COPAS
(1984) Accounting Procedure (with the election “shall” in Article III having
been elected and with no overhead fee being provided for) attached), (D)  Buyer shall not bear any expenses which result from the operation of the
Properties in a manner which is not in accordance with Seller’s covenants
contained herein, and (E) no consideration shall be given to the local, state
or federal income tax liabilities of any party.

 

24

 

(b)           Initial Adjustment at Closing. At least
five (5) days before the Closing Date, Seller shall provide to Buyer a
statement (the “Closing
Statement”) showing its computations of the amount of the adjustments to
the Base Purchase Price provided for in subsection (a) above based on
information in Seller’s possession at that time (which shall consist of actual
receipts and disbursements to the extent available and estimates of remaining
amounts, it being understood that such adjustments are to consider the full
period up to Closing and it will be necessary to use estimates for some periods
and/or amounts), and for any Asserted Defects or asserted Title Benefits as
contemplated by Section 6. If the amount of adjustments so determined which
would result in a credit to Buyer exceed the amount of adjustments so
determined which would result in a credit to Seller, Buyer shall receive a
credit at Closing for the net amount of such excess, and if the converse is
true, then the amount to be paid by Buyer to Seller at Closing shall be
increased by the net amount of such excess. Buyer and Seller shall attempt to
agree in good faith upon such adjustments prior to Closing, provided that, if
agreement is not reached, the average of the net adjustment resulting from
Buyer’s computation and the net adjustment resulting from Seller’s computation
shall be used at Closing (subject to further adjustment under subsection (c)
and (d) below.

 

(c)           Adjustment Post Closing

 

(i)            Revised Closing Statement.On or before
the ninetieth (90) day following the Closing, Seller shall deliver to Buyer a
revised Closing Statement setting forth actual adjustments to Base Purchase
Price. Each party shall provide the other such data and information as may be
reasonably requested to permit Seller to prepare such revised Closing Statement
or to permit Buyer to perform or cause to be performed an audit of such revised
Closing Statement. The revised Closing Statement shall become final and binding
upon the parties on the thirtieth (30th) day following receipt thereof by Buyer
(the “Final
Settlement Date”) unless Buyer gives written notice of its disagreement
(a “Notice of Disagreement”)
to Seller prior to such date. Any Notice of Disagreement shall specify in
reasonable detail the dollar amount and the nature and basis of any
disagreement so asserted. If a Notice of Disagreement is received by Seller in
a timely manner, then the Parties shall resolve the dispute evidenced by the
Notice of Disagreement by mutual agreement, or otherwise in accordance with
Section 11(e) below.

 

(ii)           Final Statement. If the amount of the
Purchase Price as set forth on the Final Statement (below defined)  exceeds the amount of the estimated Purchase
Price paid at the Closing, then Buyer shall pay to Seller the amount by which
the Purchase Price as set forth on the Final Statement exceeds the amount of
the estimated Purchase Price paid at the Closing within five (5) business days
after the Final Settlement Date. If the amount of the Purchase Price as set
forth on the Final Statement is less than the amount of the estimated Purchase
Price paid at the Closing, then Seller shall pay to Buyer the amount by which
the Purchase Price as set forth on the Final Statement is less than the amount
of the estimated Purchase Price paid at the Closing within five (5) business
days after the Final Settlement Date. The term “Final Statement” shall mean (i) if
the revised Closing Statement becomes final pursuant to Section 11(c)(i), such
revised Closing Statement, or (ii) upon resolution of any dispute regarding a
Notice of Disagreement, the revised Closing Statement reflecting such
resolutions, which the Parties shall issue, or cause the Accounting Arbitrator
(below defined) to issue, as applicable, following such resolution.

 

25

 

(d)           Additional Adjustments. Should any
additional items which would be the subject of adjustments provided for in
subsection (a) above come to the attention of Buyer or Seller after such
adjustments under subsection (c) above are concluded, such adjustments shall be
made by appropriate payments from Buyer to Seller or from Seller to Buyer.

 

(e)           Accounting Arbitrator. If Seller and
Buyer are unable to resolve the matters addressed in the Notice of
Disagreement, each of Buyer and Seller shall within fourteen (14) business days
after the delivery of such Dispute Notice, summarize its position with regard
to such dispute in a written document of twenty-five pages or less and submit
such summaries to the office of Al E. McClellan & Company, LLC, 10807 St.
Mary’s Lane, Suite 200, Houston, Texas 77079, or such other party as the
parties may mutually select (the “Accounting Arbitrator”), together with the Notice of
Disagreement, the revised Closing Statement and any other documentation such
party may desire to submit. Within twenty (20) business days after receiving
the parties’ respective submissions, the Accounting Arbitrator shall render a
decision choosing either Seller’ position or Buyer’s position with respect to each
matter addressed in any Notice of Disagreement based on the materials described
above and based upon the books and records of Seller with respect to the
Properties. Any decision rendered by the Accounting Arbitrator pursuant hereto
shall be final, conclusive and binding on Seller and Buyer and will be
enforceable against any of the parties in any court of competent jurisdiction.

 

12.           Assumption and Indemnification.

 

(a)           Indemnity by Buyer. Subject to Seller’s
indemnity set forth in Section 12(b) below, effective upon Closing, Buyer (i)
assumes, and agrees to timely pay and perform, all duties, obligations and
liabilities (including environmental liabilities) relating  to the ownership and operation of the
Properties, whether accruing prior to, on and after the Closing Date (the “Assumed Obligations”) and (ii) releases, defends,
indemnifies and holds Seller and its Affiliates, and the respective
shareholders, directors, officers, employees, attorneys and agents of and such
parties (collectively, the “Seller Group”)
harmless from and against any and all claims, actions, causes of action,
liabilities, damages, losses, costs or expenses (including, without limitation,
court costs and reasonable attorneys’ fees) of any kind or character
(collectively, “Losses”)
arising out of or otherwise relating to (A) the Assumed Obligations or (B) the
breach of any representation or covenant of Buyer contained herein.

 

(b)           Indemnity by Seller. Effective upon
Closing, Seller defends, indemnifies and holds Buyer and its Affiliates, and
the respective shareholders, directors, officers, employees, attorneys and
agents of such parties (collectively, the “Buyer Group”) harmless from and against any and all Losses,
arising out of or otherwise relating to (i) the breach of any representation
or covenant of Seller contained herein or (ii) any Loss attributable to any
personal injury occurring in connection with Seller’s ownership or operation of
the Properties prior to the Closing.

 

(c)           Limitations on Seller’s Indemnity. Notwithstanding
anything herein to the contrary, Seller shall have no obligation or liability
under Section 12(b) or otherwise in connection with the transactions
contemplated by this Agreement, with respect to any Losses suffered by the
Buyer Group, in the aggregate, in excess of the Base Purchase Price. Further,
notwithstanding anything herein to the contrary, Seller shall have no
obligation or liability under

 

26

 

Section 12(b).
Buyer shall have no rights to any of the amounts in the Escrow Account in
connection with a claim under Section 12(b) unless and until the aggregate
amount of the Losses suffered by the Buyer Group , when combined with the value
of Defects identified by Buyer but not asserted prior to Closing plus the value
of Post-Closing Asserted Defects is more than the Threshold Amount; provided,
however, that once such amount exceeds the Threshold Amount, then Seller shall
be obligated to indemnify the Buyer Group for all such Losses in accordance
with the terms of this Agreement. If Closing occurs, the express indemnities
set forth in Section 12 and elsewhere in this Agreement and the parties’ rights
under the Post-Closing Escrow Agreement shall be the exclusive remedies for the
parties for the breach of any representation, warranty or covenant set forth in
this Agreement.

 

(d)           Express Negligence. Without limiting or enlarging the scope of
the indemnification and release provisions set forth in this Agreement, to the
fullest extent permitted by Law, such provisions shall be applicable regardless
of whether the liabilities, Losses, costs, expenses and damages in question
arises out of or results from the sole, active, passive, concurrent or
comparative negligence, strict liability or other fault of or by any indemnitee
or released Person.

 

13.           No Commissions Owed. Seller agrees to
defend, indemnify and hold harmless the Buyer Group from and against any and
all Losses arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, Seller with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby. Buyer agrees to indemnify and hold harmless the Seller
Group from and against any and all Losses arising out of or resulting from any
agreement, arrangement or understanding alleged to have been made by, or on
behalf of, Buyer with any broker or finder in connection with this Agreement or
the transaction contemplated hereby.

 

14.           Casualty Loss.

 

(a)           Oil and Gas Properties. In the event of
damage by fire or other casualty to the Properties prior to the Closing, this
Agreement shall remain in full force and effect, and in such event (unless
Seller elects to repair such damage, which Seller shall have no obligation to
do, in which case all rights to insurance proceeds, and claims against third
parties, related thereto shall belong to Seller) as to each such Property so
damaged which is an Oil and Gas Property, at Seller’s election, either (i) such
Property shall be treated as if it had an Asserted Defect associated with it
and the procedure provided for in Section 7 shall be applicable thereto (in
which case, unless Buyer and Seller agree to the contrary, all rights to
insurance proceeds, and claims against third parties, related thereto shall
belong to Seller), or (ii) the  Base
Purchase Price will not be adjusted, and Seller shall assign to Buyer all
claims against third parties with respect to such damage, and also shall use
its reasonable effort, either to collect (and when collected pay over to Buyer)
any insurance claims related to such damage, or assign to Buyer such insurance
claims, and, in either event, Buyer shall take title to the Property affected
by such loss without reduction of the 
Base Purchase Price as a result thereof

 

(b)           Other Properties. As to each such Property so damaged which
is other than an Oil and Gas Property, Seller shall, at Buyer’s election,
either collect (and when collected pay over to Buyer) any insurance claims
related to such damage, or assign to Buyer any

 

27

 

insurance claims related to
such damage, and Buyer shall take title to the Property affected by such loss
without reduction of the  Base Purchase
Price as a result thereof. In either event Seller shall assign to Buyer all
claims against third parties with respect to such damage.

 

15.           Notices. All notices and other
communications required under this Agreement shall (unless otherwise
specifically provided herein) be in writing and be delivered personally, by
recognized commercial courier or delivery service which provides a receipt, by
facsimile, or by registered or certified mail (postage prepaid), at the
following addresses (or in the case of telecopy, facsimile number):

 

If to the
Buyer:     Whittier Energy Company

333 Clay
Street, Suite 700

Houston, Texas
77002

Attn: Dan
Silverman

Chief
Operating Officer

Fax No.: (713)
850 – 1879

 

With a copy
to:

Louis J. Davis

Thompson &
Knight LLP

333 Clay
Street, Suite 3300

Houston, Texas
77002

Fax No. (713)
654 – 1871

 

And

 

Premier
Natural Resources

One Summit
Plaza

5727 South
Lewis Avenue

Suite 200

Tulsa,
Oklahoma 74105

Fax No. 918-878-5425

Attn:  J. C. Jacobsen, President and Chief Manager

 

If to Seller:             Imperial
Petroleum, Inc.

329 Main
Street, Suite 801

Evansville,
Indiana  47708

Attn: Jeff
Wilson

Fax No.:  (812) 876-1678

 

With a copy
to:    Vinson & Elkins L.L.P.

1001 Fannin,
Suite 2300

Houston,
Texas  77002

Attn:  Robin S. Fredrickson

Fax No.:  (713) 615-5850

 

28

 

and shall be
considered delivered on the date of receipt if during business hours, or, if
not during business hours, on the next business day during business hours. Either
the Buyer or Seller may specify as its proper address any other post office
address within the continental limits of the United States by giving notice to
the other parties, in the manner provided in this Section, at least two (2)
days prior to the effective date of such change of address.

 

16.           Survival of Provisions, Certain Limitation on
Liabilities. All representations, warranties and covenants
contained made herein shall survive the Closing; provided that (a) such
representations and warranties as to title matters shall survive the Closing
and the delivery of the Conveyance for only a period of thirty (30) days
following Closing, (b) all other representations and warranties and the
covenants of the parties to be fully performed prior to Closing shall survive
the Closing and delivery of the Conveyance for a period of only one (1) year following
Closing, (c) Seller’s indemnities in Section 12(b) shall survive the Closing
and delivery of the Conveyance for a period of only one (1) year following the
Closing, and (d) the provisions of Sections 10 (to the extent the same are, by
mutual agreement, not performed at Closing), 11 and 13 shall survive the
Closing and the delivery of the Conveyance for a period of one (1) year
following Closing. All other provisions of this Agreement shall survive the
Closing and delivery of the Conveyance without time limitation. It is provided,
however, that nothing in this Section 16 or this Agreement shall be construed
as being inconsistent with or limiting the effect of the Conveyance attached as
Schedule III which provides for a special warranty of title by Seller.

 

17.           Miscellaneous Matters.

 

(a)           Further Assurances. After the Closing,
Seller agrees that it shall execute and deliver, and shall otherwise cause to
be executed and delivered, from time to time, such further instruments,
notices, division orders, transfer orders and other documents, and do such
other and further acts and things, as may be reasonably necessary to more fully
and effectively grant, convey and assign the Properties to Buyer
and to otherwise carry out the transaction contemplated hereby.

 

(b)           Parties Bear Own Expenses, No Special Damages.
Each party shall bear and pay all expenses (including, without limitation,
legal fees) incurred by it in connection with the transaction contemplated by
this Agreement. NOTWITHSTANDING
ANYTHING HEREIN WHICH MAY APPEAR TO THE CONTRARY, NEITHER PARTY SHALL HAVE ANY
OBLIGATIONS WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED
HEREBY FOR ANY SPECIAL, CONSEQUENTIAL, LOSS OF PROFITS OR PUNITIVE DAMAGES.

 

(c)           No Sales Taxes. If this transaction is
deemed to be subject to sales, transfer or similar tax, for any reason, Buyer
agrees to be solely responsible, and shall (as a part of its indemnification
obligations under Section  12 hereof) indemnify and hold the Seller Group
harmless, for any and all sales, transfer or other similar taxes (including
related penalty, interest or legal costs) due by virtue of this transaction on
the Properties transferred pursuant hereto and the Seller shall remit such
taxes at that time. Seller and Buyer agree to cooperate with each other in
demonstrating that the requirements for exemptions from such taxes have been
met.

 

29

 

(d)           Entire Agreement. This Agreement
contains the entire understanding of the parties hereto with respect to subject
matter hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such subject
matter; provided that the Confidentiality Agreement remains in full force and
effect and is not superseded or modified by this Agreement.

 

(e)           Amendments, Waivers. This Agreement may
be amended, modified, supplemented, restated or discharged (and provisions
hereof may be waived) only by an instrument in writing signed by the party
against whom enforcement of the amendment, modification, supplement,
restatement or discharge (or waiver) is sought.

 

(f)            Choice of Law. Without regard to
principles of conflicts of law, this Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Texas applicable to
contracts made and to be performed entirely within such state and the laws of
the United States of America.

 

(g)           Headings, Time of Essence, etc. The
descriptive headings contained in this Agreement are for convenience only and
shall not control or affect the meaning or construction of any provision of
this Agreement. Within this Agreement, words of any gender shall be held and
construed to cover any other gender, and words in the singular shall be held
and construed to cover the plural, unless the context otherwise requires. Time
is of the essence in this Agreement.

 

(h)           Assignment; Successors and Assigns. Neither
Buyer nor Seller shall assign this Agreement or any part hereof without the
prior written consent of the other. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.

 

(i)            Counterpart Execution. This Agreement
may be executed in counterparts, all of which are identical and all of which constitute
one and the same instrument. It shall not be necessary for Buyer and Seller to
sign the same counterpart. It is recognized that the parties may execute
separate copies of the signature pages hereto and that all of such copies may
be assembled into one or more counterparts hereof containing signature pages
with signatures of  Buyer and Seller.

 

(j)            No Press Releases. Prior to Closing
neither party shall make any public announcement with respect to the
transaction contemplated hereby without the consent of the other party, except
as may be required under applicable law (including applicable securities laws)
in which case the other parties to this Agreement shall be advised and the
parties shall use their reasonable best efforts to cause a mutually agreeable
release or announcement to be issued; provided, however, that the foregoing
shall not preclude communications or disclosures necessary to implement the
provisions of this Agreement (including communications or disclosures to
lenders or rating agencies or in connection with the receipt of any consents or
contractual notices) or to comply with applicable accounting, tax and
disclosure obligations of any governmental entity.

 

30

 

(k)           Disclaimer.           BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY SET
FORTH IN THIS AGREEMENT, NONE OF SELLER OR ANY AFFILIATE OF SELLER MAKES ANY
REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY, IMPLIED OR OTHERWISE WITH
RESPECT TO THE PROPERTIES. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, SELLER, FOR ITSELF AND ITS AFFILIATES, HEREBY EXPRESSLY DISCLAIMS
ANY AND ALL REPRESENTATIONS AND WARRANTIES ASSOCIATED WITH THE PROPERTIES,
EXPRESS, STATUTORY, IMPLIED OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY
REGARDING:  (I) TITLE, (II) ANY COSTS,
EXPENSES, REVENUES, RECEIPTS, ACCOUNTS RECEIVABLE, OR ACCOUNTS PAYABLE, (III)
ANY CONTRACTUAL, ECONOMIC OR FINANCIAL INFORMATION AND DATA ASSOCIATED WITH THE
PROPERTIES, (IV) THE CONTINUED FINANCIAL VIABILITY OR PRODUCTIVITY OF THE
PROPERTIES OR TRANSPORTABILITY OF PRODUCT, (V) THE ENVIRONMENTAL OR PHYSICAL
CONDITION OF THE PROPERTIES, (VI) ANY FEDERAL, STATE, LOCAL OR TRIBAL INCOME OR
OTHER TAX CONSEQUENCES ASSOCIATED WITH THE PROPERTIES, (VII) THE ABSENCE OF
PATENT OR LATENT DEFECTS, (VIII) THE STATE OF REPAIR OF THE PROPERTIES, (IX)
MERCHANTABILITY OR CONFORMITY TO MODELS, (X) FITNESS FOR A PARTICULAR PURPOSE
AND (XI) PRODUCTION RATES, RECOMPILATION OPPORTUNITIES, DECLINE RATES OR THE
QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY,
ATTRIBUTABLE TO THE PROPERTIES. SELLER, FOR ITSELF AND ITS AFFILIATES,
EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES, EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT ASSOCIATED WITH THE QUALITY,
ACCURACY, COMPLETENESS OR MATERIALITY OF THE INFORMATION, DATA AND MATERIALS
FURNISHED (WHETHER ELECTRONICALLY, ORALLY, BY VIDEO, IN WRITING OR ANY OTHER
MEDIUM, BY COMPACT DISK, IN ANY DATA ROOM, OR OTHERWISE) AT ANY TIME TO BUYER
GROUP ASSOCIATED WITH TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING,
INFORMATION, DATA OR MATERIALS REGARDING: 
(A) TITLE TO THE PROPERTIES, (B) COSTS, EXPENSES, REVENUES, RECEIPTS,
ACCOUNTS RECEIVABLE OR ACCOUNTS PAYABLE ASSOCIATED WITH THE PROPERTIES, (C) CONTRACTUAL,
ECONOMIC OR FINANCIAL INFORMATION ASSOCIATED WITH THE PROPERTIES, (D) THE
CONTINUED FINANCIAL VIABILITY OR PRODUCTIVITY OF THE PROPERTIES, OR
TRANSPORTABILITY OF PRODUCT, (E) THE ENVIRONMENTAL OR PHYSICAL CONDITION OF THE
PROPERTIES, (F) FEDERAL, STATE, LOCAL OR TRIBAL INCOME OR OTHER TAX
CONSEQUENCES ASSOCIATED WITH THE PROPERTIES, (G) THE ABSENCE OF PATENT OR
LATENT DEFECTS, (H) THE STATE OF REPAIR OF THE PROPERTIES, (I) ANY WARRANTY
REGARDING MERCHANTABILITY OR CONFORMITY TO MODELS, (J) ANY RIGHTS OF ANY MEMBER
OF BUYER GROUP UNDER APPROPRIATE LAWS TO CLAIM DIMINUTION OF CONSIDERATION OR
RETURN OF THE PURCHASE PRICE, (K) ANY WARRANTY OF FREEDOM FROM PATENT,
COPYRIGHT OR TRADEMARK INFRINGEMENT, (L) WARRANTIES EXISTING UNDER APPLICABLE
LAW NOW OR HEREAFTER IN EFFECT, (M) ANY WARRANTY REGARDING FITNESS FOR A
PARTICULAR PURPOSE, AND (N) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES,

 

31

 

DECLINE RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY OR
VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE PROPERTIES.

 

(l)            Arbitration. Except as provided in
Section 11(e), any controversy, dispute, or claim arising out of, in connection
with, or in relation to, the interpretation, performance or breach of this
Agreement, including, without limitation, the validity, scope, and
enforceability of this Section 17(l), will be solely and finally settled by
binding arbitration, without right of appeal. Arbitration will be conducted
before a single arbitrator in Houston, Texas by and in accordance with the then
existing rules for commercial arbitration of the American Arbitration
Association, or any successor organization and in accordance with the Federal
Arbitration Act, 9 U.S.C. § 1 et. seq. Judgment upon any award rendered by the
arbitrator may be entered by the state or federal Court having jurisdiction
thereof. Any of the parties may demand arbitration by written notice to the
other and to the American Arbitration Association (“Demand for Arbitration”). Any Demand
for Arbitration pursuant to this Section 17(l) shall be made within one hundred
eighty (180) days from the date that the dispute upon which the demand is based
arose or the other parties shall have the option to have such dispute adjudicated
in a federal court of competent jurisdiction in Texas. The parties intend that
this agreement to arbitrate be valid, enforceable and irrevocable.

 

[REMAINDER OF
PAGE INTENTIONALLY LEFT BLANK]

 

32

 

IN WITNESS
WHEREOF, this Agreement is executed by the parties hereto on the date set forth
above.

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  IMPERIAL
  PETROLEUM, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey T. Wilson 

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey T. Wilson

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  WHITTIER
  ENERGY COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel Silverman

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Daniel Silverman

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Operating Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PREMIER
  NATURAL RESOURCES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Chris Jacobsen

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  J. Chris Jacobsen

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  President / Manager

  	
   

  
								

 

 

SCHEDULE I

 

County/StateWells,
Units, Lease or Drilling Locations; WI; NRI; Allocated Amounts

 

	
  County/State

  	
   

  	
  Well, Unit,

  Lease or

  Drilling

  Locations

  	
   

  	
  Working

  Interest

  	
   

  	
  Net Revenue

  Interest

  	
   

  	
  Allocated

  Amounts

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

1

 

SCHEDULE II

 

Disclosure Schedule

 

1

 

SCHEDULE
III

 

Conveyance Form

 

IMPERIAL
PETROLEUM, INC., a Nevada corporation (herein called “Grantor”), for Ten Dollars and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET
OVER, and DELIVER unto [each of the following in separate conveyances of the
properties to be conveyed to each: WHITTIER ENERGY COMPANY, a Nevada
corporation, whose address is 333 Clay Street, Suite 700, Houston, Texas 777002
and PREMIER NATURAL RESOURCES, LLC, a Delaware limited liability company, whose
address is One Summit Plaza, 5727 South Lewis Avenue, Suite 200, Tulsa,
Oklahoma 74105] (herein called “Grantee”, the following described properties, rights and interests:

 

(a)           all
right, title and interest of Grantor in and to the oil and gas leases and other, interests, if any, described on Exhibit A
hereto (and
any ratifications, amendments and extensions thereof, whether or not the same
are described on Exhibit A);

 

(b)           Without
limitation of the foregoing, all other right, title and interest (of whatever
kind or character, whether legal or equitable, and whether vested or
contingent) of Grantor in and to the leases and other interests, if any,
described on Exhibit A hereto and in and to all lands described on Exhibit A or described or covered by such
leases or other interests (including, without limitation, interests in oil, gas
and/or mineral leases, overriding royalties, production payments, net profits
interests, fee mineral interests, fee royalty interests and other interests
insofar as they cover such lands), even though Grantor’s interest therein may
be incorrectly described in, or omitted from, such Exhibit A; and

 

(c)           all
rights, titles and interests of Grantor in and to, or otherwise derived from,
all presently existing and valid oil, gas and/or mineral unitization, pooling,
and/or communitization agreements, declarations, designations and/or orders
(including, without limitation, those described on Exhibit A hereto) and in and
to the properties covered and the units created thereby (including, without
limitation, all units formed under orders, rules, regulations, or other
official acts of any federal, state, or other authority having jurisdiction,
and voluntary unitization agreements, designations and/or declarations)
relating to the properties described in subsections (a) and (b) above;

 

(d)           to the
extent assignable, all rights, titles and interests of Grantor in and to all
presently existing and valid production sales contracts, operating agreements,
and other agreements and contracts which relate to any of the properties
described in subsections (a), (b) and (c) above (the “Contracts”); and

 

(e)           all
rights, titles and interests of Grantor in and to all materials, supplies,
machinery, equipment, improvements and other personal property and fixtures
(including, but not by way of limitation, all wells, wellhead equipment,
pumping units, flowlines, tanks, buildings, saltwater disposal facilities,
injection facilities, compression facilities, gathering systems, and other
equipment) used in connection with the exploration, development, operation or maintenance
of the properties described in subsections (a), (b) and (c) above, and,
to the

 

1

 

extent assignable, in and to all permits and
licenses (including, without limitation, all environmental and other
governmental permits, licenses and authorizations), rights of way, easements,
and other rights of surface use,  water
rights and other rights and interests used in connection with the exploration,
development, operation or maintenance of the properties described in
subsections (a), (b) and (c) above.

 

The properties, rights and interests described in
subsections (a) through (e) above are herein sometimes called the “Properties.”

 

It is provided however, that Properties does not
include:  (a) all of
Grantor’s corporate minute books, financial records, and other business records
that relate to Grantor’s business generally (including the ownership and
operation of the Properties); (b) all trade credits, all accounts, receivables
and all other proceeds, income or revenues attributable to the Properties with
respect to any period of time prior to the Effective Date (below defined); (c)
all claims and causes of action of Grantor arising under or with respect to any
Contracts that are attributable to periods of time prior to the Effective Date
(including claims for adjustments or refunds); (d) all rights and interests of
Grantor (i) under any policy or agreement of insurance or indemnity, (ii) under
any bond or (iii) to any insurance proceeds, arising, in each case, from acts,
omissions or events, or damage to or destruction of property (except as
provided in Purchase Agreement described below); (e) all hydrocarbons produced
and sold from the Properties with respect to all periods prior to the Effective
Date; (f) all claims of Grantor for refunds of or loss carry forwards with
respect to (i) production or any other taxes attributable to any period prior
to the Effective Date, (ii) income or franchise taxes or (iii) any taxes
attributable to any period prior to the Effective Date; (g) all office leases,
office furniture, personal computers and associated peripherals and all radio
and telephone equipment not on the Properties; (h) all of Grantor’s proprietary
computer software, patents, trade secrets, copyrights, names, trademarks, logos
and other intellectual property; (i) all documents and instruments of Grantor
that may be protected by an attorney-client privilege; (j) all data that cannot
be disclosed to Buyer as a result of confidentiality arrangements under agreements
with third parties; (k) all geophysical, and other seismic and related
technical data and information relating to the Properties to the extent not
assignable without payment of fee or penalty; (l) documents prepared or
received by Grantor with respect to (i) lists of prospective purchasers for the
Properties compiled by Grantor, (ii) bids submitted by other prospective
purchasers of the Properties, (iii) analyses by Grantor of any bids submitted
by any prospective purchaser, (iv) correspondence between or among Grantor, its
respective representatives, and any prospective purchaser other than Grantee
and (v) correspondence between Grantor or any of its respective representatives
with respect to any of the bids, the prospective purchasers, or the transactions
contemplated in this Agreement; (m) all vehicles of Grantor or its Affiliates
(below defined), and (n) the pulling equipment and workover rig described on
Exhibit B.

 

TO HAVE AND TO HOLD the Properties unto Grantee, its successors and assigns, forever.

 

GRANTOR AGREES TO WARRANT AND FOREVER DEFEND
TITLE TO THE PROPERTIES UNTO GRANTEE, ITS SUCCESSORS AND ASSIGNS, AGAINST THE
CLAIMS AND DEMANDS OF ALL PERSONS CLAIMING, OR TO CLAIM THE SAME,

 

2

 

OR ANY PART THEREOF BY, THROUGH OR UNDER
GRANTOR, BUT NOT OTHERWISE.

 

This
Conveyance is delivered by Grantor pursuant and subject to that certain
Purchase and Sale Agreement dated               
between Grantor,                    and
Grantee (the “Purchase Agreement”). Capitalized terms used herein and not
otherwise defined shall have the meanings given such terms in the Purchase
Agreement.

 

GRANTEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE 
AGREEMENT AND THIS CONVEYANCE, NONE OF GRANTOR OR ANY AFFILIATE OF
GRANTOR MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY, IMPLIED OR
OTHERWISE WITH RESPECT TO THE PROPERTIES. EXCEPT AS OTHERWISE EXPRESSLY SET
FORTH IN THE PURCHASE AGREEMENT, GRANTOR, FOR ITSELF AND ITS AFFILIATES, HEREBY
EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES ASSOCIATED WITH
THE PROPERTIES, EXPRESS, STATUTORY, IMPLIED OR OTHERWISE, INCLUDING ANY
REPRESENTATION OR WARRANTY REGARDING: 
(I) TITLE, (II) ANY COSTS, EXPENSES, REVENUES, RECEIPTS, ACCOUNTS
RECEIVABLE, OR ACCOUNTS PAYABLE, (III) ANY CONTRACTUAL,  ECONOMIC OR FINANCIAL INFORMATION AND DATA
ASSOCIATED WITH THE PROPERTIES, (IV) THE CONTINUED FINANCIAL VIABILITY OR
PRODUCTIVITY OF THE PROPERTIES OR TRANSPORTABILITY OF PRODUCT, (V) THE
ENVIRONMENTAL OR PHYSICAL CONDITION OF THE PROPERTIES, (VI) ANY FEDERAL, STATE,
LOCAL OR TRIBAL INCOME OR OTHER TAX CONSEQUENCES ASSOCIATED WITH THE
PROPERTIES, (VII) THE ABSENCE OF PATENT OR LATENT DEFECTS, (VIII) THE STATE OF
REPAIR OF THE PROPERTIES, (IX) MERCHANTABILITY OR CONFORMITY TO MODELS, (X)
FITNESS FOR A PARTICULAR PURPOSE AND (XI) PRODUCTION RATES, RECOMPILATION
OPPORTUNITIES, DECLINE RATES OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES
OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE PROPERTIES. GRANTOR, FOR ITSELF
AND ITS AFFILIATES, EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND
WARRANTIES, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT
ASSOCIATED WITH THE QUALITY, ACCURACY, COMPLETENESS OR MATERIALITY OF THE
INFORMATION, DATA AND MATERIALS FURNISHED (WHETHER ELECTRONICALLY, ORALLY, BY
VIDEO, IN WRITING OR ANY OTHER MEDIUM, BY COMPACT DISK, IN ANY DATA ROOM, OR
OTHERWISE) AT ANY TIME TO GRANTEE GROUP ASSOCIATED WITH TRANSACTIONS
CONTEMPLATED BY THE PURCHASE AGREEMENT, INCLUDING, INFORMATION, DATA OR
MATERIALS REGARDING:  (A) TITLE TO THE
PROPERTIES, (B) COSTS, EXPENSES, REVENUES, RECEIPTS, ACCOUNTS RECEIVABLE OR
ACCOUNTS PAYABLE ASSOCIATED WITH THE PROPERTIES, (C) CONTRACTUAL, ECONOMIC OR
FINANCIAL INFORMATION ASSOCIATED WITH THE PROPERTIES, (D) THE CONTINUED
FINANCIAL VIABILITY OR PRODUCTIVITY OF THE PROPERTIES, OR TRANSPORTABILITY OF
PRODUCT, (E) THE ENVIRONMENTAL OR PHYSICAL CONDITION OF THE PROPERTIES, (F)
FEDERAL, STATE, LOCAL OR TRIBAL INCOME OR OTHER TAX CONSEQUENCES ASSOCIATED
WITH THE PROPERTIES, (G) THE ABSENCE OF PATENT OR LATENT

 

3

 

DEFECTS, (H) THE STATE OF REPAIR OF THE
PROPERTIES, (I) ANY WARRANTY REGARDING MERCHANTABILITY OR CONFORMITY TO MODELS,
(J) ANY RIGHTS OF ANY MEMBER OF GRANTEE GROUP UNDER APPROPRIATE LAWS TO CLAIM
DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (K) ANY WARRANTY
OF FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, (L) WARRANTIES
EXISTING UNDER APPLICABLE LAW NOW OR HEREAFTER IN EFFECT, (M) ANY WARRANTY
REGARDING FITNESS FOR A PARTICULAR PURPOSE, AND (N) PRODUCTION RATES,
RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION OR THE
QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE
TO THE PROPERTIES.

 

Grantor
agrees to execute and deliver to Grantee, from time to time, such other and
additional instruments, notices, division orders, transfer orders and other
documents, and to do all such other and further acts and things as may be
necessary to more fully and effectively grant, convey and assign to Grantee the
Properties.

 

This
Conveyance is being executed in several counterparts all of which are identical
except that, to facilitate recordation, where a counterpart hereof is being
recorded there may be omitted from Exhibit A and Exhibit B to such counterpart
portions of Exhibit A and Exhibit B which describe or refer to properties
located in jurisdictions other than the jurisdiction in which such counterpart
is being recorded. Complete copies hereof including the entire Exhibit A and
Exhibit B have been retained by Grantor and Grantee. All of such counterparts
together shall constitute one and the same instrument.

 

IN
WITNESS WHEREOF this Conveyance has been executed on                 ,           ,
effective as to runs of oil and deliveries of gas, and for all other purposes,
as of 7:00 a.m. Central Standard Time, on February 1, 2006 (the “Effective Date”).

 

	
   

  	
  IMPERIAL
  PETROLEUM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  
	
   

  	
  Title:

  

 

4

 

STATE
OF                         

 

COUNTY
OF

 

The
foregoing instrument was acknowledged before me this         
day of                                 ,
2006, by                                                 
the                                         
of a Imperial Petroleum, Inc., a                                       
corporation, on behalf of such corporation.

 

Notary Public in and for the State of Texas

 

[FORM TO BE ADJUSTED, AS APPROPRIATE,

TO MEET LOCAL FILING/RECORDATION REQUIREMENTS.]

 

5

 

Exhibit A

 

Property Descriptions

 

1

 

Exhibit B

 

Pulling Equipment

 

1

 

Exhibit C

 

Form of Escrow Agreement

 

1

 

Exhibit D

 

Invoicing Report (Agreed Payables)

 

1Exhibit
10.1

AGREEMENT

made as of the 3rd  day of MAY in
the year of 2006

(In words, indicate day, month and year)

BETWEEN
the Owner:

(Name and address)

DOVER DOWNS, INC.

1131 NORTH DUPONT HIGHWAY

DOVER, DELAWARE 19901

and the Construction
Manager:

(Name and address)

T. N. WARD COMPANY

129 COULTER AVENUE, P.O. BOX 191

ARDMORE, PA 19003

The Project is:

(Name, address and brief description)

DOVER DOWNS HOTEL
ADDITION

1131 NORTH DUPONT HIGHWAY

DOVER, DELAWARE 19901

268 ROOM HOTEL
ADDITION

The Architect is:

(Name and address)

THE FRIEDMUTTER
GROUP

8025 BLACK HORSE PIKE

WEST ATLANTIC CITY, NJ 08232

The Owner and
Construction Manager agree as set forth below:

 1
 

 

TABLE OF CONTENTS

ARTICLE 1
  GENERAL PROVISIONS

§ 1.1
Relationship of the Parties

§ 1.2
General Conditions

ARTICLE 2
  CONSTRUCTION MANAGER’S RESPONSIBILITIES

§ 2.1
Preconstruction Phase

§ 2.2
Guaranteed Maximum Price Proposal and Contract Time

§ 2.3
Construction Phase

§ 2.4
Professional Services

§ 2.5
Hazardous Materials

ARTICLE 3
  OWNER’S RESPONSIBILITIES

§ 3.1
Information and Services

§ 3.2
Owner’s Designated Representative

§ 3.3
Architect

§ 3.4
Legal Requirements

ARTICLE 4
  COMPENSATION AND PAYMENTS FOR PRECONSTRUCTION PHASE SERVICES

§ 4.1
Compensation

§ 4.2
Payments

ARTICLE 5
  COMPENSATION FOR CONSTRUCTION PHASE SERVICES

§ 5.1
Compensation

§ 5.2
Guaranteed Maximum Price

§ 5.3
Changes in the Work

ARTICLE 6
  COST OF THE WORK FOR CONSTRUCTION PHASE

§ 6.1
Costs to Be Reimbursed

§ 6.2
Costs Not to Be Reimbursed

§ 6.3
Discounts, Rebates and Refunds

§ 6.4
Accounting Records

ARTICLE 7
  CONSTRUCTION PHASE

§ 7.1
Progress Payments

§ 7.2  Final Payment

ARTICLE 8
  INSURANCE AND BONDS

§ 8.1
Insurance Required of the Construction Manager

§ 8.2
Insurance Required of the Owner

§ 8.3
Performance Bond and Payment Bond

ARTICLE 9
  MISCELLANEOUS PROVISIONS

§ 9.1
Dispute Resolution

§ 9.2
Other Provisions

ARTICLE 10
  TERMINATION OR SUSPENSION

§ 10.1
Termination Prior to Establishing Guaranteed Maximum Price

§ 10.2
Termination Subsequent to Establishing Guaranteed Maximum Price

§ 10.3
Suspension

ARTICLE 11
  OTHER CONDITIONS AND SERVICES

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ARTICLE 1   GENERAL PROVISIONS

§ 1.1
RELATIONSHIP OF PARTIES

The Construction Manager
accepts the relationship of trust and confidence established with the Owner by
this Agreement, and covenants with the Owner to furnish the Construction
Manager’s reasonable skill and judgment and to cooperate with the Architect in
furthering the interests of the Owner. The Construction Manager shall furnish
construction administration and management services and use the Construction
Manager’s best efforts to perform the Project in an expeditious and economical
manner consistent with the interests of the Owner. The Owner shall endeavor to
promote harmony and cooperation among the Owner, Architect, Construction
Manager and other persons or entities employed by the Owner for the Project.

§ 1.2
GENERAL CONDITIONS

For the Construction
Phase, the General Conditions of the contract shall be the AIA® Document A201TM—1997,
General Conditions of the Contract for Construction, amended and attached. For
the Preconstruction Phase, or in the event that the Preconstruction and
Construction Phases proceed concurrently, A201TM—1997 shall apply to the
Preconstruction Phase only as specifically provided in this Agreement. The term
“Contractor” as used in A201TM—1997 shall mean the Construction Manager.

ARTICLE 2   CONSTRUCTION MANAGER’S RESPONSIBILITIES

The Construction Manager
shall perform the services described in this Article. The services to be
provided under Sections 2.1 and 2.2 constitute the Preconstruction Phase
services. If the Owner and Construction Manager agree, after consultation with
the Architect, the Construction Phase may commence before the Preconstruction
Phase is completed, in which case both phases will proceed concurrently.

§ 2.1
PRECONSTRUCTION PHASE  (INTENTIONALLY DELETED)

§ 2.2
GUARANTEED MAXIMUM PRICE PROPOSAL AND CONTRACT TIME

§ 2.2.1
When the Drawings and Specifications are sufficiently complete, the
Construction Manager shall propose a Guaranteed Maximum Price, which shall be
the sum of the estimated Cost of the Work and the Construction Manager’s Fee.

§ 2.2.2
As the Drawings and Specifications may not be finished at the time the
Guaranteed Maximum Price proposal is prepared, the Construction Manager shall
provide in the Guaranteed Maximum Price for further development of the Drawings
and Specifications by the Architect that is consistent with the Contract
Documents and reasonably inferable therefrom as necessary to produce the
results intended by the Contract Documents.. Such further development does not
include such things as changes in scope, systems, kinds and quality of
materials, finishes or equipment, all of which, if required, shall be
incorporated by Change Order. The Construction Manager recognizes that the
Guaranteed Maximum Price has been based on design drawings and specifications
which have not been released for construction and accepts the responsibility to
perform the entire work described in the released for construction drawings and
specifications for the Guaranteed Maximum Price without regard to the fact that
said work may have been modified or expanded consistent with the original
design intent.

§ 2.2.3
The estimated Cost of the Work shall include the Construction Manager’s
contingency, a sum established by the Construction Manager for the Construction
Manager’s exclusive use to cover costs arising under Section 2.2.2 and
other costs which are properly reimbursable as Cost of the Work but not the
basis for a Change Order.

§ 2.2.4
BASIS OF GUARANTEED MAXIMUM PRICE

The Construction Manager
shall include with the Guaranteed Maximum Price proposal a written statement of
its basis, which shall include:

.1                     A list of the
Drawings and Specifications, including all addenda thereto and the Conditions
of the Contract, which were used in preparation of the Guaranteed Maximum Price
proposal.

.2                     A list of
allowances and a statement of their basis.

.3                     A list of the
clarifications and assumptions made by the Construction Manager in the
preparation of the Guaranteed Maximum Price proposal to supplement the
information contained in the Drawings and Specifications.

 3
 

 

.4                     The proposed
Guaranteed Maximum Price, including a statement of the estimated cost organized
by trade categories, allowances, contingency, and other items and the Fee that
comprise the Guaranteed Maximum Price.

.5                     The Date of
Substantial Completion upon which the proposed Guaranteed Maximum Price is
based, and a schedule of the Construction Documents issuance dates upon which
the date of Substantial Completion is based.

§ 2.2.5
The Construction Manager shall meet with the Owner and Architect to review the
Guaranteed Maximum Price proposal and the written statement of its basis. In
the event that the Owner or Architect discover any inconsistencies or
inaccuracies in the information presented, they shall promptly notify the
Construction Manager, who shall make appropriate adjustments to the Guaranteed
Maximum Price proposal, its basis, or both.

§ 2.2.6
Unless the Owner accepts the Guaranteed Maximum Price proposal in writing on or
before the date specified in the proposal for such acceptance and so notifies
the Construction Manager, the Guaranteed Maximum Price proposal shall not be
effective without written acceptance by the Construction Manager.

§ 2.2.7
Prior to the Owner’s acceptance of the Construction Manager’s Guaranteed
Maximum Price proposal and issuance of a Notice to Proceed, the Construction
Manager shall not incur any cost to be reimbursed as part of the Cost of the
Work, except as the Owner may specifically authorize in writing.

§ 2.2.8
Upon acceptance by the Owner of the Guaranteed Maximum Price proposal, the
Guaranteed Maximum Price and its basis shall be set forth in Amendment No. 1.
The Guaranteed Maximum Price shall be subject to additions and deductions by a
change in the Work as provided in the Contract Documents, and the Date of
Substantial Completion shall be subject to adjustment as provided in the
Contract Documents.

§ 2.2.9
The Owner shall authorize and cause the Architect to revise the Drawings and
Specifications to the extent necessary to reflect the agreed-upon assumptions
and clarifications contained in Amendment No. 1. Such revised Drawings and
Specifications shall be furnished to the Construction Manager in accordance
with schedules agreed to by the Owner, Architect and Construction Manager. The
Construction Manager shall promptly notify the Architect and Owner if such
revised Drawings and Specifications are inconsistent with the agreed-upon
assumptions and clarifications.

§ 2.2.10
The Guaranteed Maximum Price shall include in the Cost of the Work only those
taxes which are enacted at the time the Guaranteed Maximum Price is
established.

§ 2.3
CONSTRUCTION PHASE

§ 2.3.1
GENERAL

§ 2.3.1.1
The Construction Phase shall commence on the earlier of:

(1)                 the Owner’s
acceptance of the Construction Manager’s Guaranteed Maximum Price proposal and
issuance of a Notice to Proceed, or issuance of a building permit which ever is
later.

(2)                 the Owner’s first
authorization to the Construction Manager to:

(a) award a
subcontract, or

(b) undertake
construction Work with the Construction Manager’s own forces, or

(c) issue a
purchase order for materials or equipment required for the Work.

§ 2.3.2
ADMINISTRATION

§ 2.3.2.1
Those portions of the Work that the Construction Manager does not customarily
perform with the Construction Manager’s own personnel shall be performed under
subcontracts or by other appropriate agreements with the Construction Manager.
The Construction Manager shall obtain bids from Subcontractors and from
suppliers of materials or equipment fabricated to a special design for the Work
from the list previously reviewed and, after analyzing such bids, shall deliver
such bids to the Owner and Architect. The Owner will then determine, with the
advice of the Construction Manager and subject to the reasonable objection of
the Architect, which bids will be accepted. The Owner may designate specific
persons or entities from whom the Construction Manager shall obtain bids;
however, if the Guaranteed Maximum Price has been established, the Owner may
not prohibit the Construction Manager from

 4
 

 

obtaining bids from other
qualified bidders. The Construction Manager shall not be required to contract
with anyone to whom the Construction Manager has reasonable objection.

§ 2.3.2.2
If the Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Construction Manager to the Owner
and Architect (1) is recommended to the Owner by the Construction Manager;
(2) is qualified to perform that portion of the Work; and (3) has
submitted a bid which conforms to the requirements of the Contract Documents
without reservations or exceptions, but the Owner requires that another bid be
accepted, then the Construction Manager may require that a change in the Work
be issued to adjust the Contract Time and the Guaranteed Maximum Price by the
difference between the bid of the person or entity recommended to the Owner by
the Construction Manager and the amount of the subcontract or other agreement
actually signed with the person or entity designated by the Owner.

§ 2.3.2.3
Subcontracts and agreements with suppliers furnishing materials or equipment
fabricated to a special design shall conform to the payment provisions of
Sections 7.1.8 and 7.1.9 and shall not be awarded on the basis of cost plus a
fee without the prior consent of the Owner.

§ 2.3.2.4
The Construction Manager shall schedule and conduct meetings at which the
Owner, Architect, Construction Manager and appropriate Subcontractors can
discuss the status of the Work. The Construction Manager shall prepare and
promptly distribute meeting minutes.

§ 2.3.2.5
Promptly after the Owner’s acceptance of the Guaranteed Maximum Price proposal,
the Construction Manager shall prepare a schedule in accordance with Section 3.10
of A201TM—1997, including the Owner’s occupancy requirements.

§ 2.3.2.6
The Construction Manager shall provide monthly written reports to the Owner and
Architect on the progress of the entire Work. The Construction Manager shall
maintain a daily log containing a record of weather, Subcontractors working on
the site, number of workers, Work accomplished, problems encountered and other
similar relevant data as the Owner may reasonably require. The log shall be
available to the Owner and Architect.

§ 2.3.2.7
The Construction Manager shall develop a system of cost control for the Work,
including regular monitoring of actual costs for activities in progress and
estimates for uncompleted tasks and proposed changes. The Construction Manager
shall identify variances between actual and estimated costs and report the
variances to the Owner and Architect at regular intervals.

§ 2.4
PROFESSIONAL SERVICES

Section 3.12.10 of
A201TM—1997 shall apply to both the Preconstruction and Construction Phases.

§ 2.5
HAZARDOUS MATERIALS

Section 10.3 of
A201TM—1997 shall apply to both the Preconstruction and Construction Phases.

ARTICLE 3   OWNER’S RESPONSIBILITIES

§ 3.1
INFORMATION AND SERVICES

§ 3.1.1
The Owner shall provide full information in a timely manner regarding the
requirements of the Project, including a program which sets forth the Owner’s
objectives, constraints and criteria, including space requirements and
relationships, flexibility and expandability requirements, special equipment
and systems, and site requirements.

§ 3.1.2
The Owner shall, at the written request of the Construction Manager prior to
commencement of the Construction Phase and thereafter, furnish to the
Construction Manager reasonable evidence that financial arrangements have been
made to fulfill the Owner’s obligations under the Contract. Furnishing of such
evidence shall be a condition precedent to commencement or continuation of the
Work. After such evidence has been furnished, the Owner shall not materially
vary such financial arrangements without prior notice to the Construction
Manager.

 5
 

 

§ 3.1.3
The Owner shall establish and update an overall budget for the Project, based
on consultation with the Construction Manager and Architect, which shall
include contingencies for changes in the Work and other costs which are the
responsibility of the Owner.

§ 3.1.4
STRUCTURAL AND ENVIRONMENTAL TESTS, SURVEYS AND REPORTS

In the Preconstruction
Phase, the Owner shall furnish the following with reasonable promptness and at
the Owner’s expense. Except to the extent that the Construction Manager knows
of any inaccuracy, the Construction Manager shall be entitled to rely upon the
accuracy of any such information, reports, surveys, drawings and tests
described in Sections 3.1.4.1 through 3.1.4.4 but shall exercise customary
precautions relating to the performance of the Work.

§ 3.1.4.1
Reports, surveys, drawings and tests concerning the conditions of the site
which are required by law.

§ 3.1.4.2
Surveys describing physical characteristics, legal limitations and utility locations
for the site of the Project, and a written legal description of the site. The
surveys and legal information shall include, as applicable, grades and lines of
streets, alleys, pavements and adjoining property and structures; adjacent
drainage; rights-of-way, restrictions, easements, encroachments, zoning, deed
restrictions, boundaries and contours of the site; locations, dimensions and
necessary data pertaining to existing buildings, other improvements and trees;
and information concerning available utility services and lines, both public
and private, above and below grade, including inverts and depths. All
information on the survey shall be referenced to a project benchmark.

§ 3.1.4.3
The services of a geotechnical engineer when such services are requested by the
Construction Manager. Such services may include but are not limited to test
borings, test pits, determinations of soil bearing values, percolation tests,
evaluations of hazardous materials, ground corrosion and resistivity tests,
including necessary operations for anticipating subsoil conditions, with
reports and appropriate professional recommendations.

§ 3.1.4.4
Structural, mechanical, chemical, air and water pollution tests, tests for
hazardous materials, and other laboratory and environmental tests, inspections
and reports which are required by law.

§ 3.1.4.5
The services of other consultants when such services are reasonably required by
the scope of the Project and are requested by the Construction Manager.

§ 3.2
OWNER’S DESIGNATED REPRESENTATIVE

The Owner shall designate
in writing a representative who shall have express authority to bind the Owner
with respect to all matters requiring the Owner’s approval or authorization.
This representative shall have the authority to make decisions on behalf of the
Owner concerning estimates and schedules, construction budgets, and changes in
the Work, and shall render such decisions promptly and furnish information
expeditiously, so as to avoid unreasonable delay in the services or Work of the
Construction Manager. Except as otherwise provided in Section 4.2.1 of
A201TM—1997, the Architect does not have such authority.

§ 3.3
ARCHITECT

The Owner shall retain an
Architect to provide Basic Services, including normal structural, mechanical
and electrical engineering services, other than cost estimating services,
described in the edition of AIA® Document B151TM—1997,  Abbreviated
Standard Form of Agreement Between Owner and Architect current
as of the date of this Agreement. The Owner shall authorize and cause the
Architect to provide those Additional Services described in B151TM—1997, requested by the Construction
Manager which must necessarily be provided by the Architect for the
Preconstruction and Construction Phases of the Work. Such services shall be
provided in accordance with time schedules agreed to by the Owner, Architect
and Construction Manager. Upon request of the Construction Manager, the Owner
shall furnish to the Construction Manager a copy of the Owner’s Agreement with
the Architect, from which compensation provisions may be deleted.

 6
 

 

§ 3.4
LEGAL REQUIREMENTS

The Owner shall determine
and advise the Architect and Construction Manager of any special legal
requirements relating specifically to the Project which differ from those
generally applicable to construction in the jurisdiction of the Project. The
Owner shall furnish such legal services as are necessary to provide the
information and services required under Section 3.1.

ARTICLE 4   COMPENSATION AND PAYMENTS FOR PRECONSTRUCTION PHASE SERVICES

The Owner shall
compensate and make payments to the Construction Manager for Preconstruction
Phase services as follows:

§ 4.1
COMPENSATION (INTENTIONALLY DELETED)

ARTICLE 5   COMPENSATION FOR CONSTRUCTION PHASE SERVICES

§ 5.1
COMPENSATION

§ 5.1.1
For the Construction Manager’s performance of the Work as described in Section 2.3,
the Owner shall pay the Construction Manager in current funds the Contract Sum
consisting of the Cost of the Work as defined in Article 7 and the
Construction Manager’s Fee determined as follows:

The Owner shall
compensate the Construction Manager for Construction Phase services as follows:

Base Fee — 3.25% of the
GMP

Change Order — 10%
overhead, plus 3.25% fee. (the 3.25% fee to apply only to the extent that the
Cost of the Work exceeds 110% of GMP.)

No reduction in
fee for deductive changes.

(State
a lump sum, percentage of actual Cost of the Work or other provision for
determining the Construction Manager’s Fee, and explain how the Construction
Manager’s Fee is to be adjusted for changes in the Work.)

§ 5.2
GUARANTEED MAXIMUM PRICE

§ 5.2.1
The sum of the Cost of the Work and the Construction Manager’s Fee are
guaranteed by the Construction Manager not to exceed the amount provided in
Amendment No. 1, subject to additions and deductions by changes in the
Work as provided in the Contract Documents. Such maximum sum as adjusted by
approved changes in the Work is referred to in the Contract Documents as the
Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price
to be exceeded shall be paid by the Construction Manager without reimbursement
by the Owner.

25% of the savings will
be paid to Construction Manager at the time of Final Payment, excluding savings
attributable to Construction Change Directives or savings due to paying less
for insurance premiums than as set forth in the GMP Proposal. The following
changes discussed to date constitute Construction  Change Directives:             1) delete room millwork, 2) delete
floor drains in rooms, 3) delete window at end of hall, 4) change specified
bath tile.

(Insert
specific provisions if the Construction Manager is to participate in any
savings.)

The Work shall be
substantially completed by October 22, 2007 (the “Target Completion Date”).
If the Construction Manager achieves Substantial Completion of the Work under
the Contract after the Target Completion Date, the Owner shall be entitled to
retain or recover from the Construction Manager, as liquidated damages and not
as a penalty, the sum of Five Thousand Dollars ($5,000) per day commencing on
the day following the Target Completion Date and continuing until the actual
date of Substantial Completion. In the event of partial turnover and actual
occupancy, the Liquidated Damages shall be reduced by the percentage of rooms
turned over.

 7
 

 

§ 5.3
CHANGES IN THE WORK

§ 5.3.1
Adjustments to the Guaranteed Maximum Price on account of changes in the Work
subsequent to the execution of Amendment No. 1 may be determined by any of
the methods listed in Section 7.3.3 of A201TM—1997.

§ 5.3.2
In calculating adjustments to subcontracts (except those awarded with the Owner’s
prior consent on the basis of cost plus a fee), the terms “cost” and “fee” as
used in Section 7.3.3.3 of A201TM—1997 and the terms “costs” and “a
reasonable allowance for overhead and profit” as used in Section 7.3.6 of
A201TM—1997 shall have the meanings assigned to them in that document and shall
not be modified by this Article 5. Adjustments to subcontracts awarded
with the Owner’s prior consent on the basis of cost plus a fee shall be
calculated in accordance with the terms of those subcontracts.  Unless specified in the GMP Proposal, no
subcontracts shall be on a cost plus a fee basis.

§ 5.3.3
In calculating adjustments to the Contract, the terms “cost” and “costs” as
used in the above-referenced provisions of A201TM—1997 shall mean the Cost of
the Work as defined in Article 6 of this Agreement, and the term “and a
reasonable allowance for profit” shall mean the Construction Manager’s Fee as
defined in Section 5.1.1 of this Agreement.

§ 5.3.4
If no specific provision is made in Section 5.1.1 for adjustment of the
Construction Manager’s Fee in the case of changes in the Work, or if the extent
of such changes is such, in the aggregate, that application of the adjustment
provisions of Section 5.1.1 will cause substantial inequity to the Owner
or Construction Manager, the Construction Manager’s Fee shall be equitably
adjusted on the basis of the Fee established for the original Work.

ARTICLE 6   COST OF THE WORK FOR CONSTRUCTION PHASE

§ 6.1
COSTS TO BE REIMBURSED

§ 6.1.1
The term “Cost of the Work” shall mean costs necessarily incurred by the
Construction Manager in the proper performance of the Work. Such costs shall be
at rates not higher than those customarily paid at the place of the Project
except with prior consent of the Owner. The Cost of the Work shall include only
the items set forth in this Article 6.

§ 6.1.2
LABOR COSTS

.1                     Wages of
construction workers directly employed by the Construction Manager to perform
the construction of the Work at the site or, with the Owner’s agreement, at
off-site workshops.

.2                     Wages or
salaries of the Construction Manager’s supervisory and administrative personnel
when stationed at the site with the Owner’s agreement, and all Project Management
and Purchasing Personnel regardless of location.

	
  Classification

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  

 

(If
it is intended that the wages or salaries of certain personnel stationed at the
Construction Manager’s principal office or offices other than the site office
shall be included in the Cost of the Work, such personnel shall be identified
below.)

.3                     Wages and
salaries of the Construction Manager’s supervisory or administrative personnel
engaged, at factories, workshops or on the road, in expediting the production
or transportation of materials or equipment required for the Work, but only for
that portion of their time required for the Work.

.4                     Costs paid or
incurred by the Construction Manager for taxes, insurance, contributions,
assessments and benefits required by law or collective bargaining agreements,
and, for personnel not covered by such agreements, customary benefits such as
sick leave, medical and health benefits, holidays, vacations and pensions,
provided that such costs are based on wages and salaries included in the Cost
of the Work under Sections 6.1.2.1 through 6.1.2.3.

 8
 

 

§ 6.1.3
SUBCONTRACT COSTS

Payments made by the
Construction Manager to Subcontractors in accordance with the requirements of
the subcontracts.

§ 6.1.4
COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION

.1                     Costs,
including transportation, of materials and equipment incorporated or to be
incorporated in the completed construction.

.2                     Costs of
materials described in the preceding Section 6.1.4.1 in excess of those
actually installed but required to provide reasonable allowance for waste and
for spoilage. Unused excess materials, if any, shall be handed over to the
Owner at the completion of the Work or, at the Owner’s option, shall be sold by
the Construction Manager; amounts realized, if any, from such sales shall be
credited to the Owner as a deduction from the Cost of the Work.

§ 6.1.5
COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED
ITEMS

.1                     Costs,
including transportation, installation, maintenance, dismantling and removal of
materials, supplies, temporary facilities, machinery, equipment, and hand tools
not customarily owned by the construction workers, which are provided by the
Construction Manager at the site and fully consumed in the performance of the
Work; and cost less salvage value on such items if not fully consumed, whether
sold to others or retained by the Construction Manager. Cost for items
previously used by the Construction Manager shall mean fair market value.

.2                     Rental
charges for temporary facilities, machinery, equipment and hand tools not
customarily owned by the construction workers, which are provided by the
Construction Manager at the site, whether rented from the Construction Manager
or others, and costs of transportation, installation, minor repairs and
replacements, dismantling and removal thereof. Rates and quantities of
equipment rented shall be subject to the Owner’s prior approval.

.3                     Costs of
removal of debris from the site.

.4                     Reproduction
costs, costs of telegrams, facsimile transmissions and long-distance telephone
calls, postage and express delivery charges, telephone at the site and
reasonable petty cash expenses of the site office.

.5                     That portion
of the reasonable travel and subsistence expenses of the Construction Manager’s
personnel incurred while traveling in discharge of duties connected with the
Work.

§ 6.1.6
MISCELLANEOUS COSTS

.1                     That portion
directly attributable to this Contract of premiums for insurance and bonds.

(If
charges for self-insurance are to be included, specify the basis of
reimbursement.)

          .007 x GMP = Premium for General &
Excess Liability.

.2                     Sales, use or
similar taxes imposed by a governmental authority which are related to the Work
and for which the Construction Manager is liable.

.3                     Fees and
assessments for the building permit and for other permits, licenses and
inspections for which the Construction Manager is required by the Contract
Documents to pay.

.4                     Fees of
testing laboratories for tests required by the Contract Documents, except those
related to nonconforming Work other than that for which payment is permitted by
Section 6.1.8.2.

.5                     Royalties and
license fees paid for the use of a particular design, process or product
required by the Contract Documents; the cost of defending suits or claims for
infringement of patent or other intellectual property rights arising from such
requirement by the Contract Documents; payments made in accordance with legal
judgments against the Construction Manager resulting from such suits or claims
and payments of settlements made with the Owner’s consent; provided, however,
that such costs of legal defenses, judgment and settlements shall not be
included in the calculation of the Construction Manager’s Fee or the Guaranteed
Maximum Price and provided that such royalties, fees and costs are not excluded
by the last sentence of Section 3.17.1 of A201TM—1997 or other provisions
of the Contract Documents.

 9
 

 

.6                     Data
processing costs related to the Work.

.7                     Deposits lost
for causes other than the Construction Manager’s negligence or failure to
fulfill a specific responsibility to the Owner set forth in this Agreement.

.8                     Legal,
mediation and arbitration costs, other than those arising from disputes between
the Owner and Construction Manager, reasonably incurred by the Construction
Manager in the performance of the Work and with the Owner’s written permission,
which permission shall not be unreasonably withheld.

.9                     Expenses
incurred in accordance with Construction Manager’s standard personnel policy
for relocation and temporary living allowances of personnel required for the
Work, in case it is necessary to relocate such personnel from distant
locations.

.10    For all trade work performed by CM cost
plus 15% overhead.

§ 6.1.7
OTHER COSTS

.1                     Other costs
incurred in the performance of the Work if and to the extent approved in
advance in writing by the Owner.

§ 6.1.8
EMERGENCIES AND REPAIRS TO DAMAGED OR NONCONFORMING WORK

The Cost of the Work
shall also include costs described in Section 6.1.1which are incurred by
the Construction Manager:

.1                     In taking
action to prevent threatened damage, injury or loss in case of an emergency
affecting the safety of persons and property, as provided in Section 10.6
of A201TM—1997.

.2                     In repairing
or correcting damaged or nonconforming Work executed by the Construction
Manager or the Construction Manager’s Subcontractors or suppliers, provided
that such damaged or nonconforming Work was not caused by the negligence or
failure to fulfill a specific responsibility to the Owner set forth in this
agreement of the Construction Manager or the Construction Manager’s foremen,
engineers or superintendents, or other supervisory, administrative or
managerial personnel of the Construction Manager, or the failure of the
Construction Manager’s personnel to supervise adequately the Work of the
Subcontractors or suppliers, and only to the extent that the cost of repair or
correction is not recoverable by the Construction Manager from insurance,
Subcontractors or suppliers.

§ 6.1.9
The costs described in Sections 6.1.1 through 6.1.8 shall be included in the
Cost of the Work notwithstanding any provision of AIA or A201TM—1997 other
Conditions of the Contract which may require the Construction Manager to pay
such costs, unless such costs are excluded by the provisions of Section 6.2.

§ 6.2
COSTS NOT TO BE REIMBURSED

§ 6.2.1
The Cost of the Work shall not include:

.1                     Salaries and
other compensation of the Construction Manager’s personnel stationed at the
Construction Manager’s principal office or offices other than the site office,
except as specifically provided in Sections 6.1.2.2 and 6.1.2.3. Unless
otherwise agreed to between Owner and Construction Manager, the only personnel
to be charged that are not on-site shall be: 
John Lesky and personnel handling estimating, purchasing and scheduling.

.2                     Expenses of
the Construction Manager’s principal office and offices other than the site
office, except as specifically provided in Section 6.1.

.3                     Overhead and
general expenses, except as may be expressly included in Section 6.1.

.4                     The
Construction Manager’s capital expenses, including interest on the Construction
Manager’s capital employed for the Work.

.5                     Rental costs
of machinery and equipment, except as specifically provided in Section 6.1.5.2.

.6                     Except as
provided in Section 6.1.8.2, costs due to the negligence of the
Construction Manager or to the failure of the Construction Manger to fulfill a
specific responsibility to the Owner set forth in this Agreement.

.7                     Costs
incurred in the performance of Preconstruction Phase Services.

.8                     Except as
provided in Section 6.1.7.1, any cost not specifically and expressly               described in Section 6.1.

.9                     Costs which
would cause the Guaranteed Maximum Price to be exceeded.

 10

 

§ 6.3
DISCOUNTS, REBATES AND REFUNDS

§ 6.3.1
Cash discounts obtained on payments made by the Construction Manager shall
accrue to the Owner if (1) before making the payment, the Construction
Manager included them in an Application for Payment and received payment
therefor from the Owner, or (2) the Owner has deposited funds with the
Construction Manager with which to make payments; otherwise, cash discounts
shall accrue to the Construction Manager. Trade discounts, rebates, refunds and
amounts received from sales of surplus materials and equipment shall accrue to
the Owner, and the Construction Manager shall make provisions so that they can
be secured.

§ 6.3.2
Amounts which accrue to the Owner in accordance with the provisions of Section 6.3.1
shall be credited to the Owner as a deduction from the Cost of the Work.

§ 6.4
ACCOUNTING RECORDS

§ 6.4.1
The Construction Manager shall keep full and detailed accounts and exercise
such controls as may be necessary for proper financial management under this
Contract; the accounting and control systems shall be satisfactory to the
Owner. The Owner and the Owner’s accountants shall be afforded access to the
Construction Manager’s records, books, correspondence, instructions, drawings,
receipts, subcontracts, purchase orders, vouchers, memoranda and other data
relating to this Project, and the Construction Manager shall preserve these for
a period of three years after final payment, or for such longer period as may
be required by law.

ARTICLE 7   CONSTRUCTION PHASE

§ 7.1
PROGRESS PAYMENTS

§ 7.1.1
Based upon Applications for Payment submitted to the Architect by the
Construction Manager and Certificates for Payment issued by the Architect, the
Owner shall make progress payments on account of the Contract Sum to the
Construction Manager as provided below and elsewhere in the Contract Documents.

§ 7.1.2
The period covered by each Application for Payment shall be one calendar month
ending on the last day of the month, or as follows:

§ 7.1.3
Provided an Application for Payment is received by the Architect not later than
the 1st day of a month, the Owner shall make payment to the
Construction Manager not later than the  25th  day of the  same
 month. If an Application for Payment is
received by the Architect after the application date fixed above, payment shall
be made by the Owner not later than twenty-five ( 25 )
days after the Architect receives the Application for Payment.

§7.1.4  With each Application for Payment, the
Construction Manager shall submit computer generated progress reports and any
other evidence required by the Owner or Architect to demonstrate that cash
disbursements already made by the Construction Manager on account of the Cost
of the Work equal or exceed (1) progress payments already  received by the Construction Manager; less (2) that
portion of those payments attributable to the Construction Manager’s Fee; plus (3) payrolls
for the period covered by the present Application for Payment.

In addition to other
required items, each Application for Payment shall be accompanied by the
following, all in form and substance satisfactory to the Owner and in
compliance with applicable Delaware statutes:

1.               A current Sworn
Statement from the Construction Manager setting forth all subcontractors and
materialmen with whom the Construction Manager has subcontracted, the amount of
such subcontract, the amount requested for any subcontractor or materialman in
the application for payment and the amount to be paid to the Construction
Manager from such progress payment, together with a current, duly executed
waiver of mechanics’ and materialmen’s liens from the Construction Manager
establishing receipt of payment or satisfaction of the payment requested by the
Construction Manager in the current Application for Payment;

 11
 

 

2.               Commencing with the
second (2nd)
Application for Payment submitted by the Construction Manager, duly executed
so-called “after the fact” waivers of mechanics’ and materialmen’s and
materialmen’s liens form all subcontractors, materialmen and, when appropriate,
from lower tier subcontractors, establishing receipt of payment or satisfaction
of payment of all amounts requested on behalf of such entities and disbursed
prior to submittal by the Construction Manager of the current Application for
Payment, plus sworn statements from all subcontractors, materialmen and, where
appropriate, from lower tier subcontractors, covering all amounts described
above.

3.               Such other
information, documentation and materials as the Owner or the Architect may
require.

§ 7.1.5
Each Application for Payment shall be based upon the most recent schedule of
values submitted by the Construction Manager in accordance with the Contract
Documents. The schedule of values shall allocate the entire Guaranteed Maximum
Price among the various portions of the Work, except that the Construction
Manager’s Fee shall be shown as a single separate item. The schedule of values
shall be prepared in such form and supported by such data to substantiate its
accuracy as the Architect may require. This schedule, unless objected to by the
Architect, shall be used as a basis for reviewing the Construction Manager’s
Applications for Payment.

§ 7.1.6
Applications for Payment shall show the percentage completion of each portion
of the Work as of the end of the period covered by the Application for Payment.
The percentage completion shall be the lesser of (1) the percentage of
that portion of the Work which has actually been completed or (2) the
percentage obtained by dividing (a) the expense which has actually been
incurred by the Construction Manager on account of that portion of the Work for
which the Construction Manager has made or intends to make actual payment prior
to the next Application for Payment by (b) the share of the Guaranteed
Maximum Price allocated to that portion of the Work in the schedule of values.

§ 7.1.7
Subject to other provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:

.1                     Take that
portion of the Guaranteed Maximum Price properly allocable to completed Work as
determined by multiplying the percentage completion of each portion of the Work
by the share of the Guaranteed Maximum Price allocated to that portion of the
Work in the schedule of values. Pending final determination of cost to the
Owner of changes in the Work, amounts not in dispute may be included as
provided in Section 7.3.8 of A201TM—1997, even though the Guaranteed
Maximum Price has not yet been adjusted by Change Order.

.2                     Add that
portion of the Guaranteed Maximum Price properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent
incorporation in the Work or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing.

.3                     Add the
Construction Manager’s Fee, less retainage of ten (  10%  ).
The Construction Manager’s Fee shall be computed upon the Cost of the Work
described in the two preceding Sections at the rate stated in Section 5.1.1
or, if the Construction Manager’s Fee is stated as a fixed sum in that Section,
shall be an amount which bears the same ratio to that fixed-sum Fee as the Cost
of the Work in the two preceding Sections bears to a reasonable estimate of the
probable Cost of the Work upon its completion.

.4                     Subtract the
aggregate of previous payments made by the Owner.

.5                     Subtract the
shortfall, if any, indicated by the Construction Manager in the documentation
required by Section 7.1.4 to substantiate prior Applications for Payment,
or resulting from errors subsequently discovered by the Owner’s accountants in
such documentation.

.6                     Subtract
amounts, if any, for which the Architect has withheld or nullified a
Certificate for Payment as provided in Section 9.5 of A201TM—1997.

§ 7.1.8
Except with the Owner’s prior approval, payments to Subcontractors shall be
subject to retention of not less than ten ( 10% ). The
Owner and the Construction Manager shall agree upon a mutually acceptable
procedure for review and approval of payments and retention for subcontracts.

 12
 

 

Once the project is 50%
complete, provided the project is on schedule, no additional retention will be
withheld.

§ 7.1.9
Except with the Owner’s prior approval, the Construction Manager shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.

§ 7.1.10
In taking action on the Construction Manager’s Applications for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Construction Manager and shall not be deemed to
represent that the Architect has made a detailed examination, audit or arithmetic
verification of the documentation submitted in accordance with Section 7.1.4
or other supporting data, that the Architect has made exhaustive or continuous
on-site inspections or that the Architect has made examinations to ascertain
how or for what purposes the Construction Manager has used amounts previously
paid on account of the Contract. Such examinations, audits and verifications,
if required by the Owner, will be performed by the Owner’s accountants acting
in the sole interest of the Owner.

§7.1.11   Owner agrees that 100% payment shall be made
for:

1)              Soil stabilization.

2)              Structural Concrete.

3)              Precast plank

Once this work is 100% complete and accepted.

§7.1.12   No retention shall be held on insurance,
permits or Subguard.

§ 7.2
FINAL PAYMENT

§ 7.2.1
Final payment shall be made by the Owner to the Construction Manager when (1) the
Contract has been fully performed by the Construction Manager except for the
Construction Manager’s responsibility to correct nonconforming Work, as
provided in Section 12.2.2 of A201TM—1997, and to satisfy other
requirements, if any, which necessarily survive final payment; (2) a final
Application for Payment and a final accounting for the Cost of the Work have
been submitted by the Construction Manager and reviewed by the Owner’s
accountants; and (3) a final Certificate for Payment has then been issued
by the Architect; such final payment shall be made by the Owner not more than
30 days after the issuance of the Architect’s final Certificate for Payment, or
as follows:

Once substantial
completion is achieved, Owner agrees to consider payments out of retention to
subcontractors that have fully performed.

§ 7.2.2
The amount of the final payment shall be calculated as follows:

.1                     Take the sum
of the Cost of the Work substantiated by the Construction Manager’s final
accounting and the Construction Manager’s Fee, but not more than the Guaranteed
Maximum Price.

.2                     Subtract
amounts, if any, for which the Architect withholds, in whole or in part, a
final Certificate for Payment as provided in Section 9.5.1 of A201TM—1997
or other provisions of the Contract Documents.

.3                     Subtract the
aggregate of previous payments made by the Owner.

If the aggregate of
previous payments made by the Owner exceeds the amount due the Construction
Manager, the Construction Manager shall reimburse the difference to the Owner.

§ 7.2.3
The Owner’s accountants will review and report in writing on the Construction
Manager’s final accounting within 30 days after delivery of the final
accounting to the Architect by the Construction Manager. Based upon such Cost
of the Work as the Owner’s accountants report to be substantiated by the
Construction Manager’s final accounting, and provided the other conditions of Section 7.2.1
have been met, the Architect will, within seven days after receipt of the
written report of the Owner’s accountants, either issue to the Owner a final
Certificate for Payment with a copy to the Construction Manager or notify the
Construction Manager and Owner in writing of the Architect’s reasons for
withholding a certificate as provided in Section 9.5.1 of A201TM—1997 . The
time periods stated in this Section 7.2 supersede those stated in Section 9.4.1
of A201TM—1997.

 13
 

 

§ 7.2.4
If the Owner’s accountants report the Cost of the Work as substantiated by the
Construction Manager’s final accounting to be less than claimed by the
Construction Manager, the Construction Manager shall be entitled to proceed in
accordance with Article 9 without a further decision of the Architect.
Unless agreed to otherwise, a demand for mediation or arbitration of the
disputed amount shall be made by the Construction Manager within 60 days after
the Construction Manager’s receipt of a copy of the Architect’s final
Certificate for Payment. Failure to make such demand within this 60-day
period shall result in the substantiated amount reported by the Owner’s
accountants becoming binding on the Construction Manager. Pending a final
resolution of the disputed amount, the Owner shall pay the Construction Manager
the amount certified in the Architect’s final Certificate for Payment.

§ 7.2.5
If, subsequent to final payment and at the Owner’s request, the Construction
Manager incurs costs described in Section 6.1 and not excluded by Section 6.2
(1) to correct nonconforming Work or (2) arising from the resolution
of disputes, the Owner shall reimburse the Construction Manager such costs and
the Construction Manager’s Fee, if any, related thereto on the same basis as if
such costs had been incurred prior to final payment, but not in excess of the
Guaranteed Maximum Price. If the Construction Manager has participated in
savings, the amount of such savings shall be recalculated and appropriate
credit given to the Owner in determining the net amount to be paid by the Owner
to the Construction Manager.

ARTICLE 8   INSURANCE AND BONDS

§ 8.1
INSURANCE REQUIRED OF THE CONSTRUCTION MANAGER

During both phases of the
Project, the Construction Manager shall purchase and maintain insurance as set
forth in Section 11.1 of A201TM—1997. Such insurance shall be written for
not less than the following limits, or greater if required by law

§ 8.1.1
Workers’ Compensation and Employers’ Liability meeting statutory limits
mandated by state and federal laws. If (1) limits in excess of those
required by statute are to be provided, or (2) the employer is not
statutorily bound to obtain such insurance coverage or (3) additional
coverages are required, additional coverages and limits for such insurance
shall be as follows:

§ 8.1.2
Commercial General Liability including coverage for Premises-Operations,
Independent Contractors’ Protective, Products-Completed Operations, Contractual
Liability, Personal Injury and Broad Form Property Damage (including
coverage for Explosion, Collapse and Underground hazards):

1,000,000/2,000,000  Each
Occurrence

2,000,000  General
Aggregate

1,000,000  Personal
and Advertising Injury

2,000,000  Products-Completed
Operations Aggregate

 1.    The policy shall be endorsed to have the
General Aggregate apply to this Project only.

 2.                  Products and Completed Operations
insurance shall be maintained for a minimum period of at least ( 2 )
year(s) after either 90 days following Substantial Completion or final
payment, whichever is earlier.

 3.                  The Contractual Liability insurance
shall include coverage sufficient to meet the obligations in Section 3.18
of A201TM—1997.

§ 8.1.3
Automobile Liability (owned, non-owned and hired vehicles) for bodily injury
and property damage:

 1,000,000  Each Accident

§ 8.1.4
Other coverage:

 Umbrella Excess Liability - $25,000,000

 14
 

 

(If
Umbrella Excess Liability coverage is required over the primary insurance or
retention, insert the coverage limits. Commercial General Liability and
Automobile Liability limits may be attained by individual policies or by a
combination of primary policies and Umbrella and/or Excess Liability policies.
If Project Management Protective Liability Insurance is to be provided, state
the limits here.)

§ 8.2
INSURANCE REQUIRED OF THE OWNER

During both phases of the
Project, the Owner shall purchase and maintain liability and property
insurance, including waivers of subrogation, with contractor and all
subcontractors named additionally insured. as set forth in Sections 11.2 and
11.4 of A201TM—1997. Such insurance shall be written for not less than the
following limits, or greater if required by law:

§ 8.2.1
Property Insurance: $320 Million

$100,000  Deductible
Per Occurrence

N/A  Aggregate
Deductible

               Builder’s Risk Insurance for new
work: in accordance with Exhibit 1 and in an amount equal to at least full
GMP Value.

§ 8.2.2
Boiler and Machinery insurance with a limit of: 
$5,000,000/occurrence.

(If
not a blanket policy, list the objects to be insured.)

§8.2.3   Builder’s Risk. Construction Manager shall
procure builder’s risk coverage for new work in accordance with Exhibit 1
and in amount equal to at least full GMP value.

§8.2.4  Construction Manager shall be responsible for
any deductibles relative to damage to property under either the property or the
builder’s risk policies to the extent the covered loss is due to the acts or
omissions of Construction Manager or its subcontractors. Owner shall be
responsible for any deductibles relative to business interruption coverage
under either the property or the builder’s risk policies.

§ 8.3
PERFORMANCE BOND AND PAYMENT BOND

§ 8.3.1
The Construction Manager shall furnish bonds covering faithful performance of
the Contract and payment of obligations arising thereunder.  Bonds may be obtained through the Construction
Managers unusal source, and the cost thereof shall be included in the Cost of
the Work. The amount of each bond shall be equal to the Guaranteed Maximum
Price, less cost of the bonds.

§ 8.3.2  The Construction Manager shall deliver the
required bonds, using AIA Document A312 to the Owner at least three days before
the commencement of any work at the Project site.

§ 8.3.3  Construction Manager shall purchase Subguard
coverage in an amount equal to the amount of subcontracted work and shall have
the policy endorsed to cover Owner’s financial interests. In addition, if there
is a refund of any of the premium paid for this coverage upon completion of the
Work, the refund shall be paid to Owner.

ARTICLE 9   MISCELLANEOUS PROVISIONS

§ 9.1
DISPUTE RESOLUTION

§ 9.1.1   The parties shall not be obligated to engage
in either mediation or arbitration but may choose to do so on a case by case
basis. Any references herein to such forms of dispute resolution shall be
deemed to apply to the parties rights relative to litigation.

§ 9.2
OTHER PROVISIONS

§ 9.2.1
Unless otherwise noted, the terms used in this Agreement shall have the same
meaning as those in A201TM—1997, General
Conditions of the Contract for Construction.

§ 9.2.2
EXTENT OF CONTRACT

This Contract, which
includes this Agreement and the other documents incorporated herein by
reference, represents the entire and integrated agreement between the Owner and
the Construction Manager and 

 15
 

 

supersedes all prior
negotiations, representations or agreements, either written or oral. This
Agreement may be amended only by written instrument signed by both the Owner
and Construction Manager. If anything in any document incorporated into this
Agreement is inconsistent with this Agreement, this Agreement shall govern.

§ 9.2.3
OWNERSHIP AND USE OF DOCUMENTS

Article 1.6 of A201TM—1997
shall apply to both the Preconstruction and Construction Phases.

§ 9.2.4
GOVERNING LAW

The Contract shall be
governed by the law of the place where the Project is located.

§ 9.2.5
ASSIGNMENT

The Owner and
Construction Manager respectively bind themselves, their partners, successors,
assigns and legal representatives to the other party hereto and to partners,
successors, assigns and legal representatives of such other party in respect to
covenants, agreements and obligations contained in the Contract Documents.
Except as provided in Section 13.2.2 of A201TM—1997, neither party to the
Contract shall assign the Contract as a whole without written consent of the
other. If either party attempts to make such an assignment without such
consent, that party shall nevertheless remain legally responsible for all
obligations under the Contract.

ARTICLE 10 TERMINATION OR SUSPENSION

§ 10.1
TERMINATION PRIOR TO ESTABLISHING GUARANTEED MAXIMUM PRICE

§ 10.1.1
Prior to execution by both parties of Amendment No. 1 establishing the
Guaranteed Maximum Price, the Owner may terminate this Contract at any time
without cause, and the Construction Manager may terminate this Contract for any
of the reasons described in Section 14.1.1 of A201TM—1997.

§ 10.1.2
If the Owner or Construction Manager terminates this Contract pursuant to this Section 10.1
prior to commencement of the Construction Phase, the Construction Manager shall
be equitably compensated for Preconstruction Phase Services performed prior to
receipt of notice of termination.

§ 10.1.3
If the Owner or Construction Manager terminates this Contract pursuant to this Section 10.1
after commencement of the Construction Phase, the Construction Manager shall,
in addition    to the compensation
provided in Section 10.1.2, be paid an amount calculated as follows:

.1                     Take the Cost
of the Work incurred by the Construction Manager.

.2                     Add the
Construction Manager’s Fee computed upon the Cost of the Work to the date of
termination at the rate stated in Section 5.1, but not less than $325,000.
If the Construction Manager’s Fee is stated as a fixed sum in that Section, an
amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work
at the time of termination bears to a reasonable estimate of the probable Cost
of the Work upon its completion.

.3                     Subtract the
aggregate of previous payments made by the Owner on account of the Construction
Phase.

The Owner shall also pay
the Construction Manager fair compensation, either by purchase or rental at the
election of the Owner, for any equipment owned by the Construction Manager
which the Owner elects to retain and which is not otherwise included in the
Cost of the Work under Section 10.1.3.1. To the extent that the Owner
elects to take legal assignment of subcontracts and purchase orders (including
rental agreements), the Construction Manager shall, as a condition of receiving
the payments referred to in this Article 10, execute and deliver all such
papers and take all such steps, including the legal assignment of such
subcontracts and other contractual rights of the Construction Manager, as the
Owner may require for the purpose of fully vesting in the Owner the rights and
benefits of the Construction Manager under such subcontracts or purchase
orders.

Subcontracts, purchase
orders and rental agreements entered into by the Construction Manager with the
Owner’s written approval prior to the execution of Amendment No. 1 shall
contain provisions permitting assignment to the Owner as described above. If
the Owner accepts such assignment, the Owner shall reimburse or indemnify the
Construction Manager with respect to all costs arising under the subcontract, 

 16
 

 

purchase order or rental
agreement except those which would not have been reimbursable as Cost of the
Work if the contract had not been terminated. If the Owner elects not to accept
the assignment of any subcontract, purchase order or rental agreement which
would have constituted a Cost of the Work had this agreement not been
terminated, the Construction Manager shall terminate such subcontract, purchase
order or rental agreement and the Owner shall pay the Construction Manager the
costs necessarily incurred by the Construction Manager by reason of such
termination.

§ 10.2
TERMINATION SUBSEQUENT TO ESTABLISHING GUARANTEED MAXIMUM PRICE

Subsequent to execution
by both parties of Amendment No. 1, the Contract may be terminated as
provided in Article 14 of A201TM—1997.

§ 10.2.1
In the event of such termination by the Owner, the amount payable to the
Construction Manager pursuant to Section 14.1.3 of A201TM—1997 shall not
exceed the amount the Construction Manager would have been entitled to receive
pursuant to Sections 10.1.2 and 10.1.3 of this Agreement.

§ 10.2.2
In the event of such termination by the Construction Manager, the amount to be
paid to the Construction Manager under Section 14.1.3 of A201TM—1997 shall
not exceed the amount the Construction Manager would have been entitled to
receive under Sections 10.1.2 and 10.1.3 above, except that the Construction
Manager’s Fee shall be calculated as if the Work had been fully completed by
the Construction Manager, including a reasonable estimate of the Cost of the
Work for Work not actually completed.

§ 10.3
SUSPENSION

The Work may be suspended
by the Owner as provided in Article 14 of A201TM—1997; in such case, the
Guaranteed Maximum Price, if established, shall be increased as provided in Section 14.3.2
of A201TM—1997 except that the term “cost of performance of the Contract” in
that Section shall be understood to mean the Cost of the Work and the term
“profit” shall be understood to mean the Construction Manager’s Fee as
described in Sections 5.1.1 and 5.3.4 of this Agreement.

ARTICLE 11 OTHER CONDITIONS AND SERVICES

§11.1  Construction Manager shall use its best
efforts ( and shall cause its subcontractors) not to interfere in any way with
Owner’s and its affiliates existing operations at its casino, hotel, Conference
center, Dining facilities, harness track, sumulcasting facilities, speedway and
related facilities (the “Existing Facilities”) and not to inconvenience or
offend patrons of the Existing Facilities or employees working there. Parking
for Construction Manager and its subcontractors and storage of equipment and
materials shall be limited to those areas designated by Owner. Fencing
requirements shall be as required to keep the entire site secure and as may be
reasonably required by Owner from time to time. Construction Manager is aware
that Owner and its affiliates conduct a major speedway event at the Existing
Facilities two (2) times per year, in June and September.
Construction Manager further agrees to curtail and secure all construction
activities for the week prior to the speedway event in accordance with the
Owner’s requirements. It shall be the Construction Manager’s responsibility to
obtain the exact dates of all the events that occur during the construction
period, inform all subcontractors and schedule all activities accordingly. Weekday
Work hours shall be between the hours of 7:00 am and 4:00 pm. Any alteration of
this work schedule must have the approval of the Owner. All weekend work must
be approved by and coordinated with the Owner. Construction Manager understands
that construction activities are immediately adjacent to existing hotel rooms
and will make every effort possible to limit construction noise decibel levels
to an absolute minimum. Excessive complaints will require an alteration of
construction schedule & activities.

 17
 

 

This Agreement entered into as of the day and year
first written above.

 

	
  OWNER

  	
   

  	
  CONSTRUCTION MANAGER

  
	
  /s/ Edward Sutor

  	
   

  	
  /s/ Tom Falvey

  
	
  (Signature)

  	
   

  	
  (Signature)

  
	
  Edward J. Sutor,
  Executive Vice President

  	
   

  	
  Thomas A. Falvey,
  President

  
	
  (Printed
  name and title)

  	
   

  	
  (Printed name and title)

  
	
   

  	
   

  	
   

  
	
  Date
  5-03-06

  	
   

  	
  Date 5-03-06

  
	
   

  	
   

  	
   

  
	
  ATTEST

  	
   

  	
  ATTEST

  

 

 18

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