SETTLEMENT AGREEMENT
EXHIBIT 10.1
WHEREAS, BP Prudhoe Bay Royalty Trust (the “Trust”) is a statutory trust under the Delaware
Statutory Trust Act, having The Bank of New York Mellon, formerly known as The Bank of New York, as
Trustee (the “Trustee”) under the BP Prudhoe Bay Royalty Trust Agreement (the “Trust Agreement”),
dated February 28, 1989, by and among (a) BP Exploration (Alaska) Inc. (“BPXA”), (b) The Standard
Oil Company (“SOC”), (c) the Trustee and (d) The Bank of New York (Delaware), now known as BNY
Mellon Trust of Delaware, as Co-Trustee (the “Co-Trustee”);
WHEREAS, BPXA and/or SOC are parties to the following agreements (together, the “Agreements”):
(a) Overriding Royalty Conveyance, between BPXA and SOC, dated February 27, 1989; and
(b) Trust Conveyance, between SOC and the Trust, dated February 28, 1989; and
(c) Support Agreement, between BPXA, SOC, BP p.l.c. and the Trust, dated February 28, 1989;
and
WHEREAS, BPXA and SOC are subsidiaries of BP p.l.c.; and
WHEREAS, pursuant to the Trust Conveyance, the Trust holds a Royalty Interest, as defined in
Section 2.1 of the Overriding Royalty Conveyance, in production from certain oil fields located in
Prudhoe Bay, Alaska, that are operated by BPXA; and
WHEREAS, pursuant to Section 3.01 of the Trust Agreement, the Royalty Interest of the Trust is
divided into Units; and
WHEREAS, Unit Holders are the owners of one or more Units of the Trust as defined in Section
1.35 of the Trust Agreement; and
WHEREAS, BPXA and SOC, in the Agreements, have undertaken certain obligations to the Trust;
and
WHEREAS, on August 7, 2006, BPXA announced a temporary shutdown of the Prudhoe Bay oil field
following oil spills on March 2, 2006 and August 6, 2006; and
WHEREAS, Section 6.01 of the Trust Agreement provides that the Trustee “is authorized to and
shall take such actions as in its judgment are necessary, desirable or advisable to achieve the
purposes of the Trust, including . . . the taking of appropriate action to enforce the terms” of
the Agreements; and
WHEREAS, the Trustee has undertaken an investigation to determine whether the Trust should
take any action pursuant to Section 6.01 of the Trust Agreement; and
WHEREAS, the Trustee and BP p.l.c. and its subsidiaries have entered into five tolling
agreements (“Tolling Agreement Number 1,” “Tolling Agreement Number 2,” “Tolling Agreement Number
3,” “Tolling Agreement Number 4” and “Tolling Agreement Number 5”), dated May 16, 2007, September
18, 2007, March 13, 2008, September 12, 2008, and March 16, 2009, respectively, to toll statutes of
limitations while the Trustee conducted its investigation; and
WHEREAS, BPXA has cooperated with the Trustee’s investigation by, among other things,
producing documents and information requested by the Trustee; and
WHEREAS, pursuant to Section 6.08 of the Trust Agreement, the Trustee “is authorized to . . .
settle by arbitration or otherwise, any claim of . . . the Trustee, the Trust or the Trust Estate,
to waive or release rights of any kind and to pay or satisfy any debt, tax or claim upon any
evidence by it deemed sufficient, without the joinder or consent of any Unit Holder;” and
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WHEREAS, in two actions brought on behalf of Unit Holders against BPXA, the courts have held
that the claims asserted in those actions can be prosecuted only by the Trust, not by individual
Unit Holders; and
WHEREAS, the Trustee and BPXA now wish to compromise any claims that the Trust and its past,
present, and future Unit Holders may have relating to conduct by BPXA that may have resulted in a
reduction of the royalty payments received by the Trust in 2006, 2007, and 2008;
NOW, THEREFORE, IT IS HEREBY AGREED by and between the Trustee, the Co-Trustee and BPXA, for
good and valuable consideration, as follows:
1. Settlement Amount
(a) The Settlement Amount is $29,469,080.92.
(b) BPXA shall pay the Settlement Amount to the Trust in accordance with Paragraph 4 below.
2. Release
(a) Subject to the provisions of Paragraphs 2(b) and 2(c) below, and effective upon the
receipt by the Trust, pursuant to Paragraph 4(b) below, of the Settlement Plus Interest Amount (as
defined in Paragraph 4(b) below), the Trustee and the C o-Trustee, on behalf of the Trust and all
past, present, and future Unit Holders, hereby release and discharge BPXA and its divisions,
subdivisions, subsidiaries, affiliates, predecessors, successors, and parents, including, without
limitation, BP p.l.c., BP America Inc. and SOC, as well as all present or former officers,
directors, trustees, agents, representatives, employees and all other persons or entities acting or
purporting to act on their behalf, of and from any and all claims, demands, rights, liabilities and
causes of action of every nature and description whatsoever, known or unknown, suspected or
unsuspected, contingent or absolute, matured or unmatured, whether or not concealed or hidden,
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that have been asserted or that could have been asserted on behalf of the Trust and its past,
present, and future Unit Holders against BPXA and its divisions, subdivisions, subsidiaries,
affiliates, predecessors, successors, and parents, including, without limitation, BP p.l.c., BP
America Inc. and SOC, as well as all present or former officers, directors, trustees, agents,
representatives, employees and all other persons or entities acting or purporting to act on their
behalf, arising out of, based upon or related in any way to any conduct by BPXA that may have
resulted in a reduction of the royalty payments received by the Trust in 2006, 2007, and 2008.
(b) This Release is not intended to, and does not, release any claims, demands, rights,
liabilities or causes of action arising out of, based upon or related in any way to any conduct by
BPXA to the extent that such conduct may result or has resulted in damage to the Trust in 2009 or
any subsequent year, including a reduction of the royalty payments received or to be received by
the Trust in 2009 or any subsequent year (“Preserved Claims,” or, in the singular, a “Preserved
Claim”). No Preserved Claim is released by this Settlement Agreement.
(c) If the Trust commences an action arising out of, based upon or related in any way to
royalties received or to be received in 2009 or any subsequent year, BPXA shall not assert a
defense of release, res judicata, collateral estoppel, “splitting a cause of action” or any similar
defense based on the terms of this Settlement Agreement (including the release provided herein).
3. Judicial Approval
The Trustee shall apply to the Court of Chancery of the State of Delaware (the “Delaware
Chancery Court”) for an order approving the Settlement Agreement. The Trustee shall give notice of
the application to all Unit Holders of record as of each quarterly distribution date after
August 7, 2006, in the form and in the manner approved by the Delaware Chancery Court. BPXA
shall be solely responsible for, and shall advance to the Trustee, the expenses of the
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provision of notice. The Trustee shall submit to the Delaware Chancery Court a proposed order that includes a
judicial release consistent with the terms of Paragraph 2(a) and (b) above.
4. Timing of Payment
(a) BPXA shall pay the Settlement Amount by making an electronic funds transfer into an
agreed-upon, interest-bearing escrow account with an escrow agent agreed to by the parties (the
“Escrow Agent”) within 10 business days of either (i) the execution of this Settlement Agreement
or (ii) receipt of the relevant escrow account details necessary to facilitate payment, whichever
occurs later in time. The parties hereto shall agree to the terms of an escrow agreement with the
Escrow Agent. BPXA shall be solely responsible for, and shall advance to the Trustee, the expenses
of the Escrow Agent, including expenses in connection with preparation of the escrow agreement.
(b) The Settlement Amount plus the interest that accrues on the Settlement Amount while it is
deposited in the escrow account (the “Settlement Plus Interest Amount”) shall be released to the
Trust by the Escrow Agent upon the later to occur of the following events (both of which must occur
before the Settlement Plus Interest Amount is released):
(i) the Delaware Chancery Court enters an order approving this Settlement Agreement in
accordance with Paragraph 3 above, and such order becomes final (a) after any appeal(s) or (b) upon
the expiration of time to appeal; and
(ii) (A) the order dismissing the complaint in Xxxxx Xxxxx Life Ins. Trust v. BP p.l.c., BP
Exploration (Alaska), Inc., and The Standard Oil Co., No. 08-2045-CV (S.D.N.Y.)
(“Xxxxx Xxxxx”), becomes final after appeal or upon the expiration of time for any further
appellate proceedings, or (B) the Xxxxx Xxxxx litigation is resolved by settlement.
BPXA may waive the condition set forth in Paragraph 4(b)(ii) above in its sole and unfettered
discretion.
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(c) The Trustee shall distribute the Settlement Plus Interest Amount to Unit Holders as part
of a regular quarterly distribution by the Trust pursuant to Section 4.02 of the Trust Agreement.
5. Effect of Disapproval of Settlement or Reversal of Order Dismissing the Xxxxx Xxxxx Complaint
In the event that (a) the Delaware Chancery Court, in connection with the Trustee’s
application to be made pursuant to Paragraph 3 above, makes a ruling that, for any reason, does not
approve this Settlement Agreement or (b) the order dismissing the complaint in Xxxxx Xxxxx is
reversed or vacated on appeal and BPXA does not waive the condition set forth in Paragraph
4(b)(ii), then the Escrow Agent shall refund the Settlement Plus Interest Amount to BPXA within 10
business days, and the terms of this Settlement Agreement shall have no further force and effect
with respect to the Parties except as specifically provided herein.
6. Tolling Agreement
(a) Any statute of limitations applicable to any Preserved Claim, whether arising in contract
or tort or otherwise, has been tolled by Tolling Agreement Numbers 1, 2, 3, 4 and 5 for the period
beginning on March 20, 2007 and ending at 11:59 p.m. on September 20, 2009, and shall continue to
be tolled for an additional period ending at 11:59 p.m. on December 31, 2010. The Tolling
Agreement set forth in this paragraph shall be in effect during the pendency of the proceedings in
the Delaware Chancery Court referred to in paragraph 3 above, and shall survive any termination or
rescission of this Settlement Agreement.
(b) While this Tolling Agreement remains in effect, BPXA shall cooperate, in the manner
described below, with any investigation that the Trustee may conduct into any Preserved Claim.
BPXA shall cooperate with such investigation by complying with reasonable requests by the Trustee
for documents and access to BPXA personnel. BPXA will reimburse the Trustee for the Trustee’s
reasonable fees and expenses, including attorneys’ fees, incurred in conducting such investigation.
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7. Fees and Expenses
In addition to the Settlement Amount in Paragraph 1(a) above, BPXA shall pay the Trustee its
reasonable attorneys’ fees and expenses, including internal expenses and expert fees, incurred in
its investigation of the claims that are the subject of this Settlement Agreement, in responding to
subpoenae issued in Xxxxx Xxxxx and in the action captioned In re BP Prudhoe Bay Royalty Trust
Litigation (W.D. Wash.), in defending the action captioned Xxxxxxx v. BP P.L.C., et al.,
3:06-CV-00260 (D. Alaska), and in seeking an order from the Delaware Chancery Court approving this
Settlement Agreement in accordance with the provisions in Paragraphs 3 and 4 above, including any
appeals from such order. BPXA shall pay such fees and expenses within 10 business days after the
later of (a) the occurrence of the event described in Paragraph 4(b)(i) above and (b) the
occurrence of the event described in Paragraph 4(b)(ii) or BPXA’s waiver of the condition of such
occurrence.
8. Choice of Law
This Settlement Agreement shall be interpreted, construed and enforced in accordance with the
substantive laws of the State of New York, without regard to principles of conflicts of law.
9. Choice of Forum
Any action concerning the implementation, performance, breach, interpretation, enforcement
and/or termination of this Settlement Agreement shall be brought in the federal or state court
sitting in New York County, New York. The parties hereto hereby submit to the jurisdiction of said
courts for the purposes set forth in this paragraph, and waive any objections
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to personal
jurisdiction, venue and the convenience of the forum. The parties designate the following as their
agents to receive service of a summons and complaint in any such action:
| The Trustee: | Xxxxxxx X. Xxxxxx, Esq. | |||
| Xxxxxxxxx & Xxxxxxxx, LLP | ||||
| 0000 Xxxxxx xx xxx Xxxxxxxx | ||||
| Xxx Xxxx, XX 00000 | ||||
| Telephone: | 000-000-0000 | |||
| Fax: | 000-000-0000 | |||
| Email: | xxxxxxx.xxxxxx@xxxxx.xxx | |||
| BPXA: | Xxxxxxx X. Xxxxxxxxx, XX, Esq. | |||
| Xxxxxxxx & Xxxxxxxx LLP | ||||
| 000 Xxxxx Xxxxxx | ||||
| Xxx Xxxx, XX 00000 | ||||
| Telephone: | 000-000-0000 | |||
| Fax: | 000-000-0000 | |||
| Email: | xxxxxxxxxx@xxxxxxxx.xxx | |||
10. Notices
Any notice relating to this Settlement Agreement shall be given in writing, by mail, fax or
email, to the following:
| To the Trustee: | Xxxx Xxxx | |||
| Vice President | ||||
| The Bank of New York Mellon | ||||
| 000 Xxxxxxx Xxxxxx, 0X Xxxxx | ||||
| Xxx Xxxx, XX 00000 | ||||
| Telephone: | 000-000-0000 | |||
| Fax: | 000-000-0000 | |||
| Email: | xxxx.xxxx@xxxxxxxxx.xxx | |||
with a copy to: |
||||
| Xxxxxxx X. Xxxxxx, Esq. | ||||
| Xxxxxxxxx & Xxxxxxxx, LLP | ||||
| 0000 Xxxxxx xx xxx Xxxxxxxx | ||||
| Xxx Xxxx, XX 00000 | ||||
| Telephone: | 000-000-0000 | |||
| Fax: | 000-000-0000 | |||
| Email: | xxxxxxx.xxxxxx@xxxxx.xxx | |||
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To BPXA: |
||||
| Xxxxxxx X. Xxxxxxx | ||||
| BP America Inc. | ||||
| P. O. Xxx 0000 | ||||
| Xxxxxxx, Xxxxx 00000 | ||||
| Telephone: | 000-000-0000 | |||
| Fax: | 000-000-0000 | |||
| Email: | xxxxxxx.xxxxxxx@xx.xxx | |||
with a copy to: |
||||
| Xxxxxxx X. Xxxxxxxxx, XX, Esq. | ||||
| Xxxxxxxx & Xxxxxxxx LLP | ||||
| 000 Xxxxx Xxxxxx | ||||
| Xxx Xxxx, XX 00000 | ||||
| Telephone: | 000-000-0000 | |||
| Fax: | 000-000-0000 | |||
| Email: | xxxxxxxxxx@xxxxxxxx.xxx | |||
11. Entire Agreement
This Settlement Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and negotiations relating
to the subject matter hereof.
12. No
Oral Amendment, Modification or Waiver
This Settlement Agreement may not be amended or modified, and its terms may not be waived,
except by a written instrument executed by all parties hereto.
13. Binding Effect
This Settlement Agreement shall be binding on and inure to the benefit of the successors,
assigns and legal representatives of all parties.
14. Execution in Counterparts
This Settlement Agreement may be executed in counterparts, each of which shall be considered
one and the same agreement.
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| BP EXPLORATION (ALASKA), INC. |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxxx XX | |||
| Xxxxxxx X. Xxxxxxxxx XX | ||||
| Counsel for BPXA | ||||
| THE BANK OF NEW YORK MELLON, as Trustee |
||||
| By: | /s/ Xxxx Xxxx | |||
| Xxxx Xxxx | ||||
| Vice President | ||||
| BNY MELLON TRUST OF DELAWARE, as Co-Trustee |
||||
| By: | /s/ Xxxxx Amgagis | |||
| Xxxxx Xxxxxxx | ||||
| Assistant Vice President | ||||
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