Exhibit 10.1


 


AGREEMENT AND PLAN OF MERGER


 


AMONG


 


FOREST OIL CORPORATION,


 


TWOCO ACQUISITION CORP.


 


AND


 


THE WISER OIL COMPANY


 


May 21, 2004


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  
	
  DEFINITIONS

  
	
   

  
	
  Section 1.01

  	
  Definitions

  	
   

  
	
  Section 1.02

  	
  Rules of Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
  THE
  OFFER

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  The Offer

  	
   

  
	
  Section 2.02

  	
  Company Actions

  	
   

  
	
  Section 2.03

  	
  Board Representation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
  MERGER;
  CONVERSION OF SECURITIES

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  The Merger

  	
   

  
	
  Section 3.02

  	
  Certificate of Incorporation

  	
   

  
	
  Section 3.03

  	
  Bylaws

  	
   

  
	
  Section 3.04

  	
  Directors and Officers

  	
   

  
	
  Section 3.05

  	
  Additional Actions

  	
   

  
	
  Section 3.06

  	
  Conversion of Shares

  	
   

  
	
  Section 3.07

  	
  Surrender and Payment

  	
   

  
	
  Section 3.08

  	
  Company Stock Options and Company Warrants

  	
   

  
	
  Section 3.09

  	
  Dissenting Shares

  	
   

  
	
  Section 3.10

  	
  Adjustments

  	
   

  
	
  Section 3.11

  	
  Withholding Rights

  	
   

  
	
  Section 3.12

  	
  Lost Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
  REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Organization and Qualification;  Subsidiaries

  	
   

  
	
  Section 4.02

  	
  Certificate of Incorporation and Bylaws

  	
   

  
	
  Section 4.03

  	
  Capitalization

  	
   

  
	
  Section 4.04

  	
  Authorization of Agreement; Board
  Recommendation; Required Vote

  	
   

  
	
  Section 4.05

  	
  Approvals

  	
   

  
	
  Section 4.06

  	
  No Violation

  	
   

  
	
  Section 4.07

  	
  Reports

  	
   

  
	
  Section 4.08

  	
  No Material Adverse Effect; Conduct

  	
   

  
	
  Section 4.09

  	
  Certain Business Practices

  	
   

  
	
  Section 4.10

  	
  Certain Obligations

  	
   

  
	
  Section 4.11

  	
  Authorizations; Compliance

  	
   

  
	
  Section 4.12

  	
  Litigation

  	
   

  
	
  Section 4.13

  	
  Employee Benefit Plans

  	
   

  
	
  Section 4.14

  	
  Taxes

  	
   

  
	
  Section 4.15

  	
  Environmental Matters

  	
   

  



 


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  Section 4.16

  	
  Insurance

  	
   

  
	
  Section 4.17

  	
  Intellectual Property

  	
   

  
	
  Section 4.18

  	
  Properties

  	
   

  
	
  Section 4.19

  	
  Reserve Report

  	
   

  
	
  Section 4.20

  	
  Prepayments; Hedging; Calls

  	
   

  
	
  Section 4.21

  	
  Anti-Takeover Plan; State Takeover Statutes

  	
   

  
	
  Section 4.22

  	
  Brokers

  	
   

  
	
  Section 4.23

  	
  Opinion of Financial Advisor

  	
   

  
	
  Section 4.24

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

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
  REPRESENTATIONS AND WARRANTIES OF THE PARENT
  COMPANIES

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Organization

  	
   

  
	
  Section 5.02

  	
  Authorization of Agreement

  	
   

  
	
  Section 5.03

  	
  Approvals

  	
   

  
	
  Section 5.04

  	
  No Violation

  	
   

  
	
  Section 5.05

  	
  Financing

  	
   

  
	
  Section 5.06

  	
  Disclosure Documents

  	
   

  
	
  Section 5.07

  	
  Ownership

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
  COVENANTS

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Affirmative Covenants

  	
   

  
	
  Section 6.02

  	
  Negative Covenants

  	
   

  
	
  Section 6.03

  	
  No Solicitation

  	
   

  
	
  Section 6.04

  	
  Notices of Certain Events; Consultation

  	
   

  
	
  Section 6.05

  	
  Merger Subsidiary

  	
   

  
	
  Section 6.06

  	
  Director and Officer Liability

  	
   

  
	
  Section 6.07

  	
  Access and Information

  	
   

  
	
  Section 6.08

  	
  Meeting of the Company’s Stockholders

  	
   

  
	
  Section 6.09

  	
  Proxy Statement

  	
   

  
	
  Section 6.10

  	
  Commercially Reasonable Efforts

  	
   

  
	
  Section 6.11

  	
  Public Announcements

  	
   

  
	
  Section 6.12

  	
  Stock Exchange De-listing

  	
   

  
	
  Section 6.13

  	
  Defense of Litigation

  	
   

  
	
  Section 6.14

  	
  State Takeover Statutes

  	
   

  
	
  Section 6.15

  	
  Filings; Other Actions

  	
   

  
	
  Section 6.16

  	
  Employee Benefit Plans

  	
   

  
	
  Section 6.17

  	
  Amendment of Stock Options

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
  CONDITIONS
  TO THE MERGER

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Conditions to the Obligations of Each Party

  	
   

  
	
  Section 7.02

  	
  Conditions to the Obligations of Parent and
  Merger Subsidiary

  	
   

  



 


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  ARTICLE VIII

  
	
  TERMINATION

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Termination

  	
   

  
	
  Section 8.02

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section 9.01

  	
  Notices

  	
   

  
	
  Section 9.02

  	
  Survival of Representations and Warranties
  and Agreements

  	
   

  
	
  Section 9.03

  	
  Amendments; No Waivers

  	
   

  
	
  Section 9.04

  	
  Fees and Expenses

  	
   

  
	
  Section 9.05

  	
  Successors and Assigns

  	
   

  
	
  Section 9.06

  	
  Governing Law

  	
   

  
	
  Section 9.07

  	
  Jurisdiction

  	
   

  
	
  Section 9.08

  	
  Counterparts; Effectiveness

  	
   

  
	
  Section 9.09

  	
  Entire Agreement

  	
   

  
	
  Section 9.10

  	
  Headings

  	
   

  
	
  Section 9.11

  	
  Severability

  	
   

  
	
  Section 9.12

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  Section 9.13

  	
  Specific Performance

  	
   

  
	
  Section 9.14

  	
  Limitations on Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ANNEXES

  
	
  Annex A

  	
  Conditions to the Offer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
  Exhibit A

  	
  Schedule of Defined
  Terms

  	
   

  
	
  Exhibit
  B

  	
  Forms
  of Stockholder Agreements

  	
   

  



 


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AGREEMENT AND
PLAN OF MERGER


 


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


 


RECITALS:


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


ARTICLE I

DEFINITIONS


 


Section 1.01                                Definitions.


 


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


 


Section 1.02                                Rules
of Construction.


 


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


 


ARTICLE II

THE OFFER


 


Section 2.01                                The
Offer.


 


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


 


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


 


2

















 


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


 


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


 


3

















 


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


 


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


 


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


 


Section 2.02                                Company Actions.


 


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


 


4

















 


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


 


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


 


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


 


5

















 


Section 2.03                                Board
Representation.


 


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


 


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


 


6

















 


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


 


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


 


ARTICLE III

MERGER; CONVERSION OF SECURITIES


 


Section 3.01                                The
Merger.


 


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


 


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


 


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


 


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


 


Section 3.02                                Certificate
of Incorporation.


 


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


 


Section 3.03                                Bylaws.


 


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


 


Section 3.04                                Directors
and Officers.


 


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


 


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


 


Section 3.05                                Additional
Actions.


 


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


 


8

















 


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


 


Section 3.06                                Conversion
of Shares.


 


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


 


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


 


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


 


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


 


Section 3.07                                Surrender
and Payment.


 


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


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


Section 3.08                                Company
Stock Options and Company Warrants.


 


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


 


11

















 


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


 


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


 


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


 


Section 3.09                                Dissenting Shares.


 


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


 


12

















 


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


 


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


 


Section 3.10                                Adjustments.


 


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


 


Section 3.11                                Withholding
Rights.


 


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


 


Section 3.12                                Lost Certificates.


 


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


 


13

















 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


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


 


Section 4.01                                Organization
and Qualification;  Subsidiaries.


 


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


 


Section 4.02                                Certificate
of Incorporation and Bylaws.


 


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


 


Section 4.03                                Capitalization.


 


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


 


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


 


14

















 


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


 


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


 


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


 


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


 


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


 


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


 


15

















 


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


 


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


 


Section 4.05                                Approvals.


 


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


 


16

















 


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


 


Section 4.06                                No Violation.


 


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


 


Section 4.07                                Reports.


 


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


 


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


 


17

















 


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


 


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


 


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


 


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


 


18

















 


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


 


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


 


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


 


Section 4.08                                No
Material Adverse Effect; Conduct.


 


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


 


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


 


19

















 


Section 4.09                                Certain
Business Practices.


 


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


 


Section 4.10                                Certain
Obligations.


 


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


 


Section 4.11                                Authorizations;
Compliance.


 


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


 


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


 


20

















 


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


 


Section 4.12                                Litigation.


 


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


 


Section 4.13                                Employee
Benefit Plans.


 


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


 


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


 


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


 


21

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


22

















 


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


 


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


 


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


 


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


 


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


 


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


 


23

















 


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


 


Section 4.14                                Taxes.


 


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


 


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


 


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


 


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


 


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


 


24

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


25

















 


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


 


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


 


Section 4.15                                Environmental
Matters.


 


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


 


Section 4.16                                Insurance.


 


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


 


Section 4.17                                Intellectual
Property.


 


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


 


26

















 


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


 


Section 4.18                                Properties.


 


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


 


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


 


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


 


Section 4.19                                Reserve Report.


 


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


 


27

















 


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


 


Section 4.20                                Prepayments;
Hedging; Calls.


 


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


 


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


 


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


 


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


 


Section 4.21                                Anti-Takeover
Plan; State Takeover Statutes.


 


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


 


28

















 


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


 


Section 4.22                                Brokers.


 


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


 


Section 4.23                                Opinion
of Financial Advisor.


 


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


 


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


 


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


 


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


 


29

















 


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


 


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


 


ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PARENT COMPANIES


 


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


 


Section 5.01                                Organization.


 


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


 


Section 5.02                                Authorization
of Agreement.


 


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


 


30

















 


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


 


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


 


Section 5.03                                Approvals.


 


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


 


Section 5.04                                No Violation.


 


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


 


31

















 


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


 


Section 5.05                                Financing.


 


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


 


Section 5.06                                Disclosure
Documents.


 


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


 


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


 


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


 


Section 5.07                                Ownership.


 


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


 


32

















 


ARTICLE VI

COVENANTS


 


Section 6.01                                Affirmative
Covenants.


 


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


 


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


 


Section 6.02                                Negative
Covenants.


 


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


 


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


 


33

















 


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


 


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


 


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


 


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


 


34

















 


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


 


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


 


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


 


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


 


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


 


35

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


36

















 


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


 


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


 


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


 


Section 6.03                                No Solicitation.


 


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


 


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


 


37

















 


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


 


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


 


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


 


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


 


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


 


38

















 


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


 


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


 


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


 


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


 


Section 6.04                                Notices
of Certain Events; Consultation.


 


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


 


39

















 


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


 


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


 


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


 


Section 6.05                                Merger Subsidiary.


 


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


 


Section 6.06                                Director
and Officer Liability.


 


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


 


40

















 


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


 


Section 6.07                                Access
and Information.


 


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


 


Section 6.08                                Meeting
of the Company’s Stockholders.


 


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


 


41

















 


Section 6.09                                Proxy
Statement.


 


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


 


Section 6.10                                Commercially
Reasonable Efforts.


 


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


 


Section 6.11                                Public
Announcements.


 


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


 


Section 6.12                                Stock
Exchange De-listing.


 


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


 


42

















 


Section 6.13                                Defense
of Litigation.


 


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


 


Section 6.14                                State
Takeover Statutes.


 


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


 


Section 6.15                                Filings;
Other Actions.


 


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


 


43

















 


Section 6.16                                Employee
Benefit Plans.


 


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


 


Section 6.17                                Amendment
of Stock Options.


 


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


 


ARTICLE VII

CONDITIONS TO THE MERGER


 


Section 7.01                                Conditions
to the Obligations of Each Party.


 


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


 


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


 


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


 


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


 


44

















 


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


 


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


 


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


 


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


 


ARTICLE VIII

TERMINATION


 


Section 8.01                                Termination.


 


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


 


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


 


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


 


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


 


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


 


45

















 


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


 


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


 


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


 


46

















 


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


 


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


 


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


 


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


 


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


 


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


 


47

















 


Section 8.02                                Effect
of Termination.


 


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


 


ARTICLE IX

MISCELLANEOUS


Section 9.01                                Notices.


 


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


 


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


 


Forest Oil Corporation


1600 Broadway


Suite 2200


Denver, CO 80202


Telephone: (303) 812-1400


Telecopy:  
(303) 812-1510


Attention:   General Counsel


 


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


 


Vinson & Elkins LLP


2300 First City Tower


1001 Fannin


Houston, Texas 77002-6760


Telephone:                                    (713) 758-2222


Telecopy:              (713)
615-5637


Attention:                                         Scott N. Wulfe


 


48

















 


(b)                                 if to the Company, to:


 


The Wiser Oil Company


8115 Preston Road


Suite 400


Dallas, Texas 75225


Telephone:
(214) 265-0080


Telecopy:(214)
373-3610


Attention:                                         George K. Hickox, Jr.

Chief Executive Officer


 


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


 


Reed Smith LLP


2500 One
Liberty Place


Philadelphia,
Pennsylvania 19103


Telephone:                                    (215) 851-8800


Telecopy:                                           (215) 851-1420


Attention:                                         Lori L. Lasher, Esq.


 


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


 


Section 9.02                                Survival
of Representations and Warranties and Agreements.


 


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


 


Section 9.03                                Amendments;
No Waivers.


 


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


 


49

















 


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


 


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


 


Section 9.04                                Fees
and Expenses.


 


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


 


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


 


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


 


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


 


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


 


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


 


50

















 


Section 9.05                                Successors
and Assigns.


 


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


 


Section 9.06                                Governing
Law.


 


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


 


Section 9.07                                Jurisdiction.


 


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


 


Section 9.08                                Counterparts;
Effectiveness.


 


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


 


Section 9.09                                Entire
Agreement.


 


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


 


51

















 


Section 9.10                                Headings.


 


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


 


Section 9.11                                Severability.


 


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


 


Section 9.12                                WAIVER
OF JURY TRIAL.


 


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


 


Section 9.13                                Specific
Performance.


 


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


 


Section 9.14                                Limitations
on Warranties.


 


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


 


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


 


[Signature Page Follows]


 


52

















 


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


 


	
   

  	
  Forest Oil Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Newton
  W. Wilson III

  	
   

  
	
   

  	
  Title:

  	
  Senior
  Vice President, General Counsel and

  
	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  The Wiser Oil Company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  George
  K. Hickox, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TWOCO Acquisition Corp.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Newton
  W. Wilson III

  
	
   

  	
  Title:

  	
  Vice
  President

  
					



 

















 


Annex
A


 


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


 


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


 


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


 


1

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


3

















 


Exhibit A


 


Agreement and Plan of Merger


 


SCHEDULE OF DEFINED TERMS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


1

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“IRS” shall
mean the Internal Revenue Service.


 


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


 


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


 


6

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


8

















 


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


 


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


 


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


 


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


 


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


 


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


 


 “PBGC” shall mean the Pension Benefit
Guaranty Corporation.


 


“Permitted
Liens” shall mean:


 


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


 


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


 


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


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


10

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“SEC” means
the Securities and Exchange Commission.


 


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


 


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


 


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


 


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


 


11

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


12

















 


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


 


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


 


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


 


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


 


13