Document:

EX-4.1

 

EXHIBIT 4.1

BP PRUDHOE BAY ROYALTY TRUST AGREEMENT

BY AND AMONG

THE STANDARD OIL COMPANY

AND

BP EXPLORATION (ALASKA) INC.

AND

THE BANK OF NEW YORK, TRUSTEE

AND

F. JAMES HUTCHINSON, CO-TRUSTEE

Dated February 28, 1989

 

 

	 	 	 	 	 
	 
	INDEX
	 	 	 	 
	 
	Preambles
	 	 	1	 
	 
	Article I — Definitions
	 	 	3	 
	 
	Article II — Creation, Name and Purpose of Trust
	 	 	 	 
	 
	Section 2.01 - Creation and Name of Trust
	 	 	13	 
	 
	Section 2.02 - Purposes
	 	 	13	 
	 
	Section 2.03 - Initial Conveyance
	 	 	14	 
	 
	Section 2.04 - Additional Conveyance
	 	 	15	 
	 
	Section 2.05 - Certificate of Trust
	 	 	21	 
	 
	Section 2.06 - Acceptance by Trustee
	 	 	21	 
	 
	Section 2.07 - Registration of Units
	 	 	21	 
	 
	Article III — Creation of Units and Certificates
	 	 	 	 
	 
	Section 3.01 - Creation of Units
	 	 	22	 
	 
	Section 3.02 - Certificates as Evidence of Ownership of Units
	 	 	22	 
	 
	Section 3.03 - Rights of Unit Holders
	 	 	23	 
	 
	Section 3.04 - Character of Rights
	 	 	24	 
	 
	Section 3.05 - Form, Execution and Dating of Certificates
	 	 	24	 
	 
	Section 3.06 - Registration and Transfer of Units
	 	 	26	 
	 
	Section 3.07 - Mutilated, Destroyed, Lost or Stolen Certificates
	 	 	30	 
	 
	Section 3.08 - Protection of Trustee
	 	 	31	 
	 
	Section 3.09 - Transfer Agent and Registrar
	 	 	31	 
	 
	Section 3.10 - Limitation of Personal Liability of Unit Holders
	 	 	31	 

 

 

	 	 	 	 	 
	 
	Article IV — Accounting and Distribution
	 	 	 	 
	 
	Section 4.01 - Fiscal Year and Accounting Method
	 	 	32	 
	 
	Section 4.02 - Distributions
	 	 	32	 
	 
	Section 4.03 - Income Tax Withholding & Reporting
	 	 	34	 
	 
	Section 4.04 - Reports to Unit Holders
	 	 	34	 
	 
	Section 4.05 - Information to be Supplied by the Company
	 	 	36	 
	 
	Section 4.06 - Information to be Provided to the Company
	 	 	37	 
	 
	Article V — Meetings of Unit Holders
	 	 	 	 
	 
	Section 5.01 - Purpose of Meetings
	 	 	38	 
	 
	Section 5.02 - Call and Notice of Meetings
	 	 	38	 
	 
	Section 5.03 - Voting
	 	 	39	 
	 
	Section 5.04 - Conduct of Meetings
	 	 	40	 
	 
	Section 5.05 - Voting of Units Held by Company, SOC and Their Respective Affiliates
	 	 	41	 
	 
	Article VI — Administration of Trust and Powers of Trustee
	 	 	 	 
	 
	Section 6.01 - General Authority
	 	 	41	 
	 
	Section 6.02 - Limited Power to Dispose of Royalty Interest and Other Trust Interests
	 	 	44	 
	 
	Section 6.03 - No Power to Engage in Business or Make Investments
	 	 	48	 
	 
	Section 6.04 - Payment of Liabilities of Trust
	 	 	48	 
	 
	Section 6.05 - Timing of Trust Income and Expenses
	 	 	49	 
	 
	Section 6.06 - Limited Power to Borrow
	 	 	50	 
	 
	Section 6.07 - Cash Reserves and Cash Held Pending Distribution Date
	 	 	52	 

 

 

	 	 	 	 	 
	 
	Section 6.08 - Settlement of Claims
	 	 	55	 
	 
	Section 6.09 - Income and Principal
	 	 	55	 
	 
	Section 6.10 - Effect of Trustee’s Power on Trust Property
	 	 	56	 
	 
	Section 6.11 - No Requirement of Diversification
	 	 	56	 
	 
	Section 6.12 - Divestiture of Units
	 	 	56	 
	 
	Section 6.13 - Prohibited Transactions
	 	 	61	 
	 
	Article VII — Rights and Liabilities of Trustee
	 	 	 	 
	 
	Section 7.01 - General Liability of Trustee
	 	 	61	 
	 
	Section 7.02 - Indemnification of Trustee
	 	 	62	 
	 
	Section 7.03 - Compensation
	 	 	66	 
	 
	Section 7.04 - Other Services and Expenses
	 	 	66	 
	 
	Section 7.05 - Reliance on Experts
	 	 	68	 
	 
	Section 7.06 - No Security Required
	 	 	68	 
	 
	Section 7.07 - Transactions in Multible Capacities
	 	 	69	 
	 
	Article VIII — Office of Trustee
	 	 	 	 
	 
	Section 8.01 - Removal of Trustee
	 	 	69	 
	 
	Section 8.02 - Resignation of Trustee
	 	 	69	 
	 
	Section 8.03 - Appointment of Successor Trustee
	 	 	70	 
	 
	Section 8.04 - Rights of a Successor Trustee
	 	 	72	 
	 
	Section 8.05 - Merger or Consolidation of Trustee
	 	 	73	 
	 
	Section 8.06 - Co-Trustee
	 	 	73	 
	 
	Article IX — Terms of Trust and Final Distribution
	 	 	 	 
	 
	Section 9.01 - Termination
	 	 	74	 
	 
	Section 9.02 - Disposition of Assets Upon Termination
	 	 	76	 

 

 

	 	 	 	 	 
	Section 9.03 - Distribution of Assets Upon Termination
	 	 	79	 
	 
	Article X — Irrevocability and Amendability
	 	 	 	 
	 
	Section 10.01 - Irrevocability
	 	 	80	 
	 
	Section 10.02 - Limited Amendability
	 	 	81	 
	 
	Section 10.03 - Corrective Amendments
	 	 	83	 
	 
	Section 10.04 - Tax Rulings & Opinions
	 	 	83	 
	 
	Article XI — Failure to Pay Amounts Due Trustee
	 	 	84	 
	 
	Article XII — Miscellaneous
	 	 	 	 
	 
	Section 12.01 - Inspection of Records
	 	 	84	 
	 
	Section 12.02 - Filing of this Agreement
	 	 	85	 
	 
	Section 12.03 - Disability of Unit Holder
	 	 	85	 
	 
	Section 12.04 - Savings Clause
	 	 	86	 
	 
	Section 12.05 - Notices
	 	 	86	 
	 
	Section 12.06 - Notice and Reports to the Company, SOC or BP
	 	 	86	 
	 
	Section 12.07 - Governing Law
	 	 	87	 
	 
	Section 12.08 - Counterparts
	 	 	87	 
	 
	Section 12.09 - Headings
	 	 	88	 
	 
	Section 12.10 - Independent Conduct
	 	 	88	 
	 
	Section 12.11
- Determination by the Trustee
	 	 	88	 
	 
	Signatures
	 	 	 	 

Exhibit A — Form of Initial Conveyance

Exhibit B — Form of Certificate

Exhibit C — Form of Compensation Agreement

 

 

BP PRUDHOE BAY ROYALTY TRUST AGREEMENT

     THIS ROYALTY TRUST AGREEMENT (the “Agreement”), made and entered into as of
the 28th day of February, 1989, by and among The Standard Oil Company, an Ohio
corporation having its principal office in Cleveland, Ohio (“SOC”), as depositor
and trustor, BP Exploration (Alaska) Inc., a Delaware corporation having its
principal office in Anchorage, Alaska (formerly Standard Alaska Production
Company) (the “Company”), The Bank of New York, a corporation organized under
the laws of the State of New York, authorized to do a banking business and
having a principal corporate trust office in New York, New York, as trustee and
F. James Hutchinson, a resident of the State of Delaware, as co-trustee.

     WHEREAS, the Company is engaged in the business of developing and
producing oil and gas and owns mineral interests in lands that contain proved
reserves and are currently producing oil and gas; and

     WHEREAS, the Company has determined to convey to SOC the Initial Royalty
Interest (hereinafter defined) pursuant to an Overriding Royalty Conveyance (as
hereinafter defined); and

     WHEREAS, SOC has determined to offer and sell trust units representing
undivided beneficial interests in the Trust, which will own the Initial Royalty
Interest; and

 

 

     WHEREAS, SOC has determined to grant to the Trust the Initial Royalty
Interest pursuant to a Trust Conveyance (as hereinafter defined) in
consideration of the issuance by the Trust of the Trust Units, (as hereinafter
defined); and

     WHEREAS, The British Petroleum Company p.l.c. (“BP”) has agreed to support
the payment obligations of the Company and SOC as more fully set forth in the
Support Agreement (as hereinafter defined); and

     WHEREAS, the Initial Conveyance (as hereinafter defined) is
contemporaneously executed and delivered to the Trust;

     NOW, THEREFORE, the Initial Royalty Interest has been granted,
assigned and delivered unto the Trust, receipt of which is hereby acknowledged
and accepted by the Trustee on behalf of the Trust, to have and to hold, in
trust as hereinafter set forth, such property and all other properties, real
or personal (including Additional Royalty Interests), which may hereafter be
received by the Trust pursuant to this Agreement; and the Company, SOC, The
Bank of New York in its capacity as Trustee, and the Co-Trustee (as
hereinafter defined) agree that such properties shall be held, administered,
paid and delivered for the purposes and subject to the terms and conditions
hereinafter provided.

( 2 )

 

 

ARTICLE I

Definitions

     As used herein, the following terms have the meanings indicated:

     Section 1.01. “Affiliate” of a Person means another Person controlled by,
controlling or under common control with such Person.

     Section 1.02. “Additional Conveyance” means collectively any instrument(s)
pursuant to which one or more Additional Royalty Interests are created or
conveyed to the Trust as provided in Section 2.04 hereof.

     Section 1.03. “Additional Royalty Interest” means any royalty interest
which is identical in all respects to the Initial Royalty Interest, except for
the identity of the parties (other than the Trust), the effective date and the
percentage set forth in the definition of Royalty Production in the related
Additional Conveyance.

     Section 1.04. “Agreement” means this instrument, as originally executed,
or, if amended pursuant to the provisions of Section 10.02 or 10.03 hereof, as
so amended.

     Section 1.05. “Beneficial Interest” means the right to share in the
benefits and the obligation to share in the detriments resulting from the
accomplishment of the purposes of the Trust as expressly set out in this
Agreement, and includes without limitation the right to share in distributions
during the term of the

( 3 )

 

 

Trust, to share in the final distributions from the Trust and to participate in
decisions affecting the Trust only to the extent expressly provided herein, and,
except as limited by the provisions of this Agreement, to exercise all other
rights of a beneficiary of a business trust created under the Delaware Trust
Act.

     Section 1.06. “BP” means The British Petroleum Company p.l.c., its
successors and assigns.

     Section 1.07. “Business Day” means any day that is not a Saturday,
Sunday, a holiday determined by the New York Stock Exchange as “affecting ‘ex’
dates” or any other day on which banking institutions in New York, New York,
or in any other city where the principal corporate trust office of the Trustee
may be located, are closed as authorized or required by law.

     Section 1.08. “Certificate” means a certificate issued by the Trust
pursuant to ARTICLE III hereof evidencing the ownership of one or more Units.

     Section 1.09. “Code” means the Internal Revenue Code of 1986, as amended,
or any successor statute or statutes.

     Section 1.10. “Company” means BP Exploration (Alaska) Inc., a Delaware
corporation and includes successors or assigns of the Company.

     Section 1.11. “Conveyance” means collectively the Initial Conveyance and
any Additional Conveyance.

( 4 )

 

 

     Section 1.12. “Co-Trustee” shall have the meaning ascribed to it in Section
1.33 hereof.

     Section 1.13. “Delaware Trust Act” means 12 Delaware Code Section 3801 et
seq.

     Section 1.14. “Distribution Date” means the date of any distribution
pursuant to Section 4.02 hereof.

     Section 1.15. “ERISA” means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute or statutes.

     Section 1.16. “Initial Conveyance” means collectively the Overriding
Royalty Conveyance and the Trust Conveyance.

     Section 1.17. “Initial Royalty Interest” means the royalty interest being
conveyed by the Company to SOC and by SOC to the Trust contemporaneously with
the execution and delivery of this Agreement pursuant to the Initial Conveyance.

     Section 1.18. “Insignificant Investor Period” means each period of time
prior to the Opinion Date during which benefit plan investors (within the
meaning-of Department of Labor regulation section 2510.3-101(f)(2)) do not own a
sufficient number of Units of a “class” to cause their equity participation in
the Trust to be “significant” (within the meaning of Department of Labor
regulation section 2510.3-101(f)(1)).

     Section 1.19. “Officer’s Certificate” means a certificate duly executed on
behalf of the Company or SOC, as the case may be, signed by any president, any
vice president, any assistant vice

( 5 )

 

 

president, or any treasurer or assistant treasurer, or any certificate
reasonably believed by the Trustee to have been so signed.

     Section 1.20. “Opinion Date” means the first date upon which all of the
following requirements have been satisfied: (i) the Trust Units have been
registered under section 12(b) or section 12(g) of the Securities Exchange Act
of 1934; (ii) the Trust Units are widely-held (within the meaning of paragraph
(b)(3) of the Regulation); (iii) the Trust Units are freely transferable (within
the meaning of paragraph (b)(4) of the Regulation); (iv) the Company has
delivered to the Trustee an opinion of nationally recognized ERISA counsel (such
counsel to be selected by the Company and approved by the Trustee and such
opinion to be reasonably acceptable to the Trust’s counsel) which states, in
effect, that the requirements described in clauses (i), (ii) and (iii) above
have been satisfied; and (v) the Company has delivered to the Trustee either (a)
an opinion of nationally recognized ERISA counsel (such counsel to be selected
by the Company and approved by the Trustee and such opinion to be reasonably
acceptable to the Trust’s counsel) or (b) an individual prohibited transaction
exemption or an advisory opinion issued by the Department of Labor to the
Trustee, the Trust or the Company which opinion, exemption or advisory opinion
states, in effect, that from and after the date upon which the requirements
described in clauses (i), (ii) and (iii) above have been satisfied, the assets
of the Trust shall not constitute plan assets (within the meaning

( 6 )

 

 

of the Regulation) with respect to any employee benefit plan (as such term is
defined in section 3(3) of ERISA) which became a Unit Holder prior to the date
such requirements have been satisfied (provided, however, that if the Company
has delivered to the Trustee an opinion of counsel as described in clause (v)(a)
above, such opinion must specifically reference and be based primarily upon an
advisory opinion or other published announcement of similar authoritative import
issued by the Department of Labor which favorably addresses the same issues
which are to be addressed in such opinion and which is based upon facts similar
to those involving the Trust and such employee benefits plans). The Company
shall use its best efforts to obtain promptly, at its expense, from the
Department of Labor the individual prohibited transaction exemption or advisory
opinion referred to in clause (v)(b) above; provided, however, that if the
Company has delivered the opinion of counsel referred to in clause (v)(a) above,
then its obligation to use its best efforts to obtain such exemption or advisory
opinion shall terminate. For purposes of this Section, the term “Regulation”
means Department of Labor regulation section 2510.3-101.

     Section 1.21. “Overriding Royalty Conveyance” means the Overriding Royalty
Conveyance from the Company to SOC, the form which is attached hereto as part of
Exhibit A.

( 7 )

 

 

     Section 1.22. “Person” means an individual, corporation, partnership,
unincorporated association, trust, estate or other organization.

     Section 1.23. “Quarter” means a period of approximately three months
beginning on the day after a Quarterly Record Date and continuing through and
including the next succeeding Quarterly Record Date, which shall be the
Quarterly Record Date for such Quarter; provided, however, that the first
Quarter hereunder shall be a period beginning on the date hereof and continuing
until April 17, 1989.

     Pursuant to the Conveyance royalty amounts payable to the Trust are
calculated on a calendar quarter basis, and each royalty payment is required to
be made on the Quarterly Record Date immediately following the close of the
calendar quarter during which the related oil production occurs. Therefore,
pursuant to the Conveyance royalty payments for the four calendar quarters in
each year are due and payable to the Trust on the Quarterly Record Date in
April, July and October of such year and in January of the following year. The
term “Quarter” as used herein refers to a three-month period which ends on the
Quarterly Record Date which occurs approximately one-half month after the end of
the corresponding royalty calculation period.

     Section 1.24. “Quarterly Income Amount” for any Quarter means the sum of
(a) the cash received by the Trust during the Quarter that is directly
attributable to the Royalty Interest, (b)

( 8 )

 

 

any cash available for distribution as a result of the reduction or elimination
during the Quarter of any existing cash reserve created pursuant to Section 6.07
hereof and (c) any other cash receipts of the Trust during the Quarter including
without limitation any cash received from interest earned pursuant to Section
6.07 hereof, reduced by the sum of (i) the liabilities of the Trust paid during
the Quarter and (ii) the amount of any cash used in the Quarter to establish or
increase a cash reserve pursuant to Section 6.07 hereof. If (a) prior to the end
of a Quarter the Trustee makes a determination of the Quarterly Income Amount
which it anticipates will be distributed to Unit Holders of record on the
Quarterly Record Date for such Quarter, based on notice provided to the Trustee
by the Company pursuant to Section 4.8(e) of the Overriding Royalty Conveyance
(and similar provisions of any Additional Conveyance), and (b) the Quarterly
Income Amount is not equal to the amount so determined because the amounts
stated in such notice were not received on or prior to such Quarterly Record
Date, the Trustee shall treat such amounts when received as if they were
received on such Quarterly Record Date.

     Notwithstanding anything to the contrary in this Section 1.24, the
Quarterly Income Amount for any Quarter shall not include any amount that would
have been required to be reported to any stock exchange on which the Units are
listed in connection with the establishment of an “ex” date in order to be
distributed to Unit Holders who were such on the Quarterly Record Date for

( 9 )

 

 

such Quarter but was not so reported unless the stock exchange agrees to such
amount being a part of that Quarter’s Quarterly Income Amount or the Trustee
receives an opinion of counsel stating that neither the Trust, the Trustee nor
The Bank of New York will be adversely affected by such inclusion. An amount
that, pursuant to the preceding sentence, is not included in the Quarterly
Income Amount for that Quarter shall be treated as if received during the next
Quarter. In this connection, the Trustee shall report quarterly to such stock
exchange (so long as reporting is so required by the stock exchange), at the
time required by the stock exchange, the amount that, pursuant to the first
paragraph of this Section 1.24, the Trustee in good faith reasonably expects to
be the Quarterly Income Amount for the Quarter being reported on.

     Section 1.25. “Quarterly Record Date” means the fifteenth day of each
January, April, July and October; provided, however, that if such day is not a
Business Day then the Quarterly Record Date shall be the next Business Day after
such day and provided further that if the Trustee determines that a different
date is required to comply with applicable law or the rules or regulations of
any stock exchange on which the Units are listed, it means such different date.
The first Quarterly Record Date shall be April 17, 1989.

( 10 )

 

 

     Section 1.26. “Record Date Unit Holder” means a Person who was a Unit
Holder of record on the Voting Record Date for a meeting of Unit Holders.

     Section 1.27. “Royalty Interest” means the Initial Royalty Interest and any
Additional Royalty Interests which may hereafter be granted to the Trust
pursuant to this Agreement, taken together.

     Section 1.28. “Royalty Statement” means the statement prepared by the
Company and delivered to the Trust pursuant to Section 4.8(f) of the Overriding
Royalty Conveyance or the comparable provision of any Additional Conveyance.

     Section 1.29. “Support Agreement” means the Support Agreement dated as of
even date herewith by and among BP, the Company, SOC and the Trust.

     Section 1.30. “Trust” means the business trust under the Delaware Trust Act
created by and administered under the terms of this Agreement.

     Section 1.31. “Trust Conveyance” means the Trust Conveyance from SOC to the
Trust, the form of which is attached hereto as part of Exhibit A.

     Section 1.32. “Trust Estate” means all assets, however and whenever
acquired, that may belong to the Trust at any designated time and shall include
both income and principal.

     Section 1.33. “Trustee” means collectively (except as otherwise provided in
Section 8.06 hereof) The Bank of New York, a

( 11 )

 

 

corporation organized under the laws of the State of New York and authorized to
do a banking business and qualified to exercise trust powers, in its capacity as
trustee hereunder, and, F. James Hutchinson, in his capacity as co-trustee
hereunder. The Bank of New York and F. James Hutchinson shall serve as the
initial trustees under this instrument. The term “Trustee” shall include any
ancillary or successor trustee or co-trustee hereunder, during the period it is
so serving in such capacity. The term “Co-Trustee” means F. James Hutchinson,
in his capacity as co-trustee hereunder, and any successor co-trustee hereunder,
during the period he or it is serving in such capacity. References to The Bank
of New York or to the Trustee, individually, or similar references shall be
deemed to be references to The Bank of New York in its individual capacity and
not in its capacity as Trustee hereunder and shall be deemed to include its
successors or assigns which serve as Trustee in their individual capacities and
not in their capacities as successor Trustees hereunder.

     Section 1.34. “Unit” or “Trust Unit” means an undivided fractional interest
in the Beneficial Interest determined as hereinafter provided.

     Section 1.35. “Unit Holder” means the owner of one or more Units as shown
by the records of the Trustee pursuant to the provisions of ARTICLE III hereof.

     Section 1.36. “Voting Record Date” means a date selected by the Trustee as
the record date for determining Unit Holders of

( 12 )

 

 

record entitled to notice of and to vote at a meeting of Unit Holders, as
provided in ARTICLE V hereof.

ARTICLE II

Creation, Name and Purpose of Trust

     Section 2.01 — Creation and Name of Trust. The Trust is hereby created
under the Delaware Trust Act as a Delaware business trust for the benefit of the
Unit Holders. The Trust shall be known as the BP Prudhoe Bay Royalty Trust, and
the Trustee may transact all affairs of the Trust in that name. Pursuant to the
Trust Conveyance, SOC has granted, bargained, sold, conveyed, assigned, set over
and delivered the Initial Royalty Interest to the Trust. The Initial Royalty
Interest shall constitute the initial Trust Estate.

     Section 2.02 — Purposes. The purposes of the Trust are (a) to convert the
Royalty Interest to cash either (1) by retaining the Royalty Interest and
collecting the proceeds from production in accordance with the terms of the
Conveyance until production has ceased permanently or the Royalty Interest has
otherwise terminated or (2) by selling or otherwise disposing of the Royalty
Interest (within the limits stated herein); and (b) to distribute such cash, net
of amounts for payment of expenses and liabilities of the Trust, to the Unit
Holders as provided herein.

     It is the intention and agreement of SOC, the Company and the Trustee to
create a grantor trust for federal income tax purposes of which the Unit Holders
are treated as the owners of trust

( 13 )

 

 

income and corpus. As set forth above and amplified herein, the Trust is
intended to be a passive entity limited to the receipt of revenues attributable
to the Royalty Interest and the distribution of such revenues, after payment of
or provision for Trust expenses and liabilities, to the Unit Holders. It is
neither the purpose nor the intention of the parties hereto to create, and
nothing in this Agreement shall be construed as creating, a partnership, joint
venture, joint stock company or similar business association between or among
Unit Holders, present or future, or between or among Unit Holders, or any of
them, and the Trustee or SOC or the Company.

     Section 2.03. — Initial Conveyance. SOC, as depositor and trustor, has
delivered, and the Trustee on behalf of the Trust has accepted, executed copies
of the Initial Conveyance. Accordingly, the Initial Royalty Interest described
therein constitutes the initial Trust Estate. In consideration of the grant of
the Initial Royalty Interest and the execution and delivery of the Support
Agreement, the Trustee is hereby directed to execute and deliver on behalf of
SOC Certificates representing an aggregate of 21,400,000 Trust Units in such
denominations and to the Persons identified by SOC in an Officer’s Certificate
delivered to the Trustee; provided, however, that the Trustee shall not be
obligated to execute and deliver such Certificates to any Person unless such
Person delivers to the Trustee a written instrument evidencing the agreement of
such Person with respect to matters

( 14 )

 

 

set forth in subsections (i) through (iv) of the last paragraph of Section 2.04
hereof.

     Section 2.04. — Additional Conveyances. The Company or an Affiliate may
from time to time grant, assign and deliver unto the Trust one or more
Additional Royalty Interests by executing and delivering to the Trust one or
more Additional Conveyances, and, subject to the conditions set forth below, the
Trustee shall accept on behalf of the Trust the assignment of such Additional
Royalty Interests and the delivery of such Additional Conveyances.

     The obligation of the Trustee to accept the assignment of any such
Additional Royalty Interest shall be subject to the condition that the
Additional Royalty Interest shall be identical in all respects to the Initial
Royalty Interest except for the effective date of the Additional Conveyance
(which must be on the first day of a calendar quarter and must be the date of
delivery thereof to the Trustee), the percentage set forth in the definition of
Royalty Production in the related Additional Conveyance and the identity of the
parties (other than the Trust) to the Additional Conveyance (provided that the
entity which will make payments to the Trust under any Additional Royalty
Interest must be the same entity which will make payments to the Trust under the
Initial Royalty Interest). Any Additional Conveyance must be identical in all
respects to the Initial Conveyance, except for changes which

( 15 )

 

 

may be necessary to ensure that the Additional Royalty Interest conforms to the
conditions set forth herein.

     In consideration of the grant of an Additional Royalty Interest, and in
exchange therefor, the Trustee shall issue, upon receipt of an Officer’s
Certificate containing the direction of the Company or such Affiliate to issue
to the order of the Company or such Affiliate, a number of whole Units in the
Trust not to exceed a total of 18,600,000 additional Units determined by the
following formula:

	 	 	 	 	 	 	 	 	 
	 

	 	Number of Units =
	 	 	A	 	 	x 21,400,000
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	16.4246	%	 	 

where “A” equals the percentage set forth in the definition of “Royalty
Production” in the related Additional Conveyance. In connection with such
issuance, the recipients of such Units and their transferees shall not be
treated as Unit Holders of record entitled to distributions with respect to the
Quarterly Income Amount for the Quarterly Record Date which occurs during the
month in which such Additional Conveyance is effective and shall not be entitled
to transfer such Units (other than to the Company or one of its Affiliates) on
or prior to such Quarterly Record Date, and the Certificates therefor shall
prominently so state.

     The acceptance by the Trustee of any assignment of an Additional Royalty
Interest shall be subject to the condition precedent that the Trustee shall have
received (a) a ruling from the Internal Revenue Service to the effect that
neither the existence

( 16 )

 

 

nor exercise of the right to assign the Additional Royalty Interest, the power
to accept such assignment or the issuance of additional Units as herein
contemplated will adversely affect the classification of the Trust as a “grantor
trust” for federal income tax purposes and (b) a ruling from the Internal
Revenue Service or an unqualified written opinion of counsel to the Trust to the
effect that such assignment will not cause (i) the income from the Trust to be
treated as unrelated business taxable income for federal income tax purposes or
(ii) the Unit Holders to recognize income, gain or loss attributable to the
Royalty Interests as a result of such assignment, except to the extent of any
gain or loss attributable to any cash received by the Trust in connection with
such assignment.

     In addition, the Trustee shall require that the Company or such Affiliate
making the deposit of the Additional Royalty Interest to the Trust pay the
expenses of such assignment and contribute a cash reserve equal to the value of
the cash reserve, if any, existing on the date such Additional Conveyance is
effective multiplied by a fraction whose numerator is the additional number of
Units to be issued and whose denominator is the sum of (a) the number of Units
outstanding immediately preceding such deposit of the Additional Royalty
Interest and (b) the number of Units then to be issued. The Trustee shall invest
the cash, if any, deposited with respect to such cash reserve as provided in
Section 6.07 hereof in investments maturing on the next succeeding Quarterly

( 17 )

 

 

Record Date, and there shall be included in the Quarterly Income Amount
distributed to Unit Holders of record on the Quarterly Record Date which occurs
during the month in which such Additional Conveyance is effective an amount
equal to the sum of (a) the amount so deposited and (b) the interest earned on
such amount from the time it is invested to such Quarterly Record Date.

     Upon acceptance thereof by the Trustee on behalf of the Trust, the
Additional Royalty Interest shall constitute a part of the Trust Estate and, to
the extent permitted by law, shall be treated by the Trustee, together with the
Initial Royalty Interest and all other Additional Royalty Interests previously
assigned to the Trust, as constituting one Royalty Interest held for the benefit
of all Unit Holders.

     Notwithstanding any other provision of this Agreement, with respect to any
Additional Royalty Interest to be conveyed to the Trust prior to the date upon
which the requirements of clauses (i), (ii), (iii) and (iv) of Section 1.20 have
been satisfied (the “Restriction Date”), the Trustee shall not be required to
accept such Additional Royalty Interest on behalf of the Trust unless each
Person who is to be issued Units in connection with such conveyance delivers to
the Trustee a written instrument evidencing the agreement of such Person:

	 	(i)	 	to furnish to the Trustee, from time to time and within five days of
its receipt of a written request from the Trustee, complete and
correct information in a form and

( 18 )

 

 

	 	 	 	manner reasonably acceptable to the Trustee as to whether such Person
is a benefit plan investor (within the meaning of Department of Labor
regulation section 2510.3-101(f)(2)) and, if such Person is a benefit
plan investor, information as to (a) the identity of the employee
benefit plan or plans established or maintained in connection with, or
owning an interest in, such benefit plan investor if such benefit plan
investor is not a “collective investment fund maintained by a bank”
within the meaning of Department of Labor Prohibited Transaction
Exemption 80-51 (a “Fund”) nor an insurance company pooled separate
account within the meaning of Department of Labor Prohibited
Transaction Exemption 78-19 (an “Account”), (b) the identity of the
employee benefit plan or plans owning an interest in excess of five
percent (with all such plans maintained by the same employer or
employee organization treated as a single plan for purposes of this
determination) of all of the assets in such benefit plan investor if
such benefit plan investor is a Fund or an Account, and (c) the
identity of the sponsor of the plan or plans described in subclauses
(a) or (b) above, and (d) information as to whether any Person
designated by the Trustee as a Person with whom the Trust proposes to
engage in a transaction is a “party in interest” (within the meaning

( 19 )

 

 

	 	 	 	of Section 3(14) of ERISA) or a “disqualified person” (within the
meaning of Section 4975(e)(2) of the Code), (collectively referred to
as a “party in interest”), as to such benefit plan investor (including
without limitation, each Plan owning a five percent interest in a Fund
or Account),
	 
	 	(ii)	 	that the Trustee shall be authorized to disclose any information
described in clause (i) above which is provided by such Person to the
Trustee and which may be necessary, in the sole opinion of the
Trustee, in order for the Trustee to perform its duties under this
Agreement,
	 
	 	(iii)	 	to comply in all respects with the recordkeeping and examination
requirements of Section III of (a) Department of Labor Prohibited
Transaction Exemption 80-51 if such Person is a benefit plan investor
which is a Fund, or (b) Department of Labor Prohibited Transaction
Exemption 78-19 if such Person is a benefit plan investor which is an
Account, and
	 
	 	(iv)	 	that such Person will not directly or indirectly transfer any of the
Units to be issued to such Person prior to the Restriction Date unless
the transferee of such Units delivers to the Trustee a written
instrument evidencing its agreement with respect to the matters
described in clauses (i), (ii) and (iii) above and this

( 20 )

 

 

	 	 	 	clause (iv) as if such transferee had received a direct issuance of
Units from the Trust in connection with the conveyance of such
Additional Royalty Interest.

     Section 2.05. — Certificate of Trust. The Trustee shall cause to be filed a
certificate of trust in the office of the Secretary of State of Delaware in
compliance with Section 3810 of the Delaware Trust Act.

     In the event that the Trustee becomes aware that any statement contained or
any matter described in the certificate of trust has changed making the
certificate false in any material respect, the Trustee shall promptly file a
certificate of amendment in the office of the Secretary of State of Delaware in
compliance with Section 3810 of the Delaware Trust Act. Upon the termination of
the Trust pursuant to Section 9.01 of this Agreement, the Trustee shall file a
certificate of cancellation in the office of the Secretary of State of Delaware
in compliance with Section 3810 of the Delaware Trust Act.

     Section 2.06. — Acceptance by Trustee. The Trustee, by joining in the
execution of this Agreement, accepts the Trust herein created and provided for
and accepts all of the rights, powers, privileges, duties and responsibilities
of the Trustee hereunder and agrees to exercise and perform the same in
accordance with the terms and provisions contained herein.

     Section 2.07. — Registration of the Units. In connection with the
contemplated registration of the Units under the

( 21 )

 

 

Securities Act of 1933, as amended, if required by the Securities and Exchange
Commission, the Company, or its designee, is hereby granted full power and
authority to sign on behalf of the Trust such registration statements and any
amendments, including post-effective amendments and any other related documents
relating to the Units as may be necessary to effect or to continue in effect
such registration.

ARTICLE III

Creation of Units and Certificates

     Section 3.01 — Creation of Units. The entire Beneficial Interest shall
initially be divided into 21,400,000 Units.

     If at any time there is assigned to the Trust an Additional Royalty
Interest pursuant to Section 2.04 hereof, the Beneficial Interest shall
thereafter be considered to be divided into a number of Units equal to the sum
of the number of Units existing prior to such assignment and the number of Units
created upon such assignment pursuant to Section 2.04 hereof, and upon the
acceptance of such assignment, the Trustee shall cause to be issued in
accordance with Section 2.04 hereof new Certificates representing the number of
Units created upon such assignment.

     Section 3.02 — Certificates as Evidence of Ownership of Units. The
ownership of the Units shall be evidenced by Certificates in substantially the
form set forth in Exhibit B attached hereto. Except as otherwise provided in
Sections 2.04 and 3.08

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hereof and notwithstanding anything else stated herein, the Trustee may for all
purposes set forth in this Agreement, including, without limitation, the making
of distributions and voting, treat the holder of any Certificate as shown by the
records of the Trustee maintained pursuant to Section 3.06 hereof as the owner
of the Units evidenced thereby.

     Section 3.03. — Rights of Unit Holders. Except as otherwise specifically
provided herein, the Unit Holders shall own pro rata the Beneficial Interest and
shall be entitled to participate pro rata in the rights and benefits of Unit
Holders under this Agreement. A Unit Holder by assignment or otherwise shall
take and hold the same subject to all the terms and provisions of this Agreement
and the Conveyance, which shall be binding upon and inure to the benefit of the
successors, assigns, legatees, heirs and personal representatives of the Unit
Holder. By an assignment or transfer of one or more Units, the assignor thereby
shall, effective as of the close of business on the date of transfer and with
respect to such assigned or transferred Unit or Units, part with, except as
provided in Sections 3.06 and 4.02 hereof in the case of a transfer after a
Quarterly Record Date and prior to the corresponding Distribution Date, (a) all
of his Beneficial Interest attributable thereto, (b) all of his rights in, to
and under such Unit or Units and (c) all interests, rights and benefits under
this Agreement of a Unit Holder that are attributable to such Unit or Units as
against all other Unit Holders, the Trust

( 23 )

 

 

and the Trustee.

     Section 3.04. — Character of Rights. The sole interest of each Unit Holder
shall be his pro rata portion of the Beneficial Interest and the obligations of
the Trust expressly created under this Agreement with respect to the Beneficial
Interest. Such interest of a Unit Holder is and shall be construed for all
purposes (except for tax purposes) to be intangible personal property, and no
Unit Holder as such shall have any legal title in or to any real property
interest that is a part of the Trust Estate including, without limiting the
foregoing, the Royalty Interest or any part thereof. No Unit Holder shall have
the right to seek or secure any partition or distribution of the Royalty
Interest or any other asset of the Trust Estate or any accounting during the
term of the Trust or during the period of liquidation and winding up under
Section 9.02 hereof.

     Section 3.05. — Form, Execution and Dating of Certificates. The
Certificates may contain such changes of form, but not substance, as the
Trustee, from time to time in its discretion, may deem necessary or desirable.
In addition, the Certificates shall contain such changes (not inconsistent with
the provisions of this Agreement) as from time to time may be required to comply
with any rule or regulation of any stock exchange on which the Units are listed.
Each Certificate shall be dated the date of its issuance. Each Certificate shall
be signed on behalf of the Trust by a duly authorized signatory of the Trustee
(which signature may be a

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facsimile to the extent permitted by law or regulations of any stock exchange on
which the Units are listed) and may be sealed with the seal of the Trustee or a
facsimile thereof.

     Pending the preparation of definitive Certificates, the Trustee shall
execute, and the Transfer Agent and Registrar (as provided in Section 3.06
hereof) shall record, countersign and register, temporary Certificates, as
directed in an Officer’s Certificate of SOC. Temporary Certificates may contain
such references to any provisions of this Agreement as may be appropriate. Every
temporary Certificate shall be executed by the Trustee and recorded,
countersigned and registered upon the same conditions and in substantially the
same manner, and with like effect, as the definitive Certificates.

     As promptly as practicable, the Trustee shall execute and furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge to the Unit Holders at the principal
corporate trust office of The Bank of New York at which Certificates may be
presented for a transfer pursuant to Section 3.06 hereof, and the Transfer Agent
and Registrar shall record, countersign and register in exchange for such
temporary Certificates a like aggregate amount of definitive Certificates. Until
so exchanged, the temporary Certificates shall be entitled to the same benefits
under this Agreement as definitive Certificates.

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     Section 3.06 — Registration and Transfer of Units. With respect to the
issuance of the initial Certificates representing ownership of the Units
(including Certificates issued pursuant to Section 2.04 hereof) and upon
subsequent transfer of such Certificates in accordance with the provisions of
this Section 3.06, the Trustee shall maintain records that reflect the name and
address of the holder of each Certificate, the number of Units represented by
each Certificate, the date of issuance and/or transfer of each Certificate, the
name of each transferee of a Certificate and any other such information as the
Trustee shall deem necessary or advisable.

     Until the Units have been registered under the Securities Act of 1933, as
amended (the “Act”), and qualified under the securities laws of the various
states in which qualification is required, the Units may not be transferred
except pursuant to the provisions of Rule 144 or, if adopted, Rule 144A under
the Act or another exemption from registration under the Act, provided that
prior to any such proposed transfer (other than a transfer to an affiliated
company), the holder of the Trust Units to be transferred shall give written
notice to the Company and the Trustee of such holder’s intention to effect such
transfer, which notice shall be accompanied by an unqualified written opinion of
legal counsel, which counsel (who the Company and the Trustee acknowledge may be
counsel in the employ of the transferring Unit Holder) and opinion (in form,
scope and substance) shall be reasonably

( 26 )

 

 

satisfactory to the Company and the Trustee, to the effect that the proposed
transfer of such Trust Units may be effected without registration under the Act
and applicable state securities laws. Further, until the requirements of clauses
(i), (ii), (iii) and (iv) of Section 1.20 have been satisfied (and for purposes
of this agreement, such requirements shall be deemed to be satisfied
simultaneously with the delivery of the opinion required by clause (iv) of
Section 1.20), the Units may not be transferred unless the Trustee shall have
received a written instrument from the proposed transferee evidencing its
agreement with respect to the matters described in clauses (i), (ii), (iii) and
(iv) of the last paragraph of Section 2.04 hereof (applied without regard to
whether the Units were originally acquired in connection with an Additional
Conveyance or the Initial Conveyance). Except as set forth in the preceding
sentences of this paragraph and as set forth in Section 2.04 hereof, all Units
shall be freely transferable, but (except as otherwise provided in Section 6.12
hereof) no transfer of any Unit shall be effective as against the Trustee prior
to entry on the records of the Trustee upon the surrender of the Certificate or
Certificates evidencing ownership of such Unit or Units (or upon compliance with
the provisions of Section 3.07 hereof) and compliance with such reasonable
regulations and requirements, including but not limited to such instruments of
transfer, including signature guarantees of a broker or bank located, or having
a correspondent located, within New York City,

( 27 )

 

 

as the Trustee may prescribe. Certificates shall be presented for transfer at
the principal corporate trust office of The Bank of New York or at such office
or agency of the Trustee as the Trustee shall maintain (and hereby agrees to
maintain) in the Borough of Manhattan, in the event the Units are listed on any
stock exchange.

     The Trustee hereby appoints The Bank of New York as Transfer Agent and
Registrar for the registration of transfer of Units. The Trustee may in its sole
discretion remove The Bank of New York as Transfer Agent and Registrar and
appoint such one or more other Transfer Agents and Registrars as it deems
appropriate.

     No service charge will be made by the Trustee to the transferor or
transferee of a Certificate for any transfer of a Unit evidenced by the
transferred Certificate, but the Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation to
such transfer. Until any such transfer, the Trustee may treat the holder of any
Certificate as shown by its records as the owner of the Units evidenced thereby
and shall not be charged with notice of any claim or demand respecting such
Certificate or the interest represented thereby by any other party. Any such
transfer of a Unit as evidenced by a transfer of a Certificate shall, as to the
Trustee, transfer to the transferee of the Certificate as of the close of
business on the date of transfer all of the undivided right, title and interest
of the transferor in and to the Beneficial Interest,

( 28 )

 

 

provided that, as to the Trustee, a transfer of a Certificate after any
Quarterly Record Date shall not transfer to the transferee of such Certificate
the right of the transferor of the Certificate to any sum payable to the
transferor as the holder of record of the Certificate on such Quarterly Record
Date. However, nothing stated herein shall affect the right of the Trustee to
act in accordance with Sections 3.07 and 6.12 hereof.

     Notwithstanding the foregoing, in the event that the Trust receives an
amount which will comprise, in whole or in part, a Quarterly Income Amount on a
day other than a Quarterly Record Date, the Trustee may notify Unit Holders of
the fact of such receipt by any means, including a press release, which the
Trustee deems appropriate in the circumstances.

     As to matters affecting the title, ownership, warranty or transfer of
Certificates, Article 8 of the Uniform Commercial Code, the Uniform Act for
Simplification of Fiduciary Security Transfers and other statutes and rules with
respect to the transfer of securities, each as adopted and then in force in the
State of Delaware, shall govern and apply. The death of any Unit Holder shall
not entitle such Unit Holder’s transferee to an accounting or valuation for any
purpose, but as to the Trustee, the transferee of a deceased Unit Holder shall
succeed to all rights of the deceased Unit Holder under this Agreement upon
proper proof of title satisfactory to the Trustee.

( 29 )

 

 

     Upon the Trustee’s receipt of written notice of the death of a Unit Holder,
the Trustee may refuse to effect the transfer of any Units held by such deceased
Unit Holder until it has received satisfactory evidence of compliance with all
tax, probate and other requirements of applicable law.

     Section 3.07 — Mutilated, Destroyed, Lost or Stolen Certificates. In the
event that any Certificate is mutilated, destroyed, lost or stolen, the Trustee
shall, if the conditions in this section are met and the Trustee has not
received notice that such Certificate has been acquired by a bona fide holder,
issue to the holder of such Certificate as shown by the records of the Trustee a
new Certificate in exchange and substitution for the mutilated Certificate or in
lieu of and substitution for the Certificate so destroyed, lost or stolen. In
every case, the applicant for a substituted Certificate shall furnish to the
Trust and the Trustee such security or indemnity as the Trustee may reasonably
require to save the Trust and the Trustee harmless and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Trustee
evidence to the Trustee’s reasonable satisfaction of the destruction, loss or
theft of such Certificate. Upon the issuance of any substituted Certificate, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses incurred in connection therewith.

( 30 )

 

 

     Section 3.08 — Protection of Trustee. The Trustee shall be protected in
acting upon any notice, stock power, Royalty Statement, Officer’s Certificate,
opinion of counsel, report of certified public accountant, any petroleum
engineer or auditor or other expert, credential, certificate, instrument of
assignment or transfer or other document or instrument reasonably believed by
the Trustee to be genuine and correct and to be signed or sent by the proper
party or parties. The Trustee is specifically authorized to rely upon the
application of Article 8 of the Uniform Commercial Code, the Uniform Act for
Simplification of Fiduciary Security Transfers and other statutes and rules with
respect to the transfer of securities, each as adopted and then in force in the
State of Delaware, as to all matters affecting title, ownership, warranty or
transfer of Certificates and the Units represented thereby, without any personal
liability for such reliance, and the indemnity granted pursuant to Section
7.02(a) hereof shall specifically extend to any matters arising as a result
thereof.

     Section 3.09 — Transfer Agent and Registrar. Any references in this ARTICLE
III to the rights and duties of the Trustee with respect to the transfer or
registration of Certificates shall also be deemed to be references to the
Transfer Agent and Registrar acting hereunder.

     Section 3.10 — Limitation of Personal Liability of Unit Holders. Unit
Holders shall, to the full extent permitted by Section 3803 of the Delaware
Trust Act, be entitled to the same

( 31 )

 

 

limitation of personal liability extended to stockholders of private
corporations for profit under the laws of the State of Delaware.

ARTICLE IV

Accounting and Distribution

     Section 4.01 — Fiscal Year and Accounting Method. Except as otherwise
required pursuant to Section 4.03 hereof, the fiscal year of the Trust shall be
the calendar year. The Trustee shall maintain the books of the Trust on a cash
basis, in accordance with generally accepted accounting practices, except to the
extent that such books must be kept on any other basis pursuant to applicable
law.

     Section 4.02 — Distributions. On the fifth day after the Trustee’s receipt
in same day finally collected funds of amounts to be received on a Quarterly
Record Date for each Quarter in each year during the term of the Trust or if
such day is not a Business Day on the next succeeding Business Day, the Trustee
shall distribute the Quarterly Income Amount for the Quarter to which such
Quarterly Record Date relates to the Unit Holders of record on such Quarterly
Record Date (except those Unit Holders which, pursuant to Section 2.04 hereof,
are not treated as Unit Holders of record entitled to distributions with respect
to the Quarterly Income Amount for such Quarterly Record Date) in proportion to
the Units owned by each such Unit Holder; provided that during any

( 32 )

 

 

period prior to the Opinion Date which is not an Insignificant Investor Period,
the Trustee shall distribute such Quarterly Income Amount (including amounts
referred to in the last sentence of this Section 4.02) on or as soon as
practicable following the Quarterly Record Date and such amounts shall be held
uninvested in a non-interest bearing account. Payment of each Unit Holder’s pro
rata portion of the Quarterly Income Amount shall be made by check or draft
mailed to each of the Unit Holders. Notwithstanding the foregoing, payments of
$100,000 or more shall be made to any Unit Holder who enters into an agreement
with the Trustee providing for such payments by wire transfer in immediately
available funds to an account of such Unit Holder as specified in the agreement.
The Trustee shall, upon the request of any such Unit Holder, enter into such an
agreement unless such agreement adversely affects The Bank of New York’s own
rights, duties or immunities under this Agreement or otherwise, in which case
the Trustee may, but shall not be obligated to, enter into such an agreement.
Except as otherwise provided in any such agreement, if, pursuant to the last
sentence of the first paragraph of Section 1.24, the Trustee treats amounts
received after a Quarterly Record Date as if they were received on such
Quarterly Record Date, the distributions of such amounts shall be made on the
fifth day after the date of receipt thereof by the Trust in finally collected
same day funds or if such day is not a Business Day, on the next succeeding
Business Day.

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     Section 4.03 — Income Tax Withholdings and Reporting. For federal and
Alaska state income tax purposes, the Trustee shall effect such withholdings and
file such returns and statements as in its judgment are required to comply with
applicable provisions of the Code and the regulations thereunder and any Alaska
state income tax laws and regulations thereunder.

     Section 4.04 — Reports to Unit Holders. As promptly as practicable
following the end of each calendar year of the Trust, but no later than 90 days
following the end of each calendar year, the Trustee shall mail to each Person
who was a Unit Holder of record at any time during such calendar year a report
containing sufficient information to enable Unit Holders to make all
calculations necessary for federal and Alaska tax purposes, including the
calculation of any depletion deduction which may be available to them for such
calendar year.

     As promptly as practicable following the end of each Quarter during the
term of the Trust, but no later than 60 days following the end of each such
Quarter, the Trustee shall mail to each Person who was a Unit Holder of record
on the Quarterly Record Date immediately preceding the distribution of such
report a report showing in reasonable detail on a cash basis the assets and
liabilities, receipts and disbursements and income and expenses of the Trust and
the Royalty Production (as that term is defined in the overriding Royalty
Conveyance) for such Quarter.

( 34 )

 

 

     Within 90 days following the end of each calendar year (or at such earlier
time as may be required by any stock exchange on which the Units are listed),
the Trustee shall mail to each Person who was a Unit Holder of record on the
Quarterly Record Date immediately preceding the distribution of such report an
annual report containing (a) financial statements audited by a nationally
recognized firm of independent public accountants retained by the Trust for such
purposes, (b) a certification by such firm stating whether or not all fees and
expenses paid by the Trust to the Trustee from the beginning of such calendar
year through the first Quarterly Record Date in the next following year were
calculated and paid in accordance with this Agreement and setting forth any
exceptions as may be noted by such firm, (c) such information as the Trustee
deems appropriate from a letter of the Independent Accountants (as such term is
defined in the Overriding Royalty Conveyance) which has been provided to the
Trustee stating whether or not, based on procedures set forth in detail in such
letter (i) the Company has complied in all material respects with the terms and
provisions of the Overriding Royalty Conveyance, Article Three and Article Four,
Sections 4.1 to 4.7 inclusive, and comparable provisions of any Additional
Conveyance, and (ii) the amounts payable to the Trust in respect of the Royalty
Interest have been accurately computed, and setting forth any exceptions to the
foregoing matters as may be noted by such firm (d) a letter of the Independent
Petroleum Engineers (as such term is defined in

( 35 )

 

 

the Overriding Royalty Conveyance) setting forth a summary of such firm’s
determinations regarding the Company’s methods, procedures and estimates
referred to in Section 4.8(d) of the Overriding Royalty Conveyance (and similar
provisions of any Additional Conveyance) and (e) copies of the latest annual
report or reports, if any, with respect to the Units filed with the Securities
and Exchange Commission or, if no such report is filed, a summary of the
information furnished to the Trustee pursuant to Section 4.8(c) of the
Overriding Royalty Conveyance (and similar provisions of any Additional
Conveyance). The Trust shall engage annually a nationally recognized firm of
independent public accountants, a firm of Independent Accountants (which may be
the same firm as the nationally recognized firm of independent public
accountants) and a firm of Independent Petroleum Engineers in order to furnish
such services as are required to permit the Trustee to perform its obligations
under this Section 4.04.

     The Trustee shall mail to Unit Holders any other reports or statements,
financial or otherwise, required to be provided to Unit Holders by law or
governmental regulation or the requirements of any stock exchange on which the
Units are listed.

     Section 4.05 — Information to be Supplied by the Company. The Company shall
provide to the Trustee on a timely basis upon request such information not known
or otherwise available to the Trustee concerning the Royalty Interest (including
information with respect to the properties burdened by the Royalty

( 36 )

 

 

Interest) as shall be necessary to permit the Trustee to comply with respect to
the Trust with the reporting obligations of the Trust pursuant to the Securities
Exchange Act of 1934, as amended, the requirements of any stock exchange on
which the Units are listed and this Agreement and for any other reasonable
purpose of the Trust.

     The Company hereby agrees to indemnify The Bank of New York, the Trustee
and the Trust, against any loss, liability, damage and expense (including
reasonable attorneys’ fees) incurred by The Bank of New York, the Trustee or the
Trust as a result of or arising out of any of the information provided to the
Trustee by the Company pursuant to this Section 4.05 being untimely, incorrect,
misleading or untrue in any material respect.

     Section 4.06 — Information to be Provided to the Company. To the extent the
Company is required to file any report with respect to the Trust with any stock
exchange on which the Units are listed or any governmental authority, the
Trustee will provide to the Company on a timely basis upon the Company’s request
such information with respect to the Trust and the Trustee that is not within
the knowledge of the Company and that is necessary to the Company’s ability to
make such filing or such report. The Company shall be indemnified by the Trustee
(which shall in turn be indemnified to the extent provided pursuant to Section
7.02(a) hereof) against any loss, liability, damage and expense (including
reasonable attorneys’ fees) incurred by the Company as a result of

( 37 )

 

 

or arising out of any of the information provided to the Company by the Trustee
pursuant to this Section 4.06 being untimely or incorrect or untrue in any
material respect. Any indemnification by the Trustee of the Company pursuant to
this Section 4.06, except for indemnification which relates to any such
information concerning The Bank of New York, shall be limited to amounts
actually received by the Trustee for such purposes from the Trust Estate.

ARTICLE V

Meetings of Unit Holders

     Section 5.01 — Purpose of Meetings. A meeting of the Unit Holders may be
called at any time and from time to time pursuant to the provisions of this
ARTICLE V to act with respect to any matter regarding which the Unit Holders are
authorized to act by the express terms of this Agreement.

     Section-5.02 — Call and Notice of Meetings. Any such meeting of the Unit
Holders may be called by the Trustee in its discretion and will be called by the
Trustee (i) as soon as practicable after receipt of a written request by the
Company or (ii) as soon as practicable after receipt of a written request that
sets forth in reasonable detail the action proposed to be taken at such meeting
and is signed by unit Holders owning not less than 25 percent of the then
outstanding units or (iii) as may be required by applicable law or regulations
of any stock exchange on which the Units

( 38 )

 

 

are listed. Except as may be otherwise required by applicable law or by any
stock exchange on which the Units are listed, written notice signed by the
Trustee (which signature may be a facsimile) of every meeting of the Unit
Holders setting forth the time and place of such meeting and in general terms
the matters proposed to be acted upon at such meeting shall be given in person
or by mail not more than 60 nor fewer than 10 days before such meeting is to be
held to all Unit Holders of record on a date (“Voting Record Date”) selected by
the Trustee, which Voting Record Date shall not be more than 60 days before the
date of such meeting. If such notice is given to any Unit Holder by mail, it
shall be directed to him at his last address as shown by the records of the
Trustee and shall be deemed to have been duly given when so addressed and
deposited in the United States mail, postage prepaid. No matter other than that
stated in the notice shall be acted upon at any meeting. All such meetings shall
be held at such time and place in the Borough of Manhattan, The City of New
York, as the notice of any such meeting may designate.

     Section 5.03 — Voting. Only a Person who was a Unit Holder on the Voting
Record Date (“Record Date Unit Holder”) shall be entitled to be present,
speak or vote at any such meeting. A person appointed by an instrument in
writing as a proxy for such Record Date Unit Holder shall be entitled at such
meeting to exercise all rights exercisable by such Record Date Unit Holder as if
such Record Date Unit Holder attended such meeting and exer-

( 39 )

 

 

cised such rights in person. In addition, any representative of the Company and
the Trustee shall be entitled to be present, speak and generally to participate
in any such meeting. All references in this Agreement to Record Date Unit
Holders shall mean either such Record Date Unit Holder or his duly appointed
proxy.

     At any such meeting, the presence in person or by proxy of Record Date Unit
Holders holding Certificates representing a majority of the Units outstanding on
the Voting Record Date shall constitute a quorum and, unless otherwise provided
in this Agreement, any matter shall be deemed to have been approved if it is
approved by the Vote of Record Date Unit Holders holding Certificates
representing a majority of the Units represented at the meeting. Each Record
Date Unit Holder shall be entitled to one vote for each Unit represented by the
Certificate or Certificates held by him. The Trustee, subject to all applicable
laws, may solicit from and vote proxies of Unit Holders entitled to vote at any
meeting thereof.

     Section 5.04 — Conduct of Meetings. The Trustee may make such reasonable
regulations as it may deem advisable governing the conduct of any such meeting
including, without limitation, provisions governing the appointment of proxies,
the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidences of the right to vote,
the preparation and use at the meeting of a list of the Persons

( 40 )

 

 

entitled to vote at the meeting and the appointment of a chairman and secretary
of the meeting.

     Section 5.05. Voting of Units Held by Company, SOC and Their Respective
Affiliates. SOC and the Company agree that, at any meeting of Unit Holders, they
will vote or cause to be voted any Units held of record or beneficially by the
Company, SOC or any Affiliate of either of them in the same proportion as the
Units voted by other Unit Holders voting at such meeting.

ARTICLE VI

Administration of Trust and Powers of Trustee

     Section 6.01 — General Authority. Subject to the limitations set forth in
this Agreement, 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 appointment of an ancillary trustee or trustees under
this Agreement, the solicitation and voting of proxies at meetings of Unit
Holders, the taking of appropriate action to enforce the terms of the
Conveyances and the Support Agreement (including the institution of any actions
or proceedings at law or in equity necessary to the foregoing) and the authority
to agree to modifications of the terms of the Conveyances or the Support
Agreement or to settle disputes with respect thereto, so long as (i) the Trustee
shall have received an unqualified written opinion of counsel to the Trust to
the effect that such modification or

( 41 )

 

 

settlement will not adversely affect the classification of the Trust as a
“grantor trust” for federal income tax purposes or cause the income from the
Trust to be treated as unrelated business taxable income for federal income tax
purposes, and (ii) such modifications or settlements do not alter the nature of
or the amount or time of receipt of payments under the Royalty Interest. The
Trustee shall not be (i) obligated or permitted to make any investment or
operating decision or otherwise physically inspect the properties burdened by
the Royalty Interest or (ii) obligated to prevent drainage or any other event or
state of facts which damages or diminishes the value of the Royalty Interest.
The Trustee is authorized to execute the Trust Conveyance and the Support
Agreement on behalf of the Trust. The Trustee is authorized to and shall take
such actions as in its judgment are necessary or advisable to give such
approvals as may be appropriate under the Conveyance, and to make such requests
as in its judgment are necessary or advisable under Section 4.8 of the
Overriding Royalty Conveyance or any comparable provision of any Additional
Conveyance, in order to preserve and protect the Trust Estate and to discharge
its other duties hereunder.

     The Company and the Trustee are hereby authorized to make and shall be
responsible for all filings on behalf of the Trust with the Securities and
Exchange Commission required by the Exchange Act and with the Securities and
Exchange Commission or such other

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governmental authorities required by applicable law or regulation with respect
to the Units as may be specified from time to time in an Officer’s Certificate
delivered to the Trustee. It is the expectation of the Company that the Units
may, in the future, be listed on the New York Stock Exchange or another stock
exchange. In this regard, the Company will advise the Trustee of any actions
that the Trustee should take in connection with effectuating such listing and,
unless the Trustee shall determine that such actions are not in the best
interest of the Trust, the Trustee shall take such actions. If listing is
accomplished, the Trustee will take all actions necessary to maintain such
listing including compliance with the rules of the stock exchange and the filing
of any reports required by the stock exchange; provided, however, that if at any
time the Company shall have informed the Trustee in writing that, in the opinion
of the Company, such listing is not in the best interest of the Unit Holders or
the interests of the Unit Holders would be better served by listing the Units on
another stock exchange as specified by the Company, then the Trustee shall as
soon as practicable call a meeting of Unit Holders in accordance with the
provision of ARTICLE V hereof and submit to a vote of Unit Holders at such
meeting a proposal to delist the Units, or to delist the Units and list the
Units on another stock exchange as specified by the Company; if such proposal is
a approved at such meeting by the affirmative vote of the Record Date Unit
Holders

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holding Certificates representing a majority of the Units represented at such
meeting in accordance with ARTICLE V, the Company will seek to accomplish the
delisting, or the delisting and listing on such other stock exchange, without
the involvement of the Trustee, but if the Company determines that action by the
Trustee is necessary, the Company will instruct the Trustee regarding what
actions the Trustee must take in order to accomplish such delisting, or
delisting and listing on such other stock exchange; in such event the Trustee
shall take such action, if any, as shall be specified by the Company in order to
accomplish the delisting of the Units from their then current stock exchange or
such delisting and listing of the Units on such other stock exchange. The
Company agrees to consider, on a periodic basis, whether or not such listing is
in the best interest of the Unit Holders and whether the interests of the Unit
Holders would be better served by listing the Units on another stock exchange,
and the Company agrees that if it should reach either conclusion it will furnish
appropriate notice in writing to the Trustee.

     The Trustee may not dispose of all or any portion of the Royalty Interest
except as provided in Sections 6.O2, 6.06 or 9.02 hereof.

     Section 6.02 — Limited Power to Dispose of Royalty Interest and Other Trust
Interests. (a) The Trustee shall not sell or otherwise dispose of all or any
part of the Trust Estate, in-

( 44 )

 

 

cluding all or any part of the Royalty Interest, or any interest therein, except
that

     (i) the Trustee shall make cash distributions to Unit Holders and pay the
liabilities of the Trust as provided herein,

     (ii) the Trustee shall sell or otherwise dispose of all or a part of the
Royalty Interest or an interest therein if, prior thereto, such sale or other
disposition and all material terms and conditions thereof (including, if
practicable, the record date for determining Unit Holders of record entitled to
receive any cash to be distributed as a result of such sale) are approved by the
affirmative vote of the Record Date Unit Holders holding Certificates
representing 70% of the Units outstanding on the Voting Record Date if such sale
is to be effected on or prior to December 31, 2010, or 60% of the Units
outstanding on the Voting Record Date if such sale is to be effected thereafter,
in each case at a meeting duly called and held in accordance with the provisions
of ARTICLE V hereof (provided that if the terms or conditions of such sale or
other disposition adversely affect The Bank of New York’s own rights, duties or
immunities under this Agreement or otherwise, the Trustee may in its discretion,
but shall not be obligated to, effect such sale or other disposition); provided,
however, that if such sale is effected in order to provide for the payment of
specific liabilities of the Trust then due and involves a part, but not all or
substantially all, of the Trust Estate, such sale shall be approved by the
affirmative vote of the Record

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Date Unit Holders holding Certificates representing a majority of the Units
outstanding on the Voting Record Date for such meeting,

     (iii) the Trustee shall mortgage, pledge, grant security interests in or
otherwise encumber the Trust Estate, or a portion thereof, if required pursuant
to Section 6.06 or 6.12 hereof,

     (iv) the Trustee shall dispose of the Trust Estate if required pursuant to
Section 9.02 hereof,

     (v) the Trustee shall sell for cash the Trust Estate, or a portion thereof,
if and to the extent that

     (1) the Trustee is unable to effect a borrowing by the Trust, as specified
in sections 6.06 or Section 6.12 hereof,

     (2) the Trustee determines that it is not practicable to submit such sale
and all material terms and conditions thereof to a vote of the Unit Holders
pursuant to clause (ii) of this paragraph (a) above,

     (3) such sale is effected in order to provide for the payment of specific
liabilities of the Trust then due, and the cash on hand is insufficient to
discharge such liabilities,

     (4) the Trustee determines that the failure to pay such liabilities at such
time will be contrary to the best interest of the Unit Holders and that such
sale is necessary to provide for the payment of such liabilities,

     (5) the sale is effected at a price which, in the opinion of an investment
banking firm, commercial banking firm or other Person qualified to render such
opinion and selected by the

( 46 )

 

 

Trustee, is at least equal to the fair market value of the interest sold, and
the sale is effected pursuant to terms and conditions which, in the opinion of
such investment banking firm, commercial banking firm or other Person, are
commercially reasonable when compared to alternatives available to the Trust,
and

     (6) the Trustee has received an unqualified written opinion of counsel to
the Trust to the effect that such sale will not adversely affect the
classification of the Trust as a “grantor trust” for federal income tax purposes
or cause the income from the Trust to be treated as unrelated business taxable
income for federal income tax purposes; provided, however, that if the Trustee
is unable to obtain such opinion the Trustee shall nevertheless effect such sale
if the Trustee determines that the failure to effect such sale will be
materially detrimental to the Unit Holders considered as a whole.

     (b) The Trustee shall distribute any cash received as a result of any such
sale pursuant to clause (ii) of paragraph (a) above, subject to the need to pay
any liabilities of the Trust or to establish or increase any cash reserves
pursuant to Section 6.07 hereof, or any cash received as a result of a sale
pursuant to clause (v) of paragraph (a) which is in excess of the amount needed
to discharge liabilities of the Trust then due, to Unit Holders of record as
specified in connection with the Unit Holder vote or, if there is no Unit Holder
vote or no record date for determining Unit Holders of record entitled to
receive any cash to

( 47 )

 

 

be distributed as a result of such sale is so specified, to Unit Holders as part
of the Quarterly Income Amount distributed with respect to the first Quarterly
Record Date following the date of any such sale (unless such sale occurs on a
Quarterly Record Date or within ten days prior to a Quarterly Record Date in
which event the distribution may be on such Quarterly Record Date unless the
Trustee determines that such an immediate distribution would prevent the Trust
from complying with applicable law or any regulation of any stock exchange on
which the Units are listed).

     Section 6.03 — No Power to Engage in Business or Make Investments.
Notwithstanding any provision of the Delaware Trust Act, the Trustee shall not
cause the Trust to engage in any business, commercial or investment activity of
any kind whatsoever, except for investment activity permitted in Section 6.07
hereof, and shall not under any circumstances use any portion of the Trust
Estate to acquire any oil and gas lease, royalty or other mineral interest or,
except as permitted in Sections 6.07 and 6.12, acquire any other asset. The
Trustee shall not accept any contribution to the Trust other than the Initial
Royalty Interest, any Additional Royalty Interest and any cash required to be
deposited pursuant to Section 2.04 hereof; provided that nothing herein shall be
construed to prevent the Trust from receiving the benefits of the Conveyance and
the Support Agreement.

     Section 6.04 — Payment of Liabilities of Trust. The Trustee is authorized
to and shall first apply all money received by it

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(other than amounts contributed under Section 2.04 hereof with respect to any
cash reserve) for the payment of all liabilities of the Trust, including but not
limited to all expenses, taxes and liabilities incurred of all kinds,
compensation to it for its services and reimbursement of its expenses pursuant
to Sections 7.03 and 7.04 hereof and compensation to such parties as may be
consulted pursuant to Section 7.05 hereof.

     Section 6.05 — Timing of Trust Income and Expenses. The Trustee will use
reasonable efforts to cause the Unit Holders to recognize income (including any
income from interest earned on investments made in accordance with this
Agreement or from any sale of the Royalty Interest, except as may be specified
in a vote of Unit Holders in the case of a sale pursuant to clause (ii) of
paragraph (a) of Section 6.02 hereof) and expenses on Quarterly Record Dates.
The Trustee will invoice the Trust for services rendered by the Trustee and, to
the extent provided in Section 7.04 hereof, reimbursement of expenses incurred
by the Trustee relating to the Trust only on a Quarterly Record Date and shall
cause the Trust to pay such invoice only on the Quarterly Record Date on which
such invoice is rendered and will use reasonable efforts to cause all Persons to
whom the Trust becomes liable to invoice the Trust for such liability on a
Quarterly Record Date and to cause the Trust to pay such liability on the
Quarterly Record Date on which such liability is invoiced. In connection with
the requirements of any stock exchange on which the Units are

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listed, the Trustee will, if required by such stock exchange, use reasonable
efforts to determine the Quarterly Income Amount and report such amount to such
stock exchange at such time as may be required by such stock exchange; provided
that the Trustee shall not be required to calculate any amounts payable pursuant
to the Conveyance. Nothing in this Section 6.05 shall be construed as requiring
the Trustee to cause payment to be made for Trust liabilities on any date other
than on such date as in its sole discretion it shall deem to be in the best
interests of the Unit Holders.

     Section 6.06 — Limited Power to Borrow. If at any time the amount of cash
on hand (which amount shall not include any amounts which have been reported to
a stock exchange on which the Units are listed or otherwise publicly announced
as the amount which will be paid to Unit Holders with respect to a Quarterly
Record Date and which amounts have not been paid) is not sufficient to pay
liabilities of the Trust then due (including any amount payable upon redemption
of Units pursuant to Section 6.12 hereof), the Trustee shall borrow from another
Person not affiliated with the Trustee, on a secured or unsecured basis, such
amounts as are required after use of any available Trust funds to pay such
liabilities as have become due; provided that the Trustee shall effect such
borrowing only under the following conditions:

     (a) the Trustee shall have determined that it is not practical to pay such
liabilities on subsequent Quarterly Record Dates

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out of funds anticipated to be available on such dates and that, in the absence
of such borrowing, the Trust Estate is subject to the risk of loss or diminution
in value;

     (b) the borrowing is effected pursuant to terms and conditions which, in
the opinion of an investment banking firm, commercial banking firm or other
Person qualified to render such opinion and selected by the Trustee, are
commercially reasonable when compared to alternatives available to the Trust,
and

     (c) the Trustee shall have received an unqualified written opinion of
counsel to the Trust to the effect that such borrowing will not adversely affect
the classification of the Trust as a “grantor trust” for federal income tax
purposes or cause the income from the Trust to be treated as unrelated business
taxable income for federal income tax purposes; provided, however, that if the
Trustee is unable to obtain such opinion the Trustee shall nevertheless effect
such borrowing if the Trustee determines that the failure to effect such
borrowing will be materially detrimental to the Unit Holders considered as a
whole.

     To secure payment of such indebtedness, the Trustee is authorized to
mortgage, pledge, grant security interests in or otherwise encumber (and to
include as a part thereof any and all terms, powers, remedies, covenants and
provisions deemed necessary or advisable in the Trustee’s discretion including,
without limitation, the power of sale with or without judicial proceedings) the
Trust Estate, or any portion thereof, including the Royalty

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Interest and to carve out and convey production payments. The Trustee is
prohibited from borrowing in its capacity as Trustee or on behalf of the Trust
except as provided in this Section 6.06 and in Section 6.12(d) hereof. In the
event of such borrowings, no further Trust distributions shall be made until the
indebtedness created by such borrowings has been paid in full.

     Section 6.07 — Cash Reserves and Cash Held Pending Distribution Date. The
Trustee shall establish a cash reserve for the payment of material liabilities
of the Trust which may become due, but only under the following conditions: (a)
the Trustee shall have determined that it is not practical to pay such
liabilities on subsequent Quarterly Record Dates out of funds anticipated to be
available on such dates and that, in the absence of such reserve, the Trust
Estate is subject to the risk of loss or diminution in value or The Bank of New
York is subject to the risk of personal liability for such liabilities and (b)
the Trustee shall have received an unqualified written opinion of counsel to the
Trust to the effect that the establishment and maintenance of such reserve will
not adversely affect the classification of the Trust as a “grantor trust” for
federal income tax purposes or cause the income from the Trust to be treated as
unrelated business taxable income for federal income tax purposes; provided
however, that if the Trustee is unable to obtain such opinion the Trustee shall
nevertheless establish such reserve if the Trustee determines that

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the failure to establish such reserve will be materially detrimental to the Unit
Holders considered as a whole or will subject The Bank of New York to the risk
of personal liability for such liabilities.

     Collected cash balances being held by the Trustee as a reserve for
liabilities shall be invested (i) in obligations issued by (or unconditionally
guaranteed by) the United States or any agency or instrumentality thereof
(provided such obligations are secured by the full faith and credit of the
United States) or (ii) if such obligations maturing as required in the last
sentence of this paragraph are not available, in repurchase agreements (1) with
any bank, having capital, surplus and undivided profits of $100,000,000 or more;
(2) which are secured by collateral of the type specified in (i) above which
collateral (a) is in the possession of the Trustee either directly or through
the Federal Reserve book-entry account of the Trustee individually or a third
party acting solely as agent for the Trustee, (b) is not subject to any third
party claims, (c) has a market value (determined at the execution date of the
relevant repurchase agreement) at least equal to the principal amount invested
in the repurchase agreement; and (3) which have a fixed rate of return. Any such
obligation or repurchase agreement must mature (x) on the next succeeding
Quarterly Record Date or, if the due date of the liability with respect to which
the reserve is established is known, on the due date of such liability and (y)
must be held to maturity

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unless there is an earlier default. In the event of a default thereon prior to
maturity, the Trustee may liquidate such investment and reinvest in another
obligation of the type and maturity date specified in this Section 6.07,
provided that the rate of return thereon is not in excess of the rate of return
specified in the investment so liquidated.

     Collected cash balances being held by the Trustee for distribution at the
next Distribution Date shall be invested (i) in obligations issued by (or
unconditionally guaranteed by) the United States or any agency or
instrumentality thereof (provided such obligations are secured by the full faith
and credit of the United States) or (ii) if such obligations with a maturity
date on such Distribution Date are not available, in repurchase agreements as
described in the immediately preceding paragraph; provided that any such
obligation or repurchase agreement must mature on such Distribution Date and
must be held to maturity, except as provided in the last sentence of the
previous paragraph.

     Except as otherwise provided in Section 4.02 hereof, in the event funds are
received by the Trustee at a time that does not allow it sufficient time to
invest in obligations or repurchase agreements of the type and maturity
specified in this Section 6.07 with interest accruing from the day such funds
are received by the Trustee, the Trustee shall, if practicable, invest such
funds overnight in a time deposit with a bank having capital, surplus and
undivided profits of $100,000,000 or more and shall, on the

( 54 )

 

 

following day, reinvest such funds (and any interest earned thereon) in
obligations or repurchase agreements of the type and maturity so specified.

     Notwithstanding the foregoing, prior to the Opinion Date and during any
period which is not an Insignificant Investor Period, none of the investments
described in this section shall be purchased from The Bank of New York.

     Section 6.08 — Settlement of Claims. The Trustee is authorized to prosecute
and defend, and to settle by arbitration or otherwise, any claim of or against
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.

     Section 6.09 — Income and Principal. The Trustee shall not be required to
keep separate accounts or records for income and principal or maintain any
reserves for depletion of any mineral assets in the Trust Estate. To the extent
that such separate accounts or records are kept, the Trustee may allocate the
receipts, disbursements and reserves of the Trust between income and principal
in the discretion of the Trustee, and the Trustee’s discretion need not accord
with the provision of any requirement of applicable law. Regardless of any such
characterization, however, the Trustee shall not make any distribution,
accumulate any funds or maintain any reserve except as expressly provided in
this Agreement.

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     Section 6.10 — Effect of Trustee’s Power on Trust Property. The powers
granted the Trustee under this Agreement may be exercised upon such terms as the
Trustee deems advisable and may affect Trust properties.

     Section 6.11 — No Requirement of Diversification. The Trustee shall be
under no obligation to diversify the Trust’s assets or to dispose of any wasting
assets.

     Section 6.12 — Divestiture of Units. If at any time the Trust or the
Trustee is made a party in any judicial or administrative proceeding which seeks
the cancellation or forfeiture of any property in which the Trust has an
interest because of the nationality, or any other status, of any one or more
Unit Holders, the following procedures will be applicable:

     (a) The Trustee will promptly give written notice (“Notice”) of the
existence of such controversy to each Unit Holder (“Ineligible Holder”) whose
nationality or other status is an issue in the proceeding and will mail a copy
of such notice to SOC and the Company. The Notice will contain a reasonable
summary of such controversy and will constitute a demand to each Ineligible
Holder that he dispose of his Units to a party that would not be an Ineligible
Holder, within 30 days after the date of the Notice.

     (b) If any Ineligible Holder fails to dispose of his Units as required by
the Notice, the Trustee shall have the right to redeem and shall redeem any such
Units at any time during the 90

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days after the expiration of the 30-day period specified in the Notice. The
redemption price on a per Unit basis will be determined as of the last Business
Day (“determination day”) preceding the end of the 30-day period specified in
the Notice and will equal the following per Unit amount:

     (1) if the Units are then listed on a stock exchange, the price will
equal the closing price of the Units on such stock exchange (or, if the
Units are then listed on more than one stock exchange, on the largest such
stock exchange in terms of the volume of Units traded thereon during the
preceding 12 months, or for the period the Units have been traded on such
stock exchange if less than 12 months) on the determination day if any
units were sold on such stock exchange on such day or, if not, on the last
day preceding the determination day on which any Units were sold on such
stock exchange, or

     (2) if the Units are not then listed on any stock exchange but are
traded in the over-the-counter market, the price will equal the closing bid
price on the determination date as quoted on the National Market System of
the National Association of Securities Dealers Automatic Quotation System
if the Units are so quoted or, if not, the mean between the closing bid and
asked prices for the Units in the over-the-counter market on the
determination day, if quotations for such prices on such day are available
or, if not, on the last

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day preceding the determination day for which such quotations are
available, or

     (3) if the Units are neither listed nor traded in the over-the-
counter market, the price shall equal the price which, in the written
opinion of a recognized firm of investment bankers selected by the Trustee,
is the fair market value of the Units. The Trustee in relying on the
opinion of such investment banking firm, shall have full authorization and
be entitled to the full protection provided by Section 7.05 hereof. If the
Trustee cannot obtain an opinion from an investment banking firm which in
the Trustee’s sole discretion is competent to render such opinion, then the
Trustee may obtain (and rely on) the opinion of any other advisor or expert
which the Trustee in its sole discretion believes to have sufficient
competence to render such opinion. Such redemption (or sale) will be
accomplished by tender of the above cash price to the Ineligible Holder at
his address as shown on the records of the Trustee, either in person or by
mail as provided in Section 12.05 hereof, accompanied by notice of
cancellation. Concurrently with such tender the Trustee shall cancel or
cause to be cancelled all Certificates representing Units then owned by
such Ineligible Holder and for which tender has been made. In the event the
tender is refused by the Ineligible Holder or if he cannot be located after
reasonable efforts to do so, the tendered but

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unclaimed sum shall be held by the Trustee in a non-interest bearing
account, uninvested and in trust for the benefit of such Ineligible Holder,
until proper claim for same has been made by such holder, but subject to
applicable laws concerning unclaimed property.

     (c) During any period prior to the Opinion Date which is not an
Insignificant Investor Period, if the redemption provided in paragraph (b)
of this Section 6.12, if effected by the Trust, would constitute a
non-exempt “prohibited transaction” within the meaning of section 406 of
ERISA or section 4975 of the Code, the Units subject to the Trust’s right
of redemption shall be purchased by the Company or by another Person
eligible to purchase such Units and designated by the Company in a
transaction which does not constitute such a non-exempt “prohibited
transaction.” Such purchase shall be accomplished by tender of the cash
price referred to in paragraph (b) to the Ineligible Holder at his address
as shown on the records of the Trustee, either in person or by mail as
provided in Section 12.05 hereof, accompanied by notice that the Units will
be transferred to the purchaser. In the event the tender is refused by the
Ineligible Holder or if he cannot be located after reasonable efforts to do
so, the Company shall cause the tendered but unclaimed sum to be placed in
a non-interest bearing account, uninvested and in trust for the benefit of
such Ineligible Holder, until a

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proper claim for same has been made by such holder, but subject to
applicable laws concerning unclaimed property. Upon receipt by the Trustee
of notice from the Company or the purchaser that the tender has been
refused or that the Ineligible Holder has not been located after reasonable
efforts to do so and that the tendered but unclaimed sum has been placed in
trust as provided herein, the Trustee shall cause to be transferred to the
purchaser the Units purchased and shall issue to the purchaser Certificates
representing such Units. Such transfer and issuance shall be effected
notwithstanding the fact that the Certificates representing the Units
purchased have not been presented to the Trustee for cancellation, and from
and after the date of such transfer such Certificates shall only represent
the right to receive the funds held in trust for the benefit of such
Ineligible Holder.

     (d) The Trustee may cause the Trust to borrow any amount required to
redeem Units in accordance with the procedures described in paragraph (b)
above, or if the Trustee is unable to effect such borrowing the Trustee may
cause the Trust to sell a portion of the Trust Estate for cash in order to
obtain funds to effect such redemption; provided that the Trustee shall
effect such borrowing only upon the terms and conditions specified in
Section 6.06 hereof and shall effect

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such sale only under the conditions specified in Section 6.02 hereof.

     Section 6.13 — Prohibited Transactions. Notwithstanding any power, right,
duty or obligation of the Trustee under this Agreement, the Trustee shall not
cause or permit the Trust to participate in any transaction which would
constitute a non-exempt “prohibited transaction” within the meaning of section
406 of ERISA or section 4975 of the Code. During any period prior to the Opinion
Date which is not an Insignificant Investor Period, (a) the Company shall
provide to the Trustee on a timely basis any and all information reasonably
requested by the Trustee concerning the relationship of the Company and its
Affiliates to certain Unit Holders specified by the Trustee and any information
listing parties-in-interest furnished by Unit Holders, (b) the Trustee shall
review all such information provided by the Company as well as any relevant
information the Trustee may receive from a Unit Holder concerning its status as
an ERISA-covered entity and the identification of parties-in-interest under
ERISA with respect to such Unit Holder, and (c) the Trustee shall make
reasonable inquiry of each Person desiring to enter into a transaction with the
Trust as to whether such Person is a party-in-interest under ERISA with respect
to ERISA-covered Unit Holders.

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ARTICLE VII

Rights and Liabilities of Trustee

     Section 7.01 — General Liability of Trustee. The Trustee is empowered to
act in its discretion and shall not be personally or individually liable for any
act or omission except in the case of negligence, bad faith or fraud. No action
taken or suffered in good faith by the Trustee in reliance upon and in
accordance with the written opinion of any counsel or the written advice of any
other expert shall in any event constitute negligence, bad faith or fraud within
the purview of this Agreement.

     The Trustee shall not be answerable for the negligence of any experts,
provided that the Trustee has selected such experts with due care in good faith.

     It is acknowledged that the Trustee has taken the Trust Estate as is and
without examination. The Trustee shall have no responsibility for any statements
made or omitted in any disclosure documents relating to the Units or the Trust
Estate and, except as may be required by law, no duty to verify the accuracy or
completeness of the same.

     The Bank of New York and the Trustee will have no duties whatsoever except
such duties as are set forth in this Agreement, and no implied covenant or
obligation shall be read into this Agreement against the Trustee.

     Section 7.02 — Indemnification of Trustee.

     (a) The Bank of New York and the Trustee (including its

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agents and employees) shall be indemnified by, and receive reimbursement
from (i) the Company (1) during any period prior to the Opinion Date which
is not an Insignificant Investor Period, (2) whenever the assets of the
Trust are insufficient or not permitted by applicable law to provide such
indemnity and (3) after the termination of the Trust to the extent that the
Trustee did not have actual knowledge, or should not have reasonably known,
of a potential claim against the Trustee for which a reserve could have
been established and used to satisfy such claim in accordance with Section
9.03 prior to the final distribution of assets of the Trust upon its
termination or to the extent any such reserve was insufficient and (ii) the
Trust Estate during any other period, against and from any and all
liability, expense, claim, damage or loss (including reasonable legal fees
and expenses) incurred by it, individually or as Trustee, in the
administration of the Trust and the Trust Estate or any part or parts
thereof, or in the doing of any act done or performed or omission occurring
on account of its being Trustee or any consequence thereof, including
without limitation, those resulting from any non-exempt prohibited
transaction or its resignation as Trustee, except (1) such liability,
expense, claim, damage or loss arising from the Trustee’s negligence, bad
faith or fraud and (2) any loss resulting from the Trustee’s expenses
(direct or indirect) in acting

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hereunder exceeding the compensation and reimbursement provided for
pursuant to Sections 7.03, 7.04 and 7.05 hereof. From and after the Opinion
Date and during any Insignificant Investor Period, the Trustee shall have a
lien upon the Trust Estate to secure it for such indemnification and
reimbursement and for compensation to be paid to it; provided, however,
that any such lien on the Royalty Interest shall be deemed released upon a
sale or other disposition of the same. Except as provided in Section 3.07
hereof, neither the Trustee nor any agent or employee of the Trustee shall
be entitled to any reimbursement or indemnification from any Unit Holder
for any liability, expense, claim, damage or loss incurred by the Trustee
or any such agent or employee. Notwithstanding the foregoing, the Trustee
shall not be entitled to indemnity from the Trust Estate with respect to
matters for which it is entitled to indemnity pursuant to paragraph (b) of
this Section 7.02.

     (b) The Company will indemnify and hold the Trustee, individually and
as Trustee, and the Trust harmless from and against any losses, claims,
damages or liabilities to which the Trustee, individually or as Trustee, or
the Trust may become subject, under the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based

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upon an untrue statement or alleged untrue statement of a material fact
contained in any offering circular, private placement memorandum or similar
document or the registration statement or any prospectus relating to the
registration of the Units under the Securities Act of 1933, as amended, or
in any report or other document filed pursuant to the Securities Exchange
Act of 1934, as amended, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Trustee,
individually and as Trustee, or the Trust for any legal or other expenses
reasonably incurred by the Trustee, individually and as Trustee, or the
trust in connection with investigating or defending any such action or
claim; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the registration statement or any
prospectus or such amendment or supplement in reliance upon and in
conformity with information furnished to the Company by the Trustee,
individually or as Trustee. The foregoing indemnity and hold harmless
agreement shall inure to the benefit of all offi-

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cers,
directors and controlling persons of the Trustee, individually and as
Trustee.

     (c) All indemnifications of The Bank of New York and the Trustee by
the Company under this Agreement shall survive the termination of the Trust
and the termination of this Agreement. Moreover, any provision in this
Agreement that provides for the indemnification of The Bank of New York and
the Trustee or that limits the liability of The Bank of New York and the
Trustee shall also apply with respect to any Transfer Agent and Registrar.

     Section 7.03 — Compensation. The Trustee shall receive from the Trust
Estate compensation for its services as set forth in Exhibit C attached hereto
and, to the extent provided in Sections 7.04 and 7.05 hereof, reimbursement of
expenses incurred as Trustee of the Trust and as Transfer Agent and Registrar of
the Certificates representing the Units. In the event that any Person serving as
Trustee is not also serving as Transfer Agent and Registrar, the compensation
payable pursuant to Exhibit C shall be allocated among such Persons as the
Trustee shall determine.

     Section 7.04 — Other Services and Expenses. Charges for performing any
services not contemplated or specifically covered in Exhibit C will be charged
to the Trust on the basis of the Trustee’s then prevailing rate for such
services; provided, however, that during any period prior to the Opinion Date
which is not an Insignificant Investor Period, any services rendered by the

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Trustee in enforcing the terms and conditions of the Conveyance or the Support
Agreement shall not be deemed to be services not contemplated or specifically
covered in Exhibit C; and provided further that services by the Trustee on
behalf of the Trust in connection with the defense of any litigation against the
Trust or the Trustee, in connection with any audit of the books and records of
the Trust by the Internal Revenue Service, in connection with any investigation
by the Securities and Exchange Commission or other governmental bodies involving
the Trust and other matters which increase the obligations of the Trustee beyond
those contemplated by this Agreement and are not the result of discretionary
action on the part of the Trustee shall constitute services not contemplated or
specifically covered in Exhibit C.

     The initial organizational costs of the Trust, including the printing of
the initial Certificates, the Trustee’s acceptance fee, out of pocket expenses
and the fees of legal counsel of the Trustee, will be paid by the Company.
During any period prior to the opinion Date which is not an Insignificant
Investor Period, the Trustee shall cause the Trust to pay directly out of the
Trust Estate all expenses, taxes and liabilities incurred and relating to the
Trust, including but not limited to fees and expenses incurred for experts hired
pursuant to Section 7.05 hereof; provided, however, that The Bank of New York
may incur, and shall be reimbursed out of the Trust Estate for, the actual cost
to The Bank of New York of all of its out-of-pocket costs and expenses

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for printing, microfiche, postage, delivery and pick-up, long distance
telephone, travel and other similar costs and expenses which are incurred in
connection with the performance of its duties as Trustee or Transfer Agent and
Registrar. From and after the Opinion Date and during any Insignificant Investor
Period, The Bank of New York may incur any out-of-pocket costs and expenses in
the discharge of its duties as Trustee or Transfer Agent and Registrar (or may,
but shall not be required to, cause the Trust to pay any or all of such expenses
directly out of the Trust Estate), including but not limited to fees and
expenses incurred for experts hired pursuant to Section 7.05 hereof; provided,
however, that The Bank of New York shall be reimbursed out of the Trust Estate
at actual cost to The Bank of New York.

     Section 7.05 — Reliance on Experts. The Trustee shall consult with
accountants, counsel and petroleum engineers as specifically provided herein and
may otherwise consult with counsel (including its own counsel), accountants,
geologists, engineers and other parties deemed by the Trustee to be qualified as
experts on the matters submitted to them. The Trustee is authorized to rely on
the advice of such experts as provided in Section 7.01 hereof and to make
payments of all reasonable fees for services or expenses thus incurred out of
the Trust Estate.

     Section 7.06 — No Security Required. No bond or other security shall be
required of the Trustee.

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     Section 7.07 — Transactions in Multiple Capacities. To the extent permitted
by applicable law and except as otherwise provided herein, the Trustee shall not
be prohibited in any way in exercising its powers or from dealing with The Bank
of New York in any other capacity, fiduciary or otherwise.

ARTICLE VIII

Office of Trustee

     Section 8.01 — Removal of Trustee. The Trustee may be removed as Trustee
hereunder, with or without cause, by the affirmative vote at a meeting duly
called and held in accordance with the provisions of ARTICLE V hereof of Record
Date Unit Holders holding Certificates representing a majority of the Units
represented at the meeting. Subsequent to such vote, any Trustee being removed
shall have only those duties and obligations such Trustee would have if such
Trustee had commenced a resignation as described in Section 8.02 hereof.

     Section 8.02 — Resignation of Trustee. (a) Any Trustee may at any time
resign for any reason whatsoever, with or without cause, and without the
necessity of any court proceeding. Any such resignation may be commenced by
giving notice to the Company. Such notice to the Company shall be promptly
confirmed in writing, and shall be followed by the giving of written notice to
each of the Unit Holders at such Unit Holder’s last address as shown by the
records of the Trust at the time such notice is given by

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first-class mail. Any resigning Trustee shall account to its successor for the
administration of the Trust as may be reasonably required by the successor
Trustee. Any and all successors to any resigning Trustee shall be fully
protected in relying upon such accounting. Any resignation shall be effective
upon the appointment of and acceptance of the appointment by a successor
Trustee.

     (b) At no time subsequent to any Trustee’s commencement of a resignation
(as described above) shall such Trustee have any duties or obligations with
respect to any filings under the Securities Act of 1933, as amended, or any
successor statute or statutes or the rules and regulations thereunder, and
subsequent to the commencement of a resignation, the resigning Trustee shall
have only those other duties and obligations expressly set forth herein or
contemplated hereby.

     (c) No Trustee commencing a resignation shall have any liability for any
consequences, expenses, damages, or effects of any kind whatsoever including,
without limitation, any delay in or non-commencement of any SEC registration, in
whole or in part, arising out of or relating to its commencing a resignation or
in invoking its rights and privileges with respect thereto as set forth above.

     Section 8.03 — Appointment of Successor Trustee. If the Trustee has given
notice of its intention to resign, a successor Trustee shall be appointed by the
Company; provided, that if the Trustee has been removed by a vote of Unit
Holders pursuant to

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Section 8.01 hereof, a successor Trustee may be appointed by the Unit Holders at
such meeting. Notice of the appointment of a successor Trustee shall be given by
the resigning Trustee within ten days of receipt of notice of such appointment
to each Unit Holder as of the date of the appointment of the successor Trustee
at each Unit Holder’s last address as shown by the records of the Trustee.

     In the event that a successor Trustee has not been appointed within 60 days
after the commencement of a resignation or occurrence of a vacancy, a successor
Trustee may be appointed by any state court of Delaware, upon the application of
any Unit Holder. In the event any such application is filed, any such court may
appoint a temporary successor Trustee at any time after such application is
filed with it which shall, pending the final appointment of a successor Trustee,
have such powers and duties as the court appointing such temporary successor
Trustee shall provide in its order of appointment, consistent with the
provisions of this Agreement. In the event such court shall deem it necessary,
the court may appoint such temporary successor Trustee or successor Trustee on
such terms as to compensation as it shall deem necessary and reasonable
notwithstanding any provision herein to the contrary. In no event shall any
Trustee which has commenced a resignation as described in preceding Section 8.02
have any duty or obligation to appoint or apply for the appointment of

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any successor Trustee or be eligible to be named as a successor Trustee.

     A Trustee appointed under the provisions of this Section 8.03 shall be a
corporation organized and doing business under the laws of the United States,
any state thereof or the District of Columbia authorized under such laws to
exercise trust powers or a national banking association domiciled in the United
States, in either case which has a capital, surplus and undivided profits (as of
the end of its last fiscal year prior to its appointment) of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities. Unless the Trust already has a Trustee that is a resident of or has
a principal office in the State of Delaware, then any Trustee appointed under
this Section 8.03 shall be such a resident or have such a principal office.

     Section 8.04 — Rights of Successor Trustee. Immediately upon the
appointment of any successor Trustee (including a temporary successor Trustee),
all rights, titles, duties, powers and authority of the resigning Trustee
hereunder shall be vested in and undertaken by the successor Trustee which shall
be entitled to receive from the Trustee which it succeeds, in addition to the
accounting referred to in Section 8.02 hereof, all of the Trust Estate held by
it hereunder and all records and files in connection therewith. No successor
Trustee shall be obligated to examine or seek alteration of any accounting of
any preceding Trustee, nor shall any successor Trustee be liable personally for
failing

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to do so or for any act or omission of any preceding Trustee. The preceding
sentence shall not prevent any successor Trustee or anyone else from taking any
action otherwise permissible in connection with any such accounting.

     Section 8.05. — Merger or Consolidation of Trustee. Neither a change of
name of the Trustee, any merger or consolidation of the Trustee with or into
another bank or trust company nor the transfer of its trust operations to a
separate corporation shall affect the Trustee’s right, obligation or capacity to
act hereunder. Any such successor shall continue as the Trustee hereunder.

     Section 8.06 — Co-Trustee.

     (a) The Co-Trustee has been appointed as trustee and joined as a party
hereunder in order to satisfy the requirements of Section 3807 of the Delaware
Trust Act. In the event of the resignation or removal of the Co-Trustee, there
shall be appointed a successor Co-Trustee hereunder who shall meet the
requirements of Section 3807 of the Delaware Trust Act unless at the time of
such resignation or removal at least one other Trustee acting hereunder
satisfies such requirements. Any successor Co-Trustee shall be appointed in the
manner set forth in Section 8.03 hereof.

     (b) Notwithstanding any other term or provision hereof to the contrary, The
Bank of New York, in its capacity as Trustee, alone may exercise the rights and
powers granted to the Trustee herein and shall be solely charged with the
performance of the

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duties herein declared on the part of the Trustee to be had and exercised or to
be performed; provided, however, that if The Bank of New York, in its capacity
as Trustee, deems it necessary or desirable for the Co-Trustee to act in a
particular matter, the Co-Trustee shall have and exercise the rights and powers
granted herein and shall be charged with the performance of the duties herein
declared on the part of the Trustee to be had and exercised or to be performed,
but only in such particular matter, and the foregoing shall not relieve The Bank
of New York, in its capacity as Trustee, from any liability or obligation of the
Trustee to any Unit Holder.

     (c) The Bank of New York, in its capacity as Trustee, alone may execute and
deliver, on behalf of the Trust, any writing, document or instrument which the
Trustee is required to execute and deliver, including, without limitation, the
Conveyance, the Certificates and any writing, document or instrument of a purely
ministerial nature.

ARTICLE IX

Term of Trust and Final Distribution

     Section 9.01. — Termination. The Trust shall terminate upon the first to
occur of the following events or times:

(a) on or prior to December 31, 2010, a decision to terminate the Trust by
the affirmative vote at a meeting duly called and held in accordance with
the provisions of ARTICLE

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V hereof of the Record Date Unit Holders holding Certificates representing
70 percent of the Units outstanding on the Voting Record Date; or

(b) after December 31, 2010 either

     (i) at such time as the sum of the net revenues from the Royalty
Interest for two successive years commencing with any year after 2010 are
less than $1,000,000 per year, unless the net revenues during such period
have been materially and adversely impacted by an event constituting “Force
Majeure” as defined below; or

     (ii) a decision to terminate the Trust by the affirmative vote at a
meeting duly called and held in accordance with the provisions of ARTICLE V
hereof of the Record Date Unit Holders holding Certificates representing 60
percent of the Units outstanding on the Voting Record Date.

     The term “Force Majeure” shall mean, without limitation, the following:

     (i) acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders or restraints of any kind of the government
of the United States or of the State of Alaska or any of their departments,
agencies, political subdivisions or officials, or any civil or military
authority; insurrections; civil disturbances; riots; epidemics; sabotage;
war, whether or not declared; landslides; lightning; earthquakes; fires;
hurricanes; winds; tornados;

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storms; droughts; floods; arrests; restraint of government and people;
explosions; breakage, malfunction or accident to facilities, machinery,
transmission pipes or canals; partial or entire failure of utilities;
shortages of labor, materials, supplies or transportation; or

     (ii) any other cause, circumstance or event (other than depletion of
the petroleum reservoir in which the Trust has an interest) not reasonably
within the control of the Company.

     Section 9.02. — Disposition of Assets Upon Termination. Subject to the
proviso set forth below, upon termination of the Trust, the Trustee shall sell
for cash (unless by the affirmative vote of the Record Date Unit Holders holding
Certificates representing 70 percent of the Units outstanding on the Voting
Record Date if the decision to terminate the Trust was made on or prior to
December 31, 2010, or 60 percent of the Units outstanding on the Voting Record
Date if the decision to terminate the Trust was made thereafter, the Unit
Holders approve the sale for a specified non-cash consideration, in which event
the Trustee may, but shall not be required to, attempt to consummate such
non-cash sale, but only if the Trustee shall have received a ruling from the
Internal Revenue Service or an unqualified written opinion of counsel to the
Trust to the effect that such non-cash sale will not adversely affect the
classification of the Trust as a “grantor trust” for federal income tax purposes
or cause the income from the Trust to

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be treated as unrelated business taxable income for federal income tax purposes)
in one or more sales all the assets other than cash then held in the Trust
Estate; provided however that as soon as practical following termination of the
Trust the Trustee shall obtain an opinion of an investment banking firm,
commercial banking firm or other Person qualified to render such opinion and
selected by the Trustee as to the fair market value of the Trust Estate on the
day of termination of the Trust; and provided further, that upon receipt of such
opinion the Trustee shall notify the Company thereof, and the Company shall have
the right, exercisable by notice to the Trustee within thirty days of receipt of
such notice, to purchase the assets of the Trust at a price equal to the greater
of (i) the fair market value of the Trust Estate as set forth in such opinion or
(ii) the number of then outstanding Trust Units times the following per Unit
amount:

     (A) if the Units are then listed on a stock exchange, the price will equal
the closing price of the Units on such stock exchange (or, if the Units are then
listed on more than one stock exchange, on the largest such stock exchange in
terms of the volume of Units traded thereon during the preceding twelve months,
or for the period the Units have been traded on such stock exchange if less than
twelve months) on the day of termination of the Trust if any Units were sold on
such stock exchange on such day or, if not, on the last day preceding the day of
termination

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of the Trust on which any Units were sold on such stock exchange, or

     (B) if the Units are not then listed on any stock exchange but are traded
in the over-the-counter market, the price will equal the closing bid price on
the day of termination of the Trust as quoted by the National Market System of
the National Association of Securities Dealers Automated Quotation System if the
Units are so quoted or, if not, the mean between the closing bid and asked
prices for the Units in the over-the-counter market on the day of termination of
the Trust, if quotations for such prices on such day are available or, if not,
on the last day preceding the day of termination of the Trust for which such
quotations are available.

If the Units are neither listed nor traded in the over-the-counter market, the
price shall equal the fair market value of the Trust Estate as set forth in such
opinion.

     In rendering such opinion, such firm or other Person shall take into
account the cash owned by the Trust, the liabilities of the Trust, the costs
incident to the sale of the Royalty Interest, the other costs of termination of
the Trust and such other factors as such firm or other Person rendering such
opinion shall deem relevant.

     In the event that the Company does not exercise its option, the Trustee
shall effect any such sale (a) pursuant to procedures or material terms and
conditions approved by the affirmative vote

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of the Record Date Unit Holders holding Certificates representing 70 percent of
the Units outstanding on the Voting Record Date if such sale is effected on or
prior to December 31, 2010, or 60 percent of Units outstanding on the Voting
Record Date if such sale is effected thereafter, in each case at a meeting duly
called and held in accordance with the provisions of ARTICLE V hereof (provided
that if the procedures, terms or conditions of such sale adversely affect The
Bank of New York’s own rights, duties or immunities under this Agreement or
otherwise, the Trustee may in its discretion, but shall not be obligated to,
effect such sale pursuant to such procedures or terms or conditions) or (b)
without a vote of the Unit Holders if (i) the Trustee determines that it is not
practicable to submit such procedures or terms and conditions to a vote of the
Unit Holders pursuant to clause (a) above and (ii) such sale is effected at a
price which is at least equal to the fair market value of the Trust Estate as
set forth in such opinion and pursuant to terms and conditions which, in the
opinion of such firm or other Person rendering such opinion on the fair market
value of the Trust Estate are commercially reasonable when compared to
alternatives available to the Trust.

     Section 9.03. — Distribution of Assets upon Termination. The Trustee shall
as promptly as practicable send notice by first class mail of the date (which
shall be not more than 10 Business Days after the date such notice is sent) on
which it will distribute the proceeds of any such sale, and on such date shall
dis-

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tribute such proceeds and any other cash in the Trust Estate in proportion to
the Units owned by each such Unit Holder upon surrender of the Certificate
evidencing such Units, after paying, satisfying and discharging all of the
existing liabilities of the Trust including fees of the Trustee, or, if
necessary, setting up reserves in such amounts as the Trustee in its discretion
deems appropriate to provide for payment of contingent liabilities. Any such
reserve shall be established in accordance with the procedures specified in
Section 6.07 hereof. From and after the date of distribution set forth in such
notice to Unit Holders, any amounts held by the Trustee pending distribution
shall be held uninvested in a non-interest bearing account.

     Upon making final distribution to the Unit Holders, the Trustee shall be
under no further liability except as provided in Section 7.01 hereof. For the
purposes of liquidating and winding up the affairs of the Trust at its
termination, the Trustee shall continue to act as Trustee and may exercise each
power until its duties have been fully performed and the Trust Estate has been
finally distributed.

ARTICLE X

Irrevocability and Amendability

     Section 10.01 — Irrevocability. This Agreement and Trust are intended to be
and are irrevocable. No Person shall have the

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right or power to terminate, revoke, alter, amend or change this Agreement or
any provisions hereof except as expressly provided in ARTICLE IX hereof or in
this ARTICLE X.

     Section 10.02 — Limited Amendability. Any provision of this Agreement
(other than this Section 10.02) may be amended by the vote at a meeting duly
called and held in accordance with the provisions of ARTICLE V hereof of the
Record Date Unit Holders holding Certificates representing a majority of the
Units outstanding on the Voting Record Date, but no such amendment shall be
effective unless and until consented to in writing by the Trustee (provided,
however, that the Trustee will so consent unless such amendment affects The Bank
of New York’s own rights, duties or immunities under this Agreement or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, agree to such amendment), and in no event may an amendment be made
which would:

     (a) alter the rights of the Unit Holders as against each other;

     (b) reduce or delay the distributions to the Unit Holders provided for
in Sections 2.04, 4.02, 6.02 and 9.02 hereof;

     (c) permit the Trustee to distribute the Royalty Interest in kind
either during the continuation of the Trust or during the period of
liquidation and winding up under Section 9.02 hereof;

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     (d) provide the Trustee with the power to engage in business or
investment activities (this prohibition is not intended to limit the
authority of the Trustee specifically provided in this Agreement);

     (e) adversely affect the characterization of the Trust as a business
trust under the Delaware Trust Act or as a grantor trust for federal income
tax purposes or cause the income from the Trust to be treated as unrelated
business taxable income for federal income tax purposes;

     (f) alter the voting requirements set forth in Sections 6.02, 8.01,
9.01 and 10.02 hereof;

     (g) alter the number of Units in the Trust; or

     (h) alter the nature of or the amount or time of receipt of payments
under the Royalty Interest;

unless such amendment is approved (1) by the vote at a meeting duly called and
held in accordance with the provisions of ARTICLE V hereof of the Record Date
Unit Holders holding Certificates representing at least 80 percent of the Units
outstanding on the Voting Record Date in the case of subsections (b) through (h)
inclusive above and 100 percent of such Units in the case of subsection (a)
above, and (2) by the Trustee (provided, however, that the Trustee will so
consent unless such amendment affects The Bank of New York’s own rights, duties
or immunities under this Agreement or otherwise, in which case the Trustee may
in its discretion, but shall not be obligated to, agree to such amendment).

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     Any amendment of Sections 4.05 or Section 7.02(b) shall, in addition to the
above requirements, also require the consent of the Company.

     Section 10.03 — Corrective Amendments. Notwithstanding Section 10.02
hereof, SOC, the Company and the Trustee (without the consent of the Unit
Holders) may from time to time and at any time enter into an agreement amending
the terms of this Agreement or any other agreement relating to the establishment
or administration of the Trust to cure any ambiguity or to correct or supplement
any provision contained herein or therein which may be defective or inconsistent
with any other provision contained herein or therein, to make any other
provision with respect to matters arising hereunder or thereunder that do not
adversely affect the Unit Holders or which may be required by law in connection
with the registration of the Units for resale.

     Section 10.04 — Tax Rulings and Opinions. No amendment to this Agreement
permitted by Sections 10.02 or 10.03 hereof shall be effective until the Trustee
shall have received a ruling from the Internal Revenue Service or an unqualified
written opinion of counsel to the Trust to the effect that such amendment will
not adversely affect the classification of the Trust as a “grantor trust” for
federal income tax purposes or cause the income from the Trust to be treated as
unrelated business taxable income for federal income tax purposes.

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ARTICLE XI

Failure to Pay Amounts Due Trustee

     If, for any reason the royalty payable with respect to the Royalty Interest
or any amount payable by the Company hereunder is not paid to the Trustee as
provided in the Conveyance or hereunder, the Trustee shall as soon as
practicable notify BP by facsimile transmission or telex. The Trustee shall not
exercise any remedies it may have against the Company for failure to pay any
amounts unless BP fails to cause to be paid such amounts pursuant to its
obligations under the Support Agreement within 30 days of notice to BP as set
forth in the preceding sentence. Notice to the Company or BP shall be made to
the notice addresses specified in Section 12.06 hereof.

ARTICLE XII

Miscellaneous

     Section 12.01 — Inspection of Records. Each Unit Holder and his duly
authorized agents, attorneys and accountants shall have the right upon request
during reasonable business hours at his own cost and expense to examine and
inspect the books and records of the Trustee relating to the Trust, including
lists of Unit Holders, for any proper purpose, except information which the
Conveyance requires the Trustee to keep confidential.

     The Trustee, or its authorized representative, shall have the right during
reasonable business hours at the cost and expense of

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the Trust to inspect the Company’s books and records relating to the properties
burdened by the Royalty Interest and to discuss with representatives of the
Company the affairs, finances and accounts of the Company relating to the
properties burdened by the Royalty Interest.

     Section 12.02 — Filing of this Agreement. Except as otherwise required by
law, neither this Agreement nor any executed copy hereof need be filed in any
jurisdiction in which any of the properties comprising the Trust Estate is
located, but the same may be filed for record in any jurisdiction by the
Trustee. In order to avoid the necessity of filing this Agreement for record,
the Trustee agrees that for the purpose of vesting the record title in any
successor Trustee, the retiring Trustee will, upon appointment of any successor
Trustee, execute and deliver to such successor Trustee appropriate assignments
or conveyances.

     Section 12.03 — Disability of Unit Holder. Except as otherwise provided in
Section 4.02 hereof, any payment or distribution to a Unit Holder may be made by
check of the Trustee drawn to the order of the Unit Holder, regardless of
whether or not the Unit Holder is a minor or under other legal disability,
without the Trustee having further responsibility with respect to such payment
or distribution. This Section 12.03 shall not be deemed to prevent the Trustee
from making any payment or distribution by any other method that is appropriate
under law.

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     Section 12.04 — Savings Clause. If any provision of this Agreement should
be held illegal or invalid, such invalidity or illegality shall not affect the
remaining provisions of this Agreement, or any other property interests, and
each provision of this Agreement shall exist separately and independently, and
shall be applied to property interests separately and independently, of every
other provision, and this Agreement shall be construed as if such illegal or
invalid provision had never existed.

     Section 12.05 — Notices. Any notice or demand which by any provision of
this Agreement is required or permitted to be given or served upon the Trustee
by any Unit Holder may be given or served by being deposited, postage prepaid
and by registered or certified mail, in a post office or letter box addressed
(until another address is designated by notice given by the Trustee to the Unit
Holders and the Company) to the Trustee at 21 West Street, 12th Floor, New York,
NY 10286, Attention: Corporate Trust, Trustee Administration. Any notice or
other communication by the Trustee to any Unit Holders shall be deemed to have
been sufficiently given, for all purposes, when deposited, postage prepaid, in a
post office or letter box addressed to said holder at his last address as shown
by the records of the Trustee.

     Section 12.06 — Notice and Reports to the Company, SOC or BP. Whenever any
notice, communication or report is given by the Trustee to Unit Holders pursuant
to the provisions of this Agreement or is otherwise required to be provided to
Unit Holders

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pursuant to the provisions of this Agreement or is required to be provided to
the Company, SOC or BP, the Trustee shall provide, by in-hand delivery or by
certified or registered mail, such notice, communication or report to the
Company at the following address:

BP Exploration (Alaska) Inc.

c/o BP America Inc.

200 Public Square

Cleveland, OH 44114-2375

Attention: Treasurer

or to SOC at the following address:

The Standard Oil Company

c/o BP America Inc.

200 Public Square

Cleveland, OH 44114-2375

Attn: Treasurer

or to BP at the following address:

The British Petroleum Company p.l.c.

Brittanic House, Moor Lane

London EC24 9BU, England

Attention: Secretary

FAX: 011-44-879-2341

or at such other address as the Company, SOC or BP, as the case may be, may from
time to time advise the Trustee in writing.

     Section 12.07 — Governing Law. The Trust hereby created is a Delaware
business trust, and the laws of Delaware shall control with respect to the
construction, administration and validity of the Trust. This Agreement shall be
governed by and construed in accordance with the law of the State of Delaware
without regard to conflicts of law rules.

     Section 12.08 — Counterparts. This Agreement may be executed in a number of
counterparts, each of which shall constitute an

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original, but such counterparts shall together constitute but one and the same
instrument.

     Section 12.09 — Headings. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.

     Section 12.10. — Independent Conduct. SOC, the Company, The Bank of New
York and the Co-Trustee on behalf of all future Unit Holders hereby reserve and
retain the right to engage in all businesses and activities of any kind
whatsoever (irrespective of whether the same may be in competition with the
Trust), and to acquire and own all assets however acquired and whenever situated
and to receive compensation or profit thereof, for their own respective accounts
and without in any manner being obligated to disclose or offer such businesses,
activities, assets, compensation or profit to each other or to the Trust.

     Section 12.11 — Determination by the Trustee. In the event that the Trustee
is required to take action or permitted not to take action under Sections
6.02(a)(ii), 9.02(b) and 10.02 (except for any amendment to Sections 7.03, 7.04
or the last sentence of Section 7.05 hereof) which is conditioned upon a
determination by the Trustee that the action to be taken or omitted does not or
will not adversely affect The Bank of New York’s rights, duties or immunities
under this Agreement or otherwise, the Trustee shall not, in making such
determination, take into consideration the loss of Trustee’s fees or the loss of
other financial benefits

( 88 )

 

 

(other than the right to reimbursement of expenses or indemnities against
liabilities) which may result from any termination of the Trust or other event
which would cause The Bank of New York to cease to serve as Trustee hereunder as
a result of such action. The loss of such fees or such other financial benefits
shall not be deemed to constitute an adverse impact on The Bank of New York’s
own rights, duties or immunities under this Agreement or otherwise.

( 89 )

 

 

     IN WITNESS WHEREOF, SOC has caused this Agreement to be executed by its
duly authorized Chairman and Chief Executive officer and its seal to be hereunto
affixed and attested by its duly authorized Secretary and the Company has caused
this Agreement to be executed by its duly authorized Treasurer and its seal to
by hereunto affixed and attested by its duly authorized Secretary and the
Trustee has caused this Agreement to be executed by its duly authorized
Assistant Vice President and its seal to be hereunto affixed and attested by its
duly authorized Assistant Vice President and the Co-Trustee has executed this
Agreement as of the 28th day of February, 1989.

	 	 	 	 	 	 
	ATTEST:	 	THE STANDARD OIL COMPANY
	 
	 	 	 	 
	/s/ J. M. Casarik
 

Secretary

	 	By:
	 	/s/ James H. Ross
 

	 
	 	 	 	 
	ATTEST:	 	BP EXPLORATION (ALASKA) INC.
	 
	 	 	 	 
	/s/ J. M. Casarik
 

Secretary

	 	By:
	 	/s/ E. Whitehead
 

	 
	 	 	 	 
	ATTEST:	 	THE BANK OF NEW YORK, Trustee
	 
	 	 	 	 
	/s/ David A. Sampson
 

	 	By:
	 	/s/ W. N. Gitlin
 

	 
	 	 	 	 
	/s/ Eric A. Mazie
 

Witness

	 	 	 	/s/ F. James Hutchinson
 

F. James Hutchinson, Co-Trustee

 

 

	 	 	 	 	 
	STATE OF OHIO

	)	 	 	 
	 

	)     SS
	 
	COUNTY OF CUYAHOGA

	)	 	 	 

     BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared J. H. Ross, known to me to be
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged before me that the same was the act of The Standard Oil Company, an
Ohio corporation, and that he executed the same as the act of such corporation
for the purposes and consideration therein expressed and in the capacity therin
stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 28th day of February,
1989.

	 	 	 	 
	 

	 	/s/ JoAnn Motuza
	 

	 	 
	 

	 	Notary Public
	 

	 	My commission expires:
	 
	 	 
	 

	 	JoANN
MOTUZA

	 

	 	Notary
Public, State of Ohio

	 

	 	Recorded in Cuyahoga County
	 

	 	My
Comm. Expires 9-14-92

 

 

	 	 	 	 	 
	STATE OF OHIO

	)	 	 	 
	 

	)     SS
	 
	COUNTY OF CUYAHOGA

	)	 	 	 

     BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared E. Whitehead, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged before me that the same was the act of the said BP Exploration
(Alaska) Inc., a Delaware corporation, and that he executed the same as the act
of such corporation for the purposes and consideration therein expressed and in
the capacity therein stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 28th day of February,
1989.

	 	 	 	 
	 

	 	/s/ JoAnn Motuza
	 

	 	 
	 

	 	Notary Public
	 

	 	My commission expires:
	 
	 	 
	 

	 	JoANN
MOTUZA

	 

	 	Notary
Public, State of Ohio

	 

	 	Recorded in Cuyahoga County
	 

	 	My
Comm. Expires 9-14-92

 

 

	 	 	 	 	 
	STATE OF NEW YORK

	)	 	 	 
	 

	     ss.:
	 
	COUNTY OF NEW YORK

	)	 	 	 

     Before me, a notary public in and for said County, personally appeared
Walter N. Gitlin, known to me to be the person who, as Assistant Vice President
of The Bank of New York, the corporation which executed the foregoing
instrument, signed the same, and acknowledged to me that he did so sign said
instrument in the name and upon behalf of said corporation as such officer and
that he executed the same as the act of such corporation for the purposes and
consideration therein expressed and in the capacity therein stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 23rd day of February,
1989.

	 	 	 	 
	 

	 	/s/ Virginia Barazotti
	 

	 	 
	 

	 	Notary Public, in and for
	 

	 	New York
	 

	 	My Commission Expires:
	 
	 	 
	 

	 	VIRGINIA
BARAZOTTI

	 

	 	Notary Public, State of New York
	 

	 	No. 41-4734647

	 

	 	Qualified
in Queens County

	 

	 	Certificate filed in New York County
	 

	 	Commission
Expires Nov. 30, 1989

 

 

	 	 	 	 	 
	STATE OF DELAWARE

	)           )SS
	 
	COUNTY OF NEW CASTLE

	)	 	 	 

     BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared James Hutchinson, known to me
to be the person whose name is subscribed to the foregoing instrument and
acknowledged before me that he is a resident of the State of Delaware and that
he executed the same as his free and voluntary act for the purposes and
consideration therein expressed and in the capacity therein stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 17th day February, 1989.

	 	 	 
	 

	 	/s/ Lisa M. Harrison
	[SEAL]

	 	Notary Public
	 
	 	 
	 

	 	My commission expires:
	 
	 	 
	 

	 	MY COMMISSION EXPIRES
	 

	 	     AUGUST 8, 1990

 

 

EXHIBIT A

[OMITTED]

     See Exhibits 4.2 and 4.3 to the Annual Report on Form 10-K of the BP
Prudhoe Bay Royalty Trust for the fiscal year ended December 31, 2006 (File No.
1-10243)

 

 

EXHIBIT B

PPN 056663* 207

			
	 	 	 
	Number ___
	 	___Units

CERTIFICATE FOR UNITS OF BENEFICIAL INTEREST

IN BP PRUDHOE BAY ROYALTY TRUST

Created by, Issued Under and Subject to the BP Prudhoe Bay Royalty Trust
Agreement effective as of February 28, 1989. This Certificate of Beneficial
Interest is transferable in the City of New York, New York.

___

     THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO MANDATORY
REDEMPTION BY THE TRUSTEE OR MANDATORY PURCHASE AND TRANSFER UNDER CERTAIN
CIRCUMSTANCES IF A PROCEEDING IS COMMENCED SEEKING FORFEITURE OF TRUST
PROPERTIES DUE TO A UNIT HOLDER’S INELIGIBILITY TO OWN UNITS BY REASON OF THE
NATIONALITY OR OTHER STATUS OF SUCH HOLDER.

___

     UNTIL THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND QUALIFIED UNDER THE
SECURITIES LAWS OF VARIOUS STATES, THEY MAY NOT BE TRANSFERRED UNLESS THE
TRUSTEE AND THE COMPANY HAVE RECEIVED (1) AN OPINION OF COUNSEL SATISFACTORY TO
THE TRUSTEE AND THE COMPANY TO THE EFFECT THAT THE PROPOSED TRANSFER MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
AND (2) AN INSTRUMENT FROM THE TRANSFEREE AGREEING TO PROVIDE CERTAIN
INFORMATION FROM TIME TO TIME WITH REGARD TO ERISA, AS DEFINED IN THE ROYALTY
TRUST AGREEMENT.

     THIS CERTIFIES THAT ___is the owner of ___Units of
Beneficial Interest (“Units”) in that certain Trust known and designated as the
BP Prudhoe Bay Royalty Trust, created and established under the terms of the
above referenced Royalty Trust Agreement by and among The Standard Oil Company,
an Ohio corporation with its principal office in Cleveland, Ohio, BP Exploration
(Alaska) Inc., a Delaware corporation having its principal office in Anchorage,
Alaska (the “Company”), The Bank of New York, a New York corporation, authorized
to do a banking business and having a principal corporate trust office in New
York, New York, as Trustee (the “Trustee”), and F. James Hutchinson, a resident
of the State of Delaware as Co-Trustee, a duplicate original of which Royalty
Trust Agreement is, for the

 

 

information of all concerned, held by said Trustee at its principal corporate
trust office in New York, New York. Said Royalty Trust Agreement is hereby
referred to and made a part of this Certificate for all purposes, and the owner
of this Certificate by accepting the same consents to, and becomes bound by, all
the terms and provisions of said Royalty Trust Agreement and the provisions
herein. The Units represented by this Certificate are transferable on the
records of the Trustee by the holder hereof in person, or by duly authorized
attorney, upon surrender of this Certificate, properly endorsed, to the Trustee.
This Certificate shall not be valid until countersigned and registered by the
Transfer Agent and Registrar.

     WITNESS the seal of the Trustee and the signature of its duly authorized
signatory.

Date:                                        

	 	 	 
	 

	 	                                        , as Trustee
	 
	 	 
	 

	 	By                                                             
	 

	 	               Authorized Signatory

Countersigned and Registered:

Transfer Agent and Registrar

By                                                             

          Authorized Signatory

- 2 -

 

 

ASSIGNMENT

     For value received                                          hereby sell(s),
assign(s) and transfer(s)unto                                                             Units of Beneficial Interest represented
by the within Certificate,
and do(es) hereby constitute and appoint irrevocably                     
Attorney to transfer said Units on the records of within named The Bank of New
York, Trustee, with full power of substitution in the premises.

     Date:                                        

	 	 	 
	 
	 	 
	 

	 	 

	 
	 	 
	 
	 	 
	Signature Guaranteed:

 

Bank or Broker located 

or having a correspondent 

located within New York City

	 	 

NOTICE — The signature to this
assignment must correspond with
the name as written upon the face
of the Certificate, in every
particular, without alteration or
enlargement, or any change
whatsoever.
	 
	By:                                                             

          Authorized Officer
	 	 

- 3 -

 

 

EXHIBIT C

COMPENSATION OF THE BANK OF NEW YORK

(As Trustee and Transfer Agent and Registrar)

I. Introductory Note. The Bank of New York (the “Bank”) is serving as a Trustee
of the BP Prudhoe Bay Royalty Trust and as Transfer Agent and Registrar of the
Units issued pursuant thereto. Capitalized terms which are not otherwise defined
in this Exhibit C shall have the meanings ascribed to them in the BP Prudhoe Bay
Royalty Trust Agreement (the “Agreement”). The fee described in Part III hereof
is intended to compensate the Bank for all services rendered in its capacity as
Trustee. Fees for the Bank’s services as Transfer Agent and Registrar are
provided for in Part IV hereof.

II. Certain Definitions

     (1) “Administrative Services” means the duties of the Bank, as Trustee, to
(a) receive, collect and account for payments in respect of the Royalty, (b)
invest all collected cash balances as required by the Agreement, (c) pay all
expenses and fees of the Trust, (d) calculate and distribute quarterly all
Quarterly Income Amounts, (e) file such state and federal income tax returns as
the Trustee considers necessary or appropriate to comply with applicable law,
(f) supply all data to Unit Holders necessary to enable them to prepare their
Alaska and federal income tax returns, (g) respond to inquiries from Unit
Holders concerning the Trust and refer those concerning the Royalty to the
Company, (h) secure the hiring and consulting with experts to the extent the
Trustee is required or chooses to do so, (i) secure the preparation of and file
all reports, notices and statements as may be required to comply with applicable
securities laws and regulations and the rules of any stock exchange on which the
Units may be listed and (j) maintain communications with the Company respecting
the Trust.

     (2) “Extraordinary Services” means substantially increased administrative
duties or responsibilities including, without limitation, (a) any requirement
for the establishment of record dates more frequently than once a Quarter, or
more than one distribution per Quarter (b) expanded tax or regulatory
requirements, (c) the sale of assets by or the dissolution and liquidation of
the Trust, (d) except as otherwise provided in the Agreement with respect to any
period prior to the Opinion Date, which is not an Insignificant Investor Period,
enforcing through any action, suit, proceeding or arbitration the terms and
conditions of the Support Agreement or the Conveyance, defending litigation
against the Trustee or the Trust and in connection with any governmental audit

 

 

or investigation and other matters which increase the obligations of the Trustee
beyond those contemplated by the Agreement which are not the result of
discretionary action on the part of the Trustee, and (e) meetings pursuant to
Article V of the Agreement.

III. Quarterly Fees

     The Bank, as Trustee, shall be entitled to receive on each Quarterly Record
Date a Quarterly Fee calculated as follows:

     The Quarterly Fee for Administrative Services shall be the sum of (i)
$.0011 per Unit outstanding on such Quarterly Record Date and (ii) $10.00 for
each payment by wire transfer to a Unit Holder. Such Quarterly Fee shall be
increased for each calendar year commencing after December 31, 1990 by the
proportionate increase, if any, during the preceding calendar year in the
Consumer Price Index as defined in the Overriding Royalty Conveyance during the
preceding calendar year.

     The Quarterly Fee for Extraordinary Services shall be the Bank’s current
fee for similar or analogous services at the time such Extraordinary Services
are rendered.

IV. Transfer Service Fees

     An additional fee will be charged by the Bank, as Transfer Agent and
Registrar, for services related to the transfer and registration of Units. The
fees to be paid and services to be rendered by the Bank, as Transfer Agent and
Registrar, pursuant to this Part IV are as follows:

     A fee of $1.50 per Quarter times the number of Unit Holder accounts as of
the Quarterly Record Date for:

(1) Issuance and registration of all certificates.

(2) The complete maintenance of all Unit Holder accounts.

(3) The processing of all transfers including those requiring special
handling, i.e., regular, irregular, non-legal items, legal items and
documentary transfers.

(4) The processing of all stop transfer orders including placement,
maintenance and removal.

(5) The posting of all Certificates’issued and cancelled.

(6) The processing of the distributions of the Quarterly Income Amounts to
Unit Holders.

(7) The distribution of all required tax forms and returns and the
solicitation of taxpayer identification numbers or social security numbers
as required.

(8) The mailing of quarterly and annual reports to the Unit Holders as
required by Section 4.04 of the Agreement.

- 2 -

 

 

     Certificates issued each month in excess of 1/12th of the number of holders
at the end of the previous year will be billed at $1.25 each.

     Any additional transfer services will be charged on the Bank’s current fee
schedule in effect at the time such services are rendered.

     The fee for transfer services will remain as stated herein until December
31, 1990 and thereafter, shall be increased in the same manner as the Trustee’s
Quarterly Fee for Administrative Services.

     The fees set forth herein of the Trustee, Registrar, and Transfer Agent
shall be in addition to any amounts payable as indemnification or reimbursement
under the Agreement or the Support Agreement.

- 3 -

 

 

     IN WITNESS WHEREOF, SOC has caused this Agreement to be executed by its
duly authorized Chairman and Chief Executive Officer and its seal to be hereunto
affixed and attested by its duly authorized Secretary and the Company has caused
this Agreement to be executed by its duly authorized Treasurer and its seal to
hereunto affixed and attested by its duly authorized Secretary and the Trustee
has caused this Agreement to be executed by its duly authorized Assistant Vice
President and its seal to be hereunto affixed and attested by its duly
authorized Assistant Vice President and the Co-Trustee has executed this
Agreement as of the 28th day of February, 1989.

	 	 	 	 	 	 
	ATTEST:	 	THE STANDARD OIL COMPANY
	 
	 	 	 	 
	/s/ J. M. Casarik

	 	By:
	 	/s/ James H. Ross
	 

	 	 	 	 
	Secretary
	 	 	 	 
	 
	 	 	 	 
	ATTEST:	 	BP EXPLORATION (ALASKA) INC.
	 
	 	 	 	 
	/s/ J. M. Casarik

	 	By:
	 	/s/ E. Whitehead
	 

	 	 	 	 
	Secretary
	 	 	 	 
	 
	 	 	 	 
	ATTEST:	 	THE BANK OF NEW YORK, Trustee
	 
	 	 	 	 
	/s/ David A. Sampson

	 	By:
	 	/s/ W. N. Gitlin
	 

	 	 	 	 
	 
	 	 	 	 
	/s/ Eric A. Mazie

	 	 	 	/s/ F. James Hutchinson
	 

	 	 	 	 
	Witness

	 	 	 	F. James Hutchinson, Co-Trustee

 

 

	 	 	 	 	 
	STATE OF OHIO

	 	)	 	 
	 

	 	)     SS

	COUNTY OF CUYAHOGA 

	 	)	 	 

     BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared J. H. Ross, known to me to be
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged before me that the same was the act of The Standard Oil Company, an
Ohio corporation, and that he executed the same as the act of such corporation
for the purposes and consideration therein expressed and in the capacity therin
stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 28th day of February,
1989.

	 	 	 
	 

	 	/s/ JoAnn Motuza
	 

	 	 
	 

	 	Notary Public
	 

	 	My commission expires:
	 
	 	 
	 

	 	JoANN
MOTUZA

	 

	 	Notary
Public, State of Ohio

	 

	 	Recorded in Cuyahoga County
	 

	 	My
Comm. Expires 9-14-92

 

 

	 	 	 	 	 
	STATE OF OHIO

	 	)	 	 
	 

	 	)     SS

	COUNTY OF CUYAHOGA

	 	)	 	 

     BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared E. Whitehead, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged before me that the same was the act of the said BP Exploration
(Alaska) Inc., a Delaware corporation, and that he executed the same as the act
of such corporation for the purposes and consideration therein expressed and in
the capacity therein stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 28th day of February,
1989.

	 	 	 
	 

	 	/s/ JoAnn Motuza
	 

	 	 
	 

	 	Notary Public
	 

	 	My commission expires:
	 
	 	 
	 

	 	JoANN
MOTUZA

	 

	 	Notary
Public, State of Ohio

	 

	 	Recorded in Cuyahoga County
	 

	 	My
Comm. Expires 9-14-92

 

 

	 	 	 	 	 
	STATE OF NEW YORK

	)	 	 	 
	 

	      ss.:
	 
	COUNTY OF NEW YORK

	)	 	 	 

     Before me, a notary public in and for said County, personally appeared
Walter N. Gitlin, known to me to be the person who, as Assistant Vice President
of The Bank of New York, the corporation which executed the foregoing
instrument, signed the same, and acknowledged to me that he did so sign said
instrument in the name and upon behalf of said corporation as such officer and
that he executed the same as the act of such corporation for the purposes and
consideration therein expressed and in the capacity therein stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 23rd day of February,
1989.

	 	 	 	 
	 

	 	/s/ Virginia Barazotti
	 

	 	 
	 

	 	Notary Public, in and for
	 

	 	New York
	 

	 	My Commission Expires:
	 
	 	 
	 

	 	VIRGINIA
BARAZOTTI

	 

	 	Notary
Public, State of New York

	 

	 	No. 41-4734647

	 

	 	Qualified
in Queens County

	 

	 	Certificate filed in New York County
	 

	 	Commission
Expires Nov. 30, 1989

 

 

	 	 	 	 	 
	STATE OF DELAWARE

	)           )SS
	 
	COUNTY OF NEW CASTLE

	)	 	 	 

     BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared James Hutchinson, known to me
to be the person whose name is subscribed to the foregoing instrument and
acknowledged before me that he is a resident of the State of Delaware and that
he executed the same as his free and voluntary act for the purposes and
consideration therein expressed and in the capacity therein stated.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 17th day February, 1989.

	 	 	 
	 

	 	/s/ Lisa M. Harrison
	[SEAL]

	 	Notary Public
	 
	 	 
	 

	 	My commission expires:
	 
	 	 
	 

	 	MY COMMISSION EXPIRES
	 

	 	     AUGUST 8, 1990EX-4.2

 

EXHIBIT 4.2

OVERRIDING ROYALTY CONVEYANCE

Dated February 27, 1989

Between

BP EXPLORATION (ALASKA) INC.

(“Grantor”)

and

THE STANDARD OIL COMPANY

(“Grantee”)

RECORD THIS INSTRUMENT IN THE BARROW RECORDING DISTRICT.

BP EXPLORATION (ALASKA) INC. (a) was formerly known as (1) STANDARD ALASKA
PRODUCTION COMPANY, (2) SOHIO ALASKA PETROLEUM COMPANY, (3) SOHIO NATURAL
RESOURCES COMPANY, and (4) SOHIO PETROLEUM COMPANY and (b) is successor-in-
interest by merger to (1) BP ALASKA EXPLORATION INC. and (2) BP OIL CORPORATION
(which was formerly known as BP EXPLORATION U.S.A. INC.); please index all eight
of these names in the Grantor Index. THE STANDARD OIL COMPANY is known in Alaska
as SOCO INC.; please index both of these names in the Grantee Index.

THE LANDS AFFECTED BY THIS INSTRUMENT ARE DESCRIBED IN EXHIBIT A ATTACHED HERETO.

ADDRESSES OF THE PARTIES TO THIS INSTRUMENT ARE SET FORTH IN SECTION 10.4 OF THIS INSTRUMENT.

	 	 	 
	RETURN THIS INSTRUMENT TO:

	 	GUESS & RUDD
	 

	 	510 L Street, Suite 700
	 

	 	Anchorage, Alaska 99501
	 

	 	Attention: Joseph J. Perkins, Jr.

 

 

OVERRIDING ROYALTY CONVEYANCE

     THIS INSTRUMENT OF CONVEYANCE, dated the 27th day of February, 1989,
between BP Exploration (Alaska) Inc., a Delaware corporation (Grantor), and The
Standard Oil Company, an Ohio corporation known as SOCO Inc. (Grantee).

WITNESSETH:

     WHEREAS, Grantor desires to grant to Grantee an overriding royalty interest
(as hereinafter more fully defined, called the “Royalty Interest”) from and out
of the Subject Interests and to transfer and convey the Royalty Interest unto
Grantee as of the Effective Date herein provided, to the end and effect that the
Royalty Interest shall burden and apply to the Subject Interests as of such
Effective Date; and

     WHEREAS, Grantee desires to accept such Royalty Interest;

     NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements herein contained, the parties agree as follows:

ARTICLE ONE

DEFINITIONS AND REFERENCES

     Average Per Barrel Royalty for any calendar quarter shall be the average of
the Per Barrel Royalty for each of the days in such calendar quarter and in the
three preceding calendar quarters. With respect to the first three calendar
quarters after the Effective Date, the Average Per Barrel Royalty shall be
calculated for any preceding quarter as if the Royalty interest had been
conveyed to Grantee prior to the beginning of the earliest preceding calendar
quarter necessary to obtain an average of the present calendar quarter and the
three preceding calendar quarters, using Chargeable Costs equal to $4.50 per
Barrel and a Cost Adjustment Factor of 1.0 for calendar quarters prior to the
Effective Date.

     Barrel shall mean 42 United States gallons corrected to 60 degrees
Fahrenheit temperature in accordance with ASTM-IP Petroleum Measurements Tables,
American Edition, ASTM Designation D-1250, and with deductions for full basic
sediment and water content as determined by recognized API standards.

     BP shall mean The British Petroleum Company, p.l.c., an English company
whose principal office is at Britannic House, Moor Lane, London EC2Y 9BU
England.

     Business Day shall mean any day that is not a Saturday, Sunday, a holiday
determined by the New York Stock Exchange as “affecting ‘ex’ dates” or any other
day on which banking institutions in New York, New York, or in any other city
where the principal corporate trust office of the Trustee may be located, are
closed as authorized or required by law.

     Chargeable Costs shall have the meaning stated in Section 4.4.

     Consumer Price Index shall have the meaning stated in Section 4.5.

 

 

     Conveyance shall mean this overriding royalty conveyance.

     Cost Adjustment Factor shall have the meaning stated in Section 4.5.

     Current Reserves shall mean the Proved Reserves as of December 31, 1987,
which is 2,035.6 million Stock Tank Barrels.

     Effective Date shall mean 12:01 o’clock A.M. Alaska Time Zone on February
28, 1989. The calendar quarter in which the Effective Date occurs shall be
deemed the first calendar quarter.

     Equivalent Financial Standing shall mean a Person having a rating assigned
to outstanding unsecured, unsupported long term debt from Moody’s Investors
Service of at least A3 or from Standard & Poor’s Corporation of at least A- or
an equivalent rating from at least one nationally-recognized statistical rating
agency, after giving effect to the sale or transfer to such Person of all or
substantially all of the Subject Interests and the assumption by such Person of
all of Grantor’s obligations under this Conveyance.

     Gas Cap Area Participation shall have the meaning stated in the Prudhoe Bay
Unit Operating Agreement.

     Gas Cap Participating Area shall have the meaning stated in the Prudhoe Bay
Unit Agreement.

     Grantee shall mean The Standard Oil Company, an Ohio corporation, while it
owns all or any part of or interest in the Royalty Interest and any other Person
or Persons who acquire legal title to all or any part of or interest in the
Royalty Interest. The Standard Oil Company is known in Alaska as SOCO INC.

     Grantor shall mean BP Exploration (Alaska) Inc., a Delaware corporation
while it owns all or any part of or interest in the Subject Interests and any
other Person or Persons who acquire all or any part of or interest in the
Subject Interests. BP Exploration (Alaska) Inc. (a) was formerly known as (i)
Standard Alaska Production Company, (ii) Sohio Alaska Petroleum Company, (iii)
Sohio Natural Resources Company and (iv) Sohio Petroleum Company and (b) is
successor-in-interest by merger to (i) BP Alaska Exploration Inc. and (ii) BP
Oil Corporation (which was formerly known as BP Exploration U.S.A. Inc.).

     Independent Accountants shall mean such firm of independent certified
public accountants as may be designated by Grantee and approved by Grantor in
the exercise of its reasonable business judgment, except that Grantee may not
designate the firm of independent certified public accountants then utilized by
Grantor.

     Independent Petroleum Engineers shall mean Miller and Lents, Ltd. or such
other firm of independent petroleum engineers as may be designated by Grantee
and approved by Grantor in the exercise of its reasonable business judgment.

     Interest Rate shall mean a varying rate per annum equal to the interest
rate publicly announced in New York City by The Bank of New York from time to
time as its prime commercial lending rate.

     Lands shall mean the lands described in Exhibit A.

     Lease shall mean and include an oil and gas lease described in Exhibit A
issued by the State of Alaska and any new oil and gas leases which may be
acquired by or for the benefit of Grantor on any Lands within one year after the
expiration of the applicable oil

2

 

and gas lease or leases described in Exhibit A covering such Lands or any
subsequent lease covering such Lands and in each case shall include, but not by
way of limitation, the entire leasehold estate, working interest and operating
rights and all and any other interests of Grantor, together with all rights,
privileges and appurtenances related thereto and all and any extensions or
renewals thereof.

     Lessor’s Royalty shall mean the royalty reserved to the State of Alaska as
lessor pursuant to each Lease.

     Lower Lower Net Profits Royalty Interest shall mean that portion of the Net
Profits Royalty Interest conveyed to The Standard Oil Company by that certain
Instrument of Conveyance and Assignment by and between BP Alaska Inc. and The
Standard Oil Company dated June 18, 1987, and subsequently conveyed to BP
Exploration (Alaska) Inc. by that certain Lower Lower NPRI Conveyance between
The Standard Oil Company and BP Exploration (Alaska) Inc. dated February 27,
1989, and merged into the leasehold estates of BP Exploration (Alaska) Inc. in
the leases described therein.

     Minimum Per Barrel Royalty shall be $8.92 per Barrel, as more fully
described in Section 4.7.

     Minimum Royalty Period shall mean the period ending September 30, 1991.

     Net Profits Royalty Interest shall mean the overriding royalty interest
described in Section 2.1 of that certain instrument titled Conveyances Between
BP Alaska Inc. and BP Oil Corporation, dated August 1, 1969, as amended, which
overriding royalty interest comprises the Upper Net Profits Royalty Interest
owned by BP Alaska Inc. on the Effective Date, the Upper Lower Net Profits
Royalty Interest owned by The Standard Oil Company on the Effective Date, and
the Lower Lower Net Profits Royalty Interest merged into certain leasehold
estates of BP Exploration (Alaska) Inc.

     Oil shall mean (i) for so long as the Prudhoe Bay Unit Agreement and the
Prudhoe Bay Unit Operating Agreement are in effect, crude oil and condensate
that are produced from the Prudhoe Bay (Permo-Triassic) Reservoir and saved and
allocated to the Subject Interests as Separator Liquid Production (as defined in
the Prudhoe Bay Unit Operating Agreement) from the Oil Rim Participating Area
and the Gas Cap Participating Area of the Prudhoe Bay Unit and taken in kind or
otherwise disposed of by Grantor in accordance with the Prudhoe Bay Unit
Agreement and the Prudhoe Bay Unit Operating Agreement, and (ii) at all times
after the expiration or termination of the Prudhoe Bay Unit Agreement or the
Prudhoe Bay Unit Operating Agreement, crude oil and condensate that are produced
from the Prudhoe Bay (Permo-Triassic) Reservoir and saved and allocated to or
otherwise attributable to the Subject Interests. All other gaseous and liquid
hydrocarbons and other marketable substances produced in association with such
crude oil and condensate that are recoverable from such formations or from other
reservoirs in the Prudhoe Bay Unit and allocated to or otherwise attributable to
the Subject Interests, including natural gas liquids, shall be excluded.

     Oil Rim Area Participation shall have the meaning stated in the Prudhoe Bay
Unit Operating Agreement.

     Oil Rim Participating Area shall have the meaning stated in the Prudhoe Bay
Unit Agreement.

     Per Barrel Royalty shall have the meaning stated in Section 4.2.

     Person shall mean any individual, corporation, partnership, trust, estate
or other entity, organization or association.

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     Production Taxes shall mean the sum of any severance taxes, excise taxes
(including windfall profit tax), sales taxes, value added taxes or other similar
or direct taxes imposed upon the reserves or production, delivery or sale of
Royalty Production, as specified and calculated in Section 4.6.

     Proved Reserves shall mean Grantor’s estimate (to the extent that such
estimate has been determined to be reasonable by the Independent Petroleum
Engineers pursuant to Section 4.8 (d), unless Grantee has waived in writing its
right pursuant to Section 4.8 (d) to cause the Independent Petroleum Engineers
to determine whether Grantor’s estimate of Proved Reserves is reasonable) of the
quantities of crude oil and condensate that (i) geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years under
existing economic and operating conditions (i.e. prices and costs as of the date
the estimate is made; prices shall include consideration of changes in existing
prices provided only by contractual arrangements, but not price escalations
based on future conditions) from the Prudhoe Bay (Permo-Triassic) Reservoir in
the Prudhoe Bay Unit and (ii) will be allocated to the Subject Interests as
Separator Liquid Production (as defined in the Prudhoe Bay Unit Operating
Agreement) from the Oil Rim Participating Area and the Gas Cap Participating
Area of the Prudhoe Bay Unit pursuant to the terms and provisions of the Prudhoe
Bay Unit Agreement and the Prudhoe Bay Unit Operating Agreement. In estimating
the Proved Reserves, Grantor will be guided by the following principles:

     (i) Reservoirs are considered proved if economic productibility is
supported by either actual production or conclusive formation test. The area of
a reservoir considered proved includes (a) that portion delineated by drilling
and defined by gas-oil and/or oil-water contacts, if any, and (b) the
immediately adjoining portions not yet drilled, but which can be reasonably
judged as economically productive on the basis of available geological and
engineering data. In the absence of information on fluid contacts, the lowest
known structural occurrence of hydrocarbons controls the lower proved limit of
the reservoir.

     (ii) Reserves which can be produced economically through application of
improved recovery techniques (such as fluid injection) are included in the
“proved” classification when successful testing by a pilot project, or the
operation of an installed program in the reservoir, provides support for the
engineering analysis on which the project or program was based.

     (iii) Estimates of proved reserves do not include the following:

     (a) oil that may become available from known reservoirs but is
classified separately as “indicated additional reserves”;

     (b) crude oil and condensate the recovery of which is subject to
reasonable doubt because of uncertainty as to geology, reservoir
characteristics, or economic factors;

     (c) crude oil and condensate that may occur in undrilled prospects;

     (d) crude oil and condensate that may be recovered from oil shales,
coal, gilsonite and other such sources.

     Prudent Standard shall have the meaning stated in Section 7.1.

     Prudhoe Bay (Permo-Triassic) Reservoir shall have the meaning stated in the
Prudhoe Bay Unit Agreement.

4

 

     Prudhoe Bay Unit is the oil and gas unit situated on the North Slope of
Alaska in which the Subject Interests have been heretofore unitized for the
production of oil and gas.

     Prudhoe Bay Unit Agreement shall mean the agreement dated April 1, 1977, as
amended, among the State of Alaska and the Prudhoe Bay Unit Working Interest
Owners (as defined in said agreement) establishing the Prudhoe Bay Unit.

     Prudhoe Bay Unit Operating Agreement shall mean the agreement dated April
1, 1977, as amended, among the Prudhoe Bay Unit Working Interest Owners (as
defined in said agreement) governing Prudhoe Bay Unit operations.

     Quarterly Record Date shall mean the fifteenth day of each January, April,
July and October; provided, however, that if such day is not a Business Day then
the Quarterly Record Date shall be the next Business Day after such day and
provided further that if Grantor is notified by Grantee that it has determined
that a different date is required to comply with applicable law or the rules and
regulations of any stock exchange on which the units of beneficial interest of
the Trust are listed, it means such different date. The first Quarterly Record
Date shall be April 17, 1989.

     Redetermination Settlement Agreement shall mean that certain agreement
titled Redetermination Settlement Agreement among ARCO Alaska, Inc., Exxon
Corporation, Sohio Alaska Petroleum Company and BP Alaska Exploration Inc.,
dated June 30, 1982.

     Royalty Interest shall mean the overriding royalty interest described in
Section 2.1.

     Royalty Production for each day in a calendar quarter shall be 16.4246% of
the lesser of (1) the first 90,000 Barrels of Grantor’s actual average daily
production of Oil for such quarter and (2) Grantor’s actual average daily
production of Oil for such quarter. Grantor’s actual average daily production of
Oil for any calendar quarter shall be the total production of Oil for such
quarter, net of Lessor’s Royalty, divided by the number of days in such quarter.

     Royalty Statement means the statement prepared by Grantor for delivery to
Grantee pursuant to Section 4.8 (f).

     Stock Tank Barrel means a Barrel of stabilized Oil at a temperature of 60
degrees Fahrenheit and pressure of 14.7 psia.

     Subject Interests shall mean each kind and character of right, title, claim
or interest owned by Grantor in the Leases insofar as the Leases affect the
Lands, as such Subject Interests are now affected by the Prudhoe Bay Unit
Agreement, the Prudhoe Bay Unit Operating Agreement, the Redetermination
Settlement Agreement and the Net Profits Royalty Interest (excluding the Lower
Lower Net Profits Royalty Interest), and as such Subject Interests are now or
may later be affected by applicable law, judicial decree, arbitration,
redetermination or actions of governmental agencies having jurisdiction in the
matter.

     Trust shall mean the BP Prudhoe Bay Royalty Trust, a business trust under
the Delaware Trust Act administered under the terms of the BP Prudhoe Bay
Royalty Trust Agreement among The Standard Oil Company, BP Exploration (Alaska)
Inc., The Bank of New York, Trustee, and F. James Hutchinson, Co-Trustee, dated
February 28, 1989.

5

 

     Trustee shall mean, at the time of determination, the Trustee of the Trust
other than the Co-Trustee thereunder or any ancillary trustee.

     Upper Lower Net Profits Royalty Interest shall mean that portion of the Net
Profits Royalty Interest conveyed to The Standard Oil Company by that certain
Instrument of Conveyance and Assignment by and between BP Alaska Inc. and The
Standard Oil Company dated June 18, 1987, but not subsequently conveyed to BP
Exploration (Alaska) Inc. by that certain Lower Lower NPRI Conveyance between
The Standard Oil Company and BP Exploration (Alaska) Inc. dated February 27,
1989.

     Upper Net Profits Royalty Interest shall mean that portion of the Net
Profits Royalty Interest not conveyed to The Standard Oil Company by that
certain Instrument of Conveyance and Assignment by and between BP Alaska Inc.
and The Standard Oil Company dated June 18, 1987.

     WTI Price shall have the meaning stated in Section 4.3.

     All references to Articles, Sections or other subdivisions refer to the
corresponding Articles, Sections and other subdivisions of this Conveyance, and
the words this Conveyance, herein, hereof, hereby, hereunder and words of
similar import refer to this Conveyance as a whole and not to any particular
Article, Section or other subdivision hereof.

ARTICLE TWO

OVERRIDING ROYALTY CONVEYANCE

     Section 2.1 Conveyance. Grantor, for and in consideration of the sum of Ten
Dollars ($10.00) and other good and valuable consideration to it paid by
Grantee, the receipt and sufficiency of which are hereby acknowledged, has
bargained, sold, granted, conveyed, transferred, assigned, set over and
delivered, and by these presents does hereby bargain, sell, grant, convey,
transfer, assign, set over and deliver unto Grantee an overriding royalty
interest (the Royalty Interest) consisting of the right to receive a Per Barrel
Royalty for each Barrel of Royalty Production, if, as and when there is Royalty
Production, as more fully provided herein. Grantee shall have no right to take
Oil in kind.

     TO HAVE AND TO HOLD the Royalty Interest unto Grantee, its successors and
assigns, for the term set forth in Section 10.2; subject, however, to the terms
and provisions of this Conveyance.

ARTICLE THREE

PAYMENT

     Section 3.1 Payment. The aggregate payments from Grantor to Grantee under
the Royalty Interest for any calendar quarter will equal, except for the first
calendar quarter as set forth in Section 4.1, the sum of the product for each
day of such calendar quarter of (1) the Royalty Production and (2) the Per
Barrel Royalty; provided, that the total payment under the Royalty Interest for
any calendar quarter (including any quarter during the Minimum Royalty Period)
shall not be (1) less than zero or (2) more than the aggregate value of the
total production of Oil for such calendar quarter, net of Lessor’s Royalty and
less the value of any applicable payments made to the owners of the Net Profits
Royalty Interest (excluding the Lower Lower Net Profits Royalty Interest).

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     Grantor hereby agrees to pay to Grantee on the Quarterly Record Date
following the end of each calendar quarter all payments that are then due to
Grantee under the Royalty Interest in respect of such calendar quarter
(including, without limitation, all payments, if any, that are due pursuant to
the Minimum Per Barrel Royalty provisions of Section 4.7). Grantor will make all
payments due to Grantee by wire transfer (or such other manner as Grantor and
Grantee may agree) to an account designated by Grantee in finally collected same
day funds.

     Section 3.2 Overpayment. If at any time Grantor inadvertently pays Grantee
more than the amount due, Grantee shall not be obligated to return any such
overpayment, but the amount or amounts otherwise payable to Grantee for any
subsequent period or periods shall be reduced by such overpayment, plus an
amount equal to the product of (i) the amount of such overpayment, (ii) the
Interest Rate, and (iii) a fraction, the numerator of which is the number of
days from the date of the overpayment to the date of the payment subject to
reduction as a result of such overpayment, and the denominator of which is 360
days.

     Section 3.3 Underpayment. If at any time Grantor inadvertently pays Grantee
less than the amount due, Grantor shall pay to Grantee, in accordance with the
provisions of the next succeeding sentence, the amount of such underpayment,
together with interest thereon in an amount equal to the product of (i) the
amount of such underpayment, (ii) the Interest Rate, and (iii) a fraction, the
numerator of which is the number of days from the date of the underpayment to
the date of the payment subject to increase as a result of such underpayment,
and the denominator of which is 360 days. Grantor will make all payments due to
Grantee pursuant to this Section 3.3 on the Quarterly Record Date next following
the calendar quarter in which the underpayment in question is discovered by wire
transfer (or such other manner as Grantor and Grantee may agree) to an account
designated by Grantee in finally collected same day funds. Should Grantor
knowingly fail to pay to Grantee when due the entire amount owing pursuant to
Section 3.1. Grantor shall pay to Grantee interest as provided in this Section
3.3 and, in addition to and not in lieu of such interest, all damages to which
Grantee shall be entitled as a result of such knowing failure to pay.

ARTICLE FOUR

COMPUTATION OF ROYALTY

     Section 4.1 Calculation of Royalty Amount. The Royalty Interest entitles
Grantee to receive, for the first calendar quarter ending March 31, 1989, the
sum of the product for each day in such quarter from the Effective Date to the
end of such quarter of, and for each calendar quarter thereafter the sum of the
product for each day in such quarter of, (1) the Royalty Production and (2) the
Per Barrel Royalty, subject to the Minimum Per Barrel Royalty provisions of
Section 4.7; provided, that the payment under the Royalty Interest for any
calendar quarter (including any quarter during the Minimum Royalty Period) shall
not be (1) less than zero or (2) more than the aggregate value of the total
production of Oil for such calendar quarter, net of Lessor’s Royalty and less
the value of any applicable payments made to the owners of the Net Profits
Royalty Interest (excluding the Lower Lower Net Profits Royalty Interest).

     Section 4.2 Per Barrel Royalty. The Per Barrel Royalty in effect for any
day shall equal the WTI Price for such day less the sum of (1) the product of
the Chargeable Costs and the Cost Adjustment Factor and (2) Production Taxes.

     Section 4.3 WTI Price. WTI Price for any trading day shall mean (1) the
latest price (expressed in dollars per Barrel) for West Texas intermediate crude
oil of

7

 

standard quality having a specific gravity of 40 degrees API for delivery
at Cushing, Oklahoma (West Texas Crude), quoted for such trading day by the Dow
Jones International Petroleum Report (which is published in The Wall Street
Journal) or if the Dow Jones International Petroleum Report does not publish
such quotes, then such price as quoted by Reuters, or if Reuters does not
publish such quotes, then such price as quoted in Platt’s Oilgram Price Report,
or (2) if for any reason such publications do not publish such price, then the
WTI Price will mean, until (1) shall again be applicable, the simple average of
the daily mean prices expressed in dollars per Barrel) quoted for West Texas
Crude by one major oil company, one petroleum broker and one petroleum trading
company, in each case unaffiliated with Grantor. Such major oil company,
petroleum broker and petroleum trading company shall have substantial United
States operations and will be designated by Grantor from time to time in an
officer’s certificate delivered to Grantee. In the event that prices for West
Texas Crude shall not be quoted so as to permit the calculation of WTI Price,
West Texas Crude, for the purpose of calculating the WTI Price first for (1) and
then (2) above, shall mean such other light sweet domestic crude oil of standard
quality as shall be designated by Grantor in an officer’s certificate delivered
to Grantee and approved by Grantee in the exercise of its reasonable business
judgment with appropriate allowance for transportation costs to the Gulf Coast
(or other appropriate location) to equilibrate such price to the WTI Price as
contemplated hereunder. The WTI Price for any day which is not a trading day
shall be the WTI Price for the next preceding day which is a trading day.

     Section 4.4 Chargeable Costs. The Chargeable Costs per Barrel of Royalty
Production shall be the amount set forth in the following table opposite the
calendar year stated:

	 	 	 	 	 	 	 
	For the	 	Chargeable
	Year Ending	 	Costs Per
	December 31	 	Barrel
	 	1989	 	 	 	4.50	 
	 	1990	 	 	 	4.50	 
	 	1991	 	 	 	4.50	 
	 	1992	 	 	 	6.00	 
	 	1993	 	 	 	6.75	 
	 	1994	 	 	 	8.00	 
	 	1995	 	 	 	8.25	 
	 	1996	 	 	 	8.50	 
	 	1997	 	 	 	8.85	 
	 	1998	 	 	 	9.30	 
	 	1999	 	 	 	9.80	 
	 	2000	 	 	 	10.00	 
	 	2001	 	 	 	10.75	 
	 	2002	 	 	 	11.25	 
	 	2003	 	 	 	11.75	 
	 	2004	 	 	 	12.00	 
	 	2005	 	 	 	12.25	 
	 	2006	 	 	 	12.50	 
	 	2007	 	 	 	12.75	 
	 	2008	 	 	 	13.00	 
	 	2009	 	 	 	13.25	 
	 	2010	 	 	 	14.50	 
	 	2011	 	 	 	16.60	 
	 	2012	 	 	 	16.70	 
	 	2013	 	 	 	16.80	 
	 	2014	 	 	 	16.90	 

8

 

	 	 	 	 	 	 	 
	For the	 	Chargeable	 
	Year Ending	 	Costs Per	 
	December 31	 	Barrel	 
	 	2015	 	 	 	17.00	 
	 	2016	 	 	 	17.10	 
	 	2017	 	 	 	17.20	 
	 	2018	 	 	 	20.00	 
	 	2019	 	 	 	23.75	 
	 	2020	 	 	 	26.50	 
	 	thereafter	 	 	increasing by $2.75 each year

     Chargeable Costs shall be subject to a maximum reduction of $1.20 per year
in years subsequent to 1995 in the following circumstances, irrespective of
whether the number of Proved Reserves added during any applicable period is a
positive number, a negative number, or zero:

     (a) If, by December 31, 1995, 100,000,000 or more Stock Tank Barrels (STB)
of Proved Reserves have not been added to Current Reserves (before taking into
account any production therefrom) then for each year 1996 through 2000,
inclusive, Chargeable Costs as set forth in the table above shall be reduced, as
of January 1 in each such year, by an amount equal to the lesser of (A) $1.20 or
(B) the product of $1.20 and a fraction, the numerator of which shall be the
difference between 100,000,000 STB of Proved Reserves and the actual number of
STB of Proved Reserves so added to Current Reserves from January 1, 1988 through
December 31, 1995, and the denominator of which shall be 100,000,000 STB of
Proved Reserves.

     (b) If, between January 1, 1996 and December 31, 2000, an additional
200,000,000 STB of Proved Reserves (that is, 200,000,000 STB of Proved Reserves
in addition to the 100,000,000 STB of Proved Reserves that are referred to in
Section 4.4 (a)) have not been added to Current Reserves (before taking into
account any production therefrom) then for each year from 2001 through 2005,
inclusive, Chargeable Costs as set forth in the table above shall be reduced, as
of January 1 in each such year, by an amount equal to the lesser of (A) $1.20 or
(B) the product of $1.20 and a fraction, the numerator of which shall be the
difference between (1) 200,000,000 STB of Proved Reserves and (2) the sum of (i)
the actual number of STB of Proved Reserves so added to Current Reserves from
January 1, 1996 through December 31, 2000 plus (ii) the excess, if any, of the
number of STB of Proved Reserves so added to Current Reserves from January 1,
1988 through December 31, 1995 over 100,000,000 STB of Proved Reserves (provided
that the sum of (i) and (ii) shall not exceed 200,000,000 STB of Proved
Reserves), and the denominator of which shall be 200,000,000 STB of Proved
Reserves.

     (c) The tests set forth in (i) and (ii) below shall be utilized to
calculate the reduction, if any, in Chargeable Costs for the year 2006 and each
year thereafter. If the calculations under both such tests produce a reduction
in Chargeable Costs, the greater of such reductions shall apply. If the
calculation under one of such tests produces a reduction in Chargeable Costs but
the calculation under the other test does not, the calculation that produces the
reduction shall apply. In applying the tests below, it is the intention of
Grantor and Grantee that test (i) allow as a credit toward the 400,000,000 STB
of Proved Reserves that must be added to Current Reserves during the period set
forth in such test an amount equal to the excess, if any, of the number of STB
of Proved Reserves added to Current Reserves prior to December 31, 2000 over
300,000,000 STB of Proved Reserves, while test (ii) sets a level of only
100,000,000 STB of Proved Reserves that must be added to Current Reserves during
the period set forth in such test, but does not allow a credit for additions of
STB of Proved Reserves accrued prior to December 31, 2000.

9

 

     (i) If, between January 1, 2001 and December 31, 2005, an additional
400,000,000 STB of Proved Reserves (that is, 400,000,000 STB of Proved
Reserves in addition to the 100,000,000 STB of Proved Reserves that are
referred to in Section 4.4(a) and the 200,000,000 STB of Proved Reserves
that are referred to in Section 4.4(b)) have not been added to Current
Reserves (before taking into account any production therefrom), then for
the year 2006 and each year thereafter Chargeable Costs as set forth in the
table above shall be reduced, as of January 1 of each such year, by an
amount equal to the lesser of (A) $1.20 or (B) the product of $1.20 and a
fraction, the numerator of which shall be the difference between (1)
400,000,000 STB of Proved Reserves and (2) the sum of (i) the actual number
of STB of Proved Reserves so added to Current Reserves from January 1, 2001
through December 31, 2010 plus (ii) the excess, if any, of the number of
STB of Proved Reserves so added to Current Reserves from January 1, 1988
through December 31, 2000 over 300,000,000 STB of Proved Reserves (provided
that the sum of (i) and (ii) shall not exceed 400,000,000 STB of Proved
Reserves) and the denominator of which shall be 400,000,000 STB of Proved
Reserves.

     (ii) If between January 1, 2001 and December 31, 2005, an additional
100,000,000 STB of Proved Reserves (that is, 100,000,000 STB of Proved
Reserves in addition to any and all STB of Proved Reserves that are added
to Current Reserves prior to January 1, 2001) have not been added to
Current Reserves (before taking into account any production therefrom),
then for the year 2006 and each year thereafter Chargeable Costs as set
forth in the table above shall be reduced, as of January 1 of each such
year, by an amount equal to the lesser of (A) $1.20 or (B) the product of
$1.20 and a fraction, the numerator of which shall be the difference
between 100,000,000 STB of Proved Reserves and the number of STB of Proved
Reserves added to Current Reserves from January 1, 2001 through December
31, 2005 and the denominator of which shall be 100,000,000 STB of Proved
Reserves.

     Grantor shall report to Grantee the amount of Proved Reserves added in any
year, taking into account the reductions, if any, to Proved Reserves resulting
from modifications of Grantor’s estimates which were made of Proved Reserves for
prior years, it being agreed that only the net amount of Proved Reserves (that
is, additions net of reductions resulting from modifications of previous
estimates of Proved Reserves) shall be utilized in determining whether the
requisite number of STB of Proved Reserves have been added pursuant to the
provisions of this Section 4.4.

     Section 4.5 Cost Adjustment Factor. The Cost Adjustment Factor shall mean
the ratio of (1) the Consumer Price Index published for the most recently past
February, May, August or November, as the case may be, to (2) the Consumer Price
Index published most recently prior to the Effective Date, provided, however,
that (a) if for any calendar quarter the average WTI Price was $18.00 or less,
then in such event the Cost Adjustment Factor for such quarter shall be the Cost
Adjustment Factor for the immediately preceding quarter, and (b) the Cost
Adjustment Factor for any calendar quarter in which the average WTI Price
exceeds $18.00, after a calendar quarter during which the average WTI Price is
equal to or less than $18.00, and for each following calendar quarter in which
the average WTI Price is greater than $18.00, shall be the product of (x) the
Cost Adjustment Factor for the most recently past calendar quarter in which the
average WTI Price is equal to or less than $18.00 and (y) a fraction, the
numerator of which shall be the Consumer Price Index published for the most
recently past February, May, August or November, as the case may be, and the
denominator of which shall be the Consumer Price Index published for the most
recently past February, May, August or November during a quarter in which the
average WTI Price was equal to or less than $18.00. The Consumer Price Index
shall mean the U.S. Consumer Price Index, all items and all urban consumers,
U.S. city average, 1982-84 equals 100, as first published, without seasonal
adjustment, by the Bureau of Labor Statistics,

10

 

Department at Labor, without regard to subsequent revisions or corrections by
such Bureau.

     Section 4.6 Production Taxes. Production Taxes in existence on the
Effective Date or subsequently imposed shall be computed at defined statutory
rates. In the case of taxes based upon wellhead or field value, WTI Price less
the product of $4.50 times the Cost Adjustment Factor shall be deemed to be the
wellhead or field value. At the Effective Date the Production Taxes payable with
respect to the Royalty Production are the Alaska Oil and Gas Properties
Production Tax (“Alaska Production Tax”) and the Alaska Oil and Gas Conservation
Tax (“Alaska Conservation Tax”). For the purposes of the Royalty Interest, the
Alaska Production Tax shall be computed without regard to the “economic limit
factor” as the greater of the “percentage of value amount” (based on the
statutory rate and the wellhead value as defined above) and the “cents per
barrel amount” as such terms are used with respect to such tax. Grantor hereby
agrees to pay to the appropriate taxing authorities when due all Production
Taxes in respect of the Royalty Interest, except those Production Taxes which
Grantor is contesting in good faith and which Grantor is not required to then
pay by law. As of the Effective Date, the statutory rate for the purpose of
calculating the “percentage of value amount” is 15% with respect to the Alaska
Production Tax and four mills per Barrel of Oil production with respect to the
Alaska Conservation Tax.

     Section 4.7 Minimum Royalty. If, with respect to any calendar quarter
during the Minimum Royalty Period, the Average Per Barrel Royalty is less than
$8.92 per Barrel, Grantor will make an additional payment to Grantee at the time
specified in Section 3.1 equal to the sum of the product for each day of such
calendar quarter of (1) the difference between the Minimum Per Barrel Royalty
and the Average Per Barrel Royalty and (2) the Royalty Production; provided,
that the total payments under the Royalty Interest for any calendar quarter
(including any payments under this Section 4.7) shall not exceed the aggregate
value of the total production of Oil for such calendar quarter, net of Lessor’s
Royalty and less the value of any applicable payments made to the owners of the
Net Profits Royalty Interest (excluding the Lower Lower Net Profits Royalty
Interest).

     Section 4.8 Information and Reports. Grantor shall:

     (a) provide Grantee with such information concerning the Royalty Interest
as Grantee may need and to which Grantor has access to permit Grantee (i) to
comply with any reporting or disclosure obligations of Grantee pursuant to
applicable law and the requirements of any stock exchange in which the
securities of Grantee are listed, (ii) to prepare Alaska, federal and other
income tax returns and (iii) to prepare reports required to be forwarded by
Grantee to its security holders;

     (b) provide Grantee and the Independent Accountants (the expenses of such
Independent Accountants to be borne by Grantee) with access, at the office of
Grantor during reasonable business hours, to inspect Grantor’s books and
records, which books and records shall be true and correct in all material
respects and sufficient to enable the Independent Accountants to verify the
correctness of the amounts paid and payable to Grantee as the owner of the
Royalty Interest and to discuss with representatives of Grantor the affairs,
finances and accounts of Grantor relating to the Leases and the Subject
Interests; provided that Grantee and the Independent Accountants shall keep the
information therein confidential except for information which Grantee is
required by law to disclose;

     (c) furnish to Grantee on or before February 28 of each year a report
containing all information of a nature, of a standard and in a form consistent
with the requirements of the Securities and Exchange Commission respecting the
inclusion of

11

 

reserve and reserve valuation information in filings under the Securities Act of
1933 and the Securities Exchange Act of 1934 and with applicable accounting
rules. Such report shall set forth, among other things, Grantor’s estimates of
future net cash flows from Proved Reserves attributable to the Royalty Interest,
the discounted present value thereof, the assumptions utilized in arriving at
the estimates contained therein, and the estimate of the quantities of Proved
Reserves (including reductions of Proved Reserves as a result of modification of
Grantor’s estimates of Proved Reserves from prior years) added to Current
Reserves during the preceding year. Current Reserves shall not be reduced by
production of Oil since December 31, 1987;

     (d) unless such right is waived in writing by Grantee, provide to the
Independent Petroleum Engineers (the expenses of such Independent Petroleum
Engineers to be borne by Grantee) all access and information which the
Independent Petroleum Engineers deem necessary to determine whether the methods
and procedures employed by Grantor to accumulate and evaluate the necessary
information and to estimate and document the Proved Reserves and annual
production rate forecasts and to prepare the report referred to in Section 4.8
(c) are effective and in accordance with generally accepted geological and
engineering practices in the petroleum industry and whether Grantor’s estimate
of the quantities of Proved Reserves set forth in such report are, in the
aggregate, reasonable, and if not, to determine and specify that portion of
Grantor’s estimate of Proved Reserves that, in the opinion of the Independent
Petroleum Engineers, is reasonable, it being agreed that in the event of a
material disagreement with respect to the correct quantities of Proved Reserves,
the opinion of the Independent Petroleum Engineers shall govern for all purposes
of this Conveyance; in carrying out their investigation the Independent
Petroleum Engineers may review, among other things they deem relevant, (i)
Grantor’s procedures for estimating and documenting Proved Reserves, (ii)
Grantor’s estimates of in-place reservoir volumes, (iii) Grantor’s estimates of
recovery factors and production profiles for the various areas, pay zones,
projects and recovery processes that are included in Grantor’s estimate of
Proved Reserves, (iv) Grantor’s production strategy and procedures for
implementing that strategy, (v) the sufficiency of data available for making
estimates of Proved Reserves and production profiles, and (vi) pertinent
provisions of the Prudhoe Bay Unit Agreement and the Prudhoe Bay Unit Operating
Agreement; provided, that the Independent Petroleum Engineers shall keep the
information so provided confidential except for information which is required by
law to be disclosed;

     (e) provide Grantee on a date no later than twelve calendar days prior to
each Quarterly Record Date (unless otherwise agreed by Grantee) information as
to the amount to be paid to Grantee on the next Quarterly Record Date.

     (f) provide to Grantee, and to Grantee’s designee, a Royalty Statement
within five working days after the end of each calendar quarter which shall
consist of a computation, supported by data required to perform the computations
hereunder, of the amount to be paid to Grantee at the next Quarterly Record
Date;

     (g) provide Grantee with such other information as Grantee may reasonably
request from time to time and to which Grantor has access.

     All costs and expenses incurred by Grantor in providing reports and
information under this Conveyance shall be borne by Grantor.

     Section 4.9 Indemnification. Grantor hereby agrees to indemnify and save
harmless Grantee from and against any expense (including, without limitation,
the expense of suit and attorneys’ fees), claim, damage, loss or liability
incurred by Grantee as a result of or arising out of the information provided to
Grantee by Grantor pursuant to

12

 

Section 4.8 being untimely provided or incorrect or untrue or misleading in any
material respect.

ARTICLE FIVE

NON-LIABILITY OF GRANTEE

     Section 5.1 Non-Expense Bearing Interest; Non-Liability of Grantee;
Indemnification. It is the express intent of Grantor and Grantee that the
Royalty Interest shall constitute (and this Conveyance shall conclusively be
construed for all purposes as creating) a non-expense bearing interest for all
purposes. Grantor and Grantee acknowledge that, pursuant to the terms of the
Prudhoe Bay Unit Operating Agreement, if Grantor fails to pay any costs or
expenses chargeable to Grantor under the Prudhoe Bay Unit Operating Agreement
and the production of Oil is insufficient to pay such costs and expenses, then
the Royalty Interest is chargeable with a pro rata portion of such cost and
expenses and is subject to the enforcement against it of liens granted to the
unit operators of the Prudhoe Bay Unit. However, as more fully set forth in
Section 7.2, Grantor has agreed to pay timely all costs and expenses chargeable
to it pursuant to the Prudhoe Bay Unit Operating Agreement and to insure that no
such costs and expenses will be chargeable against the Royalty Interest. Grantor
and Grantee acknowledge that in no event shall Grantee ever be liable or
responsible in any way for any expense, claim, damage, loss, obligation or
liability incurred by Grantor or Grantee or others attributable to the Subject
Interests or to Oil produced therefrom (including, without limitation, those
incurred in connection with or attributable to the developing, exploring,
drilling, equipping, testing, operating, reworking, maintaining, plugging or
abandoning of any well or the storing, handling, treating or marketing of the
production therefrom), and Grantor hereby agrees to indemnify and save harmless
Grantee from and against any such expense (including, without limitation, the
expense of suit and attorneys’ fees), claim, damage, loss, obligation and
liability, irrespective of whether same arises pursuant to the provisions of the
Prudhoe Bay Unit Operating Agreement or otherwise.

ARTICLE SIX

UNITIZATION

     Section 6.1 Prudhoe Bay Unit. The Subject Interests have been heretofore
unitized for the production of oil and gas in the Prudhoe Bay Unit. The Subject
Interests are and shall be subject to the terms and provisions of the Prudhoe
Bay Unit Agreement and the Prudhoe Bay Unit Operating Agreement, the Leases, and
any other type of contract, conveyance, or Instrument, recorded or unrecorded,
relating to the Subject Interests or Grantor’s interest therein in effect at the
Effective Date.

     Section 6.2 Right to Amend. Grantor shall have the right and power to
alter, change, amend or terminate the Prudhoe Bay Unit Agreement, the Prudhoe
Bay Unit Operating Agreement, the Leases, and any other type of contract,
conveyance, or instrument, recorded or unrecorded, as heretofore or hereafter
entered into, as to all or any part of the Subject Interests, upon such terms
and provisions as Grantor shall in its sole discretion determine, but, if
Grantor exercises such right and power in breach of the Prudent Standard, it
will, and hereby agrees to, indemnify and save harmless Grantee from and against
any and all expense (including, without limitation, the expense of suit and
attorneys’ fees), claim, damage, loss, obligation and liability incurred by
Grantee as a result of or arising out of Grantor’s exercise of the aforesaid
right and power in breach of the Prudent Standard. If and whenever, through the
exercise of such right and power,

13

 

or pursuant to any law hereafter enacted or any rule, regulation or order of any
governmental body or official hereafter promulgated, any of the Subject
Interests are altered, changed, amended or terminated in any manner, the Royalty
Interest insofar as it affects such Subject Interests shall also be altered,
changed, amended or terminated, and in any such event such Royalty Interest,
insofar as it is affects such Subject Interests, shall apply to and affect only
the Royalty Production which is allocated to such Subject Interests, but no such
alteration, change, amendment or termination shall affect the definition of
Royalty Production as set forth in Article One or the method of making payments
under the Royalty Interest as set forth in Article Three or the method of
computing the payments under the Royalty Interest as set forth in Article Four.
Grantee hereby agrees that it will never challenge the right and power of the
Grantor to so alter, change, amend or terminate the Prudhoe Bay Unit Agreement,
the Prudhoe Bay Unit Operating Agreement, the Leases and any other type of
contract conveyance or instrument, recorded or unrecorded, as heretofore or
hereafter entered into, as to all or any part of the Subject Interests, upon
such terms and provisions as Grantor shall in its sole discretion determine, but
nothing in this Section 6.2 shall be construed to release Grantor from its
indemnity obligation to Grantee as set forth in the first sentence of this
Section 6.2 and in other provisions of this Conveyance or to deny Grantee any of
the benefits to which it is entitled under this Conveyance or at law or in
equity.

ARTICLE SEVEN

OPERATION OF SUBJECT INTERESTS

     Section 7.1 Prudent Operator Standard. Grantor agrees, to the extent it has
the legal right to do so under the Prudhoe Bay Unit Agreement, the Prudhoe Bay
Unit Operating Agreement, the Leases and applicable law affecting or pertaining
to the Subject Interests, that it will conduct and carry on the development,
exploration, production, maintenance and operation of the Subject Interests with
reasonable and prudent business judgment, in accordance with the provisions of
this Article Seven and good oil and gas field practices, as a reasonable and
prudent operator, and without regard to the existence of the Royalty Interest or
any other royalty, overriding royalty, or other interest created subsequent to
the Effective Date (the “Prudent Standard”). However, nothing contained in this
Section 7.1 shall be deemed to prevent or restrict Grantor from electing not to
participate in any operation which is to be conducted under the terms of either
the Prudhoe Bay Unit Agreement or the Prudhoe Bay Unit Operating Agreement if
such election is made by Grantor in accordance with the Prudent Standard.
Grantor shall not be obligated to continue to produce Oil from the Subject
Interests in the Prudhoe Bay Unit or to maintain such production at any
particular level so long as Grantor acts in accordance with Prudent Standard.
Notwithstanding anything elsewhere herein to the contrary, Grantor shall never
be liable to Grantee for the manner in which Grantor performs its duties
hereunder as long as Grantor has acted in accordance with the Prudent Standard.
Grantee shall have no right to operate or direct operations of the Subject
Interests.

     Section 7.2 Assurances. (1) Grantor agrees, to the extent it has the legal
right to do so under the terms of the Prudhoe Bay Unit Agreement, the Prudhoe
Bay Unit Operating Agreement, the Leases and applicable law affecting or
pertaining to the Subject Interests, that it will perform all material
obligations to be performed by it (including without limitations making timely
payment of all costs and expenses chargeable to it pursuant to any applicable
agreement to insure that the Royalty Interest is not charged with any portion of
any such costs or expenses and that no lien or security interest is enforced
against the Royalty Interest by virtue of any matter arising by through or under
Grantor) under all material contracts and agreements applicable to the Subject
Interests and the production and transportation to market of Oil (including,
without

14

 

limitation, the Prudhoe Bay Unit Agreement and the Prudhoe Bay Unit Operating
Agreement) and will use its best efforts (by taking such action as is available
to it by contract, at law, or in equity) to enforce the performance under such
contracts and agreements of the other parties thereto.

     (ii) The provisions set forth in this Conveyance that require Grantor to
perform certain duties or take certain actions (but subject to the express and
implied limitations in this Conveyance) that can only be performed or taken by
the operator of the Prudhoe Bay Unit, acting under the direction and supervision
of the working interest owners of the Prudhoe Bay Unit, or the operators of
facilities or pipelines separate from the Prudhoe Bay Unit, shall be construed
to require Grantor to use its best efforts (by taking such action as is
available to it by contract (including, without limitation, exercising its right
to vote and to initiate proposals), at law or in equity) to cause the operator
to perform the duty or to take the action in question. Without limitation of the
generality of the foregoing, if the operator elects, pursuant to the applicable
operating agreement, to become a nonconsenting party with respect to such duty
or action, and if Grantor may cause such duty or action to be performed or taken
by becoming a consenting party under the applicable operating agreement, then
Grantor shall so elect to become a consenting party unless a reasonable and
prudent operator, acting in accordance with good oil and gas field practices and
without regard to the existence of the Royalty Interest or any other royalty,
overriding royalty or other interest created subsequent to the Effective Date,
would refuse to undertake the performance of the duty or the taking of the
action in question.

     Section 7.3 Abandonment of Properties. Nothing herein contained shall
obligate Grantor to continue to operate any well or maintain in force or attempt
to maintain in force any of the Subject Interests when, in Grantor’s opinion,
formed in accordance with the Prudent Standard, such well or Subject Interest
ceases to produce or is not capable of producing oil or gas in paying
quantities. The expiration of a Subject Interest in accordance with the terms
and conditions applicable thereto shall not be considered to be a voluntary
surrender or abandonment thereof.

     Section 7.4 Non-Operating Interest In Minerals. It is the express intent of
Grantor and Grantee that the Royalty Interest shall constitute (and this
Conveyance shall conclusively be construed for all purposes as creating) a
non-operating interest in minerals for all purposes. Without limitation of the
generality of the immediately preceding sentence, Grantor and Grantee
acknowledge that Grantee has no right or power to participate in the selection
of a drilling contractor, to propose the drilling of a well, to determine the
timing or sequence of drilling operations, to commence or shut down production,
to take over operations or to share in any operating decision whatsoever
(including, without limitation, the alteration, change, amendment or termination
of the Prudhoe Bay Unit Agreement, the Prudhoe Bay Unit Operating Agreement, the
Leases or any other type of contract, conveyance, or instrument, recorded or
unrecorded, as heretofore or hereafter entered into, as to all or any part of
the Subject Interests hereunder). Grantor and Grantee hereby expressly negate
any intent to create (and this Conveyance shall never be construed as creating)
a mining or other partnership or joint venture.

ARTICLE EIGHT

GOVERNMENT REGULATION

     Section 8.1 Government Regulations. All obligations of Grantor hereunder
shall be subject to all applicable laws, regulations and rules of the State of
Alaska and the United States of America and all other governmental agencies or
authorities having

15

 

jurisdiction in the matter (except those being contested in good faith). Grantor
shall be entitled to use its reasonable discretion in making filings, for itself
and on behalf of Grantee, with any governmental body, agency, board or
commission having jurisdiction, affecting the Subject Interests or the Royalty
Interest, provided that any such filings shall be limited to notice required in
connection with the grant or transfer of the Royalty Interest.

     Section 8.2 Government Approval. This Conveyance shall not be effective
until approved by the Commissioner of the Department of Natural Resources, State
of Alaska, or his designee.

ARTICLE NINE

ASSIGNMENTS

     Section 9.1 Assignment by Grantor. Grantor shall have the right to assign,
sell, transfer, convey, mortgage or pledge the Subject Interests, or any part
thereof, provided that same is expressly made subject to the Royalty Interest
and the terms and provisions of this Conveyance and that a certified copy of the
recorded instrument accomplishing same is promptly furnished to Grantee by
Grantor. From and after the effective date of any such assignment, sale,
transfer or Conveyance by Grantor, the grantee thereunder shall succeed to all
the requirements upon and responsibilities of Grantor hereunder as to the
interests so acquired by such grantee, and, from and after said effective date,
Grantor shall be relieved of such requirements and responsibilities, excepting
only for those accrued or due for performance prior to such effective date and
except as otherwise provided in Section 9.2. The kind of notice provided herein
shall be exclusive, and no other kind, whether actual or constructive, shall be
binding on Grantee.

     Section 9.2 Effect of Assignment by Grantor. Notwithstanding any provision
of this Conveyance to the contrary, no assignment, sale, transfer, conveyance,
mortgage or pledge of the Subject Interests, or any part thereof, shall
adversely affect any of Grantee’s rights hereunder, including, without
limitation, the amount, computation or method of payment of the Royalty
Interest, it being the intent of Grantor and Grantee that for the purpose of
determining the Royalty Interest payable to Grantee no disposition will be
deemed to have been effected during the term of this Conveyance. Should Grantor
dispose of its interest in the Subject Interests as to some of the Subject
Interests, or as to some part thereof, then, effective as of the date of such
disposition, BP Exploration (Alaska) Inc. shall automatically be designated by
all owners of the Subject Interests as their agent, throughout the term of this
Conveyance, (i) to make all designations that Grantor is entitled to make
pursuant to Section 4.3, (ii) to obtain all information and take such other
steps as may be necessary to permit the Independent Petroleum Engineers and the
Independent Accountants and Grantor to perform their respective obligations and
duties under this Conveyance (including, without limitation, the calculations to
be made pursuant to Article Three and Article Four) and (iii) to make all
payments and to deliver and receive all communications on behalf of Grantor, it
being agreed that during such time, if any, that the Subject Interests are owned
by more than one Person, Grantee shall never be obligated without its consent to
receive payments from or to deliver or receive communications under this
Conveyance from or to any Grantor other than BP Exploration (Alaska) Inc.;
provided, however, that BP Exploration (Alaska) Inc. shall be released from its
obligations under this Conveyance upon the sale or transfer by it of all or
substantially all of the Subject Interests, if the transferee is of Equivalent
Financial Standing and unconditionally agrees to assume and be bound by all of
BP Exploration (Alaska) Inc.’s obligations under this Conveyance in a writing in
form and substance reasonably satisfactory to Grantee.

16

 

     Section 9.3 Assignment by Grantee. Grantee has the right to assign the
Royalty Interest in whole or in part. No such assignment will affect the method
of computing the Royalty Interest, and if more than one Person becomes entitled
to participate in the Royalty Interest, Grantor may withhold from such other
Person payments to which such Person would otherwise be entitled hereunder and
the furnishing of any data or information which Grantor is required by the terms
hereof to furnish Grantee until Grantor is furnished a recordable instrument
executed by or binding upon all Persons interested in the Royalty Interest
designating one Person who is to receive such payments, data and information.

     Section 9.4 Change In Ownership. No change of ownership or right to receive
payment of the Royalty Interest, or of any part thereof, however accomplished,
shall be binding upon Grantor until notice thereof shall have been furnished by
the Person claiming the benefit thereof, and then only with respect to payments
thereafter made. Notice of sale or assignment shall consist of a certified copy
of the recorded instrument accomplishing the same; notice of change of ownership
or right to receive payment accomplished in any other manner (for example by
reason of incapacity, death or dissolution) shall consist of certified copies of
such documents and complete proceedings as are legally binding and conclusive of
the rights of all parties. Until such notice shall have been furnished to
Grantor as above provided, the payment or tender of all sums payable on the
Royalty Interest may be made in the manner provided herein precisely as if no
such change in interest or ownership or right to receive payment had occurred.
The kind of notice herein provided shall be exclusive, and no other kind,
whether actual or constructive, shall be binding on Grantor.

     Section 9.5 Rights of Mortgagee or Trustee. If Grantee shall at any time
execute a mortgage or deed of trust covering all or part of the Royalty
Interest, subject to the notice provisions of Section 9.4, the mortgagee(s) or
trustee(s) therein named or the holder of any obligation secured thereby shall
be entitled, to the extent such mortgage or deed of trust so provides, to
exercise all the rights, remedies, powers and privileges conferred upon Grantee
by the terms of this Conveyance, but the provisions of this Section 9.5 shall in
no way be deemed or construed to impose upon Grantor any obligation or liability
undertaken by Grantee under such mortgage or deed of trust or under the
obligation secured thereby.

ARTICLE TEN

MISCELLANEOUS

     Section 10.1 Proportionate Reduction. In the event of failure or deficiency
in title of the State of Alaska to any of the Lands which affects any of the
Subject Interests, or any modification of the Subject Interests as provided in
Article Six, the portion of the Royalty Production from such affected or
modified Subject Interests out of which the Royalty Interest attributable to
such Subject Interests shall be payable shall be reduced in the same proportion
that such Subject Interests are reduced, but such failure or deficiency in title
shall not affect the definition of Royalty Production as set forth in Article
One or the method of paying the Royalty Interest as set forth in Article Three
or the method of computing the payments to be made under the Royalty Interest as
act forth in Article Four.

     Section 10.2 Term. Subject to the limitations stated herein, this
Conveyance shall remain in force so long as any of the Subject Interests are in
effect, provided, however, that all warranties and indemnities set forth in this
Conveyance shall survive for the maximum period permitted by law.

17

 

     Section 10.3 Further Assurances. Should any additional instrument of
assignment or conveyance be required to describe more specifically any interests
subject hereto or to vest in any Person to whom Grantee assigns the Royalty
Interest in whole or in part the benefit of all covenants, representations,
warranties and indemnities made by Grantor to or for the benefit of Grantee
pursuant to this Conveyance, Grantor agrees to execute and deliver the same.
Also, if any other or additional instruments are required in connection with the
transfer of interests in the Leases to comply with applicable law, regulations,
the Prudhoe Bay Unit Agreement, the Prudhoe Bay Unit Operating Agreement or any
other applicable agreements, Grantor will execute and deliver the same.

     Section 10.4 Notices. Any notice, request, demand, report, statement or
other instrument which may be required or permitted to be given to any party
hereto or other Person succeeding to any interest of a party hereto shall be
deemed sufficiently given if in writing and delivered to such party or Person or
to an officer of such party or Person or deposited in the United States mail in
a sealed envelope, first class mail, with postage prepaid, addressed to such
party or Person at its or his address stated in this Conveyance, or at such
other address as the party or Person to be addressed shall have designated by
written notice to each such party or Person. Each party’s proper address shall
be deemed to be that set forth herein below until such party gives to the other
party, in the manner above prescribed, notice of a new address, after which such
new address shall be deemed the proper address until changed in like manner.
Notice shall be deemed given when actually received by the party or Person to
which such notice was intended.

	 	 	 	 	 
	 

	 	Grantor:
	 	BP Exploration (Alaska) Inc.
	 

	 	 	 	     P.O. Box 196612
	 

	 	 	 	     900 East Benson Boulevard
	 

	 	 	 	     Anchorage, Alaska 99519-6612
	 
	 	 	 	 
	 

	 	Grantee:
	 	The Standard Oil Company
	 

	 	 	 	     200 Public Square
	 

	 	 	 	     Cleveland, Ohio 44114-2375

     Section 10.5 Covenants and Warranties with Respect to Participating
Interest and Net Profits Royalty Interest. Grantor hereby covenants and warrants
that its Oil Rim Area Participation as of the Effective Date is 50.6848339% and
its Gas Cap Area Participation as of the Effective Date is 13.8398950%, that as
of the Effective Date its Oil Rim Area Participation and its Gas Cap Area
Participation is subject only to the Net Profits Royalty Interest (exclusive of
the Lower Lower Net Profits Royalty Interest) and that such interests are
subject to change or adjustment only as provided herein or as may be provided
under the terms of the Prudhoe Bay Unit Operating Agreement and the Prudhoe Bay
Unit Agreement, including, without limitation, any adjustments which might
result from the final redetermination of hydrocarbon pore volume as provided in
Article 37 of the Prudhoe Bay Unit Operating Agreement. Grantor further
covenants that if the existence of the Net Profits Royalty Interest or the
making of any payments under the Net Profits Royalty Interest results in a
decrease in any payment to Grantee under the Royalty Interest, Grantor shall and
hereby agrees to pay Grantee, in addition to and independent of payments
required to be made to Grantee under the Royalty Interest, the amount of any
such decrease, together with interest thereon in an amount equal to the product
of (i) the amount of such decrease, (ii) the Interest Rate, and (iii) a
fraction, the numerator of which is the number of days from the date of such
decrease until the date of payment to Grantee of the amount owing pursuant to
this Section 10.5 and the denominator of which is 360 days, together with such
other damages (but not including interest) to which Grantee may be entitled
under this Conveyance, or at law or in equity, it being the

18

 

express intent of Grantor and Grantee that Grantee is not to be prejudiced in
any way by the existence of or the making of any payments under the Net Profits
Royalty Interest.

     Section 10.6 Other Covenants. Grantor hereby covenants and warrants that it
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware, is qualified to transact business and is in
good standing in the State of Alaska and is qualified with the Alaska Department
of Natural Resources to hold interests in state oil and gas leases; that it has
the legal right and authority to bargain, grant, sell, convey, transfer, assign,
set over and deliver the Royalty Interest to Grantee and that it has the legal
right and authority to execute, deliver and perform this Conveyance; that the
execution, delivery and performance of this Conveyance by it (i) does not
require the consent of any other Person except as set forth in Section 8.2; (ii)
does not require any action by or filing with any governmental body, agency, or
official that has not been accomplished, other than the filings which are
required under the terms of the Leases and the terms of applicable statutes of
the State of Alaska and the administrative regulations of the Alaska Department
of Natural Resources, which filings will be promptly made upon execution of this
Conveyance; and, (iii) will not violate or conflict with any law, statute,
regulation, agreement, judgment, injunction, order, decree or other instrument
to which Grantor is subject or is party or by which Grantor or the Leases or the
Subject Interests are bound and that this Conveyance is a valid and binding
agreement of Grantor, enforceable against Grantor in accordance with its terms.
Grantor hereby binds itself and its successors and assigns to forever defend the
title to the Royalty Interest unto Grantee and its successors and assigns
against every Person claiming the same or any part thereof by, through or under
Grantor, but not otherwise. This Conveyance is made with full substitution and
subrogation of Grantee in and to all covenants, representations and warranties
by others heretofore given or made in respect of the Leases or the Subject
Interests.

     Section 10.7 Binding Effect. This Conveyance and all of the rights and
obligations hereunder (including, without limitation, those arising out of the
covenants, representations, warranties and indemnities made by Grantor to or for
benefit of Grantee pursuant to this Conveyance) shall bind and inure to the
benefit of the successors and assigns of Grantor and Grantee.

     Section 10.8 Headings for Convenience. The headings used in this Conveyance
are inserted for convenience only and shall be disregarded in construing this
Conveyance.

     Section 10.9 Counterparts. This Conveyance may be executed in several
original counterparts. Each such counterpart shall for all purposes be deemed an
original, and all such counterparts shall constitute but one and the same
Conveyance.

     Section 10.10 Interest Affecting Real Property. The Royalty Interest
created and transferred by this Conveyance is an interest affecting real
property within the meaning of AS 40.17.110(b)(59). The parties intend that the
covenants contained in this Conveyance run with and burden the Lands and the
Subject Interests to the maximum extent possible under applicable law.

     Section 10.11 Waiver; Estoppel. The failure of Grantor or Grantee to insist
upon strict performance of any provision of this Conveyance shall not constitute
a waiver of or estoppel against asserting the right to require such performance
in the future, nor shall a waiver or estoppel in any one instance constitute a
waiver or estoppel with respect to a later breach of a similar nature or
otherwise.

     Section 10.12 Right to Information. The Standard Oil Company shall remain
entitled throughout the term of this Conveyance to receive from Grantor a copy
of

19

 

all information that is furnished to Grantee by Grantor, irrespective of the
assignment by The Standard Oil Company of the Royalty Interest in whole to any
other Person.

     Section 10.13 Indemnification. Grantor hereby agrees to indemnify and save
harmless Grantee from and against any expense (including, without limitation,
the expense of suit and attorneys’ fees), claim, damage, loss or liability
incurred by Grantee as a result of or arising out of the breach by Grantor of
any of its representations, warranties or covenants set forth in this
Conveyance.

     Section 10.14 Independent Payments. All payments to which Grantee is
entitled by reason of the indemnities set forth in this Conveyance by Grantor to
Grantee or by reason of any breach by Grantor of its representations, warranties
or covenants shall be in addition to and independent of all payments required to
be made to Grantee under the Royalty Interest.

     Section 10.15 Governing Law. The validity, effect and construction of this
Conveyance shall be governed by the laws of the State of Alaska.

     Section 10.16 Amendment. This Conveyance may not be amended, altered or
modified except pursuant to a written Instrument executed by Grantor and
Grantee.

20

 

     IN WITNESS WHEREOF, the parties hereto have caused this Conveyance to be
duly executed as of the day and year first written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	GRANTOR:	 	 
	[SEAL]
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:	 	 	 	BP Exploration (Alaska) Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ John A. Reeder
 

Assistant Secretary

	 	 	 	By
	 	/s/ G.N. Nelson
 

G.N. Nelson, President
	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	GRANTEE:	 	 
	[SEAL]
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:	 	 	 	The Standard Oil Company	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ J.M. Cesarik
 

	 	 	 	By
	 	/s/ James H. Ross
 

	 	 

ACKNOWLEDGMENT

	 	 	 
	STATE OF ALASKA

	 	 )
	 

	 	 )   ss
	THIRD JUDICIAL DISTRICT

	 	 )

     Before me, a notary public, in and for the State of Alaska, personally
appeared G.N. Nelson, known to me to be the person who, as President of BP
Exploration (Alaska) Inc., the corporation which executed the foregoing
instrument, signed the same, and acknowledged to me that he did so sign said
instrument in the name and upon behalf of said corporation as such officer; that
the same is his free act and deed as such officer, and the free and corporate
act and deed of said corporation; that he was duly authorized thereunto by its
board of directors; and that the seal affixed to said instrument is the
corporation seal of said corporation. In testimony whereof, I have hereunto
subscribed my name, and affixed my official seal, at Anchorage, Alaska, this
20th day of February, 1989.

	 	 	 	 	 
	[SEAL]

	 	/s/ Keri L. Hopkins
 

Notary Public in and for Alaska
	 	 
	 
	 	 	 	 
	 

	 	My Commission Expires: 1-14-93	 	 

	 	 	 
	STATE OF OHIO

	 	 )
	 

	 	 )   ss
	COUNTY OF CUYAHOGA

	 	 )

     Before me, a notary public, in and for said county, personally appeared
James H. Ross and J.M. Cesarik, known to me to be the persons who, as Chairman
and Chief Executive Officer and Corporate Secretary, respectively, of The
Standard Oil Company, the corporation which executed the foregoing instrument,
signed the same, and acknowledged to me that they did so sign said instrument in
the name and upon behalf of said corporation as such officers, respectively;
that the same is their free act and deed as such officers, respectively, and the
free and corporate act and deed of said corporation; that they were duly
authorized thereunto by its board of directors; and that the seal affixed to
said instrument is the corporation seal of said corporation. In testimony
whereof, I have hereunto subscribed my name, and affixed my official seal, at
Cleveland, Ohio this 15th day of February, 1989.

	 	 	 	 	 
	[SEAL]

	 	/s/ JoAnn Motuza
 

Notary Public in and for Ohio
	 	 
	 
	 	 	 	 
	 

	 	My Commission Expires:	 	 

JoANN MOTUZA

Notary Public, State of Ohio

Recorded in Cuyahoga County

My Comm. Expires 9-14-92

21

 

EXHIBIT A

OVERRIDING ROYALTY CONVEYANCE

STATE OF ALASKA

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Grantor’s	 	Recorded
	PBU	 	Lease	 	Lands	 	Working	 	Book/
	Tract	 	Serial No.	 	Description	 	Interest	 	Page*
	16	 	ADL-25637	 	Secs. 13,24
	 	 	50	%	 	42/609
	 	 	 	 	T12N-R10E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	47	 	ADL-28260	 	Secs. 1,2,11,12
	 	 	100	%**	 	52/40
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	25	 	ADL-28277	 	Secs. 26,35,36
	 	 	100	%**	 	52/44
	 	 	 	 	T12N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	24	 	ADL-28278	 	Secs. 27,28,33,34
	 	 	100	%**	 	52/50
	 	 	 	 	T12N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	23	 	ADL-28279	 	Secs. 29,30,31,32
	 	 	100	%**	 	52/56
	 	 	 	 	T12N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	44	 	ADL-28280	 	Secs. 1,2,11,12
	 	 	100	%**	 	52/62
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	45	 	ADL-28281	 	Secs. 3,4,9,10
	 	 	100	%**	 	52/68
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	46	 	ADL-28282	 	Secs. 5,6,7,8
	 	 	100	%**	 	52/74
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	57	 	ADL-28283	 	Secs. 17,18,19,20
	 	 	100	%**	 	52/80
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	58	 	ADL-28284	 	Secs. 15,16,21,22
	 	 	100	%**	 	52/86
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	59	 	ADL-28285	 	Secs. 13,14,23,24
	 	 	100	%**	 	52/92
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	76	 	ADL-28286	 	Secs. 25,26,35,36
	 	 	100	%**	 	52/98
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	29/178
	 	 	 	 	 
	 	 	 	 	 	 
	77	 	ADL-28287	 	Secs. 27,28,33,34
	 	 	100	%**	 	47/235
	 	 	 	 	T11N-R13E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	60	 	ADL-28305	 	Secs. 17,18,19,20
	 	 	100	%**	 	47/223
	 	 	 	 	T11N-R14E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	74	 	ADL-28309	 	Secs. 27,28,33,34
	 	 	100	%**	 	42/336
	 	 	 	 	T11N-R14E, UM
	 	 	 	 	 	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Grantor’s	 	Recorded
	PBU	 	Lease	 	Lands	 	Working	 	Book/
	Tract	 	Serial No.	 	Description	 	Interest	 	Page*
	75	 	ADL-28310	 	Secs. 29,30,31,32
	 	 	100	%**	 	47/241
	 	 	 	 	T11N-R14E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	90	 	ADL-28311	 	Secs. 1,2,11,12
	 	 	100	%**	 	47/229
	 	 	 	 	T10N-R14E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	89	 	ADL-28312	 	Secs. 3,4,9,10
	 	 	100	%**	 	52/104
	 	 	 	 	T10N-R14E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	101	 	ADL-28315	 	Secs. 13,14,23,24
	 	 	100	%**	 	52/110
	 	 	 	 	T10N-R14E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	38	 	ADL-28320	 	Secs. 1,2,11,12
	 	 	100	%**	 	47/199
	 	 	 	 	T11N-R15E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	100	 	ADL-28330	 	Secs. 17,18,19,20
	 	 	100	%**	 	52/116
	 	 	 	 	T10N-R15E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	99	 	ADL-28331	 	Secs. 15,16,21,22
	 	 	100	%**	 	52/122
	 	 	 	 	T10N-R15E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	110	 	ADL-28333	 	Secs. 25,26,35,36
	 	 	100	%**	 	42/341
	 	 	 	 	T10N-R15E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	108	 	ADL-28335	 	Secs. 29,30,31,32
	 	 	100	%**	 	52/128
	 	 	 	 	T10N-R15E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	66	 	ADL-28339	 	Secs. 17,18,19
	 	 	100	%**	 	47/193
	 	 	 	 	T11N-R16E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	69	 	ADL-28343	 	Secs. 30,31,32
	 	 	100	%**	 	42/356
	 	 	 	 	T11N-R16E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	111	 	ADL-28349	 	Secs. 29,30,31
	 	 	100	%**	 	42/370
	 	 	 	 	T10N-R16E, UM
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 
	31	 	ADL-34630	 	Secs. 25,26,35,36
	 	 	100	%**	 	47/205
	 	 	 	 	T12N-R15E, UM
	 	 	 	 	 	 

 

			
	*	 	All book and page references are to the lease records of the Noatak-Kobuk
Recording District, except: (i) Lease ADL 25637 is recorded in the Miscellaneous
Records of the Fairbanks Recording District; and (iii)[sic] Lease ADL 28286 is
recorded both in the Lease Records of the Noatak-Kobuk Recording District (Book
52/page 98) and the Lease Records of the Fairbanks Recording District (Book
29/page 178).
	 
	**	 	The interest of BP Exploration (Alaska) Inc. in these leases is subject
to the Net Profits Royalty Interest (excluding the Lower Lower Net Profits
Royalty Interest).

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}]]