Exhibit 10.1

 

AGREEMENT AND PLAN OF MERGER

 

AMONG

 

FOREST OIL CORPORATION,

 

TWOCO ACQUISITION CORP.

 

AND

 

THE WISER OIL COMPANY

 

May 21, 2004

 

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TABLE OF CONTENTS

 

ARTICLE I

DEFINITIONS

 

Section 1.01

Definitions

 

Section 1.02

Rules of Construction

 

 

 

 

ARTICLE II

THE OFFER

 

 

 

Section 2.01

The Offer

 

Section 2.02

Company Actions

 

Section 2.03

Board Representation

 

 

 

 

ARTICLE III

MERGER; CONVERSION OF SECURITIES

 

 

 

Section 3.01

The Merger

 

Section 3.02

Certificate of Incorporation

 

Section 3.03

Bylaws

 

Section 3.04

Directors and Officers

 

Section 3.05

Additional Actions

 

Section 3.06

Conversion of Shares

 

Section 3.07

Surrender and Payment

 

Section 3.08

Company Stock Options and Company Warrants

 

Section 3.09

Dissenting Shares

 

Section 3.10

Adjustments

 

Section 3.11

Withholding Rights

 

Section 3.12

Lost Certificates

 

 

 

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

 

 

Section 4.01

Organization and Qualification;  Subsidiaries

 

Section 4.02

Certificate of Incorporation and Bylaws

 

Section 4.03

Capitalization

 

Section 4.04

Authorization of Agreement; Board Recommendation; Required Vote

 

Section 4.05

Approvals

 

Section 4.06

No Violation

 

Section 4.07

Reports

 

Section 4.08

No Material Adverse Effect; Conduct

 

Section 4.09

Certain Business Practices

 

Section 4.10

Certain Obligations

 

Section 4.11

Authorizations; Compliance

 

Section 4.12

Litigation

 

Section 4.13

Employee Benefit Plans

 

Section 4.14

Taxes

 

Section 4.15

Environmental Matters

 

 

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Section 4.16

Insurance

 

Section 4.17

Intellectual Property

 

Section 4.18

Properties

 

Section 4.19

Reserve Report

 

Section 4.20

Prepayments; Hedging; Calls

 

Section 4.21

Anti-Takeover Plan; State Takeover Statutes

 

Section 4.22

Brokers

 

Section 4.23

Opinion of Financial Advisor

 

Section 4.24

Proxy Statement; Offer Documents; Schedule TO; Schedule 14D-9

 

 

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PARENT COMPANIES

 

 

 

Section 5.01

Organization

 

Section 5.02

Authorization of Agreement

 

Section 5.03

Approvals

 

Section 5.04

No Violation

 

Section 5.05

Financing

 

Section 5.06

Disclosure Documents

 

Section 5.07

Ownership

 

 

 

 

ARTICLE VI

COVENANTS

 

 

 

Section 6.01

Affirmative Covenants

 

Section 6.02

Negative Covenants

 

Section 6.03

No Solicitation

 

Section 6.04

Notices of Certain Events; Consultation

 

Section 6.05

Merger Subsidiary

 

Section 6.06

Director and Officer Liability

 

Section 6.07

Access and Information

 

Section 6.08

Meeting of the Company’s Stockholders

 

Section 6.09

Proxy Statement

 

Section 6.10

Commercially Reasonable Efforts

 

Section 6.11

Public Announcements

 

Section 6.12

Stock Exchange De-listing

 

Section 6.13

Defense of Litigation

 

Section 6.14

State Takeover Statutes

 

Section 6.15

Filings; Other Actions

 

Section 6.16

Employee Benefit Plans

 

Section 6.17

Amendment of Stock Options

 

 

 

 

ARTICLE VII

CONDITIONS TO THE MERGER

 

 

 

Section 7.01

Conditions to the Obligations of Each Party

 

Section 7.02

Conditions to the Obligations of Parent and Merger Subsidiary

 

 

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ARTICLE VIII

TERMINATION

 

 

 

Section 8.01

Termination

 

Section 8.02

Effect of Termination

 

 

 

 

ARTICLE IX

MISCELLANEOUS

 

 

 

Section 9.01

Notices

 

Section 9.02

Survival of Representations and Warranties and Agreements

 

Section 9.03

Amendments; No Waivers

 

Section 9.04

Fees and Expenses

 

Section 9.05

Successors and Assigns

 

Section 9.06

Governing Law

 

Section 9.07

Jurisdiction

 

Section 9.08

Counterparts; Effectiveness

 

Section 9.09

Entire Agreement

 

Section 9.10

Headings

 

Section 9.11

Severability

 

Section 9.12

WAIVER OF JURY TRIAL

 

Section 9.13

Specific Performance

 

Section 9.14

Limitations on Warranties

 

 

 

 

 

 

 

ANNEXES

Annex A

Conditions to the Offer

 

 

 

 

 

 

 

EXHIBITS

Exhibit A

Schedule of Defined Terms

 

Exhibit B

Forms of Stockholder Agreements

 

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, dated as of May 21, 2004 (this “Agreement”),
is by and among Forest Oil Corporation, a New York corporation (the “Parent”),
TWOCO Acquisition Corp., a Delaware corporation and a wholly owned direct
subsidiary of the Parent (“Merger Subsidiary”), and The Wiser Oil Company, a
Delaware corporation (the “Company”).  The Parent and Merger Subsidiary are
sometimes referred to herein as the “Parent Companies.”

 

RECITALS:

 

WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary and the
Company have each approved the acquisition of the Company by Parent on the terms
and subject to the conditions set forth in this Agreement.

 

WHEREAS, Parent proposes to cause Merger Subsidiary to make a tender offer to
purchase all of the issued and outstanding shares of common stock, par value
$0.01 per share, of the Company (“Shares”), at a price of $10.60 per Share,
subject to adjustment pursuant to Section 2.01(e) (the “Offer Price”) net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in this Agreement (such tender offer, as it may be amended and
supplemented from time to time as permitted under this Agreement, the “Offer”).

 

WHEREAS, after acquiring the Shares pursuant to the Offer, Merger Subsidiary
will merge with and into the Company (the “Merger”), whereby each issued and
outstanding Share not owned directly or indirectly by Parent or the Company,
except as otherwise provided herein, will be converted into the right to receive
the Offer Price.

 

WHEREAS, the Board of Directors of the Company has unanimously (i) determined
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, are advisable, and in the best interests of, the Company
and its stockholders, (ii) adopted resolutions approving and declaring advisable
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, and (iii) subject to the terms and conditions contained herein,
agreed to recommend that the stockholders of the Company accept the Offer,
tender their Shares and, if required by applicable Law, adopt and approve this
Agreement and the transactions contemplated hereby, including the Merger.

 

WHEREAS, as an inducement to the Parent entering into this Agreement, certain
Persons in their capacities as stockholders of the Company are concurrently with
the execution and delivery of this Agreement entering into agreements in
substantially the forms attached hereto as Exhibit B (the “Stockholder
Agreements”).

 

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:

 

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ARTICLE I
DEFINITIONS

 

Section 1.01                                Definitions.

 

Certain capitalized and other terms used in this Agreement are defined in
Exhibit A hereto and are used herein with the meanings ascribed to them therein.

 

Section 1.02                                Rules of Construction.

 

Unless the context otherwise requires, as used in this Agreement:  (a) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (b) “or” is not exclusive; (c) “including” means
“including, without limitation;” (d) words in the plural include the singular;
(e) the terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar
words refer to this entire Agreement and (f) the terms “Article” or “Section”
refer to the specified Article or Section of this Agreement.

 

ARTICLE II
THE OFFER

 

Section 2.01                                The Offer.

 

(a)                                  Subject to the provisions of this
Agreement, as promptly as practicable, and in any event no more than seven
Business Days, after the date of this Agreement, Merger Subsidiary shall, and
Parent shall cause Merger Subsidiary to, commence, within the meaning of Rule
l4d-2 under the Exchange Act, the Offer.  The obligation of Merger Subsidiary
to, and of Parent to cause Merger Subsidiary to, accept for payment and pay for
any Shares tendered shall be subject only to the satisfaction of the conditions
set forth in Annex A and to the terms and conditions of this Agreement; provided
that Parent and Merger Subsidiary may waive any of the conditions to the Offer
(other than the Minimum Condition, which may not be waived without the prior
written consent of the Company) and may make changes in the terms and conditions
of the Offer except that, without the prior written consent of the Company, no
change may be made to the form of consideration to be paid, no decrease in the
Offer Price or the number of Shares sought in the Offer may be made, no change
which imposes additional conditions to the Offer or modifies any of the
conditions set forth in Annex A in any manner adverse to the holders of the
Shares may be made and neither Parent nor Merger Subsidiary may extend the
Offer, except in accordance with Section 2.01(c).

 

(b)                                 On the date of commencement of the Offer,
Parent and Merger Subsidiary shall file with the SEC a Tender Offer Statement on
Schedule TO (as amended and supplemented from time to time, the “Schedule TO”),
which shall comply in all material respects with the provisions of applicable
federal securities Laws, and shall contain the offer to purchase relating to the
Offer and forms of the related letter of transmittal and other appropriate
documents (which documents, as amended or supplemented from time to time, are
referred to herein collectively as the “Offer Documents”).  The Parent and the
Merger Subsidiary further agree to disseminate the Offer Documents to holders of
Shares as and to the extent required by applicable federal securities Laws.  In
conducting the

 

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Offer, the Parent and the Merger Subsidiary shall comply in all material
respects with the provisions of the Exchange Act and any other applicable Laws
necessary to be complied with in connection with the Offer.  The Company shall
promptly furnish to Parent and Merger Subsidiary all information concerning the
Company and its Subsidiaries and the Company’s stockholders that may be required
or reasonably requested in connection with any action contemplated by this
Section 2.01.  The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Offer Documents prior to their filing
with the SEC.  Parent and Merger Subsidiary agree to provide the Company, and to
consult with the Company and its counsel regarding, any comments that may be
received from the SEC or its staff (whether written or oral) with respect to the
Offer Documents promptly after receipt thereof and any responses thereto.  Each
of Parent, Merger Subsidiary and the Company agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect, and
Parent and Merger Subsidiary further agree to take all steps necessary to cause
the Offer Documents as so corrected to be filed with the SEC and be disseminated
to holders of Shares, in each case, as and to the extent required by Law.

 

(c)                                  The initial scheduled expiration date of
the Offer shall be 20 Business Days after the date of its commencement. 
Notwithstanding the foregoing, Parent and Merger Subsidiary shall have the right
to extend the Offer (i) from time to time if, at any scheduled or extended
expiration date of the Offer, any of the conditions to the Offer set forth in
Annex A shall not have been satisfied or waived; provided that if any of the
conditions to the Offer are not satisfied or waived on any scheduled or extended
expiration date of the Offer, Parent and Merger Subsidiary shall extend the
Offer, if such condition or conditions could reasonably be expected to be
satisfied prior to ten Business Days following the initial scheduled expiration
date of the Offer; provided further that if the conditions set forth in clauses
(x) or (y) of the first sentence of Annex A hereto are not satisfied or waived
or the condition set forth in clause (z) of Annex A hereto is not satisfied or
waived as a result of the occurrence of any of the events described in
subparagraph (b) thereon on any scheduled expiration date of the Offer, Parent
and Merger Subsidiary shall extend the Offer at the written request of the
Company if such conditions or condition could reasonably be expected to be
satisfied on or before July 31, 2004, (ii) for any period required by any rule,
regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer or any period required by applicable Law, (iii) on one
or more occasions (all such occasions aggregating not more than 20 Business
Days) beyond the latest expiration that would otherwise be permitted under
clause (i) or (ii) of this sentence, if, on such expiration date, the number of
Shares tendered (and not withdrawn) pursuant to the Offer, together with Shares
then owned by Parent, represents more than 50% but less than 90% of the
outstanding Shares on a fully diluted basis; provided, however, that Parent’s
decision to extend the Offer in the case of this clause (iii) shall constitute a
waiver of the conditions set forth in clauses (c) and (e) (excluding any wilful
or intentional breach of any material obligation of the Company) on Annex A and
of its right to terminate the Agreement under Sections 8.01(b), (d) (unless
there has been a wilful or intentional breach of any material obligation by the
Company), (i) or (j), (iv) on up to two occasions (for a period not to exceed
ten Business Days on each occasion) if an Adverse Market Change shall have
occurred and be continuing on the

 

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initial or any extended expiration date of the Offer, and (v) for one or more
subsequent offering periods of up to an additional 20 Business Days in the
aggregate (collectively, the “Subsequent Period”) pursuant to Rule 14d-11 of the
Exchange Act.

 

(d)                                 Subject to the terms and conditions of the
Offer and this Agreement, Merger Subsidiary shall, and Parent shall cause Merger
Subsidiary to, accept for payment and pay for Shares validly tendered and not
withdrawn pursuant to the Offer as soon as possible after the expiration
thereof; provided that Merger Subsidiary shall immediately accept and promptly
pay for all Shares as they are tendered during any Subsequent Period.  Parent
shall provide or cause to be provided to Merger Subsidiary on a timely basis the
funds necessary to purchase any Shares that Merger Subsidiary becomes obligated
to purchase pursuant to the Offer.

 

(e)                                  The Offer Price may be increased by the
Parent without the consent of the Company, in which case the Offer shall be
extended, without the consent of the Company, as required by applicable Law.

 

Section 2.02                                Company Actions.

 

(a)                                  The Company hereby approves of and consents
to the Offer and represents and warrants that the Board of Directors of the
Company, at a meeting duly called and held, has unanimously (i) determined that
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, are advisable, and in the best interests of, the Company and its
stockholders, (ii) adopted resolutions approving and declaring advisable this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, (iii) resolved to recommend that the stockholders of the Company accept
the Offer, tender their Shares and, if required by applicable Law, adopt and
approve this Agreement and the transactions contemplated hereby, including the
Merger, provided that such recommendation may be withdrawn, modified or amended
in accordance with the provisions of Section 6.03, (iv) acknowledged that such
approval is effective for purposes of Section 203 of the DGCL, (v) resolved to
elect, to the extent permitted by Law, not to be subject to any “moratorium,”
“control share acquisition,” “business combination,” “fair price” or other form
of anti-takeover Laws and regulations of any jurisdiction that may purport to be
applicable to this Agreement or the Stockholder Agreements, (vi) taken all
necessary steps to render Section 203 of the DGCL inapplicable to the Merger,
Parent, Merger Subsidiary, the acquisition of Shares pursuant to the Offer and
the transactions contemplated by the Stockholder Agreements and (vii) consented
to the transactions contemplated by the Stockholder Agreements and this
Agreement under that certain Stockholders Agreement, dated May 26, 2000, among
the Company and certain of its stockholders.  The Company further represents
that the Company’s financial advisor, Petrie Parkman, has delivered to the Board
of Directors of the Company an opinion to the effect that, as of the date of
such opinion, the consideration to be received by the holders of Shares (other
than Parent and Merger Subsidiary) in the Offer and the Merger is fair to such
holders from a financial point of view.  The Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Board of Directors
of the Company described in the first sentence of this Section 2.02(a), subject
to the Company’s rights to withdraw, modify or amend its

 

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recommendation in accordance with the provisions of Section 6.03 and represents
that it has obtained all necessary consents to permit the inclusion of the
fairness opinion of Petrie Parkman in the Schedule 14D-9 and the Proxy Statement
so long as such inclusion is in form and substance reasonably satisfactory to
Petrie Parkman and its counsel.  The Company hereby represents and warrants that
it has been advised that each of its directors and executive officers intends to
tender pursuant to the Offer any and all Shares they own beneficially or of
record.

 

(b)                                 The Company shall file with the SEC on the
date of commencement of the Offer a Solicitation/Recommendation Statement on
Schedule 14D-9 (as amended and supplemented from time to time, the
“Schedule 14D-9”) that shall reflect, subject to the provisions of Section 6.03,
the recommendation of the Company’s Board of Directors referred to above, and
shall disseminate the Schedule 14D-9 to stockholders of the Company as required
by Rule 14D-9 promulgated under the Exchange Act.  To the extent practicable,
the Company shall cooperate with Parent and Merger Subsidiary in mailing or
otherwise disseminating the Schedule 14D-9 with the appropriate Offer Documents
to the Company’s stockholders.  The Schedule 14D-9 shall comply in all material
respects with the provisions of applicable federal securities Laws.  The Company
shall deliver copies of the proposed form of the Schedule 14D-9 to Parent within
a reasonable time prior to the filing thereof with the SEC for review and
comment by Parent and its counsel (who shall provide any comments thereon as
soon as practicable).  The Company agrees to provide Parent copies of, and to
consult with Parent and its counsel regarding any comments that may be received
from the SEC or its staff (whether written or oral) with respect to the
Schedule 14D-9 promptly after receipt thereof and any responses thereto.  Each
of the Company, the Parent and Merger Subsidiary shall promptly correct any
information provided by it for use in the Schedule 14D-9 that shall become false
or misleading in any material respect, and the Company shall take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to the stockholders of the Company as and to the extent
required by applicable Law.

 

(c)                                  In connection with the Offer, the Company
shall promptly furnish Parent with (or cause Parent to be furnished with)
mailing labels, security position listings and any available listing or computer
file containing the names and addresses of the record holders of the Shares as
of a recent date, and shall furnish Parent with such information and assistance
as Parent or its agents may reasonably request in communicating the Offer to the
stockholders of the Company.  Subject to the requirements of applicable Law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Merger, Parent and Merger
Subsidiary shall, and shall cause each of their Affiliates to, hold in
confidence the information contained in any of such labels, listings and files,
use such information only in connection with the Offer and the Merger, and, if
this Agreement is terminated, deliver to the Company all copies of such
information or extracts therefrom then in their possession or under their
control.

 

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Section 2.03                                Board Representation.

 

(a)                                  Subject to applicable Law and to the extent
permitted by the NYSE, promptly upon the acceptance for payment of any Shares
pursuant to the Offer, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, to serve on the Board of
Directors of the Company as will give Merger Subsidiary representation on the
Board of Directors of the Company equal to the product of (i) the total number
of directors on the Board of Directors (giving effect to the election of any
additional directors pursuant to this Section) and (ii) the percentage that the
number of Shares beneficially owned by Parent and/or Merger Subsidiary
(including Shares accepted for payment) bears to the number of Shares
outstanding.  The Company shall take all actions necessary to cause Parent’s
designees to be elected or appointed to the Company’s Board of Directors,
including increasing the size of the Board of Directors and/or securing the
resignations of incumbent directors (including, if necessary, to ensure that a
sufficient number of independent directors are serving on the Board of Directors
of the Company in order to satisfy the NYSE listing requirements).  Unless
waived in writing by Parent, the Company shall, prior to the expiration of the
Offer, deliver to Parent such resignations of directors conditioned upon
acceptance of Shares for payment and evidence of the valid election of Parent’s
designees to the Company’s Board of Directors conditioned upon acceptance of
Shares for payment so as to effect the provisions of this Section 2.03(a). 
Subject to applicable Law, the Company shall cause individuals designated by
Parent to constitute the same percentage as is on the entire Board of Directors
of the Company (after giving effect to this Section 2.03(a)) to be on (i) each
committee of the Board of Directors of the Company and (ii) each Board of
Directors and each committee thereof of each Subsidiary of the Company.  The
Company’s obligations to appoint designees to its Board of Directors shall be
subject to compliance with Section 14(f) of the Exchange Act.  At the request of
Parent, the Company shall promptly take, at its expense, all actions required
pursuant to Section 14(f) and Rule 14f-1 under the Exchange Act in order to
fulfil its obligations under this Section 2.03(a) and shall include in the
Schedule 14D-9 or otherwise timely mail to its stockholders all necessary
information to comply therewith.  Parent will supply to the Company, and be
solely responsible for, all information with respect to itself and its officers,
directors and Affiliates required by Section 14(f) and Rule 14f-1 under the
Exchange Act.

 

(b)                                 Notwithstanding the provisions of
Section 2.03(a), following the election or appointment of Parent’s designees
pursuant to Section 2.03(a) and until the Effective Time, the Company shall use
its commercially reasonable efforts to cause its Board of Directors to have at
least two directors who are directors on the date hereof and who are not
Affiliates, stockholders or employees of Parent or any of its Subsidiaries (the
“Independent Directors”); provided that if any Independent Directors cease to be
directors for any reason whatsoever, the remaining Independent Directors (or
Independent Director, if there is only one remaining) shall be entitled to
designate any other Person(s) who shall not be an Affiliate, stockholder or
employee of Parent or any of its Subsidiaries to fill such vacancies and such
Person(s) shall be deemed to be Independent Director(s) for purposes of this
Agreement; provided that the remaining Independent Directors shall fill such
vacancies as soon as practicable, but in any event

 

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within ten Business Days, and further provided that if no such Independent
Director is appointed in such time period, Parent shall designate such
Independent Director(s), provided further that if no Independent Director then
remains, the other directors shall designate two Persons who shall not be
Affiliates, stockholders or employees of Parent or any of its Subsidiaries to
fill such vacancies and such Persons shall be deemed to be Independent Directors
for purposes of this Agreement.   In all cases, the selection of any Independent
Directors who are not directors on the date hereof shall be subject to the
approval of Parent, not to be unreasonably withheld or delayed.

 

(c)                                  Following the election or appointment of
Parent’s designees pursuant to Section 2.03(a) and until the Effective Time, the
approval of a majority of the Independent Directors shall be required to
authorize (and such authorization shall constitute the authorization of the
Board of Directors and no other action on the part of the Company, including any
action by any other director of the Company, shall be required to authorize) any
termination of this Agreement by the Company, any amendment of this Agreement
requiring action by the Board of Directors, any extension of time for
performance of any obligation or action hereunder by Parent or Merger Subsidiary
and any enforcement of or any waiver of compliance with any of the agreements or
conditions contained herein for the benefit of the Company, any action to seek
to enforce any obligations of Parent or Merger Subsidiary under this Agreement
or any other action by the Company’s Board of Directors under or in connection
with this Agreement.  The Independent Directors shall have full power solely
with respect to the matters set forth in the previous sentence to be approved by
the Independent Directors and in connection herewith the Independent Directors
shall be authorized, on behalf of and at the expense of the Company, to retain
one law firm and other advisors.

 

ARTICLE III
MERGER; CONVERSION OF SECURITIES

 

Section 3.01                                The Merger.

 

(a)                                  Upon the terms and subject to the
conditions hereof, and in accordance with the provisions of the DGCL, Merger
Subsidiary shall be merged with and into the Company at the Effective Time. 
Following the Merger, the Company shall continue as the surviving corporation
(the “Surviving Corporation”) and shall continue its corporate existence under
the Laws of the State of Delaware, and the separate corporate existence of
Merger Subsidiary shall cease.

 

(b)                                 Subject to the provisions of this Agreement,
as soon as practicable following the satisfaction or waiver (by the parties) of
the conditions set forth in Article VII, the parties to this Agreement shall
cause the Merger to be consummated by filing with the Secretary of State of the
State of Delaware (the “Delaware Secretary of State”) a certificate of merger or
other appropriate document (the “Certificate of Merger”) in such form as is
required by and executed in accordance with the DGCL.  The Merger shall become
effective when the Certificate of Merger has been filed with the Delaware
Secretary of State or at such later time as shall be agreed upon by Parent and
the Company and specified in the Certificate of Merger (the “Effective Time”).

 

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(c)                                  Notwithstanding anything herein to the
contrary, in the event that Merger Subsidiary shall acquire at least 90% of the
outstanding Shares, following the satisfaction or waiver (by the parties) of the
conditions set forth in Article VII Parent and the Company hereby agree to take
all necessary and appropriate action to cause the Merger to become effective,
without a meeting of the holders of Shares, in accordance with Section 253 of
the DGCL as promptly as practicable.

 

(d)                                 The Merger shall have the effects specified
under the DGCL.  As of the Effective Time, the Company shall be a direct wholly
owned subsidiary of Parent.

 

Section 3.02                                Certificate of Incorporation.

 

The Certificate of Incorporation of the Company in effect immediately prior to
the Effective Time shall be, from and after the Effective Time, the Certificate
of Incorporation of the Surviving Corporation (the “Surviving Charter”), until
amended as provided in the Surviving Charter or by applicable Law.

 

Section 3.03                                Bylaws.

 

The Company shall take all requisite action so that the Bylaws of Merger
Subsidiary in effect immediately prior to the Effective Time shall be, from and
after the Effective Time, the Bylaws of the Surviving Corporation (the
“Surviving Bylaws”), until amended in accordance with the Surviving Charter, the
Surviving Bylaws or by applicable Law.

 

Section 3.04                                Directors and Officers.

 

(a)                                  The Company shall take all requisite action
so that the directors of Merger Subsidiary immediately prior to the Effective
Time shall be, from and after the Effective Time, the directors of the Surviving
Corporation until their successors are duly elected and qualified or until their
earlier death, resignation or removal in accordance with the Surviving Charter,
the Surviving Bylaws and the DGCL.

 

(b)                                 The officers of the Company immediately
prior to the Effective Time shall be, from and after the Effective Time, the
officers of the Surviving Corporation until their successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Charter, the Surviving Bylaws and the DGCL.

 

Section 3.05                                Additional Actions.

 

If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or assurances in Law
or any other acts are necessary or desirable to (a) vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of the Company or (b)
otherwise carry out the provisions of this Agreement, the Company and its
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
deeds, assignments or assurances in Law and to take all acts necessary, proper
or desirable to vest, perfect or confirm title to and possession of such

 

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rights, properties or assets in the Surviving Corporation and otherwise to carry
out the provisions of this Agreement, and the officers and directors of the
Surviving Corporation are authorized in the name of the Company or otherwise to
take any and all such action.

 

Section 3.06                                Conversion of Shares.

 

At the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Merger Subsidiary, the Company or the holders of any of the
following securities:

 

(a)                                  each Share held immediately prior to the
Effective Time by the Company or any wholly-owned Subsidiary of the Company and
each issued and outstanding Share owned by Parent, Merger Subsidiary or any
other Subsidiary of Parent shall be cancelled automatically and retired and
shall cease to exist, and no payment or consideration shall be made with respect
thereto;

 

(b)                                 each issued and outstanding Share other than
(i) Shares referred to in Section 3.06(a) and (ii) Dissenting Shares, shall be
converted into the right to receive an amount in cash, without interest, equal
to the Offer Price (the “Merger Consideration”).  At the Effective Time, all
such Shares shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares immediately prior to the Effective Time shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration, without interest; and

 

(c)                                  each share of capital stock of Merger
Subsidiary issued and outstanding immediately prior to the Effective Time shall
be converted into 17,000 fully paid and nonassessable shares of common stock,
par value $.01 per share, of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.

 

Section 3.07                                Surrender and Payment.

 

(a)                                  Prior to the Effective Time, Parent shall
appoint a bank or trust company to act as disbursing agent (the “Disbursing
Agent”) for the payment of Merger Consideration upon surrender of certificates
representing the Shares.  Parent will enter into a disbursing agent agreement
with the Disbursing Agent, and at such times, and from time to time, as the
Disbursing Agent requires funds to make the payments pursuant to
Section 3.06(b), Parent shall deposit or cause to be deposited with the
Disbursing Agent cash in an aggregate amount necessary to make the payments
pursuant to Section 3.06(b) to holders of Shares (such amounts being hereinafter
referred to as the “Exchange Fund”).  The Disbursing Agent shall invest the
Exchange Fund as directed by Parent; provided that such investments shall be (i)
direct obligations of the United States of America, (ii) obligations for which
the full faith and credit of the United States of America is pledged to provide
for the payment of principal and interest, or (iii) commercial paper rated the
highest quality by either Moody’s Investors Services, Inc. or Standard & Poor’s
Corporation; provided further that no loss thereon or thereof shall affect the
amounts payable to holders of Shares pursuant to Section 3.06(b).  Any interest

 

9

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and other income resulting from such investment shall become a part of the
Exchange Fund, and any amounts in excess of the amounts payable under
Section 3.06(b) shall be promptly paid to Parent.

 

(b)                                 Merger Subsidiary shall instruct the
Disbursing Agent to mail promptly after the Effective Time, but in no event
later than the fifth Business Day thereafter, to each person who was a record
holder as of the Effective Time of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Shares (the
“Certificates”), and whose Shares were converted into the right to receive
Merger Consideration pursuant to Section 3.06(b), a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Disbursing Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration.  Upon surrender of a Certificate to the Disbursing Agent for
cancellation, together with such letter of transmittal duly executed and such
other documents as may be reasonably required by the Disbursing Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration payable in respect of that Certificate, less any required
withholding of Taxes, and such Certificate shall forthwith be cancelled.  No
interest will be paid or accrued on the cash payable upon the surrender of the
Certificates.

 

(c)                                  If payment is to be made to a person other
than the person in whose name the Certificate surrendered is registered, it
shall be a condition of payment that the Certificate so surrendered be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such payment pay any transfer or other taxes required by reason of
the payment to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable.

 

(d)                                 Until surrendered in accordance with the
provisions of this Section 3.07, each Certificate (other than Certificates
representing Shares owned by Parent, Merger Subsidiary or any other subsidiary
of Parent, Shares held by the Company and Dissenting Shares) shall represent for
all purposes, from and after the Effective Time, only the right to receive the
applicable Merger Consideration.

 

(e)                                  At and after the Effective Time, there
shall be no registration of transfers of Shares which were outstanding
immediately prior to the Effective Time on the stock transfer books of the
Surviving Corporation.  From and after the Effective Time, the holders of Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares except as otherwise provided in this
Agreement or by applicable Law.  The Merger Consideration paid upon the
surrender of Certificates in accordance with the terms of this Article III shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
Shares previously represented by such Certificates.  If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
such Certificates shall represent the right to receive the Merger Consideration
as provided in this Article III.  At the close of business on the day of the
Effective Time the stock ledger of the Company shall be closed.

 

10

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(f)                                    Any portion of the Merger Consideration
made available to the Disbursing Agent to pay for Shares for which appraisal
rights have been perfected shall be returned to Parent upon demand.  At any time
more than twelve months after the Effective Time, the Disbursing Agent shall
upon demand of Parent deliver to it any funds which had been made available to
the Disbursing Agent and not disbursed in exchange for Certificates (including
all interest and other income received by the Disbursing Agent in respect of all
such funds).  Thereafter, holders of Certificates shall look only to the
Surviving Corporation (subject to the terms of this Agreement, abandoned
property, escheat and other similar Laws) as general creditors thereof with
respect to any Merger Consideration that may be payable, without interest, upon
due surrender of the Certificates held by them.  Any amounts remaining unclaimed
immediately prior to such time when such amounts would otherwise escheat or
become the property of any governmental unit or agency, shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.  Notwithstanding the foregoing, none of Parent, Merger Subsidiary, the
Company, the Surviving Corporation or the Disbursing Agent shall be liable to
any holder of a Certificate for any Merger Consideration delivered in respect of
such Certificate of Shares to a public official pursuant to any abandoned
property, escheat or other similar Law.

 

Section 3.08                                Company Stock Options and Company
Warrants.

 

(a)                                  The Company represents and warrants that
each option to acquire Shares granted under any Company Stock Plan or any other
agreement (each, a “Company Stock Option”) automatically becomes fully vested
and exercisable upon consummation of the Offer (the “Trigger Event”) pursuant to
the terms of the Company Stock Plans without any action on the part of the
Company, Parent, Merger Subsidiary or the holder of any such Company Stock
Option.  At the Effective Time, each Company Stock Option outstanding
immediately prior to the Effective Time, without any action on the part of the
Company, Parent, Merger Subsidiary or the holder of any such Company Stock
Option, shall be converted into the right to receive an amount in cash, without
interest, equal to (a) the Option Consideration multiplied by (b) the aggregate
number of Shares into which the applicable Company Stock Option was exercisable
immediately prior to the Effective Time.  Any payment made pursuant to this
Section 3.08(a) to the holder of any Company Stock Option shall be reduced by
any income or employment Tax withholding required under (i) the Code, (ii) any
applicable state, local or foreign Tax Laws or (iii) any other applicable Laws. 
To the extent that any amounts are so withheld, those amounts shall be treated
as having been paid to the holder of that Company Stock Option for all purposes
under this Agreement. The Company shall make the payments in respect of the
Company Stock Options as promptly as practicable following the cancellation of
such Company Stock Options as contemplated by this Section 3.08(a) by checks
payable to the holders of such Company Stock Options unless the aggregate amount
payable to a particular individual exceeds $500,000, in which event payment
shall be made by wire transfer of immediate available funds upon receipt by the
Company of written payment instructions from the relevant option holder. Upon
written notice from the Company, Parent shall cause Merger Subsidiary to pay to
the Company an amount in cash sufficient to fund the Company’s payment
obligation under this Section 3.08(a) as such amounts are paid (such

 

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amount to be set forth in such written notice).  The Company shall take all
requisite action so that, immediately following such payment, each Company Stock
Option shall be cancelled and all Company Stock Plans shall be terminated.  The
Company shall not grant any additional stock options or other stock-based
compensation under the Company Stock Plans or otherwise from and after the date
hereof.

 

(b)                                 Prior to the Effective Time, the Board of
Directors of the Company, or an appropriate committee of non-employee directors
of Parent, shall adopt a resolution consistent with the interpretive guidance of
the SEC so that the disposition by any officer or director of the Company who is
a covered person of the Company (if any) for purposes of Section 16 under the
Exchange Act (“Section 16”) of Shares or Company Stock Options pursuant to this
Agreement and the Merger shall be an exempt transaction for purposes of
Section 16.

 

(c)                                  At the Effective Time, each Company Warrant
outstanding immediately prior to the Effective Time, without any action on the
part of the Company, Parent, Merger Subsidiary or the holder of any such Company
Warrant, shall be converted into the right to receive an amount in cash, without
interest, equal to (a) the Warrant Consideration multiplied by (b) the aggregate
number of Shares into which the applicable Company Warrant was exercisable
immediately prior to the Effective Time.  Any payment made pursuant to this
Section 3.08(c) to the holder of any Company Warrant shall be reduced by any
income Tax withholding required under (i) the Code, (ii) any applicable state,
local or foreign Tax Laws or (iii) any other applicable Laws.  To the extent
that any amounts are so withheld, those amounts shall be treated as having been
paid to the holder of that Company Warrant for all purposes under this
Agreement. The Company shall make the payments in respect of the Company
Warrants as promptly as practicable following the cancellation of such Company
Warrants as contemplated by this Section 3.08(c) by wire transfer of immediate
available funds upon receipt by the Company of written payment instructions from
the relevant warrant holder and the surrender of such Company Warrant duly
endorsed to the Company. Upon written notice from the Company, Parent shall
cause Merger Subsidiary to pay to the Company an amount in cash sufficient to
fund the Company’s payment obligation under this Section 3.08(c) as such amounts
are paid (such amount to be set forth in such written notice).  The Company
shall take all requisite action so that, immediately following such payment,
each Company Warrant shall be cancelled and all related agreements shall be
terminated.  The Company shall not grant any additional warrants, options or
similar rights from and after the date hereof.

 

Section 3.09                                Dissenting Shares.

 

(a)                                  Notwithstanding anything in this Agreement
to the contrary, Shares that are held by any record holder who has not voted in
favor of the Merger or consented thereto in writing and who has demanded
appraisal rights in accordance with Section 262 of the DGCL (the “Dissenting
Shares”) shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due in respect of such Dissenting Shares pursuant to the DGCL;
provided, however, that any holder of Dissenting Shares who shall have failed to
perfect

 

12

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or shall have withdrawn or lost his rights to appraisal of such Dissenting
Shares, in each case under the DGCL, shall forfeit the right to appraisal of
such Dissenting Shares, and such Dissenting Shares shall be deemed to have been
converted into the right to receive, as of the Effective Time, the Merger
Consideration without interest.  Notwithstanding anything to the contrary
contained in this Section 3.09, if the Merger is rescinded or abandoned, then
the right of any stockholder to be paid the fair value of such stockholder’s
Dissenting Shares shall cease.  The Surviving Corporation shall comply with all
of its obligations under the DGCL with respect to holders of Dissenting Shares.

 

(b)                                 The Company shall give Parent (i) prompt
written notice of any demands for appraisal, any withdrawals of such demands
received by the Company and any other related instruments served pursuant to the
DGCL and received by the Company, and (ii) the opportunity to direct and
participate in all negotiations and proceedings with respect to demands for
appraisal under the DGCL.  The Company shall not, except with the prior written
consent of Parent, make any payment with respect to any demands for appraisal or
negotiate, offer to settle or settle any such demands.

 

Section 3.10                                Adjustments.

 

If during the period between the date of this Agreement and the Effective Time,
any change in the outstanding Shares shall occur, including by reason of any
reclassification, recapitalization, stock dividend, stock split or combination,
exchange or readjustment of Shares, or any stock dividend thereon with a record
date during such period, the Offer Price, the Merger Consideration and any other
amounts payable pursuant to this Agreement, as the case may be, shall be
appropriately adjusted.

 

Section 3.11                                Withholding Rights.

 

Each of the Surviving Corporation and Parent shall be entitled to deduct and
withhold, or cause the Disbursing Agent to deduct and withhold, from the
consideration otherwise payable to any Person pursuant to this Article such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign tax Law. 
If the Surviving Corporation or Parent, as the case may be, so withholds
amounts, such amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which the Surviving
Corporation or Parent, as the case may be, made such deduction and withholding.

 

Section 3.12                                Lost Certificates.

 

If any Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such Person of a bond, in such reasonable amount as the Surviving Corporation
may direct, as indemnity against any claim that may be made against it with
respect to such Certificate, the Disbursing Agent will pay, in exchange for such
affidavit claiming such Certificate is lost, stolen or destroyed, the Merger
Consideration to be paid in respect of the Shares represented by such
Certificate, as contemplated by this Article.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to the Parent Companies that:

 

Section 4.01                                Organization and Qualification; 
Subsidiaries.

 

The Company is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware.  Each Subsidiary of the
Company is a legal entity duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation or organization, and the
Company and each Subsidiary of the Company has all requisite corporate or
similar power and authority to own, lease and operate its properties and to
carry on its businesses as they are now being conducted and is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than any exceptions that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 4.01 of the Company’s Disclosure Letter sets forth, as of the date
hereof, a true and complete list of all the Company’s directly or indirectly
owned Subsidiaries, together with (A) the nature of legal organization of such
Subsidiary, (B) the jurisdiction of incorporation or organization of such
Subsidiary and (C) the percentage of such Subsidiary’s Equity Securities owned
by the Company or another of its Subsidiaries.

 

Section 4.02                                Certificate of Incorporation and
Bylaws.

 

The Company has heretofore provided or made available to the Parent complete and
correct copies of its Certificate of Incorporation and Bylaws and the governing
documents of each of its Subsidiaries (other than inactive, non-operating
limited liability entities with no significant assets or liabilities identified
in Section 4.01 of the Company’s Disclosure Letter), in each case as amended or
restated to the date hereof. The Company is not in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.

 

Section 4.03                                Capitalization.

 

(a)                                  The authorized capital stock of the Company
consists of (i) 30,000,000 Shares, of which as of May 20, 2004, (A) 15,471,007
shares were issued and outstanding and (B) 176,204 shares were issued and held
in the treasury of the Company and (ii) 1,300,000 shares of Company Preferred
Stock, of which on the date hereof none are issued and outstanding.  Since May
20, 2004, no Equity Securities of the Company have been issued by the Company,
except Shares issued upon exercise of outstanding Company Stock Options.

 

(b)                                 As of May 20, 2004, there were (i)
outstanding Company Stock Options permitting the holders thereof to purchase
540,750 Shares and (ii) 666,150 Shares reserved in respect of the Company Stock
Plans.  No Company Stock Options have been granted on or after May 20, 2004. 
Except as set forth in Section 4.03(b) of the Company’s Disclosure Letter, each
of the outstanding Equity Securities of the Company is, and each such Equity
Security issuable upon the exercise of Company Stock Options will be, when
issued, duly authorized, validly issued, fully paid and nonassessable, and

 

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has not been, or will not be, issued in violation of (nor are any of the
authorized Equity Securities of the Company subject to) any pre-emptive or
similar rights.  Except as set forth in Section 4.03(a) above or in
Section 4.03(b) of the Company’s Disclosure Letter, no Equity Securities of the
Company are reserved for issuance.  Except as set forth in Section 4.03(b) of
the Company’s Disclosure Letter, there are no (i) outstanding securities,
options or warrants, agreements or commitments of any character to which the
Company or any of its Subsidiaries is a party relating to the Equity Securities
of the Company or any of its Subsidiaries or obligating the Company or any of
its Subsidiaries to grant, issue, deliver or sell, or cause to be granted,
issued, delivered or sold, any Equity Securities of the Company or any of its
Subsidiaries or (ii) stock appreciation rights or similar derivative securities
or rights of the Company or any of its Subsidiaries or any obligations by the
Company or any of its Subsidiaries to make any payments based on the price or
value of any Equity Securities of the Company or any of its Subsidiaries. 
Except as set forth in Section 4.03(b) of the Company’s Disclosure Letter, there
are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Equity Securities of
the Company or any of its Subsidiaries.  Except as described in Section 4.03(b)
of the Company’s Disclosure Letter, none of the Company nor any of its
Subsidiaries directly or indirectly owns, has agreed to purchase or otherwise
acquire or holds any interest convertible into or exchangeable or exercisable
for, any Equity Securities of any Person (other than the Subsidiaries of the
Company).

 

(c)                                  Except as set forth in Section 4.03(c) of
the Company’s Disclosure Letter, all the issued and outstanding shares of Equity
Securities of each Subsidiary of the Company (other than any inactive,
non-operating limited liability entity with no significant assets or liabilities
identified in Section 4.01 of the Company’s Disclosure Letter), (i) have been
duly authorized and are validly issued, and, with respect to capital stock, are
fully paid and nonassessable, and were not issued in violation of any
pre-emptive or similar rights and (ii) are owned by the Company or one of its
Subsidiaries free and clear of all Liens.

 

(d)                                 Except as set forth in Section 4.03(d) of
the Company’s Disclosure Letter, there are no voting trusts, proxies or other
agreements, commitments or understandings of any character to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound with respect to the voting of any Equity Securities of the
Company or any of its Subsidiaries.

 

(e)                                  Except for Company Stock Options and the
Company Warrants, neither the Company nor any of its Subsidiaries has any
outstanding bonds, debentures, notes or other obligations the holder of which
has the right to vote or which are convertible into, or exchangeable for,
securities having the right to vote with the stockholders of the Company on any
matter.

 

Section 4.04                                Authorization of Agreement; Board
Recommendation; Required Vote.

 

(a)                                  The Company has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and, subject to any

 

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required approval of this Agreement and the Merger by the Required Company Vote,
to consummate the transactions contemplated hereby.  The execution and delivery
of this Agreement by the Company and consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than, with respect
to the Merger, the approval of this Agreement and the Merger by the Required
Company Vote if required).  This Agreement has been duly executed and delivered
by the Company and (assuming due authorization, execution and delivery hereof by
the other parties hereto) constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms except
as enforcement may be limited by applicable bankruptcy, insolvency or other Laws
affecting creditor’s rights generally or by legal principles of general
applicability governing the availability of equitable remedies.

 

(b)                                 The Board of Directors of the Company, at a
meeting duly called and held on May 21, 2004, has by unanimous approval of all
directors determined that this Agreement, the Offer and the Merger are advisable
and in the best interest of the Company’s stockholders and resolved to recommend
that the holders of Shares accept the Offer, tender their Shares and, if
required by applicable Law, approve this Agreement and the Merger.  If required
by applicable Law, the affirmative vote of the holders of at least a majority of
the issued and outstanding Shares to approve this Agreement and the Merger (the
“Required Company Vote”) is the only vote of holders of Shares or other
securities (equity or otherwise) of the Company necessary to consummate the
Merger.

 

Section 4.05                                Approvals.

 

The execution and delivery of this Agreement does not, and consummation of the
transactions contemplated hereby will not, require the Company or any of its
Subsidiaries to obtain any Authorization or other approval of or from, or to
make any filing with or notification to, any Governmental Authority or third
Person, except (a) for the applicable requirements, if any, of the Exchange Act,
the Competition Act, the Investment Canada Act, state securities or “blue sky”
Laws, and the filing and recordation of the Certificate of Merger as required by
the DGCL, (b) as set forth in Section 4.05 of the Company’s Disclosure Letter,
(c) if required by applicable Law approval of this Agreement and the Merger by
the Required Company Vote, and (d) consents, authorizations, permits, actions
by, filings or notifications that are customarily obtained or made following the
transfer of interests in oil and gas properties and (v) such other consents,
approvals, authorizations, permits, actions, filings or notifications, the
failure of which to be made or obtained, individually or in the aggregate, would
not be expected to have a material effect on the ongoing value, business or
operations of the Company and its Subsidiaries, taken as a whole.  The Company’s
Board of Directors has determined that the total fair market value of the
reserves of oil, natural gas, shale or tar sands, or rights to reserves of oil,
natural gas, shale or tar sands together with associated exploration or
production

 

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assets of the Company and its Subsidiaries does not exceed $500 million and the
fair market value of all of the assets of the Company and its Subsidiaries other
than their reserves of oil, natural gas, shale or tar sands, or rights to
reserves of oil, natural gas, shale or tar sands and associated exploration or
production assets does not exceed $50 million (with such determinations made in
accordance with Section 802.3 promulgated under the HSR Act).

 

Section 4.06                                No Violation.

 

Assuming that the Authorizations, filings and notifications described in
Section 4.05 have been obtained or made, except as set forth in Section 4.06 of
the Company’s Disclosure Letter, the execution and delivery by the Company of
this Agreement does not and consummation of the transactions contemplated by
this Agreement will not (a) conflict with, result in any violation or breach of,
or cause a default (or an event that with notice, lapse of time or otherwise
would become a default) under, (i) any Law, Regulation or Order applicable to
the Company or any of its Subsidiaries, (ii) the Certificate of Incorporation or
Bylaws of the Company or (iii) the organizational documents of the Company’s
Subsidiaries or (b) conflict with, result in any violation or breach of, or
cause a default (or an event that with notice, lapse of time or otherwise would
become a default) under, or give to others any right of termination,
cancellation, amendment or acceleration of, or require a payment under, or
result in the loss of any benefit under, or in the creation of a Lien on any of
the properties or assets of the Company or any of its Subsidiaries pursuant to,
any note, bond, mortgage, indenture, deed of trust, lease, license, permit,
franchise, contract or agreement to which the Company or any of its Subsidiaries
is a party or by which it or any of its Subsidiaries or its or their respective
properties or assets is bound, except in the case of matters described in
clauses (a)(i) and (b) of this Section 4.06 that, individually or in the
aggregate, would not have a Company Material Adverse Effect.

 

Section 4.07                                Reports.

 

(a)                                  Since January  1, 2001, (i) the Company and
its Subsidiaries have timely filed all Company SEC Reports required to be filed
with the SEC.  The Company SEC Reports filed on or prior to the date of this
Agreement, giving effect to any amendments or supplements thereto filed prior to
the date hereof, (i) were prepared in all material respects in accordance with
the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley
Act, as the case may be and (ii) did not at the time they were filed (or if
amended or supplemented, at the date of such amendment of supplement), contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The Company SEC Reports filed after the date of this Agreement and
prior to the Effective Time, giving effect to any amendments or supplements
thereto, will be prepared in all material respects in accordance with the
requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act,
as the case may be, and (ii) will not at the time they are filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 

(b)                                 The Company’s Consolidated Financial
Statements and any consolidated financial statements of the Company (including
any related notes thereto) contained in any SEC Reports filed by the Company
with the SEC after the date of this Agreement and prior to the Effective Time
(i) have been or will be prepared in all material respects

 

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in accordance with the published Regulations of the SEC and GAAP applied on a
consistent basis throughout the periods involved (except (A) to the extent
required by changes in GAAP, (B) with respect to the Company’s Consolidated
Financial Statements, as may be indicated in the notes thereto and (C) in the
case of unaudited statements, as permitted by Form 10-Q under the Exchange Act)
and (ii) fairly present or will fairly present, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates thereof and the consolidated results of their operations and
cash flows for the periods indicated (subject, in the case of any unaudited
interim financial statements, to normal and recurring year-end adjustments).

 

(c)                                  Except for liabilities or obligations that
are adequately reflected, reserved for or disclosed in the Company’s
Consolidated Financial Statements and for liabilities or obligations incurred in
the ordinary course of business of the Company since March 31, 2004 that,
individually or in the aggregate, would not have a Company Material Adverse
Effect, there exist no liabilities or obligations of the Company and its
Subsidiaries, whether known or unknown, accrued, absolute, contingent or
threatened that, individually or in the aggregate, would have a Company Material
Adverse Effect.

 

(d)                                 The Company’s principal executive officer
and its principal financial officer have disclosed, based on their most recent
evaluation, to the Company’s auditors and the audit committee of the Company’s
Board of Directors (i) all significant deficiencies in the design or operation
of internal controls that could adversely affect the Company’s ability to
record, process, summarize and report financial data and have identified for the
Company’s auditors any material weaknesses in internal controls and (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company’s internal controls.  The Company has
established and maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15 under the Exchange Act); such disclosure controls and
procedures are designed to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the Company’s principal
executive officer and its principal financial officer by others within those
entities, particularly during the periods in which the periodic reports required
under the Exchange Act are being prepared; and, to the Knowledge of the Company,
such disclosure controls and procedures are effective in alerting in a timely
fashion the Company’s principal executive officer and its principal financial
officer to material information required to be included in the Company’s
periodic reports required under the Exchange Act.

 

(e)                                  Except as would not reasonably be expected
to result in a Company Material Adverse Effect, the Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance
that:  (i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for physical assets is compared with the existing physical assets
at reasonable intervals and appropriate actions are taken with respect to any
differences.

 

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(f)                                    Since January 1, 2001, neither the
Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any
director, officer, employee, auditor, accountant or representative of the
Company or any of its Subsidiaries has received or otherwise had or obtained
knowledge of any complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of the Company or any of its Subsidiaries or their respective
internal accounting controls, including any complaint, allegation, assertion or
claim that the Company or any of its Subsidiaries has engaged in questionable
accounting or auditing practices.  No attorney representing the Company or any
of its Subsidiaries, whether or not employed by the Company or any of its
Subsidiaries, has reported evidence of a violation of securities Laws, breach of
fiduciary duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Company’s Board of Directors or any
committee thereof or to any director or officer of the Company.

 

(g)                                 Except as disclosed in the Company’s Current
Year’s SEC Reports filed prior to the date of this Agreement, there are no
related party transactions or off-balance sheet structures or transactions with
respect to the Company or any of its Subsidiaries that would be required to be
reported or set forth in the SEC Reports.

 

(h)                                 Except as set forth in Section 4.07(h) of
the Company’s Disclosure Letter, since January 1, 2001 to the date of this
Agreement, none of the Company nor any of its Subsidiaries has received from the
SEC or any other Governmental Authority any written comments or questions with
respect to any of their SEC Reports (including the financial statements or
reserve estimates included therein) or any registration statement filed by any
of them with the SEC or any notice from the SEC or other Governmental Authority
that such SEC Reports (including the financial statements or reserve estimates
included therein) or registration statements are being reviewed or investigated,
and to the Knowledge of the Company, there is not, as of the date of this
Agreement, any investigation or review being conducted by the SEC or any other
Governmental Authority of any SEC Reports (including the financial statements or
reserve estimates included therein) or registration statements of the Company or
any of its Subsidiaries.

 

Section 4.08                                No Material Adverse Effect; Conduct.

 

(a)                                  Except as disclosed in the Company’s
Current Year’s SEC Reports filed prior to the date of this Agreement, since
December 31, 2003, there has not been any Company Material Adverse Effect.

 

(b)                                 Except as set forth in the Company’s Current
Year’s SEC Reports filed prior to the date of this Agreement or in
Section 4.08(b) of the Company’s Disclosure Letter, since December 31, 2003,
each of the Company and its Subsidiaries has operated its business only in the
usual and ordinary course consistent with past practices and neither the Company
nor any of its Subsidiaries has taken any action that would have been prohibited
had Section 6.02 been in effect at all times since December 31, 2003.

 

19

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Section 4.09                                Certain Business Practices.

 

To the Knowledge of the Company, since January 1, 2001, neither the Company or
any of its Subsidiaries nor any director, officer, employee or agent of the
Company or any of its Subsidiaries has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity or (b) made any unlawful payment to any government official
or employee or to any political party or campaign or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended.

 

Section 4.10                                Certain Obligations.

 

Except for those listed in Section 4.10 of the Company’s Disclosure Letter or
filed as an exhibit to the Company’s SEC Reports filed prior to the date hereof,
as of the date hereof, there are no Material Contracts.  The Company has
provided to Parent a true and correct copy of each Material Contract listed in
Section 4.10 of the Company’s Disclosure Letter.  Except as set forth in
Section 4.10 of the Company’s Disclosure Letter, with respect to each Material
Contract to which the Company or any of its Subsidiaries is a party, (i) such
Material Contract is valid, binding and enforceable in accordance with its terms
and is in full force and effect; (ii) none of the Company nor any of its
Subsidiaries is in breach or default thereof, nor has the Company or any of its
Subsidiaries received notice that it is in breach of or default thereof; and
(iii) no event has occurred which, with notice, or lapse of time or both, would
constitute a breach or default thereof by the Company or any of its Subsidiaries
or, to the Knowledge of the Company, by any other party thereto or would permit
termination, modification, or acceleration thereof by any other party thereto
except in each such case as would not have a Company Material Adverse Effect.

 

Section 4.11                                Authorizations; Compliance.

 

(a)                                  Except for such exceptions that,
individually or in the aggregate, would not have a Company Material Adverse
Effect  (i) the Company and each of its Subsidiaries has obtained all
Authorizations that are necessary to own, lease and operate its properties and
to carry on its businesses as currently conducted, (ii) such Authorizations are
in full force and effect and will remain in full force and effect after the
consummation of the Merger and there are no existing violations thereof or
defaults thereunder and (iii) there is no action, proceeding or investigation
pending or, to the Knowledge of the Company, threatened regarding, and no event
has occurred that has resulted in or after notice or lapse of time, or both,
could reasonably be expected to result in, suspension, revocation or
cancellation of any such Authorizations.

 

(b)                                 Except as set forth in Section 4.11(b) of
the Company’s Disclosure Letter, the Company and its Subsidiaries are in
compliance and at all times since January 1, 2001 have complied with all
applicable Laws and Regulations and are not in default with respect to any Order
applicable to the Company or any of its Subsidiaries, except such events of
noncompliance or defaults that, individually or in the aggregate, would not have
a Company Material Adverse Effect.  Except as set forth in Section 4.11(b) of
the Company’s Disclosure Letter, none of the Company nor any of its Subsidiaries
has been notified by any Governmental Authority regarding possible
non-compliance, defaults or

 

20

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violations of Laws or Orders, except any such possible non-compliance, defaults
or violations that, individually or in the aggregate, would not have a Company
Material Adverse Effect.

 

Section 4.12                                Litigation.

 

There are no claims, actions, suits, charges, investigations or proceedings
(including any proceedings in arbitration) pending or, to the Knowledge of the
Company, threatened against the Company or any of its Subsidiaries or any
properties or rights of the Company or any of its Subsidiaries or against any
present or former officer, director or employee of the Company or any of its
Subsidiaries or other Person for which the Company or any Subsidiary may be
liable, at Law or in equity, except claims, actions, suits, charges,
investigations or proceedings that are disclosed in the Company’s Current Year’s
SEC Reports filed prior to the date hereof, that are set forth in Section 4.12
of the Company’s Disclosure Letter or that, individually or in the aggregate, if
adversely determined would not have a Company Material Adverse Effect.

 

Section 4.13                                Employee Benefit Plans.

 

Each Company Benefit Plan is listed in Section 4.13 of the Company’s Disclosure
Letter, including, with respect to Terminated Company Benefit Plans, the date of
termination.  True and correct copies of each of the following, to the extent
applicable, have been delivered to the Parent with respect to each Current
Company Benefit Plan:  the most recent annual or other report filed with the
Employee Benefits Security Administration or any other Governmental Authority,
the plan document (including all amendments thereto), the trust agreement
(including all amendments thereto), the most recent summary plan description,
the most recent actuarial report or valuation, and the most recent determination
letter, issued by the IRS with respect to any Current Company Benefit Plan
intended to be qualified under Section 401 of the Code.  Except as set forth in
the Company’s SEC Reports filed prior to the date hereof or in Section 4.13 of
the Company’s Disclosure Letter:

 

(a)                                  With respect to each Company Benefit Plan,
no event has occurred and, to the Knowledge of the Company, there exists no
condition or set of circumstances in connection with which the Company or any of
its Subsidiaries could be subject to any liability under the terms of such
Company Benefit Plan, ERISA, the Code or any other applicable Law, other than
any condition or set of circumstances that, individually or in the aggregate,
would not have a Company Material Adverse Effect.

 

(b)                                 To the Knowledge of the Company, each
Current Company Benefit Plan intended to be qualified under Section 401 of the
Code (i) satisfies in form the requirements of such Section except to the extent
amendments are not required by Law to be made until a date after the Effective
Time, (ii) has received a favorable determination letter from the IRS regarding
such qualified status, (iii) has not, since the receipt of the most recent
favorable determination letter, been amended other than amendments required by
applicable Law and (iv) has not been operated in a way that would adversely
affect its qualified status.

 

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(c)                                  There has been no termination or partial
termination of any Current Company Benefit Plan within the meaning of
Section 411(d)(3) of the Code.

 

(d)                                 Any Terminated Company Benefit Plan intended
to have been qualified under Section 401 of the Code received a favorable
determination letter from the IRS with respect to its termination.

 

(e)                                  There are no actions, suits or claims
pending (other than routine claims for benefits) or, to the Knowledge of the
Company, threatened against, or with respect to, any Company Benefit Plan or its
assets that, individually or in the aggregate, would have a Company Material
Adverse Effect and, to the Knowledge of the Company, no facts or circumstances
exist that could give rise to any such actions, suits or claims, except as would
not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(f)                                    To the Knowledge of the Company, there is
no material matter pending (other than routine qualification determination
filings) with respect to any Company Benefit Plan before the IRS, the U.S.
Department of Labor, the PBGC or any other Governmental Authority.

 

(g)                                 All contributions required to be made to
Company Benefit Plans pursuant to their terms and the provisions of ERISA, the
Code or any other applicable Law have been timely made, except as would not,
individually or in the aggregate, have a Company Material Adverse Effect.

 

(h)                                 Except as would not, individually or in the
aggregate, have a Company Material Adverse Effect, neither the Company nor any
corporation, trade, business or entity under common control with the Company,
within the meaning of Section 414(b), (c), (m), or (o) of the Code or
Section 4001 of ERISA, contributes to, or has contributed to, or had any other
obligation or liability to, within six years prior to the Closing Date, any
multiemployer plan within the meaning of Section 3(37) of ERISA.  As to each
Current Company Benefit Plan subject to Title IV of ERISA, (i) there has been no
event or condition which presents a significant risk of plan termination, (ii)
no accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred, (iii) except
as would not, individually or in the aggregate, have a Company Material Adverse
Effect, no reportable event within the meaning of Section 4043 of ERISA has
occurred within six years prior to the date of this Agreement, (iv) no notice of
intent to terminate such Current Company Benefit Plan has been given under
Section 4041 of ERISA, (v) no proceeding has been instituted under Section 4042
of ERISA to terminate such Current Company Benefit Plan, (vi) no liability to
the PBGC has been incurred (other than with respect to required premium payments
that are not past due), and (vii) the assets of the Current Company Benefit Plan
equal or exceed the actuarial present value of the benefit liabilities, within
the meaning of Section 4041 of ERISA, under the Current Company Benefit Plan,
based upon reasonable actuarial assumptions and the asset valuation principles
established by the PBGC.

 

(i)                                     In connection with the consummation of
the transactions contemplated by this Agreement, no payment of money or other
property, acceleration of benefits or

 

22

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provision of other rights has been or will be made hereunder, under any
agreement contemplated herein, or under any Current Company Benefit Plan or any
of the programs, agreements, policies or other arrangements described in
paragraph (k) below that could reasonably be expected to be nondeductible under
Section 280G of the Code, whether or not some other subsequent action or event
would be required to cause such payment, acceleration or provision to be
triggered.

 

(j)                                     The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) require the Company or any of its Subsidiaries to make a larger contribution
to, or pay greater benefits or provide other rights under, any Current Company
Benefit Plan or any of the programs, agreements, policies or other arrangements
described in paragraph (k) below than it otherwise would, whether or not some
other subsequent action or event would be required to cause such payment or
provision to be triggered or (ii) create or give rise to any additional vested
rights or service credits under any Current Company Benefit Plan or any of such
programs, agreements, policies or other arrangements, whether or not some other
subsequent action or event would be required to cause such creation or
acceleration to be triggered.

 

(k)                                  Neither the Company nor any of its
Subsidiaries is a party to or is bound by any severance or change in control
agreement, program or policy with respect to any employee, officer, director or
consultant.  True and correct copies of all employment agreements with officers
of the Company and its Subsidiaries, and all vacation, overtime, severance and
other compensation policies or programs of the Company and its Subsidiaries
relating to their employees have been made available to the Parent.

 

(l)                                     No Current Company Benefit Plan provides
retiree medical or retiree life insurance benefits to any Person and neither the
Company nor any of its Subsidiaries is contractually or otherwise obligated
(whether or not in writing) to provide any Person with life insurance or medical
benefits upon retirement or termination of employment, other than as required by
the provisions of Sections 601 through 608 of ERISA and Section 4980B of the
Code.  Each Current Company Benefit Plan may be unilaterally amended or
terminated in its entirety without liability except as to benefits accrued
thereunder prior to such amendment or termination.

 

(m)                               Neither the Company nor any of its
Subsidiaries has contributed, transferred or otherwise provided any cash,
securities or other property to any grantee, trust, escrow or other arrangement
that has the effect of providing or setting aside assets for benefits payable
pursuant to any termination, severance or other change in control agreement.

 

(n)                                 Neither the Company nor any Subsidiary of
the Company is a party to or bound by any collective bargaining or similar
agreement with any union or work rules or practices agreed to with any labor
organization or employee association.  No collective bargaining agreement is
being negotiated by the Company or any of its Subsidiaries.  There is no pending
or, to the Knowledge of the Company, threatened labor dispute, strike or work
stoppage against the Company or any of its Subsidiaries.  To the

 

23

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Knowledge of the Company, neither the Company or any of its Subsidiaries nor any
representative or employee of the Company or any of its Subsidiaries has
committed any unfair labor practices in connection with the operation of the
business of the Company and its Subsidiaries.  There is no pending or, to the
Knowledge of the Company, threatened charge or complaint against the Company or
any of its Subsidiaries by or before the National Labor Relations Board or any
comparable agency of any state of the United States.

 

Section 4.14                                Taxes.

 

(a)                                  Except for such matters as are set forth in
Section 4.14(a) of the Company’s Disclosure Letter, (i) all material returns and
reports of or with respect to any Tax (“Tax Returns”) that are required to be
filed by or with respect to any of the Company and its Subsidiaries on or before
the Effective Time have been or will be duly and timely filed, (ii) all material
items of income, gain, loss, deduction and credit or other items (“Tax Items”)
required to be included in each such Tax Return have been so included and all
such Tax Items and any other information provided in each such Tax Return are
true, correct and complete in all material respects, (iii) all material Taxes
owed by any of the Company and its Subsidiaries which are or have become due
have been timely paid in full, (iv) no material penalty, interest or other
charge is or will become due with respect to the late filing of any such Tax
Return or late payment of any such Tax, (v) all Tax withholding and deposit
requirements imposed on or with respect to any of the Company and its
Subsidiaries have been satisfied in full in all material respects, (vi) there
are no mortgages, pledges, liens, encumbrances, charges or other security
interests on any of the assets of the Company or any of its Subsidiaries that
arose in connection with any failure (or alleged failure) to pay any Tax and
(vii) all material Tax liabilities, to the extent not yet due and payable, have
been fully and adequately disclosed and accrued on the Company’s Consolidated
Financial Statements.

 

(b)                                 Except as set forth in Section 4.14(b) of
the Company’s Disclosure Letter, there is no material claim against the Company
or any of its Subsidiaries for Taxes, and no material assessment, deficiency or
adjustment has been asserted, proposed or, to the Knowledge of the Company,
threatened with respect to any Tax Return of or with respect to any of the
Company and its Subsidiaries.

 

(c)                                  To the Knowledge of the Company, no claim
has ever been made by a Governmental Authority in a jurisdiction where any of
the Company and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation in that jurisdiction.

 

(d)                                 Except as set forth in Section 4.14(d) of
the Company’s Disclosure Letter, there is not in force any extension of time
with respect to the due date for the filing of any Tax Return of or with respect
to the Company or any its Subsidiaries or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect to
the Company or any of its Subsidiaries.

 

(e)                                  Neither the Company nor any of its
Subsidiaries have entered into any Tax allocation, sharing or indemnity
agreement under which the Company or its Subsidiaries

 

24

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could become liable to another Person (other than the Company or its
Subsidiaries) as a result of the imposition of Tax upon such Person, or the
assessment or collection of Tax.

 

(f)                                    Neither the Company nor any of its
Subsidiaries owns any interest in any controlled foreign corporation (as defined
in section 957 of the Code), passive foreign investment company (as defined in
section 1297 of the Code), foreign personal holding company (as defined in
Section 552 of the Code) or other entity the income of which is required to be
included in the income of the Company or such Subsidiary.

 

(g)                                 Except as set forth in Section 4.14(g) of
the Company’s Disclosure Letter, none of the transactions contemplated by this
Agreement will result in Tax liability or the recognition of any item of income
or gain to any of the Company or its Subsidiaries.

 

(h)                                 Except as set forth in Section 4.14(h) of
the Company’s Disclosure Letter, neither the Company nor any of its Subsidiaries
(i) has been a member of an affiliated group filing a consolidated Tax Return or
(ii) has any liability for the Taxes of any Person under United States Treasury
regulations by reason of being a member of a group of entities filing a
consolidated, combined or unified Tax Return (or any similar provision of state,
local or foreign Law), as a transferee or successor, by contract, or otherwise.

 

(i)                                     Neither the Company nor any of its
Subsidiaries has been a party to a distribution of stock pursuant to Section 355
of the Code during the two-year period preceding the date hereof as either a
distributing corporation or a controlled corporation, as those terms are defined
in Section 355(a) of the Code.

 

(j)                                     True and correct copies of all material
Tax Returns filed by the Company or any of its Subsidiaries for any period that
is considered open for assessment or reassessment under applicable Tax Laws have
been provided to the Parent.

 

(k)                                  All Tax pools, accounts and attributes
available to reduce the future Taxes of the Company or any of its Subsidiaries,
and the appropriate classification of such tax pools, accounts and attributes
are fully and accurately disclosed in Section 4.14(k) of the Company’s
Disclosure Letter.

 

(l)                                     Neither the Company, nor any of its
Subsidiaries, has any pending claims for refund of any Tax.

 

(m)                               To the Knowledge of the Company, there are no
pending Tax audits, assessments, or proceedings in respect of or affecting the
business or assets of the Company or any of its Subsidiaries.

 

(n)                                 To the Knowledge of the Company, since 2000,
neither the Company nor any or its Subsidiaries has entered into any agreement
with any Governmental Authority with respect to Tax matters relating to the
Company or any of its Subsidiaries or any of their assets or business
operations.

 

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(o)                                 To the Knowledge of the Company, since 2000,
neither the Company nor any of its Subsidiaries have requested or received
approval to make, nor agreed to change, any Tax reporting practices, including
any accounting methods.

 

(p)                                 Neither the Company, nor any of its
Subsidiaries, has made any request for any ruling with regard to Taxes, which
ruling, if issued, would be binding on the Company or any of its Subsidiaries.

 

Section 4.15                                Environmental Matters.

 

Except for matters that, individually or in the aggregate, would not be expected
to result in a Company Material Adverse Effect or as set forth in Section 4.15
of the Company Disclosure Letter, (a) the properties, operations and activities
of the Company and its Subsidiaries are in compliance with all applicable
Environmental Laws, (b) the Company and its Subsidiaries and the properties,
operations and activities of the Company and its Subsidiaries are not subject to
any existing, pending or, to the Knowledge of the Company, threatened action,
suit, investigation, inquiry or proceeding by any third party, including any
Governmental Authority, under any Environmental Law, (c) all Authorizations, if
any, required to be obtained or filed by the Company or any of its Subsidiaries
under any Environmental Law in connection with the business of the Company or
its Subsidiaries have been obtained or filed and are valid and currently in full
force and effect and will remain valid and in full force and effect after the
consummation of the Merger and the Company and its Subsidiaries are in
compliance with the terms and conditions of such Authorizations, (d) to the
Knowledge of the Company, there has been no release of any hazardous substance,
pollutant or contaminant into the environment by the Company or its Subsidiaries
or in connection with their properties or operations and (e) to the Knowledge of
the Company, there has been no exposure of any Person or property to any
hazardous substance, pollutant or contaminant in connection with the properties,
operations and activities of the Company and its Subsidiaries.

 

Section 4.16                                Insurance.

 

The Company and its Subsidiaries own and are beneficiaries under insurance
policies underwritten by reputable insurers that, as to risks insured, coverages
and related limits and deductibles which the Company believes are reasonably
adequate in all material respects for its business and operations.  All premiums
due with respect to all such insurance policies that are material have been paid
and, to the Knowledge of the Company, all such policies are in full force and
effect.  There is no material claim by the Company or any of its Subsidiaries
pending under any of the Company’s insurance policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds.

 

Section 4.17                                Intellectual Property.

 

The Company or its Subsidiaries own, or are licensed or otherwise have the right
to use, Intellectual Property currently used in the conduct of the business of
the Company and its Subsidiaries, except where the failure to so own or
otherwise have the right to use such Intellectual Property would not,
individually or in the aggregate, have a Company Material Adverse Effect.  No
Person has notified either the Company or any of its Subsidiaries that their

 

26

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use of the Intellectual Property infringes on the rights of any Person, subject
to such claims and infringements as do not, individually or in the aggregate,
give rise to any liability on the part of the Company and its Subsidiaries that
could have a Company Material Adverse Effect, and, to the Knowledge of the
Company, no Person is infringing on any right of the Company or any of its
Subsidiaries with respect to any such Intellectual Property. No claims are
pending or, to the Knowledge of the Company, threatened that the Company or any
of its Subsidiaries is infringing or otherwise adversely affecting the rights of
any Person with regard to any Intellectual Property that, individually or in the
aggregate, would give rise to a Company Material Adverse Effect.

 

Section 4.18                                Properties.

 

(a)                                  Except for the Oil and Gas Interests (to
which subparagraph (c) of this Section 4.18 applies), (i) the Company and its
Subsidiaries have good and indefeasible title to, or have a valid and
enforceable right to use or a valid and enforceable leasehold interest in, all
real property (including all buildings, fixtures and other improvements thereto)
owned, used or held for use by them and material to the conduct of their
respective businesses as such businesses are now being conducted, except for
defects in title that would not, individually or in the aggregate, have a
Company Material Adverse Effect and (ii) neither the Company’s nor any of its
Subsidiaries’ ownership of or leasehold interest in any such property is subject
to any Lien, except for Permitted Liens.

 

(b)                                 Except for the Oil and Gas Interests (to
which subparagraph (c) of this Section 4.18 applies), the Company and its
Subsidiaries have good title to, or in the case of leased property and assets,
valid leasehold interests in, all of their tangible personal properties and
assets, used or held for use in their business, and such properties and assets,
are free and clear of any Liens, except for Permitted Liens or those Liens as
are set forth in Section 4.18 of the Company Disclosure Letter and except where
the failure to have such title would not, individually or in the aggregate, have
a Company Material Adverse Effect.

 

(c)                                  The Company or its Subsidiaries have Good
and Marketable Title to the Oil and Gas Interests referred to or reflected in
the Company Reserve Report or the Company’s Consolidated Balance Sheet (other
than Oil and Gas Interests disposed of in the ordinary course since March 31,
2004) free and clear of any Liens other than Permitted Liens or except as would
not, individually or in the aggregate, have a Company Material Adverse Effect.

 

Section 4.19                                Reserve Report.

 

Company has furnished Parent estimates of the Company’s oil and gas reserves
attributable to Company’s Oil and Gas Interests as of January 1, 2004 in reports
as described in Section 4.19 of the Company Disclosure Letter (collectively, the
“Company Reserve Report”).  The factual, non-interpretive data on which the
Company Reserve Report was based for purposes of estimating the oil and gas
reserves set forth therein and in any supplement thereto or update thereof, each
of which has been furnished to Parent, was accurate in all material respects,
and to the Knowledge of the Company no errors in such information existed at the
time such information was provided. Except for changes (including changes in
Hydrocarbon commodity

 

27

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prices) generally affecting the oil and gas industry and normal depletion by
production, there has been no change in respect of the matters addressed in the
Company Reserve Report that would reasonably be expected to have a Company
Material Adverse Effect.  Set forth in Section 4.19 of the Company’s Disclosure
Letter is a list of all material Oil and Gas Interests of Company that were
included in the Company Reserve Report that have been disposed of prior to the
date of this Agreement, excluding normal depletion by production. To the
Knowledge of Company, and based on the information given to Company by
third-party operators for all wells not operated by the Company, the Company
Payout Balances for each of the wells as used in the Company Reserve Report were
accurate in all material respects as of the dates to which Company had
calculated them.

 

Section 4.20                                Prepayments; Hedging; Calls.

 

As of the date hereof, except as set forth in Section 4.20 of the Company’s
Disclosure Letter or in the Company’s Current Year’s SEC Reports filed prior to
the date of this Agreement and except as would not reasonably be expected to
have a Company Material Adverse Effect:

 

(a)                                  neither the Company nor any of its
Subsidiaries has any outstanding obligations for the delivery of Hydrocarbons
attributable to any of the Oil and Gas Interests of the Company or any of its
Subsidiaries in the future on account of prepayment, advance payment,
take-or-pay or similar obligations without then or thereafter being entitled to
receive full value therefor;

 

(b)                                 neither the Company nor any of its
Subsidiaries is bound by any future, hedge, swap, collar, put, call, floor, cap,
option or other contract that is intended to benefit from, relate to or reduce
or eliminate the risk of fluctuations in the price of commodities, including
Hydrocarbons, interest rates, currencies or securities (a “Derivative
Transaction”); and

 

(c)                                  no Person has any call upon, option to
purchase, or similar rights with respect to the production of Hydrocarbons
attributable to the Oil and Gas Interests of the Company and its Subsidiaries,
except for any such call, option or similar right at market prices, and upon
consummation of the transactions contemplated by this Agreement, the Company or
its Subsidiaries will have the right to market production from the Oil and Gas
Interests of the Company and its Subsidiaries on terms no less favorable than
the terms upon which such production is currently being marketed.

 

Section 4.21                                Anti-Takeover Plan; State Takeover
Statutes.

 

Prior to the execution of this Agreement, the Board of Directors of the Company
has taken all necessary action to cause the execution of this Agreement and the
Stockholder Agreements and the transactions contemplated hereby and thereby to
be exempt from or not subject to the provisions of Section 203 of the DGCL and
any other state takeover statute or state Law that purports to limit or restrict
business combinations or the ability to acquire or vote shares.  To the
Company’s Knowledge, no “moratorium,” “control share acquisition,” “business
combination,” “fair price” or other form of anti-takeover Laws and regulations
applies or purports to apply to the Merger, this Agreement, or any of the
transactions contemplated by this

 

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Agreement.  Neither the Company nor any of its Subsidiaries has in effect any
stockholder rights plan or similar device or arrangement, commonly or
colloquially known as a “poison pill” or “anti-takeover” plan or any similar
plan, device or arrangement and the Board of Directors of the Company has not
adopted or authorized the adoption of such a plan, device or arrangement.

 

Section 4.22                                Brokers.

 

No broker, finder or investment banker (other than Petrie Parkman) is entitled
to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its Subsidiaries.  Prior to the date of this
Agreement, the Company has provided to the Parent a complete and correct copy of
all agreements between the Company and Petrie Parkman relating to the
transactions contemplated by this Agreement.

 

Section 4.23                                Opinion of Financial Advisor.

 

The Company has received the written opinion of Petrie Parkman to the effect
that, as of the date of such opinion, the Offer Price is fair, from a financial
point of view, to the holders of Shares and the Company has provided a copy of
such letter to the Parent.

 

Section 4.24                                Proxy Statement; Offer Documents;
Schedule TO; Schedule 14D-9.

 

(a)                                  Each document required to be filed by the
Company with the SEC or required to be distributed or otherwise disseminated to
the Company’s stockholders in connection with the transactions contemplated by
this Agreement (the “Company Disclosure Documents”), including the
Schedule 14D-9, the proxy or information statement of the Company (the “Proxy
Statement”), if any, to be filed with the SEC in connection with the Merger, and
any amendments or supplements thereto, when filed, distributed or disseminated,
as applicable, will comply as to form in all material respects with the
applicable requirements of the Exchange Act. The representations and warranties
contained in this Section 4.24(a) do not apply to statements or omissions
included in the Company Disclosure Documents based upon information furnished to
the Company by Parent specifically for use therein.

 

(b)                                 The Proxy Statement, as supplemented or
amended, if applicable, at the time such Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on adoption of this Agreement and at the Effective
Time, and (ii) any Company Disclosure Documents (other than the Proxy
Statement), at the time of the filing of such Company Disclosure Document or any
supplement or amendment thereto and at the time of any distribution or
dissemination thereof, will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.  The representations and warranties contained in this
Section 4.24(b) do not apply to statements or omissions included in the Company
Disclosure Documents based upon information furnished to the Company by Parent
specifically for use therein.

 

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(c)                                  None of the information with respect to the
Company or any of its Subsidiaries or Affiliates that the Company furnishes to
Parent for use in the Offer Documents, at the time of the filing thereof, at the
time of any distribution or dissemination thereof and at the time of the
consummation of the Offer, will contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.

 

(d)                                 To the Knowledge of the Company, neither the
Company nor its Subsidiaries have entered into any arrangement, agreement or
plan, or amended, supplemented or otherwise modified any arrangement, agreement
or plan that would provide a payment or benefit to a stockholder of the Company,
including any director, officer or employee of the Company or its Subsidiaries,
and has not otherwise paid or conveyed consideration or a benefit to a
stockholder of the Company, which in any such case would result in the
consummation of the Offer at the Offer Price being in violation of Rule 14d-10
promulgated under the Exchange Act.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT COMPANIES

 

The Parent Companies hereby represent and warrant to the Company that:

 

Section 5.01                                Organization.

 

(a)                                  Parent is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of New York,
and has all requisite power and authority to own, lease and operate its
properties and carry on its business substantially as now conducted by it and is
qualified to carry on business under the laws of each jurisdiction in which it
carries on a material portion of its business, and Merger Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
substantially as now conducted, except where the failure to do so would not
have, individually or in the aggregate, a Parent Material Adverse Effect. Merger
Subsidiary has not engaged and will not engage in any activities other than in
connection with or as contemplated by this Agreement and the transactions
contemplated hereby. The copies of the charter and bylaws of the Parent and
Merger Subsidiary that have been made available to the Company are complete and
correct and in full force and effect.

 

Section 5.02                                Authorization of Agreement.

 

(a)                                  Each of the Parent and Merger Subsidiary
has all requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.  The execution and delivery of this Agreement
by each of the Parent and Merger Subsidiary and consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Parent and Merger

 

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Subsidiary, respectively, and no other corporate proceedings on the part of the
Parent or Merger Subsidiary are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby.  This Agreement has been duly
executed and delivered by the Parent and Merger Subsidiary and (assuming due
authorization, execution and delivery hereof by the other party hereto)
constitutes a legal, valid and binding obligation of the Parent and Merger
Subsidiary, enforceable against the Parent and Merger Subsidiary in accordance
with its terms except as enforcement may be limited by applicable bankruptcy,
insolvency or other Laws affecting creditor’s rights generally or by legal
principles of general applicability governing availability of equitable
remedies.

 

(b)                                 The Board of Directors of the Parent, at a
meeting duly called and held on May 21, 2004, has by unanimous approval of all
directors present determined that this Agreement and the Merger are advisable
and in the best interest of the Parent’s stockholders.  No vote of the holders
of shares of Parent Common Stock or other securities (equity or otherwise) of
the Parent is necessary to consummate the Merger.

 

Section 5.03                                Approvals.

 

The execution and delivery of this Agreement does not, and consummation of the
transactions contemplated hereby will not, require the Parent or any of its
Subsidiaries to obtain any Authorization or other approval of or from, or to
make any filing with or notification to any Governmental Authority or third
Person, except (a) for the applicable requirements, if any, of the Exchange Act,
state securities or “blue sky” Laws, the Competition Act, the Investment Canada
Act and the filing and recordation of the Certificate of Merger as required by
the DGCL, (b) as set forth in Section 5.03 of the Parent’s Disclosure Letter and
(c) where the failure to obtain such Authorizations, or make such filings or
notifications, would not, individually or in the aggregate, have a Parent
Material Adverse Effect.

 

Section 5.04                                No Violation.

 

Assuming that the Authorizations, filings and notifications described in
Section 5.03 have been obtained or made, except as set forth in Section 5.04 of
the Parent’s Disclosure Letter, the execution and delivery by the Parent or
Merger Subsidiary of this Agreement does not and consummation of the
transactions contemplated by this Agreement will not (a) conflict with, result
in any violation or breach of, or cause a default (or an event that with notice,
lapse of time or otherwise would become a default) under (i) any Law, Regulation
or Order applicable to the Parent or Merger Subsidiary or any of their
respective Subsidiaries, (ii) the Certificate of Incorporation or Bylaws of the
Parent or Merger Subsidiary or (iii) the organizational documents of the
Parent’s Subsidiaries, or (b) conflict with, result in any violation or breach
of, or cause a default (or an event that with notice, lapse of time or otherwise
would become a default) under, or give to others any right of termination,
cancellation, amendment or acceleration of, or require a payment under, or
result in the loss of any benefit under, or in the creation of a Lien on any of
the properties or assets of the Parent or any of its Subsidiaries pursuant to,
any note, bond, mortgage, indenture, deed of trust, lease, license, permit,
franchise, contract or agreement to which the Parent or any of its Subsidiaries
is a party or by which it or any of its Subsidiaries or its or their respective
properties or assets is bound, except in the case of matters described in

 

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clauses (a)(i) and (b) that, individually or in the aggregate, would not have a
Parent Material Adverse Effect.

 

Section 5.05                                Financing.

 

The Parent and Merger Subsidiary has as of the date hereof and will have
immediately prior to the consummation of the Offer and immediately prior to the
consummation of the Merger sufficient funds to enable it to consummate the Offer
and Merger on the terms contemplated by this Agreement.

 

Section 5.06                                Disclosure Documents.

 

(a)                                  Each of the Offer Documents when filed with
the SEC, distributed or disseminated, as applicable, will comply as to form in
all material respects with the applicable requirements of the Exchange Act. The
representations and warranties contained in this Section 5.06(a) do not apply to
statements or omissions included in the Offer Documents based upon information
furnished to Parent by the Company specifically for use therein.

 

(b)                                 The Offer Documents at the time such Offer
Documents are filed with the SEC, at the time of any distribution or
dissemination thereof and at the time of the consummation of the Offer will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 5.06(b) do not apply to statements or
omissions included in the Offer Documents based upon information furnished to
Parent by the Company specifically for use therein.

 

(c)                                  None of the information with respect to
Parent or Merger Subsidiary or any of their respective Subsidiaries or
Affiliates that Parent furnishes to the Company specifically for use in the
Company Disclosure Documents, at the time of the filing thereof, at the time of
any distribution or dissemination thereof, at the time of the consummation of
the Offer and at the time such stockholders vote on adoption of this Agreement
will contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.

 

Section 5.07                                Ownership.

 

Neither Parent nor any of its Subsidiaries owns any Shares or other securities
convertible into Shares.

 

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ARTICLE VI
COVENANTS

 

Section 6.01                                Affirmative Covenants.

 

(a)                                  The Company covenants and agrees that,
prior to the Effective Time, unless otherwise expressly contemplated by this
Agreement or consented to in writing by the Parent, it will and will cause its
Subsidiaries to (a) operate its business only in the usual and ordinary course
consistent with past practices and (b) use its commercially reasonable efforts
to preserve intact its present business organization, maintain its material
rights and franchises, retain the services of its key employees and preserve its
relationships with customers, suppliers and other Persons with which it has
significant business dealings.

 

(b)                                 The Company and its Subsidiaries shall
prepare and file in a timely manner all Tax Returns required to be filed, but
not yet filed, prior to the Effective Time.  To the extent the Company or any of
its Subsidiaries has knowledge of: (i) any notification regarding any bill for
collection of any amount due for Taxes, or the commencement of scheduling of any
other administrative or judicial proceeding with respect to the determination,
assessment or collection of any Tax, including the commencement of any audit or
other investigation; (ii) any written notice or correspondence received from any
Governmental Authority, including any request for a waiver or other arrangement
providing for an extension of time with respect to the assessment or
re-assessment of any Tax, the filing of any Tax Returns, or the payment of any
Tax, or the levy of any governmental charge with respect to the Company or any
of its Subsidiaries; or (iii) any disputes or requests for information received
from any Governmental Authority with respect to information submitted by the
Company or any of its Subsidiaries; the Company shall provide prompt notice to
the Parent of such matter, setting forth information (to the extent known)
describing any asserted Tax liability in reasonable detail and including copies
of notices or other documentation received from the applicable Governmental
Authority with respect to such matter.

 

Section 6.02                                Negative Covenants.

 

The Company covenants and agrees that, except as expressly set forth in
Section 6.02 of the Company’s Disclosure Letter (with an indication as to which
paragraph of Section 6.02 such exception relates), as expressly contemplated by
this Agreement or as otherwise consented to in writing by the Parent (or orally
by Parent’s chief executive officer, chief financial officer or general counsel
and confirmed in writing within 24 hours by the Company to Parent), from the
date of this Agreement until the Effective Time, it will not do, and will not
permit any of its Subsidiaries to do, any of the following:

 

(i)                                     (A) increase the compensation payable to
or to become payable to or grant any bonuses to any former or present director,
officer, employee or consultant, except in the ordinary course of business
consistent with past practice for Persons who are not former or present officers
or directors, (B) enter into or amend any employment, severance, termination or
similar agreement or

 

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arrangement with any former or present director, officer, employee or
consultant, (C) establish, adopt, enter into or amend or modify any Benefit Plan
except as may be required by applicable Law, (D) grant any severance, retention
or termination pay, (E) take any action to accelerate the vesting of any
outstanding Company Stock Options, (F) amend or take any other actions to
increase the amount of, or accelerate the payment or vesting of, any benefit or
amount under any Benefit Plan, policy or arrangement (including the acceleration
of vesting, waiving of performance criteria or the adjustment of awards or
providing for compensation or benefits to any former or present director,
officer, employee or consultant), (G) contribute, transfer or otherwise provide
any cash, securities or other property to any grantee, trust, escrow or other
arrangement that has the effect of providing or setting aside assets for
benefits payable pursuant to any termination, severance, retention or other
change in control agreement; except (1) pursuant to any contract, agreement or
other legal obligation of the Company or any of its Subsidiaries existing at the
date of this Agreement, (2) in the case of severance or termination payments,
pursuant to the severance policy of the Company or its Subsidiaries existing at
the date of this Agreement (copies of which have been furnished to the Parent),
and (3) as required by applicable Law;

 

(ii)                                  declare, set aside or pay any dividend on,
or make any other distribution in respect of outstanding Equity Securities of
the Company or any of its Subsidiaries, except for dividends by a wholly owned
Subsidiary of the Company to the Company or another wholly owned Subsidiary of
the Company;

 

(iii)                               (A) directly or indirectly redeem, purchase
or otherwise acquire, or offer to redeem, purchase or otherwise acquire, any
outstanding Equity Securities of the Company or any of its Subsidiaries except
for (1) any such acquisition by the Company or any of its wholly owned
Subsidiaries directly from any wholly owned Subsidiary of the Company or (2) any
repurchase, forfeiture or retirement of Shares or Company Stock Options
occurring pursuant to the terms as in effect on the date of this Agreement of
any Equity Securities outstanding on the date hereof, or of any Benefit Plan
existing on the date hereof or (B) effect any reorganization or recapitalization
or split, combine or reclassify any of the capital stock of or other equity
interest in the Company or any of its Subsidiaries or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, such capital stock or equity interests;

 

(iv)                              (A) offer, issue, deliver, grant or sell, or
authorize or propose the offering, issuance, delivery, grant or sale (including
the grant of any Liens or limitations on voting rights), of any Equity
Securities of the Company or any of its Subsidiaries, except for issuances of
Shares (1) upon the exercise of Company Stock Options or Company Warrants
outstanding at the date of this Agreement in accordance with the terms thereof
as in effect

 

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on the date of this Agreement, (2) upon the expiration of any restrictions upon
issuance of any grant existing at the date of this Agreement of restricted stock
or bonus stock pursuant to the terms as in effect on the date of this Agreement
of any Current Company Benefit Plans or (3) that constitute periodic issuances
of Shares required by the terms as in effect on the date of this Agreement of
any Current Company Benefit Plans, (B) amend or otherwise modify the terms of
any outstanding Equity Securities the effect of which will be to make such terms
more favorable to the holders thereof, or (C) except as expressly contemplated
in Section 6.03 or otherwise in this Agreement, enter into or announce any
agreement, understanding or arrangement with respect to the sale, voting,
registration or repurchase of any Equity Securities of the Company or any of its
Subsidiaries.

 

(v)                                 (A) merge, consolidate, combine or
amalgamate with any Person or dissolve or liquidate, (B) acquire or agree to
acquire, by merging or consolidating with, purchasing Equity Securities in,
purchasing all or a portion of the assets of, or in any other manner, any
business or any Person or otherwise acquire or agree to acquire any assets of
any other Person (other than the purchase of assets from suppliers or vendors in
the ordinary course of business consistent with past practice), in each case for
consideration in excess of $100,000 or for consideration for all such
acquisitions in excess of $250,000 or (C) make any loans, advances or capital
contributions to, or investments in any Person except for loans, advances and
capital contributions (1) to any wholly owned Subsidiary or (2) pursuant to and
in accordance with the terms of any Material Contract or other legal obligation,
in each case existing as of the date of this Agreement;

 

(vi)                              sell, transfer, lease, exchange or otherwise
dispose of, or grant any Lien with respect to, any of the material properties or
assets of the Company or any of its Subsidiaries, except for sales of oil and
gas in the ordinary course of business consistent with past practice;

 

(vii)                           adopt or propose any amendments to its
Certificate of Incorporation or Bylaws or other organizational documents;

 

(viii)                        (A) change any of its methods or principles of
accounting in effect at December 31, 2003, except to the extent required to
comply with GAAP as advised by the Company’s regular independent accountants,
(B) make or rescind any material election relating to Taxes (other than any
election that must be made periodically and is made consistent with past
practice), (C) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, (D) change any of its material methods of reporting income or
deductions for U.S. federal income tax purposes from those employed in the
preparation of the U.S. federal income tax returns for the taxable year ended
December 31, 2003, (E) submit any claim for refund of any Tax, (F) request any
tax opinions or rulings, (G) authorize any Tax indemnities, (H) make any Tax
election except elections which are consistent with past practices and which are
required to be made in connection with Tax Returns filed for any Tax period
prior to the Effective Time, (I) file with or provide to a Governmental
Authority any waiver extending the statutory period for assessment or
reassessment of Tax or any other waiver of restrictions on assessment or
collection of any Tax; (J) enter into or amend any agreement or settlement with

 

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any Governmental Authority respecting Taxes or (K) amend or revoke any
previously filed Tax Return except, in each case, as may be required by Law;

 

(ix)                                incur, create, assume, guarantee or
otherwise become liable for any obligation for borrowed money, purchase money
indebtedness or any obligation of any other Person, whether or not evidenced by
a note, bond, debenture, guarantee, indemnity or similar instrument, except for
(A) additional borrowings under credit lines existing at the date of this
Agreement not exceeding $3,000,000 in the aggregate, (B) trade payables incurred
in the ordinary course of business consistent with past practice, and (C)
indebtedness with any wholly owned Subsidiary;

 

(x)                                   except for existing authorizations for
expenditures and capital expenditures approved in the 2004 Capital Budget
approved by the Company’s Board of Directors (copies of which authorizations and
2004 Capital Budget have been provided to Parent), make or commit to make any
capital expenditures in excess of $100,000 in the aggregate;

 

(xi)                                pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) prior to the same being due in excess of $25,000 in the
aggregate, other than pursuant to mandatory terms of any agreement,
understanding or arrangement as in effect on the date hereof;

 

(xii)                             take or cause to be taken any action that
could reasonably be expected to result in any of the representations or
warranties contained herein becoming untrue or inaccurate in any material
respect;

 

(xiii)                          modify, amend or terminate, or waive, assign or
release any material rights or claims, or grant any consent under, any
confidentiality agreement relating to an Acquisition Proposal or otherwise under
any standstill or similar agreement or fail to enforce as is reasonably
practicable any such agreement upon the reasonable request of Parent;

 

(xiv)                         (A) enter into, renew, modify, amend or terminate
any Material Contract to which the Company or any of its Subsidiaries is a
party, or waive, delay the exercise of, release or assign any material rights or
claims thereunder except in the ordinary course of business consistent with past
practice, (B) enter into any Derivative Transaction or any fixed-price commodity
sales agreement with a duration of more than three months, or (C) enter into or
amend in any material manner any contract, agreement or commitment with any
former or present director, officer or employee of the Company or any of its
Subsidiaries or with any Affiliate or associate (as defined under the Exchange
Act) of any of the foregoing Persons except to the extent permitted under
paragraph (i) above;

 

(xv)                            consent to or otherwise permit any Transfer (as
such term is defined in the Stockholder Agreements) of any Shares by any Person
party to a

 

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Stockholder Agreement except for such Transfers as are permitted under such
Stockholder Agreement; or

 

(xvi)                         agree in writing or otherwise to do any of the
foregoing.

 

Except as otherwise contemplated by Section 2.03, nothing contained in this
Agreement shall give Parent, directly or indirectly, rights to control or direct
the Company’s operations prior to the Effective Time. Prior to the Effective
Time, the Company shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision of the Company’s operations.

 

Section 6.03                                No Solicitation.

 

(a)                                  From the date of this Agreement until the
Effective Time or the termination of this Agreement in accordance with
Article VIII, except as specifically permitted in Sections 6.03(d), 6.03(f) or
6.03(g)(ii), the Company shall not, nor shall it authorize or permit any of its
Subsidiaries or its or their Representatives to, directly or indirectly: (i)
solicit, initiate or knowingly encourage any inquiries, offers or proposals that
constitute, or are reasonably likely to lead to, any Acquisition Proposal; (ii)
engage in discussions or negotiations with, furnish or disclose any information
or data relating to the Company or any of its Subsidiaries to, or in response to
a request therefor, give access to the properties, assets or the books and
records of the Company or its Subsidiaries to, any Person that has made or, to
the Knowledge of the Company, may be considering making any Acquisition Proposal
or otherwise in connection with an Acquisition Proposal; (iii) grant any waiver
or release under any standstill or similar contract with respect to the Shares,
any Company Equity Securities or any properties or assets of the Company or its
Subsidiaries; (iv) withdraw, modify or amend the approval or recommendation of
the Offer, the Merger or this Agreement by the Board of Directors of the
Company; (v) approve, endorse or recommend any Acquisition Proposal; (vi) enter
into any agreement in principle, arrangement, understanding or contract relating
to any Acquisition Proposal; or (vii) take any action to exempt or make not
subject to the provisions of Section 203 of the DGCL or any other state takeover
statute or state Law that purports to limit or restrict business combinations or
the ability to acquire or vote shares, any Person (other than Parent and its
Subsidiaries) or any action taken thereby, which Person or action would have
otherwise been subject to the restrictive provisions thereof and not exempt
therefrom.

 

(b)                                 The Company shall, and shall cause each of
its Subsidiaries and instruct its Representatives to, immediately cease any
existing solicitations, discussions, negotiations or other activity with any
Person being conducted with respect to any Acquisition Proposal on the date
hereof.  The Company shall promptly inform its Representatives who have been
engaged or are otherwise providing assistance in connection with the
transactions contemplated by this Agreement of the Company’s obligations under
this Section 6.03.  Without limiting the foregoing, the Company agrees that any
breach of the restrictions set forth in this Section 6.03, including any failure
of such Representatives to comply with any instructions referred to above, by
any of such

 

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Representatives or any Affiliate or Subsidiary of the Company shall be deemed to
be a breach by the Company of this Section 6.03.

 

(c)                                  The Company shall notify Parent as soon as
practicable (but in any event within 24 hours) after receipt of (i) any
Acquisition Proposal or indication that any Person is considering making an
Acquisition Proposal, (ii) any request for information relating to the Company
or any of its Subsidiaries or (iii) any request for access to the properties,
assets or the books and records of the Company or its Subsidiaries that the
Company reasonably believes is reasonably likely to lead to an Acquisition
Proposal.  The Company shall provide Parent promptly with the identity of such
Person, a detailed description of such Acquisition Proposal, indication or
request and, if applicable, a copy of such Acquisition Proposal.  The Company
shall keep Parent fully informed on a reasonably current basis of the status and
details of any such Acquisition Proposal, indication or request.

 

(d)                                 Notwithstanding the foregoing, prior to the
Acceptance Date, nothing in this Agreement shall prevent the Company or its
Board of Directors from:

 

(i)                                     engaging in discussions or negotiations
with, or furnishing or disclosing any information relating to, the Company or
any of its Subsidiaries or, in response to a request therefor, giving access to
the properties, assets or the books and records of the Company or any of its
Subsidiaries to, any Person who has made a bona fide written and unsolicited
Acquisition Proposal made after the date hereof if the Board of Directors
determines that such Acquisition Proposal is reasonably likely to result in a
Superior Proposal, but only so long as (x) the Board of Directors has (A) acted
in good faith and by a majority of the members of its entire Board of Directors,
(B) determined, after consultation with its legal and financial advisors, that
such Acquisition Proposal is reasonably likely to result in a Superior Proposal
and (C) determined, after consultation with its outside legal counsel, that the
failure to take such action is reasonably likely to result in a breach of its
fiduciary obligations to the stockholders of the Company under applicable Laws
(in the case of (B) and (C), taking into account any adjustments to the terms
and conditions of this Agreement, the Offer or the Merger offered in writing by
Parent in response to such Acquisition Proposal), and (y) the Company (A) enters
into a confidentiality agreement with such Person on terms and conditions no
more favorable to such Person than those contained in the Confidentiality
Agreement and (B) concurrently discloses or makes available the same information
to Parent as it makes available to such Person in accordance with
Section 6.03(e); and

 

(ii)                                  subject to compliance with
Section 6.03(d)(i), entering into a definitive agreement with respect to a
Superior Proposal (and taking any action required under Section 203 of the DGCL
or any other state takeover Law in connection with such Superior Proposal), but
only so long as (A) the Board of Directors, acting in good faith and by a
majority of the members of the entire Board of Directors, has approved such
definitive agreement, (B) the Board of Directors has determined, after
consultation with its outside legal and financial

 

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advisors, that such bona fide written and unsolicited Acquisition Proposal
constitutes a Superior Proposal, (C) the Board of Directors of the Company has
determined, after consultation with its outside legal counsel, that the failure
to take such action is reasonably likely to result in a breach of its fiduciary
obligations to the stockholders of the Company under applicable Laws and (D) the
Company terminates this Agreement pursuant to, and after complying with all of
the provisions of, Section 8.01(f).

 

(e)                                  If the Company or any of its Subsidiaries
or its or their Representatives receives a request for information from a Person
who has made an unsolicited bona fide written Acquisition Proposal involving the
Company and the Company is permitted to provide such Person with information
pursuant to this Section 6.03, the Company will provide to Parent a copy of the
confidentiality agreement with such Person promptly upon its execution and
provide to Parent a list of, and copies of, the information provided to such
Person concurrently with its delivery to such Person and promptly provide Parent
with access to all information to which such Person was provided access, in each
case only to the extent not previously provided to Parent.

 

(f)                                    The Board of Directors of the Company
shall not (i) approve, endorse or recommend, or propose to approve, endorse or
recommend, any Acquisition Proposal or (ii) enter into any agreement in
principle or understanding or a contract relating to an Acquisition Proposal,
unless the Company terminates this Agreement pursuant to, and after complying
with all of the provisions of, Section 8.01(f).

 

(g)                                 Notwithstanding the foregoing, (i) the Board
of Directors of the Company shall be permitted to disclose to the stockholders
of the Company a position with respect to an Acquisition Proposal required by
Rule 14e-2(a), Item 1012(a) of Regulation M-A or Rule 14d-9 promulgated under
the Exchange Act and (ii) the Board of Directors of the Company may withdraw,
modify or amend its recommendation of the Offer, the Merger and this Agreement
at any time if it determines, after consultation with its outside legal counsel,
that the failure to take such action is reasonably likely to result in a breach
of its fiduciary obligations to the stockholders of the Company under applicable
Laws.

 

Section 6.04                                Notices of Certain Events;
Consultation.

 

(a)                                  The Company shall as promptly as reasonably
practicable notify Parent of:  (i) any notice or other communication of which
the Company has Knowledge from any Person alleging that the consent of such
Person (or another Person) is or may be required in connection with the
transactions contemplated by this Agreement; (ii) any notice or other
communication of which the Company has Knowledge from any Governmental Authority
in connection with the transactions contemplated by this Agreement; (iii) any
actions, suits, claims, investigations or proceedings commenced or, or to the
Knowledge of the Company, threatened against, relating to or involving or
otherwise affecting the Company or any of its Subsidiaries that, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Section 4.12 or which relate to the consummation of the transactions
contemplated by this Agreement; and (iv) any fact or occurrence between the date
of this Agreement and the Effective Time of which it has

 

39

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Knowledge which makes any of its representations contained in this Agreement
untrue in any material respect or causes any material breach of its obligations
under this Agreement.

 

(b)                                 Each of Parent and Merger Subsidiary shall
as promptly as reasonably practicable notify the Company of:  (i) any notice or
other communication of which the Parent has Knowledge from any Person alleging
that the consent of such Person (or other Person) is or may be required in
connection with the transactions contemplated by this Agreement; (ii) any notice
or other communication of which the Parent has Knowledge from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings commenced or, or
to the Knowledge of the Parent, threatened against, the Parent or any of its
Subsidiaries which relate to the consummation of the transactions contemplated
by this Agreement; and (iv) any fact or occurrence between the date of this
Agreement and the Effective Time of which it becomes aware which makes any of
its representations contained in this Agreement untrue in any material respect
or causes any material breach of its obligations under this Agreement.

 

(c)                                  The Company shall consult with Parent prior
to making its financial results for any period publicly available after the date
of this Agreement and prior to filing any Company SEC Reports after the date of
this Agreement.

 

Section 6.05                                Merger Subsidiary.

 

Parent will take all action necessary (a) to cause Merger Subsidiary to perform
its obligations under this Agreement and to commence the Offer and consummate
the Merger on the terms and conditions set forth in this Agreement and, to the
extent permitted under the DGCL, in accordance with Section 253 of the DGCL as
promptly as reasonably practicable following completion of the Offer and (b) to
ensure that, prior to the Effective Time, Merger Subsidiary shall not conduct
any business or make any investments other than as specifically contemplated by
this Agreement.  Parent shall not, and shall not permit Merger Subsidiary to,
take any action that would result in the breach of any representation and
warranty of Parent hereunder (except for representations and warranties made as
of a specific date) such that the Company would have the right to terminate this
Agreement pursuant to Section 8.01(d).

 

Section 6.06                                Director and Officer Liability.

 

From and after the Effective Time, the Surviving Corporation shall indemnify,
defend and hold harmless to the fullest extent permitted by Law the present and
former officers and directors of the Company and its Subsidiaries against all
losses, claims, damages, fines, penalties and liability in respect of acts or
omissions occurring at or prior to the Effective Time including amounts paid in
settlement or compromise with the approval of the Parent (which approval shall
not be unreasonably withheld or delayed).  Parent and Merger Subsidiary agree
that all rights to exculpation and indemnification for acts or omissions
occurring prior to the Effective Time now existing in favor of the current and
former officers and directors of the Company as provided in the Company’s
Certificate of Incorporation or Bylaws or any agreement set forth in
Schedule 6.06 of the Company Disclosure Letter, in each case in effect as of the
date hereof, shall survive

 

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the Merger and shall continue in full force and effect in accordance with their
terms and without amendment thereof.  For at least six years after the Effective
Time, the Parent will cause Merger Subsidiary to, and Surviving Corporation
will, without any lapse in coverage, provide officers’ and directors’ liability
insurance in respect of acts or omissions occurring prior to the Effective Time
covering each such Person currently covered by the Company’s officers’ and
directors’ liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date hereof;
provided, that the Surviving Corporation shall not be obligated to expend annual
premiums during such period in excess of 200% of the per annum rate of the
aggregate annual premium currently paid by the Company for such insurance on the
date of this Agreement, provided that if the annual premium for such insurance
shall exceed such 200% in any year, the Surviving Corporation shall be obligated
to obtain a policy with the greatest coverage available for a cost not exceeding
such amount; provided further that in the event Parent shall prior to the sixth
anniversary of the Effective Time, directly or indirectly, sell all or
substantially all of the assets or capital stock of the Surviving Corporation,
prior to such sale, Parent shall either assume such obligation or cause a
Subsidiary of Parent having a net worth substantially equivalent to, or in
excess of the net worth of, the Surviving Corporation immediately prior to such
sale to assume such obligation. Parent shall cause the Surviving Corporation to
reimburse all expenses, including reasonable attorney’s fees, incurred by any
Person to enforce the obligations of Parent and Surviving Corporation under this
Section 6.06.

 

Section 6.07                                Access and Information.

 

Each of the Company and the Parent will, and will cause its Subsidiaries to, (i)
afford to the other and its Representatives appropriate access, at reasonable
times upon reasonable prior notice, to the officers, employees, agents,
properties, offices and other facilities of the other and to its books, records,
contracts and documents and (ii) furnish promptly to the other and its
Representatives such information concerning its business, properties, contracts,
records and personnel (including financial, operating and other data and
information) as may be reasonably requested, from time to time, by or on behalf
of the other party.

 

Section 6.08                                Meeting of the Company’s
Stockholders.

 

If required by applicable Law in order to consummate the Merger, the Company
shall take all action necessary in accordance with the DGCL and its Certificate
of Incorporation and Bylaws to convene a meeting of the Company’s stockholders
(the “Stockholders Meeting”) as promptly as practicable following the purchase
of Shares in the Offer.  At the Stockholders Meeting, all of the Shares then
owned by Parent, Merger Subsidiary or any other subsidiary of Parent shall be
voted to approve the Merger and this Agreement (subject to applicable Law). 
Unless the Board of Directors has withdrawn or modified its recommendation in
accordance with the provisions of Section 6.03, the Board of Directors of the
Company shall recommend that the Company’s stockholders vote to approve the
Merger and this Agreement if such vote is sought, shall use its best efforts to
solicit from stockholders of the Company proxies in favor of the Merger if a
proxy statement is prepared and sent and shall take all other action in its
judgment necessary and appropriate to secure the vote of stockholders required
by the DGCL to effect the Merger.

 

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Section 6.09                                Proxy Statement.

 

If required under applicable Law, the Company shall prepare the Proxy Statement,
file it with the SEC under the Exchange Act as promptly as practicable after
Merger Subsidiary purchases Shares pursuant to the Offer, and use all
commercially reasonable efforts to have the Proxy Statement cleared by the SEC.
Parent and Merger Subsidiary shall promptly furnish to the Company all
information concerning Parent and Merger Subsidiary that may be required or
reasonably requested in connection with any action contemplated by this
Section 6.10.  Parent, Merger Subsidiary and the Company shall cooperate with
each other in the preparation of the Proxy Statement, and the Company shall
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to Parent promptly
copies of all correspondence between the Company or any Representative of the
Company and the SEC.  The Company shall give Parent and its counsel a reasonable
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Parent and its counsel a reasonable opportunity to review all
amendments and supplements to the Proxy Statement and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the SEC.  Each of the Company, Parent and Merger Subsidiary
agrees to use its commercially reasonable efforts, after consultation with the
other parties hereto to respond promptly to all such comments of and requests by
the SEC.  As promptly as practicable after the Proxy Statement has been cleared
by the SEC, the Company shall mail the Proxy Statement to the stockholders of
the Company.  The Proxy Statement shall include the recommendation by the Board
of Directors of the Company that the Company’s stockholders vote to approve the
Merger and this Agreement unless the Board of Directors of the Company has
withdrawn or modified its recommendation in accordance with Section 6.03 in
connection with a Superior Proposal.

 

Section 6.10                                Commercially Reasonable Efforts.

 

Subject to the terms and conditions of this Agreement, each party will use its
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws and Regulations to consummate the transactions contemplated by
this Agreement.

 

Section 6.11                                Public Announcements.

 

Parent and the Company will consult with each other before issuing any press
release or making any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by applicable
Law or any listing agreement with the New York Stock Exchange will not issue any
such press release or make any such public statement prior to such consultation.

 

Section 6.12                                Stock Exchange De-listing.

 

Parent and the Company shall use their commercially reasonable efforts to cause
the Shares to be de-listed from the Company exchange and de-registered under the
Exchange Act promptly following the Effective Time.

 

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Section 6.13                                Defense of Litigation.

 

The Company shall not settle or offer to settle any claim, action, suit, charge,
investigation or proceeding against the Company, any of its Subsidiaries or any
of their respective directors or officers by any stockholder of the Company
arising out of or relating to this Agreement or the transactions contemplated by
this Agreement without the prior written consent of Parent.  The Company shall
not cooperate with any Person that may seek to restrain, enjoin, prohibit or
otherwise oppose the transactions contemplated by this Agreement, and the
Company shall cooperate with Parent and Merger Subsidiary in resisting any such
effort to restrain, enjoin, prohibit or otherwise oppose such transactions.

 

Section 6.14                                State Takeover Statutes.

 

(a)                                  If any State takeover statute or similar
Law is or becomes applicable to this Agreement, the Offer, the Merger or the
transactions contemplated by this Agreement, each of Parent and the Company and
their respective Boards of Directors shall (a) take all reasonable action to
ensure that such transactions may be consummated as promptly as practicable upon
the terms and subject to the conditions set forth in this Agreement and (b)
otherwise act to eliminate or minimize the effects of such takeover statute or
Law.

 

Section 6.15                                Filings; Other Actions.

 

Subject to the terms and conditions herein provided, the Company and Parent
shall:  (a) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Acceptance Date,
and which consents, approvals, permits or authorizations are required to be
obtained prior to the Acceptance Date from any Governmental Authorities in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents, approvals, permits or
authorizations; and (b) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement.  If required to comply with applicable Law,
Parent and the Company shall each promptly (but in no event more than five
Business Days following the date of this Agreement) make either an advanced
ruling certificate request or a pre-merger notification under the Competition
Act with respect to the Offer and the Merger and shall promptly thereafter make
any other required submissions under the Competition Act.  If required to comply
with applicable Law, Parent shall promptly (but in no event more than five
Business Days following the date of this Agreement) request that the Investment
Review Division of Industry Canada confirm that the investment by Parent in the
Company’s Canadian business is not reviewable under the Investment Canada Act. 
Failing receipt by Parent of such confirmation, if required, on or before the
tenth Business Day after the commencement of the Offer or such later date as may
be agreed by Parent and the Company, Parent shall promptly file with Industry
Canada an application for review of the investment by Parent in the Company’s
Canadian business.  Parent shall make any other required filings or submissions
under the Investment Canada Act.

 

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Section 6.16                                Employee Benefit Plans.

 

From and after the Effective Time, the Surviving Corporation shall honor in
accordance with their terms, the employment, severance, indemnification or
similar agreements between the Company and certain employees; provided, however,
that nothing herein shall preclude Parent or any of its Affiliates from having
the right to terminate the employment of any employee, with or without cause, or
to amend or to terminate any employee benefit plan established, maintained or
contributed to by Parent or any of its Affiliates.

 

Section 6.17                                Amendment of Stock Options.

 

As soon as practicable following the date hereof, the Company shall use its
commercially reasonable efforts to cause each issued and outstanding option
under the Company Stock Plans to be amended to permit the conversion of such
options at the Effective Time as provided in Section 3.08 hereof to the extent
such options do not permit such treatment; provided, however, that in no event
shall the Company provide any benefit or consideration to the holder of any such
option in obtaining such amendment or take any other action prohibited in
connection with the transactions contemplated by this Agreement under Rule
14d-10 promulgated under the Exchange Act.

 

ARTICLE VII
CONDITIONS TO THE MERGER

 

Section 7.01                                Conditions to the Obligations of
Each Party.

 

The obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:

 

(i)                                     if approval of the Merger by the holders
of Shares is required by applicable Law, this Agreement and the Merger shall
have been approved by the Company Required Vote; provided that Parent and Merger
Subsidiary shall have voted all of their Shares in favor of the Agreement and
the Merger;

 

(ii)                                  no provision of any applicable Law or
Order of any Governmental Authority of competent jurisdiction which has the
effect of making the Merger illegal or shall otherwise restrain or prohibit the
consummation of the Merger shall be in effect (each party agreeing to use its
commercially reasonable efforts, including appeals to higher courts, to have any
Order lifted);

 

(iii)                               all consents, authorizations, Orders and
approvals of (or filings or registrations with) any Governmental Authority
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Time and except where the

 

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failure to have obtained or made any such consent, authorization, Order,
approval, filing or registration would not make the Merger illegal or have a
Company Material Adverse Effect or a Parent Material Adverse Effect, as the case
may be; and

 

(iv)                              Merger Subsidiary shall have accepted for
purchase and paid for the Shares tendered pursuant to the Offer.

 

Section 7.02                                Conditions to the Obligations of
Parent and Merger Subsidiary.

 

The obligations of Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the further condition that the Company shall have
performed in all material respects, all of its obligations hereunder required to
be performed by it at or prior to the Effective Time, except where the failure
to have so performed would not have a Company Material Adverse Effect.

 

ARTICLE VIII
TERMINATION

 

Section 8.01                                Termination.

 

This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time (notwithstanding any approval of this Agreement by
the stockholders of the Company):

 

(a)                                  by mutual written consent of the Company
and Parent;

 

(b)                                 by either the Company or Parent if the
Merger has not been consummated on or before November 30, 2004 (the “End Date”);
provided that in the event the Merger has not been consummated on or before
November 30, 2004 and prior to such date the SEC shall have reviewed or provided
oral or written comments to the Offer Documents or the Proxy Statement, the End
Date shall be extended to the extent such review or comment process delayed the
consummation of the Merger beyond November 30, 2004; provided further that in no
event shall the End Date extend beyond January 31, 2005 (provided that the right
to terminate this Agreement under this clause (b) shall not be available to any
party whose failure to fulfil any of its material obligations under this
Agreement has been the cause of the failure to consummate the Merger by such
date);

 

(c)                                  by either the Company or Parent, if there
shall be any applicable Law that makes consummation of the Offer or the Merger
illegal or otherwise prohibited or if any Order of a Governmental Authority of
competent jurisdiction shall restrain or prohibit the consummation of the Offer
or the Merger, and such Order shall become final and nonappealable; provided,
that the right to terminate this Agreement under this clause (c) shall not be
available to any party who has not used its commercially reasonable efforts to
have such Order lifted;

 

(d)                                 prior to the Acceptance Date by (x) the
Company if there has been a breach by Parent of any representation or warranty
of Parent contained in this Agreement

 

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which would have a Parent Material Adverse Effect, (y) Parent if there has been
a breach of the representations and warranties or covenants or agreements of the
Company contained in this Agreement such that the condition to the Offer set
forth in clause (e) of Annex A would not be satisfied, or (z) by the Company if
Parent shall not have performed in all material respects each material
obligation, agreement and covenant to be performed with by it under the
Agreement, and in each of clauses (x), (y) and (z), such breach is not curable
or, if curable, is not cured within 30 days after written notice of such breach
is given by the terminating party to the other party;

 

(e)                                  by Parent prior to the Acceptance Date, if,
(i) the Board of Directors of the Company shall have failed to recommend, or
shall have withdrawn or modified in a manner adverse to Parent, its approval or
recommendation of this Agreement, the Offer or the Merger, or shall have
recommended, or entered into, or publicly announced its intention to enter into,
an agreement or an agreement in principle with respect to a Superior Proposal
(or shall have resolved to do any of the foregoing), (ii) the Company shall have
breached in any material respect any of its obligations under Section 6.03,
(iii) the Board of Directors of the Company shall have refused to affirm its
approval or recommendation of this Agreement, the Offer or the Merger within ten
Business Days of any written request from Parent, (iv) a competing tender or
exchange offer constituting an Acquisition Proposal shall have been commenced
and the Company shall not have sent holders of the Shares pursuant to Rule 14e-2
promulgated under the Exchange Act, (within ten Business Days after such tender
or exchange offer is first published, sent or given (within the meaning of Rule
14e-2)), a statement disclosing that the Board of Directors of the Company
recommends rejection of such Acquisition Proposal, (v) the Board of Directors of
the Company shall exempt any other Person from the provisions of Section 203 of
the DGCL, or (vi) the Company or its Board of Directors publicly announces its
intention to do, or resolves to do, any of the foregoing;

 

(f)                                    the Company prior to the Acceptance Date,
if the Board of Directors of the Company shall approve, subject to complying
with the terms of this Agreement, a Superior Proposal in accordance with
Section 6.03; provided, however, that the Company may not terminate pursuant to
this Section 8.01(f) unless (i) such Superior Proposal did not result from the
Company’s breach of Section 6.03, (ii) the Company’s Board of Directors
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Parent in writing that
it intends to enter into such an agreement, attaching the most current version
of such agreement to such notice (including any subsequent amendments or
modifications), (iii) during the three Business Day period after the Company’s
notice (the “Negotiation Period”), (x) the Company shall have offered to
negotiate with (and, if accepted, negotiate with), and shall have instructed its
financial and legal advisors to offer to negotiate with (and if accepted,
negotiate with), Parent to attempt to make such adjustments in the terms and
conditions of this Agreement as will enable the Company to proceed with this
Agreement; provided, that the Company shall not be required to comply with this
clause (iii) if the next scheduled expiration date of the Offer is scheduled to
expire on or before the third Business Day after the

 

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end of the Negotiation Period unless Parent agrees in writing to extend the
Offer until 5:00 p.m. New York City time on the third Business Day after the end
of the Negotiation Period and (y) the Board of Directors of the Company shall
have determined in good faith, after consultation with its independent financial
advisors and outside legal counsel and, after considering the results of such
negotiations and the revised proposal made by Parent, if any, that the Superior
Proposal giving rise to the Company’s notice (including any subsequent
amendments or modifications) continues to be a Superior Proposal, (iv) such
termination is within three Business Days following the Negotiation Period, if
any, and (v) no termination pursuant to this Section 8.01(f) shall be effective
unless the Company shall provide Parent with a written acknowledgment from each
other party to the Superior Proposal that it is aware of the amounts due Parent
under Section 9.04 and that such party waives any right it may have to contest
any such amounts payable under Section 9.04;

 

(g)                                 by the Company, if the Offer has not been
commenced within seven Business Days following the date of this Agreement
(except as a result of any material breach of this Agreement by the Company);
provided that such right of termination shall have been exercised by the Company
prior to the commencement of the Offer;

 

(h)                                 by Parent or the Company if as the result of
the failure of any of the conditions set forth in Annex A hereto, the Offer
shall have terminated or expired in accordance with its terms (including after
giving effect to any extensions, if any, pursuant to Section 2.01(c)) without
Merger Subsidiary having purchased any Shares pursuant to the Offer; provided,
however, that the right to terminate this Agreement pursuant to this
Section 8.01(h) shall not be available to any party whose failure to fulfil any
of its material obligations under this Agreement has been the cause of such
failure;

 

(i)                                     by Parent if either the Chief Executive
Officer or the Chief Financial Officer of the Company fails to provide the
certifications required under Section 302 or Section 906 of the Sarbanes-Oxley
Act with respect to any Annual Report on Form 10-K or Quarterly Report on Form
10-Q of the Company at the time such report is required to be filed under the
Exchange Act; or

 

(j)                                     by Parent if, on or prior to August 15,
2004, the Company shall have not publicly filed its Quarterly Report on Form
10-Q for the fiscal quarter ending June 30, 2004, (ii) at any time after the
date hereof, there is any material restatement of the Company’s consolidated
financial statements, or any material change to the Company’s previously
announced financial results, or (iii) the Company shall have filed with the SEC,
or otherwise announced, one or more amendments to a Company SEC Report in which
the Company makes a downward material restatement of the proved Hydrocarbon
reserves of the Company and its Subsidiaries.

 

The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.

 

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Section 8.02                                Effect of Termination.

 

If this Agreement is terminated pursuant to Section 8.01, this Agreement (but
not the Confidentiality Agreement) shall become void and of no effect with no
liability on the part of any party (or any stockholder or Representative of such
party) to the other party hereto; provided that, if such termination shall
result from the wilful (i) failure of a party to fulfil a condition to the
performance of the obligations of the other parties, (ii) failure of a party to
perform a material covenant hereof, or (iii) breach by a party hereto of any
representation or warranty or agreement contained herein, such party shall be
fully liable for any and all liabilities and damages incurred or suffered by the
other parties as a result of such wilful failure or breach; provided further,
however, that notwithstanding the foregoing or anything else in this Agreement
to the contrary, the provisions of this Section 8.02 and Article IX shall
survive any termination hereof.

 

ARTICLE IX
MISCELLANEOUS

Section 9.01                                Notices.

 

All notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given,

 

(a)                                  if to Parent or Merger Subsidiary, to:

 

Forest Oil Corporation

1600 Broadway

Suite 2200

Denver, CO 80202

Telephone: (303) 812-1400

Telecopy:   (303) 812-1510

Attention:   General Counsel

 

with a required copy (which shall not constitute notice) to:

 

Vinson & Elkins LLP

2300 First City Tower

1001 Fannin

Houston, Texas 77002-6760

Telephone:                                    (713) 758-2222

Telecopy:              (713) 615-5637

Attention:                                         Scott N. Wulfe

 

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(b)                                 if to the Company, to:

 

The Wiser Oil Company

8115 Preston Road

Suite 400

Dallas, Texas 75225

Telephone: (214) 265-0080

Telecopy:(214) 373-3610

Attention:                                         George K. Hickox, Jr.
Chief Executive Officer

 

with a required copy (which shall not constitute notice) to:

 

Reed Smith LLP

2500 One Liberty Place

Philadelphia, Pennsylvania 19103

Telephone:                                    (215) 851-8800

Telecopy:                                           (215) 851-1420

Attention:                                         Lori L. Lasher, Esq.

 

or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto.  Each such notice, request or
other communication shall be effective when received at the address specified in
this Section (or on the next Business Day if received after 5:00 p.m. local time
on a Business Day or if received on a day that is not a Business Day).

 

Section 9.02                                Survival of Representations and
Warranties and Agreements.

 

The representations and warranties contained herein and in any certificate or
other writing delivered pursuant hereto shall not survive the Effective Time. 
This Section 9.02 shall not limit any covenant or agreement of the parties to
this Agreement which, by its terms, contemplates performance after the Effective
Time.

 

Section 9.03                                Amendments; No Waivers.

 

(a)                                  Any provision of this Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the Company,
Parent and Merger Subsidiary or, in the case of a waiver, by the party against
whom the waiver is to be effective; provided that (i) any waiver or amendment
shall be effective against a party only if the Board of Directors of such party
approves such waiver or amendment and (ii) after the adoption of this Agreement
by the stockholders of the Company, no such amendment or waiver shall, without
the further approval of such stockholders and each party’s Board of Directors,
alter or change (x) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (y) prior to the
Effective Time, any term of the Certificate of Incorporation of the Surviving
Corporation or (z) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company.  Notwithstanding any provision of this Section 9.03 to the
contrary, no provision of this Agreement may be waived by the

 

49

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Company or amended following the purchase by Parent or Merger Subsidiary of
Shares pursuant to the Offer unless such amendment or waiver is approved by the
affirmative vote of a majority of the Independent Directors.

 

(b)                                 No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law.

 

Section 9.04                                Fees and Expenses.

 

(a)                                  Except as otherwise provided in this
Section 9.04, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such cost or expense.

 

(b)                                 The Company will pay, or cause to be paid to
Parent by wire transfer of immediately available funds to an account designated
by Parent, in accordance with Section 9.04(c), the sum of $11.0 million if:

 

(i)                                     this Agreement is terminated pursuant to
Section 8.01(e) or Section 8.01(f); or

 

(ii)                                  this Agreement is terminated pursuant to
Section 8.01(h) and, with respect to this clause (ii) only, at the time of such
termination (x) the Minimum Condition has not been satisfied, (y) an Acquisition
Proposal existed or had been previously announced and (z) prior to the
nine-month anniversary of such termination, the Company or any of its
Subsidiaries consummates any Acquisition Proposal.

 

(c)                                  Any amounts payable pursuant to
Section 9.04(b) (i) shall be payable on the earlier of (i) the 90th day after
such termination and (ii) concurrently with the consummation of an Acquisition
Proposal.  Any amounts payable pursuant to Section 9.04(b)(ii) shall be payable
concurrently with the consummation of an Acquisition Proposal.

 

(d)                                 The Company acknowledges that the agreements
contained in this Section 9.04 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Merger Subsidiary would not have entered into this Agreement.  Accordingly, if
the Company fails to pay promptly any amounts due pursuant to this Section 9.04,
and, in order to obtain such payment, Parent commences a suit which results in a
judgment against the Company for the fee or expense reimbursement set forth in
this Section 9.04, the Company shall pay to Parent its costs and expenses
(including attorneys’ fees and expenses) in connection with such suit, together
with interest from the date of termination of this Agreement on the amounts so
owed at the lesser of the prime rate of Chase Manhattan Bank per annum in effect
from time to time during such period, plus 2% or, if lower, the maximum rate
permitted by Law.

 

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Section 9.05                                Successors and Assigns.

 

The provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, provided that
no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other parties hereto
(and which transfer shall not relieve Parent and Merger Subsidiary of their
obligations hereunder in the event of a breach by their transferee).

 

Section 9.06                                Governing Law.

 

This Agreement shall be construed in accordance with and governed by the Laws of
the State of Delaware, without regard to the Laws that might otherwise govern
under applicable principles of conflicts of Law.

 

Section 9.07                                Jurisdiction.

 

Each party to this Agreement hereby irrevocably agrees that any legal action or
proceeding arising out of or relating to this Agreement or any agreements or
transactions contemplated hereby shall be brought in the state courts of the
State of Delaware or the United States District Court for the District of
Delaware and hereby expressly submits to the personal jurisdiction and venue of
such courts for the purposes thereof and expressly waives any claim of improper
venue and any claim that such courts are an inconvenient forum.  Each party
hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the address
set forth or referred to in Section 9.01, such service to become effective ten
days after such mailing.

 

Section 9.08                                Counterparts; Effectiveness.

 

This Agreement may be signed in any number of counterparts (including by
facsimile), each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.  This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.

 

Section 9.09                                Entire Agreement.

 

This Agreement, the Company Disclosure Letter and the Confidentiality Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement.  No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto.  Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder except for the provisions of Section 6.06, which
are intended for the benefit of the Company’s former and present officers and
directors.

 

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Section 9.10                                Headings.

 

The table of contents and headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

 

Section 9.11                                Severability.

 

If any term or other provision of this Agreement is invalid, illegal or
unenforceable, all other terms and provisions of this Agreement shall remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party.

 

Section 9.12                                WAIVER OF JURY TRIAL.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 9.13                                Specific Performance.

 

The parties hereto agree that irreparable damage would occur in the event any of
the provisions of this Agreement were not to be performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of
the terms hereof in addition to any other remedies at Law or in equity.

 

Section 9.14                                Limitations on Warranties.

 

(a)                                  Except for the representations and
warranties contained in is Agreement, the Company Disclosure Letter and any
agreements or certificates delivered pursuant to this Agreement, the Company
makes no other express or implied representation or warranty to Parent or Merger
Subsidiary. Parent and Merger Subsidiary each acknowledge that, in entering into
this Agreement, it has not relied on any representations or warranties of the
Company other than the representations and warranties of the Company set forth
in this Agreement, the Company Disclosure Letter or any agreements or
certificates delivered pursuant to this Agreement.

 

(b)                                 Except for the representations and
warranties contained in this Agreement and any agreements or certificates
delivered pursuant to this Agreement, Parent and Merger Subsidiary make no other
express or implied representation or warranty to the Company. The Company
acknowledges that, in entering into this Agreement, it has not relied on any
representations or warranties of Parent and Merger Subsidiary other than the
representations and warranties of Parent and Merger Subsidiary set forth in this
Agreement or any agreements or certificates delivered pursuant to this
Agreement.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

 

Forest Oil Company

 

 

 

 

 

By:

 

 

 

Name:

Newton W. Wilson III

 

 

Title:

Senior Vice President, General Counsel and

 

 

Secretary

 

 

 

 

 

 

 

 

 

The Wiser Oil Company

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

George K. Hickox, Jr.

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

 

TWOCO Acquisition Corp.

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

Newton W. Wilson III

 

Title:

Vice President

 

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Annex A

 

Notwithstanding any other provision of the Offer, Parent and Merger Subsidiary
shall not be required to accept for payment or purchase or pay for any Shares,
may postpone the acceptance for payment of Shares tendered pursuant to the
Offer, and may terminate the Offer in each case in accordance with the
Agreement, if (w) the Minimum Condition (as defined below) shall not have been
satisfied by the expiration date of the Offer or (x) the applicable waiting
period under the Competition Act shall not have expired or an advance ruling
certificate pursuant to Section 102 of the Competition Act shall not have been
issued by the Commissioner of Competition appointed under the Competition Act
(the “Commissioner”) or, in the alternative, a “no action letter” shall not have
been issued by the Commissioner indicating that the Commissioner has determined
not to make an application for an order under Section 92 of the Competition Act,
(y) the Investment Review Division of Industry Canada has not confirmed that the
investment by Parent in the Company’s Canadian business is not reviewable under
the Investment Canada Act and if an application for review of such investment
has been filed by Parent with Industry Canada, the investment has not been
approved, or (z) at any time on or after the date of this Agreement and before
the acceptances of Shares for payment by Merger Subsidiary, any of the following
conditions exist:

 

(a) there shall be instituted or pending any action or proceeding by any
Governmental Authority (i) challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
making of the Offer, the acceptance for payment of or payment for some of or all
the Shares by Parent or Merger Subsidiary or the consummation of the Merger,
(ii) seeking to obtain damages or otherwise directly or indirectly relating to
the transactions contemplated by this Agreement, including the Offer or the
Merger or the Stockholder Agreements, (iii) seeking to restrain or prohibit
Parent’s ownership or operation (or that of its respective Subsidiaries or
Affiliates) of all or any material portion of the business or assets of the
Company and its Subsidiaries, taken as a whole, or of Parent and its
Subsidiaries, taken as a whole, or to compel Parent or any of its Subsidiaries
or Affiliates to dispose of or hold separate all or any material portion of the
business or assets of the Company and its Subsidiaries, taken as a whole, or of
Parent and its Subsidiaries, taken as a whole, (iv) seeking to impose or confirm
material limitations on the ability of Parent, Merger Subsidiary or any of
Parent’s other Subsidiaries or Affiliates effectively to exercise full rights of
ownership of the Shares, including the right to vote any Shares acquired or
owned by Parent, Merger Subsidiary or any of Parent’s other Subsidiaries or
Affiliates on all matters properly presented to the Company’s stockholders, (v)
seeking to require divestiture by Parent, Merger Subsidiary or any of Parent’s
other Subsidiaries or Affiliates of any Shares, (vi) seeking to compel Parent or
any of its Subsidiaries to dispose of or hold separate any material portion of
(A) the business, assets or properties of the Company and its Subsidiaries,
taken as a whole, or (B) the business, assets or properties of Parent and its
Subsidiaries, taken as a whole or (vii) that otherwise, in the good faith
judgment of Parent, has a Company Material Adverse Effect; or

 

(b) there shall have been any action taken, or any Law or Order, enacted,
enforced, promulgated, issued or deemed applicable to the Offer or the Merger,
by any Governmental Authority or there shall be instituted or pending any action
or proceeding by any Person, domestic or foreign, before any Governmental
Authority, that in either case, in the good faith judgment of Parent, is
reasonably likely, directly or indirectly, to result in any of the consequences
referred to in clauses (i) through (vii) of paragraph (a) above; or

 

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(c) Since December 31, 2003, there has been any event, occurrence or development
or state of circumstances or facts which, individually or in the aggregate, has
had or would reasonably be expected to have a Company Material Adverse Effect;
or

 

(d)  the Board of Directors of the Company shall have failed to recommend, or
shall have withdrawn or modified in a manner adverse to Parent, its approval or
recommendation of this Agreement, the Offer or the Merger, or shall have
recommended, or entered into, or publicly announced its intention to enter into,
an agreement or an agreement in principle with respect to a Superior Proposal
(or shall have resolved to do any of the foregoing); or

 

(e) (i) any of the representations and warranties of the Company contained in
this Agreement shall not be true and correct (without giving effect to any
materiality or Company Material Adverse Effect qualifiers set forth therein), as
of the date of this Agreement and as of such latter time, other than such
representations and warranties that are made as of a specified date, which
representations and warranties shall not have been be true and correct as of
such date, except, in each case, where the failure of such representations and
warranties to be true and correct (without giving effect to any materiality or
Company Material Adverse Effect qualifiers set forth therein) has not had and
would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect, or (ii) any of the representations and
warranties of the Company contained in Sections 4.03 (Capitalization), 4.04
(Authorization of Agreement; Board Recommendation; Required Vote) or 4.24(d)
(Payments to Stockholders) shall not be true and correct (without giving effect
to any materiality or Company Material Adverse Effect qualifiers set forth
therein), as of the date of this Agreement and as of such latter date, other
than such representations and warranties that are made as of a specified date,
which representations and warranties shall not have been be true and correct as
of such date in all material respects, or (iii) the Company shall not have
performed in all material respects each obligation, agreement and covenant to be
performed by it under the Agreement; or

 

(f) at least 95% of the Shares subject to issued and outstanding options under
the Company Stock Plans shall have been amended as provided in Section 6.17 to
permit the conversion thereof in accordance with Section 3.08; or

 

(g)  this Agreement shall have been terminated in accordance with its terms.

 

For purposes of this Annex A, the term “Minimum Condition” means that there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer that number of Shares that would constitute more than 50% of the
voting power (determined on a fully diluted basis but excluding the Company
Warrants) on the date of purchase of all the securities of the Company entitled
to vote in the election of directors or in a merger.

 

The foregoing conditions (other than the Minimum Condition) are for the sole
benefit of Parent and Merger Subsidiary and may, except as provided otherwise in
Section 2.01(a) of this Agreement, be waived by Parent and Merger Subsidiary in
whole or in part at any time and from time to time in their discretion.  The
failure by Parent or Merger Subsidiary at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver

 

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with respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time
prior to the Effective Time.

 

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Exhibit A

 

Agreement and Plan of Merger

 

SCHEDULE OF DEFINED TERMS

 

The following terms when used in the Agreement shall have the meanings set forth
below:

 

“Acceptance Date” means the first date on which the Merger Subsidiary purchases
any Shares pursuant to the Offer.

 

 “Acquisition Proposal” means any contract, proposal, offer or other indication
of interest (whether or not in writing and whether or not delivered to the
stockholders of the Company generally) relating to any of the following (other
than the transactions contemplated by this Agreement or the Merger):  (a) any
merger, share exchange, take-over bid, tender offer, recapitalization,
consolidation or other business combination directly or indirectly involving the
Company or its Subsidiaries, (b) the acquisition in any manner, directly or
indirectly, of any business that generates 15% or more of the Company’s
consolidated net revenues, net income or stockholders’ equity, or assets
representing 15% of the book value of the assets of the Company and its
Subsidiaries, taken as a whole, (or any license, lease, long-term supply
agreement, exchange, mortgage, pledge or other arrangement having a similar
economic effect) in each case in a single transaction or a series of related
transactions, or (c) any acquisition of beneficial ownership (as defined under
Section 13(d) of the Exchange Act direct or indirect) of 15% or more of the
Shares or the capital stock of the Company whether in a single transaction or a
series of related transactions.

 

“Adverse Market Change” means any general suspension of trading in, or
limitation on prices for, securities on the NYSE, any declaration of a banking
moratorium by any Governmental Authority or any general suspension of payments
in respect of banks in the United States that regularly participate in the
United States market in loans to large corporations, any material limitation by
any Governmental Authority in the United States that materially affects the
extension of credit generally by banks or other lending institutions in the
United States that regularly participate in the market in loans to large
corporations, any commencement of a war involving the United States, any
commencement of war involving the United States or any commencement of armed
hostilities or other national or international calamity, including a significant
terrorist attack or similar event, involving the United States that has a
material adverse effect on bank syndication or financial markets in the United
States or, in the case of any of the foregoing occurrences existing on or at the
time of commencement of the Offer, a material acceleration or worsening thereof.

 

“Affiliate” means, when used with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.  As used in the definition of “Affiliate,” the term “control” means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

 

 “Agreement” shall have the meaning as set forth in the opening paragraph.

 

“Authorization” shall mean any and all permits, licenses, authorizations,
franchises, orders, certificates, registrations or other approvals granted by
any Governmental Authority.

 

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“Benefit Plans” shall mean, with respect to a specified Person, any employee
pension benefit plan (whether or not insured), as defined in Section 3(2) of
ERISA, any employee welfare benefit plan (whether or not insured) as defined in
Section 3(1) of ERISA, any plans that would be employee pension benefit plans or
employee welfare benefit plans if they were subject to ERISA, such as foreign
plans and plans for directors, any stock bonus or other equity compensation,
stock ownership, stock option, stock purchase, stock appreciation rights,
phantom stock, severance, retention, employment, vacation, holiday, sick leave,
change-in-control, deferred compensation and any bonus or incentive compensation
plan, agreement, program or policy (whether qualified or nonqualified, written
or oral) sponsored, maintained, or contributed to by the specified Person or any
of its Subsidiaries for the benefit of any of the present or former directors,
officers, employees, agents, consultants or other similar representatives
providing services to or for the specified Person or any of its Subsidiaries in
connection with such services or any such plans which have been so sponsored,
maintained or contributed to within six years prior to the date of this
Agreement; provided, however, that such term shall not include (a) routine
employment policies and procedures developed and applied in the ordinary course
of business and consistent with past practice, including wage policies, (b)
workers compensation insurance and (c) directors and officers liability
insurance.

 

“Board of Directors” means, with respect to any Person, the board of directors
of such Person.

 

“Business Day” means any day, other than Saturday, Sunday or a United States
federal holiday, and shall consist of the time period from 12:01 a.m. through
12:00 midnight Eastern time; provided that for purposes of Article II, “Business
Day” as it relates to time periods prescribed under the Securities Act or the
Exchange Act shall have the meaning given to such term in Rule 14d-1(g)(3) of
the Exchange Act.

 

“Bylaws” means, with respect to any Person, the bylaws of such Person in effect
on the date hereof unless the context otherwise requires.

 

“Certificate of Incorporation” means, with respect to any Person, the
certificate of incorporation or articles of amalgamation, as applicable, of such
Person in effect on the date hereof unless the context otherwise requires.

 

“Certificate of Merger” shall have the meaning as set forth in Section 3.01(b).

 

“Certificates” shall have the meaning as set forth in Section 3.07(b).

 

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.

 

“Company” shall have the meaning as set forth in the opening paragraph.

 

“Company Annual Report” shall mean the Annual Report on Form 10-K of the Company
for the year ended December 31, 2003 filed with the SEC.

 

“Company Benefit Plans” shall mean Benefit Plans with respect to the Company or
any of its Subsidiaries.

 

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“Company Disclosure Documents” shall have the meaning as set forth in
Section 4.24(a).

 

“Company Disclosure Letter” means the disclosure letter from the Company to
Parent, dated the date hereof.

 

“Company Material Adverse Effect” shall mean a Material Adverse Effect on the
Company; provided, that in no event shall any of the following constitute a
Company Material Adverse Effect: (i) any change or effect resulting from changes
in general economic, regulatory or political conditions, conditions in the
United States or worldwide capital markets or any outbreak of hostilities or war
(except for any changes referred to in this subclause which, individually or in
the aggregate, disproportionately affect the business, assets, properties,
liabilities, results of operations or financial condition of the Company and its
Subsidiaries taken as a whole, as compared to other industry participants), (ii)
any change or effect that affects the oil and gas exploration and development
industry or exploration and production companies of a similar size to the
Company and a majority of whose reserves are natural gas generally (including
changes in commodity prices, general market prices and regulatory changes
affecting the oil and gas industry or exploration and production companies of a
similar size to the Company and a majority of whose reserves are natural gas
generally) (except for any changes referred to in this subclause which,
individually or in the aggregate, disproportionately affect the business,
assets, properties, liabilities, results of operations or financial condition of
the Company and its Subsidiaries taken as a whole, as compared to other industry
participants, and exploration and production companies of a similar size to the
Company and a majority of whose reserves are natural gas), (iii) any change in
the trading prices or trading volume of the Company’s capital stock (but not any
change or effect underlying such change in prices or volume to the extent such
change or effect would otherwise constitute a Company Material Adverse Effect),
(iv) any failure by the Company to meet any published revenue or earnings
projections (but not any change or effect underlying such failure to the extent
such change or effect would otherwise constitute a Company Material Adverse
Effect), (v) any change or effect resulting from the announcement or pendency of
this Agreement, the Offer, the Merger or the other transactions contemplated
hereby (provided that the exception in this subclause (v) shall not apply to the
use of the term “Material Adverse Effect” with respect to the representations
and warranties contained in Sections 4.06, 4.13(i) or 4.13(j) or clause (e) of
Annex A insofar as it relates to the representations and warranties contained in
Sections 4.06, 4.13(i) or 4.13(j)), or (vi) any change or effect resulting from
a change in the laws applicable to the Company or any of its Subsidiaries.

 

“Company Payout Balances” means the status, as of the dates of Company’s
calculations, of the recovery by Company or a third party of a cost amount
specified in the contract relating to a well out of the revenue from such well
where the net revenue interest of Company therein will be reduced or increased
when such amount has been recovered.

 

“Company Preferred Stock” shall mean the preferred stock of the Company, par
value $10.00 per share.

 

“Company Reserve Report” shall have the meaning as set forth in Section 4.19.

 

“Company Stock Options” shall have the meaning as set forth in Section 3.08(a).

 

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“Company Stock Plans” shall mean The Wiser Oil Company 1991 Stock Incentive Plan
and The Wiser Oil Company 1991 Non-Employee Directors’ Option Plan, each as
amended through the date hereof.

 

“Company Warrants” shall mean warrants to purchase 741,716 Shares at an exercise
price of $4.25 per share.

 

“Company’s Consolidated Balance Sheet” shall mean the consolidated balance sheet
of the Company as of March 31, 2004 included in the Company’s Consolidated
Financial Statements.

 

“Company’s Consolidated Financial Statements” shall mean the audited
consolidated balance sheets of the Company and its Subsidiaries as of
December 31, 2002 and 2003 and the related consolidated statements of operations
and cash flows for the fiscal years ended December 31, 2001, 2002 and 2003,
together with the notes thereto and included in the Company Annual Report and
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of March 31, 2004 and the related unaudited consolidated statements of
operations and cash flows for the three months ended March 31, 2004 and included
in the Company Current Year’s SEC Reports.

 

“Company’s Disclosure Letter” shall mean a letter of even date herewith
delivered by the Company to the Parent Companies prior to the execution of the
Agreement and certified by a duly authorized officer of the Company, which
identifies exceptions to the Company’s representations and warranties contained
in Article IV by specific Section and subsection references.

 

“Competition Act” means the Competition Act (Canada).

 

“Confidentiality Agreement” shall mean that certain confidentiality agreement
between the Parent and the Company dated February 23, 2004.

 

“Control” (including the terms “controlled,” “controlled by” and “under common
control with”) means (except where another definition is expressly indicated)
the possession, directly or indirectly or as trustee or executor, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of stock or as trustee or executor, by contract or
credit arrangement or otherwise.

 

“Court” shall mean any court or arbitration tribunal of the United States, any
foreign country or any domestic or foreign state, and any political subdivision
thereof.

 

“Current Company Benefit Plans” shall mean Benefit Plans that are sponsored,
maintained or contributed to by the Company or any of its Subsidiaries as of the
date of this Agreement.

 

“Current Year’s SEC Reports” of a Person shall mean SEC Reports filed or
required to be filed by such Person since December 31, 2003.

 

“Derivative Transaction” shall have the meaning as set forth in Section 4.20(b).

 

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“Delaware Secretary of State” shall have the meaning as set forth in
Section 3.01(b).

 

“DGCL” shall mean the General Corporation Law of the State of Delaware.

 

“Disbursing Agent” shall have the meaning as set forth in Section 3.07(a).

 

“Dissenting Shares” shall have the meaning as set forth in Section 3.09(a).

 

“Effective Time” shall have the meaning as set forth in Section 3.01(b).

 

“End Date” shall have the meaning as set forth in Section 8.01(b).

 

“Environmental Law or Laws” shall mean any and all Laws pertaining to health,
safety or the environment currently in effect and applicable to a specified
Person and its Subsidiaries, including the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980
(“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, the Oil Pollution Act of 1990, as amended
(“OPA”), any state or local Laws implementing the foregoing federal Laws, and
all other environmental conservation or protection Laws.  For purposes of the
Agreement, the terms “hazardous substance” and “release” have the meanings
specified in CERCLA; provided, however, that, to the extent the Laws of the
state or locality in which the property is located establish a meaning for
“hazardous substance” or “release” that is broader than that specified in either
CERCLA, such broader meaning shall apply, and the term “hazardous substance”
shall include all dehydration and treating wastes, waste (or spilled) oil, and
waste (or spilled) petroleum products, and (to the extent in excess of
background levels) radioactive material, even if such are specifically exempt
from classification as hazardous substances pursuant to CERCLA or RCRA or the
analogous statutes of any jurisdiction applicable to the specified Person or its
Subsidiaries or any of their respective properties or assets.

 

“Equity Securities” shall mean, with respect to a specified Person, any shares
of capital stock of, or other equity interests in, or any securities that are
convertible into or exchangeable for any shares of capital stock of, or other
equity interests in, or any options, warrants or rights of any kind to acquire
any shares of capital stock of, or other equity interests in, such Person.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the Regulations promulgated thereunder.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the Regulations promulgated thereunder.

 

“Exchange Fund” shall have the meaning as set forth in Section 3.07(a).

 

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“GAAP” shall mean accounting principles generally accepted in the United States
as in effect from time to time.

 

“Good and Marketable Title” shall mean such title that: (i) is deducible of
record (from the records of the applicable parish or county or (A) in the case
of federal leases, from the records of the applicable office of the Minerals
Management Service or Bureau of Land Management, (B) in the case of Indian
leases, from the applicable office of the Bureau of Indian Affairs, (C) in the
case of state leases, from the records of the applicable state land office) or
is assignable to Company or its Subsidiaries out of an interest of record (as so
defined) because of the performance by Company or its Subsidiaries of all
operations required to earn an enforceable right to such assignment; (ii) except
as set forth in Section 4.18(b) of the Company’s Disclosure Letter, entitles
Company or its Subsidiaries to receive a percentage of Hydrocarbons produced,
saved and marketed from such well or property not less than the interest set
forth in the Company Reserve Report with respect to each proved property
evaluated therein under the caption “Net Revenue Interest” or “NRI” without
reduction during the life of such property except as stated in the Company
Reserve Report; and (iii) obligates Company and its Subsidiaries to pay costs
and expenses relating to each such proved property in an amount not greater than
the interest set forth under the caption “Working Interest” or “WI” in the
Company Reserve Report with respect to such property without increase over the
life of such property except as shown on the Company Reserve Report.

 

“Governmental Authority” shall mean any governmental agency or authority
(including a Court) of the United States, any foreign country, or any domestic
or foreign state, and any political subdivision thereof, and shall include any
multinational authority having governmental or quasi-governmental powers.

 

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the Regulations promulgated thereunder.

 

“Hydrocarbons” shall mean oil, condensate, gas, casinghead gas and other liquid
or gaseous hydrocarbons.

 

“Independent Directors” shall have the meaning as set forth in Section 2.03(b).

 

“Intellectual Property” shall mean all patents, patent rights, trademarks,
rights, trade names, trade name rights, service marks, service mark rights,
copyrights, technology, know-how, processes and other proprietary intellectual
property rights and computer programs.

 

“Investment Canada Act” means the Investment Canada Act (Canada).

 

“IRS” shall mean the Internal Revenue Service.

 

“Knowledge” shall mean, with respect to either the Company or the Parent, the
actual knowledge of any executive officer of such party.

 

“Law” shall mean all laws, statutes, ordinances and Regulations of the United
States, any state of the United States, any foreign country, any foreign state
and any political subdivision thereof, including all decisions of Courts having
the effect of law in each such jurisdiction.

 

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“Lien” shall mean any mortgage, pledge, security interest, adverse claim,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing), any conditional sale or other title retention agreement, any
lease in the nature thereof or the filing of or agreement to give any financing
statement under the Laws of any jurisdiction.

 

“Material Adverse Effect” shall mean with respect to a specified Person, any
change, effect, event, circumstance or occurrence with respect to the business,
condition (financial or otherwise), results of operations, properties, assets,
liabilities or obligations of such Person or those of its Subsidiaries, that is,
or would be reasonably expected to have a material adverse effect on the current
or future business, assets, properties, liabilities or obligations, results of
operations or condition (financial or otherwise) of the Person and its
Subsidiaries, taken as a whole, or on the ability of the Person to perform in a
timely manner its obligations under this Agreement or consummate the
transactions contemplated by this Agreement.

 

“Material Contract” shall mean each contract, lease, indenture, agreement,
arrangement or understanding to which the Company or any of its Subsidiaries is
a party or to which any of the assets or operations of the Company or any of its
Subsidiaries is subject that (a) is of a type that would be required to be
included as an exhibit to a registration statement on Form S-1 pursuant to
Paragraph (2), (4) or (10) of Item 601(b) of Regulation S-K under the Securities
Act if such a registration statement were to be filed by the Company under the
Securities Act on the date of determination, or (b) is described below:

 

(1) Any collective bargaining agreement or other contract with any labor union,
collective bargaining representative, works council, or other form of employee
representative.

 

(2) any contract, agreement or understanding limiting or restricting the freedom
of the Company or any of its Subsidiaries (A) to engage in any line of business,
(B) to own, operate, sell, transfer, pledge or otherwise dispose of or encumber
any asset, (C) to compete with any Person or (D) to engage in any business or
activity in any geographic region.

 

(3) any lease or similar agreement under which the Company or any of its
Subsidiaries is the lessor of, or makes available for use by any third Person,
any tangible personal property owned by the Company or any of its Subsidiaries
for an annual rent in excess of $25,000, in each case;

 

(4) any contract, agreement, understanding or instrument relating to any
outstanding loan or advance by the Company or any of its Subsidiaries to, or
investment by the Company or any of its Subsidiaries in, any Person (excluding
trade receivables and advances to employees for normally incurred business
expenses each arising in the ordinary course of business consistent with past
practice);

 

(5) any partnership, joint venture or profit sharing agreement with any Person,
which partnership, joint venture or profit sharing agreement generated revenues
during its most recently completed fiscal year or is expected to generate net
revenues to the Company or its Subsidiaries during the current fiscal year of
$50,000 or more;

 

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(6) any employment or consulting agreement, contract or commitment between the
Company or any of its Subsidiaries and any employee, officer, director or
consultant thereof;

 

(7) any contract, agreement or understanding relating to the disposition or
acquisition by the Company or any of its Subsidiaries after the date of this
Agreement of assets having a book value or fair market value in excess of
$50,000;

 

(8) contracts, agreements or understandings relating to any outstanding
commitment for capital expenditures in excess of $100,000;

 

(9) contracts, agreements or understandings containing provisions applicable
upon a change of control of the Company or any of its Subsidiaries;

 

(10) contracts, agreements or understandings with former or present directors or
officers;

 

(11) confidentiality or standstill agreements with any Person that restrict the
Company or any of its Subsidiaries in the use of any information or the taking
of any actions that were entered into in connection with the consideration by
the Company or any of its Subsidiaries of any material acquisition of assets or
Equities Securities;

 

(12) any mortgages, indentures, guarantees, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit involving amounts in excess of $100,000;

 

(13) except for contracts, agreements or understandings the subject matter of
which are subject to any of the clauses (1) through (12) above, any contract,
agreement or understanding involving payments by or to the Company or any of its
Subsidiaries in excess of $100,000; and

 

(14) any other agreement which is material to the Company and its Subsidiaries
taken as a whole.

 

“Merger” shall have the meaning as set forth in the Recitals.

 

“Merger Consideration” shall have the meaning as set forth in Section 3.06(b).

 

“Merger Subsidiary” shall have the meaning as set forth in the opening
paragraph.

 

“Minimum Condition” shall have the meaning as set forth in Annex A.

 

“Negotiation Period” shall have the meaning as set forth in Section 8.01(f).

 

“NYSE” shall mean the New York Stock Exchange, Inc.

 

“Offer” shall have the meaning as set forth in the Recitals.

 

“Offer Documents” shall have the meaning as set forth in Section 2.01(b).

 

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“Offer Price” shall have the meaning as set forth in the Recitals.

 

“Oil and Gas Interests” means (i) direct and indirect interests in and rights
with respect to oil, gas, mineral, and related properties and assets of any kind
and nature, direct or indirect, including working, leasehold and mineral
interests and operating rights and royalties, overriding royalties, production
payments, net profit interests and other nonworking interests and nonoperating
interests; (ii) all interests in rights with respect to Hydrocarbons and other
minerals or revenues therefrom, all contracts in connection therewith and claims
and rights thereto (including all oil and gas leases, operating agreements,
unitization and pooling agreements and orders, division orders, transfer orders,
mineral deeds, royalty deeds, oil and gas sales, exchange and processing
contracts and agreements, and in each case, interests thereunder), surface
interests, fee interests, reversionary interests, reservations, and concessions;
(iii) all easements, rights of way, licenses, permits, leases, and other
interests associated with, appurtenant to, or necessary for the operation of any
of the foregoing; and (iv) all interests in equipment and machinery (including
wells, well equipment and machinery), oil and gas production, gathering,
transmission, treating, processing, and storage facilities (including tanks,
tank batteries, pipelines, and gathering systems), pumps, water plants, electric
plants, gasoline and gas processing plants, refineries, and other tangible
personal property and fixtures associated with, appurtenant to, or necessary for
the operation of any of the foregoing.

 

“Option Consideration” means the excess, if any, of the Merger Consideration
over the per share exercise price of the applicable Company Stock Option
immediately prior to the Effective Time.

 

“Order” shall mean any judgment, order or decree of any Court or other
Governmental Authority, federal, foreign, state or local, of competent
jurisdiction.

 

“Parent” shall have the meaning as set forth in the opening paragraph.

 

“Parent Material Adverse Effect” shall mean a Material Adverse Effect on the
Parent.

 

 “PBGC” shall mean the Pension Benefit Guaranty Corporation.

 

“Permitted Liens” shall mean:

 

(a) Liens associated with obligations reflected in the Company’s Consolidated
Balance Sheet,

 

(b) consents to assignment and similar contractual provisions affecting such
property or asset with respect to which consents are obtained from appropriate
parties, or, in the case of consents of Governmental Authorities, if such
consents are customarily obtained subsequent to a sale or conveyance;

 

(c)  preferential rights to purchase and similar contractual provisions
affecting such property or asset with respect to which waivers are obtained from
the appropriate parties or the appropriate time period has expired without an
exercise of the rights;

 

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(d)  rights reserved to or vested in a Governmental Authority having
jurisdiction to control or regulate such property or asset in any manner
whatsoever and all laws of such Governmental Authorities;

 

(e)  easements, rights-of-way, permits, licenses, servitudes, surface leases,
sub-surface leases, grazing rights, logging rights, ponds, lakes, waterways,
canals, ditches, reservoirs, equipment, pipelines, utility lines, railways,
streets, roads and structures on, over or through such asset that do not
materially affect or impair the ownership, use or operation of such property or
asset;

 

(f)  liens for current Taxes or assessments not yet delinquent;

 

(g)  liens of operators relating to obligations not yet delinquent;

 

(h)  any (i) undetermined or inchoate liens or charges constituting or securing
the payment of expenses that were incurred incidental to maintenance,
development, production or operation of such property or asset or for the
purpose of developing, producing or processing Hydrocarbons therefrom or
therein, and (ii) statutory materialman’s, mechanics’, repairmans’, employees’,
contractors’ or other similar liens or charges relating to obligations not yet
delinquent;

 

(i)  the terms and conditions of the instruments creating such property or asset
(including all oil and gas leases) and all lessors’ royalties, overriding
royalties, net profits interests, carried interests, production payments,
reversionary interests and other burdens on or deductions from the proceeds of
production (in each case) that do not operate to reduce the net revenue interest
(referred to herein as “NRI”) for such property or asset (if any) set forth in
the Company Reserve Report or increase the working interest (referred to herein
as “WI”) for such property or asset (if any) set forth in the Company Reserve
Report, without a corresponding increase in the corresponding NRI;

 

(j)  defects and irregularities that do not, individually or in the aggregate,
result in a Company Material Adverse Effect;

 

(k) production sales contracts; division orders; contracts for sale, purchase,
exchange, refining or processing of Hydrocarbons; farm-out or farm-in
agreements; participation agreements; unitization and pooling designations,
declarations, orders and agreements; operating agreements; agreements of
development; area of mutual interest agreements; gas balancing and deferred
production agreements; plant agreements; production handling agreements;
processing agreements; pipeline, gathering and transportation agreements;
injection, repressuring and recycling agreements; carbon dioxide purchase or
sale agreements; and salt water or other disposal agreements, (in each case) to
the extent the same (i) are ordinary and customary to the oil, gas and other
mineral exploration, development, processing or extraction business and (ii)
except in connection with actions taken by the Surviving Corporation or its
Subsidiaries after the Effective Time, do not operate to reduce the NRI for such
property or asset (if any) set forth in the Company Reserve Report, without a
corresponding increase in the corresponding NRI; and

 

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(l) all defects and irregularities affecting such property or asset that do not
operate to reduce the NRI for such property or asset (if any) set forth in the
Company Reserve Report or increase the WI for such property or asset (if any)
set forth in the Company Reserve Report, without a corresponding increase in the
corresponding NRI, and do not otherwise interfere materially with the operation,
value or use of such property or asset.

 

 “Person” shall mean (i) an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity, but shall not include a Governmental Authority, or (2) any “person” for
purposes of Section 13(d)(3) of the Exchange Act.

 

“Petrie Parkman” shall mean Petrie Parkman & Co., Inc.

 

“Proxy Statement” shall have the meaning as set forth in Section 4.24(a).

 

“Regulation” shall mean any rule or regulation of any Governmental Authority
having the effect of Law or of any rule or regulation of any self-regulatory
organization, such as the NYSE.

 

“Representatives” means, when used with respect to Parent or the Company, the
directors, officers, employees, consultants, accountants, legal counsel,
financing sources, investment bankers, agents, controlling persons and other
representatives of Parent, its Affiliates and its Subsidiaries, or the Company,
its Affiliates and its Subsidiaries.

 

“Required Company Vote” shall have the meaning as set forth in Section 4.04(b).

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002 and the Regulations
promulgated thereunder.

 

“Schedule 14D-9” shall have the meaning as set forth in Section 2.02(b).

 

“Schedule TO” shall have the meaning as set forth in Section 2.01(b).

 

“SEC” means the Securities and Exchange Commission.

 

“SEC Reports” shall mean (1) all Annual Reports on Form 10-K, (2) all Quarterly
Reports on Form 10-Q, (3) all proxy statements relating to meetings of
stockholders (whether annual or special), (4) all Current Reports on Form 8-K
and (5) all other reports, schedules, registration statements or other documents
required to be filed by a specified Person with the SEC pursuant to the
Securities Act or the Exchange Act.

 

“Section 16” shall have the meaning as set forth in Section 3.08(b).

 

“Securities Act” shall mean the Securities Act of 1933, as amended, and the
Regulations promulgated thereunder.

 

“Shares” shall have the meaning as set forth in the Recitals.

 

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“Stockholder Agreements” shall have the meaning as set forth in the recitals.

 

“Stockholders Meeting” shall have the meaning as set forth in Section 6.08.

 

“Subsequent Period” shall have the meaning as set forth in Section 2.01(c).

 

“Subsidiary” of a specified Person shall be any corporation, partnership,
limited liability company, joint venture or other legal entity of which the
specified Person (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, 50% or more of the stock or other equity or
partnership interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.

 

“Superior Proposal” means a bona fide written Acquisition Proposal made by a
third party for at least a majority of the voting power of the Company’s then
outstanding securities or all or substantially all of the assets of the Company
and its Subsidiaries, taken as a whole, if the Board of Directors of the Company
determines in good faith by a vote of a majority of the entire Board of
Directors of the Company (based on, among other things, the advice of its
independent financial advisors and after consultation with outside counsel),
taking into account all legal, financial, regulatory and other aspects of the
proposal and the Person making such proposal, that such proposal (i) would, if
consummated in accordance with its terms, be more favorable, from a financial
point of view, to the holders of the Shares than the transactions contemplated
by this Agreement (taking into account any adjustments to the terms and
conditions of this Agreement, the Offer or the Merger offered in writing by
Parent, and any amounts payable pursuant to Section 9.04 by the Company), (ii)
contains conditions which are all reasonably capable of being satisfied in a
timely manner, (iii) is not subject to any financing contingency or to the
extent financing for such proposal is required, that such financing is then
committed, and (iv) was not made in violation of any standstill or similar
agreement to which the Company or any of its Subsidiaries is a party.

 

“Surviving Bylaws” shall have the meaning as set forth in Section 3.03.

 

“Surviving Charter” shall have the meaning as set forth in Section 3.02.

 

 “Surviving Corporation” shall have the meaning as set forth in Section 3.01.

 

“Tax” or “Taxes” shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, social security taxes, stamp taxes,
value added taxes or other taxes of or with respect to gross receipts, premiums,
real property, personal property (tangible and intangible), windfall profits,
sales, use, transfers, licensing, registration, employment, capital stock,
unemployment, disability, payroll, estimated and franchises imposed by or under
any Law; and such terms shall include any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any such tax or any contest or dispute thereof.

 

“Tax Items” shall have the meaning as set forth in Section 4.14(a).

 

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“Tax Returns” shall have the meaning as set forth in Section 4.14(a).

 

“Terminated Company Benefit Plans” shall mean Benefit Plans that were sponsored,
maintained or contributed to by the Company or any of its Subsidiaries within
six years prior to the date of this Agreement but which have been terminated
prior to the date of this Agreement.

 

“Trigger Event” shall have the meaning as set forth in Section 3.08(a).

 

“Warrant Consideration” shall mean the excess of the Merger Consideration over
the per share exercise price of the applicable Company Warrant immediately prior
to the Effective Time.

 

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