SECOND AMENDMENT TO TAX SHARING AGREEMENT
EFFECTIVE JANUARY 1, 1997
This SECOND AMENDMENT TO THE TAX SHARING AGREEMENT (this
"Second Amendment") is made and entered into as of January
1, 1997 by and among ATLANTIC RICHFIELD COMPANY, a Delaware
corporation ("ARCO"), VASTAR RESOURCES, INC., a Delaware
corporation ("VRI"), and the Subsidiaries of VRI that are
signatories hereto.
WHEREAS, ARCO and VRI entered into a Tax Sharing
Agreement effective as of October 1, 1993 and to a First
Amendment effective as of June 1, 1995 to provide for the
sharing of income tax liability, including specifically
credits provided under section 29 of the Internal Revenue
Code of 1986 (the "Basic Agreement as Amended").
WHEREAS, the parties wish to enter into an agreement to
modify the Basic Agreement as Amended to allow Vastar to
realize more immediately benefits from section 29 credits
that it generates and that are utilized by the ARCO Group,
and to fairly compensate ARCO for earlier payment.
NOW THEREFORE, in consideration of the premises
and the mutual covenants and agreements contained herein,
the parties agree as follows:
1. DEFINITIONS. Any capitalized term not otherwise
defined herein shall have the meaning given to such term in
Section 1 of the Basic Agreement as Amended.
2. AMENDMENTS TO BASIC AGREEMENT AS AMENDED. The
Basic Agreement as Amended shall be further amended as
follows:
a. Section 1(k) is deleted and a new Section 1(k) is
hereby added to read as follows:
(k) DESIGNATED CREDIT shall mean (i)
in the case of income tax credits described
in section 29 of the Code ("section 29
credits") that do not constitute Refundable
Designated Credits, as defined below, the
product of the amount of such credits
multiplied by 96.75%, (ii) Refundable
Designated Credits and (iii) income tax
credits described in section 43 of the Code
("section 43 credits"), provided that all of
such credits are generated by any member of
the VRI Group (1) in the ordinary course of
its trade or business of exploration,
development, production and marketing of
natural resources and (2) from interests in
properties that are acquired by any Member
of the VRI Group in the ordinary course of
its trade or business. All determinations
of whether a Designated Credit was generated
or whether a property was acquired by a
Member of the VRI Group in the ordinary
course of its trade or business shall be
made by ARCO in its sole and absolute
discretion. Upon request from ARCO, Vastar
shall provide certifications relating to the
facts associated with the generation or
acquisition of such credits and shall
furnish such additional data or information
as ARCO may require in order to make such
determinations.
b. The third sentence of Section 4(a) shall be
amended by deleting the phrase "prepared in
accordance with subsections (b) and (c) of this
Section 4" and by inserting the phrase "prepared
in accordance with subsections (b), (c) and (h) of
this Section 4".
c. The preamble to Section 4(h) and Section 4(h)(i)
shall be deleted. New Section 4(h)(i) is hereby
added to read and provide as follows:
(i) USE OF DESIGNATED CREDITS IN CURRENT
TAXABLE YEAR.
Amounts of Designated Credits generated in a
Taxable Year may be applied to reduce the VRI
Group Consolidated Tax Liability for the Taxable
Year in the same manner as if the Pro Forma VRI
Return were an actual return. In addition,
Designated Credits may further reduce the VRI
Group Consolidated Tax Liability (including
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a reduction below zero which will result in a
negative amount that is refundable to VRI to the
extent provided herein), without regard to the
impact of any statutory or income limitations but
only if and to the extent that such Designated
Credits reduce the ARCO Group Consolidated Tax
Liability for such Taxable Year (or in the case of
carryover Designated Credits, a prior Taxable
Year). Notwithstanding the foregoing, (A) the
refund, if any, that VRI is permitted to receive
with respect to any Taxable Year that is
attributable to the utilization of Refundable
Designated Credits pursuant to this Section 4(h)
(including credits utilized pursuant to the
carryover provisions of Sections 4(h)(iv) and
4(h)(v) of this Agreement) may not exceed
$15 million, and (B) VRI will not be permitted to
receive a refund that is attributable to the use
of section 43 credits.
Refundable Designated Credits that are
utilized pursuant to the carryover provisions of
Sections 4(h)(iv) and 4(h)(v) shall be applied
against the $15 million limitation in the year
that they are utilized. In the event that the
amount of VRI's refund that is attributable to its
use of Refundable Designated Credits pursuant to
this Section 4(h) with respect to a Taxable Year
is less than $15 million, such shortfall shall not
increase the $15 million limitation in any
subsequent Taxable Year.
ARCO shall refund in cash to VRI the tax
benefit associated with the Designated Credits
that are permitted to be refunded pursuant to this
Section 4(h) within 60 days of the actual
reduction in the ARCO Group Consolidated Tax
Liability (or, in the case of Refundable
Designated Credits that are utilized pursuant to
Section 4(h)(v), within 60 days of Completion
date) for such Taxable Year. For purposes of this
Section 4(h)(i), the actual reduction in the ARCO
Group Consolidated Tax Liability occurs when
credits are either applied on the ARCO Group's
Consolidated Return for a Taxable Year or used to
reduce the ARCO Group's estimated income tax
payments for such year (as determined by ARCO).
To the extent that VRI has received a refund
pursuant to Section 4(h) with respect to
Designated Credits, the amount of carryovers on
the Pro Forma VRI Return shall be correspondingly
reduced (adjustments shall also be made to reflect
subsequent adjustments pursuant to this
Section 4(h) or Section 8).
If VRI has received a refund from ARCO
pursuant to this Section 4(h)(i) with respect to a
Taxable Year as a result of any Designated Credit
and (A) ARCO determines that such credits did not
reduce the ARCO Group Consolidated Tax Liability
for such year (or, if applicable, for a prior
Taxable Year) or (B) if the amount of Designated
Credits for which VRI has received a refund with
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respect to a Taxable Year exceeds the amount of
section 29 credits from Members of the VRI Group
that are eligible to be treated as Designated
Credits in such year and utilized under this
Section 4(h) in such year, then VRI shall
reimburse ARCO for any payment received within 60
days of receiving from ARCO a schedule setting
forth ARCO's calculation of VRI's reimbursement
obligations pursuant to this sentence. ARCO shall
make such calculation within 30 days of the
Completion date for such Taxable Year; HOWEVER,
any failure by ARCO to redetermine the amount of
credits that reduce the ARCO Group Consolidated
Tax Liability or to reconcile the amount of
Designated Credits utilized within the 30-day
period set forth in the preceding sentence shall
not prevent ARCO, in its sole and absolute
discretion, from making subsequent calculations of
VRI's refund obligations contemplated by the
preceding sentence, as circumstances warrant,
within the applicable statute of limitations
(determined as if the Pro Forma VRI Return were an
actual return that is subject to any extensions
that have been granted by ARCO with respect to the
Consolidated Return).
d. Section 4(h)(ii) shall be deleted. References to
Section 4(h)(ii) in the Basic Agreement As Amended
shall be deemed to be references to
Section 4(h)(i).
e. The first sentence of Section 4(h)(iii) is amended
by deleting the phrase "(z) cannot be utilized
under Section 4(h)(i) solely because of the
limitation contained therein that prevents
Designated Credits from reducing the VRI Group Tax
Liability below zero."
f. The first sentence of Section 4(h)(iv) is amended
by deleting the phrase ", in the case of
Refundable Designated Credits,".
g. Section 4(h)(v) shall be deleted, and new
Section 4(h)(v) is hereby added to read and
provide as follows:
(v) DESIGNATED CREDITS PREVIOUSLY
UTILIZED BY THE ARCO GROUP. Amounts of
Designated Credits that have been applied to
reduce the ARCO Group Consolidated Tax
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Liability in a prior Taxable Year, but which
have not been applied to reduce the VRI
Group Tax Liability under Section 4(h)(i)
solely because of (A) the limitation
contained in Section 4(h)(i) that prevents
Designated Credits described in section 43
of the Code from reducing the VRI Group Tax
Liability below zero or (B) the limitation
contained in Section 4(h)(i) that limits
refunds with respect to Refundable
Designated Credits, may be applied to reduce
the VRI Group Consolidated Tax Liability in
any subsequent Taxable Year, including a
reduction below zero, notwithstanding any
statutory or income limitations. For
purposes of the preceding sentence, the
provisions of Sections 4(h)(i) and 4(h)(iii)
shall apply to Refundable Designated Credits
carried over pursuant to this
Section 4(h)(v) as if such credits were
generated by sales of production from the
well in the Taxable Year to which they are
carried. The preceding sentence is not
intended to affect the application of the
ordering rule contained in the first
sentence of Section 4(h)(vi) of this
Agreement.
h. Section 4(h)(viii) shall be deleted and new
Section 4(h)(viii) is hereby added to read and
provide as follows:
(viii) DISPLACED CREDITS. If VRI has
reduced the VRI Group Consolidated Tax
Liability or received a refund pursuant to
this Section 4(h) for any Taxable Year
pursuant to this Section 4(h) as a result of
any Designated Credit of any Member of the
VRI Group, and such Designated Credit is
subsequently displaced by another attribute
of the ARCO Group in a situation where
Section 4(h)(vii) does not apply, VRI shall
reimburse ARCO for any amount by which VRI's
liability to ARCO was reduced as a result of
the use of the displaced Designated Credit
or repay to ARCO the amount of the refund
from ARCO that was attributable to the use
of the displaced Designated Credit. For
purposes of this Section 4(h)(viii),
Refundable Designated Credits shall be
deemed to be displaced prior to Designated
Credits. A Designated Credit that is
displaced may be carried forward pursuant to
Section 4(h)(iv) thereafter, or, with the
consent of ARCO, carried back if ARCO
determines that the circumstances giving
rise to such displacement will allow it
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to utilize a greater amount of Designated
Credits in a prior Taxable Year than it
would have utilized absent such
circumstances.
i. Section 7(b) of the Basic Agreement As Amended is
amended by deleting the following phrase "(other
than Designated Credits (including carryovers)
that reduced the VRI Group Tax Liability for any
Taxable Year pursuant to Section 4(h) of this
Agreement or Refundable Designated Credits
(including carryovers) with respect to which VRI
has received a refund from ARCO pursuant to
Section 4(h) of this Agreement)" in the 10th and
19th lines of that section and by substituting in
its place the following phrase "(other than
Designated Credits (including carryovers) that
reduced the VRI Group Consolidated Tax Liability
or with respect to which VRI has received a refund
from ARCO for any Taxable Year pursuant to
Section 4(h) of this Agreement)".
3. EFFECTIVE DATE AND PAYMENT FOR CARRY FORWARD
DESIGNATED CREDITS.
The effective date for this Second Amendment shall be
January 1, 1997. ARCO shall pay $59,382,000 to VRI within 2
days after the execution date of this Second Amendment to
compensate VRI for all Designated Credits that were (i)
generated by the VRI Group prior to January 1, 1997 and (ii)
with respect to which VRI is not entitled to compensation
under the Basic Agreement as Amended in any Taxable Year
ending prior to the effective date of this
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Second Amendment. The amount of the carryovers on the Pro
Forma VRI Return shall be reduced by the full amount of the
Designated Credits for which VRI received compensation,
notwithstanding the fact that the payment was calculated by
reference to 96.75% of the statutory credit amount for
certain of such credits. The amount of, and payment for,
such credits shall continue to be subject to adjustments as
provided in the Basic Agreement as Amended, including
without limitation, Sections 4(h)(vii), 4(h)(viii) and 8;
PROVIDED HOWEVER, that to the extent that the adjustment
affects the calculation of credits described in the first
sentence of this Section 3, the amount of such adjustment
shall be calculated at 96.75% of the statutory credit
amount.
4. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICT OF LAWS.
5. CONTINUATION OF BASIC AGREEMENT AS AMENDED. The
Basic Agreement as Amended continues in full force and
effect, except as expressly amended herein.
IN WITNESS WHEREOF, the parties hereto have caused
their names to be subscribed and executed by their
respective authorized officers on the dates indicated,
effective as of January 1, 1997.
ATLANTIC RICHFIELD COMPANY
By:/s/ XXXXXXX X. XXXXXXXXXXXX Date: 3/20/97
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Xxxxxxx X. Xxxxxxxxxxxx
Associate General Tax Officer
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VASTAR RESOURCES, INC.
By: /s/ A. XXXXX XXXXXX Date: 3/18/97
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A. Xxxxx Xxxxxx
General Tax Officer
F&H PIPELINE COMPANY
By: /s/ A. XXXXX XXXXXX Date: 3/18/97
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A. Xxxxx Xxxxxx
Assistant Secretary
GRANT GATHERING COMPANY
By: /s/ A. XXXXX XXXXXX Date: 3/18/97
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A. Xxxxx Xxxxxx
Assistant Secretary
WILBURTON HUB, INC.
By: /s/ A. XXXXX XXXXXX Date: 3/18/97
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A. Xxxxx Xxxxxx
Assistant Secretary
VASTAR GAS MARKETING, INC.
By: /s/ A. XXXXX XXXXXX Date: 3/18/97
------------------- -------
A. Xxxxx Xxxxxx
Assistant Secretary
VASTAR HOLDINGS, INC.
By: /s/ A. XXXXX XXXXXX Date: 3/18/97
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A. Xxxxx Xxxxxx
Assistant Secretary
VASTAR POWER MARKETING, INC.
By: /s/ A. XXXXX XXXXXX Date: 3/18/97
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A. Xxxxx Xxxxxx
Assistant Secretary
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