EXHIBIT 10.1
THIRD AMENDMENT TO THE TAX SHARING AGREEMENT
EFFECTIVE OCTOBER 30, 1998
This THIRD AMENDMENT TO THE TAX SHARING AGREEMENT ("Third Amendment") is
made and entered into as of October 30, 1998 by and among ATLANTIC RICHFIELD
COMPANY, a Delaware corporation ("ARCO"), VASTAR RESOURCES, INC., a Delaware
corporation ("VRI"), VASTAR OFFSHORE, INC. (formerly Western Midway Company), a
Delaware corporation ("VOI"), Vastar Pipeline, LLC, a Delaware Limited Liability
Company ("VPL"), and the other Subsidiaries of VRI that are signatories hereto.
WHEREAS, ARCO, VRI and VRI's subsidiaries entered into that certain tax
sharing agreement dated effective October 1, 1993, and amendments thereto
effective June 1, 1995 and January 1, 1997 (the "Basic Tax Sharing Agreement"),
in each case to provide for the sharing of the ARCO Group Consolidated Tax
Liability, the state and local income and franchise tax liabilities relating to
certain consolidated, combined or unitary returns filed by the ARCO Group and
certain other matters relating to the inclusion of the VRI Group in the ARCO
Group; and
WHEREAS, ARCO and VRI entered into that certain stock purchase agreement
dated as of August 4, 1998 (the "Stock Purchase Agreement") to provide for the
sale of all of the common stock of Western Midway Company to VRI; and
WHEREAS, the Stock Purchase Agreement contains provisions relating to the
tax treatment of the assets acquired by VOI and VPL pursuant to that certain
Exchange Agreement dated as of August 4, 1998 by and among Mobil Exploration &
Producing US, Inc., as agent for Mobil Oil Exploration & Producing Southeast
Inc. and Mobil Texas & New Mexico Inc., and Western Midway Company (the
"Exchange Agreement"); and
WHEREAS, the Stock Purchase Agreement provides that the Basic Tax Sharing
Agreement will be amended to take into account the tax provisions in the Stock
Purchase Agreement relating to the assets acquired by VOI and VPL pursuant to
the Exchange Agreement (the "Gulf Assets"); and
WHEREAS, ARCO and VRI and its subsidiaries have agreed to amend Section
7(b) of the Basic Tax Sharing Agreement to incorporate their full and final
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agreement with respect to certain provisions of the Stock Purchase Agreement
that require ARCO to make certain payments to VRI in the event of a
deconsolidation of VRI and to clarify the application of Section 7(b) to certain
Designated Credits.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
1. DEFINITIONS. Sections 1(m) through 1(s) are redesignated 1(n) through
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1(t) and a new Section 1(m) is added to read as follows;
"(m) EXCHANGE AGREEMENT shall mean that certain exchange agreement dated as of
August 4, 1998 by and among Mobil Exploration & Producing US, Inc., as agent for
Mobil Oil Exploration & Producing Southeast Inc. and Mobil Texas & New Mexico
Inc., and Western Midway Company."
Sections 1(t) through 1(aa) are redesignated 1(v) through 1(cc) and a new
Section 1(u) is added to read as follows:
"(u) STOCK PURCHASE AGREEMENT shall mean that certain stock purchase agreement
dated as of August 4, 1998 between ARCO and VRI."
All capitalized terms not otherwise defined herein shall have the meaning given
to those terms in the Basic Tax Sharing Agreement or if not defined therein, in
the Stock Purchase Agreement.
2. AMENDMENT TO SECTION 4 OF THE BASIC TAX SHARING AGREEMENT. A new
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Section 4(j) is added to the Basic Tax Sharing Agreement to read as follows:
"(j) Special Provisions Applicable to the Assets Acquired By Vastar Offshore,
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Inc. and Vastar Pipeline, LLC. Notwithstanding anything else to the contrary in
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this Agreement, the Pro Forma VRI Return and the Pro Forma State Return shall be
prepared (1) as if the aggregate adjusted tax basis of Vastar Offshore, Inc.
("VOI") and Vastar Pipeline, LLC ("VPL") in all of the assets acquired by VOI
and VPL pursuant to the Exchange Agreement on the initial date of such
acquisition was $440,021,187 and (2) as if such adjusted tax basis were
allocated among such assets in the manner specified on Appendix A hereto.
Moreover, tax reimbursement payments made to the VRI Group pursuant to Section
10.1 or 10.2 of the Stock Purchase Agreement, and tax reimbursement payments
made by the VRI Group pursuant to such Sections of the Stock Purchase Agreement,
shall not
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be considered items of income or deduction, respectively, on the Pro Forma VRI
Return or the Pro Forma State Return."
3. AMENDMENT TO SECTION 7(B) OF THE BASIC TAX SHARING AGREEMENT.
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Section 7(b) of the Basic Tax Sharing Agreement is amended by adding the
following language immediately after the third sentence of that section:
"Notwithstanding anything to the contrary in the Code or other applicable
authority, ARCO shall make the determinations required by this Section 7(b) as
if all Designated Credits described in Section 4(h)(iv) of the Basic Tax
Sharing Agreement are credits that would have been available for carryover by
the VRI Group if all Pro Forma VRI Returns had been actual returns.
In the event that ARCO and VRI determine that the aggregate tax basis of the
Gulf Assets immediately following an event that causes VRI to cease to be a
Member of the ARCO Group (taking into account any step up in such basis relating
to such event, whether pursuant to a Section 338(h)(10) election or otherwise)
(the "Actual Basis") is less than the aggregate tax basis that would have
resulted (taking into account all allowed or allowable depreciation or
amortization deductions) on such date if the initial tax basis of such assets as
of the Closing Date of the Stock Purchase Agreement had been $440,021,187 (the
"Calculated Basis"), then ARCO shall pay to VRI an amount equal to the
discounted present value (based on a discount rate of 10%, compounded annually)
of the dollar amount of deductions for depreciation and depletion attributable
to the difference between the Actual Basis and the Calculated Basis, as
determined in a commercially reasonable manner. In the event that (i) VRI
becomes the Common Parent of its own Affiliated Group for the year beginning on
the date it ceases to be a member of the ARCO Group and (ii) there is a Final
Determination after such date that the initial tax basis of the Gulf Assets as
of the Closing Date of the Stock Purchase Agreement is less than $440,021,187
and as a result the aggregate tax basis of the Gulf Assets as of the date of the
calculation set forth in the preceding sentence (taking into account any
increase in such tax basis related to such event) ("Redetermined Basis") is less
than the Actual Basis used by the parties in such calculation, then ARCO shall
recalculate the amounts, if any, that it owes pursuant to the preceding sentence
using the Redetermined Basis in lieu of the Actual Basis and shall promptly pay
to VRI the excess of the recalculated amount over the amount, if any, paid to
VRI pursuant to the initial calculation."
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4. EFFECTIVE DATE. This Third Amendment shall be effective as of October
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30, 1998.
5. CONTINUATION OF THE BASIC TAX SHARING AGREEMENT. The Basic Tax Sharing
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Agreement shall continue in full force and effect, except as expressly amended
herein.
6. CONFLICTS BETWEEN THIS THIRD AMENDMENT AND THE STOCK PURCHASE
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AGREEMENT. In the event a conflict arises between the terms of the Basic Tax
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Sharing Agreement as amended by this Third Amendment and the terms of the Stock
Purchase Agreement during any Taxable Year in which the Basic Tax Sharing
Agreement and this Third Amendment are in effect, the terms of the Basic Tax
Sharing Agreement and this Third Amendment shall control. The parties hereto
intend that this Third Amendment to the Basic Tax Sharing Agreement shall
supersede Sections 11.1(a)(v) and 11.1(b) of the Stock Purchase Agreement and
shall constitute the parties' final agreement with respect to such sections.
VRI and its Affiliates further agree to release ARCO from any indemnity
obligations pursuant to Section 11.1(a)(v) of the Stock Purchase Agreement. It
is intended that this Agreement shall constitute a writing described in Section
12.3 of the Stock Purchase Agreement. If the items of income, deduction, gain,
loss, credits and other tax attributes of the Gulf Assets are included in the
Pro Forma VRI Return and the Pro Forma State Return in accordance with the Basic
Tax Sharing Agreement and this Third Amendment for the period(s) after the
Closing Date (as defined in the Stock Purchase Agreement) and VRI satisfies its
payment obligations with respect thereto pursuant to the Basic Tax Sharing
Agreement and this Third Amendment, then VOI and the VRI Group shall have no
further liability to ARCO for income and franchise taxes attributable to the
Gulf Assets. Furthermore, the tax indemnity provisions of the Basic Tax Sharing
Agreement shall be applicable with respect to the payment by VRI of such taxes.
The undersigned acknowledge their agreement to the foregoing Third Amendment
effective on the date specified above.
ATLANTIC RICHFIELD COMPANY VASTAR RESOURCES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx By: /s/ A. Xxxxx Xxxxxx
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Xxxxxxx X. Xxxxxxxxxxxx A. Xxxxx Xxxxxx
Vice President and General Tax Officer
General Tax Officer
Date: August 26, 1999 Date: August 26, 1999
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F & H PIPELINE GRANT GATHERING COMPANY
By: /s/ A. Xxxxx Xxxxxx By: /s/ A. Xxxxx Xxxxxx
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A. Xxxxx Xxxxxx A. Xxxxx Xxxxxx
Assistant Secretary Assistant Secretary
Date: 8/26/99 Date: 8/26/99
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WILBURTON HUB, INC. VASTAR GAS MARKETING, INC.
By: /s/ A. Xxxxx Xxxxxx By: /s/ A. Xxxxx Xxxxxx
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A. Xxxxx Xxxxxx A. Xxxxx Xxxxxx
Assistant Secretary Assistant Secretary
Date: 8/26/99 Date: 8/26/99
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VASTAR HOLDINGS, INC VASTAR POWER MARKETING, INC.
By: /s/ A. Xxxxx Xxxxxx By: /s/ A. Xxxxx Xxxxxx
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A. Xxxxx Xxxxxx A. Xxxxx Xxxxxx
Assistant Secretary Assistant Secretary
Date: 8/26/99 Date: 8/26/99
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VASTAR OFFSHORE, INC. VASTAR PIPELINE, LLC
By: /s/ A. Xxxxx Xxxxxx By: /s/ A. Xxxxx Xxxxxx
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A. Xxxxx Xxxxxx A. Xxxxx Xxxxxx
General Tax Officer and Assistant Secretary
Assistant Secretary Date: 8/26/99
Date: 8/26/99 ---------
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VASTAR ENERGY, INC.
By: /s/ A. Xxxxx Xxxxxx
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A. Xxxxx Xxxxxx
Assistant Secretary
Date: 8/26/99
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APPENDIX A TO THIRD AMENDMENT TO THE TAX SHARING AGREEMENT
VASTAR'S BASIS IN MOBIL ASSETS - PER VASTAR/ARCO TAX SHARING AGREEMENT
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VASTAR TAX BASIS IN MOBIL ASSETS
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General Asset Product Class ARCO Basis Vastar
Class No. SIC Code No. Kind of Asset After LKE Adjustment Adjusted Basis
--------- ------------ --------------------------------------------------- ------------- ------------ ---------------
SEC 1031 - EXCHANGE ASSETS
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00.110 ---- Office furniture, fixtures, and equipment 265,327 (68,544) 196,783
00.120 ---- Information systems (computers and peripheral equipment) 11,841 (3,059) 8,782
00.130 ---- Data handling equipment, except computers 0 0 0
---- 3533 Oil field machinery and equipment 162,847,141 (42,069,679) 120,777,462
3663 Radio & TV communication equipment 140,523 (36,302) 104,221
---- ---- Reserves 346,902,565 (29,187,027) 317,715,538
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Sub-Total 510,167,397 (71,364,611) 438,802,786
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NON-SEC 1031 - EXCHANGE ASSETS
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00.220 ---- Automobiles, taxis - 0 0
00.241 ---- Light general purpose trucks - 0 0
00.280 ---- Vessels, barges, tugs, and similar water-transportation
equipment 93 (24) 69
---- 3441 Fabricated structural metal 1,624,945 (419,786) 1,205,159
---- 3537 Forklift 7,586 (1,960) 5,626
3548 Welding apparatus 7,401 (1,912) 5,489
---- ---- Co-Gen Partnership Interest - 0 0
---- ---- Oil price guarantee - 0 0
00.400 ---- Industrial steam and electric generation and/or 0 0
steam distribution systems 2,775 (717) 2,058
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Sub-Total 1,642,799 (424,398) 1,218,401
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Grand Total 511,810,196 (71,789,009) 440,021,187
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Amount to allocate to Tangible/Depletable Assets:
Gross basis per Stock Purchase Agreement 470,000,000
Less: WMC cash balance at purchase date (29,229,342)
Adjustments for post closing operating expenses (5,971,855)
Add: Vastar capitalized costs 5,222,384
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Amount to allocate to Tangible/Depletable
Assets 440,021,187
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Note 1: Gross basis per Article 10.4 of Stock Purchase Agreement
Note 2: Adjustments for post closing operating expenses per discussions w/Xxx Xxxxxxx @ Vastar
and Xxxx Xxxxxxxxxx @ AWE.
Note 3: Vastar capitalized costs per discussions w/ Xxx Xxxxxxx @ Vastar
