AGREEMENT AND PLAN OF MERGER



 


 


 


 


 


AGREEMENT AND PLAN OF MERGER


 


by and among


 


WHITING PETROLEUM CORPORATION,


 


WPC EQUITY ACQUISITION CORP.


 


and


 


EQUITY OIL COMPANY


 


February 1, 2004


TABLE OF CONTENTS


 


Page


ARTICLE 1: DESCRIPTION OF TRANSACTION 



  1.1 MERGER OF MERGER SUB
  INTO THE COMPANY 

  1.2 EFFECT OF THE MERGER 

  1.3 CLOSING; EFFECTIVE
  TIME 

  1.4 ARTICLES OF
  INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS 

  1.5 CONVERSION OF SHARES 

  1.6 EXCHANGE OF
  CERTIFICATES 

  1.7 FURTHER ACTION 

  
    
      
        ARTICLE 2: REPRESENTATIONS AND WARRANTIES
        OF THE COMPANY 

      

    

  

  2.1 ORGANIZATION AND GOOD
  STANDING 

  2.2 AUTHORITY;
  ENFORCEABILITY; NO CONFLICT 

  2.3 CAPITALIZATION 

  2.4 SEC FILINGS 

  2.5 FINANCIAL STATEMENTS;
  TAX MATTERS 

  2.6 NO UNDISCLOSED
  LIABILITIES 

  2.7 ABSENCE OF CERTAIN
  CHANGES AND EVENTS 

  2.8 LEGAL PROCEEDINGS 

  2.9 RECOMMENDATION OF THE
  COMPANY BOARD; OPINION OF FINANCIAL ADVISOR 

  2.10 ERISA COMPLIANCE;
  BENEFIT PLANS 

  2.11 ENVIRONMENTAL
  MATTERS 

  2.12 AGREEMENTS,
  CONTRACTS AND COMMITMENTS 

  2.13 COMPLIANCE WITH
  LAWS; PERMITS 

  2.14 CERTAIN PAYMENTS 

  2.15 LABOR MATTERS;
  EMPLOYEES 

  2.16 BROKERS; FINDERS 

  2.17 INSURANCE 

  2.18 INTELLECTUAL
  PROPERTY 

  2.19 BOOKS AND RECORDS 

  2.20 COMPANY OIL AND GAS
  PROPERTIES 

  2.21 INFORMATION IN SEC
  DOCUMENTS 

  2.22 DISCLOSURE SCHEDULE
  

  2.23 DUE DILIGENCE 

  
    
      
        ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF PARENT
        AND MERGER SUB 

      

    

  

  3.1 ORGANIZATION AND GOOD
  STANDING 

  3.2 AUTHORITY;
  ENFORCEABILITY; NO CONFLICT 

  3.3 CAPITALIZATION 

  3.4 SEC FILINGS 

  3.5 FINANCIAL STATEMENTS;
  TAX MATTERS 

  3.6 NO UNDISCLOSED
  LIABILITIES 

  3.7 ABSENCE OF CERTAIN
  CHANGES AND EVENTS 

  3.8 LEGAL PROCEEDINGS 

  3.9 ENVIRONMENTAL MATTERS
  

  3.10 COMPLIANCE WITH
  LAWS; PERMITS 

  3.11 BROKERS; FINDERS 

  3.12 PARENT OIL AND GAS
  PROPERTIES 

  3.13 INFORMATION IN SEC
  DOCUMENTS 

  3.14 DISCLOSURE SCHEDULE
  

  3.15 DUE DILIGENCE 

  
    
      
        ARTICLE 4: CERTAIN COVENANTS OF THE COMPANY AND PARENT
        

      

    

  

  4.1 ACCESS AND
  INVESTIGATION 

  4.2 OPERATION OF
  COMPANY’S BUSINESS 

  4.3 NO SOLICITATION 

  
    
      
        ARTICLE 5: ADDITIONAL COVENANTS OF THE PARTIES 

      

    

  

  5.1 PREPARATION OF THE
  FORM S-4 AND THE PROXY STATEMENT 

  5.2 SHAREHOLDERS’
  MEETING 

  5.3 REASONABLE BEST
  EFFORTS TO CLOSE 

  5.4 DISCLOSURE 

  5.5 INDEMNIFICATION 

  5.6 TRANSFER TAXES 

  5.7 AFFILIATES 

  5.8 SECTION 16 MATTERS 

  5.9 PUBLIC ANNOUNCEMENTS 

  
    
      
        ARTICLE 6: CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
        PARTIES 

      

    

  

  6.1 COMPANY SHAREHOLDER
  APPROVAL 

  6.2 NO RESTRAINTS 

  6.3 REGISTRATION
  STATEMENT EFFECTIVE; PROXY STATEMENT 

  
    
      
        ARTICLE 7: CONDITIONS PRECEDENT TO PARENT’S AND
        MERGER SUB’S 

        OBLIGATION TO CLOSE 

      

    

  

  7.1 ACCURACY OF
  REPRESENTATIONS 

  7.2 COMPANY’S
  PERFORMANCE 

  7.3 CONSENTS 

  7.4 OFFICER’S
  CERTIFICATE 

  7.5 NO PROCEEDINGS 

  
    
      
        ARTICLE 8: CONDITIONS PRECEDENT TO COMPANY’S
        OBLIGATION TO CLOSE 

      

    

  

  8.1 ACCURACY OF
  REPRESENTATIONS 

  8.2 PARENT’S AND
  MERGER SUB’S PERFORMANCE 

  8.3 CONSENTS 

  8.4 OFFICER’S
  CERTIFICATE 

  8.5 FEES AND EXPENSES 

  8.6 NO PROCEEDINGS 

  8.7 LEGAL OPINION 

  
    
      
        ARTICLE 9: TERMINATION 

      

    

  

  9.1 TERMINATION 

  9.2 EFFECT OF TERMINATION
  

  9.3 EXPENSES/DAMAGE UPON
  TERMINATION 

  
    
      
        ARTICLE 10: GENERAL PROVISIONS 

      

    

  

  10.1 NOTICES 

  10.2 FURTHER ACTIONS 

  10.3 INCORPORATION OF
  SCHEDULES AND EXHIBITS 

  10.4 ENTIRE AGREEMENT
  AND MODIFICATION 

  10.5 NON-SURVIVAL OF
  REPRESENTATIONS AND WARRANTIES 

  10.6 TIME OF ESSENCE 

  10.7 DRAFTING AND
  REPRESENTATION 

  10.8 SEVERABILITY 

  10.9 ASSIGNMENT;
  SUCCESSORS; NO THIRD-PARTY RIGHTS 

  10.10 ENFORCEMENT OF
  AGREEMENT 

  10.11 WAIVER 

  10.12 GOVERNING LAW 

  10.13 JURISDICTION;
  SERVICE OF PROCESS 

  10.14 COUNTERPARTS 

  
    
      
        EXHIBIT A 

        EXHIBIT B 

        EXHIBIT C 

        SCHEDULE 1 

      

    

  




 


AGREEMENT AND PLAN OF MERGER


This Agreement and Plan of Merger ("Agreement") is made as of February 1,
2004, by and among Whiting Petroleum Corporation, a Delaware corporation
("Parent"), WPC Equity Acquisition Corp., a Colorado corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Equity Oil Company, a
Colorado corporation (the "Company"). Certain capitalized terms used in this
Agreement are defined in Exhibit A.


 


PRELIMINARY STATEMENTS


A. The board of directors of each of Parent, Merger Sub and the Company has approved,
and deems it advisable and in the best interests of its respective companies and
shareholders to engage in a strategic business combination and consummate a merger of
Merger Sub with and into the Company in accordance with this Agreement and the Colorado
Business Corporation Act ("Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly-owned Subsidiary of Parent.


B. The board of directors of the Company, based upon the recommendation of the Special
Committee, has determined that the Merger and the per share Merger Consideration is fair
to and in the best interests of the Shareholders of the Company and has resolved to
recommend that the Shareholders approve this Agreement and each of the Contemplated
Transactions upon the terms and subject to the conditions set forth in this Agreement.


C. As a condition to and inducement to Parent’s and Merger Sub’s willingness
to enter into this Agreement and incur the obligations set forth herein, simultaneously
with the execution of this Agreement, certain significant Shareholders are entering into
Shareholder Agreements (the "Shareholder Agreements") with Parent and Merger
Sub.


D. For Federal income tax purposes, it is intended that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and that this Agreement constitutes a plan of
reorganization.


 


 


AGREEMENT


In consideration of the foregoing and the mutual representations, warranties,
covenants and agreements in this Agreement, the Parties hereto, intending to be legally
bound, agree as follows:


 


 


ARTICLE 1: DESCRIPTION OF TRANSACTION


1.1 MERGER OF MERGER SUB INTO THE COMPANY


Upon the terms and subject to the conditions set forth in this Agreement, at the
Effective Time, Merger Sub shall be merged with and into the Company, and the separate
existence of Merger Sub shall cease. Following the Effective Time, the Company shall
continue as the surviving corporation ("Surviving Corporation"). The name of
Surviving Corporation shall remain "Equity Oil Company".


 


1.2 EFFECT OF THE MERGER


The Merger shall have the effects set forth in this Agreement and in the applicable
provisions of the Colorado Business Corporation Act ("CBCA").


 


1.3 CLOSING; EFFECTIVE TIME


The consummation of the Merger ("Closing") shall take place at the offices of
Holme Roberts & Owen LLP, 1700 Lincoln Street, Suite 4100, Denver, Colorado 80203, at
9:00 a.m. (or at such other place and time as the Parties may agree) on a date to be
designated by Parent ("Closing Date"); provided, however, such date shall be no
later than the fifth Business Day after the satisfaction or waiver of the last to be
satisfied or waived of the conditions set forth in Articles 6, 7 and 8 (other than those
conditions that by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of such conditions). 


Subject to the provisions of this Agreement, articles of merger satisfying the
applicable requirements of the CBCA ("Articles of Merger") shall be duly
executed by the Company and Merger Sub and, simultaneously with or as soon as practicable
following Closing, filed with the Secretary of State of the State of Colorado
("Secretary of State"). The Merger shall become effective upon the later of: (a)
the date and time of the filing of the Articles of Merger with the Secretary of State, or
(b) such later date and time (not to exceed five Business Days from the Closing Date) as
may be specified in the Articles of Merger ("Effective Time").


1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS


At the Effective Time:


(a) the Articles of Incorporation of Surviving Corporation shall be the Articles of
Incorporation of Merger Sub; provided, however, that Article I of the Articles of
Incorporation of Merger Sub shall be amended to provide that the name of the Surviving
Corporation shall be "Equity Oil Company";


(b) the Bylaws of Surviving Corporation shall be the Bylaws of Merger Sub; 


(c) the directors of Surviving Corporation immediately after the Effective Time shall
be the respective individuals who are directors of Merger Sub immediately prior to the
Effective Time; and


(d) the officers of Surviving Corporation immediately after the Effective Time shall be
the respective individuals who are officers of the Merger Sub immediately prior to
the Effective Time.


 


1.5 CONVERSION OF SHARES


(a) Each share of Company Common Stock issued and outstanding immediately prior to the
Effective Time whether or not subject to transfer restrictions or rights of the Company to
reacquire such shares (other than (i) shares of Company Common Stock held in the
Company’s treasury, and (ii) shares of Company Common Stock held by Parent or Merger
Sub) shall, by virtue of the Merger and without any action on the part of Parent, Merger
Sub, the Company or the holder thereof, be cancelled and extinguished and be converted
into the right to receive, pursuant to Section 1.6, 0.185 (the "Exchange
Ratio") validly issued, fully paid and nonassessable shares of Parent Common Stock,
together with cash in lieu of fractional shares of Parent Common Stock (collectively, the
"Merger Consideration"). As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and will automatically be canceled and retired
and shall cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger Consideration and any
dividend or other distributions to which such Shareholder is entitled pursuant to Section
1.6(a), in each case to be issued or paid as consideration for the surrender of such
certificate in accordance with Section 1.6, without interest. Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time, the outstanding
shares of Parent Common Stock will have been changed into a different number of shares or
a different class, by reason of the occurrence or record date of any stock dividend,
subdivision, reclassification, recapitalization, split, combination, exchange of shares or
similar transaction, the Exchange Ratio will be appropriately adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares or similar transaction.


(b) Each share of Merger Sub Common Stock issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the part of
Parent, Merger Sub or the Company, be converted into and become one fully paid and
nonassessable share of common stock of Surviving Corporation.


(c) Each share of Company Common Stock held in the treasury of the Company and each
share of Company Common Stock held by Parent or Merger Sub (or their respective
Subsidiaries) immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, the Company or the holder thereof,
be cancelled, retired and cease to exist and no payment shall be made with respect
thereto. 


 


(d) Before the Closing, the Company will use its Reasonable Best Efforts to enter
into an option termination agreement, in a form reasonably acceptable to Parent (the
"Option Termination Agreement"), with each holder of outstanding options to
acquire Company Common Stock (the "Company Stock Options") granted under any
Company stock option plan ("Option Plan") providing for the cashing out of any
such Company Stock Options on or immediately prior to the Closing Date. The Option
Termination Agreement shall provide, among other things, that each applicable Company
Stock Option shall be cashed out at the difference between the applicable strike price for
the Company Stock Option and the closing price quoted on the Nasdaq National Market for
the Company Common Stock on the Business Day immediately prior to the Closing Date.
Holders of Company Stock Options that do not enter into an Option Termination Agreement
shall have the rights granted to them under the applicable Options Plans; provided,
however, the Company agrees to make such changes to the Option Plans as Parent and the
Company may agree are appropriate to give effect to the Merger.


(e) To the extent not terminated in accordance with Section 1.5(d), at the Effective
Time, by virtue of the Merger and without the need of any further corporate action, each
Company Stock Option that was granted prior to the Effective Time pursuant to the Option
Plans and that remains outstanding immediately prior to the Effective Time shall cease to
represent a right acquire shares of Company Common Stock and shall be converted (each, as
so converted, a "Converted Option"), at the Effective Time, into an option to
acquire, on the same terms and conditions as were applicable under the Company Stock
Options, shares of Parent Common Stock, and the per share exercise price of such Converted
Option (rounded to the nearest whole cent) shall equal the exercise price of the
corresponding Company Stock Option immediately prior to the Effective Time divided by the
Exchange Ratio. The number of shares of Parent Common Stock subject to each such Converted
Option shall equal the number of shares of Company Common Stock to which the corresponding
Company Stock Option was subject immediately prior to the Effective Time, multiplied by
the Exchange Ratio (rounded to the nearest whole share). At the Effective Time, (i) all
references to Company in the Option Plans and in the stock option agreements evidencing
the related Company Stock Options shall be deemed to refer to Parent and (ii) Parent shall
assume all of Company’s obligations with respect to Company Stock Options as so
converted into Converted Options. On or prior to the Effective Time, Company shall take
all actions necessary such that grants of Company Stock Options are treated in accordance
with the immediately preceding sentences.


(f) As soon as practicable after the Effective Time, Parent will deliver to the holders
of Company Stock Options, if any, appropriate notices setting forth such holders’
rights pursuant to the respective Option Plans and the agreements evidencing the grants of
such Company Stock Options and that such Company Stock Options and agreements have been
assumed by Parent and will continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 1.5 after giving effect to the Merger).


(g) All restrictions or limitations on transfer and vesting with respect to Company
Stock Options awarded under the Option Plans or any other plan, program or arrangement of
the Company, to the extent that such restrictions or limitations will not have already
lapsed, shall fully vest and mature with respect to all such Company Stock Options after
giving effect to the Merger.


 


1.6 EXCHANGE OF CERTIFICATES


(a) On or prior to the Closing Date, Parent shall select a reputable bank or trust
company acceptable to the Company to act as exchange agent in connection with the Merger
("Exchange Agent"). Promptly after the Effective Time, Parent shall deposit with
the Exchange Agent the certificates representing the shares of Parent Common Stock
issuable pursuant to Section 1.5 for the benefit of the Shareholders to be exchanged
through the Exchange Agent for outstanding shares of Company Common Stock (such shares of
Parent Common Stock, together with any dividends or other distributions with respect to
any shares of Parent Common Stock with a record date after the Effective Time and any cash
payments in lieu of any fractional shares of Parent Common Stock in accordance with
Section 1.6(h), being subsequently in this Agreement referred to as the "Exchange
Fund").


(b) As soon as reasonably practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each Shareholder (i) a letter of transmittal in customary form
approved by the Company, which shall specify that delivery shall be effected, and risk of
loss and title to Company Stock Certificates shall pass, only upon delivery of the Company
Stock Certificates to the Exchange Agent and contain such other provisions as Parent may
reasonably specify, and (ii) instructions for use in effecting the surrender of Company
Stock Certificates in exchange for the Merger Consideration therefor. Upon surrender of a
Company Stock Certificate to the Exchange Agent for exchange, together with a duly
executed letter of transmittal and such other documents as may be reasonably required by
the Exchange Agent or Parent, (x) the holder of such Company Stock Certificate shall be
entitled to receive in exchange therefor (as promptly as practicable) the applicable
Merger Consideration, without interest thereon, less the required withholding of Taxes,
and (y) each Company Stock Certificate so surrendered shall be canceled. Until surrendered
as contemplated by this Section 1.6, each Company Stock Certificate (other than Company
Stock Certificates representing shares of Company Common Stock canceled pursuant to
Section 1.5(c)) shall be deemed, from and after the Effective Time, to represent only the
right to receive for each share of Company Common Stock represented thereby the Merger
Consideration provided for under this Agreement, without any interest thereon. If any
Company Stock Certificate shall have been lost, stolen or destroyed, Surviving Corporation
may, in its discretion and as a condition precedent to the issuance of the Merger
Consideration, require the owner of such lost, stolen or destroyed Company Stock
Certificate to provide an appropriate affidavit as indemnity against any claim that may be
made against the Exchange Agent, Parent or Surviving Corporation with respect to such
Company Stock Certificate.


(c) After the Effective Time, there shall be no transfers on the stock transfer books
of Surviving Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company Stock
Certificates are presented to Surviving Corporation, they shall be cancelled and exchanged
for the Merger Consideration in accordance with the procedures set forth in this Section
1.6.


(d) From and after the Effective Time, Shareholders holding Company Stock Certificates
immediately prior to the Effective Time shall cease to have any rights with respect to
such shares of Company Common Stock except as otherwise provided herein or by applicable
Law. Such Shareholders shall have no rights, after the Effective Time, with respect to
such shares of Company Common Stock.


(e) Any portion of the Exchange Fund (including the proceeds of any investments
thereof) that remains undistributed to Shareholders as of the date 180 days after the date
on which the Effective Time occurs shall be delivered to Parent upon demand, and any
Shareholders who have not theretofore surrendered their Company Stock Certificates in
accordance with this Section 1.6 shall thereafter look only to Parent for satisfaction of
their claims for Merger Consideration.


(f) Each of the Exchange Agent, Parent and Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable pursuant to
this Agreement to any Shareholder such amounts as may be required to be deducted or
withheld therefrom under the Code or any provision of state, local or foreign Tax Law or
under any other applicable Law. To the extent such amounts are so deducted or withheld,
such amounts shall be treated for all purposes under this Agreement as having been paid to
the Person to whom such amounts would otherwise have been paid.


(g) Notwithstanding anything to the contrary in this Section 1.6, none of the Exchange
Agent, Company, Parent or Surviving Corporation shall be liable to any Shareholder for any
amount properly delivered to a public official pursuant to any applicable abandoned
property, escheat or other applicable Law.


(h) No certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Company Stock Certificates, no dividend
or distribution of Parent shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote or to any rights of
a shareholder of Parent. As promptly as practicable following the Effective Time, Parent
shall pay to the Exchange Agent an amount in cash equal to the product obtained by
multiplying (i) the fractional share interest to which each former Shareholder (after
taking into account all shares of Company Common Stock held at the Effective Time by such
holder) would otherwise be entitled by (ii) the closing price for a share of Parent Common
Stock as reported on the New York Stock Exchange (as reported in The Wall Street Journal,
or, if not reported thereby, any other authoritative source) on the Closing Date. As soon
as practicable after the determination of the amount of cash to be paid to Shareholders
with respect to any fractional share interests, the Exchange Agent will make available
such amounts to such holders subject to and in accordance with the terms of this Section
1.6.


 


1.7 FURTHER ACTION


If, at any time after the Effective Time, any further action is determined by Parent to
be necessary or desirable to carry out the purposes of this Agreement or to vest Surviving
Corporation with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company or
otherwise) to take such action. 


 


 


ARTICLE 2: REPRESENTATIONS AND WARRANTIES OF THE COMPANY


The Company represents and warrants to Parent and Merger Sub that, except as set forth
in the Company Disclosure Schedule or in any of the Company’s SEC Reports:


 


2.1 ORGANIZATION AND GOOD STANDING


The Company is duly organized, validly existing and in good standing under the laws of
the state of Colorado, with full corporate power and authority to conduct its business as
now being conducted, to own or use the properties and assets that it purports to own or
use and to perform all its respective obligations under the Company Contracts, except
where the failure to have such power or authority would not result in a Company Material
Adverse Effect. The Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of the states of California, North Dakota, Montana,
Utah and Wyoming and the Province of Alberta, Canada, and each other state or jurisdiction
in which either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification, except where the failure
to be so qualified would not result in a Company Material Adverse Effect.


 


2.2 AUTHORITY; ENFORCEABILITY; NO CONFLICT


(a) The Company has all necessary corporate power and authority to execute and deliver
this Agreement and the other agreements referred to in this Agreement, to perform its
obligations hereunder and thereunder and to consummate the Contemplated Transactions. The
execution and delivery of this Agreement by the Company and the consummation by the
Company of the Contemplated Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Contemplated Transactions
(other than, with respect to the Merger, the approval of this Agreement by the holders of
two-thirds (2/3) of the then outstanding shares of Company Common Stock ("Required
Company Shareholder Vote") and the filing of appropriate merger documents as required
by the CBCA). The affirmative vote by the holders of two-thirds (2/3) of the then
outstanding shares of Company Common Stock as of the record date for the Company
Shareholders’ Meeting is the only vote of the holders of any class or series of the
Company’s securities necessary to approve this Agreement and the Contemplated
Transactions. This Agreement has been duly and validly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to bankruptcy and
other laws affecting creditors’ rights generally and to general principles of equity.
No filings, permits, authorizations, consents or approvals are required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), in order to consummate the Contemplated Transactions.


(b) The execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement and the consummation of the Contemplated Transactions by the
Company will not, require any Consent of, or filing with or notification to, any
Governmental Body, except (i) for (A) applicable requirements, if any, of the Exchange
Act, the Securities Act and state securities or "blue sky" laws, (B) the filing
of Articles of Merger as required by the CBCA, and (C) such material Consents set forth on
Schedule 2.2 of the Company Disclosure Schedule (the "Company Required Material
Consents"); and (ii) where failure to obtain such Consents, or to make such filings
or notifications, would not result in a Company Material Adverse Effect.


(c) Neither the execution and delivery of this Agreement nor the consummation of any of
the Contemplated Transactions do or will, directly or indirectly, except as set forth in
Section 2.2(b), (i) Contravene, conflict with or result in a violation of (A) any
provision of the Governing Documents of the Company, or (B) any resolution adopted by the
board of directors or Shareholders of the Company; (ii) Contravene, conflict with or
result in a violation of any Law or Order; (iii) Contravene, conflict with or result in a
violation of any of the terms or requirements of any Governmental Authorization that is
held by the Company; (iv) Contravene, conflict with or result in a violation or breach of
any provision of, or give any Person the right to declare a default or exercise any remedy
under, accelerate the maturity or performance of or cancel, terminate or modify, any
material Company Contract; (v) require a Consent from any Person; or (vi) result in the
imposition or creation of any Encumbrance upon or with respect to any of the assets owned
or used by the Company, except, in the case of clauses (ii), (iii), (iv), (v) and (vi),
for any such Contravention, conflict or violation that would not have a Company Material
Adverse Effect. The Company’s board of directors has approved the Merger, this
Agreement, the Shareholder Agreements and the transactions contemplated hereby and
thereby, and such approval is sufficient to render inapplicable to the Merger, this
Agreement, the Shareholder Agreements and the transactions contemplated hereby and thereby
any material limitations on business combinations contained in any restrictive provision
of any "fair price," "moratorium," "control share
acquisition," "interested shareholder" or other similar anti-takeover
statute or regulation under Colorado Law or restrictive provision of any applicable
anti-takeover provision in the Company’s Articles of Incorporation or Bylaws.


 


2.3 CAPITALIZATION


The authorized capital stock of the Company consists of 50,000,000 shares of Company
Common Stock. As of the date hereof, (a) 12,029,661 shares of Company Common Stock are
issued and outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable, (b) 1,716,125 shares of Company Common Stock are reserved for issuance upon
the exercise of outstanding Company Stock Options, (c) 848,000 shares of Company Common
Stock are held in the treasury of the Company, and (d) 233,000 shares of Company Common
Stock are reserved for issuance pursuant to Company Stock Options not yet granted. Other
than the financing arrangements that have been specifically disclosed in or filed as
Exhibits to the Company SEC Reports, there are not any bonds, debentures, notes or other
indebtedness or securities of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on which the
Company’s Shareholders may vote. Except as set forth in this Section 2.3, as of the
date hereof no shares of capital stock or other voting securities of the Company are
issued, reserved for issuance or outstanding, and no shares of capital stock or other
voting securities of the Company will be issued or become outstanding after the date
hereof other than upon exercise of Company Stock Options outstanding as of the date
hereof. Except as set forth in this Section 2.3, there are no options, stock appreciation
rights, warrants or other rights, Contracts, arrangements or commitments of any character
("Options") relating to the issued or unissued capital stock of the Company, or
obligating the Company to issue, grant or sell any shares of capital stock of, or other
equity interests in, or securities convertible into equity interests in, the Company. The
Company does not own, or have any Contract or other obligation to acquire, any equity
securities or other securities of any Person or any direct or indirect equity or ownership
interest in any other business. The Company has no Subsidiaries.


 


2.4 SEC FILINGS


Since January 1, 2001, the Company has filed all required forms, reports, registration
statements, information statements and documents with the SEC required to be filed by it
pursuant to the federal securities laws and the SEC rules and regulations thereunder. The
Company SEC Reports (a) have been filed on a timely basis; and (b) were prepared in all
material respects in accordance with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations thereunder. None of the
Company SEC Reports required by the Exchange Act at the time filed, nor any of the Company
SEC Reports required by the Securities Act as of the date of their effectiveness,
contained any untrue statement of a material fact or omitted to state a 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, except to the
extent that information contained in any Company SEC Report has been revised or superseded
by a later-filed Company SEC Report filed and publicly available prior to the date hereof.


 


2.5 FINANCIAL STATEMENTS; TAX MATTERS


(a) The financial statements and notes contained or incorporated by reference in the
Company SEC Reports fairly present the financial condition and the results of operations,
changes in shareholders’ equity and cash flow of the Company as at the respective
dates of and for the periods referred to in such financial statements, all in accordance
with GAAP and Regulation S-X of the SEC, subject, in the case of interim financial
statements, to year-end adjustments and the omission of notes to the extent permitted by
Regulation S-X of the SEC (that, if presented, would not differ materially from notes to
the financial statements found in the Company’s Report on Form 10-Q for the period
ended September 30, 2003 included in the Company SEC Reports (the balance sheet included
in such Quarterly Report is the "Balance Sheet")); the financial statements
referred to in this Section 2.5 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to such
financial statements.


(b) The Company has duly filed all material Tax Returns required to be filed by it in
respect of any Taxes, and all Taxes owed by the Company shown thereon to be due and
payable have been paid. All Tax Returns filed by the Company are accurate in all material
respects. The Company has accrued on its financial statements or financial books and
records adequate reserves for the payment of all Taxes not yet due and payable, in
accordance with past practice. Except as set forth in the Company Disclosure Schedule,
(i) no claim for material unpaid Taxes has become an Encumbrance against the property
of the Company or is being asserted against the Company; (ii) no audit, examination,
investigation or other proceeding is pending, being conducted, or to the Knowledge of the
Company, threatened by a Tax authority in connection with any examination of Taxes paid by
or on behalf of, or Tax Returns filed by or on behalf of, the Company; (iii) no
extension or waiver of the statute of limitations on the assessment of any Taxes has been
granted by the Company and is currently in effect; (iv)  the Company is not a party
to, or bound by, or has any obligation under, or potential liability with regards to, any
Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement
and the Company does not have any liability for Taxes under Treasury Regulation
Section 1.1502-6 (or an analogous provision of state, local or foreign law);
(v) no power of attorney has been granted by or with respect to the Company with
respect to any matter relating to Taxes; and (f) the Company has not been the subject
of a Tax ruling or determination that has continuing effect.


(c) Neither the Company nor any Affiliate of the Company has taken or agreed to take
any action or knows of any fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.


 


2.6 NO UNDISCLOSED LIABILITIES


The Company has no Liabilities except for Liabilities reflected or reserved against in
the Balance Sheet, current liabilities incurred in the Ordinary Course of Business,
Liabilities set forth in the Company SEC Reports and contingent or inchoate liabilities
that would not have a Company Material Adverse Effect. 


 


2.7 ABSENCE OF CERTAIN CHANGES AND EVENTS


Since the date of the Balance Sheet, the Company has conducted its business only in the
Ordinary Course of Business, there has not been any Company Material Adverse Effect and
there has not been:


(a) any material loss, damage or destruction to, or any material interruption in the
use of, any of the assets of the Company that has had a Company Material Adverse Effect;


(b) (i) any declaration, accrual, set aside or payment of any dividend or any other
distribution in respect of any shares of capital stock of the Company, or (ii) any
repurchase, redemption or other acquisition by the Company of any shares of capital stock
or other securities;


(c) any sale, issuance or grant, or authorization of the issuance of, (i) any capital
stock or other security of the Company (except for Company Common Stock issued upon the
valid exercise of outstanding Company Stock Options), (ii) any option, warrant or right to
acquire any capital stock or other security of the Company (except for Company Stock
Options) or (iii) any instrument convertible into or exchangeable for any capital stock or
other security of the Company;


(d) any amendment to any Governing Document of the Company or any merger,
consolidation, share exchange, business combination, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction involving the Company;


(e) any creation of any Subsidiary of the Company or acquisition by the Company of any
equity or other interest in any other Person;


(f) except as set forth in Section 2.7(f) of the Company Disclosure Schedule, any
single capital expenditure by the Company which exceeds $100,000;


(g) except as set forth in Section 2.7(g) of the Company Disclosure Schedule, any sale
of a Company Oil and Gas Property;


(h) except in the Ordinary Course of Business, any action by the Company to (i) enter
into, or suffer any of the assets owned or used by it to become bound by, any Company
Material Contract, or (ii) amend or terminate, or waive any material right or remedy
under, any Company Material Contract;


(i) any (i) acquisition, lease or license by the Company of any material right or other
material asset from any Person, (ii) sale or other disposal or lease or license by the
Company of any material right or other material asset to any Person or (iii) waiver or
relinquishment by the Company of any right, except for rights or other assets acquired,
leased, licensed or disposed of in the Ordinary Course of Business;


(j) any write-off as uncollectible of, or establishment of any reserve in excess of
$50,000 with respect to, any account receivable or other indebtedness of the Company
outside the Ordinary Course of Business;


(k) any pledge of any assets of, or sufferance of any of the assets of, the Company to
become subject to any Encumbrance, except for pledges or sufferances of assets made in the
Ordinary Course of Business;


(l) any adoption, establishment, entry into or amendment by the Company of any stock
option plan, stock bonus plan, or incentive compensation plan;


(m) any employment or severance agreement (not terminable at will) entered into by the
Company;


(n) change in any Company Plan or other Benefit Plan;


(o) any change of the methods of accounting or accounting practices of the Company in
any material respect;


(p) any material Tax election by the Company;


(q) any commencement or settlement of any Proceeding by the Company which exceeds
$25,000; or 


(r) any agreement or commitment to take any of the actions referred to in clauses (b)
through (q) above.


 


2.8 LEGAL PROCEEDINGS


Except as set forth in Section 2.8 of the Company Disclosure Statement, there is no
pending, or to the Knowledge of the Company threatened, Proceeding (a) that has been
commenced by or against the Company or that otherwise relates to or the business of, or
any of the assets owned by, the Company, except for such Proceedings as are normally
incident to the business carried on by the Company, or (b) that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering with, any
of the Contemplated Transactions.


 


2.9 RECOMMENDATION OF THE COMPANY BOARD; OPINION OF FINANCIAL ADVISOR


(a) The board of directors of the Company, at a meeting duly called and held, (i)
determined that this Agreement and the Contemplated Transactions are fair to, and in the
best interests of, the Shareholders of the Company, (ii) approved this Agreement and the
Contemplated Transactions, and (iii) resolved to recommend the approval of this Agreement
and the Merger by the Shareholders of the Company (the "Company Board
Recommendation") and directed (subject to Section 4.3(c) hereof) that such matter be
submitted for consideration by the Shareholders of the Company at the Company
Shareholders’ Meeting.


(b) Petrie Parkman & Co., Inc. ("Petrie Parkman") has rendered to the
Company’s board of directors its opinion to the effect that, as of the date of its
opinion and subject to the assumptions and limitations set forth in such opinion, the
Exchange Ratio is fair from a financial point of view to the holders of Company Common
Stock. A complete and correct written copy of Petrie Parkman’s engagement letter has
been delivered to Parent and a complete and correct written copy of Petrie Parkman’s
opinion letter will be delivered to Parent promptly after the date of this Agreement. The
Company has received the approval of Petrie Parkman to permit the inclusion of a copy of
its written opinion, when delivered, in its entirety in the Proxy Statement/Prospectus,
subject to Petrie Parkman’s review of the Proxy Statement/Prospectus, and references
thereto in the Proxy Statement/Prospectus and Form S-4.


 


2.10 BENEFIT PLANS; ERISA COMPLIANCE


Section 2.10 of the Company Disclosure Schedule sets forth a complete list of all
Benefit Plans. The Company has no material Unfunded Liabilities relating to any Single
Employer Plans. Neither the Company nor any other member of the Controlled Group has
incurred any material withdrawal liability relating to any Multiemployer Plans. Each
Company Plan and other Benefit Plan has been administered in a manner that would not
result in a Company Material Adverse Effect, no material Reportable Event has occurred
with respect to any Plan, neither the Company nor any other member of the Controlled Group
has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to
reorganize or terminate any Plan. The Company is not an entity deemed to hold "plan
assets" within the meaning of 29 C.F.R. Section 25 10.3-101 of an employee benefit
plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any
plan (within the meaning of Section 4975 of the Code). With respect to any Benefit Plan
that is an employee welfare benefit plan (as defined in Section 3(l) of ERISA), (i)
no such Benefit Plan provides benefits, including without limitation, death or medical
benefits, beyond termination of employment or retirement other than (A) coverage mandated
by law or (B) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code, and (ii) each such Benefit Plan (including any such Plan
covering retirees or other former employees) may be amended or terminated without
liability that would have a Company Material Adverse Effect. The execution of, and
performance of the transactions contemplated in, this Agreement will not (either alone or
upon the occurrence of any additional or subsequent events) (i) constitute an event
under any Benefit Plan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee of the Company, or
(ii) result in the triggering or imposition of any restrictions or limitations on the
right of the Company or Parent to cause any such Benefit Plan to be amended or terminated
(or which would result in any materially adverse consequence for so doing). No payment or
benefit that will or may be made by the Company, Parent, or any of their respective
subsidiaries or affiliates with respect to any employee of the Company under any Benefit
Plan in connection with the Merger will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code.


For purposes of Section 2.7 (n) and this Section 2.10, the following defined terms
shall apply:


"Benefit Plan" means any "employee benefit plans" (as defined in
Section 3(3) of ERISA), bonus, pension, profit sharing, deferred compensation,
incentive compensation, excess benefit, stock, stock option, severance, termination pay,
change in control or other material employee benefit plans, programs, arrangements or
agreements currently maintained, or contributed to, or required to be maintained or
contributed to, by the Company or any Person that, together with the Company, is treated
as a single employer under Section 414 of the Code for the benefit of any current or
former employees, officers, directors or independent contractors of the Company and with
respect to which the Company has any liability.


"Controlled Group" means all members of a controlled group of corporations or
other business entities and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single employer under
Section 414 of the Code.


"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company or any member of the
Controlled Group is a party to which more than one employer is obligated to make
contributions.


"Plan" means an employee pension benefit plan which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code as to
which the Company or any member of the Controlled Group may have any liability.


"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan, excluding,
however, such events as to which the Pension Benefit Guaranty Corporation has by
regulation waived the requirement of Section 4043(a) of ERISA that it be notified within
30 days of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any such waiver of the notice requirement
in accordance with either Section 4043(a) of ERISA or Section 4 12(d) of the Code.


"Single Employer Plan" means a Plan maintained by the Company or any member
of the Controlled Group for employees of the Company or any member of the Controlled
Group.


"Unfunded Liabilities" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under all Single Employer Plans exceeds the
fair market value of all such Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plans using Pension Benefit Guaranty
Corporation actuarial assumptions for single employer plan terminations.


 


2.11 ENVIRONMENTAL MATTERS


To the Knowledge of the Company, the Company is in substantial compliance with all
applicable Environmental Laws except to the extent that any events of non-compliance, when
considered in the aggregate, would not result in Environmental Liabilities that would have
a Company Material Adverse Effect. To the Knowledge of the Company, the Company has not
received any order, notice, or other communication regarding a current, unresolved
violation of any applicable Environmental Law from (a) any Governmental Body, or (b) the
current or prior owner or operator of any Facilities. For purposes of this Section 2.11,
"Environmental Liabilities" means any cost, damages, expense, liability,
obligation, or other responsibility arising from or under Environmental Law and consisting
of or relating to:


(a) any environmental conditions or pollution (including on-site or off-site
contamination and regulation of chemical substances or products);


(b) fines, penalties, judgments, awards, settlements, legal or administrative
Proceedings, damages, losses, claims, demands and response, investigative, remedial, or
inspection costs and expenses arising under Environmental Law; or


(c) any other compliance, corrective, investigative, or remedial measures required
under Environmental Law.


The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq., as amended.


 


2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS


(a) Section 2.12 of the Company Disclosure Schedule sets forth all material Contracts
(excluding oil and gas leases and assignments, agreements creating other oil and gas
interests, joint operating agreements and exploration/participation agreements under which
the Company does not have any unperformed material obligations) to which the Company is a
party (each, a "Company Material Contract"), including, but not limited to,
Contracts (i) that relates to indebtedness for borrowed money in an amount exceeding $1
million, (ii) that is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC), (iii) that obligates the Company to make any
payments or issue or pay anything of value to any director, officer, key employee or
consultant, (iv) that limits or purports to limit the ability of the Company to compete in
the United States or Canadian oil and gas exploration, production and marketing business
with any Person in any geographic area or during any period of time, (v) that includes any
material indemnification, contribution or guarantee obligations, (vi) that relates to
capital expenditures involving total payments of more than $500,000, (vii) that requires
annual or remaining payments in excess of $100,000 after the date hereof, (viii) that is a
seismic license agreement, (ix) that is a fixed price commodity sales agreement with a
remaining term of more than 60 days or (x) that obligates the Company to provide funds to,
or make any investment (in the form of a loan, capital contribution or otherwise) in, any
other Person. Each such Contract (x) is valid and binding on the parties thereto and is in
full force and effect and (y) upon consummation of the Contemplated Transactions shall
continue in full force and effect except where such failure would not result in a Company
Material Adverse Effect.


(b) The Company is not in default in any respect under any Company Material Contract to
which it is a party or by which it or any of its properties or assets is bound, which
default would have a Company Material Adverse Effect.


 


2.13 COMPLIANCE WITH LAWS; PERMITS


The Company has complied with, is not in violation of, and has not received any notices
of violation with respect to, any applicable Law with respect to the conduct of its
business, or the ownership or operation of its business, except for failures to comply or
violations which would not have a Company Material Adverse Effect. The Company has all
permits, licenses, easements, variations, exemptions, consents, certificates approvals,
authorizations and registrations (collectively, "Permits") with and under all
federal, state and local Laws, and from all Governmental Bodies required by it to carry on
its business as currently conducted, except where the failure to have such Permits would
not have a Company Material Adverse Effect.


 


2.14 CERTAIN PAYMENTS


To the Company’s Knowledge, the Company has not directly or indirectly, in
violation of applicable Law, made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (a) to obtain favorable treatment in securing
business, (b) to pay for favorable treatment for business secured, or (c) to obtain
special concessions or for special concessions already obtained, for or in respect of the
Company.


 


2.15 LABOR MATTERS; EMPLOYEES


(a) To the Knowledge of the Company: 



  
    (i) There is no labor strike, dispute, slowdown, work stoppage or lockout actually
    pending against or affecting the Company and, during the past 12 months, there has not
    been any such action;

    (ii) the Company is not a party to or bound by any collective bargaining or similar
    agreement with any labor organization, or work rules or practices agreed to with any labor
    organization or employee association applicable to employees of the Company;

    (iii) none of the employees of the Company are represented by any labor organization
    and the Company has no Knowledge of any current union organizing activities among the
    employees of the Company;

    (iv) there is no unfair labor practice charge or complaint against the Company pending
    before the National Labor Relations Board;

    (v) there is no grievance or arbitration proceeding arising out of any
    collective bargaining agreement or other grievance procedure relating to the Company
    pending before the National Labor Relations Board;

    (vi) there are no pending citations, relating to the Company before the Occupational
    Safety and Health Administration; and 

    (vii) there are no pending claims by any current or former employee of the Company or
    any employment-related claims or investigations by any Governmental Body, including any
    charges to the Equal Employment Opportunity Commission or state employment practice
    agency, investigations regarding compliance with federal, state or local wage and hour
    laws, audits by the Office of Federal Contractor Compliance Programs, complaints of sexual
    harassment or any other form of unlawful harassment, discrimination, or retaliation.

  




 


(b) In the last 12 months, the Company has not effectuated (i) a "plant
closing" (as defined in the Worker Adjustment and Retraining Notification Act of 1988
("WARN Act")) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Company, or (ii) a
"mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company, nor has the Company been affected by any transaction or engaged
in layoffs or employment terminations sufficient in number to trigger application of any
similar state or local law.


 


2.16 BROKERS; FINDERS


No broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Contemplated Transactions based upon
arrangements made by or on behalf of the Company, except for the fees payable by the
Company to Petrie Parkman. The Company has heretofore furnished Parent true and complete
copies of all agreements between the Company and Petrie Parkman.


 


2.17 INSURANCE


The Company has made available to Parent copies of all insurance policies carried by
the Company. All such policies are in full force and effect, and no notice of cancellation
has been given with respect to any such policy. All premiums due on such policies have
been paid in a timely manner and the Company has complied in all material respects with
the terms and provisions of such policies. 


 


2.18 INTELLECTUAL PROPERTY


The Company owns the right, title and interest, free and clear of any Encumbrance, in
and to, or a license to use, or otherwise has the right to use, all patents and patent
rights, trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, logos, domain names, corporate names and goodwill associated
therewith, and copyrights ("Intellectual Property") currently used in the
conduct of the business of the Company, except where the failure to so own, be licensed or
otherwise have the right to use such Intellectual Property would not have a Company
Material Adverse Effect. No Person has notified the Company that the Company’s use of
the Intellectual Property infringes on the rights of any Person.


 


2.19 BOOKS AND RECORDS


The minute books, stock record books and other records of the Company are complete and
correct in all material respects and have been maintained in accordance with sound
business practices, including an adequate system of internal controls. The minute books of
the Company contain accurate and complete records of the meetings held of, and corporate
action taken by, the Shareholders and the Company’s board of directors.


 


2.20 COMPANY OIL AND GAS PROPERTIES


(a) The Company has furnished Parent with a copy of the Company Reserve Report. To the
Company’s Knowledge, the factual, non-interpretive data on which the Company Reserve
Report was based for purposes of estimating the oil and gas reserves set forth in the
Company Reserve Report and in any supplement thereto or update thereof furnished to Parent
was accurate at the time provided to Ryder Scott Company in all material respects.


(b) Except for goods and other property sold, used or otherwise disposed of since the
date of the Balance Sheet in the Ordinary Course of Business and as to title defects
which, when considered in the aggregate, would not have a Company Material Adverse Effect,
the Company has Defensible Title in and to (i) the oil and gas properties forming the
basis for the proved reserves reflected in the Company Reserve Report as owned by the
Company (the "Company Oil and Gas Properties"), and (ii) all other properties,
interests in properties and assets, real and personal, reflected in the Company’s SEC
Reports as owned by the Company, free and clear of any Encumbrances, except Permitted
Encumbrances.


(c) As used herein, the term "Defensible Title" means such interest in
production from the Company Oil and Gas Properties in the Company Reserve Report that
entitles the holder thereof to receive not materially less than the interest set forth in
the Company Reserve Report with respect to such property under the caption "Revenue
Interest" or "NRI" without reduction during the life of such property
except as stated in such reserve report; and obligates the holder thereof to pay costs and
expenses relating to each such property in a proportion not materially greater than the
interest set forth under the caption "Working Interest" or "WI" in the
Company Reserve Report with respect to such property, without increase over the life of
such property except as shown on the Company Reserve Report.


(d) As used herein, the term "Permitted Encumbrances" shall mean:



  
    (i) lessors’ royalties, overriding royalties, division orders, reversionary
    interests and net profits and similar burdens which do not operate to reduce the net
    revenue interests in any property below those set forth in the Company Reserve Report;

    (ii) the terms and conditions of the oil, gas and mineral leases (the "Company
    Leases") related to the Company Oil and Gas Properties and all agreements, orders,
    instruments and declarations to which the Company Leases are subject and that are
    customary and acceptable in the oil and gas industry in the area of the particular
    property;

    (iii) liens arising under operating agreements, pooling, unitization or communitization
    agreements, and similar agreements of a type and nature customary in the oil and gas
    industry and securing payment of amounts not yet delinquent;

    (iv) liens securing payments to mechanics and materialmen, and liens securing payment
    of taxes or assessments, which liens are not yet delinquent or, if delinquent, are being
    contested in good faith in the Ordinary Course of Business;

    (v) conventional rights of reassignment obligating the Company to reassign its
    interests in a portion of the Company Oil and Gas Properties to a third party in the event
    the Company intends to release or abandon such interest;

    (vi) calls on or preferential rights to purchase production at not less than prevailing
    prices;

    (vii) covenants, conditions, and other terms to which the Company Oil and Gas
    Properties are subject that are not such as to materially interfere with the operation,
    value, use and enjoyment of the Company Oil and Gas Properties;

    (viii) rights reserved to or vested in any Governmental Body to control or regulate any
    of the Company Oil and Gas Properties in any manner, and all applicable laws, rules,
    regulations and orders of any such Governmental Body; and

    (ix) easements, rights-of-way, servitudes, permits, surface leases, and other surface
    uses on, over or in respect of any of the Company Oil and Gas Properties that would not
    materially interfere with the operation of the Company Oil and Gas Properties.

  




 


(e) The Company Leases are in good standing, valid and effective and all
royalties, rentals and other payments due by the Company to any lessor of any such leases
have been properly paid, except as to Company Leases, royalties, rentals and other
payments which, when considered in the aggregate, would not have a Company Material
Adverse Effect. All major items of operating equipment of the Company are in good
operating condition and in a state of reasonable maintenance and repair, ordinary wear and
tear excepted.


(f) Section 2.20(f) of the Company Disclosure Schedule sets forth the Company’s
material future, hedge, swap, collar, put, call, floor, cap, option and other contracts
intended to benefit from, relate to or reduce or eliminate the risk of fluctuations in the
price of hydrocarbons as of the date hereof.


(g) Except as set forth in Section 2.20(g) of the Company Disclosure Schedule and for
gas balancing agreements containing customary provisions, the Company is not obligated
under, by virtue of a prepayment arrangement, a "take or pay" arrangement, a
production payment or any other arrangement, to deliver hydrocarbons produced from the
Company Oil and Gas Properties at some future time without then or thereafter receiving
full payment therefor. To the Company’s Knowledge, Section 2.20(g) of the Company
Disclosure Schedule sets forth a substantially accurate estimate of the net amount that
the Company Oil and Gas Properties are, in the aggregate, either "over-produced"
or "under-produced."


(h) Other than as expressly set forth in this Section 2.20, the Company makes no
representation or warranty, and hereby disclaims any representation or warranty, that the
reserve estimates, cost and cash flow estimates, oil and gas commodity price estimates,
other price estimates or production or flow rate estimates contained in the Company
Reserve Report, or in any supplement thereto or update thereof, are complete, accurate or
not misleading, such estimates being predicted as to future events which are inherently
subject to incompleteness, inaccuracy and uncertainty.


 


2.21 INFORMATION IN SEC DOCUMENTS 


The information supplied by the Company for inclusion in the Form S-4 and Proxy
Statement/Prospectus shall comply in all material respects with the provisions of
applicable federal securities laws, except that no representation is made by the Company
with respect to statements made therein based on information furnished by Parent or Merger
Sub for inclusion in the Form S-4 and Proxy Statement/Prospectus.


 


2.22 DISCLOSURE SCHEDULE


The Parent and Merger Sub acknowledge and agree that (a) the Company Disclosure
Schedule may include certain items and information solely for informational purposes for
the convenience of the Parties hereto, (b) the disclosure of any matter in the Company
Disclosure Schedule shall not be deemed to constitute an acknowledgment by the Company
that the matter is material or is required to be disclosed pursuant to the provisions of
this Agreement, (c) any fact or item disclosed in the Company Disclosure Schedule and
referenced by a particular section in this Agreement shall, should the existence of the
fact or item or its contents be relevant to any section in this Agreement, be deemed to be
disclosed with respect to such section whether or not a specific cross-reference appears
(provided that the relevance of such fact or item shall be reasonably evident from such
disclosure), (d) the disclosure of any fact or item in the Company Disclosure Schedule
shall not represent an admission by the Company that such fact or item actually
constitutes noncompliance with, or a violation of, any law, regulation or statute to which
such disclosure is applicable as such disclosure has been made for purposes of creating
exceptions to the representations and warranties made by the Company to Parent and Merger
Sub, and (e) each attachment referenced in the Company Disclosure Schedule shall be deemed
incorporated into and a part of such Company Disclosure Schedule.


 


2.23 DUE DILIGENCE


Company is experienced and knowledgeable in the oil and gas business and is aware of
its risks. To the Company’s Knowledge, it and its Representatives have been permitted
full and complete access to the books and records, facilities, equipment, Tax Returns,
Contracts, insurance policies and other properties and assets of the Parent that it and
its Representatives have desired or requested to see or review, and that it and its
Representatives have had an opportunity to meet with the officers and employees of the
Parent to discuss the business of the Parent. Company acknowledges that none of the Parent
or any other Person has made any representation or warranty, expressed or implied, as to
the accuracy or completeness of any information regarding the Parent furnished or made
available to Company and its Representatives, except as expressly set forth in this
Agreement or the Parent Disclosure Schedule, and none of the Parent or any other Person
shall have or be subject to any liability to Company or any other Person resulting from
the distribution to Company, or Company’s use of, any such information, including and
any information, documents or material made available to Company in any "data
rooms", management presentations or in any other form in expectation of the
transactions contemplated hereby.


 


 


ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF PARENT


AND MERGER SUB


Parent and Merger Sub represent and warrant to Company that, except as set forth in the
Parent Disclosure Schedule or in any of the Parent’s SEC Reports:


 


3.1 ORGANIZATION AND GOOD STANDING


The Parent and WOGC are each duly organized, validly existing and in good standing
under the laws of the state of Delaware, with full corporate power and authority to
conduct their business as now being conducted, to own or use the properties and assets
that they purport to own or use and to perform all their respective obligations under
their Contracts, except where the failure to have such power or authority would not result
in a Parent Material Adverse Effect. The Parent and WOGC are each duly qualified to do
business as a foreign corporation and are each in good standing under the laws of the
states or jurisdictions in which either the ownership or use of the properties owned or
used by either of them, or the nature of the activities conducted by either of them,
requires such qualification, except where the failure to be so qualified would not result
in a Parent Material Adverse Effect.


The Merger Sub is duly organized, validly existing and in good standing under the laws
of the state of Colorado. Except for obligations incurred in connection with its
incorporation or the negotiation and consummation of this Agreement and the Contemplated
Transactions, Merger Sub has not incurred any obligation or Liability nor engaged in any
business or activity of any type or kind whatsoever, or entered into any agreement or
arrangement with any Person.


 


3.2 AUTHORITY; ENFORCEABILITY; NO CONFLICT


(a) Each of Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement and the other agreements referred to in this Agreement,
to perform its obligations hereunder and thereunder and to consummate the Contemplated
Transactions. The execution and delivery of this Agreement by the Parent and Merger Sub
and the consummation by the Parent and Merger Sub of the Contemplated Transactions have
been duly and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement
or to consummate the Contemplated Transactions (other than, with respect to the Merger,
the filing of appropriate merger documents as required by the CBCA). This Agreement has
been duly and validly executed and delivered by the Parent and constitutes the legal,
valid and binding obligation of the Parent, enforceable against the Parent in accordance
with its terms, subject to bankruptcy and other laws affecting creditors’ rights
generally and to general principles of equity.


(b) The execution and delivery of this Agreement by the Parent and Merger Sub does not,
and the performance of this Agreement and the consummation of the Contemplated
Transactions by the Parent and Merger Sub will not, require any Consent of, or filing with
or notification to, any Governmental Body, except (i) for (A) applicable requirements, if
any, of the Exchange Act, the Securities Act and state securities or "blue sky"
laws, (B) the filing of Articles of Merger as required by the CBCA, and (C) such material
Consents set forth on Schedule 3.2 of the Parent Disclosure Schedule (the "Parent
Required Material Consents"); and (ii) where failure to obtain such Consents, or to
make such filings or notifications, would not result in a Parent Material Adverse Effect.


(c) Neither the execution and delivery of this Agreement nor the consummation of any of
the Contemplated Transactions do or will, directly or indirectly, except as set forth in
Section 3.2(b), (i) Contravene, conflict with or result in a violation of (A) any
provision of the Governing Documents of the Parent or Merger Sub, or (B) any resolution
adopted by the board of directors or stockholders of the Parent or Merger Sub; (ii)
Contravene, conflict with or result in a violation of any Law or Order; (iii) Contravene,
conflict with or result in a violation of any of the terms or requirements of any
Governmental Authorization that is held by the Parent; (iv) Contravene, conflict with or
result in a violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, accelerate the maturity or performance of
or cancel, terminate or modify, any material Parent Contract or (v) require a Consent from
any Person, except, in the case of clauses (ii), (iii), (iv) and (v), for any such
Contravention, conflict or violation that would not have a Parent Material Adverse Effect.
The boards of directors of the Parent and Merger Sub, at meetings duly called and held,
have approved this Agreement and the Contemplated Transactions. The vote of the
Parent’s stockholders is not required in connection with the Contemplated
Transactions.


 


3.3 CAPITALIZATION


The authorized capital stock of the Parent consists of 75,000,000 shares of Parent
Common Stock and 5,000,000 shares of preferred stock. As of the date hereof, (a)
18,750,000 shares of Parent Common Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable, (b) 2,000,000 shares of Parent
Common Stock are reserved for issuance under the Parent’s stock option plans, and (c)
no shares of Parent Common Stock are held in the treasury of the Parent. Other than the
financing arrangements that have been specifically disclosed in or filed as Exhibits to
the Parent SEC Reports, there are not any bonds, debentures, notes or other indebtedness
or securities of the Parent having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which the Parent’s
stockholders may vote. Except as set forth in this Section 3.3, as of the date hereof no
shares of capital stock or other voting securities of the Parent are issued, reserved for
issuance or outstanding, and no shares of capital stock or other voting securities of the
Parent will be issued or become outstanding after the date hereof other than upon exercise
of Parent Options outstanding as of the date hereof. Except as set forth in this Section
3.3, there are no Options relating to the issued or unissued capital stock of the Parent,
or obligating the Parent to issue, grant or sell any shares of capital stock of, or other
equity interests in, or securities convertible into equity interests in, the Parent. WOGC
is the Parent’s only Subsidiary which would constitute a "significant
subsidiary" within Rule 1-02(w) or Regulation S-X of the Securities Act.


The authorized capital stock of Merger Sub consists of 100 shares of Merger Sub Common
Stock. As of the date hereof, 100 shares of Merger Sub Common Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and held by Parent.


 


3.4 SEC FILINGS


The Parent has filed all required forms, reports, registration statements, information
statements and documents with the SEC required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder. The Parent SEC Reports (a)
have been filed on a timely basis; and (b) were prepared in all material respects in
accordance with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations thereunder. None of the Parent SEC Reports required
by the Exchange Act at the time filed, nor any of the Parent SEC Reports required by the
Securities Act as of the date of their effectiveness, contained any untrue statement of a
material fact or omitted to state a 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, except to the extent that information contained in
any Parent SEC Report has been revised or superseded by a later-filed Parent SEC Report
filed and publicly available prior to the date hereof.


 


3.5 FINANCIAL STATEMENTS; TAX MATTERS


(a) The financial statements and notes contained or incorporated by reference in the
Parent SEC Reports fairly present the financial condition and the results of operations,
changes in stockholders’ equity and cash flow of the Parent and WOGC as at the
respective dates of and for the periods referred to in such financial statements, all in
accordance with GAAP and Regulation S-X of the SEC, subject, in the case of interim
financial statements, to year-end adjustments and the omission of notes to the extent
permitted by Regulation S-X of the SEC (that, if presented, would not differ materially
from notes to the financial statements for the period ended September 30, 2003 included in
the Parent SEC Reports (the "Parent Balance Sheet")); the financial statements
referred to in this Section 3.5 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to such
financial statements.


(b) Neither the Parent nor any Affiliate of the Parent has taken or agreed to take any
action or knows of any fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.


 


3.6 NO UNDISCLOSED LIABILITIES


Neither the Parent nor WOGC has any Liabilities except for Liabilities reflected or
reserved against in the Parent Balance Sheet, current liabilities incurred in the Ordinary
Course of Business, Liabilities set forth in the Parent SEC Reports and contingent or
inchoate liabilities that would not have a Parent Material Adverse Effect. 


 


3.7 ABSENCE OF CERTAIN CHANGES AND EVENTS


Except as disclosed in the Parent SEC Reports, since September 30, 2003, the Parent and
WOGC have each conducted their business only in the Ordinary Course of Business and there
has not been any Parent Material Adverse Effect.


 


3.8 LEGAL PROCEEDINGS


Except to the extent that would not have a Parent Material Adverse Effect, there is no
pending, or to the Knowledge of the Parent or WOGC threatened, Proceeding (a) that has
been commenced by or against the Parent or WOGC or that otherwise relates to or the
business of, or any of the assets owned by, the Parent or WOGC, except for such
Proceedings as are normally incident to the business carried on by the Parent or WOGC, or
(b) that challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated Transactions.


 


3.9 ENVIRONMENTAL MATTERS


To the Knowledge of the Parent, the Parent and WOGC are in substantial compliance with
all applicable Environmental Laws except to the extent that any events of non-compliance,
when considered in the aggregate, would not result in Environmental Liabilities that would
have a Parent Material Adverse Effect. To the Knowledge of the Parent, neither the Parent
nor WOGC has received any order, notice, or other communication regarding a current,
unresolved violation of any applicable Environmental Law from (a) any Governmental Body,
or (b) the current or prior owner or operator of any Facilities. For purposes of this
Section 3.9, "Environmental Liabilities" means any cost, damages, expense,
liability, obligation, or other responsibility arising from or under Environmental Law and
consisting of or relating to:


(a) any environmental conditions or pollution (including on-site or off-site
contamination and regulation of chemical substances or products);


(b) fines, penalties, judgments, awards, settlements, legal or administrative
Proceedings, damages, losses, claims, demands and response, investigative, remedial, or
inspection costs and expenses arising under Environmental Law; or


(c) any other compliance, corrective, investigative, or remedial measures required
under Environmental Law.


The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq., as amended.


 


3.10 COMPLIANCE WITH LAWS; PERMITS


The Parent and WOGC have each complied with, are not in violation of, and have not
received any notices of violation with respect to, any applicable Law with respect to the
conduct of their business, or the ownership or operation of their business, except for
failures to comply or violations which would not have a Parent Material Adverse Effect.
The Parent and WOGC each have all Permits with and under all federal, state and local
Laws, and from all Governmental Bodies required by them to carry on their business as
currently conducted, except where the failure to have such Permits would not have a Parent
Material Adverse Effect.


 


3.11 BROKERS; FINDERS


No broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Contemplated Transactions based upon
arrangements made by or on behalf of the Parent or Merger Sub.


 


3.12 PARENT OIL AND GAS PROPERTIES


(a) The Parent has furnished Company with a copy of the Parent Reserve Report. To the
Parent’s Knowledge, the factual, non-interpretive data on which the Parent Reserve
Report was based for purposes of estimating the oil and gas reserves set forth in the
Parent Reserve Report and in any supplement thereto or update thereof furnished to Company
was accurate at the time provided to Ryder Scott Company, Cawley, Gillespie &
Associates, Inc. and R.A. Lenser & Associates, Inc., in all material respects.


(b) Except for goods and other property sold, used or otherwise disposed of since the
date of the Parent Balance Sheet in the Ordinary Course of Business and as to title
defects which, when considered in the aggregate, would not have a Parent Material Adverse
Effect, the Parent and WOGC, as applicable, has Defensible Title in and to (i) the oil and
gas properties forming the basis for the proved reserves reflected in the Parent Reserve
Report as owned by the Parent or WOGC (the "Parent Oil and Gas Properties"), and
(ii) all other properties, interests in properties and assets, real and personal,
reflected in the Parent’s SEC Reports as owned by the Parent or WOGC, free and clear
of any Encumbrances, except Permitted Encumbrances.


(c) As used herein, the term "Defensible Title" means such interest in
production from the Parent Oil and Gas Properties in the Parent Reserve Report that
entitles the holder thereof to receive not materially less than the interest set forth in
the Parent Reserve Report with respect to such property under the caption "Revenue
Interest" or "NRI" without reduction during the life of such property
except as stated in such reserve report; and obligates the holder thereof to pay costs and
expenses relating to each such property in a proportion not materially greater than the
interest set forth under the caption "Working Interest" or "WI" in the
Parent Reserve Report with respect to such property, without increase over the life of
such property except as shown on the Parent Reserve Report.


(d) As used herein, the term "Permitted Encumbrances" shall mean:



  
    (i) lessors’ royalties, overriding royalties, division orders, reversionary
    interests and net profits and similar burdens which do not operate to reduce the net
    revenue interests in any property below those set forth in the Parent Reserve Report;

    (ii) the terms and conditions of the oil, gas and mineral leases (the "Parent
    Leases") related to the Parent Oil and Gas Properties and all agreements, orders,
    instruments and declarations to which the Parent Leases are subject and that are customary
    and acceptable in the oil and gas industry in the area of the particular property;

    (iii) liens arising under operating agreements, pooling, unitization or communitization
    agreements, and similar agreements of a type and nature customary in the oil and gas
    industry and securing payment of amounts not yet delinquent;

    (iv) liens securing payments to mechanics and materialmen, and liens securing payment
    of taxes or assessments, which liens are not yet delinquent or, if delinquent, are being
    contested in good faith in the Ordinary Course of Business;

    (v) conventional rights of reassignment obligating the Parent or WOGC to reassign its
    interests in a portion of the Parent Oil and Gas Properties to a third party in the event
    the Parent or WOGC, as applicable, intends to release or abandon such interest;

    (vi) calls on or preferential rights to purchase production at not less than prevailing
    prices;

    (vii) covenants, conditions, and other terms to which the Parent Oil and Gas Properties
    are subject that are not such as to materially interfere with the operation, value, use
    and enjoyment of the Parent Oil and Gas Properties;

    (viii) rights reserved to or vested in any Governmental Body to control or regulate any
    of the Parent Oil and Gas Properties in any manner, and all applicable laws, rules,
    regulations and orders of any such Governmental Body; and

    (ix) easements, rights-of-way, servitudes, permits, surface leases, and other surface
    uses on, over or in respect of any of the Parent Oil and Gas Properties that would not
    materially interfere with the operation of the Parent Oil and Gas Properties.

  




 


(e) The Parent Leases are in good standing, valid and effective and all
royalties, rentals and other payments due by the Parent and WOGC, as applicable, to any
lessor of any such leases have been properly paid, except as to Parent Leases, royalties,
rentals and other payments which, when considered in the aggregate, would not have a
Parent Material Adverse Effect. All major items of operating equipment of the Parent and
WOGC are in good operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted.


(f) Other than as expressly set forth in this Section 3.12, the Parent makes no
representation or warranty, and hereby disclaims any representation or warranty, that the
reserve estimates, cost and cash flow estimates, oil and gas commodity price estimates,
other price estimates or production or flow rate estimates contained in the Parent Reserve
Report, or in any supplement thereto or update thereof, are complete, accurate or not
misleading, such estimates being predicted as to future events which are inherently
subject to incompleteness, inaccuracy and uncertainty.


 


3.13 INFORMATION IN SEC DOCUMENTS 


The information supplied by Parent or Merger Sub for inclusion in the Form S-4 and
Proxy Statement/Prospectus shall comply in all material respects with the provisions of
applicable federal securities laws, except that no representation is made by Parent or
Merger Sub with respect to statements made therein based on information furnished by the
Company for inclusion in the Form S-4 and Proxy Statement/Prospectus.


 


3.14 DISCLOSURE SCHEDULE


The Company acknowledges and agrees that (a) the Parent Disclosure Schedule may include
certain items and information solely for informational purposes for the convenience of the
Parties hereto, (b) the disclosure of any matter in the Parent Disclosure Schedule shall
not be deemed to constitute an acknowledgment by the Parent that the matter is material or
is required to be disclosed pursuant to the provisions of this Agreement, (c) any fact or
item disclosed in the Parent Disclosure Schedule and referenced by a particular section in
this Agreement shall, should the existence of the fact or item or its contents be relevant
to any section in this Agreement, be deemed to be disclosed with respect to such section
whether or not a specific cross-reference appears (provided that the relevance of such
fact or item shall be reasonably evident from such disclosure), (d) the disclosure of any
fact or item in the Parent Disclosure Schedule shall not represent an admission by the
Parent that such fact or item actually constitutes noncompliance with, or a violation of,
any law, regulation or statute to which such disclosure is applicable as such disclosure
has been made for purposes of creating exceptions to the representations and warranties
made by the Parent and Merger Sub to Company, and (e) each attachment referenced in the
Parent Disclosure Schedule shall be deemed incorporated into and a part of such Parent
Disclosure Schedule.


 


3.15 DUE DILIGENCE


Parent is experienced and knowledgeable in the oil and gas business and is aware of its
risks. To the Parent’s Knowledge, it and its Representatives have been permitted full
and complete access to the books and records, facilities, equipment, Tax Returns,
Contracts, insurance policies and other properties and assets of the Company that it and
its Representatives have desired or requested to see or review, and that it and its
Representatives have had an opportunity to meet with the officers and employees of the
Company to discuss the business of the Company. Parent acknowledges that none of the
Company or any other Person has made any representation or warranty, expressed or implied,
as to the accuracy or completeness of any information regarding the Company furnished or
made available to Parent and its Representatives, except as expressly set forth in this
Agreement or the Company Disclosure Schedule, and none of the Company or any other Person
shall have or be subject to any liability to Parent or any other Person resulting from the
distribution to Parent, or Parent’s use of, any such information, including and any
information, documents or material made available to Parent in any "data rooms",
management presentations or in any other form in expectation of the transactions
contemplated hereby. Parent acknowledges that, should the Closing occur, Parent shall
acquire the capital stock of the Company without any representation or warranty as to
merchantability or fitness of the assets of the Company for any particular purpose, and
such assets shall be in an "as is" condition and on a "where is"
basis.


 


 


 


ARTICLE 4: CERTAIN COVENANTS OF THE COMPANY AND PARENT


4.1 ACCESS AND INVESTIGATION


During the period from the date of this Agreement through the Effective Time (the
"Pre-Closing Period"), each Party shall, and shall cause the Representatives of
such Party to: (a) provide the other Party’s Representatives with reasonable access
to such Party’s Oil and Gas Properties, such Party’s Representatives, personnel
and assets and to all existing books, records, Tax Returns, work papers and other
documents and information relating to such Party; and (b) provide the other Party’s
Representatives with such copies of such Party’s Material Contracts and the existing
books, records, Tax Returns, work papers and other documents and information relating to
such Party, and with such additional financial, operating and other data and information
regarding such Party, as the other Party may reasonably request.


 


4.2 OPERATION OF COMPANY’S BUSINESS


During the Pre-Closing Period, except as provided in this Agreement: (i) the Company
shall conduct its business and operations (A) in the Ordinary Course of Business and (B)
in compliance with all applicable Laws and the requirements of all of the Company’s
Material Contracts, except where failure to so comply would not have a Company Material
Adverse Effect; (ii) the Company shall use its Reasonable Best Efforts to preserve intact
its current business organization, keep available the services of its current directors,
officers and employees and maintain its relations and goodwill with all suppliers,
customers, landlords, creditors, licensors, licensees, employees and other Persons having
business relationships with the Company; (iii) the Company shall not take, without the
prior Consent of the Parent, any affirmative action within its control as a result of
which any of the changes or events in Section 2.7 would occur; and (iv) the Company shall
promptly notify the Parent of (A) any notice or other communication from any Person
alleging that the Consent of such Person is or may be required in connection with the
Contemplated Transactions, and (B) any Proceeding commenced against, relating to or
involving or otherwise affecting the Company that relates to the consummation of the
Contemplated Transactions.


 


4.3 NO SOLICITATION


(a) The Company and its Representatives shall immediately cease any discussions or
negotiations, if any, with any other Persons that may be ongoing as of the date hereof
with respect to any Acquisition Proposal. The Company shall immediately request each
Person who has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any portion thereof to return all confidential
information heretofore furnished to such Person by or on behalf of the Company. Following
the date hereof, the Company shall not directly or indirectly, and shall not authorize or
permit any Representative of the Company directly or indirectly to, except pursuant to
Section 4.3(c), (i) solicit, initiate or knowingly encourage any inquires that would
reasonably be expected to lead to the submission of any Acquisition Proposal, (ii) furnish
any information regarding the Company to any Person in connection with or in response to
an Acquisition Proposal or an inquiry or indication of interest that could reasonably be
expected to lead to an Acquisition Proposal, (iii) engage in discussions or negotiations
with any Person with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Merger Sub the Company Board Recommendation or
(v) enter into any letter of intent or similar document or any Contract contemplating or
otherwise relating to any Acquisition Transaction; provided, however, that prior to the
approval of this Agreement by the Required Company Shareholder Vote, this Section 4.3(a)
shall not prohibit the Company from furnishing nonpublic information regarding the Company
to, or entering into discussions with, any Person in response to an unsolicited (i.e.,
solicited after the date hereof) Significant Proposal that is submitted to the Company by
such Person (and not withdrawn) after the date of this Agreement if (w) neither the
Company nor its Representatives have violated the provisions of this Section 4.3, (x) the
board of directors of the Company shall have determined in good faith, after consultation
with its outside legal advisors, that any such actions are required in order for the board
of directors of the Company to comply with its fiduciary obligations to the Company’s
Shareholders under applicable Law, (y) the Company promptly gives Parent written notice of
the identity of such Person and of the Company’s intention to furnish nonpublic
information to, or enter into discussions with, such Person, and the Company receives from
such Person an executed confidentiality agreement in substantially the form attached as Exhibit
B (it being understood and agreed that, notwithstanding anything in this Agreement to
the contrary, including the last sentence of Section 4.3(b), the Company shall be entitled
to waive paragraph 8 of such confidentiality agreement and any such waiver shall not
constitute a breach of this Section 4.3) and (z) the Company promptly furnishes such
nonpublic information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent).


(b) The Company shall promptly (and in no event later than 48 hours after receipt of
any Acquisition Proposal) advise Parent orally and in writing of any Acquisition Proposal,
any inquiry or indication of interest that could lead to an Acquisition Proposal or any
request for nonpublic information relating to the Company (including the identity of the
Person making or submitting such Acquisition Proposal, inquiry, indication of interest or
request, and the terms thereof) that is made or submitted by any Person during the
Pre-Closing Period. The Company shall keep Parent fully informed with respect to the
status of any such Acquisition Proposal, inquiry, indication of interest or request and
any modification or proposed modification thereto. Subject to the provisions of this
Section 4.3, the Company agrees not to release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which the Company is a party
and will use its best efforts to enforce any such agreements at the request of and on
behalf of the Parent.


(c) Notwithstanding anything to the contrary contained in this Agreement, prior to the
approval of this Agreement by the Required Company Shareholder Vote, the Company Board
Recommendation may be withdrawn or modified in a manner adverse to Parent if: (i) neither
the Company nor its Representatives have violated the provisions of this Section 4.3; (ii)
a bona fide written proposal to acquire (by merger or otherwise) all of the outstanding
shares of Company Common Stock (other than Company Common Stock owned by the Person making
the proposal) is made by a third party to the Company after the date of this Agreement and
is not withdrawn; (iii) the Company provides Parent with at least five Business Days prior
notice of any meeting of the Company’s board of directors at which the board of
directors will consider and determine whether such offer is a Superior Proposal, during
which five-Business Day period the Company shall cause its financial and legal advisors to
negotiate in good faith with Parent in an effort to make such adjustments in the terms and
conditions of this Agreement as would enable the Company to proceed with the transactions
contemplated herein on such adjusted terms; (iv) notwithstanding such negotiations and
adjustments pursuant to clause (iii) above, the Company’s board of directors
determines in good faith that such offer constitutes a Superior Proposal; (v) the
Company’s Special Committee and board of directors determines in good faith, after
having taken into account the written advice of the Company’s outside legal counsel,
that, in light of such Superior Proposal, the withdrawal or modification of the Company
Board Recommendation is required in order for the Company’s board of directors to
comply with its fiduciary obligations to the Company’s Shareholders under applicable
Law; and (vi) prior to the earlier of the withdrawal or modification of the Company Board
Recommendation or the approval or recommendation of, or execution of a definitive
agreement with respect to, any such Superior Proposal, the Company makes the payments
required to be made pursuant to Section 9.3. In making any determination to withdraw or
modify the Company Board Recommendation, the Company may consider any revised offer by
Parent made prior to any determination to make such withdrawal or modification. The
Company may communicate information about any Acquisition Proposal to its stockholders if,
in the judgment of the Company’s board of directors, based upon the advice of outside
counsel, the failure to communicate information would violate federal or state securities
laws or constitute a breach of the directors’ fiduciary duties. Nothing contained in
this Agreement shall prohibit the Company or the Company’s board of directors from
taking and disclosing to the Company’s stockholders a position with respect to an
Acquisition Proposal pursuant to Rule 14d-9 and 14e-2(a) promulgated under the Exchange
Act.


 


 


ARTICLE 5: ADDITIONAL COVENANTS OF THE PARTIES


5.1 PREPARATION OF THE FORM S-4 AND THE PROXY STATEMENT 


As soon as reasonably practicable following the date of this Agreement, the
Company and Parent will prepare and Parent will file with the SEC a registration statement
on Form S-4 with respect to the issuance of Parent Common Stock in the Merger (the
"Form S-4"), in which the proxy statement relating to the approval by the
Shareholders of the Company of the Agreement (as amended or supplemented from time to
time, the "Proxy Statement/Prospectus") will be included as a prospectus. Each
of the Company and Parent will use its Reasonable Best Efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after such filing.
The Company will use its Reasonable Best Efforts to cause the Proxy Statement/Prospectus
to be mailed to the Shareholders of the Company as promptly as reasonably practicable
after the Form S-4 is declared effective under the Securities Act. Parent will also take
any action required to be taken under any applicable state securities laws in connection
with the issuance of shares of Parent Common Stock in the Merger, and the Company will
furnish all information concerning the Company and the holders of shares of Company Common
Stock as may be reasonably requested by Parent in connection with any such action and the
preparation, filing and distribution of the Proxy Statement/Prospectus. No filing of, or
amendment or supplement to, the Form S-4 will be made by Parent, and no filing of, or
amendment or supplement to the Proxy Statement/Prospectus will made by the Company, in
each case without providing the other Party a reasonable opportunity to review and comment
thereon. If at any time prior to the Effective Time any information relating to the
Company or Parent, or any of their respective Affiliates, directors or officers, should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement to either the Form S-4 or the Proxy Statement/Prospectus, so that either such
document would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the Party which discovers such information
will promptly notify the other Parties hereto and an appropriate amendment or supplement
describing such information will be promptly filed with the SEC and, to the extent
required by law, disseminated to the Shareholders of the Company. The Parties will notify
each other promptly of the receipt of any comments from the SEC or the staff of the SEC
and of any request by the SEC or the staff of the SEC for amendments or supplements to the
Proxy Statement/Prospectus or the Form S-4 or for additional information and will supply
each other with copies of (i) all correspondence between it or any of its Representatives,
on the one hand, and the SEC or the staff of the SEC, on the other hand, with respect to
the Proxy Statement/Prospectus, the Form S-4 or the Merger and (ii) all orders of the SEC
relating to the Form S-4.


 


5.2 SHAREHOLDERS’ MEETING 


The Company shall, as soon as reasonably practicable, subject to the Company’s
right to terminate this Agreement pursuant to Section 9.1, take all action necessary under
all applicable Laws to call, give notice of and hold a meeting of the Company’s
Shareholders to vote on a proposal to approve the Merger and this Agreement (the
"Company Shareholders’ Meeting") and, subject to
Section 4.3(c), shall use its Reasonable Best Efforts to solicit the approval of the
Merger and this Agreement by the Required Company Shareholder Vote. The Company
Shareholders’ Meeting shall be held on a date selected by the Company in consultation
with Parent as promptly as practicable after the Form S-4 is declared effective by the
SEC. Subject to Section 4.3(c), the Proxy Statement/Prospectus shall include the Company
Board Recommendation.


 


5.3 REASONABLE BEST EFFORTS TO CLOSE


(a) The Parties shall use their Reasonable Best Efforts to take, or cause to be taken,
all actions necessary to consummate and make effective the Contemplated Transactions.
Without limiting the generality of the foregoing, but subject to the Company’s right
to terminate this Agreement pursuant to Section 9.1, Parent and the Company (i) shall make
all filings (if any) and give all notices (if any) required to be made and given by such
Party in connection with the Contemplated Transactions and to submit promptly any
additional information requested in connection with such filings and notices, (ii) shall
use their Reasonable Best Efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Laws or Contract, or otherwise) by such Party in connection
with any of the Contemplated Transactions and (iii) shall use its Reasonable Best Efforts
to lift any restraint, injunction or other legal bar to any of the Contemplated
Transactions. The Company shall promptly deliver to Parent a copy of each such filing
made, each such notice given and each such Consent obtained by the Company during the
Pre-Closing Period. If any state takeover statute or other similar statute or regulation
becomes or is deemed to become applicable to the Merger, this Agreement, the Shareholder
Agreements or any of the transactions contemplated hereby or thereby, the Parties shall
(at Parent’s expense) promptly grant such approvals and take such actions as are
reasonably necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions contemplated
hereby.


(b) Parent will cause the shares of Parent Common Stock to be issued in the Merger to
be approved for listing on the New York Stock Exchange, subject to official notice of
issuance, prior to the Closing Date.


(c) Each of Parent and the Company will use its Reasonable Best Efforts to cause the
Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code and
to obtain the opinion of counsel referred to in Section 8.7, including by executing
customary representation letters referred to therein and delivering such letters prior to
(i) the filing of the Form S-4 with the SEC and (ii) the Closing.


 


5.4 DISCLOSURE


Parent and the Company shall consult with each other before issuing any press release
or otherwise making any public statement with respect to the Merger or any of the other
Contemplated Transactions. Without limiting the generality of the foregoing, the Company,
Parent and Merger Sub shall not, and shall not permit any of their Representatives to,
make any disclosure regarding the Merger or any of the other Contemplated Transactions
unless (a) Parent and Company shall have approved such disclosure or (b) the Company or
Parent shall have been advised by its outside legal counsel that such disclosure is
required by applicable Law or the rules of the New York Stock Exchange or the Nasdaq
National Market, as applicable.


 


5.5 INDEMNIFICATION


 


(a) For a period until six (6) years after the Effective Time, Parent will
cause the Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements, dated prior to the date hereof,
between the Company and its directors and officers as of the date hereof to immediately
prior to the Effective Time (the "Indemnified Parties") and any indemnification
provisions under the Company’s Governing Documents as in effect on the date hereof.
The Governing Documents of the Surviving Corporation will contain provisions with respect
to exculpation, indemnification and advancement of expenses protecting and indemnifying
the Indemnified Parties to the fullest extent of applicable Law, which provisions will not
be amended, repealed or otherwise modified for a period of six (6) years from the
Effective Time in any manner that would adversely affect the rights thereunder of the
Indemnified Parties, unless such modification is required by applicable law.


(b) For a period of six (6) years after the Effective Time, Parent will cause the
Surviving Corporation to use its commercially reasonable efforts to maintain in effect, if
available, directors’ and officers’ liability insurance covering the Indemnified
Parties on terms no less favorable than those applicable to the current directors and
officers of the Company, with an amount of coverage of not less than 100% of the amount of
coverage maintained by the Company as of the date of this Agreement, with respect to
matters occurring at or prior to the Effective Time (including, without limitation, the
Contemplated Transactions); provided, however, that in satisfying its obligation under
this Section 5.5(b) the Surviving Corporation shall not be obligated to pay
annual premiums in excess of the amount per annum the Company is currently paying for such
coverage; provided further, that if the annual premiums of such insurance coverage exceeds
such amount, the Surviving Corporation shall be obligated to obtain policies with as much
coverage as is available for a cost not exceeding such amount. 


(c) This Section 5.5 shall survive the consummation of the Contemplated Transactions,
is intended to benefit the Company, the Surviving Corporation and each Indemnified Party,
shall be binding on all successors and assigns of the Surviving Corporation and Parent,
and shall be enforceable by the Indemnified Parties.


(d) If the Surviving Corporation or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each case, to
the extent necessary, proper provision shall be made so that the successors and assigns of
the Surviving Corporation shall assume the obligations set forth in this Section 5.5.


 


5.6 TRANSFER TAXES


Parent shall pay any sales, use, transfer, stamp, documentary or other similar
Taxes and any recording and filing fees incurred in connection with the Contemplated
Transactions.


 


5.7 AFFILIATES


The Company will deliver to Parent a letter identifying all persons who, to the
Company’s reasonable knowledge, are at the time this Agreement is submitted for
adoption by the Shareholders, "affiliates" of the Company for purposes of Rule
145 under the Securities Act. The Company will use its Reasonable Best Efforts to cause
each such person to deliver to Parent prior to the mailing of the Proxy
Statement/Prospectus a written letter substantially in the form attached as Exhibit C
hereto. 


 


5.8 SECTION 16 MATTERS


Prior to the Effective Time, each of the Parent and the Company shall use their
Reasonable Best Efforts to cause any dispositions of Company Common Stock or acquisitions
of Parent Common Stock resulting from the transactions contemplated by this Agreement by
each individual who is subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company, to be exempt under Rule 16b-3 promulgated under
the Exchange Act.


 


5.9 PUBLIC ANNOUNCEMENTS


The Parent and the Company will consult with and provide each other the reasonable
opportunity to review and comment upon any press release prior to the issuance of any
press release relating to this Agreement or the Contemplated Transactions and shall not
issue any such press release prior to such consultation except as may be required by law
or by obligations pursuant to any listing agreement with any national securities exchange.


 


 


ARTICLE 6: CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
PARTIES


The obligation of each Party to effect the Merger is subject to the satisfaction, on or
before the Closing Date, of each of the following conditions:


 


6.1 COMPANY SHAREHOLDER APPROVAL


This Agreement and the Merger shall have been duly approved by the Required Company
Shareholder Vote.


 


6.2 NO RESTRAINTS


No temporary restraining Order, preliminary or permanent injunction or other Order
preventing the consummation of the Merger shall have been issued by any court of competent
jurisdiction or any other Governmental Body and shall remain in effect, and there shall
not be any Law enacted, adopted or deemed applicable to the Merger that prohibits,
retrains, enjoins, restricts or makes consummation of the Merger illegal.


 


6.3 REGISTRATION STATEMENT EFFECTIVE; PROXY STATEMENT 


The SEC shall have declared the Form S-4 effective and the Parent Common Stock issuable
to the Shareholders and to holders of Company Stock Options shall be approved for listing
on the New York Stock Exchange, subject to official notice of issuance. No stop order
suspending the effectiveness of the Form S-4 or any part thereof shall have been issued
and no proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement/Prospectus, shall have been initiated or threatened in writing by the SEC and
not concluded or withdrawn.


 


 


ARTICLE 7: CONDITIONS PRECEDENT TO PARENT’S AND
MERGER SUB’S


OBLIGATION TO CLOSE


The obligation of Parent and Merger Sub to effect the Merger and to take the other
actions required to be taken by Parent and Merger Sub at Closing is subject to the
satisfaction, on or before the Closing Date, of each of the following conditions (any of
which may be waived by Parent and Merger Sub, in whole or in part):


 


7.1 ACCURACY OF REPRESENTATIONS


The representations and warranties of the Company contained in this Agreement (a) that
are qualified as to materiality or a Company Material Adverse Effect shall be true and
correct in all respects as of the date of this Agreement and as of the Closing Date as if
made on the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such earlier date), and (b) that
are not so qualified shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as if made on the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in which case as
of such earlier date), except for such breaches of representations and inaccuracies in
warranties in this clause (b) that have not had a Company Material Adverse Effect.


 


7.2 COMPANY’S PERFORMANCE


The Company shall have performed, in all material respects, its covenants and
agreements contained in this Agreement required to be performed on or prior to the Closing
Date.


 


7.3 CONSENTS


Each of the Governmental Authorizations, the Company Required Material Consents and the
other Consents identified in Section 2.2 must have been obtained and must be in full force
and effect, the absence of which would result in a Company Material Adverse Effect. Each
of the Governmental Authorizations, the Parent Required Material Consents and the other
Consents identified in Section 3.2 must have been obtained and must be in full force and
effect, the absence of which would result in a Parent Material Adverse Effect. If a filing
pursuant to the HSR Act is required, the applicable waiting period under the HSR Act shall
have expired or been terminated.


 


 


7.4 OFFICER’S CERTIFICATE


The Company shall have delivered to Parent and Merger Sub a certificate, executed on
behalf of the Company by an authorized executive officer of the Company, and dated as of
the Closing Date that the conditions set forth in Sections 7.1, 7.2, 7.3 and 7.5 have been
duly satisfied.


 


7.5 NO PROCEEDINGS


There shall not be pending any Proceeding: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger; (b) relating to the Merger and seeking to obtain
from the Company or any of its officers or directors or from Parent or any of its
Subsidiaries any damages that would result in a Parent Material Adverse Effect; (c)
seeking to prohibit or limit in any material respect Parent’s ability to vote,
receive dividends with respect to or otherwise exercise ownership rights with respect to
the Company; (d) which would materially and adversely affect the right of Surviving
Corporation to own the assets or operate the business of the Company; or (e) seeking to
compel the Company, Parent or any Subsidiary of Parent to dispose of or hold separate any
material assets, as a result of the Merger, which, in each instance, if adversely
determined, would have a Company Material Adverse Effect.


 


 


ARTICLE 8: CONDITIONS PRECEDENT TO COMPANY’S
OBLIGATION TO CLOSE


The Company’s obligation to effect the Merger and to take the other actions
required to be taken by the Company at the Closing is subject to the satisfaction, on or
before the Closing Date, of each of the following conditions (any of which may be waived
by the Company, in whole or in part):


 


8.1 ACCURACY OF REPRESENTATIONS


The representations and warranties of Parent and Merger Sub contained in this Agreement
(a) that are qualified as to materiality or a Parent Material Adverse Effect shall be true
and correct in all respects as of the date of this Agreement and as of the Closing Date as
if made on the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such earlier date), and (b) that
are not so qualified shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as if made on the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in which case as
of such earlier date), except for such breaches of representations and inaccuracies in
warranties in this clause (b) that have not had a Parent Material Adverse Effect.


 


8.2 PARENT’S AND MERGER SUB’S PERFORMANCE


Parent and Merger Sub shall have performed, in all material respects, their respective
covenants and agreements contained in this Agreement required to be performed on or prior
to the Closing Date.


 


8.3 CONSENTS


Each of the Governmental Authorizations, the Parent Required Material Consents and the
other Consents identified in Section 2.2 must have been obtained and must be in full force
and effect without limitation or condition that has, or would be reasonably expected to
have a Parent Material Adverse Effect. If a filing pursuant to the HSR Act is required,
the applicable waiting period under the HSR Act shall have expired or been terminated.


 


8.4 OFFICER’S CERTIFICATE


Parent shall have delivered to the Company a certificate, executed on behalf of Parent
and Merger Sub by an authorized executive officer of Parent, and dated as of the Closing
Date that the conditions set forth in Sections 8.1, 8.2, 8.3 and 8.6 have been duly
satisfied.


 


8.5 FEES AND EXPENSES


At Closing, all reasonable fees and expenses of the Special Committee and its advisors,
including all reasonable attorneys’ and other professional fees shall be paid in
full.


 


8.6 NO PROCEEDINGS


There shall not be pending any Proceeding: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger; (b) relating to the Merger and seeking to obtain
material damages from the Company; or (c) which would materially and adversely affect the
right of Surviving Corporation to own the assets or operate the business of the Company.


 


8.7 LEGAL OPINION 


The Company shall have received the written opinion of Holme Roberts & Owen LLP, in
form and substance reasonably satisfactory to it, dated as of the Closing Date, to the
effect that the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, and such opinion shall not have been withdrawn. In rendering such
opinion, counsel shall be entitled to rely upon, among other things, reasonable
assumptions as well as customary representation letters of Parent, Merger Sub and Company.


 


 


ARTICLE 9: TERMINATION


9.1 TERMINATION


This Agreement may be terminated prior to the Effective Time (whether before or after
the approval of this Agreement by the Company’s Shareholders):


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


(b) by either Parent or the Company if:



  
    (i) if the Merger shall not have been consummated by July 31, 2004 (unless the failure
    to consummate the Merger is attributable to a failure on the part of the Party seeking to
    terminate this Agreement to perform any material obligation required to be performed by
    such Party at or prior to the Effective Time); 

    (ii) any Governmental Body shall have issued an order, decree or ruling or taken any
    other action (which order, decree, ruling or other action the parties hereto shall use
    their reasonable efforts to lift), which permanently restrains, enjoins or otherwise
    prohibits the Merger and such order, decree, ruling or other action shall have become
    final and non-appealable; or

    (iii) (A) the Company Shareholders’ Meeting (including any adjournments and
    postponements thereof) shall have been held and completed and the Company’s
    Shareholders shall have voted on a proposal to approve this Agreement, and (B) this
    Agreement shall not have been approved at such meeting (and shall not have been approved
    at any adjournment or postponement thereof) by the Required Company Shareholder Vote;
    provided, however, that a Party shall not be permitted to terminate this Agreement
    pursuant to this Section 9.1(b)(iii) if the failure to obtain such Shareholder approval is
    attributable to a failure on the part of such Party to perform any material obligation
    required to be performed by such Party at or prior to the Effective Time.

  




(c) by the Company if:



  
    (i) [Intentionally omitted.]

    (ii) prior to the approval of this Agreement by the Required Company Shareholder Vote,
    (A) any of Parent’s or Merger Sub’s representations and warranties shall have
    been inaccurate as of the date of this Agreement, such that the condition set forth in
    Section 8.1 would not be satisfied, or (B) (1) any of Parent’s or Merger Sub’s
    representations and warranties shall have become inaccurate as of a date subsequent to the
    date of this Agreement (as if made on such subsequent date), such that the condition set
    forth in Section 8.1 would not be satisfied and (2) such inaccuracy has not been cured by
    Parent or Merger Sub, as applicable, within five Business Days after its receipt of
    written notice thereof and remains uncured at the time notice of termination is given, or
    (C) any of Parent’s or Merger Sub’s covenants contained in this Agreement shall
    have been breached, such that the condition set forth in Section 8.2 could not be
    satisfied; provided, that the Company may not terminate this Agreement pursuant to this
    Section 9.1(c)(ii) if the Company is at such time in material breach of its obligations
    under this Agreement; or

    (iii) prior to the approval of this Agreement by the Required Company Shareholder Vote,
    (i) a bona fide written proposal to acquire (by merger or otherwise) all of the
    outstanding shares of Company Common Stock (other than Company Common Stock owned by the
    Person making the proposal) is made by a third party to the Company after the date of this
    Agreement and is not withdrawn; (ii) the Company provides Parent with at least five
    Business Days prior notice of any meeting of the Company’s board of directors at
    which the board of directors will consider and determine whether such offer is a Superior
    Proposal, during which five-Business Day period the Company shall cause its financial and
    legal advisors to negotiate in good faith with Parent in an effort to make such
    adjustments in the terms and conditions of this Agreement as would enable the Company to
    proceed with the transactions contemplated herein on such adjusted terms; (iii)
    notwithstanding such negotiations and adjustments pursuant to clause (ii) above, the
    Company’s board of directors determines in good faith that such offer constitutes a
    Superior Proposal, (iv) in light of such Superior Proposal, the Special Committee and
    board of directors of the Company shall have determined in good faith, after having taken
    into account the written advice of the Company’s outside legal advisors, that
    termination of this Agreement is required in order for the board of directors of the
    Company to comply with its fiduciary obligations to the Company’s Shareholders under
    applicable Law, (v) the Company and its Representatives have complied in all material
    respects with Section 4.3, (vi) the Company pays the Damage Payment and expenses provided
    for under Section 9.3(a) prior to termination, and (vii) the board of directors of the
    Company concurrently approves, and the Company concurrently enters into, a binding
    definitive written agreement providing for the implementation of such Superior Proposal.

  




(d) by Parent if:



  
    (i) [Intentionally omitted.]

    (ii) any of the following have occurred: (a) the Company’s board of directors
    recommends to the Company’s Shareholders any Acquisition Proposal, Significant
    Proposal or Superior Proposal; (b) the Company enters into any agreement, letter of intent
    or similar document (other than a confidentiality or other similar agreement executed in
    accordance with Section 4.3(c)) contemplating or otherwise relating to any Acquisition
    Proposal, Significant Proposal or Superior Proposal; (c) the Company’s board of
    directors or any committee thereof shall have withdrawn, modified or changed, or publicly
    proposed to withdraw, modify or change, in a manner adverse to Parent or Merger Sub the
    Company Board Recommendation; or (d) the Company’s board of directors shall have
    resolved to do any of the foregoing; or

    (iii) prior to the approval of this Agreement by the Required Company Shareholder Vote,
    (A) any of the Company’s representations and warranties shall have been inaccurate as
    of the date of this Agreement, such that the condition set forth in Section 7.1 would not
    be satisfied, or (B) (1) any of the Company’s representations and warranties shall
    have become inaccurate as of a date subsequent to the date of this Agreement (as if made
    on such subsequent date), such that the condition set forth in Section 7.1 would not be
    satisfied, and (2) such inaccuracy has not been cured by the Company within five Business
    Days after its receipt of written notice thereof and remains uncured at the time notice of
    termination is given, or (C) any of the Company’s covenants contained in this
    Agreement shall have been breached, such that the condition set forth in Section 7.2 could
    not be satisfied; provided, that Parent may not terminate this Agreement pursuant to this
    Section 9.1(d)(iii) if either the Parent or Merger Sub is at such time in material breach
    of its obligations under this Agreement.

  




 


9.2 EFFECT OF TERMINATION


If this Agreement is terminated as provided in Section 9.1, this Agreement shall be of
no further force or effect; provided, however, that this Section 9.2 and Section 9.3 and
Article 10 shall survive the termination of this Agreement and shall remain in full force
and effect. Any confidentiality, non-disclosure agreement or other similar agreements by
or among the Parties shall also survive the termination of this Agreement.


 


9.3 EXPENSES/DAMAGE UPON TERMINATION


(a) Except as set forth in this Section 9.3, all fees and expenses incurred in
connection with this Agreement and the Contemplated Transactions shall be paid by the
Party incurring such expenses, whether or not the Contemplated Transactions are
consummated; provided, however, that if this Agreement is terminated (i) by Parent
pursuant to Section 9.1(d), (ii) by the Company pursuant to Section 9.1(c)(iii), or (iii)
by Parent or the Company pursuant to Sections 9.1(b)(i) or 9.1(b)(iii) and, in the case of
such a termination pursuant to Sections 9.1(b)(i) or 9.1(b)(iii), (A) at any time after
the date of this Agreement and prior to such termination an Acquisition Proposal shall
have been received by the Company and/or publicly announced or otherwise publicly
communicated to the Company’s Shareholders generally and (B) prior to the twelve
month anniversary of such termination, the Company shall enter into a definitive agreement
with respect to such Acquisition Proposal or such Acquisition Proposal is consummated,
then the Company shall, in the case of clause (i), not later than one Business Day
following such termination, in the case of clause (ii), as provided in Section
9.1(c)(iii), or in the case of clause (iii), not later than one Business Day following the
Company entering into a definitive agreement with respect to, or the consummation of, the
Acquisition Proposal prior to the twelve month anniversary of such termination, make a
nonrefundable cash payment to Parent in an amount equal to $2,500,000 (the "Damage
Payment"), together with the aggregate amount of all reasonable fees and expenses
(including all reasonable attorneys’ fees, accountants’ fees, financial advisory
fees and filing fees) that have been paid or that may become payable by or on behalf of
Parent in connection with the preparation and negotiation of this Agreement and otherwise
in connection with any of the Contemplated Transaction. The Company acknowledges that the
agreements contained in this Section 9.3(a) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements, Parent
and Merger Sub would not enter into this Agreement; accordingly, if the Company fails to
pay the amount due pursuant to this Section 9.3(a), and, in order to obtain
such payment, Parent or Merger Sub commences a suit which results in a judgment against
the Company for the fee set forth in this Section 9.3(a), the Company shall
pay to Parent or Merger Sub, as the case may be, its costs and expenses (including
attorneys’ fees and expenses) in connection with such suit, together with interest on
the amount of the fee at the prime rate of Bank One, NA in effect on the date such payment
was required to be made.


(b) Notwithstanding the preceding, in the event that this Agreement is terminated by
the Company pursuant to Section 9.1(c)(ii), then Parent shall make a nonrefundable cash
payment to the Company equal to the Damage Payment, together with the aggregate amount of
all reasonable fees and expenses (including all reasonable attorneys’ fees,
accountants’ fees, financial advisory fees and filing fees) that have been paid or
that may become payable by or on behalf of the Company in connection with the preparation
and negotiation of this Agreement and otherwise in connection with any other Contemplated
Transaction.


 


(C) THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE DAMAGE PAYMENT (TOGETHER WITH THE
PAYMENT OF APPLICABLE COSTS AND EXPENSES) SHALL BE DEEMED TO BE SOLE AND EXCLUSIVE
LIQUIDATED DAMAGES FOR THE TERMINATION OF THIS AGREEMENT FOR THE CAUSES DESCRIBED IN
SECTION 9.3(a) AND SECTION 9.3(b), AS APPLICABLE.


 


 


ARTICLE 10: GENERAL PROVISIONS


10.1 NOTICES


All notices, consents, waivers and other communications under this Agreement must be in
writing and will be deemed given to a Party when (a) delivered to the appropriate address
by hand or by nationally recognized overnight courier service (costs prepaid), (b) sent by
facsimile or e-mail with confirmation of transmission by the transmitting equipment or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested; in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated below (or to
such other address, facsimile number, e-mail address or individual as a Party may
designate by notice to the other Parties):


If to the Company:


Equity Oil Company


10 West Broadway, Suite 806


Salt Lake City, Utah 84101


Attn: Paul M. Dougan


Facsimile No.: (801) 521-3534


E-mail Address: pdougan@xmission.com


 


With a copy (which will not constitute notice) to:


Holme Roberts & Owen LLP


299 South Main Street, Suite 1800


Salt Lake City, Utah 84111


Attn: Stuart A. Fredman


Facsimile No.: (801) 521-9639


E-mail Address: stuart.fredman@hro.com


 


If to Parent or Merger Sub:


Whiting Petroleum Corporation


1700 Broadway, Suite 2300


Denver, Colorado 80290


Attn: James J. Volker, President and CEO


Facsimile No.: (303) 861-4023


E-mail Address: JimV@whiting.com


With a copy (which will not constitute notice) to:


Welborn Sullivan Meck & Tooley, P.C.


821 – 17th Street, Suite 500


Denver, Colorado 80202


Attn: Kendor P. Jones


Facsimile No.: (303) 832-2366


E-mail Address: kjones@wsmtlaw.com


and


Foley & Lardner


777 East Wisconsin Avenue


Milwaukee, Wisconsin 53202


Attn: Benjamin F. Garmer, III


Facsimile No.: (414) 297-4900


E-mail Address: bgarmer@foley.com


10.2 FURTHER ACTIONS


Upon the request of any Party to this Agreement, the other Parties will (a) furnish to
the requesting Party any additional information, (b) execute and deliver any other
documents and (c) take any other actions as the requesting Party may reasonably require to
more effectively carry out the intent of this Agreement and the Contemplated Transactions.


 


10.3 INCORPORATION OF SCHEDULES AND EXHIBITS


The Schedules and Exhibits identified in this Agreement, including the Company
Disclosure Schedule and any supplements thereto, are incorporated herein by reference and
made a part of this Agreement.


 


10.4 ENTIRE AGREEMENT AND MODIFICATION


This Agreement supersedes all prior agreements among the Parties with respect to its
subject matter and constitutes (along with the documents delivered pursuant to this
Agreement) a complete and exclusive statement of the terms of the agreement between the
Parties with respect to its subject matter. This Agreement may be amended with the
approval of the respective boards of directors of the Company and Parent at any time
(whether before or after the approval of this Agreement by the Company’s
Shareholders); provided, however, that after any such approval of this Agreement by the
Company’s Shareholders, no amendment shall be made which by Law requires further
approval of the Company’s Shareholders without the further approval of such
Shareholders. This Agreement may not be amended, supplemented or otherwise modified except
in a written document executed by all of the Parties to this Agreement.


 


10.5 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES


The representations and warranties of the Company, Parent and Merger Sub contained in
this Agreement and all rights to any causes of action relating thereto shall terminate at
the Effective Time, and only the covenants that by their terms survive the Effective Time
shall survive the Effective Time.


 


10.6 TIME OF ESSENCE


With regard to all dates and time periods set forth or referred to in this Agreement,
time is of the essence.


 


10.7 DRAFTING AND REPRESENTATION


The Parties have participated jointly in the negotiation and drafting of this
Agreement. No provision of this Agreement will be interpreted for or against any Party
because that Party or its legal representative drafted the provision.


 


10.8 SEVERABILITY


If a court of competent jurisdiction holds any provision of this Agreement invalid or
unenforceable, the other provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.


 


10.9 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS


No Party may assign any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of the other Parties; provided, however,
Parent can assign all of its rights and obligations under this Agreement to any Affiliate
of Parent so long as Parent unconditionally guarantees the obligations of such Affiliate.
Subject to the preceding sentence, this Agreement will apply to, be binding in all
respects upon and inure to the benefit of each Party’s successors and permitted
assigns. Nothing expressed or referred to in this Agreement will be construed to give any
Person, other than the Parties to this Agreement, any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provision of this Agreement except
such rights as may inure to a successor or permitted assignee under this Section and for
the provisions of Article 1 (collectively, "Third-Party Provisions"). The
Third-Party Provisions may be enforced by the beneficiaries thereof.


 


10.10 ENFORCEMENT OF AGREEMENT


Each Party acknowledges and agrees that the other Party could be damaged irreparably if
any of the provisions of this Agreement are not performed in accordance with the specific
terms and that any breach of this Agreement by the Company could not be adequately
compensated in all cases by monetary damages alone. Accordingly, each Party agrees that,
in addition to any other right or remedy to which the other Party may be entitled, at Law
or in equity, but subject to the provisions of Section 9.3, the other Party will be
entitled to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent breaches or
threatened breaches of any of the provisions of this Agreement, without posting any bond
or other undertaking.


 


10.11 WAIVER


The rights and remedies of the Parties to this Agreement are cumulative and not
alternative. Neither any failure nor any delay by any Party in exercising any right, power
or privilege under this Agreement or any of the documents referred to in 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.
To the maximum extent permitted by applicable Law, (a) no claim or right arising out of
this Agreement or any of the documents referred to in this Agreement can be discharged by
one Party, in whole or in part, by a waiver or renunciation of the claim or right unless
in a written document signed by the other Party, (b) no waiver that may be given by a
Party will be applicable except in the specific instance for which it is given and (c) no
notice to or demand on one Party will be deemed to be a waiver of any obligation of that
Party or of the right of the Party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred to in
this Agreement.


 


10.12 GOVERNING LAW


This Agreement shall be construed in accordance with, and governed in all respects by,
the laws of the State of Colorado (without giving effect to principles of conflict of
law).


 


10.13 JURISDICTION; SERVICE OF PROCESS


Any action, hearing, suit or Proceeding arising out of or relating to this Agreement or
any Contemplated Transaction must be brought in the courts of the State of Colorado, City
and County of Denver, or, if it has or can acquire jurisdiction, in the federal courts
located in the State of Colorado, City and County of Denver. Each of the Parties
irrevocably submits to the exclusive jurisdiction of each such court in any such
Proceeding and waives any objection it may now or hereafter have to venue or to
convenience of forum. The Parties agree that any or all of them may file a copy of this
Section with any court as written evidence of the knowing, voluntary and bargained
agreement between the Parties irrevocably to waive any objections to venue or to
convenience of forum. Process in any Proceeding referred to in this Section may be served
on any Party anywhere in the world.


 


10.14 COUNTERPARTS


This Agreement may be executed in any number of counterparts and by different Parties
on separate counterparts, each of which, when executed and delivered, shall be deemed to
be an original, and all of which, when taken together, shall constitute but one and the
same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile
shall be equally as effective as delivery of an original executed counterpart of this
Agreement. Any Party delivering an executed counterpart of this Agreement by telefacsimile
also shall deliver an original executed counterpart of this Agreement but the failure to
deliver an original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.


 


[The remainder of this page intentionally left blank]


 


The Parties have executed and delivered this Agreement as of the date indicated in the
first sentence of this Agreement.


 


 


WHITING PETROLEUM CORPORATION


 


By: /s/ James J. Volker


James J. Volker, President and CEO


 


 


WPC EQUITY ACQUISITION CORP.


 


By: /s/ James J. Volker


James J. Volker, President 


 


 


 


EQUITY OIL COMPANY


 


By: /s/ Paul M. Dougan


 


Paul M. Dougan, President and CEO


 


 


EXHIBIT A


 


CONSTRUCTION AND DEFINITIONS


 


 


1. CONSTRUCTION


Any reference in the Agreement (as defined below) to an "Article,"
"Section," "Exhibit" or "Schedule" refers to the
corresponding Article, Section, Exhibit or Schedule of or to the Agreement, unless the
context indicates otherwise. The headings of Articles and Sections are provided for
convenience only and should not affect the construction or interpretation of the
Agreement. In this Agreement, unless a clear contrary intention appears:


 


(a) the singular number includes the plural number and vice versa;


(b) reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are not prohibited by this Agreement, and
reference to a Person in a particular capacity excludes such Person in any other capacity
or individually;


(c) reference to any gender includes each other gender;


(d) reference to any agreement, document or instrument means such agreement, document
or instrument as amended or modified and in effect from time to time in accordance with
the terms thereof;


(e) reference to any Law means such Law as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, including rules and
regulations promulgated thereunder, and reference to any section or other provision of any
Law means that provision of such Law from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or reenactment of such
section or other provision;


(f) "hereunder," "hereof," "hereto," and words of similar
import shall be deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof;


(g) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such term;


(h) "or" is used in the inclusive sense of "and/or";


(i) with respect to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding"; and


(j) references to documents, instruments or agreements shall be deemed to refer as well
to all addenda, exhibits, schedules or amendments thereto.


 


2. DEFINITIONS


For the purposes of the Agreement, the following terms and variations on them have the
meanings specified in this Section:


"Acquisition Proposal" means any offer, proposal, inquiry or indication of
interest (other than an offer, proposal, inquiry or indication of interest by Parent)
contemplating or otherwise relating to any Acquisition Transaction.


"Acquisition Transaction" means any transaction or series of transactions
involving:


(a) any merger, consolidation, share exchange, business combination, issuance of
securities, acquisition of securities, tender offer, exchange offer or other similar
transaction (i) in which the Company is a constituent corporation, (ii) in which a Person
or "group" (as defined in the Exchange Act and the rules promulgated thereunder)
of Persons (other than Parent, Merger Sub or any of their affiliates) directly or
indirectly acquires beneficial or record ownership of securities representing more than
9.9% of the outstanding securities of any class of voting securities of the Company, or
(iii) in which the Company issues or sells securities representing more than 9.9% of the
outstanding securities of any class of voting securities of the Company; or


(b) any sale (other than sales of Inventory in the Ordinary Course of Business), lease
(other than in the Ordinary Course of Business), exchange, transfer (other than sales of
Inventory in the Ordinary Course of Business), license (other than nonexclusive licenses
in the Ordinary Course of Business), acquisition or disposition of any business or
businesses or assets that constitute or account for a material portion of the consolidated
net revenues, net income or assets of the Company.


"Affiliate" of a specified Person means a Person who, directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under common control
with, such specified Person.


"Agreement" is defined in the first paragraph of the Agreement.


"Articles of Merger" is defined in Section 1.3.


"Balance Sheet" is defined in Section 2.5.


"Business Day" means any day other than a Saturday, a Sunday or a day when
commercial banks in Salt Lake City, Utah or Denver, Colorado are authorized by law, rule
or regulation to be closed. In computing time periods, the first Business Day following
the occurrence of the applicable event shall be counted as the first day of the time
period.


"CBCA" is defined in Section 1.2.


"Closing" is defined in Section 1.3.


"Closing Date" is defined in Section 1.3.


"Code" is defined in the Preliminary Statements to this Agreement.


"Company" is defined in the first paragraph of the Agreement.


"Company Board Recommendation" is defined in Section 2.9(a).


"Company Common Stock" means the common stock, $1.00 par value per share, of
the Company.


"Company Contract" means any legally binding Contract (a) under which the
Company has or may acquire rights, (b) under which the Company is or may become subject to
Liability or (c) by which the Company or any of its assets is or may become bound.


"Company Disclosure Schedule" means the Disclosure Schedule delivered
pursuant to Article 2 by the Company to Parent concurrently with the execution and
delivery of the Agreement, together with any updates to it permitted by the Agreement.


"Company Leases" is defined in Section 2.20(d).


"Company Material Adverse Effect" means an event, violation, inaccuracy,
circumstance or other matter that would have a material adverse effect on the long-term
business, condition, capitalization, assets, liabilities, operations or financial
performance of the Company taken as a whole; provided, however, that solely for purposes
of the representations and warranties set forth in Sections 2.6, 2.11 and 2.20(b),
"Company Material Adverse Effect" means events, violations, inaccuracies,
circumstances or other matters that would have an adverse impact on the results of its
operations or financial or other condition of an amount in excess of $6,000,000; provided,
further, that in any event, the following shall not be deemed to constitute, create or
cause a Company Material Adverse Effect: any changes, circumstances or effects (i) that
affect generally the oil and gas industry such as fluctuations in the price of oil and
gas, and that result from international, national, regional, state or local economic
conditions, from general developments or conditions in the industry in which the Company
conducts business or from other general economic conditions, facts or circumstances that
are not subject to the control or such Party, (ii) that result from any of the
Contemplated Transactions and public announcement thereof, (iii) that result from any
change in the trading prices or volumes of the capital stock of the Company, (iv) that
result from the effects of conditions or events resulting from an outbreak or escalation
of hostilities (whether nationally or internationally), or the occurrence of any other
calamity or crisis (whether nationally or internationally), including, without limitation,
the occurrence of one or more terrorist attacks or (v) that result from any change
resulting from the actions of Parent. The method of determining the amount of a Company
Material Adverse Effect resulting from a violation, inaccuracy or breach of the
Company’s representations and warranties set forth in Section 2.11 and Section
2.20(b) shall be determined in accordance with Schedule 1.


"Company Material Contracts" is defined in Section 2.12.


"Company Oil and Gas Properties" is defined in Section 2.20(b).


"Company Required Material Consents" is defined in Section 2.2(b).


"Company Reserve Report" means the report of Ryder Scott Company containing
estimates of the Company’s oil and gas reserves as of October 1, 2003.


"Company SEC Reports" means (a) the Company’s Annual Reports on Form
10-K for each fiscal year of the Company beginning since January 1, 2001, (b) its
Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in each of the
fiscal years of the Company referred to in clause (a) above, (c) all proxy statements
relating to the Company’s meetings of Shareholders (whether annual or special) held,
and all information statements relating to Shareholder consents, since the beginning of
the first fiscal year referred to in clause (a) above, (d) its Current Reports on Form 8-K
filed since the beginning of the first fiscal year referred to in clause (a) above, and
(e) all other forms, reports, registration statements and other documents filed by the
Company with the SEC since the beginning of the first fiscal year referred to in clause
(a) above.


"Company Shareholders’ Meeting" is defined in Section 5.2.


"Company Stock Certificate" means any validly issued certificate representing
shares of Company Common Stock.


"Company Stock Options" is defined in Section 1.5(d).


"Consent" means any approval, consent, ratification, waiver or other
authorization.


"Contemplated Transactions" means all of the transactions to be carried out
in accordance with the Agreement, including the merger of Merger Sub with and into the
Company, the performance by the Parties of their other obligations under the Agreement.


"Contract" means any contract, agreement, commitment, understanding, lease,
license, franchise, warranty, guaranty, mortgage, note, bond or other instrument or
consensual obligation (whether written or oral and whether express or implied) that is
legally binding.


"Contravene" or "Contravention" -- an act or omission would
"Contravene" something if, as the context requires:


(a) the act or omission would conflict with it, violate it, result in a breach or
violation of or failure to comply with it, or constitute a default under it;


(b) the act or omission would give any Governmental Body or other Person the right to
revoke, withdraw, suspend, cancel, terminate or modify it, to exercise any remedy or
obtain any relief under it or to declare a default or accelerate the maturity of any
obligation under it; or 


(c) the act or omission would result in the creation of an Encumbrance on the stock or
any of the assets of the Company. 


"Converted Option" is defined in Section 1.5(e).


"Damage Payment" is defined in Section 9.3(a).


"Defensible Title" is defined in Section 2.20(c).


"Effective Time" is defined in Section 1.3.


"Encumbrance" means any mortgage, pledge, claim, lien, security interest,
encumbrance or restriction of any kind; provided, however, that the term
"Encumbrance" does not include (a) mechanic’s, materialman’s or
similar liens with respect to amounts arising or incurred in the Ordinary Course of
Business, (b) statutory liens for current Taxes not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate Proceedings, (c) liens
securing rental payments under capital lease arrangements, (d) defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of title
insurance or zoning, entitlement and other land use and environmental regulations by any
Governmental Body, (e) Permitted Encumbrances, (f) any Encumbrance on or affecting the
applicable Party’s properties and assets which is discharged at or prior to the
Effective Time or disclosed on the such Party’s Disclosure Schedule; and (g) such
other imperfections in title, charges, easements, restrictions and Encumbrances which do
not result in a Company or Parent Material Adverse Effect, as applicable.


"Entity" means any corporation, general partnership, limited liability
company, limited partnership, limited liability partnership, joint venture, estate, trust,
company, firm, society or other enterprise, association or organization.


"Environment" means the soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life, and any other environmental medium or natural
resource.


"Environmental Law" means any applicable binding and enforceable federal or
state Law relating to the Environment or Hazardous Materials, as currently enforced,
including the United States Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. 9601 et seq., as amended, Resource Conservation and
Recovery Act; the Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq; the
Toxic Substances Control Act, 15 U.S.C. 2601 et seq; the Clean Air Act, 42 U.S.C.
7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. 3803 et seq.; the
Hazardous Material Transportation Act, 49 U.S.C. 1801 et seq.; and the Occupational
Safety and Health Act, 29 U.S.C. 651 et seq. (to the extent it regulates
occupational exposure to Hazardous Materials).


"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.


"Exchange Act" means the Securities Exchange Act of 1934, as amended.


"Exchange Agent" is defined in Section 1.6(a).


"Exchange Fund" is defined in Section 1.6(a).


"Exchange Ratio" is defined in Section 1.5(a).


"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by such Person and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling stock)
currently or formerly owned or operated by such Person.


"Form S-4" is defined in Section 5.1.


"GAAP" means generally accepted accounting principles for financial reporting
in the United States.


"Governing Document" means any charter, articles, bylaws, certificate,
statement, statutes or similar document adopted, filed or registered in connection with
the creation, formation or organization of an Entity, and any Contract among all equity
holders, partners or members of an Entity. 


"Governmental Authorization" means any Consent, license, permit or
registration issued, granted, given or otherwise made available by or under the authority
of any Governmental Body or pursuant to any Law.


 


"Governmental Body" means any (a) nation, region, state, county, city,
town, village, district or other jurisdiction, (b) federal, state, local, municipal,
foreign or other government, (c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department or other Entity and any
court or other tribunal), (d) multinational organization, (e) body exercising, or entitled
to exercise, any administrative, executive, judicial, legislative, policy, regulatory or
taxing authority or power of any nature or (f) official of any of the foregoing.


"Hazardous Materials" means any substances in reportable quantities that are
classified as of the date of this Agreement pursuant to Environmental Laws as
"hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," "pollutants," "toxic
pollutants," "hazardous air pollutants."


"HSR Act" is defined in Section 2.2.


"Indemnified Parties" is defined in Section 5.5(a).


"Intellectual Property" is defined in Section 2.18.


"Knowledge" means, with respect to any Party, the actual knowledge of such
Party’s directors or officers.


"Law" means any constitution, law, statute, treaty, rule, regulation,
ordinance, code, binding case law, principle of common law or notice of any Governmental
Body.


"Liabilities" includes liabilities or obligations of any nature, whether
known or unknown, whether absolute, accrued, contingent, choate, inchoate or otherwise,
whether due or to become due, and whether or not required to be reflected on a balance
sheet prepared in accordance with GAAP. 


"Merger" is defined in the Preliminary Statements.


"Merger Consideration" is defined in Section 1.5(a).


"Option Plans" is defined in Section 1.5(d).


"Merger Sub" is defined in the first paragraph of the Agreement.


"Merger Sub Common Stock" means the common stock of Merger Sub.


"Options" is defined in Section 2.3.


"Order" means any order, injunction, judgment, decree, ruling, assessment or
arbitration award of any Governmental Body or arbitrator, and any Contract with any
Governmental Body pertaining to compliance with Law.


"Ordinary Course of Business" refers to actions taken in such Person’s
normal operation, consistent with its past practice and having no Company or Parent
Material Adverse Effect, as applicable.


"Parent" is defined in the first paragraph of the Agreement.


"Parent Balance Sheet" is defined in Section 3.5.


"Parent Common Stock" means the Common Stock, $0.001 par value per share, of
Parent.


"Parent Disclosure Schedule" means the Disclosure Schedule delivered pursuant
to Article 3 by Parent and Merger Sub to the Company concurrently with the execution and
delivery of the Agreement, together with any updates to it permitted by the Agreement.


"Parent Leases" is defined in Section 3.12.


"Parent Material Adverse Effect" means an event, violation, inaccuracy,
circumstance or other matter that would have a material adverse effect on the long-term
business, condition, capitalization, assets, Liabilities, operations or financial
performance of Parent and its Subsidiaries taken as a whole; provided, however, that the
following shall not be deemed to constitute, create or cause a Parent Material Adverse
Effect: any changes, circumstances or effects (i) that affect generally the oil and
industry such as fluctuations in the price of oil and gas, and that result from
international, national, regional, state or local economic conditions, from general
developments or conditions in the industry in which Parent conducts business or from other
general economic conditions, facts or circumstances that are not subject to the control or
such Party, (ii) that result from any of the Contemplated Transactions and public
announcement thereof, (iii) that result from any change in the trading prices or volumes
of the capital stock of Parent; (iv) that result from the effects of conditions or events
resulting from an outbreak or escalation of hostilities (whether nationally or
internationally), or the occurrence of any other calamity or crisis (whether nationally or
internationally), including, without limitation, the occurrence of one or more terrorist
attacks; or (v) that result from any change resulting from the actions of the Company.


 


"Parent Oil and Gas Properties" is defined in Section 3.12.


"Parent Required Material Consents" is defined in Section 3.2(b).


"Parent Reserve Report" means the report of Ryder Scott Company, Cawley,
Gillespie & Associates, Inc. and R.A. Lenser & Associates, Inc., containing
estimates of the Parent’s and WOGC’s oil and gas reserves as of October 7, 2003.


"Parent SEC Reports" means all forms, reports, registration statements and
other documents filed by Parent with the SEC.


"Party" means the Company, Parent or Merger Sub.


"Permits" is defined in Section 2.13.


"Permitted Encumbrances" is defined in Section 2.20(d).


"Person" refers to an individual or an Entity.


"Petrie Parkman" is defined in Section 2.9(c).


"Pre-Closing Period" is defined in Section 4.1.


"Proceeding" means any action, audit, examination, investigation, hearing,
litigation or suit (whether civil, criminal, administrative, judicial or investigative,
whether formal or informal, and whether public or private) commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Body.


"Proxy Statement/Prospectus" is defined in Section 5.1.


"Reasonable Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible; provided, however, that a Person required to use Reasonable
Best Efforts under the Agreement will not be required to make any material change to its
business, dispose of any material asset, expend material funds, incur any material burden
or take actions that would result in a material adverse change in the benefits to such
Person of the Agreement and the Contemplated Transactions.


"Representative" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, legal counsel, accountant or other
representative of that Person.


"Required Company Shareholder Vote" means the affirmative vote in favor of
the Agreement and the Merger by the holders of two-thirds (2/3) of the issued and
outstanding shares of Company Common Stock entitled to vote on the matter.


"SEC" means the United States Securities and Exchange Commission and any
successor agency performing similar functions.


"Secretary of State" is defined in Section 1.3.


"Securities Act" means the Securities Act of 1933, as amended.


"Shareholder" means record and beneficial holders of the Shares of Company
Common Stock.


"Shares" means shares of Company Common Stock.


"Significant Proposal" means any bona fide written proposal made by a third
party (other than by Parent, Merger Sub or any of their affiliates) to acquire directly or
indirectly (i) all the equity securities or (ii) the assets of the Company substantially
as an entirety, which the Company board of directors determines in good faith, (a) could
be more favorable from a financial point of view to the Company’s Shareholders than
the Contemplated Transactions, and (b) is reasonably capable of being consummated.


"Special Committee" means that committee of independent directors established
by the Company’s board of directors to evaluate the fairness of the Agreement and the
Contemplated Transactions to the Company’s Shareholders.


"Subsidiary" of any Entity means any Entity of which such Entity directly or
indirectly owns or has a right to acquire, beneficially or of record, (a) an amount of
voting securities of other interests in such Entity that is sufficient to enable the
Entity owning the securities to elect at least a majority of the members of such
Entity’s board of directors or other governing body, and (b) at least 50% of the
outstanding equity or financial interests of such Entity.


"Superior Proposal" means any bona fide written proposal made by a third
party (other than by Parent, Merger Sub or any of their affiliates) to acquire directly or
indirectly (i) all the equity securities or (ii) the assets of the Company substantially
as an entirety, which the Company board of directors determines in good faith (after
consultation with its independent financial advisors and outside counsel), taking into
account all legal, financial, regulatory and other aspects of the proposal and the person
making such proposal, (x) would, if consummated, be more favorable from a financial point
of view, to the Shareholders than the Contemplated Transactions, (y) is made by a third
party that has the good faith intent to proceed with negotiations and has the financial
and other capability to consummate and (z) is reasonably likely to be consummated without
undue delay. In the event that the Superior Proposal is a cash offer, such offer must be
fully financed (which for the purposes of this Agreement shall mean the receipt of a
commitment letter, from a reputable Person capable of financing the transaction, subject
only to normal and customary conditions). 


"Surviving Corporation" is defined in Section 1.1.


 


"Tax" or "Taxes" means all federal, state, local, foreign
and other taxes, charges, fees, duties (including customs duties), levies or assessments,
including income, gross receipts, net proceeds, alternative or add-on minimum, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use, franchise,
excise, value added, stamp, leasing, lease, user, transfer, fuel, excess profits,
occupational, interest equalization, windfall profits, severance, license, payroll,
environmental, capital stock, disability, employee’s income withholding, other
withholding, unemployment and social security taxes, that are imposed by any Governmental
Body, and including any interest, penalties or additions to tax attributable thereto. 


"Tax Return" means any report, return or other information required to be
supplied to a Governmental Body in connection with any Taxes.


"Third-Party Provisions" is defined in Section 10.9.


"WOGC" means (i) Whiting Oil and Gas Corporation, a Delaware corporation and
wholly-owned Subsidiary of Parent and (ii) any other "significant subsidiary"
within Rule 1-02(w) or Regulation S-X of the Securities Act.


 


EXHIBIT B


 


CONFIDENTIALITY AGREEMENT


 


__________ __, _______


 


[Other Person’s Name and Address] 


 


Attention: [Name of Contact at other Person]


To Whom It May Concern:


Equity Oil Company ("Equity") and [Other Person ("X")] (each
referred to as a "Company" and collectively referred to as the
"Companies") have a preliminary interest in exploring a possible negotiated
transaction that might involve a merger or other form of business combination of the
Companies. In connection with [X’s] analysis of such a transaction, [X]
has requested or may request in the future certain oral and written information concerning
Equity, which information may be furnished by officers, directors, employees and/or agents
or representatives of Equity (collectively, the "Information"). As a condition
to being furnished with the Information, [X] agrees (and agrees to cause its
affiliates and direct its advisors) to treat all Information in accordance with, and
otherwise to comply with, the following terms and conditions of this letter agreement
(this "Agreement"):


1. All Information furnished will be used by [X] solely for the purpose of
evaluating a possible negotiated transaction between the Companies, approved by the board
of directors of the Companies, and will not be used in any way directly or indirectly
detrimental to Equity, and unless and until the Companies have completed a negotiated
transaction pursuant to a definitive agreement (the "Transaction Agreement")
such Information will be kept confidential by [X] and its affiliates and advisors;
provided, however, that [X] may disclose the furnished Information or portions
thereof to those of its directors, officers and employees and representatives of its
advisors (the persons to whom such disclosure is permissible being collectively called
"Representatives") who need to know such Information for the purpose of
evaluating the possible transaction (it being understood that those Representatives will
be informed of the confidential nature of the Information, will agree to be bound by this
Agreement and will be directed by [X] not to disclose to any other person any
Information relating to Equity).


 


[X] agrees to be responsible for any breach of this Agreement by its affiliates,
advisors or Representatives.


If [X] is requested or required (by oral questions, interrogatories, requests
for information or documents, subpoenas, civil investigative demands or similar processes)
to disclose any Information furnished in the course of its dealings with Equity or its
affiliates or advisors, [X] will (i) provide Equity with prompt notice thereof
and copies of the documents requested or required to be disclosed so that Equity may seek
an appropriate protective order or other appropriate remedy, or waive compliance with the
provisions of this Agreement and (ii) consult with Equity as to the advisability of [X’s]
taking of legally available steps to resist or narrow such request. It is further agreed
that, if in the absence of a protective order or the receipt of a waiver hereunder, [X]
is nonetheless, in the written opinion of its legal counsel, compelled to disclose
Information concerning Equity to any tribunal or to any party to a proceeding before any
tribunal or else stand liable for contempt or suffer other censure or penalty, [X]
may disclose such Information to such tribunal or party without liability hereunder; provided,
however, that [X] shall give Equity written notice of the Information to be so
disclosed as far in advance of its disclosure as is practicable and shall use its
reasonable efforts to obtain, to the greatest extent practicable, an order or other
reliable assurance that confidential treatment will be accorded to such Information so
required to be disclosed.


2. For the purposes of this Agreement, the term "Information" does not
include any information that: (i) is or becomes generally available to and known by
the public (other than as a result of an unpermitted disclosure directly or indirectly by [X]
or its affiliates, advisors or Representatives); (ii) is already in the possession of
[X] at the time of such disclosure or thereafter becomes available to [X] on
a nonconfidential basis from a source other than Equity or its affiliates, advisors or
Representatives, provided that such source is not and was not bound by a confidentiality
agreement with or other obligation of secrecy to Equity of which [X] has knowledge
after reasonable inquiry; or (iii) has already been or is hereafter independently
acquired or developed by [X] without violating any confidentiality agreement with
or other obligation of secrecy to [X].


3. If the Companies do not proceed with a transaction, or if Equity so requests at any
time, [X] will return promptly to Equity all copies, extracts or other
reproductions in whole or in part of the Information in the possession of [X] or
its affiliates, advisors or Representatives, and [X] will destroy or cause to be
destroyed all copies of any memoranda, notes, analyses, compilations, studies or other
documents prepared by [X] or for its use based on, containing or otherwise
reflecting any Information relating to Equity. Such destruction shall, if
requested, be certified in writing to Equity by an authorized officer supervising such
destruction.


4. Except with the prior written consent of the other Company or as required by
applicable law, each Company will not, and will direct its affiliates, advisors and
Representatives not to, disclose to any person either the fact that any investigations,
discussions or negotiations are taking place concerning a possible transaction between the
Companies or that any Information has been requested or received, or any of the terms,
conditions or other facts with respect to any such possible transaction, including the
status thereof, except to the extent that any such disclosure is, in the written opinion
of counsel, required by applicable law. In the event either Company determines that it is
required by applicable law to make any such disclosure, such Company shall so advise the
other Company immediately and shall consult and cooperate to the greatest extent feasible
with respect to the timing, manner and contents of such disclosure. The term
"person" as used throughout this Agreement will be interpreted broadly to
include, without limitation, any corporation, company, partnership or other entity or
individual.


5. Until the earliest to occur of (a) the execution by the Companies of a Transaction
Agreement, or (b) two years from the date of this agreement, [X] agrees not
to initiate or maintain contact (except for those contacts made in the ordinary course of
business) with any officer, director or employee or agent of Equity or its subsidiaries
regarding its business, operations, prospects or finances, except with the express
permission of Equity.


6. It is understood that the Companies will arrange for appropriate contacts for due
diligence purposes. Unless otherwise agreed to by the Companies, all
(i) communications regarding a possible transaction, (ii) requests for additional
Information, (iii) requests for property or facility tours or management meetings,
and (iv) discussions or questions regarding procedures, will be submitted or directed
to Petrie Parkman & Co., Inc. and [Name of Contact at other Person] at [X] or
any other person they may designate in writing. [X] further agrees that for a
period of one year from the date hereof, [X] will not offer employment to any of
the employees of Equity (or any subsidiary thereof) with whom it has had contact during
the period of its due diligence investigations, provided that this prohibition shall not
apply to offers of employment made by [X] to the public or the industry generally,
and that [X] shall not be prohibited from employing any such person who contacts [X]
on his or her own initiative.


7. [X] understands and acknowledges that Equity is not and will not be (other
than in the Transaction Agreement, if any) making any representation or warranty, express
or implied, as to the accuracy or completeness of any furnished Information; and neither
Equity nor any of its directors, officers, employees, stockholders, owners, affiliates,
representatives or agents has or will have any liability to [X] or any other person
(other than as provided in the Transaction Agreement, if any) resulting from any reliance
upon or use of, or otherwise with respect to, any furnished Information. 


8. [X] agrees that until the expiration of two years from the date of this
Agreement, it shall not (a) in any manner acquire, agree to acquire or make any proposal
to acquire, directly or indirectly, any securities or property of Equity or any of its
subsidiaries, (b) except at the specific written request of Equity, propose to enter into,
directly or indirectly, any merger or business combination involving Equity or any of its
subsidiaries or to purchase, directly or indirectly, a material portion of the assets of
Equity or any of its subsidiaries, (c) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" (as such terms are used
in the proxy rules of the Securities and Exchange Commission) to vote, or seek to advise
or influence any person with respect to the voting of, any voting securities of Equity or
any of its subsidiaries, (d) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with
respect to any voting securities of Equity or any of its subsidiaries, (e) otherwise act,
alone or in concert with others, to seek to control or influence the management, board of
directors or policies of Equity, (f) disclose any intention, plan or arrangement
inconsistent with the foregoing or (g) advise, assist or encourage any other persons in
connection with any of the foregoing. [X] also agrees during such period not to (i)
request Equity (or its directors, officers, employees or agents), directly or indirectly,
to amend or waive any provisions of this paragraph (including this sentence), or (ii) take
any action which might require Equity to make a public announcement regarding the
possibility of a business combination or merger.


9. Each of the Companies hereby acknowledges that it is aware, and that it has advised
or will advise its directors, officers, employees, agents and advisors who are informed as
to the matters that are the subject of this Agreement, that the United States securities
laws prohibit any person who has material, nonpublic information
concerning the matters that are the subject of this Agreement from purchasing or selling
securities of a company that may be a party to a transaction of the type contemplated by
this Agreement or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely to purchase
or sell such securities.


10. Each of the Companies also understands and agrees that, unless and until a
Transaction Agreement has been executed and delivered, no contract or agreement providing
for a transaction between the Companies shall be deemed to exist, and neither Company is
or will be under any legal obligation of any kind whatsoever with respect to such
transaction by virtue of this Agreement or any other written or oral expression, except,
in the case of this Agreement, for the matters specifically agreed to herein. Unless
agreed otherwise, each of the Companies shall be responsible for its own expenses incurred
in connection with the matters described in this Agreement. The agreement set forth in
this paragraph may be modified or waived only by a separate writing by each of the
Companies expressly so modifying or waiving such agreement. For purposes of this
paragraph, the term "Transaction Agreement" does not include any executed letter
of intent or any other preliminary written agreement which by its terms contemplates a
further definitive agreement, nor does it include any written or verbal acceptance of any
offer or bid that may be made in the future.


11. Each of the Companies agrees that the other Company shall be entitled to equitable
relief, including injunction and specific performance, in the event of any breach of the
provisions of this Agreement, in addition to all other remedies available to the other
Company at law or in equity, and that it shall not oppose the granting of such relief on
the basis that the other party has adequate remedy at law. Each Company also hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Utah and of the United States of America located in Utah for any
actions, suits or proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any action, suit or
proceeding relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail shall be effective service of
process for any action, suit or proceedings brought against it in any such court. Each
Company hereby irrevocably and unconditionally waives any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of Utah or the United States of America
located in Utah, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum. No failure or delay by a Company
in exercising any right, privilege or power under this Agreement will operate as a waiver
thereof, and no variation shall be effective unless in writing and signed by an officer of
the Company on its behalf.


12. [X] agrees that Equity reserves the right by written notice, in its sole and
absolute discretion, to reject any or all proposals, to decline to furnish further
Information and to terminate discussions and negotiations at any time. The exercise by
Equity of the rights referred to in this paragraph shall not affect the enforceability of
any provision of this Agreement.


13. This Agreement is for the sole benefit of the Companies and will be governed and
construed in accordance with the laws of the State of Utah, without giving effect to the
choice of law rules thereof. 


14. If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.


15. This Agreement is not assignable by either Company to any person or entity,
including by operation of law, without the prior written consent of the other Company, and
any assignment without the written consent shall be null and void. Subject to the
foregoing, this Agreement shall be binding on the respective successors and assigns of the
Companies.


16. This Agreement contains the entire agreement and understanding between the
Companies as to the subject matter hereof and supersedes any prior agreements,
commitments, representations, writings and discussions, whether oral or written, relating
to that subject matter.


17. All obligations under this Agreement will expire two years from the date of this
Agreement, except as otherwise set forth herein.


To confirm your agreement with the foregoing, please sign this Agreement and return one
executed copy, whereupon this Agreement will constitute our agreement with respect to the
subject matter hereof.


Very truly yours,


EQUITY OIL COMPANY


 


By: 


Paul M. Dougan


President and


Chief Executive Officer


Confirmed and Agreed as of


the date set forth below:


[Other Person]


 


By: 


Date: 


EXHIBIT C


 


RULE 145 AFFILIATES LETTER 


 


 


Whiting Petroleum Corporation


1700 Broadway, Suite 2300


Denver, Colorado 80290


Attn: James J. Volker, President and CEO


To Whom It May Concern:


I have been advised that I have been identified as a possible "affiliate" of
Equity Oil Company, a Colorado corporation (the "Company"), as that term is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the General Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933 (the
"Securities Act"), although nothing contained herein shall be construed as an
admission of such status or as a waiver of any rights the undersigned may have to object
to any claim that the undersigned is such an affiliate on or after the date of this letter
agreement.


Pursuant to the terms of an Agreement and Plan of Merger dated as of February 1, 2004
(the "Merger Agreement") among Whiting Petroleum Corporation, a Delaware corporation
("Parent"), WPC Equity Acquisition Corp., a Colorado corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and the Company, Merger Sub
will be merged with and into the Company (the "Merger"). As a result of the
Merger, I will receive Merger Consideration (as defined in the Merger Agreement),
including shares of common stock, par value $0.001 per share of the Parent ("Parent
Common Stock"), in exchange for shares of common stock, par value $1.00 per share of
the Company ("Common Stock"), owned by me at the effective time of the Merger as
determined pursuant to the Merger Agreement.


1. The undersigned hereby represents, warrants and covenants to Parent that in the
event the undersigned receives any Parent Common Stock pursuant to the terms of the Merger
Agreement and is deemed to be an "affiliate" of the Company for purposes of
paragraphs (c) and (d) of Rule 145:


a. The undersigned shall not make any offer, sale, pledge, transfer or other
disposition of shares of Parent Common Stock in violation of the Securities Act or the
Rules and Regulations.


b. The undersigned has carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable limitations upon the
undersigned’s ability to sell, transfer or otherwise dispose of Parent Common Stock,
to the extent the undersigned felt necessary, with the undersigned’s counsel or
counsel for the Company.


c. The undersigned has been advised that the issuance of Parent Common Stock to the
undersigned pursuant to the terms of the Merger Agreement has been registered with the
Commission under the Securities Act on a Registration Statement on Form S-4. However, the
undersigned has also been advised that, because at the time the Merger Agreement and the
transactions contemplated thereby are submitted for a vote of the shareholders of the
Company, (i) the undersigned may be deemed to be an affiliate of the Company and (ii) the
distribution by the undersigned of Parent Common Stock has not been registered under the
Securities Act, the undersigned may not sell, transfer or otherwise dispose of the shares
of Parent Common Stock issued to the undersigned pursuant to the terms of the Merger
Agreement unless (A) such sale, transfer or other disposition is made in conformity with
the volume and other limitations of Rule 145 promulgated by the Commission under the
Securities Act, (B) such sale, transfer or other disposition has been registered under the
Securities Act or (C) in the opinion of counsel reasonably acceptable to Parent, or
pursuant to a "no action" letter obtained by the undersigned from the staff of
the Commission, such sale, transfer or other disposition is otherwise exempt from
registration under the Securities Act.


d. The undersigned understands that Parent is under no obligation to register the sale,
transfer or other disposition of Parent Common Stock by the undersigned or on the
undersigned’s behalf under the Securities Act. Furthermore, except as provided in
paragraph 2(a) below, Parent is under no obligation to take any other action necessary in
order to make compliance with an exemption from such registration available.


e. The undersigned also understands that stop transfer instructions will be given to
Parent’s transfer agent with respect to Parent Common Stock issued to the undersigned
pursuant to the terms of the Merger Agreement, and there will be placed on the respective
certificates for such Parent Common Stock a legend stating in substance:



  
    
      
        "The shares represented by this certificate were issued in a transaction to which
        Rule 145 promulgated under the Securities Act of 1933, as amended, applies. The shares
        have not been acquired by the holder with a view to, or for resale in connection with, any
        distribution thereof within the meaning of the Securities Act of 1933, as amended. The
        shares may not be sold, pledged or otherwise disposed of except in compliance with the
        requirements of Rule 145 or pursuant to a registration statement under, or in accordance
        with an exemption from the registration requirements of, the Securities Act of 1933, as
        amended."

      

    

  




f. Execution of this letter shall not be considered an admission on the
undersigned’s part that the undersigned is an "affiliate" of the Company as
described in the first paragraph of this letter, nor as a waiver of any rights the
undersigned may have to object to any claim that the undersigned is such an affiliate.


2. By Parent’s acceptance of this letter Parent hereby agrees with the undersigned
as follows:


a. For so long as and to the extent necessary to permit the undersigned to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Securities Act, Parent shall take all such actions as are reasonably available
to file, on a timely basis, all reports and data required to be filed with the Commission
by it pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), furnish to the undersigned upon request a written statement as
to whether Parent has complied with such reporting requirements during the 12 months
preceding any proposed sale under Rule 145 and otherwise take all such actions as
reasonably available to permit such sales or other dispositions pursuant to Rule 145 and
Rule 144. Parent has filed, on a timely basis, all reports and data required to be filed
with the Commission under Section 13 of the Exchange Act during the preceding 12 months.


b. It is understood and agreed that certificates with the legend set forth in
paragraph 1(e) above will, after surrender of such certificates, be substituted by
delivery of certificates without such legends if (i) one year shall have elapsed from the
date the undersigned acquired the Parent Common Stock, received pursuant to the terms of
the Merger Agreement and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the undersigned acquired the
Parent Common Stock, received pursuant to the terms of the Merger Agreement and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, or (iii) Parent
has received either an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Parent, or a "no-action" letter obtained by the undersigned from
the staff of the Commission, to the effect that the restrictions imposed by Rule 144 and
Rule 145 under the Securities Act no longer apply to the undersigned. 


3. This letter shall be governed by, and construed in accordance with, the laws of the
State of Colorado without giving effect to its principles or rules of conflicts of laws to
the extent such principles or rules would require the application of the law of another
jurisdiction.



  
    
      
        
          
            
              
                
                  
                    Very truly yours,

                    By: 

                    Name: 

                    Title (if applicable): 

                    

                  

                

              

            

          

        

      

    

  




Acknowledged and Accepted:


 


WHITING PETROLEUM CORPORATION


 


By: 


James J. Volker, President and CEO


 


Schedule 1


 


Calculation of Title Defects and Environmental Defects


 


Capitalized terms used but not defined in this Schedule 1 shall have the
meanings assigned to such terms in the Agreement to which it is annexed, except that the
term "Agreement" shall be deemed to refer to the Agreement to which this Schedule
1 is appended.


(a) Notice of Title Defects. In connection with the Parent’s due diligence
review conducted prior to the Effective Time, the Parent may give the Company notice (a
"Defect Notice") of any Title Defect (as defined below). Such Defect Notice
shall comply with the following:


 


(i) Such Defect Notice must be received by the Company on or before the Effective Time
(the "Notice Deadline").


(ii) Such Defect Notice shall be in writing and shall include the following:


(A) a description of each Company Oil and Gas Property that is affected by the
Title Defect (a "Defective Interest"); 


(B) the basis for treating such property as a Defective Interest and copies of
supporting documents reasonably necessary for the Company to verify the existence of such
asserted Title Defect; 


(C) the Allocated Value (as defined below) of the affected property; and 


(D) the Parent’s good faith estimate of the amount by which the Allocated Value of
a Defective Interest has been reduced by the Title Defect (the "Defect Value")
(calculated pursuant to Section (a)(iii)).


(iii) In determining which portion of a property is a Defective Interest, it is the
intent of the Parties to include only that portion of the property materially and
adversely affected by the Title Defect. The Defect Value may not exceed the Allocated
Value of the property and shall be determined by the parties in good faith taking into
account all relevant factors, including without limitation, the following:


(A) the Allocated Value of the affected property;


(B) as to the well, lease and unit interests, the potential for or actual reduction in
the NRI of the Defective Interest, or the potential for or actual increase in the WI to
the extent such increase is not accompanied by a corresponding increase in NRI;


(C) the legal effect of the Title Defect;


(D) if the Title Defect is a lien or encumbrance on the property, the cost of removing
such lien or encumbrance;


(E) if the Title Defect represents only a possibility of title failure, the probability
that such failure will occur; and


(F) whether the Company has received proceeds of production from the Defective
Interest, consistent with the NRI set forth in the Company Reserve Report, for the last
three years without interruption or challenge based on the Title Defect.


(b) Notice of Environmental Defects. In connection with the Parent’s due
diligence review conducted prior to the Effective Time, the Parent may give the Company
notice (an "Environmental Defect Notice") of any violation of Environmental
Laws, the presence of Hazardous Materials or any other Environmental Liabilities (an
"Environmental Defect") related to the Company Oil and Gas Properties existing
as of the date of this Agreement. Notwithstanding the foregoing, Environmental Liabilities
relating to (A) restoration or reclamation that does not involve a violation of
Environmental Laws or the release or disposal of Hazardous Materials; (B) plugging
and abandonment liabilities that do not involve a violation of Environmental Laws; or
(C) employee health and safety, shall not be considered an Environmental Defect. Such
Environmental Defect Notice shall be in writing, must be delivered by the Notice Deadline
and shall include:


 


(i) a description of each Company Oil and Gas Property that is affected by the
Environmental Defect (an "Environmental Defective Interest");


(ii) sufficient detail to put the Company on reasonable notice of the nature of the
Environmental Defect identified;


(iii) a description in reasonable detail of the investigation, removal, remediation or
other action required to remedy the Environmental Defect (the "Cleanup") and a
calculation of the amount necessary to carry out the Cleanup, itemized in reasonable
detail in accordance with the requirements of this Section (b); and


(iv) if applicable, a statement of the amount of Environmental Liabilities likely to be
incurred by the Parent (or the Company) on account of the Environmental Defect, such
amount to include the likely expense of defense in connection with any existing or
probable third party action. The aggregate of claimed amounts in Section (b)(iii) and
(iv) is herein called the "Environmental Defect Value." The Environmental Defect
Value shall be determined in accordance with the Lowest Cost Response (as defined below)
applicable to such Environmental Defect and shall not include any internal costs of any
Party associated with the Cleanup.


 


Related Definitions to be Added to Schedule 1


 


"Allocated Value" means the value allocated to the proved reserves for a
particular Company Oil and Gas Property which shall be calculated by multiplying the
discounted present value of the proved reserves for such Company Oil & Gas Property
set forth in the Company Reserve Report at fifteen percent (15 %) discount rate by a
fraction, (x) the numerator of which is the total Merger Consideration paid for all Shares
and (y) the denominator of which is total discounted present value of the proved reserves
for all Company Oil & Gas Properties set forth in the Company Reserve Report at
fifteen percent (15 %) discount rate.


 


"Lowest Cost Response" means the response required or allowed under
Environmental Laws that addresses the condition present at (x) the lowest cost
(considered as a whole taking into consideration any negative impact such response may
have on the conduct of the Company’s oil and gas exploration and production business
and any potential additional costs or liabilities that may arise as a result of such
response) as compared to any other response that is consistent with Environmental Laws and
(y) consistent with the policies of the Parent to address similar conditions present,
if any, at the Parent’s properties. Taking no action shall constitute the Lowest Cost
Response if, after investigation, taking no action is determined to be consistent with
Environmental Laws, any requirements of contracts, leases or other agreements binding on
the property and any requirements of any Governmental Body with jurisdiction
(collectively, the "Environmental Requirements"). If taking no action is not
consistent with the Environmental Requirements, the least costly non-permanent remedy
(such as mechanisms to contain or stabilize Hazardous Materials, including caps, dikes,
encapsulation, leachate collection systems, etc.) shall be the Lowest Cost Response,
provided that such non-permanent remedy is consistent with the Environmental Requirements
and least costly permanent remedy.


"Title Defect" means any lien, encumbrance, adverse claim, encroachment,
irregularity, defect in or objection to real property title, excluding Permitted
Encumbrances, that alone or in combination with other defects renders the title of the
Company to be less than Defensible Title. Notwithstanding the foregoing, the following
shall not be considered Title Defects:


(i) defects based solely on lack of information in the Company’s files provided
that the public records contain such information; 


(ii) defects in the early chain of title consisting of the mere failure to recite
marital status in a document or omissions of successors of heirship or estate proceedings,
unless the Parent provides affirmative evidence that such failure or omission has resulted
in another party’s actual and superior claim of title to the relevant property;


(iii) defects arising out of lack of survey, unless a survey is required by applicable
laws or regulations; 


(iv) defects that are defensible by possession under applicable statutes of limitation
for adverse possession or for prescription;


(v) defects arising out of lack of corporate or other entity authorization unless the
Parent provides affirmative evidence that the action was not authorized and results in
another party’s actual and superior claim of title to the relevant property;


(vi) defects based on a gap in Company’s chain of title in the BLM records as to
federal leases, or in the BIA or BLM records as to Native American leases, in the
state’s records as to state leases or in the county records as to fee leases, unless
such gap is affirmatively shown to exist in such records by an abstract of title, title
opinion or landman’s title chain, which documents shall be included in a Defect
Notice; and


(vii) defects asserting a change in WI or NRI based on a change in drilling and spacing
units, tract allocation or other changes in pool or unit participation occurring after the
date of the Company Reserve Report, to the extent reasonably anticipated by Parent prior
to the execution of this Agreement.