Document:

Exhibit 4.3

 

AMERICAN POWER CONVERSION CORPORATION

 

2004 LONG-TERM INCENTIVE PLAN

 

1.                                      Definitions.

 

As used herein, the
following words or terms have the meanings set forth below.

 

1.1                                 “Award” means Options, Restricted Stock,
Performance Restricted Stock, Restricted Stock Units, Performance Restricted
Stock Units, and any other equity-based interests as the Committee shall
determine, or any combination thereof.

 

1.2                                 “Board of Directors” means the Board of
Directors of the Company.

 

1.3                                 “Code” means the U.S. Internal Revenue
Code of 1986, as from time to time amended and in effect, or any successor
statute as from time to time in effect.

 

1.4                                 “Committee” means the committee appointed
by the Board of Directors to administer the Plan,  or the Board of Directors as a whole if no appointment is made,
provided that, if any member of the Committee does not qualify as both an
outside director for purposes of Section 162(m) of the Code and a
non-employee director for purposes of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, the remaining members of the Committee (but
not less than two members) shall be constituted as a subcommittee of the
Committee to act as the Committee for purposes of granting or approving the
payment of any Awards.

 

1.5                                 “Common Stock” means the common stock,
par value $.01 per share, of the Company.

 

1.6                                 “Company” means American Power Conversion
Corporation, a corporation established under the laws of The Commonwealth of
Massachusetts.

 

1.7                                 “Fair Market Value” of a share of Common
Stock for purposes of determining the exercise price per share of an Option
shall be determined as of the date of grant or, if the prices or quotes
discussed in this paragraph are unavailable for such date, the last
business day for which such prices or quotes are available prior to the
date of grant.  If the Common Stock is
publicly traded, “Fair Market Value” shall mean (i) the average (on that
date) of the high and low prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if the Common Stock is
then traded on a national securities exchange; or (ii) the last reported
sale price (on that date) of the Common Stock on the Nasdaq National Market, if
the Common Stock is not then traded on a national securities exchange; or
(iii) the closing bid price (or average of bid prices) last quoted (on
that date) by an established quotation service for over-the-counter securities,
if the Common Stock is not reported on the Nasdaq National Market.  If the Common Stock is not publicly traded,
“Fair Market Value” shall be deemed to be the fair value of the Common Stock as
determined by the Committee after taking into consideration all factors which
it deems appropriate, including, without limitation, recent sale and offer
prices of the Common Stock in private transactions negotiated at arm’s length.

 

1.8                                 “Incentive Stock Option” means an Option
intended to be an “incentive stock option” within the meaning of
Section 422 of the Code.

 

1.9                                 “Option” means a stock option entitling
the holder to acquire shares of Common Stock, once vested, upon payment of the
exercise price.

 

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1.10                           “Participant” means a person who is
granted an Award under the Plan.

 

1.11                           “Performance Award” means an Award
granted by the Committee pursuant to Section 6.10.

 

1.12                           “Performance Criteria” means any, or any
combination, of the following areas of performance (determined either on a
consolidated basis or, as the context permits, on a divisional, subsidiary,
line of business, geographical, project, product or individual basis or in
combinations thereof): sales; revenues; assets; expenses; income; margins;
earnings before or after any deductions and whether or not on a continuing
operations or an aggregate or per share basis; return on equity, investment,
capital or assets; inventory; organizational realignments or other
organizational changes; infrastructure changes; one or more operating ratios;
borrowing levels, leverage ratios or credit rating; market share; capital
expenditures; cash flow; stock price; stockholder return; sales of products or
services; customer satisfaction or loyalty; customer acquisition or retentions;
acquisitions or divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split ups and the like; reorganizations;
strategic investments or recapitalizations, restructurings, financings
(issuance of debt or equity) or refinancings; business process or core
competency metrics; and the performance of the Company in any of the items
mentioned above in comparison to performance of any indexes or peer
groups.  Performance Criteria and any
Performance Goals with respect thereto need not be based upon any increase, a
positive or improved result or avoidance of loss.

 

1.13                           “Performance Goal” means an objectively
determinable performance goal established by the Committee with respect to a
given Performance Award that relates to one or more Performance Criteria.

 

1.14                           “Performance Period” means a time period
which shall, in all cases, exceed three (3) months in length, during which
the Performance Goals established in connection with Performance Awards must be
met. Performance Periods may be subdivided into performance cycles of no less
than three months.

 

1.15                           “Performance Restricted Stock” means
Common Stock that is subject to a risk of forfeiture or other restrictions that
will lapse upon the satisfaction of one or more specified Performance Goals.

 

1.16                           “Performance Restricted Stock Unit” means
a right to receive Common Stock in the future, with the right to future
delivery of the Common Stock subject to a risk of forfeiture or other
restrictions that will lapse upon the satisfaction of one or more specified
Performance Goals.

 

1.17                           “Plan” means the American Power Conversion
Corporation 2004 Long-Term Incentive Plan, as from time to time amended and in
effect.

 

1.18                           “Restricted Stock” means Common Stock
that is subject to a risk of forfeiture or other restrictions that will lapse
upon the satisfaction of one or more specified conditions.

 

1.19                           “Restricted Stock Unit” means a right to
receive Common Stock in the future, with the right to future delivery of the
Common Stock subject to a risk of forfeiture or other restrictions that will
lapse upon the satisfaction of one or more specified conditions.

 

1.20                           “Service Relationship” means (a) for
an employee of the Company or its Subsidiaries, such person’s employment
relationship with the Company or its Subsidiaries, and (b) for a
consultant, contractor, director or advisor of the Company or its Subsidiaries,
such person’s consulting, contractor, director or advisory relationship with
the Company or its Subsidiaries.

 

1.21                           “Stock Award” means an Award of
Restricted Stock, Performance Restricted Stock, Restricted Stock Units, Performance
Restricted Stock Units or other equity-based interest that is not an Option, or
any combination thereof.

 

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1.22                           “Subsidiary” or “Subsidiaries” means a
corporation or corporations in which the Company owns, directly or indirectly,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock.

 

1.23                           “Ten Percent Stockholder” means any
person who, at the time an Award is granted, owns or is deemed to own stock (as
determined in accordance with Sections 422 and 424 of the Code) possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or its parent or a Subsidiary.

 

2.                                      Purpose.

 

The Plan has been
established to advance the interests of the Company by providing for the grant
to Participants of incentive Awards.

 

3.                                      Administration.

 

3.1                                 The Plan shall be administered by the
Committee and, to the extent provided herein, the Board of Directors. A
majority of the members of the Committee shall constitute a quorum, and all
determinations of the Committee made by a majority of its members at a meeting
at which a quorum is present shall constitute the valid acts of the Committee.
Any determination of the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by all of the Committee members.

 

3.2                                 Subject to the provisions set forth
herein, the Committee shall have full authority to determine the terms and
conditions of Awards to be granted under the Plan. Subject to the provisions
set forth herein, the Committee shall have full authority to interpret the
terms of the Plan and of Awards granted under the Plan, to adopt, amend and
rescind rules and guidelines for the administration of the Plan and for its own
acts and proceedings, and to decide all questions and settle all controversies
and disputes which may arise in connection with the Plan.

 

3.3                                 The interpretation and construction by
the Committee of any provisions of the Plan or any Award granted under the Plan
shall be final and binding on all concerned persons unless otherwise determined
by the Board of Directors.

 

4.                                      Shares Subject to the Plan; Limitations.

 

4.1                                 Number of Shares.  The number of shares of Common Stock that
may be delivered in satisfaction of Awards granted under the Plan (such shares
are hereinafter referred to as the “Authorized Shares”) shall be equal to
(a)  the number of shares of Common
Stock that remain available for grant under the Company’s 1997 Stock Option
Plan (the “1997
Plan”) as of the
Effective Date (as hereinafter defined), plus (b) any shares of Common Stock
underlying outstanding awards under the 1997 Plan that after the Effective Date
(as hereinafter defined) expire or terminate without being exercised or that
would otherwise again become available for issuance under the 1997 Plan ,
provided that in no event shall the number of Authorized Shares exceed
15,000,000.  The number of shares of
Common Stock delivered upon exercise of an Award shall be determined without
consideration of any Common Stock actually or constructively transferred by the
Award holder to the Company (including through the holding back of shares that
would otherwise have been deliverable upon exercise) in payment of the exercise
price or tax withholding.

 

4.2                                 Reacquired Shares.  If Common Stock subject to any Award under
the Plan is not issued or ceases to be issuable for any reason, including
because the Award is forfeited, terminated, expires

 

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unexercised, is settled in cash in lieu of Common
Stock or is exchanged for other Awards, the shares of Common Stock that were
subject to that Award shall again be included in Authorized Shares.

 

4.3                                 Type of Shares.  Common Stock delivered by the Company
under the Plan may be authorized but unissued Common Stock or previously issued
Common Stock acquired by the Company. No fractional shares of Common Stock will
be delivered under the Plan.

 

4.4                                 Limit on Shares for Awards.  No more than 1,000,000 Authorized Shares
may be allocated to Awards that are granted to any individual Participant
during any 12 month period.  This limit
shall not be adjusted by the cancellation, forfeiture, termination, expiration,
or lapse of any Award prior to its payment.

 

4.5                                 Limit on Shares for Restricted Stock and Restricted Stock
Units.  Subject
to Section 4.2, no more than fifty percent (50%) of the Authorized Shares
may be issued to Participants pursuant to Awards of Restricted Stock or
Restricted Stock Units.

 

5.                                      Eligibility and Participation.

 

The Committee may select
Participants from among those (1) employees of the Company and its
Subsidiaries, (2) non-employee Directors and (3) any consultants,
contractors or advisors to the Company or its Subsidiaries, who, in the opinion
of the Committee, are in a position to make a significant contribution to the
success of the Company and its Subsidiaries. No officer, employee, non-employee
Director, consultant, contractor, advisor, or Participant shall be entitled to
receive any Award under the Plan unless and until such person has been
designated by the Committee to be a Participant and such Participant has
actually received such Award. The designation of a Participant to receive any
Award under the Plan shall not require the Committee to designate that person
to receive any other Award under the Plan. In selecting persons to be
Participants and in determining the type and amount of their respective Awards,
the Committee shall consider any and all factors that it deems relevant or
appropriate. Eligibility for Incentive Stock Options is limited to employees of
the Company or of a “parent corporation” or “subsidiary corporation” of the
Company as those terms are defined in Section 424 of the Code.

 

6.                                      Awards.

 

6.1                                 General.  The Committee will determine the terms and
conditions of all Awards, subject to the limitations provided herein. Although
the Plan also provides for the grant of Performance Awards under
Section 6.10, notwithstanding anything herein to the contrary, the
Committee may, in its sole discretion, grant Awards under the Plan containing
performance-related goals that do not constitute Performance Awards, do not
comply with Section 6.10 and may not be granted or administered to comply
with the requirements of Section 162(m) of the Code.

 

6.2                                 Participants.  From time to time while the Plan is in
effect, the Committee may, in its absolute discretion, select from among the
persons eligible to receive Awards (including persons to whom Awards were
previously granted) those Participants to whom Awards are to be granted.

 

6.3                                 Award Agreements.  Each Award granted under the Plan shall be
evidenced by a written Award agreement in such form as the Committee shall from
time to time approve. Award agreements shall comply with the terms and
conditions of the Plan and may contain such other provisions not inconsistent
with the terms and conditions of the Plan as the Committee shall deem
advisable. In the case of an Incentive Stock Option, the Award agreement shall
contain, or refer to, such provisions relating to exercise and other matters as
are required of “incentive stock options” under the Code. Award agreements may
be evidenced by an electronic transmission (including an e-mail or reference to
a

 

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website or other URL) sent to the Participant through
the Company’s normal process for communicating electronically with its
employees. As a condition to receiving an Award, the Committee may require the
proposed Participant to affirmatively accept the Award and agree to the terms
and conditions set forth in the Award agreement by physically and/or
electronically executing the Award agreement or by otherwise physically and/or
electronically acknowledging such acceptance and agreement. With or without
such affirmative acceptance, however, the Committee may prescribe conditions
(including the exercise or attempted exercise of any benefit conferred by the
Award) under which the proposed Participant may be deemed to have accepted the
Award and agreed to the terms and conditions set forth in the Award agreement.

 

6.4                                 Non-Transferability of Awards.  No Award may be transferred
by the Participant otherwise than by will, by the laws of descent and
distribution and during the Participant’s lifetime the Award may be exercised
only by him or her.

 

6.5                                 Exercise; Vesting; Lapse of Restrictions.  The Committee may determine
the time or times at which (a) an Award will become exercisable,
(b) an Award will vest or (c) the restrictions to which an Award is
subject will lapse.

 

6.5.1                        Determination of the Exercise Price.  The Committee will determine
the exercise price, if any, of each Award requiring exercise. Notwithstanding
the foregoing, the exercise price per share of Common Stock for an Incentive
Stock Option shall be not less than 100% (110% in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder) of the Fair Market Value per
share on the date the Incentive Stock Option is granted.

 

6.5.2                        Additional Conditions.  The Committee or the Board of Directors
may at the time of grant condition the exercise of an Award upon agreement by
the Participant to subject the Common Stock to any restrictions on transfer or
repurchase rights in effect on the date of exercise. Any such conditions shall
be set forth in the Award agreement or other document evidencing the Award.

 

6.5.3                        Manner of Exercise.  Any exercise of an Award shall be made in
such manner as may be from time to time prescribed by the Committee, including,
without limitation, pursuant to electronic, telephonic or other instructions to
a third party administrating the Plan. In the event an Award is exercised by
the executor or administrator of a deceased Participant, or by the person or
persons to whom the Award has been transferred by the Participant’s will or the
applicable laws of descent and distribution, the Company shall be under no
obligation to deliver stock thereunder until the Company is satisfied that the
person or persons exercising the Award is or are the duly appointed executor or
administrator of the deceased Participant or the person or persons to whom the
Award has been transferred by the Participant’s will or by the applicable laws
of descent and distribution.

 

6.5.4                        Payment of Exercise Price.  Where the exercise of an Award is to be
accompanied by payment, the Committee may determine the required or permitted
forms of payment, subject to the following: 
all payments will be by cash or check acceptable to the Committee, or, if
permitted by the Committee (i) through the delivery of shares of Common
Stock that have a fair market value equal to the exercise price,
(ii) through a broker-assisted exercise program acceptable to the
Committee, or (iii) by any combination of the foregoing permissible forms
of payment, provided that where shares of Common Stock issued under an Award
are part of an original issue of shares, the Award will require that at least
so much of the exercise price as equals the par value of such shares be paid in
a type of consideration that is lawful for the payment of par value under
applicable law.

 

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6.5.5                        Period of Awards.  An Award shall be exercisable during such
period of time as the Committee may specify, but in the case of an Incentive
Stock Option not after the expiration of ten years (five years in the case of
an Incentive Stock Option granted to a Ten Percent Stockholder) from the date
the Option is granted.

 

6.6                                 Termination of Awards.  Unless the Award by its terms or the
Committee by resolution shall expressly provide otherwise:

 

6.6.1                        Vesting.  If a Participant’s Service Relationship terminates for
any reason, all Awards shall cease vesting on the date of termination of the
Participant’s Service Relationship (“Date of Termination”), provided that
Awards vesting on the Date of Termination shall be considered to have vested.

 

6.6.2                        Options.  If a Participant’s Service Relationship terminates due
to the Participant’s death or Disability, 
all Options that are vested as of the Date of Termination may be
exercised by the Participant, or in the case of death by the Participant’s
executor or administrator or the person or persons to whom the Options are
transferred by will or the applicable laws of descent and distribution, until
the earlier of (a) the specified expiration date of the Option, or (b) one
hundred eighty (180) days after the Date of Termination.  “Disability” means the disability of the
Participant within the meaning of Section 22(e)(3) of the Code.  If a Participant’s Service Relationship
terminates for any reason other than death or Disability, all Options that are
vested as of the Date of Termination may be exercised by the Participant until
the earlier of (a) the specified expiration date of the Option, or (b) ninety
(90) days after the Termination Date. 
The Committee shall also determine all matters relating to whether a
Service Relationship is continuous, including, for example and without
limitation, in the event the Service Relationship changes from an employment
relationship to a consulting or advisory relationship.

 

6.6.3                        Notwithstanding anything in this
Section 6.6 to the contrary, (i) no Award granted under the Plan may
be exercised beyond the date on which such Award would otherwise expire
pursuant to the terms thereof, and (ii) no Incentive Stock Option granted
under the Plan may be exercised after the expiration of ten years (five years
in the case of an Incentive Stock Option granted to a Ten Percent Stockholder)
from the date the Incentive Stock Option was granted.

 

6.7                                 Tax Withholding.

 

6.7.1                        The Committee shall have the right to
require the individual exercising the Award to remit to the Company an amount
sufficient to satisfy any federal, state, or local withholding tax requirements
(or to make other arrangements satisfactory to the Company with regard to such
taxes) prior to the delivery of any Common Stock pursuant to the exercise of
the Award. In the case of an Incentive Stock Option, the Committee may require
as a condition of exercise that the individual exercising the Incentive Stock
Option agree (i) to inform the Company promptly of any disposition (within
the meaning of Section 422(a)(1) of the Code and the regulations
thereunder) of Common Stock received upon exercise, and (ii) to give such
security as the Committee deems adequate to meet the potential liability of the
Company for the withholding of tax, and to augment such security from time to
time in any amount reasonably deemed necessary by the Committee to preserve the
adequacy of such security.

 

6.7.2                        In the case of an Award that is exercised
by an individual that is subject to taxation in a foreign jurisdiction, the
Committee shall have the right to require the individual exercising the Award
to remit to the Company an amount sufficient to satisfy any tax or withholding
requirement of that foreign jurisdiction (or to make other arrangements
satisfactory to the

 

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Company with regard to
such taxes prior to the delivery of any Common Stock pursuant to the exercise
of the Award).

 

6.8                                 Options.  Each eligible Participant who is also a
United States taxpayer may be granted Incentive Stock Options only to the
extent that, in the aggregate under this Plan and all incentive stock option
plans of the Company, such Incentive Stock Options do not violate the annual
vesting limitation contained in Section 422(d) of the Code (currently
$100,000, determined at the time the Incentive Stock Options is granted). Any
Options granted to an employee in excess of such amount will not be treated as
Incentive Stock Options.

 

6.9                                 Stock Awards.

 

6.9.1                        Rights as a Stockholder.  Subject to any restrictions applicable to
an Award,  (a) a Participant holding
Restricted Stock or Performance Restricted Stock, whether vested or unvested,
shall be entitled to enjoy all stockholder rights with respect to such
Restricted Stock or Performance Restricted Stock, including the right to
receive dividends and to vote the shares and (b) with regard to Awards other
than Restricted Stock and Performance Restricted Stock, a Participant may not
vote the shares represented by an Award, but an Award may provide a Participant
with the right to receive dividend payments or dividend equivalent payments
with respect to Common Stock subject to the Award (both before and after such
Common Stock is earned or vested), which payments may be either made currently
or credited to an account for the Participant, and may be settled in cash or
Common Stock, as determined by the Committee. Any such settlements, and any
such crediting of dividends or dividend equivalents or reinvestment in shares
of Common Stock, may be subject to such conditions, restrictions and
contingencies as the Committee shall establish, including the reinvestment of
such credited amounts in Common Stock equivalents.

 

6.9.2                        Stock Certificates; Legends.  Certificates representing shares of
Restricted Stock shall bear an appropriate legend referring to the restrictions
to which they are subject, and any attempt to dispose of any such shares in
contravention of such restrictions shall be null and void and without effect.
The certificates representing shares of Restricted Stock may be held by the
Company until the restrictions to which they are subject are satisfied.

 

6.10                           Performance Awards.

 

6.10.1                  Recipients of Performance Awards.  The Committee may grant
Performance Awards to any Participant. Each Performance Award shall contain the
Performance Goals for the Award, including the Performance Criteria, the target
and maximum amounts payable, and such other terms and conditions of the
Performance Award as the Committee in its discretion establishes. In the case
of Performance Awards to any Participant whom the Committee determines is or
may become a “covered employee” within the meaning of Section 162(m) of the
Code during the Performance Period or before payment of the Performance Award,
each such Performance Award may, in the Committee’s discretion, be granted and
administered to comply with the requirements of Section 162(m) of the
Code. Each such Performance Award to a covered employee shall be confirmed by,
and be subject to, a Performance Award agreement.

 

6.10.2                  Establishment of Performance Goals.  The Committee shall establish
the Performance Goals for Performance Awards. The Committee shall determine the
extent to which any Performance Criteria shall be used and weighted in
determining Performance Awards. The Committee may not modify any Performance
Goal during a Performance Period for any “covered employee” within the meaning
of Section 162(m) of the Code in a way that could make it more

 

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likely that such
Performance Goal would be achieved. The Performance Goals for any Performance
Award for any such “covered employee” shall be established not later than
90 days after the start of the Performance Period to which the Performance
Award relates and, for Performance Periods shorter than one year, prior to the
completion of twenty-five percent (25%) of such period.

 

6.10.3                  No Discretion to Increase Performance Awards.  The Committee shall establish
for each Performance Award the amount of Common Stock payable at specified
levels of performance, based on the Performance Goal for each Performance
Criteria. The Committee shall make all determinations regarding the achievement
of any Performance Goals. The Committee may not increase the Common Stock that
would otherwise be payable upon achievement of the Performance Goal or Goals.

 

6.10.4                  Certification of Achievement of Performance Goals.  The actual payments of Common
Stock to a Participant under a Performance Award will be calculated by applying
the achievement of Performance Criteria to the Performance Goal. In the case of
any Performance Award to a “covered employee” within the meaning of
Section 162(m) of the Code, the Committee shall make all calculation of
actual payments of Common Stock and shall certify prior to the payment of the
Performance Award the extent, if any, to which the Performance Goals have been
met; provided, however, that the Committee shall not be required to certify the
extent to which the Performance Goals have been met if the payments under the
Performance Award are attributable solely to the increase in the price of the
Common Stock.

 

6.10.5                  Timing of Payment of Performance Awards.  Payment of earned Performance
Awards shall be made in accordance with terms and conditions prescribed or
authorized by the Committee. The Committee may permit the Participants to elect
to defer the receipt of Performance Awards upon such terms as the Committee
deems appropriate.

 

6.11                           Repricing.  Notwithstanding any other provision of the Plan
(except for Section 7.1 relating to stock dividends, stock splits and
changes in corporate structure or capitalization), the Committee shall not
reprice any Option granted under the Plan without stockholder approval.

 

6.12                           Authority of the Committee.  Subject to the provisions of
Section 9, the Committee shall have the authority, either generally or in
any particular instance, to waive compliance by a Participant with any obligation
to be performed by him under an Award and to waive any condition or provision
of an Award.

 

6.13                           Listing of Common Stock, Withholding and Other Legal
Requirements.  The
Company shall not be obligated to deliver any Common Stock until all federal,
state and international laws and regulations which the Company may deem
applicable have been complied with, nor, in the event the outstanding Common
Stock is at the time listed upon any stock exchange, until the stock to be
delivered has been listed or authorized to be added to the list upon official
notice of issuance to such exchange. In addition, if the shares of Common Stock
subject to any Award have not been registered in accordance with the Securities
Act of 1933, as amended, the Company may require the person or persons who
wishes or wish to exercise such Award to make such representation or agreement
with respect to the sale of Common Stock acquired on exercise of the Award as
will be sufficient, in the opinion of the Company’s counsel, to avoid violation
of said Act, and may also require that the certificates evidencing said Common
Stock bear an appropriate restrictive legend.

 

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7.                                      Effect of Certain Transactions.

 

7.1                                 Changes to Common Stock.  In the event of a stock dividend, stock
split or other change in corporate structure or capitalization affecting the
Common Stock that becomes effective after the Effective Date (as hereinafter
defined), the Committee shall make appropriate adjustments in (i) the number
and kind of shares of stock for which Awards may thereafter be granted
hereunder, (ii) the number and kind of shares of stock remaining subject
to each Award outstanding at the time of such change and (iii) the
exercise price of each Award, if applicable. References in the Plan to shares
of Common Stock will be construed to include any stock or securities resulting
from an adjustment pursuant to this Section 7.1.

 

7.2                                 Acquisition, Merger or Consolidation.

 

7.2.1                        Consequences of an Acquisition.  Upon the consummation of an Acquisition, the
Committee or the Board of Directors, or the board of directors of the surviving
or acquiring entity (as used in this Section 7.2, the “Board”),
shall, as to outstanding Awards (on the same basis or on different bases as the
Board shall specify), make appropriate provision for the continuation of
such Awards by the Company or the assumption of such Awards, whether vested or
unvested, by the surviving or acquiring entity by substituting on an equitable
basis for the shares of Common Stock then subject to such Awards either
(a) the consideration payable with respect to the outstanding shares of
Common Stock, whether vested or unvested, in connection with the Acquisition,
(b) shares of stock of the surviving or acquiring corporation or
(c) such other securities or other consideration as the Board deems
appropriate, the fair market value of which (as determined by the Board in its
sole discretion) shall not materially differ from the fair market value of the
shares of Common Stock subject to such Awards immediately preceding the
Acquisition. In addition to or in lieu of
the foregoing, with respect to outstanding Options, the Board may, on
the same basis or on different bases as the Board shall specify, upon written notice to the affected optionees,
provide that one or more Options then outstanding must be exercised, in whole
or in part, within a specified number of days of the date of such notice, at
the end of which period such Options shall terminate, or provide that one or more
Options then outstanding, in whole or in part, shall be terminated in exchange
for a cash payment equal to the excess of the fair market value (as determined
by the Board in its sole discretion) for the shares of Common Stock subject to
such Options over the exercise price thereof; provided, however, that
before terminating any portion of an Option that is not vested or exercisable
(other than in exchange for a cash payment), the Board must first accelerate in
full the exercisability of the portion that is to be terminated.  Unless otherwise determined by the Board (on
the same basis or on different bases as the Board shall specify), any
repurchase rights or other rights of the Company that relate to an Award shall
continue to apply to consideration, including cash, that has been substituted,
assumed or amended for an Award pursuant to this paragraph. The Company may hold in escrow all or any
portion of any such consideration in order to effectuate any continuing
restrictions or risks of forfeiture.

 

7.2.2                        Acquisition Defined.  An “Acquisition” shall mean: (x) the sale of
the Company by merger in which the stockholders of the Company in their
capacity as such no longer own a majority of the outstanding equity securities
of the Company (or its successor); or (y) any sale of all or substantially all
of the assets or capital stock of the Company (other than in a spin-off or
similar transaction); or  (z) any other
acquisition of the business of the Company, as determined by the Board.

 

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7.2.3                        Assumption of Options Upon Certain
Events.  In connection with a
merger or consolidation of an entity with the Company or the acquisition by the
Company of property or stock of an entity, the Board may grant Awards under the
Plan in substitution for stock and stock-based awards issued by such entity or
an affiliate thereof.  The substitute
Awards shall be granted on such terms and conditions as the Board considers
appropriate in the circumstances.

 

8.                                      Rights to a Service Relationship.

 

Neither the adoption of
the Plan nor any grant of Awards confers upon any employee, non-employee
Director, consultant, contractor or advisor of the Company or a Subsidiary any
right to the continuation of a Service Relationship with the Company or a
Subsidiary, as the case may be, nor does it interfere in any way with the right
of the Company or a Subsidiary to terminate the Service Relationship of any of
those persons at any time.

 

9.                                      Discontinuance, Cancellation, Amendment and Termination.

 

The Committee or the
Board of Directors may at any time discontinue granting Awards under the
Plan.  The Board of Directors or the
Committee may at any time and in any way amend, suspend or terminate the Plan
or any Award granted under the Plan; provided, however, that no such amendment,
suspension or termination may materially impair any Award then outstanding
without the consent of the holder of such Award; and provided further, however,
that without the requisite vote of the Company’s stockholders, no amendment to
the Plan may increase the number of shares available for issuance under the
Plan. The amendment of an Award under this Section 9 may include, without
limitation, the declaration by the Committee or the Board of Directors that any
Options shall become immediately exercisable or vest in full or in part or that
any Stock Awards shall be free of some or all restrictions, risks of forfeiture
or conditions.

 

10.                               Effective Date.

 

The Plan will become
effective automatically as of the date on which it is approved by the
stockholders of the Company (the “Effective Date”) and unless the Plan is
sooner terminated by the Committee or the Board of Directors, no Awards shall
be granted under the Plan after the tenth anniversary of the Effective Date.

 

11.                               Liability of the Company.

 

By accepting any benefits
under the Plan, each Participant and each person claiming under or through such
Participant shall be conclusively deemed to have indicated acceptance and
ratification of, and consented to, any action taken or made under the Plan by
the Company, including, without limitation, the Board of Directors and the
Committee. No Participant or any person claiming under or through a Participant
shall have any right or interest, whether vested or otherwise, in the Plan or any
Award hereunder, contingent or otherwise, unless and until such Participant
shall have complied with all of the terms, conditions and provisions of the
Plan and any Award agreement related thereto. Neither the Company nor any of
its Subsidiaries, nor any of their respective directors, officers, employees or
agents, shall be liable to any Participant or any other person if it is
determined for any reason by the Internal Revenue Service or any court having
jurisdiction that any Incentive Stock Option granted hereunder does not qualify
for tax treatment as an “incentive stock option” under Section 422 of the
Code.

 

10

 

12.                               Unfunded Plan.

 

Insofar as it provides
for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants who are granted Awards, any such
accounts will be used merely as an administrative convenience. Except for the
holding of Restricted Stock in escrow, the Company shall not be required to segregate
any assets that may at any time be represented by Awards, nor shall the Plan be
construed as providing for such segregation, nor shall the Company, it
officers, the Board of Directors or the Committee be deemed to be a trustee of
Common Stock or cash to be awarded under the Plan. Any liability of the Company
to any Participant with respect to an Award shall be based solely upon any
contractual obligations that may be created by the Plan; no such obligation of
the Company shall be deemed to be secured by any pledge or other encumbrance on
any property of the Company.

 

13.                               Dispute Resolution and Governing Law.

 

Participants and the
Company agree to resolve issues that may arise out of or relate to the Plan or
the same subject matter by binding arbitration in Providence, Rhode Island in
accordance with the rules of the American Arbitration Association. The Plan and
Awards granted hereunder, including Award agreements, shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
excluding its conflicts or choice of law rules or principles that might
otherwise refer construction or interpretation of this Plan to the substantive
law of another jurisdiction.

 

14.                               Foreign Jurisdictions.

 

To the extent that the
Committee determines that the material terms set by the Committee or imposed by
the Plan preclude the achievement of the material purposes of the Plan in
jurisdictions outside the United States, the Committee will have the authority
and discretion to modify those terms and provide for such additional terms and
conditions as the Committee determines to be necessary, appropriate or
desirable to accommodate differences in local law, policy or custom or to
facilitate administration of the Plan. The Committee may adopt or approve
sub-plans, appendices or supplements to, or amendments, restatements or
alternative versions of, the Plan as it may consider necessary, appropriate or
desirable, without thereby affecting the terms of the Plan as in effect for any
other purpose. The special terms and any appendices, supplements, amendments,
restatements or alternative versions, however, shall not include any provisions
that are inconsistent with the terms of the Plan as then in effect, unless the
Plan could have been amended to eliminate such inconsistency without further
approval by the stockholders. The Committee shall also have the authority and
discretion to delegate the foregoing powers to appropriate officers of the
Company.

 

11Exhibit
10.1

 

Texas
Independent

Exploration Limited

 

1600 Smith, Suite 3800

Houston, Texas 77002

Phone: (713) 751-0419
ext. 232

Fax: (713) 759-0234

 

June 15, 2004

 

Whittier
Energy Company

333 Clay Street

Suite 1100

Houston, TX  77002

 

	
  RE:

  	
   

  	
  Offer to Sell

  
	
   

  	
   

  	
  Tom Lyne Field, Live
  Oak County, TX

  
	
   

  	
   

  	
  Cameron Field, Starr
  County, TX

  
	
   

  	
   

  	
  Scott & Hopper
  Field, Brooks County, TX

  

 

Gentlemen:

 

TEXAS INDEPENDENT
EXPLORATION LIMITED, a Texas limited partnership and successor by conversion of
Texas Independent Exploration, Inc., GULFCOAST ACQUISITIONS LIMITED, a Texas
limited partnership and successor by conversion of Gulfcoast Acquisition
Corporation, FREDERICK W. ZIMMERMAN, individually, and FREDERICK W. ZIMMERMAN
d/b/a ISLAND RESOURCES (hereinafter collectively referred to as “Seller”
or “Sellers”) hereby offer to sell, subject to the terms and conditions of this
letter agreement (the “Agreement”), to WHITTIER ENERGY COMPANY, a Nevada
corporation (hereinafter referred to as “Buyer”), Seller’s right, title
and interest, as described below, in and to the following assets, SAVE AND
EXCEPT the Excluded Assets (as hereinafter defined) (collectively, the “Properties”):

 

(a)                                  The specific
interests set forth on Exhibit “A” attached hereto and made a part
hereof in and to all of the oil and gas wells (the “Wells”) set forth on
Exhibit “A”, together with like interests in all well bores of the Wells
(the “Well Bores”), together with like interests in the rights to
operate, maintain, and produce, receive, sell, dispose and/or market production
from the Wells, together with like interests in the oil, gas and mineral leases
described on Exhibit “A” and any extensions, ratifications, and
amendments thereof (collectively the “Leases”), but only insofar as such
interests are required to operate, maintain, and produce, receive, sell,
dispose and/or market oil, gas and other hydrocarbons produced or capable of
being produced from each of the Wells; and, as to that portion of the Leases
covering lands and subsurface depths other than the lands and subsurface depths
covered or occupied by the Wells and Well Bores, the specific interests set
forth on Exhibit “A” in and to the Leases, insofar as the Leases cover
and relate to the lands and subsurface depths described on Exhibit “A”
(the “Lands”);

 

(b)                                 To the extent same
are used in connection with, attributable to or allocable to the Leases, Lands,
Wells or Well Bores, like interests in (i) all machinery,

 

1

 

improvements, personal property, fixtures,
equipment, pipelines and other facilities (except as excluded below)
including without limitation wellhead equipment, pumping units, saltwater
disposal facilities, injection facilities, compression facilities, down hole
equipment, casing, pump jacks, storage tanks, meters, gathering lines,
separators, and other equipment, and (ii) all oil, gas and related hydrocarbons
(together with minerals produced in conjunction therewith) produced on or after
the Effective Date (collectively “Personal Property”);

 

(c)                                  To the extent same
relate to or are attributable or allocable to the Leases, Lands, Wells or Well
Bores, like interests 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) (the “Units”); and

 

(d)                                 To the extent same
relate to or are attributable or allocable to the Leases, Lands, Wells, Well
Bores, Personal Property or Units or are used in connection with the
exploration, development, operation or maintenance of the Leases, Lands, Wells,
Well Bores, Personal Property or Units, and to the extent same are assignable
or transferable by Seller without restriction under applicable law or third
party agreements (without the payment of any funds or other consideration),
like interests in (i) all contracts, agreements and other instruments (except
as excluded below), (ii) all rights of way, easements, other rights of surface
use, authorizations, permits, licenses, authorizations, and similar rights and
interests, and (iii) all other rights, privileges, benefits, powers and
obligations conferred or imposed upon the owner and holder of the Leases,
Lands, Wells, or Personal Property.

 

As used herein, the term “Wells” also includes any
new well drilled and completed as a replacement for any well set forth on
Exhibit “A” which, although producing oil or gas in commercially paying
quantities or capable of producing oil or gas in commercial paying quantities,
nevertheless encounters downhole mechanical difficulties or downhole conditions
that require such well to be plugged and abandoned.  In such event, such “replacement well” shall be considered for
all purposes hereunder as one of the Wells.  The surface location of any “replacement well” shall be
within 100’ of the well being replaced, and Assignee shall use its best efforts
as are reasonable under the circumstances to position the producing bottomhole
location of such “replacement well” within 100’ of the previously producing
bottomhole location of the well being replaced.

 

The Properties do not and will not include any
interest in the following assets and properties (“Excluded Assets”):

 

(a)                                  all (i) trade
credits, accounts receivable, notes receivable and other receivables
attributable to each Seller’s interest in the Properties with respect to any
period of time prior to the Effective Date, and (ii) deposits, cash, checks in
process of collection, cash equivalents and funds attributable to each Seller’s
interest in the Properties with respect to any period of time prior to the
Effective Date;

 

(b)                                 all corporate,
financial, and tax records of Sellers (provided, however, Seller shall provide
Buyer and Buyer’s independent accountants with reasonable access to records
(including Seller’s supporting revenue and expense records relating to the

 

2

 

Properties) necessary to satisfy disclosure
requirements of federal and state securities laws;

 

(c)                                  all claims and
causes of action of Sellers (i) arising from acts, omissions or events, or
damage to or destruction of property occurring prior to the Effective Date, or
(ii) affecting any of the Excluded Assets set forth in this definition;

 

(d)                                 all rights, titles,
claims and interests of Sellers accruing prior to the Effective Date (i) under
any policy or agreement of insurance or indemnity, (ii) under any bond, or
(iii) to any insurance or condemnation proceeds or awards;

 

(e)                                  claims of Sellers
for refund of, or loss carry forwards with respect to, income, severance or
franchise taxes or any other taxes attributable to: (i) any period prior to the
Effective Date, or (ii) any of the Excluded Assets set forth in this
definition;

 

(f)                                    all amounts due or
payable to Sellers as adjustments or refunds under any contracts or agreements
affecting the Properties, with respect to periods prior to the Effective Date,
specifically including, without limitation, amounts recoverable from audits
under operating agreements;

 

(g)                                 all amounts due or
payable to Sellers as adjustments to insurance premiums related to the
Properties with respect to any period prior to the Effective Date;

 

(h)                                 all proceeds, benefits,
income or revenues accruing (and any security or other deposits made) with
respect to (i) the Properties prior to the Effective Date; and (ii) any of the
Excluded Assets set forth in this definition;

 

(i)                                     all attorney-client
communications or attorney work product, records and documents subject to
unaffiliated, third party confidentiality provisions, or claims of privilege;

 

(j)                                     (i) seismic data
and any other data of a similar nature, (ii) reserve information and reports,
(iii) seismic or any seismic interpretive or forecast data, development and
exploration geological records, geochemical, and geophysical information and
data, or other proprietary information relating thereto, whether owned or
licensed by Sellers, and (iv) any interpretive data;

 

(k)                                  all of Sellers’
intellectual property, including but not limited to proprietary computer
software, patents, trade secrets, copyrights, names, marks, and logos;

 

(l)                                     all vehicles,
furniture, office supplies, office equipment, telecommunications equipment,
telecommunication facilities, telephones, telephone systems and related
equipment, microwave systems, radios, radio systems and related equipment and
licenses, computers, tools and other similar personal property;

 

(m)                               any pipelines,
easements, fixtures, tanks, LACT units or equipment located on the Properties
which belong to third persons, including lessors, provided, however, that any
rights in such items held by Seller are included in the definition of
Properties to the extent such rights apply to the specific interest set forth
on Exhibit “A” and are used in connection with the Lands, Leases, Wells or Well
Bores;

 

3

 

(n)                                 all of Sellers’ interests in the Wells, Well
Bores, Leases, Lands, Personal Property and Units not included within the
specific interests set forth on Exhibit “A” in such Wells, Well Bores, Leases,
Lands, Personal Property and Units; and

 

(o)                                 As to the Swierc Gas Unit facility, the
currently inactive and bypassed Dehi tower and Dehi reboiler located on the
lands covered by the Swierc Gas Unit being identified as follow:

 

 

	
  Item Description

  	
   

  	
  Manufacturer

  	
   

  	
  Manu/Date

  	
   

  	
  Serial #

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dehi
  Tower

  	
   

  	
  Smith Industries

  	
   

  	
  1979

  	
   

  	
  25919

  	
   

  
	
  Dehi
  reboiler

  	
   

  	
  Smith Industries

  	
   

  	
  1979

  	
   

  	
  21763

  	
   

  

 

(p)                                 the
non-exclusive right to use facilities that are used in common with the
Properties and the Excluded Assets for purposes of the production, treatment
and marketing of hydrocarbons, including such things as meter runs, gathering
systems and pipelines.

 

TERMS AND
CONDITIONS

 

1.                                       As
used herein the term “Purchase Price” shall mean collectively all consideration
given by Buyer to Seller to purchase the Properties.  Subject to Sections 3 and 33 below, the amount of the cash
purchase price for the Properties to be paid by Buyer to Seller at Closing (as
hereinafter defined) shall be Five Million Two Hundred Seventy Thousand and
No/100 Dollars ($5,270,000.00) (the “Cash Purchase Price”).  Such amount shall be paid by wire transfer
in immediately available funds to Seller’s account as designated by Seller,
which designation shall be made not later than two (2) Business Days prior to
the date such payment is due.  “Business
Day” as used in this Agreement shall mean any day, except a Saturday,
Sunday or other day on which commercial banks in New York, New York or Houston,
Texas are required or authorized by law to be closed.

 

2.                                       In
addition to the Cash Purchase Price, and subject to Section 3 below, as
additional consideration to Seller for the transactions contemplated herein,
Buyer shall execute in favor of and deliver to Seller at Closing, a  subordinated
promissory note in the principal amount of Two Million One Hundred Eighty Seven
Thousand Three Hundred Thirty and No/100 Dollars ($2,187,330.00) with a coupon
rate of 7% simple interest payable quarterly and convertible immediately after
issuance at Seller’s option into common stock of Whittier Energy Corporation
(the “Convertible Note”).  The
Convertible Note conversion price shall be $2.00 per common share.  The Convertible Note shall be
substantially in the form attached hereto as Exhibit F, and shall also be
executed by Whittier Energy Corporation as indicated therein.

 

3.                                       As additional consideration to Seller for the transactions
contemplated herein, Buyer shall deliver to Seller at Closing, a  warrant,
or warrants, substantially in the form attached hereto as Exhibit I,
representing the right to purchase, in the aggregate, 300,000 shares of common
stock of Whittier Energy Corporation at an exercise price of $2.50 per share
and having a term of three years from the date of issuance.

 

4

 

4.                                       In
addition to the above, as additional consideration for the transactions
contemplated herein Seller and Buyer shall execute at Closing the Upside
Sharing Payment Agreement attached hereto as Exhibit “B” (the “Upside
Sharing Payment Agreement”).

 

5.                                       Also
in addition to the forgoing consideration, as additional consideration for the
transactions contemplated herein, Buyer shall carry the “Retained Interest of
Seller” (as defined in the Exhibit “C” attached hereto and made a part hereof,
in the drilling of the first two (2) wells drilled on the Cameron 137 lease
(see Exhibit “A” for description of said lease) after Closing and in the
drilling of the first two (2) wells drilled on the Scott & Hopper leases
(see Exhibit “A” for descriptions of said leases) after Closing.  The terms and conditions more particularly
describing the Retained Interest of Seller and governing these carried
interests, including the reassignment of certain portions of the Properties
from Buyer to Seller upon the happening of certain events, are set forth on
Exhibit “C”.

 

6.                                       Also
in addition to the forgoing consideration, as additional consideration for the
transactions contemplated herein, Seller shall be entitled to the “Scott
& Hopper #3 Well Excess Production Volumes” being 50% of the “Buyer’s
Net Revenues” (as hereinafter defined) attributable to the production produced,
saved and sold from the Scott & Hopper #3 well that is in excess of the
production amounts set forth on the schedule attached hereto as Exhibit
“D” and made a part hereof.  Payment(s)
of such Scott & Hopper #3 Well Excess Production Volumes, if any, shall be
made on an annual basis from Buyer to Seller no later than 120 days after
Buyer’s fiscal year-end.  As used in
this Section 6, (1) “Buyer’s Net Revenues” shall mean the proceeds
received by Buyer attributable to Buyer’s Net Revenue Interest in production less
(i) any expenses incurred or paid by Buyer, or assessed to or against Buyer,
for actual processing or transportation costs that occur downstream of the
sales meter located on the leased premises on which the producing well is
located, and (ii) severance and ad valorem taxes attributable to such production,
and (2) “Buyer’s Net Revenue Interest” shall mean Buyer’s share of production
in the Properties acquired from Seller pursuant to this Agreement.

 

7.                                       The
Purchase Price and additional consideration provided for hereunder excludes any
sales taxes or other taxes required to be paid in connection with the sale of
the Properties pursuant to this Agreement. 
Buyer, however, shall be liable for any sales and use taxes, conveyance,
transfer and recording fees and real estate transfer stamps or taxes that may
be imposed on any transfer of the Properties pursuant to this Agreement.  Seller shall, in accordance with applicable
law, collect and remit any sales or similar taxes that are required to be paid
as a result of the transfer of the Properties by Seller to Buyer.

 

8.                                       The
effective date of the transaction shall be 7:00 a.m. local time on
March 1, 2004 (“Effective Date”), and, subject to the conditions stated in
this Agreement, the consummation of the transactions contemplated hereby (the “Closing”)
shall occur at Seller’s office on or before June 10, 2004; provided,
however, by mutual agreement Seller and Buyer may extend the date of Closing to
occur on or before five (5) Business Days after June 10, 2004.  Notwithstanding
anything to the contrary contained herein, either Seller or Buyer, acting
independently of one another and in the exercise of its sole and absolute
discretion, has the right to terminate this Agreement at any time prior to
Closing for any reason whatsoever.  In
the event of such termination, (i) this Agreement shall no longer be of any
force and effect,  and the transactions contemplated by this Agreement shall be
abandoned and (ii) all rights and obligations of the parties under or pursuant
to this Agreement shall terminate without further liability or obligation from
one party to the other except for the hereinafter identified Prior
Confidentiality Agreement

 

5

 

and Due Diligence
Letter.  Such termination shall be made
by the delivery of written notice from the terminating party to the other party
before Closing.

 

9.                                       Seller
shall be liable for all costs (including but not limited to ad valorem,
production, severance or excised taxes and royalties) and entitled to all
revenues attributable to the Properties prior to the Effective Date.  Buyer shall be responsible for and entitled
to same after the Effective Date.  Any
adjustments pursuant to this section will be made at Closing if
possible.  If adjustment amounts are
indeterminable as of Closing, adjustment will be made within ninety (90) days
of Closing.  Each of the parties hereto,
on behalf of itself and its parent, subsidiary and affiliated entities, agrees
to indemnify and hold harmless the other from the costs, liabilities and
obligations assumed or retained herein. 
In addition, Seller shall be entitled to retain all COPAS overhead
charges applicable to the Properties, even after the Effective Date, up to the
time Seller ceases to be the Operator of the Properties.

 

10.                                 The
obligations of Buyer under this Agreement shall be in addition to, and not in
lieu of, Buyer’s obligations under any confidentiality agreements previously
executed by Seller and Buyer that relate to the Properties (the “Prior
Confidentiality Agreement”). 
Notwithstanding anything to the contrary contained in the Prior
Confidentiality Agreement, Buyer acknowledges and agrees that the terms and
provisions of the Prior Confidentiality Agreement shall not be superseded by
the provisions of this Agreement, but shall continue in full force and effect
until the Closing Date, or if Closing does not occur, under the terms of such
Prior Confidentiality Agreement.  In
addition, reference is hereby made to that certain letter between the parties
dated May 3, 2004, a copy of which is attached hereto as Exhibit G, concerning
Buyer’s due diligence pertaining to the Properties (the “Due Diligence
Letter”).  Seller and Buyer agree that
the Due Diligence Letter shall continue in force and effect as written;
provided, however, wherever there is a conflict between a provision of this
Agreement and a provision of the Due Diligence Letter, if any, the provision of
this Agreement shall control.

 

11.                                 At
the Closing, (i) Seller shall execute, acknowledge and deliver to Buyer a
conveyance of the Properties in the form attached hereto as Exhibit H (the
“Conveyance”) and (ii) to the extent Buyer so requests, Seller shall execute
and deliver to Buyer (1) letters in lieu of transfer orders (or similar
documentation), in form acceptable to all parties, (2) an affidavit or other
certification, as permitted by the Internal Revenue Code of 1986 as amended
(the “Code”) that Seller is not a “foreign person” within the meaning of
Section 1445 of the Code (i.e., Seller is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined in such Code and the regulations promulgated
thereunder), (3) Texas Railroad Commission Change of Operator P-4 forms, (4)
any other forms required by governmental authority concerning the transfer of
the Properties or change of operator of the Properties, (5) resignation of
operator notices to non-operator working interest owners, and (6) other
operating agreement related letters concerning the transfer of the Properties or
change of operator.

 

12.                                 Exhibit
E attached hereto and made a part hereof sets forth the agreement between
Seller and Buyer as to the allocation of the Purchase Price among the
Properties.  Seller and Buyer, to the
extent required by the IRS, agree to consistently report, in all filings,
Purchase Price allocations among the Properties in accordance with Exhibit
“E”.  Seller and Buyer, to the extent
required by the IRS, agree to reasonably cooperate with each other in the
preparation, execution and filing of (a) all information returns and
supplements required to be filed with the IRS by the parties under
Section 1060 of the

 

6

 

Code and the Treasury
Regulations promulgated thereunder relating to the allocation of the Purchase
Price, and (b) all similar filings required to be filed with respect to the
transactions contemplated by this Agreement with the IRS and all other
appropriate taxing authorities.

 

13.                                 If
the Closing occurs, Seller and Buyer agree as follows:

 

(a)                                  Buyer
assumes and agrees to pay, perform and discharge the following liabilities and
obligations (collectively, the “Assumed Obligations”):

 

(i)                                     all
liabilities and obligations that are attributable to the ownership or operation
of the Properties after the Effective Date, which shall include damage to
property, or injury to or death of persons, in each case occurring after the
Effective Date, but attributable, in whole or in part to physical conditions
that existed or field operations that occurred before the Effective Date;

 

(ii)                                  all
liabilities and obligations to properly plug and abandon all wells and
disassemble and remove all related facilities and equipment now or hereafter
located on the Properties and clean up and restore the Properties (including
all obligations to clean, close and abandon all pits and impoundments) in
accordance with applicable laws (regardless of whether any such obligation to
plug, abandon, remove, clean up and restore is attributable to periods of time
prior to or after the Effective Date);

 

(iii)                               any
and all obligations with respect to imbalances of oil, gas or other
hydrocarbons under any gas balancing or similar arrangements affecting the
Properties with respect to amounts owed thereunder by Seller as of the
Effective Date;

 

(iv)                              any
obligations or liability for claims arising from the following occurrences,
events and activities on or related to the Properties, regardless of whether
resulting from acts or omissions prior to the Closing Date, or the condition of
the Properties at Closing: (i) any pollutants, contaminants, or hazardous or
toxic waste, substances or materials at, on, or beneath any Property requiring
action to remedy, stabilize, treat, clean up, or otherwise alter the
environmental condition of the air, land, soil, surface, subsurface strata,
surface water, ground water, or sediments with respect to any Property, (ii)
underground injection activities and waste disposal; or (iii) necessary
remediation, and the cost of such remediation, or any control, assessment, or
compliance with respect to any pollution or contamination.

 

(b)                                 BUYER AGREES TO RELEASE, INDEMNIFY,
DEFEND AND HOLD HARMLESS SELLER AND ITS AFFILIATES AND ITS AND THEIR RESPECTIVE
DIRECTORS, MEMBERS, MANAGERS, GENERAL PARTNERS, OFFICERS, EMPLOYEES, AGENTS,
REPRESENTATIVES, HEIRS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “SELLER
INDEMNIFIED PARTIES”) FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES,
LOSSES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND
REASONABLE ATTORNEYS’ FEES) (COLLECTIVELY, “LOSSES”) THAT ARE
ATTRIBUTABLE TO (i) THE ASSUMED OBLIGATIONS OR (ii) A BREACH BY BUYER OF ITS
WARRANTIES, COVENANTS, REPRESENTATIONS AND

 

7

 

AGREEMENTS HEREUNDER, IN EACH CASE WITHOUT REGARD TO
THE SOLE, PARTIAL OR CONCURRENT NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY,
OR OTHER FAULT OF THE SELLER INDEMNIFIED PARTIES;

 

(c)                                  Seller and Buyer agree the indemnity
provisions contained in this Agreement are conspicuous, that the same comply
with the express negligence test and that the parties intend to shift the risk
of liability as therein provided.

 

14.                                 After
Closing, Seller and Buyer agree to take such further actions and to execute,
acknowledge and deliver such additional documents and instruments as may be
necessary or useful in carrying out the purposes of this Agreement or of any
document delivered pursuant hereto.

 

15.                                 IF
THE CLOSING OCCURS AND WITHOUT LIMITING BUYER’S OBLIGATIONS HEREUNDER, BUYER
HEREBY ASSUMES AND SHALL BE RESPONSIBLE FOR AND AGREES TO INDEMNIFY, RELEASE,
DEFEND AND HOLD HARMLESS THE SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY
AND ALL LOSSES ATTRIBUTABLE TO DAMAGE TO PROPERTY, INJURY TO OR DEATH OF
PERSONS OR OTHER LIVING THINGS, NATURAL RESOURCE DAMAGES, CERCLA RESPONSE
COSTS, ENVIRONMENTAL REMEDIATION AND RESTORATION COSTS, OR FINES OR PENALTIES
(COLLECTIVELY, “CLAIMS”) ARISING OUT OF OR ATTRIBUTABLE TO, IN
WHOLE OR IN PART, EITHER DIRECTLY OR INDIRECTLY, THE CONDITION OR OPERATION OF
THE PROPERTIES AT ANY TIME BEFORE, AT OR AFTER THE EFFECTIVE DATE (INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS RELATING TO ANY CONDITION EXISTING ON, IN OR
UNDER, OR RESULTING FROM OPERATION OF, THE PROPERTIES AS OF THE EFFECTIVE DATE)
THAT IS DETERMINED TO BE A RESULT OF OR CAUSED IN WHOLE OR IN PART BY SELLER’S
VIOLATION OF, FAILURE TO FULFILL DUTIES IMPOSED BY OR INCURRENCE OF LIABILITY
UNDER, ANY ENVIRONMENTAL LAWS (AS DEFINED BELOW) OR UNDER ANY PRINCIPLE OF
COMMON LAW RELATING TO DUTIES TO PROTECT OR NOT UNDULY DISTURB HUMAN HEALTH OR
ENVIRONMENTAL QUALITY.

 

As used herein, the term
“Environmental Laws” shall mean any and all laws, statutes, regulations,
rules, orders, ordinances, permits, waivers, or determinations of any federal,
state or local governmental authority pertaining to safety, health or
conservation or protection of the environment, wildlife, or natural reserves in
effect in any and all jurisdictions in which the Properties are located,
including, without limitation, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, the Safe Drinking Water Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended  (“CERCLA”), the
Superfund Amendments and Reauthorization Act of 1986, as amended (“SARA”),
the Resource Conservation and Recovery Act, as amended (“RCRA”), the
Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic
Substances Control Act, as amended, and the Occupational Safety and Health Act,
as amended (“OSHA”), and any applicable state, tribal, or local
counterparts.  The terms “hazardous
substance”, “release”, and “threatened release” shall have the meanings
specified in CERCLA; provided, however, that to the extent the laws of the
state in which the Properties are located are applicable and have established a
meaning for “hazardous substance”, “release”, “threatened release”, “solid

 

8

 

waste”, “hazardous
waste”, and “disposal” that is broader than that specified in CERCLA or RCRA,
such broader meaning shall apply with respect to the matters covered by such
laws.

 

16.                                 Upon
Buyer’s acceptance of this offer in the manner provided for herein, subject to
the termination right of the parties set forth in Section 8 above, this
offer shall constitute a binding and enforceable agreement between the parties.

 

17.                                 Except
as expressly provided herein to the contrary, neither party shall assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party and any assignment made without such consent
shall be void; provided, however, that Buyer hereby consents to (i) an
assignment by Seller of all or part of its rights under this Agreement in order
to accomplish a like kind exchange and (ii) an assignment by Seller of all or
any portion of its rights hereunder, but not its obligations, after the
Closing.  Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns.

 

18.                                 In
the event there is a conflict between the terms of this Agreement and the
Conveyance, the terms and conditions of this Agreement shall prevail.

 

19.                                 Except
as otherwise provided herein, each party shall be solely responsible for all
expenses incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own counsel and consultants).  Buyer shall pay for all documentary, filing
and recording fees required in connection with the filing and recording of the
Conveyance delivered by Seller to Buyer at Closing.  Within 45 days following Closing, Buyer shall furnish Seller
with a statement setting forth the recording information for each county or
parish wherein such Conveyance was recorded.

 

20.                                 If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced under any rule of law, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in a materially adverse manner with respect to either party.

 

21.                                 Seller
and Buyer shall consult with each other with regard to all publicity and other
releases issued at or prior to the Closing concerning this Agreement and the
transactions contemplated hereby and, except as required by applicable law or
the applicable rules or regulations of any governmental body or stock exchange,
neither party shall issue any publicity or other release without the prior
written consent of the other party.

 

22.                                 NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, SELLER MAKES NO
REPRESENTATION OR WARRANTIES OF ANY KIND TO BUYER THAT BUYER WILL SUCCEED TO
SELLER’S OPERATORSHIP OF ANY WELL CONSTITUTING A PART OF THE PROPERTIES.  BUYER ACKNOWLEDGES AND AGREES THAT BUYER
WILL BE REQUIRED TO COMPLY WITH THE TERMS OF ANY APPLICABLE OPERATING
AGREEMENT, UNIT OPERATING AGREEMENT OR OTHER CONTRACT RELATING TO ANY ELECTIONS
OR OTHER SELECTION PROCEDURES IN ORDER TO SUCCEED SELLER AS OPERATOR
THEREUNDER.

 

9

 

23.                           This
Agreement, including all Exhibits attached hereto and made a part hereof,
together with the Prior Confidentiality Agreement and Due Diligence Letter,
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with respect
to same.  No supplement, amendment,
alteration, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the parties hereto.

 

24.                           This
Agreement is governed under the laws of the State of Texas excluding any conflicts
of law rules or principal that might apply the law of another
jurisdiction.  All disputes shall be
submitted to the jurisdiction of the courts in the State of Texas and venue
shall be in Harris County, Texas.

 

25.                           The
representations, warranties, covenants and obligations of the parties under
this Agreement shall survive the Closing.

 

26.                                 Seller represents to Buyer that:

 

(a)                                  Organization and
Qualification.  Texas Independent Exploration Limited is a
limited partnership duly organized and legally existing and in good standing under the laws of the State of Texas.  Gulfcoast Acquisitions Limited is a limited
partnership duly organized and legally existing and in good standing under the laws of the State of Texas.

 

(b)                                 Due Authorization. 
Each of the Sellers 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.  To
Seller’s “Knowledge” (which, as
used in this Agreement, shall mean the actual knowledge of Frederick W.
Zimmerman for all matters, Kent Davidson for land matters, and Todd Grabois for
accounting and financial matters), neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
the compliance 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.

 

(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.  To
Seller’s Knowledge, there are no pending or threatened suits, actions,
administrative or arbitration proceedings in which Seller is a party for which demands have been made upon Seller
and which materially affect the Properties or materially affect Seller’s
title to any of the Properties, or the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.

 

(f)                                    Warranty of Title. 
Except for a mortgage to Compass Bank, Seller has not previously sold, conveyed, mortgaged or transferred, or is
subject to an enforceable

 

10

 

agreement to sell, convey, mortgage or transfer, the
Properties (or any interest therein). 
Except for the Permitted Encumbrances (below defined), the Properties
are free and clear of any and all liens, security interests, encumbrances, and
other burdens caused or created by, through or under Seller, but not otherwise.  As
used in this Agreement the term “Permitted Encumbrances” shall mean:  (i) any materialman’s, mechanic’s,
repairman’s, employee’s, contractor’s, operator’s or other similar liens or
charges for unpaid liquidated amounts arising in the ordinary course of
business which are not yet due; (ii) liens for taxes and similar assessments
which are not yet due; (iii) all lessors’ royalties, overriding royalties,
and other similar burdens which are of record or which are reflected on
Seller’s division of interest pay decks provided by Seller to Buyer’s
consultants pertaining to the Properties; (iv) unitization and pooling
designations, declarations, and orders, (v) agreements which are of record or
copies of which were provided by Seller to Buyer or its consultants, or which
were secured by Buyer from Seller, pertaining to Buyer’s due diligence relative
to the Properties or which are set forth on Exhibit “A” and (vi) the existing
mortgage to Compass Bank.

 

(g)                                 AFE Items.  (i)
Seller has not incurred any single expense, or made any commitments to make a
single expenditure, in connection with (and no other obligations or liabilities
have been incurred which would adversely affect) the ownership or operation of
the Properties after the Effective Date, which exceeds $50,000, net to Seller’s
interest, as to any individual well or surface facility.

 

(h)                                 Tax Partnerships.  To Seller’s Knowledge, none of the
Properties is subject to a tax partnership.

 

(i)                                     No Material
Misstatement.  No representation or warranty made by Seller
in this Agreement contains or will contain, at the time of execution of this
Agreement and at the Closing, any untrue statement of a material fact.

 

27.                                 Buyer represents to Seller that:

 

(a)                                  Organization and Qualification.  Whittier Energy Company is a corporation
duly organized and legally existing and in good standing under the laws of the
State of Nevada.

 

(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. 
To Buyer’s Knowledge (which, as used in this Agreement, shall mean the
actual knowledge, after reasonable inquiry, of any officer or manager of Buyer
or Whittier Energy Corporation in charge of a discrete business area or
function having responsibility for the referenced matter), neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the compliance 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.

 

(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 Buyer,
enforceable in

 

11

 

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.  To Buyer’s Knowledge, there are no pending suits, actions,
administrative or arbitration proceedings in which Buyer is a party, and which
materially affect Buyer’s execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, and to Buyer’s Knowledge,
no demands which might lead to the same have been made on Buyer.

 

(f)                                    Exhibit “D”, Net production forecast schedule for
Scott & Hopper #3 Existing Completion, is the production forecast
schedule for said well that Buyer has provided Compass Bank.

 

(g)                                 Preferred Stock.  As of Closing, neither Buyer nor Whittier Energy Corporation has
any issued or outstanding shares of preferred stock.

 

(h)                                 Employee Stock Options.  As of Closing, the Buyer has no outstanding
options to acquire its common stock.  At
Closing, Whittier Energy Corporation will have no more than 1,600,000 shares of
its common stock available for issuance under outstanding stock option plans
(“Stock Incentive Plans”), including Whittier Energy Corporation’s Long Term
Incentive Plan, and will have no more than 916,500 options to acquire shares of
Whittier Energy Corporation’s common stock issued and outstanding under its
existing Stock Incentive Plans.

 

28.                                 If Closing occurs, Seller will deliver to Buyer, within ten (10)
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, non-geophysical surveys and
non-interpretive maps, contracts and contract files, production marketing
records, correspondence files, 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 cooperate with Buyer to obtain a release of such restriction or otherwise
obtain access).  Any Seller may, at its
election, and at its expense, make and retain copies of any or all such files.

 

29.                                 If Closing occurs, Seller shall, on the date
of Closing, agree (and, upon the delivery to Buyer of the Conveyance, shall be
deemed to have agreed), to continue to be responsible for payment of all costs
and expenses relating to the operation of the Properties before the Closing
Date.

 

30.                                 Prior
to the Closing Seller agrees to inform Buyer concerning active proposals (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.

 

31.                                 Seller agrees to indemnify and hold harmless
Buyer (and its partners and its and
their respective affiliates, and the respective officers, directors,
employees, attorneys and agents of such parties) from and against any and all
claims, actions, causes of action,

 

12

 

liabilities,
damages, losses, costs or expenses (including, without limitation, court costs
and reasonable attorneys fees) of any kind or character 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
Seller (and its partners and its and
their respective affiliates and the respective officers, directors,
employees, attorneys and agents of such parties) 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 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.

 

32.                                 With
respect to any
third party that Seller has not previously sent information to or negotiated
with concerning the sale or disposal of the Properties, while this
Agreement is in force and effect, Sellers and any of their officers, directors,
employees, or agents shall not, directly or indirectly, solicit any offer from,
initiate or engage in any discussions or negotiations with, or provide any
information to, such third parties concerning any possible proposal regarding a
merger, sale of assets or stock, or other transaction involving the
acquisition, disposition or conveyance of the Properties.

 

33.                                 The
amount of the Cash Purchase Price of $5,270,000.00 and the amount due on the
Convertible Note in the amount of $2,187,330.00 shall each be adjusted at
Closing as herein after provided by the amount of the Upward Adjustments and
Downward Adjustments defined below as follows:

 

(a)                                  Upward Adjustments.  The amount of the Cash Purchase Price and
the Convertible Note in the proportions provided for in (c) below shall be
adjusted upward by the following amounts (determined without duplication and on
a cash basis in accordance with generally accepted accounting principles
consistently applied):

 

(i)                                     the
amount of all expenses (net to Sellers’ interest) incurred and paid on behalf
of Sellers that are attributable to the ownership or operation of the
Properties and to the period of time from and after the Effective Date through
May 31, 2004, including without
limitation, capital expenditures, ad valorem, property and similar taxes and
assessments, severance, sales and production taxes (but excluding income taxes
and franchise taxes), rentals and similar charges, amounts billed under
applicable operating agreements and prepaid expenses;

 

(ii)                                  the
value of all merchantable, allowable oil in storage (net to Seller’s interest)
above the pipeline connection at the Effective Date net of severance taxes and
royalty, the value to be the posted price on the Effective Date less taxes and
deductions/adjustments by the purchaser for gravity, transportation, and other
customary deductions/adjustments; and

 

(iii)                               any
other amount agreed upon by Seller and Buyer.

 

(b)                                 Downward Adjustments.  The amount of the Cash Purchase Price and
the Convertible Note in the proportions provided for in (c) below shall be
adjusted downward by the following amounts (determined without duplication and
on a cash basis in accordance with generally accepted accounting principles
consistently applied):

 

13

 

(i)                                     the
amount of all proceeds (net to Sellers’ interest) earned and received by or on
behalf of Sellers that are attributable to the ownership or operation of the
Properties for the period of time from and after the Effective Date through May
31, 2004, which Seller shall be entitled to keep;

 

(ii)                                  any
property taxes allocated to Seller pursuant to Section 34; and

 

(iii)                               any
other amount agreed upon by Seller and Buyer.

 

All such adjustments made
as of Closing shall be set forth on a preliminary settlement statement
(“Preliminary Settlement Statement”) to be prepared by Seller and Buyer within
two days of Closing.  All such
adjustments on the Preliminary Settlement Statement shall be made based on
actual numbers, or if such numbers are not available, on estimated numbers,
with such estimates to be corrected to actual numbers in the Final Recap
Statement (as defined in Section 35 below).

 

(c)                                  Adjustment Amount.  As used herein the, the term
“Preliminary Settlement Amount” shall mean the amount that results from
subtracting the total of Downward Adjustments as reflected in the Preliminary
Settlement Statement from the total of Upward Adjustments as reflected in the
Preliminary Settlement Statement.  The
Preliminary Settlement Amount shall be allocated 1/3 to the Cash Purchase Price
and 2/3 to the Convertible Note with the amount of each at Closing either being
increased or reduced appropriately.

 

34.                                 Real
estate and personal property taxes, if any, for the calendar year January 1,
2004, through December 31, 2004, shall be prorated to the Effective Date
based upon the most recent property tax assessments and most recent certified
tax rates.  Such tax proration shall be
settled at Closing by an adjustment to the Cash Purchase Price.  Buyer will assume responsibility for the
actual payment to applicable government authorities of any unpaid property
taxes not yet due.

 

35.                                 Within
90 days after the Closing, Seller shall provide to Buyer, for Buyer’s review, a
proposed final recapitulation settlement in the form of the Preliminary
Settlement Statement (the “Final Recap Statement”) to account for all
adjustments known as of such date pursuant to Section 33 (the “Final
Recap”).  Buyer shall have the right,
within 30 days after receipt of the Final Recap Statement, to audit the Final
Recap Statement.  If Buyer disagrees
with the Final Recap Statement, Buyer and Seller shall use best efforts to
reach agreement within 30 days following Buyer’s audit of the Final Recap
Statement.

 

Should the parties be
unable to resolve any disagreements relating to the Final Recap, such
disagreement shall, at the earliest practicable date, be referred, by either or
both of the parties, to an accounting firm mutually acceptable to Buyer and
Seller (the “Accounting Firm”), along with all audit reports, work papers,
schedules, and calculations related to the matter in dispute.  Within 25 days after such submission, the
Accounting Firm shall issue a letter report determining the Final Recap, which
shall be final and binding.  Each party
shall bear its own fees and expenses incurred in resolving any dispute under
this Section 35, except for the Accounting Firm, which shall be borne
equally by the parties.

 

14

 

Payment of monies owed
under the Final Recap shall be made by check from one party to the other and
shall be paid within 10 days from the date Seller and Buyer agree on the Final
Recap Statement, or 10 days from the determination of the Final Recap by the
Accounting Firm, whichever is later.

 

36.                                 Notwithstanding anything else herein
contained to the contrary, and except for (i) the indemnity of Sellers provided
for in Section 37 and in the Upside Sharing Payment Agreement and (ii) the
representations, warranties, covenants and obligations of Seller under this
Agreement that are timely made the subject matter of a Buyer’s Claim or Claims
(as defined below), the representations, warranties, covenants and obligations
of Seller under this Agreement shall survive the Closing only for a period of
one (1) year from and after the Closing Date; provided, however, that any claim
with respect to the breach of such representations, warranties, covenants and
obligations of Seller may be made only if Buyer shall have notified Seller in
writing of such claim, containing reasonable details concerning the nature of
such claim, on or before one (1) year from and after the Closing Date (“Buyer’s
Claim or Claims”).  With respect to any
representations, warranties, covenants and obligations of Seller under this
Agreement that are the subject matter of a Buyer’s Claim or Claims, such
representations, warranties, covenants and obligations of Seller under this
Agreement shall continue to be in force and effect only for the purpose of
permitting Buyer to pursue Buyer’s Claim(s) described in the notice and then
only until such time as the particular Buyer’s Claim or Claims pertaining
thereto is resolved, either by agreement of the parties or judicial
decree.  Seller shall not have any
obligation or liability under this Agreement or in connection with or with
respect to the transactions contemplated in this Agreement for any breach,
misrepresentation or noncompliance with respect to any representation,
warranty, covenant, indemnity or obligation (a) if such breach,
misrepresentation or noncompliance shall have been waived by the Buyer in
writing or (b) if the Buyer had knowledge of, or pursuant to its due diligence
review should have had knowledge of, the relevant facts based on Buyer’s due
diligence review of documents made available by Seller to Buyer at or before
Closing.

 

37.                                 Each
of the Sellers (i) hereby instructs and
authorizes Buyer to make all payments due Sellers under this Agreement and the
Exhibits attached hereto, including, without limitation, payment of the
Purchase Price, to Texas Independent Exploration Limited (“TIE”) and (ii)
agrees to hold Buyer harmless and indemnify Buyer, to the extent and amount of
such payments, from and against any claim made by a Seller concerning such payments
made by Buyer to TIE.

 

TEXAS INDEPENDENT EXPLORATION LIMITED

 

By: Independent
Operating, L.L.C., a Texas limited

liability company, its
general partner

 

 

	
  By:

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman,
  Manager

  

 

15

 

	
  GULFCOAST
  ACQUISITIONS LIMITED

  
	
  By: Blanco Minerals,
  L.L.C., a Texas limited

  liability company, its general partner

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman,
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman

  
	
   

  	
   

  
	
   

  	
   

  
	
  FREDERICK W. ZIMMERMAN

  
	
  d/b/a ISLAND RESOURCES

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman

  

 

 

AGREED TO AND ACCEPTED
THIS 15th DAY OF JUNE, 2004.

 

WHITTIER ENERGY COMPANY

 

	
  By:

  	
  /s/ Daniel H. Silverman

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Daniel H. Silverman

  
	
   

  	
   

  
	
  Title:

  	
  Chief Operating Officer

  

 

16

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