Document:

exv10w2

 

Exhibit 10.2

INDEMNIFICATION AGREEMENT

     This
Agreement is made as of the ___ day of                     , 2008, by and between Bookham, Inc.,
a Delaware corporation (the “Corporation), and                      (the “Indemnitee”), a
director or officer of the Corporation.

     WHEREAS, highly competent persons have become more reluctant to serve corporations as
directors or in other capacities unless they are provided with adequate protection through
insurance or adequate indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation;

     WHEREAS, Indemnitee may also be entitled to indemnification pursuant to the General
Corporation Law of the State of Delaware (“DGCL”). The By-laws, Certificate of Incorporation of
the Corporation and the DGCL expressly provide that indemnification provisions are not exclusive,
and contemplate that contracts may be entered into between the Corporation and members of the board
of directors, officers and other persons with respect to indemnification;

     WHEREAS, the board of directors of the Corporation (the “Board”) has determined that the
increased difficulty in attracting and retaining such persons is detrimental to the best interests
of the Corporation’s stockholders and that the Corporation should act to assure such persons that
there will be increased certainty of indemnification protection in the future;

     WHEREAS, it is reasonable, prudent and necessary for the Corporation to contractually obligate
itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the Corporation free from
undue concern that they will not be so indemnified;

     WHEREAS, this Agreement is a supplement to and in furtherance of the By-laws and Certificate
of Incorporation of the Corporation and any resolutions adopted pursuant the By-laws and
Certificate of Incorporation, and shall not be deemed a substitute for, nor to diminish or abrogate
any rights of Indemnitee under such charter documents;

     NOW, THEREFORE, the parties agree as follows:

     1. Agreement to Serve. The Indemnitee agrees to serve or continue to serve as a
director or officer of the Corporation for so long as the Indemnitee is duly elected or appointed
or until such time as the Indemnitee tenders a resignation in writing.

     2. Definitions. As used in this Agreement:

          (a) “Corporate Status” means the status of a person who is or was a director, officer,
employee, agent or fiduciary of the Corporation, or is or was serving, or has agreed to serve, at
the request of the Corporation, as a director, officer, fiduciary, partner, trustee, member,
employee or agent of, or in a similar capacity with, another corporation, partnership, joint
venture, trust, limited liability company or other enterprise.

 

 

          (b) “Disinterested Director” means a director of the Corporation who is not and was not a
party to the Proceeding in respect of which indemnification is sought by Indemnitee.

          (c) “Enterprise” means the Corporation and any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at
the express written request of the Corporation as a director, officer, employee, agent or
fiduciary. With respect to employee benefit plans: references to “fines” shall include any
excise tax assessed with respect to any employee benefit plan; references to “serving at the
request of the Corporation” shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner such person reasonably believed to be in the
interests of the participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner “not opposed to the best interests of the Corporation” as referred to in
this Agreement.

          (d) “Expenses” means, without limitation, attorneys’ fees, retainers, court costs,
transcript costs, fees and expenses of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees and other
disbursements or expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, participating, or being or preparing
to be a witness in a Proceeding. Expenses shall also mean any federal, state or local or foreign
taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement and shall include any ERISA excise taxes or penalties imposed in any Proceeding
relating to any Indemnifiable Event. Expenses also shall include Expenses incurred in connection
with any appeal resulting from any Proceeding, including without limitation the premium, security
for, and other costs relating to any cost bond, or other appeal bond or its equivalent.
Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of
judgments or fines against Indemnitee.

          (e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced
in matters of corporation law and neither presently is, nor in the past five (5) years has been,
retained to represent: (1) the Corporation or Indemnitee in any matter material to either such
party (other than with respect to matters concerning Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (2) any other party to the Proceeding
giving rise to a claim for indemnification hereunder. The term “Independent Counsel” shall not
include any person who, under the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the Corporation or Indemnitee in an
action to determine Indemnitee’s rights under this Agreement. The Corporation agrees to pay the
reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant to this Agreement.

          (f) “Proceedings” means any threatened, pending or completed action, suit,
arbitration, alternative dispute resolution proceeding, formal or informal investigation,

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inquiry, administrative hearing or any other actual, threatened or completed
proceeding, whether brought by or in the right of the Corporation or otherwise and whether
civil, criminal, administrative or investigative, in which Indemnitee is or will be involved
as a party or otherwise, by reason of the fact that Indemnitee is or was an officer or
director of the Corporation, by reason of any action taken by him or her, or of any inaction
on his or her part while acting as an officer or director of the Corporation, or by reason
of the fact that the Indemnitee is or was serving at the request of the Corporation as a
director, officer, employee, agent or fiduciary of an Enterprise; in each case whether or
not he or she is acting or serving in any such capacity at the time any liability or expense
is incurred for which indemnification can be provided under this Agreement; including one
pending on or before the date of this Agreement, but excluding one initiated by an
Indemnitee pursuant to Section 11 of this Agreement to enforce his or her rights under this
Agreement.

     3. Indemnity of Indemnitee. The Corporation agrees to hold harmless and indemnify
Indemnitee to the fullest extent permitted by law, as such may be amended from time to time. In
furtherance of the foregoing indemnification, and without limiting the generality of this
obligation:

          (a) Indemnification in Third-Party Proceedings. The Corporation shall indemnify the
Indemnitee in accordance with the provisions of this Paragraph 3(a) if, by reason of the
Indemnitee’s Corporate Status or by reason of any action alleged to have been taken or omitted in
connection with such status, the Indemnitee was or is a party to or threatened to be made a party to
or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the
Corporation to procure a judgment in its favor). Pursuant to this Paragraph 3(a), Indemnitee
shall be indemnified against all Expenses, judgments, fines, penalties and amounts paid in
settlement actually and reasonably incurred by or on behalf of the Indemnitee in connection with
such Proceeding, if the Indemnitee acted in good faith and in a manner which the Indemnitee
reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with
respect to any criminal Proceeding, had no reasonable cause to believe that his or her conduct
was unlawful.

          (b) Indemnification in Proceedings by or in the Right of the Corporation. The
Corporation shall indemnify the Indemnitee in accordance with the provisions of this
Paragraph 3(b) if, by reason of the Indemnitee’s Corporate Status or by reason of any action
alleged to have been taken or omitted in connection with such status, the Indemnitee was or is a
party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the
right of the Corporation to procure a judgment in its favor. Pursuant to this Paragraph 3(b),
Indemnitee shall be indemnified against all Expenses and, to the extent permitted by law, amounts
paid in settlement actually and reasonably incurred by or on behalf of the Indemnitee in
connection with such Proceeding, if the Indemnitee acted in good faith and in a manner which the
Indemnitee reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that, if applicable law so provides, no indemnification shall be made under
this Paragraph 3(b) in respect of any claim, issue, or matter as to which the Indemnitee shall
have been adjudged to be liable to the Corporation, unless, and only to the extent, that the
Court of Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but in view of all
the

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circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for
such Expenses as the Court of Chancery or such other court shall deem proper.

     4. Additional Indemnity. In addition to, and without regard to any limitations on,
the indemnifications provided elsewhere in this Agreement, the Corporation indemnifies and holds
harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid or to be
paid in settlement actually and reasonably incurred by or on behalf of the Indemnitee, if, by
reason of his or her Corporate Status, he or she is, or is threatened to be made, a party to or
participant in any Proceeding (including a Proceeding by or in the right of the Corporation),
including, without limitation, all liability arising out of the negligence or active or passive
wrongdoing of Indemnitee. The only limitation that shall exist upon the Corporation’s obligations
pursuant to this Agreement shall be that the Corporation shall not be obligated to make any payment
to Indemnitee that is finally determined (under the procedures, and subject to the presumptions,
set forth in Paragraph 10) to be unlawful.

     5. Indemnification for Expenses of a Witness. To the extent that the Indemnitee is,
by reason of the Indemnitee’s Corporate Status, a witness in any Proceeding to which the Indemnitee
is not a party, the Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by or on behalf of the Indemnitee in connection with serving as a witness.

     6. Indemnification of Expenses of Successful Party. To the extent that the Indemnitee
has been successful, on the merits or otherwise, in defense of any Proceeding or in defense of any
claim, issue or matter in a Proceeding, the Indemnitee shall be indemnified against all Expenses
incurred by or on behalf of the Indemnitee in connection with such Proceeding. Without limiting
the foregoing, if any Proceeding or any claim, issue or matter in a Proceeding is disposed of, on
the merits or otherwise (including a disposition without prejudice), without (i) the disposition
being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the
Corporation, (iii) a plea of guilty or nolo
contendere by the Indemnitee, (iv) an adjudication that
the Indemnitee did not act in good faith and in a manner the Indemnitee reasonably believed to be
in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal
proceeding, an adjudication that the Indemnitee had reasonable cause to believe his or her conduct
was unlawful, the Indemnitee shall be considered for the purposes of this Agreement to have been
wholly successful with respect to the Proceeding, or claim, issue or matter in a Proceeding,
respectively. If Indemnitee is not wholly successful in a Proceeding, but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Corporation shall indemnify Indemnitee against all Expenses actually and reasonably
incurred by or on behalf of the Indemnitee in connection with each successfully resolved claim,
issue or matter. For purposes of this paragraph and without limitation, the termination of any
claim, issue or matter in a Proceeding by dismissal, with or without prejudice, shall be deemed to
be a successful result as to such claim, issue or matter.

     7. Exceptions to Right of Indemnification.

          (a) Action Initiated by Indemnitee. The Corporation shall not indemnify the
Indemnitee in connection with a Proceeding (or part thereof) initiated by the Indemnitee against
the Corporation or its directors, officers, employees or other Indemnitees, unless the

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initiation of such Proceeding (1) was approved by the Board, or (2) the Corporation provides
the indemnification in its sole discretion, pursuant to the power vested in the Corporation under
applicable law.

          (b) Indemnitee Reimbursed From Insurance. The Corporation shall not indemnify the
Indemnitee to the extent the Indemnitee is reimbursed from the proceeds of insurance, and in the
event the Corporation makes any indemnification payments to the Indemnitee and the Indemnitee is
subsequently reimbursed from the proceeds of insurance, the Indemnitee shall promptly refund such
indemnification payments to the Corporation to the extent of such insurance reimbursement.

          (c) Section 16(b) Actions. The Corporation shall not indemnify the Indemnitee for
an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of
securities of the Corporation within the meaning of Section 16(b) of the Securities Exchange Act
of 1934, as amended, or similar provision of state statutory law or common law. Notwithstanding
anything to the contrary stated or implied in this Section 7(c), indemnification pursuant to this
Agreement relating to any Proceeding against Indemnitee for an accounting for profits made from
the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of
Section 16(b) of the Exchange Act or similar provisions of any federal, state or local laws shall
not be prohibited if Indemnitee ultimately establishes in any Proceeding that no recovery of such
profits from Indemnitee is permitted under Section 10(b) of the Exchange Act of similar
provisions of any federal, state of local laws.

     8. Notification and Defense of Claim. As a condition precedent to the Indemnitee’s
right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as
practicable of any Proceeding for which indemnity will or could be sought; provided, that the
failure to so notify the Corporation shall not release the Corporation of any liability it may have
to the Indemnitee, except to the extent that the Corporation has been prejudiced by such failure.
With respect to any Proceeding of which the Corporation is so notified, the Corporation will be
entitled to participate in the Proceeding at its own expense and/or to assume the defense of the
Proceeding at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After
notice from the Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such Proceeding, other than as provided below in this
Paragraph 8. The Indemnitee shall have the right to employ his or her own counsel in connection
with such Proceeding, but the fees and expenses of such counsel incurred after notice from the
Corporation of its assumption of the defense of the Proceeding shall be at the expense of the
Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the
Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a
conflict of interest or position on any significant issue between the Corporation and the
Indemnitee in the conduct of the defense of such Proceeding or (iii) the Corporation shall not in
fact have employed counsel to assume the defense of such Proceeding, in each of which cases the
fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Agreement. The Corporation shall not be entitled, without
the consent of the Indemnitee, to assume the defense of any claim brought by or

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in the right of the Corporation or as to which counsel for the Indemnitee shall have
reasonably made the conclusion provided for in clause (ii) above. The Corporation shall not be
required to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding effected without its written consent. The Corporation shall not settle any Proceeding
in any manner, without the Indemnitee’s written consent, provided that Indemnitee’s written consent
shall be required if such settlement (i) grants Indemnitee a complete and unqualified release of
liability, (ii) does not impose any penalty or limitation on Indemnitee, and (iii) does not admit
any liability or misconduct by Indemnitee. Neither the Corporation nor the Indemnitee will
unreasonably withhold or delay their consent to any proposed settlement.

     9. Advancement of Expenses. In the event that the Corporation does not assume the
defense, pursuant to Paragraph 8 of this Agreement, of any Proceeding of which the Corporation
receives notice under this Agreement, any Expenses incurred by or on behalf of the Indemnitee in
defending such Proceeding shall be paid by the Corporation in advance of the final disposition of
such Proceeding within ten (10) days after the receipt by the Corporation of a statement or
statements from Indemnitee requesting such advance or advances from time to time; provided,
however, that the payment of such Expenses incurred by or on behalf of the Indemnitee in advance of
the final disposition of such Proceeding shall be made only upon receipt of an undertaking by or on
behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized
in this Agreement. Such undertaking shall be accepted without reference to the financial ability
of the Indemnitee to make repayment. Any advances and undertakings to
repay pursuant to this Paragraph 9 shall be unsecured and interest
free.

     10. Procedures and Presumptions for Indemnification.

          (a) Written Request. In the event the Indemnitee wishes to exercise his or her
rights to indemnification or advancement of Expenses pursuant to the Paragraphs 3, 4, 5 or 6 or
any other indemnification obligations under this Agreement, the Indemnitee shall submit to the
Corporation a written statement to this effect, including with such statement documentation and
information as is reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the
Corporation shall, promptly upon receipt of such a request for indemnification, advise the Board
in writing that Indemnitee has requested indemnification.

          (b) Payment Dates. Any such advancement of Expenses or indemnification pursuant to
Paragraphs 5 and 6, or any other indemnification obligations under this Agreement other than
pursuant to Paragraphs 3 and 4, shall be paid within ten (10) days of receipt by the Corporation
of the written request of the Indemnitee. Indemnification pursuant to Paragraphs 3 or 4 of this
Agreement, that are approved following a determination of entitlement as set forth in this
Paragraph 10, shall be made promptly within thirty (30) days after receipt by the Corporation of
the written request of the Indemnitee.

          (c) Procedure for Determining Entitlement to Indemnification.

	 	(i)	 	Upon written request by Indemnitee for
indemnification pursuant to this Paragraph 10, a determination, if
required by applicable law, with respect to Indemnitee’s entitlement to
indemnification

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	 	 	 	shall be made in the specific case by one of the following four
methods, which shall be at the election of the Board: (A) by a
majority vote of the Disinterested Directors, even though less than a
quorum, (B) by a committee of Disinterested Directors designated by a
majority vote of the Disinterested Directors, even though less than a
quorum, (C) if there are no Disinterested Directors or if the
Disinterested Directors so direct, by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to
the Indemnitee, or (D) if so directed by the Board, by the
stockholders of the Corporation.

	 	(ii)	 	If the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to this
Paragraph 10, the Independent Counsel shall be selected as provided in
this Paragraph 10(c). The Independent Counsel shall be selected by the
Board. Indemnitee may, within ten (10) days after such written notice
of selection shall have been given, deliver to the Corporation, as the
case may be, a written objection to such selection; provided, however,
that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of
“Independent Counsel” as defined in Paragraph 2 of this Agreement, and
the objection shall set forth with particularity the factual basis of
such assertion. Absent a proper and timely objection, the person so
selected shall act as Independent Counsel. If a written objection is
made and substantiated, the Independent Counsel selected may not serve
as Independent Counsel unless and until such objection is withdrawn or
a court has determined that such objection is without merit. If,
within twenty (20) days after submission by Indemnitee of a written
request for indemnification pursuant to this Paragraph 10(c), no
Independent Counsel shall have been selected and not objected to,
either the Corporation or Indemnitee may petition the Court of Chancery
of the State of Delaware or other court of competent jurisdiction for
resolution of any objection made by the Indemnitee to the Corporation’s
selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the court or by such other
person as the court shall designate, and the person with respect to
whom all objections are so resolved or the person so appointed shall
act as Independent Counsel under this Paragraph 10(c). The Corporation
shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting
pursuant to this Paragraph 10, and the Corporation shall pay all
reasonable fees and expenses incident to the procedures of this
Paragraph 10, regardless of the manner in which such Independent
Counsel was selected or appointed.

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	 	(iii)	 	If the person, persons or entity empowered or
selected under this Paragraph 10 to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within
sixty (60) days after receipt by the Corporation of the request for
indemnification, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall
be entitled to such indemnification absent (A) a misstatement by
Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee’s statement not materially misleading, in
connection with the request for indemnification, or (B) a prohibition
of such indemnification under applicable law; provided, however, that
such sixty (60)-day period may be extended for a reasonable time, not
to exceed an additional thirty (30) days, if the person, persons or
entity making such determination with respect to entitlement to
indemnification in good faith requires such additional time to obtain
or evaluate documentation and/or information relating to the
determination; and provided, further, that the foregoing provisions of
this Paragraph 10 shall not apply if the determination of entitlement
to indemnification is to be made by the stockholders pursuant to this
Paragraph 10 and if (A) within fifteen (15) days after receipt by the
Corporation of the request for such determination, the Board or the
Disinterested Directors, if appropriate, resolve to submit such
determination to the stockholders for their consideration at an annual
meeting of the stockholders to be held within seventy-five (75) days
after such receipt and such determination is made at the meeting, or
(B) a special meeting of stockholders is called within fifteen (15)
days after such receipt for the purpose of making the determination,
such meeting is held for such purpose within sixty (60) days after
having been so called and such determination is made at the meeting.
	 
	 	(iv)	 	Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to
Indemnitee’s entitlement to indemnification, including providing to
such person, persons or entity upon reasonable advance request any
documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination. Any
Independent Counsel, member of the Board or stockholder of the
Corporation shall act reasonably and in good faith in making a
determination regarding the Indemnitee’s entitlement to indemnification
under this Agreement. Any costs or expenses (including attorneys’ fees
and disbursements) incurred by Indemnitee in so cooperating with the
person, persons or entity

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	 	 	 	making such determination shall be borne by the Corporation
(irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Corporation indemnifies and agrees to hold
Indemnitee harmless from such costs and expenses.

          (d) Presumptions for Determination of Entitlement to Indemnification.

	 	(i)	 	In making a determination with respect to
entitlement to indemnification under this Agreement, the person or
persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement. Anyone
seeking to overcome this presumption shall have the burden of proof and
the burden of persuasion by clear and convincing evidence. Neither the
failure of the Corporation (including by its directors or Independent
Counsel) to have made a determination prior to the commencement of any
action pursuant to this Agreement that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard of
conduct, nor an actual determination by the Corporation (including by
its directors or Independent Counsel) that Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or
create a presumption that Indemnitee has not met the applicable
standard of conduct.
	 
	 	(ii)	 	Indemnitee shall be deemed to have acted in
good faith if Indemnitee’s action is based on the records or books of
account of the Enterprise, including financial statements, or on
information supplied to Indemnitee by the officers of the Enterprise in
the course of their duties, or on the advice of legal counsel for the
Enterprise or on information or records given or reports made to the
Enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the
Enterprise. In addition, the knowledge and/or actions, or failure to
act, of any director, officer, agent or employee of the Enterprise
shall not be imputed to Indemnitee for purposes of determining the
right to indemnification under this Agreement. Whether or not the
foregoing provisions of this subparagraph (ii) are satisfied, it shall
in any event be presumed that Indemnitee has at all times acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion
by clear and convincing evidence.
	 
	 	(iii)	 	The termination of any Proceeding or any
claim, issue or matter in a Proceeding, by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself,

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	 	 	 	adversely affect the right of Indemnitee to indemnification or create
a presumption that the Indemnitee did not act in good faith and in a
manner which the Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect
to any criminal Proceeding, had reasonable cause to believe that his
or her conduct was unlawful.

	 	(iv)	 	The Corporation acknowledges that a settlement
or other disposition short of final judgment may be successful if it
permits a party to avoid expense, delay, distraction, disruption and
uncertainty. In the event that any action, claim or proceeding to
which Indemnitee is a party is resolved in any manner other than by
adverse judgment against Indemnitee (including, without limitation,
settlement of such action, claim or proceeding with or without payment
of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have the
burden of proof and the burden of persuasion by clear and convincing
evidence.

     11. Remedies. The right to indemnification or advancement of Expenses as provided by
this Agreement shall be enforceable by the Indemnitee in any court of competent jurisdiction.
Unless otherwise required by law, the burden of proving that indemnification is not appropriate
shall be on the Corporation. The Indemnitee’s expenses (of the type described in the definition of
“Expenses” in Paragraph 2(d)) incurred in connection with successfully establishing the
Indemnitee’s right to indemnification, in whole or in part, in any such Proceeding shall also be
indemnified by the Corporation.

               (a) In the event that (1) a determination is made pursuant to Paragraph 10 of this Agreement
that Indemnitee is not entitled to indemnification under this Agreement, (2) advancement of
Expenses is not timely made pursuant to Paragraph 9 of this Agreement, (3) payment of
indemnification is not made pursuant to Paragraph 10(b) of this Agreement, or (4) no determination
of entitlement to indemnification is made pursuant to Paragraph 10(c) of this Agreement within
ninety (90) days after receipt by the Corporation of the request for indemnification, Indemnitee
shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any
other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification.
Indemnitee shall commence such proceeding seeking an adjudication within one hundred eighty (180)
days following the date on which Indemnitee first has the right to commence such proceeding
pursuant to this Paragraph 11(a). The Corporation shall not oppose Indemnitee’s right to seek any
such adjudication.

               (b) In the event that a determination shall have been made pursuant to Paragraph 10(c) of this
Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced
pursuant to this Paragraph 11 shall be conducted in all respects as a de novo trial on the merits,
and Indemnitee shall not be prejudiced by reason of the adverse determination under Paragraph 10.

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               (c) If a determination shall have been made pursuant to Paragraph 10(c) of this Agreement that
Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in
any judicial proceeding commenced pursuant to this Paragraph 11, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
misstatement not materially misleading in connection with the application for indemnification, or
(ii) a prohibition of such indemnification under applicable law.

               (d) In the event that Indemnitee, pursuant to this Paragraph 11, seeks a judicial adjudication
of his or her rights under, or to recover damages for breach of, this Agreement, or to recover
under any directors’ and officers’ liability insurance policies maintained by the Corporation, the
Corporation shall pay on his or her behalf, in advance, any and all expenses (of the types
described in the definition of Expenses in Paragraph 2(d) of this Agreement) actually and
reasonably incurred by him or her in such judicial adjudication, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advancement of expenses or
insurance recovery.

               (e) The Corporation shall be precluded from asserting in any judicial proceeding commenced
pursuant to this Paragraph 11 that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and shall stipulate in any such court that the Corporation is bound by all
the provisions of this Agreement. The Corporation shall indemnify Indemnitee against any and all
Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the
Corporation of a written request for same) advance, to the extent not prohibited by law, such
expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by
Indemnitee for indemnification or advance of Expenses from the Corporation under this Agreement or
under any directors’ and officers’ liability insurance policies maintained by the Corporation,
regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification,
advancement of Expenses or insurance recovery, as the case may be.

               (f) No determination as to entitlement to indemnification under this Agreement shall be
required to be made prior to the final disposition of the Proceeding.

     12. Contribution.

               (a) Whether or not the indemnification provided in Paragraphs 3 and 4 of this Agreement is
available, in respect of any threatened, pending or completed action, suit or proceeding in which
the Corporation is jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), the Corporation shall pay, in the first instance, the entire amount of any judgment or
settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such
payment and the Corporation waives and relinquishes any right of contribution it may have against
Indemnitee. The Corporation shall not enter into any settlement of any action, suit or proceeding
in which the Corporation is jointly liable with Indemnitee (or would be if joined in such action,
suit or proceeding) unless such settlement provides for a full and final release of all claims
asserted against Indemnitee.

- 11 -

 

               (b) Without diminishing or impairing the obligations of the Corporation set forth in the
preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any
portion of any judgment or settlement in any threatened, pending or completed action, suit or
proceeding in which the Corporation is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Corporation shall contribute to the amount of expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits
received by the Corporation and all officers, directors or employees of the Corporation, other than
Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which
such action, suit or proceeding arose; provided, however, that the proportion determined on the
basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by
reference to the relative fault of the Corporation and all officers, directors or employees of the
Corporation other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection
with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as
any other equitable considerations which the law may require to be considered. The relative fault
of the Corporation and all officers, directors or employees of the Corporation, other than
Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference
to, among other things, the degree to which their actions were motivated by intent to gain personal
profit or advantage, the degree to which their liability is primary or secondary and the degree to
which their conduct is active or passive.

               (c) The Corporation agrees to fully indemnify and hold Indemnitee harmless from any claims of
contribution which may be brought by officers, directors or employees of the Corporation, other
than Indemnitee, who may be jointly liable with Indemnitee.

               (d) To the fullest extent permissible under applicable law, if the indemnification provided
for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Corporation, in
lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for
Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in
such proportion as is deemed fair and reasonable in light of all of the circumstances of such
Proceeding in order to reflect (1) the relative benefits received by the Corporation and Indemnitee
as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (2) the
relative fault of the Corporation (and its directors, officers, employees and agents) and
Indemnitee in connection with such event(s) and/or transaction(s).

     13. Subrogation. In the event of any payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of recovery of the
Indemnitee, who shall execute all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to enable the Corporation to bring
suit to enforce such rights. The Corporation’s obligation to
indemnify or advance Expenses under this Agreement to an Indemnitee who is or was serving at the request of the Corporation as a

- 12 -

 

director, officer, employee or agent of an Enterprise shall be reduced by any amount Indemnitee has
actually received as indemnification or advancement of expenses from such Enterprise.

     14. Term of Agreement. This Agreement shall continue until and terminate upon the
later of (i) six years after the date that the Indemnitee shall have ceased to serve as a director
or officer of the Corporation or, at the request of the Corporation, as a director, officer,
partner, trustee, member, employee or agent of an Enterprise or (ii) the final termination of all
Proceedings pending on the date set forth in clause (i) in respect of which the Indemnitee is
granted rights of indemnification or advancement of Expenses under this Agreement and of any
Proceeding commenced by the Indemnitee pursuant to Paragraph 11 of this Agreement relating to such
Proceedings.

     15. Indemnification Not Exclusive. The indemnification and advancement of Expenses
provided by this Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may be entitled under the Certification of Incorporation, the By-Laws, any other
agreement, any vote of stockholders or Disinterested Directors, the DGCL, any other law (common or
statutory), or otherwise, both as to action in the Indemnitee’s official capacity and as to action
in another capacity while holding office for the Corporation. No amendment, alteration or repeal
of this Agreement or of any provision of this Agreement shall limit or restrict any right of
Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his
or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change
in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be
afforded currently under the Certificate of Incorporation, the Bylaws and this Agreement, it is
the intent of the parties that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change. No right or remedy conferred in this Agreement is intended to be
exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in
addition to every other right and remedy given under this Agreement, or now or after the date of
this Agreement existing at law or in equity or otherwise.

     16. Insurance. Nothing contained in this Agreement shall be deemed to prohibit the
Corporation from purchasing and maintaining insurance, at its expense, to protect itself or the
Indemnitee against any expense, liability or loss incurred by it or the Indemnitee in any such
capacity, or arising out of the Indemnitee’s status as such, whether or not the Indemnitee would be
indemnified against such expense, liability or loss under this Agreement; provided that the
Corporation shall not be liable under this Agreement to make any payment of amounts otherwise
indemnifiable under this Agreement if and to the extent that the Indemnitee has otherwise actually
received such payment under any insurance policy, contract, agreement or otherwise. To the extent
that the Corporation maintains an insurance policy or policies providing liability insurance for
directors, officers, employees, or agents or fiduciaries of the Corporation or of any Enterprise
that such person serves at the request of the Corporation, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms. For the duration of Indemnitee’s service
as a director and/or officer of the Corporation, and thereafter for so long as Indemnitee shall be
subject to any pending or possible claim indemnifiable pursuant to the terms of this Agreement, the
Corporation shall use commercially reasonable efforts (taking into account the scope and amount of
coverage available relative to the cost thereof) to cause to be maintained in effect policies or
directors’ and officers’ liability insurance providing
coverage for directors and/or officers of the Corporation that is at least substantially comparable in scope and
amount to

- 13 -

 

that proved by the Corporation’s current policies of director’s and officers’ liability
insurance. The minimum AM Best rating for the insurance carriers of such insurance carrier hall be
not less than A-VI. In the event of a Change in Control the Corporation shall maintain in force any
and all insurance policies than maintained by the Company in providing insurance; directors’ and
officers’ liability, fiduciary, employment practices or otherwise, in respect of Indemnitee, for a
period of six year thereafter. If, at the time of the receipt of a notice of a claim pursuant to
the terms of this Agreement, the Corporation has director and officer liability insurance in
effect, the Corporation shall give prompt notice of the commencement of such proceeding to the
insurers in accordance with the procedures set forth in the respective policies. The Corporation
shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of
the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of
such policies.

     17. No Special Rights. Nothing herein shall confer upon the Indemnitee any right to
continue to serve as an officer or director of the Corporation for any period of time or at any
particular rate of compensation.

     18. Savings Clause. The invalidity of unenforceability of any provision of this
Agreement shall in no way affect the validity or enforceability of any other provision. Without
limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee
indemnification rights to the fullest extent permitted by applicable laws. In the event any
provision of this Agreement conflicts with any applicable law, such provision shall be deemed
modified, consistent with the aforementioned intent, to the extent necessary to resolve such
conflict. If this Agreement or any portion of this Agreement shall be invalidated on any ground by
any court of competent jurisdiction, then the Corporation shall nevertheless indemnify the
Indemnitee as to Expenses, judgments, fines, penalties and amounts paid in settlement with respect
to any Proceeding to the full extent permitted by any applicable portion of this Agreement that
shall not have been invalidated and to the fullest extent permitted by applicable law.

     19. Counterparts. This Agreement may be executed and delivered by facsimile signature
and in two or more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     20. Successors and Assigns. This Agreement shall be binding upon the Corporation and
its successors and assigns and shall inure to the benefit of the estate, heirs, executors,
administrators and personal representatives of the Indemnitee.

     21. Headings. The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or to affect the
construction of this Agreement.

     22. Modification and Waiver. This Agreement may be amended from time to time to
reflect changes in Delaware law or for other reasons. Except as expressly provided in this
Agreement, no supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties to this Agreement. No waiver of any of the

- 14 -

 

provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provision of this Agreement, nor shall any such waiver constitute a continuing waiver.

     23. Notices. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been given (i) when delivered by hand,
(ii) if mailed by certified or registered mail with postage prepaid, on the third day after the
date on which it is so mailed, or (iii) two (2) business
days after deposit with an internationally
recognized overnight courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent:

	 	 	 	 	 
	 

	 	(a)   if to the Indemnitee, to:	 	 
	 
	 	 	 	 
	 

	 	(b)   if to the Corporation, to:
	 	Chief Executive Officer
	 

	 	 	 	2584 Junction Avenue
	 

	 	 	 	San Jose, California 95134
	 
	 	 	 	 
	 

	 	          Copy to:
	 	General Counsel
	 

	 	 	 	2584 Junction Avenue
	 

	 	 	 	San Jose, California 95134

or to such other address as may have been furnished to the Indemnitee by the Corporation or to the
Corporation by the Indemnitee, as the case may be.

     24. Applicable Law. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware, without regard to its conflict of law rules.
The Indemnitee may elect to have the right to indemnification or reimbursement or advancement of
Expenses interpreted on the basis of the applicable law in effect at the time of the occurrence of
the event or events giving rise to the applicable Proceeding, to the extent permitted by law, or on
the basis of the applicable law in effect at the time such indemnification or reimbursement or
advancement of Expenses is sought. Such election shall be made, by a notice in writing to the
Corporation, at the time indemnification or reimbursement or advancement of Expenses is sought;
provided, however, that if no such notice is given, and if the DGCL is amended, or other Delaware
law is enacted, to permit further indemnification of the directors and officers, then the
Indemnitee shall be indemnified to the fullest extent permitted under the DGCL, as so amended, or
by such other Delaware law, as so enacted.

     25. Enforcement. The Corporation expressly confirms and agrees that it has entered
into this Agreement in order to induce the Indemnitee to continue to serve as an officer or

- 15 -

 

director of the Corporation, and acknowledges that the Indemnitee is relying upon this
Agreement in continuing in such capacity.

     26. Entire Agreement. This Agreement sets forth the entire agreement of the parties
to this Agreement in respect of the subject matter contained in this Agreement and supercedes all
prior agreements, whether oral or written, by any officer, employee or representative of any party
in respect of the subject matter contained in this Agreement. Any prior agreement of the parties
in respect of the subject matter contained in this Agreement is terminated and cancelled. For
avoidance of doubt, the parties confirm that the foregoing does not apply to or limit the
Indemnitee’s rights under Delaware law or the Corporation’s Certificate of Incorporation or
By-Laws.

     27. Consent to Suit. In the case of any dispute under or in connection with this
Agreement, the Indemnitee may only bring suit against the Corporation in the Court of Chancery of
the State of Delaware. The Indemnitee consents to the exclusive jurisdiction and venue of the
courts of the State of Delaware, and the Indemnitee waives any claim the Indemnitee may have at any
time as to forum non conveniens with respect to such venue. The Corporation shall have the right
to institute any legal action arising out of or relating to this Agreement in any court of
competent jurisdiction. Any judgment entered against either of the parties in any proceeding under
this Agreement may be entered and enforced by any court of competent jurisdiction.

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

	 	 	 	 	 	 	 
	INDEMNITEE	 	 	 	BOOKHAM, INC.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 
 	 	 	 	 
	 
	 	 	 	 	 	 
	Print Name:

	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 

- 16 -exv10w1

 

Exhibit 10.1

 

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

dated as of

February 6, 2008

among

QUEST RESOURCE CORPORATION,

PINNACLE GAS RESOURCES, INC.

and

QUEST MERGERSUB, INC.

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE 1 THE MERGER	 	 	2	 
	 

	 	Section 1.1 The Merger
	 	 	2	 
	 

	 	Section 1.2 The Closing
	 	 	2	 
	ARTICLE 2 CERTIFICATE OF INCORPORATION AND BYLAWS	 	 	3	 
	 

	 	Section 2.1 Certificate of Incorporation of the Surviving Corporation
	 	 	3	 
	 

	 	Section 2.2 Bylaws of the Surviving Corporation
	 	 	3	 
	ARTICLE 3 DIRECTORS AND OFFICERS OF QUEST AND OF THE SURVIVING CORPORATION 3	 	 	 	 
	 

	 	Section 3.1 Board of Directors and Officers of Quest
	 	 	3	 
	 

	 	Section 3.2 Board of Directors of the Surviving Corporation
	 	 	3	 
	 

	 	Section 3.3 Officers of the Surviving Corporation
	 	 	3	 
	ARTICLE 4 CONVERSION OF SECURITIES	 	 	4	 
	 

	 	Section 4.1 Conversion of Capital Stock of Pinnacle and MergerSub
	 	 	4	 
	 

	 	Section 4.2 Exchange of Certificates Representing Pinnacle Common Stock
	 	 	5	 
	 

	 	Section 4.3 Adjustment of Exchange Ratio
	 	 	7	 
	 

	 	Section 4.4 Rule 16b-3 Approval
	 	 	7	 
	ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PINNACLE	 	 	8	 
	 

	 	Section 5.1 Existence; Good Standing; Corporate Authority
	 	 	8	 
	 

	 	Section 5.2 Authorization, Validity and Effect of Agreements
	 	 	8	 
	 

	 	Section 5.3 Capitalization
	 	 	8	 
	 

	 	Section 5.4 Subsidiaries
	 	 	9	 
	 

	 	Section 5.5 Compliance with Laws; Permits
	 	 	9	 
	 

	 	Section 5.6 No Conflict
	 	 	10	 
	 

	 	Section 5.7 SEC Documents and Compliance
	 	 	11	 
	 

	 	Section 5.8 Litigation
	 	 	12	 
	 

	 	Section 5.9 Absence of Certain Changes
	 	 	12	 
	 

	 	Section 5.10 Taxes
	 	 	13	 
	 

	 	Section 5.11 Employee Benefit Plans
	 	 	14	 
	 

	 	Section 5.12 Labor Matters
	 	 	16	 
	 

	 	Section 5.13 Environmental Matters
	 	 	17	 
	 

	 	Section 5.14 Intellectual Property
	 	 	17	 
	 

	 	Section 5.15 Decrees, Etc
	 	 	18	 
	 

	 	Section 5.16 Insurance
	 	 	18	 
	 

	 	Section 5.17 No Brokers
	 	 	18	 
	 

	 	Section 5.18 Opinion of Financial Advisor and Board Approval
	 	 	19	 
	 

	 	Section 5.19 Quest Stock Ownership
	 	 	19	 
	 

	 	Section 5.20 Vote Required
	 	 	19	 
	 

	 	Section 5.21 Certain Contracts
	 	 	19	 
	 

	 	Section 5.22 Capital Expenditure Program
	 	 	20	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	Section 5.23 Improper Payments
	 	 	20	 
	 

	 	Section 5.24 Takeover Statutes; Rights Plans
	 	 	20	 
	 

	 	Section 5.25 Title, Ownership and Related Matters
	 	 	20	 
	 

	 	Section 5.26 Proxy Statement
	 	 	21	 
	 

	 	Section 5.27 Properties; Oil and Gas Matters
	 	 	21	 
	 

	 	Section 5.28 Hedging
	 	 	24	 
	 

	 	Section 5.29 Gas Regulatory Matters
	 	 	24	 
	ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF QUEST AND MERGERSUB	 	 	24	 
	 

	 	Section 6.1 Existence; Good Standing; Corporate Authority
	 	 	24	 
	 

	 	Section 6.2 Authorization, Validity and Effect of Agreements
	 	 	25	 
	 

	 	Section 6.3 Capitalization
	 	 	25	 
	 

	 	Section 6.4 Subsidiaries
	 	 	26	 
	 

	 	Section 6.5 Compliance with Laws; Permits
	 	 	26	 
	 

	 	Section 6.6 No Conflict
	 	 	27	 
	 

	 	Section 6.7 SEC Documents
	 	 	28	 
	 

	 	Section 6.8 Litigation
	 	 	30	 
	 

	 	Section 6.9 Absence of Certain Changes
	 	 	30	 
	 

	 	Section 6.10 Taxes
	 	 	30	 
	 

	 	Section 6.11 Employee Benefit Plans
	 	 	32	 
	 

	 	Section 6.12 Labor Matters
	 	 	33	 
	 

	 	Section 6.13 Environmental Matters
	 	 	34	 
	 

	 	Section 6.14 Intellectual Property
	 	 	34	 
	 

	 	Section 6.15 Decrees, Etc
	 	 	35	 
	 

	 	Section 6.16 Insurance
	 	 	35	 
	 

	 	Section 6.17 No Brokers
	 	 	35	 
	 

	 	Section 6.18 Opinion of Financial Advisor and Board Approvals
	 	 	36	 
	 

	 	Section 6.19 Pinnacle Stock Ownership
	 	 	36	 
	 

	 	Section 6.20 Vote Required
	 	 	36	 
	 

	 	Section 6.21 Certain Contracts
	 	 	36	 
	 

	 	Section 6.22 Capital Expenditure Program
	 	 	37	 
	 

	 	Section 6.23 Improper Payments
	 	 	37	 
	 

	 	Section 6.24 Takeover Statutes; Rights Plans
	 	 	37	 
	 

	 	Section 6.25 Title, Ownership and Related Matters
	 	 	37	 
	 

	 	Section 6.26 Proxy Statement
	 	 	38	 
	 

	 	Section 6.27 Properties; Oil and Gas Matters
	 	 	38	 
	 

	 	Section 6.28 Hedging
	 	 	40	 
	 

	 	Section 6.29 Gas Regulatory Matters
	 	 	40	 
	ARTICLE 7 COVENANTS	 	 	40	 
	 

	 	Section 7.1 Conduct of Business
	 	 	40	 
	 

	 	Section 7.2 No Solicitation by Quest
	 	 	44	 
	 

	 	Section 7.3 No Solicitation by Pinnacle
	 	 	46	 
	 

	 	Section 7.4 Meetings of Stockholders
	 	 	49	 
	 

	 	Section 7.5 Filings; Reasonable Best Efforts, Etc
	 	 	49	 
	 

	 	Section 7.6 Inspection
	 	 	51	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	Section 7.7 Publicity
	 	 	52	 
	 

	 	Section 7.8 Registration Statement on Form S-4
	 	 	52	 
	 

	 	Section 7.9 Listing Application
	 	 	53	 
	 

	 	Section 7.10 Letters of Accountants
	 	 	53	 
	 

	 	Section 7.11 Agreements of Rule 145 Affiliates
	 	 	54	 
	 

	 	Section 7.12 Expenses
	 	 	54	 
	 

	 	Section 7.13 Indemnification and Insurance
	 	 	54	 
	 

	 	Section 7.14 Antitakeover Statutes
	 	 	55	 
	 

	 	Section 7.15 Notification
	 	 	55	 
	 

	 	Section 7.16 Employee Matters
	 	 	55	 
	 

	 	Section 7.17 Quest Board of Directors; Executive Officers
	 	 	56	 
	 

	 	Section 7.18 Quest Rights Agreement
	 	 	56	 
	 

	 	Section 7.19 Registration Rights
	 	 	57	 
	 

	 	Section 7.20 Quest Guarantee
	 	 	57	 
	ARTICLE 8 CONDITIONS	 	 	57	 
	 

	 	Section 8.1 Conditions to Each Party’s Obligation to Effect the Merger
	 	 	57	 
	 

	 	Section 8.2 Conditions to Obligation of Pinnacle to Effect the Merger
	 	 	58	 
	 

	 	Section 8.3 Conditions to Obligation of Quest and MergerSub to Effect the Merger
	 	 	58	 
	ARTICLE 9 TERMINATION	 	 	59	 
	 

	 	Section 9.1 Termination by Mutual Consent
	 	 	59	 
	 

	 	Section 9.2 Termination by Pinnacle or Quest
	 	 	59	 
	 

	 	Section 9.3 Termination by Quest
	 	 	60	 
	 

	 	Section 9.4 Termination by Pinnacle
	 	 	60	 
	 

	 	Section 9.5 Effect of Termination
	 	 	61	 
	 

	 	Section 9.6 Extension; Waiver
	 	 	62	 
	ARTICLE 10 GENERAL PROVISIONS	 	 	62	 
	 

	 	Section 10.1 Nonsurvival of Representations, Warranties and Agreements
	 	 	62	 
	 

	 	Section 10.2 Notices
	 	 	62	 
	 

	 	Section 10.3 Assignment; Binding Effect; Benefit
	 	 	64	 
	 

	 	Section 10.4 Entire Agreement
	 	 	64	 
	 

	 	Section 10.5 Amendments
	 	 	64	 
	 

	 	Section 10.6 Governing Law
	 	 	64	 
	 

	 	Section 10.7 Counterparts
	 	 	65	 
	 

	 	Section 10.8 Headings
	 	 	65	 
	 

	 	Section 10.9 Interpretation. In this Agreement:
	 	 	65	 
	 

	 	Section 10.10 Waivers
	 	 	66	 
	 

	 	Section 10.11 Incorporation of Disclosure Letters and Exhibits
	 	 	66	 
	 

	 	Section 10.12 Severability
	 	 	66	 
	 

	 	Section 10.13 Enforcement of Agreement
	 	 	66	 
	 

	 	Section 10.14 Consent to Jurisdiction and Venue
	 	 	66	 

iii

 

	 	 	 
	Exhibit Number	 	Document
	7.11

	 	Affiliate Letter
	7.19

	 	Registration Rights
	8.1(f)

	 	Consents

iv

 

GLOSSARY OF DEFINED TERMS

	 	 	 
	Defined Terms	 	Where Defined
	Agreement

	 	Preamble
	Antitrust Laws

	 	Section 7.5(c)
	Applicable Laws

	 	Section 5.5(a)
	Average Price

	 	Section 4.2(e)
	CGAI

	 	Section 6.27(c)
	Certificate of Merger

	 	Section 1.1(b)
	Certificates

	 	Section 4.2(b)
	Closing

	 	Section 1.2
	Closing Date

	 	Section 1.2
	Code

	 	Recitals
	Confidentiality Agreement

	 	Section 7.6
	Cut-off Time

	 	Section 5.3
	DGCL

	 	Section 1.1(a)
	Effective Time

	 	Section 1.1(b)
	Environmental Laws

	 	Section 5.13(a)
	ERISA

	 	Section 5.11(a)
	ERISA Affiliate

	 	Section 5.11(b)
	Exchange Act

	 	Section 4.4
	Exchange Agent

	 	Section 4.2(a)
	Exchange Fund

	 	Section 4.2(a)
	Exchange Ratio

	 	Section 4.1(a)
	FBR

	 	Section 6.17
	Form S-4

	 	Section 5.26
	GGAI

	 	Section 6.27(c)
	Hazardous Materials

	 	Section 5.13(b)
	HSR Act

	 	Section 5.6(b)
	Hydrocarbons

	 	Section 5.27(b)
	Incentive Stock Options

	 	Section 7.16(b)
	JRD

	 	Section 5.17
	Letter of Transmittal

	 	Section 4.2(b)
	Liens

	 	Section 6.4(a)
	Material Adverse Effect

	 	Section 10.9(c)
	Merger

	 	Section 1.1(a)
	MergerSub

	 	Preamble
	MLP

	 	Section 6.6(a)
	Oil and Gas Properties

	 	Section 5.27(b)
	Original Execution Date

	 	Recitals
	Permitted Liens

	 	Section 5.25(a)
	Pinnacle

	 	Recitals
	Pinnacle Adverse Recommendation Change

	 	Section 7.3(b)

v

 

	 	 	 
	Defined Terms	 	Where Defined
	Pinnacle Benefit Plans

	 	Section 5.11(a)
	Pinnacle Common Stock

	 	Recitals
	Pinnacle Disclosure Letter

	 	Article 5
	Pinnacle Material Contracts

	 	Section 5.21(a)
	Pinnacle Notice of Adverse Recommendation

	 	Section 7.3(b)
	Pinnacle Options

	 	Section 4.1(d)
	Pinnacle Permits

	 	Section 5.5(b)
	Pinnacle Preferred Stock

	 	Section 5.3
	Pinnacle Real Property

	 	Section 5.5(c)
	Pinnacle Reports

	 	Section 5.7
	Pinnacle Reserve Reports

	 	Section 5.27(c)
	Pinnacle Stock Plan

	 	Section 4.1(d)
	Pinnacle Stockholder Approval

	 	Section 5.20
	Pinnacle Superior Proposal

	 	Section 7.3(a)
	Pinnacle Takeover Proposal

	 	Section 7.3(a)
	Proxy Statement/Prospectus

	 	Section 5.26
	Quest

	 	Preamble
	Quest Adverse Recommendation Change

	 	Section 7.2(b)
	Quest Benefit Plans

	 	Section 6.11(a)
	Quest Common Stock

	 	Recitals
	Quest Disclosure Letter

	 	Article 6
	Quest Material Contracts

	 	Section 6.21(a)
	Quest Midstream MLP

	 	Section 10.9(d)
	Quest Notice of Adverse Recommendation

	 	Section 7.2(b)
	Quest Permits

	 	Section 6.5(b)
	Quest Preferred Stock

	 	Section 6.3
	Quest Real Property

	 	Section 6.5(c)
	Quest Reports

	 	Section 6.7(a)
	Quest Reserve Reports

	 	Section 6.27
	Quest Rights Agreement

	 	Section 6.24
	Quest Stockholder Approval

	 	Section 6.20
	Quest Superior Proposal

	 	Section 7.2(a)
	Quest Takeover Proposal

	 	Section 7.2(a)
	Regulatory Filings

	 	Section 5.6(b)
	Representatives

	 	Section 7.2(a)
	Returns

	 	Section 5.10
	Rule 145 Affiliates

	 	Section 7.11
	Sarbanes-Oxley Act

	 	Section 5.7(b)
	SEC

	 	Section 4.1(d)
	Securities Act

	 	Section 4.2(d)
	Subsidiary

	 	Section 10.9(d)
	Surviving Corporation

	 	Section 1.1(a)

vi

 

	 	 	 
	Defined Terms	 	Where Defined
	Takeover Statute

	 	Section 5.24
	Taxes

	 	Section 5.10(d)
	Termination Date

	 	Section 9.2(a)
	Treasury Regulations

	 	Recitals

vii

 

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

     AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the “Agreement”) dated as of February 6,
2008, is by and among Quest Resource Corporation, a Nevada corporation (“Quest”), Pinnacle Gas
Resources, Inc., a Delaware corporation (“Pinnacle”), and Quest MergerSub, Inc., a Delaware
corporation and a wholly owned Subsidiary of Quest (“MergerSub”).

RECITALS

     WHEREAS, on October 15, 2007 (the “Original Execution Date”), Quest, Pinnacle and MergerSub
entered into that certain Agreement and Plan of Merger (the “Original Agreement”), which the Board
of Directors of each of Quest, Pinnacle and MergerSub desire to amend and restate to effect certain
modifications deemed desirable by such Boards of Directors;

     WHEREAS, the Board of Directors of Quest and the Board of Directors of Pinnacle have each
determined that a business combination between Quest and Pinnacle is fair to and in the best
interests of their respective stockholders and presents a unique opportunity for their respective
companies to achieve long-term strategic and financial benefits, and accordingly have agreed to
effect a business combination upon the terms and subject to the conditions set forth in this
Agreement and have approved this Agreement and declared this Agreement and the Merger advisable;

     WHEREAS, in furtherance of the foregoing, the Board of Directors of each of Quest, Pinnacle
and MergerSub has approved this Agreement and the Merger, upon the terms and subject to the
conditions of this Agreement, pursuant to which each share of common stock, par value $0.01 per
share, of Pinnacle (the “Pinnacle Common Stock”) issued and outstanding immediately prior to the
Effective Time will be converted into the right to receive shares of common stock, par value $0.001
per share, of Quest (the “Quest Common Stock”) as set forth herein, other than Pinnacle Common
Stock owned by Quest or MergerSub (or any of their respective direct or indirect wholly owned
Subsidiaries);

     WHEREAS, concurrently with the execution of the Original Agreement, as a condition and
inducement to Quest’s and MergerSub’s willingness to enter into the Original Agreement, Quest and
certain stockholders of Pinnacle entered into a support agreement, dated as of the Original
Execution Date pursuant to which such stockholders have agreed, subject to the terms thereof, to
vote their respective shares of Pinnacle Common Stock in favor of adoption of this Agreement and
otherwise to support the Merger upon the terms and conditions set forth therein; and

     WHEREAS, concurrently with the execution of this Agreement, as a condition and inducement to
Pinnacle’s willingness to enter into this Agreement, Pinnacle and the members of Quest’s Board of
Directors, individually and not in their capacities as directors, entered into a support agreement,
of even date herewith, pursuant to which such individuals have agreed, subject to the terms
thereof, to vote their respective shares of Quest Common Stock in favor of adoption of this
Agreement and otherwise to support the Merger upon the terms and conditions set forth therein; and

1

 

     WHEREAS, for federal income tax purposes, it is intended by the parties hereto that (i) the
merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the “Code”), and the rules and regulations promulgated thereunder (the
“Treasury Regulations”), and (ii) this Agreement constitute a plan of reorganization within the
meaning of Section 368 of the Code and such Treasury Regulations.

     ACCORDINGLY, in consideration of the foregoing, and of the representations, warranties,
covenants and agreements contained in this Agreement, and for other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties to this Agreement agree
to amend and restate the Original Agreement in its entirety as follows:

ARTICLE 1

THE MERGER

     Section 1.1 The Merger.

          (a) Upon the terms and subject to the conditions set forth in this Agreement, at the Effective
Time, MergerSub shall be merged with and into Pinnacle (the “Merger”) in accordance with Delaware
law and this Agreement, and the separate corporate existence of MergerSub shall thereupon cease.
Pinnacle shall be the surviving corporation in the Merger (sometimes referred to herein as the
“Surviving Corporation”). The Merger shall have the effects specified herein and in the General
Corporation Law of the State of Delaware (the “DGCL”). As a result of the Merger, the Surviving
Corporation shall become a wholly owned Subsidiary of Quest.

          (b) As soon as practicable following the satisfaction or waiver (subject to Applicable Laws)
of the conditions set forth in this Agreement, at the Closing, Pinnacle shall cause a properly
executed certificate of merger (the “Certificate of Merger”) meeting the requirements of Section
251 of the DGCL to be filed in accordance with such section. The Merger shall become effective at
the time of filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later time that Pinnacle and Quest shall have
agreed upon and designated in the Certificate of Merger as the effective time of the Merger (the
“Effective Time”).

     Section 1.2 The Closing. Upon the terms and subject to the conditions set forth in this
Agreement, the closing of the Merger (the “Closing”) shall take place at the offices of Stinson
Morrison Hecker LLP, 1201 Walnut Street, Suite 2900, Kansas City, Missouri 64106, at 9:00 a.m.,
local time, on the first business day immediately following the date of fulfillment or waiver (in
accordance with the provisions hereof) of the last to be fulfilled or waived of the conditions set
forth in Section 8.1, or, if on such day any condition set forth in Section 8.2 or
Section 8.3 has not been fulfilled or waived (in accordance with the provisions hereof)
(other than those conditions that by their nature are to be fulfilled at the Closing, but subject
to the fulfillment or waiver of such conditions), as soon as practicable after all the conditions
set forth in Article 8 have been fulfilled or waived in accordance herewith. The date on
which the Closing occurs is hereinafter referred to as the “Closing Date.”

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ARTICLE 2

CERTIFICATE OF INCORPORATION AND BYLAWS

     Section 2.1 Certificate of Incorporation of the Surviving Corporation. As of the Effective
Time, the certificate of incorporation of MergerSub as in effect immediately prior to the Effective
Time shall be the certificate of incorporation of the Surviving Corporation, until thereafter
amended as provided therein or by Applicable Law, provided, however, that the certificate of
incorporation of the Surviving Corporation shall be amended in the Merger to provide that the
Surviving Corporation shall have the name “Quest Western Resource Corporation.”

     Section 2.2 Bylaws of the Surviving Corporation. As of the Effective Time, the bylaws of
MergerSub as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving
Corporation, until thereafter amended as provided therein or by applicable law, provided, however,
that such bylaws shall be amended to reflect the change of the name of the Surviving Corporation as
contemplated by Section 2.1.

ARTICLE 3

DIRECTORS AND OFFICERS OF QUEST AND

OF THE SURVIVING CORPORATION

     Section 3.1 Board of Directors and Officers of Quest. Quest shall take all requisite action
to cause the directors and executive officers of Quest as of the Closing to be as provided in
Section 7.17. Each such director and executive officer shall remain in office until his or
her successor shall be elected and qualified or his or her earlier death, resignation or removal in
accordance with the articles of incorporation and bylaws of Quest in effect at the time.

     Section 3.2 Board of Directors of the Surviving Corporation. The directors of MergerSub
immediately prior to the Effective Time shall be the directors of the Surviving Corporation from
and after the Effective Time, until their successors shall be elected and qualified or their
earlier death, resignation or removal in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation.

     Section 3.3 Officers of the Surviving Corporation. The officers of MergerSub immediately
prior to the Effective Time shall be the officers of the Surviving Corporation from and after the
Effective Time, until their successors shall be elected and qualified or their earlier death,
resignation or removal in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation.

3

 

ARTICLE 4

CONVERSION OF SECURITIES

     Section 4.1 Conversion of Capital Stock of Pinnacle and MergerSub.

          (a) At the Effective Time, the holders of shares of Pinnacle Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of Pinnacle Common Stock to
be canceled without payment of any consideration therefor pursuant to Section 4.1(c))
shall, by virtue of the Merger, have the right to receive 0.5278 (the “Exchange Ratio”) of a
validly issued, fully paid and nonassessable share of Quest Common Stock in exchange for each share
of Pinnacle Common Stock. Each such share of Pinnacle Common Stock shall cease to be outstanding
and shall be canceled and shall cease to exist, and each holder of any such share of Pinnacle
Common Stock shall thereafter cease to have any rights with respect to such share of Pinnacle
Common Stock, except the right to receive, without interest, shares of Quest Common Stock in
accordance with Section 4.2, any unpaid dividends and distributions on shares of Quest
Common Stock in accordance with Section 4.2(c) and cash for fractional shares in accordance
with Section 4.2(e) upon the surrender of the relevant Certificate or cancellation of
uncertificated shares.

          (b) At the Effective Time, each issued and outstanding share of common stock, par value $0.01
per share, of MergerSub shall be converted, by reason of the Merger, into one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

          (c) At the Effective Time, each share of Pinnacle Common Stock issued and held in Pinnacle’s
treasury and each share of Pinnacle Common Stock owned immediately prior to the Effective Time by
MergerSub or Quest (or any of their respective direct or indirect wholly owned Subsidiaries) shall,
by virtue of the Merger, cease to be issued and shall be canceled without payment of any
consideration therefor, and no shares of Quest Common Stock or other consideration shall be
delivered in exchange therefor.

          (d) At the Effective Time, each stock option to purchase one or more shares of Pinnacle Common
Stock (in each case, an “Option”) that is then outstanding, whether or not then exercisable or
vested, shall be converted into an obligation of the Surviving Corporation to pay to the holder
thereof an amount in cash (reduced by any applicable withholding) equal to the product of (i) the
number of shares previously subject to such Option, whether or not then exercisable or vested, and
(ii) the excess, if any, of the Consideration Per Share over the exercise price per share
previously subject to such Option, and the effect of such action shall extinguish all Options for
all purposes. For purposes herein, “Consideration Per Share” means the product obtained by
multiplying (x) the Exchange Ratio by (y) the Average Price. The Surviving Corporation shall make
all such payments as soon as practicable and, in any event, within ten (10) business days after the
Closing Date. Prior to the Effective Time, Pinnacle shall use its reasonable best efforts to take
any and all action necessary to effectuate the matters described in this Section 4.1(d).

4

 

          (e) Immediately prior to the Effective Time, each outstanding award of restricted stock,
granted by Pinnacle to a non-employee director of Pinnacle, that has not vested shall become fully
vested and each such share of restricted Pinnacle Stock shall be treated at the Effective Time the
same as, and have the same rights and be subject to the same conditions, as each share of Pinnacle
Common Stock not subject to any restrictions; provided, that, upon vesting the holder may satisfy
the applicable withholding tax obligations by returning to the Surviving Corporation a sufficient
number of shares of Pinnacle Common Stock equal in value to such obligation. Prior to the
Effective Time, Pinnacle shall use its reasonable best efforts to take any and all action necessary
to effectuate the matters described in this Section 4.1(e).

          (f) At the Effective Time, each other share of restricted stock of Pinnacle that was issued by
Pinnacle prior to the Effective Time shall be converted into and exchanged for the right to receive
restricted shares of Quest Common Stock (i) equal to the number of shares of such restricted
Pinnacle Common Stock immediately prior to the Effective Time multiplied by the Exchange Ratio, and
rounded down to the nearest whole share, and (ii) otherwise subject to the terms of the applicable
plan of Pinnacle and the agreement or other document evidencing the grant of such restricted stock.
Prior to the Effective Time, Pinnacle shall use its reasonable best efforts to take any and all
action necessary to effectuate the matters described in this Section 4.1(f).

     Section 4.2 Exchange of Certificates Representing Pinnacle Common Stock.

          (a) Prior to the Effective Time, Quest shall appoint a bank or trust company reasonably
satisfactory to Pinnacle to act as exchange agent (the “Exchange Agent”). Quest shall, when and as
needed, deposit, or cause to be deposited with the Exchange Agent, for the benefit of the holders
of shares of Pinnacle Common Stock for exchange in accordance with this Article 4,
certificates representing the shares of Quest Common Stock to be issued pursuant to Section
4.1 and delivered pursuant to this Section 4.2 in exchange for outstanding shares of
Pinnacle Common Stock. When and as needed, Quest shall provide the Exchange Agent immediately
following the Effective Time cash sufficient to pay cash in lieu of fractional shares of Quest
Common Stock in accordance with Section 4.2(e) (such cash and certificates for shares of
Quest Common Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the “Exchange Fund”).

          (b) Uncertificated shares of Pinnacle Common Stock subject to conversion in accordance with
this Agreement shall be automatically cancelled by the transfer agent of Pinnacle, and Quest shall
issue to the holders thereof Certificates, or upon the due request of a holder thereof,
uncertificated shares of Quest Common Stock, and Quest shall pay any unpaid dividends and
distributions on shares of Quest Common Stock in accordance with Section 4.2(c) and cash in
lieu of fractional shares in accordance with Section 4.2(e). Promptly after the Effective
Time, Quest shall cause the Exchange Agent to mail to each holder of record of one or more
certificates (“Certificates”) that immediately prior to the Effective Time represented shares of
Pinnacle Common Stock: (A) a letter of transmittal (the “Letter of Transmittal”), which shall
specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Quest may reasonably specify and (B) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares of Quest Common

5

 

Stock, any unpaid dividends and distributions on shares of Quest Common Stock in accordance
with Section 4.2(c) and cash in lieu of fractional shares in accordance with Section
4.2(e). Upon surrender of a Certificate for cancellation to the Exchange Agent together with
such Letter of Transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive in exchange therefor (x) a
certificate representing that number of whole shares of Quest Common Stock and (y) a check
representing the amount of cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive pursuant to the provisions of
this Article 4, after giving effect to any required withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on the cash in lieu
of fractional shares and unpaid dividends and distributions, if any, payable to holders of
Certificates. In the event of a transfer of ownership of Pinnacle Common Stock that is not
registered in the transfer records of Pinnacle, a certificate representing the proper number of
shares of Quest Common Stock, together with a check for the cash to be paid in lieu of fractional
shares, may be issued to such a transferee if the Certificate representing such Pinnacle Common
Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

          (c) Notwithstanding any other provisions of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to shares of Quest Common
Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Quest Common Stock issuable upon surrender of such
Certificate as a result of the conversion provided in this Article 4 until such Certificate
is surrendered as provided herein. Subject to the effect of Applicable Laws, following surrender
of any such Certificate, there shall be paid to the holder of the Certificate so surrendered,
without interest, (i) at the time of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment date prior to
surrender payable with respect to the number of whole shares of Quest Common Stock issued pursuant
to Section 4.1, less the amount of any withholding taxes, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date after the Effective
Time but prior to surrender and a payment date subsequent to surrender payable with respect to such
whole shares of Quest Common Stock, less the amount of any withholding taxes.

          (d) At or after the Effective Time, the Surviving Corporation shall pay from funds on hand at
the Effective Time any dividends or make other distributions with a record date prior to the
Effective Time that may have been declared or made by Pinnacle on shares of Pinnacle Common Stock
which remain unpaid at the Effective Time, and, after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of the shares of Pinnacle Common
Stock which were outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to Quest, the presented Certificates shall be canceled and
exchanged for certificates representing shares of Quest Common Stock and cash in lieu of fractional
shares, if any, deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Article 4. Certificates surrendered for exchange by any
person constituting an “affiliate” of Pinnacle for purposes of Rule 145(c) under the Securities Act
of 1933, as amended (the “Securities Act”), shall not be exchanged until Pinnacle has received a
written agreement from such person as provided in Section 7.11.

6

 

          (e) No fractional shares of Quest Common Stock shall be issued pursuant hereto. In lieu of
the issuance of any fractional shares of Quest Common Stock pursuant to Section 4.1(b),
cash adjustments will be paid to holders in respect of any fractional shares of Quest Common Stock
that would otherwise be issuable, and the amount of such cash adjustment shall be equal to such
fractional proportion of the Average Price of Quest Common Stock. “Average Price” means the
average of the closing prices of a share of Quest Common Stock, as such price is reported on the
NASDAQ Global Market as reported in The Wall Street Journal or such other source as the
parties shall agree in writing, for the 15 trading days ending on the third trading day immediately
preceding the Effective Time.

          (f) Any portion of the Exchange Fund (including the proceeds of any investments thereof and
any certificates for shares of Quest Common Stock) that remains undistributed to the former
stockholders of Pinnacle one year after the Effective Time shall be delivered to Quest. Any former
stockholders of Pinnacle who have not theretofore complied with this Article 4 shall
thereafter look only to Quest for delivery of certificates representing their shares of Quest
Common Stock and cash in lieu of fractional shares and for any unpaid dividends and distributions
on the shares of Quest Common Stock deliverable to such former stockholder pursuant to this
Agreement.

          (g) None of Quest, Pinnacle, Surviving Corporation, the Exchange Agent or any other person
shall be liable to any person for any portion of the Exchange Fund properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.

          (h) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by Quest, the posting by such person of a bond in such reasonable amount as Quest
may direct as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate certificates representing the shares of Quest Common Stock, cash in lieu of fractional
shares and unpaid dividends and distributions on shares of Quest Common Stock, as provided in
Section 4.2(c), deliverable in respect thereof pursuant to this Agreement.

     Section 4.3 Adjustment of Exchange Ratio. If, between the date of this Agreement and the
Effective Time (and as permitted by Section 7.l), the outstanding shares of Pinnacle Common
Stock or Quest Common Stock shall have been increased, decreased, changed into or exchanged for a
different number of shares or different class, in each case, by reason of any reclassification,
recapitalization, stock split, split-up, combination or exchange of shares or a stock dividend or
dividend payable in other securities shall be declared with a record date within such period, or
any similar event shall have occurred, the Exchange Ratio shall be appropriately adjusted to
provide to Quest and the holders of Pinnacle Common Stock the same economic effect as contemplated
by this Agreement prior to such event.

     Section 4.4 Rule 16b-3 Approval. Prior to the Closing, Quest and Pinnacle, and their
respective Boards of Directors or committees thereof, shall use their reasonable best efforts to
take all actions to cause any dispositions of Pinnacle Common Stock (including derivative
securities with respect to Pinnacle Common Stock) or acquisitions of Quest Common Stock (including
derivative securities with respect to Quest Common Stock) resulting from the

7

 

transactions contemplated hereby by each individual who is subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), to be exempt from Section 16(b) of the Exchange Act under Rule 16b-3 promulgated under the
Exchange Act in accordance with the terms and conditions set forth in no-action letters issued by
the SEC in similar transactions.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF PINNACLE

     Except as set forth in the disclosure letter delivered to Quest by Pinnacle at or prior to the
execution of this Agreement (the “Pinnacle Disclosure Letter”) and making reference to the
particular subsection of this Agreement to which exception is being taken (provided that any
information set forth in one section or subsection of the Pinnacle Disclosure Letter shall be
deemed to apply to each other section or subsection thereof to which its relevance is reasonably
apparent), Pinnacle represents and warrants to Quest and MergerSub that:

     Section 5.1 Existence; Good Standing; Corporate Authority. Pinnacle is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Delaware.
Pinnacle is duly qualified to do business and, to the extent such concept or a similar concept
exists in the relevant jurisdiction, is in good standing under the laws of any jurisdiction in
which the character of the properties owned or leased by it therein or in which the transaction of
its business requires such qualification, except where the failure to be so qualified or in good
standing, individually or in the aggregate, has not had and is not reasonably likely to have a
Pinnacle Material Adverse Effect. Pinnacle has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted. The copies of
Pinnacle’s certificate of incorporation and bylaws on file with the SEC are true and correct and
contain all amendments as of the date of this Agreement.

     Section 5.2 Authorization, Validity and Effect of Agreements. Pinnacle has the requisite
corporate power and authority to execute and deliver this Agreement and, upon receipt of the
Pinnacle Stockholder Approval, to consummate the transactions contemplated by this Agreement. The
execution of this Agreement and the consummation by Pinnacle of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on behalf of Pinnacle, other
than the receipt of the Pinnacle Stockholder Approval. Pinnacle has duly executed and delivered
this Agreement. Assuming this Agreement constitutes the valid and legally binding obligation of
the other parties hereto, this Agreement constitutes the valid and legally binding obligation of
Pinnacle, enforceable against Pinnacle in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’
rights and general principles of equity. Assuming the accuracy of the representations and
warranties set forth in Section 6.19, Pinnacle has taken all action necessary to render the
restrictions set forth in Section 203 of the DGCL, and any other applicable takeover law
restricting or purporting to restrict business combinations, inapplicable to this Agreement and the
transactions contemplated hereby.

     Section 5.3 Capitalization. The authorized capital stock of Pinnacle consists of 100,000,000
shares of Pinnacle Common Stock and 25,000,000 shares of preferred stock, par

8

 

value $0.01 per share (“Pinnacle Preferred Stock”). As of February 4, 2008 (the “Cut-off
Time”), there were (i) 29,019,751 outstanding shares of Pinnacle Common Stock (which includes
outstanding restricted stock), (ii) 881,000 shares of Pinnacle Common Stock reserved for issuance
upon exercise of outstanding Pinnacle Options, and (iii) no outstanding shares of Pinnacle
Preferred Stock. From the Cut-off Time to the date of this Agreement, no additional shares of
Pinnacle Common Stock or Pinnacle Preferred Stock have been issued (other than pursuant to Pinnacle
Options which were outstanding as of the Cut-off Time and are included in the number of shares of
Pinnacle Common Stock reserved for issuance upon exercise of outstanding Pinnacle Options in clause
(ii) above), no additional Pinnacle Options have been issued or granted, and there has been no
increase in the number of shares of Pinnacle Common Stock issuable upon exercise of the Pinnacle
Options from the number issuable under such Pinnacle Options as of the Cut-off Time. All such
issued and outstanding shares of Pinnacle Common Stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. As of the date of this Agreement, except as set
forth in this Section 5.3, there are no outstanding shares of capital stock and there are
no options, warrants, calls, subscriptions, convertible securities or other rights, agreements or
commitments which obligate Pinnacle or any of its Subsidiaries to issue, transfer, sell or register
any shares of capital stock or other voting securities of Pinnacle or any of its Subsidiaries.
Pinnacle has no outstanding bonds, debentures, notes or other obligations the holders of which have
the right to vote (or which are convertible into or exercisable for securities having the right to
vote) with the stockholders of Pinnacle on any matter.

     Section 5.4 Subsidiaries. As of the date of this Agreement, Pinnacle does not have any
Subsidiaries.

     Section 5.5 Compliance with Laws; Permits. Except for such matters as, individually or in the
aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect
and except for matters related to taxes and Environmental Laws, which are treated exclusively in
Sections 5.10 and 5.13, respectively:

          (a) Neither Pinnacle nor any Subsidiary of Pinnacle is in violation of any applicable law,
rule, regulation, code, governmental determination, order, treaty, convention, governmental
certification requirement or other public limitation, U.S. or non-U.S. (collectively, “Applicable
Laws”), and no claim is pending or, to the knowledge of Pinnacle, threatened with respect to any
such matters. No condition exists which does or could reasonably be expected to constitute a
violation of or deficiency under any Applicable Law by Pinnacle or any Subsidiary of Pinnacle.

          (b) Pinnacle and each Subsidiary of Pinnacle hold all permits, licenses, certifications,
variations, exemptions, orders, franchises and approvals of all governmental or regulatory
authorities necessary for the lawful conduct of their respective businesses (the “Pinnacle
Permits”). All Pinnacle Permits are in full force and effect and there exists no default
thereunder or breach thereof, and Pinnacle has no notice or actual knowledge that such Pinnacle
Permits will not be renewed in the ordinary course after the Effective Time. No governmental
authority has given, or to the knowledge of Pinnacle threatened to give, any action to terminate,
cancel or reform any Pinnacle Permit.

9

 

          (c) Pinnacle and each Subsidiary of Pinnacle possess all permits, licenses, operating
authorities, orders, exemptions, franchises, variances, consents, approvals or other authorizations
required for the present ownership and operation of all its real property or leaseholds (“Pinnacle
Real Property”). There exists no material default or breach with respect to, and no party or
governmental authority has taken or, to the knowledge of Pinnacle, threatened to take, any action
to terminate, cancel or reform any such permit, license, operating authority, order, exemption,
franchise, variance, consent, approval or other authorization pertaining to the Pinnacle Real
Property.

     Section 5.6 No Conflict.

          (a) Except as disclosed in Section 5.6(a) of the Pinnacle Disclosure Letter, neither
the execution and delivery by Pinnacle of this Agreement nor the consummation by Pinnacle of the
transactions contemplated by this Agreement in accordance with the terms hereof will (i) subject to
receipt of the Pinnacle Stockholder Approval, conflict with or result in a breach of any provisions
of the certificate of incorporation or bylaws of Pinnacle; (ii) violate, or conflict with, or
result in a breach of any provision 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 in a
right of termination or cancellation of, or give rise to a right of purchase under, or accelerate
the performance required by, or result in the creation of any Lien upon any of the properties of
Pinnacle or its Subsidiaries under, or result in being declared void, voidable, or without further
binding effect, or otherwise result in a detriment to Pinnacle or any of its Subsidiaries under,
any of the terms, conditions or provisions of, any note, bond, mortgage, indenture, deed of trust,
license, concession, franchise, permit, lease, contract, agreement, joint venture or other
instrument or obligation to which Pinnacle or any of its Subsidiaries is a party, or by which
Pinnacle or any of its Subsidiaries or any of their properties may be bound or affected; or (iii)
subject to the filings and other matters referred to in Section 5.6(b), contravene or
conflict with or constitute a violation of any provision of any law, rule, regulation, judgment,
order or decree binding upon or applicable to Pinnacle or any of its Subsidiaries, except as, in
the case of matters described in clause (ii) or (iii), individually or in the aggregate, that have
not had and are not reasonably likely to have a Pinnacle Material Adverse Effect.

          (b) Neither the execution and delivery by Pinnacle of this Agreement nor the consummation by
Pinnacle of the transactions contemplated hereby in accordance with the terms hereof will require
any consent, approval, qualification or authorization of, or filing or registration with, any court
or governmental or regulatory authority, other than filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the “HSR Act”), the Exchange Act, the Securities
Act or applicable state securities and “Blue Sky” laws (collectively, the “Regulatory Filings”),
and (ii) the filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, except for any consent, approval, qualification or authorization the failure to obtain
which, and for any filing or registration the failure to make which, has not had and is not
reasonably likely to have a Pinnacle Material Adverse Effect.

          (c) Except as set forth in Section 5.6(c) of the Pinnacle Disclosure Schedule, this
Agreement, the Merger and the transactions contemplated hereby do not, and will not, upon
consummation of such transactions in accordance with their terms, result in any “change of control”
or similar event or circumstance under (i) the terms of any Pinnacle Material Contract or

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(ii) any contract or plan under which any employees, officers or directors of Pinnacle or any
of its Subsidiaries are entitled to payments or benefits, which, in the case of either clause (i)
or (ii), gives rise to rights or benefits not otherwise available absent such change of control or
similar event and requires either a cash payment or an accounting charge in accordance with U.S.
generally accepted accounting principles, or (iii) any material Pinnacle Permit.

     Section 5.7 SEC Documents and Compliance.

          (a) Pinnacle and its Subsidiaries have filed with the SEC all documents (including exhibits
and any amendments thereto) required to be so filed by them since May 10, 2007 (each registration
statement, report, proxy statement or information statement (other than preliminary materials) they
have so filed, each in the form (including exhibits and any amendments thereto) filed with the SEC,
collectively, the “Pinnacle Reports”). Except as described in Section 5.7 of the Pinnacle
Disclosure Letter, as of its respective date, each Pinnacle Report (i) complied in all material
respects with the applicable requirements of the Exchange Act or the Securities Act, as the case
may be, and the rules and regulations thereunder and (ii) did not contain any untrue statement of a
material fact or 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, except for any statements in any Pinnacle Report that have been modified by an
amendment to such report filed with the SEC prior to the date hereof. Each of the consolidated
balance sheets included in or incorporated by reference into the Pinnacle Reports (including
related notes and schedules) complied as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC with respect thereto and
fairly presents in all material respects the consolidated financial position of Pinnacle and its
Subsidiaries (or such entities as indicated in such balance sheet) as of its date, and each of the
consolidated statements of operations, cash flows and changes in stockholders’ equity included in
or incorporated by reference into the Pinnacle Reports (including any related notes and schedules)
fairly presents in all material respects the results of operations, cash flows or changes in
stockholders’ equity, as the case may be, of Pinnacle and its Subsidiaries (or such entities as
indicated in such balance sheet) for the periods set forth therein (subject, in the case of
unaudited statements, to (x) such exceptions as may be permitted by Form 10-Q of the SEC and (y)
normal, recurring year-end audit adjustments which are not material in the aggregate), in each case
in accordance with generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Except as and to the extent set forth on the consolidated
balance sheet of Pinnacle and its Subsidiaries included in the most recent Pinnacle Report filed
prior to the date of this Agreement that includes such a balance sheet, including all notes
thereto, as of the date of such balance sheet, neither Pinnacle nor any of its Subsidiaries had any
liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that
would be required to be reflected on, or reserved against in, a consolidated balance sheet of
Pinnacle or in the notes thereto prepared in accordance with generally accepted accounting
principles consistently applied, other than liabilities or obligations which, individually or in
the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse
Effect.

          (b) Since May 10, 2007, the chief executive officer and chief financial officer of Pinnacle
have made all certifications (without qualification or exceptions to the matters certified)
required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the

11

 

statements contained in any such certifications are complete and correct; neither Pinnacle nor
its officers have received notice from any governmental authority questioning or challenging the
accuracy, completeness, form or manner of filing or submission of such certification. Pinnacle has
established and maintains disclosure controls and procedures and internal control over financial
reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under
the Exchange Act) as required by Rule 13a-15 under the Exchange Act. Pinnacle’s disclosure
controls and procedures are reasonably designed to ensure that all material information required to
be disclosed by Pinnacle in the reports that it files under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the
SEC, and that all such material information is accumulated and communicated to the management of
Pinnacle as appropriate to allow timely decisions regarding required disclosure and to make the
certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. To the
knowledge of Pinnacle, it has disclosed, based on its most recent evaluations, to Pinnacle’s
outside auditors and the audit committee of the board of directors of Pinnacle (A) all significant
deficiencies in the design or operation of internal controls over financial reporting and any
material weaknesses, which have more than a remote chance to materially adversely affect Pinnacle’s
ability to record, process, summarize and report financial data (as defined in Rule 13a-15(f) of
the Exchange Act) and (B) any fraud, whether or not material, that involves management or other
employees who have a significant role in Pinnacle’s internal controls over financial reporting.

          (c) Since January 1, 2007, to the knowledge of Pinnacle, neither Pinnacle nor any of its
Subsidiaries nor any director, officer, employee, auditor, accountant or representative of Pinnacle
or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of Pinnacle or any of its Subsidiaries,
including any material complaint, allegation, assertion or claim that Pinnacle or any of its
Subsidiaries has a “significant deficiency” or “material weakness” (as such terms are defined in
the Public Accounting Oversight Board’s Auditing Standard No. 2, as in effect on the date hereof),
in Pinnacle’s controls over financial reporting.

          (d) None of Pinnacle or any of its Subsidiaries has, since May 10, 2007, extended or
maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the
form of a personal loan to or for any director or executive officer (or equivalent thereof) of
Pinnacle. No loan or extension of credit is maintained by Pinnacle or its Subsidiaries to which
the second sentence of Section 13(k)(1) of the Exchange Act applies.

     Section 5.8 Litigation. Except as described in the Pinnacle Reports filed prior to the date
of this Agreement, there are no actions, suits or proceedings pending against Pinnacle or any of
its Subsidiaries or, to Pinnacle’s knowledge, threatened against Pinnacle or any of its
Subsidiaries, at law or in equity or in any arbitration or similar proceedings, before or by any
U.S. federal or state court, commission, board, bureau, agency or instrumentality or any arbitral
or other dispute resolution body, that, individually or in the aggregate, have had or are
reasonably likely to have a Pinnacle Material Adverse Effect.

     Section 5.9 Absence of Certain Changes. Except as described in Section 5.9 of the
Pinnacle Disclosure Letter, from January 1, 2007 to the date of this Agreement, there has not

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been (i) a Pinnacle Material Adverse Effect or (ii) except as described in the Pinnacle
Reports filed with the SEC prior to the date of this Agreement, (A) any material change by Pinnacle
or any of its Subsidiaries in any of their respective accounting methods, principles or practices
or any of their respective tax methods, practices or elections applicable to Pinnacle’s
consolidated financial statements, except as may have been required by a change in law or generally
accepted accounting principles; (B) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Pinnacle or any redemption, purchase or other
acquisition of any of its equity securities, other than the acquisition by Pinnacle of shares of
Pinnacle Common Stock and Pinnacle Options in connection with the forfeiture of such awards for no
consideration; (C) any split, combination or reclassification of any capital stock of Pinnacle or
any of its Subsidiaries or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of that capital stock; (D) any
damage to or any destruction or loss of physical properties owned or used by Pinnacle or any of its
Subsidiaries, whether or not covered by insurance, that individually or in the aggregate
constitutes a Pinnacle Material Adverse Effect; or (E) any reevaluations by Pinnacle or any of its
Subsidiaries of any of their assets which, in accordance with generally accepted accounting
principles, Pinnacle will reflect in its consolidated financial statements, including any
impairment of assets, and which in the aggregate are material to them, other than changes to
financial statements resulting from the impairment of oil and gas assets due to changes in
commodity prices.

     Section 5.10 Taxes.

          (a) All tax returns, statements, reports, declarations, estimates and forms (“Returns”)
required to be filed by or with respect to Pinnacle or any of its Subsidiaries (including any
Return required to be filed by an affiliated, consolidated, combined, unitary or similar group that
included Pinnacle or any of its Subsidiaries) have been properly filed on a timely basis with the
appropriate governmental authorities, except to the extent that any failure to file, individually
or in the aggregate, has not had and is not reasonably likely to have a Pinnacle Material Adverse
Effect, and all taxes that have become due (regardless of whether reflected on any Return) have
been duly paid or deposited in full on a timely basis or adequately reserved for in accordance with
generally accepted accounting principles, except to the extent that any failure to pay or deposit
or make adequate provision for the payment of such taxes, individually or in the aggregate, has not
had and is not reasonably likely to have a Pinnacle Material Adverse Effect.

          (b) Except to the extent such matters, individually or in the aggregate, have not had and are
not reasonably likely to have a Pinnacle Material Adverse Effect, (i) no audit or other
administrative proceeding or court proceeding is presently pending with regard to any tax or Return
of Pinnacle or any of its Subsidiaries as to which any taxing authority has asserted in writing any
claim; (ii) no governmental authority is now asserting in writing any deficiency or claim for taxes
or any adjustment to taxes with respect to which Pinnacle or any of its Subsidiaries may be liable;
and (iii) neither Pinnacle nor any of its Subsidiaries has any liability for any tax under Treasury
Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the
affiliated group of which Pinnacle or any of its Subsidiaries is the common parent, within the
meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law. As of the
date of this Agreement, neither Pinnacle nor any of its Subsidiaries has granted any material
request, agreement, consent or waiver to extend any period

13

 

of limitations applicable to the assessment of any tax upon Pinnacle or any of its
Subsidiaries. Neither Pinnacle nor any of its Subsidiaries is a party to any closing agreement
described in Section 7121 of the Code or any predecessor provision thereof or any similar agreement
under any tax law. Neither Pinnacle nor any of its Subsidiaries is a party to, is bound by or has
any obligation under any tax sharing, allocation or indemnity agreement or any similar agreement or
arrangement other than with respect to any such agreement or arrangement among Pinnacle and any of
its Subsidiaries. Since December 31, 2005, Pinnacle has not made or rescinded any material
election relating to taxes or settled or compromised any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to any material taxes, or,
except as may be required by Applicable Law, made any material change to any of its methods of
reporting income or deductions for federal income tax purposes from those employed in the
preparation of its most recently filed federal Returns. Pinnacle has not engaged in any “listed
transaction” within the meaning of Treasury Regulation Section 1.6011-4. Neither Pinnacle nor any
of its Subsidiaries has been a “controlled corporation” or a “distributing corporation” in any
distribution that was purported or intended to be governed by Section 355 of the Code (or any
similar provision of state, local or foreign law) (i) occurring during the two-year period ending
on the date hereof or (ii) that otherwise constitutes part of a “plan” or “series of related
transactions” (within the meaning of Section 355(e) of the Code) that includes the Merger.

          (c) Neither Pinnacle nor any of its Subsidiaries knows of any fact or has taken or failed to
take any action that could reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code.

          (d) For purposes of this Agreement, “tax” or “taxes” means all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, accumulated earnings, personal holding company, excess
profits, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, disability, capital stock or windfall profits taxes, customs duties
or other taxes, fees, assessments or governmental charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by any taxing authority.

     Section 5.11 Employee Benefit Plans.

          (a) Section 5.11 of the Pinnacle Disclosure Letter contains a list of all Pinnacle
Benefit Plans. The term “Pinnacle Benefit Plans” means all employee benefit plans and other
benefit arrangements, including all “employee benefit plans” as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 (“ERISA”), whether or not U.S.-based plans, and all
other material employee benefit, bonus, incentive, deferred compensation, stock option (or other
equity-based), severance, employment, change in control, welfare (including post-retirement medical
and life insurance) and fringe benefit plans, practices or agreements, whether or not subject to
ERISA or U.S.-based and whether written or oral, sponsored, maintained or contributed to or
required to be contributed to by Pinnacle or any of its Subsidiaries or ERISA Affiliates or to
which Pinnacle or any of its Subsidiaries or ERISA Affiliates is a party or is required to provide
benefits under Applicable Laws. Pinnacle has made available to Quest true and complete copies of
the Pinnacle Benefit Plans and, if applicable, the most recent trust agreements, Forms 5500,
summary plan descriptions, funding statements,

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annual reports, actuarial reports and Internal Revenue Service determination or opinion
letters for each such plan.

          (b) Except to the extent such matters, individually or in the aggregate, have not had and are
not reasonably likely to have a Pinnacle Material Adverse Effect: all applicable reporting and
disclosure requirements have been met with respect to the Pinnacle Benefit Plans; to the extent
applicable, the Pinnacle Benefit Plans comply with the requirements of ERISA and the Code or with
the regulations of any applicable jurisdiction, and any Pinnacle Benefit Plan intended to be
qualified under Section 401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service (or is entitled to rely upon a favorable opinion letter issued by the
Internal Revenue Service); the Pinnacle Benefit Plans have been maintained and operated in
accordance with their terms, and, to Pinnacle’s knowledge, there are no breaches of fiduciary duty
in connection with the Pinnacle Benefit Plans; there are no pending or, to Pinnacle’s knowledge,
threatened claims against or otherwise involving any Pinnacle Benefit Plan, and no suit, action or
other litigation (excluding routine claims for benefits incurred in the ordinary course of Pinnacle
Benefit Plan activities) has been brought against or with respect to any Pinnacle Benefit Plan; all
material contributions required to be made as of the date of this Agreement to the Pinnacle Benefit
Plans have been made or provided for; with respect to any “employee pension benefit plans,” as
defined in Section 3(2) of ERISA, that are subject to Title IV of ERISA and have been maintained or
contributed to within six years prior to the Effective Time by Pinnacle, its Subsidiaries or any
trade or business (whether or not incorporated) which is under common control, or which is treated
as a single employer, with Pinnacle or any of its Subsidiaries under Section 414(b), (c), (m) or
(o) of the Code (an “ERISA Affiliate”), (i) neither Pinnacle nor any of its Subsidiaries or ERISA
Affiliates has incurred any direct or indirect liability under Title IV of ERISA in connection with
any termination thereof or withdrawal therefrom, and (ii) there does not exist any accumulated
funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA, whether
or not waived.

          (c) No Pinnacle Benefit Plan (including for such purpose, any employee benefit plan described
in Section 3(3) of ERISA which Pinnacle or any of its Subsidiaries or ERISA Affiliates maintained,
sponsored or contributed to within the six-year period preceding the Effective Time) is (i) a
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA), (ii) a “multiple employer plan”
(within the meaning of Section 413(c) of the Code) or (iii) subject to Title IV or Section 302 of
ERISA or Section 412 of the Code. Except as set forth in Section 5.11(c) of the Pinnacle
Disclosure Letter, (A) neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby shall cause any payments or benefits to any employee, officer or
director of Pinnacle or any of its Subsidiaries to be either subject to an excise tax or
non-deductible to Pinnacle under Sections 4999 and 280G of the Code, respectively, whether or not
some other subsequent action or event would be required to cause such payment or benefit to be
triggered, and (B) the execution of, and performance of the transactions contemplated by, this
Agreement will not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, policy, arrangement or agreement or any trust or loan
(in connection therewith) that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits
or obligations to fund benefits with respect to any employee of Pinnacle or any Subsidiary thereof.

15

 

          (d) No Pinnacle Benefit Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of Pinnacle or any Subsidiary
of Pinnacle for periods extending beyond their retirement or other termination of service other
than (i) coverage mandated by Applicable Laws, (ii) death benefits under any “pension plan” or
(iii) benefits the full cost of which is borne by the current or former employee (or his
beneficiary).

          (e) From January 1, 2007 to the date of this Agreement, except in the ordinary course of
business consistent with past practice or as described in the Pinnacle Reports filed prior to the
date of this Agreement, there has not been (i) any granting, or any commitment or promise to grant,
by Pinnacle or any of its Subsidiaries to any officer of Pinnacle or any of its Subsidiaries of (A)
any increase in compensation or (B) any increase in severance or termination pay (other than
increases in severance or termination pay as a result of an increase in compensation in accordance
with Section 5.11(e)(i)(A)), (ii) any entry by Pinnacle or any of its Subsidiaries into any
employment, severance or termination agreement with any person who is an employee of Pinnacle or
any of its Subsidiaries, (iii) any increase in, or any commitment or promise to increase, benefits
payable or available under any pre-existing Pinnacle Benefit Plan, except in accordance with the
pre-existing terms of that Pinnacle Benefit Plan, (iv) any establishment of, or any commitment or
promise to establish, any new Pinnacle Benefit Plan, (v) any amendment of any existing stock
options, stock appreciation rights, performance awards or restricted stock awards or (vi) except in
accordance with and under pre-existing compensation policies, any grant, or any commitment or
promise to grant, any stock options, stock appreciation rights, performance awards, or restricted
stock awards.

     Section 5.12 Labor Matters.

          (a) Neither Pinnacle nor any of its Subsidiaries is a party to, or bound by, any collective
bargaining agreement or similar contract, agreement or understanding with a labor union or similar
labor organization. As of the date of this Agreement, to Pinnacle’s knowledge, there are no
organizational efforts with respect to the formation of a collective bargaining unit presently
being made or threatened.

          (b) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Pinnacle Material Adverse Effect, (i) neither Pinnacle nor any
Subsidiary of Pinnacle has received any written complaint of any unfair labor practice or other
unlawful employment practice or any written notice of any material violation of any federal, state
or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the
employment of individuals by, or the employment practices of, Pinnacle or any Subsidiary of
Pinnacle or the work conditions or the terms and conditions of employment and wages and hours of
their respective businesses and (ii) there are no unfair labor practice charges or other
employee-related complaints against Pinnacle or any Subsidiary of Pinnacle pending or, to the
knowledge of Pinnacle, threatened, before any governmental authority by or concerning the employees
working in their respective businesses.

16

 

     Section 5.13 Environmental Matters.

          (a) Except as described in the Pinnacle Reports filed with the SEC prior to the date of this
Agreement, Pinnacle and each Subsidiary of Pinnacle has been and is in compliance with all
applicable orders of any court, governmental authority or arbitration board or tribunal and any
applicable law, ordinance, rule, regulation or other legal requirement (including common law)
related to human health and the environment (“Environmental Laws”) except for such matters as,
individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle
Material Adverse Effect. There are no past or present facts, conditions or circumstances that
interfere with the conduct of any of their respective businesses in the manner now conducted or
which interfere with continued compliance with any Environmental Law, except for any non-compliance
or interference that, individually or in the aggregate, has not had and is not reasonably likely to
have a Pinnacle Material Adverse Effect.

          (b) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Pinnacle Material Adverse Effect, no judicial or administrative
proceedings or governmental investigations are pending or, to the knowledge of Pinnacle, threatened
against Pinnacle or its Subsidiaries that allege the violation of or seek to impose liability
pursuant to any Environmental Law, and there are no past or present facts, conditions or
circumstances at, on or arising out of, or otherwise associated with, any current (or, to the
knowledge of Pinnacle or its Subsidiaries, former) businesses, assets or properties of Pinnacle or
any Subsidiary of Pinnacle, including but not limited to on-site or off-site disposal, release or
spill of any material, substance or waste classified, characterized or otherwise regulated as
hazardous, toxic, pollutant, contaminant or words of similar meaning under Environmental Laws,
including petroleum or petroleum products or byproducts (“Hazardous Materials”) which violate
Environmental Law or are reasonably likely to give rise to (i) costs, expenses, liabilities or
obligations for any cleanup, remediation, disposal or corrective action under any Environmental
Law, (ii) claims arising for personal injury, property damage or damage to natural resources, or
(iii) fines, penalties or injunctive relief.

          (c) Neither Pinnacle nor any of its Subsidiaries has (i) received any notice of noncompliance
with, violation of, or liability or potential liability under any Environmental Law or (ii) entered
into any consent decree or order or is subject to any order of any court or governmental authority
or tribunal under any Environmental Law or relating to the cleanup of any Hazardous Materials,
except for any such matters as have not had and are not reasonably likely to have a Pinnacle
Material Adverse Effect.

     Section 5.14 Intellectual Property. Pinnacle and its Subsidiaries own or possess adequate
licenses or other valid rights to use all patents, patent rights, know-how, trade secrets,
trademarks, trademark rights and other proprietary information and other proprietary intellectual
property rights used or held for use in connection with their respective businesses as currently
being conducted, except where the failure to own or possess such licenses and other rights,
individually or in the aggregate, has not had and is not reasonably likely to have a Pinnacle
Material Adverse Effect, and there are no assertions or claims challenging the validity of any of
the foregoing that, individually or in the aggregate, have not had and are not reasonably likely to
have a Pinnacle Material Adverse Effect. The conduct of Pinnacle’s and its Subsidiaries’
respective businesses as currently conducted does not conflict with any patents, patent rights,

17

 

licenses, trademarks, trademark rights, trade names, trade name rights or copyrights of
others, except for such conflicts that, individually or in the aggregate, have not had and are not
reasonably likely to have a Pinnacle Material Adverse Effect. There is no material infringement of
any proprietary right owned by or licensed by or to Pinnacle or any of its Subsidiaries, except for
such infringements that, individually or in the aggregate, have not had and are not reasonably
likely to have a Pinnacle Material Adverse Effect.

     Section 5.15 Decrees, Etc. Except for such matters as, individually or in the aggregate, have
not had and are not reasonably likely to have a Pinnacle Material Adverse Effect, (a) no order,
writ, fine, injunction, decree, judgment, award or determination of any court or governmental
authority or any arbitral or other dispute resolution body has been issued or entered against
Pinnacle or any Subsidiary of Pinnacle that continues to be in effect that materially affects the
ownership or operation of any of their respective assets, and (b) no criminal order, writ, fine,
injunction, decree, judgment or determination of any court or governmental authority has been
issued against Pinnacle or any Subsidiary of Pinnacle.

     Section 5.16 Insurance.

          (a) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Pinnacle Material Adverse Effect, Pinnacle and its Subsidiaries
maintain insurance coverage with financially responsible insurance companies in such amounts and
against such losses as are customary in the industries in which Pinnacle and its Subsidiaries
operate on the date of this Agreement.

          (b) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Pinnacle Material Adverse Effect, no event relating specifically to
Pinnacle or its Subsidiaries has occurred that could reasonably be expected, after the date of this
Agreement, to result in material upward adjustment in premiums under any insurance policies they
maintain. Excluding insurance policies that have expired and been replaced in the ordinary course
of business, no excess liability or protection and indemnity insurance policy has been canceled by
the insurer within one year prior to the date of this Agreement, and no threat in writing has been
made to cancel (excluding cancellation upon expiration or failure to renew) any such insurance
policy of Pinnacle or any Subsidiary of Pinnacle during the period of one year prior to the date of
this Agreement. Prior to the date of this Agreement, no event has occurred, including the failure
by Pinnacle or any Subsidiary of Pinnacle to give any notice or information or by giving any
inaccurate or erroneous notice or information, which materially limits or impairs the rights of
Pinnacle or any Subsidiary of Pinnacle under any such excess liability or protection and indemnity
insurance policies.

     Section 5.17 No Brokers. Pinnacle has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of Quest or Pinnacle to
pay any finder’s fees, brokerage or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby, except that Pinnacle
has retained Jefferies Randall & Dewey, a division of Jefferies & Company, Inc. (“JRD”), as its
financial advisor, the fees of which shall not exceed those set forth in Section 5.17 of
the Pinnacle Disclosure Letter.

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     Section 5.18 Opinion of Financial Advisor and Board Approval. The Board of Directors of
Pinnacle has received the opinion of JRD to the effect that, subject to the assumptions,
qualifications and limitations relating to such opinion, the Exchange Ratio is fair, from a
financial point of view, as of the date of this Agreement, to the holders of Pinnacle Common Stock
other than Quest or any of its affiliates, it being agreed that none of Quest or MergerSub has any
rights with respect to such opinion. Pinnacle’s Board of Directors, at a meeting duly called and
held, (i) determined that this Agreement and the transactions contemplated hereby are advisable and
in the best interests of the stockholders of Pinnacle, (ii) approved this Agreement and the
transactions contemplated hereby and (iii) recommended adoption of this Agreement by the
stockholders of Pinnacle. Pinnacle shall provide Quest (solely for informational purposes) a true,
correct and complete copy of such opinion promptly following the date of this Agreement.

     Section 5.19 Quest Stock Ownership. Neither Pinnacle nor any of its Subsidiaries owns any
shares of capital stock of Quest or any other securities convertible into or otherwise exercisable
to acquire shares of capital stock of Pinnacle or has the right to acquire or vote such shares
under any agreement, arrangement or understanding, whether or not in writing, nor does it have any
agreement, arrangement or understanding, whether or not in writing, for the purpose of acquiring,
holding, voting or disposing of such shares or other securities. Pinnacle is not an “interested
stockholder” (within the meaning of Nevada Revised Statutes Section 78.423) with respect to Quest
and has not, within the last three years, been an “interested stockholder” with respect to Quest.

     Section 5.20 Vote Required. Assuming the accuracy of the representations and warranties set
forth in Section 6.19, the only vote of the holders of any class or series of Pinnacle
capital stock necessary to approve any transaction contemplated by this Agreement is the
affirmative vote in favor of the adoption of this Agreement by the holders of at least a majority
of the outstanding shares of Pinnacle Common Stock (the “Pinnacle Stockholder Approval”).

     Section 5.21 Certain Contracts.

          (a) Except for this Agreement and except as filed as an exhibit to the Pinnacle Reports,
neither Pinnacle nor any of its Subsidiaries is a party to or bound by any “material contract” (as
such term is defined in item 601(b)(10) of Regulation S-K of the SEC) (all contracts of the type
described in this Section 5.21(a) being referred to herein as the “Pinnacle Material
Contracts”).

          (b) Each Pinnacle Material Contract is in full force and effect, and Pinnacle and each of its
Subsidiaries have in all material respects performed all obligations required to be performed by
them to date under each Pinnacle Material Contract to which they are party, except where such
failure to be in full force and effect or such failure to perform, individually or in the
aggregate, has not had and is not reasonably likely to have a Pinnacle Material Adverse Effect.
Except for such matters as, individually or in the aggregate, have not had and are not reasonably
likely to have a Pinnacle Material Adverse Effect, neither Pinnacle nor any of its Subsidiaries
(x) knows of, or has received written notice of, any breach of or violation or default under (nor,
to the knowledge of Pinnacle, does there exist any condition which with the passage of time or the
giving of notice or both would result in such a violation or default under) any Pinnacle

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Material Contract or (y) has received written notice of the desire of the other party or
parties to any such Pinnacle Material Contract to exercise any rights such party has to cancel,
terminate or repudiate such contract or exercise remedies thereunder. Each Pinnacle Material
Contract is enforceable by Pinnacle or a Subsidiary of Pinnacle in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors’ rights and general principles of equity, except where such unenforceability
does not constitute, individually or in the aggregate, a Pinnacle Material Adverse Effect.

     Section 5.22 Capital Expenditure Program. Section 5.22 of the Pinnacle Disclosure
Letter accurately sets forth in all material respects the capital expenditures that are forecast,
as of the date of this Agreement, to be incurred by Pinnacle and its Subsidiaries during 2008 on a
quarterly basis.

     Section 5.23 Improper Payments. No bribes, kickbacks or other similar payments have been made
in violation of Applicable Laws by Pinnacle or any Subsidiary of Pinnacle or agent of any of them
in connection with the conduct of their respective businesses or the operation of their respective
assets, and neither Pinnacle or any Subsidiary of Pinnacle nor any agent of any of them has
received any such payments from vendors, suppliers or other persons.

     Section 5.24 Takeover Statutes; Rights Plans. Assuming the accuracy of the representations of
Quest in Section 6.19 hereof, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not cause to be applicable to the
Merger the restrictions on “business combinations” set forth in Section 203 of the DGCL or any
similar provision (a “Takeover Statute”). Pinnacle does not have any preferred share purchase
rights plan or similar rights plan in effect.

     Section 5.25 Title, Ownership and Related Matters.

          (a) Pinnacle and its Subsidiaries have, free and clear of all Liens except for Permitted
Liens, defensible title to their respective inventory, equipment and other tangible and intangible
property, including the natural gas production, gathering and processing equipment owned and/or
operated by Pinnacle or its Subsidiaries and related spare parts as may be reduced by the
consumption thereof, or increased through the replacement thereof or addition thereto, in the
ordinary course of maintenance and operation of their respective businesses, in each case as
necessary to permit Pinnacle and its Subsidiaries to conduct their respective businesses as
currently conducted in all material respects. As used in this Agreement, the term “Permitted
Liens” shall mean Liens for taxes not yet due and payable; statutory Liens of lessors; Liens of
carriers, warehousemen, repairmen, mechanics and materialmen arising by operation of law in the
ordinary course of business; Liens incurred in the ordinary course of business that secure
obligations not yet due and payable; Liens securing indebtedness of Pinnacle and its Subsidiaries
or Quest and its Subsidiaries outstanding as of the date of this Agreement or incurred in
accordance with Section 7.1 hereof and Liens incurred or deposits made in the ordinary
course of business in connection with workers’ compensation, unemployment insurance and other types
of social security.

          (b) Each of Pinnacle and its Subsidiaries has complied in all respects with the terms of all
leases to which it is a party and under which it is in occupancy, except as,

20

 

individually or in the aggregate, have not had and are not reasonably likely to have a
Pinnacle Material Adverse Effect, and all leases to which Pinnacle or any of its Subsidiaries is a
party or under which it is in occupancy are in full force and effect. Each of Pinnacle and its
Subsidiaries enjoys peaceful and undisturbed possession of the properties or assets purported to be
leased under its material leases. As used in this Section 5.25(b), the term “leases” does
not include Oil and Gas Properties.

          (c) Neither Pinnacle nor any of its Subsidiaries has received any written notice from any
person disputing or challenging its ownership of the fee interests, easements or rights-of-way
through which any of its pipeline or gathering systems extend, other than disputes or challenges
that have not had or are not reasonably likely to have a Pinnacle Material Adverse Effect.

     Section 5.26 Proxy Statement. None of the information to be supplied by Pinnacle for
inclusion in (a) the joint proxy statement relating to Pinnacle Stockholder Approval and Quest
Stockholder Approval (in each case, as defined below) (also constituting the prospectus in respect
of the Quest Common Stock into which Pinnacle Common Stock will be converted) (the “Proxy
Statement/Prospectus”), to be filed by Pinnacle and Quest with the SEC, and any amendments or
supplements thereto, or (b) the Registration Statement on Form S-4 (the “Form S-4”) to be filed by
Quest with the SEC in connection with the Merger, and any amendments or supplements thereto, will,
at the respective times such documents are filed, and, in the case of the Proxy
Statement/Prospectus, at the time the Proxy Statement/Prospectus or any amendment or supplement
thereto is first mailed to Pinnacle and Quest stockholders, at the time of Pinnacle Stockholders
Approval and the Quest Stockholders Approval and at the Effective Time, and, in the case of the
Registration Statement, when it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be made therein or
necessary in order to make the statements made therein, in light of the circumstances under which
they were made, not misleading.

     Section 5.27 Properties; Oil and Gas Matters.

          (a) All major items of operating equipment owned or leased by Pinnacle or its Subsidiaries in
connection with the operation of its Oil and Gas Properties are, in the aggregate, in a state of
repair so as to be adequate in all material respects for reasonably prudent operations in the areas
in which they are operated, except as have not had and are not reasonably likely to have,
individually or in the aggregate, a Pinnacle Material Adverse Effect.

          (b) Except for goods and other property sold, used or otherwise disposed of since the dates of
the respective Pinnacle Reserve Reports (defined in clause (c) below) in the ordinary course of
business or reflected as having been sold, used or otherwise disposed of in Pinnacle SEC Reports,
as of the date of this Agreement, Pinnacle and its Subsidiaries have good and defensible title to,
or valid leases or contractual rights to, all equipment and other personal property used or
necessary for use in the operation of its Oil and Gas Properties in the manner in which such
properties were operated prior to the date hereof. For purposes of this Agreement, “Oil and Gas
Properties” means direct and indirect interests in and rights with respect to oil, gas, mineral,
and related properties and assets of any kind and nature, direct or indirect, including working,
leasehold and mineral interests and operating rights and royalties, overriding royalties,

21

 

production payments, net profit interests and other non-working interests and non-operating
interests; all interests in rights with respect to oil, condensate, gas, casinghead gas and other
liquid or gaseous hydrocarbons (collectively, “Hydrocarbons”) and other minerals or revenues
therefrom, all contracts in connection therewith and claims and rights thereto (including all oil
and gas leases, operating agreements, unitization and pooling agreements and orders, division
orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing
contracts and agreements, and in each case, interests thereunder), surface interests, fee
interests, reversionary interests, reservations, and concessions; all easements, rights of way,
licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for
the operation of any of the foregoing; and all interests in equipment and machinery (including
wells, well equipment and machinery), oil and gas production, gathering, transmission, treating,
processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering
systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and
other tangible personal property and fixtures associated with, appurtenant to, or necessary for the
operation of any of the foregoing.

          (c) Except for property sold or otherwise disposed of since the dates of the respective
Pinnacle Reserve Reports in the ordinary course of business or reflected as having been sold or
otherwise disposed of in Pinnacle SEC Reports, as of the date of this Agreement, Pinnacle and its
Subsidiaries have good and defensible title to all Oil and Gas Properties forming the basis for the
reserves reflected in the reserve reports of Netherland, Sewell & Associates, Inc. (“NSAI”)
relating to Pinnacle interests referred to therein as of December 31, 2006 and in the internal
reserve reports prepared by Pinnacle and furnished to Quest (the “Pinnacle Reserve Reports”), and
in each case as attributable to interests owned by Pinnacle and its Subsidiaries, free and clear of
any liens, except: (a) liens reflected in the Reserve Reports or in Pinnacle SEC Documents filed
prior to the date of this Agreement, and (b) such imperfections of title, easements, liens,
government or tribal approvals or other matters and failures of title as, individually or in the
aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect.
Except as has not had and is not reasonably likely to have, individually or in the aggregate, a
Pinnacle Material Adverse Effect, all material proceeds from the sale of hydrocarbons produced from
the Oil and Gas Properties of Pinnacle and its Subsidiaries are being received by them in a timely
manner and are not being held in suspense for any reason. To Pinnacle’s knowledge, the gross and
net undeveloped acreage of Pinnacle and its Subsidiaries as most recently reported in a Pinnacle
SEC Report was correct in all material respects as of the date of such Pinnacle SEC Report, and
there have been no changes in such gross and net undeveloped acreage since such date which have had
or are reasonably likely to have a Pinnacle Material Adverse Effect.

          (d) The leases and other agreements pursuant to which Pinnacle and its Subsidiaries lease or
otherwise acquire or obtain operating rights affecting any real or personal property given value in
Pinnacle Reserve Reports are in good standing, valid and effective, and the rentals due by Pinnacle
or any of its Subsidiaries to any lessor of any such oil and gas leases have been properly paid,
except in each case as, individually or in the aggregate, have not had and are not reasonably
likely to have a Pinnacle Material Adverse Effect. Pinnacle and its Subsidiaries have paid all
royalties, overriding royalties and other burdens on production due by Pinnacle and its
Subsidiaries with respect to their Oil and Gas Properties, except for any non-

22

 

payment of which, individually or in the aggregate, has not had and is not reasonably likely
to have a Pinnacle Material Adverse Effect.

          (e) For the purposes of this Agreement, “good and defensible title” means title that is free
from reasonable doubt to the end that a reasonable person engaged in the business of purchasing and
owning, developing, and operating producing oil and gas properties in the geographical areas in
which they are located, with knowledge of all of the material facts and their legal bearing, would
be willing to accept the same in a transaction involving interests of comparable magnitude to those
of Pinnacle or Quest reflected in Pinnacle Reserve Reports or the Quest Reserve Reports,
respectively, taken as a whole, which title (i) entitles Pinnacle or Quest, as the case may be (or
their respective Subsidiaries), to receive a percentage of the hydrocarbons produced, saved and
marketed from the respective oil, gas and mineral lease, unit or well throughout the duration of
the productive life of such lease, unit or well, which is not less than the “net revenue interest”
shown on the Pinnacle Reserve Report or the Quest Reserve Report, as the case may be, for such
lease, unit or well, except for decreases in connection with those operations in which Pinnacle or
Quest (or their respective Subsidiaries), as applicable, may be or hereafter become a
non-consenting co-owner; (ii) obligates Pinnacle or Quest (or their respective Subsidiaries), as
the case may be, to bear a percentage of the costs and expenses associated with the ownership,
operation, maintenance and repair of any oil, gas and mineral lease, unit or well which is not
greater than the “working interest” shown on the Pinnacle Reserve Report or the Quest Reserve
Report, as the case may be, with respect to such lease, unit or well, without increase throughout
the life of such lease, unit or well other than (x) increases accompanied by at least a
proportionate interest in the net revenue interest, (y) increases reflected in the Pinnacle Reserve
Report or the Quest Reserve Report, as applicable, and (z) increases resulting from contribution
requirements with respect to defaulting co-owners under applicable operating agreements that are
accompanied by at least a proportionate increase in the net revenue interest.

          (f) All information (excluding assumptions and estimates but including the statement of the
percentage of reserves from the oil and gas wells and other interests evaluated therein to which
Pinnacle or its Subsidiaries are entitled and the percentage of the costs and expenses related to
such wells or interests to be borne by Pinnacle or its Subsidiaries) supplied to NSAI, in each case
relating to Pinnacle interests referred to in Pinnacle Reserve Reports as of December 31, 2006, by
or on behalf of Pinnacle and its Subsidiaries that was material to such firms’ estimates of proved
oil and gas reserves attributable to the Oil and Gas Properties of Pinnacle and its Subsidiaries in
connection with the preparation of Pinnacle Reserve Reports was (at the time supplied or as
modified or amended prior to the issuance of Pinnacle Reserve Reports) to Pinnacle’s knowledge
accurate in all material respects and Pinnacle has no knowledge of any material errors in such
information that existed at the time of such issuance.

          (g) Except as has not had and is not reasonably likely to have, individually or in the
aggregate, a Pinnacle Material Adverse Effect, all Oil and Gas Properties operated by Pinnacle or
its Subsidiaries have been operated in accordance with reasonable, prudent oil and gas field
practices and in compliance with the applicable oil and gas leases and applicable law.

          (h) Neither Pinnacle nor any of its Subsidiaries has produced hydrocarbons from its Oil and
Gas Properties in excess of regulatory allowables or other applicable limits on production that
could result in curtailment of production from any such property, except any

23

 

such violations which, individually or in the aggregate, have not had and are not reasonably
likely to have a Pinnacle Material Adverse Effect.

          (i) Except as set forth in Section 5.27(i) of the Pinnacle Disclosure Letter, none of
the material Oil and Gas Properties of Pinnacle or any of its Subsidiaries is subject to any
preferential purchase, consent or similar right which would become operative as a result of the
transactions contemplated by this Agreement.

          (j) None of the Oil and Gas Properties of Pinnacle or any of its Subsidiaries are subject to
any tax partnership agreement or provisions requiring a partnership income tax return to be filed
under Subchapter K of Chapter 1 of Subtitle A of the Code.

          (k) Attached as Section 5.27(k) of the Pinnacle Disclosure Letter is a schedule of all
remaining costs and expenses for the plugging and abandonment by Pinnacle of wells for which
Pinnacle is liable pursuant to any Applicable Law or contract, which schedule is true and correct
as of its date.

     Section 5.28 Hedging. Section 5.28 of the Pinnacle Disclosure Letter sets forth for
the periods shown all obligations of Pinnacle and each of its Subsidiaries for the delivery of
Hydrocarbons attributable to any of the properties of Pinnacle or any of its Subsidiaries in the
future on account of prepayment, advance payment, take-or-pay, forward sale or similar obligations
without then or thereafter being entitled to receive full value therefor. Except as set forth in
Section 5.28 of the Pinnacle Disclosure Letter, as of the date of this Agreement, neither
Pinnacle nor any of its Subsidiaries is bound by futures, hedge, swap, collar, put, call, floor,
cap, option or other contracts that are intended to benefit from, relate to or reduce or eliminate
the risk of fluctuations in the price of commodities, including Hydrocarbons, or securities.

     Section 5.29 Gas Regulatory Matters. None of Pinnacle or any of its Subsidiaries is a gas
utility under Applicable Law.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

OF QUEST AND MERGERSUB

     Except as set forth in the disclosure letter delivered to Pinnacle by Quest at or prior to the
execution of this Agreement (the “Quest Disclosure Letter”) and making reference to the particular
subsection of this Agreement to which exception is being taken (provided that any information set
forth in one section or subsection of the Quest Disclosure Letter shall be deemed to apply to each
other section or subsection thereof to which its relevance is reasonably apparent), Quest and
MergerSub, jointly and severally, represent and warrant to Pinnacle that:

     Section 6.1 Existence; Good Standing; Corporate Authority. Quest is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Nevada.
MergerSub is a corporation duly incorporated, validly existing and in good standing under the laws
of the State of Delaware. Each of Quest and MergerSub is duly qualified to do business and, to the
extent such concept or a similar concept exists in the relevant jurisdiction, is in good

24

 

standing under the laws of any jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business requires such qualification,
except where the failure to be so qualified or in good standing, individually or in the aggregate,
has not had and is not reasonably likely to have a Quest Material Adverse Effect. Each of Quest and
MergerSub has all requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as now conducted. The copies of the articles or certificate of
incorporation and bylaws of Quest and MergerSub previously made available to Pinnacle are true and
correct and contain all amendments as of the date of this Agreement.

     Section 6.2 Authorization, Validity and Effect of Agreements. Each of Quest and MergerSub has
the requisite corporate power and authority to execute and deliver this Agreement and, upon receipt
of the Quest Stockholder Approval, to consummate the transactions contemplated by this Agreement.
The execution of this Agreement and the consummation by each of Quest and MergerSub of the
transactions contemplated hereby have been duly authorized by all requisite corporate action on
behalf of each of them, other than (i) the receipt of Quest Stockholder Approval, and (ii) the
adoption of this Agreement by Quest in its capacity as sole stockholder of MergerSub. Each of
Quest and MergerSub has duly executed and delivered this Agreement. Assuming this Agreement
constitutes a valid and legally binding obligation of Pinnacle, this Agreement constitutes the
valid and legally binding obligation of each of Quest and MergerSub, enforceable against Quest and
MergerSub in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors’ rights and general
principles of equity. Assuming the accuracy of the representations and warranties set forth in
Section 5.19, MergerSub has taken all action necessary to render the restrictions set forth
in Section 203 of the DGCL, and Quest has taken all action necessary to render the restrictions set
forth in Nevada Revised Statutes Section 78.411 et seq., and any other applicable takeover law
restricting or purporting to restrict business combinations, inapplicable to this Agreement and the
transactions contemplated hereby.

     Section 6.3 Capitalization. The authorized capital stock of Quest consists of 200,000,000
shares of Quest Common Stock and 50,000,000 shares of preferred stock, par value $0.001 per share
(“Quest Preferred Stock”), of which 500,000 shares have been designated as Series A Convertible
Preferred Stock and 100,000 shares have been designated as Series B Junior Participating Preferred
Stock. As of the Cut-off Time, there were (i) 22,472,145 outstanding shares of Quest Common Stock,
(ii) 1,341,928 shares of Quest Common Stock reserved for issuance upon exercise of outstanding
Quest Options or to be issued upon vesting of outstanding equity awards, and (iii) no outstanding
shares of Quest Preferred Stock, including the Series A Convertible Preferred Stock and the Series
B Junior Participating Preferred Stock, which Series B Junior Participating Preferred Stock has
been reserved for issuance upon the exercise of the preferred stock purchase rights issued under
the Quest Rights Agreement. From the Cut-off Time to the date of this Agreement, no additional
shares of Quest Common Stock have been issued (other than pursuant to Quest Options which were
outstanding as of the Cut-off Time and are included in the number of shares of Quest Common Stock
reserved for issuance upon exercise of outstanding Quest Options in clause (ii) above), no
additional Quest Options have been issued or granted, and there has been no increase in the number
of shares of Quest Common Stock issuable upon exercise of the Quest Options from those issuable
under such Quest Options as of the Cut-off Time. All such issued and outstanding shares of Quest
Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive
rights.

25

 

As of the date of this Agreement, except as set forth in Section 6.3 of the Quest
Disclosure Letter, there are no outstanding shares of capital stock and there are no options,
warrants, calls, subscriptions, convertible securities or other rights, agreements or commitments
which obligate Quest or any of its Subsidiaries to issue, transfer, sell or register any shares of
capital stock or other voting securities of Quest or any of its Subsidiaries. Quest has no
outstanding bonds, debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the right to vote) with
the stockholders of Quest on any matter.

     Section 6.4 Subsidiaries.

          (a) Each of Quest’s Subsidiaries is a corporation or other legal entity duly organized,
validly existing and, to the extent such concept or a similar concept exists in the relevant
jurisdiction, in good standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or other entity power and authority to own, operate and lease its properties and
to carry on its business as it is now being conducted, and is duly qualified to do business and is
in good standing (where applicable) in each jurisdiction in which the ownership, operation or lease
of its property or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or in good standing, individually or in the
aggregate, has not had and is not reasonably likely to have a Quest Material Adverse Effect. As of
the date of this Agreement, all of the outstanding shares of capital stock of, or other ownership
interests in, each of Quest’s Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable (except as nonassessability may be affected by Applicable Law), and are owned,
directly or indirectly, by Quest free and clear of all mortgages, deeds of trust, liens, security
interests, pledges, leases, conditional sale contracts, charges, privileges, easements, rights of
way, reservations, options, rights of first refusal and other encumbrances (“Liens”) other than
Permitted Liens.

          (b) All of the outstanding capital stock of MergerSub is owned directly by Quest. MergerSub
has been formed solely for the purpose of engaging in the transactions contemplated hereby and, as
of the Effective Time, will not have engaged in any activities other than in connection with the
transactions contemplated by this Agreement. Immediately prior to the Effective Time, MergerSub
will have 100 outstanding shares of its common stock, par value $0.01 per share, which shares will
be validly issued, fully paid, nonassessable and free of preemptive rights.

     Section 6.5 Compliance with Laws; Permits. Except for such matters as, individually or in the
aggregate, have not had and are not reasonably likely to have a Quest Material Adverse Effect and
except for matters related to taxes and Environmental Laws, which are treated exclusively in
Sections 6.10 and 6.13, respectively:

     (a) Neither Quest nor any Subsidiary of Quest is in violation of any Applicable Laws, and no
claim is pending or, to the knowledge of Quest, threatened with respect to any such matters. No
condition exists which does or could reasonably be expected to constitute a violation of or
deficiency under any Applicable Law by Quest or any Subsidiary of Quest.

26

 

          (b) Quest and each Subsidiary of Quest hold all permits, licenses, certifications, variations,
exemptions, orders, franchises and approvals of all governmental or regulatory authorities
necessary for the lawful conduct of their respective businesses (the “Quest Permits”). All Quest
Permits are in full force and effect and there exists no default thereunder or breach thereof, and
Quest has no notice or actual knowledge that such Quest Permits will not be renewed in the ordinary
course after the Effective Time. No governmental authority has given, or to the knowledge of Quest
threatened to give, any action to terminate, cancel or reform any Quest Permit.

          (c) Quest and each Subsidiary of Quest possess all permits, licenses, operating authorities,
orders, exemptions, franchises, variances, consents, approvals or other authorizations required for
the present ownership and operation of all its real property or leaseholds (“Quest Real Property”).
There exists no material default or breach with respect to, and no party or governmental authority
has taken or, to the knowledge of Quest, threatened to take, any action to terminate, cancel or
reform any such permit, license, operating authority, order, exemption, franchise, variance,
consent, approval or other authorization pertaining to the Quest Real Property.

     Section 6.6 No Conflict.

          (a) Except as disclosed in Section 6.6 of the Quest Disclosure Letter, neither the
execution and delivery by Quest and MergerSub of this Agreement nor the consummation by any of them
of the transactions contemplated by this Agreement in accordance with the terms hereof will
(i) conflict with or result in a breach of any provisions of the articles or certificate of
incorporation or bylaws of Quest or MergerSub or the limited partnership agreement or certificate
of limited partnership of either Quest Midstream MLP or the Quest Energy Partners, L.P. (the
“MLP”); (ii) violate, or conflict with, or result in a breach of any provision 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 in a right of termination or cancellation of, or give rise
to a right of purchase under, or accelerate the performance required by, or result in the creation
of any Lien upon any of the properties of Quest or its Subsidiaries under, or result in being
declared void, voidable, or without further binding effect, or otherwise result in a detriment to
Quest or any of its Subsidiaries under, any of the terms, conditions or provisions of, any note,
bond, mortgage, indenture, deed of trust, license, concession, franchise, permit, lease, contract,
agreement, joint venture or other instrument or obligation to which Quest or any of its
Subsidiaries is a party, or by which Quest or any of its Subsidiaries or any of their properties
may be bound or affected; or (iii) subject to the filings and other matters referred to in
Section 6.6(b), contravene or conflict with or constitute a violation of any provision of
any law, rule, regulation, judgment, order or decree binding upon or applicable to Quest or any of
its Subsidiaries, except as, in the case of matters described in clause (ii) or (iii), individually
or in the aggregate, that have not had and are not reasonably likely to have a Quest Material
Adverse Effect.

          (b) Neither the execution and delivery by Quest or MergerSub of this Agreement nor the
consummation by either of them of the transactions contemplated hereby in accordance with the terms
hereof will require any consent, approval, qualification or authorization of, or filing or
registration with, any court or governmental or regulatory authority,

27

 

other than (i) the Regulatory Filings, (ii) the filing of a listing application with the

NASDAQ Stock Market pursuant to Section 7.9, and (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, except for any consent, approval,
qualification or authorization the failure to obtain which, and for any filing or registration the
failure to make which, has not had and is not reasonably likely to have a Quest Material Adverse
Effect.

          (c) This Agreement, the Merger and the transactions contemplated hereby do not, and will not,
upon consummation of such transactions in accordance with their terms, result in any “change of
control” or similar event or circumstance under (i) the terms of any Quest Material Contract or
(ii) any contract or plan under which any employees, officers or directors of Quest or any of its
Subsidiaries are entitled to payments or benefits, which, in the case of either clause (i) or (ii),
gives rise to rights or benefits not otherwise available absent such change of control or similar
event and requires either a cash payment or an accounting charge in accordance with U.S. generally
accepted accounting principles, or (iii) any material Quest Permit.

     Section 6.7 SEC Documents.

          (a) Quest and its Subsidiaries have filed with the SEC all documents (including exhibits and
any amendments thereto) required to be so filed by them since December 31, 2004 (each registration
statement, report, proxy statement or information statement (other than preliminary materials) they
have so filed, each in the form (including exhibits and any amendments thereto) filed with the SEC,
collectively, including the filings made by MLP, the “Quest Reports”). As of its respective date,
each Quest Report (i) complied in all material respects with the applicable requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and regulations thereunder
and (ii) did not contain any untrue statement of a material fact or 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, except for any statements in any Quest
Report that have been modified by an amendment to such report filed with the SEC prior to date
hereof. Except as set forth in Section 6.7(a) of the Quest Disclosure Letter, each of the
consolidated balance sheets included in or incorporated by reference into the Quest Reports
(including related notes and schedules) complied as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto and fairly presents in all material respects the consolidated financial position of Quest
and its Subsidiaries (or such entities as indicated in such balance sheet) as of its date, and each
of the consolidated statements of operations, cash flows and changes in stockholders’ equity
included in or incorporated by reference into the Quest Reports (including any related notes and
schedules) fairly presents in all material respects the results of operations, cash flows or
changes in stockholders’ equity, as the case may be, of Quest and its Subsidiaries (or such
entities as indicated in such balance sheet) for the periods set forth therein (subject, in the
case of unaudited statements, to (x) such exceptions as may be permitted by Form 10-Q of the SEC
and (y) normal, recurring year-end audit adjustments which are not material in the aggregate), in
each case in accordance with generally accepted accounting principles consistently applied during
the periods involved, except as may be noted therein. Except as and to the extent set forth on the
consolidated balance sheet of Quest and its Subsidiaries included in the most recent Quest Report
filed prior to the date of this Agreement that includes such a balance sheet, including all notes

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thereto, as of the date of such balance sheet, neither Quest nor any of its Subsidiaries had
any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a consolidated balance sheet of
Quest or in the notes thereto prepared in accordance with generally accepted accounting principles
consistently applied, other than liabilities or obligations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Quest Material Adverse Effect.

          (b) Since December 31, 2004, the chief executive officer and chief financial officer of Quest
have made all certifications (without qualification or exceptions to the matters certified)
required by the Sarbanes-Oxley Act, and the statements contained in any such certifications are
complete and correct; neither Quest nor its officers have received notice from any governmental
authority questioning or challenging the accuracy, completeness, form or manner of filing or
submission of such certification. Quest has established and maintains disclosure controls and
procedures and internal control over financial reporting (as such terms are defined in paragraphs
(e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under
the Exchange Act. Quest’s disclosure controls and procedures are reasonably designed to ensure
that all material information required to be disclosed by Quest in the reports that it files under
the Exchange Act are recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that all such material information is accumulated and
communicated to the management of Quest as appropriate to allow timely decisions regarding required
disclosure and to make the certifications required pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act. The management of Quest has completed its assessment of the effectiveness of
Quest’s internal control over financial reporting in compliance with the requirements of Section
404 of the Sarbanes-Oxley Act for the year ended December 31, 2006, and such assessment concluded
that such controls were effective. To the knowledge of Quest, it has disclosed, based on its most
recent evaluations, to Quest’s outside auditors and the audit committee of the board of directors
of Quest (A) all significant deficiencies in the design or operation of internal controls over
financial reporting and any material weaknesses, which have more than a remote chance to materially
adversely affect Quest’s ability to record, process, summarize and report financial data (as
defined in Rule 13a-15(f) of the Exchange Act) and (B) any fraud, whether or not material, that
involves management or other employees who have a significant role in Quest’s internal controls
over financial reporting.

          (c) Since January 1, 2007, to the knowledge of Quest, neither Quest nor any of its
Subsidiaries nor any director, officer, employee, auditor, accountant or representative of Quest or
any of its Subsidiaries has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of Quest or any of its Subsidiaries,
including any material complaint, allegation, assertion or claim that Quest or any of its
Subsidiaries has a “significant deficiency” or “material weakness” (as such terms are defined in
the Public Accounting Oversight Board’s Auditing Standard No. 2, as in effect on the date hereof),
in Quest’s internal controls over financial reporting.

          (d) There is no reason to believe that Quest’s auditors and its chief executive officer and
chief financial officer will not be able to give the certifications and attestations to the extent
required pursuant to the rules and regulations adopted pursuant to Section 404 of the

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Sarbanes-Oxley Act in connection with the filing of Quest’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2007.

          (e) None of Quest or any of its Subsidiaries has, since July 30, 2002, extended or maintained
credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent thereof) of Quest. No
loan or extension of credit is maintained by Quest or its Subsidiaries to which the second sentence
of Section 13(k)(1) of the Exchange Act applies.

     Section 6.8 Litigation. Except as set forth in Section 6.8 of the Quest Disclosure
Letter or as described in the Quest Reports filed prior to the date of this Agreement, there are no
actions, suits or proceedings pending against Quest or any of its Subsidiaries or, to Quest’s
knowledge, threatened against Quest or any of its Subsidiaries, at law or in equity or in any
arbitration or similar proceedings, before or by any U.S. federal or state court, commission,
board, bureau, agency or instrumentality or any arbitral or other dispute resolution body, that,
individually or in the aggregate, have had or are reasonably likely to have a Quest Material
Adverse Effect.

     Section 6.9 Absence of Certain Changes. From January 1, 2007 to the date of this Agreement,
there has not been (i) a Quest Material Adverse Effect or (ii) except as described in the Quest
Reports filed with the SEC prior to the date of this Agreement, (A) any material change by Quest or
any of its Subsidiaries in any of their respective accounting methods, principles or practices or
any of their respective tax methods, practices or elections applicable to Quest’s consolidated
financial statements, except as may have been required by a change in law or generally accepted
accounting principles; (B) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Quest or any redemption, purchase or other
acquisition of any of its equity securities; (C) any split, combination or reclassification of any
capital stock of Quest or any of its Subsidiaries or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution for shares of that
capital stock; (D) any damage to or any destruction or loss of physical properties owned or used by
Quest or any of its Subsidiaries, whether or not covered by insurance, that individually or in the
aggregate constitutes a Quest Material Adverse Effect; or (E) any reevaluations by Quest or any of
its Subsidiaries of any of their assets which, in accordance with generally accepted accounting
principles, Quest will reflect in its consolidated financial statements, including any impairment
of assets, and which in the aggregate are material to them, other than changes to financial
statements resulting from the impairment of oil and gas assets due to changes in commodity prices.

     Section 6.10 Taxes.

          (a) All Returns required to be filed by or with respect to Quest or any of its Subsidiaries
(including any Return required to be filed by an affiliated, consolidated, combined, unitary or
similar group that included Quest or any of its Subsidiaries) have been properly filed on a timely
basis with the appropriate governmental authorities, except to the extent that any failure to file,
individually or in the aggregate, has not had and is not reasonably likely to have a Quest Material
Adverse Effect, and all taxes that have become due (regardless of whether reflected on any Return)
have been duly paid or deposited in full on a timely basis or adequately

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reserved for in accordance with generally accepted accounting principles, except to the extent
that any failure to pay or deposit or make adequate provision for the payment of such taxes,
individually or in the aggregate, has not had and is not reasonably likely to have a Quest Material
Adverse Effect.

          (b) Except to the extent such matters, individually or in the aggregate, have not had and are
not reasonably likely to have a Quest Material Adverse Effect, (i) no audit or other administrative
proceeding or court proceeding is presently pending with regard to any tax or Return of Quest or
any of its Subsidiaries as to which any taxing authority has asserted in writing any claim; (ii) no
governmental authority is now asserting in writing any deficiency or claim for taxes or any
adjustment to taxes with respect to which Quest or any of its Subsidiaries may be liable; and
(iii) neither Quest nor any of its Subsidiaries has any liability for any tax under Treasury
Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the
affiliated group of which Quest or any of its Subsidiaries is the common parent, within the meaning
of Section 1504(a)(1) of the Code or any similar provision of any other tax law. As of the date of
this Agreement, neither Quest nor any of its Subsidiaries has granted any material request,
agreement, consent or waiver to extend any period of limitations applicable to the assessment of
any tax upon Quest or any of its Subsidiaries. Neither Quest nor any of its Subsidiaries is a
party to any closing agreement described in Section 7121 of the Code or any predecessor provision
thereof or any similar agreement under any tax law. Neither Quest nor any of its Subsidiaries is a
party to, is bound by or has any obligation under any tax sharing, allocation or indemnity
agreement or any similar agreement or arrangement other than with respect to any such agreement or
arrangement among Quest and any of its Subsidiaries. Since December 31, 2005, Quest has not made
or rescinded any material election relating to taxes or settled or compromised any claim, action,
suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to any
material taxes, or, except as may be required by Applicable Law, made any material change to any of
its methods of reporting income or deductions for federal income tax purposes from those employed
in the preparation of its most recently filed federal Returns. Quest has not engaged in any
“listed transaction” within the meaning of Treasury Regulation Section 1.6011-4. Neither Quest nor
any of its Subsidiaries has been a “controlled corporation” or a “distributing corporation” in any
distribution that was purported or intended to be governed by Section 355 of the Code (or any
similar provision of state, local or foreign law) (i) occurring during the two-year period ending
on the date hereof or (ii) that otherwise constitutes part of a “plan” or “series of related
transactions” (within the meaning of Section 355(e) of the Code) that includes the Merger.

          (c) Neither Quest nor any of its Subsidiaries knows of any fact or has taken or failed to take
any action that could reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code.

          (d) The MLP will be properly classified as a partnership for federal income tax purposes and,
for the portion of the taxable year of the MLP that ends at the Effective Time, 90 percent or more
of the gross income of the MLP will consist of “qualifying income,” as defined in Section 7704(d)
of the Code.

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     Section 6.11 Employee Benefit Plans.

          (a) Section 6.11 of the Quest Disclosure Letter contains a list of all Quest Benefit
Plans. The term “Quest Benefit Plans” means all employee benefit plans and other benefit
arrangements, including all “employee benefit plans” as defined in Section 3(3) of ERISA, whether
or not U.S.-based plans, and all other material employee benefit, bonus, incentive, deferred
compensation, stock option (or other equity-based), severance, employment, change in control,
welfare (including post-retirement medical and life insurance) and fringe benefit plans, practices
or agreements, whether or not subject to ERISA or U.S.-based and whether written or oral,
sponsored, maintained or contributed to or required to be contributed to by Quest or any of its
Subsidiaries or ERISA Affiliates or to which Quest or any of its Subsidiaries or ERISA Affiliates
is a party or is required to provide benefits under Applicable Laws. Quest has made available to
Quest true and complete copies of the Quest Benefit Plans and, if applicable, the most recent trust
agreements, Forms 5500, summary plan descriptions, funding statements, annual reports, actuarial
reports and Internal Revenue Service determination or opinion letters for each such plan.

          (b) Except to the extent such matters, individually or in the aggregate, have not had and are
not reasonably likely to have a Quest Material Adverse Effect: all applicable reporting and
disclosure requirements have been met with respect to the Quest Benefit Plans; to the extent
applicable, the Quest Benefit Plans comply with the requirements of ERISA and the Code or with the
regulations of any applicable jurisdiction, and any Quest Benefit Plan intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter from the Internal
Revenue Service (or is entitled to rely upon a favorable opinion letter issued by the Internal
Revenue Service); the Quest Benefit Plans have been maintained and operated in accordance with
their terms, and, to Quest’s knowledge, there are no breaches of fiduciary duty in connection with
the Quest Benefit Plans; there are no pending or, to Quest’s knowledge, threatened claims against
or otherwise involving any Quest Benefit Plan, and no suit, action or other litigation (excluding
routine claims for benefits incurred in the ordinary course of Quest Benefit Plan activities) has
been brought against or with respect to any Quest Benefit Plan; all material contributions required
to be made as of the date of this Agreement to the Quest Benefit Plans have been made or provided
for; with respect to any “employee pension benefit plans,” as defined in Section 3(2) of ERISA,
that are subject to Title IV of ERISA and have been maintained or contributed to within six years
prior to the Effective Time by Quest, its Subsidiaries or any of their ERISA Affiliates,
(i) neither Quest nor any of its Subsidiaries or ERISA Affiliates has incurred any direct or
indirect liability under Title IV of ERISA in connection with any termination thereof or withdrawal
therefrom, and (ii) there does not exist any accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA, whether or not waived.

          (c) No Quest Benefit Plan (including for such purpose, any employee benefit plan described in
Section 3(3) of ERISA which Quest or any of its Subsidiaries or ERISA Affiliates maintained,
sponsored or contributed to within the six-year period preceding the Effective Time) is (i) a
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA), (ii) a “multiple employer plan”
(within the meaning of Section 413(c) of the Code) or (iii) subject to Title IV or Section 302 of
ERISA or Section 412 of the Code. Except as set forth in Section 6.11(c) of the Quest
Disclosure Letter, (A) neither the execution of this Agreement nor

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the consummation of the transactions contemplated hereby shall cause any payments or benefits
to any employee, officer or director of Quest or any of its Subsidiaries to be either subject to an
excise tax or non-deductible to Quest under Sections 4999 and 280G of the Code, respectively,
whether or not some other subsequent action or event would be required to cause such payment or
benefit to be triggered, and (B) the execution of, and performance of the transactions contemplated
by, this Agreement will not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any benefit plan, policy, arrangement or agreement or any trust
or loan (in connection therewith) that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligations to fund benefits with respect to any employee of Quest or any Subsidiary
thereof.

          (d) No Quest Benefit Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of Quest or any Subsidiary of
Quest for periods extending beyond their retirement or other termination of service other than
(i) coverage mandated by Applicable Laws, (ii) death benefits under any “pension plan” or
(iii) benefits the full cost of which is borne by the current or former employee (or his
beneficiary).

          (e) From January 1, 2007 to the date of this Agreement, except in the ordinary course of
business consistent with past practice or as described in the Quest Reports filed prior to the date
of this Agreement, there has not been (i) any granting, or any commitment or promise to grant, by
Quest or any of its Subsidiaries to any officer of Quest or any of its Subsidiaries of (A) any
increase in compensation or (B) any increase in severance or termination pay (other than increases
in severance or termination pay as a result of an increase in compensation in accordance with
Section 6.11(e)(i)(A)), (ii) any entry by Quest or any of its Subsidiaries into any
employment, severance or termination agreement with any person who is an employee of Quest or any
of its Subsidiaries, (iii) any increase in, or any commitment or promise to increase, benefits
payable or available under any pre-existing Quest Benefit Plan, except in accordance with the
pre-existing terms of that Quest Benefit Plan, (iv) any establishment of, or any commitment or
promise to establish, any new Quest Benefit Plan, (v) any amendment of any existing stock options,
stock appreciation rights, performance awards or restricted stock awards or (vi) except in
accordance with and under pre-existing compensation policies, any grant, or any commitment or
promise to grant, any stock options, stock appreciation rights, performance awards, or restricted
stock awards.

     Section 6.12 Labor Matters.

          (a) Neither Quest nor any of its Subsidiaries is a party to, or bound by, any collective
bargaining agreement or similar contract, agreement or understanding with a labor union or similar
labor organization. As of the date of this Agreement, to Quest’s knowledge, there are no
organizational efforts with respect to the formation of a collective bargaining unit presently
being made or threatened.

          (b) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Quest Material Adverse Effect, (i) neither Quest nor any Subsidiary of
Quest has received any written complaint of any unfair labor practice or other

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unlawful employment practice or any written notice of any material violation of any federal,
state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to
the employment of individuals by, or the employment practices of, Quest or any Subsidiary of Quest
or the work conditions or the terms and conditions of employment and wages and hours of their
respective businesses and (ii) there are no unfair labor practice charges or other employee-related
complaints against Quest or any Subsidiary of Quest pending or, to the knowledge of Quest,
threatened, before any governmental authority by or concerning the employees working in their
respective businesses.

     Section 6.13 Environmental Matters.

          (a) Except as described in the Quest Reports filed with the SEC prior to the date of this
Agreement, Quest and each Subsidiary of Quest has been and is in compliance with all Environmental
Laws except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Quest Material Adverse Effect. There are no past or present facts,
conditions or circumstances that interfere with the conduct of any of their respective businesses
in the manner now conducted or which interfere with continued compliance with any Environmental
Law, except for any non-compliance or interference that, individually or in the aggregate, has not
had and is not reasonably likely to have a Quest Material Adverse Effect.

          (b) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Quest Material Adverse Effect or disclosed in Quest SEC Reports, no
judicial or administrative proceedings or governmental investigations are pending or, to the
knowledge of Quest, threatened against Quest or its Subsidiaries that allege the violation of or
seek to impose liability pursuant to any Environmental Law, and there are no past or present facts,
conditions or circumstances at, on or arising out of, or otherwise associated with, any current
(or, to the knowledge of Quest or its Subsidiaries, former) businesses, assets or properties of
Quest or any Subsidiary of Quest, including but not limited to on-site or off-site disposal,
release or spill of any Hazardous Materials which violate Environmental Law or are reasonably
likely to give rise to (i) costs, expenses, liabilities or obligations for any cleanup,
remediation, disposal or corrective action under any Environmental Law, (ii) claims arising for
personal injury, property damage or damage to natural resources, or (iii) fines, penalties or
injunctive relief.

          (c) Neither Quest nor any of its Subsidiaries has (i) received any notice of noncompliance
with, violation of, or liability or potential liability under any Environmental Law or (ii) entered
into any consent decree or order or is subject to any order of any court or governmental authority
or tribunal under any Environmental Law or relating to the cleanup of any Hazardous Materials,
except for any such matters as have not had and are not reasonably likely to have a Quest Material
Adverse Effect or disclosed in Quest SEC Reports.

     Section 6.14 Intellectual Property. Quest and its Subsidiaries own or possess adequate
licenses or other valid rights to use all patents, patent rights, know-how, trade secrets,
trademarks, trademark rights and other proprietary information and other proprietary intellectual
property rights used or held for use in connection with their respective businesses as currently
being conducted, except where the failure to own or possess such licenses and other rights,

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individually or in the aggregate, has not had and is not reasonably likely to have a Quest
Material Adverse Effect, and there are no assertions or claims challenging the validity of any of
the foregoing that, individually or in the aggregate, have not had and are not reasonably likely to
have a Quest Material Adverse Effect. The conduct of Quest’s and its Subsidiaries’ respective
businesses as currently conducted does not conflict with any patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights or copyrights of others, except for
such conflicts that, individually or in the aggregate, have not had and are not reasonably likely
to have a Quest Material Adverse Effect. There is no material infringement of any proprietary
right owned by or licensed by or to Quest or any of its Subsidiaries, except for such infringements
that, individually or in the aggregate, have not had and are not reasonably likely to have a Quest
Material Adverse Effect.

     Section 6.15 Decrees, Etc. Except for such matters as, individually or in the aggregate, have
not had and are not reasonably likely to have a Quest Material Adverse Effect, (a) no order, writ,
fine, injunction, decree, judgment, award or determination of any court or governmental authority
or any arbitral or other dispute resolution body has been issued or entered against Quest or any
Subsidiary of Quest that continues to be in effect that materially affects the ownership or
operation of any of their respective assets and (b) no criminal order, writ, fine, injunction,
decree, judgment or determination of any court or governmental authority has been issued against
Quest or any Subsidiary of Quest.

     Section 6.16 Insurance.

          (a) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Quest Material Adverse Effect, Quest and its Subsidiaries maintain
insurance coverage with financially responsible insurance companies in such amounts and against
such losses as are customary in the industries in which Quest and its Subsidiaries operate on the
date of this Agreement.

          (b) Except for such matters as, individually or in the aggregate, have not had and are not
reasonably likely to have a Quest Material Adverse Effect, no event relating specifically to Quest
or its Subsidiaries has occurred that could reasonably be expected, after the date of this
Agreement, to result in an upward adjustment in premiums under any insurance policies they
maintain. Excluding insurance policies that have expired and been replaced in the ordinary course
of business, no excess liability or protection and indemnity insurance policy has been canceled by
the insurer within one year prior to the date of this Agreement, and no threat in writing has been
made to cancel (excluding cancellation upon expiration or failure to renew) any such insurance
policy of Quest or any Subsidiary of Quest during the period of one year prior to the date of this
Agreement. Prior to the date of this Agreement, no event has occurred, including the failure by
Quest or any Subsidiary of Quest to give any notice or information or by giving any inaccurate or
erroneous notice or information, which materially limits or impairs the rights of Quest or any
Subsidiary of Quest under any such excess liability or protection and indemnity insurance policies.

     Section 6.17 No Brokers. Neither Quest nor MergerSub has not entered into any contract,
arrangement or understanding with any person or firm which may result in the obligation of Quest or
MergerSub to pay any finder’s fees, brokerage or other like payments in

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connection with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except that Quest has retained FBR Capital Markets (“FBR”), as
its financial advisor, the fees of which shall not exceed those set forth in Section 6.17
of the Quest Disclosure Letter.

     Section 6.18 Opinion of Financial Advisor and Board Approvals. The Board of Directors of
Quest has received the opinion of FBR to the effect that, subject to the assumptions,
qualifications and limitations relating to such opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of Quest Common Stock, it being agreed that Pinnacle has no
rights with respect to such opinion. Quest’s Board of Directors, at a meeting duly called and
held, (i) determined that this Agreement and the transactions contemplated hereby are advisable and
in the best interests of the stockholders of Quest, (ii) approved this Agreement and the
transactions contemplated hereby and (iii) recommended adoption of this Agreement by the
stockholders of Quest. Quest shall provide Pinnacle (solely for informational purposes) a true,
correct and complete copy of such opinion promptly following the date of this Agreement.

     Section 6.19 Pinnacle Stock Ownership. Neither Quest nor any of its Subsidiaries owns any
shares of capital stock of Pinnacle or any other securities convertible into or otherwise
exercisable to acquire shares of capital stock of Pinnacle or has the right to acquire or vote such
shares under any agreement, arrangement or understanding, whether or not in writing, nor does it
have any agreement, arrangement or understanding, whether or not in writing, for the purpose of
acquiring, holding, voting or disposing of such shares or other securities. Quest is not an
“interested stockholder” (within the meaning of Section 203 of the DGCL) with respect to Pinnacle
and Quest has not, within the last three years, been an “interested stockholder” with respect to
Pinnacle.

     Section 6.20 Vote Required. Assuming the accuracy of the representations and warranties set
forth in Section 5.19, the only vote of the holders of any class or series of Quest capital
stock necessary to approve any transaction contemplated by this Agreement is the affirmative vote
in favor of the adoption of this Agreement by the holders of at least a majority of the shares of
Quest Common Stock present, in person or by proxy, at a meeting of the holders of Quest Common
Stock duly called and held (the “Quest Stockholder Approval”).

     Section 6.21 Certain Contracts.

          (a) Except
for this Agreement and except as set forth in Section 6.21(a) of the Quest
Disclosure Letter or filed as an exhibit to the Quest Reports, neither Quest nor any of its
Subsidiaries is a party to or bound by any “material contract” (as such term is defined in item
601(b)(10) of Regulation S-K of the SEC) (all contracts of the type described in this
Section 6.21(a) being referred to herein as the “Quest Material Contracts”).

          (b) Each Quest Material Contract is in full force and effect, and Quest and each of its
Subsidiaries have in all material respects performed all obligations required to be performed by
them to date under each Quest Material Contract to which they are party, except where such failure
to be in full force and effect or such failure to perform, individually or in the aggregate, has
not had and is not reasonably likely to have a Quest Material Adverse Effect. Except for such
matters as, individually or in the aggregate, have not had and are not reasonably

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likely to have a
Quest Material Adverse Effect, neither Quest nor any of its Subsidiaries (x) knows of, or has
received written notice of, any breach of or violation or default under (nor, to the knowledge of
Quest, does there exist any condition which with the passage of time or the giving of notice or
both would result in such a violation or default under) any Quest Material Contract or (y) has
received written notice of the desire of the other party or parties to any such Quest Material
Contract to exercise any rights such party has to cancel, terminate or repudiate such contract or
exercise remedies thereunder. Each Quest Material Contract is enforceable by Quest or a Subsidiary
of Quest in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors’ rights and general
principles of equity, except where such unenforceability does not constitute, individually or in
the aggregate, a Quest Material Adverse Effect.

     Section 6.22 Capital Expenditure Program. Section 6.22 of the Quest Disclosure Letter
accurately sets forth in all material respects the capital expenditures that are forecast, as of
the date of this Agreement, to be incurred by Quest and its Subsidiaries during 2008 on a quarterly
basis.

     Section 6.23 Improper Payments. No bribes, kickbacks or other similar payments have been made
in violation of Applicable Laws by Quest or any Subsidiary of Quest or agent of any of them in
connection with the conduct of their respective businesses or the operation of their respective
assets, and neither Quest or any Subsidiary of Quest, nor any agent of any of them has received any
such payments from vendors, suppliers or other persons.

     Section 6.24 Takeover Statutes; Rights Plans. Assuming (a) the accuracy of the
representations of Pinnacle in Section 5.19, (b) the security ownership information set
forth in Pinnacle’s Amendment No. 7 to Form S-1 filed with the SEC on September 27, 2007, under the
caption “Security Ownership of Certain Beneficial Owners and Management” includes all shares of
Pinnacle Common Stock beneficially owned by Credit Suisse and its Affiliates and Associates (as
defined in the Quest Rights Agreement), and (c) that up to an additional 50,000 shares of Quest
Common Stock may be beneficially owned by Credit Suisse and its Affiliates and Associates (as
defined in the Quest Rights Agreement), the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not cause to be applicable to the
Merger any Takeover Statute and will not result in a “Triggering Event” as defined in the Rights
Agreement, dated as of May 31, 2006, between Quest and UMB Bank, n.a. (the “Quest Rights
Agreement”).

     Section 6.25 Title, Ownership and Related Matters.

          (a) Quest and its Subsidiaries have, free and clear of all Liens except for Permitted Liens
and Liens, if any, created or permitted to be imposed by Quest, defensible title to their
respective inventory, equipment and other tangible and intangible property, including the natural
gas compression and oil and natural gas production, gathering and processing equipment owned and/or
operated by Quest or its Subsidiaries and related spare parts as may be reduced by the consumption
thereof, or increased through the replacement thereof or addition thereto, in the ordinary course
of maintenance and operation of their respective businesses, in each case as necessary to permit
Quest and its Subsidiaries to conduct their respective businesses as currently conducted in all
material respects.

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          (b) Each of Quest and its Subsidiaries has complied in all material respects with the terms of
all leases to which it is a party and under which it is in occupancy, except as, individually or in
the aggregate, have not had and are not reasonably likely to have a Quest Material Adverse Effect,
and all leases to which Quest or any of its Subsidiaries is a party or under which it is in
occupancy are in full force and effect. Each of Quest and its Subsidiaries enjoys peaceful and
undisturbed possession of the properties or assets purported to be leased under its material
leases. As used in this Section 6.25(b), the term “leases” does not include Oil and Gas
Properties.

          (c) Neither Quest nor any of its Subsidiaries has received any written notice from any person
disputing or challenging its ownership of the fee interests, easements or rights-of-way through
which any of its pipeline or gathering systems extend, other than disputes or challenges that have
not had or are not reasonably likely to have a Quest Material Adverse Effect.

     Section 6.26 Proxy Statement. None of the information to be supplied by Quest for inclusion
in (a) the Proxy Statement/Prospectus, to be filed by Pinnacle and Quest with the SEC, and any
amendments or supplements thereto, or (b) the Registration Statement to be filed by Quest with the
SEC in connection with the Merger, and any amendments or supplements thereto, will, at the
respective times such documents are filed, and, in the case of the Proxy Statement/Prospectus, at
the time the Proxy Statement/Prospectus or any amendment or supplement thereto is first mailed to
Pinnacle and Quest stockholders, at the time of Pinnacle Stockholder Approval and the Quest
Stockholder Approval and at the Effective Time, and, in the case of the Registration Statement,
when it becomes effective under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be made therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading.

     Section 6.27 Properties; Oil and Gas Matters.

          (a) All major items of operating equipment owned or leased by Quest or its Subsidiaries in
connection with the operation of its Oil and Gas Properties are, in the aggregate, in a state of
repair so as to be adequate in all material respects for reasonably prudent operations in the areas
in which they are operated, except as have not and are not reasonably likely to have, individually
or in the aggregate, a Quest Material Adverse Effect.

          (b) Except for goods and other property sold, used or otherwise disposed of since the dates of
the respective Reserve Reports (defined in clause (c) below) in the ordinary course of business or
reflected as having been sold, used or otherwise disposed of in the Quest SEC Reports, as of the
date of this Agreement, Quest and its Subsidiaries have good and defensible title to, or valid
leases or contractual rights to, all equipment and other personal property used or necessary for
use in the operation of its Oil and Gas Properties in the manner in which such properties were
operated prior to the date hereof.

          (c) Except for property sold or otherwise disposed of since the dates of the respective
Reserve Reports in the ordinary course of business or reflected as having been sold or otherwise
disposed of in the Quest SEC Reports, as of the date of this Agreement, Quest and its

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Subsidiaries
have good and defensible title to all Oil and Gas Properties forming the basis for the reserves
reflected in the reserve reports of Cawley, Gillespie & Associates, Inc. (“CGAI”), relating to
Quest interests referred to therein as of June 30, 2007 and in the internal reserve reports
prepared by Quest and furnished to Pinnacle (the “Quest Reserve Reports”), and in each case as
attributable to interests owned by Quest and its Subsidiaries, free and clear of any liens, except:
(a) liens reflected in the Quest Reserve Reports or in Quest SEC Documents filed prior to the date
of this Agreement, and (b) such imperfections of title, easements, liens, government or tribal
approvals or other matters and failures of title as, individually or in the aggregate, have not had
and are not reasonably likely to have a Quest Material Adverse Effect. Except as has not had and
is not reasonably likely to have, individually or in the aggregate, a Quest Material Adverse
Effect, all material proceeds from the sale of hydrocarbons produced from the Oil and Gas
Properties of Quest and its Subsidiaries are being received by them in a timely manner and are not
being held in suspense for any reason. To Quest’s knowledge, the gross and net undeveloped acreage
of Quest and its Subsidiaries as reported in Quest’s most recent Form 10-K filed with SEC prior to
this Agreement and in the Form S-1 was correct in all material respects as of the date of such Form
10-K and Form S-1, respectively, and there have been no changes in such gross and net undeveloped
acreage since such date which, individually or in the aggregate, have had or are reasonably likely
to have a Quest Material Adverse Effect.

          (d) Except as set forth in Section 6.27(d) of the Quest Disclosure Letter, the leases
and other agreements pursuant to which Quest and its Subsidiaries lease or otherwise acquire or
obtain operating rights affecting any real or personal property given value in the Quest Reserve
Reports are in good standing, valid and effective, and the rentals due by Quest or any of its
Subsidiaries to any lessor of any such oil and gas leases have been properly paid, except in each
case as, individually or in the aggregate, have not had and are not reasonably likely to have a
Quest Material Adverse Effect. Quest and its Subsidiaries have paid all royalties, overriding
royalties and other burdens on production due by Quest and its Subsidiaries with respect to their
Oil and Gas Properties, except for any non-payment of which, individually or in the aggregate, has
not had and is not reasonably likely to have a Quest Material Adverse Effect.

          (e) All information (excluding assumptions and estimates but including the statement of the
percentage of reserves from the oil and gas wells and other interests evaluated therein to which
Quest or its Subsidiaries are entitled and the percentage of the costs and expenses related to such
wells or interests to be borne by Quest or its Subsidiaries) supplied to CGAI, in each case
relating to Quest’s interests referred to in the Quest Reserve Reports as of December 31, 2006, by
or on behalf of Quest and its Subsidiaries that was material to such firms’ estimates of proved oil
and gas reserves attributable to the Oil and Gas Properties of Quest and its Subsidiaries in
connection with the preparation of the Quest Reserve Reports was (at the time supplied or as
modified or amended prior to the issuance of the Quest Reserve Reports) to Quest’s knowledge
accurate in all material respects and Quest has no knowledge of any material errors in such
information that existed at the time of such issuance.

          (f) Except as has not had and is not reasonably likely to have, individually or in the
aggregate, a Quest Material Adverse Effect, all Oil and Gas Properties operated by Quest or its
Subsidiaries have been operated in accordance with reasonable, prudent oil and gas field practices
and in compliance with the applicable oil and gas leases and applicable law.

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          (g) Neither Quest nor any of its Subsidiaries has produced hydrocarbons from its Oil and Gas
Properties in excess of regulatory allowables or other applicable limits on production that could
result in curtailment of production from any such property, except any such violations which,
individually or in the aggregate, have not had and are not reasonably likely to have a Quest
Material Adverse Effect.

          (h) Except as set forth in Section 6.27(h) of the Quest Disclosure Letter, none of the
material Oil and Gas Properties of Quest or any of its Subsidiaries is subject to any preferential
purchase, consent or similar right which would become operative as a result of the transactions
contemplated by this Agreement.

          (i) Except as set forth in Section 6.27(i) of the Quest Disclosure Letter, none of the
Oil and Gas Properties of Quest or any of its Subsidiaries are subject to any tax partnership
agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of
Chapter 1 of Subtitle A of the Code.

          (j) Attached as Section 6.27(j) of the Quest Disclosure Letter is a schedule of all
remaining costs and expenses for the plugging and abandonment by Quest of wells for which Quest is
liable pursuant to any Applicable Law or contract, which schedule is true and correct as of its
date.

     Section 6.28 Hedging. Section 6.28 of the Quest Disclosure Letter sets forth for the
periods shown all obligations of Quest and each of its Subsidiaries for the delivery of
Hydrocarbons attributable to any of the properties of Quest or any of its Subsidiaries in the
future on account of prepayment, advance payment, take-or-pay, forward sale or similar obligations
without then or thereafter being entitled to receive full value therefor. Except as set forth in
Section 6.28 of the Quest Disclosure Letter, as of the date of this Agreement, neither
Quest nor any of its Subsidiaries is bound by futures, hedge, swap, collar, put, call, floor, cap,
option or other contracts that are intended to benefit from, relate to or reduce or eliminate the
risk of fluctuations in the price of commodities, including Hydrocarbons, or securities.

     Section 6.29 Gas Regulatory Matters. None of Quest or any of its Subsidiaries is a gas
utility under Applicable Law.

ARTICLE 7

COVENANTS

     Section 7.1 Conduct of Business. Prior to the Effective Time, except as set forth in
Section 7.1 of the Pinnacle Disclosure Letter or the Quest Disclosure Letter or as any
other provision of this Agreement expressly permits or provides or (provided that the party
proposing to take such action has provided the other party with advance notice of the proposed
action to the extent practicable) as required by Applicable Laws, unless the other party has
consented in writing thereto, such consent not to be unreasonably withheld, delayed or conditioned,
each of Pinnacle and Quest:

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          (a) shall, and shall cause each of its Subsidiaries to, conduct its operations according to
their usual, regular and ordinary course in substantially the same manner as heretofore conducted;

          (b) shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use its
reasonable best efforts, to preserve intact their business organizations and goodwill (except that
any of its Subsidiaries may be merged with or into, or be consolidated with, any of its
Subsidiaries or may be liquidated into it or any of its Subsidiaries), keep available the services
of their respective officers and employees and maintain satisfactory relationships with those
persons having business relationships with them;

          (c) shall not amend or propose to amend its articles or certificate of incorporation or
bylaws, other than bylaw amendments that are not detrimental to the interests of stockholders;

          (d) shall not permit or allow MergerSub to amend its certificate of incorporation or bylaws;

          (e) shall promptly notify the other of any material change in its or any of its material
Subsidiaries’ condition (financial or otherwise) or business or any termination, cancellation,
repudiation or material breach of any Pinnacle Material Contract or Quest Material Contract,
respectively (or communications indicating that the same may be contemplated), or the initiation of
any material litigation or proceedings (including arbitration and other dispute resolution
proceedings) or material governmental complaints, investigations, inquiries or hearings (or
communications indicating that the same may be contemplated) or any material developments in any
such litigation, proceedings, complaints, investigations, inquiries or hearings;

          (f) shall not, and shall not permit any of its Subsidiaries to, (i) except pursuant to the
exercise of options or upon the settlement of restricted stock units in each case existing on the
Original Execution Date and disclosed in this Agreement or the Pinnacle Disclosure Letter or the
Quest Disclosure Letter, issue any shares of its capital stock or other equity securities, effect
any stock split or otherwise change its capitalization as it existed on the Original Execution
Date, (ii) grant, confer or award any option, warrant, conversion right or other right not existing
on the Original Execution Date to acquire or otherwise with respect to any shares of its capital
stock or other equity securities, or grant or issue any restricted stock or securities, except in
each case for awards under the Quest Benefit Plans or the Pinnacle Benefit Plans in existence as of
the Original Execution Date to any newly hired employees or to existing officers, directors or
employees in the ordinary course of business consistent with past practices; provided, however,
that the vesting or exercisability of any award made after the Original Execution Date as permitted
by this clause (ii) shall not accelerate as a result of the pendency, approval or consummation of
the transactions contemplated by this Agreement, (iii) amend or otherwise modify any option,
warrant, conversion right or other right to acquire any shares of its capital stock existing on the
Original Execution Date, (iv) with respect to any of its former, present or future officers,
directors or employees, increase any compensation or benefits, award or pay any bonuses, establish
any bonus plan or arrangement or enter into, amend or extend (or permit the extension of) any
employment or consulting agreement, except in each case in the

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ordinary course of business
consistent with past practices or as required by law, (v) except as expressly permitted under this
Agreement, adopt any new employee benefit plan or agreement (including any stock option, stock
benefit or stock purchase plan) or amend (except as required by law) any existing employee benefit
plan in any material respect, or (vi) permit any holder of an option or other award pertaining to
shares of Pinnacle Common Stock or Quest Common Stock to have shares withheld upon exercise,
vesting or payment for tax purposes, in excess of the number of shares needed to satisfy the
minimum statutory withholding requirements for federal and state tax withholding;

          (g) shall not (i) declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or (ii) redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock of any of its Subsidiaries, or make any
commitment for any such action, other than the acquisition of shares in connection with the
forfeiture of awards for no consideration;

          (h) except as set forth in Section 7.1(h) of the Quest Disclosure Letter, shall not,
and shall not permit any of its Subsidiaries to, sell, lease, license, encumber or otherwise
dispose of, or enter into a contract to sell, lease, license, encumber or otherwise dispose of, any
of its assets (including capital stock of Subsidiaries, other than the initial public offering by
the MLP) which are, individually or in the aggregate, material to it and its Subsidiaries as a
whole, except for (i) sales of surplus or obsolete equipment, (ii) sales of other assets in the
ordinary course of business or sales of assets pursuant to contractual rights existing as of the
Original Execution Date that were entered into the ordinary course of business consistent with past
practices, (iii) sales, leases or other transfers between such party and its wholly owned
Subsidiaries or between those Subsidiaries, (iv) sales, dispositions or divestitures as may be
required by or in conformance with Applicable Laws in order to permit or facilitate the
consummation of the transactions contemplated by this Agreement in accordance with Section
7.5(c), or (v) arm’s-length sales or other transfers not described in clauses (i) through (iii)
above for aggregate consideration not exceeding $5.0 million for each of Quest and Pinnacle;

          (i) except as set forth in Section 7.1(i) of the Quest Disclosure Letter, shall not,
and shall not permit any of its Subsidiaries to, (i) acquire or agree to acquire by merging or
consolidating with, or by purchasing an equity interest in or a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership, association or other
business organization or division thereof, except in each case for acquisitions and agreements that
involve an aggregate consideration of less than (A) $10.0 million for all acquisitions of the
equity interests in or a substantial portion of the assets of businesses or entities whose
principal assets are oil and gas leases, gathering systems and related pipelines and equipment and
(B) $5.0 million for all other acquisitions to which this paragraph relates, in each case for each
of Quest and Pinnacle (excluding, with respect to this clause (i), acquisitions approved in writing
by both parties), or (ii) acquire or agree to acquire, directly or indirectly, any assets or
securities that would require a filing or approval under the HSR Act;

          (j) shall not, and shall cause its Subsidiaries not to, change any of the material accounting
principles or practices used by it except as may be required as a result of a change in generally
accepted accounting principles;

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          (k) shall, and shall cause any of its Subsidiaries to, use commercially reasonable efforts to
maintain in full force without interruption its present insurance policies or comparable insurance
coverage;

          (l) shall not, and shall not permit any of its Subsidiaries to, (i) make or rescind any
material election relating to taxes, including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or other investments where it has the
capacity to make such binding election, (ii) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes except
to the extent of any reserve reflected on that party’s consolidated balance sheet as of June 30,
2007 as filed with the SEC in its Quarterly Report on Form 10-Q for the quarter then ended relating
to such matter that was established in the ordinary course of business consistent with past
practice, or (iii) change in any material respect any of its methods of reporting any item for tax
purposes from those employed in the preparation of its tax returns for the most recent taxable year
for which a return has been filed, except as may be required by Applicable Law;

          (m) shall not, and shall cause its Subsidiaries not to, materially increase its spending
compared to its capital expenditure budget set forth in the Pinnacle Disclosure Letter and the
Quest Disclosure Letter, respectively;

          (n) except as set forth in Section 7.1(n) of the Quest Disclosure Letter, shall not,
and shall not permit any of its Subsidiaries to, (i) incur any indebtedness for borrowed money in
excess of $30 million, in the aggregate, or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any of its debt securities or any of its
Subsidiaries or guarantee any debt securities of others, other than (A) borrowings from that
party’s or its Subsidiary’s revolving credit facility in the ordinary course of business, (B)
borrowings the proceeds of which are used to repay or repurchase other indebtedness of that party
or its Subsidiaries or (C) borrowings in respect of intercompany debt or (ii) except in the
ordinary course of business or with or between its Subsidiaries, enter into any material lease
(whether such lease is an operating or capital lease) or create any material Liens on its property
(other than Permitted Liens or Liens securing debt permitted to be incurred by this Section
7.1(n));

          (o) shall not, and shall cause its Subsidiaries not to, purchase or otherwise acquire any
shares of capital stock of Pinnacle or Quest, other than shares purchased solely to satisfy
withholding obligations in connection with the vesting or exercise (as applicable) of restricted
stock, stock options, stock appreciation rights, restricted stock units and similar awards by the
grantees thereof;

          (p) shall not take any action that could reasonably be expected to delay materially or
adversely affect in a material respect the ability of any of the parties hereto to obtain any
consent, authorization, order or approval of any governmental commission, board or other regulatory
body or the expiration of any applicable waiting period required to consummate the transactions
contemplated by this Agreement;

          (q) unless in the good faith opinion of its Board of Directors after consultation with its
outside legal counsel the following would be inconsistent with its fiduciary duties, (i)

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shall not
terminate, amend, modify or waive any provision of any agreement containing a standstill covenant
to which it is a party; and (ii) shall enforce, to the fullest extent permitted under Applicable
Law, the provisions of any such agreement, including by obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or any state having jurisdiction;

          (r) shall not take any action that would reasonably be expected to result in any condition in
Article 8 not being satisfied; and

          (s) shall not (i) agree in writing or otherwise to take any of the prohibited actions
described above or (ii) permit any of its Subsidiaries to agree in writing or otherwise to take any
of the prohibited actions described above that refer to Subsidiaries.

     Section 7.2 No Solicitation by Quest.

          (a) Quest shall not, nor shall it authorize or permit any of its Subsidiaries or any of their
respective directors, officers or employees or any investment banker, financial advisor, attorney,
accountant or other advisor, agent or representative (collectively, “Representatives”) retained by
it or any of its Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or knowingly encourage, or take any other action designed to, or which could reasonably be
expected to, facilitate, any inquiry or the making of any proposal or offer that constitutes, or
that could reasonably be expected to lead to, a Quest Takeover Proposal, or (ii) enter into,
continue or otherwise participate in any discussions or negotiations regarding, or furnish to any
person any confidential information in connection with, any Quest Takeover Proposal. Without
limiting the foregoing, it is agreed that any violation of the restrictions set forth in the
preceding sentence by any Representative of Quest or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of Quest or any of its Subsidiaries or otherwise, shall be a
breach of this Section 7.2 by Quest. Quest shall, and shall cause its Subsidiaries to,
immediately cease and cause to be terminated all existing discussions or negotiations with any
person conducted heretofore with respect to any Quest Takeover Proposal and request the prompt
return or destruction of all confidential information previously furnished. Notwithstanding the
foregoing, at any time prior to obtaining Quest Stockholder Approval, in response to a bona fide
written Quest Takeover Proposal that the Board of Directors of Quest determines in good faith
(after consultation with outside counsel and a financial advisor of nationally recognized
reputation) constitutes or is reasonably likely to lead to a Quest Superior Proposal, and which
Quest Takeover Proposal was made after the Original Execution Date and did not otherwise result
from a breach of this Section 7.2, Quest may, if its Board of Directors determines in good
faith (after consultation with outside counsel) that the failure to do so would be inconsistent
with its fiduciary duties to the stockholders of Quest under Applicable Laws, and subject to
compliance with Section 7.2(c) and after giving Pinnacle written notice of such
determination, (x) furnish information with respect to Quest and its Subsidiaries to the person
making such Quest Takeover Proposal (and its Representatives) pursuant to a customary
confidentiality agreement not less restrictive of such person than the Confidentiality Agreement,
provided that all such information has previously been provided to Pinnacle or is provided to
Pinnacle prior to or substantially concurrently with the time it is provided to such person, and
(y) participate in discussions or negotiations with the person making such Quest Takeover Proposal
(and its Representatives) regarding such Quest Takeover Proposal.

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     The term “Quest Takeover Proposal” means any inquiry, proposal or offer from any person
relating to, or that could reasonably be expected to lead to, directly or indirectly, (i) any
acquisition or purchase, whether by purchase, exchange, merger, consolidation, business combination
or similar transaction, in one transaction or a series of transactions, of assets or businesses
that constitute 20% or more of the revenues, net income or the assets of Quest and its Subsidiaries
on a consolidated basis (excluding the initial public offering of common units by the MLP pursuant
to the MLP Registration Statement and the transactions contemplated thereby), or 20% or more of any
class of equity securities of Quest, (ii) any tender offer or exchange offer that if consummated
would result in any person beneficially owning 20% or more of any class of equity securities of
Quest, or (iii) any merger, consolidation, business combination, recapitalization, liquidation,
dissolution, joint venture, binding share exchange or similar transaction involving Quest pursuant
to which any person or the stockholders of any person would own 20% or more of any class of equity
securities of Quest or of any resulting parent company of Quest, other than the transactions
contemplated by this Agreement.

     The term “Quest Superior Proposal” means any unsolicited bona fide proposal or offer made by a
third party that if consummated would result in such person’s (or its stockholders’) owning,
directly or indirectly, more than 50% of the shares of Quest Common Stock then outstanding (or of
the surviving entity in a merger or the direct or indirect parent of the surviving entity in a
merger) or all or substantially all the assets of Quest, which the Board of Directors of Quest
determines in good faith (after consultation with a financial advisor of nationally recognized
reputation) to be (i) more favorable to the stockholders of Quest from a financial point of view
than the Merger (taking into account all the terms and conditions of such proposal and this
Agreement (including any changes to the financial terms of this Agreement proposed by Pinnacle in
response to such offer or otherwise)) and (ii) reasonably capable of being financed and completed,
taking into account all financial, legal, regulatory, timing and other aspects of such proposal.

     For purposes of the definitions of “Quest Takeover Proposal” and “Quest Superior Proposal,”
the term “person” shall include any group within the meaning of Section 13(d) of the Exchange Act.

          (b) Neither the Board of Directors of Quest nor any committee thereof shall (i) (A) withdraw
(or modify in a manner adverse to Pinnacle), or publicly propose to withdraw (or modify in a manner
adverse to Pinnacle), the approval, recommendation or declaration of advisability by such Board of
Directors or any such committee thereof of this Agreement, the Merger or the other transactions
contemplated by this Agreement, (B) recommend, adopt or approve, or publicly propose to recommend,
adopt or approve, any Quest Takeover Proposal or (C) fail to reaffirm within a reasonable period of
time upon request by Pinnacle (publicly if so requested) its recommendation of this Agreement, the
Quest Merger and the other transactions contemplated by this Agreement (any such action or failure
described in this clause (i) being referred to as a “Quest Adverse Recommendation Change”) or
(ii) approve or recommend, or publicly propose to approve or recommend, or allow Quest or any of
its Subsidiaries to execute or enter into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement constituting or related to, or that is
intended to or could reasonably be expected to lead to, any Quest Takeover Proposal (other than a
confidentiality

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agreement referred to in Section 7.2(a)). Notwithstanding the foregoing,
at any time prior to obtaining Quest Stockholder Approval, the Board of Directors of Quest may make
a Quest Adverse Recommendation Change if such Board of Directors determines in good faith (after
consultation with outside counsel) that the failure to do so would be inconsistent with its
fiduciary duties to the stockholders of Quest under Applicable Laws; provided, however, that no
Quest Adverse Recommendation Change may be made until after the fifth business day following
Pinnacle’s receipt of written notice (a “Quest Notice of Adverse Recommendation”) from Quest
advising Pinnacle that the Board of Directors of Quest intends to make a Quest Adverse
Recommendation Change and specifying the terms and conditions of the Quest Superior Proposal, if
any, that is related to such Quest Adverse Recommendation Change (it being understood and agreed
that any amendment to the financial terms or any other material term of such Quest Superior
Proposal shall require a new Quest Notice of Adverse Recommendation and a new five business day
period). In determining whether to make a Quest Adverse Recommendation Change, the Board of
Directors of Quest shall take into account any changes to the financial terms of this Agreement
proposed by Pinnacle in response to a Quest Notice of Adverse Recommendation or otherwise.

          (c) In addition to the obligations of Quest set forth in paragraphs (a) and (b) of this
Section 7.2, Quest shall promptly (and in any event within one business day after receipt
thereof) advise Pinnacle orally and in writing of any Quest Takeover Proposal or any inquiry with
respect to or that could reasonably be expected to lead to any Quest Takeover Proposal, the
material terms and conditions of any such Quest Takeover Proposal or inquiry (including any changes
thereto) and the identity of the person making any such Quest Takeover Proposal or inquiry. Quest
shall (i) keep Pinnacle fully informed of the status and material terms and conditions (including
any change therein) of any such Quest Takeover Proposal or inquiry and (ii) provide to Pinnacle as
soon as practicable after receipt or delivery thereof with copies of all correspondence and other
written material sent or provided to Quest or any of its Subsidiaries from any person that
describes any of the material terms and conditions of any Quest Takeover Proposal.

          (d) Nothing contained in this Section 7.2 shall prohibit Quest from (x) taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated
under the Exchange Act or (y) making any required disclosure to the stockholders of Quest if, in
the good faith judgment of the Board of Directors of Quest (after consultation with outside
counsel) failure to so disclose would constitute a violation of Applicable Law or fiduciary duty;
provided, however, that in no event shall Quest or its Board of Directors or any committee thereof
take, or agree or resolve to take, any action prohibited by Section 7.2(b).

     Section 7.3 No Solicitation by Pinnacle.

          (a) Pinnacle shall not, nor shall it authorize or permit any of its Subsidiaries or any of
their respective directors, officers or employees or any Representative retained by it or any of
its Subsidiaries to, directly or indirectly through another person, (i) solicit, initiate or
knowingly encourage, or take any other action designed to, or which could reasonably be expected
to, facilitate, any inquiry or the making of any proposal or offer that constitutes, or that could
reasonably be expected to lead to, a Pinnacle Takeover Proposal or (ii) enter into, continue or
otherwise participate in any discussions or negotiations regarding, or furnish to any person

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any
confidential information in connection with, any Pinnacle Takeover Proposal. Without limiting the
foregoing, it is agreed that any violation of the restrictions set forth in the preceding sentence
by any Representative of Pinnacle or any of its Subsidiaries, whether or not such person is
purporting to act on behalf of Pinnacle or any of its Subsidiaries or otherwise, shall be a breach
of this Section 7.3 by Pinnacle. Pinnacle shall, and shall cause its Subsidiaries to,
immediately cease and cause to be terminated all existing discussions or negotiations with any
person conducted heretofore with respect to any Pinnacle Takeover Proposal and request the prompt
return or destruction of all confidential information previously furnished. Notwithstanding the
foregoing, at any time prior to obtaining Pinnacle Stockholder Approval, in response to a bona fide
written Pinnacle Takeover Proposal that the Board of Directors of Pinnacle determines in good faith
(after consultation with outside counsel and a financial advisor of nationally recognized
reputation) constitutes or is reasonably likely to lead to a Pinnacle Superior Proposal, and which
Pinnacle Takeover Proposal was made after the Original Execution Date and did not otherwise result
from a breach of this Section 7.3, Pinnacle may, if its Board of Directors determines in
good faith (after consultation with outside counsel) that the failure to do so would be
inconsistent with its fiduciary duties to the stockholders of Pinnacle under Applicable Laws, and
subject to compliance with Section 7.3(c) and after giving Quest written notice of such
determination, (x) furnish information with respect to Pinnacle and its Subsidiaries to the person
making such Pinnacle Takeover Proposal (and its Representatives) pursuant to a customary
confidentiality agreement not less restrictive of such person than the Confidentiality Agreement,
provided that all such information has previously been provided to Quest or is provided to Quest
prior to or substantially concurrently with the time it is provided to such person, and
(y) participate in discussions or negotiations with the person making such Pinnacle Takeover
Proposal (and its Representatives) regarding such Pinnacle Takeover Proposal.

     The term “Pinnacle Takeover Proposal” means any inquiry, proposal or offer from any person
relating to, or that could reasonably be expected to lead to, directly or indirectly, (i) any
acquisition or purchase, whether by purchase, exchange, merger, consolidation, business combination
or similar transaction, in one transaction or a series of transactions, of assets or businesses
that constitute 20% or more of the revenues, net income or the assets of Pinnacle and its
Subsidiaries, on a consolidated basis, or 20% or more of any class of equity securities of
Pinnacle, (ii) any tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of Pinnacle, or (iii) any merger,
consolidation, business combination, recapitalization, liquidation, dissolution, joint venture,
binding share exchange or similar transaction involving Pinnacle pursuant to which any person or
the stockholders of any person would own 20% or more of any class of equity securities of Pinnacle
or of any resulting parent company of Pinnacle, other than the transactions contemplated by this
Agreement.

     The term “Pinnacle Superior Proposal” means any unsolicited bona fide proposal or offer made
by a third party that if consummated would result in such person’s (or its stockholders’) owning,
directly or indirectly, more than 50% of the shares of Pinnacle Common Stock then outstanding (or
of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a
merger) or all or substantially all the assets of Pinnacle, which the Board of Directors of
Pinnacle determines in good faith (after consultation with a financial advisor of nationally
recognized reputation) to be (i) more favorable to the stockholders of Pinnacle from a financial
point of view than the Merger (taking into account all the terms and conditions of such proposal

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and this Agreement (including any changes to the financial terms of this Agreement proposed by
Quest in response to such offer or otherwise)) and (ii) reasonably capable of being financed and
completed, taking into account all financial, legal, regulatory, timing and other aspects of such
proposal.

     For purposes of the definitions of “Pinnacle Takeover Proposal” and “Pinnacle Superior
Proposal,” the term “person” shall include any group within the meaning of Section 13(d) of the
Exchange Act.

          (b) Neither the Board of Directors of Pinnacle nor any committee thereof shall (i) (A)
withdraw (or modify in a manner adverse to Quest), or publicly propose to withdraw (or modify in a
manner adverse to Quest), the approval, recommendation or declaration of advisability by such Board
of Directors or any such committee thereof of this Agreement, the Merger or the other transactions
contemplated by this Agreement, (B) recommend, adopt or approve, or publicly propose to recommend,
adopt or approve, any Pinnacle Takeover Proposal or (C) fail to reaffirm within a reasonable period
of time upon request by Quest (publicly if so requested) its recommendation of this Agreement, the
Merger and the other transactions contemplated by this Agreement (any such action or failure
described in this clause (i) being referred to as a “Pinnacle Adverse Recommendation Change”) or
(ii) approve or recommend, or publicly propose to approve or recommend, or allow Pinnacle or any of
its Subsidiaries to execute or enter into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement constituting or related to, or that is
intended to or could reasonably be expected to lead to, any Pinnacle Takeover Proposal (other than
a confidentiality agreement referred to in Section 7.3(a)). Notwithstanding the foregoing,
at any time prior to obtaining Pinnacle Stockholder Approval, the Board of Directors of Pinnacle
may make a Pinnacle Adverse Recommendation Change if such Board of Directors determines in good
faith (after consultation with outside counsel) that the failure to do so would be inconsistent
with its fiduciary duties to the stockholders of Pinnacle under Applicable Laws; provided, however,
that no Pinnacle Adverse Recommendation Change may be made until after the fifth business day
following Quest’s receipt of written notice (a “Pinnacle Notice of Adverse Recommendation”) from
Pinnacle advising Quest that the Board of Directors of Pinnacle intends to make a Pinnacle Adverse
Recommendation Change and specifying the terms and conditions of the Pinnacle Superior Proposal, if
any, that is related to such Pinnacle Adverse Recommendation Change (it being understood and agreed
that any amendment to the financial terms or any other material term of such Pinnacle Superior
Proposal shall require a new Pinnacle Notice of Adverse Recommendation and a new five business day
period). In determining whether to make a Pinnacle Adverse Recommendation Change, the Board of
Directors of Pinnacle shall take into account any changes to the financial terms of this Agreement
proposed by Quest in response to a Pinnacle Notice of Adverse Recommendation or otherwise.

          (c) In addition to the obligations of Pinnacle set forth in paragraphs (a) and (b) of this
Section 7.3, Pinnacle shall promptly (and in any event within one business day after
receipt thereof) advise Quest orally and in writing of any Pinnacle Takeover Proposal or any
inquiry with respect to or that could reasonably be expected to lead to any Pinnacle Takeover
Proposal, the material terms and conditions of any such Pinnacle Takeover Proposal or inquiry
(including any changes thereto) and the identity of the person making any such Pinnacle

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Takeover
Proposal or inquiry. Pinnacle shall (i) keep Quest fully informed of the status and material terms
and conditions (including any change therein) of any such Pinnacle Takeover Proposal or inquiry and
(ii) provide to Quest as soon as practicable after receipt or delivery thereof with copies of all
correspondence and other written material sent or provided to Pinnacle or any of its Subsidiaries
from any person that describes any of the material terms and conditions of any Pinnacle Takeover
Proposal.

          (d) Nothing contained in this Section 7.3 shall prohibit Pinnacle from (x) taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated
under the Exchange Act or (y) making any required disclosure to the stockholders of Pinnacle if, in
the good faith judgment of the Board of Directors of Pinnacle (after consultation with outside
counsel) failure to so disclose would constitute a violation of Applicable Law or fiduciary duty;
provided, however, that in no event shall Pinnacle or its Board of Directors or any committee
thereof take, or agree or resolve to take, any action prohibited by Section 7.3(b).

     Section 7.4 Meetings of Stockholders.

          (a) Each of Pinnacle and Quest shall take all action necessary, in accordance with Applicable
Law and its articles or certificate of incorporation and bylaws, to convene a meeting of its
stockholders as promptly as practicable after the Form S-4 has been declared effective to consider
and vote upon the adoption of this Agreement. Pinnacle and Quest shall coordinate and cooperate
with respect to the timing of such meetings and shall use their reasonable best efforts to hold
such meetings on the same day.

          (b) Subject to Sections 7.2 and 7.3, respectively, each of Pinnacle and Quest, through
its Board of Directors, shall recommend approval of such matters and use its reasonable best
efforts to take all lawful action to solicit approval by its stockholders in favor of such matters.

          (c) Quest shall take all action necessary to cause MergerSub to adopt this Agreement as the
sole stockholder of MergerSub prior to the Closing.

     Section 7.5 Filings; Reasonable Best Efforts, Etc.

          (a) Subject to the terms and conditions herein provided, Quest and Pinnacle shall:

          (i) if applicable, make their respective required filings under the HSR Act
contemplated by Section 8.1(b) (and shall share equally all filing fees incident
thereto), which filings shall be made not more than 15 business days from the Original
Execution Date, and thereafter shall promptly make any other required submissions under the
HSR Act;

          (ii) use their reasonable best efforts to cooperate with one another in (A) determining
which filings are required to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the Effective Time
from, governmental or regulatory authorities of the United States,

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the several states,
and
other jurisdictions in connection with the execution and delivery of this Agreement, and the
consummation of the Merger and the transactions contemplated by this Agreement; and (B)
timely making all such filings and timely seeking all such consents, approvals, permits or
authorizations without causing a Pinnacle Material Adverse Effect or a Quest Material
Adverse Effect;

          (iii) promptly notify each other of any communication concerning this Agreement or the
transactions contemplated hereby to that party from any governmental or regulatory authority
and permit the other party to review in advance any proposed communication concerning this
Agreement or the transactions contemplated hereby to any governmental or regulatory
authority;

          (iv) not participate or agree to participate in any meeting or discussion with any
governmental or regulatory authority in respect of any filing, investigation or other
inquiry concerning this Agreement or the transactions contemplated hereby unless it consults
with the other party in advance and, to the extent permitted by such governmental or
regulatory authority, gives the other party the opportunity to attend and participate in
such meeting or discussion;

          (v) furnish the other party with copies of all correspondence, filings and
communications (and memoranda setting forth the substance thereof) between it and its
affiliates and representatives on the one hand, and any government or regulatory authority
or members of any such authority’s staff on the other hand, with respect to this Agreement
and the transactions contemplated hereby;

          (vi) furnish the other party with such necessary information and reasonable assistance
as such other party and its affiliates may reasonably request in connection with their
preparation of necessary filings, registrations or submissions of information to any
governmental or regulatory authorities, including, if applicable, any filings necessary or
appropriate under the provisions of the HSR Act;

          (vii) if applicable, “substantially comply” and certify substantial compliance with any
request for additional information (also known as a “second request”) issued pursuant to the
HSR Act as soon as reasonably practicable following the issuance of the request for
additional information; and

          (viii) upon the terms and subject to the conditions herein provided, use their
reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under Applicable Laws or otherwise to
consummate and make effective, in an expeditious manner, the transactions contemplated by
this Agreement, including using reasonable best efforts to satisfy the conditions precedent
to the obligations of any of the parties hereto, to obtain all necessary authorizations,
consents and approvals, to effect all necessary registrations and filings, to obtain the
consents contemplated by Section 8.1(f).

          (b) Without limiting Section 7.5(a), but subject to Section 7.5(c), Pinnacle
and Quest shall each use reasonable best efforts:

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          (i) if applicable, to cause the expiration or termination of the applicable waiting
period under the HSR Act;

          (ii) to avoid the entry of, or to have vacated, terminated or modified, any decree,
order or judgment that would restrain, prevent or delay the Closing; and

          (iii) to take any and all steps necessary to obtain any consents or eliminate any
impediments to the Merger.

          (c) Nothing in this Agreement shall require Pinnacle or Quest to dispose of any of its assets
or to limit its freedom of action with respect to any of its businesses, or to consent to any
disposition of its assets or limits on its freedom of action with respect to any of its businesses,
whether prior to or after the Effective Time, or to commit or agree to any of the foregoing, to
obtain any consents, approvals, permits or authorizations or to remove any impediments to the
Merger relating to Antitrust Laws or to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order or other order in any suit or proceeding relating to the
HSR Act or other antitrust, competition, premerger notification or trade-regulation law, regulation
or order (“Antitrust Laws”), other than such dispositions, limitations or consents, commitments or
agreements that in each such case may be conditioned upon the consummation of the Merger and the
transactions contemplated hereby and that in each such case, individually or in the aggregate, do
not have and are not reasonably likely to have a Material Adverse Effect on Quest after the Merger;
provided, however, that neither Quest nor Pinnacle shall take or agree to any action required or
permitted by this Section 7.5(c) without the prior written consent of the other party
(which consent shall not be unreasonably withheld or delayed).

          (d) Pinnacle, Quest and MergerSub shall each use its reasonable best efforts to cause the
Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code and to
obtain the Tax opinions set forth in Section 8.2(c) and Section 8.3(b). Pinnacle,
Quest and MergerSub agree to file all Tax Returns consistent with the treatment of the Merger as a
“reorganization” within the meaning of Section 368(a) of the Code and in particular as a
transaction described in Section 368(a)(2)(E) of the Code. This Agreement is intended to
constitute a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g).

     Section 7.6 Inspection. From the Original Execution Date to the Effective Time, each of Quest
and Pinnacle shall allow all designated officers, attorneys, accountants and other representatives
of Pinnacle or Quest, as the case may be, reasonable access, at all reasonable times, upon
reasonable notice, to the records and files, correspondence, audits and properties, as well as to
all information relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs of Pinnacle and Quest and their respective Subsidiaries,
including inspection of such properties; provided that no investigation pursuant to this
Section 7.6 shall affect any representation or warranty given by any party hereunder, and
provided further that notwithstanding the provision of information or investigation by any party,
no party shall be deemed to make any representation or warranty except as expressly set forth in
this Agreement. Notwithstanding the foregoing, no party shall be required to provide any
information (i) it reasonably believes it may not provide to the other parties by reason of

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Applicable Laws, (ii) that constitutes information protected by attorney/client privilege, or (iii)
that it is required to keep confidential by reason of contract or agreement with third parties,
provided that, in such case, the party withholding such information will provide to the requesting
party a description of the type or nature of the withheld information to the greatest extent
permissible. The parties hereto shall make reasonable and appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding sentence apply. Each
of Pinnacle and Quest agrees that it shall not, and shall cause its respective representatives not
to, use any information obtained pursuant to this Section 7.6 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. All non-public information
obtained pursuant to this Section 7.6 shall be governed by the Mutual Confidential
Agreement dated December 6, 2007 between Pinnacle and Quest (the “Confidentiality Agreement”).
Quest and Pinnacle agree that Section 7 (Term) of the Confidentiality Agreement shall hereby be
amended to read in its entirety as follows: The term of this Agreement, during which Confidential
Information may be furnished, shall be from the Original Execution Date to the date of October 16,
2008.

     Section 7.7 Publicity. Each of Pinnacle and Quest will consult with each other before issuing
any press release or similar public announcement pertaining to this Agreement or the transactions
contemplated hereby and shall not issue any such press release or make any such public announcement
without the prior consent of the other party, which consent shall not be unreasonably withheld,
delayed or conditioned, except as may be required by Applicable Laws or by obligations pursuant to
any listing agreement with any national securities exchange, in which case the party proposing to
issue such press release or make such public announcement shall use its reasonable best efforts to
consult in good faith with the other party before issuing any such press releases or making any
such public announcements.

     Section 7.8 Registration Statement on Form S-4.

          (a) Each of Pinnacle and Quest shall cooperate and promptly prepare, and Pinnacle and Quest
shall file with the SEC, as soon as practicable, the Form S-4 under the Securities Act with respect
to the shares of Quest Common Stock issuable in connection with the Merger, a portion of which Form
S-4 shall also serve as the joint proxy statement with respect to the meetings of the stockholders
of Pinnacle and of Quest in connection with the transactions contemplated by this Agreement. The
respective parties will cause the Proxy Statement/ Prospectus and the Form S-4 to comply as to form
in all material respects with the applicable provisions of the Securities Act, the Exchange Act and
the rules and regulations thereunder. Each of Pinnacle and Quest shall use its reasonable best
efforts to have the Form S-4 declared effective by the SEC as promptly as practicable and to keep
the Form S-4 effective as long as is necessary to consummate the Merger and the transactions
contemplated hereby. Each of Pinnacle and Quest shall use its reasonable best efforts to obtain,
prior to the effective date of the Form S-4, all necessary state securities law or “Blue Sky”
permits or approvals required to carry out the transactions contemplated by this Agreement. Each
party will advise the others, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, the issuance of any stop
order, the suspension of the qualification of the shares of Quest Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction or any request by the SEC for
amendment of the Proxy Statement/Prospectus or the Form S-4 or comments thereon and responses
thereto or requests by

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the SEC for additional information. Each of the parties shall also promptly
provide each other party copies of all written correspondence received from the SEC and summaries
of all oral comments received from the SEC in connection with the transactions contemplated by this
Agreement. Each of the parties shall promptly provide each other party with drafts of all
correspondence intended to be sent to the SEC in connection with the transactions contemplated by
this Agreement and allow each such party the opportunity to comment thereon prior to delivery to
the SEC.

          (b) Pinnacle and Quest shall each use its reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to its stockholders as promptly as practicable after the Form S-4
is declared effective under the Securities Act.

          (c) Each of Pinnacle and Quest shall ensure that the information provided by it for inclusion
in the Proxy Statement/Prospectus and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the respective meetings of stockholders of Pinnacle and Quest, or, in
the case of information provided by it for inclusion in the Form S-4 or any amendment or supplement
thereto, at the time it becomes effective, (i) will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading and
(ii) will comply as to form in all material respects with the provisions of the Securities Act and
the Exchange Act.

     Section 7.9 Listing Application. Pinnacle and Quest shall use reasonable best efforts to
cause Quest to promptly prepare and submit to the NASDAQ Stock Market a listing application
covering the shares of Quest Common Stock (and the associated rights under the Quest Rights
Agreement) issuable in connection with the Merger and shall use reasonable best efforts to obtain,
prior to the Effective Time, approval for the listing of such shares of Quest Common Stock on the
NASDAQ Global Market.

     Section 7.10 Letters of Accountants.

          (a) Quest shall use reasonable best efforts to cause to be delivered to Pinnacle “comfort”
letters of Murrell, Hall, McIntosh & Co., PLLP, Quest’s independent public accountants, dated
within two business days of the effective date of the Form S-4 and within two business days of the
meeting of stockholders of Quest contemplated by Section 7.4, respectively, and addressed
to Pinnacle with regard to certain financial information regarding Quest included in the Form S-4,
in form reasonably satisfactory to Pinnacle and customary in scope and substance for “comfort”
letters delivered by independent public accountants in connection with registration statements
similar to the Form S-4.

     (b) Pinnacle shall use reasonable best efforts to cause to be delivered to Quest “comfort”
letters of Ehrhardt Keefe Steiner & Hottman PC, Pinnacle’s independent public accountants, dated
within two business days of the effective date of the Form S-4 and within two business days of the
meeting of stockholders of Pinnacle contemplated by Section 7.4, respectively, and
addressed to Quest, with regard to certain financial information regarding Pinnacle included in the
Form S-4, in form reasonably satisfactory to Quest and customary in

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scope and substance for
“comfort” letters delivered by independent public accountants in connection with registration
statements similar to the Form S-4.

     Section 7.11 Agreements of Rule 145 Affiliates. Prior to the Effective Time, Pinnacle shall
cause to be prepared and delivered to Quest a list identifying all persons whom Pinnacle believes,
at the date of the meeting of Pinnacle’s stockholders to consider and vote upon the adoption of
this Agreement, are “affiliates,” as that term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act (the “Rule 145 Affiliates”) of Pinnacle. Pinnacle shall use its reasonable best
efforts to cause each person who is identified as its Rule 145 Affiliate in such list to deliver to
Quest, at or prior to the Effective Time, a written agreement in the form of Exhibit 7.11 to the
Original Agreement. Quest shall be entitled to place restrictive legends on any certificates
representing shares of Quest Common Stock issued to such Rule 145 Affiliates pursuant to the
Merger.

     Section 7.12 Expenses. Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such expenses, except (i) as Section 9.5 otherwise provides, (ii)
that Quest and Pinnacle shall share equally (A) the fees incident to the filings referred to in
Section 7.5(a)(i), (B) the SEC and other filing fees incident to the Form S-4 and the Proxy
Statement/Prospectus and the costs and expenses associated with printing the Proxy
Statement/Prospectus, and (C) the fees associated with the NASDAQ Stock Market listing referred to
in Section 7.9, and (iii) as otherwise agreed in writing by the parties.

     Section 7.13 Indemnification and Insurance.

          (a) For six years after the Effective Time, Quest shall indemnify and hold harmless and
advance expenses to, to the greatest extent permitted by law as of the Original Execution Date, the
individuals who at or prior to the Effective Time were officers and directors of Pinnacle and its
Subsidiaries with respect to all acts or omissions by them in their capacities as such or taken at
the request of Pinnacle at any time prior to the Effective Time. Quest will honor all
indemnification agreements, expense advancement and exculpation provisions with the individuals who
at or prior to the Effective Time were officers and directors of Pinnacle or its Subsidiaries
(including under Pinnacle’s certificate of incorporation or by-laws) in effect as of the Original
Execution Date in accordance with the terms thereof. Pinnacle has disclosed to Quest all such
indemnification agreements prior to the Original Execution Date.

          (b) For a period of six years after the Effective Time, Quest shall cause to be maintained
officers’ and directors’ liability insurance covering all officers and directors of Pinnacle who
are, or at any time prior to the Effective Time were, covered by Pinnacle’s existing officers’ and
directors’ liability insurance policies on terms substantially no less advantageous to such persons
than such existing insurance, provided that Quest shall not be required to pay annual premiums in
excess of 200% of the last annual premium paid by Pinnacle prior to the Original Execution Date
(the amount of which premium is set forth in Section 7.13 of the Pinnacle Disclosure
Letter), but in such case shall purchase as much coverage as reasonably practicable for such
amount.

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          (c) The rights of each person identified in Section 7.13(a) shall be in addition to
any other rights such person may have under the certificate of incorporation or bylaws of Pinnacle
or any of its Subsidiaries, under Applicable Law or otherwise. The provisions of this Section
7.13 shall survive the consummation of the Merger and expressly are intended to benefit each
such person.

          (d) In the event Quest or any of its successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all of its properties and assets to
any person, then proper provision shall be made so that the successors and assigns of Quest shall
assume the obligations set forth in this Section 7.13.

     Section 7.14 Antitakeover Statutes. If any Takeover Statute is or may become applicable to
the transactions contemplated hereby, each of the parties hereto and the members of its Board of
Directors shall grant such approvals and take such actions as are necessary so that the
transactions contemplated by this Agreement may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to eliminate or minimize the effects of any Takeover
Statute on any of the transactions contemplated by this Agreement.

     Section 7.15 Notification. Each party shall give to the others prompt notice of (i) any
representation or warranty made by it or contained in this Agreement becoming untrue or inaccurate
in any material respect and (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the obligations of the
parties under this Agreement.

     Section 7.16 Employee Matters.

          (a) To the extent required in any change in control agreement between Pinnacle and any
employee of Pinnacle identified in Section 5.6 of the Pinnacle Disclosure Letter, as of the
Effective Time, Quest (i) assumes and agrees to perform such agreement and (ii) agrees that such
employee may enforce such agreement against Quest.

          (b) Pinnacle and Quest agree that all employees of Pinnacle and its Subsidiaries immediately
prior to the Effective Time shall be employed by the Surviving Corporation immediately after the
Effective Time, it being understood that Quest and the Surviving Corporation shall, except as
required by law, have no obligations to continue employing such employees for any length of time
thereafter except pursuant to any applicable employment agreements. Quest shall deem, and shall
cause the Surviving Corporation to deem, the period of employment with Pinnacle and its
Subsidiaries (and with predecessor employers with respect to which Pinnacle and its Subsidiaries
shall have granted service credit) to have been employment and service with Quest and the Surviving
Corporation for benefit plan eligibility and vesting purposes (but not for purposes of benefit
accruals or benefit computations) for all of Quest’s and the Surviving Corporation’s employee
benefit plans, programs, policies or arrangements to the extent service with Quest or the Surviving
Corporation is recognized under any such plan, program, policy or arrangement.

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          (c) Under any medical and dental plans covering any employee or former employee of Pinnacle,
there shall be waived, and Quest or the Surviving Corporation shall cause the relevant insurance
carriers and other third parties to waive, all restrictions and limitations for any medical
condition existing as of the Effective Time of any of such employees and their eligible dependents
for the purpose of any such plans, provided such persons had the requisite “creditable” service
prior to the Effective Time, but only to the extent that such condition would be covered by the
relevant Pinnacle Benefit Plan if it were not a pre-existing condition and only to the extent of
comparable coverage in effect immediately prior to the Effective Time. Further, Quest shall offer
to each employee of Pinnacle and its Subsidiaries coverage under a group health plan that credits
such employee towards the deductibles imposed under the group medical and dental plan of Quest or
the Surviving Corporation, for the year during which the Effective Time occurs, with any
deductibles already incurred during such year under the relevant Pinnacle Benefit Plan.

          (d) Immediately after the Effective Time, Quest shall grant to those employees of Pinnacle and
its Subsidiaries that continue employment with Quest or the Surviving Corporation after the
Effective Time awards of restricted stock of Quest pursuant to the terms of Quest’s existing stock
benefit plan, with such restrictions and forfeiture rights under the terms of such plan as are
customary for new employees of Quest. The vesting schedule and the number of shares subject to
such award for each such employee shall be equal to the number of shares set forth opposite such
employee’s name as set forth in Section 7.16(d) of the Pinnacle Disclosure Letter.

          (e) Quest shall cause the Surviving Corporation to continue in effect and to perform its
obligations under the Retention and Severance Plan dated October 15, 2007 of Pinnacle, in
accordance with the terms and conditions set forth therein.

     Section 7.17 Quest Board of Directors; Executive Officers. Prior to the Closing, each party
hereto will take all action necessary to cause (i) the Board of Directors of Quest as of the
Effective Time to consist of six (6) members, two (2) of whom shall consist of current members of
the Pinnacle Board of Directors or such other persons as may be designated by the Pinnacle Board of
Directors and four (4) of whom shall consist of current members of the Quest Board of Directors and
who will be designated by the Quest Board of Directors, and (ii) Jerry D. Cash to serve as
President and Chief Executive Officer of Quest as of the Effective Time. Each of the two (2)
persons designated by the current Pinnacle Board of Directors to become members of the Board of
Directors of Quest shall be subject to the reasonable, good faith approval by the Nominating
Committee of the Board of Directors of Quest, in accordance with Quest’s Corporate Governance
Guidelines and Nominating Committee Charter, and each shall be nominated and appointed or elected
in a separate Class on Quest’s staggered Board of Directors. From and after the Effective Time,
each person so designated shall serve as a director or officer, as applicable, of Quest until such
person’s successor shall be elected and qualified or such person’s earlier death, resignation or
removal in accordance with the articles of incorporation and bylaws of Quest.

     Section 7.18 Quest Rights Agreement. If any Distribution Date or Triggering Event occurs
under the Quest Rights Agreement at any time during the period from the Original Execution Date to
the Effective Time, the Board of Directors of Quest shall take such actions as

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are necessary and
permitted under the Quest Rights Agreement to provide that Rights Certificates representing an
appropriate number of rights issued pursuant to the Quest Rights Agreement are issued to Pinnacle’s
stockholders who receive Quest Common Stock pursuant to the Merger. If Quest is not permitted
under the Quest Rights Agreement to provide Rights Certificates to such Pinnacle stockholders,
Pinnacle and Quest shall make such adjustment to the Exchange Ratio as Pinnacle and Quest shall
mutually agree so as to preserve the economic benefits that Pinnacle and Quest each reasonably
expected on the date of this Agreement to receive as a result of the consummation of the Merger and
the other transactions contemplated by this Agreement.

     Section 7.19 Registration Rights. The persons listed on Section 7.19 of the Pinnacle
Disclosure Letter shall have the registration rights set forth on Exhibit 7.19 to the Original
Agreement with respect to all of the shares of Quest Common Stock issued to such persons in the
Merger.

     Section 7.20 Quest Guarantee. Quest agrees to take all action necessary to cause MergerSub to
perform all of MergerSub’s agreements, covenants and obligations under this Agreement and to
consummate the Merger on the terms and subject to the conditions set forth in this Agreement.

ARTICLE 8

CONDITIONS

     Section 8.1 Conditions to Each Party’s Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be subject to the fulfillment or waiver by each
of the parties to this Agreement (subject to Applicable Laws) at or prior to the Closing Date of
the following conditions:

          (a) Quest Stockholder Approval and Pinnacle Stockholder Approval shall have been obtained.

          (b) (i) If applicable, any waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated, and (ii) there shall not have been a final or
preliminary administrative order denying approval of or prohibiting the Merger issued by a
regulatory authority, which order is in the reasonable judgment of either Pinnacle or Quest
reasonably likely to have a Material Adverse Effect on Quest after the Merger.

          (c) None of the parties hereto shall be subject to any decree, order or injunction of a U.S.
court of competent jurisdiction that prohibits the consummation of the Merger.

          (d) The Form S-4 shall have become effective and no stop order with respect thereto shall be
in effect.

          (e) The shares of Quest Common Stock to be issued pursuant to the Merger and the other
transactions contemplated by this Agreement shall have been authorized for listing on the NASDAQ
Stock Market, subject to official notice of issuance.

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          (f) Pinnacle or Quest shall have obtained all of the consents listed under its name on Exhibit
8.1(f) to the Original Agreement, except where the failure to obtain any consent, individually or
in the aggregate, shall not have had and shall not be reasonably likely to have a Material Adverse
Effect on Quest after the Merger.

     Section 8.2 Conditions to Obligation of Pinnacle to Effect the Merger. The obligation of
Pinnacle to effect the Merger shall be subject to the fulfillment or waiver by Quest and MergerSub
at or prior to the Closing Date of the following conditions:

          (a) (i) Quest and MergerSub shall have performed, in all material respects, their covenants
and agreements contained in this Agreement required to be performed on or prior to the Closing
Date, and (ii) the representations and warranties of Quest and MergerSub contained in this
Agreement shall be true and correct in all respects as of the Closing Date (except to the extent
such representations and warranties expressly relate to an earlier date, in which case as of such
earlier date), except where the failure of the representations and warranties to be true and
correct, individually or in the aggregate, has not had and is not reasonably likely to have a Quest
Material Adverse Effect (other than representations and warranties qualified by Quest Material
Adverse Effect or materiality, which shall be true and correct in all respects), and Pinnacle shall
have received a certificate of each of Quest and MergerSub, executed on its behalf by its Chief
Executive Officer, President or Chief Financial Officer, dated the Closing Date, certifying to such
effect.

          (b) Reserved.

          (c) Pinnacle shall have received the opinion of Andrews Kurth LLP, counsel to Pinnacle, in
form and substance reasonably satisfactory to Pinnacle and dated the Closing Date, to the effect
that for U.S. federal income tax purposes (i) the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code and (ii) each of Pinnacle, Quest, and MergerSub will be a
party to such reorganization within the meaning of Section 368(b) of the Code, and such opinion
shall not have been withdrawn, revoked or modified. In rendering such opinion, such counsel shall
be entitled to receive and rely upon representations of officers of Pinnacle, Quest and MergerSub
as to such matters as such counsel may reasonably request.

          (d) At any time after the date of this Agreement, there shall not have occurred and be
continuing as of the Closing Date any change, event, occurrence, state of facts or development that
individually or in the aggregate has had or is reasonably likely to have a Quest Material Adverse
Effect.

     Section 8.3 Conditions to Obligation of Quest and MergerSub to Effect the Merger. The
obligations of Quest and MergerSub to effect the Merger shall be subject to the fulfillment or
waiver by Quest at or prior to the Closing Date of the following conditions:

          (a) (i) Pinnacle shall have performed, in all material respects, its covenants and agreements
contained in this Agreement required to be performed on or prior to the Closing Date, and (ii) the
representations and warranties of Pinnacle contained in this Agreement shall be true and correct in
all respects as of the Closing Date (except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier date), except

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where the
failure of the representations and warranties to be true and correct, individually or in the
aggregate, has not had and is not reasonably likely to have a Pinnacle Material Adverse Effect
(other than representations and warranties qualified by Pinnacle Material Adverse Effect or
materiality, which shall be true and correct in all respects), and Quest shall have received a
certificate of Pinnacle, executed on its behalf by its Chief Executive Officer, President or Chief
Financial Officer, dated the Closing Date, certifying to such effect.

          (b) Quest shall have received the opinion of Stinson Morrison Hecker LLP, counsel to Quest, in
form and substance reasonably satisfactory to Quest and dated the Closing Date, to the effect that
for U.S. federal income tax purposes (i) the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code and (ii) each of Pinnacle, Quest, and MergerSub will be a
party to such reorganization within the meaning of Section 368(b) of the Code, and such opinion
shall not have been withdrawn, revoked or modified. In rendering such opinion, such counsel shall
be entitled to receive and rely upon representations of officers of Quest, MergerSub and Pinnacle
as to such matters as such counsel may reasonably request.

          (c) At any time after the date of this Agreement, there shall not have occurred and be
continuing as of the Closing Date any change, event, occurrence, state of facts or development that
individually or in the aggregate has had or is reasonably likely to have a Pinnacle Material
Adverse Effect.

ARTICLE 9

TERMINATION

     Section 9.1 Termination by Mutual Consent. This Agreement may be terminated, and the Merger
may be abandoned, at any time prior to the Effective Time, whether before or after Quest
Stockholder Approval or Pinnacle Stockholder Approval has been obtained, by the mutual written
consent of Quest and Pinnacle, through action of their respective Boards of Directors.

     Section 9.2 Termination by Pinnacle or Quest. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after Quest Stockholder Approval or Pinnacle
Stockholder Approval has been obtained, by action of the Board of Directors of Pinnacle or Quest
if:

          (a) the Merger shall not have been consummated by May 16, 2008 (the “Termination Date”);
provided, however, that the right to terminate this Agreement pursuant to this clause (a) shall not
be available to any party whose failure to perform or observe in any material respect any of its
obligations under this Agreement in any manner shall have been the cause of, or resulted in, the
failure of either Merger to occur on or before such date;

          (b) a meeting of Quest’s stockholders for the purpose of obtaining Quest Stockholder Approval
shall have been held and such approval shall not have been obtained upon a vote taken thereon;

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          (c) a meeting of Pinnacle’s stockholders for the purpose of obtaining Pinnacle Stockholder
Approval shall have been held and such approval shall not have been obtained upon a vote taken
thereon; or

          (d) a court of competent jurisdiction or federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling or taken any other
action 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; provided, however, that the party seeking to terminate this Agreement pursuant to
this clause (d) shall have complied with Section 7.5 and, with respect to other matters not
covered by Section 7.5, shall have used its reasonable best efforts to remove such
injunction, order or decree.

     Section 9.3 Termination by Quest. This Agreement may be terminated at any time prior to the
Effective Time by action of the Board of Directors of Quest if:

          (a) Pinnacle shall have breached any representation or warranty or failed to perform any
covenant or agreement set forth in this Agreement or any representation or warranty of Pinnacle
shall have become untrue, in any case such that the conditions set forth in Section 8.3(a)
would not be satisfied (assuming for purposes of this Section 9.3(a) that the references in
Section 8.3(a) to “Closing Date” mean the date of termination pursuant to this Section
9.3(a)), and such breach shall not be curable, or, if curable, shall not have been cured within
45 days after written notice of such breach is given to Pinnacle by Quest; provided, however, that
Quest may not terminate this Agreement under this Section 9.3(a) if it is then in breach of
any representation, warranty, covenant or agreement set forth in this Agreement such that Pinnacle
would then be entitled to terminate this Agreement under Section 9.4(a) (without giving
effect to the proviso in Section 9.4(a));

          (b) a Pinnacle Adverse Recommendation Change shall have occurred; or

          (c) a Quest Adverse Recommendation Change shall have occurred.

     Section 9.4 Termination by Pinnacle. This Agreement may be terminated at any time prior to
the Effective Time by action of the Board of Directors of Pinnacle if:

          (a) Quest or MergerSub shall have breached any representation or warranty or failed to perform
any covenant or agreement set forth in this Agreement or any representation or warranty of Quest or
MergerSub shall have become untrue, in either case such that the conditions set forth in
Section 8.2(a) would not be satisfied (assuming for purposes of this Section 9.4(a)
that the references in Section 8.2(a) to “Closing Date” mean the date of termination
pursuant to this Section 9.4(a)), and such breach shall not be curable, or, if curable,
shall not have been cured within 45 days after written notice of such breach is given to Quest by
Pinnacle; provided, however, that Pinnacle may not terminate this Agreement under this Section
9.4(a) if it is then in breach of any representation, warranty, covenant or agreement set forth
in this Agreement such that Quest would then be entitled to terminate this Agreement under
Section 9.3(a) (without giving effect to the proviso in Section 9.3(a));

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          (b) a Quest Adverse Recommendation Change shall have occurred; or

          (c) a Pinnacle Adverse Recommendation Change shall have occurred.

     Section 9.5 Effect of Termination.

          (a) In the event that this Agreement is terminated by Pinnacle pursuant to Section
9.4(b) or by Quest pursuant to Section 9.3(c) and, in either case, no Pinnacle Material
Adverse Effect shall have occurred after the date of this Agreement and be continuing at the time
of the Quest Adverse Recommendation Change giving rise to the termination by Pinnacle, then Quest
shall pay Pinnacle a fee equal to either (x) $3,000,000 if Quest has received a Quest Superior
Proposal prior to termination, or (y) $5,000,000 if Quest has not received a Quest Superior
Proposal prior to termination, in either case, payable on the first business day following the date
of termination of this Agreement. In the event that (A) after the Original Execution Date, a Quest
Takeover Proposal is made to Quest or is made directly to the stockholders of Quest generally or
otherwise becomes publicly known or any person publicly announces an intention (whether or not
conditional) to make a Quest Takeover Proposal and (B) this Agreement is terminated by either
Pinnacle or Quest pursuant to Section 9.2(a) or Section 9.2(b), and within 365 days
of the termination described in the immediately preceding sentence Quest or any of its Subsidiaries
enters into any definitive agreement with respect to, or consummates, any Quest Takeover Proposal,
then Quest shall pay Pinnacle a fee equal to $3,000,000 on the earlier of the date Quest or its
Subsidiary enters into such agreement with respect to such Quest Takeover Proposal and the date
such Quest Takeover Proposal is consummated.

          (b) In the event that this Agreement is terminated by Quest pursuant to Section 9.3(b)
or by Pinnacle pursuant to Section 9.4(c), and, in either case, no Quest Material Adverse
Effect shall have occurred after the date of this Agreement and be continuing at the time of the
Pinnacle Adverse Recommendation Change giving rise to the termination by Quest, then Pinnacle shall
pay Quest a fee equal to $3,000,000 on the first business day following the date of termination of
this Agreement. In the event that (A) after the Original Execution Date, a Pinnacle Takeover
Proposal is made to Pinnacle or is made directly to the stockholders of Pinnacle generally or
otherwise becomes publicly known or any person publicly announces an intention (whether or not
conditional) to make a Pinnacle Takeover Proposal and (B) this Agreement is terminated by either
Pinnacle or Quest pursuant to Section 9.2(a) or Section 9.2(c), and within 365 days
of the termination described in the immediately preceding sentence Pinnacle or any of its
Subsidiaries enters into any definitive agreement with respect to, or consummates, any Pinnacle
Takeover Proposal, then Pinnacle shall pay Quest a fee equal to $3,000,000 on the earlier of the
date Pinnacle or its Subsidiary enters into such agreement with respect to such Pinnacle Takeover
Proposal and the date such Pinnacle Takeover Proposal is consummated.

          (c) Each party acknowledges and agrees that the agreements contained in this Section
9.5 are an integral part of the transactions contemplated by this Agreement, and that, without
these agreements, the other parties hereto would not enter into this Agreement; accordingly, if
Quest or Pinnacle fails promptly to pay the amount due pursuant to this Section 9.5, and,
in order to obtain such payment, the other party commences a suit that results in a judgment for a
fee payable pursuant to this Section 9.5, such party shall also reimburse the other party’s
costs and expenses (including attorneys’ fees and expenses) in connection with such suit,

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together
with interest on the amount of such fee from the date such payment was required to be made until
the date of payment at the prime rate of Bank of America, N.A. in effect on the date such payment
was required to be made. Any payment to be made under this Section 9.5 shall be made by
wire transfer of same-day funds.

          (d) In the event of termination of this Agreement and the abandonment of the Merger pursuant
to this Article 9, all obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 9.5, the last two sentences of
Section 7.6, and Section 7.12 and except for the provisions of Sections 10.2,
10.3, 10.4, 10.6, 10.8, 10.9, 10.11, 10.12, 10.13 and 10.14, provided that nothing herein shall
relieve any party from any liability for any willful and material breach by such party of any of
its representations, warranties, covenants or agreements set forth in this Agreement and all rights
and remedies of the nonbreaching party under this Agreement, at law or in equity, shall be
preserved. The Confidentiality Agreement shall survive any termination of this Agreement, and the
provisions of such Confidentiality Agreement shall apply to all information and material delivered
by any party hereunder.

          (e) For purposes of Sections 9.3, 9.4 and 9.5, the terms “Quest Takeover Proposal” and
“Pinnacle Takeover Proposal” shall have the meanings assigned to such terms in Sections 7.2(a)
and 7.3(a), respectively, except that all references to “20%” therein shall be deemed to be
references to “50%.”

     Section 9.6 Extension; Waiver. At any time prior to the Effective Time, each party may by
action taken by its Board of Directors, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.

ARTICLE 10

GENERAL PROVISIONS

     Section 10.1 Nonsurvival of Representations, Warranties and Agreements. All representations,
warranties and agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger; provided, however, that the agreements contained in
Article 4 and in Sections 3.1, 3.2, 3.3, 7.11, 7.12, 7.13, 7.16 and this
Article 10 shall survive the Merger. After a representation and warranty has terminated and
expired, no claim for damages or other relief may be made or prosecuted through litigation or
otherwise by any person who would have been entitled to that relief on the basis of that
representation and warranty prior to its termination and expiration. The Confidentiality Agreement
shall survive any termination of this Agreement, and the provisions of the Confidentiality
Agreement shall apply to all information and material delivered by any party hereunder.

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     Section 10.2 Notices. Except as otherwise provided herein, any notice required to be given
hereunder shall be sufficient if in writing and sent by facsimile transmission, courier service
(with proof of service) or hand delivery, addressed as follows:

     if to Quest or MergerSub, at:

Quest Resource Corporation

9520 N. May Avenue

Suite 300

Oklahoma City, Oklahoma 73120

Attention: Chief Executive Officer

Facsimile No.: (405) 840-9897

     with a copy, which shall not constitute notice for purposes hereof, to:

Stinson Morrison Hecker, LLP

1201 Walnut

Suite 2900

Kansas City, Missouri 64106

Attention: Patrick Respeliers

Facsimile No.: (816) 691-3495

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     if to Pinnacle, at:

Pinnacle Gas Resources, Inc.

1 East Alger

Sheridan, Wyoming 82801

Attention: Chief Executive Officer

Facsimile No.: (307) 673-9710

     with a copy, which shall not constitute notice for purposes hereof, to:

Andrews Kurth LLP

600 Travis, Suite 4200

Houston, Texas 77002

Attention: David C. Buck

Facsimile: (713) 238-7120

or to such other address as any party shall specify by written notice so given, and such notice
shall be deemed to have been delivered as of the date so telecommunicated or personally delivered.

     Section 10.3 Assignment; Binding Effect; Benefit. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of
Section 7.13, Section 7.16 and Section 7.19, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

     Section 10.4 Entire Agreement. This Agreement, the exhibits to this Agreement, the Quest
Disclosure Letter, the Pinnacle Disclosure Letter, the Confidentiality Agreement and any other
documents delivered by the parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect thereto.

     Section 10.5 Amendments. This Agreement may be amended by the parties hereto, by action taken
or authorized by their Boards of Directors, at any time before or after approval of matters
presented in connection with the Merger by the stockholders of Quest or Pinnacle, but after any
such stockholder approval, no amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. To be effective, any amendment or
modification hereto must be in a written document each party has executed and delivered to the
other parties.

     Section 10.6 Governing Law. This Agreement and the rights and obligations of the parties
hereto shall be governed by and construed and enforced in accordance with the laws of

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the State of
Delaware without regard to the conflicts of law provisions thereof that would cause the laws of any
other jurisdiction to apply.

     Section 10.7 Counterparts. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument. Each counterpart may consist of
a number of copies hereof each signed by less than all, but together signed by all of the parties
hereto.

     Section 10.8 Headings. Headings of the Articles and Sections of this Agreement are for the
convenience of the parties only and shall be given no substantive or interpretative effect
whatsoever.

     Section 10.9 Interpretation. In this Agreement:

          (a) Unless the context otherwise requires, words describing the singular number shall include
the plural and vice versa, words denoting any gender shall include all genders, and words denoting
natural persons shall include corporations, limited liability companies and partnerships and vice
versa.

          (b) The phrase “to the knowledge of” and similar phrases relating to knowledge of Quest or
Pinnacle, as the case may be, shall mean the collective knowledge, after reasonable investigation,
of the individuals listed on Section 10.9 of the Quest Disclosure Letter or the Pinnacle
Disclosure Letter, as the case may be.

          (c) “Material Adverse Effect” means, with respect to any party, any change, effect, event,
occurrence, state of facts or development that individually or in the aggregate has a material
adverse effect on or change in (a) the business, assets, financial condition or results of
operations of such person and its Subsidiaries, taken as a whole, except for any such change or
effect that arises or results from (A) changes in general economic, capital market, regulatory or
political conditions or changes in law or the interpretation thereof that, in any case, do not
disproportionately affect such person in any material respect, (B) changes that affect generally
the industries in which Quest or Pinnacle are engaged and do not disproportionately affect such
person in any material respect, (C) acts of war or terrorism that do not disproportionately affect
such person in any material respect, (D) any change in the trading prices or trading volume of the
Quest Common Stock or the Pinnacle Common Stock (but not any change or effect underlying such
change in prices or volume to the extent such change or effect would otherwise constitute a
Material Adverse Effect), (E) the failure of a party or its Subsidiaries to take any action
referred to in Section 7.1 due to the other party’s unreasonable withholding of consent or
delaying its consent, (F) changes to the financial statements of the party resulting from the
impairment of such party’s oil and gas assets due to changes in commodity prices, or (G) any
condition or circumstance expressly disclosed in the Pinnacle Disclosure Letter or the Quest
Disclosure Letter, or (b) the ability of the party to consummate the transactions contemplated by
this Agreement or fulfill the conditions to closing.

          (d) The term “Subsidiary,” when used with respect to any party, means any (i) corporation or
other organization (including a limited liability company or a partnership),

65

 

whether incorporated
or unincorporated, of which such party directly or indirectly owns or controls at least 50% of the
securities or other interests having by their terms ordinary voting power to elect at least 50% of
the board of directors or others performing similar functions with respect to such corporation or
(ii) other organization or any organization of which such party directly or indirectly is, or owns
or controls, a general partner or managing member. For the avoidance of doubt, Quest Midstream
Partners, L.P. (the “Quest Midstream MLP”) and the MLP shall each be considered a Subsidiary of
Quest.

     Section 10.10 Waivers. Except as provided in this Agreement, no action taken pursuant to this
Agreement, including any investigation by or on behalf of any party, or delay or omission in the
exercise of any right, power or remedy accruing to any party as a result of any breach or default
hereunder by any other party shall be deemed to impair any such right power or remedy, nor will it
be deemed to constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this Agreement. The waiver by any
party hereto of a breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.

     Section 10.11 Incorporation of Disclosure Letters and Exhibits. The Quest Disclosure Letter,
the Pinnacle Disclosure Letter and all exhibits attached hereto and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set forth herein.

     Section 10.12 Severability. If any provision of this Agreement is invalid, illegal or
unenforceable, that provision will, to the extent possible, be modified in such a manner as to be
valid, legal and enforceable but so as to retain most nearly the intent of the parties as expressed
herein, and if such a modification is not possible, that provision will be severed from this
Agreement, and in either case the validity, legality and enforceability of the remaining provisions
of this Agreement will not in any way be affected or impaired thereby. 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.

     Section 10.13 Enforcement of Agreement. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition to any other remedy
to which they are entitled at law or in equity.

     Section 10.14 Consent to Jurisdiction and Venue. Each of the parties hereto (i) consents to
submit itself to the personal jurisdiction of the Delaware Court of Chancery or any federal court
located in the State of Delaware in the event any dispute arises out of this Agreement or any of
the transactions contemplated herein, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court and (iii) agrees
that it will not bring any action relating to this Agreement or any of the transactions
contemplated herein in any court other than the Delaware Court of Chancery or any federal court
sitting in the State of Delaware.

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          The parties have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.

	 	 	 	 	 
	 	PINNACLE GAS RESOURCES, INC.

 	 
	 	By:  	/s/ Peter G. Schoonmaker
 	 
	 	 	Peter G. Schoonmaker 	 
	 	 	Chief Executive Officer 	 
	 
	 	QUEST RESOURCE CORPORATION

 	 
	 	By:  	/s/ Jerry D. Cash
 	 
	 	 	Jerry D. Cash 	 
	 	 	Chief Executive Officer 	 
	 
	 	QUEST MERGERSUB, INC.

 	 
	 	By:  	/s/ Jerry D. Cash
 	 
	 	 	Jerry D. Cash 	 
	 	 	Chief Executive Officer 	 
	 

67

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