**Exhibit 2.1**

 

 

**AGREEMENT AND PLAN OF MERGER**

 

 

**by and among**

 

 

**Whittier Energy Corporation**

 

 

**RPC Acquisition Company, Inc.**

 

 

**And**

 

 

**RIMCO Production Company, Inc.**

 

 

**dated as of April 18, 2005**

 

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**TABLE OFCONTENTS**

 
| ARTICLE 1  THE MERGER                                                |                                                |
|---------------------------------------------------------------------------|-----------------------------------------------------|
| Section 1.1                                                          | The Merger                                          |   |
| Section 1.2                                                          | The Closing                                         |   |
| Section 1.3                                                          | Effective  Time                                     |   |
| Section 1.4                                                          | Certificate of  Incorporation                       |   |
| Section 1.5                                                          | Bylaws                                              |   |
| Section 1.6                                                          | Board of  Directors of Surviving Corporation        |   |
| Section 1.7                                                          | Officers  of RIMCO                                  |   |
|                                                                      |                                                |   |
| ARTICLE 2  CONVERSION OF RIMCO SHARES                                |                                                |
| Section 2.1                                                          | Effect on Capital Stock                             |   |
| Section 2.2                                                          | Dissenting Shares                                   |   |
|                                                                      |                                                |   |
| ARTICLE 3  REPRESENTATIONS AND WARRANTIES OF RIMCO                   |                                                |
| Section 3.1                                                          | Existence;  Good Standing; Corporate Authority      |   |
| Section 3.2                                                          | Authorization,  Validity and Effect of Agreements   |   |
| Section 3.3                                                          | Capitalization                                      |   |
| Section 3.4                                                          | Subsidiaries; Investments                           |   |
| Section 3.5                                                          | No  Violation                                       |   |
| Section 3.6                                                          | No Conflict                                         |   |
| Section 3.7                                                          | Financial  Statements; Liabilities; Frost Documents |   |
| Section 3.8                                                          | Litigation                                          |   |
| Section 3.9                                                          | Absence of Certain Changes                          |   |
| Section 3.10                                                         | Taxes                                               |   |
| Section 3.11                                                         | Employee Benefit Plans                              |   |
| Section 3.12                                                         | Employee  Matters                                   |   |
| Section 3.13                                                         | Environmental Matters                               |   |
| Section 3.14                                                         | Intellectual Property                               |   |
| Section 3.15                                                         | Equipment                                           |   |
| Section 3.16                                                         | Properties, Title, and  Defects                     |   |
| Section 3.17                                                         | Insurance                                           |   |
| Section 3.18                                                         | No Brokers                                          |   |
| Section 3.19                                                         | Contracts; Debt  Instruments                        |   |
| Section 3.20                                                         | Board  Recommendation; Vote Required                |   |
| Section 3.21                                                         | Certain  Contracts                                  |   |
|                                                                      |                                                |   |
| ARTICLE 4  REPRESENTATIONS AND WARRANTIES OF WHITTIER AND MERGER SUB |                                                |
| Section 4.1                                                          | Existence; Good  Standing; Corporate Authority      |   |
| Section 4.2                                                          | Authorization,  Validity and Effect of Agreements   |   |
| Section 4.3                                                          | Subsidiaries                                        |   |
| Section 4.4                                                          | No  Violation                                       |   |
| Section 4.5                                                          | No Conflict                                         |   |

 

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| Section 4.6                                        | Financial Information                                                          |   |
|---------------------------------------------------------|--------------------------------------------------------------------------------|--------|
| Section 4.7                                        | Litigation and Liabilities                                                     |   |
| Section 4.8                                        | Taxes                                                                          |   |
| Section 4.9                                        | No Brokers                                                                     |   |
| Section 4.10                                       | Financial Capability                                                           |   |
|                                                    |                                                                           |   |
| ARTICLE 5  COVENANTS AND AGREEMENTS OF THE PARTIES |                                                                           |
| Section 5.1                                        | Conduct  of Business                                                           |   |
| Section 5.2                                        | Meeting of Stockholders                                                        |   |
| Section 5.3                                        | Filings; Reasonable  Efforts                                                   |   |
| Section 5.4                                        | Inspection;  Due Diligence                                                     |   |
| Section 5.5                                        | Confidentiality                                                                |   |
| Section 5.6                                        | Publicity                                                                      |   |
| Section 5.7                                        | Expenses                                                                       |   |
| Section 5.8                                        | Indemnification  and Insurance for the Benefit of RIMCO Officers and Directors |   |
| Section 5.9                                        | Employee  Benefits                                                             |   |
| Section 5.10                                       | Cash Infusion                                                                  |   |
| Section 5.11                                       | Allocated Values                                                               |   |
| Section 5.12                                       | Continuation of Insurance                                                      |   |
| Section 5.13                                       | Access to Books and Records                                                    |   |
|                                                    |                                                                           |   |
| ARTICLE 6  CONDITIONS                              |                                                                           |
| Section 6.1                                        | Conditions  to Each Party’s Obligation to Effect the Merger               |   |
| Section 6.2                                        | Conditions  to Obligation of RIMCO to Effect the Merger                        |   |
| Section 6.3                                        | Conditions  to Obligation of Whittier to Effect the Merger                     |   |
|                                                    |                                                                           |   |
| ARTICLE 7  EARNEST MONEY; DEFECTS                  |                                                                           |
| Section 7.1                                        | Deposit                                                                        |   |
| Section 7.2                                        | Application                                                                    |   |
| Section 7.3                                        | Forfeiture/Return                                                              |   |
| Section 7.4                                        | Defect Notice and  Total Defect Value                                          |   |
|                                                    |                                                                           |   |
| ARTICLE 8  TERMINATION                             |                                                                           |
| Section 8.1                                        | Termination by Mutual  Consent                                                 |   |
| Section 8.2                                        | Termination by  Whittier or RIMCO                                              |   |
| Section 8.3                                        | Termination by RIMCO                                                           |   |
| Section 8.4                                        | Termination by Whittier                                                        |   |
| Section 8.5                                        | Effect of Termination                                                          |   |
|                                                    |                                                                           |   |
| ARTICLE 9  INDEMNIFICATION                         |                                                                           |
| Section 9.1                                        | Indemnification by RIMCO                                                       |   |
| Section 9.2                                        | Indemnification  by Whittier and Merger Sub                                    |   |
| Section 9.3                                        | Limitations  upon Indemnity; Basket Amount                                     |   |
| Section 9.4                                        | Indemnification  Despite Negligence                                            |   |
| Section 9.5                                        | Insurance  Proceeds                                                            |   |
| Section 9.6                                        | Procedure for  Indemnification                                                 |   |

 

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| Section 9.7                    | Exclusive  Remedy                                               |   |
|-------------------------------------|-----------------------------------------------------------------|--------|
| Section 9.8                    | Third Party Beneficiaries                                       |   |
|                                |                                                            |   |
| ARTICLE 10  GENERAL PROVISIONS |                                                            |
| Section 10.1                   | Survival                                                        |   |
| Section 10.2                   | Notices                                                         |   |
| Section 10.3                   | Assignment;  Binding Effect; Benefit                            |   |
| Section 10.4                   | Entire  Agreement                                               |   |
| Section 10.5                   | Amendments                                                      |   |
| Section 10.6                   | Governing  Law; Arbitration; Jurisdiction; Waiver of Jury Trial |   |
| Section 10.7                   | Counterparts                                                    |   |
| Section 10.8                   | Headings                                                        |   |
| Section 10.9                   | Interpretation                                                  |   |
| Section 10.10                  | Waivers                                                         |   |
| Section 10.11                  | Severability                                                    |   |
| Section 10.12                  | Enforcement  of Agreement; Limitation on Damages                |   |
| Section 10.13                  | Obligations of  Merger Sub and Whittier                         |   |
| Section 10.14                  | Extension;  Waiver                                              |   |
| Section 10.15                  | Conflict  Waiver                                                |   |

 
| Annex A -        | Definitions                                            |   |
|------------------|--------------------------------------------------------|--------|
|             |                                                   |   |
| Exhibit A - | Certificate of  Incorporation of Surviving Corporation |   |
|             |                                                   |   |
| Exhibit B - | Bylaws of Surviving  Corporation                       |   |
|             |                                                   |   |
| Exhibit C - | Holdback Escrow  Agreement                             |   |
|             |                                                   |   |
| Exhibit D - | Common Stock  Ownership                                |   |
|             |                                                   |   |
| Exhibit E - | Transferred  Interests                                 |   |
|             |                                                   |   |
| Exhibit F - | RIMCO Properties                                       |   |
|             |                                                   |   |
| Exhibit G - | Allocated Values                                       |   |
|             |                                                   |   |
| Exhibit H - | Letter of Transmittal  for use by RIMCO Stockholders   |   |
|             |                                                   |   |
| Exhibit I - | Form of Voting  Agreement                         |   |

 

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**AGREEMENT AND PLAN OF MERGER**

 

This AGREEMENT AND PLANOF MERGER (this “Agreement”), dated as of April 18, 2005, is among WhittierEnergy Corporation, a Nevada corporation (“Whittier”), RPC AcquisitionCompany, Inc., a Delaware corporation and a direct and wholly ownedsubsidiary of Whittier (“Merger Sub”), and RIMCO Production Company, Inc.,a Delaware corporation (“RIMCO”).

 

**RECITALS:**

 

WHEREAS, the respectiveBoards of Directors of each of Whittier, Merger Sub and RIMCO have determinedthat the merger of Merger Sub with and into RIMCO (the “Merger”), in themanner contemplated herein, is advisable and in the best interests of theirrespective corporations and stockholders, and, by resolutions duly adopted,have approved this Agreement; and

 

WHEREAS, unless thecontext requires otherwise, all capitalized terms used herein shall have themeanings set out in Annex A hereto; and

 

WHEREAS, RIMCO, Whittierand Merger Sub desire to make certain representations, warranties, covenantsand agreements in connection with this Agreement.

 

NOW, THEREFORE, inconsideration of the foregoing, and of the representations, warranties,covenants and agreements contained herein, the parties hereto hereby agree asfollows:

 

# ARTICLE 1

#  

# THE MERGER

 

Section 1.1                                 The Merger.  Subjectto the terms and conditions of this Agreement, at the Effective Time, MergerSub shall be merged with and into RIMCO in accordance with this Agreement, andthe separate corporate existence of Merger Sub shall thereupon cease.  RIMCO (sometimes hereinafter referred to asthe “Surviving Corporation”) shallbe the surviving corporation in the Merger and shall be a wholly ownedsubsidiary of Whittier.  The Merger shallhave the effects specified in the DGCL.

 

Section 1.2                                 The Closing.  Subject to the terms and conditions of thisAgreement, the closing of the Merger (the “Closing”)shall take place (a) at the offices of Winstead Sechrest & MinickP.C., 910 Travis, Suite 2400, Houston, Texas 77002, at 9:00 a.m.,local time, on the first business day immediately following the day on whichthe last to be fulfilled or waived of the conditions set forth in Article 6(other than those conditions that by their nature are to be satisfied at theClosing, but subject to fulfillment or waiver of those conditions) shall befulfilled or waived in accordance herewith or (b) at such other time, dateor place as Whittier and RIMCO may agree in writing; provided that, in no eventshall the Closing occur later than June 17, 2005.  The date on which the Closing occurs ishereinafter referred to as the “Closing Date.”

 

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Section 1.3                                 Effective Time.  If all the conditions to the Merger set forthin Article 6 shall have been fulfilled or waived in accordance herewithand this Agreement shall not have been terminated as provided in Article 8,on the Closing Date, a certificate of merger (the “Certificate of Merger”) meeting the requirementsof Section 251 of the DGCL shall be properly executed and filed with theSecretary of State of the State of Delaware. The Merger shall become effective upon the filing of the Certificate ofMerger with the Secretary of State of the State of Delaware in accordance withthe DGCL, or at such later time that the parties hereto shall have agreed uponand designated in such filing as the effective time of the Merger (the “Effective Time”).

 

Section 1.4                                 Certificate of Incorporation.  At the Effective Time, the certificate ofincorporation of RIMCO shall be amended to read as set forth in Exhibit Aattached hereto, and as so amended shall be the certificate of incorporation ofthe Surviving Corporation, until duly amended in accordance with applicable law.

 

Section 1.5                                 Bylaws.  At the Effective Time, the bylaws of RIMCOshall be amended to read as set forth in Exhibit Battached hereto, and as so amended shall be the bylaws of the SurvivingCorporation, until duly amended in accordance with applicable law.

 

Section 1.6                                 Boardof Directors of Surviving Corporation.  The Board of Directors of the SurvivingCorporation shall consist of the Board of Directors of Merger Sub, as itexisted immediately prior to the Effective Time, until changed in accordancewith applicable law.  Each member of theBoard of Directors of RIMCO shall tender his resignation as a director of RIMCO,to be effective at the Effective Time.

 

Section 1.7                                 Officers of RIMCO.  The officers of Merger Sub, as in effectimmediately before the Merger, shall become the officers of the SurvivingCorporation as of the Effective Date.  Asof the Effective Time, each officer of RIMCO shall tender his or herresignation.

 

# ARTICLE 2

#  

# CONVERSION OF RIMCO SHARES

#  

Section 2.1                                 Effect on CapitalStock.  At the EffectiveTime, the Merger shall have the following effects on the capital stock of RIMCOand Merger Sub, without any action on the part of the holder of any capitalstock of RIMCO or Merger Sub:

 

### (a)                                  Cancellationof RIMCO Common Shares.  Subject tothe provisions of this Section 2.1, each share of Common Stock, $.001 parvalue per share, of RIMCO (each a “RIMCO Common Share” and collectivelythe “RIMCO Common Shares”) issued and outstanding immediately prior tothe Effective Time shall, by virtue of the Merger and without any action on thepart of the holder thereof, be cancelled and converted into the right toreceive approximately $28.233 per share or $55,000,000 in the aggregate, to bepaid by Whittier or Merger Sub in cash, provided, however, that approximately $1.2833per share out of such cash amount, or an aggregate of $2,500,000 in cash,subject to adjustment as provided below, shall be held back (the “HoldbackAmount”) and deposited in escrow pursuant to Section 2.1(b) tosecure the indemnity obligations of RIMCO contemplated in Section 9.2.  The total amount paid to the

 

2

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RIMCO Stockholders (the “MergerConsideration”) shall be reduced to the extent that any holder of RIMCO CommonShares exercises dissenter’s rights of appraisal, but the remaining RIMCOStockholders shall receive their full per share Merger Consideration.  The Holdback Amount shall be adjusted downwardon a dollar-for-dollar basis to the extent the RIMCO Dividend is greater than $17,500,000;provided that the Holdback Amount shall never be less than $2,125,000.  Concurrent with any reduction in the HoldbackAmount, the Basket Amount shall be reduced by a corresponding amount asprovided in Section 9.3, except that the Basket Amount shall never be lessthan $250,000.  By way of example, if theRIMCO Dividend is determined to be $18,000,000, then the Holdback Amount shallbe reduced to $2,125,000 and the Basket Amount will be reduced to $500,000.

###  

### (b)                                 Tosecure the indemnification obligations of RIMCO under Article 9, Whittiershall withhold at the Closing Date from the Merger Consideration payable to theRIMCO Stockholders pursuant to Section 2.1(a), the Holdback Amount, whichamount shall be paid at the Closing to the Escrow Agent pursuant to the escrowagreement attached hereto as Exhibit C (the “Escrow Agreement”).  The Holdback Amount (a portion of which isbeing held by the Escrow Agent as contemplated in Section 7.1 hereof) willbe held by the Escrow Agent for a period of six months from the Closing Date,plus such additional period as necessary for the resolution of all claims madeby Whittier in accordance with this Agreement (the “Holdback Period”)and the Escrow Agreement, which shall include the following:

###  

#### (i)                                     Whittiermay withdraw all or any portion of the Holdback Amount to pay indemnification underArticle 9 upon giving not less than 30 days prior written notice to theRIMCO Agent of an indemnity obligation under Article 9 and the intent towithdraw all or a portion of the Holdback Amount to apply thereto, unless the RIMCOAgent objects to such payment by written notice to Whittier and the EscrowAgent delivered within 15 days after receipt of notice from Whittier of intent towithdraw from the Holdback Amount;

####  

#### (ii)                                  Ifthe RIMCO Agent timely objects to a payment out of the Holdback Amount under Section 2.1(b)(i),any dispute shall be resolved as set out in the Escrow Agreement and no funds tocover such claim shall be withdrawn from the Holdback Amount until the disputeis resolved.  Any funds to which Whittieris entitled as a result of such dispute resolution shall be paid out of theHoldback Amount.  The remaining Holdback Amountfunds shall remain on deposit with the Escrow Agent and shall be subject to theprovisions of the Escrow Agreement until the expiration of the Holdback Period;and

####  

#### (iii)                               The amount, if any, ofthe Holdback Amount remaining at the expiration of the Holdback Period shall bedisbursed to the RIMCO Stockholders proportionately according to their respectiveownership of RIMCO Common Shares immediately prior to the Effective Time.  In addition, the Escrow Agent shall pay the RIMCOStockholders any interest earned on the amount of the Holdback Amount held inEscrow to the extent such Holdback Amount is paid to the RIMCO Stockholderspursuant to the provisions of this Section 2.

 

3

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### (c)                                  AtClosing, Whittier shall deposit the Merger Consideration into an account with CompassBank, which shall pay it to the RIMCO Stockholders on the Effective Date by:

###  

#### (i)                                     Depositingthe Holdback Amount with the Escrow Agent under the Escrow Agreement; and

####  

#### (ii)                                  Disbursingthe balance pro rata to the RIMCO Stockholders in accordance with writteninstructions from the RIMCO Stockholders. In this regard, prior to the Closing RIMCO shall send a form of Letterof Transmittal in substantially in the form of Exhibit H heretowhich shall be used by the RIMCO Stockholders to direct Compass Bank as to paymentof the Merger Consideration.

####  

### (d)                                 MergerSub.  At the Effective Time, eachshare of common stock, par value $1.00 per share, of Merger Sub issued andoutstanding immediately prior to the Effective Time shall be converted into oneshare of common stock of the Surviving Corporation, and the SurvivingCorporation shall thereby become a wholly owned subsidiary of Whittier.

###  

### (e)                                  Interest.  For income tax purposes, Whittier shallinclude in its income any interest earned on the Holdback Amount prior todisbursement to the RIMCO Stockholders.

###  

Section 2.2                                 Dissenting Shares*.** *Notwithstanding anything in thisAgreement to the contrary, with respect to each RIMCO Common Share as to whichthe holder thereof shall have properly complied with the provisions of Section 262of the DGCL as to appraisal rights (each, a “DissentingShare”), if any, such holder shall be entitled to payment, solelyfrom the Surviving Corporation, of the appraisal value of the Dissenting Sharesto the extent permitted by and in accordance with the provisions of Section 262of the DGCL; provided, however, that (i) if any holder of DissentingShares, under the circumstances permitted by and in accordance with the DGCL,affirmatively withdraws his demand for appraisal of such Dissenting Shares, (ii) ifany holder of Dissenting Shares fails to establish his entitlement to appraisalrights as provided in the DGCL or (iii) if any holder of Dissenting Sharestakes or fails to take any action the consequence of which is that such holderis not entitled to payment for his shares under the DGCL, such holder orholders (as the case may be) shall forfeit the right to appraisal of such RIMCOCommon Shares and such RIMCO Common Shares shall thereupon cease to constituteDissenting Shares and if each such RIMCO Common Share shall thereafter bedeemed to have been converted into and to have become, as of the EffectiveTime, the right to receive, without interest thereon, the pro rata Merger Considerationallowable to such shares.  RIMCO shallgive Whittier prompt notice of any demands received by RIMCO for appraisal ofRIMCO Common Shares, and Whittier shall have the right to participate in allnegotiations and proceedings with respect to such demands. RIMCO shall notsettle, make any payments with respect to, or offer to settle, any claim withrespect to Dissenting Shares without the written consent of Whittier.

 

# ARTICLE 3

#  

# REPRESENTATIONS AND WARRANTIES OF RIMCO

#  

Except as set forth inthe RIMCO Disclosure Schedule (each section of which qualifies thecorrespondingly numbered representation, warranty or covenant of this Agreementto the

 

4

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extent specified thereinand such other representations, warranties or covenants to the extent a matterin such section is disclosed in such a way as to make its relevance tosuch other representation, warranty or covenant reasonably apparent) deliveredto Whittier concurrently with the execution hereof, RIMCO represents andwarrants to Whittier as of the date of this Agreement, that:

 

Section 3.1                                 Existence; Good Standing; Corporate Authority. RIMCO is a corporation duly incorporated, validly existing and in goodstanding under the laws of the State of Delaware.  RIMCO is duly qualified to do business as aforeign corporation and is in good standing under the laws of each jurisdictionin which the character of the properties owned or leased by it therein or inwhich the transaction of its business makes such qualification necessary, allas listed on Schedule 3.1 of the RIMCO Disclosure Schedule, except wherethe failure to be so qualified would not reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect on RIMCO.  RIMCO has all requisite corporate power andauthority to own, operate and lease its properties and to carry on its businessas now conducted.  The copies of RIMCO’scertificate of incorporation and bylaws previously made available to Whittierare true and correct and contain all amendments as of the date hereof.

 

Section 3.2                                 Authorization,Validity and Effect of Agreements.  RIMCO has the requisite corporate power andauthority to execute and deliver this Agreement and all other agreements anddocuments contemplated herein to which it is a party.  The consummation by RIMCO of the transactionscontemplated herein has been duly authorized by all requisite corporate action,other than, with respect to the Merger, the adoption of this Agreement by the RIMCOStockholders.  This Agreement constitutesthe valid and legally binding obligation of RIMCO, enforceable in accordance withits terms, subject to applicable bankruptcy, insolvency, moratorium or othersimilar laws relating to creditors’ rights and general principles of equity.

 

Section 3.3                                 Capitalization.  The authorized capital stock of RIMCOconsists solely of 12,500,000 RIMCO Common Shares and 500,000 shares ofpreferred stock.  As of the date hereof,1,948,060 RIMCO Common Shares were issued and outstanding and none of thepreferred shares are outstanding.  Allissued and outstanding RIMCO Common Shares (i) are duly authorized,validly issued, fully paid, nonassessable and free of preemptive rights, (ii) werenot issued in violation of the terms of any agreement or other understandingbinding upon RIMCO, and (iii) were issued in compliance with allapplicable charter documents of RIMCO and all applicable federal and statesecurities laws, rules and regulations. The names of the holders of the RIMCO Common Shares and the number ofshares held by each is set forth on Exhibit D  hereto. There are no options, warrants, calls, subscriptions, stockholder rightsplan or similar instruments, convertible securities, or other rights,agreements or commitments which obligate RIMCO or any of its Subsidiaries toissue, transfer or sell any shares of capital stock or other voting securitiesof RIMCO or any of its Subsidiaries, except as disclosed in the RIMCODisclosure Schedule.  RIMCO has nooutstanding bonds, debentures, notes or other obligations the holders of whichhave the right to vote (or which are convertible into or exercisable forsecurities having the right to vote) with the stockholders of RIMCO on anymatter.

 

Section 3.4                                 Subsidiaries;Investments.  RIMCO ownsthe Subsidiaries listed on Schedule 3.4 of the RIMCO Disclosure Schedule.  Each of RIMCO’s Subsidiaries is a corporationduly organized, validly existing and in good standing (where applicable) underthe

 

5

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laws of its jurisdictionof incorporation, has the corporate authority to own, operate and lease itsproperties and to carry on its business as it is now being conducted, and isduly qualified to do business and is in good standing (where applicable) ineach jurisdiction listed on such Schedule 3.4 in which the ownership,operation or lease of its property or the conduct of its business requires suchqualification, except for jurisdictions in which such failure to be soqualified or to be in good standing would not reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect on RIMCO.  All of the outstanding shares of capitalstock of each of RIMCO’s Subsidiaries is duly authorized, validly issued, fullypaid and nonassessable, and is owned, directly or indirectly, by RIMCO free andclear of all Liens except for that certain Put-Call Agreement dated January 1,2004, a copy of which has heretofore been provided to Whittier, obligating RIMCOto sell the shares of RIMCO Royalty Management, Inc. to the unitholders ofRIMCO Royalty Partners, L.P. in the event of a change of control of RIMCO.  The RIMCO Disclosure Schedule sets forthfor each Subsidiary of RIMCO, its name and jurisdiction of incorporation ororganization.  The RIMCO Disclosure Schedule listsall partnerships, joint ventures, and other Persons in which RIMCO has aninvestment and the percentage owned, number of shares owned or amount invested,as appropriate.

 

Section 3.5                                 No Violation.  Neither RIMCO nor any of its Subsidiaries is,or has received notice that it would be with the passage of time, in violationof any term, condition or provision of (a) its charter documents orbylaws, (b) any loan or credit agreement, note, bond, mortgage, indenture,contract, agreement, lease, license or other instrument, or (c) any orderof any court, governmental authority or arbitration board or tribunal, or anylaw, ordinance, governmental rule or regulation to which RIMCO or any ofits Subsidiaries or any of their respective properties or assets is subject, oris delinquent with respect to any report required to be filed with anygovernmental entity, except, in the case of matters described in clause (b) or(c), as would not reasonably be expected to have, individually or in theaggregate, a Material Adverse Effect on RIMCO. Except as would not reasonably be expected to have, individually or in theaggregate, a Material Adverse Effect on RIMCO, (i) RIMCO and itsSubsidiaries hold all Permits required for the operation of their respectivebusinesses, and (ii) RIMCO and its Subsidiaries are in compliance with theterms of their Permits.  No investigationby any governmental authority with respect to RIMCO or any of its Subsidiariesis pending or, to the Knowledge of RIMCO, threatened against RIMCO.

 

Section 3.6                                 No Conflict.

 

### (a)                                  Neitherthe execution and delivery by RIMCO of this Agreement nor the consummation by RIMCOof the transactions contemplated herein in accordance with the terms hereofwill: (i) conflict with or result in a breach of any provisions of thecharter documents or bylaws of RIMCO; (ii) except for consents required tobe obtained (the “Frost Required Consents”) under the Amendment andRestatement of Credit Agreement dated as of September 16, 2002, asamended, between RIMCO and the Frost National Bank and all other loan documentsexecuted and delivered thereunder (collectively, the “Frost Documents”)violate, or conflict with, or result in a breach of any provision of, orconstitute a default (or an event which, with notice or lapse of time or both,would constitute a default) under, or result in the termination or in a rightof termination or cancellation of, or give rise to a right of purchase under,or accelerate the performance required by, or result in the creation of anyLien that is not a Permitted Encumbrance upon any of the properties of RIMCO orits Subsidiaries under, or result

 

6

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in being declared void,voidable, or without further binding effect, or otherwise result in a detrimentto RIMCO or any of its Subsidiaries under any of the terms, conditions orprovisions of, any note, bond, mortgage, indenture, deed of trust, RIMCOPermit, lease, contract, agreement, joint venture or other instrument orobligation to which RIMCO or any of its Subsidiaries is a party, or by which RIMCOor any of its Subsidiaries or any of their properties is bound or affected; or (iii) contraveneor conflict with or constitute a violation of any provision of any law, rule,regulation, judgment, order or decree binding upon or applicable to RIMCO orany of its Subsidiaries, except, in the case of matters described inclause (ii) or (iii), as would not reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect.

###  

### (b)                                 Neitherthe execution and delivery by RIMCO of this Agreement nor the consummation by RIMCOof the transactions contemplated herein in accordance with the terms hereofwill require any consent, approval or authorization of, or filing orregistration with, any governmental or regulatory authority, other than thefilings provided for in Article 1, except for (i) approvals andconsents of governmental authorities that are routinely granted after theconsummation of transactions of the nature contemplated in this Agreement, and (ii) anyconsent, approval or authorization, the failure of which to obtain and for anyfiling or registration the failure of which to make would not reasonably beexpected to have, individually or in the aggregate, a Material Adverse Effecton RIMCO.

###  

### (c)                                  Otherthan as contemplated in Sections 3.6(a) and 3.6(b), no consents,assignments, waivers, authorizations or other certificates are necessary inconnection with the transactions contemplated herein to provide for thecontinuation in full force and effect of all of the RIMCO Material Contracts orfor RIMCO to consummate the transactions contemplated herein, except where thefailure to receive such consents or other certificates would not reasonably beexpected to have, individually or in the aggregate, a Material Adverse Effecton RIMCO.

###  

### (d)                                 Exceptas set out in Schedule 3.6 of the RIMCO Disclosure Schedule, neither theexecution and delivery of this Agreement nor the consummation of thetransactions contemplated herein will: (i) result in any payment from RIMCOor its Subsidiaries (including severance, unemployment compensation, parachutepayment, bonus or otherwise) becoming due to any director, employee orindependent contractor of RIMCO or any of its Subsidiaries under any of the RIMCOPlans or otherwise; (ii) increase any benefits otherwise payable under anyof the RIMCO Plans or otherwise; or (iii) result in the acceleration ofthe time of payment or vesting of any such benefits.

###  

Section 3.7                                 FinancialStatements; Liabilities; FrostDocuments.

 

### (a)                                  RIMCOhas heretofore delivered to Whittier (i) a consolidated balance sheet ofRIMCO and its Subsidiaries for the periods ended December 31, 2003 and 2004,and (ii) and the related consolidated statements of income, stockholdersequity and cash flows for the periods ended December 31, 2003 and 2004,together with related notes and schedules, certified by KPMG, whose reportthereon is included therewith (the “Financial Statements”).  The Financial Statements  (i) are in accordance with the books andrecords of RIMCO and its Subsidiaries in all material respects (with the term “material”being defined for the purposes of this Section 3.7 as such term is definedunder generally accepted accounting principles, or “GAAP”) and were

 

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prepared in accordancewith GAAP applied on a consistent basis throughout the periods involved, and (ii) fairlypresent in all material respects the consolidated financial position of RIMCOand its Subsidiaries as of the respective dates thereof and the consolidatedresults of operations and cash flows for the periods indicated.

###  

### (b)                                 Subsequentto December 31, 2004, except for matters of the type disclosed in thisAgreement and the RIMCO Disclosure Schedule, neither RIMCO nor any of itsSubsidiaries has incurred any liabilities except for (i) liabilities orobligations incurred in the ordinary course of business and consistent withpast practice, (ii) ordinary course of business professional fees,including reservoir engineering, audit, tax and land auditing record systemsprofessional fees and expenses, and (iii) professional fees and expensesincurred in connection with or as a result of the Merger.

###  

(c)                                  RIMCOhas provided Whittier with true and correct copies of the Frost Documents.  The outstanding principal balance of thefacility created under the Frost Documents is $1,000,000 as of the date of thisAgreement.

 

Section 3.8                                 Litigation.  Except as described in Schedule 3.8 of theRIMCO Disclosure Schedule, there are no actions, suits or proceedings pendingagainst RIMCO or any of its Subsidiaries or, to the Knowledge of RIMCO, towhich any of the RIMCO Properties are subject, or, to the Knowledge of RIMCO,threatened against RIMCO or any of its Subsidiaries, at law or in equity, orbefore or by any federal, state or foreign commission, court, board, bureau,agency or instrumentality.  There are nooutstanding judgments, decrees, injunctions, awards or orders against RIMCO orany of its Subsidiaries.

 

Section 3.9                                      Absence ofCertain Changes.  Exceptas described in Schedule 3.9 of the RIMCO Disclosure Schedule, since December 31,2004, RIMCO has conducted its business only in the ordinary and usual course ofbusiness, and during such period there has not been (i) any event,condition, action or occurrence that has had or would reasonably be expected tohave, individually or in the aggregate, a Material Adverse Effect on RIMCO; (ii) anymaterial change by RIMCO or any of its Subsidiaries (viewed on a consolidatedbasis) in any of its accounting methods, principles or practices or any of itstax methods, practices or elections, except for changes required by GAAP; (iii) anymaterial damage, destruction, or loss to the business or properties of RIMCOand its Subsidiaries, taken as a whole, not covered by insurance; (iv) anydeclaration, setting aside or payment of any dividend or other distribution inrespect of the capital stock of RIMCO, other than a dividend or dividends thatare in accordance with the RIMCO Dividend contemplated herein, or any direct orindirect redemption, purchase or any other acquisition by RIMCO of any suchstock; (v) any change in the capital stock or in the number of shares orclasses of RIMCO’s authorized or outstanding capital stock.

 

Section 3.10                           Taxes.

 

### (a)                                  Eachof RIMCO and its Subsidiaries has (i) duly filed (or there has been filedon its behalf) on a timely basis (taking into account any extensions of time tofile before the date hereof) with appropriate governmental authorities all taxreturns, statements, reports, declarations, estimates and forms required to befiled by or with respect to it, except to the extent that any failure to file wouldnot reasonably be expected to have, individually or in the aggregate,

 

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a Material Adverse Effecton RIMCO, and (ii) duly paid or deposited in full on a timely basis ormade adequate provisions in accordance with GAAP (or there has been paid ordeposited or adequate provision has been made on its behalf) for the payment ofall taxes required to be paid by it other than those being contested in goodfaith by RIMCO or a Subsidiary of RIMCO and except to the extent that anyfailure to pay or deposit or make adequate provision for the payment of suchtaxes would not have or could not reasonably be expected to have, individuallyor in the aggregate, a Material Adverse Effect on RIMCO.

###  

### (b)                                 Exceptas described in Schedule 3.10 of the RIMCO Disclosure Schedule, thefederal income tax returns of RIMCO and each of its Subsidiaries have not beenexamined by the IRS.  As of the datehereof, neither RIMCO nor any of its Subsidiaries has granted any requests,agreements, consents or waivers to extend the statutory period of limitationsapplicable to the assessment of any taxes of RIMCO or any of its Subsidiariesthat will be outstanding as of the Effective Time; neither RIMCO nor any of itsSubsidiaries is a party to, is bound by or has any obligation under any taxsharing, allocation or indemnity agreement or any similar agreement orarrangement; and there are no tax liens on any assets of RIMCO or itsSubsidiaries except for (A) taxes not yet currently due and (B) mattersbeing contested by RIMCO in good faith for which adequate reserves arereflected in the Financial Statements.

###  

### (c)                                  Forpurposes of this Agreement, “tax” or “taxes” means all federal,state, county, local, foreign or other net income, gross income, grossreceipts, sales, use, ad valorem, transfer, accumulated earnings, personalholding, excess profits, franchise, profits, license, withholding, payroll,employment, excise, severance, stamp, occupation, premium, property,disability, capital stock, or windfall profits taxes, customs duties or othertaxes, fees, assessments or governmental charges of any kind whatsoever,together with any interest and any penalties, additions to tax or additionalamounts imposed by any taxing authority (domestic or foreign).

###  

Section 3.11                           Employee BenefitPlans.  All employeebenefit plans, programs, arrangements and agreements covering active, former orretired employees of RIMCO and any of its Subsidiaries which provide materialbenefits to such employees, or as to which RIMCO or any of its Subsidiaries hasany material liability or material contingent liability, are listed in Schedule 3.11of the RIMCO Disclosure Schedule (the “RIMCO Plans”).

###  

### (b)                                 RIMCOhas made available to Whittier, to the extent applicable, a true, correct andcomplete copy of each of the RIMCO Plans, and all contracts relating thereto,or to the funding thereof, including, without limitation, all trust agreements,insurance contracts, administration contracts, investment managementagreements, subscription and participation agreements, and record-keepingagreements, each as in effect on the date hereof.

###  

### (c)                                  AllRIMCO Plans comply in form in all material respects and have been administeredin all material respects with all applicable requirements of law, excluding anydeficiencies that would not reasonably be expected to have, individually or inthe aggregate, a Material Adverse Effect on RIMCO.  No event has occurred which will or couldcause any such RIMCO Plan to fail to comply with such requirements, excludingany deficiencies that would not reasonably be expected to have, individually orin the aggregate, a Material Adverse Effect on RIMCO, and no notice has beenissued to RIMCO by any governmental authority questioning or challenging suchcompliance.

 

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### (d)                                 Exceptfor those employer contributions that are not yet due, all required employercontributions under any such plans have been made and the applicable funds havebeen funded in accordance with the terms thereof, excluding any deficienciesthat would not have or could not reasonably be expected to have, individuallyor in the aggregate, a Material Adverse Effect on RIMCO.

###  

### (e)                                  AnyRIMCO Plan intended to be qualified under Section 401(a) of the Codehas been determined by the IRS to be qualified as to form, and to the Knowledgeof RIMCO, nothing has occurred to cause the loss of such qualified status.

###  

### (f)                                    Exceptas described in Schedule 3.11(f) of the RIMCO Disclosure Schedule,there are no pending, or to the Knowledge of RIMCO, anticipated claims againstor otherwise involving any of RIMCO Plans and no suit, action or otherlitigation (excluding claims for benefits incurred in the ordinary course of RIMCOPlan activities) has been brought against or with respect to any RIMCO Plan.

###  

### (g)                                 Noneof the assets of any RIMCO Plan is invested in securities of RIMCO or any realproperty owned by RIMCO.

###  

### (h)                                 Therehave been no acts or omissions by RIMCO or any of its Subsidiaries which havegiven rise to or may give rise to fines, penalties, taxes or related chargesunder Section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Codefor which RIMCO or any of its Subsidiaries may be liable that would reasonablybe expected to result in a Material Adverse Effect on RIMCO.

###  

### (i)                                     Exceptas described in Schedule 3.11(i) of the RIMCO Disclosure Schedule,neither RIMCO nor any of its Subsidiaries has any liability or contingentliability for providing, under any RIMCO Plan or otherwise, any post-retirementmedical, dental or life insurance benefits, other than continuing coveragethrough the month of an employee’s termination or statutory liability forproviding group health plan continuation coverage under Sections 601-608of ERISA and Section 4980B of the Code.

###  

### (j)                                     RIMCOand its Subsidiaries have never had a defined benefit plan.

 

Section 3.12                           Employee Matters.  Neither RIMCO nor any of its Subsidiaries isa party to, or bound by, any collective bargaining agreement, contract or otheragreement or understanding with a labor union or labor organization.

###  

### (b)                                 Tothe Knowledge of RIMCO, there are no organizational efforts with respect to theformation of a collective bargaining unit presently being made or threatenedinvolving employees of RIMCO or any of its Subsidiaries.

###  

### (c)                                  TheSchedule 3.12(c) of the RIMCO Disclosure Schedule lists allcurrent employees, their compensation and benefits.

 

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Section 3.13                           EnvironmentalMatters.

 

### (a)                                  Asused in this Agreement:

###  

#### (i)                                     “EnvironmentalLaws” means any and all applicable laws, statutes, regulations, rules,orders, ordinances, legally enforceable directives, and rules of commonlaw of any governmental entity pertaining to protection of human health (to theextent arising from exposure to Hazardous Materials) or the environment(including, without limitation, any natural resource damages or any generation,use, storage, treatment, disposal, Release, threatened Release, discharge, oremission of Hazardous Materials into the indoor or outdoor environment) ineffect at the time of Closing;

####  

#### (ii)                                  “HazardousMaterials” means any (1) chemical, product, substance, waste,pollutant, or contaminant that is defined or listed as hazardous or toxic orthat is otherwise regulated under any Environmental Law; and (2) asbestoscontaining materials, whether in a friable or non-friable condition,polychlorinated biphenyls, naturally occurring radioactive materials or radon;

####  

#### (iii)                               “EnvironmentalPermits” means any and all permits, registrations, licenses, consents,exemptions, variances, authorizations, and similar approvals required underEnvironmental Laws;

####  

#### (iv)                              “Release”means any depositing, spilling, leaking, pumping, pouring, placing, emitting,discarding, abandoning, emptying, discharging, migrating, injecting, escaping,leaching, dumping, or disposing;

####  

#### (v)                                 “RIMCOReal Properties” means those real properties owned, leased, or otherwiseoperated by RIMCO or its Subsidiaries in connection with the performance of theirrespective businesses, and specifically includes without limitation the RIMCOProperties; and

####  

#### (vi)                              “OffsiteNon-RIMCO Real Properties” means any real properties other than RIMCO RealProperties.

####  

### (b)                                 Exceptas described in Schedule 3.13 of the RIMCO Disclosure Schedule or as wouldnot reasonably be expected to have, individually or in the aggregate, aMaterial Adverse Effect:

###  

#### (i)                                     RIMCOand its Subsidiaries and their respective operations, assets, businesses and RIMCOReal Properties, to the Knowledge of RIMCO are and have been in compliance withall Environmental Laws and Environmental Permits;

####  

#### (ii)                                  Tothe Knowledge of RIMCO, all Environmental Permits required under EnvironmentalLaws for operating RIMCO’s and its Subsidiaries’ assets, businesses, and RIMCOReal Properties as they are currently being operated have been obtained and arecurrently in full force and effect, and there are no conditions orcircumstances that would limit or preclude RIMCO or its Subsidiaries fromrenewing such Environmental Permits;

####  

#### (iii)                               RIMCO and itsSubsidiaries are not subject to any pending or, to the Knowledge of RIMCO,threatened claims, actions, suits, investigations, inquiries or

 

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#### proceedings under Environmental Laws, and neither RIMCO nor itsSubsidiaries have received, to the Knowledge of RIMCO, notice of allegedviolations under applicable Environmental Laws with respect to their respectiveoperations, assets, businesses, or RIMCO Real Properties;

####  

#### (iv)                              Tothe Knowledge of RIMCO, there have been no Release of Hazardous Materials on,under or from the RIMCO Real Properties and there is no investigation,remediation, removal, or monitoring of Hazardous Materials required underEnvironmental Laws at such properties;

####  

#### (v)                                 Tothe Knowledge of RIMCO, neither RIMCO nor its Subsidiaries have received anywritten notice asserting an alleged liability or obligation under anyEnvironmental Laws with respect to the investigation, remediation, removal, ormonitoring of any Hazardous Materials at, under, or Released or threatened tobe Released from any Offsite Non-RIMCO Real Properties and, to the Knowledge ofRIMCO, there are no conditions or circumstances that would reasonably beexpected to result in the receipt of such written notice;

####  

#### (vi)                              Tothe Knowledge of RIMCO, there has been no exposure of any person or property toHazardous Materials in connection with RIMCO’s or its Subsidiaries’ operations,assets, businesses, or RIMCO Real Properties that would reasonably be expectedto form the basis for a claim for damages or compensation; and

####  

#### (vii)                           To the Knowledge of RIMCO, RIMCOand its Subsidiaries have made available to Whittier complete and correctcopies of all material environmental site assessment reports, studies, and correspondenceon environmental matters (in each instance relevant to RIMCO or itsSubsidiaries) that are in RIMCO’s or its Subsidiaries’ possession and relatingto their respective operations, assets, businesses, or RIMCO Real Properties.

####  

Except as specificallyset forth in this Section 3.13, neither RIMCO nor any of its Subsidiariesmakes any representation or warranty regarding compliance or failure to complywith, or any actual or contingent liability under, any Environmental Law.

 

Section 3.14                           IntellectualProperty.  RIMCO and itsSubsidiaries own or possess all necessary licenses or other valid rights to useall patents, patent rights, trademarks, trademark rights and proprietaryinformation used or held for use in connection with their respective businessesas currently being conducted, free and clear of Liens, except where the failureto own or possess such licenses and other rights would not reasonably beexpected to have, individually or in the aggregate, a Material Adverse Effecton RIMCO, and to the Knowledge of RIMCO, there are no assertions or claimschallenging the validity of any of the foregoing.  Except in the ordinary course of business,neither RIMCO nor any of its Subsidiaries has granted to any other person anylicense to use any of the foregoing.  Theconduct of RIMCO’s and its Subsidiaries’ respective businesses as currentlyconducted does not, to the Knowledge of RIMCO, conflict with any patents,patent rights, licenses, trademarks, trademark rights, trade names, trade namerights or copyrights of others.  To theKnowledge of RIMCO, there is no infringement of any proprietary right owned byor licensed by or to RIMCO or any of its Subsidiaries.  Except as set

 

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forth on Schedule 3.14of the RIMCO Disclosure Schedule, no license of RIMCO to use seismic data shallrequire the payment of any additional fee as a result of a change of control ofRIMCO pursuant to the Merger.

 

Section 3.15                           Equipment.  To the Knowledge of RIMCO, RIMCO owns, or hasrights to use, all personal property and other equipment (including but notlimited to fixtures, and personal property such as vehicles, pipelines, storagetanks, flowlines, wellhead equipment, pumping units, platforms, buildingssaltwater disposal facilities, injection facilities),  and other personal property and equipmentnecessary to operate the RIMCO Properties as they are currently beingoperated.  RIMCO MAKES NO OTHERWARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ITS PERSONAL PROPERTY OR EQUIPMENT,ALL OF WHICH IS USED AND IS TRANSFERRED TO THE SURVIVING CORPORATION “AS IS,”AND “WITH ALL FAULTS,” AND SUBJECT TO PERMITTED ENCUMBRANCES.

 

Section 3.16                           Properties,Title, and Defects.

 

### (a)                                  Exhibit Fcontains, as of March 31, 2005, (i) a list of all RIMCO leases, Units,and Wells, (ii) the Net Revenue Interest and Working Interest of RIMCO orits Subsidiaries therein, (iii) a list showing the lessor/lessee, leasedate, recording data, and gross acres, and a list of lease options included inthe RIMCO Properties, and (iv) the estimated gross acres for eachUndeveloped project identified on Exhibit Fand included in the RIMCO Properties.  Except as set forth in Schedule 3.16(a) ofthe RIMCODisclosure Schedule, RIMCO and/or its Subsidiaries hold Good andDefensible Title to each of the RIMCO Properties identified on Exhibit F.

###  

### (b)                                 [ThisSection 3.16(b) has been intentionally left blank.]

###  

### (c)                                  Asof March 31, 2005, except as set forth in either Exhibit F orin Schedule 3.16(c) of the RIMCO Disclosure Schedule, no non-consentoperations exist with respect to any of the RIMCO Properties that have resultedor will result in a temporary or permanent increase or decrease in RIMCO’s NetRevenue Interest or Working Interest in such RIMCO Property.

###  

### (d)                                 Tothe Knowledge of RIMCO, as of March 31, 2005, except as set forth in Schedule 3.16(d) ofthe RIMCO Disclosure Schedule, all proceeds from the sale of hydrocarbonsproduced from the RIMCO proportionate share of the RIMCO Properties arecurrently being paid to RIMCO, and no portion of such proceeds is currentlybeing held in suspense by any purchaser thereof or any other party by whomproceeds are paid except for immaterial amounts.

###  

### (e)                                  Schedule 3.16(e) setsforth, for the period January 1, 2005 through March 31, 2005 (i) allAFEs received, signed and approved by RIMCO and its Subsidiaries, and (ii) allcash calls received by RIMCO and its Subsidiaries.  Except as set forth on Schedule 3.16(e),in the period January 1, 2005 through March 31, 2005, neither RIMCOnor any of its Subsidiaries has approved any expenses, or made commitments tomake expenditures (capital or otherwise) or to apply revenues from a Well’sproduction in connection with any RIMCO Properties with respect to theownership or operation of RIMCO Properties after the date of this Agreement,other than expenses incurred in the normal operation of existing Wells on theRIMCO Properties or to continue operations on the drilling, completion orplugging of any Well or any Well operation

 

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for which RIMCO hasconsented to participate and is required to continue to participate pursuant toapplicable agreements or to conduct emergency operations on any Well, platform,pipeline or other production facility.

###  

### (f)                                    Exceptas set forth in Schedule 3.16(f) of the RIMCO Disclosure Schedule, there existno agreements or other arrangements under which RIMCO or any of its Subsidiariesundertakes to perform gathering, transportation, processing or other marketingservices for any third party for a fee or other consideration that is now, ormay hereafter be, unrepresentative of commercial rates being received by thirdparties in comparable, arm’s length transactions.

###  

### (g)                                 Exceptas set forth in Schedule 3.16(g) of the RIMCO Disclosure Schedule, neitherRIMCO nor any of its Subsidiaries has received any advance, take-or-pay orother similar payments that entitle purchasers of production to receivedeliveries of hydrocarbons without paying therefor, and, on a net, basis among RIMCOand its Subsidiaries taken as a whole, RIMCO and its Subsidiaries are neitherunderproduced nor overproduced, in either case, to any extent, under gasbalancing or similar arrangements.

###  

### (h)                                 Exceptas set forth in Schedule 3.16(h) of the RIMCO Disclosure Schedule, neitherRIMCO, any of its Subsidiaries nor any of the RIMCO Properties is subject to (i) anynon-compete agreements, (ii) any tax partnership, or (iii) anyagreement, contract or commitment relating to the disposition or acquisition ofthe assets of, or any interest in, any third party business entity.

###  

### (i)                                     RIMCOhas delivered to Whittier a true and correct copy of the reserve reportprepared by Netherland, Sewell & Associates, Inc. dated as of January 1,2005 relating to RIMCO’s oil and gas reserves.

###  

Section 3.17                           Insurance.  RIMCO and its Subsidiaries maintain theinsurance described in Schedule 3.17 of the RIMCO Disclosure Schedule.

 

Section 3.18                           No Brokers.  RIMCO has not entered into any contract,arrangement or understanding with any person or firm which may result in theobligation of Whittier, Merger Sub or RIMCO to pay any finder’s fees, brokerageor agent’s commissions or other like payments in connection with thenegotiations leading to this Agreement or the consummation of the transactionscontemplated herein.

 

Section 3.19                           Contracts;Debt Instruments.

 

### (a)                                  Exceptfor documents described in Schedule 3.19 of the RIMCO Disclosure Schedule,there are no contracts or agreements that are material to the business,properties, assets, financial condition or results of operations of RIMCO andits Subsidiaries taken as a whole (“RIMCO Material Contracts”).  Neither RIMCO nor any of its Subsidiaries isin violation of or in default under (nor does there exist any condition whichwith the passage of time or the giving of notice or both would cause such aviolation of or default under) any RIMCO Material Contract to which it is aparty or by which it or any of its properties or assets is bound, except forviolations or defaults that would not reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect on RIMCO.  Each RIMCO Material Contract is in full forceand effect, and is a legal, valid and binding obligation of RIMCO or one of itsSubsidiaries

 

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and, to the Knowledge of RIMCO,each of the other parties thereto, enforceable in accordance with its terms,except as such enforceability may be limited by bankruptcy, insolvency,moratorium or other similar laws relating to creditors’ rights and generalprinciples of equity and except where the failure of any RIMCO MaterialContract to be a legal, valid and binding obligation and enforceable inaccordance with its terms would not have or could not reasonably be expected tohave, individually or in the aggregate, a Material Adverse Effect on RIMCO.  No condition exists or event has occurredwhich (whether with or without notice or lapse of time or both) wouldconstitute a default by RIMCO or one of its Subsidiaries or, to the Knowledgeof RIMCO, any other party thereto under any RIMCO Material Contract or resultin a right of termination of any RIMCO Material Contract, except for anycondition or event that would not reasonably be expected to have, individuallyor in the aggregate, a Material Adverse Effect on RIMCO.

###  

### (b)                                 Setforth in Schedule 3.19 of the RIMCO Disclosure Schedule is, as of thedate hereof, (i) a list of all loan or credit agreements, notes, bonds,mortgages, indentures and other agreements and instruments pursuant to which RIMCOor any of its Subsidiaries has indebtedness outstanding or under whichindebtedness may be incurred, and (ii) the respective principal amountsoutstanding thereunder as of the date hereof.

###  

### (c)                                  NeitherRIMCO nor any of its Subsidiaries has entered into any contract and there is nocommitment, judgment, injunction, order or decree to which RIMCO or any of itsSubsidiaries is a party or subject to that has or would reasonably be expectedto have the effect of prohibiting or impairing the conduct of business by RIMCOor any of its Subsidiaries or any contract that may be terminable as a resultof Whittier’s status as a competitor of any party to such contract, except, ineach case, for any prohibition, impairment or termination right that would notreasonably be expected to have, individually or in the aggregate, a MaterialAdverse Effect on RIMCO.

###  

### (d)                                 Schedule 3.19of the RIMCO Disclosure Schedule lists all employment agreements with anyemployee of RIMCO and all obligations to any former employee of RIMCO.

###  

Section 3.20                           BoardRecommendation; Vote Required. The Board of Directors of RIMCO has unanimously approved the Merger asbeing in the best interests of RIMCO and the RIMCO Stockholders, andunanimously recommends to the RIMCO Stockholders that they vote in favor of theMerger.                                          Theaffirmative vote of holders of a majority in interest of the voting power ofthe outstanding RIMCO Common Shares is the only vote necessary to adopt thisAgreement and the transactions contemplated herein (as applied to thisAgreement and the transactions contemplated herein, the “RIMCO Requisite Vote”).  The holders of not less than the number ofRIMCO Common Shares necessary to achieve the RIMCO Requisite Vote have enteredinto voting agreements, substantially in the form of the Voting Agreementattached hereto as Exhibit I,with RIMCO and Whittier to vote their shares in favor of the Merger.

 

Section 3.21                           Certain Contracts.  Neither RIMCO nor any of its Subsidiaries isa party to or bound by (a) any non-competition agreement or any otheragreement or obligation which purports to limit the manner in which, or thelocalities in which, the current business of RIMCO and its Subsidiaries, takenas a whole, or Whittier and its Subsidiaries, taken as a whole, is

 

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conducted, or (b) anyexecutory agreement or obligation which pertains to the acquisition ordisposition of any asset, or which provides any third party any Lien, except,in the case of this clause (ii), for such agreements or obligations that wouldnot reasonably be expected to have, individually or in the aggregate, aMaterial Adverse Effect on RIMCO.

 

# ARTICLE 4

#  

# REPRESENTATIONS AND WARRANTIES OF

# WHITTIER AND MERGER SUB

#  

Except as set forth inthe disclosure letter delivered to RIMCO concurrently with the execution hereof(the “Whittier Disclosure Schedule”), Whittier and Merger Sub, jointlyand severally, represent and warrant to RIMCO that:

 

Section 4.1                                 Existence;Good Standing; CorporateAuthority.  Whittier is acorporation duly incorporated, validly existing and in good standing under thelaws of the State of Nevada.  Merger Subis a corporation duly incorporated, validly existing and in good standing underthe laws of the State of Delaware.  Eachof Whittier and Merger Sub is duly qualified to do business as a foreigncorporation and is in good standing under the laws of each jurisdiction inwhich the character of the properties owned or leased by it therein or in whichthe transaction of its business makes such qualification necessary, exceptwhere the failure to be so qualified would not have or could not reasonably beexpected to have, individually or in the aggregate, a Material Adverse Effecton Whittier.  Each of Whittier and MergerSub has all requisite corporate power and authority to own, operate and leaseits properties and to carry on its business as now conducted.  The copies of each of Whittier’s and MergerSub’s certificate of incorporation and bylaws previously made available to RIMCOare true and correct and contain all amendments as of the date hereof.

 

Section 4.2                                 Authorization,Validity and Effect of Agreements.  Each of Whittier and Merger Sub has therequisite corporate power and authority to execute and deliver this Agreementand all other agreements and documents contemplated herein to which it is aparty.  The consummation by each of Whittierand Merger Sub of the transactions contemplated herein has been duly authorizedby all requisite corporate action.  ThisAgreement constitutes the valid and legally binding obligation of each of Whittierand Merger Sub, enforceable against each in accordance with its terms, subjectto applicable bankruptcy, insolvency, moratorium or other similar laws relatingto creditors’ rights and general principles of equity.

 

Section 4.3                                 Subsidiaries.

 

### (a)                                  Eachof Whittier’s Subsidiaries is a corporation, limited liability company orpartnership duly organized, validly existing and in good standing (whereapplicable) under the laws of its jurisdiction of incorporation ororganization, has the corporate, limited liability company or partnership powerand authority to own, operate and lease its properties and to carry on itsbusiness as it is now being conducted, and is duly qualified to do business andis in good standing (where applicable) in each jurisdiction in which theownership, operation or lease of its property or the conduct of its businessrequires such qualification, except for jurisdictions in which such failure tobe so qualified or to be in good standing would not have or could not

 

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reasonably be expected tohave, individually or in the aggregate, a material adverse effect on Whittierand its Subsidiaries, taken as a whole. All of the outstanding shares of capital stock of, or other ownershipinterests in, each of Whittier’s Subsidiaries is duly authorized, validlyissued, fully paid and nonassessable, and is owned, directly or indirectly, by Whittierfree and clear of all Liens.  The WhittierDisclosure Schedule sets forth for each Subsidiary of Whittier its nameand jurisdiction of incorporation or organization.

###  

### (b)                                 Allof the outstanding shares of capital stock of Merger Sub are owned directly by Whittier.  Merger Sub was formed solely for the purposeof engaging in the transactions contemplated herein and has not engaged in anyactivities other than in connection with the transactions contemplated by thisAgreement.

###  

Section 4.4                                 No Violation.  Neither Whittier nor any of its Subsidiariesis, or has received notice that it would be with the passage of time, inviolation of any term, condition or provision of (a) its charter documentsor bylaws, (b) any loan or credit agreement, note, bond, mortgage,indenture, contract, agreement, lease, license or other instrument, or (c) anyorder of any court, governmental authority or arbitration board or tribunal, orany law, ordinance, governmental rule or regulation to which Whittier orany of its Subsidiaries or any of their respective properties or assets issubject, or is delinquent with respect to any report required to be filed withany governmental entity.  Whittier andits Subsidiaries hold (i) all Permits necessary for the lawful conduct oftheir respective businesses, (ii) all Permits needed to conduct RIMCO’sbusiness after Closing and, (iii) Whittier and its Subsidiaries are incompliance with the terms of their Permits. No investigation by any governmental authority with respect to Whittieror any of its Subsidiaries is pending or, to the knowledge of Whittier,threatened, against Whittier or any of its Subsidiaries.

 

Section 4.5                                 No Conflict.

 

### (a)                                  Neitherthe execution and delivery by Whittier and Merger Sub of this Agreement nor theconsummation by Whittier and Merger Sub of the transactions contemplated hereinin accordance with the terms hereof will: (i) conflict with or result in abreach of any provisions of the charter documents or bylaws of Whittier or MergerSub; (ii) violate, or conflict with, or result in a breach of anyprovision of, or constitute a default (or an event which, with notice or lapseof time or both, would constitute a default) under, or result in thetermination or in a right of termination or cancellation of, or give rise to aright of purchase under, or accelerate the performance required by, or resultin the creation of any Lien upon any of the properties of Whittier or itsSubsidiaries under, or result in being declared void, voidable, or withoutfurther binding effect, or otherwise result in a detriment to Whittier or anyof its Subsidiaries under any of the terms, conditions or provisions of, anynote, bond, mortgage, indenture, deed of trust, Whittier Permit, lease,contract, agreement, joint venture or other instrument or obligation to which Whittieror any of its Subsidiaries is a party, or by which Whittier or any of itsSubsidiaries or any of their properties is bound or affected; or (iii) contraveneor conflict with or constitute a violation of any provision of any law, rule,regulation, judgment, order or decree binding upon or applicable to Whittier orany of its Subsidiaries.

###  

### (b)                                 Neitherthe execution and delivery by Whittier or Merger Sub of this Agreement nor theconsummation by Whittier or Merger Sub of the transactions contemplated hereinin

 

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accordance with the termshereof will require any consent, approval or authorization of, or filing orregistration with, any governmental or regulatory authority.

###  

### (c)                                  Noconsents, assignments, waivers, authorizations or other certificates arenecessary in connection with the transactions contemplated herein or for Whittierto consummate the transactions contemplated herein.

###  

Section 4.6                                 FinancialInformation.  Whittier hasheretofore delivered to RIMCO (i) a consolidated balance sheet of Whittierand its consolidated Subsidiaries for the periods ended December 31, 2003and 2004, and (ii) and the related consolidated statements of income,stockholders equity and cash flows for the periods ended December 31, 2003and 2004, together with related notes and schedules, certified by GrantThornton LLP for 2004 and Brown, Armstrong, Paulden, McCown, Starbuck &Keeter Accountancy Corporation for 2003, whose report thereon is includedtherewith (the “Whittier Financial Statements”).  The Whittier Financial Statements  (i) are in accordance with the books andrecords of Whittier and its Subsidiaries in all material respects (with theterm “material” being defined for the purposes of this Section 4.6 as suchterm is defined under generally accepted accounting principles, or “GAAP”) and were prepared in accordancewith GAAP applied on a consistent basis throughout the periods involved, and (ii) fairlypresent in all material respects the consolidated financial position ofWhittier and its Subsidiaries as of the respective dates thereof and theconsolidated results of operations and cash flows for the periods indicated.

 

Section 4.7                                 Litigation andLiabilities.  There are noactions, suits or proceedings pending against Whittier or any of itsSubsidiaries or, to Whittier’s Knowledge, threatened against Whittier or any ofits Subsidiaries, at law or in equity, or before or by any federal, state orforeign commission, court, board, bureau, agency or instrumentality, other thanthose that would not have or could not reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect on Whittier.  There are no outstanding judgments, decrees,injunctions, awards or orders against Whittier or any of its Subsidiaries.

 

Section 4.8                                 Taxes.  Each of Whittier and its Subsidiaries andeach Affiliated, consolidated, combined, unitary or similar group of which anysuch corporation is or was a member has (i) duly filed (or there has beenfiled on its behalf) on a timely basis (taking into account any extensions oftime to file before the date hereof) with appropriate governmental authoritiesall returns required to be filed by or with respect to it, and (ii) dulypaid or deposited in full on a timely basis or made adequate provisions inaccordance with GAAP (or there has been paid or deposited or adequate provisionhas been made on its behalf) for the payment of all taxes required to be paidby it other than those being contested in good faith by Whittier or aSubsidiary of Whittier.

 

Section 4.9                                 No Brokers.  Whittier has not entered into any contract,arrangement or understanding with any person or firm which may result in theobligation of RIMCO to pay any finder’s fees, brokerage or agent’s commissionsor other like payments in connection with the negotiations leading to thisAgreement or the consummation of the transactions contemplated herein.

 

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Section 4.10                           FinancialCapability.  Afterdiscussion with its investment and commercial bankers, the Board of Directorsand management of Whittier reasonably believes that it will, through theissuance of equity securities in a private placement transaction and theincurrence of debt through a commercial bank of recognized standing, have sufficientcash at Closing to pay the Merger Consideration and for the cash infusioncontemplated in Section 5.10.                    Whittierhas provided to RIMCO for its confidential information, the engagement letterwith its investment bank and the term sheet from its commercial bank withrespect to such financings.

 

# ARTICLE 5

#  

# COVENANTS AND AGREEMENTS OF THE PARTIES

#  

Section 5.1                                 Conduct of Business.  Prior to the Effective Time, except as setforth in the RIMCO Disclosure Schedule or as specifically contemplated in thisAgreement, including Section 5.9, or as consented to in writing by Whittier,RIMCO:

 

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

###  

### (b)                                 shalluse its reasonable efforts, and shall cause each of its Subsidiaries (exceptfor RIMCO Holdings Corporation, which is in the process of being dissolved) touse reasonable efforts, to preserve intact their business organizations andgoodwill, keep available the services of their employees (except that theemployment contracts of Messrs. Hood, Whitney and Jorden will terminate asof Closing) and maintain satisfactory relationships with those persons havingbusiness relationships with them;

###  

### (c)                                  shallnot amend its certificate of incorporation or bylaws;

###  

### (d)                                 shallpromptly notify Whittier of (i) any material adverse change in itsfinancial condition or business or any termination, cancellation, repudiationor material breach of any Material Contract (or any communications specificallyindicating that the same may be threatened); (ii) the institution of anylitigation or governmental complaint, investigation or hearing to the extentcommunicated in writing to RIMCO (or communications specifically indicatingthat the same may be threatened); (iii) the occurrence, or failure tooccur, of any event, which occurrence or failure to occur would cause anyrepresentation or warranty of RIMCO contained in this Agreement to be untrue orinaccurate in any respect when made; (iv) any failure of RIMCO to complyin any  respect with or satisfy anycovenant, condition or agreement to be complied with or satisfied by it underthis Agreement; or (v) any other event that could reasonably be expectedto result in a Material Adverse Effect on RIMCO; provided, however,that no such notification shall affect the representations and warranties ofRIMCO or the conditions to the obligations of the parties hereunder;

###  

### (e)                                  shallnot (i) issue any shares of its capital stock, effect any stock split orotherwise change its capitalization as it existed on the date hereof, (ii) grant,confer or award any option, warrant, conversion right or other right notexisting on the date hereof to acquire any shares of its capital stock, (iii) increaseany compensation or benefits of any officer, director, employee or

 

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agent of RIMCO or any ofits Subsidiaries, except in the ordinary course of business consistent with thepast practice of RIMCO or any of its Subsidiaries (as applicable), or enterinto or amend any employment agreement or severance agreement with any of itspresent or future officers, directors or employees except with new employeesconsistent with past practice, or (iv) adopt any new employee benefit plan(including any stock option, stock benefit or stock purchase plan) or amend(except as required by law) any existing employee benefit plan in any materialrespect;

###  

### (f)                                    shallnot, and, shall not permit any of its Subsidiaries to (i) declare, setaside or pay any dividend or make any other distribution or payment withrespect to any shares of its capital stock (other than a dividend or dividendsthat in the aggregate do not exceed the amount permissible for purposes of the RIMCODividend) or (ii) redeem, purchase or otherwise acquire any shares of itscapital stock or capital stock of any of its Subsidiaries or any option,warrant, conversion right or other right to acquire such shares, or make anycommitment for any such action;

###  

### (g)                                 shallnot, and shall not permit any of its Subsidiaries to, sell, lease or otherwisedispose of any of its assets (including capital stock of any of its Subsidiaries),except for (i) the stock of RIMCO Royalty Management, Inc., which willbe sold to the unitholders of RIMCO Royalty Partners, L.P. as contemplated inthat certain Put-Call Agreement dated January 1, 2004 (the “Put-CallAgreement”), (ii) the transfer to RIMCO Royalty Management, Inc.of those certain interests described on Exhibit E hereto (the “TransferredInterests”), (iii) RIMCO Holdings Corporation, which is in the processof being dissolved and its assets (cash in the amount of approximately$285,000, 80% of which will go to RIMCO) distributed to its stockholders; (iv) salesfor an amount up to $100,000 in the aggregate, and (v) the sale of oil andgas and other assets in the ordinary course of business and for fair value;

###  

### (h)                                 shallnot, and shall not permit any of its Subsidiaries to authorize, propose, agreeto, enter into or consummate any merger, consolidation or business combinationtransaction (other than the Merger) or acquire or agree to acquire by mergingor consolidating with, or by purchasing a substantial equity interest in or asubstantial portion of the assets of, or by any other manner, any business orany corporation, partnership, association or other business organization ordivision thereof;

###  

### (i)                                     shallnot, except as may be required as a result of a change in law or in GAAP,change any of the accounting principles or practices used by it;

###  

### (j)                                     shall,and shall cause each of its Subsidiaries to, use reasonable efforts to maintainthe insurance in effect on the date hereof;

###  

### (k)                                  shallnot, and shall not permit any of its Subsidiaries to, except where it would notbe reasonably expected to have, individually or in the aggregate, a MaterialAdverse Effect on RIMCO, (i) make or rescind any express or deemedelection relating to taxes, including elections for any and all joint ventures,partnerships, limited liability companies, working interests or otherinvestments where it has the capacity to make such binding election, (ii) settleor compromise any claim, action, suit, litigation, proceeding, arbitration,investigation, audit or controversy relating to taxes, or (iii) change inany respect any of its methods of reporting any item for federal income taxpurposes from those employed in the preparation of its federal income tax

 

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return for the mostrecent taxable year for which a return has been filed, except as may berequired by applicable law;

###  

### (l)                                     shallnot, nor shall it permit any of its Subsidiaries to, (i) incur anyindebtedness for borrowed money (except under credit lines in existence as ofthe date of this Agreement) or guarantee any such indebtedness or issue or sellany debt securities or warrants or rights to acquire any debt securities ofsuch party or any of its Subsidiaries or guarantee any debt securities ofothers, or (ii) except in the ordinary course of business, enter into anymaterial lease (whether such lease is an operating or capital lease) or createany Liens on the property of RIMCO in connection with any indebtedness thereof;

###  

### (m)                               shalluse all commercially reasonable efforts to obtain the Frost Required Consentsto the transactions contemplated in this Agreement, and shall not take anyaction that is likely to delay materially or adversely affect the ability ofany of the parties hereto to obtain any consent, authorization, order or approvalof any governmental commission, board or other regulatory body or theexpiration of any applicable waiting period required to consummate the Merger;

###  

### (n)                                 shallprovide Whittier with a true and correct copy of all quarterly financialstatements of RIMCO prepared for internal use by RIMCO’s management as soon aspracticable but not later than 60 days after the end of the quarter for whichthe statements are prepared;

###  

### (o)                                 shallnot enter into or amend any agreement with any holder of RIMCO capital stock withrespect to holding, voting or disposing of RIMCO Common Shares;

###  

### (p)                                 shallnot split, combine, subdivide or reclassify its outstanding shares of capitalstock;

###  

### (q)                                 shallnot enter into any Hedge or fixed price commodity sales agreements;

###  

### (r)                                    RIMCOshall not, except in the ordinary course of business, sell, lease, farm-out,transfer or abandon any portion of the RIMCO Properties other than (i) itemsof materials, supplies, machinery, equipment, improvements or other personalproperty or fixtures forming a part of the RIMCO Properties no longer needed orwhich are replaced or (ii) production of oil, gas and/or other minerals,or the products therefrom, in the ordinary course of business; or, withoutWhittier’s consent, release, permit to terminate, modify or reduce its rightsunder any oil, gas and/or mineral lease forming a material part of the RIMCOProperties;

###  

### (s)                                  RIMCOshall not take materially more of the oil or gas produced from the wellslocated on any RIMCO Property (or on units in which such propertiesparticipate) than their ownership of such RIMCO Property would entitle them(absent any oil or gas balancing agreement or arrangement) to take;

###  

### (t)                                    shallpromptly provide to Whittier copies of all AFEs and all cash calls receivedwith respect to any RIMCO Property after the date of this Agreement and shallnot approve any material AFE without the prior approval of Whittier, whichapproval shall not be unreasonably withheld;

 

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### (u)                                 shallnot fail to timely consent to any economically beneficial operation or object toany non-economic operations involving the RIMCO Properties that are operated bythird parties;

###  

### (v)                                 shallnot, nor shall it permit any of its Subsidiaries to, agree in writing orotherwise to take any of the foregoing actions;

###  

### (w)                               shallprovide Whittier within 15 days of the date of this Agreement written notice ofany action taken after March 31, 2005 and on or before the date of thisAgreement, or the occurrence of any event during such period, which would, butfor any date limitation contained in Section 3.16, be required to beincluded on Exhibit F or listed on any portion of Schedule 3.16;and

###  

### (x)                                   shallprovide a copy of the completed, but not filed, federal income tax return ofRIMCO and its Subsidiaries for the 2004 fiscal year to Whittier on or before May 15,2005.

###  

Section 5.2                                 Meeting of Stockholders.  RIMCO will take all action necessary inaccordance with applicable law and its certificate of incorporation and bylawsto convene, as promptly as practicable after the Final Notice Date, a meetingof its stockholders for purposes of obtaining the RIMCO Requisite Vote in favorof approval and adoption of this Agreement and the transactions contemplatedherein

 

Section 5.3                                 Filings; ReasonableEfforts.

 

### (a)                                  Subjectto the terms and conditions herein provided, RIMCO and Whittier shall:

###  

#### (i)                                     usetheir reasonable efforts to satisfy the conditions to closing in Article 6as promptly as practicable and to cooperate with one another in (A) determiningwhich filings are required to be made prior to the Effective Time with, andwhich consents, approvals, permits or authorizations are required to beobtained prior to the Effective Time from, governmental or regulatoryauthorities of the United States, the several states, and foreign jurisdictionsin connection with the execution and delivery of this Agreement and theconsummation of the Merger and the transactions contemplated herein; and (B) timelymaking all such filings and timely seeking all such consents, approvals,permits or authorizations;

####  

#### (ii)                                  promptlynotify each other of any communication concerning this Agreement or the Mergerto that party from any governmental authority and permit the other party toreview in advance any proposed communication concerning this Agreement or theMerger to any governmental entity;

####  

#### (iii)                               not agree to participatein any meeting or discussion with any governmental authority in respect of anyfilings, investigation or other inquiry concerning this Agreement or the Mergerunless it consults with the other party in advance and, to the extent permittedby such governmental authority, gives the other party the opportunity to attendand participate thereat; and

 

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#### (iv)                              furnishthe other party with such necessary information and reasonable assistance assuch other parties and their respective Affiliates may reasonably request inconnection with their preparation of necessary filings, registrations orsubmissions of information to any governmental or regulatory authorities.

####  

### (b)                                 Withoutlimiting Section 5.3(a), Whittier and RIMCO shall:

###  

#### (i)                                     eachuse its reasonable efforts to avoid the entry of, or to have vacated orterminated, any decree, order or judgment that would restrain, prevent or delaythe Closing, including defending through litigation on the merits any claimasserted in any court by any party; and

####  

#### (ii)                                  eachuse reasonable efforts to avoid or eliminate each and every impediment underany antitrust, competition or trade regulation law that may be asserted by anygovernmental entity with respect to the Merger so as to enable the Closing tooccur as soon as reasonably possible.

####  

Section 5.4                                 Inspection;  Due Diligence.

 

### (a)                                  Fromthe date hereof to the Effective Time, RIMCO shall allow all designatedofficers, attorneys, accountants and other representatives of Whittier accessat all reasonable times upon reasonable notice to the records and files,correspondence, audits and properties, as well as to all information relatingto commitments, contracts, titles and financial position, or otherwisepertaining to the business and affairs of RIMCO and its Subsidiaries, includinginspection of RIMCO’s properties; provided that notwithstanding the provisionof information, RIMCO shall not be deemed to make any representation orwarranty except as specifically set forth in this Agreement.  Notwithstanding the foregoing, RIMCO shallnot be required to provide any information which it reasonably believes it maynot provide to Whittier by reason of applicable law, rules or regulations,which RIMCO believes based on the advice of counsel constitutes informationprotected by attorney/client privilege, or which it is required to keepconfidential by reason of contract or agreement with third parties; providedthat in the event that any information is withheld from Whittier based on theforegoing provision, RIMCO shall advise Whittier that information has beenwithheld.  Whittier agrees that it willnot, and will cause its representatives not to, use any information obtainedpursuant to this Section 5.4 for any purpose unrelated to the consummationof the transactions contemplated by this Agreement.  All nonpublic information obtained pursuantto this Section 5.4 or prior to the execution of this Agreement is andshall be governed by the provisions of Section 5.5.

###  

### (b)                                 Whittieragrees to complete its due diligence as soon as practicable following the dateof this Agreement, and, subject to compliance by RIMCO with Section 5.4(a),agrees that it shall conclude its due diligence not later than the 30thday following the date of this Agreement. Notwithstanding the foregoing provisions of this Section 5.4(b),Whittier shall be entitled to continue to have access to and review anyinformation with respect to RIMCO and the proposed Merger that it shall deemprudent at all times up to and including the Effective Time.

###  

Section 5.5                                 Confidentiality.  Each party hereto agrees that allConfidential Information (as defined below) received by such party (the “Receiving Party”) from any other partyhereto

 

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(the “Disclosing Party”) and its attorneys,accountants, consultants, authorized representatives, employees, officers,directors, bankers, financial advisors (collectively “Disclosing Party’s Representatives”) shallbe kept confidential by the Receiving Party and shall not be disclosed by theReceiving Party in any manner whatsoever; provided, however, that (i) anyof such Confidential Information may be disclosed to such directors, officers,employees, and authorized representatives (including without limitationattorneys, accountants, consultants, bankers, and financial advisors) of theReceiving Party (collectively, the “ReceivingParty’s Representatives”) as need to know such information for thepurpose of evaluating the Merger (it being understood that such Receiving Party’sRepresentatives shall be informed by the Receiving Party of the confidentialnature of such information and shall be required to treat such informationconfidentially), (ii) any disclosure of Confidential Information may bemade to the extent to which the Disclosing Party consents in writing, (iii) ConfidentialInformation may be disclosed by the Receiving Party or any Receiving Party’sRepresentatives to the extent that, in the opinion of counsel for the ReceivingParty or such Receiving Party’s Representatives, they are legally compelled todo so, provided that, prior to making such disclosure, the party being legallycompelled to disclose such information advises and consults with the DisclosingParty regarding such disclosure and provided further that the party beinglegally compelled to disclose such information discloses only that portion ofthe Confidential Information as is legally required, and the party compelled todisclose such information takes reasonable steps to seek confidential treatmentof the disclosed information, whether by *in camera*proceedings,disclosure under seal, limited disclosure to a judge, or other similarprotections and (iv) any of such Confidential Information may be disclosedto any banks or other financial institutions or other prospective investorsthat may provide financing (“Financing Parties”)if such banks or other financial institutions or other prospective investorsagree to comply with the provisions of this Section. The term “Confidential Information”, as usedherein, means all information (irrespective of the form of communication)obtained by or on behalf of a Receiving Party from a Disclosing Party or theDisclosing Party Representatives, other than information which (i) was orbecomes generally available to the public other than as a result of disclosureby the Receiving Party or any Receiving Party’s Representative, (ii) wasor becomes available to the Receiving Party on a nonconfidential basis prior todisclosure to the Receiving Party or the Receiving Party Representatives, or (iii) wasor becomes available to the Receiving Party from a source other than theDisclosing Party or the Disclosing Party’s Representatives, provided that suchsource is not known by the Receiving Party to be bound by a confidentialityagreement with the Disclosing Party.

 

RIMCO acknowledgesthat in connection with the equity financing to be undertaken by Whittier ascontemplated in Section 4.10 hereof, Whittier will be required to makedisclosures with respect to the business, properties and Financial Statement ofRIMCO in its private placement memorandum and in a filing under Form 8-Krequired by Regulation FD under the Securities Act of 1934.  Whittier shall seek the consent of RIMCO touse Confidential Information of RIMCO for such purposes and RIMCO agrees thatit will not unreasonably withhold its consent to the use of its ConfidentialInformation for such purposes.  Whittieragrees that if it is otherwise required to report any of RIMCO’s ConfidentialInformation to the Securities and Exchange Commission (“SEC”) it willseek confidential treatment for such information to the extent permitted by therules and regulations of the SEC, and will first notify RIMCO.

 

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### (a)                                  Ifthis Agreement is terminated, each Receiving Party shall promptly return, andshall use their reasonable best efforts to cause all Receiving PartyRepresentatives and Financing Parties to promptly return, all ConfidentialInformation to the Disclosing Party without retaining any copies thereof,provided that such portion of the Confidential Information as consists ofnotes, compilations, analyses, reports, studies, or other documents prepared bythe Receiving Party, the Receiving Party’s Representatives and the FinancingParties shall be destroyed and each of such Parties shall so certify to theDisclosing Party.

###  

### (b)                                 ThisSection 5.5 supplements, but does not replace or supersede the ConfidentialityAgreement between RIMCO and Whittier dated January 7, 2005.

###  

Section 5.6                                 Publicity.  RIMCO and Whittier will consult with eachother and will mutually agree upon any press releases or public announcementspertaining to this Agreement or the transactions contemplated herein and shallnot issue any such press releases or make any such public announcements priorto such consultation and agreement, except as may be required by applicablelaw, in which case the party proposing to issue such press release or make suchpublic announcement shall use its reasonable efforts to consult in good faithwith the other party before issuing any such press releases or making any suchpublic announcements.

 

Section 5.7                                 Expenses.  Whether or not the Merger is consummated, allcosts and expenses incurred in connection with this Agreement and thetransactions contemplated herein shall be paid by the party incurring suchexpenses.  In particular, all third partyexpenses incurred by RIMCO with respect to this Agreement and the Merger,including accountants, tax advisors and attorneys, shall be paid by RIMCO at orbefore Closing.

 

Section 5.8                                 Indemnificationand Insurance for the Benefitof RIMCO Officers and Directors.

 

### (a)                                  Fromand after the Effective Time, Whittier will cause the Surviving Corporation to,indemnify, defend and hold harmless to the fullest extent permitted underapplicable law each person who is immediately prior to the Effective Time, orhas been at any time prior to the Effective Time, an officer, director, oremployee of RIMCO (or any of its Subsidiaries or division thereof) and eachperson who immediately prior to the Effective Time is serving or prior to theEffective Time has served at the request of RIMCO as a director, officer,trustee or fiduciary of another corporation, partnership, limited liability RIMCO,joint venture, trust, pension or other employee benefit plan or enterprise(individually an “Indemnified Party” and collectively, the “IndemnifiedParties”) against all losses, claims, damages, liabilities, costs orexpenses (including attorneys’ fees), judgments, fines, penalties and amountspaid in settlement in connection with any claim, action, suit, proceeding orinvestigation arising out of or pertaining to acts or omissions, or allegedacts or omissions, by them in their capacities as such, whether commenced,asserted or claimed before or after the Effective Time.  In the event of any such claim, action, suit,proceeding or investigation (an “Action”), (i) Whittier shall, orshall cause the Surviving Corporation to, pay, as incurred, the fees and expensesof counsel selected by the Indemnified Party, which counsel shall be reasonablyacceptable to Surviving Corporation, in advance of the final disposition of anysuch Action to the fullest extent permitted by applicable law, and, ifrequired, upon receipt of any undertaking required by applicable law, and (ii) Whittierwill, and will cause the Surviving Corporation to, cooperate in the defense ofany

 

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such matter; provided,however, neither Whittier nor the Surviving Corporation shall be liable for anysettlement effected without its written consent (which consent shall not beunreasonably withheld or delayed), and provided further that neither Whittiernor the Surviving Corporation shall be obligated pursuant to this Section 5.8(a) topay the fees and disbursements of more than one counsel for all IndemnifiedParties in any single Action, unless, in the good faith judgment of any of theIndemnified Parties, there is or may be a conflict of interests between two ormore of such Indemnified Parties, in which case there may be separate counselfor each similarly situated group.

###  

### (b)                                 Theparties agree that the rights to indemnification hereunder, includingprovisions relating to advances of expenses incurred in defense of any actionor suit, in the certificate of incorporation, bylaws and any indemnificationagreement of RIMCO and its Subsidiaries with respect to matters occurringthrough the Effective Time, shall survive the Merger for six years after theEffective Time; provided, however, that all rights to indemnification andadvancement of expenses in respect of any Action pending or asserted or claimmade within such period shall continue until the disposition of such Action orresolution of such claim.  Whittier shallcause the Surviving Corporation to purchase director and officer insurance andshall keep such insurance in effect for a period of six years from theEffective Time to cover RIMCO officers and directors as of the Effective Time,and will provide a copy of such policy to the former directors.  Such insurance shall be in addition to allrights to indemnification the Indemnified Parties shall have under thecertificate of incorporation or bylaws of RIMCO or the DGCL or otherwise.

###  

### (c)                                  Inthe event Whittier, RIMCO or any of their successors or assigns (i) consolidateswith or merges into any other person and shall not be the continuing orsurviving corporation or entity in such consolidation or merger or (ii) transfersall or substantially all of its properties and assets to any person, then andin either such case, Whittier shall cause proper provision to be made so thatthe successors and assigns of Whittier, as the case may be, shall assume theobligations set forth in this Section 5.8.

###  

Section 5.9                                 Employee Benefits.

 

### (a)                                  Whittierwill cause the Surviving Corporation to honor, in accordance with this Section 5.9,all employee benefit plans, contracts, agreements and commitments of RIMCO orany of its Subsidiaries as set forth on Schedule 3.11 of the RIMCODisclosure Schedule (including the executive change-in-control severanceagreements and the RIMCO Amended and Restated Severance Bonus Policy dated June 16,2004 (“Severance Policy”)(copies of which  have been heretofore furnished to Whittier), providedhowever, that except as otherwise specifically provided in this Section 5.9,Whittier reserves the right to modify or terminate any such plan, contract,agreement or commitment in accordance with its terms.

###  

### (b)

###  

#### (i)                                     Forthe period beginning at the Effective Time and ending eighteen months after theEffective Time (or such later date determined by Whittier), Whittier agrees tocause the Surviving Corporation and its Subsidiaries (and any successorentities to the Surviving Corporation or any of its Subsidiaries) to maintainthe RIMCO medical

 

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#### and dental insurance plans, as in effect immediately prior to theEffective Time (or that Whittier will provide another comparable group healthplan) as necessary to fulfill any COBRA obligations of the SurvivingCorporation and its Subsidiaries to former employees of the SurvivingCorporation and employees of the Surviving Corporation who cease to be employedafter the Effective Date;

####  

#### (ii)                                  Whittiershall cause the Surviving Corporation to maintain the RIMCO Production Company, Inc.401(k) Plan until at least December 31, 2005 and shall cause the SurvivingCorporation to continue the employer non-discretionary contributions under the RIMCO401(k) Plan based on employee compensation paid through December 31, 2005.

####  

#### (iii)                               Subject tosubparagraphs (ii) and (iii), if the benefits applicable to officersor employees of the Surviving Corporation or its Subsidiaries (and anysuccessor entities to the Surviving Corporation or any of its Subsidiaries) aremodified, then Whittier hereby agrees, and agrees to cause its Subsidiaries, toprovide to officers and employees of the Surviving Corporation and itsSubsidiaries (and any successor entities to the Surviving Corporation or any ofits Subsidiaries) who become or remain regular (full-time) employees of Whittieror any of its Subsidiaries (including, without limitation, the SurvivingCorporation and any successor entity to the Surviving Corporation for so longas it is a Subsidiary of Whittier) employee benefits, no less favorable thanthose provided by Whittier and its Subsidiaries to their similarly situated(considering both position and geographic location) officers and employees;

####  

#### (iv)                              Eachemployee of the Surviving Corporation or its Subsidiaries (and any successorentities to the Surviving Corporation or any of its Subsidiaries) who becomes aparticipant in any employee benefit plan, program, policy, or arrangement of Whittieror any of its Subsidiaries on or after the Effective Time shall be given creditunder such plan, program, policy, or arrangement for all service with RIMCO,any of its Subsidiaries, any of their predecessors to the extent such predecessoremployment was recognized under comparable employee plans of RIMCO or any ofits Subsidiaries, and, if applicable, with Whittier or any of its Subsidiaries,prior to becoming such a participant for purposes of eligibility, vesting andbenefit determination;

####  

#### (v)                                 Atsuch time, if any, as Whittier causes an employee of the Surviving Corporationor its Subsidiaries (and any successor entities to the Surviving Corporation orany of its Subsidiaries) to be covered under a group health plan maintained by Whittieror one of its Subsidiaries (other than the group health plan maintained by RIMCOat the Effective Time), Whittier shall cause (A) such employee and his orher eligible dependents (including, without limitation, all such dependents ofthe employee covered immediately prior to such time under RIMCO’s group healthplan) to be credited under such Whittier or Subsidiary group health plan, forthe year during which such coverage under such group health plan begins, withany deductibles and copayments already incurred during such year under thegroup health plan of RIMCO (or successor entity to RIMCO), and (B) such Whittieror Subsidiary group health plan to waive any preexisting condition restrictionsto the extent necessary to provide immediate coverage;

 

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#### (vi)                              Nothingin this Section 5.9(b) shall be construed as a contract ofemployment, and this Section 5.9(b) shall not give any employee theright to be retained in the employ of Whittier or any of its Subsidiaries.  Nothing in this Section 5.9(b) shallbe construed to require the provision of coverage or benefits to an employeefollowing termination of employment except as set out in subparagraph (i) aboveand to the extent set out in Severance Policy (which may not be terminated andas to which benefits may not be reduced or the term shortened) or such coverageor benefits is otherwise required by law or pursuant to the terms of theapplicable plan or arrangement; and

####  

#### (vii)                           The parties intend and agreethat the employees of RIMCO and its Subsidiaries on the Closing Date are thirdparty beneficiaries with respect to the provisions of this Section 5.9that are applicable to such employee and shall be entitled to enforce suchprovisions against the parties.

####  

### (c)                                  In the event Whittieror any of its successors or assigns (i) consolidates with or merges intoany other person and shall not be the continuing or surviving corporation orentity in such consolidation or merger or (ii) transfers all orsubstantially all of its properties and assets to any person, then and in eithersuch case, Whittier shall cause proper provision to be made so that thesuccessors and assigns of Whittier, as the case may be, shall assume theobligations set forth in this Section 5.9.

###  

Section 5.10                           Cash Infusion.  AtClosing, Whittier will contribute to the capital of RIMCO sufficient cash toenable RIMCO to pay all of RIMCO’s obligations to employees under the executivechange-in-control severance agreements and retention bonuses, all third partyexpenses as referred to in Section 5.7, any unpaid portion of the RIMCODividend, retire the indebtedness outstanding under the Frost Loan, and toprovide sufficient working capital for the continuing operations of theSurviving Corporation.

 

Section 5.11                           Allocated Values.  Whittierand RIMCO have assigned an agreed Allocated Value on Exhibit G to each of the RIMCOProperties identified on Exhibit F.

 

Section 5.12                           Continuationof  Insurance.  For a period not lessthan six months following the Effective Date, Whittier will maintain, or willcause the Surviving Corporation to maintain, the same or comparable insuranceas to environmental and well control insurance for the RIMCO Properties as theinsurance of RIMCO presently in effect as described on Schedule 3.17.

 

Section 5.13                           Access toBooks and Records.  In the event of a claimfor indemnification by Whittier under this Agreement and claim for payment outof the Escrow Agreement, the RIMCO Agent and its representatives shall beprovided copies of such of the books and records of the Surviving Corporation asshall be reasonably necessary to review information and documentation to assessand respond to Whittier’s claim, which access shall include the right tointerview knowledgeable employees and make copies of pertinent books andrecords.  All such records shall bemaintained in strictest confidence and shall be used only for the purpose ofassessing and responding to any such claim. After such claim is resolved, all copies of any and all books andrecords of Whittier or Surviving Corporation shall be returned to Whittier.

 

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# ARTICLE 6

#  

# CONDITIONS

#  

Section 6.1                                 Conditionsto Each Party’s Obligation toEffect the Merger.  Therespective obligations of each party to effect the Merger shall be subject tothe fulfillment or waiver by mutual agreement of the parties at or prior to theClosing Date of the following conditions:

 

### (a)                                  Anymandatory waiting period or required consent under any applicable law orregulation shall have expired or been obtained except where the failure toobserve such waiting period or obtain a consent referred to in this paragraphwould not reasonably be expected to delay or prevent the consummation of theMerger or have a material adverse effect on the expected benefits of thetransactions contemplated by this Agreement to Whittier.

###  

### (b)                                 Noneof the parties hereto shall be subject to any decree, order or injunction of acourt of competent jurisdiction, U.S. or foreign, which prohibits theconsummation of the Merger, and no statute, rule or regulation shall havebeen enacted by any governmental authority which prohibits or makes unlawfulthe consummation of the Merger.

###  

Section 6.2                                 Conditionsto Obligation of RIMCO to Effectthe Merger.  The obligation ofRIMCO to effect the Merger shall be subject to the fulfillment or waiver by RIMCOat or prior to the Closing Date of the following conditions:

 

### (a)                                  Whittierand Merger Sub shall have performed in all material respects their respectivecovenants and agreements contained in this Agreement required to be performedon or prior to the Closing Date and the representations and warranties of Whittierand Merger Sub contained in this Agreement shall be true and correct in allmaterial respects, in each case as of the date of this Agreement and as of theClosing Date (except for representations and warranties made as of a specifieddate, which need be true and correct only as of the specified date), and RIMCOshall have received a certificate of Whittier, executed on its behalf by itsPresident or a Vice President of Whittier, dated the Closing Date, certifyingto such effect.

###  

### (b)                                 TheRIMCO Requisite Vote shall have been obtained.

###  

Section 6.3                                 Conditionsto Obligation of Whittier toEffect the Merger.  Theobligations of Whittier and Merger Sub to effect the Merger shall be subject tothe fulfillment or waiver by Whittier at or prior to the Closing Date of thefollowing conditions:

 

### (a)                                  RIMCOshall have performed in all material respects its covenants and agreementscontained in this Agreement required to be performed on or prior to the ClosingDate and the representations and warranties of RIMCO contained in thisAgreement (i) to the extent qualified by Material Adverse Effect or anyother materiality qualification shall be true and correct, and (ii) to theextent not qualified by Material Adverse Effect or any other materialityqualification shall be true and correct in all material respects, in each caseas of the date of this Agreement and as of the Closing Date (except forrepresentations and warranties made as of a specified date, which need be trueand correct only as of the specified date), and Whittier shall

 

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have received acertificate of RIMCO, executed on its behalf by its Chairman of the Board or Presidentof RIMCO, dated the Closing Date, certifying to such effect.

###  

### (b)                                 TheRIMCO Requisite Vote shall have been obtained.

###  

### (c)                                  AllRIMCO Stockholders who have notes payable to RIMCO shall have repaid such notesin full, including any interest owing thereon, on or prior to Closing, providedthat such payment may be made by any such RIMCO Stockholder directing Whittierin writing at least 5 business days prior to the Closing that Whittier repaysuch loan by applying a portion of the Merger Consideration otherwise due suchRIMCO Stockholder (other than such Stockholder’s pro rata share of the HoldbackAmount) under the terms of this Agreement to the repayment of suchindebtedness.

###  

# ARTICLE 7

#  

# EARNEST MONEY; DEFECTS

#  

Section 7.1                                 Deposit.  Simultaneously with execution of thisAgreement, Whittier has caused the $1,000,000 it previously deposited with theEscrow Agent to continue to be held by the Escrow Agent pursuant to the termsof the Escrow Agreement attached hereto as Exhibit C. Such funds shall remain deposited in aseparate, interest bearing money market account with the Escrow Agent. The $1,000,000plus all earnings thereon shall be hereinafter called the “Earnest Money.”

 

Section 7.2                                 Application.  The Earnest Money shall be deemed a payment towardthe Merger Consideration at the Effective Time of the Merger.

 

Section 7.3                                 Forfeiture/Return.  If the Merger is not consummated for anyreason and this Agreement is terminated pursuant to Article 8, the EarnestMoney shall be returned to Whittier or paid to RIMCO according to theprovisions of Article 8 as liquidated damages.  If the Earnest Money is paid to RIMCOpursuant to Article 8, it is the intent of the parties that such paymentwill be treated as liquidated damages and full compensation to RIMCO for all costsand other damages suffered by RIMCO as a result of any breach by Whittier ofthis Agreement, including the failure to consummate the Merger for any reason,and not as a penalty.  The parties agreethat (i) the amount of such damages would be extremely difficult orimpractical to ascertain, and (ii) the amount of liquidated damagesprovided for herein is not a penalty and bears a reasonable relationship to thedamages which Whittier and RIMCO estimate may be incurred by RIMCO because of Whittier’sbreach of this Agreement and failure to consummate the Merger.

 

Section 7.4                                 DefectNotice and Total Defect Value.

 

### (a)                                  Onor before the Final Notice Date, Whittier shall have the right to identify TitleDefects with respect to the RIMCO Properties, and notify RIMCO on or before theFinal Notice Date of the same.  Suchnotices given by Whittier (“Defect Notice”) will be in writing and setforth in reasonable detail: (i) the basis of the Defect that Whittierbelieves exists; (ii) the specific RIMCO Property to which Whittier claimsthe Defect applies; (iii) Whittier’s good faith reasonable estimate of thevalue of each Defect (“Whittier’s Defect Value”), which value shall

 

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be based upon theAllocated Values set forth in Exhibit G, and shall mean the amountof probable loss, liability, diminution of value, costs and expenses whichwould reasonably be expected to be suffered or incurred by the SurvivingCorporation as a result of the existence, and/or (if appropriate, Whittierchooses to include such amount) the cure, of a Defect.  The total value of all the Defects specifiedin all Defect Notices, shall be called the “Total Defect Value”.  The Total Defect Value shall be adjusted asprovided in this Section 7.4.  Whittier’ssole right to recover for Defects and for breaches of Section 3.16(a) ofthis Agreement shall be through the provisions of this Section 7.4.  Failure of Whittier to raise a Defect by theFinal Notice Date shall terminate any further right to raise issues withrespect to Defects and breaches of Section 3.16(a).

###  

### (b)                                 RIMCO’SResponse to Defect Notices.  RIMCOmay respond to Defect Notices as received or wait until the Final Notice Dateand receipt of all Defect Notices from Whittier and respond to all DefectNotices.  RIMCO’s options with respect toany or all Defect Notices are:

###  

#### (i)                                     NotifyWhittier, no later than ten days after the Final Notice Date, of which DefectsRIMCO elects to cure, in which event, all third party costs incurred by RIMCOin effecting such cure shall be a Damage under Article 9, eligible forindemnification, subject to the Basket Amount, if the Merger occurs, butWhittier shall not be entitled to any other indemnification or adjustment tothe Merger Consideration for such Defects except such third party costs tocure; or

####  

#### (ii)                                  NotifyWhittier, no later than ten days after the Final Notice Date, which Defects orwhich Whittier’s Defect Values RIMCO disputes and as to which RIMCO does notelect to cure; or

####  

#### (iii)                               Notify Whittier, nolater than ten days after the Final Notice Date, which Defects and the Whittier’sDefect Values with respect thereto, with which RIMCO agrees, in which case(s)Whittier shall be entitled to indemnification for the amount(s) of suchWhittier’s Defect Value(s) as Damages under Article 9, subject to theBasket Amount, if the Merger occurs.

####  

If RIMCO disputes anyDefect or disputes Whittier’s Defect Value with respect to a Defect and doesnot instead undertake to cure the Defect as to a RIMCO Property, then RIMCO andWhittier shall attempt in good faith, for a period of five business days, toresolve such dispute by negotiation among senior executives of their companieswho have authority to settle the controversy. If the parties are unable to resolve the dispute, then it shall besubmitted to expedited binding arbitration by Johnny B. Johnson, Esq.,Wilson and Johnson, Houston, Texas (the “Arbitrator”) who shalldetermine whether there is a Defect (as defined in this Agreement) and, basedon information presented by Whittier and RIMCO, the total lost value to theRIMCO Property as a result of the Defect, such lost value to be determinedbased on the Allocated Value for the RIMCO Property in question, the Defectdetermined in accordance with this Agreement, and if curable, the cost toeffect cure, which shall be the measure of the Whittier’s Defect Value if cureis available and less than the diminution in value or probable loss orliability.  Based upon the relativemerits of the positions of the parties as to any Defect, the Arbitrator, inmaking any determination pursuant to this Section 7.4(b) shall assessthe costs of the Arbitrator against that party which the Arbitrator determinesshould bear such expense given the equities of the

 

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disputed claims.  The Closing shall be delayed if necessary forthe Arbitrator to make any necessary determinations under this paragraph andany determinations by the Arbitrator shall be final and binding on RIMCO andWhittier.

 

If RIMCO has undertakento cure any Defect, it shall keep track of all third party expenses incurred toeffect such cure, so that such amounts can be reimbursed to Whittier as Damagesafter the Merger out of the Holdback Amount, after the Basket Amount has beenmet.  If necessary, the Closing Date andthe Effective Date shall be extended for up to 30 days****topermit RIMCO to effect cure on those properties as to which it has undertakento effect cure;  provided that if RIMCOhas not effected such cure within such 30 days, such Defect shall be determinedby the Arbitrator as provided above.

 

### (c)                                  Withdrawal.  Whittier may withdraw any Defect Notice atanytime or amend downward any Whittier’s Defect Value.

###  

### (d)                                 Termination.  Reference is made to the provisions of Article 8as to the rights of the parties to terminate this Agreement if the aggregate ofthe Whittier’s Defect Values exceed certain amounts.  Such aggregate amount shall be calculated assoon as practicable after final resolution of each Defect claimed by Whittier.

###  

# ARTICLE 8

#  

# TERMINATION

#  

Section 8.1                                 Terminationby Mutual Consent.  ThisAgreement may be terminated at any time prior to the Effective Time by themutual written agreement of RIMCO and Whittier approved by action of theirrespective Boards of Directors.

 

Section 8.2                                 Terminationby Whittier or RIMCO.  Atany time prior to the Effective Time, this Agreement may be terminated by eitherof RIMCO or Whittier, in either case by action of its Board of Directors, if:

 

### (a)                                  theMerger shall not have been consummated by sixty (60) calendar days after thedate of this Agreement unless extended in accordance with Section 7.4;provided, however, that the right to terminate this Agreement pursuant to thisclause (a) shall not be available to any party whose failure or whoseAffiliates’ failure to perform or observe in any material respect any of itsobligations under this Agreement, including but not limited to a party’swillingness to promptly consummate the Merger once that party’s conditions toClosing have been satisfied, in any manner shall have been the principal causeof, or resulted in, the failure of the Merger to occur on or before such date;or

###  

### (b)                                 theRIMCO Requisite Vote shall not have been obtained at a meeting (includingadjournments and postponements) of the RIMCO Stockholders duly convened inaccordance with the terms of this Agreement for the purpose of obtaining the RIMCORequisite Vote; or

###  

### (c)                                  aUnited States federal or state court or United States federal or state orforeign governmental, regulatory or administrative agency or commission shallhave issued an order, decree or ruling or taken any other action (including theenactment of any statute, rule,

 

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regulation, decree orexecutive order) permanently restraining, enjoining or otherwise prohibitingthe Merger and such order, decree, ruling or other action (including theenactment of any statute, rule, regulation, decree or executive order) shallhave become final and nonappealable; provided, however, that the party seekingto terminate this Agreement pursuant to this clause (c) shall havecomplied with Section 5.3 and with respect to other matters not covered bySection 5.3 shall have used its reasonable efforts to remove such injunction,order or decree.

###  

Section 8.3                                 Termination by RIMCO.  At any time prior to the Effective Time, thisAgreement may be terminated by RIMCO, by action of its Board of Directors, if

 

### (a)                                  (i) therehas been a material breach by Whittier or Merger Sub of any representation,warranty, covenant or agreement set forth in this Agreement or if anyrepresentation or warranty of Whittier or Merger Sub shall have become untrue,in either case such that the conditions set forth in Section 6.2(a) wouldnot be satisfied, and (ii) such breach is not curable, or, if curable, isnot cured within 30 days after written notice of such breach is given to Whittierby RIMCO; provided, however, that the right to terminate this Agreementpursuant to this Section 8.3(a) shall not be available to RIMCO ifit, at such time, is in material breach of any representation, warranty,covenant or agreement set forth in this Agreement such that the conditions setforth in Section 6.3(a) shall not be satisfied;

###  

### (b)                                 theTotal Defect Value as determined under Section 7.4(d) exceeds$2,500,000; or

###  

### (c)                                  byJune 17, 2005,****Whittier doesnot have the funds necessary to pay the Merger Consideration and make the cashinfusions contemplated in Section 5.10.

###  

Section 8.4                                 Termination by Whittier.  At any time prior to the Effective Time, thisAgreement may be terminated by Whittier, by action of its Board of Directors,if:

 

### (a)                                  (i) therehas been a material breach by RIMCO of any representation, warranty, covenantor agreement set forth in this Agreement or if any representation or warrantyof RIMCO shall have become untrue, in either case such that the conditions setforth in Section 6.3(a) would not be satisfied and (ii) suchbreach is not curable, or, if curable, is not cured within 30 days after writtennotice of such breach is given by Whittier to RIMCO; provided, however, thatthe right to terminate this Agreement pursuant to this Section 8.4(a) shallnot be available to Whittier if it, at such time, is in material breach of anyrepresentation, warranty, covenant or agreement set forth in this Agreementsuch that the conditions set forth in Section 6.2(a) shall not besatisfied;

###  

### (b)                                 priorto obtaining the RIMCO Requisite Vote, the Board of Directors of RIMCO shallhave withdrawn, modified, withheld or changed, in a manner adverse to Whittier,the Board’s approval or recommendation of this Agreement or the Merger;

###  

### (c)                                  ifthe Total Defect Value as determined under Section 7.4(d) exceeds $2,500,000;or

###  

### (d)                                 theMerger shall not have been consummated by sixty (60) calendar days after thedate of this Agreement.

 

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Section 8.5                                 Effect ofTermination.

 

### (a)                                  Ifthis Agreement is terminated by RIMCO pursuant to Section 8.2(a) or8.3(a) or (c) or by Whittier pursuant to Section 8.4(d), RIMCOshall be entitled to the Earnest Money, and the parties shall have no furtherobligations hereunder, except as set forth in Section 10.1.

###  

### (b)                                 Ifthis Agreement is terminated for any other reason other than as set forth in Section 8.5(a),Whittier shall be entitled to the Earnest Money, and the parties shall have nofurther obligations hereunder, except as set forth in Section 10.1.

###  

### (c)                                  Thesole remedy for any termination pursuant to this Article 8 shall belimited to the refund of the Earnest Money to Whittier or the payment of theEarnest Money to RIMCO, in either case, as provided in Sections 8.5(a) and(b).

###  

# ARTICLE 9

#  

# INDEMNIFICATION

#  

RIMCO, on the one hand,and Whittier and Merger Sub, severally on the other hand, each make thefollowing covenants:

 

Section 9.1                                 Indemnificationby RIMCO.  RIMCO covenantsand agrees that it will indemnify, defend, protect and hold harmless Whittierand Merger Sub, and their respective officers, directors, employees, stockholders,agents, representatives and Affiliates, at all times from and after the date ofthis Agreement from and against all claims, damages (including incidental andconsequential damages), actions, suits, proceedings, demands, assessments, penalties,fines, adjustments, losses, liabilities, diminutions of value, costs, andexpenses (including specifically, but without limitation, reasonable attorneys’fees and expenses of investigation) whether or not involving a third partyclaim (collectively “Damages”)incurred by any such indemnified party as a result of or arising directly orindirectly from or in connection with (i) any breach of therepresentations and warranties of RIMCO set forth herein or in the RIMCO DisclosureSchedule, except as limited by Section 7.4, (ii) any EnvironmentalDefect (provided however, that as to an Environmental Defect, Damages arelimited as set out in the definition of Environmental Defects), (iii) anybreach or nonfulfillment of any covenant or agreement on the part of RIMCO inthis Agreement (including, but not limited to, indemnification obligations setforth elsewhere in this Agreement), and (iv) third party costs of cureunder Section 7.4(b)(i).

 

Section 9.2                                 Indemnificationby Whittier and Merger Sub.  Whittier and Merger Sub covenant and agreethat they, jointly and severally, will indemnify, defend, protect and holdharmless the officers, directors, employees, agents, representatives andSubsidiaries of RIMCO immediately before the Merger and the RIMCO Stockholders atall times from and after the date of this Agreement from and against allDamages incurred by the RIMCO Stockholders as a result of or arising directlyor indirectly from or in connection with (i) any breach of therepresentations and warranties of Whittier and Merger Sub set forth herein, and(ii) any breach or nonfulfillment of any covenant or agreement on the partof Whittier or Merger Sub in this Agreement.

 

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Section 9.3                                 Limitationsupon Indemnity; Basket Amount.

 

### (a)                                  Theindemnification obligations of RIMCO on the one hand and of Whittier and theMerger Sub on the other hand, under the provisions of this Article 9,shall be limited as to amount so as to apply only after the amount of, and tothe extent that, Damages of the party to be indemnified exceed the BasketAmount, as determined in Section 9.3(b). For the purpose of determining whether or not Damages exceed the Basket,Damages shall include Defects, claims, damages, actions, suits, proceedings,demands, assessments, adjustments, losses, liabilities, diminutions of value,costs and expenses incurred by the indemnified party under circumstances thatconstitute a breach of a representation, warranty or agreement of such party, or that would have constituted sucha breach if the representation, warranty or agreement were not qualified by theterm “material,” “Material Adverse Effect****or anyvariation of any thereof.  Further, suchindemnification obligations are limited as to time to apply only to Damages ofthe party to be indemnified with respect to which notice of a claim forindemnification is given to the indemnifying party on or before the five month anniversaryof the Closing Date, and as to indemnification from RIMCO, indemnification maybe sought only for the Holdback Amount under the Escrow Agreement; providedthat the parties recognize that any such claim may not be resolved until theprocedures described in the Escrow Agreement for the resolution of claims havebeen completed.

###  

### (b)                                 Whittierand RIMCO agree that that a basket amount of $1,000,000 (as adjusted herein the“Basket Amount”) shall be established as a level below which a partyshall not be entitled to recover indemnification under Article 9.  The Basket Amount applicable to RIMCO shall beadjusted as follows:  the Basket Amount shallbe reduced on a dollar-for-dollar basis to the extent by which the RIMCODividend exceeds $17,500,000, provided, that the adjustments pursuant to this Section 9.4(b) shallnot reduce the Basket applicable to RIMCO to an amount less than $250,000.

###  

Section 9.4                                 IndemnificationDespite Negligence.  It isthe express intention of the parties hereto that each party to be indemnifiedpursuant to this Article 9 shall be indemnified and held harmless from andagainst all Damages as to which indemnity is provided for under this Article 9notwithstanding that any such Damages arise out of or result from the ordinary,strict, sole, or contributory negligence of such party and regardless ofwhether any other party (including the other parties to this Agreement) is oris not also negligent.

 

Section 9.5                                 Insurance Proceeds.  Any indemnification payment required to bemade pursuant to this Agreement shall be reduced by the net amount of anyinsurance proceeds received by the indemnified party or any of its Affiliateswith respect to the submission of a claim for the item giving rise to theindemnification payment.

 

Section 9.6                                 Procedurefor Indemnification.  Promptlyafter receipt by an indemnified party under Sections 9.1, or 9.2 of notice ofthe commencement of any third party action, such indemnified party shall, if aclaim in respect thereof is to be made against an indemnifying party under suchSection, give written notice to the indemnifying party of the commencementthereof, but the failure so to notify the indemnifying party shall not relieveit of any liability that it may have to any indemnified party except to theextent the indemnifying party demonstrates that the defense of such action isprejudiced thereby.  In case any suchaction shall be brought against an indemnified party and it shall give writtennotice to the indemnifying party of the commencement thereof, the indemnifyingparty shall be entitled to participate therein and, to the

 

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extent that it may wish,to assume the defense thereof with counsel reasonably satisfactory to suchindemnified party.  If the indemnifyingparty elects to assume the defense of such action, the indemnified party shallhave the right to employ separate counsel at its own expense and to participatein the defense thereof.  If theindemnifying party elects not to assume (or fails to assume) the defense ofsuch action, the indemnified party shall be entitled to assume the defense ofsuch action with counsel of its own choice, at the expense of the indemnifyingparty.  If the action is asserted againstboth the indemnifying party and the indemnified party and there is a conflictof interests which renders it inappropriate for the same counsel to representboth the indemnifying party and the indemnified party, the indemnifying partyshall be responsible for paying for separate counsel for the indemnified party;provided, however, that if there is more than one indemnified party, theindemnifying party shall not be responsible for paying for more than oneseparate firm of attorneys to represent the indemnified parties, regardless ofthe number of indemnified parties.  Ifthe indemnifying party elects to assume the defense of such action, (a) nocompromise or settlement thereof may be effected by the indemnifying partywithout the indemnified party’s written consent (which shall not beunreasonably withheld) unless the sole relief provided is monetary damages thatare paid in full by the indemnifying party and (b) the indemnifying partyshall have no liability with respect to any compromise or settlement thereofeffected without its written consent (which shall not be unreasonablywithheld).

 

Section 9.7                                 Exclusive Remedy.  Except as provided below with respect to breachesof Sections 5.8 and 5.9, the indemnification rights set forth in this Article 9,and as to Whittier, reimbursement out of the Holdback Amount, shall be theexclusive remedy, regardless of whether arising under contract, tort, availableto any party for breach, by any other party to this Agreement, of anyrepresentation, warranty, covenant or agreement herein contained.

 

Section 9.8                                 Third PartyBeneficiaries.  Becausethe covenants and agreements of Whittier, RIMCO, Surviving Corporation andMerger Subsidiary extend beyond six months, third party beneficiaries underSections 5.8 and 5.9 of this Agreement are not limited by the provisionsof this Article 9, the six month limitation for the bringing of claims,nor are they subject to the Basket Amount.

 

# ARTICLE 10

#  

# GENERAL PROVISIONS

#  

Section 10.1           Survival.

 

### (a)                                  Inthe event of termination of this Agreement and the abandonment of the Mergerpursuant to Article 8, all rights and obligations of the parties heretoshall terminate, except the provisions of Sections 5.5, 5.6, 5.7, 7.3, 8.510.3, 10.4, 10.6, 10.8, 10.9 10.11, and 10.12, all of which shall survive.

###  

### (b)                                 Therepresentations and warranties in this Agreement shall each survive the Closingand shall each remain in effect thereafter for the period that an indemnifiedparty is entitled to indemnification based on a breach thereof in accordancewith Article 9; provided, that Article 2, this Article 10 andthe agreements contained in Sections 5.5-5.8 shall survive theconsummation of the Merger, unless otherwise provided herein.

 

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Section 10.2                           Notices.  Any notice required to be given hereundershall be sufficient if in writing, and (a) sent by courier service (withproof of service), hand delivery or certified or registered mail (returnreceipt requested and first-class postage prepaid) or (b) by facsimile or emailtransmission provided that any facsimile or email transmission shall be supplemented,by transmission on the same day the email or facsimile is sent, with a copy ofsuch facsimile or email by courier service (with next business day delivery),addressed as follows:

 
| if to Whittier or  Merger Sub:                                     |
|--------------------------------------------------------------------|
|                                                               |   |   |
|                                                               | Whittier Energy  Corporation |   |
|                                                               | 333 Clay Street |   |
|                                                               | Suite 1100 |   |
|                                                               | Houston, Texas 77002 |   |
|                                                               | Facsimile: (713) 850-1879 |   |
|                                                               | Attention: | Bryce W. Rhodes |
|                                                               |   | President and Chief  Executive Officer |
|                                                               |   |   |
|                                                               | with a copy to: |   |
|                                                               |   |   |
|                                                               | Thompson & Knight LLP |   |
|                                                               | 333 Clay Street, Suite 3300 |   |
|                                                               | Houston, Texas 77002 |   |
|                                                               | Facsimile:  832-397-8110 |   |
|                                                               | Attention: | Dallas Parker |   |
|                                                               |   |   |
| if to RIMCO:                                                       |   |
|                                                               |   |   |
|                                                               | RIMCO Production  Company, Inc. |   |
|                                                               | 600 Travis, Suite 7050 |   |
|                                                               | Houston, Texas 77002 |   |
|                                                               | Facsimile: (713) 247-0730 |   |
|                                                               | Attention: | Roy V. Hood |   |
|                                                               |   | Chairman of the Board  and Chief Executive Officer |   |
|                                                               |   |   |
|                                                               | with a copy to: |   |
|                                                               |   |   |
|                                                               | Winstead Sechrest & Minick P.C. |   |
|                                                               | 910 Travis, Suite 2400 |   |
|                                                               | Houston, Texas 77002 |   |
|                                                               | Facsimile: (713) 650-2400 |   |
|                                                               | Attn: | Gail McDonald |   |
|                                                               |   |   |
| if to the RIMCO Agent, by notice to all of the  following persons: |
|                                                               |   |   |
|                                                               | Roy V. Hood |   |
|                                                               | 935 Tiki Drive |   |
|                                                               | Tiki Island, TX 77554 |   |

 

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|   | Email:  RVHood@houston.rr.com  |          |
|--------|------------------------------------------|---------------|
|   |                                     |          |
|   | A. Lee Jorden                            |          |
|   | 2807 Hampton Drive                       |          |
|   | Missouri City, TX 77459                  |          |
|   | Facsimile:  281-835-9063            |          |
|   |                                     |          |
|   | David R. Whitney                         |          |
|   | 245 Steele Road                          |          |
|   | New Hartford, CT 06057                   |          |
|   | Facsimile**:**[to come by  Closing]      |          |
|   |                                     |          |
|   | In each case** **with a copy  to:   |          |
|   |                                     |          |
|   | Winstead Sechrest & Minick P.C. |          |
|   | 910 Travis, Suite 2400              |          |
|   | Houston, Texas 77002                     |          |
|   | Facsimile: (713) 650-2400                |          |
|   | Attn:                                    | Gail McDonald |   |
|        |                                          |               |  |

 

or to such other addressas any party shall specify by written notice so given, and such notice shall bedeemed to have been delivered as of the date so telecommunicated, personallydelivered or mailed.

 

Section 10.3                           Assignment;Binding Effect; Benefit.  Neitherthis Agreement nor any of the rights, interests or obligations hereunder shallbe assigned by any of the parties hereto (whether by operation of law orotherwise) without the prior written consent of the other parties.  This Agreement shall be binding upon andshall inure to the benefit of the parties hereto and their respectivesuccessors and assigns.  Except for theprovisions of Article 2 and as provided in Sections 5.8 and 5.9,notwithstanding anything contained in this Agreement to the contrary, nothingin this Agreement, expressed or implied, is intended to confer on any personother than the parties hereto any rights, remedies, obligations or liabilitiesunder or by reason of this Agreement.

 

Section 10.4                           Entire Agreement.  This Agreement, the ConfidentialityAgreement, RIMCO Disclosure Schedule, the Whittier Disclosure Schedule,Annex A hereto, the exhibits hereto and any documents delivered by theparties in connection herewith constitute the entire agreement among theparties with respect to the subject matter hereof and supersede all prioragreements and understandings among the parties with respect thereto.  No addition to or modification of anyprovision of this Agreement shall be binding upon any party hereto unless madein writing and signed by all parties hereto. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS ANDWARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER WHITTIER, MERGER SUB NOR RIMCOMAKES ANY OTHER REPRESENTATIONS OR WARRANTIES AND EACH HEREBY DISCLAIMS ANYOTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS,DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHERREPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND

 

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DELIVERY OF THISAGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN, NOTWITHSTANDING THE DELIVERYOR DISCLOSURE TO ANY OTHER PARTY OR ANY OTHER PARTY’S REPRESENTATIVES OF ANYDOCUMENT OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.

 

Section 10.5                           Amendments.  This Agreement may be amended by the partieshereto, by action taken or authorized by their Boards of Directors, at any timebefore or after approval of matters presented in connection with the Merger bythe RIMCO Stockholders, but after any such stockholder approval, no amendmentshall be made which by law requires the further approval of stockholderswithout obtaining such further approval. This Agreement may not be amended except by an instrument in writingsigned on behalf of each of the parties hereto.

 

Section 10.6                           GoverningLaw; Arbitration; Jurisdiction;Waiver of Jury Trial.

 

### (a)                                  THISAGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THESTATE OF TEXAS.  EXCEPT AS SET OUT IN SECTION 7.4OR AS PROVIDED IN THE ESCROW AGREEMENT IN REGARD TO DISPUTE RESOLUTION BY ARBITRATION,EACH OF RIMCO, MERGER SUB AND WHITTIER HEREBY IRREVOCABLY AND UNCONDITIONALLYCONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF THESTATE OF TEXAS AND OF THE UNITED STATES OF AMERICA, IN EITHER CASE LOCATED INHOUSTON, TEXAS (THE “TEXAS COURTS”) FOR ANY LITIGATION ARISING OUT OF ORRELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN (AND AGREESNOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVESANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE TEXAS COURTSAND AGREES NOT TO PLEAD OR CLAIM IN ANY TEXAS COURT THAT SUCH LITIGATIONBROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANYCONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVECOMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBYIRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO ATRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUTOF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THISAGREEMENT.

###  

Section 10.7                           Counterparts.  This Agreement may be executed in severalcounterparts, each of which shall be deemed to be an original, but all of whichtogether shall be deemed to be one and the same instrument.

 

Section 10.8                           Headings.  Headings of the Articles and Sections of thisAgreement are for the convenience of the parties only, and shall be given nosubstantive or interpretative effect whatsoever.

 

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Section 10.9                           Interpretation.  In this Agreement:

 

Unless the contextotherwise requires, words describing the singular number shall include theplural and vice versa, and words denoting any gender shall include all gendersand words denoting natural persons shall include corporations and partnershipsand vice versa.

 

The words “include”, “includes”and “including” are not limiting.

 

Section 10.10                     Waivers.  Except as provided in this Agreement, noaction taken pursuant to this Agreement, including, without limitation, anyinvestigation by or on behalf of any party, shall be deemed to constitute awaiver by the party taking such action of compliance with any representations,warranties, covenants or agreements contained in this Agreement.  The waiver by any party hereto of a breach ofany provision hereunder shall not operate or be construed as a waiver of anyprior or subsequent breach of the same or any other provision hereunder.  The failure of any party to this Agreement toassert any of its rights under this Agreement shall not constitute a waiver ofsuch rights.

 

Section 10.11                     Severability.  Any term or provision of this Agreement whichis invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,be ineffective to the extent of such invalidity or unenforceability withoutrendering invalid or unenforceable the remaining terms and provisions of thisAgreement or affecting the validity or enforceability of any of the terms orprovisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is sobroad as to be unenforceable, the provision shall be interpreted to be only sobroad as is enforceable.

 

Section 10.12                     Enforcementof Agreement; Limitation onDamages.  The parties heretoagree that irreparable damage would occur in the event that any of theprovisions of this Agreement were not performed in accordance with its specificterms or was otherwise breached.  It isaccordingly agreed that the parties shall be entitled to an injunction orinjunctions to prevent breaches of this Agreement and to enforce specificallythe terms and provisions hereof in any Delaware Court, this being in additionto any other remedy to which they are entitled at law or in equity.  IN NO EVENT SHALL ANY PARTY BE LIABLE INRESPECT OF THIS AGREEMENT FOR PUNITIVE OR EXEMPLARY DAMAGES.

 

Section 10.13                     Obligationsof Merger Sub and Whittier. Whenever this Agreement requires Merger Sub (or its successors) to takeany action prior to the Effective Time, such requirement shall be deemed toinclude an undertaking on the part of Whittier to cause Merger Sub to take suchaction and a guarantee of the performance thereof.  Notwithstanding any provision herein to thecontrary, any agreement of Whittier to cause the Surviving Corporation to takeany action shall only mean  that Whittierwill exercise its commercially reasonable efforts as the stockholder of theSurviving Corporation and shall not require Whittier to pay any amounts onbehalf of the Surviving Corporation or any other Person, to lend any monies tothe Surviving Corporation or any other Person, or to make any capitalcontributions to the Surviving Corporation or any other Person.

 

Section 10.14                     Extension; Waiver.  At any time prior to the Effective Time, eachparty may, to the extent legally allowed, (a) extend the time for theperformance of any of the obligations or other acts of the other partieshereto, (b) waive any inaccuracies in the representations and warrantiesmade to such party contained herein or in any document delivered

 

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pursuant hereto and (c) waivecompliance with any of the agreements or conditions for the benefit of suchparty contained herein.  Any agreement onthe part of a party hereto to any such extension or waiver shall be valid onlyif set forth in an instrument in writing signed on behalf of such party.

 

Section 10.15                     Conflict Waiver.  Whittier recognizes that Winstead, Sechrest &Minick P.C. (“Winstead”) has represented RIMCO in this transaction and forseveral years prior to this transaction. Whittier on behalf of itself and the Surviving Corporation herebyconsents to Winstead’s continued representation of the RIMCO Agent and theRIMCO Stockholders under the Escrow Agreement and any disputes with respect tothe indemnification under this Agreement or the Escrow Agreement, if any,including in any arbitration, and waives any conflict of interest, if any, thatit might raise by such representation.

 

**[SIGNATURE PAGE FOLLOWS]**

 

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 IN WITNESS WHEREOF, the parties have executedthis Agreement and caused the same to be duly delivered on their behalf on theday and year first written above.

 
|   | RIMCO  PRODUCTION COMPANY, INC.         |
|--------|-----------------------------------------|
|   |                                    |
|   |                                    |
|   | By:                                     |   |
|   | Roy V. Hood, Chairman of the Board      |
|   | and Chief Executive Officer             |
|   |                                    |
|   |                                    |
|   | WHITTIER  ENERGY CORPORATION            |
|   |                                    |
|   |                                    |
|   | By:                                     |   |
|   | Daniel H. Silverman, Vice President and |
|   | Chief Operating Officer                 |
|   |                                    |
|   |                                    |
|   | RPC  ACQUISITION COMPANY, INC.          |
|   |                                    |
|   |                                    |
|   | By:                                     |   |
|   | Daniel H. Silverman, Vice President and |
|   | Chief Operating Officer                 |
|        |                                         |  |  |

 

ThisAgreement and Plan of Reorganization is executed as of the date first mentionedabove by each of the following persons for the sole purpose of accepting hisappointment as RIMCO Agent as contemplated in this Agreement:

 

 
|   |              |
|--------|-------------------|
|   | Roy  V. Hood      |
|   |              |
|   |              |
|   | A.  Lee Jorden    |
|   |              |
|   |              |
|   | David  R. Whitney |

 

42

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**ANNEX A**

 

“Affiliate” meanswith respect to any Person, a Person that, directly or indirectly through oneor more intermediaries, controls, is controlled by or is under common controlwith such Person, and the term “Affiliated” has a correlative meaning.  The term “control” means the possession,directly or indirectly, of the power to direct or cause the direction of themanagement and policies of a Person, whether through the ownership of votingSecurities, by contract or otherwise.

 

“Allocated Value”is a value assigned to each RIMCO Property listed on Exhibit G byWhittier and RIMCO, jointly.  TheAllocated Values are not necessarily market values and do not equal the MergerConsideration, which is the total consideration for all RIMCO Common Shares,which includes goodwill; going concern value; employees-in-place; an on-goingoperation; offices; insurance; furniture, fixtures, equipment; seismic studies;etc.

 

“Agreement” meansthis Agreement and Plan of Merger.

 

“Basket Amount”has the meaning set out in Section 9.3(b).

 

“Certificate of Merger”has meaning set out in Section 1.3.

 

“Closing” meansthe closing of the transactions contemplated in Section 1.2.

 

“Closing Date”means the date on which the Closing occurs, as provided in Section 1.2.

 

“Code” means theInternal Revenue Code of 1986, as amended.

 

“Consent” meansthe consents to assign or transfer, including a transfer occasioned by amerger, or any other restriction or limitation on transferability, which arisesor is required as a result of the transactions contemplated in this Agreement,as listed on the RIMCO Disclosure Schedule.

 

“Damages” has themeaning set out in Section 9.1.

 

“DGCL” means theDelaware General Corporation Law.

 

“Defect” means aTitle Defect.

 

“Dissenting Shares”has the meaning set out in Section 2.2

 

“Environmental Defect”means any condition existing as of the date of this Agreement or at the ClosingDate on any RIMCO Property that is a violation of any Environmental Laws existingas of the date of this Agreement or as of the Closing Date; provided, that noEnvironmental Defect may be claimed pursuant to this Agreement (i) unlessthe operator of such affected RIMCO Property recognizes such condition as aviolation of such Environmental Laws

 

A-1

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that requires remediationand (ii) determines to commence remediation, with an estimate or actualcost of clean-up.  Whittier’s Damagesshall be the lesser of (x) RIMCO’s Working Interest share to cure suchEnvironmental Defect based on the operator’s cost to cure or estimate thereof,or (y) the Allocated Value of the RIMCO Property to which such EnvironmentalDefect relates.

 

“Environmental Laws”has the meaning set out in Section 3.13.

 

“Escrow Agent”means Compass Bank.

 

“Escrow Agreement”has the meaning set out in Section 2.1(b).

 

“Effective Time”means the time that the Merger is effective, as provide in Section 1.3.

 

“ERISA” means theEmployee Retirement Income Security Act of 1974, as amended.

 

“Final Notice Date”means that date which is the thirtieth (30th) calendar day followingthe date of this Agreement.

 

“Financial Statements”means RIMCO’s December 31, 2004 audited financial statements.

 

“Frost Documents”has the meaning set out in Section 3.6(a).

 

“Frost RequiredConsents” has the meaning set out in Section 3.6(a).

 

“GAAP” meansgenerally accepted accounting principles as applied in the United States.

 

“Good and DefensibleTitle” means such title to the RIMCO Properties that (a) entitlesRIMCO or any of its Subsidiaries to receive not less than the Net RevenueInterests for the Units and the Wells set forth in Exhibit F; (b) obligatesRIMCO or any of its Subsidiaries to bear not more than the Working Interestsfor the Units and the Wells set forth in Exhibit F hereto (unlessthere is a corresponding increase in the Net Revenue Interests); (c) withrespect to each Undeveloped project, results in RIMCO and its Subsidiariesowning the estimated gross acres forsuch project set forth in Exhibit F; and as to all of such types of properties (d) is free andclear of all liens, defects and encumbrances, except for Permitted Encumbrances.

 

“Hedge” means any future derivative, swap, collar, put, call, cap,option or other contract that is intended to benefit from, relate to, or reduceor eliminate the risk of fluctuations in interest rates, basis risk or theprice of commodities.

 

“Holdback Amount”has the meaning set out in Section 2.1(a).

 

“Holdback Period”has the meaning set out in Section 2.1(b).

 

“IRS” meansInternal Revenue Service.

 

“Knowledge of RIMCO”means the actual present knowledge of Roy V. Hood, David R. Whitney or A. LeeJorden.

 

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“Knowledge of Whittier”means the actual present knowledge of Bryce W. Rhodes, Daniel Silverman or MikeYoung.

 

“Lien” or “Liens”means liens, pledges, security interests, mortgages, claims and likeencumbrances or rights created by statute or contract to secure indebtedness.

 

“Material AdverseEffect” with respect to a party shall mean a material adverse effectrespecting (a) the business, assets and liabilities (taken together) orfinancial condition of such party and its Subsidiaries on a consolidated basisor (b) the ability of a party to consummate the transactions contemplated inthis Agreement or fulfill the conditions to Closing set forth in Article 6,except to the extent (in the case of either clause (a) orclause (b) above) that such adverse effect results from (i) generaleconomic, regulatory or political conditions or changes therein in the UnitedStates; or (ii) changes in, or events or conditions affecting, the oil andgas industry generally.

 

“Merger” means themerger of Merger Sub with and into RIMCO.

 

“Merger Consideration”has the meaning set out in Section 2.1(a).

 

“Merger Sub” meansRPC Acquisition Company, Inc., a Delaware corporation wholly owned byWhittier.

 

“Net Revenue Interest”means a share, expressed as a decimal, percentage or fraction, of the oil, gasand other minerals and the products derived therefrom (or the proceeds of salethereof) produced and saved from or otherwise attributable to the RIMCOProperties after the deduction of all royalties and overriding royalties.

 

“Permits” meanspermits, licenses, variances, exemptions, orders, franchises and approvals ofall governmental authorization.

 

“PermittedEncumbrances” means (i) lessor’s royalties, overriding royalties,division orders and sales contracts covering oil or gas, reversionary interestsand similar burdens, forced pooling orders and all existing operatingagreements and unit agreements, if the net cumulative effect of such burdensdoes not operate to reduce RIMCO’s Net Revenue Interests to less than the NetRevenue Interests set forth in Exhibit F, or increase RIMCO’sWorking Interests to more than the Working Interests set forth in Exhibit F(unless there is a corresponding increase in the Net Revenue Interests); (ii) anyand all federal and state regulatory orders and rules to which the RIMCOProperties are presently subject; (iii) Preferential Rights to purchaseand required Consents to assignments and similar agreements with respect towhich (A) waivers or consents have been obtained prior to the Final NoticeDate from the appropriate parties, or (B) required notice has been givento the holders of such rights and the appropriate time period for assertingsuch rights has expired prior to the Final Notice Date without an exercise ofsuch rights; (iv) liens for taxes or assessments not due or not delinquentas of the time of Closing; (v) all routine designations of operator,rights to consent by, required notices to, filings with, or other actions bygovernmental entities in connection with the operation, sale or conveyance ofoil and gas leases or interests therein if the same are customarily obtainedafter such sale or conveyance; (vi) all easements, rights-of-way, rightsof use, servitudes, water rights, permits, surface leases and other rights inrespect of surface operations, pipelines, grazing or the like; and easementsfor

 

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streets, alleys,highways, pipelines, telephone lines, power lines, railways and other easementsand rights-of-way, on, over or in respect of any of the RIMCO Properties to theextent that the same do not materially interfere with the value, use oroperation of the RIMCO Properties; (vii) statutory and conventional lienssecuring payments to operators, statutory liens for the protection of royaltyowners, mechanics and materialmen or others, payments of taxes or other claimsor payment obligations that are, in each case, not yet delinquent or, ifdelinquent, are being contested in good faith in the normal course of businessand which, if contested, have been previously disclosed in writing to Whittier;(viii) any non-delinquent obligations or duties to any municipality orpublic authority with respect to any franchise, grant, certificate, license orpermit, and all applicable law; (ix) Routine Government Approvals;(x) conventional rights of assignment prior to abandonment; (xi) titleproblems either commonly encountered in the oil and gas business or arisingunder joint operating agreements, production sales agreements, gas balancingagreements, exploration agreements, oil and gas mineral leases, poolingagreements, unitization agreements, communitization agreements, area of mutualinterest agreements, agreements containing seismic licenses, permits or otherrights to geographical or geophysical data and information, options to lease,preferential rights to the extent that such do not materially adversely affect RIMCO’sNet Revenue Interest or increase RIMCO’s Working Interest in any RIMCO Property;and (xii) such Title Defects as Whittier has waived or has been deemed tohave waived; and (xiii) any liens as expressly set forth in the Frost Documentsor RIMCO’s Financial Statements.

 

“Person” means anindividual, corporation, limited liability company, partnership, association,trust, or other entity or organization.

 

“Preferential Right”means any preferential right or option to purchase or otherwise to acquire anyof the RIMCO Properties or any interest therein which arises as a result of thetransactions contemplated by this Agreement.

 

“RIMCO” meansRIMCO Production Company, Inc., a Delaware corporation.

 

“RIMCO Agent”shall mean Roy V. Hood, A. Lee Jordan and David R. Whitney, collectively.

 

“RIMCO Common Share”means a share of common stock $.001 par value per share, of RIMCO.

 

“RIMCO DisclosureSchedule” means the disclosure document delivered by RIMCO to Whittiersimultaneously with the execution of the Agreement.

 

“RIMCO Dividend”means the sum of all dividends paid or to be paid in cash to the holders of theRIMCO Common Shares subsequent to September 30, 2004, and up to andincluding the Closing Date, in an aggregate maximum amount of $17,500,000, plusan amount (not greater than $1,000,000) which shall be equal to the amount ofthe overpayment of federal income tax by RIMCO for the period January 1,2004 through September 30, 2004. By way of example, if RIMCO has overpaidtaxes in the amount of $500,000 for such period, then the amount of the RIMCO Dividendshall be increased to $18,000,000.  Theamount of such overpayment shall be calculated by determining RIMCO’s actualfederal income tax liability for

 

A-4

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2004 (calculated inaccordance with reasonable and customary tax principles and in a manner consistentwith RIMCO’s past practices) from its 2004 federal income tax return,multiplying that amount by 9/12 (“the Computed September 30 Tax”)and comparing the Computed September 30 Tax to the amount deposited (the “Deposit”)by RIMCO for federal income taxes for income during the period January 1,2004 through September 30, 2004, including $1,658,273.00 of 2003 federaltax overpayment which was credited to the 2004 estimated taxes paid.  If the Deposit exceeds the Computed September 30Tax, the amount by which the Computed September 30 Tax exceeds the Depositshall be the amount added to the $17,500,000 permitted RIMCO Dividend, but inno event shall the RIMCO Dividend exceed $18,500,000.

 

“RIMCO MaterialContracts” has the meaning set out in Section 3.19.

 

“RIMCO Plan” hasthe meaning set out in Section 3.11.

 

“RIMCO Properties”means all oil, gas and/or mineral leases, lease options, Units, Wells, and allother oil, gas and/or mineral rights or interests owned or held by RIMCO or anyof its Subsidiaries, including, but not limited to, record title interests, WorkingInterests, Net Revenue Interests, overriding royalty interests, as shown on Exhibit F.

 

“RIMCO Requisite Vote”has the meaning set out in Section 3.20.

 

“RIMCO Stockholders”means each of the holders of RIMCO Common Shares as of the Closing Date otherthan those holders who have properly elected and perfected their right ofappraisal under Section 26.2 of the DGCL with respect to the Merger.

 

“Routine GovernmentalApprovals” means approvals required to be obtained from any governmental ortribal authority that are customarily obtained after consummation of atransaction.

 

“Subsidiary” meansany corporation, partnership, or limited liability company owned 100% by thenamed Person, directly or indirectly.

 

“Surviving Corporation”means the survivor of the Merger, which is RIMCO.

 

“tax” or “taxes”has the meaning set out in Section 3.10(c).

 

“Transferred Interests”means those assets transferred to RIMCO Royalty Management, Inc. asdescribed on Exhibit E hereto.

 

“Title Defect”means any encumbrance, fact, circumstance, occurrence or condition which causesRIMCO to not have Good and Defensible Title to RIMCO Property..

 

“Undeveloped” asto a project means acreage not held by production.

 

“Units” meansthose units, and any ownership interests therein, in oil, gas and/or mineralproperties described on Exhibit F.

 

“Whittier” meansWhittier Energy Corporation, a Nevada corporation.

 

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“Well” or “Wells”means the wells described in Exhibit F attached hereto andincorporated herein by reference for all purposes.

 

“Whittier DisclosureSchedule” means the disclosure document delivered by Whittier to RIMCOsimultaneously with the execution hereof.

 

“Working Interest”means an ownership share, expressed as a decimal, fraction or percentage, ofthe oil, gas and other minerals and other products derived therefrom, burdenedby the costs of exploring, drilling, developing and operating and producing suchoil, gas and other minerals and other products derived therefrom.

 

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