AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

By and Among

GASCO ENERGY, INC. (“ Parent ”),

GASCO ACQUISITION, INC. (“ Merger Sub ”)

and

BREK ENERGY CORPORATION (“ Company ”)

Dated as of September 20, 2006

TABLE OF CONTENTS

AGREEMENT AND PLAN OF MERGER

     This Agreement and Plan of Merger (this “ Agreement ”) dated as of September 20, 2006, by and among Gasco Energy, Inc. (“ Parent ”), a Nevada corporation, Gasco Acquisition, Inc. (“ Merger Sub ”), a Nevada corporation and a wholly-owned subsidiary of Parent and Brek Energy Corporation (“ Company ”), a Nevada corporation.

     WHEREAS, the respective boards of directors of each of Parent, Merger Sub and Company deem it advisable and in the best interests of their respective shareholders that Parent acquire Company through the merger of Merger Sub with and into Company (the “ Merger ”) upon the terms and subject to the conditions set forth herein, and such boards of directors have approved the Merger; and

     WHEREAS, concurrently with the execution and delivery of this Agreement, with the approval of Company’s board of directors, Parent has entered into voting agreements with Richard N. Jeffs, Gregory Pek, Ian Robinson, Michael L. Nazmack, Eugene Sweeney and Shawne Malone (under which such party has among other things agreed to support the Merger upon the terms and conditions set forth therein (the “ Voting Agreement ”)); and

     WHEREAS, for federal income tax purposes, the parties intend that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the “ Code ” ) ;

     NOW, THEREFORE, in consideration of the premises and the representations, warranties and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

THE MERGER

     1.1 The Merger . Upon the terms and subject to the conditions hereof, at the Effective Time (as defined in Section 1.2 ) Merger Sub shall merge with and into the Company and the separate corporate existence of Merger Sub shall cease and Company shall be the surviving corporation in the Merger (sometimes referred to herein as the “ Surviving Corporation ”). The Merger shall have the effects set forth in Section 92A.250 of the Nevada Revised Statutes (the “ NRS ”), including the Surviving Corporation’s succession to and assumption of all rights and obligations of Merger Sub.

     1.2 Effective Time of the Merger . The Merger shall become effective (the “ Effective Time ”) upon the later of (i) the filing of the properly executed articles of merger relating to the Merger with the Secretary of State of Nevada in accordance with the NRS (the “Articles of Merger”), and the issuance by the Secretary of State of Nevada of a certificate of merger with respect thereto, and (ii) at such later time as the parties shall agree and set forth in such Articles of Merger. The filing of the Articles of Merger referred to above shall be made as soon as practicable after the satisfaction or waiver of the conditions set forth in Article VIII.

     1.3 Tax Treatment . It is intended that the Merger shall constitute a reorganization under Section 368(a) of the Code.

ARTICLE II

THE SURVIVING CORPORATION

     2.1 Articles of Incorporation . At the Effective Time, the articles of incorporation of Company in effect immediately prior to the Effective Time shall be amended so that they are identical to the articles of incorporation of Merger Sub in effect immediately prior to the Effective Time until thereafter amended in accordance with the terms thereof and the NRS.

     2.2 Bylaws . The bylaws of Merger Sub as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation at and after the Effective Time until thereafter amended in accordance with the terms thereof and as provided by the articles of incorporation of the Surviving Corporation and the NRS.

     2.3 Directors and Officers .

          (a) The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.

          (b) The officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.

ARTICLE III

CONVERSION OF SHARES

     3.1 Conversion of Capital Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any capital stock described below:

          (a)  Treasury Stock . All shares of common stock of Company, par value $.001 per share (the “ Company Common Stock ”), that are held in Company’s treasury shall be canceled and retired and no cash, capital stock or other consideration shall be delivered in exchange therefor.

          (b)  Conversion of Company Common Stock . Subject to Section 3.6 , each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 3.1(a) and any Dissenting Shares (as defined and to the extent provided in Section 3.2 ) shall be converted into (i) a number of shares of Parent’s common stock, par value $0.0001 per share (the “ Parent Common Stock ”) equal to 11,000,000 divided by the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time, calculated on a fully diluted basis (the “ Exchange Ratio ”). Such consideration, together

with cash in lieu of fractional shares of Parent Common Stock as contemplated by Section 3.6 , without interest, is referred to herein as the “ Merger Consideration .” All shares of Company Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and the holder of a certificate (“ Stock Certificate ”) that, immediately prior to the Effective Time, represented outstanding shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration to be issued or paid in consideration therefor upon the surrender of such certificate in accordance with Section 3.3 .

          (c)  Conversion of Merger Sub Common Stock . Each share of common stock of Merger Sub, par value $0.01 per share (“ Merger Sub Common Stock ”), issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of the common stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares shall from and after the Effective Time evidence ownership of the same number of shares of capital stock of the Surviving Corporation.

          (d)  Parent Common Stock . Each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time shall not be affected by the Merger.

          (e)  Dividends/Distributions . No dividends or other distributions declared or made after the Effective Time with a record date after the Effective Time shall be paid to the holder of any unsurrendered Stock Certificate with respect to the applicable Merger Consideration represented thereby until the holder of record of such Stock Certificate shall surrender such Stock Certificate in accordance with Section 3.3 . Subject to the effect of applicable laws (including escheat and abandoned property laws), following surrender of any such Stock Certificate there shall be paid to the record holder of the certificate or certificates representing the Merger Consideration issued in exchange therefor, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to Merger Consideration, and (ii) if the payment date for any dividend or distribution payable with respect to Merger Consideration has not occurred prior to the surrender of such Stock Certificate, at the appropriate payment date therefor, the amount of dividends or other distributions with a record date after the Effective Time but prior to the surrender of such Stock Certificate and a payment date subsequent to the surrender of such Stock Certificate.

           (f) Full Satisfaction; No Registration at Transfer . All Merger Consideration issued upon the surrender of Stock Certificates in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such Stock Certificates and Company Common Stock formerly represented thereby, and from and after the Effective Time there shall be no further registration of transfers effected on the stock transfer books of the Surviving Corporation of shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Stock Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article III .

     3.2 Dissenting Shares .

          (a) Notwithstanding any provision of this Agreement to the contrary, any shares of Company Common Stock held by a holder who has demanded and perfected the right to dissent and obtain payment of the fair value of his shares in accordance with Section 92A.300 to 92A.500, inclusive, of the NRS and who, as of the Effective Time, has not effectively withdrawn such rights (“Dissenting Shares”), shall not be converted into or represent a right to receive the Merger Consideration pursuant to Section 3.1, but the holder thereof shall only be entitled to such rights as are granted by the NRS.

          (b) Notwithstanding the provisions of subsection (a), if the holder of shares of Company Common Stock who demands payment for his shares under the NRS shall effectively withdraw the right to dissent and obtain payment, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares shall automatically be converted into and represent only the right to receive the Merger Consideration upon surrender of the certificate representing such shares.

          (c) Company shall give Parent and Merger Sub (i) prompt notice of any written demands for payment of any shares of Company Common Stock, withdrawals of such demands, and any other instruments served pursuant to the NRS and received by Company and (ii) the opportunity to participate in all negotiations and proceedings which take place prior to the Effective Time with respect to demands for payment under the NRS. Company shall not, except with the prior written consent of Parent, voluntarily make any payment before the Effective Time with respect to any demands for payment of shares of Company Common Stock or offer to settle or settle any such demands.

     3.3 Surrender and Exchange .

          (a) Prior to the Effective Time, Parent shall authorize one or more transfer agent(s) reasonably acceptable to Company to act as exchange agent hereunder (the “ Exchange Agent ”) with respect to the Merger. At or prior to the Effective Time, Parent shall deposit with the Exchange Agent for the benefit of the holders of Company Common Stock, for exchange in accordance with this Section 3.3 through the Exchange Agent, certificates representing the shares of Parent Common Stock issuable pursuant to Section 3.1 in exchange for outstanding shares of Company Common Stock (collectively, the “ Exchange Fund ”). The Exchange Agent shall, pursuant to irrevocable instructions, deliver the applicable Merger Consideration in exchange for surrendered Stock Certificates pursuant to Section 3.1 out of the Exchange Fund. Except as contemplated by Section 3.3(e) , the Exchange Fund shall not be used for any other purpose.

          (b) Promptly after the Effective Time, but in any event not later than five Business Days (as defined below) thereafter, Parent will send, or will cause the Exchange Agent to send, to each holder of a Stock Certificate that immediately prior to the Effective Time represented outstanding Company Common Stock a letter of transmittal and instructions for use in effecting the exchange of such Stock Certificates for the Merger Consideration (which shall specify that delivery shall be effected and risk of loss and title to the Stock Certificates shall pass only upon delivery of the Stock Certificates to the Exchange Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and instructions for use in

effecting the exchange of such Stock Certificates for the Merger Consideration. Provision also shall be made for holders of Stock Certificates to procure in person immediately after the Effective Time a letter of transmittal and instructions and to deliver in person immediately after the Effective Time such letter of transmittal and Stock Certificates in exchange for the applicable Merger Consideration. For purposes of this Agreement, “ Business Day ” means any date that is not a Saturday or Sunday or other day on which banks are required or authorized by law to be closed in the city of New York.

          (c) After the Effective Time, Stock Certificates shall represent the right, upon surrender thereof to the Exchange Agent, together with a duly executed and properly completed letter of transmittal relating thereto, to receive in exchange therefor the applicable Merger Consideration subject to any required tax withholding, and the Stock Certificates so surrendered shall be canceled. No interest will be paid or will accrue on any cash amount payable upon the surrender of any such Stock Certificates. Until so surrendered, each such Stock Certificate shall, after the Effective Time, represent for all purposes only the right to receive the applicable Merger Consideration.

          (d) If Merger Consideration is to be paid to a Person other than the registered holder of the Stock Certificate or Certificates surrendered in exchange therefor, it shall be a condition to such payment that the Stock Certificate or Certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such issuance shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not applicable. For this Agreement, “ Person ” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a Governmental Authority.

          (e) Any Merger Consideration in the Exchange Fund that remains unclaimed by the holders of Company Common Stock one year after the Effective Time shall be returned to Parent, upon demand, and any such holder who has not exchanged such holder’s Stock Certificates in accordance with this Section 3.3 prior to that time shall thereafter look only to Parent, as a general creditor thereof, to exchange such Stock Certificates for the Merger Consideration to which such holder is entitled pursuant to Section 3.1 . If outstanding Stock Certificates are not surrendered prior to six years after the Effective Time (or, in any particular case, prior to such earlier date on which any Merger Consideration deliverable in respect of such Stock Certificates would otherwise escheat to or become the property of any governmental unit or agency), the Merger Consideration deliverable in respect of such Stock Certificates shall, to the extent permitted by applicable law, become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto. Notwithstanding the foregoing, none of Parent, Company, the Surviving Corporation, the Exchange Agent or any other Person shall be liable to any holder of Stock Certificates for any amount paid, or Merger Consideration delivered, to a public official pursuant to applicable abandoned property, escheat or similar laws.

          (f) If any Stock Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Stock Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made

against it with respect to such Stock Certificate, the Exchange Agent will deliver in exchange for such lost, stolen or destroyed Stock Certificate the Merger Consideration in respect thereof pursuant to this Agreement.

     3.4 Stock Options . All options (the “ Company Stock Options ”) outstanding under Company’s stock option plans or agreements (the “ Company Stock Option Plans ”), shall be or become fully vested at the Effective Time, and shall, at the option of the holder thereof, either remain outstanding following the Effective Time or be immediately exercised. If a Company Stock Option is exercised, whether before or after the Effective Time, the holder thereof may elect to relinquish a portion of the shares (having equivalent value) subject to such options in lieu of paying the cash exercise price for shares received upon such exercise. At the Effective Time, the Company Stock Options shall, by virtue of the Merger and without any further action on the part of Company or the holder thereof, be assumed by Parent. From and after the Effective Time, all references to Company in the Company Stock Option Plans and the applicable stock option agreements issued thereunder shall be deemed to refer to Parent, which shall have assumed the Company Stock Option Plans as of the Effective Time by virtue of this Agreement and without any further action. Each Company Stock Option assumed by Parent (each, a “ Substitute Option ”) shall be exercisable upon the same terms and conditions as under the applicable Company Stock Option Plan and the applicable option agreement issued thereunder, except that (A) each such Substitute Option shall be immediately exercisable for, and represent the right to acquire, that whole number of shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Substitute Option multiplied by the Exchange Ratio and (B) the exercise price per share of Parent Common Stock shall be an amount equal to the exercise price per share of Company Common Stock subject to such Substitute Option in effect immediately prior to the Effective Time divided by the Exchange Ratio (the exercise price per share, as so determined, being rounded upward to the nearest full cent).

     3.5 Warrants . All warrants (the “ Company Warrants ”) outstanding that are exercisable for shares of Company Common Stock, other than Company Warrants that in the aggregate are exercisable for no more than 100,000 shares of Company Common Stock (the “ Permitted Warrants ”), shall be exercised prior to the Effective Time. If a Company Warrant is exercised, whether before or after the Effective Time, the holder thereof may elect to relinquish a portion of the shares (having equivalent value) subject to such Warrant in lieu of paying the cash exercise price for shares received upon such exercise.

     At the Effective Time, the Permitted Warrants shall, by virtue of the Merger and without any further action on the part of Company or the holder thereof, be assumed by Parent. From and after the Effective Time, all references to Company in the Permitted Warrants and the agreements governing the Permitted Warrants shall be deemed to refer to Parent. Each Company Permitted Warrant assumed by Parent (each, a “ Substitute Warrant ”) shall be exercisable upon the same terms and conditions as under the agreement governing such warrant, except that (A) each such Substitute Warrant shall be immediately exercisable for, and represent the right to acquire, that whole number of shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Substitute Warrant multiplied by the Exchange Ratio and (B) the exercise price per share of Parent Common Stock shall be an amount equal to the exercise price per share of Company

Common Stock subject to such Substitute Warrant in effect immediately prior to the Effective Time divided by the Exchange Ratio (the exercise price per share, as so determined, being rounded upward to the nearest full cent).

     3.6 No Fractional Shares . No fractional shares of Parent Common Stock shall be issued in the Merger and fractional share interests shall not entitle the owner thereof to vote or to any rights of a stockholder of Parent. All holders of fractional shares of Parent Common Stock shall be entitled to receive, in lieu thereof, an amount in cash equal to such fraction times the average of the closing prices of Parent Common Stock on the American Stock Exchange over 20 consecutive trading days ending on the third trading day before the Closing Date (the “ Parent Market Price ”).

     3.7 Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at a location mutually acceptable to Company and Parent, at 10:00 a.m., local time, on the day (the “ Closing Date ”) on which all of the conditions set forth in Article VIII are satisfied or waived (other than conditions that can be satisfied only by delivery of certificates or other documents at the Closing and where such delivery is in the control of a party hereto), or at such other date and time as Company and Parent shall otherwise agree. At the conclusion of the Closing on the Closing Date, the parties hereto shall cause the Articles of Merger to be filed with the Secretary of State of the State of Nevada.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF COMPANY

     Company represents and warrants to Parent and Merger Sub as follows:

     4.1 Organization and Qualification .

          (a) Each of Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its state of organization, is duly qualified to do business as a foreign corporation and is in good standing in the jurisdictions set forth in Section 4.1(a) of the disclosure letter delivered to Parent contemporaneously with the execution hereof (the “ Company Disclosure Schedule ”), which includes each jurisdiction in which the character of the properties owned by it or the nature of its business makes such qualification necessary, except in jurisdictions, if any, where the failure to be so qualified would not result in a Company Material Adverse Effect (as defined below). Each of Company and its Subsidiaries has all requisite corporate power and authority to own, use or lease its properties and to carry on its business as it is now being conducted. Each of Company and its Subsidiaries has made available to Parent a complete and correct copy of its articles of incorporation and bylaws (or similar organizational documents), each as amended to date, and such copies as so delivered are in full force and effect.

          (b) For purposes of this Agreement, (i) a “ Company Material Adverse Effect ” shall mean any change, effect, event, occurrence or state of facts that is or could reasonably be expected to be materially adverse to the condition (financial or otherwise), business, properties or results of operations of Company and its Subsidiaries, taken as a whole, or that could

reasonably be expected to materially impair the ability of Company to perform its obligations under this Agreement or to consummate the Merger; provided that none of the following, alone or in combination, shall constitute a Company Material Adverse Effect or be considered in determining whether a Company Material Adverse Effect has occurred or will occur: any change, effect, event, occurrence, state of facts or development arising out of, resulting from or relating to (x) the economy in general, (y) the oil and gas exploration and production industry in general (including, without limitation, changes in commodity prices, general market prices and regulatory changes) or (z) the transactions contemplated by this Agreement or the announcement thereof; and (ii) “ Subsidiary ” shall mean, with respect to any party, any corporation or other organization whether incorporated or unincorporated, of which (x) at least a majority of the securities or other interests having by their terms voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly beneficially owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries, or (y) such party or any Subsidiary of such party is a general partner of a partnership or a manager of a limited liability company. For purposes of this Agreement, the term Subsidiary, when used with respect to the Company, shall not include those entities listed as Excluded Subsidiaries in Section 4.1(a) of the Company Disclosure Schedules (each an “ Excluded Subsidiary ”).

     4.2 Capitalization .

          (a) The authorized capital stock of Company consists of 300,000,000 shares of Company Common Stock. As of the date of this Agreement, (i) 61,098,090 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Common Stock were held in treasury, (iii) Company Stock Options to acquire an aggregate of 1,580,000 shares of Company Common Stock were outstanding under all stock option plans and agreements of Company or its Subsidiaries, and (iv) Company Warrants to purchase 18,534,460 shares of Company Common Stock were outstanding and no warrants exist to purchase capital stock of any subsidiary of the Company. All such outstanding shares have been validly issued and are fully paid, non-assessable and free of preemptive rights. Except as set forth above and in Section 4.2(a) of the Company Disclosure Schedule, there are no outstanding subscriptions, options, rights, warrants, convertible securities, stock appreciation rights, phantom equity, or other agreements or commitments obligating Company to issue, transfer, sell, redeem, repurchase or otherwise acquire any shares of its capital stock of any class. Section 4.2(a) of the Company Disclosure Schedule sets forth a detailed list of all Company Stock Option, Company Warrants and all other rights to acquire shares of the Company’s capital stock.

          (b) Company is, directly or indirectly, the record and beneficial owner of all of the outstanding shares of capital stock of each of its Subsidiaries, there are no irrevocable proxies with respect to any such shares, and no equity securities of any of its Subsidiaries are or may become required to be issued because of any options, warrants, rights to subscribe to, calls or commitments, understandings or other agreements of any character whatsoever relating to, or securities or rights convertible into or exchangeable or exercisable for, shares of any capital stock of any Subsidiary of the Company. All of such shares so owned by Company are validly issued, fully paid and nonassessable and are owned by it free and clear of all Liens (as defined herein).

          (c) Except as set forth in Section 4.2(c) of the Company Disclosure Schedule, there are not as of the date hereof and there will not be at the Effective Time any shareholder agreements, voting trusts or other agreements or understandings to which Company is a party relating to the voting of any shares of the capital stock of Company that will limit in any way the solicitation of proxies by or on behalf of Company from, or the casting of votes by, the shareholders of Company with respect to the Merger. There are no restrictions on Company to vote the stock of any of its Subsidiaries.

4.3 Authority . Company has the requisite corporate power and authority to execute and deliver this Agreement and the Voting Agreement and, subject to obtaining the Company Shareholders’ Approval and other approvals as expressly contemplated by this Agreement, to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Voting Agreement and (subject to obtaining the Company Shareholders’ Approval) the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by Company’s board of directors, and no other corporate proceedings on the part of Company are necessary to authorize this Agreement or the Voting Agreement or to consummate the transactions contemplated hereby or thereby, other than obtaining the Company Shareholders’ Approval and other approvals as expressly contemplated by this Agreement. This Agreement has been, and the Voting Agreements to which Company is or will be a party are, or upon execution will be, duly and validly executed and delivered by Company and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto and, with respect to this Agreement, obtaining the Company Shareholders’ Approval, constitute or upon execution will constitute, valid and binding obligations of Company enforceable against Company in accordance with their respective terms, except as such enforceability may be subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting the rights of creditors and of general principles of equity (the “ Enforceability Exception ”).

     4.4 Consents and Approvals; No Violation . The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the performance by Company of its obligations hereunder will not:

          (a) subject to obtaining the Company Shareholders’ Approval and other approvals as expressly contemplated by this Agreement, conflict with any provision of Company’s articles of incorporation or bylaws or the articles of incorporation or bylaws (or other similar organizational documents) of any of its Subsidiaries;

          (b) require any consent, waiver, approval, order, authorization or permit of, or registration, filing with or notification to any governmental or regulatory authority or agency (a “ Governmental Authority ”), except for (i) the filing of the Articles of Merger with the Secretary of State of Nevada and the issuance by the Secretary of State of Nevada of a certificate of merger with respect thereto, (ii) the filing of the Registration Statement and the Proxy Statement/Prospectus with the Securities and Exchange Commission (“ SEC ”) in accordance with the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), (iii) such consents, approvals, orders, authorizations and regulations, declarations and filings as may be required under applicable state securities or blue sky laws, and (iv) approvals and registrations that, if not

obtained or made, would not be reasonably expected to have a Company Material Adverse Effect;

          (c) result in any violation of or the breach of or constitute a default (with notice or lapse of time or both) under, or give rise to any right of termination, cancellation or acceleration or guaranteed payments or a loss of a material benefit under, any of the terms, conditions or provisions of any note, lease, mortgage, license, agreement or other instrument or obligation to which Company or any of its Subsidiaries is a party or by which Company or any of its Subsidiaries or any of their respective properties or assets may be bound, except for such violations, breaches, defaults, or rights of termination, cancellation or acceleration, or losses as to which requisite waivers or consents have been obtained or which, individually or in the aggregate, would not reasonably be expected to result in a Company Material Adverse Effect;

          (d) violate the provisions of any order, writ, injunction, judgment, decree, statute, rule or regulation applicable to Company or any Subsidiary of Company; or

          (e) result in the creation of any lien, mortgage, pledge, security interest, encumbrance, claim or charge of any kind (collectively, “ Liens ”) upon any properties or assets or on any shares of capital stock of Company or its Subsidiaries under any agreement or instrument to which Company or any of its Subsidiaries is a party or by which Company or any of its Subsidiaries or any of their properties or assets is bound.

     4.5 Company SEC Reports . Except as set forth in Section 4.5 of the Company Disclosure Schedule, Company has filed with the SEC, and has heretofore made available (provided that all documents filed by Company electronically with the SEC and publicly available prior to the date hereof shall be deemed available) to Parent true and complete copies of, each form, registration statement, report, schedule, proxy or information statement and other document (including exhibits and amendments thereto, but excluding preliminary materials), required to be filed with the SEC since January 1, 2003 under the Securities Act of 1933, as amended (the “ Securities Act ”) or the Exchange Act (collectively, the “ Company SEC Reports ”). As of their respective dates, such Company SEC Reports (a) complied in all material respects with all applicable requirements of the Securities Act and the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and (b) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

     4.6 Company Financial Statements . Each of the audited consolidated financial statements and unaudited consolidated interim financial statements of Company (including any related notes and schedules) included (or incorporated by reference) in the Company SEC Reports, have been prepared in accordance with generally accepted accounting principles (“ GAAP ”) applied on a consistent basis (except as may be indicated in the notes thereto and subject, in the case of quarterly financial statements, to normal and recurring year-end adjustments) and fairly present, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of Company and its Subsidiaries as of the date thereof and the consolidated results of operations and cash flows (and changes in financial position, if any) of Company and its Subsidiaries for the periods presented therein (subject to

normal year-end adjustments and the absence of financial footnotes in the case of any unaudited interim financial statements). As of the Effective Time, no long-term liabilities of the Company and its Subsidiaries shall exist, the current assets of the Company and its Subsidiaries, on a consolidated basis, shall not be less than the current liabilities of the Company and its Subsidiaries, on a consolidated basis, and the total liabilities of the Company and its Subsidiaries, on a consolidated basis, shall not exceed $100,000.

     4.7 Material Agreements . Except as set forth in Section 4.7 of the Company Disclosure Schedule (each a “ Material Agreement ”), the Company is not a party to or bound by any:

          (a) employment agreement or employment contract;

          (b) agreement, contract or other arrangement with (1) any Affiliate of the Company, or (2) any current or former officer, director or employee of the Company, or any Affiliate of the Company;

          (c) agreement, contract or other instrument under which the Company has borrowed any money from, or issued any note, bond, debenture or other evidence of indebtedness to, any person or any other note, bond, debenture or other evidence of indebtedness issued to any person;

          (d) agreement, contract or other instrument under which (1) any person has directly or indirectly guaranteed indebtedness, liabilities or obligations of the Company or (2) the Company has directly or indirectly guaranteed indebtedness, liabilities or obligations of any Person;

          (e) agreement, contract or other instrument under which the Company has, directly or indirectly, made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person;

          (f) agreement or instrument providing for indemnification of any person with respect to liabilities relating to any current or former business of the Company or any predecessor person; or

          (g) other agreement, contract, lease, license, commitment or instrument to which the Company is a party or by or to which it or any of the assets of the Company is bound or subject which constitutes an obligation of the Company in excess of $5,000.

     4.8 Absence of Undisclosed Liabilities . Except as disclosed in the Company SEC Reports (including the financial statements and notes thereto included therein) filed prior to the date of this Agreement or in Section 4.8 of the Company Disclosure Schedule, neither Company nor any of its Subsidiaries has incurred any liabilities or obligations of any nature (contingent or otherwise).

     4.9 Absence of Certain Changes . Except as contemplated by this Agreement, as set forth in Section 4.9 of the Company Disclosure Schedule or as disclosed in the Company SEC Reports filed prior to the date of this Agreement, since December 31, 2005 (a) Company and its Subsidiaries have conducted their business in all material respects in the ordinary course

consistent with past practices, (b) there has not been any change or development, or combination of changes or developments that, individually or in the aggregate, would have a Company Material Adverse Effect or that would constitute a violation of the covenants contained in Section 6.1, (c) there has not been any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of Company or any repurchase, redemption or other acquisition by Company or any of its Subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, Company or any of its Subsidiaries, (d) there has not been any amendment of any term of any outstanding security of Company or any of its Subsidiaries, and (e) there has not been any change in any method of accounting or accounting practice by Company or any of its Subsidiaries, except for any such change required because of a concurrent change in GAAP or to conform a Subsidiary’s accounting policies and practices to those of Company.

     4.10 Taxes . Except as otherwise disclosed in Section 4.10 of the Company Disclosure Schedule and for matters that would have no Company Material Adverse Effect:

          (a) Company and each of its Subsidiaries have timely filed all material Tax Returns required by applicable law to be filed by any of them prior to or as of the Closing Date. All such Tax Returns and any amendments thereto are or will be true, complete and correct in all material respects. Company and each of its Subsidiaries have paid all Taxes (except for Taxes that are being contested in good faith by appropriate proceedings), due with respect to any period ending prior to or as of the Closing Date. Company and each of its Subsidiaries have complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes.

          (b) No Audit by a Tax Authority is pending with respect to any Tax Returns filed by, or Taxes due from, Company or any of its Subsidiaries. No material deficiency or adjustment for any Taxes has been proposed, asserted or assessed against Company or any of its Subsidiaries. There are no liens for Taxes upon the assets of Company or any of its Subsidiaries, except liens for current Taxes not yet delinquent.

          (c) Neither Company nor any of its Subsidiaries has given any waiver of statutes of limitations relating to the payment of Taxes, has executed any powers of attorney with respect to Tax matters, or has agreed to any extension of time with respect to a Tax assessment or deficiency, which will be outstanding as of the Closing Date. Neither Company nor any of its Subsidiaries is currently the beneficiary of any extension of time within which to file any Tax Return.

          (d) None of the Company or any of its Subsidiaries has a liability for Taxes of any Person (other than Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise.

          (e) Neither Company nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person in a transaction that was purported or intended to be governed in whole or in part by Code Sections 355 or 361 within the two-year period preceding the date of this Agreement.

          (f) None of Company or its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local, or foreign income Tax law) executed on or prior to the Closing Date; or (iii) open transaction disposition made on or prior to the Closing Date.

          (g) Neither Company nor any of its Subsidiaries has participated, within the meaning of Treasury Regulation Section 1.6011-4(c), in (i) any “listed transaction” within the meaning of Code Section 6011 and the Treasury Regulation thereunder (or any corresponding or similar provision of state, local, or foreign income Tax law) or (ii) any transaction required to be registered with the Internal Revenue Service under Code Section 6111 and the Treasury Regulation thereunder (or any corresponding or similar provision of state, local, or foreign income Tax law).

          (h) As used in this Agreement, (i) “ Audit ” shall mean any audit, assessment of Taxes, other examination by any tax attorney, proceeding or appeal of such proceeding relating to Taxes; (ii) “ Taxes ” shall mean all Federal, state, local and foreign taxes, and other assessments of a similar nature (whether imposed directly or through withholding), including any interest, additions to tax, or penalties applicable thereto; (iii) “ Tax Authority ” shall mean the Internal Revenue Service and any other domestic or foreign Governmental Authority responsible for the administration of any Taxes; and (iv) “ Tax Returns ” shall mean all Federal, state, local and foreign tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax Return.

     4.11 Litigation . Except as disclosed in the Company SEC Reports or Section 4.11 of the Company Disclosure Schedule, there is no suit, claim, action, proceeding or investigation pending or, to Company’s knowledge, threatened against or directly affecting Company or any of its Subsidiaries. Except as disclosed in the Company SEC Reports or Section 4.11 of the Company Disclosure Schedule, there is not in existence any order, judgment or decree of any court or other tribunal or other agency enjoining or requiring Company or any of its Subsidiaries to take any action of any kind with respect to its business, assets or properties. Notwithstanding the foregoing, no representation or warranty in this Section 4.11 is made with respect to Environmental Laws, which are covered exclusively by the provisions set forth in Section 4.13 .

     4.12 Employee Benefit Plans; ERISA .

          (a) Neither the Company nor any of its Subsidiaries has or at any time had any employee benefit plans and arrangements (written or oral) of any type (including plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), including severance pay, sick leave, vacation pay, salary continuation for disability, compensation agreements, retirement, deferred compensation, bonus, long-term incentive, stock option, stock purchase, hospitalization, medical insurance, life insurance and scholarship programs sponsored, maintained, contributed to, or obligated to contribute to by Company or any of its Subsidiaries. Neither Company nor any of its Subsidiaries maintains or has any fixed or

contingent liability with respect to, any employee benefit, pension or other plan that is subject to ERISA.

     4.13 Environmental Liability . Except as set forth in Section 4.13 of the Company Disclosure Schedule, to the knowledge of Company:

          (a) The businesses of Company and its Subsidiaries, other than with respect to the oil and gas interests for which Parent serves as operator (the “ Parent Properties ”), have been and are operated in material compliance with all federal or state statutes, regulations or rules relating to the regulation or protection or human health, safety or the environment, including the Clean Water Act, the Oil Pollution Act, the Safe Drinking Water Act, the Resource Conservation & Recovery Act, the Clean Air Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Hazardous Materials Transportation Act, the Solid Waste Disposal Act, the Toxic Substances Control Act and the Emergency Planning and Community Right-to-Know Act, each as amended and currently in effect (together, the “ Environmental Laws ”).

          (b) Neither Company nor any of its Subsidiaries has caused or allowed the generation, treatment, storage, discharge, release, disposal or transport of any pollutant, contaminant or waste that is regulated by any Governmental Authority or any material that is defined as a “hazardous waste,” “hazardous substance,” “hazardous material,” “restricted hazardous waste,” “toxic waste,” or “toxic pollutant” under any Environmental Laws (“ Hazardous Substances ”) at any of its properties or facilities other than the Parent Properties, except in material compliance with all Environmental Laws.

          (c) Neither Company nor any of its Subsidiaries has received any written notice from any Governmental Authority or third party alleging or concerning any material violation by Company or any of its Subsidiaries of, or responsibility or liability of Company or any of its Subsidiaries under, any Environmental Law. There are no pending, or to the knowledge of Company, threatened, claims, suits, actions, proceedings or investigations with respect to the businesses or operations of Company or any of its Subsidiaries alleging or concerning any material violation of or responsibility or liability under any Environmental Law that, if adversely determined, could reasonably be expected to have a Company Material Adverse Effect.

          (d) Company and its Subsidiaries are in possession of and in material compliance with all material approvals, permits, licenses, registrations and similar type authorizations from, all Governmental Authorities under all Environmental Laws with respect to the operation of the businesses of Company and its Subsidiaries other than the Parent Properties.

          (e) No pending claims have been asserted or threatened to be asserted against Company or its Subsidiaries for any personal injury or property damage alleged to arise out of exposure to Hazardous Substances used, handled, generated, transported or disposed by Company or its Subsidiaries at property owned or operated by Company or its Subsidiaries that is not a Parent Property.

     4.14 Compliance with Applicable Laws . Company and each of its Subsidiaries hold all material approvals, licenses, permits, registrations and similar type authorizations necessary for the lawful conduct of their respective businesses, as now conducted, and such businesses are not

being, and neither Company nor any of its Subsidiaries has received any notice from any Person that any such business has been or is being conducted in violation of any law, ordinance or regulation, including any law, ordinance or regulation relating to occupational health and safety; provided, however, notwithstanding the foregoing, no representation or warranty in this Section 4.14 is made with respect to Environmental Laws, which are covered exclusively by the provisions set forth in Section 4.13 .

     4.15 Insurance . Company has made available to Parent a true, complete and correct copy of each insurance policy or the binder therefor relating to Company or its Subsidiaries that are currently in effect. With respect to each insurance policy or binder none of Company, any of its Subsidiaries or any other party to the policy is in breach or default thereunder (including with respect to the payment of premiums or the giving of notices), and Company does not know of any occurrence or any event which (with notice or the lapse of time or both) would constitute such a breach or default or permit termination, modification or acceleration under any such policy, except for such breaches or defaults which, individually or in the aggregate, would not result in a Company Material Adverse Effect. Section 4.15 of the Company Disclosure Schedule describes any self-insurance arrangements affecting Company or its Subsidiaries.

     4.16 Labor Matters; Employees .

          (a) Except as otherwise set forth in Section 4.16(a) of the Company Disclosure Schedule, there are no employees of Company or any of its Subsidiaries.

          (b) Each of Company and its Subsidiaries is in material compliance with all laws, rules, regulations and orders relating to the employment of labor, including all such laws, rules, regulations and orders relating to wages, hours, collective bargaining, discrimination, civil rights, safety and health, workers’ compensation and the collection and payment of withholding or social security taxes and similar taxes.

     4.17 Permits . Immediately prior to the Effective Time, Company and its Subsidiaries will hold all of the permits, licenses, certificates, consents, approvals, entitlements, plans, surveys, relocation plans, environmental impact reports and other authorizations of Governmental Authorities (collectively, “ Permits ”) required or necessary to construct, own, operate, use and/or maintain their respective properties and conduct their operations as currently conducted, except for such Permits, the lack of which, individually or in the aggregate, would not have a Company Material Adverse Effect; provided, however, that notwithstanding the foregoing, no representation or warranty in this Section 4.17 is made with respect to Permits issued pursuant to Environmental Laws, which are covered exclusively by the provisions set forth in Section 4.13 .

     4.18 Properties .

          (a) Except for goods and other property sold, used or otherwise disposed of since December 31, 2005 in the ordinary course of business and except as set forth in Section 4.18 of the Company Disclosure Schedule, Company and its Subsidiaries have Good and Marketable Title (as defined below), in and to all real properties, interests in real properties and other assets (including Company’s Oil and Gas Interests (as defined in Section 4.19(b) but excluding

personal property) included as an asset on the Company Balance Sheet and good and defensible title to all personal properties, interests in properties and other assets included as an asset on the Company Balance Sheet, free and clear of any Liens, except (i) Liens associated with obligations reflected in the Company Balance Sheet, (ii) Liens for current taxes not yet due and payable, (iii) materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s, and other similar liens, charges or encumbrances arising in the ordinary course of business to the extent (A) the same have not yet become due and payable, (B) payment is being withheld as provided by law or (C) their validity is being contested in good faith by appropriate action and (iv) all rights to consent by, required notices to, filings with, or other actions by any Governmental Authority in connection with the sale or conveyance of oil and gas leases or interests if they are customarily obtained subsequent to the sale or conveyance. Except as set forth in Section 4.18 of the Company Disclosure Schedule, all leases and other agreements pursuant to which Company or any of its Subsidiaries leases or otherwise acquires or obtains operating rights affecting any real or personal property are in good standing and are valid and enforceable in accordance with their terms, and all royalties, rentals and other payments due by Company or any of its Subsidiaries to any lessor of any such oil and gas leases have been paid, except in each case as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. All such agreements and leases are listed on Section 4.18 of the Company Disclosure Schedule. There have been no material changes proposed in the production allowables for any wells included in the Oil and Gas Interests of Company and its Subsidiaries.

          (b) “ Good and Marketable Title ” means such title that: (i) is deducible of record (from the records of the applicable parish or county or (A) in the case of federal leases, from the records of the applicable office of the Minerals Management Service or Bureau of Land Management, (B) in the case of Indian leases, from the applicable office of the Bureau of Indian Affairs, (C) in the case of state leases, from the records of the applicable state land office) or is assignable to Company or its Subsidiaries out of an interest of record because of the performance by Company or its Subsidiaries of all operations required to earn an enforceable right to such assignment; (ii) is free from reasonable doubt to the end that a prudent purchaser engaged in the business of owning, developing and operating producing oil and gas properties with knowledge of all of the facts and their legal bearing would be willing to accept and pay full value for the same and a prudent lender would be willing to lend against it as collateral without discount for title matters; (iii) except as set forth in Section 4.18(b)(iii) of the Company Disclosure Schedule, entitles Company or its Subsidiaries to receive a percentage of Hydrocarbons produced, saved and marketed from such well or property not less than the interest set forth in the Company Reserve Report with respect to each proved property evaluated therein under the caption “Net Revenue Interest” or “NRI” without reduction during the life of such property except as stated in the Company Reserve Report; (iv) obligates Company and its Subsidiaries to pay costs and expenses relating to each such proved property in an amount not greater than the interest set forth under the caption “Working Interest” or “WI” in the Company Reserve Report with respect to such property without increase over the life of such property except as shown on the Company Reserve Report; and (v) does not restrict the ability of Company or its Subsidiaries to use the properties as currently intended.

     4.19 Reserve Report .

          (a) Company has furnished Parent estimates of Company’s oil and gas reserves attributable to Company’s Oil and Gas Interests (as defined below) as of January 1, 2006 in reports as described in Section 4.19 of the Company Disclosure Schedule (collectively, the “ Company Reserve Report ”). The factual, non-interpretive data on which the Company Reserve Report was based for purposes of estimating the oil and gas reserves set forth therein and in any supplement thereto or update thereof, each of which has been furnished to Parent, was accurate in all material respects, and Company has no knowledge of any material errors in such information that existed at the time such information was provided. There has been no change in respect of the matters addressed in the Company Reserve Report that would reasonably be expected to have a Company Material Adverse Effect. Set forth in Section 4.19 of the Company Disclosure Schedule is a list of all material Oil and Gas Interests of Company that were included in the Company Reserve Report that have been disposed of prior to the date of this Agreement. To the knowledge of Company, and based on the information given to Company by third-party operators for all wells not operated by Company, the Company Payout Balances (as defined below) for each of the wells as used in the Company Reserve Report were accurate in all material respects as of the dates to which Company had calculated them.

          (b) For purposes of this Agreement, “ Oil and Gas Interests ” means (i) direct and indirect interests in and rights with respect to oil, gas, mineral, and related properties and assets of any kind and nature, direct or indirect, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other nonworking interests and nonoperating interests; (ii) all interests in rights with respect to 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; (iii) all easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and (iv) all interests in equipment and machinery (including wells, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing.

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

     4.20 Operations; Equipment . Except as otherwise set forth in Section 4.20 of the Company Disclosure Schedule, to the knowledge of the Company:

          (a) all wells included in the Oil and Gas Interests of Company and its Subsidiaries (other than wells that the Parent operates) have been drilled and (if completed) completed, operated and produced in accordance with good oil and gas field practices and in compliance in all respects with applicable oil and gas leases and applicable Laws, except where any failure or violation has not had, and would not reasonably be expected to have, a Company Material Adverse Effect; and

          (b) all equipment and machinery currently in use and material to the operation of the Oil and Gas Interests of Company and of its Subsidiaries (other than such equipment and machinery used in the operation of Parent Properties) as conducted prior to the date hereof are in reasonable working condition, ordinary wear and tear excepted.

     4.21 Prepayments; Hedging; Calls . As of the date hereof, except as set forth in Section 4.21 of the Company Disclosure Schedule:

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

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

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

     4.22 Restrictive Agreements . Except as set forth in Section 4.22 of the Company Disclosure Schedule, neither Company nor any of its Subsidiaries is a party to, or bound by, any contract, agreement or similar arrangement which upon the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby would purport to restrict, by virtue of a confidentiality, non-competition, territorial exclusivity or other provision, the scope of the business or operation of Parent or any of its affiliates (other than Company and its Subsidiaries) geographically or otherwise.

     4.23 Required Shareholder Vote or Consent . The only vote of the holders of any class or series of Company’s capital stock that will be necessary to consummate the Merger and the

other transactions contemplated by this Agreement is the approval by the holders of a majority of the outstanding shares of Company Common Stock, on the applicable record date (the “ Company Shareholders’ Approval ”).

     4.24 Proxy Statement/Prospectus; Registrat