AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

STONE ENERGY CORPORATION (PARENT)

STONE ENERGY OFFSHORE, L.L.C. (MERGER SUB)

and

BOIS D’ARC ENERGY, INC. (COMPANY)

dated as of

April 30, 2008

TABLE OF CONTENTS

ARTICLE I

1.1		The Merger			1
1.2		Effective Time of the Merger			1
1.3		Closing			2
1.4		Certificate of Formation			2
1.5		Limited Liability Company Agreement			2
1.6		Directors and Officers			2

ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES

2.1		Effect of the Merger			2
2.2		No Dissenters’ Rights			3
2.3		Treatment of Stock Options; Restricted Stock			3
2.4		Exchange of Certificates			5
2.5		Stock Transfer Books			8

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

3.1		Organization			8
3.2		Capitalization			9
3.3		Authorization; Validity of Agreement			10
3.4		No Violations; Consents and Approvals			11
3.5		SEC Reports and Financial Statements			12
3.6		Oil and Gas			13
3.7		Absence of Certain Changes			16
3.8		Absence of Undisclosed Liabilities			17
3.9		Disclosure Documents			17
3.10		Employee Benefit Plans; ERISA			17
3.11		Litigation; Compliance with Law			19
3.12		Intellectual Property			20
3.13		Material Contracts			22
3.14		Taxes			23
3.15		Environmental Matters			25
3.16		Company Assets			26
3.17		Insurance			26
3.18		Labor Matters; Employees			26

3.19		Affiliate Transactions			27
3.20		Derivative Transactions and Hedging			28
3.21		Natural Gas Act			28
3.22		Disclosure Controls and Procedures			28
3.23		Investment Company			28
3.24		No Rights Agreement			28
3.25		Takeover Laws			29
3.26		Required Vote by Company Stockholders			29
3.27		Recommendation of Company Board of Directors; Opinion of Financial Advisor			29
3.28		Brokers			29
3.29		Reorganization			29
3.30		No Other Representations or Warranties			30

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB

4.1		Organization			30
4.2		Capitalization			31
4.3		Authorization; Validity of Agreement			32
4.4		No Violations; Consents and Approvals			32
4.5		SEC Reports and Financial Statements			33
4.6		Oil and Gas Reserves			35
4.7		Absence of Certain Changes			37
4.8		Absence of Undisclosed Liabilities			37
4.9		Disclosure Documents			37
4.10		Employee Benefit Plans; ERISA			38
4.11		Litigation; Compliance with Law			39
4.12		Intellectual Property			41
4.13		Material Contracts			42
4.14		Taxes			43
4.15		Environmental Matters			45
4.16		Parent Assets			46
4.17		Insurance			46
4.18		Labor Matters; Employees			46
4.19		Affiliate Transactions			47
4.20		Derivative Transactions and Hedging			47
4.21		Natural Gas Act			48
4.22		Disclosure Controls and Procedures			48
4.23		Investment Company			48
4.24		Rights Agreement			48
4.25		Recommendation of Parent Board of Directors; Opinion of Financial Advisor			48
4.26		Required Vote by Parent Stockholders			49
4.27		Stockholder Agreements			49

4.28		Brokers			49
4.29		Reorganization			49
4.30		No Other Representations or Warranties			49

ARTICLE V

COVENANTS

5.1		Interim Operations of the Company			49
5.2		Interim Operations of Parent			53
5.3		Acquisition Proposals			55
5.4		Access to Information and Properties			62
5.5		Further Action; Commercially Reasonable Efforts			63
5.6		Proxy Statement; S-4; Company Special Meeting; Parent Special Meeting			64
5.7		Notification of Certain Matters			65
5.8		Directors’ and Officers’ Insurance and Indemnification			66
5.9		Publicity			66
5.10		Stock Exchange Listing			66
5.11		Employee Benefits			67
5.12		Certain Tax Matters			68
5.13		Section 16 Matters			69

ARTICLE VI

CONDITIONS

6.1		Conditions to Each Party’s Obligation to Effect the Merger			69
6.2		Conditions to the Obligation of the Company to Effect the Merger			70
6.3		Conditions to Obligations of Parent and Merger Sub to Effect the Merger			71

ARTICLE VII

TERMINATION

7.1		Termination			72
7.2		Effect of Termination			73

ARTICLE VIII

MISCELLANEOUS

8.1		Fees and Expenses			73
8.2		Amendment; Waiver			75
8.3		Survival			76
8.4		Notices			76
8.5		Rules of Construction and Interpretation; Definitions			77
8.6		Headings; Schedules			82
8.7		Counterparts			82

8.8		Entire Agreement			82
8.9		Severability			82
8.10		Governing Law			82
8.11		Assignment			82
8.12		Parties in Interest			83
8.13		Specific Performance			83
8.14		Jurisdiction			83

TABLE OF DEFINED TERMS

Acceptable Confidentiality Agreement			78
Acquisition Agreement			57
Acquisition Proposal			62
Advisers Act			29
Agreement			1
Antitrust Division			64
Articles of Merger			1
Business Day			79
Certificate			3
Certificate of Merger			1
Claim			79
Cleanup			79
Closing			2
Closing Date			2
Code			1
Committee			4
Company			1
Company Adverse Recommendation Change			57
Company Assets			27
Company Balance Sheet			13
Company Benefit Plans			18
Company Board			11
Company Common Stock			3
Company Credit Agreement			11
Company Disclosure Letter			9
Company Employee			68
Company Employee Agreement			18
Company ERISA Affiliate			18
Company IP Rights			22
Company Leased Real Property			79
Company Leases			79
Company Material Contract			23
Company Notice of Change			58
Company Oil and Gas Agreements			15
Company Option			4
Company Owned Real Property			79
Company Permits			21
Company Preferred Stock			10
Company Real Property			79
Company Required Vote			29
Company Reserve Report			14
Company Restricted Stock			5
Company SEC Documents			13
Company Special Meeting			66
Company Termination Fee			74
Confidentiality Agreements			63
D&O			67
Delaware Secretary of State			1
Derivative Transaction			79
DLLCA			1
Effective Time			2
Employment and Withholding Taxes			79
Environmental Claim			80
Environmental Laws			80
ERISA			18
Exchange Act			13
Exchange Agent			5
Exchange Fund			5
FERC			29
FTC			64
GAAP			14
Governmental Entity			12
Hazardous Material			80
HSR Act			12
Hydrocarbons			15
Intellectual Property			21
Interim Company Reserve Report			65
Investment Company Act			29
knowledge			80
Laws			12
Liens			80
Litigation			81
mass layoff			28
Material Adverse Effect			81
Merger			1
Merger Consideration			3
Merger Sub			1
Nevada Secretary of State			2
NGA			29
NRS			1
Oil and Gas Interests			15
Option Amount			4
Option Amount Cash Percentage			4
Option Amount Stock Percentage			4
Parent			1
Parent Adverse Recommendation Change			60
Parent Assets			46
Parent Balance Sheet			35

Parent Benefit Plans			39
Parent Board			49
Parent Common Stock			3
Parent Credit Agreement			32
Parent Disclosure Letter			30
Parent Employee Agreement			39
Parent ERISA Affiliate			39
Parent IP Rights			42
Parent Leased Real Property			81
Parent Leases			81
Parent Material Contract			43
Parent Notice of Change			61
Parent Oil and Gas Agreements			36
Parent Owned Real Property			81
Parent Permits			41
Parent Preferred Stock			31
Parent Proposal			49
Parent Real Property			82
Parent Required Vote			49
Parent Reserve Report			35
Parent Rights			32
Parent Rights Agreement			32
Parent SEC Documents			34
Parent Special Meeting			66
Parent Stock Options			32
Parent Termination Fee			74
Per Share Cash Consideration			3
Per Share Stock Consideration			3
Permitted Liens			82
Person			82
plant closing			28
Proxy Statement			18
Registered Company IP			22
Registered Parent IP			42
Release			82
Representatives			56
Return			82
S-4			18
Sarbanes-Oxley Act			13
SEC			13
Section 2.3 Parent Common Stock Value			4
Securities Act			10
Stock Plan			4
Stockholder Agreements			50
Subsidiary			82
Superior Proposal			62
Surviving Entity			1
Tax			82
Termination Date			72
WARN Act			28

          This Agreement and Plan of Merger (this “ Agreement ”) dated April 30, 2008, by and among Stone Energy Corporation, a Delaware corporation (“ Parent ”), Stone Energy Offshore, L.L.C., a Delaware limited liability company and wholly owned Subsidiary of Parent (“ Merger Sub ”), and Bois d’Arc Energy, Inc., a Nevada corporation (the “ Company ”). Certain capitalized terms not defined herein are defined in Section 8.5 of this Agreement.

          WHEREAS, the respective boards of directors of each of Parent, Merger Sub and the Company have unanimously (i) approved and declared advisable the merger of the Company with and into Merger Sub, upon the terms and subject to the conditions set forth in this Agreement, and (ii) approved this Agreement;

          WHEREAS, for U.S. federal income tax purposes, it is intended that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “ Code ”); and

          WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and to prescribe various conditions to the Merger.

          NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants and agreements contained in this Agreement, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

     1.1 The Merger . Upon the terms and subject to the satisfaction or (to the extent permitted by applicable Law) waiver of the conditions set forth in Article VI, at the Effective Time (as defined below), the Company shall merge with and into Merger Sub (the “ Merger ”), the separate existence of the Company shall thereupon cease and Merger Sub shall be the surviving entity in the Merger (sometimes referred to herein as the “ Surviving Entity ”) as a wholly owned Subsidiary of Parent. The Merger shall have the effects set forth in the Delaware Limited Liability Company Act (the " DLLCA ”) and the Nevada Revised Statutes (the “ NRS ”), including the Surviving Entity’s succession to and assumption of all rights and obligations of Merger Sub and the Company.

     1.2 Effective Time of the Merger . Upon the terms and subject to the provisions of this Agreement, at the Closing, Parent, Merger Sub and the Company will cause (i) an appropriate Certificate of Merger (the “ Certificate of Merger ”) to be executed and filed with the Secretary of State of the State of Delaware (the “ Delaware Secretary of State ”) in such form and executed as provided in the DLLCA and (ii) appropriate Articles of Merger (the “ Articles of Merger ”) to be executed and filed with the Secretary of State of the State of Nevada (the “ Nevada Secretary of State ”) in such form and executed as provided in the NRS. The Merger shall become effective (the “ Effective Time ”) upon the later of (i) the date and time of filing of a properly executed Certificate of Merger with the Delaware Secretary of State in accordance with the DLLCA and properly executed Articles of Merger with the Nevada Secretary of State in accordance with the

NRS, and (ii) such time as the parties shall agree and as specified in the Certificate of Merger and Articles of Merger. The filing of the Certificate of Merger and Articles of Merger referred to above shall be made as soon as practicable on the Closing Date set forth in Section 1.3.

     1.3 Closing . The closing (the “ Closing ”) of the transactions contemplated by this Agreement will take place at 10:00 a.m. (local time) on a date to be specified by the parties, which shall be no later than the second Business Day after satisfaction or (to the extent permitted by applicable Law) waiver of the conditions set forth in Article VI (other than any such conditions which by their nature cannot be satisfied until the Closing Date, which shall be required to be so satisfied or (to the extent permitted by applicable Law) waived on the Closing Date), at the offices of Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas 77002 unless another time, date or place is agreed to in writing by the parties hereto (such date upon which the Closing occurs, the “ Closing Date ”).

     1.4 Certificate of Formation . Pursuant to the Merger, the Certificate of Formation of Merger Sub in effect immediately prior to the Effective Time shall be the Certificate of Formation of the Surviving Entity until thereafter changed or amended in accordance with the Limited Liability Company Agreement of the Surviving Entity and the DLLCA.

     1.5 Limited Liability Company Agreement . Pursuant to the Merger, the Limited Liability Company Agreement of Merger Sub in effect immediately prior to the Effective Time shall be the Limited Liability Company Agreement of the Surviving Entity at and after the Effective Time until thereafter amended in accordance with the terms thereof and the DLLCA.

     1.6 Directors and Officers . At and after the Effective Time, the directors and officers of Merger Sub shall be the directors and officers, respectively, of the Surviving Entity until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Entity’s Limited Liability Company Agreement and the DLLCA.

ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES

     2.1 Effect of the Merger . At the Effective Time, by virtue of the Merger and without any action on the part of any party or the holder of any of their securities:

          (a) Membership Interests of Merger Sub . The issued and outstanding membership interests of Merger Sub shall remain issued and outstanding and unchanged, and the sole member shall remain the sole member of Merger Sub.

          (b) Capital Stock of the Company . Subject to the other provisions of this Article II, each share of common stock of the Company, par value $0.01 per share (the “ Company Common Stock " ), issued and outstanding immediately prior to the Effective Time (excluding any shares of Company Common Stock described in Section 2.1(d)) shall be converted into the right to receive (i) 0.165 shares of the common stock of Parent, par value $0.01 per share (the “ Parent Common Stock ”), together with the Parent Rights associated

therewith (the “ Per Share Stock Consideration ”), and (ii) cash in an amount equal to $13.65, without interest (the “ Per Share Cash Consideration ;” the Per Share Cash Consideration together with the Per Share Stock Consideration are herein referred to as the “ Merger Consideration ”).

          (c) Certificates . All such shares of Company Common Stock, when so converted, shall cease to be outstanding and shall automatically be canceled and cease to exist. Each holder of a certificate (a “ Certificate ”) previously representing any such shares shall cease to have any rights with respect thereto, except the right to receive (i) the Merger Consideration, (ii) any dividends or other distributions in accordance with Section 2.4, and (iii) any cash to be paid in lieu of any fractional shares of Parent Common Stock in accordance with Section 2.4, in each case to be issued or paid in consideration therefor upon the surrender of such Certificates in accordance with Section 2.4.

          (d) Treasury Stock . All shares of Company Common Stock held by the Company as treasury shares or by Parent or Merger Sub or by any Subsidiary of Parent, Merger Sub or the Company immediately prior to the Effective Time shall automatically be canceled and cease to exist as of the Effective Time and no consideration shall be delivered or deliverable therefor.

          (e) Impact of Stock Splits, Etc . If, between the date of this Agreement and the Effective Time, the shares of Parent Common Stock or Company Common Stock shall be changed or proposed to be changed into a different number or class of shares by reason of the occurrence of or record date with respect to any reclassification, recapitalization, split-up, combination, exchange of shares or similar readjustment, in any such case within such period, or a stock dividend thereon shall be declared with a record date within such period, appropriate adjustments shall be made to the Per Share Stock Consideration, and only with respect to changes in the outstanding shares of Company Common Stock, to the Per Share Cash Consideration. Nothing in this Section 2.1(e) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

     2.2 No Dissenters’ Rights . Pursuant to Section 92A.390 of the NRS, no dissenters’ rights or rights of appraisal will apply in connection with the Merger.

     2.3 Treatment of Stock Options; Restricted Stock .

          (a) Prior to the Effective Time, the Company, the Company Board and the Compensation Committee of the Company Board (the “ Committee ”) shall take all actions necessary under the Company’s Amended and Restated Long-Term Incentive Plan (the “ Stock Plan ”) to cause each option to purchase shares of Company Common Stock granted under the Stock Plan that is outstanding immediately prior to the Effective Time (a “ Company Option ”) to be cancelled at the Effective Time by virtue of the Merger and without any action on the part of the holder thereof, the Company, Parent or Merger Sub. Each Company Option shall be converted into the right to receive, from the Surviving Entity, within two Business Days following the Effective Time, an amount (the “ Option Amount ”) (less any applicable withholding Taxes and without interest) equal to the excess of (A) the number of shares of Company Common Stock subject to such Company Option multiplied by the Merger

Consideration; provided however that for purposes of this Section 2.3(a) only, the Per Share Stock Consideration portion of the Merger Consideration shall be determined using the average closing sales price of Parent Common Stock as reported by The Wall Street Journal for the five trading days immediately preceding the two Business Days prior to the date on which the Effective Time shall occur (such value, the “ Section 2.3 Parent Common Stock Value ”, over (B) the per share exercise price of such Company Option multiplied by the number of shares of Company Common Stock subject to such Company Option. The Option Amount Cash Percentage of the Option Amount shall be paid in cash. The Option Amount Stock Percentage of the Option Amount shall be paid in the form of Parent Common Stock utilizing the Section 2.3 Parent Common Stock Value. The “ Option Amount Cash Percentage “shall be the quotient (expressed as a percentage) of the Per Share Cash Consideration divided by the sum of the Per Share Cash Consideration and the Section 2.3 Parent Common Stock Value. The “ Option Amount Stock Percentage ” shall equal 100% less the Option Amount Cash Percentage. As of the Effective Time, all Company Options shall automatically cease to exist, and each holder of a Company Option shall cease to have any rights with respect thereto, except, with respect to Company Options, the right to receive payment of the Option Amount. Prior to the Effective Time, the Company, the Company Board and the Committee shall take all actions necessary under the Stock Plan, the award agreements thereunder and otherwise to effectuate the provisions of this Section 2.3(a), including providing notice to the holders of Company Options of such provisions

          (b) Subject to the terms and upon the conditions herein, as of the Effective Time, the restrictions on each restricted share of Company Common Stock (the “ Company Restricted Stock ”) granted and then outstanding under the Stock Plan shall, and without any action on the part of the holder thereof, the Company, Parent or Merger Sub, lapse, and each such share of Company Restricted Stock shall be fully vested in each holder thereof at such time, and each such share of Company Restricted Stock will 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 Company 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 Entity or Parent a sufficient number of shares of Company Common Stock equal in value to such obligation. Prior to the Effective Time, the Company, the Company Board and the Committee shall take all actions necessary under the Stock Plan, the award agreements thereunder and otherwise to effectuate this Section 2.3(a).

          (c) Except as contemplated by clauses (a) and (b) above, the Surviving Entity and Parent shall be entitled to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from the consideration otherwise payable pursuant to this Section 2.3 to any holders of Company Options or Company Restricted Stock such amounts as it may be required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld by the Surviving Entity, Parent or the Exchange Agent, as the case may be, the withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holders of Company Options or Company Restricted Stock, as applicable, in respect of which the deduction and withholding was made by the Surviving Entity, Parent or the Exchange Agent, as the case may be. The Surviving Entity and Parent agree that no wage withholding shall be made with respect to Restricted Stock

with respect to which a valid and timely election has been made under Section 83(b) of the Code unless required by applicable Law.

     2.4 Exchange of Certificates .

          (a) Exchange Agent . Prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with the Company’s transfer agent or a bank or trust company designated by Parent and reasonably satisfactory to the Company (the “ Exchange Agent ”), for the benefit of the holders of shares of Company Common Stock, for exchange in accordance with this Article II, through the Exchange Agent, sufficient cash and Parent Common Stock to make pursuant to this Article II all deliveries of cash and Parent Common Stock as required by this Article II. Parent agrees to make available to the Exchange Agent, from time to time as needed, cash sufficient to pay any dividends and other distributions pursuant to Section 2.4(c) and to make payments in lieu of fractional shares pursuant to Section 2.4(e). Any cash and Parent Common Stock deposited with the Exchange Agent (including as payment for fractional shares in accordance with Section 2.4(e) and any dividends or other distributions in accordance with Section 2.4(c)) shall hereinafter be referred to as the “ Exchange Fund .” The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration contemplated to be paid for shares of Company Common Stock pursuant to this Agreement out of the Exchange Fund. Except as contemplated by Sections 2.4(c) and 2.4(e) hereof, the Exchange Fund shall not be used for any other purpose.

          (b) Exchange Procedures . Promptly after the Effective Time, Parent shall instruct the Exchange Agent to mail to each record holder, as of the Effective Time, of an outstanding Certificate that immediately prior to the Effective Time represented shares of Company Common Stock (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent, and shall be in customary form and agreed to by Parent and the Company prior to the Effective Time) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificates. Promptly after the Effective Time, upon surrender of Certificates for cancellation to the Exchange Agent together with such letters of transmittal, properly completed and duly executed, and such other documents as may be required pursuant to such instructions, the holders of such Certificates shall be entitled to receive in exchange therefor (A) shares of Parent Common Stock representing, in the aggregate, the whole number of shares of Parent Common Stock that such holder has the right to receive pursuant to Section 2.1 (after taking into account all shares of Company Common Stock then held by such holder) and (B) a check in the amount equal to the aggregate amount of cash that such holder has the right to receive pursuant to Section 2.1 and this Article II, including cash payable in lieu of any fractional shares of Parent Common Stock pursuant to Section 2.4(e) and dividends and other distributions pursuant to Section 2.4(c). No interest shall be paid or accrued on any Merger Consideration, cash in lieu of fractional shares or on any unpaid dividends and distributions payable to holders of Certificates. In the event of a transfer of ownership of shares of Company Common Stock which is not registered in the transfer records of the Company, the Merger Consideration payable in respect of such shares of Company Common Stock may be paid to a transferee if the Certificate representing such shares of Company Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect

such transfer and the Person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other Taxes required by reason of the delivery of the Merger Consideration in any name other than that of the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Exchange Agent that such Taxes have been paid or are not payable. Until surrendered as contemplated by this Section 2.4, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificate, cash in lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.4(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.4(c).

          (c) Distributions with Respect to Unexchanged Parent Common Stock . No dividends or other distributions declared or made with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the Parent Common Stock that such holder would be entitled to receive upon surrender of such Certificate and no cash payment in lieu of fractional shares of Parent Common Stock shall be paid to any such holder until such holder shall surrender such Certificate in accordance with this Section 2.4. Subject to applicable Law, following surrender of any such Certificate, there shall be paid to such holder of Parent Common Stock issuable in exchange therefor, without interest, (i) promptly after the time of such surrender, the amount of any cash due pursuant to Section 2.1 and cash payable in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.4(e) and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to the Parent Common Stock and payable with respect to such Parent Common Stock, 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 such surrender and a payment date subsequent to such surrender payable with respect to such Parent Common Stock.

          (d) Further Rights in Company Common Shares . The Merger Consideration issued upon conversion of a share of Company Common Stock in accordance with the terms hereof (including any cash paid pursuant to Section 2.4(c) or Section 2.4(e)) shall be deemed to have been issued in full satisfaction of all rights pertaining to such share of Company Common Stock.

          (e) Fractional Shares . No certificates or scrip or Parent Common Stock representing fractional shares of Parent Common Stock or book entry credit of the same shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to have any rights as a holder of any Parent Common Stock. Notwithstanding any other provision of this Agreement, each holder of shares of Company Common Stock exchanged in the Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock (after taking into account all Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to the product of (i) the average of the closing sale prices of Parent Common Stock on the NYSE as reported by The Wall Street Journal for the five trading days immediately preceding the two Business Days prior to the date on which the Effective Time shall occur and (ii) the fraction of a share of Parent Common Stock that such holder would otherwise be entitled to receive pursuant to Section 2.1 hereof. As promptly as practicable after the determination of the amount of cash,

if any, to be paid to holders of fractional interests, the Exchange Agent shall so notify Parent, and Parent shall, or shall cause the Surviving Entity to, deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward payments to such holders of fractional interests subject to and in accordance with the terms hereof.

          (f) Termination of Exchange Fund . Any portion of the Exchange Fund which remains undistributed to the holders of Company Common Stock after 180 days following the Effective Time occurs shall be delivered to Parent upon demand and, from and after such delivery to Parent, any former holders of Company Common Stock who have not theretofore complied with this Article II shall thereafter look only to Parent for the Merger Consideration payable in respect of such shares of Company Common Stock, any cash in lieu of fractional shares of Parent Common Stock to which they are entitled pursuant to Section 2.4(e) and any dividends or other distributions with respect to Parent Common Stock to which they are entitled pursuant to Section 2.4(c), in each case, without any interest thereon. Any amounts remaining unclaimed by holders of shares of Company Common Stock immediately prior to such time as such amounts would otherwise escheat to or become the property of any governmental entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any Liens, claims or interest of any Person previously entitled thereto.

          (g) No Liability . Neither Parent nor the Surviving Entity shall be liable to any holder of shares of Company Common Stock for any such shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any abandoned property, escheat or similar Law.

          (h) Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificate, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.4(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.4(c), in each case, without any interest thereon.

          (i) Withholding . Each of Parent, the Surviving Entity and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as Parent, the Surviving Entity or the Exchange Agent is required to deduct and withhold under the Code or any provision of state, local, or foreign Tax Law, with respect to the making of such payment. To the extent that amounts are so withheld by Parent, the Surviving Entity or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Common Stock in respect of whom such deduction and withholding was made by Parent, the Surviving Entity or the Exchange Agent, as the case may be.

          (j) Book Entry . All shares of Parent Common Stock to be issued in the Merger shall be issued in book entry form, without physical certificates.

     2.5 Stock Transfer Books . At the close of business on the date on which the Effective Time occurs, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of shares of Company Common Stock theretofore outstanding on the records of the Company. From and after the close of business on the date on which the Effective Time occurs, any Certificates presented to the Exchange Agent, Parent or the Surviving Entity for any reason shall be converted into the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificates, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.4(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.4(c), in each case, without any interest thereon.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except as set forth in the disclosure letter delivered by the Company to Parent at or prior to the execution and delivery of this Agreement (the “ Company Disclosure Letter ”) (each section of which qualifies the correspondingly numbered representation, warranty or covenant to the extent specified therein and such other representations, warranties or covenants to the extent a matter in such section is disclosed in such a way as to make its relevance to such other representation, warranty or covenant reasonably apparent), the Company represents and warrants to Parent as follows:

     3.1 Organization .

          (a) Each of the Company and its Subsidiaries is a corporation or other entity duly organized, validly existing, and in good standing (to the extent such concept exists in such jurisdiction) under the Laws of the jurisdiction of its incorporation or organization, and has all requisite corporate or other power and authority to own, lease, use and operate its properties and to carry on its business as it is now being conducted.

          (b) Each of the Company and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction (to the extent such concepts exist in such jurisdictions) where the character of the property owned, operated or leased by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or to be in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.

          (c) The Company has previously made available to Parent a complete, true and correct copy of each of its articles of incorporation and bylaws, in each case as amended (if so amended) to the date of this Agreement, and has made available the certificate of incorporation, bylaws or other organizational documents of each of its Subsidiaries, in each case as amended (if so amended) to the date of this Agreement. Neither the Company nor any of its

Subsidiaries is in violation of its articles or certificate of incorporation, bylaws or other organizational documents.

          (d) Section 3.1(d) of the Company Disclosure Letter sets forth a complete, true and correct list of all of the Subsidiaries of the Company, together with the jurisdiction of incorporation or organization of each Subsidiary, the percentage of outstanding capital stock or other equity interest of each Subsidiary held by the Company or any other subsidiary and the names of the directors, managers and officers of each Subsidiary. Except as disclosed in Section 3.1(d) of the Company Disclosure Letter, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. The respective certificates or articles of incorporation and bylaws or other organizational documents of the Subsidiaries of the Company do not contain any provision limiting or otherwise restricting the ability of the Company to control its Subsidiaries in any material respect.

          (e) All names by which the Company previously conducted business or was known are as listed in Section 3.1(e) of the Company Disclosure Letter.

     3.2 Capitalization .

          (a) The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock and 10,000,000 shares of preferred stock, par value $.01 per share (the “ Company Preferred Stock ”). As of April 29, 2008, 66,449,000 shares of Company Common Stock were issued and outstanding (including 650,000 shares of unvested Company Restricted Stock issued under the Stock Plan). As of the date of this Agreement, (i) there are no shares of Company Preferred Stock issued and outstanding or held in the treasury of the Company, and (ii) 1,632,890 shares of Company Common Stock are reserved for issuance in respect of future grants under the Stock Plan. As of April 15, 2008, there are outstanding Company Options to purchase an aggregate of 3,250,000 shares of Company Common Stock. Since April 15, 2008, (i) no shares of Company Common Stock have been issued, except pursuant to Company Options outstanding on April 15, 2008, and (ii) no Company Options have been granted. Neither the Company nor any of its Subsidiaries directly or indirectly owns any shares of Company Common Stock. No bonds, debentures, notes or other indebtedness having the right to vote (or convertible into or exchangeable for securities having the right to vote) on any matters on which stockholders of the Company may vote are issued or outstanding. All issued and outstanding shares of the Company’s capital stock are, and all shares that may be issued or granted pursuant to the exercise of Company Options will be, when issued or granted in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. The issuance and sale of all of the shares of capital stock described in this Section 3.2 have been in compliance with United States federal and state securities Laws. Neither the Company nor any of its Subsidiaries has agreed to register any securities under the Securities Act of 1933, as amended (together with the rules and regulations thereunder, the “ Securities Act ”), or under any state securities Law or granted registration rights to any individual or entity. Except for the Company Options, as of the date of this Agreement, there are no outstanding or authorized (x) options, warrants, preemptive rights, subscriptions, calls or other rights,

convertible securities, agreements, claims or commitments of any character obligating the Company or any of its Subsidiaries to issue, transfer or sell any shares of capital stock or other equity interest in the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or equity interests, (y) contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the Company or any of its Subsidiaries or any such securities or agreements listed in clause (x) of this sentence, or (z) voting trusts or similar agreements to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock of the Company or any of its Subsidiaries. The Company has previously provided to Parent true and correct information with respect to each Company Option outstanding as of the date of this Agreement including: (i) the name of the holder; (ii) the particular plan pursuant to which the Company Option was granted; (iii) the number of shares of Company Common Stock subject to such Company Option; (iv) with respect to each Company Option, the exercise price per share of Company Common Stock; (v) the date on which such Company Option was granted or issued; (vi) the applicable vesting schedule; (vii) the date on which such Company Option expires; and (viii) whether the exercisability of such Company Option will be accelerated in any way by the transactions contemplated by this Agreement. Immediately after the consummation of the Merger, there will not be any outstanding subscriptions, options, warrants, calls, preemptive rights, subscriptions, or other rights, convertible or exchangeable securities, agreements, claims or commitments of any character by which the Company or any of its Subsidiaries will be bound calling for the purchase or issuance of any shares of the capital stock of the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or any other such securities or agreements.

          (b) (i) All of the issued and outstanding shares of capital stock (or equivalent equity interests of entities other than corporations) of each of the Company’s Subsidiaries are owned, directly or indirectly, by the Company free and clear of any Liens, other than (x) statutory Liens for Taxes not yet due and payable, (y) such restrictions as may exist under applicable Law, and (z) Liens granted pursuant to the Company’s Credit Agreement, dated May 11, 2005, as amended, among the Company and each of the lenders party thereto (the “ Company Credit Agreement ”), and all such shares or other ownership interests have been duly authorized, validly issued and are fully paid and non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof, and (ii) neither the Company nor any of its Subsidiaries owns any shares of capital stock or other securities of, or interest in, any other Person, except for the securities of the Subsidiaries of the Company, or is obligated to make any capital contribution to or other investment in any other Person.

          (c) Except for the Company Credit Agreement, no indebtedness of the Company or any of its Subsidiaries contains any restriction (other than customary notice provisions) upon (i) the prepayment of any indebtedness of the Company or any of its Subsidiaries, (ii) the incurrence of indebtedness by the Company or any of its Subsidiaries, or (iii) the ability of the Company or any of its Subsidiaries to grant any Lien on the properties or assets of the Company or any of its Subsidiaries.

     3.3 Authorization; Validity of Agreement . The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, subject to approval of this Agreement by the Company Required Vote.

The adoption of this Agreement, the approval of the Merger, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Company (the “ Company Board ”). The Company Board has directed that this Agreement and the transactions contemplated hereby be submitted to the Company’s stockholders for approval at a meeting of such stockholders and has recommended that the stockholders of the Company approve this Agreement. Except for the Company Required Vote, no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery of this Agreement by Parent and Merger Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforcement may be subject to or limited by (i) bankruptcy, insolvency, reorganization, moratorium or other Laws, now or hereafter in effect, affecting creditors’ rights generally and (ii) the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). The Company Board has taken all action necessary to render the provisions of Sections 78.411 to 78.444, inclusive, of the NRS, that would prohibit the Merger or any other “combination” (as defined in NRS 78.416), inapplicable to this Agreement, the Merger and the other transactions contemplated by this Agreement, and the Stockholder Agreements.

     3.4 No Violations; Consents and Approvals .

          (a) Except as set forth in Section 3.4(a) of the Company Disclosure Letter, neither the execution, delivery and performance of this Agreement by the Company, nor the consummation by the Company of the Merger or any other transactions contemplated hereby, will (i) violate or conflict with any provision of the articles of incorporation or the bylaws of the Company, or the articles or certificate of incorporation, bylaws or similar governing documents of any of the Company’s Subsidiaries, (ii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination, cancellation, modification or amendment under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of the Company or any of its Subsidiaries under, or result in the acceleration or trigger of any payment, time of payment, vesting or increase in the amount of any compensation or benefit payable pursuant to, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease, license, contract, collective bargaining agreement, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective assets or properties may be bound, or (iii) assuming the consents, approvals, orders, authorizations, registrations, filings or permits referred to in Section 3.4(b) are duly and timely obtained or made and the Company Required Vote has been obtained, conflict with or violate any federal, state, provincial, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law, rule or regulation (collectively, " Laws ”) applicable to the Company, any of its Subsidiaries or any of their respective properties or assets; except in the case of clauses (ii) and (iii), for (A) the Company Credit Agreement, (B) certain seismic license agreements and (C) such conflicts, violations, breaches, defaults, losses, obligations, payments, rights (if exercised) or Liens which

individually or in the aggregate have not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (b) No material filing or registration with, declaration or notification to, or order, authorization, consent or approval of, any federal, state, provincial, local or foreign court, arbitral, legislative, administrative, executive or regulatory authority or agency (a “ Governmental Entity ”) or any other Person is required to be obtained or made by the Company or any of its Subsidiaries in connection with the execution, delivery and performance of this Agreement by the Company or the consummation by the Company of the Merger or any other transactions contemplated hereby, except for (i) compliance with any applicable requirements of the Exchange Act, (ii) compliance with any applicable requirements of the Securities Act, (iii) compliance with any applicable state securities or “blue sky” or takeover Laws, (iv) the adoption of this Agreement by the Company Required Vote, (v) such filings, authorizations or approvals, or expiration or termination of applicable waiting periods, as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the “ HSR Act ”), (vi) the filing of the Certificate of Merger with the Delaware Secretary of State and the Articles of Merger with the Nevada Secretary of State, (vii) compliance with any applicable requirements under stock exchange rules, (viii) consents or approvals of any Governmental Entity, which are normally obtained after the consummation of this type of transaction, and (ix) any such filing, registration, declaration, notification, order, authorization, consent or approval that the failure to obtain or make individually or in the aggregate would not be reasonably likely to have or result in a Material Adverse Effect on the Company.

     3.5 SEC Reports and Financial Statements .

          (a) The Company has timely filed with the Securities and Exchange Commission (the “ SEC ”) all forms and documents required to be filed by it since May 10, 2005 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including (A) its Annual Reports on Form 10-K, (B) its Quarterly Reports on Form 10-Q, (C) all proxy statements relating to meetings of stockholders of the Company (in the form mailed to stockholders), and (D) all other forms, reports and registration statements required to be filed by the Company with the SEC since May 10, 2005. The documents described in clauses (A)-(D) above, in each case as amended (whether filed prior to, on or after the date of this Agreement), are referred to in this Agreement collectively as the “ Company SEC Documents .” As of their respective dates or, if amended and publicly available prior to the date of this Agreement, as of the date of such amendment with respect to those disclosures that are amended, the Company SEC Documents, including the financial statements and schedules provided therein or incorporated by reference therein, (x) 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 and (y) complied in all material respects with the applicable requirements of the Exchange Act, the Securities Act, the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”) and other applicable Laws, as the case may be, and the applicable rules and regulations of the SEC thereunder. None of the Subsidiaries of the Company is subject to the periodic reporting requirements of the Exchange Act or required to file any form, report or other document with the SEC, the NYSE, any stock exchange or any other comparable Governmental Entity.

          (b) The December 31, 2007 consolidated balance sheet of the Company (the “ Company Balance Sheet ”) and the related consolidated statements of operations, changes in stockholders’ equity and cash flows (including, in each case, the related notes, where applicable), as reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 filed with the SEC under the Exchange Act, fairly present (within the meaning of the Sarbanes-Oxley Act), and the financial statements to be filed by the Company with the SEC after the date of this Agreement will fairly present (subject, in the case of unaudited statements, to recurring audit adjustments normal in nature and amount), in all material respects, the consolidated financial position and the consolidated results of operations, cash flows and changes in stockholders’ equity of the Company and its Subsidiaries as of the respective dates or for the respective fiscal periods therein set forth; each of such statements (including the related notes, where applicable) complies, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will comply, with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will be, prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) consistently applied during the periods involved, except as indicated in the notes thereto. The books and records of the Company and its Subsidiaries have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Ernst & Young LLP is an independent public accounting firm with respect to the Company and has not resigned or been dismissed as independent public accountants of the Company. Ernst & Young LLP has not indicated to the Company that it has any material disagreements with the Company’s accounting policies.

          (c) The Company has not received any notice from the SEC that its accounting policies are subject to review or investigation, except for those comments previously issued by the SEC that have already been resolved.

          (d) Since May 10, 2005, (A) the exercise price of each Company Option has been no less than the Fair Market Value (as defined under the terms of the respective Stock Plan under which such Company Option was granted) of a share of Company Common Stock as determined on the date of grant of such Company Option, and (B) all grants of Company Options were validly issued and properly approved by the Company Board (or a duly authorized committee or subcommittee thereof) in material compliance with applicable Law and recorded in the Company’s financial statements referred to in Section 3.5(b) in accordance with GAAP, and no such grants involved any “back dating,” “forward dating” or similar practices with respect to the effective date of grant.

     3.6 Oil and Gas .

          (a) The Company has furnished to Parent a reserve report prepared by Lee Keeling and Associates, Inc. containing estimates of the oil and gas reserves that are owned by the Company and its Subsidiaries as of December 31, 2007 (the “ Company Reserve Report ”). The factual, non-interpretive data relating to the Oil and Gas Interests of the Company and its Subsidiaries on which the Company Reserve Report was based for purposes of estimating the oil and gas reserves set forth therein, to the knowledge of the Company, was accurate in all material

respects at the time such data was provided to the reserve engineers for the Company Reserve Report. The Company Reserve Report conforms to the guidelines with respect thereto of the SEC. Except for changes (including changes in Hydrocarbon commodity prices) generally affecting the oil and gas industry and normal depletion by production, there has been no change in respect of the matters addressed in the Company Reserve Report that would reasonably be expected to have a Material Adverse Effect on the Company. Since January 1, 2005, all of the Company’s and its Subsidiaries’ wells have been drilled and (if completed) completed, operated and produced in compliance in all respects with applicable oil and gas leases and applicable Laws, except where any noncompliance would not reasonably be expected to have a Material Adverse Effect on the Company. To the Company’s knowledge, neither the Company nor any of its Subsidiaries is in violation of any applicable Law or contract requiring the Company or such Subsidiary to plug and abandon any well because the well is not currently capable of producing in commercial quantities or for any other reasons. With respect to any Oil and Gas Interests of the Company and its Subsidiaries that are not operated by the Company or any of its Subsidiaries, the Company makes the representations and warranties set forth in this Section 3.6 only to its actual knowledge without having made specific inquiry of the operators with respect hereto.

          (b) For purposes of this Agreement, “ Oil and Gas Interests ” means direct and indirect interests in and rights with respect to oil, gas or minerals, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, 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) Set forth in Section 3.6(c) of the Company Disclosure Letter is a list of all material Oil and Gas Interests that were included in the Company Reserve Report that have been disposed of prior to the date hereof.

          (d) Except as set forth in Section 3.6(d) of the Company Disclosure Letter, proceeds from the sale of Hydrocarbons produced from the Company’s Oil and Gas Interests are being received by the Company and the Subsidiaries in a timely manner and are not being held in suspense for any reason (except in the ordinary course of business or which would not reasonably be expected to have a Material Adverse Effect).

          (e) Except as set forth in Section 3.6(e) of the Company Disclosure Letter, none of the Company or its Subsidiaries has received any material deficiency payment under any gas contract for which any Person has a right to take deficiency gas from the Company or any of its Subsidiaries, nor has the Company or any of its Subsidiaries received any material payment for production which is subject to refund or recoupment out of future production.

          (f) The Company has previously provided or made available to Parent true and complete copies of all Company Oil and Gas Agreements, together with all amendments, extensions and other modifications thereof. To the knowledge of the Company, all Company Oil and Gas Agreements are in good standing, valid and effective and all royalties, rentals and other payment due by the Company to any lessor of any such oil and gas leases have been paid, except in each case, as has not had, and would not reasonably be expected to have, a Material Adverse Effect. For purposes of this Agreement, “ Company Oil and Gas Agreements ” means the following types of agreements or contracts to which the Company or any of its Subsidiaries is a party, whether as an original party, by succession or assignment or otherwise: oil and gas leases, farm-in and farm-out agreements, agreements providing for an overriding royalty interest, agreements providing for a royalty interest, agreements providing for a net profits interest, crude oil or natural gas sales or purchase contracts, joint operating agreements, unit operating agreements, unit agreements, field equipment leases, and agreements restricting the Company or any of its Subsidiaries’ ability to operate, obtain, explore for or develop interests in a particular geographic area. Set forth in Section 3.6(f) of the Company Disclosure Letter is a list of all Company Oil and Gas Agreements that contain restrictions on the Company’s or any of its Subsidiaries’ ability to operate, obtain, explore for or develop interests in a particular geographic area.

          (g) The Oil and Gas Interests of the Company and its Subsidiaries are not subject to (i) any instrument or agreement evidencing or related to indebtedness for borrowed money, whether directly or indirectly, except for the Company Credit Agreement and Permitted Liens, or (ii) any agreement not entered into in the ordinary course of business (other than the Overriding Royalty Interest Incentive Plan) in which the amount involved is in excess of $1 million. In addition, except as set forth in the Company SEC Documents filed and publicly available prior to the date hereof, no Company Material Contract contains any provision that prevents the Company or any of its Subsidiaries from owning, managing and operating the Oil and Gas Interests of the Company and its Subsidiaries in accordance with historical practices.

          (h) Except as set forth in Section 3.6(h) of the Company Disclosure Letter, as of March 31, 2008, (i) there are no outstanding calls for payments in excess of $1 million that are due or that the Company or its Subsidiaries are committed to make that have not been made; (ii) there are no material operations with respect to which the Company or its Subsidiaries have become a non-consenting party; and (iii) there are no commitments for the material expenditure of funds for drilling or other capital projects other than projects with respect to which the operator is not required under the applicable operating agreement to seek consent.

          (i) Except as set forth in Section 3.6(i) of the Company Disclosure Letter, there are no provisions applicable to the material Oil and Gas Interests reflected in the Company Reserve Report that increase the royalty percentage of the lessor thereunder in a manner that is not accounted for in such Company Reserve Report; and none of the Oil and Gas Interests of the

Company and its Subsidiaries are limited by terms fixed by a certain number of years (other than primary terms under oil and gas leases).

          (j) Except as set forth in Section 3.6(j) of the Company Disclosure Letter, there are no calls (exclusive of market calls) on the Company’s oil or natural gas production, and the Company has no obligation to deliver oil or natural gas pursuant to any take-or-pay, prepayment or similar arrangement without receiving full payment therefor, excluding gas imbalances disclosed in Section 3.6(e) of the Company Disclosure Letter.

     3.7 Absence of Certain Changes .

          (a) Since December 31, 2007, (i) the Company and its Subsidiaries have conducted their respective business only in the ordinary course consistent with past practice in all material respects, and (ii) there has not occurred or continued to exist any event, change, occurrence, effect, fact, circumstance or condition which, individually or in the aggregate, has had, or is reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (b) Since December 31, 2007 to the date of this Agreement, neither the Company nor any of its Subsidiaries has (i) (A) increased or agreed to increase the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any officer, employee or director from the amount thereof in effect as of December 31, 2007 other than in the ordinary course of business consistent with past practices, (B) except as set forth in Section 3.7(b) of the Company Disclosure Letter, granted any severance or termination pay or entered into any contract to make or grant any severance or termination pay (other than in the ordinary course of business substantially consistent with past practices or pursuant to pre-existing plans or arrangements), (C) entered into or made any loans to any of its officers, directors or employees or made any change in its borrowing or lending arrangements for or on behalf of any of such Persons whether pursuant to an employee benefit plan or otherwise (except for loans pursuant to the terms of the Company’s or its affiliates’ retirement plans and routine travel advances), or (D) adopted or amended any new or existing Company Benefit Plan, (ii) declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any of the Company’s capital stock, (iii) effected or authorized any split, combination or reclassification of any of the Company’s capital stock or any issuance thereof or issued any other securities in respect of, in lieu of or in substitution for shares of the Company’s capital stock, except for issuances of Company Common Stock (1) upon the exercise of Company Options or vesting of Company Awards, in each case in accordance with their terms at the time of exercise or (2) in connection with recruitment activities in the ordinary course of business consistent with past practice, (iv) changed in any material respect, or has knowledge of any reason that would have required or would require changing in any material respect, any accounting methods (or underlying assumptions), principles or practices of the Company or its Subsidiaries, including any material reserving, renewal or residual method, practice or policy, except as required by GAAP or by applicable Law, (v) made any material Tax election or settled or compromised any material income Tax liability, (vi) made any material change in the policies and procedures of the Company or its Subsidiaries in connection with trading activities, (vii) sold, leased, exchanged, transferred or otherwise disposed of any material Company Asset other than in the ordinary course of business consistent with past practices, (viii) revalued, or has knowledge of any reason that would have required or would require revaluing, any of the Company Assets in

any material respect, including writing down the value of any of the Company Assets or writing off notes or accounts receivable other than in the ordinary course of business consistent with past practices, or (ix) made any agreement or commitment (contingent or otherwise) to do any of the foregoing.

     3.8 Absence of Undisclosed Liabilities . Since December 31, 2007, neither the Company nor any of its Subsidiaries has incurred any liabilities or obligations (accrued, contingent or otherwise), except for (i) liabilities incurred in the ordinary course of business consistent with past practice that individually or in the aggregate have not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company, (ii) liabilities in respect of Litigation (which are the subject of Section 3.11(a)), and (iii) liabilities under Environmental Laws (which are the subject of Section 3.15). Neither the Company nor any of its Subsidiaries is in default in respect of the terms and conditions of any indebtedness or other agreement which individually or in the aggregate has had, or would be reasonably likely to have or result in, a Material Adverse Effect on the Company.

     3.9 Disclosure Documents . None of the information to be supplied by the Company for inclusion in (i) the joint proxy statement relating to the Company Special Meeting and the Parent Special Meeting (in each case, as defined below) (also constituting the prospectus in respect of Parent Common Stock into which the Company Common Stock will be converted) (together with any amendments or supplements thereto, the “ Proxy Statement ”), to be filed by the Company and Parent with the SEC, and any amendments or supplements thereto, or (ii) the Registration Statement on Form S-4 (together with any amendments or supplements thereto, the “ S-4 ”) to be filed by Parent 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, at the time the Proxy Statement or any amendment or supplement thereto is first mailed to the Company stockholders and Parent stockholders, at the time of the Company Special Meeting and the Parent Special Meeting and at the Effective Time, and, in the case of the S-4, 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. The Proxy Statement will comply in all material respects with the provisions of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to information provided by Parent or Merger Sub for inclusion in the Proxy Statement.

     3.10 Employee Benefit Plans; ERISA .

          (a) Section 3.10(a)(1) of the Company Disclosure Letter contains a true and complete list of all the individual or group employee benefit and compensation plans or arrangements of any type (including, without limitation, all bonus, equity-based, change of control, incentive and plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), sponsored, maintained or contributed to by the Company or any trade or business, whether or not incorporated, which together with the Company would be deemed a “single employer” within the meaning of Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA (a " Company ERISA Affiliate ”) or with respect to which any Company ERISA Affiliate has any obligations or liability (“ Company Benefit

Plans ”), and Section 3.10(a)(2) of the Company Disclosure Letter lists each material individual employment, severance or similar agreement with respect to which the Company or any Company ERISA Affiliate has any current or future obligation or liability (“ Company Employee Agreement ”). With respect to each Company Benefit Plan, the Company has made available to Parent a true, correct and complete copy of such Company Benefit Plan, and, to the extent applicable, trust agreements, insurance contracts and other funding vehicles, the most recent Annual Reports (Form 5500 Series) and accompanying schedules, summary plan descriptions, and the most recent determination letter from the Internal Revenue Service. The Company has made available to Parent a true, correct and complete copy of each Company Employee Agreement.

          (b) With respect to each Company Benefit Plan: (i) if intended to qualify under Section 401(a) or 401(k) of the Code, such Company Benefit Plan satisfies the requirements of such sections and its prototype sponsor has received an opinion letter from the Internal Revenue Service with respect to its qualification, and its related trust has been determined to be exempt from tax under Section 501(a) of the Code and, to the knowledge of the Company, nothing has occurred since the date of such letter to adversely affect such qualification or exemption; (ii) each Company Benefit Plan has been administered in substantial compliance with its terms and applicable Law; (iii) neither the Company nor any Company ERISA Affiliate has engaged in, and the Company and each Company ERISA Affiliate do not have any knowledge of any Person that has engaged in, any transaction or acted or failed to act in any manner that would subject the Company or any Company ERISA Affiliate to any liability for a breach of fiduciary duty under ERISA; (iv) no disputes are pending or, to the knowledge of the Company or any Company ERISA Affiliate, threatened other than ordinary claims for benefits; (v) neither the Company nor any Company ERISA Affiliate has engaged in, and the Company and each Company ERISA Affiliate do not have any knowledge of any Person that has engaged in, any transaction in violation of Section 406(a) or (b) of ERISA or Section 4975 of the Code for which no exemption exists under Section 408 of ERISA or Section 4975(c) of the Code or Section 4975(d) of the Code; (vi) all contributions and premiums due have been made on a timely basis; and (vii) each Company Benefit Plan may be amended or terminated unilaterally by the Company at any time without any continuing liability for benefits other than benefits accrued to the date of such amendment or termination. All contributions made or required to be made under any Company Benefit Plan meet the requirements for deductibility under the Code, and all contributions and premiums which are required and which have not been made have been properly recorded on the books of the Company or a Company ERISA Affiliate.

          (c) No Company Benefit Plan 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), (iii) subject to Title IV or Section 302 of ERISA or Section 412 of the Code or (iv) a multiple employer welfare arrangement, under Section 3(40) of ERISA. No event has occurred with respect to the Company or a Company ERISA Affiliate in connection with which the Company could be subject to any liability (except for regular contributions and benefit payments in the ordinary course of plan business) or Lien with respect to any Company Benefit Plan.

          (d) Except as set forth in Section 3.10(d) of the Company Disclosure Letter, (i) no present or former employees of the Company or any of its Subsidiaries are covered by any

Company Employee Agreements or Company Benefit Plans that provide or will provide any severance pay, post-termination health or life insurance benefits (except as required pursuant to Section 4980B of the Code or Part 6 of Title I of ERISA) or any similar benefits, (ii) neither the execution of this Agreement nor the consummation of the transactions contemplated by this Agreement shall cause any payments or benefits to any employee, officer or director of the Company or any of its Subsidiaries to be either subject to an excise Tax or non-deductible to the Company 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 (iii) neither the execution of this Agreement nor the consummation of the transactions contemplated by this Agreement shall result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer or director of the Company or any of its Subsidiaries, whether or not some other subsequent action or event would be required to cause such payment or benefit to be triggered, accelerated, delivered or increased.

          (e) None of the Company Benefit Plans is subject to the laws of any country other than the United States.

          (f) There are no Company equity-based grants, options or awards outstanding other than those granted under the Company Stock Plan.

     3.11 Litigation; Compliance with Law .

          (a) Except for such Litigation that individually or in the aggregate has not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company, (i) there is no Litigation pending or, to the knowledge of the Company, threatened in writing against, relating to or naming as a party thereto the Company or any of its Subsidiaries, any of their respective properties or assets or any of the Company’s officers or directors (in their capacities as such), (ii) there is no order, judgment, decree, injunction or award of any Governmental Entity against and/or binding upon the Company, any of its Subsidiaries or any of the Company’s officers or directors (in their capacities as such), and (iii) there is no Litigation that the Company or any of its Subsidiaries has pending against other parties, where such Litigation is intended to enforce or preserve material rights of the Company or any of its Subsidiaries.

          (b) Except as individually or in the aggregate has not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company, each of the Company and its Subsidiaries has complied, and is in compliance with, all Laws and Company Permits that affect the respective businesses of the Company or any of its Subsidiaries, the Company Real Property and/or the Company Assets, and the Company and its Subsidiaries have not been and are not in violation of any such Law or Company Permit; nor has any notice, charge, Claim or action been received in writing by the Company or any of its Subsidiaries or been filed, commenced, or to the knowledge of the Company, threatened against the Company or any of its Subsidiaries alleging any violation of the foregoing, except for such violations or allegations of violations as individually or in the aggregate have not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (c) Without limiting the generality of clause (b) above and mindful of the principles of the United States Foreign Corrupt Practices Act and other similar applicable foreign Laws, neither the Company nor any of its Subsidiaries, nor, in any such case, any of their respective Representatives has (i) made, offered or authorized any payment or given or offered anything of value directly or indirectly (including through a friend or family member with personal relationships with government officials) to an official of any government for the purpose of influencing an act or decision in his official capacity or inducing him to use his influence with that government with respect to the Company or any of its Subsidiaries in violation of the United States Foreign Corrupt Practices Act or other similar applicable foreign Laws, (ii) made, offered or authorized any payment to any Governmental Entity, political party or political candidate for the purpose of influencing any official act or decision, or inducing such Person to use any influence with that government with respect to the Company or any of its Subsidiaries in violation of the United States Foreign Corrupt Practices Act or other similar applicable foreign Laws or (iii) taken any action that would be reasonably likely to subject the Company or any of its Subsidiaries to any material liability or penalty under any and all Laws of any Governmental Entity.

          (d) The Company and its Subsidiaries hold all licenses, permits, certifications, variances, consents, authorizations, waivers, grants, franchises, concessions, exemptions, orders, registrations and approvals of Governmental Entities or other Persons necessary for the ownership, leasing, operation, occupancy and use of the Company Real Property, the Company Assets, and the conduct of their respective businesses as currently conducted (“ Company Permits ”), except where the failure to hold such Company Permits individually or in the aggregate has not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries has received notice that any Company Permit will be terminated or modified or cannot be renewed in the ordinary course of business, and the Company has no knowledge of any reasonable basis for any such termination, modification or nonrenewal, in each case except for such terminations, modifications or nonrenewals that individually or in the aggregate have not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company. The execution, delivery and performance of this Agreement and the consummation of the Merger or any other transactions contemplated hereby do not and will not violate any Company Permit, or result in any termination, modification or nonrenewal thereof, except in each case for such violations, terminations, modifications or nonrenewals that individually or in the aggregate have not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (e) This Section 3.11 does not relate to matters with respect to (i) Company Benefit Plans, ERISA and other employee benefit matters (which are the subject of Section 3.10), (ii) Tax Laws and other Tax matters (which are the subject of Section 3.14), (iii) Environmental Laws (which are the subject of Section 3.15), and (iv) labor matters (which are the subject of Section 3.18).

     3.12 Intellectual Property .

          (a) For purposes of this Agreement, the term “ Intellectual Property ” means any and all (i) seismic data, trademarks, service marks, brand names, Internet domain names,

logos, symbols, trade dress, trade names, trade secrets, know-how, and other proprietary rights and information, including, but not limited to, all geologic and geographical data and interpretations thereof, including geologic maps, isopachs, structure maps and any other maps, and other indicia of source of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of the same; (ii) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisions, continuations, continuations-in-part and renewal applications, and including renewals, extensions and reissues; and (iii) copyrights in and to published and unpublished works of authorship, whether copyrightable or not (including software), and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and in each of cases (i) to (iii) inclusive, whether registered, unregistered or capable of registration.

          (b) Except as set forth in Section 3.12(b) of the Company Disclosure Letter or as individually or in the aggregate would not be reasonably likely to have or result in, a Material Adverse Effect on the Company:

     (i) the Company, or one of its Subsidiaries, is the sole and exclusive owner of, or possesses adequate licenses or other rights to use, all Intellectual Property used in the present conduct of the businesses of the Company and its Subsidiaries (“ Company IP Rights ”), free and clear of all security interests (except Permitted Liens) including but not limited to liens, charges, mortgages, title retention agreements or title defects;

     (ii) to the Company’s knowledge, no consent, co-existence or settlement agreements, judgments, or court orders limit or restrict the Company’s or any of its Subsidiaries’ ownership rights in and to any Intellectual Property owned by them;

     (iii) the conduct of the business of the Company and its Subsidiaries as presently conducted does not, to the knowledge of the Company, infringe or misappropriate any third Person’s Intellectual Property; or

     (iv) to the knowledge of the Company, no third Person is infringing or misappropriating any Intellectual Property owned by the Company or its Subsidiaries, and to the knowledge of the Company there is no litigation pending or threatened in writing by or against the Company or any of its Subsidiaries, nor, to the knowledge of the Company, has the Company or any of its Subsidiaries received any written charge, claim, complaint, demand, letter or notice, that asserts a claim (a) alleging that any or all of the Company IP Rights infringe or misappropriate any third party’s Intellectual Property, or (b) challenging the ownership, use, validity, or enforceability of any Company IP Right.

          (c) All Intellectual Property owned by the Company or its Subsidiaries that is the subject of an application for registration or a registration (“ Registered Company IP ”) is to the knowledge of the Company, in force, and all application, renewal and maintenance fees in

relation to all Registered Company IP have been paid to date, except for any Registered Company IP that the Company has abandoned, not renewed or allowed to expire.

          (d) Except for such matters as individually or in the aggregate have not had and would not be reasonably likely to have or result in a Material Adverse Effect on the Company, to the Company’s knowledge (i) there does not exist, nor has the Company or any of its Subsidiaries received written notice of, any breach of or violation or default under, any of the terms, conditions or provisions of any material contracts related to Company IP Rights, and (ii) neither the Company nor any of its Subsidiaries has received written notice of the desire of the other party or parties to any such material contracts relating to Company IP Rights to exercise any rights such party or parties have to cancel, terminate or repudiate such material contract relating to Company IP Rights or exercise remedies thereunder.

     3.13 Material Contracts .

          (a) Except for such agreements or arrangements listed in Section 3.13(a) of the Company Disclosure Letter or that are included as exhibits to the Company SEC Documents filed and publicly available prior to the date of this Agreement, and except for this Agreement, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or bound by any material contract, arrangement, commitment or understanding (whether written or oral) (i) which is an employment agreement between the Company, on the one hand, and its officers and key employees, on the other hand, (ii) which, upon the consummation of the Merger or any other transaction contemplated by this Agreement, will (either alone or upon the occurrence of any additional acts or events, including the passage of time) result in any material payment or benefit (whether of severance pay or otherwise) becoming due, or the acceleration or vesting of any right to any material payment or benefits, from Parent, Merger Sub, the Company or the Surviving Entity or any of their respective Subsidiaries to any officer, director, consultant or employee of any of the foregoing, (iii) which is a material contract (as defined in Item 601(b)(10)(i) or 601(b)(10)(ii) of Regulation S-K of the SEC) to be performed after the date of this Agreement, (iv) which expressly limits the ability of the Company or any Subsidiary of the Company, or would limit the ability of the Surviving Entity (or any of its affiliates) after the Effective Time, to compete in or conduct any line of business or compete with any Person or in any geographic area or during any period of time, in each case, if such limitation is or is reasonably likely to be material to the Company and its Subsidiaries, taken as a whole, or, following the Effective Time, to the Surviving Entity and its affiliates, taken as a whole, (v) which is a material joint venture agreement, joint operating agreement, partnership agreement or other similar contract or agreement involving a sharing of profits and expenses with one or more third Persons, (vi) the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement (including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan) or (vii) which is a stockholder rights agreement or which otherwise provides for the issuance of any securities in respect of this Agreement or the Merger. Each contract, arrangement, commitment or understanding (A) included as an exhibit to the Company SEC Documents filed and publicly available prior to the date of this Agreement, or (B) listed in Section 3.13(a) of the Company Disclosure Letter described in this Section 3.13(a), whether or not included as an exhibit to the

Company SEC Documents, is referred to herein as a “ Company Material Contract ,” and for purposes of Section 5.1(t) and the bringdown of Section 3.13(b) pursuant to Section 6.3(a), “Company Material Contract” shall include as of the date entered into any such contract, arrangement, commitment or understanding that is entered into after the date of this Agreement. The Company has previously made available to Parent true, complete and correct copies of each Company Material Contract that is not included as an exhibit to the Company SEC Documents. For the avoidance of doubt, the Company’s charter constitutes a Company Material Contract.

          (b) Each Company Material Contract is valid and binding and in full force and effect and the Company and each of its Subsidiaries have performed all obligations required to be performed by them to date under each Company Material Contract, except where such failure to be valid and binding or in full force and effect or such failure to perform individually or in the aggregate has not had and would not be reasonably likely to have or result in a Material Adverse Effect on the Company. Except for such matters as individually or in the aggregate have not had and would not be reasonably likely to have or result in a Material Adverse Effect on the Company, to the Company’s knowledge, (i) there does not exist, nor has the Company or any of its Subsidiaries received written notice of, any breach of or violation or default under, any of the terms, conditions or provisions of any Company Material Contract and (ii) neither the Company nor any of its Subsidiaries has received written notice of the desire of the other party or parties to any such Company Material Contract to exercise any rights such party has to cancel, terminate or repudiate such Company Material Contract or exercise remedies thereunder. Each Company Material Contract is enforceable by the Company or a Subsidiary of the Company in accordance with its terms, except as such enforcement may be subject to or limited by (x) bankruptcy, insolvency, reorganization, moratorium or other Laws, now or hereafter in effect, affecting creditors’ rights generally and (y) the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) or except where such unenforceability individually or in the aggregate has not had, and would not be reasonably likely to have or result in, a Material Adverse Effect on the Company.

     3.14 Taxes .

          (a) (i) All material Returns required to be filed by or with respect to the Company and its Subsidiaries have been filed in accordance with all applicable Laws and all such Returns are true, correct and complete in all material respects, (ii) the Company and its Subsidiaries have timely paid all material Taxes due or claimed to be due, except for those Taxes being contested in good faith and for which adequate reserves have been established in the financial statements of the Company, (iii) all material Employment and Withholding Taxes and any other material amounts required to be withheld by the Company or any of its Subsidiaries with respect to Taxes have been withheld and either duly and timely paid to the proper Governmental Entity or properly set aside in accounts for such purpose in accordance with applicable Laws, (iv) all material sales or transfer Taxes required to be collected by the Company or any of its Subsidiaries have been duly and timely collected, or caused to be collected, and either duly and timely remitted to the proper Governmental Entity or properly set aside in accounts for such purpose in accordance with applicable Laws, (v) the charges, accruals and reserves for Taxes with respect to the Company and its Subsidiaries reflected in the Company Balance Sheet are adequate under GAAP to cover Tax liabilities accruing through the date thereof, (vi) no deficiencies for any material Taxes have been asserted or assessed, or, to the

knowledge of the Company, proposed, against the Company or any of its Subsidiaries that have not been paid in full, except for those Taxes being contested in good faith and for which adequate reserves have been established in the financial statements of the Company, and (vii) there is no action, suit, proceeding, investigation, audit or claim underway, pending or, to the knowledge of the Company, threatened or scheduled to commence, against or with respect to the Company or any of its Subsidiaries in respect of any material Tax, except as set forth in Section 3.14(a)(vii) of the Company Disclosure Letter.

          (b) Neither the Company nor any of its Subsidiaries has been included in any “consolidated,” “unitary” or “combined” Return (other than Returns which include only the Company and any Subsidiaries of the Company) provided for under the Laws of the United States, any foreign jurisdiction or any state or locality or could be liable for the Taxes of any other Person as a successor or transferee.

          (c) There are no Tax sharing, allocation, indemnification (other than indemnification provisions included in agreements entered into in the ordinary course of business) or similar agreements in effect as between the Company or any of its Subsidiaries or any predecessor or affiliate of any of them and any other party under which the Company or any of its Subsidiaries could be liable for any Taxes of any party other than the Company or any Subsidiary of the Company.

          (d) Neither the Company nor any of its Subsidiaries has, as of the Closing Date, entered into an agreement or waiver extending any statute of limitations relating to the payment or collection of material Taxes or the time with respect to the filing of any Return relating to any material Taxes.

          (e) There are no Liens for material Taxes on any asset of the Company or its Subsidiaries, except for Permitted Liens.

          (f) Neither the Company nor any of its Subsidiaries has requested or is the subject of or bound by any private letter ruling, technical advice memorandum, closing agreement or similar ruling, memorandum or agreement with any taxing authority with respect to any material Taxes, nor is any such request outstanding.

          (g) Each of the Company and its Subsidiaries has disclosed on its Returns all positions taken therein that could give rise to a substantial understatement of Tax within the meaning of Section 6662 of the Code.

          (h) Neither the Company nor any of its Subsidiaries has entered into, has any liability in respect of, or has any filing obligations with respect to, any transaction that constitutes a “reportable transaction,” as defined in Section 1.6011-4(b)(1) of the Treasury Regulations.

          (i) Neither the Company nor any of its Subsidiaries will be required to include any material item of income in, or exclude any material 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 under Section 481(c) of the Code (or any corresponding or similar provision of state, local

or foreign Tax Law) or (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax Law) executed on or prior to the Closing Date.

          (j) Except as set forth in Section 3.14(j) of the Company Disclosure Letter, since January 1, 2005, none of the Company nor any of its Subsidiaries has been a distributing corporation or a controlled corporation for purposes of Section 355 of the Code.

          (k) The Company has made available to Parent correct and complete copies of (i) all U.S. federal Returns of the Company and its Subsidiaries relating to taxable periods ending on or after May 11, 2005, filed through the date hereof, (ii) any audit report (or notice of proposed adjustment to the extent not included in an audit report) within the last three years relating to any material Taxes due from or with respect to the Company or any of its Subsidiaries and (iii) any substantive and non-privileged correspondence and memoranda relating to the matters described in clauses (i) and (ii) of this Section 3.14(k).

     3.15 Environmental Matters .

          (a) The Company and each of its Subsidiaries is in compliance with all applicable Environmental Laws except where failure to be in compliance, individually or in the aggregate, would not be reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (b) There is no Environmental Claim pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or, to the knowledge of the Company, against any Person whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of Law, except for any such Environmental Claims which, individually or in the aggregate, would not be reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (c) To the knowledge of the Company, there are no past or present actions, activities, circumstances, conditions, events or incidents, including the Release of any Hazardous Material, which would be reasonably likely to form the basis of any Environmental Claim against the Company or any of its Subsidiaries or, to the knowledge of the Company, against any Person whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law which, individually or in the aggregate, would be reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (d) There is no Cleanup of Hazardous Materials being conducted or planned at any property currently or, to the knowledge of the Company, formerly owned or operated by the Company or any of its Subsidiaries, except for such Cleanups which, individually or in the aggregate, would not be reasonably likely to have or result in, a Material Adverse Effect on the Company.

          (e) To the knowledge of the Company, no Company Asset has been involved in any Release or threatened Release of a Hazardous Material, except for such Releases which

individually or in the aggregate would not be reasonably likely to have or result in a Material Adverse Effect on the Company.

          (f) The Company and its Subsidiaries have obtained and are in compliance with all material approvals, permits, licenses, registrations and similar authorizations from all Governmental Entities under all Environmental Laws required for the operation of the businesses of the Company and its Subsidiaries as currently conducted and, to the knowledge of the Company, there are no pending or threatened, actions or proceedings alleging violations of or seeking to modify, revoke or deny renewal of any such material approvals, permits, licenses, registrations and similar authorizations.

     3.16 Company Assets . The Company has good and defensible title to all oil and gas properties forming the basis for the reserves reflected in the Company Reserve Report as attributable to Oil and Gas Interests owned by the Company and its Subsidiaries and has good and valid title to, or valid leasehold interests or other contractual rights in, all other tangible properties and assets (real, personal or mixed) of the Company and its Subsidiaries (such oil and gas properties and other properties and assets are herein referred to as the “ Company Assets ”), with respect to both the oil and gas properties and all other Company Assets, free and clear of all Liens except for (a) Permitted Liens and (b) Liens associated with obligations reflected in the Company Reserve Report. The Company and its Subsidiaries (as the case may be) have maintained all of the Company Assets owned on the date hereof in working order and operating condition, subject only to ordinary wear and tear.

     3.17 Insurance . Section 3.17 of the Company Disclosure Letter contains a true, complete and correct list of all insurance policies maintained by or on behalf of the Company and its Subsidiaries as of the date of this Agreement. The Company has made available to Parent a true, complete and correct copy of each such insurance policy or the binder therefor. Such policies are, and at the Closing policies or replacement policies having substantially similar coverages will be, in full force and effect, and all premiums due thereon have been or will be paid. The Company and its Subsidiaries have complied in all material respects with the terms and provisions of such policies. The insurance policies listed in Section 3.17 of the Company Disclosure Letter include all policies that are required in connection with the operation of the businesses of the Company and its Subsidiaries as currently conducted by applicable Laws and all agreements relating to the Company and its Subsidiaries.

     3.18 Labor Matters; Employees .

          (a) (i) There is no labor strike, dispute, slowdown, work stoppage or lockout actually pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries and, during the past five years, there has not been any such action, (ii) none of the Company or any of its Subsidiaries is a party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of the Company or any of its Subsidiaries, (iii) none of the employees of the Company or any of its Subsidiaries are represented by any labor organization and none of the Company or any of its Subsidiaries have any knowledge of any current union organizing activities among the employees of the Company or any of its Subsidiaries nor does any question concerning

representation exist concerning such employees, (iv) the Company and its Subsidiaries have each at all times been in material compliance with all applicable Laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, and are not engaged in any unfair labor practices as defined in the National Labor Relations Act or other applicable Law, ordinance or regulation, (v) there is no unfair labor practice charge or complaint against the Company or any of its Subsidiaries pending or, to the knowledge of the Company, threatened before the National Labor Relations Board or any similar state or foreign agency, (vi) there is no grievance or arbitration proceeding arising out of any collective bargaining agreement or other grievance procedure relating to the Company or any of its Subsidiaries, (vii) neither the Occupational Safety and Health Administration nor any other federal or state agency has threatened to file any citation, and there are no pending citations, relating to the Company or any of its Subsidiaries, and (viii) there is no employee or governmental claim or investigation, including any charges to the Equal Employment Opportunity Commission or state employment practice agency, investigations regarding Fair Labor Standards Act compliance, audits by the Office of Federal Contractor Compliance Programs, Workers’ Compensation claims, sexual harassment complaints or demand letters or threatened claims.

          (b) Since the enactment of the Worker Adjustment and Retraining Notification Act of 1988 (“ WARN Act ”), none of the Company or any of its Subsidiaries has effectuated (i) a “ plant closing ” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any of its Subsidiaries, or (ii) a “ mass layoff ” (as defined in the WARN Act) affecting any site of employment or facility of the Company or any of its Subsidiaries, nor has the Company or any of its Subsidiaries been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local Law, in each case that could reasonably be expected to have a Material Adverse Effect on the Company.

          (c) Section 3.18(c) of the Company Disclosure Letter contains a complete and correct list of the names of all directors and officers of the Company as of the date of this Agreement, together with such Person’s position or function. Section 3.18(c) of the Company Disclosure Letter also contains each such officer’s annual base salary or wages, incentive compensation bonus in respect of 2007, target bonus percentage and amount for 2008, and currently estimated severance payment due as a result of this Merger assuming such Person’s employment is terminated in connection therewith.

     3.19 Affiliate Transactions . Section 3.19 of the Company Disclosure Letter contains a complete and correct list of all material agreements, contracts, transfers of assets or liabilities or other commitments or transactions (other than Company Benefit Plans described in Section 3.10 of the Company Disclosure Letter), whether or not entered into in the ordinary course of business, to or by which the Company or any of its Subsidiaries, on the one hand, and any of their respective affiliates (other than the Company or any of its direct or indirect wholly owned Subsidiaries) on the other hand, are or have been a party or otherwise bound or affected, and that (a) are currently pending, in effect or have been in effect at any time since December 31, 2005 or (b) involve continuing liabilities and obligations that, individually or in the aggregate, have been, are or will be material to the Company and its Subsidiaries taken as a whole.

     3.20 Derivative Transactions and Hedging . Section 3.20 of the Company Disclosure Letter contains a complete and correct list of all Derivative Transactions (including each outstanding commodity or financial hedging position) entered into by the Company or any of its Subsidiaries or for the account of any of its customers as of the date of this Agreement. All such Derivative Transactions were, and any Derivative Transactions entered into after the date of this Agreement will be, entered into in accordance with applicable Laws, and in accordance with the investment, securities, commodities, risk management and other policies, practices and procedures employed by the Company and its Subsidiaries, and were, and will be, entered into with counterparties believed at the time and still believed to be financially responsible and able to understand (either alone or in consultation with their advisers) and to bear the risks of such Derivative Transactions. The Company and each of its Subsidiaries have, and will have, duly performed all of their respective obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and, to the knowledge of the Company, there are and will be no breaches, violations, collateral deficiencies, requests for collateral or demands for payment, or defaults or allegations or assertions of such by any party thereunder.

     3.21 Natural Gas Act . Any gas gathering system constituting a part of the properties of the Company or its Subsidiaries has as its primary function the provision of natural gas gathering services, as the term “gathering” is interpreted under Section 1(b) of the Natural Gas Act (the “ NGA ”); none of the properties have been or are certificated by the Federal Energy Regulatory Commission (the “ FERC ”) under Section 7(c) of the NGA or to the knowledge of the Company are now subject to FERC jurisdiction under the NGA; and none of the properties have been or are providing service pursuant to Section 311 of the NGA.

     3.22 Disclosure Controls and Procedures . The Company has established and maintains “disclosure controls and procedures” (as defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act) that are reasonably designed to ensure that all material information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of the Company required under the Exchange Act with respect to such reports. Neither the Company nor its independent auditors have identified any “significant deficiencies” or “material weaknesses” in the Company’s or any of its Subsidiaries’ internal controls as contemplated under Section 404 of the Sarbanes-Oxley Act.

     3.23 Investment Company . Neither the Company nor any of its Subsidiaries is an “investment company,” a company “controlled” by an “investment company,” or an “investment adviser” within the meaning of the Investment Company Act of 1940, as amended (the “ Investment Company Act ”), or the Investment Advisers Act of 1940, as amended (the “ Advisers Act ”).

     3.24 No Rights Agreement . The Company does not have any stockholder rights agreement or any similar type of anti-takeover agreement.

     3.25 Takeover Laws . Except for Section 78.438 of the NRS (which has been rendered inapplicable by action of the Company Board prior to the execution hereof), no “moratorium,” “acquisition of controlling interest,” “control share,” “fair price,” “combinations with interested stockholders,” “affiliate transaction,” “business combination,” or other similar anti-takeover statutes, laws or regulations of any state, including the State of Nevada (and including the NRS), or any applicable anti-takeover provision in the articles of incorporation or bylaws of the Company is, or at the Effective Time will be, applicable to this Agreement, the Merger, the other transactions contemplated by this Agreement or the Stockholder Agreements.

     3.26 Required Vote by Company Stockholders . The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon (the “ Company Required Vote ”) to adopt this Agreement is the only vote of the holders of capital stock of the Company required by the NRS or the articles of incorporation or the bylaws of the Company or otherwise to adopt this Agreement.

     3.27 Recommendation of Company Board of Directors; Opinion of Financial Advisor .

          (a) The Company Board, at a meeting duly called and held, duly adopted resolutions unanimously (i) determining that this Agreement and the transactions contemplated hereby are advisable and in the best interests of the Company and the stockholders of the Company, (ii) approving and adopting this Agreement and transactions contemplated hereby, (iii) recommending approval of this Agreement by the stockholders of the Company and (iv) directing that the approval of this Agreement be submitted to the stockholders of the Company for consideration in accordance with this Agreement, which resolutions, as of the date of this Agreement, have not been subsequently rescinded, modified or withdrawn in any way.

          (b) The Company Board has received an opinion of Raymond James & Associates, Inc., to the effect that, as of the date of this Agreement, the Merger Consideration to be received by the holders of shares of Company Common Stock (other than Parent, the Company or any of their Subsidiaries), in the aggregate, in the Merger is fair, from a financial point of view, to such holders. A true, complete and correct copy of such opinion will promptly be delivered to Parent by the Company solely for informational purposes after receipt thereof.

     3.28 Brokers . Except for Raymond James & Associates, Inc. and Scotia Waterous (USA), Inc., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Subsidiaries. The Company is solely responsible for the fees and expenses of Raymond James & Associates, Inc. and Scotia Waterous (USA), Inc. as and to the extent set forth in the engagement letters dated June 5, 2007 and June 8, 2007, respectively, and the Company has previously provided to Parent a true and correct copy of the engagement letters.

     3.29 Reorganization . Neither the Company nor, to the knowledge of the Company, any of its affiliates has taken or agreed to take any action that would prevent the Merger from constituting a reorganization within the meaning of Section 368(a) of the Code.

     3.30 No Other Representations or Warranties . Except for the representations and warranties contained in this Article III, neither the Company nor any other Person makes any other express or implied representation or warranty on behalf of the Company or any of its affiliates in connection with this Agreement or the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB

     Except as set forth in the disclosure letter delivered by Parent to the Company at or prior to the execution and delivery of this Agreement (the “ Parent Disclosure Letter ”) (each section of which qualifies the correspondingly numbered representation, warranty or covenant to the extent specified therein and such other representations, warranties or covenants to the extent a matter in such section is disclosed in such a way as to make its relevance to such other representation, warranty or covenant reasonably apparent), Parent and Merger Sub jointly and severally represent and warrant to the Company as follows:

     4.1 Organization .

          (a) Each of Parent, Merger Sub and Parent’s Subsidiaries is a corporation or other entity duly organized, validly existing and in good standing (to the extent such concept exists in such jurisdiction or with respect to such other entities) under the Laws of the jurisdiction of its incorporation or organization, and has all requisite corporate or other power and authority to own, lease, use and operate its properties and to carry on its business as it is now being conducted.

          (b) Each of Parent, Merger Sub and Parent’s Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction (to the extent such concepts exist in such jurisdictions) where the character of the property owned, operated or leased by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or to be in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. Since the date of its formation, Merger Sub has not engaged in any activities other than in connection with or as contemplated by this Agreement, and Merger Sub does not have any Subsidiaries.

          (c) Parent has previously made available to the Company a complete, true and correct copy of each of its certificate of incorporation and bylaws or other organizational documents of each of Parent’s Subsidiaries, in each case as amended (if so amended) to the date of this Agreement, and has made available the certificate of incorporation, bylaws or other organizational documents of each of Parent’s Subsidiaries, in each case as amended (if so amended) to the date of this Agreement. Neither Parent nor Merger Sub nor any of the Parent’s Subsidiaries is in violation of its certificate of incorporation, bylaws or other organizational documents.

          (d) Section 4.1(d) of the Parent Disclosure Letter sets forth a complete, true and correct list of all of the Subsidiaries of Parent and their respective jurisdictions of

incorporation or organization. The respective certificates or articles of incorporation and bylaws or other organizational documents of the Subsidiaries of Parent do not contain any provision limiting or otherwise restricting the ability of Parent to control its Subsidiaries in any material respect.

     4.2 Capitalization .

          (a) The authorized capital stock of Parent consists of 100,000,000 shares of Parent Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share, issuable in series (“ Parent Preferred Stock ”), none of which are issued and outstanding. As of April 25, 2008, 28,486,182 shares of Parent Common Stock were issued and outstanding (including 478,267 shares of unvested Parent restricted stock and 16,582 shares of Parent Common Stock held in the treasury of Parent). As of the date of this Agreement, 698,497 shares of Parent Common Stock are reserved for issuance under Parent stock incentive plans. As of April 25, 2008, there are outstanding stock options to acquire Parent Common Stock (the “ Parent Stock Options ”) covering an aggregate of 763,323 shares of Parent Common Stock. Since April 25, 2008, (i) no shares of Parent Common Stock have been issued, except pursuant to Parent Stock Options outstanding on April 25, 2008, and (ii) no Parent Stock Options have been granted. No bonds, debentures, notes or other indebtedness having the right to vote (or convertible into or exchangeable for securities having the right to vote) on any matters on which stockholders of Parent may vote are issued or outstanding. All issued and outstanding shares of Parent’s capital stock are, and all shares that may be issued or granted pursuant to the exercise of Parent Stock Options will be, when issued or granted in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. The issuance and sale of all of the shares of capital stock described in this Section 4.2 have been in compliance with United States federal and state securities Laws. Except as may be provided in the Rights Agreement dated as of October 15, 1998, between Parent and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (as amended, the “ Parent Rights Agreement ”), neither Parent nor any of its Subsidiaries has agreed to register any securities under the Securities Act, or under any state securities Law or granted registration rights to any individual or entity. Except for Parent Stock Options and the Junior Participating Preferred Stock purchase rights (the “ Parent Rights ”) issued pursuant to the Parent Rights Agreement, as of the date of this Agreement, there are no outstanding or authorized (x) options, warrants, preemptive rights, subscriptions, calls or other rights, convertible securities, agreements, claims or commitments of any character obligating Parent or any of its Subsidiaries to issue, transfer or sell any shares of capital stock or other equity interest in Parent or any of its Subsidiaries or securities convertible into or exchangeable for such shares or equity interests, (y) contractual obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of Parent or any of its Subsidiaries or any such securities or agreements listed in clause (x) of this sentence, or (z) voting trusts or similar agreements to which Parent or any of its Subsidiaries is a party with respect to the voting of the capital stock of Parent or any of its Subsidiaries. The Parent Common Stock issued pursuant to the Merger, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued and fully paid and non-assessable and not subject to preemptive rights, with no personal liability attaching to the ownership thereof. Such Parent Common Stock, where so issued, will be issued free and clear of any Liens, other than (x) statutory Liens

for Taxes not yet done and payable and (y) such restrictions as may expect under applicable Law.

          (b) (i) All of the issued and outstanding shares of capital stock (or equivalent equity interests of entities other than corporations) of each of Parent’s Subsidiaries are owned, directly or indirectly, by Parent free and clear of any Liens, other than (x) statutory Liens for Taxes not yet due and payable, (y) such restrictions as may exist under applicable Law, and (z) Liens granted pursuant to Parent’s Credit Agreement, dated as of November 1, 2007, among Parent and each of the lenders party thereto (collectively, the “ Parent Credit Agreement ”), and all such shares or other ownership interests have been duly authorized, validly issued and are fully paid and non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof, and (ii) neither Parent nor any of its Subsidiaries owns any shares of capital stock or other securities of, or interest in, any other Person, except for the securities of the Subsid