Document:

Exhibit 10.24

 

AGREEMENT OF SETTLEMENT OF CLASS ACTIONS

 

This Agreement of Settlement of Class Actions (“Agreement”) is entered
into between plaintiffs Deanna O’Neill, Victoria Sordelet, and Frederick Trunik
(“plaintiffs”), individually and as class representatives on behalf of all
members of the classes in Deanna O’Neill, et al. v. Vicorp Restaurants, Inc.,
Los Angeles County Superior Court Case No. BC 304 354 (the “O’Neill Action”)
and Victoria Sordelet, et al. v. Vicorp Restaurants Inc., Los Angeles
County Superior Court Case No. 315 905 (the “Sordelet Action”) (collectively,
the “Class”), on the one hand, and defendant Vicorp Restaurants, Inc. (“Vicorp”),
on the other hand.

 

I.

 

SETTLEMENT FUND

 

A.                                   Vicorp
shall pay a maximum of Six Million Five Hundred Fifty Thousand Dollars
($6,550,000) (the “Settlement Fund”) in settlement of the O’Neill Action and
the Sordelet Action.

 

B.                                     Within
five (5) business days after the “Effective Date,” as defined below, and as
checks are presented for payment, Vicorp shall wire transfer amounts payable
from the Settlement Fund, less any advances made by Vicorp pursuant to Section IX(A)(1),
to Rust Consulting, Inc. (“Claims Administrator”) as trustee for the interested
parties.

 

C.                                     Payments
to the Class shall be disbursed on a claims-made basis and shall be allocated
according to (1) workers’ compensation deductions made on the bonus claim
and/or (2) the number of weeks worked by each employee over the entire number
of weeks in the applicable class period.

 

 

II.

 

CERTIFICATION OF “THE CLASS” FOR SETTLEMENT
PURPOSES

ONLY, CLAIMS SETTLED AND CLAIMS PERIODS COVERED

 

A.                                   This
Agreement is contingent upon the approval and certification by the Los Angeles
County Superior Court (the “Court”), for settlement purposes only, of the Class
consisting of the following subclasses:

 

1.                                       All persons who,
at any time during the period October 16, 1999, to January 31, 2005,
worked for Vicorp as hourly, non-exempt in-restaurant employees, including of
servers, hosts or hostesses, cashiers, cooks, bussers, supervisors and/or
dishwashers at any California Bakers Square restaurant and who were allegedly
deprived of meal periods (the “Hourly Meal Period Subclass”);

 

2.                                       All persons who,
at any time during the period May 10, 2001, to January 31, 2005, worked
for Vicorp Restaurants, Inc. as hourly, non-exempt in-restaurant employees,
including servers, hosts or hostesses, cashiers, cooks, bussers, supervisors
and/or dishwashers at any California Bakers Square restaurant and who were
allegedly deprived of rest periods (the “Hourly Rest Period Subclass”);

 

3.                                       All restaurant
managers and associate managers employed by Vicorp in California at any time
during the period October 16, 1999, to January 31, 2005, whose
bonuses were allegedly reduced due to store losses or operational expenses
beyond their control, including without limitation workers’ compensation
expenses, workers’ compensation claims, cash 

 

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shortages, merchandise shortages, tort claims by non-employees, store
remodeling, and other losses or expenses (“the Bonus Subclass”); and

 

4.                                       All restaurant
general managers, associate managers, and assistant managers employed by Vicorp
in California at any time during the period May 10, 2001, to January 31,
2005, who claim that their job status was misclassified as exempt when, in
fact, they were entitled to overtime and rest and meal periods that otherwise
should have been available to hourly non-exempt employees (the “Misclassification
Subclass”).

 

B.                                     Vicorp
expressly reserves its right to continue to assert that this case is not
appropriate for certification as a class action if, for any reason, this
Agreement is not consummated.

 

III.

 

APPOINTMENT OF CLASS COUNSEL

 

The Court shall appoint Thomas A. Kearney, Esq., Paul Alvarez, Esq. and
Kearney Alvarez LLP as Class Counsel.

 

IV.

 

CLASS NOTICE AND CLAIM FORM

 

A.                                   Class
members may be members of one or all Subclasses, and will be entitled to their
share of the amount allocated to each applicable Subclass if they submit a
timely and valid claim form.

 

B.                                     Within
ten (10) days of entry of the Order for Preliminary Approval, Vicorp shall
provide the Claims Administrator and Class Counsel, in electronic form, a
database that contains the last known name, address, social security number,
job code, and employment dates for all 

 

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Class members, for notification and to distribute the Settlement
Fund.  Vicorp shall cooperate and provide
any additional information the Claims Administrator may reasonably request to
give notice and administer the Settlement Fund.

 

C.                                     Within
twenty-five (25) days after entry of the Order for Preliminary Approval, the
Claims Administrator shall mail notice to the Class, using the applicable
notice(s) attached hereto as Exhibit “A” (“Notice”).

 

V.

 

SETTLEMENT APPROVAL PROCEDURES

 

The Court, pursuant to California Rule of Court 1859(c), must
preliminarily approve the settlement (the “Order for Preliminary Approval”), in
substantially the form and content of Exhibit “B” hereto, on or before March 14,
2005.

 

VI.

 

THE EFFECTIVE DATE

 

This Agreement will become final and effective (the “Effective Date”)
on the occurrence of all of the following events:

 

A.                                   Entry
of the Order for Preliminary Approval.

 

B.                                     Class
Counsel filing, at or before the hearing for final approval of the settlement,
a declaration from the Claims Administrator testifying that (1) Notice to the
Class has been sent in accordance with the Order for Preliminary Approval; (2)
reporting on the number of returned initial Notices; (3) reporting on
additional efforts to trace undeliverable Notices; and (4) providing the result
of the follow-up.

 

C.                                     Entry
of the Final Judgment and Order of Dismissal (“Judgment”) attached hereto as
Exhibit “C.”

 

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D.                                    The
Judgment becomes final, which shall mean: (1) if a timely notice of appeal is
not filed, the expiration of the time for appeal after service of notice of
entry of judgment on the Class representative and all Class members who filed
objections and who did not opt-out; or (2) if a timely notice of appeal is
filed, the day after the Judgment is affirmed, or the appeal or review is
dismissed or denied, and the Judgment is no longer subject to judicial review
or other challenge.

 

VII.

 

EFFECT OF NON-APPROVAL OR FAILURE OF THE
EFFECTIVE DATE TO OCCUR

 

If the events specified in Sections V and VI do not occur, this
Agreement shall be void.  In that event,
nothing in this Agreement shall be construed as a determination, admission, or
concession of any issue in the litigation; the Settling Parties expressly
reserve their rights with respect to the prosecution and defense of the
litigation as if this Agreement never existed.

 

VIII.

 

ATTORNEYS’ FEES AND REIMBURSEMENT OF COSTS
AND EXPENSES

 

A.                                   Vicorp
agrees that counsel for the Class are entitled to an award of attorneys’ fees,
costs, and expenses.  Vicorp acknowledges
that plaintiffs and the Class have a claim for attorneys’ fees, costs and
expenses pursuant to California Labor Code Sections 218.5 and 1194 and
California Code of Civil Procedure Sections 1021.5 and 1032.  However, the claim for attorneys’ fees,
costs, and expenses has been settled in this Agreement.

 

B.                                     Vicorp
agrees not to dispute that the Settlement Fund is a “Common Fund” as defined in
The Boeing Company v. Van Gemert
(1980) 444 U.S. 472, inasmuch as each member of the Class will have an
undisputed and mathematically ascertainable part of a lump-sum judgment
recovered on his or her behalf.  Vicorp understands
that Class Counsel will apply to 

 

5

 

the Court for an award of attorneys’ fees, costs, and expenses to be
scheduled for determination at the hearing for final approval of this
settlement.  Vicorp will not oppose Class
Counsel’s application for attorneys’ fees of up to and including thirty-three
and one-third percent (33.33%) of the Settlement Fund, or Two Million, One
Hundred Sixty-Six Thousand, Four Hundred and Fifty Dollars ($2,166,450) and for
reimbursement of costs up to Thirty-Six Thousand Dollars ($36,000).

 

C.                                     Class
Counsel’s application for attorneys’ fees, costs, and expenses is not part of
this Agreement and is to be considered separately from the Court’s
consideration of the fairness, reasonableness, adequacy, and good faith of the
settlement.  Any proceedings related to
Class Counsel’s application for attorneys’ fees, costs, and/or expenses shall
not terminate or cancel the Agreement, or affect the finality of the Judgment
approving the Agreement and the settlement of the O’Neill Action and the
Sordelet Action.  Any reduction by the
Court of the attorneys’ fees, costs, and expenses sought by Class Counsel will
not serve to enlarge the Settlement Fund, but will simply revert back to Vicorp.

 

D.                                    Within
five (5) business days after the “Effective Date,” Vicorp shall wire transfer
to a bank account directed by Class Counsel all attorneys’ fees, costs and
expenses approved by the Court pursuant to this Agreement.

 

IX.

 

PLAN OF ALLOCATION AND DISTRIBUTION OF THE
SETTLEMENT FUND

 

A.                                   The
Settlement Fund shall be allocated as follows:

 

1.                                       The costs and
expenses of claims administration. 
Vicorp shall advance any costs of notice and administration reasonably
requested by the Claims Administrator. 
All such advances shall be deemed a deposit to the 

 

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Settlement Fund.  If the
settlement is not consummated, Vicorp shall not be entitled to reimbursement of
advances from plaintiffs, the Class, or Class Counsel.

 

2.                                       Ten Thousand
Dollars ($10,000) each to Class representatives Deanna O’Neill, Victoria
Sordelet, and Frederick Trunik, as reasonable compensation in recognition of
their time and effort in initiating and prosecuting the case against Vicorp, as
may be approved by the Court.  The
payment to each Class representative is in addition to any amount each may
receive as a member of the Class.

 

3.                                       Attorneys’ fees
of one-third (33.33%) and costs and expenses of Class Counsel, as may be
approved by the Court.

 

4.                                       The Net
Distributable Amount, as explained in Section IX (B) below.

 

5.                                       Any part of the
Settlement Fund that remains unclaimed or returned twelve (12) months after the
date Notice is first mailed to the Class, shall be paid to Vicorp.  Neither plaintiffs, the Class, nor any
government or public entity shall have any right to such unclaimed or returned
amounts under the unclaimed property laws of California or Colorado or any
other legal or equitable theory.

 

B.                                     Allocation
of the Net Distributable Amount.

 

The Net Distributable Amount shall be defined as the Settlement Fund,
less the costs and expenses of administration and any advances to the Claims
Administrator, the separate compensation of Class representatives, attorneys’
fees (33.33%), costs, and expenses of Class Counsel, all as set forth in Section IX(A)(1)-(3),
and all employers payroll taxes attributable to 

 

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the amounts claimed.  The Net
Distributable Amount shall be allocated and disbursed on a claims-made basis,
for all Allowed Class Member Claims (as defined in Section XI(B) below),
to the Class as follows:

 

1.                                       The Hourly Meal
Period Subclass.

 

a.                                       23% of the Net
Distributable Amount (the “Hourly Meal Period Subclass Payout”) will be
allocated to the Hourly Meal Period Subclass.

 

b.                                      Each member of
the Hourly Meal Period Subclass shall be eligible for that portion of the
Hourly Meal Period Subclass Payout calculated by the total number of weeks
worked by that member from October 16, 1999, to January 31, 2005,
divided by the total number of weeks worked by all members of the Hourly Meal
Period Subclass from October 16, 1999, to January 31, 2005 (before
any opt-outs).  The resulting fraction
shall then be multiplied by the Hourly Meal Period Subclass Payout to determine
the amount to be paid to that person.

 

2.                                       The Hourly Rest
Period Subclass.

 

a.                                       7% of the Net
Distributable Amount (the “Hourly Rest Period Subclass Payout”) will be
allocated to the Hourly Rest Period Subclass.

 

b.                                      Each member of
the Hourly Rest Period Subclass shall be eligible for that portion of the
Hourly Rest Period Subclass Payout calculated by the total number of weeks
worked by that member 

 

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from May 10, 2001, to January 31, 2005, divided by the total
number of weeks worked by all members of the Hourly Rest Period Subclass from
May 10, 2001, to January 31, 2005 (before any opt-outs).  The resulting fraction shall then be
multiplied by the Hourly Rest Period Subclass Payout to determine the amount to
be paid to that person.

 

3.                                       The Bonus
Subclass.

 

a.                                       13% of the Net
Distributable Amount (the “Bonus Subclass Payout”) will be allocated to the
Bonus Subclass.

 

b.                                      Each member of
the Bonus Subclass shall be eligible for that portion of the Bonus Subclass
Payout that is based on Vicorp’s recalculation of the bonus to which the member
would have been entitled, had workers’ compensation expenses previously
deducted in determining the member’s bonus from October 16, 1999, to January 31,
2005, not been deducted.  Vicorp’s
recalculation will identify an outstanding bonus amount for each member.  The member’s outstanding bonus amount shall
be divided by $553,000.  The resulting
percentage shall then be multiplied by the Bonus Subclass Payout to determine
the amount to be paid to that person.

 

4.                                       The
Misclassification Subclass:

 

a.                                       57% of the Net
Distributable Amount (the “Misclassification Subclass Payout”) will be
allocated to the Misclassification Subclass as follows: 1) 40% to the
restaurant general managers; 2) 

 

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47% to the associate managers; and 3) 13% to the assistant managers.

 

b.                                      Each restaurant
manager member of the Misclassification Subclass shall be eligible for that
portion of the Misclassification Subclass payout allocated to restaurant
managers calculated by the total number of weeks worked by that member from May
10, 2001, to January 31, 2005, divided by the total number of weeks worked
by all restaurant managers from May 2001, to January 31, 2005 (before any
opt-outs).  The resulting fraction shall
then be multiplied by the Misclassification Subclass Payout allocated to the
restaurant managers to determine the amount to be paid to that person.

 

c.                                       Each associate
manager member of the Misclassification Subclass shall be eligible for that
portion of the Misclassification Subclass payout allocated to associate
managers calculated by the total number of weeks worked by that member from May
10, 2001, to January 31, 2005, divided by the total number of weeks worked
by all associate managers from May 10, 2001, to January 31, 2005 (before
any opt-outs).  The resulting fraction
shall then be multiplied by the Misclassification Subclass Payout allocated to
the associate managers to determine the amount to be paid to that person.

 

10

 

d.                                      Each assistant
manager member of the Misclassification Subclass shall be eligible for that
portion of the Misclassification Subclass payout allocated to assistant
managers calculated by the total number of weeks worked by that member from May
10, 2001, to January 31, 2005, divided by the total number of weeks worked
by all assistant managers from May 10, 2001, to January 31, 2005 (before
any opt-outs).  The resulting fraction
shall then be multiplied by the Misclassification Subclass Payout allocated to
the assistant managers to determine the amount to be paid to that person.

 

C.                                     Time
for Payment by Claims Administrator.

 

1.                                       The Claims
Administrator shall make the settlement payments described in Paragraphs
IX(A)(l)-(4) as soon as practicable after the Effective Date and as checks are
presented for payment or other demand for payment properly is made, but no
later than five (5) business days after presentment or proper demand.

 

2.                                       The Claims
Administrator shall remit all payroll taxes deducted from each Allowed and paid
Class Member Claim, along with appropriate documentation, to the applicable
taxing agencies in accordance with applicable laws and regulations.

 

3.                                       The Claims
Administrator shall make the payment provided for in Section IX(A)(5) as
soon as reasonably practicable following the passage of twelve (12) months from
the date Notice is first mailed to the Class.

 

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X.

 

REQUEST FOR EXCLUSION

 

A.                                   No
person who has timely elected to be excluded from the Class, as provided for in
the Notice, shall share in the distribution of the Settlement Fund.

 

B.                                     No
later than fourteen (14) days prior to the hearing for final approval as set
forth in the Notice, the Claims Administrator shall provide Class Counsel and
Vicorp’s counsel with a declaration identifying those persons who have timely
elected to be excluded from the Class.

 

XI.

 

PROCESSING AND PAYMENT OF ALLOWED CLASS MEMBER
CLAIMS

 

A.                                   The
Notice sent to each Class member shall be accompanied by a separate Claim Form
and Request for Information (“Claim Form”) attached hereto as Exhibit “D”.

 

B.                                     Each
Class Member who has timely submitted a Claim Form and who has not timely
requested to be excluded from the Class, shall have an allowed Class member
claim, in such amount as the Claims Administrator shall calculate (the “Allowed
Class Member Claim”).

 

C.                                     The
check in payment of each Allowed Class Member Claim shall contain the following
endorsement which will document the release by every Class member of all
Released Claims against Vicorp.

 

“Negotiation of this check shall confirm that the payee has released
Vicorp according to the Release contained in the Agreement of Settlement of
Class Actions made as of March 3, 2005.”

 

D.                                    Counsel
shall work with the Claims Administrator to resolve any questions concerning
the weeks worked by any Class member and the amount of his or her Allowed Class
Member Claim.

 

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XII.

 

ACCOUNTING AND FINAL REPORT TO THE COURT

 

A.                                   Three
(3) months after the Effective Date, the Claims Administrator shall provide
Class Settlement counsel and Vicorp’s counsel with an accounting in an Interim
Report.

 

B.                                     Fifteen
(15) months after Notice is first mailed to the Class, the Claims Administrator
shall make a Final Accounting and Report to Class Counsel and Vicorp’s counsel.

 

XIII.

 

GENERAL RELEASE OF VICORP

 

A.                                   Hourly
Meal Period Subclass.

 

In exchange for the consideration recited in this Agreement, all
members of the Hourly Meal Period Subclass (excluding any who may have opted
out), on behalf of themselves and on behalf of all who claim by or through them
or in their stead, do hereby and forever release, acquit, discharge and
covenant not to sue Vicorp (which is defined to include its past, present and
future attorneys, divisions, affiliates, predecessors, successors, owners,
shareholders, officers, directors, employees, agents, trustees,
representatives, administrators, fiduciaries, assigns, subrogees, executors,
partners, parents, subsidiaries, and privies) for any and all actions, causes
of action, suits, claims, liens, demands, damages, controversies and
liabilities of any kind whatsoever (based upon any legal or equitable theory,
whether contractual, common law, statutory, federal, state or otherwise)
whether known or unknown, suspected, anticipated or unanticipated, which the
Hourly Meal Period Subclass has, ever had, or hereafter may claim to have,
against Vicorp which were alleged, or which arise out of or relate to the
claims, actions or causes of action, or facts, which were alleged, or might
have been alleged, by the Hourly Meal Period Subclass in the O’Neill Action due
to alleged failure to provide meal periods between 

 

13

 

October 16, 1999, and January 31, 2005.  Such released claims include without
limitation, for the specified time period, all claims for violation of any
state or federal statute, regulation, rule or California Industrial Welfare
Commission Wage Order concerning failure to provide meal periods and all claims
for unpaid wages, damages, penalties, and payments of any other amounts due to
such failure (including but not limited to California Labor Code Sections 201,
202, 204, 226, 512, 1174, and 1194, California Industrial Welfare Commission
Wage Order 5-1989, 5-1998, 5-2000, and 5-2001, as amended, and the Fair Labor
Standards Act; unfair business practices under California Business and Professions
Code Section 17200, et seq.; claims for overtime relating to failure to
provide meal periods; penalties under California Labor Code Sections 226.7 and
2699, and California Industrial Welfare Commission Wage Order 5-1989, 5-1998,
5-2000, and 5-2001, as amended; waiting time penalties under California Labor
Code Section 203; attorneys’ fees, costs, and expenses, and interest under
California Labor Code Sections 218.5, 218.6, 1194, California Code of Civil
Procedure Sections 1021.5 and 1032, and California Civil Code Sections 3287 and
3289; claims for punitive or exemplary damages; and all other claims for
damages, penalties, restitution, attorneys’ fees, costs, expenses and interest
relating in any way to meal period violations). 
This release does not cover claims after January 31, 2005.

 

B.                                     Hourly
Rest Period Subclass.

 

In exchange for the consideration recited in this Agreement, all
members of the Hourly Rest Period Subclass (excluding any who may have opted
out), on behalf of themselves and on behalf of all who claim by or through them
or in their stead, do hereby and forever release, acquit, discharge and
covenant not to sue Vicorp (which is defined to include its past, present and
future attorneys, divisions, affiliates, predecessors, successors, owners,
shareholders, 

 

14

 

officers, directors, employees, agents, trustees, representatives,
administrators, fiduciaries, assigns, subrogees, executors, partners, parents,
subsidiaries, and privies) for any and all actions, causes of action, suits,
claims, liens, demands, damages, controversies and liabilities of any kind
whatsoever (based upon any legal or equitable theory, whether contractual,
common law, statutory, federal, state or otherwise) whether known or unknown,
suspected, anticipated or unanticipated, which the Hourly Rest Period Subclass
has, ever had, or hereafter may claim to have, against Vicorp which were
alleged, or which arise out of or relate to the claims, actions or causes of
action, or facts, which were alleged, or might have been alleged, by the Hourly
Rest Period Subclass in the O’Neill Action due to alleged failure to provide
rest periods between May 10, 2001, and January 31, 2005.  Such released claims include without
limitation, for the specified time period, all claims for violation of any
state or federal statute, regulation, rule or California Industrial Welfare
Commission Wage Order concerning failure to provide rest periods and all claims
for unpaid wages, damages, penalties, and payments of any other amounts due to
such failure (including but not limited to California Labor Code Sections 201,
202, 204, 226, 512, 1174, and 1194, California Industrial Welfare Commission
Wage Order 5-1989, 5-1998, 5-2000, and 5-2001, as amended, and the Fair Labor
Standards Act; unfair business practices under California Business and
Professions Code Section 17200, et seq.; claims for overtime relating to
failure to provide rest periods; penalties under California Labor Code Sections
226.7 and 2699, and California Industrial Welfare Commission Wage Order 5-1989,
5-1998, 5-2000, and 5-2001, as amended; waiting time penalties under California
Labor Code Section 203; attorneys’ fees, costs and interest under
California Labor Code Sections 218.5, 218.6, 1194, California Code of Civil
Procedure Sections 1021.5 and 1032, and California Civil Code Sections 3287 and
3289; claims for punitive or exemplary damages; and all other claims for
damages, penalties, 

 

15

 

restitution, attorneys’ fees, costs, expenses and interest relating in
any way to rest period violations).  This
release does not cover claims after January 31, 2005.

 

C.                                     Bonus
Subclass.

 

In exchange for the consideration recited in this Agreement, all members
of the Bonus Subclass (excluding any who may have opted out), on behalf of
themselves and on behalf of all who claim by or through them or in their stead,
do hereby and forever release, acquit, discharge and covenant not to sue Vicorp
(which is defined to include its past, present and future attorneys, divisions,
affiliates, predecessors, successors, owners, shareholders, officers,
directors, employees, agents, trustees, representatives, administrators,
fiduciaries, assigns, subrogees, executors, partners, parents, subsidiaries,
and privies) for any and all actions, causes of action, suits, claims, liens,
demands, damages, controversies and liabilities of any kind whatsoever (based
upon any legal or equitable theory, whether contractual, common law, statutory,
federal, state or otherwise) whether known or unknown, suspected, anticipated
or unanticipated, which the Bonus Subclass has, ever had, or hereafter may
claim to have, against Vicorp which were alleged, or which arise out of or
relate to the claims, actions or causes of action, or facts, which were
alleged, or might have been alleged, by the Bonus Subclass in the O’Neill
Action due to alleged reductions in or deductions from bonuses due to store
losses or operational expenses beyond their control between October 16,
1999, and January 31, 2005, including without limitation workers’
compensation expenses, workers’ compensation claims, cash shortages,
merchandise shortages, tort claims by non-employees, store remodeling, and
losses caused by negligence.  Such
released claims include without limitation, for the specified time period, all
claims for violation of any state or federal statute, regulation, rule or
California Industrial Welfare Commission Wage Order concerning reductions in or
deductions from bonuses for 

 

16

 

workers’ compensation expenses and all other losses and expenses beyond
the claimant’s control, and all claims for unpaid wages, damages, penalties,
and payments of any other amounts due to such reductions or deductions
(including but not limited to California Labor Code Sections 201, 202, 204,
226, 1174, 1194, and 3751, California Industrial Welfare Commission Wage Order
5-1989, 5-1998, 5-2000, and 5-2001, as amended, and the Fair Labor Standards
Act; unfair business practices under California Business and Professions Code Section 17200,
et seq.; penalties under California Labor Code Sections 2699 and California
Industrial Welfare Commission Wage Order 5-1989, 5-1998, 5-2000, and 5-2001, as
amended; waiting time penalties under California Labor Code Section 203;
attorneys’ fees, costs, expenses, and interest under California Labor Code
Sections 218.5, 218.6, 1194, California Code of Civil Procedure Sections 1021.5
and 1032, and California Civil Code Sections 3287 and 3289; claims for punitive
or exemplary damages; and all other claims for damages, penalties, restitution,
attorneys’ fees, costs, expenses and interest relating in any way to reductions
in or deductions from bonuses for workers’ compensation expenses and all other
losses and expenses beyond the claimant’s control).  This release does not cover claims after January 31,
2005.

 

D.                                    Misclassification
Subclass.

 

In exchange for the consideration recited in this Agreement, all
members of the Misclassification Subclass (excluding any who may have opted
out), on behalf of themselves and on behalf of all who claim by or through them
or in their stead, do hereby and forever release, acquit, discharge and
covenant not to sue Vicorp (which is defined to include its past, present and
future attorneys, divisions, affiliates, predecessors, successors, owners,
shareholders, officers, directors, employees, agents, trustees,
representatives, administrators, fiduciaries, assigns, subrogees, executors, partners,
parents, subsidiaries, and privies) for any and all actions, 

 

17

 

causes of action, suits, claims, liens, demands, damages, controversies
and liabilities of any kind whatsoever (based upon any legal or equitable
theory, whether contractual, common law, statutory, federal, state or
otherwise) whether known or unknown, suspected, anticipated or unanticipated,
which the Misclassification Subclass has, ever had, or hereafter may claim to
have, against Vicorp which were alleged, or which arise out of or relate to the
claims, actions or causes of action, or facts, which were alleged, or might
have been alleged, by the Misclassification Subclass in the Sordelet Action due
to alleged misclassification of their job status as exempt when, in fact, they
were entitled to overtime, and meal periods and rest periods, that otherwise
should have been available to hourly non-exempt employees, between May 10,
2001, and January 31, 2005.  Such
released claims include without limitation, for the specified time period, all
claims for violation of any state or federal statute, regulation, rule or
California Industrial Welfare Commission Wage Order concerning failure to pay
overtime, and failure to provide meal periods and rest periods, and all claims
for unpaid wages, damages, penalties, and payments of any other amounts due to
such failures (including but not limited to California Labor Code Sections 201,
202, 204, 226, 512, 1174, and 1194, California Industrial Welfare Commission
Wage Order 5-1989, 5-1998, 5-2000, and 5-2001, as amended, and the Fair Labor
Standards Act; unfair business practices under California Business and
Professions Code Section 17200, et seq.; penalties under California Labor
Code Sections 226.7 and 2699, and California Industrial Welfare Commission Wage
Order 5-1989, 5-1998, 5-2000, and 5-2001, as amended; waiting time penalties
under California Labor Code Section 203; attorneys’ fees, costs, expenses
and interest under California Labor Code Sections 218.5, 218.6, 1194,
California Code of Civil Procedure Sections 1021.5 and 1032, and California
Civil Code Sections 3287 and 3289; claims for punitive or exemplary damages;
and all other claims for damages, penalties, restitution, 

 

18

 

attorneys’ fees, costs, expenses and interest relating in any way to
overtime, meal period, and rest period violations).  This release does not cover claims after January 31,
2005.

 

E.                                      Waiver
of California Civil Code Section 1542.

 

All members of the Class (excluding any who may have opted out)
expressly waive any rights or benefits available to them under the provisions
of section 1542 of the California Civil Code, which provides as follows:

 

“A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.”

 

All members of the Class understand fully the statutory language of
Civil Code Section 1542, and with this understanding, nevertheless elect
to, and do, assume all risks for claims that have arisen or that may arise in
the future, whether known or unknown, from the subject of this release, and
specifically waive all rights they may have under California Civil Code Section 1542.  Plaintiffs and the Class fully understand
that if the facts relating in any manner to this release and dismissal are
found hereafter to be other than or different from the facts now believed to be
true, they expressly accept and assume the risk and agree that this Agreement
and the release of claims contained herein shall remain effective.

 

XIV.

 

ADDITIONAL TERMS AND CONDITIONS

 

A.                                   Settlement
the Result of Arms-Length Bargaining.

 

The terms of settlement have resulted from arms-length negotiations
over more than six weeks, including a Mediation before the Honorable Edward
Infante (Magistrate Judge, Retired) 

 

19

 

on October 6, 2004, culminating in an agreement in principle on
the major points of the settlement on November 19, 2004.

 

B.                                     Notices.

 

All notices, requests, demands and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be provided by appropriate method such as personal delivery, telecopy,
overnight delivery, or First Class U.S. Mail, depending on the urgency, to:

 

	
  TO THE CLASS:

  	
   

  	
  TO VICORP RESTAURANTS, INC.:

  
	
   

  	
   

  	
   

  
	
  Thomas A. Kearney, Esq.

  	
   

  	
  Mark Riera, Esq.

  
	
  Paul Alvarez, Esq.

  	
   

  	
  Sheppard, Mullin, Richter & Hampton LLP

  
	
  633 W. 5th Street, 28th floor

  	
   

  	
  333 So. Hope St., 48th Floor

  
	
  Los Angeles, CA 90071-3125

  	
   

  	
  Los Angeles, CA 90071-1448

  
	
  Telephone: (213) 473-1900

  	
   

  	
  Telephone: (213)617-4214

  
	
  Facsimile: (213) 473-1919

  	
   

  	
  Facsimile: (213)620-1398

  

 

C.                                     No
Admission of Liability.

 

The parties agree that the lawsuit was filed, prosecuted and resolved
in good faith following substantial formal and informal discovery, motion
practice, and arms-length bargaining, and is in the best interest of Plaintiffs
and the Class members.  Nothing herein
shall constitute any admission of wrongdoing or liability by Vicorp.  Vicorp agrees that the Settlement Fund and
the other terms of the Agreement reflect a good faith settlement of the claims
asserted in this lawsuit, and were reached voluntarily after consultation with
experienced legal counsel.  The Agreement
and the settlement and all acts performed or documents executed pursuant to or
in furtherance of the Agreement or the settlement: (1) are not and shall not be
deemed to be and may not be used as an admission of, or evidence of any
wrongdoing or liability on the part of Vicorp; and (ii) are not and shall not
be deemed to be and may not be used as an admission of, or evidence of any
fault or omission of Vicorp in any civil, criminal or administrative proceeding
in 

 

20

 

any court, administrative agency or other tribunal.  However, the Agreement may be used in such
proceedings as may be necessary to conclude the settlement or to enforce the
Agreement or the Judgment, and Vicorp may file the Agreement and/or the
Judgment in any action that may be brought against it to support a defense or
counterclaim based on principles of res judicata, collateral estoppel, release,
good faith settlement, judgment bar or reduction or any other theory of claim
preclusion or issue preclusion or similar defense or counterclaim.  Vicorp has denied and continues to deny each
and all of the alleged claims.  The
settlement is a compromise and shall not be construed as an admission of
liability at any time or for any purpose, under any circumstances, by the
parties to this Agreement.  This
Agreement and the settlement shall not be used to suggest an admission of
liability in any dispute between the parties that may now exist or that may
arise in the future with respect to any person or entity.  Neither this Agreement nor anything included
herein, nor any part of the negotiations in connection herewith, shall
constitute evidence with respect to any issue or dispute.

 

D.                                    Modification
by Writing Only.

 

This Agreement, and its terms, and Exhibits, may be modified or amended
only in a writing signed by all counsel of record for the parties that will not
become effective unless and until approved by the Court, or otherwise ordered
by the Court.

 

E.                                      Representations
of Counsel.

 

1.                                       Plaintiffs and
their counsel represent that, to the best of their knowledge, there is no other
litigation pending in any other court or in any other jurisdiction raising any of
the claims asserted by plaintiffs in the within captioned matter.

 

21

 

2.                                       Plaintiffs have
expressly authorized their counsel to take all appropriate action required or
permitted to be taken pursuant to the Agreement to effectuate its terms.

 

3.                                       Each attorney
executing the Agreement or any of its Exhibits on behalf of any party hereto
hereby warrants that they have full authority to do so.

 

F.                                      Further
Cooperation.

 

The parties and their respective counsel of record shall proceed
diligently to prepare and execute all documents, to seek the necessary Court
approvals, and to do all other things reasonably necessary or convenient to
conclude the settlement as expeditiously as possible.

 

G.                                     Construction
and Interpretation.

 

This Agreement and the Exhibits “A” through “D” (the Notice, [Proposed]
Order for Preliminary Approval, [Proposed] Final Judgment and Order of
Dismissal and Claim Form and Request for Information attached hereto,
constitute the entire agreement among the parties hereto and no
representations, warranties or inducements have been made to any party
concerning the Agreement or its Exhibits other than the representations,
warranties and covenants contained and memorialized in such documents.  The parties explicitly recognize California
Civil Code Section 1625 and California Code of Civil Procedure Section 1856(a),
which provide that a written agreement is to be construed according to its
terms and may not be varied or contradicted by extrinsic evidence.  This Agreement and all other documents shall
be construed each as a whole, and with reference to one another according to
their fair meaning and intent, and not strictly for or against any party,
regardless of who drafted or who was principally responsible for drafting any
document or part thereof.

 

22

 

H.                                    Governing
Law.

 

This Agreement and the Exhibits hereto shall be deemed to have been
negotiated, executed and delivered, and to be wholly performed, in the State of
California, and the rights and obligations of the parties to the Agreement and
to the Exhibits shall be construed and enforced in accordance with, and
governed by, the internal, substantive and procedural laws of the State of
California without giving effect to that State’s choice of law principles.

 

I.                                         Counterparts.

 

The Agreement may be executed in one or more telecopied counterparts
which may be filed with the Court.  All
executed counterparts and each of them shall be deemed to be one and the same
instrument.  A complete set of original
executed counterparts shall be filed with the Court, when available.

 

J.                                        Binding
Effect.

 

This Agreement is binding upon and shall inure to the benefit of the
parties to the settlement, and their respective attorneys, and past, present
and future subsidiaries, divisions, predecessors, successors, shareholders,
officers, directors, employees, agents, trustee, representatives,
administrators, fiduciaries, assigns, subrogees, executors, partners, parents,
and privies.  Without limiting the
foregoing, this Agreement shall be binding upon the spouse or domestic partner,
children, heirs, assigns, successors and offspring of all members of the Class.

 

K.                                    Attorneys’
Fees and Costs and Expenses.

 

Except as otherwise specifically provided for herein, each party shall
bear its own attorneys’ fees, costs and expenses, taxable or otherwise,
incurred by them or arising out of this litigation and shall not seek
reimbursement thereof from any other party to this Agreement.

 

23

 

L.                                      No
Retaliation.

 

Vicorp shall not take any adverse action against any Class member
because of the existence, and participation in the lawsuit, including because
any Class member chooses to take the benefit of the settlement, requests to be
excluded from the Class, or objects to the settlement.

 

M.                                 Continuing
Jurisdiction.

 

The Court shall have continuing jurisdiction to construe, interpret and
enforce this Agreement and the settlement, to supervise notices sent, the
administration and distribution of the settlement and the Settlement Fund, and
to hear and adjudicate any dispute or litigation arising from the settlement,

 

24

 

	
  APPROVED AS TO FORM:

  	
  Sheppard, Mullin, Richter & Hampton LLP

  
	
   

  	
   

  	
   

  
	
  Kearney Alvarez LLP

  	
  By:

  	
  /s/ Mark Riera

  	
   

  
	
  Thomas A. Kearney, Esq.

  	
   

  	
  Mark Riera

  
	
  Paul Alvarez, Esq.

  	
   

  	
  Attorneys for Vicorp Restaurants, Inc.

  
	
   

  	
   

  	
   

  
	
  /s/ Thomas A. Kearney

  	
   

  	
   

  	
   

  
	
  Class Counsel

  	
   

  	
   

  
	
   

  	
  AGREED AS OF February 28, 2005

  
	
   

  	
   

  	
   

  
	
   

  	
  Vicorp Restaurants, Inc.

  
	
  AGREED AS OF February 28, 2005

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Deanna O’Neill

  	
   

  	
  By:

  	
  /s/ Debra Koenig

  	
   

  
	
  Individually and on behalf of the Class

  	
   

  	
   

  
	
  Deanna O’Neill

  	
   

  	
  Its Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  /s/ Victoria E. Sordelet

  	
   

  	
   

  	
   

  
	
  Individually and on behalf of the Class

  	
   

  	
   

  
	
  Victoria E. Sordelet

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Frederick Trunik

  	
   

  	
   

  	
   

  
	
  Individually and on behalf of the Class

  	
   

  	
   

  
	
  Frederick Trunik

  	
   

  	
   

  

 

25Exhibit 10.5

 

AMENDMENT OF LICENSE CONTRACT

FOR EXPLORATION AND EXPLOITATION

OF HYDROCARBONS ON BLOCK Z-1

 

ENTERED BY PERUPETRO S.A.

WITH

BPZ ENERGY, INC., SUCURSAL PERU

 

FIRST
CLAUSE

 

1.             BACKGROUND

 

1.1          On November 30, 2001,
PERUPETRO S.A. (hereinafter Perupetro) entered into a License Contract for
Exploration and Exploitation of Hydrocarbons in Block Z-1 with Syntroleum Perú
Holdings Limited, Sucursal del Perú, and with BPZ ENERGY INC., SUCURSAL PERU,
which was approved by Supreme Decree N° 052-2001-EM, as mandated by Law, and
made a Public Deed on November 30, 2001 by its registration on the same date, made
by Dr. Cecilia Hidalgo Morán, a Notary Public of Lima, Perú.

 

1.2          By means of Supreme
Decree N° 045-2002-EM, dated October 23, 2002, approval was given to the
Modification of the License Contract for Exploration and Exploitation of
Hydrocarbons in Block Z-1, which was also made a Public Deed on the same date
by registration made by Dr. Cecilia Hidalgo Morán, a Notary Public of Lima,
Perú.

 

1.3          Through Supreme
Decree N° 003-2004-EM, dated February 12, 2004, approval was given to the
Modification and Transferal (or Assignment) of the Contractual Position in the
License Contract for the Exploration and Exploitation of Hydrocarbons in Block
Z-1, made by Syntroleum Perú Holdings Limited, Sucursal del Perú, which
assigned all of its participation in the Contract, equivalent to ninety five
percent (95%) of participation in the Contract, to Nuevo Perú, Ltd., Sucursal
del Perú. This Modification and Assignment of Contractual Position was made a
Public Deed on March 18, 2004 by Dr. Ricardo Fernandini Barreda, a Notary
Public of Lima, Perú.

 

1

 

1.4          By means of a letter
dated November 5, 2004, and in conformance with Clause Sixteen of the Contract,
Nuevo Perú Ltd., Sucursal del Perú notified Perupetro of its decision to assign
its Contractual Position in the Contract to BPZ Energy, Inc., Sucursal Perú.

 

1.5          Plains Exploration
& Production Company acquired through a merger ownership of Nuevo Energy
Company, as agreed by Board of Directors Resolution of Plains Exploration &
Production Company that took place on July 15, 2004.

 

1.6          Perupetro, by means
of Certificate N° GGRL-CC-014-2004 dated November 24, 2004, has qualified BPZ
Energy, Inc. to assume through the intervention of its Peruvian branch, BPZ
Energy, Inc., Sucursal Perú, the ninety-five percent (95%) participation in the
Contract that has been assigned to them by Nuevo Perú, Ltd., Sucursal del Perú,
thus finally obtaining one hundred percent (100%)  of participation in the Contract.

 

1.7          The Parties carried
out negotiations with the purpose of modifying the Contract relative to the
Assignment of Contractual Position, referred to in the preceding numbered paragraphs,
and arriving at certain agreements, which are described in full in the
following paragraphs.

 

SECOND CLAUSE

 

2.1          In accordance with
Clause Sixteen of the Contract, and through this document, Nuevo Perú, Ltd.,
Sucursal del Perú has assigned its ninety-five percent (95%) participation in
the Contract to BPZ Energy, Inc., Sucursal Perú, and therefore the Contractor
consists of the following:

 

BPZ Energy Inc., Sucursal Perú with
100%  participation.

 

2.2          The Assigned Party,
in accordance with Clause 16, paragraph 16.3 of the Contract, awards all the
guarantees and assumes all the rights, responsibilities and obligations derived
from the Contract.

 

2.3          The Central Bank of
Reserves of Perú has participated in the present Modification and Assignment of
Contractual Position of the Contract,  to
become aware of the assignment of participation and to ratify the existence of
the guarantees awarded by the Government of Perú, which are indicated in the
Clause covering Financial Rights under the Contract, approved under the regulations
of Law N° 26221, Organic Law of Hydrocarbons.

 

2

 

2.4          BPZ Energy, Inc.
also participates in this Modification and Assignment of Contractual Position,
with the purpose of providing the corporate guarantee, which is enclosed as
Annex “D” of the Contract, in accordance with the agreements that appear in the
following clauses:

 

THIRD CLAUSE

 

With the express purpose of appropriately reflecting the stipulations
contained in the preceding clauses, the Parties agreed to introduce the
following modifications to the License Contract, as indicated below:

 

3.1          To
modify paragraph 1.1, which will be expressed as follows:

 

“1.1 Affiliate

Any entity whose subscribed capital shares with voting rights are owned
directly or indirectly, in a proportion equal to fifty percent (50%) or more by
any of the Parties; or any entity or person that is the owner, directly or
indirectly, of 50% or more of the subscribed capital shares with voting rights
of one of the Parties; or any entity whose subscribed capital shares with
voting rights is the property, directly or indirectly, of fifty percent (50%)
or more of the same shareholder or shareholders that own, directly or
indirectly, the fifty percent (50%) or more of the subscribed capital shares
with voting rights of any one of the Parties.”

 

3.2          To
modify paragraph 1.11, which will be expressed as follows:

 

“1.11 Contractor

The Contractor is BPZ Energy, Inc., Sucursal Perú, registered in the
Public Registry of Hydrocarbons under Registration N° 11328132 of the Book of
Operating Contractors. On the Signing Date, the participation in the Contract
of the company that conforms the Contractor is the following:

 

BPZ ENERGY, INC., SUCURSAL PERÚ = 100%”

 

3.3          To eliminate
paragraph 1.42

 

3.4          To add paragraph
1.59, which will be expressed as follows:

 

“1.59 - Date of Assignment of Contractual Position. It
is the 3rd day of February 2005, when on that date Nuevo Perú Ltd.,
Sucursal del Perú, assigned its ninety five percent (95%) participation in the
Contract to BPZ Energy, Inc., Sucursal Perú, whereby the Parties signed the
Assignment of Contractual Position in the License Contract for the Exploration
and Exploitation of Hydrocarbons in Block Z-1, which was approved by

 

3

 

Supreme Decree N° 002-2005-EM issued on the 2nd day of
February of the year 2005.”

 

3.5          To
modify paragraph 3.11, which will be expressed as follows:

 

“3.11 – BPZ Energy, Inc., participates
in the License Contract for the purpose of providing the corporate guaranty,
which appears as part of the Contract in Annex “D”, which was delivered to
Perupetro on the Date the Assignment of the Contractual Position was signed.

 

The corporate guaranty will be in place as long as the Contractor’s
obligations are still pending. The stipulations of subparagraph 22.3.5 will be
applicable if any situation foreseen in such paragraph takes place, and the
Contractor does not comply with its obligation within a period of not more than
fifteen (15) Working Days.”

 

3.6          To
modify paragraph 6.7, which will be expressed as follows:

 

“6.7 – Any of the Parties may reveal information obtained from the
Operations without the approval of the other Party, in the following cases:

 

(a)           To
an Affiliate;

(b)          In
connection with obtaining financing, or insurance, but first signing a
confidentiality agreement;

(c)           As
long as it is required by law, regulations, or resolution issued by competent
authority, including without limitation, the regulations or resolutions of governmental
authorities, insurance organizations, or stock exchange entities, where the
shares of the Party or its Affiliated companies are registered;

(d)          To
consultants, accountants, auditors, financiers, professionals, possible buyers
or assignees of the Parties, or of a participation in the License Contract, as
may become necessary in relation to the Operations, but previously obtaining an
agreement of confidentiality.

 

In those cases where the Parties agree to communicate to third parties
certain information of confidential nature, or of private character, they must
declare and give express notice of the confidential character of such
information, with the purpose of avoiding that such information be divulged to
third parties.”

 

3.7          To
modify paragraph 9.1, which will be expressed as follows:

 

“9.1 – The Contractor is subject to the common taxation regime
prevailing in the Republic of Perú, which includes the ordinary Income Tax
regime,

 

4

 

as well as the specific norms that have been established for that
purpose by Law N° 26221, Hydrocarbons Organic Law, which are prevailing at the
time of the Signing Date.

 

The State, through the Ministry of Economy and Finance, guarantees the
Contractor the benefit of taxation stability for the entire life of the License
Contract and therefore, the Contractor will be subject only to the taxation
regime prevailing on the Signing Date, in accordance with the stipulations
established in the “Regulations for the Taxation Stability Guaranty and the
Taxation Norms of Law N° 26221, Hydrocarbons Organic Law,” approved by Supreme
Decree N° 32-95-EF, and by the “Law that regulates the Tax Stability Contracts
with the State under the guidance of the Sectorial Laws – Law N° 27343”, as it
may be applicable, and by the “Law of Actualization of Hydrocarbons – Law N°
27377”.

 

3.8          To
modify paragraph 9.2, which will be expressed as follows:

 

“9.2 – The export of Hydrocarbons
produced from the Contract Area that would be made by the Contractor are free
of all Taxation, including those taxes that require express mention.”

 

3.9          To
modify paragraph 9.5, which will be expressed as follows:

 

“9.5 – In accordance with the stipulations of Article 87 of the Tax
Code, the Contractor is allowed to carry its accounting in US$ dollars, and
therefore, the determination of the income base for Taxation, which will be his
responsibility, as well as the amount of such Taxes, and the payment of such
Taxes, will be done in accordance with the law.”

 

3.10        To
modify paragraph 9.6, which will be expressed as follows:

 

“9.6 – It is here specified that the Contractor will use the method of
straight-line depreciation over a period of five (5) fiscal years, to be
counted from the first fiscal year corresponding to the Date of Initial
Commercial Extraction.

 

The above referred linear depreciation will be applicable to all
Exploration and Development costs and to all investments to be made by the
Contractor from the Signing Date of the Contract until the Date of Initial Commercial
Extraction.

 

It is also stipulated that the term of the depreciation referred to
above will be extended, without in any case exceeding the term of the Contract,
if because of differences in prices or because of any other factors on which
the Parties have agreed, and after applying the linear depreciation

 

5

 

referred to in the above paragraph, the financial statements of the
Contractor show a negative result or a fiscal loss, which in the judgment of the
Contractor has been projected, it will not be compensated for fiscal purposes
in accordance with existing taxation norms. The extending of the depreciation
period should be made known promptly to the National Taxation Superintendence.”

 

3.11        To
modify paragraph 16.1, which will be expressed as follows:

 

“16.1 – In case the Contractor arrives at an agreement to assign its
contractual position, or decides to associate with a third party in the
Contract, it should proceed to notify Perupetro in relation with such
agreement. The notification should be accompanied by a request for the
qualification of the assignee or third party participant, and should be accompanied
by all necessary complementary information that may be required to qualify the
assignee, or third party participant, as a petroleum company, in accordance
with the Law.

 

If Perupetro awards the
qualification as requested, the assignment will be made by means of a
modification of the Contract, which will be made in accordance with the law”.

 

3.12        To
modify paragraph 16.3, which will be expressed as follows:

 

“16.3 – If the Contractor assigns its contractual position or becomes
associated with a third party, in accordance with this Contract, either the
assignee or the third party, will have to provide all the required guarantees,
and should assume all the rights, responsibilities and obligations of the
assigner”.

 

3.13        To
eliminate paragraph 16.4

 

3.14        To
eliminate paragraph 16.5

 

3.15        To
modify paragraph 18.1, which will be expressed as follows:

 

“18.1 – The Contractor should maintain its accounting in accordance
with the principles and the accounting practices established and accepted in
Perú. Furthermore, the Contractor must carry and maintain all the accounting
books, detailed records, and necessary documentation that may be necessary to
account for and to control all the activities that are executed in the country
and/or abroad in connection with the purpose of the Contract, as well as for
adequate sustentation of its income, investments, costs, expenses and Taxation
incurred in each fiscal year. On

 

6

 

the other hand, within one hundred and twenty (120) Days, counted from
the Signing Date, the Contractor should provide Perupetro with a copy in the
Spanish language of the “Manual of Accounting Procedures”, which the Contractor
has decided to propose for the recording of its Operations. The “Manual of
Accounting Procedures” proposed for the recording of Contractor’s Operations,
must contain among other items, the following:

 

(a)    Language
and currency to be used for recording information in the accounting books

(b)    Principles
and accounting practices to be utilized

(c)    Structure
and Accounting Plans in agreement with the requirements of the National
Commission In Charge of Supervising Enterprises and Valuables (Comisión Nacional
Supervisora de Empresas y Valores, known as CONASEV)

(d)    Procedures
to identify the specific accounts corresponding to the Contract and also to
other Hydrocarbon contracts, and to identify the related activities and also any
other activities.

(e)    Procedures
to identify and record income, investments, costs and ordinary expenses that
may be common to the Contract, and to other Hydrocarbon contracts, or to
related activities and/or to other activities.

(f)     Definition
and identification of the specific accounts for income and expenses, and the
detailed records required for the calculation of the “Rt-1 Factor”,
as well as for the detailed procedures described in the Annex “E” of the
Contract, if that is the case”.

 

3.16        To
modify paragraph 18.5, which will be expressed as follows:

 

“18.5 – The Contractor must submit a copy to Perupetro, within thirty
(30) Days of having received the report from its external auditors related with
the financial statements of the Contractor corresponding to the prior fiscal
year. In the case that the Contractor has signed with Perupetro more than one
contract, or it is conducting activities different to those of the Contract, it
is obligated to carry separate accounts with the purpose of being able to
formulate financial statements for each contract and/or activity, and
therefore, the report prepared by its auditors must include the financial
statements for each contract and/or activity”.

 

3.17        To
modify paragraph 18.6, which will be expressed as follows:

 

“18.6 – The Contractor must submit to the National Superintendence of
Taxation Administration (Superintendencia Nacional de Administración
Tributaria, also known as SUNAT), or to the institution that may be its substitute,
a copy of all the documentation that must be submitted

 

7

 

together with the sworn declaration of Income Tax returns, which should
be submitted to Perupetro within fifteen (15) Days, after having been presented
to SUNAT”.

 

3.18        To
eliminate paragraph 18.7

 

3.19        To
modify paragraph 20.1, which will be expressed as follows:

 

“20.1 – Any notification or communication relative to the Contract,
will be considered to have been truly sent by any of the Parties, if it is in
writing and delivered by messenger, or received by means of certified mail, or
by facsimile, or by any other means that the Parties may have agreed on, and
should be addressed to the addressee during a Working Day and addressed to one
of the following addresses:

 

To Perupetro:

Perupetro S.A.

Gerencia General

Av. Luis Aldana N° 320

San Borja, Lima 41, Peru

Fax: 51-1-617-1801

 

To Contractor:

BPZ Energy Inc., Sucursal Perú

Gerencia General

Ave. Canaval y Moreyra N° 425 – Of. 81

San Isidro, Lima 27, Peru

Fax: 51-1-421-9759

 

To Corporate Guarantor

BPZ Energy, Inc.

Manuel Pablo Zúñiga-Pflücker

President

11999 Katy Freeway, Suite 560

Houston, Texas, 77079, USA

Fax: 281-556-6377

 

3.20        To
modify sub-paragraph 22.3.4, which will be expressed as follows:

 

“22.3.4 – In the case where the Contractor has been declared insolvent,
or in a condition of dissolution, or liquidation, or default, and a third party
duly qualified by Perupetro does not take over the participation of the
Contractor in the License Contract to replace the company that has been
dissolved, liquidated or defaulted within a period of fifteen (15) Working Days”.

 

8

 

3.21        To
modify paragraph 22.3.5, which will be expressed as follows:

 

“22.3.5 – In case the corporate guarantee, referred to in paragraph
3.11, is no longer valid, or in case the entity that provided the corporate
guarantee, referred to in paragraph 3.11, has been declared in a situation of
insolvency, dissolution, liquidation or default, and such guarantee has not
been assumed by a third party accepted by Perupetro”.

 

3.22        To
modify sub- paragraph 22.6, which will be expressed as follows:

 

“22.6 –At the end of the License Contract, the Contractor shall provide
ownership to the State, through Perupetro, (unless not required, but without
any cost or any other charges to the State, in good operating condition, with
good maintenance and functioning well, but taking into consideration the normal
tear and ware caused by their utilization), all buildings, energy
installations, communication systems, pipelines, housing for workers, and all
other assets and installations used for production operations formerly owned by
the Contractor, which will be used to continue Operations.

 

In case there is joint Exploitation of Crude Oil and Non-Associated
Natural Gas, and/or Non-Associated Natural Gas and Condensate at the end of the
term established by paragraph 3.1 for the Exploitation Phase of Crude Oil, the
Contractor will provide ownership to the State,
through Perupetro, (unless not required, but without any cost or any other
charges to the State, in good operating conditions, with good maintenance and
functioning well, but taking into consideration the normal tear and ware caused
by their utilization), all the assets and installations particularly
appropriate for the Exploitation of Crude Oil, which are not necessary to carry
out operations for the Exploitation of Non-Associated Natural Gas, and/or
Non-Associated Natural Gas and Condensate.

 

The assets and installations that the Contractor retains for the
Exploitation of Non-Associated Natural Gas and/or Non-Associated Natural Gas
and Condensate, which have also been utilized in the Exploitation of Crude Oil,
which will continue to be considered as property of the Contractor, will be
utilized on both types of Exploitation and for this purpose an agreement should
be entered by the Parties.

 

In case the Contractor has been using the assets and installations
described in the first paragraph of this section, but if they are not

 

9

 

accessory or connected exclusively for their use in the Operations
under this Contract, which means that they have also been used in operations in
other areas under existing contracts for Exploration and Exploitation in Peru,
the Contractor will continue to own such assets and continue the use of such
assets.

 

3.23        To
modify Annex “D”, which will be expressed as follows:

 

Annex “D”

Corporate Guarantee

 

To:          Perupetro S.A.

Avenida Luis Aldana 320

Lima 41, Perú

 

By this document BPZ Energy, Inc., in accordance with paragraph 3.11 of
the License Contract for the Exploration & Exploitation of Hydrocarbons in Block
Z-1, to be signed by PeruPetro S.A.  (“Perupetro”)
and BPZ Energy, Inc., Sucursal Perú (“Contratista”), guarantees jointly and
severally before Perupetro the compliance by BPZ Energy, Inc., Sucursal Perú of
all the obligations that this entity has assumed in the minimum work program
described in paragraph 4.6 of the Contract, as well as the execution by the
Contractor of each one of the yearly Exploitation programs, as they may be
readjusted or changed, which the Contractor will present to Perupetro in
compliance with paragraph 5.3 of the Contract.

 

This guarantee will be in place as long as the obligations of the
Contractor derived from the Contract are enforceable. To comply with the
effects of this guarantee, BPZ Energy, Inc. agrees to submit to the Laws of the
Republic of Perú, expressly renounces to any diplomatic claim and submits
itself to the arbitration process to resolve differences established in Clause
21 of the Contract.

 

Signed by: Manuel Pablo Zúñiga-Pflücker – President

 

FOURTH CLAUSE

 

4.1          On
the date of signing the Public Deed, which the present Contract has originated,
BPZ Energy, Inc. has delivered to Perupetro the corporate guarantee through
which it has assumed the jointly and severally responsibility for the
compliance of all obligations derived from the Contract, in accordance with the
text of Annex “D”.

 

10

 

The corporate guarantee delivered by BPZ Energy, Inc. substitutes the
guarantee awarded by this enterprise on the Signing Date of the Contract.

 

4.2          Similarly,
on the date of signing the Public Deed originated by this document, the
Contractor has complied with the substitution of the bank guarantee
corresponding to the first period of the Exploration Phase, in a manner to
reflect in such guarantee the conformation of the Contractor.

 

We respectfully request the Notary Public to include all that is
necessary in accordance with the Law and to notify, as is mandatory, the Public
Registry of Hydrocarbons for its registration.

 

Lima, the 3rd day of February, 2005

 

Signed on behalf of Perupetro by Mr. José Eduardo Chávez-Cáceres

 

Signed on behalf of Nuevo Perú, Ltd., Sucursal del Perú by Mr. Germán
José Martín Barrios Fernández-Concha

 

Signed on behalf of BPZ Energy, Inc., Sucursal Perú by Mr. Rafael
Zöeger-Núñez

 

Signed on behalf of Plains Exploration & Production Company

 

(Formerly Nuevo Energy Company), by Mr. Germán José Martín Barrios
Fernández-Concha

 

Signed on behalf of BPZ Energy, Inc. by Mr. Rafael Zöeger-Núñez

 

Signed on behalf of the Central Bank of Reserves of Perú by Messrs.
Renzo Guillermo Rossini Miñan and Carlos Augusto Ballón Avalos

 

This Public Deed was authorized by Doctor Germán José Martín Barrios
Fernández-Concha, Lawyer, with registration in the Register of the Lawyers
College of Lima under N° 20390

 

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