Exhibit 10.1
 

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AGREEMENT AND PLAN OF REORGANIZATION
 
by and among
 
PATINA OIL & GAS CORPORATION,
 
LE NORMAN ENERGY CORPORATION,
 
PATINA OKLAHOMA CORP.,
 
and
 
THE LE NORMAN SHAREHOLDERS
 
dated
 
October 23, 2002
 

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TABLE OF CONTENTS
 

         
Page
I.
  
DEFINITIONS
  
1
II.
  
MERGER
  
7
    
2.1    Merger; Effective Time of the Merger
  
7
    
2.2    Effect of the Merger
  
8
    
2.3    Tax-Free Reorganization
  
8
    
2.4    Merger Consideration
  
9
    
2.5    Dissenters’ Rights
  
10
    
2.6    Taking of Necessary Action; Further Action
  
10
    
2.7    Delivery Prior to Closing
  
10
    
2.8    The Closing
  
10
    
2.9    [Intentionally Deleted]
  
14
    
2.10  Shareholders’ Representative
  
14
    
2.11  Buyer Common Stock
  
15
    
2.12  Certain Shareholder Agreements
  
15
III.
  
Representations and Warranties of Shareholders
  
15
    
3.1    Title to Shares
  
15
    
3.2    Incorporation; Power and Authority
  
15
    
3.3    Valid and Binding Agreement
  
15
    
3.4    No Breach; Consents
  
16
    
3.5    Brokerage
  
16
    
3.6    Investment
  
16
IV.
  
Representations and Warranties Regarding the Company
  
16
    
4.1    Incorporation; Power and Authority
  
16
    
4.2    No Breach; Consents
  
17
    
4.3    Capitalization
  
17
    
4.4    Subsidiaries
  
18
    
4.5    Financial Statements
  
19
    
4.6    Undisclosed Liabilities
  
19
    
4.7    Books and Records
  
19
    
4.8    Absence of Certain Developments
  
19

i

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TABLE OF CONTENTS
(continued)

         
Page
    
4.9    Property
  
21
    
4.10  Accounts Receivable
  
22
    
4.11  Inventory
  
23
    
4.12  Intellectual Property
  
23
    
4.13  Material Contracts
  
23
    
4.14  Insurance/Bonding
  
25
    
4.15  Compliance with Laws; Government Authorizations
  
25
    
4.16  Litigation
  
26
    
4.17  Employees
  
26
    
4.18  Affiliate Transactions
  
27
    
4.19  Brokerage
  
27
    
4.20  Tax Matters
  
27
    
4.21  Employee Benefits
  
30
    
4.22  Environmental Matters
  
33
    
4.23  Availability of Documents
  
35
V.
  
REPRESENTATIONS AND WARRANTIES OF BUYER
  
35
    
5.1    Incorporation; Power and Authority
  
35
    
5.2    Valid and Binding Agreement
  
35
    
5.3    No Breach; Consents
  
35
    
5.4    Brokerage
  
36
    
5.5    Investment Intent
  
36
    
5.6    [Intentionally deleted.]
  
36
    
5.7    Buyer Common Stock
  
36
    
5.8    [Intentionally deleted.]
  
36
    
5.9    [Intentionally deleted.]
  
36
    
5.10  SEC Filings; Financial Statements
  
36
    
5.11  Capitalization
  
37
    
5.12  No Undisclosed Liabilities
  
37
    
5.13  Absence of Certain Changes or Events
  
37
    
5.14  Absence of Litigation
  
37

ii

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TABLE OF CONTENTS
(continued)
 

         
Page
VI.
  
AGREEMENTS OF SHAREHOLDERS
  
37
    
6.1    Conduct of the Business
  
38
    
6.2    Notice of Developments
  
39
    
6.3    Access
  
39
    
6.4    Waivers; Payment of Indebtedness
  
39
    
6.5    Conditions
  
40
    
6.6    Consents and Authorizations; Regulatory Filings
  
40
    
6.7    No Adverse Effect; Sale
  
40
    
6.8    [Intentionally deleted.]
  
40
    
6.9    Litigation Support
  
40
    
6.10  Nondisparagement
  
40
    
6.11  Non-Hire
  
40
    
6.12  Confidentiality
  
41
    
6.13  Nonsolicitation
  
41
VII.
  
AGREEMENTS OF BUYER
  
41
    
7.1    Conditions
  
41
    
7.2    [Intentionally deleted.]
  
41
    
7.3    Books and Records; Access
  
41
    
7.4    [Intentionally deleted.]
  
42
    
7.5    Release from Guarantees; Buyer Indemnity of Certain Obligations
  
42
    
7.6    Confidentiality
  
42
    
7.7    Filings
  
42
    
7.8    [Intentionally left blank.]
  
42
    
7.9    Notice of Developments
  
42
    
7.10  Access
  
43
    
7.11  Le Norman Employment
  
43
    
7.12  Le Norman Logo
  
43
VIII.
  
CONDITIONS TO CLOSING
  
43
    
8.1    Conditions to Buyer’s Obligations
  
43
    
8.2    Conditions to Shareholders’ Obligations
  
44

iii

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TABLE OF CONTENTS
(continued)
 

         
Page
IX.
  
TERMINATION; LIABILITY FOR BREACH OF REPRESENTATIONS AND WARRANTIES
  
45
    
9.1      Termination
  
45
    
9.2      Effect of Termination
  
45
    
9.3      Survival of Representations and Warranties
  
46
X.
  
ADJUSTMENT FOR DEFECTS
  
47
    
10.1    Review Period
  
47
    
10.2    Environmental Matters
  
49
    
10.3    Certain Tax Matters
  
49
XI.
  
GENERAL
  
49
    
11.1    Press Releases and Announcements
  
49
    
11.2    Expense
  
49
    
11.3    Further Assurances
  
50
    
11.4    Amendment and Waiver
  
50
    
11.5    Notices
  
50
    
11.6    Assignment
  
51
    
11.7    No Third Party Beneficiaries
  
51
    
11.8    Severability
  
51
    
11.9    Complete Agreement
  
51
    
11.10  Schedules
  
51
    
11.11  Signatures; Counterparts
  
51
    
11.12  Governing Law
  
52
    
11.13  Specific Performance
  
52
    
11.14  Jurisdiction
  
52
    
11.15  Waiver of Jury Trial
  
52
    
11.16  Construction
  
53
    
11.17  Time of Essence
  
53
    
11.18  Incorporation of Exhibits and Schedules
  
53
    
11.19  Attorneys’ Fees
  
53
    
11.20  Shareholder Consent
  
54

iv

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EXHIBITS
 
Number

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Description

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2.1(b)
  
Certificate of Merger
2.4
  
Adjustments to Merger Consideration for (1) Working Capital, (2) Hedging, and
(3) Gas Balancing
7.5
  
Shareholder Guaranteed Obligations
7.11
  
David D. Le Norman Employment Arrangement
7.12
  
Assignment of Registered Service Mark
8.1(h)
  
Hall, Estill Legal Opinion
8.2(f)
  
Dorsey & Whitney Legal Opinion

v

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AGREEMENT AND PLAN OF REORGANIZATION
 
This AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is entered into as
of the 23rd day of October, 2002, by and among PATINA OIL & GAS CORPORATION, a
Delaware corporation (“Buyer”), LE NORMAN ENERGY CORPORATION, an Oklahoma
corporation (“Company”), PATINA OKLAHOMA CORP., a Delaware corporation and a
wholly-owned subsidiary of Buyer (“Delaware Sub”) and each of the Shareholders
of the Company (“Shareholders”), including DAVID D. LE NORMAN (“Shareholders’
Representative”).
 
Recitals
 
A. Pursuant to the Certificate of Merger in the form attached hereto as Exhibit
2.1(b), the Company will merge with and into Delaware Sub (the “Merger”)
pursuant to the Oklahoma General Corporation Act (the “Oklahoma Act”), Delaware
Sub will be the surviving corporation, and the shares of common stock of the
Company issued and outstanding immediately prior to the Effective Time of the
Merger will be converted into cash and shares of common stock of Buyer.
 
B. The Parties desire to enter into this Agreement for the purpose of setting
forth certain representations, warranties and covenants made by each to the
other as an inducement to the execution and delivery of this Agreement, and to
the Merger.
 
C. The Parties intend that the Merger shall qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code (as defined below).
 
NOW, THEREFORE, in consideration of the mutual representations, warranties and
agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
 
I.  Definitions
 
“Agreement” has the meaning set forth in the first paragraph of this Agreement.
 
“Affiliate” has the meaning set forth in Rule 12b-2 under the Exchange Act.
 
“Buyer” has the meaning set forth in the first paragraph of this Agreement.
 
“Capital Expenditures” mean all costs associated with property acquisition,
exploration and development activities including, but not limited to the
purchase of producing leases, prospect costs, leasehold costs and permitting and
settlement of surface damages.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Company” has the meaning set forth in the recitals of this Agreement.
 
“Company Warrants” means warrants to purchase capital stock of the Company.

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“Confidential Information” means (a) when used with reference to the Company,
any information concerning the business and affairs of the Company and its
Subsidiaries that is designated by the Company or its Subsidiaries as
confidential or that is disclosed by the Company or a Subsidiary in a manner
reasonably indicative of its confidential nature, except for information which
(i) was known to, or had been independently developed by, Buyer or an Affiliate
of Buyer prior to the receipt thereof from Shareholders; (ii) was at the time of
disclosure by the Company or a Subsidiary a matter of public knowledge through
no fault of Buyer or an Affiliate of Buyer; or (iii) was or hereafter is
obtained by Buyer or an Affiliate of Buyer from a third party under no duty of
confidentiality to the Company or its Subsidiaries, and (b) when used with
reference to Buyer, any information concerning the business and affairs of Buyer
or its subsidiaries that is designated by Buyer as confidential or that is
disclosed by Buyer in a manner reasonably indicative of its confidential nature,
except for information which (i) was known to, or had been independently
developed by, Shareholders or an Affiliate of Shareholders prior to the receipt
thereof from Buyer; (ii) was at the time of disclosure by Buyer a matter of
public knowledge through no fault of Shareholders or an Affiliate of
Shareholders; or (iii) was or hereafter is obtained by Shareholders or an
Affiliate of Shareholders from a third party under no duty of confidentiality to
Buyer or its Subsidiaries.
 
“Consent” means any authorization, consent, approval, filing, waiver, exemption
or other action by or notice to any Person.
 
“Constituent Corporations” means Delaware Sub and the Company.
 
“Contract” means a contract, agreement, commitment or binding understanding,
whether oral or written, that is in effect as of the date of this Agreement or
any time after the date of this Agreement.
 
“Current Assets” shall mean those assets which are considered current assets for
purposes of GAAP.
 
“Current Liabilities” shall mean those liabilities which are considered current
liabilities for purposes of GAAP except that excluded from the definition of
Current Liabilities for purposes of this Agreement shall be current maturities
of long-term obligations and liabilities related to hedging transactions.
 
“Disclosure Schedules” mean the schedule delivered by Shareholders to Buyer on
or prior to the date of this Agreement.
 
“Encumbrance” means any charge, claim, community property interest, condition,
equitable interest, mortgage, deed of trust, lien, option, pledge, security
interest, right of first refusal or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations thereunder.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

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“Finder’s Fee” means the fee payable to BMO Nesbitt Burns Corp. in connection
with the transaction contemplated by this Agreement.
 
“GAAP” means United States generally accepted accounting principles, as in
effect from time to time.
 
“Governmental Authorization” means any approval, consent, license, permit,
waiver, registration or other authorization issued, granted, given, made
available or otherwise required by any Governmental Entity or pursuant to Law.
 
“Governmental Entity” means any federal, state, local, foreign, international or
multinational entity or authority exercising executive, legislative, judicial,
regulatory, administrative or taxing functions of or pertaining to government.
 
“Governmental Order” means any judgment, injunction, writ, order, ruling, award
or decree by any Governmental Entity or arbitrator.
 
“Hazardous Materials” has the meaning set forth in Section 4.22(a)(iii).
 
“HSR Act” means that Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.
 
“Insider” means (i) a shareholder, officer, director or employee of the Company
or of any Subsidiary, (ii) any Member of the Immediate Family of any
shareholder, officer, director or employee of the Company or of any Subsidiary
or (iii) any entity in which any of the persons described in clause (i) or (ii)
owns a 10% or greater beneficial interest.
 
“Intellectual Property” means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, domain names and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, drawings, specifications,
customer and supplier lists, pricing and cost information, financial
information, and business and marketing plans and proposals), (e) all computer
software (including data and related documentation), (f) all seismic,
geophysical data and other proprietary rights, and (g) all copies and tangible
embodiments thereof (in whatever form or medium).
 
“IRS” means the United States Internal Revenue Service.
 
“Knowledge,” “awareness” or words of similar import with respect to a
representation, warranty or undertaking hereunder shall mean the awareness
without performing any special inquiry of a Person that such matter is true and
accurate. Knowledge of a fact by a corporation

3

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or other entity shall mean the awareness without performing any special inquiry
of any executive officer of such corporation or other entity.
 
“Lands” means all lands described or referred to in Schedule 4.9(a) and all
lands covered by Leases, subject in both cases to the reservations, area
limitations, and depth limitations (if any) in Schedule 4.9(a).
 
“Law” means any constitution, law, ordinance, principle of common law,
regulation, statute or treaty of any Governmental Entity.
 
“Leases” means the oil, gas, and mineral deeds, leases, subleases, assignments,
licenses, permits, and other instruments and agreements described or referred to
in Schedule 4.9(a); the fee mineral interests, mineral servitudes, leasehold
interests, working interests, royalty interests, overriding royalty interests,
net profits interests, and estates created, transferred, or governed by such
instruments and agreements; and all other rights, privileges, interests, and
estates in or appurtenant to the lands covered by such instruments and
agreements or described or referred to in Schedule 4.9(a).
 
“Litigation” means any claim, action, arbitration, mediation, audit, hearing,
notices of violation, notices of alleged violations, investigation, proceeding,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Entity or arbitrator or mediator but excluding
non-violation type notices received from the Oklahoma Corporation Commission in
the Ordinary Course of Business.
 
“LNP” means Le Norman Partners, LLC, an Oklahoma limited liability company.
 
“Loss” means any Litigation, Governmental Order, complaint, claim, demand,
damage, deficiency, penalty, fine, cost, amount paid in settlement, liability,
obligation, Tax, Encumbrance, loss, expense or fee, including court costs and
attorneys’ fees and expenses.
 
“Material Adverse Effect” means any change, effect, event or condition,
individually or in the aggregate, that has had, or, with the passage of time,
could have, a material adverse effect on the business, assets, properties,
condition (financial or otherwise), results of operations or prospects of the
Company or Buyer, as applicable.
 
“Member of the Immediate Family” of a Person means a spouse, parent, child,
sibling, mother- or father-in-law, son- or daughter-in-law, and brother- or
sister-in-law of such Person.
 
“Merger” means the merger of the Company with and into Delaware Sub pursuant to
the terms of this Agreement.
 
“Mirant” means Mirant Americas Energy Capital, LLC, a Delaware limited liability
company and successor by assignment to Mirant Americas Energy Capital, LP, a
Delaware limited partnership.
 
“NYSE” means the New York Stock Exchange.

4

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“Oil and Gas Properties” means Lands, Lease and Wells.
 
“Ordinary Course of Business” means the ordinary course of business of the
Company and the Subsidiaries consistent with past custom and practice (including
with respect to quantity and frequency) as it has been conducted since December
31, 2001.
 
“Organizational Documents” means the articles or certificate of incorporation
and the bylaws and any amendment to any of the foregoing.
 
“Party” means Buyer, the Company, Delaware Sub and the Shareholders.
 
“Person” means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Entity or other entity.
 
“Plan” means every plan, fund, contract, program and arrangement (whether
written or not) for the benefit of present or former employees, including those
intended to provide (i) medical, surgical, health care, hospitalization, dental,
vision, workers’ compensation, life insurance, death, disability, legal
services, severance, sickness or accident benefits (whether or not defined in
Section 3(1) of ERISA), (ii) pension, profit sharing, stock bonus, retirement,
supplemental retirement or deferred compensation benefits (whether or not tax
qualified and whether or not defined in Section 3(2) of ERISA) or (iii) salary
continuation, unemployment, supplemental unemployment, severance, termination
pay, change-in-control, vacation or holiday benefits (whether or not defined in
Section 3(3) of ERISA), (w) that is maintained or contributed to by the Company
or any Subsidiary, (x) that the Company or any Subsidiary has committed to
implement, establish, adopt or contribute to in the future, (y) for which the
Company or any Subsidiary is or may be financially liable as a result of the
direct sponsor’s affiliation with the Company, its Subsidiaries or the Company’s
shareholders (whether or not such affiliation exists at the date of this
Agreement and notwithstanding that the Plan is not maintained by the Company or
any Subsidiary for the benefit of its employees or former employees) or (z) for
or with respect to which the Company or any Subsidiary is or may become liable
under any common law successor doctrine, express successor liability provisions
of Law, provisions of a collective bargaining agreement, labor or employment Law
or agreement with a predecessor employer. Plan does not include any arrangement
that has been terminated and completely wound up prior to the date of this
Agreement and for which neither the Company nor any Subsidiary has any present
or potential liability.
 
“Remedies Exception,” when used with respect to any Person, means performance of
such Person’s obligations except to the extent enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles.
 
“Required Consents” has the meaning set forth in Section 6.6.
 
“Returns” means all returns, declarations, reports, estimates, information
returns and statements pertaining to any Taxes.
 
“SEC” means the United States Securities and Exchange Commission.

5

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
 
“Shareholders” has the meaning set forth in the first paragraph of this
Agreement.
 
“Shareholders’ Representative” has the meaning set forth in the first paragraph
of this Agreement.
 
“Subsidiary” means any Person in which a 50% or greater ownership interest is
owned, directly or indirectly, by another Person. When used without reference to
a particular entity, “Subsidiary” means a Subsidiary of the Company.
 
“Tax Affiliate” means each of the Company and the Subsidiaries and any other
Person that is or was a member of an affiliated, combined or unitary group of
which the Company or any Subsidiary is or was a member.
 
“Taxes” means all taxes, charges, fees, levies or other assessments, including
all net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs duties, fees, assessments or charges of any kind whatsoever,
including all interest and penalties thereon, and additions to tax or additional
amounts imposed by any Governmental Entity upon the Company or any Tax
Affiliate.
 
“Treasury Regulations” means the rules and regulations under the Code.
 
“Wells” means the oil wells, condensate wells, natural gas wells, water source
wells, injection wells (for injection of water, recycling of natural gas,
injection of substances used in secondary and tertiary recovery operations, and
injection of other substances), and other wells located on the Leases, Lands or
Units, whether producing, operating, shut in, or temporarily abandoned,
including, without limitation, the wells listed on Schedule 4.9(a).
 
“Working Capital” shall mean the amount by which the Current Assets of the
Company and its Subsidiaries (and the Company’s or its Subsidiary’s
proportionate share of the Current Assets of LNP and any other companies in
which the Company or a Subsidiary owns an interest) exceed the Current
Liabilities of the Company and its Subsidiaries (and the Company’s or its
Subsidiary’s proportionate share of the Current Liabilities of LNP and any other
companies in which the Company or a Subsidiary owns an interest).
 
“Working Capital Adjustment” means the adjustment to the Merger Consideration
pursuant to Section 2.4 representing the Company’s Working Capital as set forth
in Exhibit 2.4.
 
The following terms not defined above are defined in the sections indicated
below:
 
Definition

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Defined

--------------------------------------------------------------------------------

Accredited Investor
  
3.6
Buyer Balance Sheet
  
5.12
Buyer Common Stock
  
2.4(b)
Buyer Common Stock Price
  
2.4(b)

6

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Buyer SEC Reports
  
5.10(a)
Closing
  
2.8(a)
Closing Date
  
2.8(a)
Closing Statement
  
2.7
Company Options
  
2.8(b)
Company Common Stock
  
2.1(c)
Confidentiality Agreement
  
6.3
Controlling Shareholders
  
2.4(b)
Disclosing Party
  
11.1
Effective Date of Merger
  
2.1(f)
Effective Time of Merger
  
2.1(f)
Environmental Costs
  
4.22(a)(i)
Environmental Defect
  
10.2(d)
Environmental Laws
  
4.22(a)(ii)
Good and Defensible Title
  
10.1(c)
Latest Balance Sheet
  
4.5
Latest Financial Statements
  
4.5
Leased Real Property
  
4.9(c)
List
  
4.22(a)(iv)
Material Contracts
  
4.13
Merger Consideration
  
2.4(a)
Notice of Alleged Title Defects
  
10.1(a)
Oklahoma Act
  
Recitals
Option Plans
  
5.11
Owned Real Property
  
4.9(b)
Permitted Encumbrances
  
10.1(c)
Process Agent
  
11.14
Property
  
4.22(a)(v)
Receiving Party
  
6.12 & 7.6
Regulatory Actions
  
4.22(a)(vi)
Release
  
4.22(a)(vii)
Shares
  
2.4
Shareholder Guaranteed Obligations
  
7.5
Surviving Corporation
  
2.2(a)
Third-Party Environmental Claims
  
4.22(a)(viii)
Title Defect
  
10.1(c)
Title Review Period
  
10.1

 
II. Merger
 
2.1 Merger; Effective Time of the Merger. Subject to the terms and conditions of
this Agreement, on the Closing Date:
 
(a)    The Company will be merged with and into Delaware Sub in accordance with
the Oklahoma Act and this Article II;

7

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(b)  The Certificate of Merger in the form of Exhibit 2.1(b), and executed in
accordance with, the Oklahoma Act, shall be filed with the Oklahoma Secretary of
State in accordance with the Oklahoma Act;
 
(c)  each issued and outstanding Share of common stock of the Company (“Company
Common Stock”) shall be converted into cash and/or shares of Buyer Common Stock
as provided in Section 2.4;
 
(d)  each issued and outstanding share of common stock of Delaware Sub shall
remain unchanged and shall constitute one issued and outstanding share of the
Surviving Corporation;
 
(e)  all Shares of Company common stock that are held by the Company as treasury
stock shall be canceled and retired and no Merger Consideration shall be
delivered or paid in exchange therefor; and
 
(f)  the Merger shall become effective at the time of the filing of the
Certificate of Merger with the Oklahoma Secretary of State (the date of such
filing being hereinafter referred to as the “Effective Date of the Merger” and
the time of such filing being hereinafter referred to as the “Effective Time of
the Merger”).
 
2.2    Effect of the Merger.  At the Effective Time of the Merger:
 
(a)  the separate existence of the Company shall cease and the Company shall be
merged with and into Delaware Sub (Delaware Sub is sometimes referred to herein
as the “Surviving Corporation”);
 
(b)  the Articles of Incorporation of Delaware Sub shall be the Articles of
Incorporation of the Surviving Corporation until the same may thereafter be
amended;
 
(c)  the Bylaws of Delaware Sub shall be the Bylaws of the Surviving Corporation
until the same may thereafter be amended;
 
(d)  the Persons serving as directors of Delaware Sub immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving
Corporation;
 
(e)  the Persons serving as officers of Delaware Sub immediately prior to the
Effective Time of the Merger shall be the officers of the Surviving Corporation
and shall thereafter hold office until their successors are duly elected and
qualified; and
 
(f)  the Merger shall, from and after the Effective Time of the Merger, have all
the effects provided by applicable law.
 
2.3    Tax-Free Reorganization.  The Merger is intended to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Code, however, Buyer
makes no representation, warranty or guaranty of such treatment.

8

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2.4 Merger Consideration.
 
(a) As of the Effective Time of the Merger, each of the 8,000,000 shares of
Company common stock that is issued and outstanding immediately prior to the
Effective Time of the Merger (the “Shares”) shall, by virtue of the Merger and
without any action on the part of the Shareholders, be converted into each
Shareholder’s right to receive his pro rata share of the aggregate merger
consideration. The aggregate merger consideration (the “Merger Consideration”)
is Sixty-Two Million Dollars ($62,000,000), minus:
 
(i) $49,864,744, representing all the outstanding liabilities and indebtedness
of the Company and its Subsidiaries for borrowed money (other than its share of
the indebtedness of LNP) as of June 30, 2002, including the short-term
obligations expected to be refinanced with long-term debt, but excluding
liabilities included in the Company’s Working Capital as of June 30, 2002, and
any other liabilities which are deducted from the Merger Consideration pursuant
to subsections (ii) through (xii) below;
 
(ii) $55,000, representing the Parties’ agreement as to any amounts incurred by
Shareholders or the Company in connection with this Agreement (including, but
not limited to, legal and accounting fees and expenses for which the Company
would be liable, but excluding all fees and expenses, accounting or otherwise,
related to the audit of the June 30, 2002, financial statements of the Company,
for which Buyer shall be solely responsible);
 
(iii) $2,100,000, representing the amount incurred in connection with the
cancellation of the Company Warrants under Section 2.8(b);
 
(iv) up to a maximum of $148,600 in employee severance costs for which the
Shareholders are responsible in accordance with Section 6.1(h);
 
(v) $85,000, representing the Parties’ agreement as to the estimated amount of
expenses and liabilities that the Company will incur in connection with any
litigation pending in which the Company or a subsidiary is involved on the
Closing;
 
(vi) $800,000, representing the Finder’s Fee;
 
(vii) $113,078, representing the Parties’ agreement as to a deduction for Title
Defects under Article X;
 
(viii) dividends to the Shareholders subsequent to June 30, 2002; and
 
(ix) non-current taxes due but not paid as of June 30, 2002 or that may have
accrued as of June 30, 2002 (including but not limited to ad valorem taxes and
severance taxes) but only to the extent such taxes exceed $25,000.
 
The Merger Consideration will be adjusted upward or downward to reflect:

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(x) plus $3,272,707, representing the Working Capital Adjustment as of June 30,
2002 as set forth in Exhibit 2.4;
 
(xi) minus $1,055,408, representing the agreed adjustment for hedging
transactions as of June 30, 2002, determined in accordance with Exhibit 2.4
hereto; and
 
(xii) minus $32,731, representing the agreed amount of material gas imbalances
as of June 30, 2002 as computed in accordance with Exhibit 2.4.
 
(b) The Merger Consideration will be paid as to the interests due to David Le
Norman and Duane Le Norman (“Controlling Shareholders”) 40% in cash and 60% in
such number of “restricted” shares, as defined in Rule 144 adopted under the
Securities Act, of the common stock, par value $0.01 per share, of Buyer (“Buyer
Common Stock”) rounded to the nearest whole share having an aggregate value,
based on the Buyer Common Stock Price, equal to 60% of the Controlling
Shareholder’s portion of the Merger Consideration. The portion of the Merger
Consideration paid with Buyer Common Stock is subject to equitable adjustment in
the event that, prior to the Closing Date, there is any share split,
subdivision, combination, share dividend, extraordinary dividend or
reorganization involving the Buyer Common Stock. “Buyer Common Stock Price”
means the average closing price of Buyer Common Stock on the NYSE for the period
from the first day after the date of final execution of this Agreement up to
five (5) business days prior to the Closing Date. The Merger Consideration due
all Shareholders other than the Controlling Shareholders shall be paid entirely
in cash at Closing.
 
2.5 Dissenters’ Rights. All of the Shareholders shall have voted for the Merger
and, accordingly, there shall be no dissenters’ rights under the Oklahoma Act or
any other applicable law.
 
2.6 Taking of Necessary Action; Further Action. Each Party shall take all such
action as may be necessary or appropriate in order to effect the Merger as
promptly as possible. If, at any time after the Effective Date of the Merger,
any further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises to
which it is entitled under this Agreement and applicable law, the officers and
directors of such corporation are fully authorized in the name of the
corporation or otherwise to take, and shall take, all such action.
 
2.7 Delivery Prior to Closing. At least five (5) days prior to the Closing,
Shareholders shall deliver to Buyer a schedule indicating the amounts then known
to Shareholders to be adjustments to the Merger Consideration pursuant to
Section 2.4 (the “Closing Statement”) which shall set forth the estimated Merger
Consideration together with each adjustment thereto, and the parties shall make
all reasonable efforts to agree upon the Closing Statement.
 
2.8 The Closing.

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(a) The closing of the transactions contemplated by this Agreement (the
“Closing”) will take place at the offices of the Company in Oklahoma City,
Oklahoma, at 9:00 a.m. on the later of (x) November 5, 2002 or (y) the second
business day following satisfaction or waiver of all Closing conditions as set
forth in Article VIII hereof (the “Closing Date”) or at such other place and on
such other date as may be mutually agreed by Buyer and Shareholders’
Representative, in which case “Closing Date” means the date so agreed. The
failure of the Closing will not ipso facto result in termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
The Closing will be effective as of the close of business on the Closing Date.
 
(b) Prior to the Closing, Shareholders will cause all outstanding options to
purchase capital stock of the Company (“Company Options”) to be canceled and
will cause the holders of all outstanding Company Warrants to agree in a writing
reasonably approved by Buyer to surrender their Company Warrants for
cancellation.
 
(c) Subject to the conditions set forth in this Agreement, on the Closing Date
the Certificate of Merger will be filed with the Oklahoma Secretary of State
and:
 
(i) Shareholders will deliver to Buyer:
 
(A) certificates representing all of the Shares, free and clear of all
Encumbrances, duly endorsed or accompanied by duly executed stock powers with
signatures guaranteed by a national bank or trust company or by a member firm of
the NYSE with requisite stock transfer tax stamps, if any, attached;
 
(B) a certificate of Shareholders’ Representative dated the Closing Date stating
that, to his Knowledge, the conditions set forth in Section 8.1 have been
satisfied;
 
(C) a copy of the text of the resolutions adopted by the board of directors (or
similar body) of any Shareholder that is not a natural person authorizing the
execution, delivery and performance of this Agreement, certified by an
appropriate officer of such Shareholder;
 
(D) a copy of the text of the resolutions adopted by the Board of Directors and
Shareholders of the Company approving the Merger and authorizing the execution,
delivery and performance of this Agreement, certified by an appropriate officer
of the Company;
 
(E) the agreement specified in Section 2.8(b) of the holders of the Company
Warrants;
 
(F) an updated Closing Statement, as well as duly executed copies of all
agreements, instruments, certificates and other documents necessary or
appropriate, in the reasonable opinion of Buyer’s counsel, to release any and
all Encumbrances (other than Permitted Encumbrances) against the assets of the
Company or any Subsidiary securing such

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indebtedness other than the Company’s share of debt and payout balances of LNP
which debt shall not be released, estimated as of June 30, 2002 at $24.00
million and $6.55 million, respectively;
 
(G) the minute books, stock or equity records, corporate seal and other
materials related to the corporate administration of the Company or any
Subsidiary;
 
(H) resignations in writing (effective as of the Closing Date) from such of the
officers and directors of each of the Company and the Subsidiaries as Buyer may
have requested prior to the Closing Date;
 
(I) duly executed copies of all Required Consents;
 
(J) Certificates of Good Standing dated within thirty (30) days of the Closing
Date from every state in which the nature of the Company’s and its Subsidiaries’
business or ownership of its properties requires them to be qualified to do
business as foreign corporations;
 
(K) such other certificates (including any required non-foreign affidavits
required by Treasury Regulations 1.1445-2(b)(2)), documents and instruments that
Buyer reasonably requests for the purpose of (1) evidencing the accuracy of
Shareholders’ representations and warranties, (2) evidencing the performance and
compliance by Shareholders with agreements contained in this Agreement, (3)
evidencing the satisfaction of any condition referred to in Section 8.1 or (4)
otherwise facilitating the consummation of the transactions contemplated by this
Agreement.
 
(ii) Buyer will deliver directly to the Company’s identified creditors/obligees
sufficient funds to pay in full:
 
(A) the indebtedness of the Company and its Subsidiaries for borrowed money as
of the Closing Date, including the Company’s indebtedness to Mirant and to
Dalson Investments, LLC but not including the Company’s share of any debt and
pay out balances of LNP;
 
(B) the Finder’s Fee;
 
(C) amounts owed to the holders of the Company Warrants in connection with the
cancellation thereof; and
 
(D) amounts necessary to liquidate all hedges of the Company and its
Subsidiaries existing on the Closing Date.
 
(iii) Buyer will deliver to Shareholders:
 
(A) the Merger Consideration. No fraction of a share of Buyer Common Stock will
be issued at Closing, but in lieu thereof, each holder

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of Shares that would otherwise be entitled to a fraction of a share of Buyer
Common Stock (after aggregating all fractional shares of Buyer Common Stock to
be received by such holder) will be entitled to receive from Buyer an amount of
cash (rounded to the nearest whole cent) equal to the product of (x) such
fraction multiplied by (y) the Buyer Common Stock Price;
 
(B) a certificate of Buyer dated the Closing Date stating that, to Buyer’s
Knowledge, the conditions set forth in Section 8.2 have been satisfied;
 
(C) a copy of the text of the resolutions adopted by the board of directors of
Buyer approving the Merger and authorizing the execution, delivery and
performance of this Agreement including the issuance of the Buyer Common Stock,
certified by an appropriate officer of Buyer;
 
(D) a copy of the text of resolutions adopted by the board of directors and
shareholder of Delaware Sub approving the Merger and authorizing the execution,
delivery and performance of this Agreement, certified by an appropriate officer
of Delaware Sub;
 
(E) such other certificates, documents and instruments that Shareholders
reasonably request for the purpose of (1) evidencing the accuracy of Buyer’s
representations and warranties, (2) evidencing the performance and compliance by
Buyer with agreements contained in this Agreement, (3) evidencing the
satisfaction of any condition referred to in Section 8.2 or (4) otherwise
facilitating the consummation of the transactions contemplated by this
Agreement.
 
(d) All items delivered by the parties at the Closing will be deemed to have
been delivered simultaneously, and no items will be deemed delivered or waived
until all have been delivered.
 
(e) The Confidentiality Agreement will terminate effective as of the Closing
Date.
 
(f) All consideration delivered by Buyer upon the surrender for exchange of
Shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Company Common Stock. There shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of Company Common Stock
which were outstanding immediately prior to the Effective Date of the Merger.
If, after the Effective Date of the Merger, Certificates are presented for
registration of transfer, they shall be canceled and exchanged as provided in
this Section 2.8.
 
(g) If a Shareholder has lost a Certificate evidencing ownership of Company
Common Stock, he shall be entitled to receive from Buyer the Merger
Consideration as set forth in Section 2.4 hereof upon delivering to Buyer, in
lieu of a Certificate, an affidavit of lost certificate affirming that the
Shareholder is the legal owner and holder of

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a Certificate which has been lost and agreeing to indemnify the Buyer and the
Surviving Corporation from any liability arising by reason of such lost
Certificate. The Shareholder shall not be required to post a bond or other
collateral for the performance of his indemnity obligation.
 
2.9 [Intentionally Deleted].
 
2.10 Shareholders’ Representative.
 
(a) Shareholders appoint David D. Le Norman (or any person appointed as a
successor Shareholders’ Representative pursuant to Section 2.10(b)) as their
representative and agent under this Agreement.
 
(b) Shareholders who, immediately prior to the Closing, are entitled to receive
50% or more of the Merger Consideration, may, from time to time upon written
notice to Shareholders’ Representative and Buyer, remove Shareholders’
Representative or appoint a new Shareholders’ Representative upon the death,
incapacity, resignation or removal of Shareholders’ Representative. If, after
the death, incapacity, resignation or removal of Shareholders’ Representative, a
successor Shareholders’ Representative has not been appointed by Shareholders
within fifteen (15) business days after a request by Buyer, Buyer will have the
right to appoint a Shareholders’ Representative to fill any vacancy so created
by written notice of such appointment to Shareholders.
 
(c) Shareholders authorize Shareholders’ Representative to take any action and
to make and deliver any certificate, notice, consent or instrument required or
permitted to be made or delivered under this Agreement or under the documents
referred to in this Agreement, to waive any requirements of this Agreement or to
enter into one or more amendments or supplements to this Agreement that
Shareholders’ Representative determines in Shareholders’ Representative’s sole
and absolute discretion to be necessary, appropriate or advisable. The authority
of Shareholders’ Representative includes the right to hire or retain, at the
sole expense of Shareholders, such counsel, investment bankers, accountants,
representatives and other professional advisors as Shareholders’ Representative
determines in Shareholders’ Representative sole and absolute discretion to be
necessary, appropriate or advisable in order to perform this Agreement. Any
party will have the right to rely upon any action taken by Shareholders’
Representative, and to act in accordance with such action without independent
investigation.
 
(d) Buyer will have no liability to any Shareholder or otherwise arising out of
the acts or omissions of Shareholders’ Representative or any disputes among
Shareholders or with Shareholders’ Representative. Buyer may rely entirely on
its dealings with, and notices to and from, Shareholders’ Representative to
satisfy any obligations it might have under this Agreement or any other
agreement referred to in this Agreement or otherwise to Shareholders.
 
(e) Shareholders’ Representative accepts the appointment made by this Section
2.10 and agrees to abide by the provisions of this Section 2.10.

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2.11  Buyer Common Stock. Each certificate representing Buyer Common Stock will
be imprinted with a legend substantially in the following form:
 
The securities represented by this Certificate may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration statement
under the Securities Act of 1933 (the “Act”) or pursuant to an exemption from
registration under the Act, the availability of which is to be established to
the satisfaction of the company.
 
Each holder desiring to transfer Buyer Common Stock other than pursuant to a
registration statement must furnish Buyer with a written opinion reasonably
satisfactory to Buyer in form and substance from counsel reasonably satisfactory
to Buyer by reason of experience to the effect that the holder may transfer such
Buyer Common Stock as desired without registration under the Securities Act.
This undertaking shall expire two (2) years from Closing Date if the holder is
not an Affiliate of the Buyer at such time.
 
2.12  Certain Shareholder Agreements.
 
(a)  Each Shareholder waives any co-sale rights, rights of first refusal or
similar rights that such Shareholder may have relating to the Shares or the
Merger, whether conferred by the Company’s Organizational Documents, by Contract
or otherwise.
 
(b)  Subject to satisfaction of the conditions of this Agreement, each
Shareholder and Buyer as sole shareholder of the Surviving Corporation agree to
vote in favor of the Merger, and to take any other action necessary to cause the
approval of the Merger, in accordance with the requirements of the Oklahoma Act.
 
III. Representations and Warranties of Shareholders
 
Each Shareholder represents and warrants to Buyer that, except as set forth in
the Disclosure Schedules delivered by Shareholders to Buyer on the date hereof
(the “Disclosure Schedules”) and except as otherwise expressly set forth in this
Agreement as to such Shareholder, as of the date of this Agreement and as of the
Closing Date (in all material respects):
 
3.1  Title to Shares. Such Shareholder owns, and will own as of Closing, record
and beneficially, the number of Shares listed opposite such Shareholder’s name
on Schedule 3.1, free and clear of any Encumbrance other than a pledge to Mirant
which shall be released upon payment as described hereinabove at Closing.
 
3.2  Incorporation; Power and Authority. If such Shareholder is not a natural
person, it is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Such Shareholder has all necessary
power and authority to execute, deliver and perform this Agreement.
 
3.3  Valid and Binding Agreement. If such Shareholder is not a natural person,
the execution, delivery and performance of this Agreement by such Shareholder
has been duly and

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validly authorized by all necessary corporate or equivalent action. This
Agreement has been duly executed and delivered by such Shareholder and
constitutes the valid and binding obligation of such Shareholder, enforceable
against it in accordance with its terms, subject to the Remedies Exception.
 
3.4  No Breach; Consents. The execution, delivery and performance of this
Agreement by such Shareholder will not (a) contravene any provision of the
Organizational Documents, if any, of such Shareholder; (b) violate or conflict
with any Law, Governmental Order or Governmental Authorization; (c) conflict
with, result in any breach of any of the provisions of, constitute a default (or
any event which would, with the passage of time or the giving of notice or both,
constitute a default) under, result in a violation of, increase the burdens
under, result in the termination, amendment, suspension, modification,
abandonment or acceleration of payment (or any right to terminate) or require a
Consent, including any Consent, under any Contract or Governmental Authorization
that is either binding upon or enforceable against such Shareholder other than
the Consent of Mirant; (d) result in the creation of any Encumbrance upon the
Shares held by such Shareholder; or (e) require any Governmental Authorization.
 
3.5  Brokerage. No Person will be entitled to receive any brokerage commission,
finder’s fee, fee for financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement based on any
Contract made by or on behalf of such Shareholder for which Buyer, the Company
or the Surviving Corporation is or could become liable or obligated other than
the Finder’s Fee.
 
3.6  Investment. Each Shareholder who will acquire Buyer Common Stock (a)
understands that the shares of Buyer Common Stock have not been and will not be
registered under the Securities Act or under any state securities laws, are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering and will contain a legend
restricting transfer; (b) is acquiring the shares of Buyer Common Stock solely
for such Shareholder’s own account for investment purposes, and not with a view
to the distribution thereof; (c) is a sophisticated investor with knowledge and
experience in business and financial matters; (d) has received certain
information concerning Buyer, including all of the Buyer’s filings under the
Exchange Act through October 7, 2002 including without limit, Buyer’s annual
report, its 10K(A) and 10Q(A), and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding the Buyer Common Stock; (e) is able to bear the economic risk and lack
of liquidity inherent in holding the shares of Buyer Common Stock; and (f) is an
“Accredited Investor” as that term is defined under Rule 501 of the Securities
Act.
 
IV. Representations and Warranties Regarding the Company
 
Shareholders represent and warrant to Buyer that, except as described in the
Disclosure Schedules, as of the date of this Agreement and as of the Closing
Date (in all material respects):
 
4.1  Incorporation; Power and Authority.

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(a)  Each of the Company and the Subsidiaries is a legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, and has all necessary power and authority necessary to own, lease
and operate its assets and to carry on its business as now conducted and
presently proposed to be conducted. Each of the Company and the Subsidiaries is
duly qualified to do business as a foreign corporation in each jurisdiction in
which the nature of its business or its ownership of property requires it to be
so qualified. Schedule 4.1 lists, for each of the Company and the Subsidiaries,
the jurisdiction of its organization, its form as a legal entity and each
jurisdiction in which it is so qualified. The Company has all necessary power
and authority to execute, deliver and perform this Agreement.
 
(b)  Each of the Company and the Subsidiaries is in full compliance with all
provisions of its Organizational Documents.
 
4.2  No Breach; Consents. To their Knowledge, the execution, delivery and
performance of this Agreement by Shareholders will not (a) contravene any
provision of the Organizational Documents of the Company or any Subsidiary; (b)
violate or conflict with any Law, Governmental Order or Governmental
Authorization; (c) conflict with, result in any breach of any of the provisions
of, constitute a default (or any event which would, with the passage of time or
the giving of notice or both, constitute a default) under, result in a violation
of, increase the burdens under, result in the termination, amendment,
suspension, modification, abandonment or acceleration of payment (or any right
to terminate), require a Consent, including any Consent, under any Contract or
Governmental Authorization that is either binding upon or enforceable against
the Company or any Subsidiary other than the Consent of Mirant; (d) result in
the creation of any Encumbrance upon the Company or any Subsidiary or any of the
assets of the Company or any Subsidiary; or (e) require any Governmental
Authorization.
 
4.3  Capitalization.
 
(a)  The authorized capital stock of the Company consists of 10,000,000 shares
of Company Common Stock, of which 8,000,000 shares of Company Common Stock are
issued and outstanding. Schedule 4.3(a) lists the names and addresses of each
record holder of the issued and outstanding Company Common Stock, the number of
shares held by each such holder and the share certificate numbers, repurchase or
redemption rights for such shares in favor of the Company, the vesting schedule
and forfeiture provisions for any of such shares that are “restricted stock,”
and the extent to which vesting will or may be accelerated by the transactions
contemplated by this Agreement and any limitations on the ability of the holder
of such capital stock to vote or dispose of such shares. To their Knowledge, all
issued and outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable, free of preemptive rights or any
other third party rights and in certificated form, and have been offered, sold
and issued by the Company in compliance with applicable securities and corporate
laws, Contracts applicable to the Company and the Company’s Organizational
Documents and in compliance with any preemptive rights, rights of first refusal
or similar rights. The rights and privileges of the Company Common Stock are set
forth in the Company’s Organizational Documents.

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(b)  No Company Options with respect to any shares of Company Common Stock are
outstanding. Company Warrants with respect to 2,000,000 shares of Company Common
Stock are outstanding. Schedule 4.3(b) lists the name and addresses of each
holder of an outstanding Company Warrant, the number of shares of Company Common
Stock subject to such Company Warrant, the exercise price of such Company
Warrant, the expiration date of such Company Warrant and any effect of the
transactions contemplated by this Agreement on such Company Warrant. To their
Knowledge, all outstanding Company Warrants have been offered, sold and
delivered in compliance with applicable securities and corporate laws, Contracts
applicable to the Company and the Company’s Organizational Documents. To their
Knowledge, all shares of Company Common Stock issuable upon exercise of the
Company Warrants have been offered in compliance with applicable securities and
corporate laws, Contracts applicable to the Company and the Company’s
Organizational Documents and, upon issuance in accordance with their terms, will
be duly authorized, validly issued, fully paid and nonassessable.
 
(c)  Except for the Company Warrants listed on Schedule 4.3(b), there is no
option, warrant, call, subscription, convertible security, right (including
preemptive right) or Contract of any character to which the Company is a party
or by which it is bound obligating the Company to issue, exchange, transfer,
sell, repurchase, redeem or otherwise acquire any capital stock of the Company
or obligating the Company to grant, extend, accelerate the vesting of or enter
into any such option, warrant, call, subscription, convertible security, right
or Contract. There are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to the Company. Except as contemplated by
this Agreement, there are no registration rights agreements, no voting trust,
proxy or other Contract and no restrictions on transfer with respect to any
capital stock of the Company except that the Shares are pledged to Mirant, which
pledge shall be released at Closing.
 
4.4  Subsidiaries. Except as listed on Schedule 4.4, neither the Company nor any
Subsidiary owns any Subsidiary. For each of the Company’s Subsidiaries, Schedule
4.4 shows the equity interests owned by the Company or any Subsidiary, the names
of the Persons owning such equity interests and the percentage of the
outstanding equity interests so owned. All issued and outstanding equity
interests of each Subsidiary of the Company are duly authorized, validly issued,
fully paid and nonassessable, free of preemptive rights or any other third-party
right, free and clear of all Encumbrances, and in certificated form and, to
their Knowledge, have been offered, sold and issued by such Subsidiary in
compliance with applicable securities and corporate laws, Contracts applicable
to such Subsidiary and such Subsidiary’s Organizational Documents and in
compliance with any preemptive rights, rights of first refusal or similar
rights. There is no option, warrant, call, subscription, convertible security,
right (including preemptive rights) or Contract of any character to which the
Company or any Subsidiary is a party or by which it is bound obligating any
Subsidiary of the Company or the Company to issue, exchange, transfer, sell,
repurchase, redeem or otherwise acquire any equity interest of such Subsidiary
or obligating the Company or such Subsidiary to grant, extend, accelerate the
vesting of or enter into any such option, warrant, call, subscription,
convertible security, right or Contract.

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4.5  Financial Statements. The audited consolidated balance sheet as of June 30,
2002, of the Company and its consolidated Subsidiaries (the “Latest Balance
Sheet”) and the audited consolidated statements of income, changes in
stockholders’ equity and cash flows, including notes, of the Company and its
consolidated Subsidiaries for the six-month period then ended (such statements
and the Latest Balance Sheet, the “Latest Financial Statements”) are based upon
the books and records of the Company and the Subsidiaries and present fairly in
all material respects the financial position, results of operations and cash
flows of the Company and its consolidated Subsidiaries on a consolidated basis
at June 30, 2002, and for the period indicated.
 
4.6  Undisclosed Liabilities. To their Knowledge, the Company has no liability
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for Taxes) of a character which, under GAAP, should
be accrued, shown or disclosed on a balance sheet of the Company, except for (i)
liabilities set forth on the Latest Balance Sheet, (ii) liabilities which have
arisen after June 30, 2002, in the Ordinary Course of Business (none of which,
either individually or in the aggregate, have had a Material Adverse Effect),
(iii) liabilities arising out of the transactions contemplated by this Agreement
and (iv) liabilities set forth in the Disclosure Schedules.
 
4.7  Books and Records. To their Knowledge, the books of account of the Company
and the Subsidiaries are complete and correct and have been maintained in
accordance with sound business practices. To their Knowledge, the minute books
of each of the Company and the Subsidiaries contain accurate records of all
meetings held and actions taken by the holders of stock or equity interests, the
boards of directors and committees of the boards of directors or other governing
body of each of the Company and the Subsidiaries, and no meeting of any such
holders, boards of directors or other governing body or committees has been held
for which minutes are not contained in such minute books. At the Closing, all
such books and records will be in the possession or control of Shareholders.
 
4.8  Absence of Certain Developments.
 
Since June 30, 2002, there has not been any Material Adverse Effect and:
 
(a) neither the Company nor any Subsidiary has sold, leased, transferred or
assigned any of its assets, tangible or intangible, having a net book value in
excess of $200,000;
 
(b) neither the Company nor any Subsidiary has entered into any Contract (or
series of related Contracts) either involving payments of more than $200,000 per
annum;
 
(c) no party (including the Company or any Subsidiary) has accelerated,
suspended, terminated, modified or canceled any Contract (or series of related
Contracts) involving payments of more than $200,000 per annum to which the
Company or any Subsidiary is a party or by which any of them is bound;
 
(d) no Encumbrance (other than a Permitted Encumbrance) has been imposed on any
assets of the Company or any Subsidiary;

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(e) neither the Company nor any Subsidiary has made (i) any capital expenditure
or (ii) any series of related capital expenditures, involving in either case
more than $200,000, other than in the Ordinary Course of Business;
 
(f) neither the Company nor any Subsidiary has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any individual
(except as permitted under Section 4.8(o)), corporation, partnership, limited
liability company or other business entity;
 
(g) neither the Company nor any Subsidiary has issued any note, bond or other
debt security or created, incurred, assumed or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$200,000 individually or $1,000,000 in the aggregate other than amounts advanced
under the Company’s credit facility with Mirant;
 
(h) neither the Company nor any Subsidiary has delayed, postponed or accelerated
the payment of accounts payable or other liabilities or the receipt of any
accounts receivable outside the Ordinary Course of Business;
 
(i) neither the Company nor any Subsidiary has canceled, compromised, waived or
released (i) any right or claim or (ii) any series of related rights or claims
in either case involving more than $20,000;
 
(j) neither the Company nor any Subsidiary has granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
 
(k) there has been no change made or authorized in the Organizational Documents
of the Company or any Subsidiary;
 
(l) neither the Company nor any Subsidiary has issued, sold or otherwise
disposed of any of its capital stock or equity interests, or granted any
options, warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock other than the
Company Warrants;
 
(m) neither the Company nor any Subsidiary has declared, set aside or paid any
dividend or made any distribution with respect to its capital stock or equity
interests (whether in cash or in kind) or redeemed, purchased or otherwise
acquired any of its capital stock or split, combined or reclassified any
outstanding shares of its capital stock other than a repurchase of the Company
Warrants;
 
(n) neither the Company nor any Subsidiary has experienced any damage,
destruction or loss to its property in excess of $200,000;
 
(o) neither the Company nor any Subsidiary has made any loan to, or entered into
any other transaction with, any of its directors, officers or employees other
than advances for business expenses in the Ordinary Course of Business in an
amount of less than $1,000 per transaction;

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(p) neither the Company nor any Subsidiary has entered into any written
employment agreement which is not terminable by the employer upon thirty (30)
days’ notice or any collective bargaining agreement, written or oral, or
modified the terms of any such existing agreement;
 
(q) neither the Company nor any Subsidiary has granted any increase in the base
compensation or made any other change in compensation or any other material
change in employment terms of any of its directors, officers or employees other
than raises granted effective July 1, 2002, in the Ordinary Course of Business;
 
(r) neither the Company nor any Subsidiary has adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors, officers or
employees (or taken any such action with respect to any other Plan);
 
(s) neither the Company nor any Subsidiary has made or pledged to make any
charitable contribution in excess of $2,500;
 
(t) neither the Company nor any Subsidiary has discharged or satisfied any
Encumbrance or paid any liability, other than current liabilities paid in the
Ordinary Course of Business;
 
(u) neither the Company nor any Subsidiary has disclosed, to any Person other
than Buyer and Shareholders and authorized representatives of Buyer, any
proprietary confidential information, other than pursuant to a confidentiality
agreement prohibiting the use or further disclosure of such information, which
agreement is listed on Schedule 4.8 and is in full force and effect on the date
of this Agreement other than disclosures made to lenders, attorneys, accountants
and other agents of the Company;
 
(v) the Company has not made any change in accounting principles or practices
from those utilized in the preparation of the Latest Financial Statements; and
 
(w) neither the Company nor any Subsidiary has committed to take any of the
actions described in this Section 4.8.
 
4.9 Property.
 
(a) Set forth in Schedule 4.9(a) are all of the Oil and Gas Properties of the
Company and its Subsidiaries that are individually valued in the Company’s
reserve report dated effective April 1, 2002. The Company has made a good faith
effort to list all other material Oil and Gas Properties in Schedule 4.9(a) but
no representation or warranty is made as to whether all such other material Oil
and Gas Properties are so listed.
 
(b) The Company and its Subsidiaries hold title to each parcel of real property
identified on Schedule 4.9(b) as being owned by the Company or a Subsidiary (the
“Owned Real Property”) free and clear of all Encumbrances, except for Permitted
Encumbrances and Encumbrances listed on Schedule 4.9(b), and specially warrant
the

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title of the Company and its Subsidiaries to the Owned Real Property against all
and every person whomsoever claiming by, through or under the Company or a
Subsidiary, but not otherwise.
 
(c) The leases of real property listed on Schedule 4.9(c) as being leased by the
Company or any Subsidiary (the “Leased Real Property”) are in full force and
effect, and the lessee holds a valid and existing leasehold interest under each
of the leases for the term listed on Schedule 4.9(c). The Leased Real Property
is subject to no ground lease, master lease, mortgage, deed of trust or other
Encumbrance (other than Permitted Encumbrances) or interests that would entitle
the holder thereof to interfere with or disturb use or enjoyment of the Leased
Real Property or the exercise by the lessee of its rights under such lease so
long as the lessee is not in default under such lease.
 
(d) Each parcel of real property has access, sufficient for the conduct of the
business as now conducted or as presently proposed to be conducted by the
Company or any Subsidiary on such parcel or real property, to public roads and
to all utilities, including electricity, sanitary and storm sewer, potable
water, natural gas and other utilities, used in the operation of the business at
that location. The zoning for each parcel of real property permits the presently
existing improvements and the continuation of the business presently being
conducted thereon as a conforming use. Neither the Company nor any Subsidiary is
in violation of any applicable zoning ordinance or other Law relating to the
real property, and neither the Company nor any Subsidiary has received any
notice of any such violation, or the existence of any condemnation proceeding
with respect to any of the real property. The buildings and other improvements
are located within the boundary lines of each parcel of real property and do not
encroach over applicable setback lines.
 
(e) Shareholders have no Knowledge of improvements made or proposed by any
Governmental Entity, the costs of which are to be assessed as special Taxes or
charges against any of the real property, and there are no present assessments.
 
(f) Each of the Company and the Subsidiaries has good and valid title to the
buildings, machinery, equipment and other tangible assets and properties owned
by them, located on their premises or shown in the Latest Balance Sheet or
acquired after the date thereof, free and clear of all Encumbrances, except for
Permitted Encumbrances, Encumbrances listed on Schedule 4.9(f) and such tangible
assets and properties which are held under leases.
 
(g) Each of the Company and the Subsidiaries owns, or leases under valid leases,
all buildings, machinery, equipment and other tangible assets and properties
necessary for the conduct of its respective business as presently conducted. The
buildings, machinery, equipment, and other tangible assets that the Company and
the Subsidiaries owns or leases have in the aggregate been maintained in
accordance with normal industry practice.
 
4.10 Accounts Receivable. All notes and accounts receivable of each of the
Company and the Subsidiaries are reflected properly on their books and records,
are valid, have arisen from

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bona fide transactions in the Ordinary Course of Business and to the
Shareholders’ Knowledge, are subject to no valid setoff or counterclaim.
 
4.11 Inventory. To its Knowledge, the Company maintains adequate inventory to
support the operations on the Lands, Leases and Wells.
 
4.12 Intellectual Property.
 
(a) The Company and the Subsidiaries have not interfered with, infringed upon,
misappropriated or violated any Intellectual Property rights of third parties in
any respect, and has not received since June 30, 2002, any written charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company or a Subsidiary must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Shareholders, no
third party has interfered with, infringed upon, misappropriated, or violated
any Intellectual Property rights of the Company or its Subsidiaries.
 
(b) The Company and the Subsidiaries own, lease, license, sublicense or
otherwise have adequate legal rights to use all of the Intellectual Property
which is used in connection with their business operations. Section 4.12(b) of
the Disclosure Schedules identifies (i) each patent or registration which has
been issued to the Company or its Subsidiaries with respect to any of the
Intellectual Property used in the business of the Company or its Subsidiaries,
(ii) each pending patent application or application for registration which the
Company or its Subsidiaries have made with respect to any of the Intellectual
Property used in its business, and (iii) each license which the Company or its
Subsidiaries has granted to any third party with respect to any of the
Intellectual Property used in its business (together with any exceptions). The
Shareholders have delivered to Buyer correct and complete copies of all such
patents, registrations, applications and licenses (as amended to date).
 
4.13 Material Contracts. Schedule 4.13 lists the following Contracts to which
the Company or any Subsidiary is a party or subject or by which it is bound (the
“Material Contracts”):
 
(i) all employment, agency or consulting Contracts other than implied Contracts
of employment arising under Oklahoma law which are terminable at will;
 
(ii) all stock purchase, stock option and stock incentive plans (other than
Plans);
 
(iii) all Contracts with any Insider;
 
(iv) any Contracts or group of related Contracts with the same party for the
purchase of products or services with an undelivered balance in excess of
$200,000;

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(v) any Contract or group of related Contracts with the same party for the sale
of products or services with an undelivered balance in excess of $200,000;
 
(vi) all leases of real or personal property (excluding Leases and any lease
with aggregate annual payments of $50,000 or less);
 
(vii) any Contract for the sale of any capital assets having a net book value in
excess of $25,000;
 
(viii) any Contract committing the Company or a Subsidiary to make Capital
Expenditures in excess of $200,000 after the date of this Agreement;
 
(ix) any Contract for the borrowing of money or relating to mortgaging, pledging
or otherwise placing an Encumbrance on any of the assets of the Company or any
Subsidiary;
 
(x) each written guaranty or other similar undertaking with respect to
contractual performance or any agreement to be expressly responsible for
consequential damages extended by the Company or any Subsidiary;
 
(xi) all Contracts relating to any surety bond or letter of credit required to
be maintained by the Company or any Subsidiary;
 
(xii) any Contract concerning a partnership or joint venture, the breach of
which could result in a Material Adverse Effect other than joint operating
agreements and farmout agreements;
 
(xiii) any Contracts containing exclusivity, noncompetition or nonsolicitation
provisions or that would otherwise prohibit the Company or any Subsidiary from
freely engaging in business anywhere in the world or prohibiting the
solicitation of the employees or contractors of any other entity;
 
(xiv) all Contracts pertaining to confidentiality or non-disclosure by the
Company or a Subsidiary the breach of which could result in a Material Adverse
Effect;
 
(xv) all Contracts terminable by any other party upon a change of control of the
Company or any Subsidiary or upon the failure of the Company or any Subsidiary
to satisfy financial or performance criteria specified in such Contract; and
 
(xvi) any power of attorney that is currently effective.
 
(b) Each Material Contract is valid and binding, currently in force and
enforceable in accordance with its terms, subject to the Remedies Exception.
Each of the Company and the Subsidiaries has performed all obligations required
to be performed by it in connection with each Material Contract. Neither the
Company nor any Subsidiary

24

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has received any notice of any claim of default by it under or termination of
any Material Contract. Neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing any obligation pursuant to any
Material Contract, and to Shareholders’ Knowledge there is no breach,
anticipated breach or default by any other party to any Material Contract. There
are no renegotiations of, or outstanding rights to renegotiate any material
terms of any Material Contract and no Person has made written demand for such
renegotiation.
 
4.14 Insurance/Bonding.
 
(a) Each of the Company and the Subsidiaries has at all times maintained
insurance relating to its business and covering property, fire, casualty,
liability, workers’ compensation and all other forms of insurance customarily
obtained by businesses in the same industry. Similarly, the Company has secured
and posted all required bonds with each governmental agency having jurisdiction
over the Company’s operations. Such insurance and bonds (i) are in full force
and effect, (ii) are sufficient for compliance with all requirements of
applicable Law and of any Contract to which the Company or any Subsidiary is
subject, (iii) are valid and enforceable, (iv) insures against risks of the kind
customarily insured against and in amounts customarily carried by businesses
similarly situated and (v) provide adequate insurance coverage for the
activities of each of the Company and the Subsidiaries.
 
(b) Schedule 4.14(b) lists by year for the current policy year and each of the
two (2) preceding policy years a summary of the loss experience under each
policy involving any claim setting forth (i) the name of the claimant, (ii) a
description of the policy by insurer, type of insurance and period of coverage
and (iii) the amount and a brief description of the claim. Schedule 4.14(b) also
describes the loss experience for all claims that were self-insured, including
the aggregate cost of such claims. Exhibit 7.5 lists all bonds posted by the
Company.
 
4.15 Compliance with Laws; Government Authorizations.
 
(a) To their Knowledge, each of the Company and the Subsidiaries has materially
complied with all applicable Laws and Governmental Orders. Neither the Company
nor any Subsidiary is relying on any exemption from or deferral of any Law,
Governmental Order or Governmental Authorization that would not be available to
it after the Closing.
 
(b) To their Knowledge, each of the Company and the Subsidiaries has in full
force and effect all Governmental Authorizations necessary to conduct its
business and own and operate its properties. To their Knowledge, each of the
Company and the Subsidiaries has materially complied with all Governmental
Authorizations applicable to it.
 
(c) Neither the Company nor any Subsidiary has offered, authorized, promised,
made or agreed to make gifts of money, other property or similar benefits (other
than incidental gifts of articles of nominal value) to any actual or potential

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customer, supplier, governmental employee, political party, political party
official or candidate, official of a public international organization or any
other Person in a position to assist or hinder the Company or any Subsidiary in
connection with any actual or proposed transaction, other than payments required
or permitted by the laws of the applicable jurisdiction and in compliance with
the U.S. Foreign Corrupt Practices Act.
 
(d) Neither the Company nor any Subsidiary has received any inquiry, notice or
directive to plug or abandon any well from a lessor or a Governmental Entity.
 
(e) Neither the Company nor any Subsidiary has now, or has had in the past, any
legal obligation to file any form, report, schedule, proxy statement or other
document with the SEC, and the Company has not filed with the SEC any such form,
report, schedule, proxy statement or other document.
 
4.16 Litigation. Except as disclosed in Schedule 4.16, no Litigation is pending
or, to the Knowledge of any Shareholder, threatened against the Company or any
Subsidiary. Neither the Company nor any Subsidiary is subject to any outstanding
Governmental Order, other than non-violation orders issued by the Oklahoma
Corporation Commission in the Ordinary Course of Business.
 
4.17 Employees.
 
(a) Schedule 4.17(a) states the total number of employees and indicates for each
such employee, and in the aggregate, full-time, part-time and temporary status.
Such schedule also lists such employee’s salary and any other compensation
payable other than compensation payable under the Plans. To the Knowledge of any
Shareholder, no executive employee of the Company and no group of employees of
the Company or any Subsidiary has any plans to terminate his, her or their
employment other than in the Ordinary Course of Business. Each of the Company
and the Subsidiaries has materially complied at all times with all applicable
Laws relating to employment and employment practices and those relating to the
calculation and payment of wages, including but not limited to overtime, maximum
hours of work, equal employment opportunity (including laws and regulations
prohibiting discrimination and/or harassment on the basis of race, national
origin, religion, gender, disability, age or otherwise), affirmative action and
other hiring practices, occupational safety and health, workers compensation,
unemployment, the payment of social security and other Taxes, and unfair labor
practices under the National Labor Relations Act.
 
(b) The employment of any terminated former employee of the Company or any
Subsidiary has been terminated in accordance with any applicable contractual
terms and applicable Law, and neither the Company nor any Subsidiary has any
liability under any contract or applicable Law toward any such terminated
employee. The sale of the Shares or the other transactions contemplated by this
Agreement will not cause the Company or any Subsidiary to incur or suffer any
liability relating to, or obligation to pay, severance, termination or other
payments to any Person.

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(c) Neither the Company nor any Subsidiary has made any loans to any employee of
the Company or any Subsidiary which is currently outstanding other than advances
for business-related expenses in the Ordinary Course of Business.
 
(d) None of the employees of the Company or any Subsidiary is covered by any
collective bargaining agreement, no collective bargaining agreement is currently
being negotiated and to Shareholders’ Knowledge no attempt is currently being
made or during the past five years has been made to organize any of its
employees to form or enter into any labor union. There are no strikes,
slowdowns, work stoppages or other labor controversies pending or, to the
Knowledge of any Shareholder, threatened against or otherwise affecting the
employees or facilities of the Company or any Subsidiary. None of the Company or
any Subsidiary has experienced any labor strike, slowdown, work stoppage or
other material labor controversy involving its employees within the past two (2)
years.
 
(e) Each of the Company and the Subsidiaries has paid in full to all employees
all wages, salaries and commissions due and payable to such employees and have
fully reserved on the Latest Financial Statements all amounts for wages,
salaries and commissions, bonuses and contributions required to the Company’s
401(k) Plan, if any, that are due but not yet payable to such employees or such
Plan.
 
(f) There have been no lay-offs of employees or work reduction programs
undertaken by or on behalf of the Company or any Subsidiary in the past two (2)
years, and no such programs have been adopted by the Company or any Subsidiary
or publicly announced.
 
4.18 Affiliate Transactions. Except as disclosed on Schedule 4.18, no Insider
has any Contract with the Company or any Subsidiary (other than employment not
represented by a written Contract and terminable at will) or any interest in any
assets (whether real, personal or mixed, tangible or intangible) used in or
pertaining to the business of the Company or any Subsidiary (other than
ownership of capital stock of the Company). No Insider has any direct or
indirect interest in any competitor, supplier or customer of the Company or any
Subsidiary or in any Person from whom or to whom the Company or any Subsidiary
leases any property, or in any other Person with whom the Company or any
Subsidiary otherwise transacts business of any nature. Schedule 4.18 lists all
transactions between the Company or any Subsidiary and each Insider for the last
full fiscal year and since the Last Fiscal Year End.
 
4.19 Brokerage. No Person will be entitled to receive any brokerage commission,
finder’s fee, fee for financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement based on any
Contract made by or on behalf of the Company for which Buyer or the Company is
or could become liable or obligated other than the Finder’s Fee.
 
4.20 Tax Matters.
 
(a) Each of the Company and any Tax Affiliate has (i) timely filed (or has had
timely filed on its behalf) all Returns required to be filed or sent by it in
respect of any

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Taxes or required to be filed or sent by it by any Governmental Entity, all
which were correct and complete in all material respects; (ii) timely and
properly paid (or has had paid on its behalf) all Taxes shown to be due and
payable on such Returns; (iii) established on the Latest Balance Sheet, in
accordance with GAAP and consistent with past practices, reserves that are
adequate for the payment of any Taxes not yet due and payable; and (iv) complied
with all Laws relating to the withholding of Taxes and the payment thereof
(including, without limitation, withholding of Taxes under Sections 1441 and
1442 of the Code) and timely and properly withheld from individual employee
wages and paid over to the proper Governmental Entity all amounts required to be
so withheld and paid over under applicable Law.
 
(b) All Taxes of the Company and all Tax Affiliates that will be due and payable
for any period ending on and including or ending prior to the Closing Date, will
have been paid by or on behalf of the Company or will be reflected, in a manner
consistent with past practice, on the Company’s books as an accrued Tax
liability, either current or deferred.
 
(c) There are no Encumbrances for Taxes upon any assets of the Company or any
Tax Affiliate, except Encumbrances for Taxes not yet due.
 
(d) No deficiency for any Taxes has been proposed, asserted or assessed against
the Company or any Tax Affiliate that has not been resolved and paid in full. No
waiver, extension or comparable consent given by the Company or any Tax
Affiliate regarding the application of the statute of limitations with respect
to any Taxes or Returns is outstanding, nor is any request for any such waiver
or consent pending. There has been no Tax audit or other administrative
proceeding or court proceeding with regard to any Taxes or Returns for any Tax
year subsequent to the year ended December 31, 1998, nor is any such Tax audit
or other proceeding pending, nor has there been any notice to the Company or any
Tax Affiliate by any Governmental Entity regarding any such Tax, audit or other
proceeding, or, to the Knowledge of any Shareholder, is any such Tax audit or
other proceeding threatened with regard to any Taxes or Returns. Neither the
Company nor any Tax Affiliate expects or anticipates the assessment of any
additional Taxes on the Company or any Tax Affiliate or is aware of any
unresolved questions, claims or disputes concerning the liability for Taxes of
the Company or any Tax Affiliate which would exceed the estimated reserves
established on its books and records. No claim has ever been made by a
Governmental Entity in a jurisdiction where neither the Company nor any
Subsidiary files any Return that the Company or any Tax Affiliate is or may be
subject to taxation.
 
(e) Schedule 4.20(e) lists all federal, state, local and foreign income Returns
filed with respect to any of the Company or any Tax Affiliate for taxable
periods ended on or after December 31, 1999, indicates those Returns that have
been audited and indicates those Returns that currently are the subject of
audit.
 
(f) Neither the Company nor any Tax Affiliate is a party to any Contract that
would result, separately or in the aggregate, in the payment of any “excess
parachute payments” within the meaning of Section 280G of the Code and the
consummation of the

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transactions contemplated by this Agreement will not be a factor causing
payments to be made by the Company or any Tax Affiliate that are not deductible
(in whole or in part) as a result of the application of Section 280G of the
Code.
 
(g) Neither the Company nor any Tax Affiliate has requested any extension of
time within which to file any Return, which Return has not been filed within
such extension.
 
(h) No property of the Company or any Tax Affiliate is property that the Company
or any Tax Affiliate is or will be required to treat as being owned by another
Person under the provisions of Section 168(f)(8) of the Code (as in effect prior
to amendment by the Tax Reform Act of 1986) or is “tax-exempt use property”
within the meaning of Section 168 of the Code.
 
(i) Neither the Company nor any Tax Affiliate is required to include in income
any adjustment under Section 481(a) of the Code by reason of a voluntary change
in accounting method initiated by the Company or any Tax Affiliate as a result
of the Tax Reform Act of 1986 and neither the Company nor any Tax Affiliate has
Knowledge that the IRS has proposed any such adjustment or change in accounting
method.
 
(j) All transactions that could give rise to an underpayment of tax (within the
meaning of Section 6662 of the Code) were reported by the Company and each Tax
Affiliate in a manner for which there is substantial authority or were
adequately disclosed on the Returns required in accordance with the Code.
 
(k) Neither the Company nor any Tax Affiliate has engaged in any transaction
that would result in a deemed election under Section 338(e) of the Code, and
neither the Company nor any Tax Affiliate will engage in any such transaction
within any applicable “consistency period” (as such term is defined in Section
338 of the Code).
 
(l) Neither the Company nor any Tax Affiliate is a party to any Tax allocation
or sharing agreement.
 
(m) The Company and the Tax Affiliates have evidence of payment for all Taxes,
charges, fees, levies or other assessments of a foreign country paid or accrued
from the date of the formation of each of them, respectively.
 
(n) [Intentionally deleted.]
 
(o) The Company and the Tax Affiliates are, and at all times have been,
corporations or associations taxable as corporations for United States income
tax purposes.
 
(p) Any “FSC” (within the meaning of Section 922 of the Code) has been properly
operated in accordance with the provisions in Sections 921-927 of the Code.
 
(q) All deductions claimed or reported on all Returns of the Company and any Tax
Affiliate on account of royalties or similar fees payable with respect to any

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Intellectual Property of the Company or any Subsidiary or any other party are
allowable in full.
 
(r) Neither the Company nor any Tax Affiliate has been a United States real
property holding corporation within the meaning in Section 897(c)(2) of the Code
during the applicable period specified in Section 987(c)(1)(A)(ii) of the Code.
 
(s) Neither the Company nor any Tax Affiliate has filed any consent under
Section 341(f) of the Code.
 
(t) Neither the Company nor any Subsidiary (i) has been a member of an affiliate
group filing a consolidated Return (other than a group the common parent of
which was the Company) or (ii) has any liability for the Taxes of any Person
(other than any of the Company or any Subsidiary) under Section 1.1502-6 of the
Treasury Regulation (or any similar provision of state, local or foreign law),
as a transferee or successor, by contract, or otherwise.
 
4.21 Employee Benefits.
 
(a) Schedule 4.21 lists all Plans by name and provides a brief description
identifying (i) the type of Plan, (ii) the funding arrangements for the Plan,
(iii) the sponsorship of the Plan, (iv) the participating employers in the Plan
and (v) any one or more of the following characteristics that may apply to such
Plan: (A) defined contribution plan as defined in Section 3(34) of ERISA or
Section 414(i) of the Code, (B) defined benefit plan as defined in Section 3(35)
of ERISA or Section 414(j) of the Code, (C) plan which is or is intended to be
tax qualified under Section 401(a) or 403(a) of the Code, (D) plan which is or
is intended to be an employee stock ownership plan as defined in Section
4975(e)(7) of the Code (and whether or not such plan has entered into an exempt
loan), (E) nonqualified deferred compensation arrangement, (F) employee welfare
benefit plan as defined in Section 3(1) of ERISA, (G) multiemployer plan as
defined in Section 3(37) of ERISA or Section 414(f) of the Code, (H) multiple
employer plan maintained by more than one employer as defined in Section 413(c)
of the Code, (I) plan providing benefits after separation from service or
termination of employment, (J) plan that owns any Company or other employer
securities as an investment, (K) plan that provides benefits (or provides
increased benefits or vesting) as a result of a change in control of the
Company, (L) plan that is maintained pursuant to collective bargaining and (M)
plan that is funded, in whole or in part, through a voluntary employees’
beneficiary association exempt from Tax under Section 501(c)(9) of the Code.
 
(b) Schedule 4.21 lists each corporation, trade or business (separately for each
category below that applies): (i) that is (or was during the preceding five
years) under common control with the Company within the meaning of Section
414(b) or (c) of the Code, (ii) that is (or was during the preceding five years)
in an affiliated service group with the Company within the meaning of Section
414(m) of the Code, (iii) that is (or was during the preceding five years) the
legal employer of persons providing services to the Company as leased employees
within the meaning of Section 414(n) of the Code and (iv) with respect to which
the Company or any Subsidiary is a successor employer for

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purposes of group health or other welfare plan continuation rights (including
Section 601 et seq. of ERISA) or the Family and Medical Leave Act.
 
(c) Schedule 4.21 lists (i) the most recent determination letter received by the
Company from the IRS regarding each Plan, (ii) the most recent determination or
opinion letter ruling from the IRS that each trust established in connection
with Plans that are intended to be tax exempt under Section 501(a) or (c) of the
Code are so tax exempt, (iii) all pending applications for rulings,
determinations, opinions, no action letters and the like filed with any
governmental agency (including but not limited to the Department of Labor, IRS,
Pension Benefit Guaranty Corporation and the SEC), (iv) the financial statements
for each Plan for the three most recent fiscal or plan years (in audited form if
required by ERISA) and, where applicable, Annual Report/Return (Form 5500) with
disclosure schedules, if any, and attachments for each Plan, (v) the most
recently prepared actuarial valuation report for each Plan (including but not
limited to reports prepared for funding, deduction and financial accounting
purposes), (vi) plan documents, trust agreements, insurance contracts, service
agreements and all related contracts and documents (including any employee
summaries and material employee communications) with respect to each Plan and
(vii) collective bargaining agreements (including side agreements and letter
agreements) relating to the establishment, maintenance, funding and operation of
any Plan.
 
(d) Schedule 4.21 lists each employee of the Company or any Subsidiary who is
(i) absent from active employment due to short or long term disability, (ii)
absent from active employment on a leave pursuant to the Family and Medical
Leave Act or a comparable state law, (iii) absent from active employment on any
other leave or approved absence (together with the reason for each leave or
absence) or (iv) absent from active employment due to military service (under
conditions that give the employee rights to re-employment).
 
(e) With respect to continuation rights arising under federal or state law as
applied to Plans that are group health plans (as defined in Section 601 et seq.
of ERISA), Schedule 4.21 lists (i) each employee, former employee or qualifying
beneficiary who has elected continuation and (ii) each employee, former employee
or qualifying beneficiary who has not elected continuation coverage but is still
within the period in which such election may be made.
 
(f)    (i) All Plans intended to be Tax qualified under Section 401(a) or
Section 403(a) of the Code are so qualified, (ii) all trusts established in
connection with Plans intended to be Tax exempt under Section 501(a) or (c) of
the Code are so Tax exempt, (iii) to the extent required either as a matter of
Law or to obtain the intended Tax treatment and Tax benefits, all Plans comply
in all respects with the requirements of ERISA and the Code, (iv) all Plans have
been administered in accordance with the documents and instruments governing the
Plans, (v) all reports and filings with Governmental Entities (including but not
limited to the Department of Labor, the IRS, Pension Benefit Guaranty
Corporation and the SEC) required in connection with each Plan have been timely
made, (vi) all disclosures and notices required by Law or Plan provisions to be
given to participants and beneficiaries in connection with each Plan have

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been properly and timely made and (vii) each of the Company and the Subsidiaries
has made a good faith effort to comply with the reporting and taxation
requirements for FICA taxes with respect to any deferred compensation
arrangements under Section 3121(v) of the Code.
 
(g)    (i) All contributions, premium payments and other payments required to be
made in connection with the Plans as of the date of this Agreement have been
made, (ii) a proper accrual has been made on the books of the Company for all
contributions, premium payments and other payments due in the current fiscal
year but not made as of the date of this Agreement, (iii) no contribution,
premium payment or other payment has been made in support of any Plan that is in
excess of the allowable deduction for federal income Tax purposes for the year
with respect to which the contribution was made (whether under Section 162,
Section 280G, Section 404, Section 419, Section 419A of the Code or otherwise)
and (iv) with respect to each Plan that is subject to Section 301 et seq. of
ERISA or Section 412 of the Code, the Company is not liable for any “accumulated
funding deficiency” as that term is defined in Section 412 of the Code and the
projected benefit obligations determined as of the date of this Agreement do not
exceed the assets of the Plan.
 
(h) The consummation of the transactions contemplated by this Agreement will not
(i) cause any Plan to increase benefits payable to any participant or
beneficiary, (ii) entitle any current or former employee of the Company or any
Subsidiary to severance pay, unemployment compensation or any other payment,
benefit or award or (iii) accelerate or modify the time of payment or vesting,
or increase the amount of any benefit, award or compensation due any such
employee.
 
(i)    (i) No Litigation is pending with regard to any Plan other than routine
uncontested claims for benefits, (ii) no Plan is currently under examination or
audit by the Department of Labor, the IRS or the Pension Benefit Guaranty
Corporation, (iii) the Company has no actual or potential liability arising
under Title IV of ERISA as a result of any Plan that has terminated or is in the
process of terminating, (iv) the Company has no actual or potential liability
under Section 4201 et seq. of ERISA for either a complete withdrawal or a
partial withdrawal from a multiemployer plan and (v) with respect to the Plans,
the Company has no liability (either directly or as a result of indemnification)
for (and the transactions contemplated by this Agreement will not cause any
liability for): (A) any excise Taxes under Section 4971 through Section 4980B,
Section 4999, Section 5000 or any other Section of the Code, (B) any penalty
under Section 502(i), Section 502(l), Part 6 of Title I or any other provision
of ERISA or (C) any excise Taxes, penalties, damages or equitable relief as a
result of any prohibited transaction, breach of fiduciary duty or other
violation under ERISA or any other applicable Law.
 
(j)    (i) All accruals required under FAS 106 and FAS 112 have been properly
accrued on the Latest Financial Statements, (ii) no condition, agreement or Plan
provision limits the right of the Company to amend, cut back or terminate any
Plan (except to the extent such limitation arises under ERISA) and (iii) the
Company has no liability for life insurance, death or medical benefits after
separation from employment other than (A)

32

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death benefits under the Plans and (B) health care continuation benefits
described in Section 4980B of the Code.
 
4.22 Environmental Matters.
 
(a) As used in this Section 4.22, the following terms have the following
meanings:
 
(i) “Environmental Costs” means any and all costs and expenditures, including
but not limited to any fees and expenses of attorneys and of environmental
consultants or engineers incurred in connection with investigating, defending,
remediating or otherwise responding to any Release of Hazardous Materials, any
violation or alleged violation of Environmental Laws, any fees, fines, penalties
or charges associated with any Governmental Authorization, or any actions
necessary to comply with any Environmental Laws.
 
(ii) “Environmental Laws” means any Law, Governmental Authorization or
Governmental Order relating to pollution, contamination, Hazardous Materials or
protection of the environment.
 
(iii) “Hazardous Materials” means any dangerous, toxic or hazardous pollutant,
contaminant, chemical, waste, material or substance as defined in or governed by
any Law relating to such substance or otherwise relating to the environment or
human health or safety, including without limitation any waste, material,
substance, pollutant or contaminant that might cause any injury to human health
or safety or to the environment or might subject the owner or operator of the
Property to any Environmental Costs or liability under any Environmental Law.
 
(iv) “List” means the United States Environmental Protection Agency’s National
Priorities List of Hazardous Waste Sites or any other list, schedule, log,
inventory or record, however defined, maintained by any Governmental Entity with
respect to sites from which there has been a Release of Hazardous Materials.
 
(v) “Property” means real property now owned, leased, controlled or occupied by
the Company or any Subsidiary.
 
(vi) “Regulatory Actions” means any Litigation with respect to the Company or
any Subsidiary brought or instigated by any Governmental Entity in connection
with any Environmental Costs, Release of Hazardous Materials or any
Environmental Law.
 
(vii) “Release” means the spilling, leaking, disposing, discharging, emitting,
depositing, ejecting, leaching, escaping or any other release or threatened
release, however defined, whether intentional or unintentional, of any Hazardous
Material.

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(viii) “Third-Party Environmental Claims” means any Litigation (other than a
Regulatory Action) based on negligence, trespass, strict liability, nuisance,
toxic tort or any other cause of action or theory relating to any Environmental
Costs, Release of Hazardous Materials or any violation of Environmental Law.
 
(b) No Third-Party Environmental Claims or Regulatory Actions are pending
against the Company or any Subsidiary, and, to the Knowledge of Shareholders, no
Third-Party Environmental Claims or Regulatory Actions are threatened against
the Company or any Subsidiary.
 
(c) To the Knowledge of Shareholders, no Property is set forth on a List.
 
(d) To their Knowledge, all transfer, transportation or disposal of Hazardous
Materials by the Company or any Subsidiary to properties not owned, leased or
operated by the Company or any Subsidiary has been in compliance with applicable
Environmental Laws. To their Knowledge, the Company has not transported or
arranged for the transportation of any Hazardous Materials to any location which
is (i) listed on a List, (ii) listed for possible inclusion on any List or (iii)
the subject of any Regulatory Action or Third-Party Environmental Claim.
 
(e) To their Knowledge, no Property operated by the Company or a Subsidiary was
during the period it was operated by the Company or a Subsidiary used, nor is
now being used, as a landfill, dump or other disposal, storage, transfer,
handling or treatment area for Hazardous Materials, or as a gasoline service
station or a facility for selling, dispensing, storing, transferring, disposing
or handling petroleum and/or petroleum products except in a lawful manner in the
Ordinary Course of Business.
 
(f) To their Knowledge, there has not been any Release of any Hazardous Material
on, under, about, from or in connection with the Property, including without
limitation the presence of any Hazardous Materials that have come to be located
on or under the Property from another location, that could result in a Material
Adverse Effect.
 
(g) To their Knowledge, the Company and its Subsidiaries have used and operated
their Property in material compliance with all applicable Environmental Laws.
 
(h) To their Knowledge, each of the Company and the Subsidiaries has obtained
all Governmental Authorizations relating to the Environmental Laws necessary for
operation of the Company. Each of the Company and the Subsidiaries has filed all
reports and notifications required to be filed under and pursuant to all
applicable Environmental Laws.
 
(i) To their Knowledge, no Hazardous Materials have been generated, treated,
contained, handled, located, used, manufactured, processed, buried, incinerated,
deposited or stored on, under or about any part of the Property during the
period that such Property has been operated by the Company or its Subsidiary. To
their Knowledge, the Property contains no asbestos, urea, formaldehyde, radon at
levels above natural background, PCBs or pesticides. To their Knowledge, no
aboveground or underground storage tanks are located on, under or about the
Property, or have been during the period

34

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that such property has been operated by the Company or its Subsidiary. If any
such storage tanks exist on, under or about the Property, to their Knowledge,
such storage tanks have been duly registered with all appropriate Governmental
Entities and are otherwise in compliance with all applicable Environmental Laws.
 
(j) To their Knowledge, no material expenditure will be required in order for
Buyer, the Company or any Subsidiary to comply with any Environmental Laws in
effect at the time of Closing in connection with the operation or continued
operation of the Property in a manner consistent with the present operation
thereof other than expenditures in an amount consistent with past practice.
 
(k) The Company has delivered to Buyer all environmental reports and
investigations that any Shareholder, the Company or any Subsidiary has obtained
or ordered with respect to the Company or any Subsidiary, or the Property.
 
(l) No Encumbrance has been attached or filed against the Company or any
Subsidiary in favor of any Person for (i) any liability under or violation of
any applicable Environmental Law, (ii) any Release of Hazardous Materials or
(iii) any imposition of Environmental Costs.
 
4.23 Availability of Documents. Shareholders have delivered or made available
for inspection to Buyer correct and complete copies of the items referred to in
the Disclosure Schedules or in this Agreement.
 
V. Representations and Warranties of Buyer
 
Buyer represents and warrants to Shareholders that as of the date of this
Agreement and as of the Closing Date (in all material respects):
 
5.1 Incorporation; Power and Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, with all necessary power and authority to execute, deliver and
perform this Agreement.
 
5.2 Valid and Binding Agreement. The execution, delivery and performance of this
Agreement by Buyer have been duly and validly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by Buyer
and constitutes the valid and binding obligation of Buyer, enforceable against
it in accordance with its terms, subject to the Remedies Exception.
 
5.3 No Breach; Consents. The execution, delivery and performance of this
Agreement by Buyer will not (a) contravene any provision of the Organizational
Documents of Buyer; (b) violate or conflict with any Law, Governmental Order or
Governmental Authority; (c) conflict with, result in any breach of any of the
provisions of, constitute a default (or any event which would, with the passage
of time or the giving of notice or both, constitute a default) under, result in
a violation of, increase the burdens under, result in the termination,
amendment, suspension, modification, abandonment or acceleration of payment (or
any right to terminate) or require a Consent, including any Consent under any
Contract or Governmental Authorization

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that is either binding upon or enforceable against Buyer; or (d) require any
Governmental Authorization.
 
5.4 Brokerage. No Person will be entitled to receive any brokerage commission,
finder’s fee, fee for financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement based on any
Contract made by or on behalf of Buyer for which any Shareholder is or could
become liable or obligated.
 
5.5 Investment Intent. Buyer is purchasing the Shares for its own account for
investment purposes, and not with a view to the distribution thereof.
 
5.6 [Intentionally deleted.]
 
5.7 Buyer Common Stock. The shares of Buyer Common Stock will, when issued and
delivered in accordance with this Agreement, be duly authorized, validly issued,
fully paid and nonassessable. Such shares of Buyer Common Stock will not be
registered and will be subject to the regulatory holding periods prescribed
under Rule 144 of the Securities Act.
 
5.8 [Intentionally deleted.]
 
5.9 [Intentionally deleted.]
 
5.10 SEC Filings; Financial Statements.
 
(a) Buyer has filed all forms, reports, schedules, statements and other
documents required to be filed by it during the twelve (12) months immediately
preceding the date of this Agreement (collectively, as supplemented and amended
since the time of filing, the “Buyer SEC Reports”) with the SEC. To Buyer’s
Knowledge, the SEC Reports (i) were prepared in all material respects in
accordance with all applicable requirements of the Securities Act and the
Exchange Act, as applicable, and (ii) did not, at the time they were filed,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The representation in clause (ii) of the preceding sentence does not
apply to any misstatement or omission in any Buyer SEC Report which was
superseded by subsequent Buyer SEC Reports. Further, the Buyer engaged Deloitte
& Touche, LLP to re-audit Buyer’s financial statements for the three years ended
December 31, 2001. The re-audits were completed October 4, 2002 and resulted in
adjustments for the years and quarters being re-audited as reflected in such
amended financial reports filed with the SEC.
 
(b) The audited consolidated financial statements and unaudited consolidated
interim financial statements of Buyer and its consolidated Subsidiaries included
or incorporated by reference in the Buyer SEC Reports have been prepared in
accordance with GAAP consistently applied during the periods indicated (except
as may otherwise be indicated in the notes) and present fairly the financial
position, results of operations and cash flows of Buyer and its consolidated
Subsidiaries on a consolidated basis at the respective dates and for the
respective periods indicated (except interim financial

36

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statements may not contain all notes and are subject to year-end adjustments).
Further, the Buyer engaged Deloitte & Touche, LLP to re-audit Buyer’s financial
statements for the three years ended December 31, 2001. The re-audits were
completed on October 4, 2002 and resulted in adjustments for the years and
quarters being re-audited as reflected in such financial reports filed with the
SEC.
 
5.11 Capitalization. The authorized capital stock of Buyer consists of (i)
5,000,000 shares of Preferred Stock, $.01 par value, none of which are
outstanding and (ii) 125,000,000 shares of common stock, $0.01 par value, of
which 27,548,047 shares (including 1,035,965 shares held in Treasury as of
September 30, 2002) are issued and outstanding. As of September 30, 2002, a
maximum of approximately 3,300,000 shares are reserved for issuance pursuant to
Buyer’s multiple employee and director stock plans (the “Option Plans”). All of
the outstanding shares of capital stock of Buyer have been duly authorized and
validly issued and are fully paid and nonassessable. Except for the shares
reserved under the Option Plans and except for the shares pursuant to this
Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the authorized but
unissued capital stock of Buyer or obligating Buyer to issue or sell any shares
of capital stock of, or other equity interests in, Buyer or any of its
subsidiaries.
 
5.12 No Undisclosed Liabilities. To Buyer’s Knowledge, neither Buyer nor any of
its Subsidiaries has any liability (whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
Taxes) of a character which, under GAAP, should be accrued, shown or disclosed
on a balance sheet of Buyer or its Subsidiaries, as applicable, except for (i)
liabilities set forth on its restated balance sheet as of June 30, 2002 (the
“Buyer Balance Sheet”), (ii) liabilities which have arisen after June 30, 2002,
in the Ordinary Course of Business (none of which, either individually or in the
aggregate, have had a Material Adverse Effect), and (iii) liabilities arising
out of the transactions contemplated by this Agreement.
 
5.13 Absence of Certain Changes or Events. Since June 30, 2002, Buyer and its
Subsidiaries have conducted their respective businesses in the Ordinary Course
of Business, and since such date, there has not occurred any change in the
business condition of Buyer, or any other development, that has had or could
reasonably be expected to have a Material Adverse Effect on Buyer.
 
5.14 Absence of Litigation. Other than as disclosed in the Buyer SEC Reports,
there are no claims, actions, suits, proceedings or investigations pending or,
to the Knowledge of Buyer, threatened against Buyer or any of its Subsidiaries,
or any properties or rights of Buyer or any of its Subsidiaries, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, that is required to be disclosed or if filed, would
be required to be disclosed, pursuant to Item 103 of Regulation S-K adopted
under the Securities Act and the Exchange Act.
 
VI. Agreements of Shareholders
 
Shareholders agree with Buyer that:

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6.1 Conduct of the Business. Shareholders will cause each of the Company and the
Subsidiaries to observe the following provisions to and including the Closing
Date:
 
(a) Each of the Company and the Subsidiaries will conduct its business only in,
and neither the Company nor any Subsidiary will take any action except in, the
Ordinary Course of Business and in accordance with applicable Law and, to this
end, the Company will not, on a per project basis, incur Capital Expenditures in
excess of $200,000 without prior approval from Buyer, which such approval shall
not be unreasonably withheld, conditioned or delayed other than Capital
Expenditures included in the Company’s development plan, disclosed to Buyer
prior to the execution of this Agreement or which the Company or a Subsidiary is
required to incur under existing Contracts and other than those projects listed
on Schedule 6.1(a).
 
(b) Neither the Company nor any Subsidiary will amend or modify any Material
Contract or enter into any Contract that would have been a Material Contract if
such Contract had been in effect on the date of this Agreement except that the
Company may enter into Contracts in the Ordinary Course of Business;
 
(c) Each of the Company and the Subsidiaries will (i) use reasonable efforts to
preserve its business organization and goodwill, keep available the services of
its officers, employees and consultants and maintain satisfactory relationships
with vendors, customers and others having business relationships with it, (ii)
confer on a regular and frequent basis with representatives of Buyer to report
operational matters and the general status of ongoing operations as requested by
Buyer and (iii) not take any action that would render, or which reasonably may
be expected to render, any representation or warranty made by it in this
Agreement untrue at the Closing, including any actions referred to in Section
4.8;
 
(d) The Company will not change any of its methods of accounting in effect on
the date of the Latest Balance Sheet, other than changes required by GAAP;
 
(e) Neither the Company nor any Subsidiary will cancel or terminate its current
insurance policies or allow any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse replacement policies
providing coverage equal to or greater than the coverage under the canceled,
terminated or lapsed policies for substantially similar premiums are in full
force and effect;
 
(f) Each of the Company and the Subsidiaries will file (or cause to be filed) at
its own expense, on or prior to the due date, all Returns for all Tax periods
ending on or before the Closing Date where the due date for such Returns (taking
into account valid extensions of the respective due dates) falls on or before
the Closing Date, prepared on a basis consistent with the Returns of the Company
and the Subsidiaries prepared for prior Tax periods, and will provide Buyer with
a copy of appropriate workpapers, schedules, drafts and final copies of each
federal and state income Tax Return or election of the Company or any
Subsidiary;

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(g) Neither the Company nor any Subsidiary will (i) make or rescind any express
or deemed election or take any other discretionary position relating to Taxes,
(ii) amend any Return, (iii) settle or compromise any Litigation relating to
Taxes or (iv) change any of its methods of reporting income or deductions for
federal or state income Tax purposes from those employed in the preparation of
the last filed federal or state income Tax Returns; and
 
(h) At the Closing, the Merger Consideration shall be reduced by up to $148,600,
reflecting the Shareholders’ agreed share of the aggregate maximum amount of
$198,600 of severance costs to be paid to employees of the Company or a
Subsidiary that are terminated as a result of the Closing of this Agreement.
This shall be the full extent of the Parties’ obligation for severance costs. To
the extent the total employee severance costs are less than $198,600, the Merger
Consideration shall be reduced by the actual severance cost less $50,000.
 
6.2 Notice of Developments. From the date of this Agreement through the Closing
Date, Shareholders will notify Buyer of any emergency or other change in the
Ordinary Course of Business of the Company or any Subsidiary or the commencement
of Litigation or threat of Litigation which, if successful, could have a
Material Adverse Effect. Shareholders will promptly notify Buyer in writing if
any Shareholder should discover that any representation or warranty made by such
Shareholder in this Agreement was when made, or has subsequently become, untrue
in any respect. No disclosure pursuant to this Section 6.2 will be deemed to
amend or supplement the Disclosure Schedules or to prevent or cure any
inaccuracy, misrepresentation, breach of warranty or breach of agreement.
 
6.3 Access. From the date of this Agreement through the Closing Date,
Shareholders will cause each of the Company and the Subsidiaries to afford to
Buyer and its authorized representatives full access at all reasonable times and
upon reasonable notice to the facilities, offices, properties, technology,
processes, books, business and financial records, officers, employees, business
plans, budget and projections, and other information of each of the Company and
the Subsidiaries, and otherwise provide such assistance as may be reasonably
requested by Buyer in order to allow Buyer the opportunity to verify the
accuracy of the representations and warranties of Shareholders; provided, that,
such access will be in a manner so as not to interfere with the normal business
operations of the Company. The Confidentiality Agreement, dated March 27, 2001
(the “Confidentiality Agreement”), as subsequently extended between the Company
and Buyer will apply with respect to information obtained by Buyer under this
Section 6.3.
 
6.4 Waivers; Payment of Indebtedness. To assure that Buyer obtains the full
benefit of this Agreement, effective as of the Closing Date, each Shareholder
waives any claim it might have against the Company or any Subsidiary, whether
arising out of this Agreement or otherwise, and irrevocably offers to terminate
any Contract between such Shareholder and the Company or any Subsidiary at no
cost to the Company or any Subsidiary (other than debts for borrowed money to
the Shareholders which shall be paid at the Closing and shall be a deduction
from the Merger Consideration) and other than any claim for indemnification with
respect to claims disclosed in this Agreement or asserted after the date of this
Agreement. Shareholders will cause each Shareholder, the Members of the
Immediate Family of each Shareholder and any

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Person controlled by any Shareholder to repay, in full, prior to the Closing,
all indebtedness owed to the Company or any Subsidiary by such Person.
 
6.5 Conditions. Shareholders will use commercially reasonable efforts to cause
the conditions set forth in Section 8.1 to be satisfied and to consummate the
transactions contemplated by this Agreement as soon as reasonably possible and
in any event prior to the Closing Date.
 
6.6 Consents and Authorizations; Regulatory Filings.
 
(a) Shareholders will obtain, or will cause each of the Company and the
Subsidiaries to obtain, all Consents and Governmental Authorizations required
for the consummation of the transactions contemplated by this Agreement
including those listed on Schedule 6.6 (the “Required Consents”). Shareholders
will keep Buyer reasonably advised of the status of obtaining the Required
Consents. Without limiting the foregoing, no later than the fifth business day
after the date of this Agreement, Shareholders will make, and will cause each of
the Company and the Subsidiaries to make, all filings and submissions required
by them or it (if any) under any Law applicable to Shareholders, or the Company
or any Subsidiary, required for the consummation of the transactions
contemplated by this Agreement.
 
6.7 No Adverse Effect; Sale. Each Shareholder confirms that Buyer’s restated
financial reports are deemed to have no Material Adverse Effect on such
Shareholder or the Transaction contemplated by this Agreement. No Shareholder
will sell, pledge, transfer or otherwise place any Encumbrance on any Shares
owned by such Shareholder.
 
6.8 [Intentionally deleted.]
 
6.9 Litigation Support. In the event and for so long as Buyer, the Company or
any Subsidiary is actively contesting or defending against any Litigation in
connection with any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction existing or occurring on or prior to the Closing Date involving the
Company or any Subsidiary, each Shareholder will, for a period of one (1) year
after Closing, cooperate in the contest or defense, make available its personnel
and provide such testimony and access to its books and records as may be
necessary in connection with the contest or defense. Buyer will reimburse any
such Shareholder all of his or her out-of-pocket expenses.
 
6.10 Nondisparagement. None of the Shareholders will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Company or any Subsidiary
from maintaining the same business relationships with each of the Company and
the Subsidiaries after the Closing as it maintained with each of the Company and
the Subsidiaries prior to the Closing. Each Shareholder will refer all customer
inquiries relating to the businesses of the Company or any Subsidiary to the
Buyer from and after the Closing.
 
6.11 Non-Hire. During the period that commences on the Closing Date and ends on
the second anniversary of the Closing Date, no Shareholder will, and each
Shareholder will cause

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each of its Subsidiaries not to, employ (or attempt to employ or interfere with
any employment relationship with) any retained employee of the Company or any
Subsidiary.
 
6.12 Confidentiality. Shareholders (herein called a “receiving party”) will
treat and hold as confidential all Confidential Information regarding the
Company or its Subsidiaries and will refrain from using any of the Confidential
Information except in connection with this Agreement. In the event that any
receiving party is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process or by law or regulation pursuant to the
advice of counsel) to disclose any Confidential Information, such receiving
party will notify the Buyer promptly of the request or requirement so that the
Buyer may seek an appropriate protective order. If, in the absence of a
protective order, the receiving party is, on the advice of counsel, compelled to
disclose any Confidential Information, the receiving party may disclose the
Confidential Information; provided, however, that the receiving party shall use
its reasonable efforts to obtain, at the reasonable request of the Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the
disclosing party shall designate.
 
6.13 Nonsolicitation. In consideration of the time and expense Buyer will expend
preparing for the Closing, Shareholders will deal exclusively with Buyer with
respect to the purchase of the Company until the Closing or until the Agreement
is terminated pursuant to Article IX. To this end, the Shareholders shall not
directly or indirectly through any officer, director, agent, affiliate or
otherwise of the Company, solicit, initiate or encourage submission of any
proposal or offer from any person, group or entity (including any of its
officers or employees) relating to any acquisition of their capital stock or
other equity securities in the Company, of the Company or of all or a material
portion of the Company’s Oil and Gas Properties, participate in the negotiations
regarding or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, and effort or attempt by any other person or entity to do or seek
such acquisition or other transaction.
 
VII. Agreements of Buyer
 
Buyer agrees with Shareholders that:
 
7.1 Conditions. Buyer will use its best efforts to cause the conditions set
forth in Section 8.2 to be satisfied and to consummate the transactions
contemplated by this Agreement as soon as reasonably possible and in any event
prior to the Closing Date.
 
7.2 [Intentionally deleted.]
 
7.3 Books and Records; Access. After the Closing Date, Buyer will cause the
Company to hold all of the books and records of each of the Company and the
Subsidiaries existing on the Closing Date in accordance with Buyer’s retention
policies in effect from time to time (and applied to Buyer’s representations
generally) for a period of not less than three (3) years from the Closing Date.
After the Closing Date, Buyer will cause each of the Company and the
Subsidiaries to afford Shareholders’ Representative and its accountants and
counsel, during

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normal business hours, upon reasonable request, full access to the books and
records of each of the Company and the Subsidiaries. Buyer will make available
to Shareholders’ Representative upon written request and at the expense of
Shareholders, but consistent with Buyer’s business requirements, reasonable
assistance of any of the Company’s personnel whose assistance or participation
is required by Shareholders’ Representative, in anticipation of, or preparation
for, existing or future litigation or other matters in which Shareholders are
involved related to the Company.
 
7.4 [Intentionally deleted.]
 
7.5 Release from Guarantees; Buyer Indemnity of Certain Obligations. Buyer shall
use best efforts to have the Shareholders and any officer of the Company
released from any and all guarantees of the obligations identified in Exhibit
7.5 (the “Shareholder Guaranteed Obligations”), including the assumption of such
obligations by Buyer. Whether or not Buyer obtains such releases, Buyer hereby
agrees to indemnify each Shareholder and any such officer from and against any
Claim or Loss arising out of the failure from and after the Closing Date to
satisfy the Shareholder Guaranteed Obligations in accordance with their
respective terms.
 
7.6 Confidentiality. Buyer (herein called a “receiving party”) will treat and
hold as confidential all Confidential Information disclosed to it regarding the
Company or its Subsidiaries and will refrain from using any of the Confidential
Information except in connection with this Agreement. In the event that any
receiving party is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process or by law or regulation pursuant to the
advice of counsel) to disclose any Confidential Information, such receiving
party will notify the Shareholders promptly of the request or requirement so
that the Shareholders may seek an appropriate protective order. If, in the
absence of a protective order, the receiving party is, on the advice of counsel,
compelled to disclose any Confidential Information, the receiving party may
disclose the Confidential Information; provided, however, that the receiving
party shall use its reasonable efforts to obtain, at the reasonable request of
the Shareholders, an order or other assurance that confidential treatment will
be accorded to such portion of the Confidential Information required to be
disclosed as the disclosing party shall designate.
 
7.7 Filings. Buyer shall prepare and file any filings required under the
Exchange Act, the Securities Act or any other Federal or state securities or
“blue sky” laws relating to the transactions contemplated by this Agreement.
 
7.8 [Intentionally left blank.]
 
7.9 Notice of Developments. From the date of this Agreement through the Closing
Date, Buyer will notify Shareholders of any emergency or other change in the
Ordinary Course of Business of the Company or any Subsidiary or the commencement
of Litigation or threat of Litigation which, if successful, could have a
Material Adverse Effect. Buyer will promptly notify Shareholders in writing if
any Buyer should discover that any representation or warranty made by such Buyer
in this Agreement was when made, or has subsequently become, untrue in any
respect. No disclosure pursuant to this Section 7.9 will be deemed to prevent or
cure any inaccuracy, misrepresentation, breach of warranty or breach of
agreement

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7.10 Access. From the date of this Agreement through the Closing Date, Buyer
will afford to Shareholders and their authorized representatives full access at
all reasonable times and upon reasonable notice to the facilities, offices,
properties, technology, processes, books, business and financial records,
officers, employees, business plans, budget and projections, and other
information of each of the Buyer and its Subsidiaries, and otherwise provide
such assistance as may be reasonably requested by Shareholders in order to allow
Shareholders the opportunity to verify the accuracy of the representations and
warranties of Buyer; provided, that, such access will be in a manner so as not
to interfere with the normal business operations of the Buyer.
 
7.11 Le Norman Employment. At the Closing, Buyer shall offer employment to David
D. Le Norman as provided on Exhibit 7.11 hereto.
 
7.12 Le Norman Logo. The trademarked logo of the Company described on Exhibit
7.12 shall prior to Closing be assigned by the Company to David D. Le Norman or
his designee for $10.00.
 
VIII. Conditions to Closing
 
8.1 Conditions to Buyer’s Obligations. The obligation of Buyer to take the
actions required to be taken by it at the Closing is subject to the satisfaction
or waiver, in whole or in part, in Buyer’s sole discretion of each of the
following conditions at or prior to the Closing:
 
(a) The representations and warranties set forth in Articles III and IV are true
and correct in all material respects at and as of the Closing Date;
 
(b) Shareholders performed and complied with each of their agreements contained
in this Agreement in all material respects through the Closing;
 
(c) Each Required Consent was obtained and is in full force and effect;
 
(d) No Litigation is pending or threatened (i) challenging or seeking to prevent
or delay consummation of the transactions contemplated by this Agreement, (ii)
asserting the illegality of or seeking to render unenforceable any material
provision of this Agreement, (iii) seeking to prohibit direct or indirect
ownership, combination or operation by Buyer of any portion of the business or
assets of the Company or any Subsidiary, or to compel Buyer or any of its
Subsidiaries or the Company or any Subsidiary to dispose of, or to hold
separately, or to make any change in any portion of the business or assets of
Buyer or its Subsidiaries or of the Company or its Subsidiaries, as a result of
the transactions contemplated by this Agreement, (iv) seeking to require direct
or indirect transfer or sale by Buyer of, or to impose material limitations on
the ability of Buyer to exercise full rights of ownership of, any of the Shares
or (v) imposing or seeking to impose material damages or sanctions directly
arising out of the transactions contemplated by this Agreement on Buyer or the
Company or any of their respective officers or directors;
 
(e) No Law or Governmental Order was enacted, entered, enforced, promulgated,
issued or deemed applicable to the transactions contemplated by this

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Agreement by any Governmental Entity that would reasonably be expected to
result, directly or indirectly, in any of the consequences referred to in
Section 8.1(d);
 
(f) After the date of the Latest Balance Sheet, no Material Adverse Effect
occurred with respect to the Company or its Subsidiaries considered as a whole;
 
(g) No Person asserted or threatened that, other than as set forth in the
Disclosure Schedules, such Person (i) is the owner of, or has the right to
acquire or to obtain ownership of, any capital stock of, or any other voting,
equity or ownership interest in, the Company or any Subsidiary or (ii) is
entitled to all or any portion of the Merger Consideration;
 
(h) Buyer received from counsel for Shareholders and the Company a written
opinion, dated the Closing Date, addressed to Buyer and satisfactory to Buyer’s
counsel, in the form set forth in Exhibit 8.1(h);
 
(i) [Intentionally deleted;]
 
(j) [Intentionally deleted;]
 
(k) [Intentionally deleted;]
 
(l) [Intentionally deleted.]
 
8.2 Conditions to Shareholders’ Obligations. The obligation of Shareholders to
take the actions required to be taken by them at the Closing is subject to the
satisfaction or waiver, in whole or in part, in Shareholders’ sole discretion,
of each of the following conditions at or prior to the Closing:
 
(a) The representations and warranties set forth in Article V will be true and
correct in all material respects;
 
(b) Buyer will have performed and complied with each of its agreements contained
in this Agreement in all material respects;
 
(c) No Litigation is pending or threatened (i) challenging or seeking to prevent
or delay consummation of the transactions contemplated by this Agreement, (ii)
asserting the illegality of or seeking to render unenforceable any material
provision of this Agreement, or (iii) imposing or seeking to impose material
damages or sanctions directly arising out of the transactions contemplated by
this Agreement the Shareholders;
 
(d) No Law or Governmental Order was enacted, entered, enforced, promulgated,
issued or deemed applicable to the transactions contemplated by this Agreement
by any Governmental Entity that would reasonably be expected to result, directly
or indirectly, in any of the consequences referred to in Section 8.2(c);
 
(e) After the date of the Latest Balance Sheet, no Material Adverse Effect
occurred with respect to the Buyer or its Subsidiaries considered as a whole;
and

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(f) Shareholders received from counsel for Buyer a written opinion, dated the
Closing Date, addressed to Shareholders and satisfactory to Shareholders’
counsel, in the form set forth in Exhibit 8.2(f).
 
IX. Termination; Liability for Breach of Representations and Warranties
 
9.1 Termination. This Agreement may be terminated prior to the Closing:
 
(a) by the mutual written consent of Buyer and Shareholders’ Representative;
 
(b) by either party if Buyer’s Common Stock Price five (5) business days prior
to the Closing Date is $5.00 higher or lower than the Closing Price on the date
of complete execution of this Agreement;
 
(c) by Shareholders’ Representative on behalf of Shareholders by giving written
notice to Buyer at any time prior to the Closing (i) in the event Buyer has
breached any representation, warranty, or covenant contained in this Agreement
in any material respect, and the breach has continued without cure for a period
of thirty (30) days after Shareholders delivered written notice of the breach or
(ii) if the Closing shall not have occurred on or before November 15, 2002, by
reason of the failure of any condition precedent under Section 8.2 hereof
(unless the failure results primarily from the Shareholders breaching any
representation, warranty, or covenants contained in this Agreement); and
 
(d) by Buyer by giving written notice to the Shareholders’ Representative at any
time prior to the Closing (i) in the event the Shareholders have breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, and the breach has continued without cure for a period of
thirty (30) days after Buyer delivered written notice of the breach to
Shareholders’ Representatives or (ii) if the Closing shall not have occurred on
or before November 15, 2002, by reason of the failure of any condition precedent
under Section 8.1 hereof (unless the failure results primarily from Buyer itself
breaching any representation, warranty, or covenants contained in this
Agreement).
 
9.2 Effect of Termination. In the event of termination by any Party, the
terminating Party shall promptly give notice of the same to the other Parties
and the transactions contemplated by this Agreement shall be terminated without
further action by the Parties. If the transactions contemplated by this
Agreement are terminated as provided herein:
 
(a) Each Party will redeliver all documents, work papers and other materials of
any other Party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the Party furnishing the same;
and
 
(b) No Party hereto shall have any liability or further obligation to the other
Parties to this Agreement except for any breach by a Party of its obligations
under this Agreement and except for Sections 7.6, 11.1, 11.2, 11.12, 11.14 and
11.15 which shall survive indefinitely unless sooner terminated or modified by
the parties in writing.

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9.3 Survival of Representations and Warranties.
 
(a) Except for the Controlling Shareholders whose representations and warranties
shall survive the Closing Date for a period of one (1) year at which time they
shall expire, the representations and warranties of the other Shareholders and
the Buyer set forth in this Agreement shall terminate as of the Closing. THE
PARTIES ACKNOWLEDGE THAT THEIR SOLE REMEDY AGAINST THE OTHER PARTY (EXCEPT
AGAINST THE CONTROLLING SHAREHOLDERS) FOR BREACH OF A REPRESENTATION OR WARRANTY
UNDER THIS AGREEMENT SHALL BE TO TERMINATE THIS AGREEMENT PRIOR TO CLOSING.
NEITHER BUYER NOR THE SHAREHOLDERS (EXCEPT AGAINST THE CONTROLLING SHAREHOLDERS)
SHALL HAVE ANY MONETARY LIABILITY TO THE OTHER FOR BREACH OF A REPRESENTATION OR
WARRANTY.
 
(b) THE CONTROLLING SHAREHOLDERS SHALL HAVE LIABILITY TO BUYER FOR THE BREACH OF
A REPRESENTATION OR WARRANTY SUBJECT TO THE FOLLOWING LIMITATIONS:
 
(i) FROM AND AFTER THE FIRST ANNIVERSARY OF THE CLOSING DATE, THE CONTROLLING
SHAREHOLDERS SHALL HAVE NO LIABILITY WHATSOEVER WITH RESPECT TO ANY
REPRESENTATION OR WARRANTY, EXCEPT FOR BREACHES AS TO WHICH THE CONTROLLING
SHAREHOLDERS HAVE RECEIVED WRITTEN NOTICE FROM BUYER (SPECIFYING, WITH
REASONABLE PARTICULARITY, THE FACTS ESTABLISHING SUCH BREACH AND THE SPECIFIC
NATURE AND AMOUNT OF DAMAGES) PRIOR TO SUCH FIRST ANNIVERSARY;
 
(ii) THE CONTROLLING SHAREHOLDERS SHALL HAVE NO LIABILITY BY REASON OF (A) A
BREACH OF THE REPRESENTATIONS OR WARRANTIES SET FORTH AT SECTION 4.22 OF THIS
AGREEMENT OR (B) TO THE EXTENT THE BREACH OF A REPRESENTATION OR WARRANTY SET
FORTH IN ARTICLE III RELATES TO A SHAREHOLDER OTHER THAN THE CONTROLLING
SHAREHOLDERS UNLESS SUCH THE CONTROLLING SHAREHOLDER HAD KNOWLEDGE OF SUCH
BREACH UNDER ARTICLE III PRIOR TO CLOSING;
 
(iii) THE CONTROLLING SHAREHOLDERS SHALL HAVE LIABILITY ONLY TO THE EXTENT THE
CONTROLLING SHAREHOLDERS HAD KNOWLEDGE OF THE UNTRUTH OF SUCH REPRESENTATION OR
WARRANTY AT ANY TIME PRIOR TO CLOSING;
 
(iv) THE CONTROLLING SHAREHOLDERS SHALL NOT HAVE LIABILITY IF THE BUYER
DISCOVERED THE UNTRUTH OF SUCH REPRESENTATION OR WARRANTY PRIOR TO CLOSING;

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(c)  THE AMOUNT OF ANY LOSS FOR WHICH THE CONTROLLING SHAREHOLDERS ARE LIABLE
SHALL BE NET OF ANY AMOUNTS RECOVERED BY THE BUYER, THE COMPANY OR THE SURVIVING
CORPORATION UNDER INSURANCE POLICIES WITH RESPECT TO SUCH LOSS.
 
(d)  The provisions of this Section 9.3 set forth the exclusive remedies for
breach of this Agreement or related to the transaction contemplated by this
Agreement except for termination rights as set forth in this Article IX, except
for the specific performance provision of Section 11.13, and except for remedies
expressly set forth in Article X, and shall preclude assertion by any party
hereto of any other rights or the seeking of any other remedies against any
other party hereto.
 
X.  Adjustment for Defects
 
10.1 Review Period.  Buyer had a period until October 15, 2002 (the “Title
Review Period”) in which to complete its review and inspection of the Company’s
and its Subsidiaries’ title to the Oil and Gas Properties.
 
(a)  Notice of Alleged Title Defects. On or before October 15, 2002, Buyer
notified Shareholders, in writing, (a “Notice of Alleged Title Defects”) of all
Alleged Title Defect(s). Alleged Title Defects not included in such Notice of
Alleged Title Defects may not be asserted under this Section or otherwise under
this Agreement as an adjustment to the Merger Consideration, a claim for which
damages may be recovered, a termination right or otherwise.
 
(b)  Adjustment of Merger Consideration. The Parties have agreed that the Merger
Consideration shall be reduced by $113,078 by reason of Title Defects. Such
reduction represents the Buyer’s sole and exclusive remedy against the
Shareholders and Company by reason of defects in the Company’s and its
Subsidiaries’ title to Oil and Gas Properties.
 
(c)  Definition of Title Defect. For purposes of this Agreement, the term “Title
Defect” shall mean any matter that would cause the title to the Subject Interest
to fail to qualify as Good and Defensible Title. “Good and Defensible Title,” as
used herein, shall mean a title that can be deduced from the applicable county,
state and federal records and is such that (i) the title is free and clear from
liens and encumbrances that would materially reduce, impair or prevent Buyer
from receiving payment from the purchasers of production or which would
materially impair or reduce the economic benefit Buyer could reasonably expect
from acquiring the Oil and Gas Properties; and (ii) the Oil and Gas Properties
are subject to no liens, encumbrances, obligations or defects except those which
are Permitted Encumbrances.
 
As used herein, the term “Permitted Encumbrances” shall mean:

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(i) Lessors’ royalties, overriding royalties and division orders, payments out
of production, reversionary interests and other burdens affecting Shareholders’
interest of record as of the date of this Agreement.
 
(ii) Preferential rights to purchase and required third party consents to
assignments and similar agreements which (i) have no application to the
transaction contemplated by this Agreement; or with respect to which (ii)
waivers or consents are obtained from the appropriate parties prior to Closing;
or (iii) the appropriate time period for asserting such rights has expired
without an exercise of such rights.
 
(iii) All rights to consent by, required notices to, filings with, or other
actions by governmental entities in connection with the sale or conveyance of
oil and gas leases or interests therein if the same are customarily obtained
subsequent to such sale or conveyance.
 
(iv) Non-consent penalties applied against the interest of Shareholders arising
under applicable operating agreements.
 
(v) Easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations which do not materially interfere with
or detract from the operations, value or use of the Oil and Gas Properties by
Buyer.
 
(vi) Such Title Defects as Buyer has waived or released or is deemed to have
waived pursuant to the terms of this Agreement.
 
(vii) The terms and conditions of all Leases and Contracts provided that the
same do not materially interfere with or detract from the operations, value or
use of the Oil and Gas Properties by Buyer.
 
(viii) Rights of reassignment, to the extent any exist as of the date of this
Agreement, upon the surrender or expiration of any Lease.
 
(ix) Liens for taxes or assessments not yet due or not yet delinquent.
 
(x) Liens to be released at Closing.

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10.2 Environmental Matters.
 
(a) Inspection. Prior to Closing and upon reasonable prior notice to
Shareholders, Buyer will have access to and the opportunity to inspect the Oil
and Gas Properties for all purposes, including without limitation, for the
purposes of detecting the presence of hazardous or toxic substances, pollutants
or other contaminants, environmental hazards, naturally occurring radioactive
materials (NORM), produced water, air emissions, contamination of the surface
and subsurface and any other Environmental Defect (defined below).
 
(b) Notice of Environmental Defect. Buyer was given a period of time until
October 15, 2002, to notify the Shareholders in writing of any Environmental
Defect (as defined below). Buyer provided such notice to Shareholders in a
timely fashion but listed no Environmental Defects in excess of $620,000, and
accordingly Buyer shall have no claim for damages against Shareholders by reason
of an Environmental Defect.
 
(c) Sole Remedy. Buyer’s sole remedy under this Agreement related to
environmental matters shall be to terminate this Agreement by reason of the
untruth or breach of the representation and warranty of Shareholders set forth
in Section 4.22 of this Agreement provided the aggregate cost to remediate
Environmental Defects related to such breach of Section 4.22 exceeds $620,000.
 
(d) Definition of Environmental Defects. As used herein, an “Environmental
Defect” shall mean a condition affecting the Oil and Gas Properties that is a
violation of Environmental Law.
 
10.3 Certain Tax Matters. Shareholders will cause the Company to timely file all
tax returns required to be filed with respect to all periods through and
including the Closing Date. Buyer will timely file all tax returns required to
be filed with respect to all periods from and after the Closing Date. Such tax
returns will be prepared in the manner required by applicable law and all Taxes
shown thereon shall be paid when due.
 
XI. General
 
11.1 Press Releases and Announcements. No Party shall issue any press release or
make any public announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of Buyer and
Shareholders’ Representative, which approval shall not be unreasonably withheld;
provided, however, that a party (a “Disclosing Party”) may make any public
disclosure which is required by applicable law in which case the Disclosing
Party shall notify the non-disclosing Parties prior to making the disclosure,
shall provide the non-disclosing Parties with a statement as to the basis for
its belief that disclosure is required and shall make any changes to such
disclosure reasonably requested a non-disclosing Party.
 
11.2 Expense. Buyer will bear its own costs and expenses (including accounting
and legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. The Company shall bear the costs and expenses
of the Shareholders subject to the provisions of Section 2.4(a)(ii).

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11.3 Further Assurances. On and after the Closing Date, the Parties will take
all appropriate action and execute any documents, instruments or conveyances of
any kind that may be reasonably requested by another Party to carry out any of
the provisions of this Agreement.
 
11.4 Amendment and Waiver. This Agreement may not be amended, nor may any
provision of this Agreement or any default, misrepresentation, or breach of
warranty or agreement under this Agreement be waived, except in a writing
executed by the Buyer and the Shareholders’ Representative. Neither the failure
nor any delay by any Person in exercising any right, power or privilege under
this Agreement will operate as a waiver of such right, power or privilege, and
no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. In addition, no course of
dealing between or among any persons having any interest in this Agreement will
be deemed effective to modify or amend any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement. The rights
and remedies of the parties to this Agreement are cumulative and not
alternative.
 
11.5 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
(iii) five (5) business days after being mailed, if sent by first class mail,
return receipt requested, or (iv) when receipt is acknowledged by an affirmative
act of the party receiving notice, if sent by facsimile, telecopy or other
electronic transmission device (provided that such an acknowledgement does not
include an acknowledgment generated automatically by a facsimile or telecopy
machine or other electronic transmission device). Notices, demands and
communications to Buyer and Shareholders’ Representative will, unless another
address is specified in writing, be sent to the address indicated below:
 
If to Buyer or Delaware Sub:
 
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Attn: David J. Kornder
Facsimile No. (303) 595-7407
 
With a copy to:
 
Dorsey & Whitney LLP
370 Seventeenth Street, Suite 4700
Denver, Colorado 80202
Attn: Michael J. Wozniak
Facsimile No. (303) 629-3450
 
If to Company, Shareholders or Shareholders’ Representative:
 
Le Norman Energy Corporation
204 North Robinson, Suite 950

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Oklahoma City, Oklahoma 73102-6803
Facsimile No. (405) 722-8351
 
With a copy to:
 
Le Norman Energy Corporation
P. O. Box 1024
Duncan, Oklahoma 73534-1024
Facsimile No. (580) 252-2101
 
Hall, Estill, Hardwick, Gable, Golden & Nelson P.C.
100 North Robinson, Suite 950
Oklahoma City, Oklahoma 73102
Attn: Daniel J. Glover
Facsimile No. (405) 232-8004
 
11.6 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any Party to this Agreement without the
prior written consent of the other Parties to this Agreement, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer, so
long as it remains responsible for the performance of all of its obligations
under this Agreement and the assignee and Buyer execute any documents reasonably
requested by Shareholders. Subject to the foregoing, this Agreement and all of
the provisions of this Agreement will be binding upon and inure to the benefit
of the parties to this Agreement and their respective successors and permitted
assigns.
 
11.7 No Third Party Beneficiaries. Nothing expressed or referred to in this
Agreement confers any rights or remedies upon any Person that is not a Party or
permitted assign of a Party to this Agreement.
 
11.8 Severability. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable Law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
 
11.9 Complete Agreement. This Agreement, together with its schedules and
exhibits and the Confidentiality Agreement and when executed and delivered the
Ancillary Agreements, if any, contain the complete agreement between the parties
and supersede any prior understandings, agreements or representations by or
between the parties, written or oral.
 
11.10 Schedules. The Disclosure Schedules contains a series of schedules
corresponding to the sections contained in Articles III and IV. Notwithstanding
cross references in the Disclosure Schedules to a particular provision of this
Agreement, such cross references are for convenience only and disclosure of an
item in any part of the Disclosure Schedules shall be deemed to modify all
representations and warranties.
 
11.11 Signatures; Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all

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such counterparts taken together will constitute one and the same instrument. A
facsimile signature will be considered an original signature.
 
11.12 Governing Law. THE DOMESTIC LAW, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, OF THE STATE OF DELAWARE WILL GOVERN ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE PERFORMANCE
OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.
 
11.13 Specific Performance. The Buyer and the Shareholders acknowledge and agree
that the subject matter of this Agreement, including the business, assets and
properties of the Company and the Subsidiaries, is unique, that the other would
be damaged irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are breached,
and that the remedies at law would not be adequate to compensate the Buyer and
Shareholders not in default or in breach. Accordingly, the Buyer and the
Shareholders agree that the other will be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions of this
Agreement in addition to any other remedy to which it or they may be entitled,
at law or in equity. The Buyer and the Shareholders waive any defense that a
remedy at law is adequate and any requirement to post bond or provide similar
security in connection with actions instituted for injunctive relief or specific
performance of this Agreement.
 
11.14 Jurisdiction. Subject to the procedures governing Merger Consideration
adjustment in Article II, the Buyer and the Shareholders submit to the exclusive
jurisdiction of any state or federal court sitting in Dallas, Texas, in any
action or proceeding arising out of or relating to this Agreement and agree that
all claims in respect of the action or proceeding may be heard and determined in
any such court. The Buyer and the Shareholders also agree not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. The Buyer and the Shareholders waive any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waive any bond,
surety or other security that might be required of any other party with respect
to any such action or proceeding. The Shareholders appoint CT Corporation System
(the “Process Agent”) as their agent to receive on their behalf service of
copies of the summons and complaint and any other process that might be served
in the action or proceeding. Either the Buyer or the Shareholders may make
service on the other by sending or delivering a copy of the process to the party
to be served in care of the Process Agent at the following address: 350 North
St. Paul Street, Dallas, Texas 75201. Nothing in this Section 11.14 will affect
the right of any party to serve legal process in any other manner permitted by
law or at equity.
 
11.15 Waiver of Jury Trial. THE BUYER AND SHAREHOLDERS ACKNOWLEDGE AND AGREE
THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT EACH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO

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REPRESENTATIVE, AGENT OR ATTORNEY OF THAT PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVER AND CERTIFICATIONS IN THIS SECTION.
 
11.16 Construction. The Buyer and Shareholders and their respective counsel have
participated jointly in the negotiation and drafting of this Agreement. In
addition, each of the Buyer and Shareholders acknowledge that it is and they are
sophisticated and have been advised by experienced counsel and, to the extent it
or they deemed necessary, other advisors in connection with the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the Buyer and Shareholders and no presumption or burden of proof will arise
favoring or disfavoring either by virtue of the authorship of any of the
provisions of this Agreement. The parties intend that each representation,
warranty and agreement contained in this Agreement will have independent
significance. If either has breached any representation, warranty or agreement
in any respect, the fact that there exists another representation, warranty or
agreement relating to the same subject matter (regardless of the relative levels
of specificity) that either has not breached will not detract from or mitigate
the fact that either is in breach of the first representation, warranty or
agreement. Any reference to any Law will be deemed to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
headings preceding the text of articles and sections included in this Agreement
and the headings to the schedules and exhibits are for convenience only and are
not be deemed part of this Agreement or given effect in interpreting this
Agreement. References to sections, articles, schedules or exhibits are to the
sections, articles, schedules and exhibits contained in, referred to or attached
to this Agreement, unless otherwise specified. The word “including” means
“including without limitation.” The use of the masculine, feminine or neuter
gender or the singular or plural form of words will not limit any provisions of
this Agreement. A statement that an item is listed, disclosed or described means
that it is correctly listed, disclosed or described, and a statement that a copy
of an item has been delivered means a true and correct copy of the writing has
been delivered.
 
11.17 Time of Essence. With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
 
11.18 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporate herein by reference and made a part
hereof.
 
11.19 Attorneys’ Fees. If any legal proceeding or other action relating to this
Agreement is brought or otherwise initiated, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).

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11.20 Shareholder Consent. Each Shareholder hereby consents to, authorizes and
approves the Merger pursuant to this Agreement in accordance with Section 1073
of the Oklahoma General Corporation Law.

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
 
BUYER:
  
SHAREHOLDERS:
PATINA OIL & GAS CORPORATION
  
/s/ David D. Le Norman

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David D. Le Norman
By:
  
/s/ David J. Kornder

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Name:
  
David J. Kornder

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/s/ Duane A. Le Norman

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Title:
  
Executive Vice President

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Duane A. Le Norman
SHAREHOLDERS’ REPRESENTATIVE
  
/s/ R. Bryan Waller

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R. Bryan Waller
/s/ David D. Le Norman

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David D. Le Norman
  
 
/s/ W. Rex McPhail

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W. Rex McPhail
COMPANY:
 
LE NORMAN ENERGY CORPORATION
  
/s/ Merri G. Oliver

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Merri G. Oliver
By:
 
Name:
 
Title:
  
/s/ David D. Le Norman

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David D. Le Norman

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CEO/President

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/s/ John G. Heinen

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John G. Heinen
 
/s/ Rodger K. Beck

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Rodger K. Beck
DELAWARE SUB:
 
PATINA OKLAHOMA CORP.
  
/s/ Bobby J. Randolph

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Bobby J. Randolph
By:
 
Name:
 
Title:
  
/s/ David J. Kornder

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David J. Kornder

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Vice President

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/s/ Dale D. Lovely

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Dale D. Lovely
 
/s/ Jason F. Hamilton

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Jason F. Hamilton
         
/s/ Garvin S. Williams

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Garvin S. Williams

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