Document:

exv4w1

 

EXHIBIT 4.1

AMENDMENT TO RIGHTS AGREEMENT

     AMENDMENT, dated as of April 23, 2007, to the Rights Agreement, dated as of January 31, 2007
(the “Rights Agreement”), between PYR Energy Corporation, a Maryland corporation (the “Company”),
and U.S. Stock Transfer Corporation, a California corporation, as Rights Agent (the “Rights
Agent”).

     WHEREAS, the Company and the Rights Agent have heretofore executed and entered into the Rights
Agreement;

     WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company may from time to time
supplement or amend the Rights Agreement in accordance with the provisions of Section 27 thereof;

     WHEREAS, it is proposed that the Company enter into an Agreement and Plan of Merger (as it may
be amended or supplemented from time to time, the “Merger Agreement”), substantially in the form
set forth in Exhibit A to this Amendment, by and among the Company, Samson Investment Company
(“Samson”) and Samson Acquisition Corp. (“Acquisition Corp.”), as the same may be amended from time
to time (all capitalized terms used in this Amendment and not otherwise defined herein shall have
the meaning ascribed thereto in the Merger Agreement);

     WHEREAS, it is proposed that pursuant to the terms of the Merger Agreement the Company will
grant Acquisition Corp. an option (the “Top-Up Option”), exercisable in accordance with the terms
set forth in the Merger Agreement, to purchase shares of the Company’s common stock (the “Common
Shares”) in an amount up to 19.9% of the outstanding Common Shares as of the date of the Merger
Agreement;

     WHEREAS, the Board of Directors has determined that the Merger and the other transactions
contemplated by the Merger Agreement are fair to and in the best interests of the Company and its
stockholders; and

     WHEREAS, the Board of Directors has determined that it is in the best interest of the Company
and its stockholders to amend the Rights Agreement to exempt the Merger Agreement, including, but
not limited to, the Top-Up Option, and the transactions contemplated thereby from the application
of the Rights Agreement.

     NOW, THEREFORE, the Company hereby amends the Rights Agreement as follows:

          (1) Amendment to the Preamble

          The second paragraph of the preamble of the Rights Agreement is hereby modified and amended by
deleting the phrase “the Redemption Date and the Final Expiration Date” and replacing it with “the
Redemption Date, the Termination Time and the Final Expiration Date.”

          (2) Amendment to Section 1(a)

          Section 1(a) of the Rights Agreement is hereby modified and amended by adding the following
sentence at the end thereof:

“Notwithstanding any of the terms of the foregoing definition, neither Samson nor
Acquisition Corp., shall be deemed to be an Acquiring Person by virtue of (i) the execution,
delivery or performance of

 

 

the Merger Agreement or the public announcement of such execution
and delivery, (ii) any of the transactions contemplated thereby, including, but not limited
to, the Top-Up Option or (iii) the public
announcement or the commencement of the Offer (as defined in the Merger Agreement) or the
consummation of the Offer.”

          (3) Amendment of Section 1(g)

          The definition of “Distribution Date” in Section 1(g) of the Rights Agreement is amended by
adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, a Distribution Date shall not
be deemed to have occurred as the result of (i) the approval, execution, delivery or
performance of the Merger Agreement, (ii) the commencement of the Offer or the consummation
of the Offer or the Merger, (iii) the consummation of the other transactions contemplated by
the Merger Agreement, including, but not limited to, the Top-Up Option, or (iv) the
announcement or disclosure of any of the foregoing, including, but not limited to, (A) the
announcement of Samson on March 20, 2007, of its intention to commence a cash tender offer
to purchase 100% of the Company’s outstanding shares of common stock at an offer price of
$1.21 per share, and (B) the announcement of Samson and Acquisition Corp. on March 28, 2007,
of the commencement of a cash tender offer to purchase all of the
Company’s outstanding shares of common stock for $1.21 per share.”

          (4) Amendment of Section 1(o)

          The definition of “Share Acquisition Date” in Section 1(o) of the Rights Agreement is amended
by adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, no “Share Acquisition Date”
will occur as a result of the execution, delivery or performance of the Merger Agreement or
any other transactions contemplated by the Merger Agreement (including, but not limited to,
the Top-Up Option), the public announcement of such execution and delivery, or the public
announcement or the commencement of the Offer or the consummation of the Offer.”

          (5) Addition of Section 1(q)

          A new Section 1(q) is added to the Rights Agreement, to read as follows:

“(q) ‘Samson’ shall mean Samson Investment Company, a corporation duly organized and
existing under the laws of the State of Nevada, and its successors.”

          (6) Addition of Section 1(r)

          A new Section 1(r) is added to the Rights Agreement, to read as follows:

“(r) ‘Acquisition Corp.’ shall mean Samson Acquisition Corp., a corporation duly organized
and existing under the laws of the State of Maryland, and its successors.”

- 2 -

 

          (7) Addition of Section 1(s)

          A new Section 1(s) is added to the Rights Agreement, to read as follows:

“(s) ‘Merger Agreement’ shall mean the Agreement and Plan of Merger, to be dated as of April
23, 2007, by and among Samson, Acquisition Corp. and the Company, as the same may be amended
from time to time.”

          (8) Addition of Section 1(t)

          A new Section 1(t) is added to the Rights Agreement, to read as follows:

“(t) ‘Top-Up Option’ shall mean the option granted to Acquisition Corp. pursuant to Section
1.5 of the Merger Agreement.”

          (9) Addition of Section 1(u)

          A new Section 1(u) is added to the Rights Agreement, to read as follows:

“(u) ‘Termination Time’ shall be the time immediately after the acceptance for payment of,
and payment for, all shares of the Common Shares tendered pursuant to the Offer.”

          (10) Amendment to Section 3 and Section 6

          Section 3 and Section 6 of the Rights Agreement is hereby modified and amended by deleting the
phrase “Redemption Date” and replacing it with “Redemption Date, the Termination Time,”.

          (11) Amendment of Section 7(a)

          Section 7(a) of the Rights Agreement is amended and restated to read in its
entirety as follows:

“The registered holder of any Right Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the Distribution
Date upon surrender of the Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the principal office of the
Rights Agent, together with payment of the Purchase Price for each one one-thousandth of a
Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the
close of business on January 31, 2010 (the “Final Expiration Date”), (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), (iii) the
time at which such Rights are exchanged as provided in Section 24 hereof, or (iv) the
Termination Time.”

          (12) Amendment to Section 13

          The language of Section of 13 of the Rights Agreement prior to Section 13, Clause (w) is
amended to read as follows:

 

 

“Section 13. Consolidation, Merger or Sale or Transfer of Assets of Earning Power. In the
event, directly or indirectly, (a) the Company shall consolidate with, or merge with and
into, any other Person, (b) any Person shall consolidate with the Company, or merge with and
into the Company and the Company shall be the continuing or surviving corporation of such
merger and, in connection with such merger, all or part of the Common Shares shall be
changed into or exchanged for stock or other securities of any other Person (or the Company)
or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions,
assets or earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person other than the Company
or one or more of its wholly owned Subsidiaries, provided, however, that as long as the
Merger Agreement shall not have been terminated, the references to ‘other Person’ and ‘any
Person’ in the above transactions (a) through (c) shall not include Samson, Acquisition
Corp. or any of their Affiliates or Associates, then, and in each such case, proper
provision shall be made so that”

          (13) Amendment to Section 25

          Clause (iv) of Section 25(a) of the Rights Agreement is amended to read as follows:

“(iv) to effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person, provided, however,
that as long as the Merger Agreement shall not have been terminated, such other Person shall
not, in any such consolidation, merger, or sale or transfer of assets or earning power,
include Samson, Acquisition Corp. or any of their Affiliates or Associates,”

          (14) Amendment of Section 29

          Section 29 of the Rights Agreement is amended to add the following sentence at the end
thereof:

“Nothing in this Agreement shall be construed to give any holder of Rights or any other
Person any legal or equitable rights, remedies or claims under this Agreement by virtue of
(i) the execution, delivery or performance of the Merger Agreement or the public
announcement of such execution and delivery, (ii) any of the transactions contemplated by
the Merger Agreement, including, but not limited to, the Top-Up Option or (iii) the public
announcement or the commencement of the Offer or the consummation of the Offer.”

          (15) Effectiveness

          This Amendment shall be deemed effective as of the date first written above, as
if executed on such date. Except as amended hereby, the Rights Agreement shall remain in full
force and effect and shall be otherwise unaffected hereby.

 

 

          (16) Definitions

          The term “Agreement” or “Rights Agreement” as used in the Rights Agreement shall be deemed to
refer to the Rights Agreement as amended hereby, and all references to the Agreement or Rights
Agreement
shall be deemed to include this Amendment.

          (17) Miscellaneous

          This Amendment shall be deemed to be a contract made under the laws of the
State of Maryland and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts to be made and performed entirely within such state.
This Amendment may be executed in any number of counterparts, each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall together constitute but
one and the same instrument. If any provision, covenant or restriction of this Amendment is held
by a court of competent jurisdiction or other authority to be invalid, illegal or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain
in full force and effect and shall in no way be effected, impaired or invalidated.

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
attested, all as of the date and year first above written.

	 	 	 	 	 
	Attest:

	 	 	 	PYR ENERGY CORPORATION
	 
	 	 	 	 
	/s/ Tucker Franciscus

	 	 	 	/s/ Kenneth R. Berry, Jr._
	 

	 	 	 	 
	Name: Tucker Franciscus

	 	 	 	Name: Kenneth R. Berry, Jr.
	Title: Corporate Secretary

	 	 	 	Title: Chief Executive Officer
	 
	 	 	 	 
	Attest:

	 	 	 	U.S. STOCK TRANSFER CORPORATION
	 
	 	 	 	 
	/s/ Richard Tilton

	 	 	 	/s/ Richard C. Brown
	 

	 	 	 	 
	Name: Richard Tilton

	 	 	 	Name: Richard C. Brown
	Title: Asst. Vice President

	 	 	 	Title: Vice Presidentexv10w1

 

EXHIBIT 10.1

      

AGREEMENT AND PLAN OF MERGER

Dated as of April 23, 2007

among

SAMSON INVESTMENT COMPANY,

SAMSON ACQUISITION CORP.

and

PYR ENERGY CORPORATION

      

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I THE OFFER
	 	 	2	 
	Section 1.1 The Offer
	 	 	2	 
	Section 1.2 Company Actions
	 	 	4	 
	Section 1.3 Directors of the Company
	 	 	5	 
	Section 1.4 Stockholder Meeting
	 	 	7	 
	Section 1.5 Option to Acquire Additional Shares
	 	 	8	 
	Section 1.6 Offer Documents; Schedule 14D-9; Proxy Statement
	 	 	8	 
	ARTICLE II THE MERGER
	 	 	8	 
	Section 2.1 The Merger
	 	 	8	 
	Section 2.2 Closing
	 	 	9	 
	Section 2.3 Effective Time
	 	 	9	 
	Section 2.4 Effects of the Merger
	 	 	9	 
	Section 2.5 Articles of Incorporation and Bylaws of the Surviving Corporation
	 	 	9	 
	Section 2.6 Directors and Officers of the Surviving Corporation
	 	 	9	 
	Section 2.7 Conversion of Securities
	 	 	10	 
	Section 2.8 Exchange of Certificates
	 	 	10	 
	Section 2.9 Appraisal Rights
	 	 	12	 
	Section 2.10 Company Stock Options
	 	 	13	 
	Section 2.11 Warrants
	 	 	14	 
	Section 2.12 Other Actions
	 	 	14	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	14	 
	Section 3.1 Organization, Standing and Corporate Power
	 	 	14	 
	Section 3.2 Capitalization
	 	 	16	 
	Section 3.3 Authority; Noncontravention; Voting Requirements
	 	 	17	 
	Section 3.4 Governmental Approvals
	 	 	18	 
	Section 3.5 Company SEC Documents; Undisclosed Liabilities
	 	 	19	 
	Section 3.6 Absence of Certain Changes or Events
	 	 	21	 
	Section 3.7 Legal Proceedings
	 	 	21	 

i

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page	 
	Section 3.8 Compliance With Laws; Permits
	 	 	21	 
	Section 3.9 Information Supplied
	 	 	22	 
	Section 3.10 Tax Matters
	 	 	22	 
	Section 3.11 Employee Benefits and Labor Matters
	 	 	24	 
	Section 3.12 Environmental Matters
	 	 	26	 
	Section 3.13 Contracts
	 	 	27	 
	Section 3.14 Properties
	 	 	29	 
	Section 3.15 Reserve Reports; Hedging
	 	 	30	 
	Section 3.16 Insurance
	 	 	31	 
	Section 3.17 Opinion of Financial Advisor
	 	 	31	 
	Section 3.18 Brokers and Other Advisors
	 	 	32	 
	Section 3.19 State Takeover Statutes
	 	 	32	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
	 	 	32	 
	Section 4.1 Organization
	 	 	32	 
	Section 4.2 Authority; Noncontravention
	 	 	32	 
	Section 4.3 Governmental Approvals
	 	 	33	 
	Section 4.4 Information Supplied
	 	 	33	 
	Section 4.5 Ownership and Operations of Purchaser
	 	 	34	 
	Section 4.6 Financing
	 	 	34	 
	Section 4.7 Brokers and Other Advisors
	 	 	34	 
	ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS
	 	 	34	 
	Section 5.1 Conduct of Business
	 	 	34	 
	Section 5.2 No Solicitation by the Company; Etc.
	 	 	38	 
	Section 5.3 Reasonable Best Efforts
	 	 	42	 
	Section 5.4 Public Announcements
	 	 	42	 
	Section 5.5 Access to Information
	 	 	43	 
	Section 5.6 Notification of Certain Matters
	 	 	43	 
	Section 5.7 Indemnification and Insurance
	 	 	43	 
	Section 5.8 Securityholder Litigation
	 	 	45	 

ii

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page	 
	Section 5.9 Fees and Expenses
	 	 	45	 
	ARTICLE VI CONDITIONS TO THE MERGER
	 	 	45	 
	Section 6.1 Conditions to Each Party’s Obligation to Effect the Merger
	 	 	45	 
	ARTICLE VII TERMINATION
	 	 	45	 
	Section 7.1 Termination
	 	 	45	 
	Section 7.2 Effect of Termination
	 	 	47	 
	Section 7.3 Termination Fee
	 	 	48	 
	ARTICLE VIII MISCELLANEOUS
	 	 	49	 
	Section 8.1 No Survival, Etc
	 	 	49	 
	Section 8.2 Amendment or Supplement
	 	 	49	 
	Section 8.3 Extension of Time, Waiver, Etc
	 	 	50	 
	Section 8.4 Assignment
	 	 	50	 
	Section 8.5 Counterparts
	 	 	50	 
	Section 8.6 Entire Agreement; No Third-Party Beneficiaries
	 	 	50	 
	Section 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial
	 	 	50	 
	Section 8.8 Specific Enforcement
	 	 	51	 
	Section 8.9 Notices
	 	 	51	 
	Section 8.10 Severability
	 	 	52	 
	Section 8.11 Definitions
	 	 	52	 
	Section 8.12 Interpretation
	 	 	58	 

iii

 

AGREEMENT AND PLAN OF MERGER

          This AGREEMENT AND PLAN OF MERGER, dated as of April 23, 2007 (this “Agreement”), is among
Samson Investment Company, a Nevada corporation (“Parent”), Samson Acquisition Corp., a Maryland
corporation and wholly owned Subsidiary of Parent (“Purchaser”), and PYR Energy Corporation, a
Maryland corporation (the “Company”). Certain terms used in this Agreement are used as defined in
Section 8.11.

          WHEREAS, the respective Boards of Directors of Parent, Purchaser and the Company each deems it
advisable that Parent acquire the Company on the terms and subject to the conditions provided for
in this Agreement;

          WHEREAS, Parent and Purchaser have previously commenced a tender offer (the “Pending Offer”)
to purchase all of the issued and outstanding shares of common stock, par value $0.001 per share of
the Company, including the associated Series A Junior Participating Preferred Stock purchase rights
(collectively, the “Company Common Stock”) for a price of $1.21 per share of Company Common Stock,
subject to any required withholding of Taxes, net to the seller in cash, subject to the terms and
conditions set forth in the Offer to Purchase dated March 28, 2007, and in the related letter of
transmittal;

          WHEREAS, after negotiations between representatives of the parties, Parent and Purchaser have
agreed (a) to amend the Pending Offer to provide for the purchase of all of the shares of Company
Common Stock (as the Pending Offer is so amended, the “Offer”) issued and outstanding (each, a
“Share” and collectively, the “Shares”) at a price of $1.30 per Share (such amount or any greater
amount per Share paid pursuant to the Offer, the “Offer Price”), subject to any required
withholding of Taxes, net to the seller in cash, and on the terms and subject to the conditions set
forth in this Agreement and (b) following consummation of the Offer, to cause the merger of
Purchaser with and into the Company with the Company being the surviving corporation, in accordance
with the Maryland General Corporation Law (the “MGCL”), pursuant to which the Shares (other than
certain shares as provided in paragraphs (a) and (b) of Section 2.7) will be converted into the
right to receive the Offer Price, subject to any required withholding of Taxes, net to the seller
in cash, and on the terms and subject to the conditions set forth in this Agreement (the “Merger”);

          WHEREAS, the respective Boards of Directors of Parent (on its own behalf and as the sole
stockholder of Purchaser), Purchaser and the Company have each approved this Agreement, the Offer
and the Merger; and

          WHEREAS, the Board of Directors of the Company has resolved and agreed to recommend that
holders of Shares tender their Shares pursuant to the Offer.

 

 

          NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements
contained in this Agreement, and intending to be legally bound hereby, Parent, Purchaser and the
Company hereby agree as follows:

ARTICLE I

The Offer

     SECTION 1.1 The Offer.

          (a) Provided that this Agreement shall not have been terminated in accordance with Section
7.1, as promptly as practicable following the date hereof and in any event within five (5) Business
Days following the date of this Agreement (or such other later date as the parties may mutually
agree in writing), Parent and Purchaser (i) shall amend the Offer to reflect the execution of this
Agreement and the terms hereof, (ii) shall file an amendment to their tender offer statement on
Schedule TO with respect to the Offer (together with all amendments and supplements thereto and
including exhibits thereto, the “Schedule TO”) that was originally filed on March 28, 2007, which
amendment shall include an amended offer to purchase, form of transmittal letter, form of notice of
guaranteed delivery and all other necessary documents and exhibits with the Securities and Exchange
Commission (the “SEC”) reflecting the terms and conditions of this Agreement, and make all
deliveries, filings, publications, mailings and telephonic notices required to be made in
connection with the Offer under the federal securities Laws, including Regulations 14D and 14E of
the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated
thereunder, the “Exchange Act”) (such documents filed or required to be filed with the SEC and such
other filings, deliveries, mailings and notices, collectively and together with any amendments,
exhibits or supplements thereto, the “Offer Documents”) and (iii) shall use their reasonable best
efforts to consummate the Offer. The obligations of Purchaser to, and Parent to cause Purchaser
to, accept for payment and pay for any Shares tendered pursuant to the Offer are subject only to
the conditions that (i) there shall be validly tendered and not withdrawn prior to the expiration
of the Offer such number of shares of Company Common Stock that, when added to the shares of
Company Common Stock already owned by Parent, Purchaser and their Subsidiaries, would constitute at
least a two-thirds of the shares of Company Common Stock outstanding determined on a fully diluted
basis (on a “fully diluted basis” meaning the number of Shares then issued and outstanding plus all
shares of Company Common Stock which are issuable upon the exercise of any options, rights and
warrants and upon conversion of convertible notes (excluding those Shares underlying the Notes) or
similar obligations then outstanding, whether or not vested or exercisable) immediately prior to
the date of expiration of the Offer (the “Minimum Condition”) and (ii) the other conditions set
forth in Annex A hereto (collectively with the Minimum Condition, the “Tender Offer Conditions”)
have been satisfied or waived in writing by Parent.

          (b) Without the prior written consent of the Company, Parent and Purchaser shall not decrease
the Offer Price or change the form of consideration payable

2

 

in the Offer, decrease the number of
shares of Company Common Stock sought to be purchased in the Offer, waive or change the Minimum
Condition, impose additional conditions to the Offer, modify any condition set forth in Annex A or
amend any other term of the Offer, in each case, in a manner that is materially adverse to the
holders of Shares, except as provided in this Agreement. The initial expiration date of the Offer
shall be May 24, 2007 (the “Expiration Date,” unless the period of time for which the Offer is open
shall be extended in accordance with the immediately following sentence, in which event the term
“Expiration Date” shall mean the latest time and date as the Offer, as so extended, may expire);
provided, however, that Parent and Purchaser may provide for a subsequent offering period (the
“Subsequent Offering Period”)after the Expiration Date, in accordance with Rule 14d-11 under the
Exchange Act (including the obligations that Purchaser accept and pay for all Shares validly
tendered and not withdrawn as promptly as practicable after the expiration of the initial offering
period, and accept and pay for any Shares validly tendered during such subsequent offering period
promptly following the valid tender thereof). Notwithstanding the foregoing,

               (i) Parent and Purchaser (A) shall extend the Offer (x) from time to time, for a period not to
exceed five (5) Business Days on each occasion, if at the scheduled or extended expiration date of
the Offer the Minimum Condition shall not have been satisfied, until such time as such condition is
satisfied or waived or this Agreement is terminated or (y) from time to time for a period not to
exceed five (5) Business Days at a time (or such other period as the Company shall approve) if
condition (a) set forth in Annex A shall not have been satisfied at the scheduled or any extended
expiration date of the Offer, until such time as such condition is satisfied or waived or this
Agreement is terminated, and (B) may, without the consent of the Company, from time to time, in
their sole discretion, extend the Expiration Date for such period (not to exceed ten (10) Business
Days on any single occasion) as Parent and Purchaser may determine, to a date that is no later than
July 31, 2007 (x) if immediately prior to the scheduled or any extended expiration date any of the
other Tender Offer Conditions are not satisfied or waived by Parent or (y) 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; and

               (ii) Parent and Purchaser may increase the Offer Price and extend the Expiration Date to the
extent required by applicable Law in connection with such price increase. Parent and Purchaser
shall not terminate the Offer prior to any scheduled Expiration Date without the written consent of
the Company except in the event that this Agreement is terminated pursuant to Section 7.1.

          (c) Subject to the terms of the Offer and this Agreement and the satisfaction or waiver of the
Tender Offer Conditions as of any Expiration Date, including the Minimum Condition, Parent will
cause Purchaser to accept for payment and pay for any and all shares of Company Common Stock
validly tendered and not validly withdrawn
pursuant to the Offer promptly after such Expiration Date (such date as Purchaser shall be
obligated to accept for payment any and all shares of Company Common Stock validly tendered and not
validly withdrawn pursuant to the Offer, the

3

 

“Acceptance Date”). For the avoidance of doubt, and
notwithstanding anything in this Agreement to the contrary, Purchaser shall not (and Parent shall
cause Purchaser not to) accept for payment any Shares tendered pursuant to the Offer unless the
Minimum Condition shall have been satisfied.

          (d) Each of Parent and Purchaser, on the one hand, and the Company, on the other hand, agrees
to correct promptly 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 Purchaser further
agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with
the SEC and to be disseminated to stockholders of the Company, in each case, as and to the extent
required by applicable federal securities Laws. The Company and its counsel shall be given a
reasonable opportunity to review and comment on the Offer Documents in advance of their filing with
the SEC and dissemination to stockholders of the Company. Parent and Purchaser shall provide to the
Company and its counsel copies in writing of any comments and shall inform the Company of any oral
comments that Parent, Purchaser or their counsel may receive from the SEC or its staff with respect
to the Offer Documents promptly after receipt of such comments and consult with the Company and its
counsel prior to responding to any such comments. The Company and its counsel shall be given a
reasonable opportunity to review any such written and oral comments and proposed responses.

          (e) Parent shall provide or cause to be provided to Purchaser on a timely basis the funds
necessary to purchase any Shares that Purchaser becomes obligated to purchase pursuant to the
Offer.

     SECTION 1.2 Company Actions.

          (a) The Company hereby consents to the Offer and represents and warrants that the Company’s
Board of Directors, at a meeting duly called and held, has unanimously (i) determined that this
Agreement and the Transactions, including the Offer and the Merger, are in the best interests of
the Company’s stockholders, (ii) approved and adopted this Agreement and the Transactions in
accordance with the MGCL, including for purposes of Section 3-105 thereof, and (iii) subject to
Section 5.2(c), resolved to recommend acceptance of the Offer and approval and adoption of this
Agreement and the Merger by its stockholders The Company hereby consents to the inclusion in the
Offer Documents of the recommendation of the Company’s Board of Directors described above. The
Company hereby further represents and warrants that (A) the Board of Directors of the Company has
received the opinion of C.K. Cooper & Company, dated the date of this Agreement, to the effect
that, as of such date, and subject to the various assumptions and qualifications set forth therein,
the consideration to be received by the Company’s stockholders in the Offer and the Merger is fair
to such holders from a financial point of
view (the “Fairness Opinion”) and (B) the Company has been authorized by C.K. Cooper & Company
to permit the inclusion of the Fairness Opinion and/or references thereto in the Offer Documents,
the Schedule 14D-9 and any Proxy

4

 

Statement, subject to prior review and consent by C.K. Cooper &
Company (such consent not to be unreasonably withheld or delayed).

          (b) The Company shall, after affording Parent and its counsel reasonable opportunity to review
and comment thereon, file with the SEC, as promptly as practicable on the date of the filing by
Parent and Purchaser of the Offer Documents, an amendment to its Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments, supplements and exhibits thereto, the
“Schedule 14D-9”) originally filed on April 11, 2007, with respect to the Offer, reflecting the
recommendation of the Board of Directors of the Company described in Section 1.2(a). The Company
shall cause the Schedule 14D-9 to be disseminated to holders of the Shares as and to the extent
required by applicable federal securities laws. The Company, on the one hand, and each of Parent
and Purchaser, on the other hand, shall promptly correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that it shall be or shall have become false or misleading
in any material respect, and the Company shall cause the Schedule 14D-9 as so corrected to be filed
with the SEC and disseminated to holders of the Shares, in each case, as and to the extent required
by applicable federal securities laws. The Company agrees to provide Parent and its counsel with
any comments, whether written or oral, that the Company or its counsel may receive from time to
time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments, to consult with Parent and its counsel prior to responding to any such comments and
to provide Parent with copies of all such responses, whether written or oral.

          (c) The Company shall promptly furnish Purchaser with mailing labels containing the names and
addresses of all record holders of Shares and with security position listings of Shares held in
stock depositories, each as of a recent date, together with all other available listings and
computer files containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish Purchaser with such additional information,
including updated listings and computer files of shareholders, mailing labels and security position
listings, and such other assistance as Parent, Purchaser or their agents may reasonably require in
communicating the Offer to the record and beneficial holders of Shares.

     SECTION 1.3 Directors of the Company.

          (a) Upon the purchase of Shares pursuant to the Offer and for so long thereafter as Parent and
its Subsidiaries directly or indirectly own in the aggregate more than two-thirds of the
outstanding Shares, Parent shall be entitled to designate for appointment or election to the
Company’s Board of Directors, upon written notice to the Company, such number of directors, rounded
up to the next whole number, as is equal to the product obtained by multiplying the total number of
directors on such Board (after giving effect to the directors designated by Parent pursuant to this
sentence) by the
percentage that the number of Shares so owned by Parent and its Subsidiaries bears to the
total number of Shares then outstanding. In furtherance thereof, the Company shall, upon request
of Parent, promptly cause Parent’s designees (and any replacement designees in

5

 

the event that any
designee shall no longer be on such Board of Directors) to be so appointed or elected to the
Company’s Board of Directors and, in furtherance thereof, to the extent necessary, increase the
size of such Board of Directors or obtain the resignation of such number of its directors as is
necessary to give effect to the foregoing provision. At such time as such designees constitute a
majority of the Board (the “Control Date”), the Company shall also, upon the request of Parent,
cause such persons designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Company’s Board of Directors of (i) each committee of the
Company’s Board of Directors, subject to compliance with applicable securities laws and the rules
of The American Stock Exchange (the “AMEX”), and (ii) each board of directors (or similar body) of
each Subsidiary of the Company and each committee of each such board (or similar body).
Notwithstanding the foregoing, until the Effective Time, the Board of Directors of the Company
shall have at least one director who is (A) a director of the Company on the date of this Agreement
and (B) Qualified Persons (as defined below) (“Independent Director”); provided, however, that if
there is no Independent Director for any reason whatsoever, the other directors shall be required
to designate a Qualified Person to fill such vacancy, and such persons shall be deemed to be
Independent Director for purposes of this Agreement; and provided further, however, that
notwithstanding the foregoing, in no event shall the requirement to have an Independent Director as
provided in this Section result in Parent’s designees constituting less than a majority of the
directors on the Company’s Board of Directors unless Parent shall have failed to designate a
sufficient number of persons to constitute at least a majority. As used herein, a “Qualified
Person” means an individual who (1) is not an officer of the Company or any of its Subsidiaries,
(2) qualifies as an “independent director” as defined in Section 121 of the AMEX Company Guide and
(3) is eligible to serve on the Company’s audit committee under applicable Exchange Act and AMEX
rules.

     (b) The Company shall promptly take all actions required pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under
Section 1.3(a), including mailing to the Company’s stockholders the information required by such
Section 14(f) and Rule 14f-1 (which the Company shall mail together with the Schedule 14D-9 if it
receives from Parent and Purchaser the information below on a basis timely to permit such mailing)
as is necessary to fulfill the Company’s obligations under Section 1.3(a). Parent and Purchaser
shall timely supply the Company in writing and be solely responsible for such information with
respect to Parent and Purchaser and their nominees, officers, directors and Affiliates required by
such Section 14(f) and Rule 14f-1 as is necessary in connection with the appointment of any of
Parent’s designees under Section 1.3(a). The provisions of Section 1.3(a) are in addition to and
shall not limit any rights that Purchaser, Parent or any of their Affiliates may have as a holder
or beneficial owner of Shares as a matter of Law with respect to the election of directors or
otherwise.

     (c) Following the election or appointment of Parent’s designees pursuant to Section 1.3(a) and
prior to the Effective Time, the approval by affirmative vote or written consent of a majority of
the Independent Directors then in office (the

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“Independent Director Approval”) 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) (i) any amendment or termination of this Agreement by the
Company, (ii) any extension by the Company of time for performance of any obligation or action
under this Agreement by Parent or Purchaser, (iii) any waiver, exercise or enforcement of any of
the Company’s rights under this Agreement or (iv) any amendment of the articles of incorporation or
bylaws of the Company (the “Company Charter Documents”) in a manner that adversely affects holders
of Company Common Stock (other than Parent or Purchaser).

     SECTION 1.4 Stockholder Meeting.

          (a) As promptly as practicable following the purchase of Shares pursuant to the Offer, if a
vote of stockholders is required by applicable Law in order to consummate the Merger, the Company,
acting through its Board of Directors, shall, in accordance with applicable Law and the Company
Charter Documents:

               (i) duly call, give notice of, convene and hold an annual or special meeting of the Company’s
stockholders for the purposes of considering and taking action to approve the Merger (the “Company
Stockholders Meeting”); and

               (ii) in consultation with Parent, prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and obtain and furnish the
information required by the SEC to be included therein and, after consultation with Parent, respond
promptly to any comments made by the SEC with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement (together with all amendments,
supplements and exhibits thereto, the “Proxy Statement”) to be mailed to the Company’s stockholders
at the earliest practicable date; provided that no amendments or supplements to the Proxy Statement
shall be made by the Company without consultation with Parent. Parent shall provide the Company in
writing and be solely responsible for such information with respect to Parent and its Affiliates as
shall be required to be included in the Proxy Statement.

          (b) Notwithstanding the provisions of Section 1.4(a), in the event that Parent, Purchaser and
any of Parent’s other Subsidiaries shall acquire in the aggregate at least 90% of the outstanding
Shares pursuant to the Offer or otherwise (including pursuant to Section 1.5), the parties hereto
shall, subject to Article VI hereof, take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after such acquisition, without a meeting of
stockholders of the Company, in accordance with Section 3-106 of the MGCL.

          (c) Parent shall vote, or cause to be voted, all of the Shares acquired in the Offer or
otherwise then owned by it, Purchaser and any of Parent’s other Subsidiaries in favor of the
adoption of this Agreement.

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     SECTION 1.5 Option to Acquire Additional Shares. The Company hereby grants to
Purchaser an option (the “Purchaser Option”), exercisable in accordance with this Section 1.5, to
purchase up to that number of newly issued shares of Company Common Stock (the “Purchaser Option
Shares”) equal to the number of shares that, when added to the number of Shares owned by Parent and
its Subsidiaries immediately following consummation of the Offer, shall constitute one share more
than 90% of the Shares then outstanding (after giving effect to the issuance of the Purchaser
Option Shares) for a cash purchase price per Purchaser Option Share equal to the Offer Price;
provided, however, that the number of Purchased Option Shares shall not exceed that number equal to
19.9% of the Shares outstanding on the date of this Agreement. The Purchaser Option may be
exercised by Purchaser at any time within five Business Days after Purchaser’s acceptance of and
payment for Shares pursuant to the Offer, including the Subsequent Offering Period, in accordance
with the terms of this Agreement. If Purchaser wishes to so exercise the Purchaser Option,
Purchaser shall give the Company written notice within such five-Business Day period specifying the
number of shares of Company Common Stock that Purchaser wishes to purchase pursuant to the
Purchaser Option and a place and a time (which shall be at least two, but not more than five,
Business Days after the date of delivery of such written notice) for the closing of such purchase.
At such closing, (i) the purchase price in respect of such exercise of the Purchaser Option (which
shall equal the product of (x) the number of shares of Company Common Stock being purchased
pursuant to the Purchaser Option and (y) the Offer Price) shall be paid to the Company in
immediately available funds by wire transfer to an account designated by the Company, and (ii) the
Company shall deliver to Purchaser a certificate or certificates representing the number of shares
of Company Common Stock so purchased, which certificates may include any legends required by
applicable securities laws. The Company agrees that it shall reserve (and maintain free from
preemptive rights) sufficient authorized but unissued shares of Company Common Stock so that the
Purchaser Option may be exercised without additional authorization of shares of Common Stock (after
giving effect to all other options, warrants, convertible securities and other rights to purchase
shares of Company Common Stock).

     SECTION 1.6 Offer Documents; Schedule 14D-9; Proxy Statement. Without limiting any
other provision of this Agreement, whenever any party hereto becomes aware of any event or change
which is required to be set forth in an amendment or supplement to the Offer Documents, the
Schedule 14D-9 and/or the Proxy Statement, such party shall promptly inform the other parties
thereof and each of the parties shall cooperate in the preparation, filing with the SEC and (as and
to the extent required by applicable federal securities laws) dissemination to the Company’s
stockholders of such amendment or supplement.

ARTICLE II

The Merger

     SECTION 2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the MGCL, at the Effective Time

8

 

Purchaser shall be merged
with and into the Company, and the separate corporate existence of Purchaser shall thereupon cease,
and the Company shall be the surviving corporation in the Merger (the “Surviving Corporation”).

     SECTION 2.2 Closing. The closing of the Merger (the “Closing”) shall take place at
10:00 a.m. (New York City time) on a date to be specified by the parties (the “Closing Date”),
which date shall be no later than the second Business Day after satisfaction or waiver of the
conditions set forth in Article VI (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such
time), at the offices of Weil, Gotshal & Manges LLP, 200 Crescent Court, Suite 300, Dallas, Texas
75201, unless another time, date or place is agreed to in writing by the parties hereto.

     SECTION 2.3 Effective Time. Subject to the provisions of this Agreement, as soon as
practicable on the Closing Date the parties shall file with Maryland’s State Department of
Assessments and Taxation (the “Department”) the articles of merger executed in accordance with the
relevant provisions of the MGCL (the “Articles of Merger”). The Merger shall become effective upon
the filing of the Articles of Merger or at such later time as is agreed to by the parties hereto
and specified in the Articles of Merger (the time at which the Merger becomes effective is herein
referred to as the “Effective Time”).

     SECTION 2.4 Effects of the Merger. The Merger shall have the effects set forth in the
MGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges and powers of the Company and Purchaser shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company and Purchaser shall
become the debts, liabilities and duties of the Surviving Corporation.

     SECTION 2.5 Articles of Incorporation and Bylaws of the Surviving Corporation.

          (a) The articles of incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided therein or by applicable Law.

          (b) The bylaws of the Company, as in effect immediately prior to the Effective Time, shall be
the bylaws of the Surviving Corporation until thereafter amended as provided therein or by
applicable Law.

     SECTION 2.6 Directors and Officers of the Surviving Corporation.

          (a) Each of the parties hereto shall take all necessary action to cause the directors of
Purchaser immediately prior to the Effective Time to be the directors of the Surviving Corporation
immediately following the Effective Time, until their respective successors are duly elected or
appointed and qualified or their earlier death,

9

 

resignation or removal in accordance with the
articles of incorporation and bylaws of the Surviving Corporation.

          (b) The officers of Purchaser immediately prior to the Effective Time shall be the officers of
the Surviving Corporation until their respective successors are duly appointed and qualified or
their earlier death, resignation or removal in accordance with the articles of incorporation and
bylaws of the Surviving Corporation.

     SECTION 2.7 Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of the holders of any securities of Purchaser or the Company:

          (a) Each issued and outstanding share of capital stock of Purchaser shall be converted into
and become one validly issued, fully paid and nonassessable share of common stock, par value $0.001
per share, of the Surviving Corporation.

          (b) Any Shares owned by Parent or Purchaser shall be automatically canceled and shall cease to
exist and no consideration shall be delivered in exchange therefor.

          (c) Each Share issued and outstanding immediately prior to the Effective Time (other than (i)
Shares to be canceled in accordance with Section 2.7(b) and (ii) any Dissenting Shares), shall be
converted into the right to receive an amount of cash equal to the Offer Price payable to the
holder thereof upon surrender, in the manner provided in this Agreement, of the certificate
formerly representing such Share, without interest (the “Merger Consideration”). All such Shares,
when so converted, shall no longer be outstanding and shall automatically be canceled and shall
cease to exist, and each holder of a certificate which immediately prior to the Effective Time
represented any such Shares shall cease to have any rights with respect thereto, except the right
to receive the Merger Consideration therefor upon the surrender of such certificate in accordance
with this Agreement, without interest.

     SECTION 2.8 Exchange of Certificates.

          (a) Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust
company to act as agent for the holders of Shares in connection with the Merger (the “Paying
Agent”) to receive, for the benefit of holders of Shares, the aggregate Merger Consideration to
which all holders of Shares shall become entitled pursuant to Section 2.7(c). On the Closing Date,
Parent shall deposit such aggregate Merger Consideration with the Paying Agent. Such aggregate
Merger Consideration deposited
with the Paying Agent shall, pending its disbursement to such holders, be invested by the
Paying Agent as directed by Parent. Any net profit resulting from, or interest or income produced
by, such amounts on deposit with the Paying Agent will be payable to Parent or as Parent otherwise
directs.

10

 

          (b) Exchange Procedures. Promptly after the Effective Time, Parent shall cause the
Paying Agent to mail to each holder of record of a certificate or certificates (or evidence of
shares in book-entry form), which immediately prior to the Effective Time represented outstanding
Shares (the “Certificates”), whose shares were converted pursuant to Section 2.7 into the right to
receive the Merger Consideration, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Paying Agent, and which shall be in such form and shall have such other
provisions (including customary provisions with respect to delivery of an “agent’s message” with
respect to shares held in book-entry form) as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent, together with
such letter of transmittal, duly completed and validly executed in accordance with the instructions
or receipt of an “agent’s message” (and such other customary documents as may reasonably be
required by the Paying Agent), the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration, without interest, for each Share formerly represented
by such Certificate, and the Certificate so surrendered shall forthwith be canceled. If payment of
the Merger Consideration is to be made to a Person other than the Person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that (x) the Certificate
so surrendered shall be properly endorsed or shall otherwise be in proper form for transfer and (y)
the Person requesting such payment shall have paid any transfer and other taxes required by reason
of the payment of the Merger Consideration to a Person other than the registered holder of such
Certificate surrendered or shall have established to the reasonable satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.8, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive the Merger Consideration as contemplated by this
Article II, without interest.

          (c) Transfer Books; No Further Ownership Rights in Company Stock. The Merger
Consideration paid in respect of Shares upon the surrender for exchange of Certificates in
accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock previously represented by such
Certificates, and at the close of business on the day on which the Effective Time occurs, the stock
transfer books of the Company shall be closed and thereafter there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. From and after the
Effective Time, the holders of Certificates that evidenced ownership of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable Law. Subject to the last sentence of
Section 2.8(e), if, at any time after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged for the Merger
Consideration as provided in this Article II.

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          (d) Lost, Stolen or Destroyed 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 Parent may direct, as indemnity
against any claim that may be made against it with respect to such Certificate, the Paying Agent
will pay, in exchange for such lost, stolen or destroyed Certificate, the applicable Merger
Consideration to be paid in respect of the Shares formerly represented by such Certificate, as
contemplated by this Article II.

          (e) Termination of Fund. At any time following 180 days after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds
(including any interest received with respect thereto) that had been made available to the Paying
Agent and which have not been disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look only to Parent and the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) as general creditors thereof with respect to the payment
of any Merger Consideration that may be payable upon surrender of any Certificates held by such
holders, as determined pursuant to this Agreement, without any interest thereon. Any amounts
remaining unclaimed by such holders at such time at which such amounts would otherwise escheat to
or become property of any Governmental Authority shall become, to the extent permitted by
applicable Law, the property of Parent free and clear of all claims or interest of any Person
previously entitled thereto.

          (f) No Liability. Notwithstanding any provision of this Agreement to the contrary,
none of the parties hereto, the Surviving Corporation or the Paying Agent shall be liable to any
Person for Merger Consideration delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law.

          (g) Withholding Taxes. Parent, Purchaser, the Surviving Corporation and the Paying
Agent shall be entitled to deduct and withhold from the consideration otherwise payable to a holder
of Shares pursuant to the Offer or Merger such amounts as may be required to be deducted and
withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the “Code”), or under any provision
of state, local or foreign tax Law. To the extent amounts are so withheld and paid over to the
appropriate taxing authority, the withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which such deduction and
withholding was made.

     SECTION 2.9 Appraisal Rights. Notwithstanding anything in this Agreement
to the contrary and unless an exemption is available under Section 3-202(c) of the MGCL or
otherwise, Shares that are issued and outstanding immediately prior to the Effective Time and which
are held by a stockholder who did not vote in favor of the Merger (or consent thereto in writing)
and who is entitled to demand and properly demands appraisal of such shares pursuant to, and who
complies in all respects with, the provisions of Section 3-203 of the MGCL (the “Dissenting
Stockholders”), shall not be

12

 

converted into or be exchangeable for the right to receive the Merger
Consideration (the “Dissenting Shares”), but instead such holder shall be entitled to payment of
the fair value of such shares in accordance with the provisions under Title 3, Subtitle 2 of the
MGCL (and at the Effective Time, such Dissenting Shares shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and such holder shall cease to have any rights
with respect thereto, except the right to receive the fair value of such Dissenting Shares in
accordance with the provisions under Title 3, Subtitle 2 of the MGCL), unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost rights to appraisal under
the MGCL. If any Dissenting Stockholder shall have failed to perfect or shall have effectively
withdrawn or lost such right, to the extent an exemption is not available, such holder’s Shares
shall thereupon be treated as if they had been converted into and become exchangeable for the right
to receive, as of the Effective Time, the Merger Consideration for each such Share, in accordance
with Section 2.7, without any interest thereon. The Company shall give Parent (i) prompt notice of
any written demands for appraisal of any Shares, attempted withdrawals of such demands and any
other instruments served pursuant to the MGCL and received by the Company relating to stockholders’
rights of appraisal, and (ii) the opportunity to participate in all negotiations and proceedings
with respect to demands for appraisal under the MGCL. The Company shall not, except with the prior
written consent of Parent, voluntarily make any payment with respect to, or settle, or offer or
agree to settle, any such demand for payment. Any portion of the Merger Consideration made
available to the Paying Agent pursuant to Section 2.8 to pay for Shares for which appraisal rights
have been perfected shall be returned to Parent upon demand.

     SECTION 2.10 Company Stock Options. Prior to and effective as of the Effective Time,
the Company shall have taken all such action as is necessary to terminate, subject to compliance
with this Section 2.10, the Company Stock Plans and shall have provided written notice to each
holder of a then-outstanding PYR Energy Option (whether or not such PYR Energy Option is then
vested or exercisable), that such PYR Energy Option shall be, as of the date of such notice,
exercisable in full, that such PYR Energy Option shall terminate at the Effective Time and that, if
such PYR Energy Option is not exercised or otherwise terminated on or before the Effective Time,
such holder shall be entitled to receive in cancellation of such PYR Energy Option the Option
Consideration (as defined below) at the Closing. The Company shall use its reasonable best efforts
to obtain the written acknowledgement of each holder of a then-outstanding PYR Energy Option with
regard to the cancellation of such PYR Energy Option. Except as otherwise provided
below, the Option Consideration shall be paid as soon after the Closing Date as shall be
practicable. Notwithstanding the foregoing, Parent and the Surviving Corporation shall be entitled
to deduct and withhold from the Option Consideration otherwise payable
such amounts as may be required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax Law. For purposes of
this Agreement, “Option Consideration” means, with respect to any share of Company Common Stock
issuable under a particular PYR Energy Option, an amount equal to the excess, if any, of (i) the
Merger Consideration per Share over (ii) the exercise price payable in respect of such share of

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Company Common Stock issuable under such PYR Energy Option. For purposes of this Agreement, (i)
“Company Stock Plans” shall mean the following plans of the Company: 1997 Stock Option Plan; 2000
Stock Option Plan, as amended; and 2006 Stock Inventive Plan and (ii) “PYR Energy Option” shall
mean each option issued and outstanding under the Company Stock Plans.

     SECTION 2.11 Warrants. Prior to the Effective Time, the Company shall have taken all
action necessary to provide that each Warrant outstanding immediately prior to the Effective Time
shall have been terminated and converted at the Effective Time into the right to receive a cash
amount equal to the Warrant Consideration. Except as otherwise provided below, the Warrant
Consideration shall be paid as soon after the Closing Date as shall be practicable.
Notwithstanding the foregoing, Parent and the Surviving Corporation shall be entitled to deduct and
withhold from the Warrant Consideration otherwise payable such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code, or any provision
of state, local or foreign tax Law. For purposes of this Agreement, “Warrant Consideration” means,
with respect to any share of Company Common Stock issuable under a particular Warrant, an amount
equal to the excess, if any, of (i) the Merger Consideration per Share over (ii) the exercise price
payable in respect of such share of Company Common Stock issuable under such Warrant.

     SECTION 2.12 Other Actions. Without limiting the foregoing, the Company shall take
all actions necessary to ensure that the Company will not at the Effective Time be bound by any
options, SARs, warrants or other rights or agreements which would entitle any Person, other than
Parent and its Subsidiaries, to own any capital stock of the Surviving Corporation or to receive
any payment in respect thereof.

ARTICLE III

Representations and Warranties of the Company

     The Company represents and warrants to Parent and Purchaser that except as set forth in the
disclosure schedule (with specific reference to the Section or subsection of this Agreement to
which the information stated in such disclosure relates) delivered by the Company to Parent
simultaneously with the execution of this Agreement (the “Company Disclosure Schedule”):

     SECTION 3.1 Organization, Standing and Corporate Power.

          (a) Each of the Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the Laws of the jurisdiction in which it is incorporated and has all
requisite corporate power and authority necessary to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and as currently proposed by its
management to be conducted. Except as disclosed in Section 3.1(a) of the Company Disclosure
Schedule, each of the Company and its Subsidiaries is duly licensed or qualified to do business and
is in good standing in

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each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified or in good standing,
individually or in the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect (as defined below) on the Company (“Company Material Adverse Effect”). For
purposes of this Agreement, “Material Adverse Effect” shall mean, with respect to any party, any
material adverse effect on, or any change, event, occurrence or state of facts materially adverse
to, (i) the business, properties, assets, liabilities (contingent or otherwise), results of
operations or condition (financial or otherwise) of such party and its Subsidiaries taken as a
whole, or (ii) such party’s ability to, in a timely manner, perform its obligations under this
Agreement or consummate the Transactions.

     (b) Section 3.1(b) of the Company Disclosure Schedule lists all Subsidiaries of the Company
together with the jurisdiction of organization of each such Subsidiary. All the outstanding shares
of capital stock of, or other equity interests in, each Subsidiary of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and are owned directly or
indirectly by the Company free and clear of all liens, pledges, charges, mortgages, encumbrances,
adverse rights or claims and security interests of any kind or nature whatsoever (including any
restriction on the right to vote or transfer the same, except for such transfer restrictions of
general applicability as may be provided under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the “Securities Act”), and the “blue sky” laws of the
various States of the United States) (collectively, “Liens”). Except as set forth in Section
3.1(b) of the Company Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock, voting securities or equity interests in any Person.

     (c) The copies of the Company Charter Documents that are incorporated by reference as exhibits
to the Company’s Annual Report on Form 10-KSB for the year ended August 31, 2006 are complete and
correct copies of such documents and contain all amendments thereto as in effect on the date of
this Agreement. The Company has delivered to Parent complete and correct copies of the articles of
incorporation and bylaws (or comparable organizational documents) of each of its Subsidiaries (the
“Subsidiary Documents”), as amended to the date of this Agreement. All such Company Charter
Documents and Subsidiary Documents are in full force and effect and neither the Company nor any of
its Subsidiaries is in violation of any of their
respective provisions. The Company will make available to Parent and its representatives
within five Business Days from the execution of this Agreement its corporate record books,
including copies of the minutes (or, in the case of minutes that have not yet been finalized,
drafts thereof) of meetings of stockholders, the Board of Directors and committees of the Board of
Directors of the Company and each of its Subsidiaries held since January 1, 2005.

15

 

     SECTION 3.2 Capitalization.

          (a) The authorized capital stock of the Company consists of 75,000,000 shares of Company
Common Stock and 1,000,000 shares of preferred stock, par value $0.001 per share (“Company
Preferred Stock”). At the close of business on April 17, 2007, (i) 38,010,258 shares of Company
Common Stock were issued and outstanding, (ii) no shares of Company Common Stock were held by the
Company in its treasury, (iii) 7,250,000 shares of Company Common Stock were reserved for issuance
under the Company Stock Plans (of which 1,990,764 shares of Company Common Stock were subject to
outstanding PYR Energy Options granted under the Company Stock Plans), (iv) 627,500 shares of
Company Common Stock were reserved for issuance upon exercise of the warrants referred to in
Section 3.2(a) of the Company Disclosure Schedule (correct and complete copies of which have been
delivered to Parent by the Company) (“Warrants”), (v) 5,810,001 shares of Company Common Stock were
reserved for issuance upon conversion of the Company’s convertible securities referred to in
Section 3.2(a) of the Company Disclosure Schedule (correct and complete copies of which have been
delivered to Parent by the Company) (“Convertible Securities”), (vi) no shares of Company Preferred
Stock were issued or outstanding and (vii) no shares of Company Common Stock are held by any
Subsidiary of the Company. All Shares have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights. Included in Section 3.2(a) of the Company
Disclosure Schedule is a correct and complete list, as of April 17, 2007, of all outstanding
options or other rights to purchase or receive shares of Company Common Stock granted under the
Company Stock Plans or otherwise, and, for each such option or other right, the number of shares of
Company Common Stock subject thereto, the terms of vesting, the grant and expiration dates and
exercise price thereof and the name of the holder thereof. All PYR Energy Options have an exercise
price equal to no less than the fair market value of the underlying shares of Company Common Stock
on the date of grant. Since April 17, 2007, the Company has not issued any shares of its capital
stock, voting securities or equity interests, or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock, voting securities or equity interests, other than
pursuant to the outstanding options, Warrants and Convertible Securities, in each case, referred to
above in this Section 3.2(a). Except (A) as set forth above in this Section 3.2(a) or (B) as
otherwise expressly permitted by Section 5.1 hereof, as of the date of this Agreement there are
not, and as of the Effective Time there will not be, any shares of capital stock, voting securities
or equity interests of the Company issued and outstanding or any subscriptions, options, warrants,
calls, convertible or exchangeable securities, rights, commitments or agreements of any character
providing for the issuance of any shares of capital stock, voting securities or
equity interests of the Company, including any representing the right to purchase or otherwise
receive any Company Common Stock.

          (b) None of the Company or any of its Subsidiaries has issued or is bound by any outstanding
subscriptions, options, warrants, calls, convertible or exchangeable securities, rights,
commitments or agreements of any character providing for the issuance or disposition of any shares
of capital stock, voting securities or equity

16

 

interests of any Subsidiary of the Company. There
are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock, voting securities or equity
interests (or any
options, warrants or other rights to acquire any shares of capital stock, voting securities or
equity interests) of the Company or any of its Subsidiaries.

     SECTION 3.3 Authority; Noncontravention; Voting Requirements.

          (a) The Company has all necessary corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the approval of its stockholders to the adoption of this
Agreement as contemplated by Section 1.4 (to the extent required by the MGCL) (the “Company
Stockholder Approval”), to perform its obligations hereunder and to consummate the Transactions.
The execution, delivery and performance by the Company of this Agreement, and the consummation by
it of the Transactions, have been duly authorized and approved by its Board of Directors (including
exempting the Offer, the Merger, this Agreement and the Transactions from the Maryland Business
Combination Act and the Maryland Control Share Acquisition Act (as defined in Section 3-605 and
Section 3-710 of the MGCL, respectively)), and except for obtaining the Company Stockholder
Approval, no other corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance by the Company of this Agreement and the consummation by it of
the Transactions. 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 that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws of general application affecting or
relating to the enforcement of creditors’ rights generally and (ii) is subject to general
principles of equity, whether considered in a proceeding at law or in equity (the “Bankruptcy and
Equity Exception”).

          (b) The Company’s Board of Directors, at a meeting duly called and held, has unanimously (i)
approved and declared advisable this Agreement and the Transactions, including the Offer and the
Merger (such approval having been made in accordance with the MGCL, including for purposes of
Section 3-105 thereof) and (ii) recommended that the stockholders of the Company accept the Offer,
tender their Shares to Purchaser pursuant thereto and approve the Merger.

          (c) Neither the execution and delivery of this Agreement by the Company nor the consummation
by the Company of the Transactions, nor compliance by the Company with any of the terms or
provisions hereof, will (i) conflict with or violate any provision of the Company Charter Documents
or any of the Subsidiary Documents or (ii) assuming that the authorizations, consents and approvals
referred to in Section 3.4 and the Company Stockholder Approval are obtained and the filings
referred to in Section 3.4 are made, (x) violate any Law, judgment, writ or injunction of any
Governmental Authority applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in the loss of any

17

 

benefit
under, constitute a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any Lien upon any of
the respective properties or assets of, the Company or any of its Subsidiaries under, any of the
terms, conditions or provisions of any loan or credit agreement, debenture, note, bond, mortgage,
indenture, deed of trust, license, lease, contract or other agreement, instrument or obligation
(each, a “Contract”) or Permit, to which the Company or any of its Subsidiaries is a party, or by
which they or any of their respective properties or assets may be bound or affected except, in the
case of clause (y), for such violations, conflicts, losses, defaults, terminations, cancellations,
accelerations or Liens as, individually or in the aggregate, could not reasonably be expected to
have a Company Material Adverse Effect.

          (d) The affirmative vote (in person or by proxy) of the holders of two-thirds of the
outstanding shares of Company Common Stock in favor of the adoption of this Agreement is the only
vote or approval of the holders of any class or series of capital stock of the Company or any of
its Subsidiaries which is necessary to adopt this Agreement and approve the Transactions.

          (e) The Company has made available to Parent a complete and correct copy of all current and
proposed amendments and exhibits to the Rights Agreement, dated January 31, 2007, between the
Company and U.S. Stock Transfer Corporation, as Rights Agent, which is available in the Filed
Company SEC Documents. The Company’s Board of Directors has approved an amendment (the “Rights
Amendment”) to the Rights Agreement to provide that: (i) a Distribution Date shall not occur, the
Rights shall not separate (to the extent the Rights Agreement otherwise provides for such
separation) or become exercisable, neither Parent nor Purchaser, nor any Affiliate or Associate of
Parent or Purchaser, shall become an Acquiring Person, and the Shares Acquisition Date shall not be
deemed to occur as a result of the execution, delivery or performance of this Agreement or any
other transactions contemplated by this Agreement, the public announcement of such execution and
delivery or, the public announcement or the commencement of the Offer or the consummation of the
Offer and (ii) the Rights Agreement shall expire, and no Person shall have any rights pursuant to
the Rights Agreement, after the consummation of the Offer in accordance with the terms thereof and
the terms and conditions hereof, including the acceptance for payment of, and the payment for all
shares of Company Common Stock tendered pursuant to the Offer. The Company
shall, within one (1) day of the date of this Agreement, deliver a certificate to the Rights
Agent that the Rights Amendment satisfies the terms of Section 27 of the Rights Agreement and the
Rights Agent shall, and the Company shall cause the Rights Agent to, within one (1) day of the date
of this Agreement, duly execute and deliver the Rights Amendment. Solely for purposes of this
Section 3.4(c), the terms “Rights Agent,” “Distribution Date,” “Rights,” “Affiliates,”
“Associates,” “Shares Acquisition Date” and “Acquiring Person” shall have the meaning ascribed to
them in the Rights Agreement.

     SECTION 3.4 Governmental Approvals. Except for (i) the filing with the SEC of the
Schedule 14D-9 and, if necessary, of a Proxy Statement in definitive form

18

 

relating to the Company
Stockholders Meeting, and other filings required under, and compliance with other applicable
requirements of, the Exchange Act and the rules of AMEX and (ii) the filing of the Articles of
Merger with the Department pursuant to the MGCL, no consents or approvals of, or filings,
declarations or registrations with, any Governmental Authority are necessary for the execution,
delivery and performance of this Agreement by the Company and the consummation by the Company of
the Transactions, other than such other consents, approvals, filings, declarations or registrations
that, if not obtained, made or given, could not, individually or in the aggregate, reasonably be
expected to impair in any material respect the ability of the Company to perform its obligations
hereunder, or prevent or materially impede, interfere with, hinder or delay the consummation of the
Transactions.

     SECTION 3.5 Company SEC Documents; Undisclosed Liabilities.

          (a) The Company has filed and furnished all required reports, schedules, forms,
certifications, prospectuses, and registration, proxy and other statements with the SEC since
September 1, 2003 (collectively and together with all documents filed on a voluntary basis on Form
8-K, and in each case including all exhibits and schedules thereto and documents incorporated by
reference therein, the “Company SEC Documents”). None of the Company’s Subsidiaries is required to
file periodic reports with the SEC pursuant to the Exchange Act. As of their respective effective
dates (in the case of Company SEC Documents that are registration statements filed pursuant to the
requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all
other Company SEC Documents), the Company SEC Documents complied in all material respects with the
requirements of the Exchange Act, the Securities Act and the Sarbanes-Oxley Act, as the case may
be, applicable to such Company SEC Documents, and none of the Company SEC Documents as of such
respective dates contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of the date of this Agreement,
there are no outstanding or unresolved comments received from the SEC staff with respect to the
Company SEC Documents. To the Knowledge of the Company, none of the Company SEC Documents is the
subject of ongoing SEC review or investigation.

          (b) The consolidated financial statements of the Company included in the Company SEC Documents
comply as to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited quarterly statements, as indicated in the notes
thereto) applied on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments, none of which has been or

19

 

will be, individually or in the aggregate, material to the Company and its Subsidiaries taken as a
whole).

          (c) The Company has established and maintains internal control over financial reporting and
disclosure controls and procedures (as such terms are defined in Rule 13a-15 and Rule 15d-15 under
the Exchange Act); such disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated Subsidiaries, required to be
disclosed by the Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company’s principal executive officer and its principal
financial officer to allow timely decisions regarding required disclosure; and such disclosure
controls and procedures are effective to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms. 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 Board of Directors of
the Company (x) all significant deficiencies in the design or operation of internal controls which
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 (y) any fraud, whether or not material, that involves management or other employees who have a
significant role in the Company’s internal controls. The principal executive officer and the
principal financial officer of the Company have made all certifications required by the
Sarbanes-Oxley Act, the Exchange Act and any related rules and regulations promulgated by the SEC
with respect to the Company SEC Documents, and the statements contained in such certifications are
complete and correct.

          (d) The Company is in compliance in all material respects with the provisions of Section 13(b)
of the Exchange Act.

          (e) Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise, whether known or unknown) whether or
not required, if known, to be reflected or reserved against on a consolidated balance sheet of the
Company prepared in accordance with GAAP or the notes thereto, except liabilities (i) as and to the
extent reflected or reserved against on
the audited balance sheet of the Company and its Subsidiaries as of August 31, 2006 (the
“Balance Sheet Date”) (including the notes thereto) included in the Company SEC Documents filed by
the Company and publicly available prior to the date of this Agreement (the “Filed Company SEC
Documents”) or (ii) incurred after the Balance Sheet Date in the ordinary course of business
consistent with past practice that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Company Material Adverse Effect.

          (f) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to
become a party to, any joint venture, off-balance sheet partnership or any similar Contract
(including any Contract or arrangement relating to

20

 

any transaction or relationship between or among
the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate,
including any structured finance, special purpose or limited purpose entity or Person, on the other
hand or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the
SEC)), where the result, purpose or effect of such Contract is to avoid disclosure of any material
transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the
Company’s or such Subsidiary’s published financial statements or any Company SEC Documents.

     SECTION 3.6 Absence of Certain Changes or Events. Since the Balance Sheet Date there
have not been any events, changes, occurrences or state of facts that, individually or in the
aggregate, have had or could reasonably be expected to have a Company Material Adverse Effect.
Except as disclosed in the Filed Company SEC Documents, since the Balance Sheet Date (a) the
Company and its Subsidiaries have carried on and operated their respective businesses in all
material respects in the ordinary course of business consistent with past practice and (b) neither
the Company nor any of its Subsidiaries has taken any action described in Section 5.1 that if taken
after the date hereof and prior to the Effective Time without the prior written consent of Parent
would violate such provision. Without limiting the foregoing, except as disclosed in the Filed
Company SEC Documents, since the Balance Sheet Date there has not occurred any damage, destruction
or loss (whether or not covered by insurance) of any material asset of the Company or any of its
Subsidiaries which materially affects the use thereof.

     SECTION 3.7 Legal Proceedings. Except as disclosed in the Filed Company SEC Documents
and Section 3.7 of the Company Disclosure Schedule, there is no pending or, to the Knowledge of the
Company, threatened, material legal, administrative, arbitral or other proceeding, claim, suit or
action against, or governmental or regulatory investigation of, the Company or any of its
Subsidiaries, nor is there any injunction, order, judgment, ruling or decree imposed (or, to the
Knowledge of the Company, threatened to be imposed) upon the Company, any of its Subsidiaries or
the assets of the Company or any of its Subsidiaries, by or before any Governmental Authority.

     SECTION 3.8 Compliance With Laws; Permits. The Company and its Subsidiaries are (and
since September 1, 2003 have been) in compliance in all material
respects with all laws, statutes, ordinances, codes, rules, regulations, decrees and orders of
Governmental Authorities (collectively, “Laws”) applicable to the Company or any of its
Subsidiaries, any of their properties or other assets or any of their businesses or operations.
The Company and its Subsidiaries hold all material licenses, franchises, permits, certificates,
approvals and authorizations from Governmental Authorities, or required by Governmental Authorities
to be obtained, in each case necessary for the lawful conduct of their respective businesses
(collectively, “Permits”). The Company and its Subsidiaries are (and since September 1, 2003 have
been) in compliance in all material respects with the terms of all Permits. Since September 1,
2003, neither the Company nor any of its Subsidiaries has received written notice to the effect
that a Governmental Authority (a) claimed or alleged that the Company or any of its Subsidiaries
was not in compliance with all Laws applicable to the Company or any of its

21

 

Subsidiaries, any of
their properties or other assets or any of their businesses or operations or (b) was considering
the amendment, termination, revocation or cancellation of any Permit. To the Company’s Knowledge,
the consummation of the Merger, in and of itself, will not cause the revocation or cancellation of
any Permit.

     SECTION 3.9 Information Supplied. Subject to the accuracy of the representations and
warranties of Parent and Purchaser set forth in Section 4.4, neither the Schedule 14D-9 nor any
information supplied (or to be supplied) in writing by or on behalf of the Company specifically for
inclusion or incorporation by reference in the Offer Documents will, at the respective times the
Schedule 14D-9, the Offer Documents, or any amendments or supplements thereto, are filed with the
SEC or at the time they are first published, sent or given to stockholders of the Company, or at
the expiration of the Offer, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are made, not misleading.
The Proxy Statement (if any) will not, on the date it is first mailed to stockholders of the
Company, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading and will not, at the time of the Company
Stockholders Meeting (if such a meeting is held), omit to state any material fact necessary to
correct any statement in any earlier communication from the Company with respect to the
solicitation of proxies for the Company Stockholders Meeting which shall have become false or
misleading in any material respect. The Proxy Statement (if any) and the Schedule 14D-9 will
comply as to form in all material respects with the applicable requirements of the Exchange Act.
Notwithstanding the foregoing, the Company makes no representation or warranty with respect to
information supplied by or on behalf of Parent or Purchaser for inclusion or incorporation by
reference in any of the foregoing documents.

     SECTION 3.10 Tax Matters.

          (a) Each of the Company and its Subsidiaries has timely filed, or has caused to be timely
filed on its behalf (taking into account any extension of time within
which to file), all material Tax Returns required to be filed by it, and all such filed Tax
Returns are correct and complete in all material respects. All Taxes shown to be due on such filed
Tax Returns, or otherwise required to be paid by the Company or any of its Subsidiaries, have been
timely paid.

          (b) The most recent financial statements contained in the Filed Company SEC Documents reflect
an adequate reserve for all Taxes payable by the Company and its Subsidiaries for all taxable
periods (including any portion thereof) through the date of such financial statements. No
deficiency with respect to Taxes has been proposed, asserted or assessed against the Company or any
of its Subsidiaries.

          (c) Neither the Company nor any of its Subsidiaries has constituted either a “distributing
corporation” or a “controlled corporation” (within the meaning of

22

 

Section 355(a)(1)(A) of the Code)
in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code since
the effective date of Section 355(e) of the Code.

          (d) Except as set forth in Section 3.10(d) of the Company Disclosure Schedule, no audit or
other administrative or court proceeding relating to Taxes is pending with or threatened by any
Governmental Authority with respect to Taxes of the Company or any of its Subsidiaries and no
written notice thereof has been received.

          (e) Except as set forth in Section 3.10(e) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any contract, agreement, plan or other
arrangement that, individually or collectively, could give rise to the payment of any amount which
would not be deductible by reason of Section 162(m) or Section 280G of the Code or would be subject
to withholding under Section 4999 of the Code.

          (f) The Company will make available to Parent within five Business Days from the execution of
this Agreement correct and complete copies of (i) all income and franchise Tax Returns of the
Company and its Subsidiaries for the preceding three taxable years and (ii) any audit report issued
within the last three years (or otherwise with respect to any audit or proceeding in progress)
relating to income and franchise Taxes of the Company or any of its Subsidiaries.

          (g) Neither the Company nor any of its Subsidiaries (A) has been a member of an affiliated
group filing a consolidated, combined or unitary Tax Return (other than a group the common parent
of which was the Company), (B) engaged in any “reportable transaction” within the meaning of
Treasury Regulation § 1.6011-4(b), nor (C) waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency, nor has any request
been made in writing for any such extension or waiver. The Company and its Subsidiaries have
timely withheld, collected, deposited or paid all Taxes required to have been withheld, collected,
deposited or paid, as the case may be, in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other party.

          (h) For purposes of this Agreement: (x) “Taxes” shall mean (A) all federal, state, local or
foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory,
capital stock, license, withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and
charges of any kind whatsoever, (B) all interest, penalties, fines, additions to tax or additional
amounts imposed by any Governmental Authority in connection with any item described in clause (A),
and (C) any liability in respect of any items described in clauses (A) and/or (B) payable by reason
of contract, assumption, transferee liability, operation of Law, Treasury Regulation Section
1.1502-6(a) (or any predecessor or successor thereof of any analogous or similar provision under
Law) or otherwise, and (y) “Tax Returns” shall

23

 

mean any return, report, claim for refund, estimate,
information return or statement or other similar document relating to or required to be filed with
any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.

     SECTION 3.11 Employee Benefits and Labor Matters.

          (a) Section 3.11(a) of the Company Disclosure Schedule sets forth a correct and complete list
of: (i) all “employee benefit plans” (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)), (ii) all other employee benefit plans, policies,
agreements or arrangements, and (iii) all payroll practices, including employment, consulting or
other compensation agreements, or bonus or other incentive compensation, stock purchase, equity or
equity-based compensation, deferred compensation, change in control, severance, sick leave,
vacation, loans, salary continuation, health, life insurance and educational assistance plan,
policies, agreements or arrangements with respect to which the Company or any of its Subsidiaries
has any obligation or liability, contingent or otherwise, for current or former employees,
consultants or directors of the Company or any of its Subsidiaries (collectively, the “Company
Plans”). The negotiation, execution, delivery and performance of the Employee Severance Agreements
(as defined in Section 3.10(e) of the Company Disclosure Schedule) have been duly approved by the
compensation committee of the board of directors of the Company in accordance with Rule 14d-10 of
the Exchange Act.

          (b) Correct and complete copies of the following documents with respect to each of the Company
Plans will be delivered to Parent by the Company within five Business Days from the execution of
this Agreement to the extent applicable: (i) any plans and related trust documents, insurance
contracts or other funding arrangements, and all amendments thereto; (ii) the most recent Forms
5500 and all schedules thereto, (iii) the most recent IRS determination letter; (iv) the most
recent summary plan descriptions; and (v) written summaries of all non-written Company Plans.

          (c) The Company Plans have been maintained, in all material respects, in accordance with their
terms and with all applicable provisions of ERISA, the Code and other Laws.

          (d) The Company Plans intended to qualify under Section 401 or other tax-favored treatment
under of Subchapter B of Chapter 1 of Subtitle A of the Code are so qualified, and any trusts
intended to be exempt from federal income taxation under the Code are so exempt. To the Company’s
Knowledge, nothing has occurred with respect to the operation of the Company Plans that could cause
the loss of such qualification or exemption, or the imposition of any liability, penalty or tax
under ERISA or the Code.

          (e) Parent will not have any obligation to make any contribution or other payment to any
“multiemployer plan,” as defined in Section 3(37) of ERISA (a “Multiemployer Plan”) which it would
not have had but for the consummation of the Transactions.

24

 

          (f) None of the Company Plans has been subject to Title IV of ERISA or is a Multiemployer Plan
or is or has been subject to Sections 4063 or 4064 of ERISA.

          (g) There are no pending actions, claims or lawsuits arising from or relating to the Company
Plans, (other than routine benefit claims), nor does the Company have any Knowledge of facts that
could form the basis for any such claim or lawsuit.

          (h) All amendments and actions required to bring the Company Plans into conformity in all
material respects with all of the applicable provisions of the Code, ERISA and other applicable
Laws have been made or taken, except to the extent that such amendments or actions are not required
by law to be made or taken until a date after the Closing Date.

          (i) Except as set forth in Section 3.11(i) of the Company Disclosure Schedule, none of the
Company Plans provide for post-employment life or health coverage for any participant or any
beneficiary of a participant, except as may be required under Part 6 of the Subtitle B of Title I
of ERISA and at the expense of the participant or the participant’s beneficiary.

          (j) Except as set forth in Section 3.11(j) of the Company Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the Transactions will (i) result
in any payment becoming due to any employee, (ii) increase any benefits otherwise payable under any
Company Plan, (iii) result in the acceleration of the time of payment or vesting of any such
benefits under any such plan, or (iv) require any contributions or payments to fund any obligations
under any Company Plan.

          (k) Any individual who performs services for the Company or any of its Subsidiaries (other
than through a contract with an organization other than such individual) and who is not treated as
an employee of the Company or any of its
Subsidiaries for federal income tax purposes by the Company is not an employee for such
purposes.

          (l) None of the employees of the Company or its Subsidiaries is represented in his or her
capacity as an employee of the Company or any of its Subsidiaries by any labor organization.
Neither the Company nor any of its Subsidiaries has recognized any labor organization, nor has any
labor organization been elected as the collective bargaining agent of any employees, nor has the
Company or any of its Subsidiaries entered into any collective bargaining agreement or union
contract recognizing any labor organization as the bargaining agent of any employees. There is no
union organization activity involving any of the employees of the Company or any of its
Subsidiaries pending or, to the Knowledge of the Company, threatened, nor has there ever been union
representation involving any of the employees of the Company or any of its Subsidiaries. There is
no picketing pending or, to the Knowledge of the Company, threatened, and there are no strikes,
slowdowns, work stoppages, other job actions, lockouts, arbitrations, grievances or other labor
disputes involving any of the employees

25

 

of the Company or any of its Subsidiaries pending or, to
the Knowledge of the Company, threatened. There are no complaints, charges or claims against the
Company or any of its Subsidiaries pending or, to the Knowledge of the Company, threatened that
could be brought or filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of employment or failure
to employ by the Company or any of its Subsidiaries, of any individual. The Company and its
Subsidiaries are in compliance with all Laws relating to the employment of labor, including all
such Laws relating to wages, hours, the Worker Adjustment and Retraining Notification Act and any
similar state or local “mass layoff” or “plant closing” law (“WARN”), collective bargaining,
discrimination, civil rights, safety and health, workers’ compensation and the collection and
payment of withholding and/or social security taxes and any similar tax, except for immaterial
non-compliance. There has been no “mass layoff” or “plant closing” (as defined by WARN) with
respect to the Company or any of its Subsidiaries since January 1, 2005.

     SECTION 3.12 Environmental Matters.

          (a) Except for those matters that, individually or in the aggregate, have not had and could
not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole,
(A) each of the Company and its Subsidiaries is, and has been, in compliance with all applicable
Environmental Laws, (B) there is no investigation, suit, claim, action or proceeding relating to or
arising under Environmental Laws that is pending or, to the Knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries or any real property currently or, to
the Knowledge of the Company, formerly owned, operated or leased by the Company or any of its
Subsidiaries, (C) neither the Company nor any of its Subsidiaries has received any notice of or
entered into or assumed by Contract or operation of Law or otherwise, any obligation, liability,
order, settlement, judgment, injunction or decree relating to or arising under Environmental Laws,
and (D) no facts, circumstances or conditions exist with
respect to the Company or any of its Subsidiaries or any property currently (or, to the
Knowledge of the Company, formerly) owned, operated or leased by the Company or any of its
Subsidiaries or any property to or at which the Company or any of its Subsidiaries transported or
arranged for the disposal or treatment of Hazardous Materials that could reasonably be expected to
result in the Company and its Subsidiaries incurring Environmental Liabilities.

          (b) For purposes of this Agreement:

               (i) “Environmental Laws” means all Laws relating in any way to the environment, preservation
or reclamation of natural resources, the presence, management or Release of, or exposure to,
Hazardous Materials, or to human health and safety, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. § 5101 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the Toxic

26

 

Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. § 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. §
651 et seq.), each of their state and local counterparts or equivalents. each of their foreign and
international equivalents, and any transfer of ownership notification or approval statute
(including the Industrial Site Recovery Act (N.J. Stat. Ann. § 13:1K-6 et seq.), as each
has been amended and the regulations promulgated pursuant thereto.

               (ii) “Environmental Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other
Person or in response to any violation of Environmental Law, whether known or unknown, accrued or
contingent, whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute, to the extent based upon, related to, or arising under or pursuant to
any Environmental Law, environmental permit, order or agreement with any Governmental Authority or
other Person, which relates to any environmental, health or safety condition, violation of
Environmental Law or a Release or threatened Release of Hazardous Materials.

               (iii) “Hazardous Materials” means any material, substance of waste that is regulated,
classified, or otherwise characterized under or pursuant to any Environmental Law as “hazardous”,
“toxic”, a “pollutant”, a “contaminant”, “radioactive” or words of similar meaning or effect,
including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold, urea
formaldehyde insulation, chlorofluorocarbons and all other ozone-depleting substances.

               (iv) “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, disposing of or migrating into or through the environment
or any natural or man-made structure.

     SECTION 3.13 Contracts.

          (a) Set forth in Section 3.13(a) of the Company Disclosure Schedule is a list of the following
contracts to which the Company or any of its Subsidiaries is a party (other than contracts filed as
exhibits to the Filed Company SEC Documents and those with a value or which involve an obligation
of the Company in an amount less than $25,000): (A) Contract that purports to limit, curtail or
restrict the ability of the Company or any of its existing or future Subsidiaries or Affiliates to
compete in any geographic area or line of business or restrict the Persons to whom the Company or
any of its existing or future Subsidiaries or Affiliates may sell products or deliver services ,
(B) partnership or joint venture agreement, (C) Contract for the acquisition, sale or lease of
material properties or assets (by merger, purchase or sale of stock or assets or otherwise) entered
into since September 1, 2003, (D) Contract with any (x) Governmental Authority or (y) director or
officer of the Company or any of its Subsidiaries or any

27

 

Affiliate of the Company, (E) loan or
credit agreement, mortgage, indenture, note or other Contract or instrument evidencing indebtedness
for borrowed money by the Company or any of its Subsidiaries or any Contract or instrument pursuant
to which indebtedness for borrowed money may be incurred or is guaranteed by the Company or any of
its Subsidiaries, (F) financial derivatives master agreement or confirmation, or futures account
opening agreements and/or brokerage statements, evidencing financial hedging or similar trading
activities, (G) voting agreement or registration rights agreement, (H) mortgage, pledge, security
agreement, deed of trust or other Contract granting a Lien on any material property or assets of
the Company or any of its Subsidiaries, (I) customer or supply Contract that involves total
consideration in excess of $10,000, (J) collective bargaining agreement, (K) “standstill” or
similar agreement, (L) Contract that restricts or otherwise limits the payment of dividends or
other distributions on equity securities, (M) to the extent material to the business or financial
condition of the Company and its Subsidiaries, taken as a whole, (1) lease or rental Contract, (2)
product design or development Contract, (3) consulting Contract, (4) indemnification Contract, (5)
license or royalty Contract, (6) merchandising, sales representative or distribution Contract or
(7) Contract granting a right of first refusal or first negotiation, (N) Contract for the sale of
Hydrocarbons produced from or attributable to the Oil and Gas Interests, except those sales
contracts that can be terminated by Seller and its assigns upon not more than 90 days without
penalty or detriment to the Company and its assigns, (O) Contract that creates any area of mutual
interest with respect to the acquisition by Parent or its assigns of any Oil and Gas Interests, and
(P) commitment or agreement to enter into any of the foregoing (the Contracts and other documents
required to be listed on Section 3.13(a) of the Company Disclosure Schedule and those filed as
material contracts in exhibits to the Filed Company SEC Documents, together with any and all other
Contracts of such type entered into in accordance with Section 5.2(a), each a “Material Contract”).
The Company will make available to Parent within five Business Days from the execution of this
Agreement
correct and complete copies of each Material Contract in existence as of the date hereof,
together with any and all amendments and supplements thereto and material “side letters” and
similar documentation relating thereto.

          (b) Each of the Material Contracts is valid, binding and in full force and effect and is
enforceable in accordance with its terms by the Company and its Subsidiaries party thereto, subject
to the Bankruptcy and Equity Exception. Except as separately identified in Section 3.13(b) of the
Company Disclosure Schedule, no approval, consent or waiver of any Person is needed in order that
any Material Contract continue in full force and effect following the consummation of the
Transactions. Neither the Company nor any of its Subsidiaries is in default under any Material
Contract or other Contract to which the Company or any of its Subsidiaries is a party
(collectively, the “Company Contracts”), nor does any condition exist that, with notice or lapse of
time or both, would constitute a default thereunder by the Company and its Subsidiaries party
thereto, except for such defaults as, individually or in the aggregate, have not had and could not
reasonably be expected to be material to the Company and its Subsidiaries taken as a whole. To the
Knowledge of the Company, no other party to any Company

28

 

Contract is in default thereunder, nor does
any condition exist that with notice or lapse of time or both would constitute a default by any
such other party thereunder, except for such defaults as, individually or in the aggregate, have
not had and could not reasonably be expected to be material to the Company and its Subsidiaries
taken as a whole. Neither the Company nor any of its Subsidiaries has received any notice of
termination or cancellation under any Material Contract, received any notice of breach or default
in any material respect under any Material Contract. The Company has fully complied with all of
its obligations under Section 7 of the Amexco Agreement.

     SECTION 3.14 Properties.

          (a) The Company owns no real property other than the Oil and Gas Interests.

          (b) Section 3.14(b) of the Company Disclosure Schedule contains a complete and correct list of
all real property leases and any and all amendments thereto relating to the leased real property to
which the Company and its Subsidiaries are a party or are bound other than Leases related to Oil
and Gas Interests (the “Real Property Leases”). Except as disclosed in Section 3.14(b) of the
Company Disclosure Schedule, (i) each of the Real Property Leases is in full force and effect, and,
to the Company’s Knowledge, is enforceable against the landlord which is party thereto in
accordance with its terms (subject to the Bankruptcy and Equity Exception), (ii) there are no
subleases under the Real Property Leases and none of the Real Property Leases has been assigned,
(iii) no notices of default or notices of termination have been received by the Company with
respect to the Real Property Leases which have not been withdrawn or cancelled and (iv) the Company
and the Company’s Subsidiaries are not, and to the Company’s Knowledge, no other party is, in
default under any Real Property Lease. There is no Company Knowledge of, nor has there been receipt
of any written notice of, a proceeding
in eminent domain or other similar proceeding affecting property listed on Section 3.14(b) of
the Company Disclosure Schedule.

          (c) Section 3.14(c) of the Company Disclosure Schedule sets forth a description of all Oil and
Gas Interests owned by the Company and its Subsidiaries in the Principal Properties, including the
Net Revenue Interests and Working Interests of the Company or such Subsidiary therein. Except as
set forth in Section 3.14(c) of the Company Disclosure Schedule, each of the Company and its
Subsidiaries, as applicable, has Defensible Title to all of its respective Oil and Gas Interests in
the Principal Properties.

          (d) All net profits interests, overriding royalties and other similar interests held by third
parties in the Oil and Gas Interests of the Company and its Subsidiaries in the Principal
Properties that have been created or established by or through the Company or its Subsidiaries
(inclusive of those arising under that certain net profits agreement with the Venus Exploration
Trust) are (i) disclosed in the Filed Company SEC Documents or (ii) listed on Section 3.14(d) of
the Company Disclosure Schedule, and have been properly accounted for.

29

 

          (e) The Leases comprising the Oil and Gas Interests related to the Principal Properties are in
full force and effect, and to the Company’s Knowledge, all proceeds from the sale of the Company’s
and its Subsidiaries’ share of the Hydrocarbons being produced from such Oil and Gas Interests are
currently being paid in full to the Company or its Subsidiaries by the purchasers thereof on a
timely basis, and none of such proceeds are currently being held in suspense by such purchaser or
any other party, except as set forth in Section 3.14(e) of the Company Disclosure Schedule. No
person has any call upon, option to purchase, or similar rights with respect to any portion of the
production from such Leases.

          (f) Except for obligations incurred in the normal and ordinary course of operating the
Company’s business, Section 3.14(f) of the Company Disclosure Schedule sets forth the Company’s and
its Subsidiaries’ obligations to drill additional wells or conduct other material development
operations.

          (g) Except as disclosed in the Filed Company SEC Documents, to the Company’s Knowledge no
wells located on the Oil and Gas Interests of the Company and its Subsidiaries are shut-in or
incapable of producing for which the Company or any Company Subsidiary has or will have any
liability to plug and abandon or have been plugged and abandoned but have not been plugged in
accordance with all applicable requirements of each Governmental Authority having jurisdiction over
the Oil and Gas Interests.

          (h) To the Company’s Knowledge and other than as disclosed in Section 3.14(h) of the Company
Disclosure Schedule and the Nome Long #1 well as disclosed in the Filed Company SEC Documents,
there are no wellhead or pipeline imbalances attributable to the Oil and Gas Interests of the
Company and its Subsidiaries.

          (i) To the Company’s Knowledge (i) all of the material Wells in which the Company or any of
its Subsidiaries has a material Oil and Gas Interest have been drilled and completed within the
boundaries of such property or within the limits otherwise permitted by contract, pooling or unit
agreement, and applicable Law, and all drilling and completion of the material wells included in
each property and all development and operations on such property have been conducted in compliance
with all applicable Law, ordinances, rules, regulations and Permits, and judgments, orders and
decrees of any Governmental Authority and (ii) no material well included on any property is subject
to penalties on allowables after the date hereof because of any overproduction or any other
violation of applicable Law, rules, regulations or Permits or judgments, orders or decrees of any
Governmental Authority which would prevent such well from being entitled to its full legal and
regular allowable from and after the date hereof as prescribed by any Governmental Authority.

     SECTION 3.15 Reserve Reports; Hedging.

          (a) The reserve information of the Company and the Company Subsidiaries contained in the
Company’s Annual Report on Form 10-KSB for the fiscal

30

 

year ended August 31, 2006 is derived from a
reserve report prepared by Ryder Scott Company, L.P. (the “Reserve Report”). The factual,
non-interpretive data on which the Company’s estimates of proved oil and gas reserves attributable
to the Oil and Gas Interests of the Company and the Company’s Subsidiaries were based in connection
with the preparation by the Company of the proved oil and gas reserve reports concerning the Oil
and Gas Interests of the Company and the Company’s Subsidiaries as of August 31, 2006 were (at the
time included in, or as modified or amended prior to the issuance of, the Reserve Report) accurate
in all material respects. The estimates of proved oil and gas reserves used by the Company and the
present value of any future net cash flows therefrom in the Reserve Report are in accordance with
the definitions contained in Rule 4-10(a) of Regulation S-X promulgated by the SEC. Except for
changes generally affecting the oil and gas industry (including changes in commodity prices), there
has been no material change with respect to the matters addressed in the Reserve Report.

          (b) The Company has not entered into any Hydrocarbon and financial Hedging positions
attributable to the production of the Company and the Company’s Subsidiaries. For purposes of this
Agreement, a “Hedge” means a derivative transaction within the coverage of SFAS No. 133, including
any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction,
cap transaction, floor transaction or collar transaction relating to one or more currencies,
commodities, bonds, equity securities, loans, interest rates, credit-related events or conditions
or any indexes, or any other similar transaction (including any option with respect to any of these
transactions) or combination of any of these transactions, including collateralized mortgage
obligations or other similar instruments or any debt or equity instruments evidencing or embedding
any such types of transactions, and any related credit support, collateral or transportation
arrangements related to such transactions.

     SECTION 3.16 Insurance. Section 3.16 of the Company Disclosure Schedule sets forth a
correct and complete list of all insurance policies (including information on the premiums payable
in connection therewith and the scope and amount of the coverage provided thereunder) maintained by
the Company or any of its Subsidiaries (the “Policies”). The Policies (i) have been issued by
insurers which, to the Knowledge of the Company, are reputable and financially sound, (ii) provide
coverage for the operations conducted by the Company and its Subsidiaries of a scope and coverage
consistent with customary practice in the oil and gas industry and (iii) are in full force and
effect. Neither the Company nor any of its Subsidiaries is in material breach or default, and
neither the Company nor any of its Subsidiaries have taken any action or failed to take any action
which, with notice or the lapse of time, would constitute such a breach or default, or permit
termination or modification, of any of the Policies. No notice of cancellation or termination has
been received by the Company with respect to any of the Policies. The consummation of the
Transactions will not, in and of itself, cause the revocation, cancellation or termination of any
Policy.

     SECTION 3.17 Opinion of Financial Advisor. The Board of Directors of the Company has
received the Fairness Opinion and the Company has delivered to Parent a correct and complete copy
of the Fairness Opinion.

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     SECTION 3.18 Brokers and Other Advisors. Except for C.K. Cooper & Company, the
fees and expenses of which will be paid by the Company, no broker, investment banker, financial
advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar
fee or commission, or the reimbursement of expenses, in connection with the Transactions based upon
arrangements made by or on behalf of the Company or any of its Subsidiaries. The Company has
delivered to Parent a correct and complete copy of the Company’s engagement letters with C.K.
Cooper & Company, which letter describes all fees payable to C.K. Cooper & Company in connection
with the Transactions, all agreements under which any such fees or any expenses are payable and all
indemnification and other agreements related to the engagement of C.K. Cooper & Company (the
“Engagement Letters”).

     SECTION 3.19 State Takeover Statutes. No “fair price”, “moratorium”, “control share
acquisition” or other similar antitakeover statute or regulation enacted under state or federal
laws in the United States (with the exception of the Maryland Business Combination Act and the
Maryland Control Share Acquisition Act) applicable to the Company is applicable to the Offer, the
Merger or the other Transactions. The Board of Directors of the Company has taken all acts
necessary to exempt the Offer, the Merger, this Agreement and the Transactions from the Maryland
Business Combination Act and the Maryland Control Share Acquisition Act (as defined in Section
3-605 and 3-710 of the MGCL, respectively).

ARTICLE IV

Representations and Warranties of Parent and Purchaser

     Parent and Purchaser jointly and severally represent and warrant to the Company:

     SECTION 4.1 Organization. Each of Parent and Purchaser is a corporation duly
organized, validly existing and in good standing under the Laws of the jurisdiction in which it is
incorporated.

     SECTION 4.2 Authority; Noncontravention.

          (a) Each of Parent and Purchaser has all necessary corporate power and authority to execute
and deliver this Agreement, to perform their respective obligations hereunder and to consummate the
Transactions. The execution, delivery and performance by Parent and Purchaser of this Agreement,
and the consummation by Parent and Purchaser of the Transactions, have been duly authorized and
approved by their respective Boards of Directors (and has been adopted by Parent as the sole
stockholder of Purchaser), and no other corporate action on the part of Parent and Purchaser is
necessary to authorize the execution, delivery and performance by Parent and Purchaser of this
Agreement and the consummation by them of the Transactions. This Agreement has been duly executed
and delivered by Parent and Purchaser and, assuming due authorization, execution and delivery
hereof by the Company, constitutes a legal, valid and binding obligation of each of Parent and
Purchaser, enforceable against

32

 

each of them in accordance with its terms, subject to the Bankruptcy and Equity Exception.

          (b) Neither the execution and delivery of this Agreement by Parent and Purchaser, nor the
consummation by Parent or Purchaser of the Transactions, nor compliance by Parent or Purchaser with
any of the terms or provisions hereof, will (i) conflict with or violate any provision of the
articles of incorporation or bylaws of Parent or Purchaser or (ii) assuming that the
authorizations, consents and approvals referred to in Section 4.3 are obtained and the filings
referred to in Section 4.3 are made, (x) violate any Law, judgment, writ or injunction of any
Governmental Authority applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets, or (y) violate, conflict with, result in the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any Lien upon any of the
respective properties or assets of, Parent or Purchaser or any of their respective Subsidiaries
under, any of the terms, conditions or provisions of any Contract to which Parent, Purchaser or any
of their respective Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected except, in the case of clause (y), for such violations,
conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually
or in the aggregate, could not reasonably be expected to prevent or materially impair the ability
of Parent or Purchaser to consummate the Transactions (a “Parent Material Adverse Effect”).

     SECTION 4.3 Governmental Approvals. Except for (i) the filing with the SEC of the
Offer Documents and, if necessary, a Proxy Statement in definitive form relating to the Company
Stockholders Meeting, and other filings required under, and compliance with other applicable
requirements of, the Exchange Act and the rules of The AMEX, and (ii) the filing of the Articles of
Merger with the Department pursuant to the MGCL, no consents or approvals of, or filings,
declarations or registrations with, any Governmental Authority are necessary for the execution and
delivery of this Agreement by Parent and Purchaser or the consummation by Parent and Purchaser of
the Transactions, other than such other consents, approvals, filings, declarations or registrations
that, if not obtained, made or given, could not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.

     SECTION 4.4 Information Supplied. Subject to the accuracy of the representations and
warranties of the Company set forth in Section 3.9, none of the Schedule TO, the Offer Documents or
any information supplied (or to be supplied) in writing by or on behalf of Parent or Purchaser
specifically for inclusion or incorporation by reference in the Schedule 14D-9 will, at the
respective times the Schedule TO, the Offer Documents, the Schedule 14D-9, or any amendments or
supplements thereto, are filed with the SEC or at the time they are first published, sent or given
to stockholders of the Company, or at the expiration of the Offer, as the case may be, contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light of the

33

 

circumstances under which they are made, not misleading. The information supplied by Parent
for inclusion in the Proxy Statement (if any) will not, on the date it is first mailed to
stockholders of the Company, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they are made, not misleading, and will not, at the
time of the Company Stockholders Meeting (if such a meeting is held), omit to state any material
fact necessary to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Stockholders Meeting which shall have become false or
misleading in any material respect. The Schedule TO and the Offer Documents will comply as to form
in all material respects with the applicable requirements of the Exchange Act. Notwithstanding the
foregoing, Parent and Purchaser make no representation or warranty with respect to any information
supplied by or on behalf of the Company for inclusion or incorporation by reference in any of the
foregoing documents.

     SECTION 4.5 Ownership and Operations of Purchaser. Parent owns beneficially and of
record all of the outstanding capital stock of Purchaser. Purchaser was formed solely for the
purpose of engaging in the Transactions, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.

     SECTION 4.6 Financing. Parent and Purchaser collectively have, and will have at the
dates that Purchaser becomes obligated to accept for payment and pay for Shares pursuant to the
Offer, during the Subsequent Offering Period and at the Effective Time, sufficient cash resources
available to pay for the Shares that Purchaser becomes so obligated to accept for payment and pay
for pursuant to the Offer and to pay the aggregate Merger Consideration pursuant to the Merger.

     SECTION 4.7 Brokers and Other Advisors. No broker, investment banker, financial
advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar
fee or commission from the Company in connection with the Transactions based upon arrangements made
by or on behalf of Parent or any of its Subsidiaries.

ARTICLE V

Additional Covenants and Agreements

     SECTION 5.1 Conduct of Business. Except as expressly permitted by this Agreement or
as required by applicable Law, and unless Parent shall otherwise agree in writing, during the
period from the date of this Agreement until the Control Date, the Company shall, and shall cause
each of its Subsidiaries to, (a) conduct its business in the ordinary course consistent with past
practice, (b) comply in all material respects with all applicable Laws and the requirements of all
Material Contracts, (c) use commercially reasonable efforts to maintain and preserve intact its
business organization and the goodwill of those having business relationships with it and retain
the services of its present officers and key employees, in each case, to the end that its goodwill
and ongoing

34

 

business shall be unimpaired at the Effective Time, (d) (i) instruct all attorneys and legal
counsel for the Company and its Subsidiaries to move to stay or otherwise postpone the trial
setting for Civil Action No. 1:05-CVB-530-ESH pending in the United States District Court for the
Eastern District of Texas, Beaumont Division, including all discovery and other pre-trial
proceedings and (ii) except to the extent necessary to carry out the requirements of Section
5.01(d)(i) above, not to take any further action regarding, or to incur any further costs or
expenses related to, (1) any existing litigation or proceeding, or (2) any litigation or proceeding
arising after the date hereof without prior consultation with Parent; provided that if Parent,
Purchaser or any of their Affiliates commences any litigation or proceeding after the date hereof
against the Company, then Section 5.1(d)(ii) shall not apply with respect to such new litigation or
proceeding; provided, further, that if Purchaser has not purchased and acquired pursuant to the
Offer that number of Shares necessary to satisfy the Minimum Condition prior to July 31, 2007, then
the provision of these Sections 5.1(d)(i) and 5.1(d)(ii) shall expire and terminate, (e) submit to
Parent all third party proposals for drilling, reworking, deepening, plugging or abandonment
operations (collectively, “Third Party Proposals”) received by the Company or its Subsidiaries
which involves an expenditure by Company or any of its Subsidiaries in excess of $10,000 and,
unless Parent shall otherwise agree in writing, shall not and shall not permit any of its
Subsidiaries to consent to participation or non-participation in any Third Party Proposals, and (f)
keep in full force and effect all material insurance policies maintained by the Company and its
Subsidiaries, other than changes to such policies made in the ordinary course of business. Without
limiting the generality of the foregoing, except as expressly permitted by this Agreement or as
required by applicable Law, during the period from the date of this Agreement to the Control Date,
unless Parent shall otherwise agree in writing, the Company shall not, and shall not permit any of
its Subsidiaries to:

          (i)
(A) issue, sell, grant, dispose of, pledge or otherwise encumber any shares of its capital stock, voting securities or equity interests, or any securities or rights convertible into, exchangeable or exercisable for, or
evidencing the right to subscribe for any shares of its capital stock, voting
securities or equity interests, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or
acquire any shares of its capital stock, voting securities or equity interests or any
securities or rights convertible into, exchangeable or exercisable for, or
evidencing the right to subscribe for, any shares of its capital stock, voting
securities or equity interests, provided that the Company may issue shares of
Company Common Stock upon (1) the exercise of options granted under the Company
Stock Plans and Warrants and (2) the conversion of Convertible Securities, in each
case, that are outstanding on the date of this Agreement and in accordance with the
terms thereof; (B) redeem, purchase or otherwise acquire any of
its outstanding shares of capital stock, voting securities or equity interests, or any rights,
warrants, options, calls, commitments or any other agreements of any character to
acquire any shares of its capital stock, voting securities

35

 

or equity interests; (C) declare, set aside for payment or pay any dividend
on, or make any other distribution in respect of, any shares of its capital stock
or otherwise make any payments to its stockholders in their capacity as such (other
than dividends by a direct or indirect wholly owned Subsidiary of the Company to
its parent); (D) split, combine, subdivide or reclassify any shares of its capital
stock; or (E) amend (including by reducing an exercise price or extending a term)
or waive any of its rights under any provision of the Company Stock Plans or any
agreement evidencing any outstanding stock option or other right to acquire capital
stock of the Company or any restricted stock purchase agreement or any similar or
related contract;

          (ii) incur or assume any indebtedness for borrowed money (including any draws
on existing credit facilities) or guarantee any indebtedness (or enter into a “keep
well” or similar agreement) or issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of the Company or
any of its Subsidiaries;

          (iii) sell, transfer, lease, mortgage, encumber or otherwise dispose of or
subject to any Lien (including pursuant to a sale-leaseback transaction or an asset
securitization transaction) any of its properties or assets (including securities
of Subsidiaries) to any Person, except (A) sales of Hydrocarbons in the ordinary
course of business consistent with past practice or (B) pursuant to Contracts in
force at the date of this Agreement and listed on Section 5.1(iii) of the Company
Disclosure Schedule, correct and complete copies of which will be made available to
Parent within five Business Days from the execution of this Agreement;

          (iv) make any material expenditure, except for any capital expenditure already
agreed or committed to by the Company as of the date of this Agreement under any
existing authority for expenditure, operating agreement or similar contract
(capital expenditures include, without limitation, drilling, workover, completion
and equipment costs directly associated with Wells, but specifically excludes any
legal fees, consulting fees or fees for personal services of any nature);

          (v) directly or indirectly acquire (A) by merging or consolidating with, or by
purchasing all of or a substantial equity interest in, or by any other manner, any
Person or division, business or equity interest of any Person or, (B) except in the
ordinary course of business consistent with past practice, any assets;

          (vi) make any investment (by contribution to capital, property transfers,
purchase of securities or otherwise) in, or loan or advance (other than travel and
similar advances to its employees in the ordinary course of business consistent
with past practice) to, any Person other than a direct or

36

 

indirect wholly owned Subsidiary of the Company in the ordinary course of
business;

          (vii) (A) enter into, terminate or amend any Material Contract, or, other than
in the ordinary course of business consistent with past practice, any other
Contract that is material to the Company and its Subsidiaries taken as a whole, (B)
enter into or extend the term or scope of any Contract that purports to restrict
the Company, or any existing or future Subsidiary or Affiliate of the Company, from
engaging in any line of business or in any geographic area, (C) amend or modify the
Engagement Letters, (D) enter into any Contract that would be breached by, or
require the consent of any third party in order to continue in full force
following, consummation of the Transactions, or (E) release any Person from, or
modify or waive any provision of, any confidentiality, standstill or similar
agreement;

          (viii) increase in any manner the compensation of any of its directors,
officers or employees or enter into, establish, amend or terminate any employment,
consulting, retention, change in control, collective bargaining, bonus or other
incentive compensation, profit sharing, health or other welfare, stock option or
other equity (or equity-based), pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement, trust, fund
or arrangement with, for or in respect of, any stockholder, director, officer,
other employee, consultant or Affiliate, other than immaterial amendments that do
not increase benefits or costs under such plan, as required under this Agreement,
pursuant to applicable Law or pursuant to the terms of the agreements set forth on
Section 5.1(viii) of the Company Disclosure Schedule (correct and complete copies
of which will be made available to Parent within five Business Days from the date
of this Agreement);

          (ix) make, change or rescind any material election concerning Taxes or Tax
Returns, file any amended Tax Return, enter into any closing agreement with respect
to Taxes, settle or compromise any material Tax claim or assessment or surrender
any right to claim a refund of Taxes or obtain any Tax ruling;

          (x) make any changes in financial or tax accounting methods, principles or
practices (or change an annual accounting period), except insofar as may be
required by a change in GAAP or applicable Law;

          (xi) amend the Company Charter Documents or the Subsidiary Documents;

          (xii) adopt a plan or agreement of complete or partial liquidation,
dissolution, restructuring, recapitalization, merger,

37

 

          consolidation or other reorganization (other than transactions exclusively
between wholly owned Subsidiaries of the Company);

          (xiii) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge, settlement or satisfaction in accordance with
their terms of liabilities, claims or obligations reflected or reserved against in
the most recent consolidated financial statements (or the notes thereto) of the
Company included in the Filed Company SEC Documents or incurred since the date of
such financial statements in the ordinary course of business consistent with past
practice;

          (xiv) enter into any Hedging transactions;

          (xv) non-consent or agree to non-consent with respect to any Oil and Gas
Interest;

          (xvi) become bound or obligated to participate in any drilling operation, or
consent to participate in any drilling operation, with respect to any direct and
indirect interests in and rights with respect to Oil and Gas Interests that
requires a capital expenditure in each case in excess of $10,000 net to the
Company’s or its Subsidiaries’ interest unless (i) the operation is currently an
existing obligation of the Company or its Subsidiaries or (ii) is a workover or
similar operation necessary to extend, preserve or maintain an Oil and Gas
Interest;

          (xvii) settle or compromise any litigation or proceeding material to the
Company and its Subsidiaries taken as a whole (this covenant being in addition to
the Company’s agreement set forth in Section 5.8 hereof); or

          (xviii) agree, in writing or otherwise, to take any of the foregoing actions,
or take any action or agree, in writing or otherwise, to take any action which
would (A) cause any of the representations or warranties of the Company set forth
in this Agreement (1) that are qualified as to materiality or Material Adverse
Effect to be untrue or (2) that are not so qualified to be untrue in any material
respect, or (B) in any material respect impede or delay the ability of the parties
to satisfy any of the conditions to the Offer or the Merger set forth in this
Agreement (including Annex A hereto).

     SECTION 5.2 No Solicitation by the Company; Etc.

          (a) Subject to the terms of this Section 5.2(a), the Company shall, and shall cause its
Subsidiaries and the Company’s and its Subsidiaries’ respective directors, officers, employees,
investment bankers, financial advisors, attorneys, accountants, agents and other representatives
(collectively, “Representatives”)to, immediately cease

38

 

and cause to be terminated any discussions or negotiations with any
Person conducted heretofore with respect to a Takeover Proposal, and use best efforts to obtain the
return from all such Persons or cause the destruction of all copies of confidential information
previously provided to such parties by the Company, its Subsidiaries or Representatives. The
Company shall not, and shall cause its Subsidiaries and Representatives not to, directly or
indirectly (i) solicit, initiate, or knowingly take any action to facilitate or encourage
(including by way of furnishing information) any inquiries or proposals that constitute, or may
reasonably be expected to lead to, any Takeover Proposal, (ii) participate in any discussions or
negotiations with any third party regarding any Takeover Proposal or (iii) enter into any agreement
related to any Takeover Proposal; provided, however, that if after the date hereof the Board of
Directors of the Company receives an unsolicited, bona fide written Takeover Proposal made after
the date hereof in circumstances not involving a breach of this Agreement or any standstill
agreement, and the Board of Directors of the Company reasonably believes in good faith that such
Takeover Proposal will lead to a Superior Proposal and with respect to which such Board determines
in good faith, after considering applicable provisions of state law and after consulting with and
receiving the advice of outside counsel, that the taking of such action is necessary in order for
such Board of Directors to comply with its duties as directors under Section 2-405.1 of the MGCL,
then the Company may at any time prior to the Purchase Date (but in no event after the Purchase
Date) and after providing Parent not less than 24 hours written notice of its intention to take
such actions, directly or indirectly through advisors, agents or other intermediaries (A) furnish
information with respect to the Company and its Subsidiaries to the Person making such Takeover
Proposal, but only after such Person enters into a customary confidentiality agreement with the
Company, provided that (1) such confidentiality agreement may not include any provision calling for
an exclusive right to negotiate with the Company and (2) the Company advises Parent of all such
non-public information delivered to such Person concurrently with its delivery to such Person and
concurrently with its delivery to such Person the Company delivers to Parent all such information
not previously provided to Parent, and (B) participate in discussions and negotiations with such
Person regarding such Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the foregoing restrictions by the Company’s Subsidiaries or Representatives shall be
deemed to be a breach of this Section 5.2 by the Company. The Company shall provide Parent with a
correct and complete copy of any confidentiality agreement entered into pursuant to this paragraph
within 24 hours of the execution thereof.

          (b) In addition to the other obligations of the Company set forth in this Section 5.2, the
Company shall promptly advise Parent, orally and in writing, and in no event later than 24 hours
after receipt, if any proposal, offer, inquiry or other contact is received by, any information is
requested from, or any discussions or negotiations are sought to be initiated or continued with,
the Company in respect of any Takeover Proposal, and shall, in any such notice to Parent, indicate
the identity of the Person making such proposal, offer, inquiry or other contact and the terms and
conditions of any proposals or offers or the nature of any inquiries or contacts, and thereafter
shall promptly keep Parent fully informed of all material developments affecting the status and

39

 

terms of any such proposals, offers, inquiries or requests and of the status of any such
discussions or negotiations.

          (c) Except as expressly permitted by this Section 5.2(c), neither the Board of Directors of
the Company nor any committee thereof shall (i)(A) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Parent, the recommendation by such Board of Directors
that stockholders of the Company accept the Offer, tender their Shares to Purchaser pursuant
thereto and adopt this Agreement (the “Company Recommendation”) or the approval or declaration of
advisability by such Board of Directors of this Agreement and the Transactions (including the Offer
and the Merger) or (B) approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal (any action described in this clause (i) being referred to as a “Company Adverse
Recommendation Change”), (ii) approve or recommend, or propose publicly to approve or recommend, or
cause or authorize the Company or any of its Subsidiaries to enter into, any letter of intent,
agreement in principle, memorandum of understanding, merger, acquisition, purchase or joint venture
agreement or other agreement related to any Takeover Proposal (other than a confidentiality
agreement in accordance with Section 5.2(a)) (each, a “Company Acquisition Agreement”) or (iii)
except as contemplated by this Agreement, amend or waive the Rights Agreement, redeem the Rights or
take any action which would allow any Person other than Parent or Purchaser to acquire beneficial
ownership of 15% (or, if applicable, the Grandfathered Percentage, as such term is defined in the
Rights Agreement) or more of the shares of Company Common Stock without causing a “Distribution
Date,” or the “Shares Acquisition Date” (each as defined in the Rights Agreement) to occur.
Notwithstanding the foregoing, (x) the Board of Directors of the Company may withdraw or modify the
Company Recommendation, recommend a Takeover Proposal, or redeem the Rights, amend or waive the
Rights Agreement, if such Board determines in good faith, after reviewing applicable provisions of
state law and after consulting with outside counsel, that the failure to make such withdrawal,
modification, recommendation or redemption would constitute a breach by the Board of Directors of
the Company of its fiduciary duties to the Company’s stockholders under Maryland law, and (y) if
the Board of Directors of the Company receives after the date hereof an unsolicited, bona fide
written Takeover Proposal that was made in circumstances not involving a breach of this Agreement
and that such Board determines in good faith constitutes a Superior Proposal, the Board of
Directors of the Company may, in response to such Superior Proposal and within 48 hours after the
expiration of the three business day period described below (but in no event later than the
Purchase Date), enter into a Company Acquisition Agreement with respect to such Superior Proposal
if the Company shall have concurrently with entering into such Company Acquisition Agreement
terminated this Agreement pursuant to Section 7.1(c)(i) and prior thereto paid the Termination Fee
required pursuant to Section 7.3, but only after the third business day following Parent’s receipt
of written notice from the Company advising Parent that the Board of Directors of the Company is
prepared to enter into a Company Acquisition Agreement with respect to such Superior Proposal
(which notice shall include the most
current versions of such agreement and proposal) and terminate this Agreement, and only if,
during such three business day 

40

 

period, the Company and its representatives shall have negotiated in
good faith with Parent and Parent’s representatives to make such adjustments in the terms of this
Agreement as would enable Parent to proceed with the transactions contemplated by this Agreement on
such adjusted terms and, at the end of such three business day period, after taking into account
any such adjusted terms as may have been proposed by Parent since its receipt of such written
notice, the Board of Directors of the Company has again in good faith made the determination
referred to above in this clause (y).

          (d) For purposes of this Agreement:

          “Takeover Proposal” means any inquiry, proposal or offer from any Person or “group” (as
defined in Section 13(d) of the Exchange Act), other than Parent and its Subsidiaries, relating to
any (A) direct or indirect acquisition (whether in a single transaction or a series of related
transactions) of assets of the Company and its Subsidiaries (including securities of Subsidiaries)
equal to 15% or more of the Company’s consolidated assets or to which 15% or more of the Company’s
revenues or earnings on a consolidated basis are attributable, (B) direct or indirect acquisition
(whether in a single transaction or a series of related transactions) of 15% or more of any class
of equity securities of the Company, (C) tender offer or exchange offer that if consummated would
result in any Person or “group” (as defined in Section 13(d) of the Exchange Act) beneficially
owning 15% or more of any class of equity securities of the Company or (D) merger, consolidation,
share exchange, business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries; in each case, other than the
Transactions.

          “Superior Proposal” means a bona fide written offer, obtained after the date hereof and not in
breach of this Agreement or any standstill agreement, to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, all of the equity securities of the Company or
all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis,
made by a third party, which is not subject to a financing contingency and which is otherwise on
terms and conditions which the Board of Directors of the Company determines in its good faith and
reasonable judgment (after consultation with outside counsel and its financial advisor) to be more
favorable to the Company’s stockholders from a financial point of view than the Offer, the Merger
and the other Transactions, taking into account at the time of determination any changes to the
terms of this Agreement that as of that time had been proposed by Parent in writing and the ability
of the Person making such proposal to consummate the transactions contemplated by such proposal
(based upon, among other things, the availability of financing and the expectation of obtaining
required approvals).

          (e) Nothing in this Section 5.2 shall prohibit the Board of Directors of the Company from
taking and disclosing to the Company’s stockholders a position contemplated by Rule 14e-2, Rule
14d-9 and Schedule 14D-9 if such Board determines in good faith, after consultation with outside
counsel, that failure to so disclose such
position would constitute a violation of applicable Law; provided, however, that in no

41

 

event
shall the Company or its Board of Directors or any committee thereof take, or agree or resolve to
take, any action prohibited by Section 5.2(c).

     SECTION 5.3 Reasonable Best Efforts.

          (a) Subject to the terms and conditions of this Agreement (including Section 5.3(d)), each of
the parties hereto shall cooperate with the other parties and use (and shall cause their respective
Subsidiaries to use) their respective reasonable best efforts to promptly (i) take, or cause to be
taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable to
cause the conditions to Closing to be satisfied as promptly as practicable and to consummate and
make effective, in the most expeditious manner practicable, the Transactions, including preparing
and filing promptly and fully all documentation to effect all necessary filings, notices,
petitions, statements, registrations, submissions of information, applications and other documents
(including any required or recommended filings under applicable Laws), and (ii) obtain all
approvals, consents, registrations, permits, authorizations and other confirmations from any
Governmental Authority or third party necessary, proper or advisable to consummate the
Transactions.

          (b) In furtherance and not in limitation of the foregoing, the Company shall use its
reasonable best efforts to (x) take all action necessary to ensure that no state takeover statute
or similar Law is or becomes applicable to any of the Transactions and (y) if any state takeover
statute or similar Law becomes applicable to any of the Transactions, take all action necessary to
ensure that the Transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise minimize the effect of such Law on the Transactions.

          (c) Each of the parties hereto shall use its reasonable best efforts to (i) cooperate in all
respects with each other in connection with any filing or submission with a Governmental Authority
in connection with the Transactions and in connection with any investigation or other inquiry by or
before a Governmental Authority relating to the Transactions, including any proceeding initiated by
a private party, and (ii) keep the other party informed in all material respects and on a
reasonably timely basis of any material communication received by such party from, or given by such
party to, any Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of the Transactions.

     SECTION 5.4 Public Announcements. The initial press release with respect to the
execution of this Agreement shall be a joint press release to be reasonably agreed upon by Parent
and the Company. Thereafter, neither the Company nor Parent shall issue or cause the publication
of any press release or other public announcement (to the extent not previously issued or made in
accordance with this Agreement) with respect to the Offer, the Merger, this Agreement or the other
Transactions without the prior consent of the other party (which consent shall not be unreasonably
withheld or delayed),
except as may be required by Law or by any applicable listing agreement with a national
securities

42

 

exchange as determined in the good faith judgment of the party proposing to make such
release.

     SECTION 5.5 Access to Information. Subject to applicable Laws relating to the
exchange of information, the Company shall, and shall cause each of its Subsidiaries to, afford to
Parent and Parent’s representatives reasonable access during normal business hours to all of the
Company’s and its Subsidiaries’ offices, facilities, properties, commitments, books, Contracts,
records and correspondence (in each case, whether in physical or electronic form), officers,
employees, accountants, counsel, financial advisors and other Representatives for reasonable
purposes relating to this Agreement, the Transactions contemplated hereby (including, without
limitation, monitoring the Company’s compliance with Section 5.1 of this Agreement) and the Company
shall furnish promptly to Parent (i) a copy of each report, schedule and other document filed or
submitted by it pursuant to the requirements of Federal or state securities Laws and a copy of any
communication (including “comment letters”) received by the Company from the SEC concerning
compliance with securities Laws and (ii) all other information concerning its and its Subsidiaries’
business, properties and personnel as Parent may reasonably request. No investigation, or
information received, pursuant to this Section 5.5 will modify any of the representations and
warranties of the Company.

     SECTION 5.6 Notification of Certain Matters. The Company shall give prompt notice to
Parent, and Parent shall give prompt notice to the Company, of (i) any notice or other
communication received by such party from any Governmental Authority in connection with the
Transactions or from any Person alleging that the consent of such Person is or may be required in
connection with the Transactions, if the subject matter of such communication or the failure of
such party to obtain such consent could be material to the Company, the Surviving Corporation or
Parent, (ii) any actions, suits, claims, investigations or proceedings commenced or, to such
party’s Knowledge, threatened against, relating to or involving or otherwise affecting such party
or any of its Subsidiaries which relate to the Transactions, (iii) the discovery of any fact or
circumstance that, or the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which, would cause any representation or warranty made by such party contained in
this Agreement (A) that is qualified as to materiality or Material Adverse Effect to be untrue and
(B) that is not so qualified to be untrue in any material respect, and (iv) any material failure of
such party to comply with or satisfy any covenant or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.6 shall
not (x) cure any breach of, or non-compliance with, any other provision of this Agreement or (y)
limit the remedies available to the party receiving such notice.

     SECTION 5.7 Indemnification and Insurance.

          (a) From and after the Control Date, Parent shall, or shall cause the Surviving Corporation to
(i) indemnify the individuals who at or prior to the Effective Time were directors or officers of
the Company (collectively, the “Indemnitees”) with respect to all acts or omissions by them in
their capacities as such at any time prior to the

43

 

Effective Time, to the fullest extent (A)
required by the Company Charter Documents as in effect on the date of this Agreement and (B)
permitted under applicable Law (including, without limitation, the advancement of reasonable
attorney’s fees and disbursements, which shall be paid, reimbursed or advanced by Parent or the
Surviving Corporation prior to the final disposition thereof without the requirement of any bond or
other security).

          (b) Parent shall use its reasonable best efforts to cause the Indemnitees to be covered for a
period of six years from the Effective Time by such directors’ and officers’ liability insurance
policy currently maintained by the Company (a correct and complete copy of which has been delivered
to Parent by the Company) (provided that Parent may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions that are not less advantageous in any
material respect than such policy) with respect to acts or omissions occurring prior to the
Effective Time that were committed by the Indemnitees in their capacity as such; provided, that in
no event shall Parent be required to expend per year of coverage more than 150% of the amount
currently expended by the Company per year of coverage as of the date of this Agreement (the
“Maximum Amount”) to maintain or procure insurance coverage pursuant hereto. Alternatively, Parent
may purchase “tail” insurance coverage covering for a period of six years from the Effective Time,
at a cost no greater than the Maximum Amount, that provides coverage identical in all material
respects to the coverage described above. If notwithstanding the use of reasonable best efforts to
do so, Parent is unable to maintain or obtain the insurance called for by this paragraph, Parent
shall obtain as much comparable insurance as available for the Maximum Amount. The Indemnitees may
be required to make reasonable application and provide reasonable and customary representations and
warranties to applicable insurance carriers for the purpose of obtaining such insurance.

          (c) If Parent, the Surviving Corporation or any of its successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary, proper provision
shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section 5.7.

          (d) The rights of each Indemnitee under this Section 5.7 shall be in addition to any rights
such Person may have under the Company Charter Documents or any of its Subsidiaries, under Maryland
law or any other applicable laws or under any agreement of any Indemnitee with the Company or any
of its Subsidiaries.

          (e) The Indemnitees to whom this Section 5.7 applies shall be third party beneficiaries of
this Section 5.7. The provisions of this Section 5.7 are intended to be for the benefit of each
Indemnitee and his or her heirs.

44

 

     SECTION 5.8 Securityholder Litigation. The Company shall give Parent the opportunity
to participate in the defense or settlement of any securityholder litigation against the Company
and/or its directors relating to the Transactions, and no such settlement shall be agreed to
without Parent’s prior consent, which shall not be unreasonably withheld or delayed.

     SECTION 5.9 Fees and Expenses. Except as provided in Section 7.3, all fees and
expenses incurred in connection with this Agreement and the Transactions shall be paid by the party
incurring such fees or expenses, whether or not the Transactions are consummated. Other than any
Taxes imposed upon a holder of Shares or PYR Energy Options (which Taxes shall be borne by such
holder as provided herein), Parent shall pay all Taxes incident to preparing for, entering into and
carrying out this Agreement and the consummation of the Transactions (including (i) transfer, stamp
and documentary Taxes or fees and (ii) sales, use, gains, real property transfer and other or
similar Taxes or fees).

ARTICLE VI

Conditions to the Merger

     SECTION 6.1 Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligations of each party hereto to effect the Merger shall be subject to the
satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of
the following conditions:

          (a) The Merger shall have been duly approved by the requisite vote of the holders of Company
Common Stock, if, and to the extent required by, applicable Law and the articles of incorporation
of the Company;

          (b) No Law, injunction, judgment or ruling enacted, promulgated, issued, entered, amended or
enforced by any Governmental Authority shall be in effect enjoining, restraining, preventing or
prohibiting consummation of the Merger or making the consummation of the Merger illegal; and

          (c) Purchaser shall have purchased Shares pursuant to the Offer (provided that this shall not
be a condition to Parent’s and Purchaser’s obligations if Purchaser shall have failed to purchase
Shares pursuant to the Offer in violation of this Agreement).

ARTICLE VII

Termination

     SECTION 7.1 Termination. This Agreement may be terminated and the Transactions
abandoned at any time prior to the Effective Time, whether before or after receipt of the Company
Stockholder Approval:

45

 

          (a) by the mutual written consent of the Company and Parent duly authorized by the Board of
Directors of the Company (including, from and after the Purchase Date, the Independent Director
Approval contemplated by Section 1.3) and the Board of Directors of Parent; or

          (b) by either of the Company or Parent:

               (i) if any Governmental Authority shall have enacted, promulgated, issued, entered, amended or
enforced (A) a Law prohibiting the Offer or the Merger or making the Offer or the Merger illegal,
or (B) an injunction, judgment, order, decree or ruling, or taken any other action, in each case,
enjoining, restraining, preventing or prohibiting the Offer or the Merger and such injunction,
judgment, order, decree or ruling or other action shall have become final and non-appealable;
provided, that the right to terminate this Agreement under this Section 7.1(b)(i) shall not be
available to a party if the issuance of such final, non-appealable injunction, judgment, order,
decree or ruling was primarily due to the failure of such party to perform any of its obligations
under this Agreement;

               (ii) if the Offer shall have expired pursuant to its terms (and not have been extended in
accordance with Section 1.1 hereof) without any Shares being purchased therein, provided, that the
right to terminate this Agreement under this Section 7.1(b)(ii) shall not be available to any party
whose failure to perform any of its obligations under this Agreement resulted in the failure of
Purchaser to purchase Shares in the Offer; or

               (iii) if no Shares shall have been purchased pursuant to the Offer on or before the Walk-Away
Date; provided, that the right to terminate this Agreement under this Section 7.1(b)(iii) shall not
be available to any party whose failure to perform any of its obligations under this Agreement
resulted in the failure of the Offer to be so consummated by the Walk-Away Date; or

          (c) by the Company:

               (i) if concurrently it enters into a definitive Company Acquisition Agreement providing for a
Superior Proposal in accordance with Section 5.2, provided that (x) prior thereto or simultaneously
therewith the Company shall have paid or caused to be paid the Termination Fee to Parent in
accordance with Section 7.3 (and such termination of this Agreement by the Company shall not take
effect unless and until the Termination Fee shall have been paid to Parent) and (y) the Company
shall also have complied with all the other requirements of Section 5.2; provided further, however,
that the Company may only exercise this termination right prior to the Purchase Date; or

               (ii) if (A) the representations and warranties of Parent or Purchaser set forth in this
Agreement that are qualified as to “materiality” or “Material Adverse Effect” shall not be true and
correct, or the representations and warranties of Parent or Purchaser set forth in this Agreement
that are not so qualified shall not be true

46

 

and correct in all material respects, in each case, on and as of the date of this Agreement
and on and as of the date of such determination as if made on such date (other than those
representations and warranties that address matters only as of a particular date which are true and
correct as of such date), or (B) Parent or Purchaser shall have breached or failed in any material
respect to perform or comply with any obligation, agreement or covenant required by this Agreement
to be performed or complied with by them, which inaccuracy, breach or failure (in each case under
clauses (A) and (B)) cannot be cured or has not been cured by the earlier of (I) the next scheduled
expiration date of the Offer pursuant to Section 1.1 and (II) ten business days after Parent
receives notice of such inaccuracy, breach or failure; provided, however, that the Company may only
exercise this termination right prior to the Purchase Date; or

          (d) by Parent:

               (i) if a Company Adverse Recommendation Change shall have occurred;

               (ii) if (A) after the date of this Agreement there shall have occurred any events or changes
that, individually or in the aggregate, have had or could reasonably be expected to have a Company
Material Adverse Effect or (B)(x) the representations and warranties of the Company set forth in
this Agreement that are qualified as to “materiality” or “Material Adverse Effect” shall not be
true and correct, or the representations and warranties of the Company set forth in this Agreement
that are not so qualified shall not be true and correct in all material respects, in each case, on
and as of the date of this Agreement and on and as of the date of such determination as if made on
such date (other than those representations and warranties that address matters only as of a
particular date which are true and correct as of such date), or (y) the Company shall have breached
or failed in any material respect to perform or comply with any obligation, agreement or covenant
required by this Agreement to be performed or complied with by it, which inaccuracy, breach or
failure (in each case under clauses (x) and (y)) cannot be cured or has not been cured by the
earlier of (I) the next scheduled expiration date of the Offer pursuant to Section 1.1 and (II) ten
business days after the Company receives notice of such inaccuracy, breach or failure; provided,
however, that Parent may only exercise this termination right prior to the Purchase Date; or

               (iii) if any of the events described in paragraph (d) of Annex A shall have occurred;
provided, however, that Parent may only exercise this termination right prior to the Purchase Date.

     SECTION 7.2 Effect of Termination. In the event of the termination of this Agreement
as provided in Section 7.1, written notice thereof shall be given to the other party or parties,
specifying the provision hereof pursuant to which such termination is made, and this Agreement
shall forthwith become null and void (other than Sections 5.7, 5.9, 7.2, 7.3, 8.7, 8.8 and the
first sentence of Section 3.18, all of which shall survive termination of this Agreement), and
there shall be no liability on the part of Parent or the Company or their respective directors,
officers and Affiliates, except (i) the Company

47

 

may have liability as provided in Section 7.3, and (ii) nothing shall relieve any party from
liability for fraud or any willful breach of this Agreement.

     SECTION 7.3 Termination Fee.

          (a) In the event that:

               (i) (A) a Takeover Proposal shall have been made known to the Company or shall have
been made directly to its stockholders generally or any Person shall have publicly
announced an intention (whether or not conditional or withdrawn) to make a Takeover
Proposal and thereafter, (B) this Agreement is terminated by the Company or Parent pursuant
to Section 7.1(b)(ii) or Section 7.1(b)(iii), and (C) the Company enters into a definitive
agreement with respect to, or consummates, a transaction contemplated by any Takeover
Proposal within eighteen (18) months of the date this Agreement is terminated; 

               (ii) (A) a Takeover Proposal shall have been made known to the Company or shall have
been made directly to its stockholders generally or any Person shall have publicly
announced an intention (whether or not conditional or withdrawn) to make a Takeover
Proposal and thereafter, (B) this Agreement is terminated by Parent pursuant to Section
7.1(d)(ii)(B) and the Company’s breach or failure triggering such termination shall have
been willful, and (C) the Company enters into a definitive agreement with respect to, or
consummates, a transaction contemplated by any Takeover Proposal within eighteen (18)
months of the date this Agreement is terminated;

               (iii) this Agreement is terminated by Parent pursuant to Section 7.1(d)(i); or

               (iv) this Agreement is terminated by the Company pursuant to Section 7.1(c)(i);

then in any such event under clause (i), (ii), (iii) or (iv) of this Section 7.3(a), the Company
shall pay to Parent a termination fee of $3,000,000 in cash (the “Termination Fee”).

          (b) Any payment required to be made pursuant to clause (i) or clause (ii) of Section 7.3(a)
shall be made to Parent promptly following the earlier of the execution of a definitive agreement
with respect to, or the consummation of, any transaction contemplated by, a Takeover Proposal (and
in any event not later than two Business Days after delivery to the Company of notice of demand for
payment); any payment required to be made pursuant to clause (iii) of Section 7.3(a) shall be made
to Parent promptly following termination of this Agreement by Parent pursuant to Section 7.1(d)(i)
(and in any event not later than two Business Days after delivery to the Company of notice of
demand for payment); any payment required to be made pursuant to clause (iv) of Section 7.3(a)
shall be made to Parent prior to or simultaneously with

48

 

(and as a condition to the effectiveness of) termination of this Agreement by the Company
pursuant to Section 7.1(c)(i). All such payments shall be made by wire transfer of immediately
available funds to an account to be designated by Parent.

          (c) In the event that the Company shall fail to pay the Termination Fee required pursuant to
this Section 7.3 when due, such fee shall accrue interest for the period commencing on the date
such fee became past due, at a rate equal to the rate of interest publicly announced by Citibank,
in the City of New York from time to time during such period, as such bank’s Prime Lending Rate.
In addition, if the Company shall fail to pay such fee when due, the Company shall also pay to
Parent all of Parent’s costs and expenses (including attorneys’ fees) in connection with efforts to
collect such fee. The Company acknowledges that the fee and the other provisions of this Section
7.3 are an integral part of the Transactions and that, without these agreements, Parent would not
enter into this Agreement.

ARTICLE VIII

Miscellaneous

     SECTION 8.1 No Survival, Etc. Except as otherwise provided in this Agreement, the
representations, warranties and agreements of each party hereto shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any other party hereto,
any Person controlling any such party or any of their officers, directors or representatives,
whether prior to or after the execution of this Agreement, and no information provided or made
available shall be deemed to be disclosed in this Agreement or in the Company Disclosure Schedule,
except to the extent actually set forth herein or therein. The representations, warranties and
agreements in this Agreement shall terminate at the Effective Time or, except as otherwise provided
in Section 7.2, upon the termination of this Agreement pursuant to Section 7.1, as the case may be,
except that the agreements set forth in Article II and Sections 5.7 and 5.9 and any other agreement
in this Agreement which contemplates performance after the Effective Time shall survive the
Effective Time indefinitely and those set forth in Sections 7.2, 7.3, 8.1, 8.7 and 8.8 shall
survive termination indefinitely.

     SECTION 8.2 Amendment or Supplement. At any time prior to the Effective Time, this
Agreement may be amended or supplemented in any and all respects, whether before or after approval
of any of the transactions contemplated hereby by stockholders of the Company, by written agreement
of the parties hereto, by action taken by their respective Boards of Directors (which in the case
of the Company after the Purchase Date shall include the Independent Director Approval contemplated
by Section 1.3); provided, however, that following approval of the Transactions by the stockholders
of the Company, there shall be no amendment or change to the provisions hereof which by Law would
require further approval by the stockholders of the Company without such approval.

49

 

     SECTION 8.3 Extension of Time, Waiver, Etc. At any time prior to the Effective Time,
any party may, subject to applicable Law, (a) waive any inaccuracies in the representations and
warranties of any other party hereto, (b) extend the time for the performance of any of the
obligations or acts of any other party hereto or (c) waive compliance by the other party with any
of the agreements contained herein or, except as otherwise provided herein, waive any of such
party’s conditions; provided, that, in the case of the Company following the Purchase Date, the
Independent Director Approval contemplated by Section 1.3 is obtained. Notwithstanding the
foregoing, no failure or delay by the Company, Parent or Purchaser in exercising any right
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 hereunder. Any
agreement on the part of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.

     SECTION 8.4 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by
any of the parties without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted assigns. Any
purported assignment not permitted under this Section shall be null and void.

     SECTION 8.5 Counterparts. This Agreement may be executed in counterparts (each of
which shall be deemed to be an original but all of which taken together shall constitute one and
the same agreement) and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.

     SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement, together
with Annex A hereto, and the Company Disclosure Schedule (a) constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof and thereof and (b) except for the
provisions of Section 5.7, are not intended to and shall not confer upon any Person other than the
parties hereto any rights or remedies hereunder.

     SECTION 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.

          (a) The laws of the State of Maryland (without giving effect to its conflicts of law
principles) govern this Agreement and all matters arising out of or relating to this Agreement and
any of the transactions contemplated hereby, including its negotiation, execution, validity,
interpretation, construction, performance and enforcement.

          (b) The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the circuit
court of Montgomery County (or any federal court sitting in the

50

 

State of Maryland) over any action or proceeding arising out of or relating to this Agreement
or any of the transactions contemplated hereby and each party hereto hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined in such courts. The
parties hereto hereby irrevocably waive any objection which they may now or hereafter have to the
laying of venue of any action or proceeding brought in such court or any claim that such action or
proceeding brought in such court has been brought in an inconvenient forum. Each of the parties
hereto agrees that a judgment in such action or proceeding may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by Law. Each of the parties hereto hereby
irrevocably consents to process being served by any party to this Agreement in any action or
proceeding by delivery of a copy thereof in accordance with the provisions of Section 8.9.

          (c) Each of the parties hereto hereby irrevocably waives any and all rights to trial by jury
in any legal proceeding arising out of or related to this Agreement.

     SECTION 8.8 Specific Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in the circuit court of Montgomery
County or any federal court sitting in the State of Maryland , without bond or other security being
required, this being in addition to any other remedy to which they are entitled at law or in
equity.

     SECTION 8.9 Notices. All notices, requests and other communications to any party
hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which
is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the
following addresses:

If to Parent or Purchaser, to:

Samson Investment Company

Two West Second Street

Tulsa, Oklahoma 74103

Attention: Scott Rowland

Facsimile: (918) 591-1757

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

Weil, Gotshal & Manges LLP

200 Crescent Court, Suite 300

Dallas, Texas 75201

Attention: R. Scott Cohen

Facsimile: (214) 746-7777

51

 

If to the Company, to:

PYR Energy Corporation

1675 Broadway, Suite 2450

Denver, Colorado 80202

Attention: Kenneth R. Berry, Jr.

Facsimile: (303) 825-3768

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

Patton Boggs LLP

1660 Lincoln Street, #1900

Denver Colorado 80264

Attention: Alan Talesnick

Facsimile: (303) 894-9239

or such other address or facsimile number as such party may hereafter specify by like notice to the
other parties hereto. All such notices, requests and other communications shall be deemed received
on the date of receipt by the recipient thereof if received prior to 5 P.M. in the place of receipt
and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next succeeding Business Day in
the place of receipt.

     SECTION 8.10 Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other terms, provisions and conditions of this
Agreement shall nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

     SECTION 8.11 Definitions.

          (a) As used in this Agreement, the following terms have the meanings ascribed thereto below:

          “Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly,
controls, or is controlled by, or is under common control with, such Person. For this purpose,
“control” (including, with its correlative meanings, “controlled by” and “under common control
with”) shall mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.

52

 

          “Amexco Agreement” shall mean the Confidentiality and Indemnification Agreement, dated March
26, 2007, between Amexco, LLC, Venus Oil Company, Venus Exploration, Inc., John Y Ames, Bonnie R.
Weise, Thomas E. Ewing and the Company.

          “Business Day” shall mean a day except a Saturday, a Sunday or other day on which the SEC or
banks in the City of New York are authorized or required by Law to be closed.

          “Defensible Title” shall mean, subject to matters constituting or covered by Permissible
Defects, such right, title and interest that (a) record title evidenced by an instrument or
instruments filed of record in accordance with the conveyance and recording laws of the applicable
jurisdiction (i) entitles the Company to receive not less than the applicable Net Revenue Interest
as specified for such Oil and Gas Interest set forth in Section 3.14(c) of the Company Disclosure
Schedule throughout the economic life of the Oil and Gas Interest, except for decreases disclosed
in Section 3.14(c) of the Company Disclosure Schedule and (ii) obligates the Company to bear costs
and expenses attributable to the maintenance, development and operation of such Oil and Gas
Interest in an amount not greater than the applicable Working Interest as specified for such Oil
and Gas Interest set forth in Section 3.14(c) of the Company Disclosure Schedule throughout the
economic life of such Oil and Gas Interest, other than increases (X) accompanied by at least a
proportionate interest in the applicable Net Revenue Interest, (Y) resulting from contribution
requirements with respect to defaulting co-owners under applicable operating agreements that are
accompanied by at least a proportionate increase in the applicable Net Revenue Interest or (Z)
increases resulting from elections to decrease or convert existing interests at payout pursuant to
contracts and agreements in force and effect as of the date of this Agreement and (b) is free and
clear of all Liens, claims, infringements, and other burdens, other than Permitted Liens.
Notwithstanding the foregoing, the existence of a Permissible Defect shall not constitute a failure
of Defensible Title.

          “GAAP” shall mean generally accepted accounting principles in the United States.

          “Governmental Authority” shall mean any government, court, arbitrator, regulatory or
administrative agency, commission or authority or other governmental instrumentality, federal,
state or local, domestic, foreign or multinational.

          “Hydrocarbons” shall mean, with respect to any Person, crude oil, natural gas, casinghead gas,
associated gas, condensate, sulphur, natural gas liquids, plant products and other liquid or
gaseous hydrocarbons produced in association therewith (including coalbed gas and carbon dioxide),
and all other minerals of every kind and character which may be covered by or included in or
attributable to any of the properties of such Person or any of such Person’s Subsidiaries.

          “Knowledge” of any Person that is not an individual shall mean, with respect to any matter in
question, the knowledge after due inquiry of such Person’s

53

 

directors and executive officers, and all other officers and managers having responsibility
relating to the applicable matter.

          “Net Revenue Interest” shall mean an interest (expressed as a percentage or decimal fraction)
in and to all oil, gas and other Hydrocarbons produced and saved from or attributable to an Oil and
Gas Interest.

          “Notes” shall mean the Company’s 4.99% Convertible Promissory Notes due May 24, 2009.

          “Oil and Gas Interests” shall mean direct and indirect interests in and rights with respect to
oil and gas properties and assets of any kind and nature, direct or indirect, including working,
leasehold and mineral fee interests under oil and gas leases, subleases, licenses, development
licenses, exploration licenses, concessions and other leaseholds; operating rights and
non-operating interests, and royalties, overriding royalties, production payments, net profit
interests, other non-working interests, carried interests and other properties and interests
(collectively, the “Leases”) and the lands covered thereby (collectively, the “Land(s)”); any and
all Hydrocarbon, water or injection wells on or applicable to any of the foregoing thereon or
applicable thereto (the “Wells”); any pools or units which include all or a part of any Land or
include any Well (the “Units”) and including without limitation all right, title and interest in
Hydrocarbon produced from any such Unit and revenues from the sale thereof, whether such Unit
production comes from wells located on or off of the Lands, and all tenements, hereditaments and
appurtenances belonging to, used or useful in connection with the Leases, Lands and Units;
interests under or derived from all Contracts applicable to or by which the Leases, Lands, Wells or
Units are bound or created, to the extent applicable to such properties, including operating
agreements, marketing agreements (including commodity swap, collar and/or similar derivative
agreements), transportation agreements, seismic data and interpretations and other licensed or
owned intellectual property with respect thereto, geological and geophysical agreements,
unitization, pooling and communitization agreements, joint venture agreements and farmin and
farmout agreements, and orders; division orders, transfer orders and letters in lieu thereof;
mineral deeds and 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; all easements, servitudes, rights of way, Permits,
leases, licenses, surface rights and other interests associated with, appurtenant to, used or held
for use or necessary for the operation of Leases, Lands, Wells or Units; and 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, located on, used or obtained in connection with or necessary for the
operation of the Leases, Lands, Wells or Units.

54

 

          “Permissible Defect” shall mean:

          (a) defects or irregularities arising out of lack of corporate authorization or a variation in
corporate name of record 10 years or more, unless Parent provides affirmative evidence that such
corporate action was not authorized and results in another person’s superior claim of title to the
relevant Oil and Gas Interest;

          (b) defects or irregularities that have been cured or remedied by applicable statutes of
limitation or statutes for prescription;

          (c) defects or irregularities in the chain of title of record 10 years or more consisting of
the failure to recite marital status in documents or omissions of heirship proceedings;

          (d) defects or irregularities in title which for a period of 5 years or more have not delayed
or prevented Company or its Subsidiaries (or such Person’s predecessor, if owned by the Company or
the its Subsidiaries less than 5 years) from receiving its share of the proceeds of production or
causes it to bear a share of expenses and costs greater than its Working Interest share from any
Unit or Well;

          (e) defects or irregularities resulting from or related to probate proceedings or the lack
thereof which defects or irregularities have been outstanding for 10 years or more;

          (f) conventional rights of reassignment normally actuated by an intent to abandon or release a
lease and requiring notice to the holders of such rights;

          (g) any minor defect or irregularity in title as would normally be waived by prudent persons
engaged in the oil and gas business when purchasing producing properties;

          (h) all rights to consent by, required notices to, filings with, or other actions by
governmental entities in connection with the sale or conveyance of oil and gas leases or interests
therein if they are routinely obtained subsequent to the sale or conveyance;

          (i) easements, rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations that do not materially interfere with the oil and gas operations to be
conducted on any Well or Lease; and

          (j) all rights reserved to or vested in any Governmental Authority to control or regulate any
of the Oil and Gas Interests in any manner, and all applicable laws, rules and orders of
governmental authority.

          “Permitted Liens” shall mean (i) statutory liens for current Taxes, assessments or other
governmental charges not yet delinquent or the amount or validity of which is being contested in
good faith by appropriate proceedings, provided an

55

 

appropriate reserve has been established therefor in the most recent financial statements
contained in the Filed Company SEC Documents in accordance with GAAP; (ii) mechanics’, carriers’,
workers’, and repairers’ Liens arising or incurred in the ordinary course of business that are not
material to the business, operations and financial condition of the Company Property so encumbered
and that are not resulting from a breach, default or violation by the Company or any of its
Subsidiaries of any Contract or Law; and (iii) zoning, entitlement and other land use and
environmental regulations by any Governmental Authority, provided that such regulations have not
been violated.

          “Person” shall mean an individual, a corporation, a limited liability company, a partnership,
an association, a trust or any other entity, including a Governmental Authority.

          “Principal Properties” shall mean the following Company projects, prospects and properties:
Mallard Project; North Stockyard Project; Hansford Project; Scharff Wells; and the Jefferson County
Properties (all as more fully described in Section 3.14(c) of the Company Disclosure Schedule).

          “Purchase Date” shall mean the first date on which Purchaser accepts for payment Shares
tendered and not withdrawn pursuant to the Offer.

          “Subsidiary” when used with respect to any party, shall mean any corporation, limited
liability company, partnership, association, trust or other entity the accounts of which would be
consolidated with those of such party in such party’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP, as well as any other corporation,
limited liability company, partnership, association, trust or other entity of which securities or
other ownership interests representing more than 50% of the equity or more than 50% of the ordinary
voting power (or, in the case of a partnership, more than 50% of the general partnership interests)
are, as of such date, owned by such party or one or more Subsidiaries of such party or by such
party and one or more Subsidiaries of such party.

          “Transactions” refers collectively to this Agreement and the transactions contemplated hereby,
including the Offer and the Merger.

          “Walk-Away Date” shall mean July 31, 2007.

          “Working Interest” shall mean the percentage of costs and expenses attributable to the
maintenance, development, operation, plugging and abandonment and remediation of Oil and Gas
Interests.

          The following terms are defined in the section of this Agreement set forth after such term
below:

	 	 	 	 	 
	Acceptance Date
	 	 	4	 
	Agreement
	 	 	1	 
	AMEX
	 	 	6	 
	Articles of Merger
	 	 	9	 

56

 

	 	 	 	 	 
	Balance Sheet Date
	 	 	20	 
	Bankruptcy and Equity Exception
	 	 	17	 
	Certificates
	 	 	11	 
	Closing
	 	 	9	 
	Closing Date
	 	 	9	 
	Code
	 	 	12	 
	Company
	 	 	1	 
	Company Acquisition Agreement
	 	 	40	 
	Company Adverse Recommendation Change
	 	 	40	 
	Company Charter Documents
	 	 	7	 
	Company Common Stock
	 	 	1	 
	Company Contracts
	 	 	28	 
	Company Disclosure Schedule
	 	 	14	 
	Company Material Adverse Effect
	 	 	15	 
	Company Plans
	 	 	24	 
	Company Preferred Stockholder
	 	 	16	 
	Company Recommendation
	 	 	40	 
	Company SEC Documents
	 	 	19	 
	Company Stock Plans
	 	 	14	 
	Company Stockholder Approval
	 	 	17	 
	Company Stockholders Meeting
	 	 	7	 
	Contract
	 	 	18	 
	Control Date
	 	 	6	 
	Convertible Securities
	 	 	16	 
	Department
	 	 	9	 
	Dissenting Shares
	 	 	13	 
	Dissenting Stockholders
	 	 	12	 
	Effective Time
	 	 	9	 
	Engagement Letters
	 	 	32	 
	Environmental Laws
	 	 	26	 
	Environmental Liabilities
	 	 	27	 
	ERISA
	 	 	24	 
	Exchange Act
	 	 	2	 
	Expiration Date
	 	 	3	 
	Fairness Opinion
	 	 	4	 
	Filed Company SEC Documents
	 	 	20	 
	fully diluted basis
	 	 	2	 
	Hazardous Materials
	 	 	27	 
	Hedge
	 	 	31	 
	Indemnitees
	 	 	44	 
	Independent Director
	 	 	6	 
	Independent Director Approval
	 	 	7	 
	Land
	 	 	54	 
	Laws
	 	 	21	 
	Leases
	 	 	54	 
	Liens
	 	 	15	 
	Material Adverse Effect
	 	 	15	 
	Material Contract
	 	 	28	 
	Maximum Amount
	 	 	44	 
	Merger
	 	 	1	 
	Merger Consideration
	 	 	10	 
	MGCL
	 	 	1	 
	Minimum Condition
	 	 	2	 
	Offer
	 	 	1	 
	Offer Documents
	 	 	2	 
	Offer Price
	 	 	1	 
	Option Consideration
	 	 	13	 
	Parent
	 	 	1	 
	Parent Material Adverse Effect
	 	 	34	 
	Paying Agent
	 	 	10	 
	Pending Offer
	 	 	1	 
	Permits
	 	 	21	 
	Policies
	 	 	32	 
	Proxy Statement
	 	 	7	 
	Purchaser
	 	 	1	 
	Purchaser Option
	 	 	8	 
	Purchaser Option Shares
	 	 	8	 
	PYR Energy Option
	 	 	14	 
	Qualified Person
	 	 	6	 
	Real Property Leases
	 	 	29	 
	Release
	 	 	27	 
	Representatives
	 	 	39	 
	Reserve Report
	 	 	31	 
	Rights Amendment
	 	 	18	 
	Schedule 14D-9
	 	 	5	 
	Schedule TO
	 	 	2	 
	SEC
	 	 	2	 
	Securities Act
	 	 	15	 
	Shares
	 	 	1	 
	Subsequent Offering Period
	 	 	3	 
	Subsidiary Documents
	 	 	15	 
	Superior Proposal
	 	 	42	 
	Surviving Corporation
	 	 	9	 
	Takeover Proposal
	 	 	41	 
	Taxes
	 	 	23	 
	Tender Offer Conditions
	 	 	2	 
	Termination Fee
	 	 	49	 
	Third Party Proposals
	 	 	35	 
	Units
	 	 	54	 

57

 

	 	 	 	 	 
	WARN
	 	 	26	 
	Warrant Consideration
	 	 	14	 
	Warrants
	 	 	16	 
	Wells
	 	 	54	 

58

 

     SECTION 8.12 Interpretation.

          (a) When a reference is made in this Agreement to an Article, a Section, Annex or Schedule,
such reference shall be to an Article of, a Section of, or an Annex or Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement,
they shall be deemed to be followed by the words “without limitation”. The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of this Agreement. All terms defined
in this Agreement shall have the defined meanings when used in any document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined
or referred to herein or in any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its permitted successors and
assigns.

          (b) The parties hereto have participated jointly in the negotiation and drafting of this
Agreement and, in the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.

[signature page follows]

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.

	 	 	 	 	 
	 	SAMSON INVESTMENT COMPANY

 	 
	 	By:  	/s/ C. Philip Tholen
 	 
	 	 	Name:  	C. Philip Tholen 	 
	 	 	Title:  	Executive Vice President 	 
	 
	 	SAMSON ACQUISITION CORP.

 	 
	 	By:  	/s/ C. Philip Tholen
 	 
	 	 	Name:  	C. Philip Tholen 	 
	 	 	Title:  	President 	 
	 
	 	PYR ENERGY CORPORATION

 	 
	 	By:  	/s/ Kenneth R. Berry, Jr.
 	 
	 	 	Name:  	Kenneth R. Berry, Jr. 	 
	 	 	Title:  	President and CEO 	 
	 

Signature Page to the Agreement and Plan of Merger

 

ANNEX A

Conditions to the Offer

     The capitalized terms used in this Annex A but not otherwise defined herein have the meanings
assigned to such terms in the Agreement and Plan of Merger (this “Agreement”) of which Annex A is a
part.

     Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept
for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-l(c)
under the Exchange Act (relating to Purchaser’s obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for
payment of or, subject to the restriction referred to above, the payment for, any tendered Shares,
and (subject to the provisions of the Agreement) may terminate the Offer and not accept for payment
any tendered shares if (i) the Minimum Condition shall not have been satisfied at the expiration of
the Offer or (ii) at any time on or after the date of the Agreement and prior to the expiration of
the Offer, any of the following conditions shall exist and be continuing:

     (a) there shall be any injunction, judgment, ruling, order, decree, action, proceeding or
litigation instituted, issued, entered, commenced, pending or threatened by or before any
Governmental Authority that would or that seeks or is reasonably likely to (i) restrain, enjoin,
prevent, prohibit or make illegal the acceptance for payment, payment for or purchase of some or
all of the Shares by Purchaser or Parent or the consummation of the Transactions, (ii) impose
limitations on the ability of Purchaser, Parent or any of their Affiliates effectively to exercise
full rights of ownership of the Shares, including, without limitation, the right to vote the Shares
purchased by them on all matters properly presented to the Company’s stockholders on an equal basis
with all other stockholders (including, without limitation, the adoption of the Agreement and
approval of the Transactions), (iii) restrain, enjoin, prevent, prohibit or make illegal, or impose
material limitations on, Parent’s, Purchaser’s or any of their Affiliates’ ownership or operation
of all or any material portion of the businesses and assets of the Company and its Subsidiaries,
taken as a whole, or, as a result of the Transactions, of Parent and its Subsidiaries, taken as a
whole, (iv) compel Parent, Purchaser or any of their Affiliates to dispose of any Shares or, as a
result of the Transactions, compel Parent, Purchaser or any of their Affiliates to dispose of or
hold separate any material portion of the businesses or assets of the Company and its Subsidiaries,
taken as a whole, or of Parent and its Subsidiaries, taken as a whole, or (v) impose damages on
Parent, the Company or any of their respective Subsidiaries as a result of the Transactions;

     (b) there shall be any Law enacted, issued, promulgated, amended or enforced by any
Governmental Authority applicable to (i) Parent, the Company or any of their respective Affiliates
or (ii) the Transactions that results, or that seeks or is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in paragraph (a) above;

A-1

 

     (c) (i) there shall have occurred any events or changes that, individually or in the
aggregate, have had or could reasonably be expected to have a Company Material Adverse Effect or
(ii) (A) the representations and warranties of the Company set forth in the Agreement that are
qualified as to “materiality” or “Material Adverse Effect” shall not be true and correct, or the
representations and warranties of the Company set forth in the Agreement that are not so qualified
shall not be true and correct in all material respects, in each case, at and as of the date of such
determination as if made on such date (other than those representations and warranties that address
matters only as of a particular date which are true and correct as of such date), or (B) the
Company shall have breached or failed in any material respect to perform or comply with any
obligation, agreement or covenant required by the Agreement to be performed or complied with by it,
which inaccuracy, breach or failure has not been cured prior to the expiration of the Offer;

     (d) any Person or “group” (as defined in Section 13(d)(3) of the Exchange Act), other than
Parent, Purchaser or their Affiliates or any group of which any of them is a member, shall have
acquired or announced its intention to acquire beneficial ownership (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of 15% or more of the outstanding shares of Company
Common Stock;

     (e) a Company Adverse Recommendation Change shall have occurred;

     (f) there shall have occurred (1) any general suspension of trading in securities on the New
York Stock Exchange, the American Stock Exchange or in the Nasdaq National Market System, for a
period in excess of three hours (excluding suspensions or limitations resulting solely from
physical damage or interference with such exchanges not related to market conditions), (2) a
declaration of a banking moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) any limitation or proposed limitation (whether or not
mandatory) by any United States Governmental Authority that has a material adverse effect generally
on the extension of credit by banks or other financial institutions, (4) the commencement of a war,
armed hostilities or other international or national calamity directly or indirectly involving the
United States or (5) in the case of any of the situations in clauses (1) through (4) of this
paragraph existing at the time of the commencement of the Offer, a material acceleration or
worsening thereof; or

     (g) the Agreement shall have been terminated in accordance with its terms or the Offer shall
have been terminated with the consent of the Company.

     The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted
by either of them regardless or the circumstances giving rise to such conditions or may be waived
by Parent or Purchaser, in whole or in part at any time and from time to time in the sole
discretion of Parent or Purchaser (except for any conditions which, pursuant to Section 1.1 of the
Agreement, may only be waived with the Company’s consent). The failure by Parent or Purchaser at
any time to exercise any of the foregoing rights will not be deemed a waiver of any right, the
waiver of such right

A-2

 

with respect to any particular facts or circumstances shall not be deemed a waiver with
respect to any other facts or circumstances, and each right will be deemed an ongoing right which
may be asserted at any time and from time to time.

     If the Offer is terminated, all tendered Shares not theretofore accepted for payment shall
forthwith be returned to the tendering stockholders.

A-3

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