Document:

Exhibit 10.3 Agreement and Plan of Merger

    
      

    

     

     

    

    AGREEMENT
      AND PLAN OF MERGER

     

    dated
      as of January 23, 2007

     

    by
      and between

     

    U.S.
      ENERGY CORP., a Wyoming corporation, 

     

    and

     

    CRESTED
      CORP., a Colorado corporation

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    TABLE
      OF CONTENTS

     

                                                                                                                                                                                                                                                          
      Page

     

    
      	
              ARTICLE
                1

            	
              THE
                MERGER

            	
              3

            
	 	
              1.1

            	
              The
                Merger

            	
              3

            
	 	
              1.2

            	
              Closing

            	
              3

            
	 	
              1.3

            	
              Effective
                Date

            	
              4

            
	 	
              1.4

            	
              Effects
                of the Merger

            	
              4

            
	 	
              1.5

            	
              Effect
                on Capital Stock

            	
              4

            
	 	
              1.6

            	
              Stock
                Options, and Equity and Other Compensation Plans and
                Benefits

            	
              5

            
	 	
              1.7

            	
              Exchange
                Of Certificates

            	
              5

            
	 	
              1.8

            	
              Taking
                of Necessary Action; Further Action

            	
              7

            
	
              ARTICLE
                2

            	
              REPRESENTATIONS
                AND WARRANTIES OF THE COMPANY

            	
              8

            
	 	
              2.1

            	
              Organization

            	
              8

            
	 	
              2.2

            	
              Capital
                Stock of the Company

            	
              9

            
	 	
              2.3

            	
              Authority
                Relative to this Agreement

            	
              9

            
	 	
              2.4

            	
              SEC
                Reports and Financial Statements

            	
              10

            
	 	
              2.5

            	
              Certain
                Changes

            	
              11

            
	 	
              2.6

            	
              Litigation

            	
              11

            
	 	
              2.7

            	
              Disclosure
                in Proxy Statement

            	
              11

            
	 	
              2.8

            	
              Broker’s
                or Finder’s Fees

            	
              11

            
	 	
              2.9

            	
              Employee
                Plans

            	
              11

            
	 	
              2.10

            	
              Board
                Recommendation; Company Action; Requisite Vote of the Company’s
                Stockholders

            	
              12

            
	 	
              2.11

            	
              Taxes

            	
              12

            
	 	
              2.12

            	
              Environmental

            	
              14

            
	 	
              2.13

            	
              Compliance
                with Laws

            	
              15

            
	 	
              2.14

            	
              Employment
                Matters

            	
              15

            
	 	
              2.15

            	
              Certain
                Contracts and Arrangements

            	
              15

            
	 	
              2.16

            	
              Financial
                and Commodity Hedging

            	
              16

            
	 	
              2.17

            	
              Properties

            	
              16

            
	 	
              2.18

            	
              Accounting
                Controls

            	
              16

            
	 	
              2.19

            	
              Intellectual
                Property

            	
              16

            
	
              ARTICLE
                3

            	
              REPRESENTATIONS
                AND WARRANTIES OF PARENT

            	
              16

            
	 	
              3.1

            	
              Organization

            	
              16

            
	 	
              3.2

            	
              Capital
                Stock

            	
              17

            
	 	
              3.3

            	
              Authority
                Relative to this Agreement

            	
              18

            
	 	
              3.4

            	
              SEC
                Reports and Financial Statements

            	
              18

            
	 	
              3.5

            	
              Certain
                Changes

            	
              19

            
	 	
              3.6

            	
              Litigation

            	
              19

            
	 	
              3.7

            	
              Disclosure
                in Proxy Statement

            	
              19

            
	 	
              3.8

            	
              Broker’s
                or Finder’s Fees

            	
              20

            
	 	
              3.9

            	
              Employee
                Plans

            	
              20

            
	 	
              3.10

            	
              Board
                Recommendation

            	
              22

            
	 	
              3.11

            	
              Taxes

            	
              22

            
	 	
              3.12

            	
              Environmental

            	
              23

            
	 	
              3.13

            	
              Compliance
                with Laws

            	
              24

            
	 	
              3.14

            	
              Employment
                Matters

            	
              24

            

    

    

    
      
        
          
          

        

        
          -i-

          
            

          

        

        
          
          

        

      

    

    

     

    
      TABLE
        OF CONTENTS

      (continued)

       

                                                                                                                                                                                                                                                
        Page

    

    
      	 	
              3.15

            	
              Certain
                Contracts and Arrangements

            	
              25

            
	 	
              3.16

            	
              Financial
                and Commodity Hedging

            	
              25

            
	 	
              3.17

            	
              Properties

            	
              25

            
	 	
              3.18

            	
              Accounting
                Controls

            	
              25

            
	 	
              3.19

            	
              Intellectual
                Property

            	
              25

            
	
              ARTICLE
                4

            	
              CONDUCT
                OF BUSINESS PENDING THE MERGER

            	
              26

            
	 	
              4.1

            	
              Conduct
                of Business by the Company Pending the Merger

            	
              26

            
	 	
              4.2

            	
              Conduct
                of Business of Parent

            	
              27

            
	
              ARTICLE
                5

            	
              ADDITIONAL
                AGREEMENTS

            	
              28

            
	 	
              5.1

            	
              Shareholders’
                Meeting

            	
              28

            
	 	
              5.2

            	
              Registration
                Statement

            	
              28

            
	 	
              5.3

            	
              Employee
                Benefit Matters

            	
              29

            
	 	
              5.4

            	
              Consents
                and Approvals

            	
              29

            
	 	
              5.5

            	
              Public
                Statements

            	
              30

            
	 	
              5.6

            	
              Commercially
                Reasonable Best Efforts

            	
              30

            
	 	
              5.7

            	
              Notification
                of Certain Matters

            	
              30

            
	 	
              5.8

            	
              Access
                to Information; Confidentiality

            	
              31

            
	 	
              5.9

            	
              No
                Solicitation

            	
              31

            
	 	
              5.10

            	
              Section
                16 Matters

            	
              32

            
	 	
              5.11

            	
              Voting
                Agreement

            	
              32

            
	 	
              5.12

            	
              Nasdaq
                Listing

            	
              33

            
	 	
              5.13

            	
              Tax
                Treatment

            	
              33

            
	 	
              5.14

            	
              Indemnification

            	
              33

            
	
              ARTICLE
                6

            	
              CONDITIONS

            	
              33

            
	 	
              6.1

            	
              Conditions
                to the Obligation of Each Party to Effect the Merger

            	
              33

            
	 	
              6.2

            	
              Additional
                Conditions to the Obligations of Parent

            	
              34

            
	 	
              6.3

            	
              Additional
                Conditions to the Obligation of the Company

            	
              34

            
	
              ARTICLE
                7

            	
              TERMINATION,
                AMENDMENT AND WAIVER

            	
              35

            
	 	
              7.1

            	
              Termination

            	
              35

            
	 	
              7.2

            	
              Effect
                of Termination

            	
              36

            
	 	
              7.3

            	
              Fees
                and Expenses

            	
              36

            
	 	
              7.4

            	
              Amendment

            	
              37

            
	 	
              7.5

            	
              Waiver

            	
              37

            
	
              ARTICLE
                8

            	
              GENERAL
                PROVISIONS

            	
              38

            
	 	
              8.1

            	
              Notices

            	
              38

            
	 	
              8.2

            	
              Representations
                and Warranties

            	
              38

            
	 	
              8.3

            	
              Governing
                Law; Waiver of Jury Trial

            	
              38

            
	 	
              8.4

            	
              Counterparts;
                Facsimile Transmission of Signatures

            	
              39

            
	 	
              8.5

            	
              Assignment;
                No Third Party Beneficiaries

            	
              39

            
	 	
              8.6

            	
              Severability

            	
              39

            
	 	
              8.7

            	
              Entire
                Agreement

            	
              39

            

    

    

     

    

     

    

    
      
        
          
             

          

          
          

        

        
          -ii-

          
            

          

        

        
          
          

          
          

        

      

    

    

                                           
      Schedule of Definitions

     

    

    
      	
              Term

            	
              Section
                

            
	
              '33
                Act 

            	
              2.3(c)

            
	
              '34
                Act 

            	
              2.3(c)

            
	
              Action

            	
              5.14

            
	
              Agreement
                

            	
              Preamble

            
	
              Articles
                of Merger 

            	
              1.3

            
	
              Book-Entry
                Shares

            	
              1.7(a)

            
	
              CBCA

            	
              1.1(a)

            
	
              CCCA
                

            	
              1.3

            
	
              CERCLA
                

            	
              2.12(h)

            
	
              Closing
                

            	
              1.2

            
	
              Closing
                Date 

            	
              1.2

            
	
              Code
                

            	
              Recitals

            
	
              Company
                

            	
              Preamble

            
	
              Company
                Board 

            	
              1.6

            
	
              Company
                Cases 

            	
              2.6

            
	
              Company
                Common Stock 

            	
              1.5

            
	
              Company
                Disclosure Letter 

            	
              2

            
	
              Company
                Financial Statements 

            	
              2.4(b)

            
	
              Company
                Material Adverse Effect 

            	
              2.1(a)

            
	
              Company
                SEC Reports 

            	
              2.4(a)

            
	
              Company
                Stock Option 

            	
              1.6

            
	
              Company
                Stock Plan 

            	
              1.6

            
	
              Company
                Subsidiaries 

            	
              2.1(a)

            
	
              Dissenters’
                Rights Statute

            	
              1.5(b)

            
	
              Effective
                Date 

            	
              1.3

            
	
              Electing
                Cash Out Holders

            	
              1.5(d)

            
	
              Employee
                Benefit
                Plan 

            	
              2.9(b)

            
	
              Environmental
                Laws 

            	
              2.12(h)

            
	
              ERISA
                

            	
              2.9(b)

            
	
              Exchange
                Agent 

            	
              1.7(a)

            
	
              Exchange
                Ratio

            	
              1.5(b)

            
	
              GAAP
                

            	
              2.4(b)

            
	
              Hazardous
                Substance 

            	
              2.12(i)

            
	
              Indemnified
                Liabilities

            	
              5.14

            
	
              Indemnitees

            	
              5.14

            
	
              Intellectual
                Property

            	
              2.19

            
	
              Intended
                Tax Treatment 

            	
              5.13

            
	
              Law

            	
              2.13

            
	
              Liens
                

            	
              2.1(b)

            
	
              Merger
                

            	
              1.1(a)

            
	
              Merger
                Consideration 

            	
              1.5(b)

            
	
              Navigant

            	
              3.10(a)

            
	
              Order
                

            	
              2.3(b)

            
	
              Other
                Filings 

            	
              5.2(b)

            
	
              Outside
                Date 

            	
              7.1(c)

            

    

    

    

    
      
        
          
          

        

        
          -iv-

          
            

          

        

        
          
          

        

      

    

    

    

    
      	
              Parent
                

            	
              Preamble

            
	
              Parent
                Board

            	
              3.3(a)

            
	
              Parent
                Cases 

            	
              3.6
                

            
	
              Parent
                Common Stock 

            	
              1.5(a)

            
	
              Parent
                Financial Statements 

            	
              3.4(b)

            
	
              Parent
                Material Adverse Effect 

            	
              3.1(a)

            
	
              Parent
                SEC Reports 

            	
              3.4(a)

            
	
              Parent
                Subsidiaries 

            	
              3.1(a)

            
	
              person
                

            	
              2.1(b)

            
	
              Proxy
                Statement/Prospectus 

            	
              2.7

            
	
              RCRA
                

            	
              2.12(h)

            
	
              S-4

            	
              5.2(a)

            
	
              SARs
                

            	
              2.2(b)

            
	
              SEC
                

            	
              2

            
	
              SGMI

            	
              2.1(a)

            
	
              Shareholders’
                Meeting 

            	
              5.1

            
	
              Statement
                of Merger

            	
              1.3

            
	
              Stock
                Certificate 

            	
              1.5(c)

            
	
              Superior
                Proposal 

            	
              5.9(c)

            
	
              Surviving
                Company 

            	
              1.1(a)

            
	
              Takeover
                Proposal 

            	
              5.9(c)

            
	
              Termination
                Fee

            	
              7.3(a)

            
	
              USECB
                Joint Venture

            	
              1.4

            
	
              Voting
                Agreement 

            	
              Recitals

            
	
              WBCA

            	
              1.1(a)

            

    

    

     

    

    
      
        
          
             

          

          
          

        

        
          -v-

          
            

          

        

        
          
          

          
          

        

      

    

    

    AGREEMENT
      AND PLAN OF MERGER

    

    THIS
      AGREEMENT AND PLAN OF MERGER (this “Agreement”),
      dated
      as of January 23, 2007 is by and between U.S. Energy Corp., a Wyoming
      corporation (“Parent”),
      and
      Crested Corp., a Colorado corporation (the “Company”).

     

    WHEREAS,
      the parties desire that the Company be merged with and into Parent with Parent
      as the surviving company, all as set forth in Article 1 of this
      Agreement;

     

    WHEREAS,
      the boards of directors of Parent and the Company established special committees
      in order to evaluate the proposed Merger (as defined below), and each special
      committee evaluated the Merger and recommended approval of the Merger to its
      board of directors;

     

    WHEREAS,
      the boards of directors of Parent and the Company have approved this Agreement
      and deem it advisable and in the best interests of their respective stockholders
      to consummate the transactions contemplated hereby on the terms and conditions
      set forth herein; 

     

    WHEREAS,
      in consideration of Parent entering into this Agreement and incurring certain
      related fees and expenses, Parent, the officers and directors of Parent who
      own
      Company Common Stock and the Company are executing a voting agreement, of even
      date herewith (the “Voting
      Agreement”),
      relating to the Company Common Stock (as defined below) beneficially owned
      by
      Parent; 

     

    WHEREAS,
      it is intended that, for United States federal income tax purposes, the Merger
      (as defined below) shall qualify as a reorganization within the meaning of
      Section 368(a) of the United States Internal Revenue Code of 1986, as amended
      (the “Code”),
      and
      the regulations promulgated thereunder and this Agreement constitutes a “plan of
      reorganization” within the meaning of Section 1.368(c) of the Treasury
      Regulations.

     

    NOW,
      THEREFORE, in consideration of the foregoing and of the mutual covenants
      contained in this Agreement and for other valuable consideration, the receipt
      and sufficiency of which are hereby acknowledged, Parent and the Company,
      intending to be legally bound, hereby agree as follows:

     

    ARTICLE
      1

    THE
      MERGER

    

    1.1  The
      Merger.

    

    (a)  On
      the
      terms and subject to the conditions set forth in this Agreement, and in
      accordance with the Colorado Business Corporation Act (“CBCA”)
      and
      the Wyoming Business Corporation Act (“WBCA”),
      the
      Company shall be merged with and into Parent at the Effective Date (the
“Merger”).
      At
      the Effective Date, the separate corporate existence of the Company shall cease
      and Parent shall continue as the surviving corporation of the Merger (the
“Surviving
      Company”).
      

    

    (b)  It
      is
      intended that the Merger shall constitute a reorganization under the
      Code.

     

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
 

    1.2  Closing.
      Unless
      this Agreement is earlier terminated, the closing (the “Closing”)
      of the
      Merger shall take place at the offices of Parent, 877 North 8th
      West,
      Riverton, Wyoming 82501, at 10:00 am on the first business day following the
      satisfaction or waiver (to the extent permitted by applicable Law (as defined
      in
Section
      2.13))
      of the
      conditions set forth in Article
      6,
      or at
      such other place, time and date as shall be agreed in writing between Parent
      and
      the Company. The date on which the Closing occurs is referred to in this
      Agreement as the “Closing
      Date.”

    

    1.3  Effective
      Date.
      Prior
      to the Closing, Parent shall prepare, and on the Closing Date or as soon as
      practicable thereafter, Parent
      shall file (a) a statement of merger (the “Statement
      of Merger”)
      executed in accordance with the relevant provisions of the Colorado Corporations
      and Associations Act (the “CCAA”)
      with the Secretary of State of the State of Colorado, and (b) articles of merger
      (“Articles
      of Merger”)
      executed in accordance with the relevant provisions of the WBCA with the
      Secretary of State of the State of Wyoming. The Merger shall become effective
      at
      such time as both the Statement of Merger and the Articles of Merger have been
      duly filed with the Secretaries of State of the States of Colorado and Wyoming,
      or at such subsequent time as Parent and the Company shall agree and specify
      in
      the Statement of Merger and the Articles of Merger (the date the Merger becomes
      effective being the “Effective
      Date”).

    

    1.4  Effects
      of the Merger.
      The
Merger
      shall
      have the effects set forth in section 7-90-204(1)(a) of the CCAA and section
      17-16-1106(a) of the WBCA. The articles of incorporation and bylaws of Parent
      immediately prior to the Effective Date shall be the articles of incorporation
      and bylaws of the Surviving Company. The directors and officers of Parent
      immediately prior to the Effective Date shall continue in service until the
      earlier
      of their resignation or removal or until their respective successors are duly
      elected or appointed and qualified, as the case may be. When Parent deems it
      appropriate, the joint venture between Parent and the Company (“USECB
      Joint Venture”)
      shall be terminated and wound up. 

    

    1.5  Effect
      on Capital Stock.
      At the
      Effective Date, by virtue of the Merger
      and
      without any action on the part of the holder of any shares of common
      stock, par value $0.001, of the Company (“Company
      Common Stock”),
      the following shall occur:

    

    (a)  Cancellation
      Of Treasury Stock, Parent-Owned Stock and Certain Parent Common
      Stock.
      Each
      share of Company Common Stock that is owned by the Company or Parent shall
      no
longer
      be outstanding and shall automatically be canceled and shall cease to exist,
      and
      no consideration shall be delivered or deliverable in exchange therefor. Any
      common stock of Parent (“Parent
      Common Stock”)
      owned by the Company shall
      no
longer
      be outstanding and shall automatically be canceled and shall cease to
      exist.

    

    (b)  Conversion
      Of Company Common Stock; Merger Consideration.
      Subject
      to Sections
      1.5(a),
      1.6
      and
1.7(e),
      every
      two issued and outstanding shares of Company Common Stock not held by
      Parent
      (including shares of Company Common Stock issued on exercise of the Company
      Stock Options (as those terms are defined in Section
      1.6
      below)) shall be converted into the right to receive one validly issued, fully
      paid and non-assessable share of Parent Common Stock (the “Merger
      Consideration”),
      resulting in an exchange ratio of 2:1 (the “Exchange
      Ratio”).
      The Merger Consideration on the Effective Date is subject to (i) reduction
      by
      operation of sections 7-113-101 to 7-113-302 of the CBCA (the “Dissenters’
      Rights Statute”);
      and (ii) increase by such additional shares as may be needed to pay for
      fractional shares of Company Common Stock under Section
      1.7(e)
      (such additional share number not being determinable until the Effective
      Date).

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    (c)  Effect
      Of Conversion.
      From
      and after the Effective Date, all of the shares of Company Common Stock
      converted into the Merger
      Consideration
      pursuant
      to this Section 1.5 shall no longer be outstanding and shall automatically
      be
      canceled and retired and shall cease to exist, and each holder of such shares
      evidenced by a certificate (each a “Stock
      Certificate”),
      representing any such shares of Company Common Stock (and each holder of shares
      of Company Common Stock issued upon exercise of a Company Stock Option, but
      not
      evidenced by a stock certificate) shall thereafter cease to have any rights
      with
      respect thereto, except the right to receive (i) the Total Merger Consideration,
      (ii) any dividends and other distributions in accordance with Sections
      1.7(d)
      and 1.7(f);
      (iii) any cash to be paid to an Electing Cash Out Holder (as defined below)
      under Section
      1.5(c)(1);
      and (iv) rights to payment under the Dissenters’ Rights Statute.

    

    (d)  Payments
      to Electing Cash Out Holders.
      In the
      form to be included in the proxy as part of the Prospectus/Proxy Statement,
      Parent shall provide an option to all holders of 500 or fewer shares of Company
      Common Stock to elect to receive cash in lieu of shares of Parent Common Stock
      (the “Electing
      Cash Out Holders”).
      Upon
      receiving the elections from Electing Cash Out Holders, Parent may elect either
      to (i) pay each Electing Cash Out Holder, in cash, the amount of cash equal
      to
      the number of shares of Parent Common Stock to which the Electing Cash Out
      Holder otherwise would be entitled, multiplied by the closing price of one
      share
      of Parent Common Stock on the Nasdaq Capital Market on the Effective Date,
      or
      (ii) reject the election of each Electing Cash Out Holder, and issue shares
      of
      Parent Common Stock in accordance with this Article.

    

    (e)  Changes
      To Stock.
      If at
      any time during the period between the date of this Agreement and the Effective
      Date, any change in the outstanding shares
      of capital stock of Parent or the Company shall occur by reason of any
      reclassification, recapitalization, stock split or combination, split-up,
      exchange or readjustment of shares, rights issued in respect of Parent Common
      Stock or any stock dividend thereon with a record date during such period,
      the
      Merger Consideration and any other similarly dependent items, as the case may
      be, shall be appropriately adjusted to provide the holders of shares of Company
      Common Stock the same economic effect as contemplated by this Agreement prior
      to
      such event.

    

    1.6  Stock
      Options, and Equity and Other Compensation Plans and Benefits.
      The
      board of directors of the Company (the “Company
      Board”),
      or
      the appropriate committee thereof, shall take such action as is within its
      power
      so that
      (i) at the Effective Date, each outstanding option to purchase shares of Company
      Common Stock (a “Company
      Stock Option”)
      granted under the Company’s Incentive Stock Option Plan (the “Company
      Stock Plan”),
      whether or not vested, is exercisable by its holder on a “cashless exercise”
basis, and each exercising holder shall, on the Effective Date, be entitled
      to
      receive her or his portion of the Merger Consideration, and (ii) after the
      Effective Date, any unexercised Company Stock Option shall cease to represent
      a
      right to acquire shares of Company Common Stock and shall be administered in
      accordance with the Company Stock Plan. All other compensation arrangements
      or
      plans or benefit plans (including without limitation salary, and insurance
      and
      retirement benefits) with or for the benefit of persons who may be deemed to
      be
      employees of the Company, and who also are employees of Parent, shall be
      terminated, but all such arrangements and plans for such persons as employees
      of
      Parent which are in place at the Effective Date shall not be affected as a
      result of the Merger.

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    1.7  Exchange
      Of Certificates.

    

    (a)  Exchange
      Agent.
      Computershare Trust Company (which also is the stock transfer agent for Parent
      and the Company) shall serve as the exchange agent for the Parent Common Stock
      (the
      “Exchange
      Agent”)
      for the purpose of exchanging Stock Certificates representing shares of Company
      Common Stock and non-certificated shares represented by book entry
      (“Book-Entry
      Shares”)
      for the Total Merger Consideration. Upon request by a holder of Company Common
      Stock, a stock certificate shall be issued to such a holder in lieu of
      Book-Entry Shares. Promptly after the Effective Date (but in any event within
      five business days thereafter), Parent will send, or will cause the Exchange
      Agent to send, to each holder of record of shares of Company Common Stock as
      of
      the Effective Date (exclusive of Electing Cash Out Holders) a letter of
      transmittal for use in such exchange (which shall specify that delivery shall
      be
      effected, and risk of loss and title to the Stock Certificates theretofore
      representing shares of Company Common Stock shall pass, only upon proper
      delivery of such Stock Certificates to the Exchange Agent or by appropriate
      guarantee of delivery in the form customarily used in transactions of this
      nature from a member of a national securities exchange, a member of the National
      Association of Securities Dealers, Inc., or a commercial bank or trust company
      in the United States) in such form as the Company and Parent may reasonably
      agree, for use in effecting delivery of shares of Company Common Stock to the
      Exchange Agent. Exchange of any Book-Entry Shares of the Company which are
      outstanding shall be effected in accordance with Parent’s customary procedures
      with respect to securities represented by book entry.

    

    (a)(1) No
      Requirement for Issuance of Stock Certificates for Company Common Stock Issued
      on Exercise of Company Stock Options.
      If
      permitted by the Company’s articles of incorporation and bylaws, and by the
      operating procedures of the Exchange Agent, the Company shall not be required
      to
      issue stock certificates for shares of Company Common Stock issued upon exercise
      of Company Stock Options, and shares of Parent Common Stock shall be issued
      against such documentation as the Exchange Agent may request.

    

    (b) Exchange
      Procedure.
      Each
      holder of shares of Company Common Stock that have been converted into a right
      to receive the Total Merger Consideration, upon surrender
      to the Exchange Agent of a Stock Certificate (or other documentation if a stock
      certificate is not issued under Section
      1.7(a)(1)),
      together with a properly completed letter of transmittal, will be entitled
      to
      receive (i) one or more shares of Parent Common Stock (which shall be in
      non-certificated book-entry form unless a physical certificate is requested)
      representing, in the aggregate, the whole number of shares of Parent Common
      Stock, if any, that such holder has the right to receive pursuant to Section
      1.5(b), plus one additional share if the holder otherwise would have the right
      to receive a fractional share under Section
      1.7(e)
      and dividends and other distributions pursuant to Section
      1.7(d)
      and 1.7(f).
      No interest shall be paid or accrued on any of the Total Merger Consideration,
      or on any unpaid dividends and distributions payable to holders of Stock
      Certificates or holders of Company shares without certificates. Until so
      surrendered, each such Stock Certificate shall, after the Effective Date,
      represent for all purposes only the right to receive such Merger Consideration
      and any dividends and other distributions in accordance with Sections
      1.7(d)
      and 1.7(f),
      and an additional one share as applicable in lieu of any fractional share of
      Parent Common Stock.

    

    

    
      
        
          
          

        

        
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    (c) Certificate
      Holder.
      If any
      portion of the Merger Consideration is to be registered in the name of a person
      other than the person in whose name the applicable
      surrendered Stock Certificate is registered, it shall be a condition to the
      registration thereof that the surrendered Stock Certificate shall be properly
      endorsed or otherwise be in proper form for transfer and that the person
      requesting such delivery of the Merger Consideration shall pay to the Exchange
      Agent any transfer or other similar taxes required as a result of such
      registration in the name of a person other than the registered holder of such
      Stock Certificate or establish to the satisfaction of the Exchange Agent that
      such tax has been paid or is not payable.

    

    (d) Dividends
      And Distributions.
      No
      dividends or other distributions with respect to shares of Parent Common Stock
      issued in the Merger shall be paid to
      the holder of any unsurrendered Stock Certificates or Book-Entry Shares until
      such Stock Certificates or Book-Entry Shares are properly surrendered. Following
      such surrender, there shall be paid, without interest, to the record holder
      of
      the shares of Parent Common Stock issued in exchange therefor (i) at the time
      of
      such surrender, all dividends and other distributions payable in respect of
      such
      shares of Parent Common Stock with a record date after the Effective Date and
      a
      payment date on or prior to the date of such surrender and not previously paid
      and (ii) at the appropriate payment date, the dividends or other distributions
      payable with respect to such shares of Parent Common Stock with a record date
      after the Effective Date but with a payment date subsequent to such surrender.
      For purposes of dividends or other distributions in respect of shares of Parent
      Common Stock, all shares of Parent Common Stock to be issued pursuant to the
      Merger shall be entitled to dividends pursuant to the immediately preceding
      sentence as if issued and outstanding as of the Effective Date.

    

    (e) Fractional
      Shares.
      No
      fractional shares of Parent Common Stock shall be issued in the Merger, but
      in
      lieu thereof each holder of Company Common Stock otherwise
      entitled to a fractional share of Parent Common Stock will be entitled to
      receive one additional share of Parent Common Stock. No cash payment shall
      be
      made for fractional shares of Parent Common Stock. 

    

    (f) No
      Further Ownership Rights In Company Common Stock.
      The
      Total Merger Consideration
      paid in accordance with the terms of this Article I upon conversion
      of any shares of Company Common Stock shall be deemed to have been paid in
      full
      satisfaction of all rights pertaining to such shares of Company Common Stock,
      subject, however, to the Surviving Company’s obligation to pay any dividends or
      make any other distributions with a record date prior to the Effective Date
      that
      may have been declared or made by the Company on such shares of Company Common
      Stock in accordance with the terms of this Agreement or prior to the date of
      this Agreement and which remain unpaid at the Effective Date. After the
      Effective Date there shall be no further registration of transfers on the equity
      transfer books of the Surviving Company of shares of Company Common Stock that
      were outstanding immediately prior to the Effective Date. If, after the
      Effective Date, any Stock Certificates formerly representing shares of Company
      Common Stock are presented to the Surviving Company or the Exchange Agent for
      any reason, they shall be canceled and exchanged as provided in this Article
      I.

    

    (g) No
      Liability.
      None of
      Parent, the Company or the Exchange Agent shall be liable to any person in
      respect of any Parent Common Stock
      delivered to a public official to the extent required by any applicable
      abandoned property, escheat or similar Law. If any Stock Certificate has not
      been surrendered immediately prior to such date on which the Merger
      Consideration in respect of such Stock Certificate would otherwise irrevocably
      escheat to or become the property of any governmental entity, any such shares,
      cash, dividends or distributions in respect of such Stock Certificate shall,
      to
      the extent permitted by applicable Law, become the property of the Surviving
      Company, free and clear of all claims or interest of any person previously
      entitled thereto, except as otherwise provided by Law.

     

    
 

    
      
        
          
          

        

        
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    (h) Withholding
      Rights.
      Parent
      and the Exchange Agent shall be entitled to deduct and withhold from the
      consideration otherwise payable to any holder
      of Company Common Stock pursuant to this Agreement such amounts as are required
      to be deducted and withheld with respect to the making of such payment under
      the
      Code, or under any other provision of applicable federal, state, local or
      foreign tax Law. To the extent that amounts are so withheld and paid over to
      the
      appropriate taxing authority by Parent or the Exchange Agent, as applicable,
      such withheld amounts shall be treated for all purposes of this Agreement as
      having been paid to the holders of the shares of Company Common Stock in respect
      of which such deduction and withholding was made by Parent or the Exchange
      Agent.

    

    (i) Lost
      Certificates.
      If any
      Stock Certificate shall have been lost, stolen, defaced or destroyed, upon
      the
      making of an affidavit of that fact by the
      person claiming such Stock Certificate to be lost, stolen, defaced or destroyed
      and, if reasonably required by Exchange Agent, the posting by such person of
      a
      bond in such reasonable amount as Exchange Agent may direct as indemnity against
      any claim that may be made against it with respect to such Stock Certificate,
      the Exchange Agent shall pay in respect of such lost, stolen,
      defaced or destroyed Stock Certificate the Merger Consideration with respect
      to
      each share of Company Common Stock formerly represented by such Stock
      Certificate. 

    

    1.8  Taking
      of Necessary Action; Further Action.
      Parent
      and the Company shall use all reasonable efforts to take all such actions as
      may
      be necessary or appropriate in order to effectuate the Merger as promptly as
      commercially practicable. If, at any time after the Effective Date, any further
      action is necessary or desirable to carry out the purposes of this Agreement
      and
      to vest the Parent with full right, title and possession to all assets,
      property, rights, privileges, powers and franchises of either the Company or
      the
      USECB Joint Venture, the officers of Parent are fully authorized in the name
      of
      each constituent entity or otherwise to take, and shall take, all such lawful
      and necessary action.

    

    ARTICLE
      2

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

    

    Except
      as
      publicly disclosed by the Company in the Company SEC Reports (as defined in
      Section
      2.4(a))
      filed
      with the Securities and Exchange Commission (“SEC”)
      prior
      to the date of this Agreement and except as set forth on the disclosure letter
      (each section of which qualifies the correspondingly numbered representation
      and
      warranty or covenant to the extent specified therein, provided that any
      disclosure set forth with respect to any particular section shall be deemed
      to
      be disclosed in reference to all other applicable sections of this Agreement
      and
      the disclosure letter) previously delivered by the Company to Parent (the
“Company
      Disclosure Letter”),
      the
      Company hereby represents and warrants to Parent as follows. “To the knowledge
      of the Company” and similar phrases mean the actual knowledge of the Chief
      Executive Officer and Chief Financial Officer of the Company.

     

    2.1  Organization.

    

    (a)  The
      Company owns a 50% interest in the USECC Joint Venture with Parent, through
      which they conduct all their business. Additionally, the Company owns a 1.2%
      ownership in Sutter Gold Mining, Inc. (“SGMI”).
      The
      Company also participates in mineral property ownership with Parent and has
      a
      cash flow sharing arrangement with the Parent on uranium properties in southern
      Utah, which are owned by Plateau Resources Limited, a 100% owned subsidiary
      of
      Parent. The Company therefore has no consolidated subsidiaries. Any reference
      to
“Company Subsidiaries” refers to USECC, SGMI or Plateau. Each of the Company and
      the Company Subsidiaries is duly organized, validly existing and in good
      standing under the Laws of the jurisdiction of its organization and has the
      requisite corporate or limited partnership power and authority and any necessary
      governmental approvals to own, lease and operate its property and to carry
      on
      its business as now being conducted. The Company and each of the 

     

    
 

    
      
        
          
          

        

        
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    Company
      Subsidiaries is duly qualified and/or licensed, as may be required, and in
      good
      standing in each of the jurisdictions in which the nature of the business
      conducted by it or the character of the property owned, leased or used by it
      makes such qualification and/or licensing necessary, except in such
      jurisdictions where the failure to be so qualified and/or licensed would not,
      individually or in the aggregate, have a Company Material Adverse Effect. A
      “Company
      Material Adverse Effect”
means
      any change, effect, fact, event, condition or development that would have or
      be
      reasonably likely to have a material adverse effect on (i) the condition
      (financial or otherwise), business, operations or assets of the Company and
      the
      Company Subsidiaries considered as a single enterprise or (ii) the ability
      of
      the Company to consummate the transactions contemplated by this Agreement.
      Notwithstanding anything to the contrary herein, any change, effect, fact,
      event
      or condition (x) which adversely affects the minerals industry generally or
      (y)
      which arises out of general economic conditions shall not be considered in
      determining whether a Company Material Adverse Effect has occurred. The copies
      of the articles of incorporation, and amendments, and bylaws of the Company
      which are filed as exhibits to the Company’s SEC Reports are complete and
      correct copies of such documents as in effect on the date of this
      Agreement.

    

    (b)  Section
      2.1(b) of the Company Disclosure Letter
      lists
      all of the Company Subsidiaries and their respective jurisdictions of
      incorporation. All the outstanding shares of capital stock of, or other equity
      interests in, each Company Subsidiary have been validly issued and are fully
      paid and nonassessable and are owned directly or indirectly by the Company,
      free
      and clear of all pledges, claims, liens, charges, encumbrances and security
      interests of any kind or nature whatsoever (“Liens”)
      and
      free of any other restriction (including any restriction on the right to vote,
      sell or otherwise dispose of such capital stock or other ownership interests).
      Other than joint ventures, operating agreements and similar arrangements typical
      in the Company’s industry entered into in the ordinary course of business,
      neither the Company nor any of the Company Subsidiaries directly or indirectly
      owns any equity or similar interest in, or any interest convertible into or
      exchangeable or exercisable for, any other person that is or would reasonably
      be
      expected to be material to the Company and the Company Subsidiaries considered
      as a single entity, other than the shares of Parent Common Stock owned by the
      Company or any Company Subsidiary. The term “person” as used in this Agreement
      will be interpreted broadly to include any corporation, company, group,
      partnership or other entity or individual.

    

    2.2  Capital
      Stock of the Company.

    

    (a)  As
      of the
      date of this Agreement, the authorized capital stock of the Company consists
      of
      100,000,000 shares of Company Common Stock, of which 17,182,704 are issued
      and
      outstanding, and 100,000 shares of Preferred Stock, of which none are issued
      and
      outstanding. No shares of Company Common Stock are held in the treasury of the
      Company. Such issued shares of Company Common Stock have been duly authorized,
      validly issued, are fully paid and nonassessable, and are free of preemptive
      rights. The Company has not declared or paid any dividend, or declared or made
      any distribution on, or authorized the creation or issuance of, or issued,
      or
      authorized or effected any split-up or any other recapitalization of, any of
      its
      capital stock, or directly or indirectly redeemed, purchased or otherwise
      acquired any of its outstanding capital stock. The Company has not agreed to
      take any such action, and there are no outstanding contractual obligations
      of
      the Company to repurchase, redeem or otherwise acquire any outstanding shares
      of
      capital stock of the Company.

    

    (b)  Section
      2.2(b) of the Company Disclosure Letter
      lists
      all outstanding options (including the holders of Company Stock Options),
      warrants or other rights to subscribe for, purchase or acquire from the Company
      any capital stock of the Company or securities convertible into or exchangeable
      for capital stock of the Company. There are no stock appreciation rights
      (“SARs”)
      attached to the options, warrants or rights.

     

     

     

    
      
        
        

      

      
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    (c)  Except
      for obligations under the USECB Joint Venture, and except as otherwise described
      in this Section
      2.2
      or as
      described in Section
      2.2(b) of the Company Disclosure Letter,
      the
      Company is not subject to or bound by any outstanding option, warrant, call,
      subscription or other right (including any preemptive or similar right),
      agreement, arrangement or commitment which (i) obligates the Company to issue,
      sell or transfer, or repurchase, redeem or otherwise acquire, any shares of
      the
      capital stock or other equity interests of the Company, (ii) obligates the
      Company to provide funds to make any investment (in the form of a loan, capital
      contribution or otherwise) or any other entity, (iii) restricts the transfer
      of
      any shares of capital stock of the Company or (iv) relates to the holding,
      voting or disposition of any shares of capital stock of the Company. No bonds,
      debentures, notes or other indebtedness of the Company having the right to
      vote
      (or convertible into, or exchangeable for, securities having the right to vote)
      on any matters on which the stockholders of the Company may vote are issued
      or
      outstanding.

    

    2.3  Authority
      Relative to this Agreement.

    

    (a)  The
      Company has the requisite corporate power to enter into this Agreement and
      to
      carry out its obligations hereunder. The execution and delivery of this
      Agreement by the Company, the performance by the Company of its obligations
      hereunder and the consummation by the Company of the transactions contemplated
      herein have been duly authorized by the Company Board. No other corporate
      proceedings on the part of the Company are necessary to authorize the execution
      and delivery of this Agreement, the performance by the Company of its
      obligations hereunder and the consummation by the Company of the transactions
      contemplated hereby, except for the approval of the Company’s stockholders as
      contemplated in Section
      5.1.
      This
      Agreement has been duly executed and delivered by the Company and constitutes
      a
      valid and binding obligation of the Company, enforceable in accordance with
      its
      terms, except to the extent that its enforceability may be limited by applicable
      bankruptcy, insolvency, fraudulent transfer, reorganization or other Laws
      affecting the enforcement of creditors’ rights generally or by general equitable
      principles.

    

    (b)  Neither
      the execution and delivery of this Agreement by the Company nor the consummation
      by the Company of the transactions contemplated herein nor compliance by the
      Company with any of the provisions hereof will (i) conflict with or result
      in
      any breach of the articles of incorporation or bylaws of the Company or any
      of
      the Company Subsidiaries, (ii) result in a violation or breach of any provisions
      of, or constitute a default (or an event which, with notice or lapse of time
      or
      both, would constitute a default) under, or result in the termination or
      cancellation of, or accelerate the performance or increase the fees required
      by,
      or result in a right of termination, amendment or acceleration under, a right
      to
      require redemption or repurchase of or otherwise “put” securities, or the loss
      of a material benefit under, or result in the creation of a Lien upon any of
      the
      properties or assets of the Company or any Company Subsidiaries under, any
      of
      the terms, conditions or provisions of any note, bond, mortgage, indenture,
      deed
      of trust, license, contract, lease, agreement or other instrument or obligation
      of any kind to which the Company is a party or by which the Company or any
      of
      its properties or assets may be bound or (iii) subject to compliance with the
      statutes and regulations referred to in subsection
      (c)
      below,
      violate any judgment, ruling, order, writ, injunction, decree, statute, rule
      or
      regulation (“Order”)
      applicable to the Company or any of its properties or assets, other than any
      such event described in items (ii) or (iii) which would not be reasonably likely
      to (x) prevent the consummation of the transactions contemplated hereby or
      (y) have a Company Material Adverse Effect.

     

     

     

    
      
        
        

      

      
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    (c)  Except
      for compliance with the provisions of the CBCA, the Securities Exchange Act
      of
      1934 (“’34
      Act”),
      the
      Securities Act of 1933 (the “‘33
      Act”),
      the
      rules and regulations of Nasdaq and the “blue sky” laws of various states and
      foreign laws, no action by any governmental authority is necessary for the
      Company’s execution and delivery of this Agreement or the consummation by the
      Company of the transactions contemplated hereby except where the failure to
      obtain or take such action would not be reasonably likely to have a Company
      Material Adverse Effect. 

    

    2.4  SEC
      Reports and Financial Statements.

    

    (a)  Since
      January 1, 2006, the Company has filed with the SEC all forms, reports,
      schedules, registration statements, definitive proxy statements and other
      documents (the “Company
      SEC Reports”)
      required to be filed by the Company with the SEC, excluding reports on Forms
      4
      or 5. As of their respective dates and, if amended or superseded by a subsequent
      filing prior to the date of this Agreement or the Effective Date, then as of
      the
      date of such filing, the Company SEC Reports, including, without limitation,
      any
      financial statements or schedules included therein, complied or will comply
      in
      all material respects with the requirements of the ‘33 Act, the ‘34 Act and the
      rules and regulations of the SEC applicable to such Company SEC Reports, and
      none of the Company SEC Reports contained any untrue statement of a material
      fact or omitted or will omit to state a material fact required to be stated
      therein or necessary to make the statements made therein, in the light of the
      circumstances under which they were made, not misleading. None of the Company
      Subsidiaries is required to file any forms, reports or other documents with
      the
      SEC pursuant to sections 12 or 15 of the ‘34 Act.

    

    (b)  The
      audited and unaudited financial statements (including, in each case, any related
      notes and schedules thereto) (collectively, the “Company
      Financial Statements”)
      of the
      Company contained in the Company SEC Reports have been prepared from the books
      and records of the Company, and the Company Financial Statements present fairly
      in all material respects the consolidated financial position and the
      consolidated results of operations and cash flows of the Company and its
      consolidated subsidiaries as of the dates thereof or for the periods presented
      therein in conformity with United States generally accepted accounting
      principles (“GAAP”)
      applied on a consistent basis during the periods involved (except as otherwise
      noted therein, including the related notes, and subject, in the case of
      quarterly financial statements, to normal and recurring year-end adjustments
      in
      the ordinary course of business).

    

    (c)  Except
      as
      disclosed in the Company SEC Reports or as described in Section
      2.4(c) of the Company Disclosure Letter,
      since
      January 1, 2006 the Company has not incurred any liabilities or obligations
      of
      any nature, whether accrued, contingent or absolute or otherwise (including
      without limitation under royalty arrangements), except for those arising in
      the
      ordinary course of business consistent with past practice and that would not,
      individually or in the aggregate, reasonably be expected to have a Company
      Material Adverse Effect.

    

    2.5  Certain
      Changes.
      Except
      as disclosed in the Company SEC Reports, since January 1, 2006, the Company
      has
      conducted its businesses only in the ordinary course consistent with past
      practice, and there has not been: (i) any Company Material Adverse Effect or
      (ii) any action taken by the Company that, if taken during the period from
      the
      date of this Agreement through the Effective Date, would constitute a breach
      of
Section
      4.1.
      

     

     

     

    
      
        
        

      

      
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    2.6  Litigation.
      Except
      as disclosed in the Company SEC Reports or set forth on Section
      2.6 of the Company Disclosure Letter,
      there
      is no suit, action or legal, administrative, arbitration or other proceeding
      or
      governmental investigation (the “Company
      Cases”)
      or
      Order pending or, to the knowledge of the Company, threatened against the
      Company which, if decided adversely to the Company, considered individually
      or
      in the aggregate, is reasonably likely to have a Company Material Adverse Effect
      nor is there any judgment, decree, injunction, rule or order of any court or
      other governmental entity or arbitrator outstanding against the Company having,
      or which, considered individually or in the aggregate, is reasonably likely
      to
      have, a Company Material Adverse Effect. 

    

    2.7  Disclosure
      in Proxy Statement.
      No
      information supplied by the Company for inclusion in the proxy statement to
      be
      sent to the shareholders of the Company in connection with the Shareholders’
Meeting (as defined in Section
      5.1)
      (the
“Proxy
      Statement/Prospectus”)
      shall,
      at the date the Proxy Statement/Prospectus (or any amendment thereof or
      supplement thereto) is first mailed to shareholders and at the time of the
      Shareholders’ Meeting and at the Effective Date, be false or misleading with
      respect to any 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 circumstances under which they are made, not misleading or
      necessary to correct any statement in any earlier communication with respect
      to
      the solicitation of proxies for the Shareholders’ Meeting which has become false
      or misleading. The portions of the Proxy Statement/Prospectus and S-4 supplied
      by the Company (whether by inclusion or by incorporation by reference therein)
      will comply as to form in all material respects with the requirements of the
‘33
      Act and the ‘34 Act and the rules and regulations of the SEC. Notwithstanding
      the foregoing, the Company makes no representation or warranty with respect
      to
      any information supplied by Parent which is contained in any of the foregoing
      documents.

    

    2.8  Broker’s
      or Finder’s Fees.
      No
      agent, broker, person or firm acting on behalf of the Company or under its
      authority is or will be entitled to any advisory, commission or broker’s or
      finder’s fee from any of the parties hereto in connection with any of the
      transactions contemplated herein. 

    

    2.9  Employee
      Plans.
      

    

    (a)  The
      Company does not have any employees. The Company does, however, share in the
      expenses associated with Parent’s employees, including payroll taxes, fringe
      benefits and retirement plans for all ventures in which it participates on
      a
      percentage ownership basis. The Company uses approximately 50 percent of the
      time of Parent’s employees, and reimburses the Parent on a cost reimbursement
      basis.

    

    (b)  Other
      than as disclosed in the Company SEC Reports, or as set forth on Section
      2.9(a) of the Company Disclosure Letter,
      there
      are no Employee Benefit Plans established, maintained or contributed to by
      the
      Company. An “Employee
      Benefit Plan”
means
      any employee benefit plan, program, policy, practice, agreement or other
      arrangement providing benefits to any current or former employee, officer or
      director of the Company or any beneficiary or dependent thereof that is
      sponsored or maintained by the Company or to which the Company contributes
      or is
      obligated to contribute, whether or not written, including without limitation
      any employee welfare benefit plan within the meaning of Section 3(1) of the
      Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
      any
      employee pension benefit plan within the meaning of Section 3(2) of ERISA
      (whether or not such plan is subject to ERISA) and any bonus, incentive,
      deferred compensation, vacation, education assistance, stock purchase, stock
      option, severance, employment, change of control or fringe benefit plan, program
      or policy.

    

    (c)  As
      of
      January 1, 2007, the Company does not have any outstanding loans to any current
      or former employees of the Company.

     

     

     

    
      
        
        

      

      
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    2.10  Board
      Recommendation; Company Action; Requisite Vote of the Company’s
      Stockholders.

    

    (a)  The
      special committee of the Company’s Board has recommended, and the Company Board
      has by resolutions duly approved and adopted by the unanimous vote of its entire
      board of directors at a meeting of such board duly called and held on (x)
      December 20, 2006, determined that the Exchange Ratio and the Merger
      Consideration are fair to and in the best interests of the Company and its
      stockholders (other than Parent); and on (y) January 23, 2007, approved and
      declared advisable this Agreement, the Merger and the other transactions
      contemplated hereby and recommended that the stockholders of the Company approve
      and adopt this Agreement and the Merger. In connection with such approval,
      the
      special committee of the Company Board received confirmation from its financial
      adviser, Neidiger Tucker Bruner Inc., that it would receive a formal opinion
      to
      the effect that the Merger Consideration to be paid to the stockholders of
      the
      Company in the Merger is fair to the stockholders of the Company (other than
      Parent) from a financial point of view, subject to the assumptions and
      qualifications in such opinion. The Company has been authorized by Neidiger
      Tucker Bruner Inc. to include such opinion in its entirety in the Proxy
      Statement/Prospectus, and to summarize the opinion in the Proxy
      Statement/Prospectus, so long as such summary is in form and substance
      reasonably satisfactory to Neidiger Tucker Bruner Inc. and its
      counsel.

    

    (b)  The
      affirmative vote of stockholders of the Company required for approval and
      adoption of this Agreement and the Merger is and will be (pursuant to
Section
      6.1(a))
      no
      greater than a majority of the outstanding shares of Company Common Stock.
      Except for the vote of Company Common Stock held by Parent and directors and
      officers of Parent, pursuant to the Voting Agreement under Section
      5.11,
      no
      other vote of any holder of the Company’s securities is required for the
      approval and adoption of this Agreement or the Merger.

    

    2.11  Taxes.
      

    

    (a)  Except
      as
      would not have a Company Material Adverse Effect, the Company has timely filed
      all federal, state, local, and other tax returns and reports required to be
      filed on or before the Effective Date by the Company under applicable Laws
      and
      have paid all required taxes (including any additions to taxes, penalties and
      interest related thereto) due and payable on or before the date hereof and
      all
      such tax returns and reports were true, complete and correct. The Company has
      withheld and paid over all taxes required to have been withheld and paid over,
      and complied in all material respects with all information reporting and backup
      withholding requirements, including the maintenance of required records with
      respect thereto, in connection with amounts paid or owing to any employee,
      creditor, independent contractor or other third party. There are no material
      encumbrances on any of the assets, rights or properties of the Company with
      respect to taxes, other than liens for taxes not yet due and payable or for
      taxes that the Company is contesting in good faith through appropriate
      proceedings. The Company is not a party to any tax sharing agreements, other
      than agreements between the Company and Parent.

    

    (b)  Except
      as
      set forth on Section
      2.11(b) of the Company Disclosure Letter,
      no
      audit of the tax returns of the Company is pending or, to the knowledge of
      the
      Company, threatened. No deficiencies have been asserted against the Company
      as a
      result of examinations by any state, local, federal or foreign taxing authority
      and no issue has been raised, either to the knowledge of the Company or in
      writing, by any examination conducted by any state, local, federal or foreign
      taxing authority that, by application of the same principles, might result
      in a
      proposed deficiency for any other period not so examined. The Company is not
      subject to any private letter ruling of the Internal Revenue Service or
      comparable rulings of other tax authorities that will be binding on the Company
      with respect to any period following the Closing Date.

     

     

    
      
        
        

      

      
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    (c)  There
      are
      no agreements, waivers of statutes of limitations, or other arrange-ments
      providing for extensions of time in respect of the assessment or collection
      of
      any unpaid taxes against the Company. The Company has disclosed on its federal
      income tax returns all positions taken therein that could, if not so disclosed,
      give rise to a substantial understatement penalty within the meaning of Section
      6662 of the Code. Except for the USECB Joint Venture, or otherwise as set forth
      on Section
      2.11(c) of the Company Disclosure Letter,
      the
      Company is not a party to any arrangement that constitutes a partnership for
      purposes of subchapter K of Chapter 1 of Subtitle A of the Code. The Company
      has
      properly identified any transactions that qualify as hedges under Treasury
      Regulation Section 1.1221-2 as hedges under Treasury Regulation Section
      1.1221-2(f).

    

    (d)  The
      Company is not a party to any safe harbor lease within the meaning of Section
      168(f)(8) of the Code, as in effect prior to amendment by The Tax Equity and
      Fiscal Responsibility Act of 1982. None of the property owned by the Company
      is
“tax-exempt use property” within the meaning of Section 168(h) of the Code. The
      Company is not required to make any adjustment under Code Section 481(a) by
      reason of a change in accounting method or otherwise except possibly by reason
      of the Merger. The Company has not been a member of an affiliated group of
      corporations filing a consolidated federal income tax return (other than a
      group
      the common parent of which was the Company) or has any liability for the taxes
      of another person (other than the Company or any Company Subsidiary) arising
      pursuant to Treasury Regulation § 1.1502-6 or analogous provision of state,
      local or foreign Law, or as a transferee or successor, or by contract, tax
      sharing agreement, tax indemnification agreement, or otherwise. The Company
      has
      not filed a consent under Section 341(f) of the Code with respect to the Company
      or any Company Subsidiary. The Company has not been a party to any distribution
      occurring during the two year period prior to the date of this Agreement in
      which the parties to such distribution treated the distribution as one to which
      Section 355 of the Code applied, except for distributions occurring among
      members of the same group of affiliated corporations filing a consolidated
      federal income tax return. 

    

    (e)  The
      Company has not taken, or agreed to take any action, and has no knowledge of
      any
      condition, that would prevent the Merger from qualifying as a reorganization
      described in Section 368(a) of the Code.

    

    2.12  Environmental.
      Except
      for such matters that are not, individually or in the aggregate, reasonably
      likely to have a Company Material Adverse Effect and except as set forth on
      Section
      2.12 of the Company Disclosure Letter:

    

    (a)  To
      the
      knowledge of the Company, there is no condition existing on any real property
      or
      other asset previously or currently owned, leased or operated by the Company
      or
      resulting from operations conducted thereon that would reasonably be expected
      to
      be subject to remediation obligations under Environmental Laws or give rise
      to
      any liability to the Company under Environmental Laws or constitute a violation
      of any Environmental Laws, and the Company is otherwise in compliance, in all
      material respects, with all applicable Environmental Laws.

    

    (b)  None
      of
      the Company’s real property or other assets previously or currently owned,
      leased or operated by the Company, nor the operations previously or currently
      conducted thereon or in relation thereto by the Company, are, to the knowledge
      of the Company, subject to any pending or threatened action, suit,
      investigation, inquiry or proceeding relating to any Environmental Laws by
      or
      before any court or other governmental authority.

     

     

     

    
      
        
        

      

      
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    (c)  The
      Company has made available to Parent all material site assessments, compliance
      audits, and other similar studies in its possession, custody or control and
      prepared since January 1, 2006 relating to (i) the environmental conditions
      on, under or about the properties or assets previously or currently owned,
      leased or operated by the Company, or any predecessor in interest thereto and
      (ii) any Hazardous Substances used, managed, handled, transported, treated,
      generated, stored, discharged, emitted, or otherwise released by the Company
      or
      any other Person on, under, about or from any real property or other assets
      previously or currently owned, leased or operated by the Company;

    

    (d)  The
      Company has not received any communication, whether from a governmental
      authority, citizen’s group, employee or otherwise, alleging that it is liable
      under or not in compliance with any Environmental Law.

    

    (e)  All
      material permits, notices and authorizations, if any, required under any
      Environmental Law to be obtained or filed in connection with the operation
      or
      use of any real property or other asset owned, leased or operated by the
      Company, including without limitation past or present treatment, storage,
      disposal or release of a Hazardous Substance or solid waste into the
      environment, have been duly obtained or filed, and the Company is in compliance
      in all material respects with the terms and conditions of all such permits,
      notices and authorizations.

    

    (f)  Hazardous
      Substances have not been released, disposed of or arranged to be disposed of
      by
      the Company, in violation of, or in a manner or to a location that would
      reasonably be expected to give rise to a material liability under, or cause
      the
      Company to be subject to remediation obligations under, any Environmental
      Laws.

    

    (g)  The
      Company has not assumed, contractually or, to the knowledge of the Company,
      by
      operation of Law, any liabilities or obligations of third parties under any
      Environmental Laws, except in connection with the acquisition of assets or
      entities associated therewith.

    

    (h)  “Environmental
      Laws”
means
      any federal, state and local health, safety and environmental laws, regulations,
      orders, permits, licenses, approvals, ordinances, rule of common law, and
      directives including without limitation the Clean Air Act, the Clean Water
      Act,
      the Resource Conservation and Recovery Act (“RCRA”),
      the
      Comprehensive Environmental Response, Compensation, and Liability Act
      (“CERCLA”),
      the
      Occupational Health and Safety Act, the Toxic Substances Control Act, the
      Endangered Species Act, the Oil Pollution Act and any similar foreign, state
      or
      local law, and including without limitation all Laws relating to or governing
      the use, management, treatment, transport, generation, storage, discharge or
      disposal of Hazardous Substances.

    

    (i)  “Hazardous
      Substance”
means
      (i) any “hazardous substance,” as defined by CERCLA, (ii) any “hazardous waste,”
as defined by RCRA, or (iii) any pollutant or contaminant or hazardous,
      dangerous or toxic chemical or material or any other substance including, but
      not limited to, asbestos, buried contaminants, regulated chemicals, flammable
      explosives, radioactive materials (including without limitation naturally
      occurring radioactive materials), polychlorinated biphenyls, natural gas,
      natural gas liquids, liquified natural gas, condensates, petroleum (including
      without limitation crude oil and petroleum products), including without
      limitation any Hazardous Substance regulated by, or that could result in the
      imposition of liability under, any Environmental Law or other applicable Law
      of
      any applicable governmental authority, all as amended.

     

     

     

    
      
        
        

      

      
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    2.13  Compliance
      with Laws.
      The
      Company is in compliance in all material respects with any applicable law,
      rule
      or regulation of any United States federal, state, local or foreign government
      or agency thereof (any such law, rule or regulation, a “Law”)
      that
      materially affects the business, properties or assets of the Company and the
      Company Subsidiaries, and no notice, charge, claim, action or assertion has
      been
      received by the Company or, to the Company’s knowledge, has been filed,
      commenced or threatened against the Company alleging any such violation, nor
      do
      reasonable grounds for any of the foregoing exist, that would be reasonably
      likely to have a Company Material Adverse Effect. All licenses, permits and
      approvals required under such Laws are in full force and effect, except where
      the failure to be in full force and effect would not, individually or in the
      aggregate, be reasonably likely to have a Company Material Adverse Effect.
      

    

    2.14  Employment
      Matters.
      The
      Company: (i) is not a party to or otherwise bound by any collective bargaining
      agreement, contract or other agreement or understanding with a labor union
      or
      labor organization, nor is any such contract or agreement presently being
      negotiated, nor, to the knowledge of the Company, is there, nor has there been
      in the last five years, a representation campaign respecting any of the
      employees of the Company, and, to the knowledge of the Company, there are no
      campaigns being conducted to solicit cards from employees of Company or any
      of
      the Company Subsidiaries to authorize representation by any labor organization;
      (ii) is not a party to, or bound by, any consent decree with, or citation by,
      any governmental agency relating to employees or employment practices which
      would reasonably be expected to have a Company Material Adverse Effect; or
      (iii)
      is not the subject of any proceeding asserting that it has committed an unfair
      labor practice or is seeking to compel it to bargain with any labor union or
      labor organization nor, as of the date of this Agreement, is there pending
      or,
      to the knowledge of the Company, threatened, any labor strike, dispute, walkout,
      work stoppage, slow-down or lockout involving the Company which, with respect
      to
      any event described in this clause (iii), would, individually or in the
      aggregate, reasonably be expected to have a Company Material Adverse
      Effect.

    

    2.15  Certain
      Contracts and Arrangements.
      Except
      as disclosed in the Company SEC Reports or Section
      2.15 of the Company Disclosure Letter,
      the
      Company is not a party to or bound by any agreement or other arrangement that
      limits or otherwise restricts the Company or any of its affiliates or any
      successor thereto, or that would, after the Effective Date, to the knowledge
      of
      the Company, materially limit or restrict the Surviving Company or any of its
      subsidiaries or any of their respective affiliates or any successor thereto,
      from engaging or competing in the minerals business in any significant
      geographic area, except for joint ventures, area of mutual interest agreements
      entered into in connection with prospect reviews (including such agreements
      with
      Enterra Energy Trust and Pinnacle Resources, Inc.) and similar arrangements
      entered into in the ordinary course of business. The Company is not in breach
      or
      default under any contract filed or incorporated by reference as an exhibit
      to
      the Company’s Annual Report on Form 10-K for the year ended December 31, 2005,
      or any agreements disclosed in or filed as exhibits to Forms 8-K filed from
      January 1, 2006 to the Effective Date, nor, to the knowledge of the Company,
      is
      any other party to any such contract in breach or default thereunder, except
      such breach or default as would not, individually or in the aggregate,
      reasonably be expected to have a Company Material Adverse Effect.

    

    2.16  Financial
      and Commodity Hedging.
      The
      Company is not a party to any hedging agreements or arrangements (including
      fixed price contracts, collars, swaps, caps, hedges and puts).

     

     

     

    
      
        
        

      

      
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    2.17  Properties.
      Except
      as set forth below, and except for property sold, used or otherwise disposed
      of
      since January 1, 2006 in the ordinary course of business, the Company has good
      record and marketable title in fee simple (or, with respect to real property
      not
      owned, a valid leasehold interest in all real property (excluding certain water
      rights which are held), to all interests in properties and assets reflected
      in
      the Company SEC Reports filed prior to the date of this Agreement as owned
      by
      the Company, free and clear of any Liens, other than liens for taxes not yet
      due
      and payable and mechanic’s, materialman’s, supplier’s, vendor’s or similar liens
      arising in the ordinary course of business securing amounts that are not
      delinquent. The preceding warranty is limited to such
      defects in title as could, individually or in the aggregate, reasonably be
      expected to have a Company Material Adverse Effect. 

    

    2.18  Accounting
      Controls.
      The
      Company has devised and maintained systems of internal accounting controls
      sufficient to provide reasonable assurances, in the judgment of the Company
      Board, that (a) all material transactions are executed in accordance with
      management’s general or specific authorization; (b) all material transactions
      are recorded as necessary to permit the preparation of financial statements
      in
      conformity with generally accepted accounting principals consistently applied
      with respect to any criteria applicable to such statements, (c) access to the
      material property and assets of the Company is permitted only in accordance
      with
      management’s general or specific authorization; and (d) the recorded
      accountability for items is compared with the actual levels at reasonable
      intervals and appropriate action is taken with respect to any
      differences.

    

    2.19  Intellectual
      Property.
      The
      Company does not own any patents, patent applications, trademarks or trademark
      applications or copyrights or copyright applications (“Intellectual
      Property”).
      

    

    ARTICLE
      3

    REPRESENTATIONS
      AND WARRANTIES OF PARENT 

     

    Except
      as
      publicly disclosed by Parent in the Parent SEC Reports (as defined in
Section
      3.4(a))
      filed
      with the SEC prior to the date of this Agreement, Parent hereby represents
      and
      warrants to the Company as follows. “To the knowledge of Parent” and similar
      phrases mean the actual knowledge of the Chief Executive Officer and Chief
      Financial Officer of Parent. 

     

    3.1  Organization.

    

    (a)  Each
      of
      Parent and Parent Subsidiaries (as defined below) is duly organized, validly
      existing and in good standing under its jurisdiction of incorporation or
      formation. Each of Parent and Parent Subsidiaries has the requisite corporate
      power and authority and any necessary governmental approvals to own, lease
      and
      operate its property and to carry on its business as now being conducted. Each
      of Parent and Parent Subsidiaries is duly qualified and/or licensed, as may
      be
      required, and in good standing in each of the jurisdictions in which the nature
      of the business conducted by it or the character of the property owned, leased
      or used by it makes such qualification and/or licensing necessary, except in
      such jurisdictions where the failure to be so qualified and/or licensed would
      not, individually or in the aggregate, have a Parent Material Adverse Effect.
      A
“Parent
      Material Adverse Effect”
means
      any change, effect, fact, event, condition or development that would have or
      be
      reasonably likely to have a material adverse effect on (i) the condition
      (financial or otherwise), business, operations or assets of Parent and each
      corporation, partnership, joint venture or other legal entity of which Parent
      owns, directly or indirectly, 50% or more of the stock or other equity interests
      the holder of which is generally entitled to vote for the election of the board
      of directors or other governing body of such corporation or other legal entity
      (the “Parent
      Subsidiaries,”
but
      for purposes of this Article 3, the Company is not deemed to be a Parent
      Subsidiary) considered as a single enterprise or (ii) the ability of Parent
      to
      consummate the transactions contemplated by this Agreement. Notwithstanding
      anything to the contrary herein, any

    

    
      
        
          
          

        

        
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    change,
      effect, fact, event or condition which adversely affects the minerals industry
      generally or which arises out of general economic conditions shall not be
      considered in determining whether a Parent Material Adverse Effect has occurred.
      The copies of the articles of incorporation and amendments and the bylaws of
      Parent which are filed as exhibits to Parent’s SEC Reports are complete and
      correct copies of such documents as in effect on the date of this
      Agreement.

    

    (b)  All
      the
      outstanding shares of capital stock of, or other equity interests in, each
      Parent Subsidiary have been validly issued and are fully paid and nonassessable
      and are owned directly or indirectly by Parent, free of all Liens and free
      of
      any other restriction (including any restriction on the right to vote, sell
      or
      otherwise dispose of such capital stock or other ownership interests). Neither
      Parent nor any of the Parent Subsidiaries directly or indirectly owns any equity
      or similar interest in, or any interest convertible into or exchangeable or
      exercisable for, any other person that is or would reasonably be expected to
      be
      material to Parent and the Parent Subsidiaries considered as a single
      entity.

    

    3.2  Capital
      Stock.

    

    (a)  As
      of the
      date of this Agreement, the authorized capital stock of Parent consists of
      an
      unlimited number of shares of Parent Common Stock, of which 19,747,912 are
      issued and outstanding, and 100,000 shares of Preferred Stock, of which none
      are
      issued and outstanding. 1,004,174 shares of Parent Common Stock are held in
      the
      treasury. All issued shares of Parent Common Stock (excluding for this purpose
      the treasury shares) have been duly authorized, validly issued, are fully paid
      and nonassessable, and are free of preemptive rights. Parent has not declared
      or
      paid any dividend, or declared or made any distribution on, or authorized the
      creation or issuance of, or issued, or authorized or effected any split-up
      or
      any other recapitalization of, any of its capital stock, or directly or
      indirectly redeemed, purchased or otherwise acquired any of its outstanding
      capital stock. Parent has not agreed to take any such action, and there are
      no
      outstanding contractual obligations of Parent to repurchase, redeem or otherwise
      acquire any outstanding shares of capital stock of Parent.

    

    (b)  Section
      3.2(b) of the Parent Disclosure Letter
      lists
      all outstanding options, warrants or other rights to subscribe for, purchase
      or
      acquire from the Parent any capital stock of the Parent or securities
      convertible into or exchangeable for capital stock of the Parent. There are
      no
      SARs attached to the options, warrants or rights.

    

    (c)  Except
      for their obligations under the USECB Joint Venture, and except as otherwise
      described in this Section
      3.2
      or as
      described in Section
      3.2(b) of the Parent Disclosure Letter,
      the
      Parent has no, nor is it subject to or bound by any outstanding option, warrant,
      call, subscription or other right (including any preemptive or similar right),
      agreement, arrangement or commitment which (i) obligates the Parent to issue,
      sell or transfer, or repurchase, redeem or otherwise acquire, any shares of
      the
      capital stock or other equity interests of the Parent, (ii) obligates the Parent
      to provide funds to make any investment (in the form of a loan, capital
      contribution or otherwise) or any other entity, (iii) restricts the transfer
      of
      any shares of capital stock of the Parent, or (iv) relates to the holding,
      voting or disposition of any shares of capital stock of the Parent. No bonds,
      debentures, notes or other indebtedness of the Parent having the right to vote
      (or convertible into, or exchangeable for, securities having the right to vote)
      on any matters on which the stockholders of the Parent may vote are issued
      or
      outstanding.

     

     

    
      
        
        

      

      
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    3.3  Authority
      Relative to this Agreement.

     

    (a)  The
      Parent has the requisite corporate power to enter into this Agreement and to
      carry out its obligations hereunder. The execution and delivery of this
      Agreement by the Parent, the performance by the Parent of its obligations
      hereunder and the consummation by the Parent of the transactions contemplated
      herein have been duly authorized by the Parent Board of Directors (“Parent
      Board”).
      No
      other corporate proceedings on the part of the Parent or any of the Parent
      Subsidiaries are necessary to authorize the execution and delivery of this
      Agreement, the performance by the Parent of its obligations hereunder and the
      consummation by the Parent of the transactions contemplated hereby. This
      Agreement has been duly executed and delivered by the Parent and constitutes
      a
      valid and binding obligation of the Parent, enforceable in accordance with
      its
      terms, except to the extent that its enforceability may be limited by applicable
      bankruptcy, insolvency, fraudulent transfer, reorganization or other Laws
      affecting the enforcement of creditors’ rights generally or by general equitable
      principles.

    

    (b)  Neither
      the execution and delivery of this Agreement by the Parent nor the consummation
      by the Parent of the transactions contemplated herein nor compliance by the
      Parent with any of the provisions hereof will (i) conflict with or result in
      any
      breach of the articles of incorporation or bylaws of the Parent or any of the
      Parent Subsidiaries, (ii) result in a violation or breach of any provisions
      of,
      or constitute a default (or an event which, with notice or lapse of time or
      both, would constitute a default) under, or result in the termination or
      cancellation of, or accelerate the performance or increase the fees required
      by,
      or result in a right of termination, amendment or acceleration under, a right
      to
      require redemption or repurchase of or otherwise “put” securities, or the loss
      of a material benefit under, or result in the creation of a Lien upon any of
      the
      properties or assets of the Parent or any Parent Subsidiaries under, any of
      the
      terms, conditions or provisions of any note, bond, mortgage, indenture, deed
      of
      trust, license, contract, lease, agreement or other instrument or obligation
      of
      any kind to which the Parent or any of the Parent Subsidiaries is a party or
      by
      which the Parent or any of the Parent Subsidiaries or any of their respective
      properties or assets may be bound or (iii) subject to compliance with the
      statutes and regulations referred to in subsection
      (c)
      below,
      violate any Order applicable to the Parent or any of the Parent Subsidiaries
      or
      any of their respective properties or assets, other than any such event
      described in items (ii) or (iii) which would not be reasonably likely to (x)
      prevent the consummation of the transactions contemplated hereby or
      (y) have a Parent Material Adverse Effect. 

    

    (c)  Except
      for compliance with the provisions of the WBCA, the ’34 Act, the ‘33 Act, the
      rules and regulations of Nasdaq and the “blue sky” laws of various states and
      foreign laws, no action by any governmental authority is necessary for the
      Parent’s execution and delivery of this Agreement or the consummation by the
      Parent of the transactions contemplated hereby except where the failure to
      obtain or take such action would not be reasonably likely to have a Parent
      Material Adverse Effect.

    

    3.4  SEC
      Reports and Financial Statements.

    

    (a)  Since
      January 1, 2006, the Parent has filed with the SEC all forms, reports,
      schedules, definitive proxy statements and other documents (the “Parent
      SEC Reports”)
      required to be filed by the Parent with the SEC, excluding reports on Forms
      4 or
      5. As of their respective dates and, if amended or superseded by a subsequent
      filing prior to the date of this Agreement or the Effective Date, then as of
      the
      date of such filing, the Parent SEC Reports, including, without limitation,
      any
      financial statements or schedules included therein, complied or will comply
      in
      all material respects with the requirements of the ‘33 Act, the ‘34 Act and the
      rules and regulations of the SEC promulgated which are applicable to such Parent
      SEC Reports. None of the Parent SEC Reports contained any untrue statement
      of a
      material fact or omitted or will omit to state a material fact required to
      be
      stated therein or necessary to make the statements made therein, in the light
      of
      the circumstances under which they were made, not misleading. None of the Parent
      Subsidiaries is required to file any forms, reports or other documents with
      the
      SEC pursuant to sections 12 or 15 of the ‘34 Act.

     

     

    
      
        
        

      

      
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    (b)  The
      audited and unaudited financial statements (including, in each case, any related
      notes and schedules thereto) (collectively, the “Parent
      Financial Statements”)
      of the
      Parent contained in the Parent SEC Reports have been prepared from the books
      and
      records of the Parent and its consolidated subsidiaries, and the Parent
      Financial Statements present fairly in all material respects the consolidated
      financial position and the consolidated results of operations and cash flows
      of
      the Parent and its consolidated subsidiaries as of the dates thereof or for
      the
      periods presented therein in conformity with GAAP applied on a consistent basis
      during the periods involved (except as otherwise noted therein, including the
      related notes, and subject, in the case of quarterly financial statements,
      to
      normal and recurring year-end adjustments in the ordinary course of
      business).

    

    (c)  Except
      as
      disclosed in the Parent SEC Reports or as described in Section
      3.4(c) of the Parent Disclosure Letter,
      since
      January 1, 2006 neither the Parent nor any of the Parent Subsidiaries has
      incurred any liabilities or obligations of any nature, whether accrued,
      contingent or absolute or otherwise (including without limitation under royalty
      arrangements), except for those arising in the ordinary course of business
      consistent with past practice and that would not, individually or in the
      aggregate, reasonably be expected to have a Parent Material Adverse
      Effect.

    

    3.5  Certain
      Changes.
      Except
      as disclosed in the Parent SEC Reports, since January 1, 2006, the Parent and
      each of the Parent Subsidiaries have conducted their businesses only in the
      ordinary course consistent with past practice, and there has not been: (i)
      any
      Parent Material Adverse Effect or (ii) any action taken by the Parent or any
      of
      the Parent Subsidiaries that, if taken during the period from the date of this
      Agreement through the Effective Date, would constitute a breach of Section
      4.1.
      

    

    3.6  Litigation.
      Except
      as disclosed in the Parent SEC Reports or set forth on Section
      3.6 of the Parent Disclosure Letter,
      there
      is no suit, action or legal, administrative, arbitration or other proceeding
      or
      governmental investigation (the “Parent
      Cases”)
      or
      Order pending or, to the knowledge of the Parent, threatened against the Parent
      or any of the Parent Subsidiaries which, if decided adversely to the Parent,
      considered individually or in the aggregate, is reasonably likely to have a
      Parent Material Adverse Effect, nor is there any judgment, decree, injunction,
      rule or order of any court or other governmental entity or arbitrator
      outstanding against the Parent or any of the Parent Subsidiaries having, or
      which, considered individually or in the aggregate, is reasonably likely to
      have, a Parent Material Adverse Effect. 

    

    3.7  Disclosure
      in Proxy Statement.
      No
      information about the Parent in the Proxy Statement/Prospectus shall, at the
      date the Proxy Statement/Prospectus (or any amendment thereof or supplement
      thereto) is first mailed to Company shareholders and at the time of the
      Shareholders’ Meeting and at the Effective Date, be false or misleading with
      respect to any 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 circumstances under which they are made, not misleading or
      necessary to correct any statement in any earlier communication with respect
      to
      the solicitation of proxies for the Shareholders’ Meeting which has become false
      or misleading. The Proxy Statement/Prospectus and S-4 will comply as to form
      in
      all material respects with the requirements of the ‘33 Act and the ‘34 Act and
      the rules and regulations of the SEC. Notwithstanding the foregoing, the Parent
      makes no representation or warranty with respect to any information supplied
      by
      the Company which is contained in any of the foregoing documents.

    

    3.8  Broker’s
      or Finder’s Fees.
      No
      agent, broker, person or firm acting on behalf of the Parent or under its
      authority is or will be entitled to any advisory, commission or broker’s or
      finder’s fee from any of the parties hereto in connection with any of the
      transactions contemplated herein. 

     

     

    
      
        
        

      

      
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    3.9  Employee
      Plans.
      

    

    (a)  Other
      than as disclosed in the Parent SEC Reports, or as set forth on Section
      3.9(a) of the Parent Disclosure Letter,
      there
      are no Employee Benefit Plans established, maintained or contributed to by
      the
      Parent. 

    

    (b)  With
      respect to each Employee Benefit Plan, the Parent has made available to the
      Company a true, correct and complete copy of: (i) each writing constituting
      a
      part of such Employee Benefit Plan (or to the extent no copy exists, a
      materially accurate description); (ii) for the three most recent plan years,
      Annual Report (Form 5500 Series), if any; (iii) the current summary plan
      description and any material modifications thereto, if required to be furnished
      under ERISA; and (iii) the most recent determination letter from the Internal
      Revenue Service, if any.

    

    (c)  Each
      Employee Benefit Plan that is intended to be a “qualified plan” within the
      meaning of Section 401(a) of the Code is either (i) entitled to reliance with
      respect to an opinion letter issued to a prototype plan, pursuant to Revenue
      Procedure 2005-16, or (ii) is the recipient of a favorable determination letter
      from the Internal Revenue Service that has not been revoked, and to the
      knowledge of the Parent, no event has occurred and no condition exists that
      could reasonably be expected to result in the revocation of any such
      determination letter.

    

    (d)  Except
      as
      is not reasonably likely, individually or in the aggregate, to have a Parent
      Material Adverse Effect, (i) all contributions required to be made to any
      Employee Benefit Plan (or to any person pursuant to the terms thereof) have
      been
      made or the amount of such payment or contribution obligation has been reflected
      in the Parent SEC Reports filed with the SEC prior to the date of this
      Agreement, (ii) a proper accrual has been made on the books of account of the
      Parent and any of the Parent Subsidiaries for all contributions, premium
      payments and other payments due in the current fiscal year and not paid on
      or
      before the Effective Date, and (iii) no contribution, premium payment or other
      payment has been made in support of any Employee Benefit Plan that is in excess
      of the allowable deduction for federal income tax purposes for the year with
      respect to which the contribution was made (whether under Section 162, Section
      280G, Section 404, Section 419, Section 419A of the Code or
      otherwise).

    

    (e)  Except
      as
      is not reasonably likely, individually or in the aggregate, to have a Parent
      Material Adverse Effect, with respect to each Employee Benefit Plan, the Parent
      and the Parent Subsidiaries have complied, and are now in compliance, with
      all
      provisions of ERISA, the Code and all Laws applicable to such Employee Benefit
      Plans in all material respects. Each Employee Benefit Plan has been established
      and administered in accordance with its terms in all material respects. All
      reports and filings with governmental entities (including the Department of
      Labor, the Internal Revenue Service and the SEC) required in connection with
      each Employee Benefit Plan have been timely made. All disclosures and notices
      required by Law or Employee Benefit Plan provisions to be given to participants
      and beneficiaries in connection with each Employee Benefit Plan have been
      properly and timely made. All Employee Benefit Plans intended to be tax
      qualified under Section 401(a) or Section 403(a) of the Code are so qualified.
      All trusts established in connection with Employee Benefit Plans intended to
      be
      tax exempt under Section 501(a) or (c) of the Code are so tax exempt.

    

    (f)  No
      Employee Benefit Plan is subject to Title IV of ERISA (including, without
      limitation, any multiemployer plan within the meaning of Section 4001(a)(3)
      of
      ERISA) and no liability under Title IV of ERISA has been or is expected to
      be
      incurred by the Parent, any of the Parent Subsidiaries or any other entities
      that are, along with the Parent or any of the Parent Subsidiaries, treated
      as a
      single employer under Sections 414(b), (c) or (m) of the Code.

     

     

    
      
        
        

      

      
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    (g)  Other
      than as set forth on Section
      3.9(g) of the Parent Disclosure Letter,
      no
      Employee Benefit Plan is subject to Section 409A of the Code.

    

    (h)  Neither
      the Parent nor any of the Parent Subsidiaries sponsor any of the following:
      (i)
      a plan that is or is intended to be an employee stock ownership plan as defined
      in Section 4975(c)(7) of the Code, (iii) a nonqualified deferred compensation
      arrangement, (iv) a multiemployer plan as defined in Section 3(37) of ERISA
      or
      Section 414(f) of the Code, (v) a multiple employer plan maintained by more
      than
      one employer as defined in Section 413(c) of the Code, (vi) a plan that owns
      any
      employer securities as an investment, (vii) a plan that provides benefits (or
      provides increased benefits or vesting) as a result of a change in control
      of
      the Parent or any of the Parent Subsidiaries, (viii) a plan that is maintained
      pursuant to collective bargaining, or (ix) a plan that is funded, in whole
      or in
      part, through a voluntary employees’ beneficiary association exempt from tax
      under Section 501(c)(9) of the Code.

    

    (i)  Neither
      the Parent nor any of the Parent Subsidiaries have any material liability for
      life, health or medical benefits to former employees or beneficiaries or
      dependents thereof, except for health continuation coverage as required by
      Section 4980B of the Code or Part 6 of Title I of ERISA.

    

    (j)  Except
      as
      set forth on Section
      3.9(j) of the Parent Disclosure Letter,
      the
      consummation of the transactions contemplated by this Agreement will not, either
      alone or in connection with termination of employment, (i) entitle any current
      or former employee or officer of the Parent or the Parent Subsidiaries to
      severance pay or any other material payment, (ii) accelerate the time of payment
      or vesting, or increase the amount of compensation due any such employee or
      officer or (iii) give rise to the payment of any amount that would not be
      deductible under Section 280G of the Code. 

    

    (k)  To
      the
      knowledge of the Parent, there is no suit, action or legal, administrative,
      arbitration or other proceeding or governmental investigation or Order pending
      with regard to any Employee Benefit Plan other than routine uncontested claims
      for benefits. To the knowledge of the Parent, no Employee Benefit Plan is
      currently under examination or audit by the Department of Labor, the Internal
      Revenue Service or the Pension Benefit Guaranty Corporation. To the knowledge
      of
      the Parent, neither the Parent nor any of the Parent Subsidiaries have any
      liability (either directly or as a result of indemnification) for (and the
      transactions contemplated by this Agreement will not cause any liability for):
      (i) any excise taxes under Section 4971 through Section 4980B, Section 4999,
      Section 5000 or any other Section of the Code, (ii) any penalty under Section
      502(i), Section 502(l), Part 6 of Title I or any other provision of ERISA,
      or
      (iii) any excise taxes, penalties, damages or equitable relief as a result
      of
      any prohibited transaction, breach of fiduciary duty or other violation under
      ERISA or any other applicable Law. All accruals required under FAS 106 and
      FAS
      112 have been properly accrued on the most recently issued quarterly financial
      statements. No condition, agreement or Employee Benefit Plan provision limits
      the right of any Parent to amend, cut back or terminate any Employee Benefit
      Plan (except to the extent such limitation arises under ERISA). Neither the
      Parent nor any of the Parent Subsidiaries have any liability for life insurance,
      death or medical benefits after separation from employment other than (i) death
      benefits under the Employee Benefit Plans and (ii) health care continuation
      benefits described in Section 4980B of the Code.

    

    (l)  As
      of
      January 1, 2007, the Parent does not have any outstanding loans to any current
      or former employees of the Parent.

    
 

    
      
        
        

      

      
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    3.10  Board
      Recommendation.

    

    (a)  The
      special committee of the Parent Board has recommended, and the Parent Board
      has
      by resolutions duly approved and adopted by the unanimous vote of its entire
      board of directors at a meeting of such board duly called and held on (x)
      December 20, 2006, determined that the Exchange Ratio is fair to and in the
      best
      interests of the Parent and its stockholders; and (y) January 23, 2007 approved
      and declared advisable this Agreement, the Merger and the other transactions
      contemplated hereby. In connection with such approval under (x), the Parent
      Board received from Navigant Capital Advisors, LLC (“Navigant”)
      confirmation that a formal opinion would be issued by Navigant to the effect
      that the Exchange Ratio, and the Merger Consideration to be paid to the
      stockholders of the Company (other than Parent) in the Merger is fair to the
      stockholders of the Parent from a financial point of view, subject to the
      assumptions and qualifications in such opinion. The Parent has been authorized
      by Navigant to include such opinion in its entirety in the Proxy
      Statement/Prospectus, and to summarize the opinion in the Proxy
      Statement/Prospectus, so long as such summary is in form and substance
      reasonably satisfactory to Navigant and its counsel.

    

    (b)  The
      vote
      of Parent stockholders is not required for approval and adoption of this
      Agreement under either the WBCA or the Nasdaq rules. In connection with this
      representation and warranty, the Parent Board received from The Law Office
      of
      Stephen E. Rounds an opinion that such vote is not required.

    

    3.11  Taxes.
      

    

    (a)  Except
      as
      would not have a Parent Material Adverse Effect, the Parent and the Parent
      Subsidiaries have timely filed all federal, state, local, and other tax returns
      and reports required to be filed on or before the Effective Date by the Parent
      and each Parent Subsidiary under applicable Laws and have paid all required
      taxes (including any additions to taxes, penalties and interest related thereto)
      due and payable on or before the date hereof and all such tax returns and
      reports were true, complete and correct. The Parent and the Parent Subsidiaries
      have withheld and paid over all taxes required to have been withheld and paid
      over, and complied in all material respects with all information reporting
      and
      backup withholding requirements, including the maintenance of required records
      with respect thereto, in connection with amounts paid or owing to any employee,
      creditor, independent contractor or other third party. There are no material
      encumbrances on any of the assets, rights or properties of the Parent or any
      Parent Subsidiary with respect to taxes, other than liens for taxes not yet
      due
      and payable or for taxes that the Parent or a Parent Subsidiary is contesting
      in
      good faith through appropriate proceedings. The Parent is not a party to any
      tax
      sharing agreements, other than agreements between the Parent and the Parent
      Subsidiaries.

    

    (b)  Except
      as
      set forth on Section
      3.11(b) of the Parent Disclosure Letter,
      no
      audit of the tax returns of the Parent or any Parent Subsidiary is pending
      or,
      to the knowledge of the Parent, threatened. No deficiencies have been asserted
      against the Parent or any Parent Subsidiary as a result of examinations by
      any
      state, local, federal or foreign taxing authority and no issue has been raised,
      either to the knowledge of the Parent or in writing, by any examination
      conducted by any state, local, federal or foreign taxing authority that, by
      application of the same principles, might result in a proposed deficiency for
      any other period not so examined. Neither the Parent nor any Parent Subsidiary
      is subject to any private letter ruling of the Internal Revenue Service or
      comparable rulings of other tax authorities that will be binding on the Parent
      or any Parent Subsidiary with respect to any period following the Closing
      Date.

     

     

    
      
        
        

      

      
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    (c)  There
      are
      no agreements, waivers of statutes of limitations, or other arrange-ments
      providing for extensions of time in respect of the assessment or collection
      of
      any unpaid taxes against the Parent or any Parent Subsidiary. The Parent and
      each Parent Subsidiary have disclosed on their federal income tax returns all
      positions taken therein that could, if not so disclosed, give rise to a
      substantial understatement penalty within the meaning of Section 6662 of the
      Code. Except for the USECB Joint Venture, or otherwise as set forth on
Section
      3.11(c) of the Parent Disclosure Letter,
      the
      Parent is not a party to any arrangement that constitutes a partnership for
      purposes of subchapter K of Chapter 1 of Subtitle A of the Code. The Parent
      has
      properly identified any transactions that qualify as hedges under Treasury
      Regulation Section 1.1221-2 as hedges under Treasury Regulation Section
      1.1221-2(f).

    

    (d)  Neither
      the Parent nor any Parent Subsidiary is a party to any safe harbor lease within
      the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment
      by
      The Tax Equity and Fiscal Responsibility Act of 1982. None of the property
      owned
      by the Parent nor a Parent Subsidiary is “tax-exempt use property” within the
      meaning of Section 168(h) of the Code. Neither the Parent nor any Parent
      Subsidiary is required to make any adjustment under Code Section 481(a) by
      reason of a change in accounting method or otherwise except possibly by reason
      of the Merger. Neither the Parent nor any Parent Subsidiary has been a member
      of
      an affiliated group of corporations filing a consolidated federal income tax
      return (other than a group the common parent of which was the Parent) or has
      any
      liability for the taxes of another person (other than the Parent or any Parent
      Subsidiary) arising pursuant to Treasury Regulation § 1.1502-6 or analogous
      provision of state, local or foreign Law, or as a transferee or successor,
      or by
      contract, tax sharing agreement, tax indemnification agreement, or otherwise.
      Neither the Parent nor any Parent Subsidiary has filed a consent under Section
      341(f) of the Code with respect to the Parent or any Parent Subsidiary. Neither
      the Parent nor any Parent Subsidiary has been a party to any distribution
      occurring during the two year period prior to the date of this Agreement in
      which the parties to such distribution treated the distribution as one to which
      Section 355 of the Code applied, except for distributions occurring among
      members of the same group of affiliated corporations filing a consolidated
      federal income tax return. 

    

    (e)  The
      Parent has not taken, or agreed to take any action, and has no knowledge of
      any
      condition, that would prevent the Merger from qualifying as a reorganization
      described in Section 368(a) of the Code.

    

    3.12  Environmental.
      Except
      for such matters that are not, individually or in the aggregate, reasonably
      likely to have a Parent Material Adverse Effect and except as set forth on
      Section
      3.12 of the Parent Disclosure Letter:

    

    (a)  To
      the
      knowledge of the Parent, there is no condition existing on any real property
      or
      other asset previously or currently owned, leased or operated by the Parent
      or
      any Parent Subsidiary or resulting from operations conducted thereon that would
      reasonably be expected to be subject to remediation obligations under
      Environmental Laws or give rise to any liability to the Parent or any Parent
      Subsidiary under Environmental Laws or constitute a violation of any
      Environmental Laws, and the Parent and all Parent Subsidiaries are otherwise
      in
      compliance, in all material respects, with all applicable Environmental
      Laws.

    

    (b)  None
      of
      the Parent and the Parent Subsidiaries, no real property or other asset
      previously or currently owned, leased or operated by the Parent or any Parent
      Subsidiary, nor the operations previously or currently conducted thereon or
      in
      relation thereto by the Parent or any Parent Subsidiary, are, to the knowledge
      of the Parent, subject to any pending or threatened action, suit, investigation,
      inquiry or proceeding relating to any Environmental Laws by or before any court
      or other governmental authority.

     

     

    
      
        
        

      

      
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    (c)  The
      Parent has made available to Company all material site assessments, compliance
      audits, and other similar studies in its possession, custody or control and
      prepared since January 1, 2006 relating to (i) the environmental conditions
      on, under or about the properties or assets previously or currently owned,
      leased or operated by the Parent, or any predecessor in interest thereto and
      (ii) any Hazardous Substances used, managed, handled, transported, treated,
      generated, stored, discharged, emitted, or otherwise released by the Parent
      or
      any other Person on, under, about or from any real property or other assets
      previously or currently owned, leased or operated by the Parent;

    

    (d)  The
      Parent has not received any communication, whether from a governmental
      authority, citizen’s group, employee or otherwise, alleging that it is liable
      under or not in compliance with any Environmental Law.

    

    (e)  All
      material permits, notices and authorizations, if any, required under any
      Environmental Law to be obtained or filed in connection with the operation
      or
      use of any real property or other asset owned, leased or operated by the Parent
      or any Parent Subsidiary, including without limitation past or present
      treatment, storage, disposal or release of a Hazardous Substance or solid waste
      into the environment, have been duly obtained or filed, and the Parent is in
      compliance in all material respects with the terms and conditions of all such
      permits, notices and authorizations.

    

    (f)  Hazardous
      Substances have not been released, disposed of or arranged to be disposed of
      by
      the Parent or any Parent Subsidiary, in violation of, or in a manner or to
      a
      location that would reasonably be expected to give rise to a material liability
      under, or cause the Parent to be subject to remediation obligations under,
      any
      Environmental Laws.

    

    (g)  None
      of
      the Parent and the Parent Subsidiaries has assumed, contractually or, to the
      knowledge of the Parent, by operation of Law, any liabilities or obligations
      of
      third parties under any Environmental Laws, except in connection with the
      acquisition of assets or entities associated therewith.

    

    (h)  Environmental
      Laws and Hazardous Substances have the meanings defined in Section
      2.12(h).

    

    3.13  Compliance
      with Laws.
      The
      Parent and the Parent Subsidiaries are in compliance in all material respects
      with any applicable Law that materially affects the business, properties or
      assets of the Parent and the Parent Subsidiaries, and no notice, charge, claim,
      action or assertion has been received by the Parent or any Parent Subsidiary
      or,
      to the Parent’s knowledge, has been filed, commenced or threatened against the
      Parent or any Parent Subsidiary alleging any such violation, nor do reasonable
      grounds for any of the foregoing exist, that would be reasonably likely to
      have
      a Parent Material Adverse Effect. All licenses, permits and approvals required
      under such Laws are in full force and effect, except where the failure to be
      in
      full force and effect would not, individually or in the aggregate, be reasonably
      likely to have a Parent Material Adverse Effect. 

    
 

    
      
        
        

      

      
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    3.14  Employment
      Matters.
      Neither
      the Parent nor any Parent Subsidiary: (i) is a party to or otherwise bound
      by
      any collective bargaining agreement, contract or other agreement or
      understanding with a labor union or labor organization, nor is any such contract
      or agreement presently being negotiated, nor, to the knowledge of the Parent,
      is
      there, nor has there been in the last five years, a representation campaign
      respecting any of the employees of the Parent or any of the Parent Subsidiaries,
      and, to the knowledge of the Parent, there are no campaigns being conducted
      to
      solicit cards from employees of Parent or any of the Parent Subsidiaries to
      authorize representation by any labor organization; (ii) is a party to, or
      bound
      by, any consent decree with, or citation by, any governmental agency relating
      to
      employees or employment practices which would reasonably be expected to have
      a
      Parent Material Adverse Effect; or (iii) is the subject of any proceeding
      asserting that it has committed an unfair labor practice or is seeking to compel
      it to bargain with any labor union or labor organization nor, as of the date
      of
      this Agreement, is there pending or, to the knowledge of the Parent, threatened,
      any labor strike, dispute, walkout, work stoppage, slow-down or lockout
      involving the Parent or any of the Parent Subsidiaries which, with respect
      to
      any event described in this clause (iii), would, individually or in the
      aggregate, reasonably be expected to have a Parent Material Adverse
      Effect.

    

    3.15  Certain
      Contracts and Arrangements.
      Except
      as disclosed in the Parent SEC Reports or Section
      3.15 of the Parent Disclosure Letter,
      neither
      the Parent nor any of the Parent Subsidiaries is a party to or bound by any
      agreement or other arrangement that limits or otherwise restricts the Parent
      or
      any of its Subsidiaries or any of their respective affiliates or any successor
      thereto, or that would, after the Effective Date, to the knowledge of the
      Parent, materially limit or restrict Subsidiary or the Surviving Parent or
      any
      of their subsidiaries or any of their respective affiliates or any successor
      thereto, from engaging or competing in the minerals business in any significant
      geographic area, except for joint ventures, area of mutual interest agreements
      entered into in connection with prospect reviews (including such agreements
      with
      Enterra Energy Trust and Pinnacle Resources, Inc.) and similar arrangements
      entered into in the ordinary course of business. Neither the Parent nor any
      Parent Subsidiary is in breach or default under any contract filed or
      incorporated by reference as an exhibit to the Parent’s Annual Report on Form
      10-K for the year ended December 31, 2005, or any agreements disclosed in or
      filed as exhibits to Forms 8-K filed from January 1, 2006 to the Effective
      Date,
      nor, to the knowledge of the Parent, is any other party to any such contract
      in
      breach or default thereunder, except such breach or default as would not,
      individually or in the aggregate, reasonably be expected to have a Parent
      Material Adverse Effect.

    

    3.16  Financial
      and Commodity Hedging.
      Neither
      the Parent nor any of the Parent Subsidiaries is a party to any hedging
      agreements or arrangements (including fixed price contracts, collars, swaps,
      caps, hedges and puts). 

    

    3.17  Properties.
      Except
      as set forth below, and except for property sold, used or otherwise disposed
      of
      since January 1, 2006 in the ordinary course of business, the Parent and the
      Parent Subsidiaries have good record and marketable title in fee simple (or,
      with respect to real property not owned, a valid leasehold interest in all
      real
      property (excluding water rights, as to which certain rights are held), to
      all
      interests in properties and assets reflected in the Parent SEC Reports filed
      prior to the date of this Agreement as owned by the Parent and the Parent
      Subsidiaries, free and clear of any Liens, other than liens for taxes not yet
      due and payable and mechanic’s, materialman’s, supplier’s, vendor’s or similar
      liens arising in the ordinary course of business securing amounts that are
      not
      delinquent. The preceding warranty is limited to such
      defects in title as could, individually or in the aggregate, reasonably be
      expected to have a Parent Material Adverse Effect. 

     

     

    
      
        
        

      

      
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    3.18  Accounting
      Controls.
      The
      Parent has devised and maintained systems of internal accounting controls
      sufficient to provide reasonable assurances, in the judgment of the Parent
      Board, that (a) all material transactions are executed in accordance with
      management’s general or specific authorization; (b) all material transactions
      are recorded as necessary to permit the preparation of financial statements
      in
      conformity with generally accepted accounting principals consistently applied
      with respect to any criteria applicable to such statements, (c) access to the
      material property and assets of the Parent is permitted only in accordance
      with
      management’s general or specific authorization; and (d) the recorded
      accountability for items is compared with the actual levels at reasonable
      intervals and appropriate action is taken with respect to any
      differences.

    

    3.19  Intellectual
      Property.
      The
      Parent does not own any Intellectual Property.

    

    ARTICLE
      4

    CONDUCT
      OF BUSINESS PENDING THE MERGER

    

    4.1  Conduct
      of Business by the Company Pending the Merger.
      The
      Company covenants and agrees that, prior to the Effective Date, unless Parent
      shall otherwise agree in writing (which agreement shall not be unreasonably
      withheld) or except in connection with the transactions contemplated by this
      Agreement:

    

    (a)  Except
      as
      set forth in Section
      4.1
      of the
      Company Disclosure Letter, the businesses of the Company shall be conducted
      only
      in the ordinary and usual course of business (as qualified below) and consistent
      with past practices, and the Company shall use all reasonable efforts to
      maintain and preserve intact its business organization, to maintain beneficial
      business relationships and good will with suppliers, contractors, distributors,
      customers, licensors, licensees and others having business relationships with
      it
      and keep available the services of its current key officers and employees.
      For
      all purposes of this Article 4, as applied to the Company or Parent or any
      of
      their subsidiaries, “ordinary and usual course of business” shall include a sale
      of uranium assets to sxr Uranium One and continuing the activities contemplated
      by the letter agreement with Kobex Resources Ltd. and the acquisition of mineral
      properties. 

    

    (b)  Without
      limiting the generality of the foregoing Section
      4.1(a),
      except
      as set forth in Section
      4.1
      of the
      Company Disclosure Letter, the Company shall not directly or indirectly do
      any
      of the following:

    

    (i)  other
      than as disclosed in or contemplated by the Company and Parent SEC filings,
      acquire, sell, encumber, lease, transfer or dispose of any assets, rights or
      securities that are material to the Company or terminate, cancel, materially
      modify or enter into any material commitment, transaction, line of business
      or
      other agreement, in each case other than in the ordinary course of business
      consistent with past practice, or acquire by merging or consolidating with
      or by
      purchasing a substantial equity interest in or a substantial portion of the
      assets of, or by any other manner, any business, corporation, partnership,
      association or other business organization or division thereof;

    

    (ii)  amend
      or
      propose to amend its articles of incorporation or bylaws or, in the case of
      the
      Company Subsidiaries, their respective constituent documents;

    

    (iii)  split,
      combine or reclassify any outstanding shares of, or interests in, its capital
      stock;

     

     

    
      
        
        

      

      
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    (iv)  declare,
      set aside or pay any dividend or distribution, payable in cash, stock, property
      or otherwise, with respect to any of its capital stock;

    

    (v)  redeem,
      purchase or otherwise acquire, or offer to redeem, purchase or otherwise
      acquire, any shares of its capital stock or any options, warrants or rights
      to
      acquire capital stock of the Company;

    

    (vi)  issue,
      sell, pledge, dispose of or encumber, or authorize, propose or agree to the
      issuance, sale, pledge or disposition or encumbrance by the Company shares
      of,
      or any options, warrants or rights of any kind to acquire any shares of, or
      any
      securities convertible into or exchangeable for any shares of, its capital
      stock
      of any class, or any other securities in respect of, in lieu of, or in
      substitution for any class of its capital stock outstanding on the date hereof,
      other than issuances of common stock upon exercise of any Company Stock Options
      outstanding on the date hereof;

    

    (vii)  modify
      the terms of any existing indebtedness for borrowed money or incur any
      indebtedness for borrowed money or issue any debt securities;

    

    (viii)  assume,
      guarantee, endorse or otherwise as an accommodation become responsible for,
      the
      obligations of any other person, or make any loans or advances;

    

    (ix)  authorize,
      recommend or propose any change in its capitalization;

    

    (x)  take
      any
      action with respect to the grant of or increase in any severance or termination
      pay;

    

    (xi)  adopt
      or
      establish any new employee benefit plan;

    

    (xii)  settle
      or
      compromise any liability for taxes, other than in the ordinary course of
      business;

    

    (xiii)  make
      or
      commit to make capital expenditures.;

    

    (xiv)  make
      any
      material changes in tax accounting methods except as required by GAAP or
      applicable Law;

    

    (xv)  other
      than in the ordinary course of business, pay or discharge any claims, liens
      or
      liabilities involving more than $25,000 individually or $50,000 in the
      aggregate, which are not reserved for on the balance sheet included in the
      Company Financial Statements;

    

    (xvi)  write
      off
      any accounts or notes receivable except in the ordinary course of
      business;

    

    (xvii)  knowingly
      take, or agree to commit to take, any action that would or is reasonably likely
      to result in any of the conditions to the Merger not being satisfied, or would
      make any representation or warranty of the Company contained herein inaccurate
      in any material respect at, or as of any time prior to, the Effective Date,
      or
      that would materially impair the ability of the Company, Parent, Subsidiary
      or
      the holders of shares of Company Common Stock to consummate the Merger in
      accordance with the terms hereof or materially delay such consummation;
      or

     

     

    
      
        
        

      

      
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    (xviii)  take
      any
      action that would, or is reasonably likely to, prevent or impede the Merger
      from
      qualifying as a reorganization within the meaning of Section 368(a) of the
      Code;
      or

    

    (xix)  enter
      into or modify any contract, agreement, commitment or arrangement to do any
      of
      the foregoing.

    

    4.2  Conduct
      of Business of Parent.
      Except
      as contemplated by this Agreement, during the period from the date hereof to
      the
      Effective Date or earlier termination of this Agreement, Parent without the
      prior written consent of the Company (which consent will not unreasonably be
      withheld), shall not:

    

    (a)  adopt
      or
      propose to adopt any amendments to its constituent documents, and other than
      amendments which would not have a material adverse effect on the consummation
      of
      the transactions contemplated by this Agreement; 

    

    (b)  take
      any
      action that would or is reasonably likely to prevent or impede the Merger from
      qualifying as a reorganization described in Section 368(a) of the
      Code;

    

    (c)  split,
      combine or reclassify any shares of its capital stock, declare, set aside or
      pay
      any dividend or other distribution (whether in cash, stock or property or any
      combination thereof) in respect of its capital stock, make any other actual,
      constructive or deemed distribution in respect of its capital stock or otherwise
      make any payments to stockholders in their capacity as such;

    

    (d)  adopt
      a
      plan of complete or partial liquidation or dissolution of Parent; 

    

    (e)  knowingly
      take, or agree to commit to take, any action that would or is reasonably likely
      to result in any of the conditions to the Merger not being satisfied, or would
      make any representation or warranty of Parent contained herein inaccurate in
      a
      manner that would be reasonably likely to have a Parent Material Adverse Effect
      at, or as of any time prior to, the Effective Date, or that would materially
      impair the ability of the Company and Parent to consummate the Merger in
      accordance with the terms hereof or materially delay such consummation;
      or

    

    (f)  take
      or
      agree in writing or otherwise to take any of the actions precluded by
Sections
      4.2(a)
      through
4.2(e).

    

    ARTICLE
      5

    ADDITIONAL
      AGREEMENTS

    

    5.1  Shareholders’
      Meeting.
      The
      Company, acting through its board of directors, shall, in accordance with
      applicable Law and the Company’s articles of incorporation and bylaws, (i) duly
      call, give notice of, convene and hold a meeting of its shareholders as soon
      as
      practicable following the date hereof for the purpose of considering and taking
      action on this Agreement and the transactions contemplated hereby (the
“Shareholders’
      Meeting”)
      and
      (ii) subject to its fiduciary duties under applicable Law after consultation
      with outside counsel, (A) include in the Proxy Statement/Prospectus (as defined
      in Section
      2.7)
      the
      unanimous recommendation of the directors entitled to vote that the shareholders
      of the Company vote in favor of the approval and adoption of this Agreement
      and
      the transactions contemplated hereby and (B) use its reasonable best efforts
      to
      obtain the necessary approval and adoption of this Agreement and the
      transactions contemplated hereby by its shareholders.

     

    
 

    
      
        
          
          

        

        
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    Notwithstanding
      the Company’s failure to include the recommendation contemplated by clause (A)
      of the preceding sentence (in the circumstances permitted thereby), unless
      this
      Agreement shall have been terminated pursuant to Section 7.1, the Company shall
      submit this Agreement to its stockholders at the Shareholders’ Meeting for the
      purpose of adopting this Agreement and nothing contained herein shall be deemed
      to relieve the Company of such obligation.

    

    5.2  Registration
      Statement.
      

    

    (a)  As
      soon
      as practicable following the date hereof, Parent shall prepare and file with
      the
      SEC a registration statement on S-4 to register under the Securities Act the
      issuance of the Parent Common Stock constituting the Merger Consideration
      pursuant to the Merger (the “S-4”).
      The
      Proxy Statement/Prospectus will be included as part of the S-4. Parent, the
      Company shall use their reasonable best efforts to have the S-4 declared
      effective under the ‘33 Act as promptly as practicable after such filing. Parent
      and the Company will cooperate with each other in the preparation of the S-4;
      without limiting the generality of the foregoing, Parent and the Company will
      furnish to each other the information relating to the party furnishing such
      information required to be included in the S-4, and Company and its counsel
      shall be given the opportunity to review and comment on the S-4 prior to filing
      with the SEC. Parent and the Company each agree to use its reasonable best
      efforts, after consultation with the other parties hereto, to respond promptly
      to any comments made by the SEC with respect to the S-4. The Company will use
      its reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed
      to its stockholders as promptly as practicable after the S-4 is declared
      effective under the ’33 Act. No representation, covenant or agreement is made by
      a party with respect to information supplied by the other party for inclusion
      in
      the S-4.

    

    (b)  As
      soon
      as practicable after the date hereof, the Company and Parent shall promptly
      and
      properly prepare and file any other schedules, statements, reports, or other
      documents required under the ‘34 Act (if any) or any other federal or state
      securities Laws relating to the Merger and the transactions contemplated herein
      (the “Other
      Filings”).
      Each
      party shall notify the other promptly of the receipt by such party of any
      comments or requests for additional information from any governmental official
      with respect to any Other Filings made by such party and will supply the others
      with copies of all correspondence between such party and its representatives,
      on
      the one hand, and the appropriate government official, on the other hand, with
      respect to the Other Filings. Each of the Company and Parent shall use
      reasonable efforts to obtain and furnish the information required to be included
      in the S-4 and Other Filings and, after consultation with the other, to respond
      promptly to any comments made by any governmental official.

    

    5.3  Employee
      Benefit Matters.

    

    (a)  The
      Company has no employees but will pay its portion of Employee Benefit Plans,
      wages and other employee expenses that are accrued and payable at Closing for
      employees it shares with the Parent. 

    

    (b)  The
      Parent will assume liability under any Employee Benefit Plan for claims under
      Section 4980B of the Code with respect to M&A Qualified Beneficiaries, as
      defined under Section 54.4980B-9 of the Treasury Regulations or with respect
      to
      any applicable state group health plan continuation coverage statutes. However,
      if Section 4980B of the Code or an applicable state group health plan
      continuation coverage statute does not apply, the Parent agrees to provide
      continuation coverage that would otherwise comply with the terms of Section
      4980B of the Code to any former employee of the Company and the Company
      Subsidiaries who meets the M&A Qualified Beneficiary definition set forth
      above under the Parent's Employee Benefit Plans.

     

     

    
      
        
        

      

      
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    5.4  Consents
      and Approvals.
      The
      Company and Parent shall cooperate to (a) promptly prepare and file all
      necessary documentation, (b) effect all necessary applications, notices,
      petitions and filings and execute all agreements and documents, (c) use all
      reasonable efforts to obtain all necessary permits, consents, approvals and
      authorizations of all governmental bodies and (d) use all reasonable efforts
      to
      obtain all necessary permits, consents, approvals and authorizations of all
      other parties, as necessary or advisable to consummate the transactions
      contemplated by this Agreement or required by the terms of any note, bond,
      mortgage, indenture, deed of trust, license, franchise, permit, concession,
      contract, lease or other instrument to which the Company and Parent or any
      of
      their respective subsidiaries is a party or by which any of them is bound;
      provided,
      however,
      that
      (i) no note, bond, mortgage, indenture, deed of trust, license, franchise,
      permit, concession, contract, lease or other instrument shall be amended or
      modified to increase materially the amount payable thereunder or to be otherwise
      materially more burdensome to the Company in order to obtain any permit,
      consent, approval or authorization without first obtaining the written approval
      of Parent and (ii) without the prior consent of Parent, no such actions or
      things shall be done to the extent they would, individually or in the aggregate,
      reasonably be expected to have a Company Material Adverse Effect (after giving
      effect to the Merger); and provided, further, that in the event of any action
      by
      or inquiry (formal or informal) of any governmental agency or third party
      related to or based upon matters associated with the Company’s representation in
      Section 2.25, Parent shall be entitled to take (or not take) any action it
      deems
      necessary or advisable in its sole, unfettered discretion, including that set
      forth in Section 7.1(e); provided,
      however,
      that
      Parent shall not take any affirmative action that would detrimentally affect
      the
      Company with respect to such matter. The Company shall have the right to review
      and approve in advance all characterizations of the information relating to
      the
      Company; Parent shall have the right to review and approve in advance all
      characterizations of the information relating to Parent; and each of the Company
      and Parent shall have the right to review and approve in advance all
      characterizations of the information relating to the transactions contemplated
      by this Agreement, in each case which appear in any filing (including, without
      limitation, the S-4) made in connection with the transactions under this
      Agreement. The Company and Parent agree that they will consult with each other
      with respect to the obtaining of all such necessary permits, consents, approvals
      and authorizations of all third parties and governmental bodies.

    

    5.5  Public
      Statements.
      The
      Company and Parent shall consult with each other prior to issuing any public
      announcement, statement or other disclosure with respect to this Agreement
      or
      the transactions contemplated herein and shall not issue any such public
      announcement or statement prior to such consultation, except as may be required
      by Law or Nasdaq, and each party will use commercially reasonable efforts to
      provide copies of such release or other announcement to the other party hereto,
      and give due consideration to such comments as such other party may have, prior
      to such press release or other announcement.

    

    5.6  Commercially
      Reasonable Best Efforts.
      Subject
      to the terms and conditions herein provided, the Company and Parent agree to
      use
      commercially reasonable best efforts to take, or cause to be taken, all action,
      and to do, or cause to be done, all things commercially reasonably necessary,
      proper or advisable under applicable Laws to consummate and make effective
      the
      transactions contemplated by this Agreement, including but not limited to
      obtaining all consents, approvals and authorizations required for or in
      connection with the consummation by the parties hereto of the transactions
      contemplated by this Agreement, provided, however, that the parties shall not
      be
      required to contest any legislative, administrative or judicial action or seek
      to have vacated, lifted, reversed or overturned, any decree, judgment,
      injunction or other order (whether temporary, preliminary or permanent) that
      restricts, prevents or prohibits the consummation of the transactions
      contemplated by this Agreement or pay any material amounts to obtain any
      consent, approval or authorization. In case at any time after the Effective
      Date
      any further action is necessary or desirable to carry out the purposes of this
      Agreement, that action shall be taken. In the event any litigation is commenced
      by any person involving the Company or Parent that relates to the transactions
      contemplated by this Agreement, including any other Takeover Proposal (as

     

    
 

    
      
        
          
          

        

        
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    defined
      in Section
      5.9(c)),
      the
      Company and Parent shall have the right, at its own expense, to participate
      therein.

    

    5.7  Notification
      of Certain Matters.
      The
      Company and the Parent agree to give prompt notice to each other of, and to
      use
      their respective reasonable best efforts to prevent or promptly remedy,
      (i) the occurrence or failure to occur, or the impending or threatened
      occurrence or failure to occur, of any event which occurrence or failure to
      occur would be likely to cause any of its representations or warranties in
      this
      Agreement to be untrue or inaccurate in any material respect at any time from
      the date hereof through the Effective Date; and (ii) any material failure on
      its
      part to comply with or satisfy any covenant, condition or agreement to be
      complied with or satisfied by it hereunder; provided, however, that the delivery
      of any notice pursuant to this Section
      5.7
      shall
      not limit or otherwise affect the remedies available hereunder to the party
      receiving such notice.

    

    5.8  Access
      to Information; Confidentiality.
      

    

    (a)  The
      Company shall, and shall cause the officers, directors, employees and agents
      of
      the Company to, afford the officers, employees and agents of Parent reasonable
      access at all reasonable times through the Effective Date to its officers,
      employees, agents, properties, facilities, books, records, contracts and other
      assets and shall furnish Parent all financial, operating and other data and
      information as Parent through its officers, employees or agents, may reasonably
      request. Parent shall have the right to make such due diligence investigations
      of Company as Parent shall deem reasonable. No additional investigations or
      disclosures shall affect the Company’s representations and warranties contained
      herein, or limit or otherwise affect the remedies available to Parent pursuant
      to this Agreement.

    

    (b)  Parent
      shall, and Parent shall cause officers of Parent to, afford the officers and
      directors of the Company complete access at all reasonable times from the date
      hereof through the Effective Date to its and its subsidiaries’ officers,
      properties, facilities, books, records and contracts and shall furnish the
      Company all financial, operating and other data and information as the Company
      through its officers, employees or agents, may reasonably request. The Company
      shall have the right to make such reasonable due diligence investigations as
      the
      Company shall deem necessary or reasonable. No additional investigations or
      disclosures shall affect Parent’s representations and warranties in, or limit or
      otherwise affect the remedies available to the Company pursuant to, this
      Agreement. 

    

    5.9  No
      Solicitation.

    

    (a)  From
      the
      date hereof until termination or Closing of this Agreement, the Company agrees
      that it shall not, nor shall it authorize or permit any officer, director or
      employee of, or any investment banker, attorney or other advisor or
      representative of, the Company, directly or indirectly, to (i) solicit,
      initiate, or encourage any inquiries relating to, or the submission of, any
      Takeover Proposal (defined below), (ii) approve or recommend any Takeover
      Proposal, accept any Takeover Proposal or enter into any letter of intent,
      agreement in principle or agreement with respect to any Takeover Proposal (or
      resolve to or publicly propose to do any of the foregoing), or (iii) participate
      in any discussions or negotiations regarding, or furnish to any person any
      information with respect to, or take any other action to facilitate any
      inquiries or the making of any proposal or offer that constitutes, or may
      reasonably be expected to lead to, any Takeover Proposal; provided,
      however,
      that
      (x) nothing contained in subclauses (ii) or (iii) above shall prohibit the
      Company or its board of directors from taking and disclosing to the Company’s
      stockholders a position with respect to a tender offer by a third party pursuant
      to Rules 14d-9 and 14e-2 promulgated under the ‘34 Act, provided that the board
      of directors of the Company shall not recommend that the stockholders of the
      Company tender their Company Common Stock in connection with any such tender
      or
      exchange offer unless the board of directors shall have determined in good
      faith,

     

    
 

    
      
        
          
          

        

        
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    after
      consultation with its financial advisors and outside counsel, that failing
      to
      take such action would reasonably be expected to constitute a breach of the
      fiduciary duties of the board of directors and that the relevant Takeover
      Proposal is a Superior Proposal (as defined below) and (y) prior to the
      Shareholders’ Meeting, if the Company receives an unsolicited bona fide written
      Takeover Proposal from a third party that the board of directors of the Company
      determines in good faith (after receiving the advice of a financial adviser
      of
      nationally or regionally recognized reputation) is reasonably likely to be
      a
      Superior Proposal, the Company and its representatives may conduct such
      discussions or provide such information as the board of directors of the Company
      shall determine, but only if, prior to such provision of information or conduct
      of such discussions, (A) such third party shall have entered into a
      confidentiality agreement, and (B) the board of directors of the Company
      determines in its good faith judgment, after consultation with outside counsel,
      that it is required to do so in order to comply with its fiduciary duties.
      The
      Company shall promptly notify Parent in the event it receives any Takeover
      Proposal, including the identity of the party submitting such
      proposal.

    

    (b)  The
      Company shall promptly (but in no event later than 24 hours after receipt)
      notify Parent of the material terms, conditions and other aspects of any
      inquiries, proposals or offers with respect to, or which could reasonably be
      expected to lead to, a Takeover Proposal, and of any modifications or revisions
      to the terms of any Takeover Proposal.

    

    (c)  For
      purposes of this Agreement, “Takeover
      Proposal”
means
      any proposal or offer (whether or not in writing and whether or not delivered
      to
      the stockholders of the Company generally) for a merger or other business
      combination, reorganization, share exchange, recapitalization, liquidation,
      dissolution or similar transaction involving the Company or to acquire in any
      manner (including by tender or exchange offer), directly or indirectly, a 25%
      or
      more equity interest in, any voting securities of, or assets (including equity
      interests in other entities) of the Company having an aggregate value equal
      to
      10% or more of the Company’s consolidated net asset value, other than the
      transactions contemplated by this Agreement. For purposes of this Agreement,
      “Superior
      Proposal”
means
      any unsolicited bona fide written Takeover Proposal which (i) contemplates
      (A) a
      merger or other business combination, reorganization, share exchange,
      recapitalization, liquidation, dissolution, tender offer, exchange offer or
      similar transaction involving the Company as a result of which the Company’s
      stockholders prior to such transaction in the aggregate cease to own at least
      20% of the voting securities of the ultimate parent entity resulting from such
      transaction, or (B) a sale, lease, exchange, transfer or other disposition
      (including, without limitation, a contribution to a joint venture) of at least
      10% of the value of the net assets of the Company, taken as a whole, and (ii)
      is
      on terms which the board of directors of the Company determines (after
      consultation with its financial advisor and outside counsel), taking into
      account, among other things, all legal, financial, regulatory and other aspects
      of the proposal and the person making the proposal, (A) would, if consummated,
      result in a transaction that is more favorable to its stockholders from a
      financial point of view (in their capacities as such) than the transactions
      contemplated by this Agreement (including the terms of any proposal by Parent
      to
      modify the terms of the transactions contemplated by this Agreement), and (B)
      is
      reasonably likely to be financed and otherwise completed without undue
      delay.

    

    (d)  The
      Company agrees that it will, and will cause its officers, employees, directors,
      agents and representatives to, immediately cease any activities, discussions
      or
      negotiations existing as of the date of this Agreement with any parties
      conducted heretofore with respect to any Takeover Proposal and will use its
      reasonable best efforts to cause any such parties (and its agents or advisors)
      in possession of confidential information regarding the Company that was
      furnished by or on behalf of the Company to return or destroy all such
      information. The Company shall use its reasonable best efforts to ensure that
      its officers, directors and representatives are aware of the provisions of
      this
Section
      5.9.

     

     

    
      
        
        

      

      
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    5.10  Section
      16 Matters.
      Prior
      to the Effective Date of the Merger, Parent, Subsidiary and the Company shall
      take all such steps as may be required to cause any dispositions of capital
      stock of Parent and the Company (including derivative securities) or
      acquisitions of Parent Common Stock (including derivative securities) resulting
      from the transactions contemplated by this Agreement by each individual who
      is
      subject to the reporting requirements of Section 16(a) of the ‘34 Act with
      respect to Parent or the Company, to be exempt under Rule 16b-3 under the
‘34 Act.

    

    5.11  Voting
      Agreement.
      The
      Company and Parent acknowledge and agree that Parent and those officers and
      directors of Parent who hold Company Common Stock, and the Company, have
      entered, or will enter, into a Voting Agreement providing that at the
      Shareholders’ Meeting, Parent (and those officers and directors of Parent who
      hold Company Common Stock) shall vote all of its and their Company Common Stock
      in the same manner (for, or against, the Merger) as voted by the holders of
      a
      majority of the shares of Company Common Stock not owned by Parent. The
      preceding is only a summary of the Voting Agreement.

    

    5.12  Nasdaq
      Listing.
      Parent
      shall use its reasonable best efforts to cause the Total Merger Consideration
      to
      be issued in the Merger to be approved for listing on Nasdaq, prior to the
      Effective Date, subject to official notice of issuance.

    

    5.13  Tax
      Treatment.
      The
      parties will cooperate with each other and use their respective reasonable
      best
      efforts to cause the Merger to qualify as a “reorganization” within the meaning
      of Section 368(a) of the Code (the “Intended
      Tax Treatment”),
      including (a) not taking any action that is reasonably likely to prevent the
      Intended Tax Treatment and (b) reporting the transaction in a manner consistent
      with the Intended Tax Treatment.

    

    5.14  Indemnification.
      Parent
      agrees that, for a period of six years following the Effective Date, Parent
      shall defend, protect, indemnify and hold harmless each of the Company’s
      officers and directors (collectively, the “Indemnitees”)
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith,
      including threatened actions, causes of action, suits or claims, hereafter
      an
“Action”
      (irrespective of whether any such Indemnitee is a party to such action or other
      proceeding for which indemnification hereunder is sought), and including
      reasonable attorneys’ fees and disbursements (the “Indemnified
      Liabilities”),
      incurred by the Indemnitees or any of them as a result of, or arising out of,
      or
      relating to (a) any misrepresentation or breach of any representation or
      warranty made by the Company in this Agreement or any other certificate,
      instrument or document contemplated hereby or thereby, (b) any breach of any
      covenant, agreement or obligation of the Company contained in this Agreement
      or
      any other certificate, instrument or document contemplated hereby or thereby,
      or
      (c) any Action brought or made against such Indemnitee arising out of or
      resulting from the execution, delivery, performance or enforcement of this
      Agreement or any other instrument, document or agreement executed pursuant
      hereto. To the extent that the foregoing indemnification may be unenforceable
      for any reason, including but not limited to policies of the SEC, Parent shall
      make the maximum contribution to the payment and satisfaction of each of the
      Indemnified Liabilities which is permissible under law. The
      obligations of the parties to indemnify or make contribution under this
Section
      5.14
      shall
      survive termination.

    

    ARTICLE
      6

    CONDITIONS

    

    6.1  Conditions
      to the Obligation of Each Party to Effect the Merger.
      The
      obligations of each party to effect the Merger shall be subject to the
      fulfillment at or prior to the Closing Date of the following
      conditions:

     

     

    
      
        
        

      

      
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    (a)  this
      Agreement shall have been adopted by the requisite vote of the stockholders
      of
      the Company, as required by the CBCA and the Company’s articles of incorporation
      and bylaws;

    

    (b)  no
      preliminary or permanent injunction or other order, decree or ruling issued
      by a
      court of competent jurisdiction or by a governmental, regulatory or
      administrative agency or commission, nor any statute, rule, regulation or
      executive order promulgated or enacted by any governmental authority, shall
      be
      in effect that would make the Merger illegal or otherwise prevent the
      consummation of the Merger provided, however, that prior to invoking this
      condition, each party shall have complied fully with its obligations under
      Section
      5.6
      and, in
      addition, shall use commercially reasonable efforts to have any such decree,
      ruling, injunction or order vacated, except as otherwise contemplated by this
      Agreement;

    

    (c)  The
      Merger Consideration to be issued in the Merger shall have been approved for
      listing on the Nasdaq, subject to official notice of issuance; and

    

    (d)  The
      S-4
      shall have been declared effective by the SEC under the ‘33 Act. No stop order
      suspending the effectiveness of the S-4 shall have been issued by the SEC and
      no
      proceedings for that purpose shall have been initiated or threatened by the
      SEC.

    

    6.2  Additional
      Conditions to the Obligations of Parent.
      The
      obligations of Parent to effect the Merger shall be subject to fulfillment
      at or
      prior to the Effective Date of the following additional conditions:

    

    (a)  Each
      representation or warranty of the Company shall be true and correct except
      for
      circumstances which, when considered individually or in the aggregate, have
      not
      had or would not reasonably be expected to have a Company Material Adverse
      Effect, in each case as if such representations and warranties were made at
      the
      date of this Agreement and as of the Closing Date (other than to the extent
      such
      representations and warranties are made as of a specified date, in which case
      such representations and warranties shall be true and correct as of such date
      and provided that any representation or warranty that is qualified by
      materiality or Company Material Adverse Effect shall be true and correct in
      all
      respects). There shall not have been a breach in any respect by the Company
      of
      any covenant or agreement set forth in this Agreement which breach shall not
      have been remedied within 20 days (or by the Outside Date (as defined below),
      if
      sooner) of written notice specifying such breach in reasonable detail and
      demanding that same be remedied (except where such failure to be true and
      correct or such breach, taken together with all other such failures and
      breaches, would not have a Company Material Adverse Effect); 

    

    (b)  There
      shall not be any pending suit, action, investigation or proceeding brought
      by
      any governmental authority before any court (domestic or foreign) or any action
      taken, or any statute, rule, regulation, decree, order or injunction
      promulgated, enacted, entered into or enforced by any state, federal or foreign
      government or governmental agency or authority or by any court (domestic or
      foreign) that would reasonably be expected to have the effect of:
      (i) making illegal or otherwise restraining or prohibiting the consummation
      of the Merger or materially delaying the Merger; or (ii) prohibiting or
      materially limiting the ownership or operation by the Company or Parent or
      any
      of their subsidiaries or their properties, or compelling Parent or any of
      Parent’s subsidiaries to dispose of or hold separate all or any material portion
      of the business or assets of the Company and any of its subsidiaries, taken
      as a
      whole, or Parent and its subsidiaries, taken as a whole, as a result of the
      transactions contemplated herein;

     

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

     

    (c)  There
      shall not have occurred and continue to exist any event that individually or
      in
      the aggregate would reasonably be expected to have a Company Material Adverse
      Effect (other than matters set forth in the Company Disclosure
      Letter).

    

    (d)  Parent
      shall have received the written opinion from Steve Conrad, dated as of the
      Effective Date, which shall be based on such written representations from
      Parent, the Company and others as such person may reasonably request, to the
      effect that the Merger will constitute a reorganization within the meaning
      of
      Section 368(a) of the Code.

    

    6.3  Additional
      Conditions to the Obligation of the Company.
      The
      obligations of the Company to effect the Merger shall be subject to fulfillment
      at or prior to the Effective Date of the following additional
      conditions:

    

    (a)  Each
      representation or warranty of Parent and Parent Subsidiaries shall be true
      and
      correct except for circumstances which, when considered individually or in
      the
      aggregate, have not had or would not reasonably be expected to have a Parent
      Material Adverse Effect, in each case as if such representations and warranties
      were made at the date of this Agreement and as of the Closing Date (other than
      to the extent such representations and warranties are made as of a specified
      date, in which case such representations and warranties shall be true and
      correct as of such date and provided that any representation or warranty that
      is
      qualified by materiality or Parent Material Adverse Effect shall be true and
      correct in all respects). There shall not have been a breach in any respect
      by
      Parent and Subsidiary of any covenant or agreement set forth herein which breach
      shall not have been remedied within 10 days (or by the Outside Date, if sooner)
      of written notice specifying such breach in reasonable detail and demanding
      that
      same be remedied (except where such failure to be true and correct or such
      breach, taken together with all other such failures and breaches, would not
      have
      a Parent Material Adverse Effect); or

    

    (b)  There
      shall not be any pending suit, action, investigation or proceeding brought
      by
      any governmental authority before any court (domestic or foreign) or any action
      taken, or any statute, rule, regulation, decree, order or injunction
      promulgated, enacted, entered into or enforced by any state, federal or foreign
      government or governmental agency or authority or by any court (domestic or
      foreign) that would reasonably be expected to have the effect of making illegal
      or otherwise restraining or prohibiting the consummation of the Merger or
      materially delaying the Merger.

    

    (c)  The
      Company shall have received a legal opinion dated the Effective Date from the
      Law Office of Stephen E. Rounds as counsel to Parent, in a form previously
      reviewed by and reasonably satisfactory to the Company.

    

    (d)  The
      Company shall have received the written opinion from Steve Conrad provided
      for
      in Section
      6.2(d)
      to the
      effect that the Merger will constitute a reorganization within the meaning
      of
      Section 368(a) of the Code.

    

    (e)  There
      shall not have occurred and continue to exist any event that individually or
      in
      the aggregate would reasonably be expected to have a Parent Material Adverse
      Effect.

     

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    
 

    ARTICLE
      7

    TERMINATION,
      AMENDMENT AND WAIVER

    

    7.1  Termination.
      This
      Agreement may be terminated and the Merger may be abandoned at any time prior
      to
      the Effective Date notwithstanding approval thereof by the stockholders of
      the
      Company:

    

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

    

    (b)  by
      Parent, at its sole election, without the consent of the Company, if the holders
      of more than 200,000 shares of Company Common Stock (3% of the Company Common
      Stock not held by Parent) properly give notice to Parent under, and otherwise
      satisfy the requirements of, section 7-113-202 of the CBCA. 

    

    (c)  by
      Parent
      or the Company if the consummation of the Merger shall not have occurred on
      or
      before July 31, 2007 (the “Outside
      Date”),
      unless mutually extended beyond such date; provided,
      however,
      that
      the right to terminate this Agreement under this Section 7.1(b)
      shall
      not be available to any party whose failure to fulfill any obligation under
      this
      Agreement has been the cause of, or resulted in, the failure of the Effective
      Date to occur on or before such date; provided further
      that
      such time periods shall be tolled for any period during which any party shall
      be
      subject to a nonfinal order, decree, ruling or action restraining, enjoining
      or
      otherwise prohibiting the consummation of the Merger;

    

    (d)  by
      Parent
      or the Company if a court of competent jurisdiction or governmental, regulatory
      or administrative agency or commission shall have issued an order, decree or
      ruling or taken any other action (which order, decree or ruling each of the
      parties hereto shall use all reasonable efforts to lift), in each case
      permanently restraining, enjoining or otherwise prohibiting the transactions
      contemplated by this Agreement, and such order, decree, ruling or other action
      shall have become final and nonappealable;

    

    (e)  by
      Parent
      if:

    

    (i)  the
      Company Board (or any committee thereof) shall have withdrawn, modified or
      amended in any manner adverse to Parent its approval of or recommendation in
      favor of the Merger or shall have recommended or approved a Takeover Proposal
      or
      shall have resolved to do any of the foregoing;

    

    (ii)  the
      Company shall have breached Section
      5.9
      in any
      material respect;

    

    (iii)  prior
      to
      the Effective Date there shall be a breach of any representation, warranty,
      covenant or agreement of the Company in this Agreement such that the conditions
      set forth in Section 6.2(a) are not capable of being satisfied on or before
      the Outside Date; provided
      that
      Parent may not terminate this Agreement pursuant to this clause
      (iii)
      if
      Parent is in material breach of this Agreement; or

    

    (iv)  prior
      to
      the Effective Date any governmental agency or third party shall have taken
      any
      action or commenced any inquiry related to or based upon matters associated
      with
      the Company’s representation in Section 2.25, and such matter has not been
      resolved prior to the Outside Date to the Parent’s satisfaction in its sole,
      unfettered discretion.

     

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

     

    (f)  by
      the
      Company if, prior to the Effective Date there shall be a breach of any
      representation, warranty, covenant or agreement of Parent in this Agreement
      such
      that the conditions set forth in Section
      6.3(a)
      are not
      capable of being satisfied on or before the Outside Date; provided
      that the
      Company may not terminate this Agreement pursuant to this clause
      (f)
      if the
      Company is in material breach of this Agreement; or

    

    (g)  by
      Parent
      or the Company if the vote of the Company’s stockholders taken at a duly
      convened stockholders meeting shall not have been sufficient to approve the
      Merger; or

    

    (h)  by
      Parent
      or the Company if the ratio of the closing stock price of the Common Stock
      to
      the closing stock price of the Parent Common Stock is 20% greater or less than
      the Exchange Ratio for two (2) or more consecutive trading days, even if the
      Merger has been approved by the holders of a majority of the minority shares
      of
      Company Common Stock.

    

    7.2  Effect
      of Termination.
      Upon
      the termination of this Agreement pursuant to Section
      7.1,
      this
      Agreement shall forthwith become null and void except as set forth in
Section
      7.3
      (which
      shall be the sole remedy), which shall survive such termination.

    

    7.3  Fees
      and Expenses.
      

    

    (a)  If
      Parent
      terminates this Agreement pursuant to Section
      7.1(e)(i),
      or
(ii),
      then in
      each case the Company shall pay, or cause to be paid, to Parent, as promptly
      as
      is reasonably practicable (but in no event later than two business days)
      following the date of termination an amount (“Termination
      Fee”)
      equal
      to 50% of the legal and financial advisory fees incurred by the Parent. In
      addition, if (i)(x) this Agreement is terminated pursuant to Section 7.1(c)
      (by
      the Company), or 7.1(g) (by Parent or the Company), (y) prior to such
      termination a Takeover Proposal has been publicly announced, disclosed or
      communicated and (z) on the date of such termination, Parent is not in material
      breach of this Agreement and (ii) within 12 months after such termination the
      Company shall consummate or enter into an agreement with the proponent of such
      Takeover Proposal or an affiliate of such proponent, then the Company shall
      pay
      the Termination Fee concurrently with the earlier of entering into any such
      agreement or consummating such transaction.

    

    (b)  If
      Parent
      terminates this Agreement pursuant to Section 7.1(b), Parent shall reimburse
      the
      Company 100% of the Company’s legal and advisory fees.

    

    (c)  If
      the
      Company terminates this Agreement pursuant to Section 7.1(e) following the
      intentional breach by Parent of its obligation to consummate the Merger
      following the fulfillment of each of the conditions to its obligations as set
      forth in Sections 6.1 and 6.2 above, then Parent shall pay, or cause to be
      paid,
      to the Company, as promptly as is reasonably practicable (but in no event later
      than two business days) after the date of termination, the Termination
      Fee.

    

    (d)  If
      Parent
      terminates this Agreement pursuant to Section 7.1(d)(iii) following the
      intentional breach by the Company of its obligation to consummate the Merger
      following the fulfillment of each of the conditions to its obligations as set
      forth in Sections 6.1 and 6.3 above, then the Company shall pay, or cause to
      be
      paid, to Parent, as promptly as is reasonably practicable (but in no event
      later
      than two business days) after the date of termination, the Termination
      Fee.

     

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

     

    (e)  All
      costs
      and expenses incurred in connection with this Agreement and the transactions
      contemplated hereby shall be paid by the party incurring such expenses, whether
      or not the Merger is consummated; provided, that if this Agreement is terminated
      by Parent pursuant to Section 7.1(d)(iv), the Company shall reimburse Parent
      for
      all reasonable out-of-pocket fees and expenses incurred by Parent (including
      the
      fees and expenses of its counsel and financial advisor) in connection with
      this
      Agreement and the transactions contemplated hereby, and provided further that
      if
      this Agreement is terminated by the Company pursuant to Section 7.1(e), Parent
      shall reimburse the Company for all reasonable out-of-pocket fees and expenses
      incurred by the Company (including the fees and expenses of its counsel and
      financial advisor) in connection with this Agreement and the transactions
      contemplated hereby, provided,
      however,
      that
      this Section 7.3(d) shall not be applicable in the event a payment is made
      pursuant to Section 7.3(b) or (c). 

    

    7.4  Amendment.
      This
      Agreement may be amended by the parties hereto, at any time before or after
      approval of this Agreement and the transactions contemplated herein by the
      respective boards of directors or stockholders of the parties hereto;
provided,
      however,
      that
      after any such approval by the stockholders, no amendment which under applicable
      Law may not be made without stockholder approval shall be made without such
      stockholder approval. This Agreement may not be amended except by an instrument
      in writing signed on behalf of each of the parties hereto.

    

    7.5  Waiver.
      Any
      failure of any of the parties to comply with any obligation, covenant, agreement
      or condition herein may be waived at any time prior to the Effective Date by
      any
      of the parties entitled to the benefit thereof only by a written instrument
      signed by each such party granting such waiver, but such waiver or failure
      to
      insist upon strict compliance with such obligation, representation, warranty,
      covenant, agreement or condition shall not operate as a waiver of or estoppel
      with respect to, any subsequent or other failure.

    

    ARTICLE
      8

    GENERAL
      PROVISIONS

    

    8.1  Notices.
      All
      notices and other com-munications hereunder shall be in writing and shall be
      deemed to have been duly given if delivered personally, sent by recognized
      overnight courier or sent by telecopier to the parties at the following
      addresses or at such other addresses as shall be specified by the parties by
      like notice:

    

    (a)  if
      to the
      Company:

    Crested
      Corp. 

    877
      N.
      8th
      W.

    Riverton,
      Wyoming 82501

    Attn:
      Harold F. Herron and Steve Youngbauer

    Fax
      307.857.3050

    with
      a
      copy to:

    

    Davis
      Graham & Stubbs

    Attn:
      Scot Anderson

    1550
      Seventeenth Street, Suite 500

    Denver,
      Colorado 80202

    Fax
      303.893.1379

     

     

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    
 

    (b)  if
      to
      Parent: 

    U.S.
      Energy Corp. 

    877
      N.
      8th
      W.

    Riverton,
      Wyoming 82501

    Attn:
      Keith G. Larsen and Steve Youngbauer

    Fax
      307.857.3050

    

    with
      a
      copy to:

    

    The
      Law
      Office of Stephen E. Rounds

    1544
      York
      Street, Suite 110

    Denver,
      Colorado 80206

    Fax
      303.377.0231

    

    Notice
      so
      given shall (in the case of notice so given by mail) be deemed to be given
      when
      received and (in the case of notice so given by cable, telegram, telecopier,
      telex or personal delivery) on the date of actual transmission or (as the case
      may be) personal delivery.

     

    8.2  Representations
      and Warranties.
      The
      representations and warranties contained in this Agreement shall not survive
      the
      Merger. 

    

    8.3  Governing
      Law; Waiver of Jury Trial.
      

    

    (a)  THIS
      AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
      OF
      THE STATE OF WYOMING (except as to matters of corporate statutory law applicable
      to the Company, which law shall be the CBCA) REGARDLESS OF THE LAWS THAT MIGHT
      OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. ALL MATERS
      WILL BE TRIED BEFORE EITHER A WYOMING COURT OF LAW OR A FEDERAL COURT OF LAW
      LOCATED WITHIN WYOMING.

    

    (b)  NO
      PARTY
      TO THIS AGREEMENT OR ANY ASSIGNEE OR SUCCESSOR OF A PARTY SHALL SEEK A JURY
      TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE
      BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER AGREEMENTS
      OR
      THE DEALINGS OR THE RELATIONSHIP BETWEEN THE PARTIES. NO PARTY WILL SEEK TO
      CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY
      OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS
      OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE
      PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER PARTY HAS IN ANY WAY
      AGREED WITH OR REPRESENTED TO THE OTHER PARTY THAT THE PROVISIONS OF THIS
      SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

    

    8.4  Counterparts;
      Facsimile Transmission of Signatures.
      This
      Agreement may be executed in any number of counterparts and by different parties
      hereto in separate counterparts, and delivered by means of facsimile
      transmission or otherwise, each of which when so executed and delivered shall
      be
      deemed to be an original and all of which when taken together shall constitute
      but one and the same agreement. If any party hereto elects to execute and
      deliver a counterpart signature page by means of facsimile transmission, it
      shall deliver an original of such counterpart to each of the other parties
      hereto within ten days of the date hereof, but in no event will the failure
      to
      do so affect in any way the validity of the facsimile signature or its
      delivery.

     

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    8.5  Assignment;
      No Third Party Beneficiaries.

    

    (a)  This
      Agreement and all of the provisions hereto shall be binding upon and inure
      to
      the benefit of, and be enforceable by, the parties hereto and their respective
      successors and permitted assigns, but neither this Agreement nor any of the
      rights, interests or obligations set forth herein shall be assigned by any
      party
      hereto without the prior written consent of the other parties hereto and any
      purported assignment without such consent shall be void. 

    

    (b)  Nothing
      in this Agreement shall be construed as giving any person, other than the
      parties hereto and their heirs, successors, legal representatives and permitted
      assigns, any right, remedy or claim under or in respect of this Agreement or
      any
      provision hereof except as provided in Section
      5.14.

    

    8.6  Severability.
      If any
      provision of this Agreement shall be held to be illegal, invalid or
      unenforceable under any applicable Law, then such contravention or invalidity
      shall not invalidate the entire Agreement. Such provision shall be deemed to
      be
      modified to the extent necessary to render it legal, valid and enforceable,
      and
      if no such modification shall render it legal, valid and enforceable, then
      this
      Agreement shall be construed as if not containing the provision held to be
      invalid, and the rights and obligations of the parties shall be construed and
      enforced accordingly.

    

    8.7  Entire
      Agreement.
      This
      Agreement (and the Voting Agreement) contain (and as to matters covered by
      the
      Voting Agreement, will contain) all of the terms of the understandings of the
      parties hereto with respect to the subject matters hereof and
      thereof.

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    [The
      remainder of this page is intentionally blank]

    

    

    

    
      
        
          
             

          

          
          

        

        
          39

          
            

          

        

        
          
          

          
          

        

      

    

    

    

    IN
      WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
      executed as of the date first written above. 

     

    U.S.
      ENERGY CORP.

    

    

    By:
      /s/
      Keith G. Larsen

    Name:
      Keith G. Larsen

    Title:
      Chief Executive Officer

    

    

    

    CRESTED
      CORP.

    

    

    By:
      /s/
      Harold F. Herron

    Name:
      Harold F. Herron

    Title:
      President

    
 

     

     

     

     

     

     

     

     

    
      
        [AGREEMENT
          AND PLAN OF MERGER SIGNATURE PAGE]Exhibit 10.4 Voting Agreement

    
      

    

     

     

    

      Voting
        Agreement

      Between
        

      U.S.
        Energy Corp. and Crested Corp.

      And
        Certain Shareholders of Crested Corp.

      

      This
        Voting Agreement (“Agreement”)
        is
        entered into as of January 23, 2007 by and between U.S. Energy Corp., a Wyoming
        corporation (“USE”);
        the
        individual shareholders (the “Individual
        Shareholders”)
        of
        Crested Corp., a Colorado corporation (“Crested”)
        identified on the signature page; and Crested. Each of USE and the Individual
        Shareholders are referred to as a “Shareholder;”
        collectively, those parties are referred to as the “Shareholders.”
        

      

      Whereas,
        USE and Crested have entered into an Agreement and Plan of Merger (the
“Merger
        Agreement”)
        providing for the merger (the “Merger”),
        dated
        as of the date hereof. Terms not defined in this Agreement have the meanings
        defined in the Merger Agreement.

      

      Whereas,
        the Merger Agreement requires that the Shareholders, solely in their capacities
        as holders of Crested common stock, enter into, and the Shareholders have
        agreed
        to enter into, this Voting Agreement. 

      

      NOW,
        THEREFORE, in consideration of the premises and other good and valuable
        consideration, the receipt and sufficiency of which is hereby acknowledged,
        the
        parties hereby agree as follows: 

      

      1. Representations
        and Warranties of the Shareholders.
        Each of
        the Shareholders represents and warrants to Crested as follows: 

      

      (a) Authority;
        Binding Obligation.
        The
        Shareholder has all necessary power and authority to enter into this Agreement
        and perform all of the Shareholder’s obligations hereunder. This Agreement has
        been duly and validly executed and delivered by the Shareholder and constitutes
        a valid and legally binding obligation of the Shareholder, enforceable against
        the Shareholder in accordance with its terms. 

      

      (b) Ownership
        of Shares.
        The
        Shareholder is the beneficial owner or record holder of the number of shares
        of
        Crested listed under the Shareholder’s name on the signature page (the
“Existing
        Shares”
and,
        together with any shares of Crested common stock the record or beneficial
        ownership of which is acquired by the Shareholder after the date hereof,
        the
“Shares”
        including (only for the individual Shareholders) any shares of common stock
        of
        Crested which are acquired by the Company
        Stock Option Payment
        under
        the Merger Agreement (such latter shares hereafter referred to as the
“Option
        Shares”)
        and,
        as of the date hereof, the Existing Shares and Option Shares constitute all
        the
        shares of Crested common stock owned of record or beneficially by the
        Shareholder). Provided,
        that
        the Existing Shares shown for each individual Shareholder does not reflect
        that
        person’s beneficial ownership (as defined in SEC rule 13d-3) of shares of
        Crested common stock which he holds as an officer or director of USE.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      With
        respect to the Existing Shares, the Shareholder has, without any restrictions
        except as imposed by law and this Agreement, (i) sole voting power and sole
        power to issue instructions with respect to or otherwise engage in the actions
        set forth in Section 2; (ii) sole power of disposition; and (iii) sole power
        to
        demand appraisal rights under Article 113 of the Colorado Business Corporation
        Act. With respect to the Option Shares, the Shareholder will have sole power
        of
        disposition. 

      

      (c) No
        Conflicts.
        Neither
        the execution, delivery and performance of this Agreement nor the consummation
        of the transactions contemplated hereby will conflict with or constitute
        a
        violation of or a default under (with or without notice, lapse of time, or
        both)
        any contract, agreement, voting agreement, shareholders’ agreement, trust
        agreement, voting trust, proxy, power of attorney, pooling arrangement, note,
        mortgage, indenture, instrument, arrangement or other obligation or restriction
        of any kind to which the Shareholder is a party or to which the Shareholder
        or
        the Shareholder’s Shares are subject to or bound. 

      

      2. Voting
        Agreement and Agreement Not to Transfer.
        

      

      (a)  The
        Shareholder agrees to vote or cause to be voted all of the Shareholder’s
        Existing Shares 

      

      (i) consistent
        with the vote of holders of a majority of the shares of Crested common stock
        not
        held by the Shareholders (the “Majority
        Vote of the Minority Holders”),
        whether in favor of, or against, the approval of the Merger Agreement at
        a
        meeting of the Crested shareholders, as well as any other matters required
        to be
        approved by the Crested shareholders at the meeting wherein the Merger is
        voted
        upon by the Crested shareholders. Provided,
        that
        USE may elect not to vote in favor of the Merger, even if the Merger Agreement
        has been approved by Majority Vote of the Minority Holders, as such election
        is
        permitted pursuant to the termination provisions of the Merger Agreement.
        

      

      (ii) against
        any action or agreement that would result in a breach in any material respect
        of
        any covenant, representation or warranty or any other obligation or agreement
        of
        Crested under the Merger Agreement; and 

      

      (iii) against
        the following actions (other than the Merger or the consummation of any actions
        contemplated by the Merger Agreement): 

      

      (A) any
        extraordinary corporate transactions, such as a merger, consolidation or
        other
        business combination involving Crested; 

      

      (B) any
        sale,
        lease, transfer or disposition of a material amount of the assets of Crested,
        except as may be contemplated by the Company SEC Reports.; 

      

      (C) any
        change in the majority of the board of directors of Crested; 

      

      (D)
        any
        material change in the present capitalization of Crested; 

       

      
 

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      (E) any
        amendment of Crested’s articles of incorporation or bylaws; 

      

      (F) any
        other
        change in the corporate structure, business, assets or ownership of Crested
        (but
        a vote in favor of amending the Crested Incentive Stock Option Plan to allow
        for
        cashless exercise shall be permitted); or 

      

      (G) any
        other
        action which is intended, or could reasonably be expected to, impede, interfere
        with, delay, postpone, discourage or adversely affect the contemplated economic
        benefits to Crested of the Merger and the transactions contemplated by the
        Merger Agreement. 

      

      (b) The
        Shareholder agrees not to (i) sell, transfer, convey, assign or otherwise
        dispose of any of his, her or its Existing Shares, or any of the Option Shares
        if an Individual Shareholder exercises his or her Option before the Effective
        Date; or (ii) pledge, mortgage or otherwise encumber such Existing or Option
        Shares. 

      

      3. Cooperation.
        The
        Shareholder agrees that he, she or it will not (directly or indirectly)
        initiate, solicit, encourage or facilitate any Takeover Proposal.

      

      4. Shareholder
        Capacity.
        The
        Individual Shareholder is entering into this Agreement in his or her capacity
        as
        the record or beneficial owner of the Shares and the Option Shares, and not
        in
        his or her capacity as a director or officer of Crested. Nothing in this
        Agreement shall be deemed in any manner to limit the discretion of any
        Shareholder to take any action, or fail to take any action, in his or her
        capacity as a director or officer of Crested that may be either (a) required
        of
        the Shareholder under applicable law or (b) is otherwise permitted by the
        Merger
        Agreement. 

      

      5. Termination.
        The
        obligations of the Shareholder hereunder shall terminate upon the consummation
        of the Merger. If the Merger is not consummated, the obligations of the
        Shareholder shall terminate upon the termination of the Merger
        Agreement.

      

      6. Specific
        Performance.
        The
        Shareholder acknowledges that it would be impossible to determine the amount
        of
        damages that would result from any breach of any of its obligations under
        this
        Agreement, and that the remedy at law for any breach, or threatened breach,
        would likely be inadequate. Accordingly, the Shareholder agrees that Crested
        shall, in addition to any other rights or remedies which it may have at law
        or
        in equity, be entitled to seek such equitable and injunctive relief as may
        be
        available from any court of competent jurisdiction to restrain the Shareholder
        from violating any of his, her, or its obligations under this Agreement.
        In
        connection with any action or proceeding for such equitable or injunctive
        relief, the Shareholder hereby waives any claim or defense that a remedy
        at law
        alone is adequate and agrees, to the maximum extent permitted by law, to
        have
        the obligations of the Shareholder under this Agreement specifically enforced
        against him, her or it, without the necessity of posting bond or other security,
        and consents to the entry of equitable or injunctive relief against the
        Shareholder enjoining or restraining any breach or threatened breach of this
        Agreement. 

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      7. Indemnification.
        

      

      (a) If
        and
        only if the Merger is consummated in accordance with the Merger Agreement,
        USE
        and its successors and assigns (the “Indemnifying
        Party”)
        shall,
        to the fullest extent permitted by law, indemnify, defend and hold harmless
        the
        Individual Shareholders (as incurred to the extent incurred subsequent to
        the
        Effective Date) against all costs or expenses (including reasonable attorneys’
fees), judgments, fines, losses, claims, damages or liabilities incurred
        by
        Shareholder, regardless of whether incurred prior to or after the Effective
        Date
        (collectively, “Costs”)
        in
        connection with any claim, action, suit, proceeding or investigation, whether
        civil, criminal, administrative or investigative, arising out of this Agreement
        other than an action for specific performance under Section 6. A
        Shareholder wishing to claim indemnification under this Section 7, upon
        learning of any claim, action, suit, proceeding or investigation described
        above, shall promptly notify Indemnifying Party thereof; provided that the
        failure so to notify shall not affect the obligations of Indemnifying Party
        under this Section 7 unless and to the extent that Indemnifying Party is
        actually and materially prejudiced as a result of such failure. In case any
        such
        action shall be brought against Shareholder, he or she shall promptly notify
        the
        Indemnifying Party of the commencement thereof, and the Indemnifying Party
        shall
        be entitled to assume the defense thereof, with counsel reasonably satisfactory
        to Shareholder, and after notice from the Indemnifying Party to Shareholder
        of
        its election to so assume the defense thereof, the Indemnifying Party shall
        not
        be liable to Shareholder for any legal expenses of other counsel or any other
        expenses, in each case subsequently incurred by Shareholder. 

      

      (b) If
        USE or
        any of its successors or assigns shall consolidate with or merge into any
        other
        entity and shall not be the continuing or surviving entity of such consolidation
        or merger or shall transfer all or substantially all of its assets to any
        other
        entity, then and in each case, USE shall cause proper provision to be made
        so
        that its successors and assigns shall assume the obligations set forth in
        this
        Section 7. 

      

      (c) The
        provisions of this Section 7 shall survive termination of this Agreement.

      

      (d) The
        indemnification provisions of Section 5.15 of the Merger Agreement, relating
        to
        officers and directors of Crested, shall not be affected by this Section
        7.

      

      8. Miscellaneous.
        

      

      (a) Entire
        Agreement.
        This
        Agreement constitutes the entire agreement of the parties with reference
        to the
        transactions contemplated hereby and supersedes all other prior agreements,
        understandings, representations and warranties, both written and oral, between
        the parties or their respective representatives, agents or attorneys, with
        respect to the subject matter hereof. 

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      (b) Parties
        in Interest.
        This
        Agreement shall be binding upon and inure solely to the benefit of each party
        hereto and the other parties to the Merger Agreement and their respective
        successors, assigns, estate, heirs, executors, administrators and other legal
        representatives, as the case may be. Nothing in this Agreement, express or
        implied, is intended to confer upon any other person, other than parties
        hereto
        or their respective successors, assigns, estate, heirs, executors,
        administrators and other legal representatives, as the case may be, any rights,
        remedies, obligations or liabilities under or by reason of this Agreement.
        

      

      (c) Modifications;
        Waivers.
        This
        Agreement shall not be amended, altered or modified in any manner except
        in
        writing. No waiver of breach hereunder shall be considered valid unless in
        writing, and no waiver shall be deemed a waiver of any subsequent breach.
        

      

      (d) Severability.
        Any
        term or provision of this Agreement which is invalid or unenforceable in
        any
        jurisdiction shall, as to that jurisdiction, be ineffective to the extent
        of
        such invalidity and unenforceability without rendering invalid or unenforceable
        the remaining terms and provisions of this Agreement. If any provision of
        this
        Agreement is so broad as to be unenforceable, the provision shall be interpreted
        to be only so broad as is enforceable. 

      

      (e) Governing
        Law.
        This
        Shareholder Agreement shall be deemed to be made in and in all respects shall
        be
        interpreted, construed and governed by and in accordance with the laws of
        the
        State of Wyoming, without regard to the conflict of law principles thereof.
        

      

      (f) Jurisdiction
        and Venue.
        Any
        legal action or proceeding with respect to this Agreement may be brought
        only in
        Fremont County, Wyoming, or in the courts of the United States of America
        for
        Wyoming. By this Agreement, each party (i) accepts for itself the jurisdiction
        of and venue in such courts; and (ii) irrevocably consents to the service
        of
        process out of such courts by the delivery of notice as provided below, such
        service to become effective 10 days after delivery. 

      

      (g) Attorney’s
        Fees.
        The
        prevailing party in any litigation, arbitration, mediation, bankruptcy,
        insolvency or other proceeding (“Proceeding”)
        relating to the enforcement or interpretation of this Agreement may recover
        from
        the unsuccessful party all fees and disbursements of counsel (including expert
        witness and other consultants’ fees and costs) relating to or arising out of (a)
        the Proceeding (whether or not the Proceeding results in a judgment) and
        (b) any
        post-judgment or post-award Proceeding including, without limitation, one
        to
        enforce or collect any judgment or award resulting from any Proceeding. All
        such
        judgments and awards shall contain a specific provision for the recovery
        of all
        such subsequently incurred costs, expenses, fees and disbursements of counsel.
        

      

      (h) Counterparts.
        This
        Agreement may be executed in one or more counterparts (including by facsimile),
        each of which shall be deemed to be an original, but all of which shall
        constitute one and the same instrument. 

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      (i) Notices.
        All
        notices, requests, instructions and other communications to be given hereunder
        shall be in writing and shall be deemed given if personally delivered,
        telecopied (with confirmation) or mailed by registered or certified mail,
        postage prepaid (return receipt requested), to such party at its address
        set
        forth below or such other address as such party may specify to the other
        party
        by notice:

      

      If
        to
        USE: 

      

      U.S.
        Energy Corp.

      877
        N.
        8th
        W.

      Riverton,
        Wyoming 82501 

      Attention:
        Keith G. Larsen

      Fax
        307.857.3050

      

      With
        copy
        (which shall not constitute notice) to:

      

      Stephen
        E. Rounds, Attorney

      1544
        York
        Street, Suite 110

      Denver,
        Colorado 80206

      Fax
        303.377.0231

      

      If
        to
        Crested:

      

      Crested
        Corp.

      877
        N.
        8th
        W.

      Riverton,
        Wyoming 82501 

      Attention:
        Harold F. Herron

      Fax
        307.857.3050

      

      With
        copy
        (which shall not constitute notice) to

      

      Davis
        Graham & Stubbs, LLP

      1550
        17th
        Street,
        Suite 500

      Denver,
        Colorado 80202

      Attention:
        Scot W. Anderson

      Fax
        303.893.1379

      

      If
        to an
        Individual Shareholder, to the address on the signature page 

      

      (j) Advice
        of Counsel.
        Each
        Individual shareholder acknowledges that he or she has had the opportunity
        to
        seek the advice of independent legal counsel, and has read and understood
        all of
        this Agreement. This Agreement shall not be construed against any party by
        reason of the drafting hereof.

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties execute this Agreement as of the date first
        above
        written. 

      

      Crested
        Corp.

      

      /s/
        Harold F. Herron         

      Harold
        F.
        Herron, 

      President

      

      

      U.S.
        Energy Corp.                      Existing
        Shares

      

      /s/
        Keith G. Larsen              
       12,028,618

      Keith
        G.
        Larsen, CEO

      

      
        	 	 	
                Option
                  Shares for which

              
	
                Individual
                  Shareholders*

              	
                Existing
                  Shares

              	
                USE
                  Shares will be issued

              
	 	 	 
	
                /s/
                  Daniel P. Svilar

              	 	 
	
                Daniel
                  P. Svilar

              	
                156,850

              	
                200,000

              
	 	 	 
	
                /s/
                  Robert Scott Lorimer

              	 	 
	
                Robert
                  Scott Lorimer

              	
                15,000

              	
                200,000

              
	 	 	 
	
                /s/
                  Harold F. Herron

              	 	 
	
                Harold
                  F. Herron

              	
                3,466

              	
                200,000

              
	 	 	 
	
                /s/
                  Keith G. Larsen

              	 	 
	
                Keith
                  G. Larsen

              	
                0

              	
                200,000

              
	 	 	 
	
                /s/
                  Mark J. Larsen

              	 	 
	
                Mark
                  J. Larsen

              	
                0

              	
                200,000

              
	 	 	 
	
                /s/
                  Don Anderson

              	 	 
	
                Don
                  Anderson

              	
                0

              	
                30,000

              
	 	 	 
	
                /s/
                  Michael Anderson

              	 	 
	
                Michael
                  Anderson

              	
                0

              	
                30,000

              
	 	 	 
	
                /s/
                  Michael H. Feinstein

              	 	 
	
                Michael
                  H. Feinstein

              	
                0

              	
                30,000

              
	 	 	 
	
                /s/
                  H. Russell Fraser

              	 	 
	
                H.
                  Russell Fraser

              	
                29,500

              	
                30,000

              
	 	 	 
	 	 	 

      

      * Notice
        for each Individual Shareholder shall be at the USE address.

       

       

      
        
          
          

        

        
          7

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