Document M4ajdwnxND7nx3gqM9DY407R7

ROSE-WALKER, L.L.P. Attorneys March 31, 2000 1701 N Market St Suite 200 Dallas, Texas 75202 phone: 214*752*8600 facsimile: 214 752 8700 www rosewalker com VIA REGULAR MAIL Mr. Oscar Soliz, District Clerk Nueces County Courthouse 901 Leopard Street Corpus Christi, Texas 78401 Re: Cause No. 97-0844-E; Jose J. Cano, etal. v. Owens-Coming Fiberglas Corporation, et al\ In the 148th Judicial District Court of Nueces County, Texas Dear Mr. Soliz: Enclosed is an original and one copy the Response of Defendant Hoechst Celanese Corporation to Plaintiffs' Second Request for Production (without attachments). Please file this Response among the papers in this cause, and have your staff return a file stamped copy to me in the enclosed self-addressed stamped envelope. By copy of this letter, I request that counsel for co-defendants notify the undersigned if they desire a copy of the attachments. Thank you for your attention to this matter. Very truly yours, ''j/liVJc Ia/jIS-------- Nona Walker NW/dde Ends. cc: Plaintiffs counsel (via courier, w/encls.) All other known counsel of record (via facsimile transfer) NO. 97-0844-E JOSE J. CANO, SR. AND MARIA CANO; RUBEN EURESTE; AND LEO MOORE AND VELENA FAY MOORE, PLAINTIFFS, V. OWENS-CORNING FIBERGLAS CORPORATION, ET AL., DEFENDANTS. IN THE DISTRICT COURT NUECES COUNTY, TEXAS 148TH JUDICIAL DISTRICT RESPONSE OF DEFENDANTS HOECHST CELANESE CORPORATION TO PLAINTIFF'S SECOND REQUEST FOR PRODUCTION TO: Plaintiff Jose J. Cano, Sr., by and through his attorneys of record, Holly J.W. Huart and Stephanie Finch of Baron & Budd, a'Professional Corporation, The Centrum, 3102 Oak Lawn Avenue, Suite 1100, Dallas, Texas 75219. Pursuant to Rules 192,193,196 and 197 ofthe Texas Rules ofCivil Procedure (the "Rules"), Hoechst Celanese Corporation ("Defendant" or"Celanese") submits these Responses and Objections to Plaintiffs' Second Set of Request for Production, as follows: GENERAL RESPONSES, OBJECTIONS AND ASSERTIONS OF PRIVILEGE Defendant makes the following general objections to each and every discovery request directed to it: Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production \vRosewalk01 docsvHC - Cano\Discovery\Resp to Plaintiffs' 2nd R-P.wpd Page 1 1. Defendant objects to paragraph one of the DEFINITIONS regarding "Defendant," "You," "Your," and "Your company" and paragraph three regarding "persons" because they are overly broad and unduly burdensome and pertain to corporations other than those who are parties to this suit. Defendant also objects to paragraphs one and three because they include Defendant's attorneys; information and things protected by the attorney client privilege and work product doctrine is not discoverable. 2. Defendant objects to paragraph two of the DEFINITIONS because the definition of the word "document" and the instructions regarding "possession, custody or control" are overly broad, seek information specifically exempted from discovery by the privileges afforded inthe Rules and Rule 502 of the Texas Rules of Civil Evidence, including the attorney work product doctrine, the attorney client privilege and the party communications privilege, and because it exceeds the 4* scope ofRule 192.3 ofthe Texas Rules ofCivil Procedure. Throughout these responses, Defendant will assume that the word will have its commonly used meaning, as set forth in Rule 192.3(b) and will respond accordingly. 3. Defendant objects to the definitions of "identify" contained in paragraphs 16 and 17 of the DEFINITIONS because they are overly broad, unduly burdensome and harassing. 4. Defendant objects to DEFINITION 6 to the extent that information is sought concerning asbestos in a non-friable form. 5. Defendant further objects to any discovery request seeking to charge them with knowledge or information held by their "predecessors or subsidiaries" or requiring them to provide Response of Defendants Hoechst Celancse Corporation to Plaintiffs' Second Request for Production '.\Rosewalker01 VJocsXHC - CanovDiscoveryVResp to Plaintiffs' 2nd R-P.wpd Page 2 information regarding plants other than the one in which Plaintiff Jose J. Cano, Sr. was employed, which plant is currently unknown. Defendant operated multiple facilities and employ thousands of workers.' Accordingly, it is unduly burdensome, excessively expensive and harassing to require Defendant to answer these interrogatories as to all plants. 6. Defendant objects to Plaintiff s discovery requests because they are unlimited in time. 7. Defendant objects to Plaintiffs requests to the extent that they necessarily seek disclosure of trade secrets, proprietary material and other confidential information protected from discovery by the Texas Rules of Civil Procedure. 8. The presence ofan objection does not mean that Defendant possesses non-privileged information responsive to a discovery request. SPECIFIC OBJECTIONS Each of the- following specific responses and objections incorporate by reference the above-stated general responses, objections and assertions of privilege. Subject to the foregoing, Defendant specifically responds as follows: REQUEST FOR PRODUCTION REQUEST FOR PRODUCTION NO. 1: Ifyou contend that you did not own or control the facility formerly known as the "Pontiac" or "Champlin" Refinery during any time period that Plaintiffworked (or believes he worked) at that facility, please produce all documentation that supports your contention, including but not limited to documentation pertaining to the purchase, sale, acquisition, merger, or divestment ofcorporations, subsidiaries, divisions, or other corporate entities or assets that included the purchase, sale, acquisition, merger, or divestment of the facility formerly known as the "Pontiac" or "Champlin" Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production .\RosewalkerOr-docs\HC - Cano\Discovery\Resp to Plaintiffs' 2nd R-P.wpd Page 3 Refinery; such documentation to included, by way of example and not limitation, purchase or sale agreements, minutes, resolutions, annual reports, 10K reports or other state or federal agency filings or deposition, trial testimony or affidavits of your corporate representatives who are the most knowledgeable individuals with respect to such matters. RESPONSE: Defendant additionally objects to this request because: 1. The phrase "facility formerly known as the `Pontiac' or `Champlin' Refinery" is vague and ambiguous; it does not adequately apprize Defendant of the facility Plaintiff claims was owned or controlled by Defendant where Plaintiff claims to have worked; 2. It fails to describe with reasonable particularity the item or category of items sought to be inspected, as required by Rule 196; 3. It is unlimited in time and seeks matters that are not relevant to the subject matter of this lawsuit or reasonably calculated to lead to the discovery of admissible evidence; 4. It is overly broad; and 5. It seeks to impose a duty beyond the scope of the Rules to create documents. Subject to the foregoing objections, documents that may be responsive to this request are attached to this response. Discovery is ongoing, and Celanese reserves its right to supplement this response with additional responsive documents, if any are located. Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production \\Rosewalker01'docs\HC - CanoVDiscoveryVResp to Plaintiffs' 2nd R-P.wpd Page 4 Respectfully submitted, hsxjJ.--_________ Nona Walker State Bar No. 19890600 Rose*Walker, L.L.P. 1701 N. Market Street, Suite 200 Dallas, Texas 75202 214.752.8600 (phone) 214.752.8700 (facsimile) Michael E. Hutchins Hawkins & Parnell, L.L.P. 4000 Suntrust Plaza 303 Peachtree Street, N.E. Atlanta, GA 30308-3243 404.614.6400 (phone) 404.614.7500 (facsimile) ATTORNEYS FOR DEFENDANTS HOECHST CELANESE CORPORATION AND CELANESE, LTD. Response of Defendants Hoechst Celancsc Corporation to Plaintiffs' Second Request for Production \\RosewalkerO 1 \docs\HC - Cano\Di$covery\Resp to Plaintiffs' 2nd R-P.wpd Page 5 CERTIFICATE OF SERVICE In accordance with Rule 21 of the Texas Rules of Civil Procedure, the foregoing Response to Plaintiffs Second Set ofRequest for Production has been served upon the following counsel for Plaintiff(s) by hand delivery, and upon all other known counsel of record by facsimile transmission on this 31st day of March, 2000: Russell Budd Melissa Hutts Randy Reagan Holly Huart Stephanie Finch Baron & Budd, P.C. 3102 Oak Lawn; Suite 1100 Dallas, TX 75219 Nona Walker -- Response of Defendants Hoechst Celanesc Corporation to Plaintiffs' Second Request for Production .\RosewalkOtVtocs\HC - Cano\Discovery\Resp 10 Plaintiffs' 2nd R-P.wpd Page 6 AGREEMENT dated as of August 28,1969 BETWEEN UNION PACIFIC PETROLEUM CORPORATION (a Utah corporation) AND a CELANESE CORPORATION (a Delaware corporation) Providing for die acquisition by Union Pacific Petroleum Corporation of all of the issued and outstanding capital stock of Ch--wpK" Petroleum Company and Pontiac Refining Corp. AGREEMENT dated as of the 28th day of August, 1969, between Celanese Corporation, a Delaware corporation (hereinafter called "Seller") and Union Pacific Petroleum Corporation, a Utah corporation (hereinafter called "Buyer"). Witnesseth: Whereas, the Seller owns all of the issued and outstanding shares of capital stock of Charaplin Petroleum Company, a Delaware corporation (hereinafter called "Champlin") and Pontiac Refining Corp., a Texas corporation (hereinafter called "Pontiac") (Champlin and Pontiac being hereinafter collectively called the "Companies"); and Whereas, the Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer, upon the terms and conditions herein set forth, all of the Stock (as hereinafter defined) of the Companies. Now, Therefore, the Seller and the Buyer, in consideration of the mutual covenants, agreements and provisions set forth in this Agreement, hereby agree as follows: 1. Sale and Purchase of Stock. On the terms and subject to the conditions set forth in this Agreement, the Seller shall sell, assign, transfer, and deliver to the Buyer, at the Closing hereunder on the Closing Date (as defined in Section 5 hereof), and the Buyer shall purchase and acquire from the Seller at such Closing, all of the Stock of the Companies. 2. Seller's Representations and Warranties. The Seller hereby represents and warrants as follows: 2.1. Organisation and Corporate Authority, (a) The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all necessary power and authority, corporate and otherwise! to execute and deliver this Agreement and to perform its obligations hereunder. The Seller is not subject to any restriction contained in any charter, by-law, mortgage, lien, lease, agreement, instrument, order, statute, regulation, judgment or decree, or any other restriction of any kind or character, which would prevent the consummation of the transactions contemplated in this Agree ment The execution and delivery and performance of this Agreement and the sale and purchase contem plated herein have been duly authorized by the Seller by all requisite corporate action and the Seller has delivered to Buyer true and complete copies of the resolutions adopted by its Board of Directors reflecting the grant of authority to execute, deliver and perform this Agreement, such copies having been certified by Seller's Secretary. (b) Champlin and Pontiac are each duly organized and validly existing corporations in good standing under the laws of their respective states of incorporation and each has full power and authority, corporate and otherwise, to own or lease its properties and conduct its business as now being conducted, and is qualified to do business in each jurisdiction where the character of the properties owned or leased by it or the nature of the business transacted by it makes such qualification necessary. 22. Subsidiaries. The Companies have.no subsidiaries other than the subsidiaries named below (hereinafter called "Subsidiaries"), each of which is wholly owned by Champlin: Subsidiary State of Cycler Oil Company Harbor Service Stations, Inc. Midland Gasoline Corporation Star Oil Company, Inc. Missouri Oklahoma Texas North Dakota Each Subsidiary is duly organized, validly existing and in good standing under the laws of its state of incorporation and each corporation has full power and authority, corporate and otherwise, to own or lease its properties and conduct its business as now being conducted, and is qualified to do business in each jurisdiction where the character of the properties owned or leased by it or the nature of the business transacted by it makes such qualification necessary. 2.3. Capitalisation, (a) Cbamplin has an authorized capital stock of 50,000 shares of common stock, of a par value of $100 per share, of which 44,847 shares are validly issued and outstanding, fully paid and non-assessable. Pontiac has an authorized capital stock of 140 shares of Class A common stock,, of a par value of $10 per share, and 60 shares of Class B common stock, of a par value of $10 per share of which, 140 Class A and 60 Class B shares are validly issued and outstanding, fully paid and non assessable (all of the issued and outstanding capital stock of Champlin and Pontiac being herein collec tively called the "Stock"). (b) There are no outstanding subscriptions or other agreements, options, warrants or similar rights obligating either of the Companies or any Subsidiary to issue any additional shares of its capital stock of any class or classes. 2.4. Ownership of Shares, The Seller has valid title to all the Stock, and Champlin has valid title to all of the issued and outstanding capital stock of each of the Subsidiaries, free and clear of any and ail claims, liens or encumbrances. 2.5. Financial Statements. The Seller has delivered to the Buyer copies of the following finan^al statements (attached hereto as Exhibit I) prepared, and certified to (except in the case' of the Balance Sheets dated as of June 30, 1969) by independent certified public accountants, all of which have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods indicated and, except as described in footnote 2 to the Interim Balance Sheet (as hereinafter defined), consistent with the principles followed in each respective preceding period: (a) Balance Sheets. Balance sheet of Pontiac, Consolidated Balance Sheet of Champlin and Subsidiaries, and Combined Balance Sheet of the Companies and Subsidiaries as of June 30, 1969, which present true and complete statements, as of said date, of the financial position of Pontiac and of Champlin and Subsidiaries and of the Companies and Subsidiaries respectively; and (b) Statements of Income and Retained Income. Statements of Income and Retained Income of Pontiac for the seven months ending December 31, 1967 and for the calendar year 1968 and Con solidated Income and Retained Income of Champlin and Subsidiaries for the calendar years 1964 through 1968, which present fairly for the periods covered thereby, the results of operations of Pontiac and of Champlin and Subsidiaries, respectively. 2.6. Absence of Undisclosed Liabilities. Except as and to the extent reflected or reserved against in the Balance Sheets, dated as of June 30,1969, referred to in Section 2.5(a) (hereinafter collectively called the Interim Balance Sheets), the Companies and Subsidiaries, (i) had no liabilities or obligations secured or unsecured (whether accrued, absolute, contingent or otherwise) including, without limitation, any tax liabilities (see Section 27), any liabilities as guarantor or otherwise (see Section 2.18), any liabilities in respect of litigation (see Section 2.19), in respect of or measured by income for any period prior to the dose of business on June 30, 1969, or arising out of transactions entered into, or any state of facts existing, prior thereto; and (ii) had not; as of June 30, 1969, received payment for any oil, gas or other hydrocarbons sold from their properties which had not been actually delivered by said date (other than those products of Pontiac which were treated on the books of Pontiac as having been sold to Gulf Oil Company although not having been physically removed from the Pontiac'premises) and were, as of June 30, 1969, under no obligation in respect of any production or transaction which occurred prior to the dose of business on said date to make any payment as a working interest owner or otherwise, in respect of production costs or in the nature of a royalty, overriding royalty, carve-out or other production payment, net profit or other similar interest under any joint operating or unit agreement or other agreement, whether or not covering the properties of the Companies and the Subsidiaries, except for obligations to make such payments as, when taken in the aggregate, were not substantial in amount and did not materially adversely affect their financial position. 2 2J. Tax Liabilities. Except as and to the extent reflected or reserved against in the Interim Balance Sheets, the Companies and Subsidiaries, as of June 30, 1969, had no liability (whether accrued, absolute, contingent or otherwise) to the Seller or to any taxing authority for the payment of any United States or Canadian, federal, state, provincial, county or local tax (whether or not disputed or theretofore assessed and whether or not in respect of or measured by income or revenues or real or personal property or sales or use) in respect of the period ended on June 30, 1969 and for all years prior thereto, or arising out of transactions entered into, or any state of facts existing on or prior to June 30, 1969; and the pro visions made for taxes in the Interim Balance Sheets are sufficient for the payment of any and all such taxes. The United States Federal income tax returns of Champlin and Subsidiaries have been filed on a consolidated basis with those of the Seller for the calendar tax years of 1965 through and including 1968, and the United States Federal income tax returns of Pontiac have been filed on a consolidated basis with those of the Seller for the taxable year September through December, 1967 and the calendar year 1968. None of the aforesaid consolidated United States Federal income tax returns of the Seller have been audited by the Federal Internal Revenue Service. The Federal income tax returns of Champlin and Subsidiaries through and including the calendar year 1964 and the Federal income tax returns of Pontiac through and including the taxable year ending August 31, 1967 have been audited by the Federal Internal Revenue Service and all deficiencies proposed as a result of such audits have been paid and settled. 2.8. Accounts Receivable. The Accounts Receivable, Notes Receivable and Advances reflected .cm the Interim Balance Sheets either have been collected or paid or are good and collectible in the book amounts thereof, less the amount of the allowance for doubtful accounts as therein reflected, 29. Product Inventory. The inventory shown on the Interim Balance Sheets consists of products of a quality and quantity usable or salable in the normal course of business; the value of all products of below standard quality had then been written down to realizable market value or adequate reserves provided therefor; and the values at which such inventory is carried reflect the normal inventory valuation policy of the Companies and Subsidiaries. 2.10. Materials and Supplies. The materials and supplies shown on the Interim Balance Sheets consist of items of a quality and quantity usable in the normal course of business and are reasonably suitable and fit for the purposes for which they were purchased. 2.11. Prepaid Expenses. The prepaid expenses shown on the Interim Balance Sheets reflect payment of expenses necessary and proper in connection with the normal course of business. 2.12. Real Property; Hydrocarbon Reserves; Leaseholds. The Companies and the Subsidiaries have valid title in fee, or a valid leasehold interest, in the case of leasehold property, in all real properties on which are situated the refineries, natural gas processing plants,, products pipeline terminals and office buildings described in Exhibit II hereto and to all buildings, improvements and fixtures thereon and are in lawful possession of all other real property used in the conduct of their respective businesses and of all buildings, improvements and fixtures thereon, all of which title and possessory interests are free and clear of any and all claims, liens and encumbrances, except (i) as otherwise reflected in the Interim Balance Sheets, (ii) the lien of current taxes not yet due and payable, (Hi) covenants, restrictions, reservations, easements and agreements contained in instruments of record affecting the properties, and zoning laws, ordinances, rules and regulations, if any, none of which materially adversely affects the use of die properties for the purposes for which they are now employed, and (iv) such other claims, liens or encumbrances, if any, as are not in respect of the particular property substantial in character, amount or extent, and do not materially detract from the value or interfere with the present or future use of, the property subject thereto or affected thereby, or otherwise materially impair business operations. Neither the Seller nor the Companies nor any Subsidiary has received notice of violation of any applicable zoning regulation, ordinance or other law, order, regulation or requirement relating to its operations or its owned or leased properties which would materially adversely affect the use of such properties for the purposes for which they are now employed and which has not been cured or otherwise satisfied and, so far as known to the Seller or the Companies or the Subsidiaries, there are no such violations and all 3 plants and other buildings conform with all applicable ordinances, codes and regulations. All of the hydrocarbon reserves shown on Exhibit III hereto are net proven recoverable reserves and the Com panies and the Subsidiaries have the right to recover all such reserves free and dear of any and all claims, liens and encumbrances, and there are no laws, ordinances, restrictions or rights of others (except for Federal and state proration regulations which may from time to time be in force and effect) which prevent-the recovery of such reserves. All natural gas liquids from process acreage which are induded in the hydrocarbon reserves shown on Exhibit III hereto are based on gas processing agree ments all of which are currently in full force and effect and valid and enforceable to their respective expiration dates. Neither the Seller nor the Companies has any knowledge of facts with respect to- the foreseeable cancellation or non-renewal of any such gas processing agreement which involves any sub stantial amount of such natural gas liquids. All leases pursuant to which the Companies or any Subsidiary leases from others any real property or interest therein, are valid and enforceable to their respective lease expiration dates and said leases are not in default and are held free and dear of any and all claims, liens and encumbrances except as aforesaid. 2.13. Refineries and Processing Plants. Champlin owns and operates a crude oil refinery located at Enid, Oklahoma, and owns, alone or jointly with oilier interest owners, and operates, directly or through a subsidiary corporation, natural gas processing plants located at or near Enid, Oklahoma; Oklahoma City, Oklahoma; Carthage, Texas; Bishop, Texas; and Conroe, Texas. Pontiac owns and operates a crude oil refinery located at Corpus Christi, Texas. All of said refineries and natural gas processing plants are in good operating condition and there is no significant deferred maintenance with respect thereto. 2.14. Personal and Intangible Property. The Companies and' die Subsidiaries own all of their personal and intangible property, including their machinery, rolling stock, motor vehicles and securities, free and clear of any and all claims, liens and encumbrances. 2.15. Easements and Rights-of-JVay. The interests of the Companies and the Subsidiaries in their rights-of-way, easements, grants, profits-a-prendre, permits, consents and licenses, granted or issued by others than governmental political subdivisions or regulatory authorities for the construction, maintenance and operation of gathering lines, pipelines, distribution mains, service mains, meter stations, distribution stations, servicecenters and other facilities have been perfected to the extent permitted by law and are valid and enforceable. 2.16. Pension Liability. The Companies and the Subsidiaries had, as of June 30, 1969, and in respect of all service in employment prior thereto, (i) unfunded past service liability computed in accord ance with generally accepted actuarial standards in respect of all pension or other retirement benefit plans or any other liability under any post-retirement group life insurance plan of not in excess of $4,000,000 and (ii) funded vested benefits of $12,200,000 in respect of all such pension or other retirement benefit plans. 2.17. Accounts Payable. The accounts payable shown on the Interim Balance Sheets represent indebtedness of the Companies and Subsidiaries incurred in connection with die acquisition of materials and supplies and the performance of services all in the ordinary course of business. 2.18. No Liabilities as Guarantor or Otherwise. Except as and to die extent reflected or reserved against in the Interim Balance Sheets, neither of the Companies nor any Subsidiary is directly or indirectly liable upon or with respect to (by discount, repurchase agreement or otherwise), or obligated in any other way to provide funds in respect of or to guarantee or assume, any debt, dividend or other obligation of any person, corporation, association, partnership or other entity, except endorsements made in the ordinary course of business in connection with the deposit of items for collection. 2.19. Litigation. There are no lawsuits, proceedings or governmental investigations pending, or threatened, against or relating to either of the Companies or any Subsidiary or the properties or business of any such company which will result in liability on the part of the Companies and. any Subsidiaries in an aggregate amount in excess of die aggregate amount reflected or reserved against in the Interim Balance 4 Sheets. Neither of the Companies nor any Subsidiary is a party to or subject to the provisions of any order, writ, injunction or decree of any court or federal, state, municipal or other governmental depart ment, commission, board, bureau, agency or instrumentality, domestic or foreign, which would materially adversely affect their financial position or materially impair their operations. 2.20. Labor Matters. There are no strikes or work stoppages in effect or threatened against the Companies or any Subsidiary, nor have any such strikes or work stoppages been enjoined by any current order, writ, injunction or decree of any court or federal, state, municipal or other governmental agency or instrumentality. 221. Patents and Trademarks. All patents, patent applications therefor, tradenames, copyrights, copyright registrations and application therefor, presently owned, in whole or in part, by either of the Companies or any of the Subsidiaries are valid and in good standing. 222. Enforceability and Compliance with Terms of Material Contracts. The material contracts and agreements referred to in Section 2.24(b) hereof are valid and enforceable to their respective expira tion dates and the Companies and the Subsidiaries are not in default under the terms of any such material contract or agreement 223. Minute Books. The minute books of each of the Companies and of the Subsidiaries contain the minutes of all meetings of the Directors and stockholders of each such company. 224. Material Data. The Seller has delivered to the Buyer the following documents each of which is true and complete: (a) The Charter and By-Laws of each of the Companies and the Subsidiaries; (b) A list and summary description of every' material contract or agreement to which either of the Companies or any Subsidiary is a party or has succeeded to a party by assumption or assignment or in which any such company has a beneficial interest Without limiting the meaning of the term "material", any contract or agreement shall, for the purposes of this Section, be deemed material (i) if not made in the ordinary course of business, or (ii) if die business of either of the Companies or any Subsidiary is substantially dependent upon it, as in the case of continuing con tracts to sell the major part of production, or licenses to use processes, patents or formulas upon which business depends to a material degree, or (iii) if constituting a management contract or bonus or profit-sharing plan, contract or arrangement, or (iv) if any Director or officer of the Seller, either of the Companies, or any Subsidiary or any associate of any such Director or officer is directly or indirectly a party thereto, or (v) if it is a mortgage, deed of trust, pledge, loan, credit, or, other borrowing agreement or other obligation for or relating to borrowed money, or (vi) is, in respect of the amount of such contract or agreement, or its importance to the business of the Companies and the Subsidiaries, material and the terms and conditions are of a nature of which die Buyer reasonably should be informed. [As used in clause (iv) hereinabove with respect to any such Director or officer, "associate" shall mean any member of his family, or any corporation, (other than a corporation whose securities are publicly traded) partnership, trust or other entity in which he has an interest or is a Director, officer, partner or trustee.] (c) A list reflecting the names and current annual salary rates or other fee arrangements of all directors, officers, employees and consultants or agents of the Companies and each Subsidiary whose current annual salary rate or fee from the Companies and each Subsidiary is Twenty-Five Thousand Dollars ($25,000) or more, together with a summary of the bonuses, additional compensation and other like benefits, if any, paid or payable to such persons for the calendar year 1969; (d) A statement summarizing (i) with respect to each pension undertaking for the employees of die Companies and for the employees of each Subsidiary, both salaried and non-salaried, including any formal or informal plan, die actuarial assumptions employed with respect to determining the past and normal service costs of each undertaking, die extent to which such undertaking is funded and the nature of each such funding arrangement, if any, and (ii) any other undertaking with respect to such employees pursuant to any retirement life insurance, bonus, profit-sharing, retirement or S other employee benefit, arrangement or plan; and a copy of each actuarial report prepared by or for the Companies and Subsidiaries or any one of them and used or proposed to be used in determining past and normal service costs for each such undertaking, (e) A list of every lease with the United States covering Federal lands leased by either of the Companies or any Subsidiary under the Federal Mineral Leasing Act, reflecting, by the categories of minerals set forth in said Act, the States in which such leases are held and the total acreage in each. (f) A list and summary description of (i) the crude oil charge capacity of the refineries of the Companies located at Enid, Oklahoma and Corpus Christi, Texas, and (ii) the principal refining units and processes in use at such refineries and a detailed description of the types and quantity of each type of refined products so produced during the year 1968 and the six-month period ending June 30,1969. 2.25. Absence of Certain Changes or Events. Since June 30, 1969, there has sot been: (a) Financial Condition. Any material adverse change in the financial position, or results of operations or employment of key personnel of either of the Companies or any Subsidiary; or, other than changes in the ordinary course of business not materially adverse, any damage, destruction, loss or seizure, whether as the result of an act of the Seiler or from causes beyond its reasonable control, including but not limited to acts of God, acts of government such as embarkation, priorities and allocations, war and war conditions, riot or civil commotion, sabotage, flood or explosion, whether or not covered by insurance, or any taking of property by condemnation or eminent domain. . (b) Capital Stock, Options, Dividends. Assy change in the authorized or issued capital stock . of the Companies or of any Subsidiary,, any acceptance of any subscription or any other agreement or any grant of any option warrant or similar right, in respect of the issuance of any additional shares of capital stock of the Companies or any Subsidiary or any sale or change in ownership of any shares of the capital stock of the Companies or any Subsidiary, or any declaration, setting aside or payment of any dividend or making of any other distribution or payment in respect of the capital stock of the Companies or any Subsidiary, except for dividends declared and/or paid which, when added to dividends declared and/or paid prior to June 30, 1969, do not exceed in the aggregate $15,350,000 in dividends declared and/or paid for the calendar year 1969. (c) Mortgage or Pledge of Assets; Incurring of Indebtedness. Any mortgage or pledge of any of the properties or assets of either of the Companies or any Subsidiary other than in the ordinary course of business and not substantial in amount or such as may be required to comply with indentures or other agreements in force on die date of this Agreement, or any borrowing or other incurring of indebtedness by any such company other than in the ordinary course of business and maturing not more than one year from the date of the borrowing or incurring of the indebtedness; and (d) Employee Benefit Plans and Certain Salaries. Any bonus, stock option, profit sharing, pension; retirement, or other similar arrangement or plan instituted by either of the Companies or any Subsidiary, or assy change in any of such companies' bonus and pension plans as in effect on June 30, 1969 or any increase in the compensation payable or to become payable to any officer, employee or agent whose total compensation from the Companies and each Subsidiary was then at an annual rate of more than Twenty-Five Thousand Dollars ($25,000), or any bonus, percentage of compensation, or other like benefit accrued to, or for the credit of, any officer, employee or agent of any such company, or any bonus, pension, retirement or similar payment or arrangement made or agreed to by any of such companies other than pursuant to any bonus or pension plan as in effect on June 30,1969. 3. Buyer's Representations and Warranties. The Buyer hereby represents and warrants as follows: 3.1. Organisation and Good Standing. The Buyer is a wholly-owned subsidiary of Union Pacific Railroad Company and is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah. The Bayer is not subject to any restriction contained in any darter, by-law, mortgage, lien, lease, agreement, instrument, order, statute, regulation, judgement or decree, or any other 6 restriction of any kind or character which would prevent the consummation of the transactions contem plated in this Agreement. The Buyer has all necessary power and authority, corporate and otherwise to execute and deliver this Agreement and to perform its obligations hereunder. The and delivery and performance of this Agreement and the purchase contemplated herein, have been duly authorized by all requisite corporate action, and the Buyer has delivered to the Seller true and complete copies of the resolutions of its Board of Directors reflecting the grant of authority to execute, deliver and perform this Agreement, such copies having been certified by the Buyer's Secretary. 3J2. Acquisition of Stock for Investment. The Buyer proposes to acquire the Stock of the Com panies for investment and not with a view'to, or for sale in connection with, the distribution thereof. 4. Conduct of Business Pending the Closing, Pending the dosing hereunder, except as otherwise consented to by Buyer in writing, Seller covenants, warrants and agrees that: 4.1. Business In Ordinary Course. Each of the Companies and the Subsidiaries shall refrain from (i) engaging in transactions other than in the ordinary course of business; (ii) entering into any agree ment for the sale of any material part of their properties or assets including but not limited to the sale of any materially significant production payment; (iii) drilling any new wells or deepening or recom pleting or making any substantial.workover of any existing well involving any expenditure or ahamWiing any significant producing well or leasehold equipment currently used thereon, except to the extent any such action is provided for under the 1969 Exploration and Development Program of the Companies, a copy of which has heretofore been delivered by the Seller to the Buyer; (hr) waiving, compromising or settling any substantial right or claim pertaining to such properties or assets having substantial value. 42. Certificate of Incorporation and By-Laws. No change shall be made in the Certificate of. Incorporation or By-Laws of any of the Companies or Subsidiaries. 4.3. Capital Stock, Options, Dividends. No change in the capital stock of the Companies or any Subsidiaries or option grant or change in ownership or dividend or other distribution, all as hereinabove specified in Section 225(b), shall have been made or occurred, except that in respect of dividends, the Seller shall be entitled to receive Fifteen Million Three Hundred Fifty Thousand Dollars ($15,350,000) in aggregate dividends from the Companies during the calendar year 1969. 4.4. Mortgage or Pledge of Assets; Incurring of Indebtedness. No mortgage or pledge or bor rowing or other incurring of indebtedness all as hereinbefore specified in Section 2.25(c) shall be made. 4.5. Employee Benefit Plans and Certain Salaries. No employee benefit arrangement or. plan, all as hereinbefore specified in Section 2.25(d), shall be instituted or changed or compensation increased or accrued or agreed to. There shall be no increase in the compensation payable or to become payable to any officer, employee or agent of the Companies or Subsidiaries whose compensation from the Com panies and each Subsidiary on June 30, 1969 was at an annual rate of more than Twenty-Five Thousand Dollars ($25,000). 4.6. Preservation of Business Organisation, and Goodwill. The Companies and Subsidiaries shall use their best efforts to preserve their business organizations intact, to keep available to the Buyer the services of their present officers and employees; to maintain and'keep their properties in good condition and working order, to preserve all geological and geophysical exploratory data, to preserve in full force and effect all of their oil, gas and mineral leases and any agreement entitling them to explore for and/or produce oil, gas or other hydrocarbons (except such leases as are delxberately released in the ordi nary course of business), and perform all covenants and conditions imposed upon the Companies or Subsidiaries thereunder; operate any of the properties of the Companies and Subsidiaries in a good workmanlike manner; to perform all obligations under all contracts relating to or affecting their properties including but not limited to all material contracts or agreements referred to in Section 2.24(b) hereof; and to preserve for the Buyer the goodwill of the suppliers and customers of the Companies and Subsidiaries and others having business relations with than. 7 4.7. Compliance With Law. The Companies and Subsidiaries shall duly comply with all laws applicable to them and to the conduct of their businesses; and conduct their businesses in such a manner that at the Closing Date the representations and warranties contained in this Agreement shall be true to the extent that such representations and warranties shall have been made again on and as of such date as contemplated by Section 6.1 of the Agreement 4.8. Insurance. The Companies and the Subsidiaries will maintain insurance in effect upon all their properties and with respect to the conduct of their business in such amount;? and of such kinds as are in effect on the date of this Agreement, provided that the coverage may be increased from tim to time by the Companies and the Subsidiaries in their discretion. 5. Closing and Closing Date. The consummation of the sale and purchase of the Stock of the Companies (which consummation is herein called the "Closing"), shall take place in San Juan, Puerto Rico, or such other place as may be mutually agreed upon by Buyer and Seller, commencing at 11 o'clock a.m., New York time, on January 5, 1970 or mi such other date as may be mutually agreed by Buyer and Seller (the "Closing Date"), but shah be effective as of January 1, 1970. 5.1. Sale and Delivery. At the Closing, the Seller, contemporaneously with performance by the Buyer of its obligations to be performed at such Closing, shall deliver to the Buyer the following: (i) Stock certificates representing all of the Stock of the Companies accompanied by stock powers endorsed in blank representing and warranting that the Stock is being sold, assigned, trans ferred and delivered to the Buyer free and clear of any and all claim?, hens or encumbrances, with signatures on such stock powers guaranteed by a New York bank or trust company, or member firm of a national securities exchange, with all required (if any) federal, state and local documentary transfer stamps affixed. (ii) Such further certificates, documents and other instruments as hn be reasonably required by the Buyer to evidence compliance by the Seller with each of the conditions precedent to the Buyer's obligations at the Closing, as contained in Section 6 hereof. . At the Closing, the Buyer contemporaneously with performance by the Seller of its obligations to be performed at such Closing, shall deliver to the Seller, in addition to the documents and instruments to be delivered by the Buyer pursuant to Section 5.2 hereof, such other certificates, documents and instru ments as shall be reasonably required by the Seller to evidence compliance by Buyer with each of the conditions precedent to Seller's obligations at the Closing contained in Section 7 hereof. 5.2. Purchase Price and Payment. At the Closing, the Buyer, contemporaneously with the performance by the Seller of its obligations to be performed at such Goring, shall pay to the Seller that portion of die purchase price for the Stock, befog the sum of Two Hundred Forty Million Dollars ($240,000,000) (hereinafter called the "Purchase Price"), as follows: (a) At the Closing, the Buyer shall deliver to the Seller a certified or bank cashier's check drawn on a New York Gty branch of The Chase Manhattan Bank payable in Federal Funds to the order of foe Seller in the amount of One Hundred Twenty Million Dollars ($120,000,000); and (b) Following the Goring, the Buyer shall complete payment of the Purchase Price by making three equal instalment payments (by certified or bank cashier's check drawn on a New York Gty bank payable in Federal Funds) of Forty Million Dollars ($40,000,000) each respectively on January 2,1971, January 2,1972 and January 2,1973. Such instalment payments shall bear interest on the unpaid thereof from January 1,1970 to die date of payment at die rate of nine percent (9%) per annum, payable upon the several payment dates hereinabove provided and shall not be subject to pre-payment, except that after January 2, 1971 the instalments due on January 2, 1972 and January 2,1973 may be prepaid with interest by the Buyer at any time without penalty upon 30 days written notice to the Seller, such interest to be calculated to die date of pre-payment on the basis of a 360-day year of twelve 30-day months. 8 5.3. Further Assurances. At any time and from time to time, at or after the Closing, upon the request of the Seller or the Buyer, the Seller and Buyer agree to do, execute, acknowledge and deliver or shall cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, and assurances as may be required to consummate the transactions provided for in this Agreement. 6. Conditions Precedent To Buyer's Obligations. All obligations of Buyer under this Agree ment are subject to the fulfillment, prior to or at the Closing hereunder, subject to the provisions of Section 19 hereof, of each of the following conditions: 6.1. Seller's Representations True at Closing; Performance by Seller. The representations and warranties of the Seller set forth in Section 2 of this Agreement shall be deemed to have been made again at and as of the Gosing Date (including but not limited to a reiteration of the representations and warranties with respect to the absence, as of the Gosing Date, of certain changes Or events as set forth in Section 2.25) and, except as contemplated by Section 4 hereof, shall then be a<yurat in all material respects; the Seller shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Gosing hereunder; and Buyer shall have been furnished with a certificate of appropriate officers of the Seller, dated the Gosing Date, certifying to the best of their knowledge, in such detail as Buyer may request, to the fulfillment of the foregoing conditions. 62. Examination and Report of P.eat, Marwick, Mitchell & Co. Buyer shall have received from Peat, Marwick, Mitchell & Co., independent certified public accountants, at Champlin's expense, an opinion based upon their reading of the latest available unaudited interim financial statements of the Companies and Subsidiaries since June 30,1969, consultations with and inquiries of officers of the Seller and Companies and Subsidiaries responsible for financial and accounting matters as to transactions and events relating to the Companies and Subsidiaries since June 30, 1969, and a reading of the minutes of meetings of die Directors and stockholders of the Companies and Subsidiaries since June 30, 1969, (which procedures do not constitute an examination made in accordance with generally accepted auditing standards), that there is nothing which has come to their attention which gives them or has given them reason to believe that (a) the Interim Balance Sheets were not prepared in accordance with generally accepted accounting principles applied on a basis consistent with die preceding periods and (b) during the period from June 30, 1969, to November 30, 1969 there has been any material change in the capital stock or long-term debt of the Companies and Subsidiaries or any material adverse change in the. financial position of the Companies and Subsidiaries taken as a whole as compared with the financial position reflected in the Interim Balance Sheets, or in the results of operations as compared with the corresponding period of the preceding year. 6.3. No Reduction in Net Worth. On the Gosing Date, the net worth of the Companies and Subsidiaries shall not be less than die net worth of the Companies and Subsidiaries at the dose of business on June 30, 1969, as reflected in the Interim Balance Sheets, i.e.. One Hundred Sixty Eight Million Six Hundred Thirty Four Thousand Dollars ($168,634,000). 6.4. Opinion of Seller's Counsel. Buyer shall have been furnished with an opinion, dated the Gosing Date, of counsel for the Seller and die Companies, to the effect that: (a) Organisation and Good Standing. The Seller and the Companies and the Subsidiaries are corporations duly organized, validly existing and in good standing under the laws of the states of their incorporation and the Companies and the Subsidiaries are each duly qualified to do business in jurisdiction in which the character of the properties owned or leased by each of them or the nature of the business transacted by each of them, respectively, makes such qualification necessary. (b) Corporate Authority Relative to tins Agreement. The execution, delivery and performance of this Agreement by Seller has been duly authorized and approved by all requisite corporate action 9 of the Seller, no action by stockholders is required, and this Agreement lias been duly executed and delivered by the Seller and constitutes a valid and binding obligation of Seller enforceable in accordance with its terms. (c) Capitalisation, The authorized, issued and outstanding capital stock of the Companies is as stated in Section 2.3, above, and the shares of capital stock of the Companies to be delivered to Buyer pursuant to Secton 5.1 above constitute all the issued and outstanding stock of die Companies and are validly issued, fully paid and noa-assessable. (d) Title to Stock, Upon the delivery of the stock certificates and stock powers as contem plated by Section 5.1 (i), Buyer will be vested with valid title to the Stock of the Companies free and clear of any and all claims, liens or encumbrances. (e) Compliance by Seller with All Other Requirements. The consummation at the purchase and sale contemplated by this Agreement will not violate or conflict with any provision of Seller's certificate of incorporation or by-laws, or any provision of or result in the acceleration of any obligation under any mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment or decree to which Seller or the Companies or Subsidiaries are parties or by which they are bound and will not violate any federal, state or local law or any other restriction of any other kind or character to which they are subject; all actions or proceedings required by law or this Agreement to be taken by Seller at or prior to the Closing hereunder in connection with this Agreement and the transactions provided for herein have been duly and validly taken; and no approval, consent or authorization of any governmental authority of the United States or f-anada or of any or province, governmental subdivision, agency or instrumentality thereof, or other person, not obtained, is necessary to the making or consummation of this Agreement or the continued operation and use of the businesses, assets, and properties of the Companies or the Subsidiaries in die ordinary course thereafter. * (f) Litigation. To their knowledge, except as and to the extent reserved against in the Interim Balance Sheets, there is no litigation, proceeding or governmental investigation pending or threatened against or relating to either of the Companies or any Subsidiary, or the properties or business of any such Company which is materially adverse to file businesses of the respective companies or any legal impediment to the continued operation of such businesses and properties in the ordinary course following the consummation of the sale and purchase contemplated by this Agreement, and the aggregate amount of liability that may result therefrom will not, in their opinion, be material in relation to the assets and businesses of the Companies and Subsidiaries. 6.5. Title Opinions or Evidences of Title. Buyer shall have been furnished by Seller, at Seller's expense, with (i) legal opinions or other evidences, in form and substance satisfactory to it, to the effect that with respect to the properties on which are situated the refineries, natural gas processing plants, products pipeline terminals and office buildings described in Exhibit II hereto the Companies and Subsidiaries at the time of the Closing hereunder, had valid title in fee to all of the real property described in said Exhibit II as fee property, free and clear of any and all claims, liens and encumbrances except as otherwise stated in Section 2.12 hereto, and (ii) certificates executed by the respective lessors of all real property described in said Exhibit II as leasehold property to the effect that such leases are in full force and effect until their respective expiration dates and fiat there are no outstanding notices of default thereunder. 6.6. Opinion of Buyer's Counsel. Buyer shall have received an opinion, dated the Closing Date, of its counsel, to the effect that: (a) Corporate Authority Relative to this Agreement. The execution, delivery and performance of this Agreement have been duly authorized and approved by all requisite corporate action of the Seller and the Buyer, and this Agreement has been duly executed and delivered by such parties and constitutes a valid and binding obligation enforceable in accordance with its terms. 10 (b) Compliance With AH Other Requirements. All actions or proceedings required by law or this Agreement to be taken by the Seller at or prior to the Closing hereunder in connection with this Agreement and the transactions provided for herein have been duly and validly and no approval, consent or authorization of any governmental authority of the United States dr Canada or of any state or province, governmental subdivision, agency or instrumentality thereof, or other person, not obtained, is necessary to the making or consummation of this Agreement or the continued operations and use of the business, units, and properties of the Companies, or the Subsidiaries in the ordinary course thereafter. 6.7. Litigation Affecting Closing. At the Closing Date no litigation, proceeding, or governmental investigation, shall be pending or threatened, against or relating to the Seller or the Buyer, or either of the Companies or any Subsidiary, in which it is sought to restrain or prohibit or to obtain damages or right of appraisal or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, including, without limitation, any action or claim alleging or claiming violation of die antitrust laws. 6.8. Report as to Condition of Refineries and Processing Plants. Buyer have received a report, satisfactory to it, from an independent engineering firm to the effect that the Companies' refineries located at Enid, Oklahoma and at Corpus Christi, Texas and the natural gas processing plants operated by the Companies, three of which are in Texas and two in Oklahoma, are in good operating condition and that there is no significant deferred maintenance in respect thereof. 6.9. Resignation of Officers and Directors of the Companies and the Subsidiaries. Buyer have received copies, certified by the appropriate secretary of each of the Companies and the Subsidiaries, of tiie resignations, effective as of the Closing Date, of such officers and directors of the Companies and the Subsidiaries as shall be designated prior to the dosing Date by Buyer. 7. Conditions Precedent to Seller's Obligations Hereunder. All obligations of the Seller under this Agreement are subject to the fulfillment, prior to or at the Closing hereunder, subject to the provisions of Section 19 hereof, of each of the following conditions: 7.1. Buyer's Representations True at Closing; Performance by Buyer. The representations and warranties of the Buyer set forth in Section 3 of this Agreement shall be deemed to have been made again at and as of the Closing Date and shall then be accurate in all material respects; Buyer shall have per formed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the dosing hereunder; and the Seller shall have been furnished with a certificate of appropriate officers of Buyer, dated the dosing Date, certifying to the best of their knowledge, in such detail as the Seller may request, to the fulfillment of the foregoing conditions. 72. Opinion of Buyers Counsel. Seller shall have been furnished with an opinion, dated the dosing Date, of Buyer's counsel, to the effect that: (a) Organisation and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah; (b) Corporate Authority Relative to this Agreement. The execution, delivery and performance of this Agreement by Buyer has been duly authorized and approved by all requisite corporate action of the Buyer, and this Agreement has been duly executed and delivered by the Buyer and constitutes the valid and binding obligation of Buyer enforceable in accordance with its terms; (c) Compliance by Buyer with AH Other Requirements. The consummation of the purchase and sale contemplated by this Agreement will not violate or conflict with any provision of Buyer's certificate of incorporation or by-laws; or any provision of or result in the acceleration of any obligation under any mortgage, lease, agreement, instrument, order, arbitration award, judgment or decree to which Buyer is a party or by which it is bound and will not violate any federal, state or local law or any other restriction of any other kind or character to which it is subject; all actions 11 or proceedings required by law or this Agreement to be taken by Buyer at or prior to the Gosing hereunder in connection with this Agreement and the transactions provided for herein have been duly and validly taken; and no approval, consent or authorization of any governmental authority of the United States or of any state, governmental subdivision, agency or instrumentality thereof, or other person, not obtained, is necessary to the making or consummation of this Agreement 7.3. Litigation Affecting Closing Date. At the Gosing Date no litigation, proceeding or govern mental investigation of the type referred to in Section 67 shall be pending or threatened. 7.4. Guaranty. Buyer shall deliver to Seller the Guaranty of Union Pacific Corporation in the form annexed as Exhibit IV duly executed by an officer of Union Pacific Corporation, together with true and complete copies of the resolutions adopted by the Board of Directors of Union Pacific Corpora tion reflecting the grant of authority to execute, deliver and perform said Guaranty, such copies having been certified by its Secretary, and an opinion of counsel for Union Pacific Corporation to the effect that the execution, delivery and performance of said Guaranty has been duly authorized, and approved by all requisite corporate action of Union Pacific Corporation and that said Guaranty constitutes the valid and binding obligation of Union Pacific Corporation, enforceable in accordance with its terms. 8. Parties' Right to Remedy Unfulfilled Conditions Precedent. In the event either party should determine at any time prior to the Gosing that it intends to decline to proceed with die Gosing because of unfulfilled conditions precedent under Section 6 or 7, it so notify die other party in writing immediately upon making such determination, to the end that such other party shall have the right to take such steps, at its expense, as may be necessary for die purpose of fulfilling the said condition precedent on or prior to the Closing Date. 9. Access To and Information Concerning Properties, Records, Etc. The Seller hall give to Buyer, its counsel, accountants, engineers and other representatives, full access throughout die period, prior to the Gosing Date hereunder, to all of the Companies' and Subsidiaries' properties, books, contracts, commitments and records, including all tax records of, and Federal, state and local tax returns filed by or on behalf of die Companies and the Subsidiaries, and die Seller shall furnish Buyer during such period with all such information, concerning the Companies and the Subsidiaries and their affairs as Buyer may reasonably request 10. Cooperation by Buyer. Following the Gosing, Buyer shall give and shall cause Champion and Pontiac to give Seller full cooperation in response to any request made by Seller, its auditors or other representatives, for arty assistance whatsoever in connection with any matter which relates, or arises out of. Seller's ownership at the Stock at arty time prior to the Gosing, or the operations of Champlin and Pontiac during the period of such ownership. Such assistance shall include, without limitation, tire furnishing of full and complete financial and accounting records and all other records and documents which, in tire judgment of Seller, are needed by it for firancial, accounting or other business purposes. 11. Nature and Survival of Seller's Representations, Entirety of Agreement. The Seller and Buyer agree that neither party has made any representation, warranty or covenant not set forth herein or in tiie certificates or other instruments deliverable pursuant hereto, and that this Agreement constitutes the entire agreement between the parties and supersedes any and all other agreements, oral or written, in respect of the subject matter of this Agreement Seller, and Buyer agree that this Agreement has been dated as of August 28,1969, to give recognition to the fact that it specifically replaces and supersedes the earlier agreement with respect to the subject matter of this Agreement dated -such date, between Seller and Union Pacific Railroad Company. Seller and Buyer also agree that this Agreement be executed on October 27,1969, and that all of the provisions of this Agreement, including the representa tions and warranties of the parties, shall speak as of such execution date to give recognition to the fact that Buyer was not incorporated until October 21, 1969. The representations and warranties by the Seller contained in Sections 2.1 through 2.5, 2.6 (to the*extent that it does not relate to tax liabilities), and 2J8 through 2.25 hereof, shall survive the Closing until January 2, 1972, notwithstanding any investigation at any time made by or on behalf of the Buyer or the acceptance by the Buyer of any 12 report or expert opinion contemplated in this Agreement or otherwise. The representations and warranties of the Seller contained in Subsections 2.6 and 2.7 hereof relating to tax liabilities shall survive the Closing, notwithstanding any investigation or the like as aforesaid, until such time as the United States Federal Income Tax Returns of the Seller for the tax years 1965 through 1969, consolidating the Companies and the Subsidiaries (except in the case of Pontiac which has been consolidated with the Seller only in the years 1967 through 1969), have been audited by the Internal Revenue Service and dosed by operation of law or otherwise, and all deficiencies with respect thereto have been paid or finally settled. The Seller shall have no liability with respect to any breach of (i) any of the following representations and warranties which, when taken collectively involve damages suffered by Buyer in an amount less than $250,000, (but the Seller shall have liability to the extent of the full amount thereof with respect to any such damages in excess of $250,000): that is Section 2.5(a) as to the Interim Balance Sheets, Sections 2.6 through 2.11 indusive. Section 2.17 and Sections 2.18 and 2.19 to the extent related to Section 2.6 or (ii) any of the following representations and warranties which, when taken severally, involve damages suffered by Buyer in an amount less than $100,000, (but the Seller shall have liability to die extent of the full amount thereof with respect to any such damages in excess of $100,000): that is Sections 2.1 through 2.5 indusive (except for Section 2.5(a) as to the Interim Balance Sheets), Sections 2.12 through 2.16 indusive, 2.20 through 2.25 indusive and Sections 2.18 and 2.19 to the extent they do not relate to Section 2.6 *, provided, however, that the Seller shall have no liability under this Section 11 in respect of any single matter or claim giving rise to a breach which involves damages suffered by Buyer in an amount not in excess of $50,000 and any such matter shaH not be recognized in the computation of damages under this Section 11. Except as aforesaid, the Seller agrees that after the Closing it will indemnify, protect and hold the Buyer harmless against any and all liability, claims, costs, demands, charges and expenses, induding counsel fees, in any manner imposed or accruing against the Buyer arising out of any representation or warranty made by the Seller in Section 2 of this Agreement or in any certificate or other instrument delivered by or on behalf of the Seller pursuant to or in connection with this Agreement, induding but not limited to any breach of representation or warranty with respect to taxes made under Section 27 of this Agreement The representations and warranties of Buyer, other than those set forth in Section 32, shall expire with, and be terminated and extinguished by, the Closing under this Agreement on the Closing Date and the only remedy which shall accrue to the Seller on account of any breach of any representation, or warranty, relating to the Buyer set forth herein shall be the right of Seller to refuse to proceed with the Closing provided for in this Agreement, and there shall be no liability for such breach on the part of Buyer to the Seller. The representations and warranties of Buyer set forth in Section 32 of this Agreement shall survive the dosing until January 2, 1972. 12. Procedure for Payment of United States Federal Income Taxes. 12.1. Calendar Year 1969. The Federal income tax payable with respect to the net income of Champlin and Subsidiaries and with respect to the net income of Pontiac for the calendar year 1969 will be paid by Seiler which files a consolidated Federal income tax return. After the dose of the calendar year 1969, Seller shall determine the amount of Federal income tax which Champlin and Subsidiaries and which Pontiac would have paid for the calendar year 1969 if Champlin and Subsidiaries had filed a separate consolidated Federal income tax return and if Pontiac had filed a separate Federal income tax return, such determination to be made without allowance for any surtax exemption or investment credit with respect to used property. Seller shall send to Champlin a statement of the amount of Federal income tax so determined for Champlin and Subsidiaries, and Seller shall send to Pontiac a state* ment of the amount of Federal income tax so determined for Pontiac. Buyer agrees to cause Champlin to pay to Seller in Federal Funds upon receipt of such statement the amount of Federal income tax so determined less any estimated Federal income taxes previously paid by Champlin and Subsidiaries for the year 1969 and to cause Pontiac to pay to Seller in Federal Funds, upon receipt of such statement, the amount of Federal income tax so determined less any estimated Federal income taxes previously paid by Pontiac for the year 1969. These provisions shall apply in the same manner to any excess of estimated tax payment over 1969 Federal income tax liability of the Companies and the Subsidiaries. 13 122. Audit Increases. Ii, upon audit of Seller's consolidated Federal income tax return for any of die taxable years 1965 through 1969, inclusive, Seller shall receive from the Internal Revenue Service a Revenue Agent Report and if such Report (i) increases the taxable income ot, or adversely affects items determined on a consolidated basis reasonably attributable to, Champlin and Subsidiaries and/or Pontiac for any such taxable year over the amount of such taxable income or consolidated items as disclosed in Seller's consoli dated Federal income tax return (hereinafter called the "Consolidated Return") as filed for such year; or (ii) decreases the investment tax credit and/or. other tax credits (hereinafter called the "Tax Credits") of Champlin and Subsidiaries and/or Pontiac for any such taxable year below the amount of Tax Credits claims in Seller's Consolidated Return as filed for such year; then Seller shall notify Champlin and/or Pontiac, as the case may be, of such fact within thirty (30) days of Seller's receipt of such Revenue Agent Report. When and to the extent that the increase(s) in taxable income or decrease(s) in Tax Credits, if any, as described above, are finally determined ("Finally Determined" being a term defined in Section 127), Seller shall so notify Champlin and/or Pontiac, as the case may be. Upon receipt of such notice, Champlin and/or Pontiac, as the-case may be, shall pay to Seller in Federal Funds an amount equal to the Federal Income Tax Deficiency (as deter mined under Section 12.3) for such taxable year together with interest thereon at the rate of six percent (6%) per annum computed from the 15th day of the third month following the dose of the taxable year in question. 12J. Federal Income Tax Deficiency The Federal Income Tax Deficiency for any +a-yaM .year shall be equal to the sum of (i) die amount determined by multiplying (a) die Finally Determined increase(s) in taxable income (as described in Section 12^) for such taxable year; by (b) such year's applicable Federal income tax rate (as defined in Section 12.6); and (ii) die Finally Determined decrease(s) in Tax Credits for such taxable year. 12.4. Audit Decreases. If, upon audit of Seller's Consolidated Return for any of the taxable years 1965 through 1969, indusive, Seller shall receive from the Internal Revenue Service a Revenue Agent report, and if such Report (i) decreases the taxable income of or favorably affects hems determined on a consolidated basis reasonably attributable to, Champlin and Subsidiaries and/or Pontiac for any such taxable year below the amount of such taxable income or consolidated items as disdosed in Seller's consolidated return as filed for such year; or (ii) increases die Tax Credits of Champlin and Subsidiaries and/or Pontiac for any such year over the amount of Tax Credits claimed in Seller's Consolidated Return as filed for such year; then Seller shall notify Champlin and/or Pontiac, as the case may be, of such fact within thirty (30) days of Seller's receipt of such Revenue Agent Report. When and to the extent that the decrease(s) in taxable income or increase(s) in Tax Credits, if any, as described above, are Finally Determined, Seller shall pay in Federal Funds to Champlin and/or Pontiac, as the case may be, an amount equal to the Federal Ttv^hv? Tax Overpayment (as determined under Section 1215) for such taxable year, together with interest thereon at die rate of six percent (6%) per annum computed from the 15th day of the third month following the dose of the taxable year in question. 12.5. Federal Income Tax Overpayment. The Federal Income Tax Overpayment for any taxable year 1965 through 1969 indusive shall be equal to the sum of (i) the amount determined by multiplying (a) die Finally Determined decreaie(i) in taxable income for such payable year; by (b) such year applicable Federal Income Tax Rate (as defined in Section 12.6); and (ii) die Finally Determined mcrease(s) in Tax Credits for such taxable year. 14 12.6. Applicable Federal Income Tax Rate. years 1965 through 1969 shall be: Taxable Year The applicable Federal Income Tax Rate for the taxable Applicable Federal Income Tax Rate with Respect to Items of Income or Deduction Subject to Ordinary Income Tax Rates Applicable Federal Income Tax Rate with Respect to Items of Income or Deduction Subject to Capital Gains Tax Rates 1965 ............................................... 1966 ................................................ 1967 ................................................ 1968 ............................................... 1969 ............................................... 48% 48% 48% 52.8% 52.8% 25% 25% 25% 27.5% 27.5% In the event, however, that die U.S. Internal Revenue Code is amended so as to increase the statutory capital gains tax rate for 1969 above 25%, then the rate to be applied with respect to items of income or deduction subject to such increased rate shall be such increased rate appropriately adjusted to reflect the tax surcharge rate. 12.7. Finally Determined. The terms "Finally Determined" and "Final Determination" shall mean determined pursuant to any one or more of the following: (i) a decision by the Tax Court or a judgement, decree, or other order by a court, of competent jurisdiction which has become final or if the time for appeal to the Tax Court or any court of com petent jurisdiction has expired; (ii) a dosing agreement made between the Seller and die Commissioner of Internal Revenue pursuant to Section 7221 of die Internal Revenue Code; or (iii) a final settlement of a suit, claim or other proceeding in a court or tribunal of competent jurisdiction; (iv) the expiration of the statute of limitations pertaining to the rime within which a claim for refund of federal income tax may be filed; or (v) the execution by Seller and the acceptance by the Commissioner of Internal Revenue of U.S. Treasury Department, Form 870-AD, Offer of Waiver on Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment. i.***x<\ 12.8. Retention and Access to Records. Buyer agrees to cause Champlin and the Champlin Sub sidiaries and Pontiac to retain all of their accounting books and records for each of the years 1965 through 1969 until such time as die Federal income tax liability of Seller for each such year is Finally Determined; to give Seller or its representatives full access to and the right to copy and make extracts from all such books and records; to provide the assistance of such Champlin and Pontiac personnel as may be necessary in examining and verifying such books and records; and to have Champlin and Pontiac personnel prepare the necessary workpapers as are prescribed by Seller for use in the preparation of its 1969 Consolidated Return and such other papers and reports as may be required with respect to Champlin, die Champlin Subsidiaries and Pontiac in die course of die audits of Seller's Consolidated Returns for the years 1965 through 1969. 12.9. Breach of Tax Warranty. Within 120 days following Final Determinations with respect to Seller's consolidated Federal income tax liability for all years 1965 through 1969, Seller and Buyer shall agree upon the aggregate amount, if any, by which the Accrued Federal Income Tax accounts (as that term is used in the Interim Balance Sheets) of the Companies and Subsidiaries as of December 31,1969, have been decreased as a result of such Final Determinations with respect to investment credit and other "per manent differences", as that term is defined in Accounting Principles Board Opinion 11, datH December 1967 and consistently applied with respect to the Companies-and Subsidiaries. To the extent that such amount exceeds the sum of (i) $433,333.33 plus (ii) the amount of any increase in future tax benefits to either of the Companies or any Subsidiary as a result of any such "permanent difference", it shall, for purposes of Section 11 hereof, be considered a single matter or claim with respect to Seller's repre- 15 sentations and warranties, contained in section 2 hereof, with respect to the Federal income tax liabilities of the Companies and Subsidiaries. For purposes of the preceding sentence, tax benefits shall be determined as if the Companies and Subsidiaries had continued their respective corporate existences and operations and had taxable incomes at least equal to their taxable incomes for 1969. 12.10. Buyer Participation in Tax Audit. If Seller shall be notified by the Internal Revenue Service of an audit of the books and records of Champlin and Subsidiaries and/or of Pontiac for the taxable years 1965 through 1969- inclusive, Seller shall immediately notify Buyer in writing and shall permit Buyer to participate in such audit proceedings at Buyer's expense. Seller shall not agree to or compro mise, settle or consent to any judgment, claim, set-off, assessment or deficiency or adjustment which would have the effect of increasing or decreasing the taxable income or income tax payable for Champlin and Subsidiaries or Pontiac unless either Buyer consents in writing in advance thereof' or, if Buyer is unwilling to give such consent. Seller furnishes Buyer in advance thereof a written opinion of independent counsel of recognized competence in Federal income tax matters to the effect, that taking into considera tion all items disputed by the Internal Revenue Service with respect to the taxable year in question, and viewing such items as a whole, such agreement, compromise settlement or consent constitutes a reasonable settlement of the disputes with respect to the taxable year in question. 13. Brokerage. The Seller represents and warrants to the Buyer that all negotiations relative to this Agreement have been carried on by it directly with the Buyer, without the intervention of any person, firm or corporation, other than Boyden Industrial Services, Inc., which has acted for the Seller under a Letter Agreement dated August 7,1969, a copy of which has been heretofore delivered to the Buyer, and under which Boyden Industrial Services, Inc. and Lori), Rhoades, Inc. will be entitled to <*wnpnainTi from the Seller upon consummation of the transactions contemplated by this Agreement The Seller does hereby undertake to indemnify the Buyer and hold it harmless against and in respect of any such claim for brokerage, finder's fees or other commissions or expenses relative to this Agreement, or to the purchase and sale contemplated hereby, including but not limited to dm compensation payable to Boyden Indus trial Services, Inc and Loeb, Rhoades, as aforesaid. The Buyer represents and warrants to the Seller that all negotiations relative to this Agreement have been carried on by it directly with the Seller, without the intervention of any person, firm or corporation other than Boyden Industrial Services, Inc., as aforesaid, and does hereby undertake to indemnify the Seller and hold it harmless against and in respect of any such claim for brokerage, finders' fees or other commissions or expenses relative to this Agreement based upon any alleged agreement with Buyer. 14. Best Efforts To Obtain Satisfaction of Conditions. The Seller agrees to use its best efforts to obtain the satisfaction of the conditions specified in Section 6 hereof, and Buyer agrees to use its best efforts to obtain the satisfaction of the conditions specified in Section 7 hereof. 15. Change in Name of Champlin Pipe Line Company. Seller owns all of die issued and out standing stock of Champlin Pipe line Company, a Texas corporation; which is not being purchased by Buyer. Within six months after the Closing, Seller will cause the corporate name of Champlin Pipe Line Company to be changed to a name which neither indudes, nor is substantially similar to, the name "OwCiaBn&iinPftOinl*If 16. Celancso Masks. Effective as of the Closing, Bayer will cause Champlin and Subsidiaries and Pontiac to discontinue all use whatsoever of the logo ^2 "7 and trademarks, trade names or house marks owned, first used or originated by Seller and any of its affiliated companies (the "marks"), provided, however, that Champlin and Pontiac shall have the right to sell the inventory to which such marks have been applied by them prior to the Closing, and to use such marks during a limited period which may be necessary for the complete phag out of all such marks, which doll in no event exceed one year from the Closing. 17. Public Announcements. Prior to die Closing Date; except as otherwise required by law, no press release or public announcement in respect of the transactions contemplated by this Agreement will be made by either the Seller or the Buyer unless agreed upon in advance by both. 16 18. Expense*. Except as expressly provided herein, and whether or not the transactions con templated by this Agreement are consummated, each party hereto shall pay its own expenses incident to this Agreement or to its preparation for the consummation of said transactions. 19. Waiver. Each party may, at its option, waive in writing any and all of the conditions herein contained to which its obligations hereunder are subject. 20. Amendments. Seller and the Buyer, by mutual consent of their respective Board of Directors, or officers authorized by such Boards, may amend or modify this Agreement, in such manner as may be agreed upon, by a written instrument executed by Seller and Buyer. 21. Section and Paragraph Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement 22. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed first class, postage prepaid: (a) To The Seller. If to the Seller, to Celanese Corporation, 522 Fifth Avenue, New York, N. Y., Attention, James Scott Hill, Esq., or such other address as may be designated by die Seller. (b) To The Buyer. If to the Buyer, to Union Pacific Petroleum Corporation, 120 Broadway, New York, N. Y., or such other address as may be designated by the Buyer. 23. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the **m* 24. Parties la Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein as the Seller and Buyer and their respective successors. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies under or by reason of this Agreement 25. New York Law To Govern. This Agreement shall be construed and enforced in accordance with the laws of the State of New York. Attest: [Seal] /$/ J. Scott HIH Secretary Attest: /s/ C W. Rosswom Secretary [Seal] By // John W. Brooks President UNION PACIFIC PETROLEUM CORPORATION By /*/ Frank E. Barnett rhatrman of the Board and Chief Executive Officer 17 EXHIBIT I CHAMPLIN PETROLEUM COMPANY (CONSOLIDATED) AND PONTIAC REFINING CORP. COMBINED BALANCE SHEET June 30,1969 (M $) ChampKn Cash and Short Term Securities............ ........................ . $ 11,014 Receivables (Note 2)............................................................. ... 18776 Crude and Products Inventory (Note 3) (Note 8)................ 8,413 Materials and Supplies..................................... *.................... 1731 Prepaid Expenses..................................................................... Total Current Assets............................. 363 $ 39797 Investments, Advances, Etc. (Note 4).................................... $ 1771 Property and Equipment (Note S) (Note 9)......................... $302,157 Reserve for Depredation, Depletion and Amortization.......... Net Property and Equipment............................ (168,134) $134,023 Other Assets.......... ................................................................ Total Assets........................................................ $ 434 $175725 Accounts Payable......................................................... .......... $ 10,407 Accrued Liabilities..................................................................... 5,062 Accrued Federal Income Tax (Note 2) (Note 6) (Note 10) Total Current Liabilities.......................... . .... 268 $ 15737 Deferred Investment Credit (Note 6) (Note 10).................. $ 1783 Deferred Federal Taxes (Note 2) (Note 6) (Note 10)........ $ 1,646 Deferred Gas Price Increase..................................................... $ 450 Stockholders' Equity: Capital Stock........ ............................................................... Capital Contributed ............................................................... Retained Earnings (Note 4)............................................... Total Equity........................................................ Total liabilities and Stockholders' Equity............................ . $ 4,485 124727 26997 $155709 $175725 Pontiac $ 1931 9,645 3,494 1716 413 $ 16,699 *$ 27,642 (21772) $ 5970 $$ 22769 $ 7,628 724 953 $ 9705 $ 224 $ 215 $- Combined $ 12,945 27,921 11,907 2,447 776 $ 55,996 $ usn $329799 (189,806) $139,993 $ 434 $197994 $ 18,035 5786 1721 $ 25,042 $ 2,007 $ 1761 $ 450 $2 --' 12923 $ 12925 $ 22769 $ 4,487 124727 39920 $168,634 $197994 The accompanying principles and notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) (1) Principles op Consolidation : June 30, 1969 The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Harbor Service Stations, Inc, Midland Gasoline Corporation, Star Oil Company, and Cycler Oil Company. All material intercompany accounts and transactions have been eliminated. (2) Receivables: Accounts Receivable and Accrued Federal Taxes have been credited in die approximate amount of Two and One Half Million Dollars ($2^00,000) and Deferred Federal Taxes las been charged by a Idee amount in order to eliminate the reflection of a certain claim for refund for Federal income taxes which claim was reflected in such balance sheet at December 31, 1968. (3) Inventories: Inventories of crude oil and refined products are stated at average cost, which is less than include depreciation, depletion and amortization of property, plant and equipment and does not (4) Advances and Retained Earnings: Advances and Retained Earnings have been reduced by $7 million and treated as a dividend. Although declaration has not been made the amount was advanced to Celanese prior to June 3% 1969. Included under the caption Investments, Advances, etc. are non-current notes receivables of 1,558,000. (5) Property, Plant and Equipment: Allowances for depredation, depletion and amortization of producing oil properties and depreciation of producing gas properties are provided on a modified straight-line method over asset lives ranging from 1 to IS years. Allowances for depletion and amortization of producing gas properties are provided on the uzut-of-prodnetioa method determined by reference to periodic estimates of the gas reserves of the respective properties. The remaining major plant, and equipment are depredated on a modified straight-line method. of property, (6) Income Taxes: Significant variations in the relationship between the. provision for Federal income taxes and income before * arise prindpally because of the deductions for tax purposes of intangible development costs and the excess of allowable depletion over cost depletion. Tax allocation accounting has been applied to all other material timing differences. The policy of the Company is to take the investment tax credit into income as a redaction in the provision for inenmy taxes over the estimate useful lives of the related assets. The Company will join with its parent in the filing of a consolidated Federal income tax return for 1969. The policy of the Company is to accrue its share of the income tax payable and to make periodic remittances to Celanese Corporation. (7) Pension and Retxeemsmt Flan*: The Company has a pension plan and a retirement plan covering substantially all of its employees over 29$4 years of age. Amortization of prior service costs is provided over periods ranging from 10 to IS years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. PONTIAC REFINING CORP. (8) Inventories : (a wholly-owned subsidiary of Celanese Corporation) Inventories of refined products and supplies at June 30, 1969 are stated at the lower of cost (average) or market Inventories of erode oil at June 30,1969 are stated at the lower of cost (first-in, first-out) or market (9) Pioratr, Plant and Eoumsm: Allowances far depreciation on property, plant and equipment are provided on the straight-line method over an estimated useful life of 10 years, except for transportation equipment, which has an estimated useful life of 4 years. (10) Income Taxis: The Company will join with its parent in the filing of a consolidated Federal income tax return for 1969. The policy of the Company is to accrue its share of the income tax payable and to make periodic remittances to Celanese Corporation. The policy of the Company is to lake the investment tax credit into income as a reduction in the provision for income taxes over the estimated useful lives of the related assets. Deferred Federal Taxes arise principally from accelerated depredation used for tax purposes, partially offset by provision for refinery turnarounds taken for financial purposes. (11) Sales and Cause On. Svrrtr Contracts: Substantially all of the Company's production of refined products is sold to one customer under the terras of a contract expiring in 1972. Quantities of refined products to be delivered to that customer reduces substantially in the last year of the contract The Company purchases its supply of crude products under the terras of various contracts expiring in 1972 and 1977. (12) Rxttrxmext Plan: The Company has retirement plans covering substantially all employees. Amortization of prior service costs is provided over periods ranging from 10 to IS years. The Company's policy is to fund costs accrued. Based on actuarial determinations the plans are fully funded with respect to all voted benefits. PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celanese Corporation) Accountants1 R*eport * Financial Statements - December 31, 1968 PEAT. MARWICK, MITCHELL & CO. CSKTIFIKO PUBLIC ACCOUNTANT* Peat. Marwick, Mitchell & Go. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 75230 The Board of Directors Champlin Petroleum Company: We have examined the consolidated balance sheet of Chaoplin Petroleum Company and subsidiaries, a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1968 and the related statement of income and retained income for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and statement of consolidated income and retained income present fairly the financial position, of Champlin Petroleum Company and subsidiaries at December 31, 1968 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 24, 1969 PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celanese Corporation) Statement of Income and Retained Income Year ended December 31, 1968 with figures for seven months ended December 31, 1967 Sales Operating costs: Coses excluding items listed below Selling and administrative Depreciation Total operating costs Operating income Other income Operating and other income Provision for income taxes (note 3) Net Income Retained Income at beginning of year Cash dividend Retained income at end of year Net income per conmon share 1968 Seven months ended December 31, 1967 (Thousands of dollars except per share amounts) $ 88,644 47,936 81,473 451 455 82,379 6,265 106 6,371 3,268 3,103 11.817 14,920 -623 $ 12.241 $ 15,515 44,275 227 295 44,797 3,139 11 3,150 1,581 1,569 11.248 12,817 . 1.000 11,817 7,845 See accompanying notes to financial statements PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celanese Corporation) \ Notes to Financial Statements December 31. 1968 Inventories Inventories of refined products ($2,242,000) and supplies ($1,240,000) at December 31, 1968 are stated at the lower of cost (average) or market. Inventories of crude oil ($1,268,000) at December 31, 1968 are stated at the lower of cost (first-in, first-out) or market. (2) Property, plant and equipment Allowances for depreciation of property, plant and equipment are provided on the straight-line method over an estimated useful life of 10 years, except for transportation equipment which has an estimated useful.life of 4 years. The major classes of property, plant and equipment are as follows: Assets. at cost 1968 1967 (Thousands of dollars) Plant, lines and dock facilities Land and rights-of-way Transportation equipment Other $ 26,198 716 124 396 $ 27,434 25,762 716 120 311 26,909 (3) Income taxes The Company will join with its parent in the filing of a consolidated Federal income tax return for 1968. The policy of the Company is to accrue its share of the income taxes payable and to make periodic remit tances to Celanese Corporation. The policy of the Company is to take the investment tax credit into income as a reduction in the provision for income taxes over the estimated useful lives of the related assets. Deferred Federal income taxes arise from accelerated depreciation used for tax purposes, partially offset by provision for refinery turnarounds taken for financial purposes. The provision for income taxes is as follows: PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celanese Corporation) Notes to Financial Statements. Continued (3) Income taxes, cont Current Deferred 1968 Seven months ended December 31, 1967 (Thousands of dollars) $ 3,360 1,446 135 1,581 { (4) Sales and crude supply contracts Substantially all the Company's production of refined products is sold to one customer under the terms of a contract expiring in 1972. Quantities of refined products to be delivered to that customer reduce substantially in the last year of the contract. The Company purchases its supply of f crude products under the terms of various contracts expiring in 1972 and 1977. (5) Retirement plans The Company has retirement plans covering substantially all employees. Charges to operations under the plans amounted to $243,000 for 1968 and $99,000 for the seven-month period ended December 31, 1967, including* amortization of prior service costs over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. PONTIAC REFINING CORP. Accountants * Report s Financial Statements - Deceaber 31, 1967 PEAT. MARWICK. MITCHELL & CO. etKTtriEO PUBLIC ACCOUNTANTS Peat, Mahwick, Mitchell 5c Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS,TEXAS 75250 The Board of Directors Pontiac Refining Corp.: Me have examined the balance sheet of Pontiac Refining Corp., a wholly-owned subsidiary of Celanese Corporation since June 1, 1967, as of December 31, 1967 and the related statement of income and retained Income for the seven months then ended. Our examination was made in . accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary In the circumstances. In our opinion, the accompanying balance sheet and statement of Income and retained income present fairly the financial position of Pontiac Refining Corp. at December 31, 1967 and the results of its operations for the seven months then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding period, after giving retroactive effect to the account ing changes and adjustments discussed in note 4 to the financial statements. January 25, 1968 PONTIAC REFINING CORP Statement of Income and Retained Income Seven months ended December 31, 1967 (Thousands of dollars except for per share amount) '*** j=^r^rating costs: > , Cbsts excluding items listed below Selling and administrative Depreciation Total operating costs Operating income Other income Operating and other income frovision for income taxes (note 3) **et income ktained income at beginning of year: As previously reported Adjustments (note 4) As restated Cash dividend ktained income at end of year fct income per conxoon share $ 47,936 44,275 227 295 44,797 3,139 11 3,150 . 1,581 1,569 9,731 1,517 11,248 12,817 1,000 $ 11,817 $ 7,845 See accompanying notes to financial statements PONTIAC REFINING CORP Notes to Financial Statements December 3L, 196? (1) Inventories Inventories of refined products ($2,604,000) and supplies ($1,313,000) at December 31, 1967 are stated at the lower of cost (average) or market. Inventories of crude oil ($1,219,000) at December 31, 1967 are stated at the lower of cost (first-in, first-out) or market. (2) Property, plant and equipment Allowances for depreciation of property, plant and equipment are provided on the straight-line method over an estimated useful life of 10 years, except for transportation equipment which has an estimated useful life of 4 years. The major classes of property, plant and equipment are as follows: Assets, at cost (Thousands of dollars) Plant, lines and dock facilities land and rights-of-way Transportation equipment Other $ 25,762 716 120 311 $ 26,909 (3) Income taxes The Company will join with its parent in the filing of a consolidated Federal Income tax return for 1967. The policy of the Company is to accrue its share of the Income taxes payable and to make periodic remittances to Celanese Corporation. The policy of the Company is to take the investment tax credit into income as a reduction in the provision for income taxes over the estimated use ful-lives of the related assets. Deferred Federal income taxes at December 31, 1967 represent the cumula tive amount of taxes which have been deferred as a result of using accelerated depredation for tax purposes and straight-line depreciation for financial statement purposes. The provision for income taxes is comprised of taxes currently payable, $1,446,000, and deferred taxes, $135,000. 2 PONTIAC REFINING CORP. Notes to Financial Statements, Continued Accounting changes and prior years adjustments Previously reported retained income at May 31, 1967 has been restated as follows: Increase (decrease) in May 31. 1967 balance Changes in accounting methods: Valuation of inventories Reserve for refinery turnarounds Deferred investment tax credit (Thousands of dollars) $ (220) (150) (211) Adjustments to earnings of.prior periods: Elimination of capital surplus repre senting excess hook value over cost of acquired subsidiary (fully amortized) ' Elimination of excess liability for sales price adjustment Sundry adjustments of accruals (581) 1,376 755 (33) 2,098 Net adjustments to May 31, 1967 balance $ 1,517 (5) Sales and crude sunn It contracts Substantially all the Company's production of refined products is sold to oonferecufisnteomd epr ruondduecrt,thceobte.rmdseliovferaedcotnotrattcat teTMxpitroin2g rinJu1972. ,,Ouantitie&* in the last year of the contract. The Company purchases its supply of crude products under the terms of. various contracts expiring in 1972 and 17/7 (6) Retirement plans The Company has retirement plans covering substantially all employees. Charges to operations for the plans amounted to $99,000 for the sevenmonth period ended December 31, 1967, Including amortization of prior service costs over periods ranging from 10' to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) * Accountants` Report Consolidated Financial Statements - December 31, 1968 PEAT, MARWICK. MITCHELL & CO. cmmrico ruaue accountants Peat, Marwick, Mitchell & Co. CEHTUTED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE PALLAS, TEXAS 75250 The Board of Directors Pontiac Refining Corp.: We have examined the balance sheet of Pontiac Refining Corp., a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1968 and the related statement of Income and retained income for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly Included such tests of the accounting records and such, other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statement of income and retained income present fairly the financial position of Pontiac Refining Corp. at December 31, 1968 and the results of its opera* tions for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding period. January 24, 1969 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Statement of Consolidated Income and Retained Income Year ended December 31, 1968 with comparative figures for 1967 Sales Operating costs: Costs excluding items listed below Selling and administrative Depreciation, depletion and amortisation (note 3) Dry holes and surrendered leases Total operating costs Operating income Interest and other Income Operating and other income Provision for income taxes (note 4) Net income Retained income at beginning of year Cash dividend Retained income at end of year Net income per common share 1968 1967 (Thousands of dollars except per share amounts) $ 101,308 99.859 57,383 12,493 13,999 5,015 88,890 12,418 1,026 13,444 3,125 10,319 27,985 38,304 6,700 $ 31.604 $ 230.09 52,828 12,081 12,385 3,532 80,826 19,033 779 19,812 5,300 14,512 19.954 '34,466 6.481 27,985 323.59 $e accompanying notes to consolidated financial statements % CHAMFLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements December 31. 1968 (1) Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Harbor Service Stations, Inc., Midland Gasoline Corporation, Star Oil Company, Cycler Oil Company and Empire Oil Company (purchased in 1968). All material intercompany accounts and transactions have been eliminated. (2) Inventories Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization of property, plant and equipment. As of December 31, 1968 and 1967, the inventories were classified as follows: Crude oil and refined products Materials and supplies, at average cost 1968 1967 (Thousands of dollars) $ 7,300 7,214 1,687 $ 8,987 2,020 9,234 (3) Property, plant and equipment Allowances for depreciation, depletion and amortization of producing oil properties and depreciation of producing gas properties are provided on a modified straight-line method over asset lives ranging from 1 to 15 years. Allowances for depletion and amortization of producing gas properties are provided on the unit-of-production method determined by reference to periodic estimates of the gas reserves of the respective properties. Producing oil and gas properties aggregated $153,821,000 in 1968 and $150,512,000 in 1967. The remaining major classes of property, plant and equipment are depreciated on a modified straight-line method as follows: Refinery Gas plants Marketing facilities Pipelines Assets, at cost 1968 1967 (Thousands of dollars) $ 24,799 33,003 46,805 15,740 23,783 32,416 41,345 15,311 Years 10 15 5-20 10 2 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements} Continued (3) Property, plant and equipment, cont. Nonproducing leasehold and royalty costs aggregated $12,657,000 in 1968 and $9,560,000 in 1967. (4) Income taxes Significant variations in the relationship between the provision for Federal income taxes and income before taxes arise principally because of the deductions for tax purposes of intangible development costs and the excess of allowable depletion over cost depletion. Tax allocation accounting has been applied to all other timing differences. The policy of the Company is to take the investment tax credit into Income as a reduction in the provision for income taxes over the estimated uaefhl lives of the related assets. The Company will join with its parent in the filing of a consolidated Federal income tax return for 1968. The policy of the Company is to accrue its share of the . Income taxes payable and to make periodic remit tances to Celanese Corporation. The provision for Income taxes is as follows: Current Deferred 1968 1967 (Thousands of dollars) $ 3,923 (798) $ 3,125 5,261 39 5,300 (5) Pension and retirement plans The Company has a pension plan and a retirement plan covering substantially all of its employees over 29-1/2 years of age. Charges to operations for both plans aggregated $1,263,000 in 1968 and $1,150,000 in 1967, including amortization of prior service costs over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Accountants'-# Report Consolidated-Financial Statements - December 31, 1967 I I PEAT. MARWICK. MITCHELL & CO. CCKTIFICO PUBLIC ACCOUNTANTS Peat, Marwick, Mitcheix & Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 752550 The Board o Directors. Champlin Petroleum Company: We have examined the consolidated balance sheet of Champlin Petroleum Company and subsidiaries, a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1967 and the related state* ment.of income and retained income for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly Included such tests of the .accounting rec ords and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and statement of consolidated income and retained Income present fairly the financial position of Champlin Petroleum Company and subsidiaries at December 31, 1967 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 30, 1968 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celaneae Corporation) "i* Statement of Consolidated Income and Retained Income Tear ended Decenber 31, 1967 with comparative figures for 1966 hies Iterating costs: 1 Costs excluding Items listed below Selling and administrative Depreciation, depletion and amortisation (note 3) Dry holes and surrendered leases Total operating costs Operating income Interest and other income Operating and other income Provision for income taxes (note 4) Net income fetained income at beginning of year Cash dividend Retained income at end of year Net income per common share 1967 1966 (Thousands of dollars except per share amounts) $ 99*859 92.807 52,828 12,081 12,385 3,532 80,826 19,033 779 19,812 5,300 14,512 19,954 34,466 6,481 $ 27,985 $ 323.59 46,386 11,350 11,690 3,876 73,302 19,505 556 20,061 5,600 14,461 11,466 25,927 5,973 19,954 322.45 * '"oe i>nnonlfHafd financial statements CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements December 31, 1967 (1) Principles of consolidation The 1967 consolidated financial statements Include the accounts of the Company and Its wholly-owned subsidiaries. Harbor Service Stations, Inc., Midland Gasoline Corporation, Star Oil Company and Cycler Oil Company. These insignificant subsidiaries were not consolidated prior to 1967. All material intercompany accounts and transactions have been eliminated. (2) Inventories Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization of property, plant and equipment. As of December 31, 1967 and 1966, the inventories were classified as follows: Crude oil and refined products Materials and supplies, at average cost 1967 1966 (Thousands of dollars) $ 7,214 6,832 2,020 $ 9,234 2,002 8,834 (3) Property, plant and equipment Allowances for depreciation, depletion and amortization of producing oil properties and depreciation of producing gas properties are provided on a modified straight-line method over asset lives ranging from 1 to 15 years. Allowances for depletion and amortization of producing gas prop erties are provided on the unit-of-production method determined by reference to periodic estimates of the gas reserves of the respective properties. Producing oil and gas*properties aggregated $150,512,000 in . 1967 and $147,242,000 in 1966. The remaining major classea of property, plant and equipment are depreciated on a modified straight-line method as follows: 2 CHAMPLIH PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements, Continued (3) Property, plant and equipment, cont. Refinery Gas plants Marketing facilities Pipelines- Assets, at cost 1967 1966 (Thousands of dollars) $ 23,783 32,416 41,345 15,311 23,374 31,247 36,187 14,791 Years 10 15 5-20 10 Nonproducing leasehold and royalty costs aggregated $9,560,000 in 1967 and $8,209,000 in 1966. (4) Income taxes Significant variations in the relationship between the provision for Federal income taxes and income before taxes arise primarily because of the deduc tions for tax purposes of intangible development costs and the excess of allowable depletion over cost depletion. Tax allocation accounting has been applied to all other timing differences. The policy of the Company is to take the investment tax credit into income as a reduction in the provision for income taxes over the estimated useful lives of the related, assets. The Company will join with its parent in the filing of a consolidated Federal income tax return for 1967. The policy of the Company is to accrue its share of the income taxes payable and to make periodic remittances to Celanese Corporation. The provision for income taxes is as follows: Current Deferred 1967 1966 (Thousands of dollars) $ 5,261 ___ 39 $ 5,300' 5,506 94 5,600 3 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Oelanese Corporation) Notes to Consolidated Financial Statements, Continued (5) Pension and retirement plans The Company has a pension plan and a retirement plan covering substantially all of its employees over 29-1/2 years of age. Charges to operations for both plans aggregated $1,150,000 in 1967 and $980,000 in 1966, including amortization of prior service costs over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Accountants' Report Financial Statements - December 31, 1966 PEAT. MARWICK. MITCHELL & CO. ccRnrico public accountant* Peat, Marwick, Mitchell 8c Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 75280 The Board of Directors Champlin Petroleum Company: . We have examined the balance sheet of Champlin Petroleum Company, a wholly-owned subsidiary of Celasese Corporation, as of December 31, 1966 and. the related statement of income and retained income for the year then ended. Our examination was made in accord ance with generally accepted auditing standards, and accordingly included 3uch tests of the accounting records and such other auditing procedures as ve considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statement of income and retained income present fairly the financial position of Champlin Petroleum Company at December 31, 1966 and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 31, 1967 im m m m tw w m m m w m CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Statement of Income and Retained Income Year ended December 31, 1966 with comparative figures for 1965 iting costs: Costs excluding items listed below 'Selling and administrative Depreciation, depletion and amortization (note 3) Dry holes and surrendered leases Total operating costs Operating income erest and other -income Operating and other income Lsion for income taxes (note 3) Net income Lined income at beginning of year dividend Stained income at end of year 1966 1965 (Thousands of dollars) $ 92,807 83,410 46,386 11,350 11,690 3,876 73,302 19,505 556 20,061 5,600 14,461 11,466 25,927 5,973 1 19,954 44,055 11,093 9,775 3,874 68,797 14,613 328 14,941 2,600 12,341 1,975 14,316 2,850 11,466 accompanying notes to financial statements CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Notes to Financial Statements December 31, 1966 Inventories Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization of property, plant and equipment. As of December 31, 1966 and 1965, the inventories were classified as follows: 1966 1965 (Thousands of dollars) Crude oil and refined products Materials and supplies, at average cost $ 6,832 2,002 $ 8,834 7,117 1,681 8,798 Investments and noncurrent receivables Investments and noncurrent receivables include $821,000 as of December 31, 1966 ($501,000 for 1965) that relates to four wholly-owned unconsolidated subsidiary companies. Such subsidiaries, in the aggregate, do not consti tute a significant subsidiary. On the basis of financial statements not covered by the accompanying accountants* report, the aggregate equities underlying these investments are approximately $22,000 less than the total amount at which the investments are carried. Federal income taxes The Company has adopted the guideline lives established by Internal Revenue Service and has adopted the declining-balance method of computing tax depreciation on additions to certain facilities made after January 1, 1954. The resulting reduction in income taxes is set aside as "deferred Federal income taxes" to offset the increase in taxes that is expected to occur when tax depreciation is less than it would be if the tax depreciation methods had not been adopted. Investment tax credits are deferred and taken into income over the lives of the assets to which they relate. The Company will join its parent in the filing of a consolidated Federal income tax return for 1966. 2 CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Notes to Financial Statements, Continued Retirement and penal on plana The Company has a contributory retirement plan and a noncontributory pension plan for the benefit of its enployees. The cost of the plans to the Company for the year ended December 31, 1966, amounted to approximately i960,000 including payments of $126,000 to reduce the unfunded past service costs of the plans. If the Company continues to make such payments, the retirement plan will be funded in approximately 18 years, and the pension plan in approximately 27 years. On the basis of the most recent actuarial determinations, the unfunded past service costs of the plans were estimated to be $2,635,000. I CHAMPLIN PETROLEUM COMPANY Accountants1 Report Financial.Statements^- December 31, 1965 PEAT. MARWICK. MITCHELL ft CO. CZKTiriCD PUM.IC ACCOUNTANTS Peat, Marwick, Mitchell 8c Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 75230 The Board of Directors Champlin Petroleum Company: We have examined the balance sheet of Champlin Petroleum Company, a subsidiary of Celanese Corporation of America, as. of December 31, 1965 and the' related statements of earnings and retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary In the circumstances. The financial statements for 1964, included for compara tive purposes, were examined by other certified public accountants. I In our opinion, the accompanying balance sheet and statements of earnings and retained earnings present fairly the financial position of Champlin Petroleum Company at December 31, 1965 and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preced ing year. January 28, 1966 CHAMPLIN PETROLEUM COMPANY Statement of Earnings Year ended December 31, 1965 with comparative figures for 1964 t sales ts and expenses: Cost of products sold and operating expenses, exclusive of items below Selling, general and administrative expenses Depreciation, depletion and amortization (note 4) Dry holes and surrendered leases Interest expense Operating income Ither income: Interest income Gain on sale of investments Other, net Earnings before income taxes bcome taxes (note 4): Current Deferred State Net earnings 1965 1964 i 83.410.282. 78.126.178 44,055,558 44,739,888 11,092,645 10,159,082 9,775,581 3,873,712 68.797.496 14.612.786 9,058,434. 3,524,777 1.141.887 68.624.068 9.502.110 130,294 197.596 327.890 14.940.676 118,102 961,485 24.090 1.103.677 10.605.787 2.459.000 116,000 25.000 2.600.000 1 12.340.676 65.000 35.000 100.000 10.505.787 I accompanying notes to financial statements. I CHAMPLIN PETROLEUM COMPANY Statement of Retained Earnings Year ended December 31, 1965 with comparative figures for 1964 ant at beginning of year (note 1) earnings for the year (note 1) Dividends paid by Champlin Oil & Refining Co., predecessor of Champlin Petroleum Company (note 1): Convertible preference stock Coamon stock Amount transferred to capital surplus In connection with the organization of Chanplin Petroleum Company (note 1) Dividend paid to parent company it at end of year 1965 1964 1,975,334 68,241,911 12.340.676 10.505.787 14.316.010 78.747.698 225,000 3,822,625 _ 72,724,739 2.850.000 2.850.000 76.772.364 *ee acccnpanying notes to financial statementsi CHAMFLIN PETROLEUM COMPANY Notes to Financial Statements December 31. 1965 (1) General The Company was organized on September 29, 1964 and shortly thereafter issued 44,847 shares of its $100 par value common stock for $4,484,700 in cash to Champlin Oil & Refining Co. Effective October 29, 1964 the Company acquired by donation from Champlin Oil & Refining Co. substan tially all the assets, assumed certain liabilities and succeeded to the business of that company. The assets and liabilities were recorded in accounts of the Company at the amounts carried in the accounts of Champlin Oil & Refining Co. Capital surplus was credited with the excess of assets over liabilities. On October 29, 1964 Champlin Oil & Refining Co. was merged into Celanese Corporation of America and Champlin Petroleum Company became a whollyowned operating subsidiary of Celanese. 4 For comparative purposes the accompanying financial statements set forth figures for 1964. The statement of income for that year includes the operations of Champlin Oil & Refining Co. to October 29, 1964 and the operations of its successor, Champlin Petroleum Company, for the remainder of the year. (2) Inventories of crude oil and refined products The inventories of crude oil and refined products are stated at average cost which is less than market. The valuation of these inventories . does not include depreciation, depletion and amortization of property, plant and equipment. (3) Investments in unconsolidated subsidiaries The investments in and advances to unconsolidated subsidiaries relate to three wholly-owned subsidiary companies. On the basis of financial statements not covered by the accompanying .accountants1 report, the aggregate equities underlying these investments are approximately $102,000 less than the total amount at which the investments are carried. (4) Federal income taxes The Company will Join with its parent company in the filing of a consoli dated Federal income tax return for 1965. 2 CHAMPLIN PETROLEUM COMPANY Notes to Financial Statements, Continued ) Federal income taxes, cont. The Company follows a general policy of providing for depreciation over the estimated useful life of depreciable assets cm a straight-line basis. For Federal income tax purposes the Company uses the declining balance method of computing tax depreciation of certain facilities. This policy results in tax depreciation which is generally higher, than depreciation used for financial statement purposes. Amounts equal to the tax reductions resulting from the use of this liberalized depreciation method are charged to income and concurrently set aside to offset the increase in taxes that is expected to occur when deductions claimed are less than they would be if the tax depreciation method had not been adopted. Deferral accounting has been adopted for the investment tax credit. Under * this accounting, the credits are not taken into income in the year in which they are claimed but are deferred and taken into income over the lives of the assets to which they relate. (5) Retirement and pension plans The Company has a contributory retirement plan and a noncontributory pension plan for the benefit of its employees. On the basis of the most recent actuarial determinations, the unfunded past service costs of the plans were estimated to be approximately $2,845,000. The cost of the plans to the Company for the year ended December 31, 1965 amounted to approximately $1,068,000. Arthur Andersen & Co. jo the Board of Directors and Stockholder, Champlin Petroleum Company; First National Building. Fort Worth, Texas- 76103 ,-fc We have examined the balance sheets of Champlin Petroleum Mcompany (a Delaware corporation, successor to Champlin Oil & Refining Co.) as of December 31, 1964 and 1963* and the related statements of ^income, earned surplus and capital surplusfor the years then ended tnd the supplementary statements (Exhibits 1, 2, 3 and 4) for the year ended December 31, 1964. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheets and statements of income, earned surplus and capital surplus present fairly the financial position of Champlin Petroleum Company as of. December 31, 1964, and its predecessor, Champlin Oil & Refining Co., I as of December 31, 1963, and the results of their operations for the years then ended, and the supplementary statements present fairly ^ the information set forth therein, all in conformity with generally | accepted accounting principles applied, after giving retroactive 1 effect to the changes in accounting for deferred Federal income taxes and petroleum products inventories as explained in Note 2, on a basis consistent with that of the preceding year. Fort Worth, Texas, 1 January 29, 1965. -3- CHAMPLIN PETROLEUM COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31. 1964 AND 1963 (NOTE 1) ST SALES (Note 4) 1964 1963 $75,381,314 $78,121,347 Derating charges: Cost,of products sold and other operating charges, exclusive of items below Selling, general and administrative expenses Depreciation, depletion and amortization Dry hole expense Provision for surrendered leases Interest and debt expense amortization Provision,for employees' thrift and pension plans Total operating charges Operating income $42,920,507 $43,512,702 7,776,599 9,058,434 2,159,074 1,365,703 1,141,887 7,461,871 9,242,422 2,168,900 1,300,000 1,333,278 1,457,000 1,466,000 $65,879,204 $66,485,173 $ 9,502,110 $11 ,'636,174 .OTHER INCOME AND (EXPENSE)--Net: Gain on sale of investments Dividends- and interest Other, net Total other income Net income before provision for Federal income taxes PROVISION FOR FEDERAL INCOME TAXES Net income for the year (Note 2) $ 961,485 $ 118,102 24,090 $ 1,103,677 $ 138,881 114,180 253,061 $10,605,787 $11,889,235 100*000 1,465,000 $10,505,787 $10,424,235 SSSS8S8S8SS The accompanying notes are an integral part of these statements. CHAMPLIN PETROLEUM COMPANY STATEMENTS OF EARNED SURPLUS FOR THE YEARS ENDED DECEMBER 31, 1964 AND 1963 (NOTE 1) BALANCE, December 31, 1962, as previously reported LESS- Retroactive changes applicable to prior years (Note 2)Provision for deferred Federal income taxes Elimination of depreciation, depletion and amortization costs in petroleum products invento-ries |BALANCE, beginning of year, as restated 1 | ADD- Net income for the year (Note 2) | DEDUCTI Cash dividends declared on;> Convertible preference stock ($2.25 ? per share in 1964 and $3 per share 1 in 1963) 3 Common stock ($.90 per share in 1964 | and $1.20 per share in 1963) S Amount transferred to capital surplus ? in connection with organization of Champlin Petroleum Company (Note 1) BALANCE, end of year 1964 1963 $66,053,612 $ 1,750,000 1,114,185 $ 2,864,185 $68,241,911 $63,189,427 10,505,787 10,424,235 $78,747,698 $73,613,662 $ 225,000 $ 300,000 3,822,625 5,071,751 72,724,739 - $76^772,364 $ 5,371,751 $ 1,975,334 $68,241,911 The accompanying notes are an integral., part of these statements. -5- CHAMPLIN PETROLEUM COMPANY STATEMENTS OF CAPITAL SURPLUS FOR THE YEARS ENDED DECEMBER 31, 1964 AND 1963 (NOTE 1) DANCE, beginning of year |p- Cash premium on sale of 43,181 shares |in 1964 and 21,238 shares in 1963 of {'common stock to employees under stock roption agreement (Note 5) BDUCT- Amount transferred to Champlin Petroleum Company in connection with the organization of that Company (Note 1) fiDD- Excess of assets received oyer liabilities assumed in connection with the organization of Champlin Petroleum Company (Note 1) [BALANCE, end of year- 1964 1963 $ 16,191,063 .$15:, 763,808 986,482 427,255 $ 17,177,545 $16,191,06.3 17,177,545 - $ $16,191,063 124,227,391 - $124,227,391 $16,191,063 The accompanying notes are an integral part of these, statements. `` 6- - CHAMPLIN PETROLEUM COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1964 AND 1963 (1) ORGANIZATION OF THE COMPANY: The Company was organized on September 29, 1964. Shortly thereafter, it issued 44,847 shares of its $100 par value common stock to Champlin Oil & Refining Co. for $4,484,700 in cash. Effective- October 29. 1964 (as of October 31, 1964, for accounting purposes), the Company acquired by donation from Champlin- Oil & Refining Co. substan tially all of the assets, assumed all current liabilities and succeeded to the business of that company. The assets and liabilities have been recorded in the accounts of the new Company at the amounts carried in the accounts of Champlin Oil & Refining Co. Capital surplus has been credited with the excess of assets over liabilities. On October 29, 1964, Champlin Oil & Refining* Co. was merged into Celanese Corporation of America and Champlin Petroleum Company became a wholly-owned operating subsidiary of Celanese. The long-term notes of Champlin Oil & Refining Co. were assumed by Celanese in connection with the merger. The accompanying statements of income, earned surplt and capital surplus for 1964 include (1) the operations of Champlin Petroleum Company for the two months ended December I 1964, and (2) the operations of its predecessor, Champlin Oil & Refining Co., for the ten months ended October 29, 1964. The financial statements for 1963 reflect the financial position and results of operations of Champlin Oil & Refining Co. for the year. (2) CHANGES IN ACCOUNTING POLICY: The Company changed its accounting policy in 1964 to (1) provide for deferred Federal income taxes arising from differences between depreciation recorded for financial accounting and Federal income tax purposes and (2) eliminate depreciation, depletion and amortization costs in the valuati< of petroleum products inventories. The accompanying balance sheets at December 31, 196 and 1963, and related statements of inCTOoe^earned surplus an capital surplus give retroactive effect to these--policy chang -7- 'i tin Such changes had the effect of increasing net income by $22,79 in.1964 and decreasing net income by $141,034 in 1963, reducir petroleum products inventories by $946,099 and $990,219, and establishing a reserve for deferred Federal income taxes of $2,080,000 and $2,015,000 in 1964 and 1963 respectively. Earned surplus at December 31, 1962, has been restated to show the decrease in prior years' net income of $2,864,185. (3) INVESTMENTS, ADVANCES, ETC.: Included under this caption are noncurrent notes receivable of $1,597,000 and investments in and advances of $501,000 to three wholly-owned unconsolidated subsidiaries. Based on financial statements not covered by the accompanying auditors' opinion, the aggregate equities underlying these investments are. approximately $124,000 less than the total amount at which the investments are carried. (4) NET SALES: Net sales for the years ended December 31, 1964 and 1963, were as follows: 1964 1963 Refinery products Crude oil and field distillate Gas plant products Dry gas $50,998,595 $54,044,301 17,652,651 6,883,027 12,973,417 16,550,765 7,022,776 12,376,647 Less- Company produced crude to stills $88,507,690 $89,994,489 13,126,376 11,873,142 Net sales $75,381,314 $78,121,347 (5) STOCK OPTION PLAN: Under a stock option plan, options covering 43,181 shares were outstanding and exercisable at December 31, 1963. All of the options were exercised prior to the merger referred to in Note 1. SCHEDULE OF PRINCIPAL REAL ESTATE HOLDINGS OF CHAMPLIN PETROLEUM COMPANY AND PONTIAC REFINING CORP. Exhibit n Refinejues: Enid, Oklahoma........................................... Corpus Christi, Texas.................................. Fee Fee Natural Gas Processing Plants: Bishop, Texas.............................. (Gulf Plains Plant) Carthage, Texas.......................... . Conroe, Texas............. ................. (Midland Gasoline Corp. Plant) Enid, Oklahoma.......................... . Oklahoma Gty, Oklahoma........... (Witcher Plant) Fee (subject to reverter upon abandonment of plant) Fee Leasehold Leasehold Fee Products Pipeline Terminals: Oklahoma City, Oklahoma........... Enid, Oklahoma.......................... , Hutchinson, Kansas............... ..., Superior, Nebraska..................... Columbus, Nebraska ................... Rock Rapids, Iowa............... ..... Fee Fee Fee Fee. Fee Fee Office Buildings: Fort Worth, Texas............................... Enid, Oklahoma ......................... Oklahoma Gty, Oklahoma........................... Fee Fee Fee EXHIBIT III TABLE OF HYDROCARBON RESERVES June 30, 1969 Type Crude oil and condensate................................ Natural gas liquids........................................... Champiin owned royalty.................................. Total Liquids .................................. Natural gas.................................................... Unite 46.800.000 bbls. 28.400.000 bbls. 600,000 bbls. 75300.000 bbls. 1,000,000,000 MCF The above quantities of hydrocarbon reserves were computed by Champiin's engineering department, in accordance with generally accepted petroleum engineering standards, as of January 1, 1968, and are empirically estimated to be within a 10% tolerance of such computations as of June 30, 1969. The reserves tabulated above represent Champlin's net proven recoverable reserves; Le., not includ ing royalties, overriding royalties, oil payments, working interests, or other interests owned by or payable to third parties. The reserves of natural gas liquids include both company owned reserves and reserves which will be earned as a processing fee by Champiin for processing gas owned by others in Champlin's natural gas processing plants. Approximately 60% of such natural gas liquid reserves are from company owned acreage and approximately 40% are from process acreage. EXHIBIT IV GUARANTY Union Pacific Corporation, a Utah corporation, hereby absolutely and unconditionally guarantees he payments when due of the instalment portion of the purchase price payable by Union Pacific Petroleum Corporation to Celanese Corporation under and subject to the terms and conditions of Section 5.2(b) >f the Agreement dated as of August 28, 1969 between the parties as such payment obligations may >e renewed, extended or modified by the said parties. Union Pacific Corporation waives' notice and igrees to any extension in the time of payment and further agrees that Celanese Corporation shall have iue remedy under this guaranty without being obliged to resort first to any other remedy or remedies :o enforce payment of the said installment obligations hereby guaranteed and that it may pursue all ind any other of its remedies at one or different times. In Witness Wheeeof, Union Pacific Corporation has caused this guaranty to be signed by its President and its corporate seal to be hereunto affixed and attested to by its Secretary as of [Cosposate Seat.] Attest: UNION PACIFIC CORPORATION By ................................................ NO. 97-0844-E CPY JOSE J. CANO, SR. AND MARIA CANO; RUBEN EURESTE; AND LEO MOORE AND VELENA FAY MOORE, PLAINTIFFS V. OWENS-CORNING FIBERGLAS CORPORATION, ET AL., DEFENDANTS. IN THE DISTRICT COURT NUECES COUNTY, TEXAS 148TH JUDICIAL DISTRICT RESPONSE OF DEFENDANTS HOECHST CELANESE CORPORATION TO PLAINTIFF'S SECOND REQUEST FOR PRODUCTION TO: Plaintiff Jose J. Cano, Sr., by and through his attorneys of record, Holly J.W. Huart and Stephanie Finch of Baron & Budd, a'Professional Corporation, The Centrum, 3102 Oak Lawn Avenue, Suite 1100, Dallas, Texas 75219. Pursuant to Rules 192,193,196 and 197 ofthe Texas Rules ofCivil Procedure (the "Rules"), Hoechst Celanese Corporation ("Defendant" or "Celanese") submits these Responses and Objections to Plaintiffs' Second Set of Request for Production, as follows: GENERAL RESPONSES, OBJECTIONS AND ASSERTIONS OF PRIVILEGE Defendant makes the following general objections to each and every discovery request directed to it: Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production RoscwalkcrO 1 docs\HC - Cano'Discovery Resp to Plaintiffs' 2nd R-P wpd Page 1 1. Defendant objects to paragraph one of the DEFINITIONS regarding "Defendant." "You," "Your," and "Your company" and paragraph three regarding "persons" because they are overly broad and unduly burdensome and pertain to corporations other than those who are parties to this suit. Defendant also objects to paragraphs one and three because they include Defendant's attorneys; information and things protected by the attorney client privilege and work product doctrine is not discoverable. 2. Defendant objects to paragraph two of the DEFINITIONS because the definition of the word "document" and the instructions regarding "possession, custody or control" are overly broad, seek information specifically exempted from discoveryby the privileges afforded in the Rules and Rule 502 of the Texas Rules of Civil Evidence, including the attorney work product doctrine, the attorney client privilege and the party communications privilege, and because it exceeds the scope ofRule 192.3 ofthe Texas Rules ofCivil Procedure. Throughout these responses, Defendant will assume that the word will have its commonly used meaning, as set forth in Rule 192.3(b) and will respond accordingly. 3. Defendant objects to the definitions of "identify" contained in paragraphs 16 and 17 of the DEFINITIONS because they are overly broad, unduly burdensome and harassing. 4. Defendant objects to DEFINITION 6 to the extent that information is sought Concerning asbestos in a non-friable form. 5. Defendant further objects to any discovery request seeking to charge them with knowledge or information held by their "predecessors or subsidiaries" or requiring them to provide Response of Defendants Hoechst Cclanese Corporation to Plaintiffs' Second Request for Production vRoscwalkerOl ViocsVHC - CanoxDiscovery'Resp to Plaintiffs' 2nd R-P.wpd Page 2 information regarding plants other than the one in which Plaintiff Jose J. Cano, Sr. was employed, which plant is currently unknown. Defendant operated multiple facilities and employ thousands of workers. Accordingly, it is unduly burdensome, excessively expensive and harassing to require Defendant to answer these interrogatories as to all plants. 6. Defendant objects to Plaintiffs discovery requests because they are unlimited in time. 7. Defendant objects to Plaintiffs requests to the extent that they necessarily seek disclosure of trade secrets, proprietary material and other confidential information protected from discovery by the Texas Rules of Civil Procedure. 8. The presence ofan objection does not mean that Defendant possesses non-privileged information responsive to a discovery request. SPECIFIC OBJECTIONS Each of the- following specific responses and objections incorporate by reference the above-stated general responses, objections and assertions of privilege. Subject to the foregoing. Defendant specifically responds as follows: REQUEST FOR PRODUCTION REQUEST FOR PRODUCTION NO. 1: If you contend that you did not own or control the facility formerly known as the "Pontiac" or "Champlin" Refinery during any time period that Plaintiffworked (or believes he worked) at that facility, please produce all documentation that supports your contention, including but not limited to documentation pertaining to the purchase, sale, acquisition, merger, or divestment ofcorporations, subsidiaries, divisions, or other corporate entities or assets that included the purchase, sale, acquisition, merger, or divestment of the facility formerly known as the "Pontiac" or "Champlin" Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production .vRosewalkcrQl \docs\HC - CanoVDiscoveryVResp to Plaintiffs' 2nd R-P.wpd Page 3 Refinery; such documentation to included, by way of example and not limitation, purchase or sale agreements, minutes, resolutions, annual reports, 1 OK reports or other state or federal agency filings or deposition, trial testimony or affidavits of your corporate representatives who are the most knowledgeable individuals with respect to such matters. RESPONSE: Defendant additionally objects to this request because: 1. The phrase "facility formerly known as the `Pontiac' or `Champlin' Refinery" is vague and ambiguous; it does not adequately apprize Defendant ofthe facility Plaintiff claims was owned or controlled by Defendant where Plaintiff claims to have worked; 2. It fails to describe with reasonable particularity the item or category of items sought to be inspected, as required by Rule 196; 3. It is unlimited in time and seeks matters that are not relevant to the subject matter of this lawsuit or reasonably calculated to lead to the discovery of admissible evidence; 4. It is overly broad; and 5. It seeks to impose a duty beyond the scope of the Rules to create documents. Subject to the foregoing objections, documents that may be responsive to this request are attached to this response. Discovery is ongoing, and Celanese reserves its right to supplement this response with additional responsive documents, if any are located. Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production '\RosewalkerO 1 -docsxHC - Cano\DiscoveryvResp to Plaintiffs' 2nd R-P.wpd Page 4 Respectfully submitted, 'knaiL h/xjA--_____________________ Nona Walker State Bar No. 19890600 RoseWalker, L.L.P. 1701 N. Market Street, Suite 200 Dallas, Texas 75202 214.752.8600 (phone) 214.752.8700 (facsimile) Michael E. Hutchins Hawkins & Parnell, L.L.P. 4000 Suntrust Plaza 303 Peachtree Street, N.E. Atlanta, GA 30308-3243 404.614.6400 (phone) 404.614.7500 (facsimile) ATTORNEYS FOR DEFENDANTS HOECHST CELANESE CORPORATION AND CELANESE, LTD. Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production vRosewalkerOI docs-HC - CanoiDiscovery\Rcsp to Plaintiffs' 2nd R-P.wpd Page 5 CERTIFICATE OF SERVICE In accordance with Rule 21 of the Texas Rules of Civil Procedure, the foregoing Response to Plaintiff s Second Set of Request for Production has been served upon the following counsel for Plaintiffs) by hand delivery, and upon all other known counsel of record by facsimile transmission on this 31st day of March, 2000: Russell Budd Melissa Hutts Randy Reagan Holly Huart Stephanie Finch Baron & Budd, P.C. 3102 Oak Lawn; Suite 1100 Dallas, TX 75219 Tuo/trt. Nona Walker -- Response of Defendants Hoechst Celanese Corporation to Plaintiffs' Second Request for Production \Rosewalker0lv3ocs\HC - Cano\Discovery.Resp to Plaintiffs' 2nd R-P wpd Page 6 CCowioaMKa CorrJ AGREEMENT dated as of August 28, 1969 BETWEEN UNION PACIFIC PETROLEUM CORPORATION (a Utah corporation) AND CELANESE CORPORATION (a Delaware corporation) Providing for the acquisition by Union Pacific Petroleum Corporation of all of the issued and outstanding capital stock of Champlin Petroleum Company and Pontiac Refining Corp. AGREEMENT dated as of the 28th day of August, 1969, between Celanese Corporation, a Delaware corporation (hereinafter called "Seller") and Union Pacific Petroleum Corporation, a Utah corporation (hereinafter called "Buyer"). ' 'WITNESSETH ! Whereas, the Seller owns all of the issued and outstanding shares of capital stock of Champiin Petroleum Company, a Delaware corporation (hereinafter called "Champiin") and Pontiac Refining Corp., a Texas corporation (hereinafter called "Pontiac") (Champiin and Pontiac being hereinafter collectively called the "Companies"); and Whereas, the Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer, upon the terms and conditions herein set forth, all of the Stock (as hereinafter defined) of the Companies. Now, Therefore, the Seller and the Buyer, in consideration of the mutual covenants, agreements and provisions set forth in this Agreement, hereby agree as follows: 1. Sale and Purchase of Stock. On the terms and subject to the conditions set forth in this Agreement, the Seller shall sell, assign, transfer, and deliver to the Buyer, at the Closing hereunder on the Dosing Date (as defined in Section 5 hereof), and the Buyer shall purchase and acquire from the Seller at such Dosing, all of the Stock of the Companies. 2. Seller's Representations and Warranties. The Seller hereby represents and warrants as follows: 2.1. Organisation and Corporate Authority, (a) The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all necessary power and authority, corporate and otherwise^ to execute and deliver this Agreement and to perform its obligations hereunder. The Seller is not subject to any restriction contained in any charter, by-law, mortgage, lien, lease, agreement, instrument, order, statute, regulation, judgment or decree, or any other restriction of any kind or character, which would prevent the consummation of the transactions contemplated in this Agree ment. The execution and delivery and performance of this Agreement and the sale and purchase contem plated herein have been duly authorized by the Seller by all requisite corporate action and the Seller has delivered to Buyer true and complete copies of the resolutions adopted by its Board of Directors reflecting the grant of authority to execute, deliver and perform this Agreement, such copies having been certified by Seller's Secretary. (b) Champiin and Pontiac are each duly organized and validly existing corporations in good standing under the laws of their respective states of incorporation and each has full power and authority, corporate and otherwise, to own or lease its properties and conduct its business as now being conducted, and is qualified to do business in each jurisdiction where the character of the properties owned or leased by it or the nature of the business transacted by it makes such qualification necessary. 22. Subsidiaries. The Companies have.no subsidiaries other than the subsidiaries named below (hereinafter called "Subsidiaries"), each of which is wholly owned by Oiamplin: Stat* of Incorporation Cycler Oil Company Harbor Service Stations, Inc. Midland Gasoline Corporation Star Oil Company, Inc. Missouri Oklahoma Texas North Dakota Each Subsidiary is duly organized, validly existing and in good standing under the laws of its state of incorporation and each corporation has full power and authority, corporate and otherwise, to own or Ifas* its properties and conduct its business as now being conducted, and is qualified to do business in each jurisdiction where the character of the properties owned or leased by it or the nature of the business transacted by it makes such qualification necessary. 2.3. Capitalisation, (a) Champlin has an authorized capital stock of 50,000 shares of common stock, of a par value of $100 per share, of which 44,847 shares are validly issued and outstanding1, fully paid and non-assessable. Pontiac has an authorized capital stock of 140 shares of Class A common stock, of a par value of $10 per share, and 60 shares of Class B common stock, of a par value of $10 per share of which, 140 Class A and 60 Class B shares are validly issued and outstanding, fully paid and non assessable (all of the issued and outstanding capital stock of Champlin and Pontiac being herein collec tively called the "Stock''). (b) There are no outstanding subscriptions or other agreements, options, warrants or similar rights obligating either of the Companies or any Subsidiary to issue any additional shares of its capital stock of any class or classes. 2.4. Ownership of Shares. The Seller has valid title to all the Stock, and Champlin has valid title to all of the issued and outstanding capital stock of each of the Subsidiaries, free and dear of any and ail claims, liens or encumbrances. 2.5. Financial Statements. The Seller has delivered to the Buyer copies of the following financial statements (attached hereto as Exhibit I) prepared, and certified to (except in the case of the Ralann. Sheets dated as of June 30, 1969) by independent certified public accountants, all of which have been prepared in accordance with generally accepted accounting prindples consistently followed throughout the periods indicated and, except as described in footnote 2 to the Interim Balance Sheet (as hereinafter defined), consistent with the principles followed in each respective preceding period: (a) Balance Sheets. Balance sheet of Pontiac, Consolidated ftalan<y Sheet of Champlin and Subsidiaries, and Combined Balance Sheet of the Companies and Subsidiaries as of June 30, 1969, which present true and complete statements, as of said date, of the financial position of Pontiac and of Champlin and Subsidiaries and of the Companies and Subsidiaries respectively; and (b) Statements of Income and Retained Income. Statements of Income and Retained Income of Pontiac for the seven months ending December 31, 1967 and for the calendar year 1968 and Con solidated Income and Retained Income of Champlin and Subsidiaries for the calendar years 1964 through 1968, which present fairly for the periods covered thereby, the results of operations of Pontiac and of Champlin and Subsidiaries, respectively. 2.6. Absence of Undisclosed Liabilities. Except as and to the extent reflected or reserved against in the Balance Sheets, dated as of June 30, 1969, referred to in Section 2.5(a) (hereinafter collectively called the Interim Balance Sheets), the Companies and Subsidiaries, (i) had no liabilities or obligations secured or unsecured (whether accrued, absolute, contingent or otherwise) including, without limitation, any tax liabilities (see Section 27), any liabilities as guarantor or otherwise (see Section 2.18), any liabilities in respect of litigation (see Section 2.19), in respect of or measured fay income for any period prior to the close of business on June 30, 1969, or arising out of transactions entered into, or any state of facts existing, prior thereto; and (ii) had not,- as of June 30, 1969, received payment for any oil, gas or other hydrocarbons sold from their properties which had not been actually delivered by said date (other than those products of Pontiac which were treated on the books of Pontiac as having been sold to Gulf Oil Company although not having been physically removed from the Pontiac premises) and were, as of June 30, 1969, under no obligation in respect of any production or transaction which occurred prior to the close of business on said date to make any payment as a working interest owner or otherwise, in respect of production costs or in the nature of a royalty, overriding royalty, carve-out or other production payment, net profit or other similar interest under any joint operating or unit agreement or other agreement, whether or not covering the properties of rite Companies and the Subsidiaries, except for obligations to make such payments as, when taken in the aggregate, were not substantial in amount and did not materially adversely affect their financial position. 2 27. Tax Liabilities. Except as and to the extent reflected or reserved against in the Interim Balance Sheets, the Companies and Subsidiaries, as of June 30, 1969, had no liability (whether accrued, absolute, contingent or otherwise) to the Seller or to any taxing authority for the payment of any United States or Canadian, federal, state, provincial, county or local tax (whether or not disputed or theretofore assessed and whether or not in respect of or measured by income or revenues or real or personal property or sales or use) in respect of the period ended on June 30, 1969 and for all years prior thereto, or arising out of transactions entered into, or any state of facts existing on or prior to June 30, 1969; and the pro visions made for taxes in the Interim Balance Sheets are sufficient for the payment of any and all such taxes. The United States Federal income tax returns of Champlin and Subsidiaries have been filed on a consolidated basis with those of the Seller for the calendar tax years of 1965 through and including 1968, and the United States Federal income tax returns of Pontiac have been filed on a consolidated basis with those of the Seller for the taxable year September through December, 1967 and the calendar year 1968. None of the aforesaid consolidated United States Federal income tax returns of the Seller have been audited by the Federal Internal Revenue Service. The Federal income tax returns of Champlin and Subsidiaries through and including the calendar year 1964 and the Federal income tax returns of Pontiac through and including the taxable year ending August 31, 1967 have been audited by the Federal Internal Revenue Service and all deficiencies proposed as a result of such audits have been paid and settled. 2.8. Accounts Receivable. The Accounts Receivable, Notes Receivable and Advances reflected on the Interim Balance Sheets either have been collected or paid or are good and collectible in the book amounts thereof, less the amount of the allowance for doubtful accounts as therein reflected. 2.9. Product Inventory. The inventory shown on the Interim Balance Sheets consists of products of a quality and quantity usable or salable in the normal course of business; the value of all products of below standard quality had then been written down to realizable market value or adequate reserves provided therefor; and the values at which such inventory is carried reflect the normal inventory valuation policy of the Companies and Subsidiaries. 2.10. Materials and Supplies. The materials and supplies shown on the Interim Balance Sheets consist of items of a quality and quantity usable in the normal course of business and are reasonably suitable and fit for the purposes for which they were purchased. 2.11. Prepaid Expenses. The prepaid expenses shown on the Interim Balance Sheets reflect payment of expenses necessary and proper in connection with the normal course of business. 2.12. Real Property; Hydrocarbon Reserves; Leaseholds. The Companies and the Subsidiaries have valid title in fee, or a valid leasehold interest, in the case of leasehold property, in all real properties on which are situated the refineries, natural gas processing plants,, products pipeline terminals and office buildings described in Exhibit II hereto and to all buildings, improvements and fixtures thereon and are in lawful possession of all other real property used in the conduct of their respective businesses and of all buildings, improvements and fixtures thereon, all of which title and possessory interests are free and clear of any and all rlalm*, liens and encumbrances, except (i) as otherwise reflected in the Interim Balance Sheets, (ii) the lien of current taxes not yet due and payable, (Hi) covenants, restrictions, reservations, easements and agreements contained in instruments of record affecting the properties, and zoning laws, ordinances, rules and regulations, if any, none of which materially adversely affects the use of the properties for the purposes for which they are now employed, and (iv) such other claims, liens or encumbrances, if any, as are not in respect of the particular property substantial in character, amount or extent, and do not materially detract from the value or interfere with the present or future use of, the property subject thereto or affected thereby, or otherwise materially impair business operations. Neither the Seller nor the Companies nor any Subsidiary has received notice of violation of any applicable zoning regulation, ordinance or other law, order, regulation or requirement relating to its operations or its owned or leased properties which would materially adversely affect the use of such properties for the purposes for which they are now employed and which has not been cured or otherwise satisfied and, so far as known to the Seller or the Companies or the Subsidiaries, there are no such violations and all 3 plants and other buildings conform with all applicable ordinances, codes and regulations. All of the hydrocarbon reserves shown on Exhibit III hereto are net proven recoverable reserves and the Com panies and the Subsidiaries have the right to recover all such reserves free and clear of any and all claims, liens and encumbrances, and there are no laws, ordinances, restrictions or rights of others (except for Federal and state proration regulations which may from time to time be in force and effect) which prevent the recovery of such reserves. All natural gas liquids from process acreage which are included in the hydrocarbon reserves shown on Exhibit III hereto are based on gas processing agree ments all of which are currently in full force and effect and valid and enforceable to their respective expiration dates. Neither the Seller nor the Companies has any knowledge of facts with respect to- the foreseeable cancellation or non-renewal of any such gas processing agreement which involves any sub stantial amount of such natural gas liquids. All leases pursuant to which the Companies or any Subsidiary leases from others any real property or interest therein, are valid and enforceable to their respective lease expiration dates and said leases are not in default and are held free and dear of any and all claims, liens and encumbrances except as aforesaid. 2.13. Refineries and Processing Plants. Champlin owns and operates a crude oil refinery located at Enid, Oklahoma, and owns, alone or jointly with other interest owners, and operates, directly or through a subsidiary corporation, natural gas processing plants located at or near Enid, Oklahoma; Oklahoma City, Oklahoma; Carthage, Texas; Bishop, Texas; and Conroe, Texas. Pontiac owns and operates a crude oil refinery located at Corpus Christi, Texas. All of said refineries and natural gas processing plants are in good operating condition and there is no significant deferred maintenance with respect thereto. 2.14. Personal and Intangible Property. The Companies and the Subsidiaries own all of their personal and intangible property, including their machinery, rolling stock, motor vehicles and securities, free and clear of any and all claims, liens and encumbrances. 2.15. Easements and Rights-of-Way. The interests of the Companies and the Subsidiaries in their rights-of-way, easements, grants, profits-a-prendre, permits, consents and licenses, granted or issued by others than governmental political subdivisions or regulatory authorities for the construction, maintenance and operation of gathering lines, pipelines, distribution mains, service mains, meter stations, distribution stations, servicecenters and other facilities have been perfected to the extent permitted by law and are valid and enforceable. 2.16. Pension Liability. The Companies and the Subsidiaries had, as of June 30, 1969, and in respect of all service in employment prior thereto, (i) unfunded past service liability computed in accord ance with generally accepted actuarial standards in respect of all pension or other retirement benefit plans or any other liability under any post-retirement group life insurance plan of not in excess of $4,000,000 and (ii) funded vested benefits of $12,200,000 in respect of all such pension or other retirement benefit plans. 2.17. Accounts Payable. The accounts payable shown on the Interim Balance Sheets represent indebtedness of the Companies and Subsidiaries incurred in connection with die acquisition of materials and supplies and the performance of services all in the ordinary course of business. 2.18. No Liabilities as Guarantor or Otherwise. Except as and to the extent reflected or reserved against in die Interim Balance Sheets, neither of the Companies nor any Subsidiary is directly or indirecdy liable upon or with respect to (by discount, repurchase agreement or otherwise), or obligated in any other way to provide funds in respect of or to guarantee or assume, any debt, dividend or other obligation of any person, corporation, association, partnership or other entity, except endorsements made in the ordinary course of business in connection with the deposit of items for collection. 2.19. Litigation. There are no lawsuits, proceedings or governmental investigations pending, or threatened, against or relating to either of the Companies or any Subsidiary or the properties or business of any such company which will result in liability on the part of the Companies and.any Subsidiaries in an aggregate amount in excess of the aggregate amount reflected or reserved against in the Interim Balance 4 Sheets. Neither of the Companies nor any Subsidiary is a party to or subject to the provisions of any order, writ, injunction or decree of any court or federal, state, municipal or other governmental depart ment, commission, board, bureau, agency or instrumentality, domestic or foreign, which would materially adversely affect their financial position or materially impair their operations. 2.20. Labor Matters. There are no strikes or work stoppages in effect or threatened against the Companies or any Subsidiary, nor have any such strikes or work stoppages been enjoined by any current order, writ, injunction or decree of any court or federal, state, municipal or other governmental agency or instrumentality. 2.21. Patents and Trademarks. All patents, patent applications therefor, tradenames, copyrights, copyright registrations and application therefor, presently owned, in whole or in part, by either of the Companies or any of the Subsidiaries are valid and in good standing. 222. Enforceability and Compliance with Terms of Material Contracts. The material contracts and agreements referred to in Section 2.24(b) hereof are valid and enforceable to their respective expira tion dates and the Companies and the Subsidiaries are not in default under the terms of any such material contract or agreement 2.23. Minute Books. The minute books of each of the Companies and of the Subsidiaries contain the minutes of all meetings of die Directors and stockholders of each such company. 2.24. Material Data. The Seller has delivered to the Buyer the following documents each of which is true and complete: (a) The Charter and By-Laws of each of the Companies and the Subsidiaries; (b) A list and summary description of every' material contract or agreement to which either of the Companies or any Subsidiary is a party or has succeeded to a party by assumption or assignment or in which any such company has a beneficial interest. Without limiting the meaning of the term "material", any contract or agreement shall, for the purposes of this Section, be deemed material (i) if not made in the ordinary course of business, or (ii) if the business of either of the Companies or any Subsidiary is substantially dependent upon it, as in the case of continuing con tracts to sell the major part of production, or licenses to use processes, patents or formulas upon which business depends to a material degree, or (iii) if constituting a management contract or bonus or profit-sharing plan, contract or arrangement, or (iv) if any Director or officer of the Seller, either of the Companies, or any Subsidiary or any associate of any such Director or officer is directly or indirectly a party thereto, or (v) if it is a mortgage, deed of trust, pledge, loan, credit, or. other borrowing agreement or other obligation for or relating to borrowed money, or (vi) is, in respect of the amount of such contract or agreement, or its importance to the business of the Companies and the Subsidiaries, material and the terms and conditions are of a nature of which the Buyer reasonably should be informed. [As used in clause (iv) hereinabove with respect to any such Director or officer, "associate" shall mean any member of his family, or any corporation, (other than a corporation whose securities are publicly traded) partnership, trust or other entity in which he has an interest or is a Director, officer, partner or trustee.] (c) A list reflecting the names and current annual salary rates or other fee arrangements of all directors, officers, employees and consultants or agents of the Companies and each Subsidiary whose current annual salary rate or fee from the Companies and each Subsidiary is Twenty-Five Thousand Dollars ($25,000) or more, together with a summary of the bonuses, additional compensation and other like benefits, if any, paid or payable to such persons for the calendar year 1969; (d) A statement summarizing (i) with respect to each pension undertaking for the employees of file Companies and for the employees of each Subsidiary, both salaried and non-salaried, including any formal or informal plan, die actuarial assumptions employed with respect to determining the past and normal service costs of each undertaking, the extent to which such undertaking is funded and the nature of each such funding arrangement, if any, and (ii) any other undertaking with respect to such employees pursuant to any retirement life insurance, bonus, profit-sharing, retirement or 5 other employee benefit, arrangement or plan; and a copy of each actuarial report prepared by or for the Companies and Subsidiaries or any one of them and used or proposed to be used in determining past and normal service costs for each such undertaking. (e) A list of every lease with the United States covering Federal lands leased by either of the Companies or any Subsidiary under the Federal Mineral Leasing Act, reflecting, by the categories of minerals set forth in said Act, the States in which such leases are held and the total acreage in each. (f) A list and summary description of (i) the crude oil charge capacity of the refineries of the Companies located at Enid, Oklahoma and Corpus Christi, Texas, and (ii) the principal refining units and processes in use at such refineries and a detailed description of the types and quantity of each type of refined products so produced during the year 1968 and the six-month period ending June 30,1969. 225. Absence of Certain Changes or Events. Since June 30, 1969, there has not been.* (a) Financial Condition. Any material adverse change in the financial position, or results of operations or employment of key personnel of either of the Companies or any Subsidiary; or, other than changes in the ordinary course of business not materially adverse, any damage, destruction; loss or seizure, whether as the result of an act of the Seller or from causes beyond its reasonable control, including but not limited to acts of God, acts of government such as embarkation, priorities and allocations, war and war conditions, riot or civil commotion, sabotage, flood or explosion, whether or not covered by insurance, or any taking of property by condemnation or eminent domain. . (b) Capital Stock, Options, Dividends. Any change in die authorized or issued capital stock of the Companies or of any Subsidiary,, any acceptance of any subscription or any other agreement or any grant of any option warrant or similar right, in respect of the issuance of any additional shares of capital stock of the Companies or any Subsidiary or any sale or change in ownership of any shares of the capital stock of the Companies or any Subsidiary, or any declaration, setting aside or payment of any dividend or making of any other distribution or payment in respect of the capital stock of the Companies or any Subsidiary, except for dividends declared and/or paid which, when added to dividends declared and/or paid prior to June 30, 1969, do not exceed in the aggregate $15,350,000 in dividends declared and/or paid for the calendar year 1969. (c) Mortgage or Pledge of Assets; Incurring of Indebtedness. Any mortgage or pledge of any of the properties or assets of either of the Companies or any Subsidiary other than in the ordinary course of business and not substantial in amount or such as may be required to comply with indentures or other agreements in force on the date of this Agreement, or any borrowing or other incurring of indebtedness by any such company other than in the ordinary course of business and maturing not more than one year from the date of the borrowing or incurring of the indebtedness; and (d) Employee Benefit Plans and Certain Salaries. Any bonus, stock option, profit sharing, pension; retirement, or other similar arrangement or plan instituted by either of the Companies or any Subsidiary, or any change in any of such companies' bonus and pension plans as in effect on June 30, 1969 or any increase in the compensation payable or to become payable to any officer, employee or agent whose total compensation from the Companies and each Subsidiary was then at an annual rate of more than Twenty-Five Thousand Dollars ($25,000), or any bonus, percentage of compensation, or other like benefit accrued to, or for the credit of, any officer, employee or agent of any such company, or any bonus, pension, retirement or similar payment or arrangement made or agreed to by any of such companies other than pursuant to any bonus or pension plan as in effect on June 30, 1969. 3. Buyer's Representations and Warranties. The Buyer hereby represents and warrants as follows: 3.1. Organisation and Good Standing. The Buyer is a wholly-owned subsidiary of Union Pacific Railroad Company and is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah. The Buyer is not subject to any restriction contained in any charter, by-law, mortgage, lien, lease, agreement, instrument, order, statute, regulation, judgement or decree, or any other 6 restriction of any kind or character which would prevent the consummation of the transactions contem plated in this Agreement. The Buyer has all necessary power and authority, corporate and otherwise, to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery and performance of this Agreement and the purchase contemplated herein, have been duly authorized by all requisite corporate action, and the Buyer has delivered to the Seller true and complete copies of the resolutions of its Board of Directors reflecting the grant of authority to execute, deliver and perform this Agreement, such copies having been certified by the Buyer's Secretary. 32. Acquisition of Stock for Investment. The Buyer proposes to acquire the Stock of the Com panies for investment and not with a view to, or for sale in connection with, the distribution thereof. 4. Conduct of Business Pending the Closing, Pending the Closing hereunder, except as otherwise consented to by Buyer in writing, Seller covenants, warrants and agrees that: 4.1. Business In Ordinary Course. Each of the Companies and the Subsidiaries shall refrain from (i) engaging in transactions other than in the ordinary course of business; (ii) entering into any agree ment for the sale of any material part of their properties or assets including but not limited to the sale of any materially significant production payment; (iii) drilling any new wells or deepening or recom pleting or making any substantial.workover of any existing well involving any expenditure or abandoning any significant producing well or leasehold equipment currently used thereon, except to the extent any such action is provided for under the 1969 Exploration and Development Program of the Companies, a copy of which has heretofore been delivered by the Seller to the Buyer; (iv) waiving, compromising or settling any substantial right or claim pertaining to such properties or assets having substantial value. 42. Certificate of Incorporation and By-Laws. No change shall be made in the Certificate of Incorporation or By-Laws of any of the Companies or Subsidiaries. 4.3. Capital Stock, Options, Dividends. No change in the capital stock of the Companies or any Subsidiaries or option grant or change in ownership or dividend or other distribution, all as hereinabove specified in Section 2.25(b), shall have been made or occurred, except that in respect of dividends, the Seller shall be entitled to receive Fifteen Million Three Hundred Fifty Thousand Dollars ($15,350,000) in aggregate dividends from the Companies during the calendar year 1969. 4.4. Mortgage or Pledge of Assets; Incurring of Indebtedness. No mortgage or pledge or bor rowing or other incurring of indebtedness all as hereinbefore specified in Section 2.25(c) shall be made. 4.5. Employee Benefit Plans and Certain Salaries. No employee benefit arrangement or. plan, all as hereinbefore specified in Section 225(d), shall be instituted or changed or compensation increased or accrued or agreed to. There shall be no increase in the compensation payable or to become payable to any officer, employee or agent of the Companies or Subsidiaries whose compensation from the Com panies and each Subsidiary on June 30,1969 was at an annual rate of more than Twenty-Five Thousand Dollars ($25,000). 4.6. Preservation of Business Organization and Goodwill. The Companies and Subsidiaries shall use their best efforts to preserve their business organizations intact, to keep available to the Buyer the services of their present officers and employees; to maintain and'keep their properties in good condition and working order, to preserve all geological and geophysical exploratory data, to preserve in full force and effect all of their oil, gas and mineral leases and any agreement entitling them to explore for and/or produce oil, gas or other hydrocarbons (except such leases as are deliberately released in the ordi nary course of business), and perform all covenants and conditions imposed upon the Companies or Subsidiaries thereunder; operate any of the properties of the Companies and Subsidiaries in a good workmanlike manner; to perform all obligations under all contracts relating to or affecting thenproperties including but not limited to all material contracts or agreements referred to in Section 2.24(b) hereof; and to preserve for the Buyer the goodwill of the suppliers and customers of die Companies and Subsidiaries and others having business relations with them. 7 4.7. Compliance With Lena. The Companies and Subsidiaries shall duly comply with all laws applicable to them and to the conduct of their businesses; and conduct their businesses in such a manner that at the Closing Date the representations and warranties contained in this Agreement shall be true to the extent that such representations and warranties shall have been made again on and as of such date as contemplated by Section 6.1 of the Agreement. 4.8. Insurance. The Companies and the Subsidiaries will maintain insurance in upon all their properties and with respect to the conduct of their business in such amounts and of such kinds as are in effect on the date of this Agreement, provided that the coverage may be increased from tim to time by the Companies and the Subsidiaries in their discretion. 5. Closing and Closing Date. The consummation of the sale and purchase of the Stock of the Companies (which consummation is herein called the "Closing"), shall take place in San Juan, Puerto Rico, or such other place as may be mutually agreed upon by Buyer and Seller, commencing at 11 o'clock ann., New York time, on January 5, 1970 or on such other date as may be mutually agreed by Buyer and Seller (the "Closing Date"), but shall be effective as of January 1, 1970. 5.1. Sale and Delivery. At the Closing, the Seller, contemporaneously with performance by the Buyer of its obligations to be performed at such Closing, shall deliver to the Buyer the following: (i) Stock certificates representing all of the Stock of the Companies accompanied by stock powers endorsed in blank representing and warranting that the Stock is being sold, assigned, trans ferred and delivered to the Buyer free and clear of any and all claims, Hens or encumbrances, with signatures on such stock powers guaranteed by a New York bank or trust company, or member firm of a national securities exchange, with all required (if any) federal, state and local documentary transfer stamps affixed. (ii) Such further certificates, documents and other instruments as be reasonably required by the Buyer to evidence compliance by the Seller with each of the conditions precedent to the Buyer's obligations at the Closing, as contained in Section 6 hereof. At tiie Closing, the Buyer contemporaneously with performance by the Seller of its obligations to be performed at such Closing, shall deliver to the Seller, in addition to the documents and instruments to be delivered by the Buyer pursuant to Section S2 hereof, such other certificates, documents and instru ments as shall be reasonably required by the Seller to evidence compliance by Buyer with each of the conditions precedent to Seller's obligations at the Closing contained in Section 7 hereof. 52. Purchase Price and Payment. At the Closing, the Buyer, contemporaneously with the performance by the Seller of its obligations to be performed at such Closing, shall pay to the Seller that portion of the purchase price for the Stock, being the sum of Two Hundred Forty Million Dollars ($240,000,000) (hereinafter called the "Purchase Price"), as follows: (a) At the Closing, the Buyer shall deliver to the Seller a certified or bank cashier's check drawn on a New York City branch of The Chase Manhattan Bank payable in Federal Funds to the order of the Seller in the amount of One Hundred Twenty Million Dollars ($120,000,000); and (b) Following the dosing, the Buyer shall complete payment of the Purchase Price by making three equal instalment payments (by certified or bank cashier's check drawn on a New York Gty bank payable in Federal Funds) of Forty Million Dollars ($40,000,000) each respectively on January 2,1971, January 2,1972 and January 2,1973. Such instalment payments shall bear interest on the unpaid balance thereof from January 1,1970 to the date of payment at the rate of nine percent (9%) per annum, payable upon the several payment dates hereinabove provided and shall not be subject to pre-payment, except that after January 2, 1971 the instalments due on January 2, 1972 and January 2, 1973 may be prepaid with interest by the Buyer at any time without penalty upon 30 days written notice to the Seller, such interest to be calculated to the date of pre-payment on the bans of a 360-day year of twelve 30-day months. 8 5.3. Further Assurances. At any time and from time to time, at or after the dosing, upon the request of the Seller or the Buyer, the Seller and Buyer agree to do, execute, acknowledge and deliver or shall cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, and assurances as may be required to consummate the transactions provided for in this Agreement. 6. Conditions Precedent To Buyer's Obligations. All obligations of Buyer under this Agree ment are subject to the fulfillment, prior to or at the dosing hereunder, subject to the provisions of Section 19 hereof, of each of the following conditions: 6.1. Seller's Representations True at Closing; Performance by Seller. The representations and warranties of the Seller set forth in Section 2 of this Agreement shall be deemed to have been made again at and as of the dosing Date (including but not limited to a reiteration of the representations and warranties with respect to the absence, as of the dosing Date, of certain changes or events as set forth in Section 2.25) and, except as contemplated by Section 4 hereof, shall then be accurate in all material respects; the Seller shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the dosing hereunder; and Buyer shall have been furnished with a certificate of appropriate officers of the Seller, dated the dosing Date, certifying to the best of their knowledge, in such detail as Buyer may request, to the fulfillment of the foregoing conditions. 6.2. Examination and Report of Peat, Marwick, Mitchell & Co. Buyer shall have received from Peat, Marwick, Mitchell & Co., independent certified public accountants, at Champlin's expense, an opinion based upon their reading of the latest available unaudited interim financial statements of the Companies and Subsidiaries since June 30,1969, consultations with and inquiries of officers of the Seller and Companies and Subsidiaries responsible for financial and accounting matters as to transactions and events relating to the Companies and Subsidiaries since June 30, 1969, and a reading of the minutes of meetings of the Directors and stockholders of the Companies and Subsidiaries since June 30, 1969, (which procedures do not constitute an examination made in accordance with generally accepted auditing standards), that there is nothing which has come to their attention which gives them or has given them reason to believe that (a) the Interim Balance Sheets were not prepared in accordance with generally accepted accounting principles applied on a basis consistent with the preceding periods and (b) during the period from June 30, 1969, to November 30, 1969 there has been any material change in the capital stock or long-term debt of the Companies and Subsidiaries or any material adverse change in the finanrial position of the Companies and Subsidiaries taken as a whole as compared with the financial position reflected m the Interim Balance Sheets, or in the results of operations as compared with the corresponding period of the preceding year. 6.3. No Reduction, in Net Worth. On the Closing Date, the net worth of the Companies and Subsidiaries shall not be less than the net worth of the Companies and Subsidiaries at the dose of business on June 30,1969, as reflected in the Interim Balance Sheets, i.e., One Hundred Sixty Eight Million Six Hundred Thirty Four Thousand Dollars ($168,634,000). 6.4. Opinion of Seller's Counsel. Buyer shall have been furnished with an opinion, dated the Closing Date, of counsel for the Seller and die Companies, to the effect that: (a) Organisation and Good Standing. The Seller and the Companies and the Subsidiaries are corporations duly organized, validly existing and in good standing under the laws of the states of their incorporation and the Companies and the Subsidiaries are each duly qualified to do business in Jgfh jurisdiction in which the character of the properties owned or leased by each of them or the nature of the business transacted by each of them, respectively, makes such qualification necessary. (b) Corporate Authority Relative to this Agreement. The execution, delivery and performance of this Agreement by Seller has been duly authorized and approved by all requisite corporate action 9 of the Seller, no action by stockholders is required, and this Agreement lias been duly executed and delivered by the Seller and constitutes a valid and binding obligation of Seller enforceable in accordance with its terms. (c) Capitalisation. The authorized, issued and outstanding capital stock of the Companies is as stated in Section 2.3, above, and the shares of capital stock of the Companies to be delivered to Buyer pursuant to Secton S.l above constitute all the issued and outstanding stock of the Companies and are validly issued, fully paid and non-assessable. (d) Title to Stock. Upon the delivery of the stock certificates and stock powers as contem plated by Section S.l(i), Buyer will be vested with valid title to the Stock of the Companies free and clear of any and all claims, liens or encumbrances. (e) Compliance by Seller with All Other Requirements. The consummation of the purchase and sale contemplated by this Agreement will not violate or conflict with any provision of Seller's certificate of incorporation or by-laws, or any provision of or result in the acceleration of any obligation under any mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment or decree to which Seller or the Companies or Subsidiaries are parties or by which they are bound and will not violate any federal, state or local law or any other restriction of any other kind or character to which they are subject; all actions or proceedings required by law or this Agreement to be taken by Seller at or prior to the Closing hereunder in connection with this Agreement and the transactions provided for herein have been duly and validly taken; and no approval, consent or authorization of any governmental authority of the United States or f-aor of any state or province, governmental subdivision, agency or instrumentality thereof, or other person, not obtained, is necessary to the making or consummation of this Agreement or the continued operation and use of the businesses, assets, and properties of the Companies or the Subsidiaries in die ordinary course thereafter. (f) Litigation. To their knowledge, except as and to the extent reserved against in the Interim Balance Sheets, there is no litigation, proceeding or governmental investigation pending or threatened against or relating to either of the Companies or any Subsidiary, or the properties or business of any such Company which is materially adverse to die businesses of the respective companies or any legal impediment to the continued operation of such businesses and properties in the ordinary course following the consummation of the sale and purchase contemplated by this Agreement, and the aggregate amount of liability that may result therefrom will not, in their opinion, be material in relation to the assets and businesses of the Companies and Subsidiaries. 6.5. Title Opinions or Evidences of Title. Buyer shall have been furnished by Seller, at Seller's expense, with (i) legal opinions or other evidences, in form and substance satisfactory to it, to the effect that with respect to the properties on which are situated the refineries, natural gas processing plants, products pipeline terminals and office buildings described in Exhibit II hereto the Companies and Subsidiaries at the time of the Closing hereunder, had valid title in fee to all of the real property described in said Exhibit II as fee property, free and clear of any and all claims, liens and encumbrances except as otherwise stated in Section 2.12 hereto, and (ii) certificates executed by the respective lessors of all real property described in said Exhibit II as leasehold property to the effect that such leases are in full force and effect until their respective expiration dates and that there are no outstanding notices of default thereunder. 6.6. Opinion of Buyer's Counsel. Buyer shall have received an opinion, dated the Closing Date, of its counsel, to the effect that: (a) Corporate Authority Relative to this Agreement. The execution, delivery and performance of this Agreement have been duly authorized and approved by all requisite corporate action of the Seller and the Buyer, and this Agreement has been duly executed and delivered by such parties and constitutes a valid and binding obligation enforceable in accordance with its terms. 10 pn (b) Compliance With All Other Requirements. All actions or proceedings required by law or this Agreement to be taken by the Seller at or prior to the Closing hereunder in connection with this Agreement and the transactions provided for herein have been duly and validly taken, and no approval, consent or authorization of any governmental authority of the United States or ranaHa or of any state or province, governmental subdivision, agency or instrumentality thereof, or other person, not obtained, is necessary to the making or consummation of this Agreement or the continue operations and use of the business, units, and properties of the Companies, or the Subsidiaries in the ordinary course thereafter. 6.7. Litigation Affecting Closing. At the Closing Date no litigation, proceeding, or governmental investigation, shall be pending or threatened, against or relating to the Seller or the Buyer, or either of the Companies or any Subsidiary, in which it is sought to restrain or prohibit or to obtain damages or right of appraisal or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, including, without limitation, any action or claim alleging or claiming violation of the antitrust laws. 6.8. Report as to Condition of Refineries and Processing Plants. Buyer shall have received a report, satisfactory to it, from an independent engineering firm to the effect that the Companies' refineries located at Enid, Oklahoma and at Corpus Christi, Texas and the natural gas processing plants operated by the Companies, three of which are in Texas and two in Oklahoma, are in good operating condition and that there is no significant deferred maintenance in respect thereof. 6.9. Resignation of Officers and Directors of the Companies and the Subsidiaries. Buyer shall have received copies, certified by the appropriate secretary of each of the Companies and the Subsidiaries, of the resignations, effective as of the Closing Date, of such officers and directors of the Companies and the Subsidiaries as shall be designated prior to the Date by Buyer. 7. Conditions Precedent to Seiler's Obligations Hereunder. All obligations of the Seller under this Agreement are subject to the fulfillment, prior to or at the Closing hereunder, subject to the provisions of Section 19 hereof, of each of the following conditions: 7.1. Buyer's Representations True at Closing; Performance by Buyer. The representations and warranties of the Buyer set forth in Section 3 of this Agreement shall be deemed to have been made again at and as of the Closing Date and shall then be accurate in all material respects; Buyer shall have per formed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing hereunder; and the Seller shall have been furnished with a certificate of appropriate officers of Buyer, dated the Goring Date, certifying to the best of their knowledge, in such detail as the Seller may request, to the fulfillment of the foregoing conditions. 72. Opinion of Buyers Counsel. Seller shall have been furnished with an opinion, dated the Qosing Date, of Buyer's counsel, to the effect that: (a) Organisation and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah; (b) Corporate Authority Relative to this Agreement. The execution, delivery and performance of this Agreement by Buyer has been duly authorized and approved by all requisite corporate action of the Buyer, and this Agreement has been duly executed and delivered by the Buyer and constitutes the valid and binding obligation of Buyer enforceable in accordance with its terms; (c) Compliance by Buyer with AU Other Requirements. The consummation of the purchase and sale contemplated by this Agreement will not violate or conflict with any provision of Buyer's certificate of incorporation or by-laws; or any provision of or result in the acceleration of any obligation under any mortgage, lease, agreement, instrument, order, arbitration award, judgment or decree to which Buyer is a party or by which it is bound and will not violate any federal, state or local law or any other restriction of any other kind or character to which it is subject; all actions 11 or proceedings required by law or this Agreement to be taken by Buyer at or prior to the Closing hereunder in connection with this Agreement and the transactions provided for herein have been duly and validly taken; and no approval, consent or authorization of any governmental authority of the United States or of any state, governmental subdivision, agency or instrumentality thereof, or other person, not obtained, is necessary to the making or consummation of this Agreement. 7.3. Litigation Affecting Closing Date. At the Closing Date no litigation, proceeding or govern mental investigation of the type referred to in Section 67 shall be pending or threatened. 7.4. Guaranty. Buyer shall deliver to Seller the Guaranty of Union Pacific Corporation in the form annexed as Exhibit IV duly executed by an officer of Union Pacific Corporation, together with true and complete copies of the resolutions adopted by the Board of Directors of Union Pacific Corpora tion reflecting the grant of authority to execute, deliver and perform said Guaranty, such copies having been certified by its Secretary, and an opinion of counsel for Union Pacific Corporation to the effect that the execution, delivery and performance of said Guaranty has been duly authorized and approved by all requisite corporate action of Union Pacific Corporation and that said Guaranty constitutes the valid and binding obligation of Union Pacific Corporation, enforceable in accordance with its terms. 8. Parties' Right to Remedy Unfulfilled Conditions Precedent. In the event either party should determine at any time prior to the Cosing that it intends to decline to proceed with the Cosing because of unfulfilled conditions precedent under Section 6 or 7, it shall so notify the other party in writing immediately upon making such determination, to the end that such other party shall have the right to take such steps, at its expense, as may be necessary for the purpose of fulfilling the said condition precedent on or prior to the Cosing Date. 9. Access To and Information Concerning Properties, Records, Etc. The Seller haH give to Buyer, its counsel, accountants, engineers and other representatives, full access throughout the period prior to the Cosing Date hereunder, to all of the Companies' and Subsidiaries* properties, books, contracts, commitments and records, including all tax records of, and Federal, state and local tax returns filed by or on behalf of the Companies and the Subsidiaries, and the Seller shall furnish Buyer during such period with all such information, concerning the Companies and the Subsidiaries and their affairs as Buyer may reasonably request 10. Cooperation by Buyer. Following the dosing. Buyer shall give and shall cause Champlin and Pontiac to give Seller full cooperation in response to any request made by Seller, its auditors or other representatives, for any assistance whatsoever in connection with any matter which relates, or arises out of, Seller's ownership of the Stock at any time prior to the dosing, or the operations of Champlin and Pontiac during the period of such ownership. Such assistance shall include, without limitation, the furnishing of fall and complete financial and accounting records and all other records and documents which, in the judgment of Seller, are needed by it for financial, accounting or other business purposes. 11. Nature and Survival of Seller's Representations, Entirety of Agreement. The Seller and Buyer agree that neither party has made any representation, warranty or covenant not set forth herein or in the certificates or other instruments deliverable pursuant hereto, and that this Agreement constitutes the entire agreement between the parties and supersedes any and all other agreements, oral or written, in respect of the subject matter of this Agreement Seller, and Buyer agree that this Agreement has been dated as of August 28,1969, to give recognition to the fact that it specifically replaces and supersedes the earlier agreement with respect to the subject matter of this Agreement dated such date, between Seller and Union Pacific Railroad Company. Seller and Buyer also agree that this Agreement be executed on October 27,1969, and that all of the provisions of this Agreement, including the representa tions and warranties of the parties, shall speak as of such execution date to give recognition to the fact that Buyer was not incorporated until October 21, 1969. The representations and warranties by the Seller contained in Sections 2.1 through 2.5, 2.6 (to the*extent that it does not relate to tax liabilities), and 2.8 through 2.25 hereof, shall survive the Closing until January 2, 1972, notwithstanding any investigation at any tin** made by or on behalf of the Buyer or the acceptance by the Buyer of any 12 report or expert opinion contemplated in this Agreement or otherwise. The representations and warranties of the Seller contained in Subsections 2.6 and 2.7 hereof relating to tax liabilities shall survive the Dosing, notwithstanding any investigation or the like as aforesaid, until such time as the United States Federal Income Tax Returns of the Seller for the tax years 1965 through 1969, consolidating tie Companies and the Subsidiaries (except in the case of Pontiac which has been consolidated with the Seller only in the years 1967 through 1969), have been audited by the Internal Revenue Service and closed by operation of law or otherwise, and all deficiencies with respect thereto have been paid or finally settled The Seller shall have no liability with respect to any breach of (i) any of the following representations and warranties which, when taken collectively involve damages suffered by Buyer in an amount less than $250,000, (but the Seller shall have liability to the extent of the full amount thereof with respect to any such damages in excess of $250,000): that is Section 2.5(a) as to the Interim Balance Sheets, Sections 2.6 through 2.11 inclusive, Section 2.17 and Sections 2.18 and 2.19 to the extent related to Section 2.6 or (ii) any of the following representations and warranties which, when taken severally, involve damages suffered by Buyer in an amount less than $100,000, (but the Seller shall have liability to the extent of the full amount thereof with respect to any such damages in excess of $100,000): that is Sections 2.1 through 2.5 inclusive (except for Section 2.5(a) as to the Interim Balance Sheets), Sections 2.12 through 2.16 inclusive, 220 through 225 inclusive and Sections 2.18 and 2.19 to the extent they do not relate to Section 2.6; provided, however, that die Seller shall have no liability under this Section 11 in respect of any single matter or claim giving rise to a breach which involves damages suffered by Buyer in an amount not in excess of $50,000 and any such matter shall not be recognized in the computation of damages under this Section 11. Except as aforesaid, the Seller agrees that after the Dosing it will indemnify, protect and hold the Buyer harmless against any and all liability, claims, costs, demands, charges and expenses, including counsel fees, in any manner imposed or accruing against the Buyer arising out of any representation or warranty made by the Seller in Section 2 of this Agreement or in any certificate or- other instrument delivered by or on behalf of the Seller pursuant to or in connection with this Agreement, including but not limited to any breach of representation or warranty with respect to taxes made under Section 22 of this Agreement. The representations and warranties of Buyer, other than those set forth in Section 32, shall expire with, and be terminated and extinguished by, the Dosing under this Agreement on the Dosing Date and the only remedy which shall accrue to the Seller on account of any breach of any representation, or warranty, relating to the Buyer set forth herein shall be the right of Seller to refuse to proceed with the Dosing provided for in this Agreement, and there shall be no liability for such breach on the part of Buyer to the Seller. The representations, and warranties of Buyer set forth in Section 32 of this Agreement shall survive the Dosing until January 2, 1972. 12. Procedure for Payment of United States Federal Income Taxes. 12.1. Calendar Year 1969. The Federal income tax payable with respect to die net income of Qiamplin and Subsidiaries and with respect to the net income of Pontiac for the calendar year 1969 will be paid by Seller which files a consolidated Federal income tax return. After the close of the ral^wHar year 1969, Seller hall determine the amount of Federal income tax which Qiamplin and Subsidiaries and which Pontiac would have paid for the calendar year 1969 if Qiamplin and Subsidiaries tiarf filed a separate consolidated Federal income tax return and if Pontiac had filed a separate Federal income +** return, such determination to be made without allowance for any surtax exemption or investment credit with respect to used property. Seller shall send to Qiamplin a statement of the amount of Federal income tax so determined for Qiamplin and Subsidiaries, and Seller shall send to Pontiac a state ment of the amount of Federal income tax so determined for Pontiac. Buyer agrees to cause Qiamplin to pay to Seller in Federal Funds upon receipt of such statement the amount of Federal income tax so determined less any estimated Federal income taxes previously paid by Qiamplin and Subsidiaries for the year 1969 and to cause Pontiac to pay to Seller in Federal Funds, upon receipt of such statement, the amount of Federal income tax so determined less any estimated Federal income taxes previously paid by Pontiac for the year 1969. These provisions shall apply in the same manner to any excess of estimated tax payment over 1969 Federal income tax liability of die Companies and the Subsidiaries. 13 122. Audit Increases. If, upon audit of Seller's consolidated Federal income tax return for any of the taxable years 1965 through 1969, inclusive, Seller shall receive from the Internal Revenue Service a Revenue Agent Report and if such Report (i) increases the taxable income ot, or adversely affects items determined on a consolidated basis reasonably attributable to, Champlin and Subsidiaries and/or Pontiac for any such taxable year over the amount of such taxable income or consolidated items as disclosed in Seller's consoli dated Federal income tax return (hereinafter called the "Consolidated Return") as filed for such year; or (ii) decreases the investment tax credit and/or other tax credits (hereinafter called the "Tax Credits") of Champlin and Subsidiaries and/or Pontiac for any such taxable year below the amount of Tax Credits claims in Seller's Consolidated Return as filed for such year; then Seller shall notify Champlin and/or Pontiac, as the case may be, of such fact within thirty (30) days of Seiler's receipt of such Revenue Agent Report. When and to the extent that the increase (s) in taxable income or decrease(s) in Tax Credits, if any, as described above, are finally determined ("Finally Determined" being a term defined in Section 127), Seller shall so notify Champlin and/or Pontiac, as the case may be. Upon receipt of such notice, Champlin and/or Pontiac, as the case may be, shall pay to Seller in Federal Funds an amount equal to the Federal Income Tax Deficiency (as deter mined under Section 12.3) for such taxable year together with interest thereon at the rate of six percent (6%) per annum computed from the 15th day of the third month following the close of the taxable year in question. 12.3. Federal Income Tax Deficiency. The Federal Income Tax Deficiency for any taxable year shall be equal to the sum of (i) the amount determined by multiplying (a) die Finally Determined increase(s) in taxable income (as described in Section 127) for such taxable year; by (b) such year's applicable Federal income tax rate (as defined in Section 12.6); and (ii) the Finally Determined decrease(s) in Tax Credits for such taxable year. 12.4. Audit Decreases. If, upon audit of Seller's Consolidated Return for any of the taxable years 1965 through 1969, inclusive. Seller shall receive from the Internal Revenue Service a Revenue Agent report, and if such Report (i) decreases the taxable income of or favorably affects items determined on a consolidated haris reasonably attributable to, Champlin and Subsidiaries and/or Pontiac for any such taxable year below the amount of such taxable income or consolidated items as disclosed in Seller's consolidated return as filed for such year; or (ii) increases the Tax Credits of Champlin and Subsidiaries and/or Pontiac for any such taxable year over the amount of Tax Credits claimed in Seller's Consolidated Return as filed for such year; then Seller shall notify Champlin and/or Pontiac, as the case may be, of such fact within thirty (30) days of Seller's receipt of such Revenue Agent Report. When and to the extent that the decrease(s) in taxable income or increaae(s) in Tax Credits, if any, as described above, are Finally Determined, Seller shall pay in Federal Funds to Champlin and/or Pontiac, as the case may be, an amount equal to the Federal Income Tax Overpayment (as determined under Section 1215) for such taxable year, together with interest thereon at the rate of six percent (6%) per annum computed from the 15th day of the third month following the close of the taxable year in question. 12.5. Federal Income Tax Overpayment. The Federal Income Tax Overpayment for any taxable year 1965 through 1969 inclusive shall be equal to the sum of (i) the amount determined by multiplying (a) the Finally Determined decreaie(s) in taxable income for such payable year; by (b) such year applicable Federal Income Tax Rate (as defined in Section 12.6) ; and (ii) die Finally Determined increase(s) in Tax Credits for such taxable year. 14 12.6. Applicable Federal Income Tax Rate. years 1965 through 1969 shall be: Taxable Year The applicable Federal Income Tax Rate for the taxable Applicable Federal Income Tax Rate with Respect to Items of Income or Deduction Subject to Ordinary Income Tax Rates Applicable Fieral Income Tax Rate with Respect to Items of Income or Deduction Subject to Capital Gains Tax Rates 1965 ............................................. 1966 ............................................. 1967 ............................................. 1968 ...................................... 1969 ............................................. 48% 48% 48% 52.8% 52.8% 25% 25% 25% 27.5% 27.5% In the event, however, that the U.S. Internal Revenue Code is amended so as to increase the statutory capital gains tax rate for 1969 above 25%, then the rate to be applied with respect to items of income or deduction subject to such increased rate shall be such increased rate appropriately adjusted to reflect the tax surcharge rate. 12.7. Finally Determined. The terms "Finally Determined" and "Final Determination" shall mean determined pursuant to any one or more of the following: (i) a decision by the Tax Court or a judgement, decree, or other order by a court, of competent jurisdiction which has become Anal or if the time for appeal to the Tax Court or any court of com petent jurisdiction has expired; (ii) a closing agreement made between the Seller and the Commissioner of Internal Revenue pursuant to Section 7221 of the Internal Revenue Code; or (iii) a final settlement of a suit, claim or other proceeding in a court or tribunal of competent jurisdiction; (tv) the expiration of the statute of limitations pertaining to the time within which a claim for refund of federal income tax may be filed; or (v) the execution by Seller and the acceptance by the Commissioner of Internal Revenue of U.S. Treasury Department, Form 870-AD, Offer of Waiver on Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment. 12.8. Retention and Access to Records. Buyer agrees to cause Champiin and the Champlin Sub sidiaries and Pontiac to retain all of their accounting books and records for each of the years 1965 through 1969 until such time as the Federal income tax liability of Seller for each such year is Finally Determined; to give Seller or its representatives full access to and the right to copy and make extracts from all such books and records; to provide the assistance of such Champlin and Pontiac personnel as may be necessary in examining and verifying such books and records; and to have Champlin and Pontiac personnel prepare the necessary workpapers as are prescribed by Seller for use in the preparation of its 1969 Consolidated Return and such other papers and reports as may be required with respect to Champlin, the Champlin Subsidiaries and Pontiac in the course of the audits of Seller's Consolidated Returns for the years 1965 through 1969. 12.9. Breach of Tar Warranty. Within 120 days following Final Determinations with respect to Seller's consolidated Federal income tax liability for all years 1965 through 1969, Seller and Buyer shall agree upon the aggregate amount, if any, by which the Accrued Federal Income Tax accounts (as that term is used in the Interim Balance Sheets) of the Companies and Subsidiaries as of December 31, 1969, have been decreased as a result of such Final Determinations with respect to investment credit and other "per manent differences", as that term is defined in Accounting Principles Board Opinion 11, dated December 1967 and consistently applied with respect to the Companies- and Subsidiaries. To the extent that such amount exceeds the sum of (i) $433,333.33 plus (ii) the amount of any increase in future tax benefits to either of the Companies or any Subsidiary as a result of any such "permanent difference", it shall, for purposes of Section 11 hereof, be considered a single matter or claim with respect to Seller's repre- 15 sentations and warranties, contained in section 2 hereof, with respect to die Federal income tax liabilities of the Companies and Subsidiaries. For purposes of the preceding sentence, tax benefits shall be determined as if the Companies and Subsidiaries had continued their respective corporate existences and operations and had taxable incomes at least equal to their taxable incomes for 1969. 12.10. Buyer Participation in Tax Audit. If Seller shall be notified by the Internal Revenue Service of an audit of the books and records of Champlin and Subsidiaries and/or of Pontiac for the taxable years 1965 through 1969- inclusive, Seller shall immediately notify Buyer in writing and shall permit Buyer to participate in such audit proceedings at Buyer's expense. Seller shall not agree to or compro mise, settle or consent to any judgment, claim, set-off, assessment or deficiency or adjustment which would have the effect of increasing or decreasing the taxable income or income tax payable for Champlin and Subsidiaries or Pontiac unless either Buyer consents in writing in advance thereof or, if Buyer is unwilling to give such consent, Seller furnishes Buyer in advance thereof a written opinion of independent counsel of recognized competence in Federal income tax matters to the effect, that taking into considera tion all items disputed by the Internal Revenue Service with respect to the taxable year in question, and viewing such items as a whole, such agreement, compromise settlement or consent constitutes a reasonable settlement of the disputes with respect to the taxable year in question. 13. Brokerage. The Seller represents and warrants to the Buyer that all negotiations relative to this Agreement have been carried on by it directly with the Buyer, without the intervention of any person, firm or corporation, other than Boyden Industrial Services, Inc^ which has acted for the Seller under a Letter Agreement dated August 7,1969, a copy of which has been heretofore delivered to the Buyer, and under which Boyden Industrial Services, Inc and Loeb, Rhoades, Inc win he entitled to compensation from the Seller upon consummation of the transactions contemplated by this Agreement The Seller does hereby undertake to indemnify the Buyer and hold it harmless against and in respect of any such elaim for brokerage, finder's fees or other commissions or expenses relative to this Agreement, or to the purchase and sale contemplated hereby, including but not limited to the compensation payable to Boyden Indus trial Services, Inc and Lori), Rhoades, as aforesaid. The Buyer represents and warrants to the Seller that all negotiations relative to this Agreement have been carried on by it directly with the Seller, without the intervention of any person, firm or corporation other than Boyden Industrial Services, Inc., as aforesaid, and does hereby undertake to indemnify the Seller and hold it harmless against and in respect of any such claim for brokerage, finders' fees or other commissions or expenses relative to this Agreement based upon any alleged agreement with Buyer. 14. Best Efforts To Obtain Satisfaction of Conditions. The Seller agrees to use its best efforts to obtain the satisfaction of the conditions specified in Section 6 hereof, and Buyer agrees to use its best efforts to obtain the satisfaction of the conditions specified in Section 7 hereof. 15. Change in Name of Champlin Pipe Line Company. Seller owns all of the issued and out standing stock of Champlin Pipe Line Company, a Texas corporation; which is not being purchased by Buyer. Within six months after the Closing, Seller will cause the corporate name of Champlin Pipe Line Company to be changed to a name which neither indudes, nor is substantially similar to, the name "Champlin." 16. Celaneae Marks. Effective as of the Closing, Buyer will cause Champlin and Subsidiaries and Pontiac to discontinue all use whatsoever of the logo ^2 ^d any and all trademarks, trade names or house marks owned, first used or originated by Seller and any of its affiliated companies (the "marks"), provided, however, that Champlin and Pontiac shall have the right to sell the inventory to which such marks have been applied by them prior to the Closing, and to use such marks during a limited period which may be necessary for the complete phasing out of all such marks, which shall in no event exceed one year from die Closing. 17. Public Announcements. Prior to die Goring Date, except as otherwise required by law, no press release or public announcement in respect of the transactions contemplated by this Agreement will be made by either the Seller or the Buyer unless agreed upon in advance by both. 16 18. Expense*. Except as expressly provided herein, and whether or not the transactions con templated by this Agreement are consummated, each party hereto shall pay its own expenses incident to this Agreement or to its preparation for the consummation of said transactions. 19. Waiver. Each party may, at its option, waive in writing any and all of the conditions herein contained to which its obligations hereunder are subject 20. Amendment*. Seller and the Buyer, by mutual consent of their respective Board of Directors, or officers authorized by such Boards, may amend or modify this Agreement, in such manner as may be agreed upon, by a written instrument executed by Seller and Buyer. 21. Section and Paragraph Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement 22. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed first class, postage prepaid: (a) To The Seller. If to the Seller, to Celanese Corporation, 522 Fifth Avenue, New York, N. Y., Attention, James Scott Hill, Esq., or such other address as may be designated by the Seller. (b) To The Buyer. If to the Buyer, to Union Pacific Petroleum Corporation, 120 Broadway, New York, N. Y., or such other address as may be designated by the Buyer. 23. Counterpart*.. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument 24. Parties In Interest This Agreement shall inure to the benefit of and be binding upon the parties named herein as the Seller and Buyer and their respective successors. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies under or by reason of this Agreement 25. New York Law To Govern. This Agreement shall be construed and enforced in accordance with the laws of the State of New York. Ik Witness Whereof, the undersigned parties hereto have duly executed this Agreement as of the date first above written. CELANESE CORPORATION Attest: [Seal] /s/ J. Scott Hm Secretary By // John W. Brooks President UNION PACIFIC PETROLEUM CORPORATION Attest: By /%/ Frank E. Barnett Chairman of the Board and Chief Executive Officer /*/ C W. Rosswom Secretary [Seal] 17 EXHIBIT I CHAMPLIN PETROLEUM COMPANY (CONSOLIDATED) AND PONTIAC REFINING CORP. COMBINED BALANCE SHEET June 30,1969 (M $) Cash and Short Term Securities........... ,.............................. Receivables (Note 2).............................................................. ChampHa $ 11,014 18,276 Pontiac $ 1,931 9,645 Crude and Products Inventory (Note 3) (Note 8)............... 8,413 3,494 Materials and Supplies.....................................*.................... 1,231 1,216 Prepaid Expenses......................................... ............... '.... Total Current Assets.................................. . Investments, Advances, Etc. (Note 4).................................. 363 $ 39,297 $ 1,571 413 $16,699 $-- Property and Equipment (Note 5) (Note 9)........................ $302,157 $ 27,642 Reserve for Depredation, Depletion and Amortization.......... (168,134) (21,672) Net Property and Equipment........................... $134,023 - $ 5,970 Other Assets......................................................................... Total Assets .................... ....................... . $ 434 $175,325 $-- $ 22,669 Accounts Payable.............................................................. . $ 10,407 $ 7,628 Accrued Liabilities.................................................................. 5,062 724 Accrued Federal Income Tax (Note 2) (Note 6) (Note 10) 268 Total Current Liabilities........................... $ 15/37 953 $ 9,305 Deferred Investment Credit (Note 6) (Note 10)................. $ 1,783 $ 224 Deferred Federal Taxes (Note 2) (Note 6)(Note 10).......... $ 1,646 $ 215 Deferred Gas Price Increase.................................................. $ 450 $ -- Stockholders' Equity: Capital Stock................................................................... Capital Contributed............................................................ Retained Earnings (Note 4)............................................... Total Equity ................................. Total liabilities and Stoddwlders' Equity............................ $ 4,485 124,227 26997 $155,709 $175,325 $2 -- 12,923 $ 12925 $ 22,669 Combined $ 12945 27921 11907 2,447 776 $ 55996 $ 1,571 $329799 (189906) $139993 $ 434 $197994 $ 18,035 5786 1721 $ 25,042 $ 2,007 $ 1961 $ 450 $ 4,487 124727 39,920 $168,634 $197994 The accompanying principle* sad notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) June 30, 1969 (1) Principles op Consolidation : The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Harbor Service Stations, Inc, Midland Gasoline Corporation, Star Oil Company, and Cycler Oil Company. All material intercompany accounts and transactions .have been eliminated. (2) Receivables : Accounts Receivable and Accrued Federal Taxes have been credited in die approximate amount of Two and One Half Million Dollars ($2400,000) and Deferred Federal Taxes has been charged by a like amount in order to eliminate the reflection of a certain claim for refund for Federal income taxes which claim was reflected in such haianr* sheet accounts at December 31,1968. (3) Inventories: Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization oi property, plant and equipment (4) Advances and Retained Earnings : Advances and Retained Earnings have been reduced by $7 million and treated as a dividend. Although declaration has not been made the amount was advanced to Celanese prior to June 3% 1969. Included under the caption Investments, Advances, etc. are non-current notes receivables of 1^1458,000. (5) Property, Plant and Equipment: Allowances for depreciation, depletion and amortization of producing oil properties and depredation of producing gas properties are provided on a modified straight-line method over asset lives ranging from 1 to 15 years. Allowances for depletion and amortization of producing gas properties are provided on the unit-of-production method determined by reference to periodic estimates of the gas reserves of the respective properties. The remaining major classes of property, plant, and equipment are depreciated on a modified straight-line method (6) Income Taxes: Significant variations in the relationship between the provision for Federal income taxes and income before tax** arise prindpally because of the deductions for tax purposes of intangible development costs and the excess of allowable depletion over cost depletion. Tax allocation accounting has been applied to all cither material timing differences. The policy of the Company is to take the investment tax credit into income as a redaction in the provision for income taxes over the estimate useful lives of the related assets. The Company will join with its parent in the filing of a consolidated Federal income tax return for 1969. The policy of the Company is to accrue its share of the income tax payable and to make periodic remittances to fAnw Corporation. (7) Pension and Retirement Plans: The Company has a pension plan and a retirement plan covering substantially all of its employees over 29yi years of age. Amortization of prior service costs is provided over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celane-- Corporation) (8) Inventories: Inventories of refined products and supplies at June 30, 1969 are stated at the lower of cost (average) or market Inventories of crude oil at June 30,1969 are stated at the lower of cost (first-in, first-oat) or market (9) Pronaxr, Plant and Equipment: Allowances for depredation on property, plant and equipment are provided on the straight-line method over an estimated useful life of 10 years, except for transportation equipment which has an estimated useful life of 4 years. (10) Income Taxes: The Company will join with its parent in the filing of a consolidated Federal income tax return for 1969. The policy of the Company is to accrue its share of the income tax payable and to make periodic remittances to Celanese Corporation. The policy of the Company is to take the investment tax credit into income as a redaction in the provision for income taxes over the estimated useful lives of the related assets. Deferred Federal Taxes arise prindpally from accelerated depredation used for tax purposes, partially offset by provision for refinery turnarounds taken for financial purposes. (11) Sales and Cause Oil Surly Contracts: Substantially all of the Company's production of refined products is sold to one customer under the terms of a contract expiring in 1972. Quantities of refined products to be delivered to that customer reduces substantially in the last year of the contract The Company purchases its supply of crude products under the terms of various contracts expiring in 1972 and 1977. (12) Rxtibement Plan: The Company has retirement plans covering substantially all employees. Amortization of prior service costs is provided over periods ranging from 10 to IS years. The Company's policy is to fund costs accrued. Based on actuarial determinations the plans are fully funded with respect to all voted benefits. PONTIAC REFINING CORP. (a wholly-owned aubsidi,ary_of Celanese Corporation) Accountants' Report Financial Statements^ December 31, 1968 PEAT. MARWICK, MITCHELL & CO. cxfmmo fuuic accountants Peat, Marwick, Mitchell & Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS. TEXAS 75250 The Board o Directors Champ1in Petroleum Company: We have examined the consolidated balance sheet of Champlin Petroleum Company and subsidiaries, a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1968 and the related statement of income and retained income for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and statement of consolidated income and retained income present fairly the financial position, of Champlin Petroleum Company and subsidiaries at December 31, 1968 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 24, 1969 PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celanese Corporation) Statement of Income and Retained Income Year ended December 31, 1968 with figures for seven months ended December 31, 1967 Sales Operating costs: Costs excluding items listed below Selling and administrative Depreciation Total operating costs Operating income Other income Operating and other income Provision for income taxes (note 3) Net income Retained income at beginning of year Cash dividend Retained income at end of year Net income per common share 1968 Seven months ended December 31, 1967 (Thousands of dollars except per share amounts) $ 88,644 47,936 81,473 451 455 82,379 6,265 106 6,371 3,268 3,103 11,817 14,920 2.679 $ 12.241 $ 15,515 44,275 227 295 44,797 3,139 11 3,150 1,581 1,569 11.248 12,817 . 1.000 11,817 7,845 See accompanying notes to financial statements PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celanese Corporation) \ Notes to Financial Statements December 31. 1968 (1) Inventories Inventories of refined products ($2,242,000) and supplies ($1,240,000) at December 31, 1968 are stated at the lower of cost (average) or market. Inventories of crude oil ($1,268,000) at December 31, 1968 are stated at the lower of cost (first-in, first-out) or market. (2) Property, plant and equipment Allowances for depreciation of property, plant and equipment are provided on the straight-line method over an estimated useful life of 10 years, except for transportation equipment which has an estimated useful life of 4 years. The major classes of property, plant and equipment are as follows: Assets, at cost 1968 1967 (Thousands of dollars) Plant, lines and dock facilities Land and rights-of-way Transportation equipment Other $ 26,198 716 124 396 $ 27.434 25,762 716 120 311 26,909 (3) Income taxes The Company will join with its parent in the filing of a consolidated Federal income tax return for 1968. The policy of the Company is to accrue its share of the income taxes payable and to make periodic remit tances to Celanese Corporation. The policy of the Company is to take the investment tax credit into income as a reduction in the provision for Income taxes over the estimated useful lives of the related assets. Deferred Federal income taxes arise from accelerated depreciation used for tax purposes, partially offset by provision for refinery turnarounds taken for financial, purposes. The provision for income taxes is as follows: 2 PONTIAC REFINING CORP. (a wholly-owned subsidiary of Celanese Corporation) Notes to Financial Statements. Continued (3) Income taxes. cont. Current Deferred 1968 Seven months ended December 31, 1967 (Thousands of dollars) $ 3,360 (92) $ 3,268 1,446 135 1,581 (4) Sales and crude supply contracts Substantially all the Company's production of refined products is sold to one customer under the terms of a contract expiring in 1972. Quantities of refined products to be delivered to that customer reduce substantially in the last year of the contract. The Company purchases its supply of crude products under the terms of various contracts expiring in 1972 and 1977. (5) Retirement plans The Company has retirement plans covering substantially all employees. Charges to operations under the plans amounted to $243,000 for 1968 and $99,000 for the seven-month period ended December 31, 1967, including' amortization of prior service costs over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. PONTIAC REFINING CORP. Accountants' Report Financial Statements - December 31, 1967 PEAT. MARWICK, MITCHELL & CO. CSlITtf'IKO PUBLIC ACCOUNTANTS Peat, Marwick, Mitchell Sc Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS .TEXAS 75250 Hie Board of Directors Pontiac Refining Corp.: We have examined the balance sheet of Pontiac Refining Corp., a wholly-owned subsidiary of Celanese Corporation since June 1, 1967, as of December 31, 1967 and the related statement of income and retained income for the seven months then ended. Our examination was made in . accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statement of income and retained income present fairly the financial position of Pontiac Refining Corp. at December 31, 1967 and the results of its operations for the seven months then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding period, after giving retroactive effect to the account ing changes and adjustments discussed in note 4 to the financial statesients. Rut;//rz*54aC' pz>. January 25, 1968 PONTIAC REFINING CORP. Statement of Income and Retained Income Seven months ended December 31, 1967 (Thousands of dollars except for per share amount) JM** grating costs: Costs excluding items listed below Selling and administrative Depreciation Total operating costs Operating income Other income Operating and other income frovision for income taxes (note 3) **et income ktained income at beginning of year: As previously reported Adjustments (note 4) As restated Csh dividend ktained income at end of year kt income per common share $ 47,936 44,275 227 . 295 44,797 3,139 IX 3,150 1,581 1,569 9,731 1,517 11,248 12,817 1,000 $ 11,817 $ 7,845 See accompanying notes to financial statements PONTIAC REFINING CORP. Note8 to Financial Statements December 3L, 196? (1) Inventories Inventories of refined products ($2,604,000) and supplies ($1,313,000) at December 31, 1967 are stated at the lower of cost (average) or market. Inventories of crude oil ($1,219,000) at December 31, 1967 are stated at the lower of cost (first-in, first-out) or market. (2) Property, plant and equipment Allowances for depreciation of property, plant and equipment are provided on the straight-line method over an estimated useful life of 10 years, except for transportation equipment which has an estimated useful life of 4 years. The major classes of property, plant and equipment are as follows: Assets, at cost (Thousands of dollars) Plant, lines and dock facilities Land and rights-of-way Transportation equipment Other $ 25,762 716 120 311 $ 26,909 (3) Income taxes The Company will join with its parent in the filing of a consolidated Federal income tax return for 1967. The policy of the Company is to accrue its share of the income taxes payable and to make periodic remittances to Celanese Corporation. The policy of the Company is to take the investment tax credit into income as a reduction in the provision for income taxes over the estimated use ful lives of the related assets. Deferred Federal income taxes at December 31, 1967 represent the cumula tive amount of taxes which have been deferred as a result of using accelerated depreciation for tax purposes and straight-line depreciation for financial statement purposes. The provision for income taxes is comprised of taxes currently payable, $1,446,000, and deferred taxes, $135,000. 2 PONTIAC REFINING CORP. Notes to FinancialStatements, Continued Accounting changes and prior years adjustments Previously reported retained income at May 31, 1967 has been restated as follows: Increase (decrease) in May 31. 1967 balance Changes in accounting methods: Valuation of inventories Reserve for refinery turnarounds Deferred investment tax credit (Thousands of dollars) $ (220) (150) (211) Adjustments to earnings of.prior periods: Elimination of capital surplus repre senting excess book value over cost of acquired subsidiary (fully amortized) ' Elimination of excess liability for sales price adjustment Sundry adjustments of accruals (581) 1,376 755 (33) 2,098 Net adjustments to May 31, 1967 balance $ 1,517 (5) Sales and crude supply contracts Substantially all the Company's production of refined products is sold to one customer under the terns of a contract expiring in 1972. Quantities of refilled products to be delivered to that customer reduce substantially in the last year of the contract. The Company purchases its supply of crude products under the terms of. various contracts expiring in 1972 and 1977. (6) Retirement plans The Company has retirement plans covering substantially all employees. Charges to operations for the plans amounted to $99,000 for the sevenmonth period ended December 31, 1967, including amortization of prior service costs over periods ranging from 10' to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Accountants' Report Consolidated Financial Statements - December 31, 1968 PEAT. MARWICK. MITCHELL 8e CO. I CtftffPICD PUBLIC ACCOUNTANTS Peat, Marwick, Mitcheijl & Co. CEKT1FCED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 75800 The Board of Directors Pontiac Refining Corp.: We have examined the balance sheet of Pontiac Refining Corp., a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1968 and the related statement of income and retained income for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statement of income and retained income present fairly the financial position of Pontiac Refining Corp. at December 31, 1968 and the results of its opera tions for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding period. January 24, 1969 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Statement of Consolidated Income and Retained Income Year ended December 31, 1968 with comparative figures for 1967 Sales Operating costs: Costs excluding items listed below Selling and administrative Depreciation, depletion and amortization (note 3) Dry holes and surrendered leases Total operating costs Operating income Interest and other income Operating and other Income Provision for income taxes (note 4) Net income Retained income at beginning of year Cash dividend Retained income at end of year Net income per comaon share 1968 1967 (Thousands of dollars except per share amounts) $ 101,308 99,859 57,383 12,493 13,999 5,015 88,890 12,418 1,026 13,444 3,125 10,319 27.985 38,304 6.700 $, 31.604 $ 230.09 52,828 12,081 12,385 3,532 80,826 19,033 779 19,812 5,300 14,512 19.954 '34,466 6,481 27,985 323.59 See accompanying notes to consolidated financial statements CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements December 31. 1968 (1) Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Harbor Service Stations, Inc., Midland Gasoline Corporation, Star Oil Company, Cycler Oil Company and. Empire Oil Company (purchased in 1968). All material intercompany accounts and transactions have been eliminated. (2) Inventories Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization of property, plant and equipment. As of December 31, 1968 and 1967, the inventories were classified as follows: Crude oil and refined products Materials and supplies, at average cost ' 1968 1967 (Thousands of dollars) $ 7,300 7,214 1.687 $ 8,987 2.020 9,234 (3) Property, plant and equipment Allowances for depreciation, depletion and amortization of producing oil properties and depreciation of producing gas properties are provided on a modified straight-line method over asset lives ranging from 1 to 15 years. Allowances for depletion and amortization of producing gas properties are provided on the unit-of-production method determined by reference to periodic estimates of the gas reserves of the respective properties. Producing oil and gas properties aggregated $153,821,000 in 1968 and $150,512,000 in 1967. The remaining major classes of property, plant and equipment are depreciated on a modified straight-line method as follows:. Refinery Gas plants Marketing facilities Pipelines Assets, at cost 1968 1967 (Thousands of dollars) $ 24,799 33,003 46,805 15,740 23,783 32,416 41,345 15,311 Years 10 15 5-20 10 2 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements, Continued (3) Property, plant and equipment, cont. Nonproducing leasehold and royalty costs aggregated $12,637,000 in 1968 and $9,560,000 in 1967. (4) Income taxes Significant variations in the relationship between the provision for Federal income taxes and income before taxes arise principally because of the deductions for tax purposes of intangible development costs and the excess of allowable depletion over cost depletion. Tax allocation accounting has been applied to all other timing differences. The policy of the Company is to take the investment tax credit into Income as a reduction in the provision for income taxes over the estimated useful lives of the related assets. The Company will join with its parent in the filing of a consolidated Federal income tax return for 1968. The policy of the Company is to accrue its share of the income taxes payable and to make periodic remit tances to Celanese Corporation. The provision for income taxes is as follows: Current Deferred 1968 1967 (Thousands of dollars) $ 3,923 (798) $ 3,125 (5) Pension and retirement plans The Company has a pension plan and a retirement plan covering substantially all of its employees over 29-1/2 years of age. Charges to operations for both plans aggregated $1,263,000 in 1968 and $1,150,000 in 1967, including amortization of prior service costs over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. CHAKPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Accountants' Report Consolidated-Financial Statements - December 31, 1967 PEAT, MARWICK. MITCHELL & CO. ccrtifiko public accountants Peat, Marwick, Mitchexx Sc Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS T028O The Board of Directors Champ1in Petroleum Company: We have examined the consolidated balance sheet of Champlin Petroleum Company and subsidiaries, a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1967 and the related state ment, of income and retained income for'the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the .accounting rec ords and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and statement of consolidated income and retained income present fairly the financial position of Champlin Petroleum Company and subsidiaries at December 31, 1967 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 30, 1968 CHAHPLIH PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Statement of Consolidated Income and Retained Income Year ended December 31, 1967 with comparative figures for 1966 Ides grating costs: Costs excluding items listed below Selling and administrative Depreciation, depletion and amortization (note 3) Dry holes and surrendered leases " Total operating coats (Operating income Interest and other income Operating and other income Provision for income taxes (note 4) Net income fetained income at beginning of year Cash dividend ! Retained income at end of year Net income per common share 1967 1966 (Thousands of dollars except per share amounts) 99,859 92.807 52,828 12,081 12,385 3,532 80,826 19,033 779 19,812 5,300 14,512 , 19,954 34,466 6,481 27,985 323.59 46,386 11,350 11,690 3,876 73,302 19,505 556 20,061 5,600 14,461 11,466 25,927 5,973 19,954 322.45 </4afd financial statements CHAMPL32T PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements December 31, 1967 Principles of consolidation The 1967 consolidated financial statements Include the accounts of the Company and its wholly-owned subsidiaries, Harbor Service Stations, Inc., Midland Gasoline Corporation, Star Oil Company and Cycler Oil Company. These insignificant subsidiaries were not consolidated prior to 1967. All material intercompany accounts and transactions have been eliminated. Inventories Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization of property, plant and equipment. As of December 31, 1967 and 1966, the inventories were classified as follows: Crude oil and refined products Materials and supplies, at average cost 1967 1966 (Thousands of dollars) $ 7,214 6,832 2,020 $ 9,234 2,002 8,834 (3) Property, plant and equipment Allowances for depreciation, depletion and amortization of producing oil properties and depreciation of producing gas properties are provided on a modified straight-line method over asset lives ranging from 1 to 15 year8. Allowances for depletion and astortization of producing gas prop erties are provided on the unit-of-production method determined by reference to periodic estimates of the gas reserves of the respective properties. Producing oil and gar properties aggregated $150,512,000 in 1967 and $147,242,000 in 1966. The remaining major classea of property, plant and equipment are depreciated on a modified straight-line method as follows: 2 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements, Continued (3) Property, plant and equipment, cont. Refinery Gas plants Marketing facilities Pipelines Assets. at cost 1967 1966 (Thousands >f dollars) $ 23,783 32,416 41,345 15,311 23,374 31,247 36,187 14,791 Years . 10 15 5-20 10 Nonproducing leasehold and royalty costs aggregated $9,560,000 in 1967 and $8,209,000 in 1966. (4) Income taxes Significant variations in the relationship between the provision for Federal income taxes and income before taxes arise primarily because of the deduc tions for tax purposes of intangible development costs and the excess of allowable depletion over cost depletion. Tax allocation accounting has been applied to all other timing differences. The policy of the Company is to take the investment tax credit into income as a reduction in the provision for income taxes over the estimated useful lives of the related assets. The Company will join with its parent in the filing of a consolidated Federal income tax return for 1967. The policy of the Company is to accrue its share of the income taxes payable and to make periodic remittances to Celanese Corporation. The provision for incometaxes is as follows: Current Deferred 1967 1966 (Thousands ofdollars) $ 5,261 39 $ 5,300' 5,506 94 5,600 3 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Oelanese Corporation) Notes to Consolidated Financial Statements, Continued (5) Pension and retirement plans The Company has a pension plan and a retirement plan covering substantially all of its employees over 29-1/2 years of age. Charges to operations for both plans aggregated $1,150,000 in 1967 and $980,000 in 1966, including amortization of prior service costs over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Accountants' Report Financial Statements - December 31, 1966 PEAT. MARWICK. MITCHELL & CO. CeRTIFICO PUBLIC ACCOUHTANTk Peat, Marwick, Mitchell & Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 73250 The Board of Directors Champlin Petroleum Company: We have examined the balance sheet of Champlin Petroleum Company, a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1966 and. the related statement of income and retained income for the year then ended. Our examination was made in accord ance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statement of income and retained income present fairly the financial position of Champlin Petroleum Company at December 31, 1966 and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 31, 1967 gw w w w s CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Statement of Income and Retained Income Year ended December 31, 1966 with comparative figures for 1965 sting costs: Costs excluding items listed below 'Selling and administrative Depreciation, depletion and amortization (note 3) Dry holes and surrendered leases Total operating costs Operating income erest and other -income Operating and other income dsion for income taxes (note 3) Net income Lned income at beginning of year ah dividend tained income at end of year 1966 1965 (Thousands of dollars) $ 92,807 83,410 46,386 11,350 11,690 3,876 73,302 19,505 556 20,061 5,600 14,461 11,466 25,927 5,973 $ 19,954 44,055 11,093 9,775 3,874 68,797 14,613 328 14,941 2,600 12,341 1,975 14,316 2,850 11,466 ** accompanying notes to financial statements. CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Notes to Financial Statements December 31, 1966 (l) Inventories Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization of property, plant and equipment. As of December 31, 1966 and 1965, the inventories were classified as follows: 1966 1965 (Thousands of dollars)' Crude oil and refined products Materials and supplies, at average cost $ 6,832 2,002 $ 8,834 (2) Investments and noncurrent receivables Investments and noncurrent receivables include $821,000 as of December 31, 1966 ($501,000 for 1965) that relates to four wholly-owned unconsolidated subsidiary conpanies. Such subsidiaries, in the aggregate, do not consti tute a significant subsidiary. On the basis of financial statements not covered by the accompanying accountants1 report, the aggregate equities underlying these investments are approximately $22,000 less than the total amount at which the investments are carried. (3) Federal income taxes The Company has adopted the guideline lives established by Internal Revenue Service and has adopted the declining-balance method of conputing tax depreciation on additions to certain facilities made after January 1, 1954. The resulting reduction in income taxes is set aside as "deferred Federal income taxes" to offset the increase in taxes that is expected to occur when tax depreciation is less than it would be if the tax depreciation methods had not been adopted. Investment tax credits are deferred and taken into income over the lives of the assets to which they relate. The Company will join its parent in the filing of a consolidated Federal income tax return for 1966. z CHAMPLIN PETROLEUM COMPANY (a wholly-owned subsidiary of Celanese Corporation) Notes to Financial Statements, Continued Retirement and pension nlans The Company has a contributory retirement plan and a noncontributory pension plan for the benefit of its enployees. The cost of the plans to the Company for the year ended December 31, 1966, amounted to approximately $980,000 including payments of $126,000 to reduce the unfunded past service costs of the plans. If the Company continues to make such payments, the retirement plan will be funded in approximately 18 years, and the pension plan in approximately 27 years. On the basis of the most recent actuarial determinations, the unfunded past service costs of the plans were estimated to be $2,635,000. i CHAMPLIN PETROLEUM COMPANY Accountants' Report Financial Statements - December 31, 1965 PEAT. MARWICK. MITCHELL & CO. cuvrtpieo puslic accountants Peat, Marwick, Mitcheix & Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 75250 The Board of Directors Champlin Petroleum Company: We have examined the balance sheet of Champlin Petroleum Company, a subsidiary of Celanese Corporation of America, as.of December 31, 1965 and the related statements of earnings and retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The financial statements for 1964, included for compara tive purposes, were examined by other certified public accountants. I In our opinion, the accompanying balance sheet and statements of earnings and retained earnings present fairly the financial position of Champlin Petroleum Company at December 31, 1965 and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preced ing year. January 28, 1966 CHAMPLIN PETROLEUM COMPANY Statement of Earnings Year ended December 31, 1965 with comparative figures for 1964 it sales ists and expenses: Cost of products sold and operating expenses, exclusive of items below Selling, general and administrative expenses Depreciation, depletion and amortization (note 4) Dry holes and surrendered leases Interest expense Operating income tier income: Interest income Gain on sale of investments. Other, net Earnings before income taxes some taxes (note 4): Current Deferred State Net earnings 1965 1964 * 83.410.282- 78.126.178 44,055,558 44,739,888 11,092,645 10,159,082 9,775,581 3,873,712 -' 68.797.496 14.612.786 9,058,434 3,524,777 1.141.887 68.624.068 9.502.110 130,294 -- 197.596 327.890 14.940.676 118,102 961,485 24.090 1.103.677 10.605.787 2,459,000 116,000 25.000 2.600.000 t 121340 T 676 65,000 35.000 100.000 10.505.787 accompanying notes to financial statements CHAMPLIN PETROLEUM COMPANY Statement of Retained Earnings Year ended December 31, 1965 with comparative figures for 1964 t at beginning of year (note 1) earnings for the year (note 1) ct: Dividends paid by Champlln Oil & Refining Co., predecessor of Champlln Petroleum Company (note 1): Convertible preference stock CoKnon stock Amount transferred to capital surplus in connection with the organization of Champlln Petroleum Company (note 1) Dividend paid to parent company t at end of year 1965 1964 1,975,334 68,241,911 12.340.676 10.505.787 14.316.010 78.747.698 225,000 -- 3,822,625 2.850.000 2.850.000 $ 11.466.010 72,724,739 76.772.364 1.375.334 acccapanying notes to financial statements. CHAMPLIN PETROLEUM COMPANY Notes to Financial Statements December 31, 1965 (1) General The Company was organized on September 29, 1964 and shortly thereafter issued 44,847 shares of its #100 par value common stock for #4,484,700 in cash to Champlin Oil & Refining Co. Effective October 29, 1964 the Company acquired by donation from Champlin Oil & Refining Co. substan tially All the assets, assumed certain liabilities and succeeded to the business of that company. The assets and liabilities were recorded in accounts of the Company at the amounts carried in the accounts of Champlin Oil & Refining Co. Capital surplus was credited with the 1 excess of assets over liabilities. j ' On October 29., 1964 Champlin Oil & Refining Co, was merged into Celanese ` - Corporation of America and Champlin Petroleum Company became a wholly; owned operating subsidiary of Celanese. j For comparative purposes the accompanying financial statements set forth J figures for 1964. The statement of income for that year includes the j operations of Champlin Oil & Refining Co. to October 29, 1964 and the ] operations of its successor, Champlin Petroleum Company, for the remainder of the year. (2) Inventories of crude oil and refined products I The inventories of crude oil and refined products are stated at average cost which is less than market. The valuation of these inventories . does not include depreciation, depletion and amortization of property, plant and equipment. (3) Investments in unconsolidated subsidiaries The investments in and advances to unconsolidated subsidiaries relate to three wholly-owned subsidiary companies. On the basis of financial statements not covered by the accompanying .accountants1 report, the aggregate equities underlying these Investments are approximately #102,000 less than the total amount at which the investments are carried. (4) Federal income taxes The Company will join with its parent company in the filing of a consoli dated Federal income tax return for 1965. i 2 CHAMPLIN PETROLEUM COMPANY Notes to Financial Statements, Continued ) Federal income taxes, cont. The Company follows a general policy of providing for depreciation over the estimated useful life of depreciable assets on a straight-line basis. For Federal income tax purposes the Company uses the declining balance method of computing tax depreciation of certain facilities. This policy results in tax depreciation which is generally higher, than depreciation used for financial statement purposes. Amounts equal to the tax reductions resulting from the use of this liberalized depreciation method are charged to income and concurrently set aside to offset the increase in taxes that is expected to occur when deductions claimed are less than they would be if the tax depreciation method had not been adopted. Deferral accounting has been adopted fqr the investment tax credit. Under * this accounting, the credits are not taken Into income in the year In which they are claimed but are deferred and taken into income over the lives of the assets to which they relate. (5) Retirement and pension plans The Company has a contributory retirement plan and a noncontributory pension plan for the benefit of its employees. On the basis of the most recent actuarial determinations, the unfunded past service costs of the plans were estimated to be approximately $2,845,000. the cost of the plans to the Company for the year ended December 31, 1965 amounted to approximately $1,068,000. Arthur Andersen & Co. 0 the Board of Directors and Stockholder, Champlin Petroleum Company: First National Building. Fort Worth, Texas- 76io2 We have examined the balance sheets of Champlin Petroleum Company (a Delaware corporation, successor to Champlin Oil & Refining Co.) as of December 31, 1964 and 1963, and the related statements of income, earned surplus and capital surplusfor the years then ended and the supplementary statements (Exhibits 1, 2, 3 and 4) for the year ended December 31,. 1964. Our examination was made in accordance with ; generally accepted auditing standards, and accordingly included such < tests of the accounting records and such other auditing procedures ; as we considered necessary in the circumstances. In our opinion, the accompanying balance sheets and statements of income, earned surplus and capital surplus present fairly the financial position of Champlin Petroleum Company as of. ! December 31, 1964, and its predecessor, Champlin Oil & Refining Co., as of December 31, 1963, and the results of their operations for the years then ended, and the supplementary statements present fairly \ the information set forth therein, all in conformity with generally | j accepted accounting principles applied, after giving retroactive 4 effect to the changes in accounting for deferred Federal income taxes | and petroleum products inventories as explained in Note 2, on a basis 4 i consistent with that of the preceding year. Fort Worth, Texas i J anuary 29, 196.5. CHAMPLIN PETROLEUM COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31. 1964 AND 1963 (NOTE 1) T SALES (Note 4) 1964 1963 $75,381,314 $78,121,347 Operating charges: g Cost of products sold and other operating charges, exclusive of items below Selling, general and administrative expenses Depreciation, depletion and amortization Dry hole expense Provision for surrendered leases Interest and debt expense amortization Provision for employees' thrift and pension plans Total operating charges a Operating income $42,920,507 $43,512,702 7,776,599 9,058,434 2,159,074 1,365,703 1,141,887 7,461,871 9,242,422 2,168,900 1,300,000 1,333,278 1,457,000 1,466,000 $65,879,204 $66,485,173 $ 9,502,110 $11,636,174 .OTHER INCOME AND (EXPENSE)--Net: Gain on sale of investments Dividends- and interest Other, net Total other income Net income before provision for Federal income taxes PROVISION FOR FEDERAL INCOME TAXES Net income for the year (Note 2) $ 961,485 $ 118,102 24,090 $ 1,103,677 $ 138,881 114,180 253,061 $10,605,787 $11,889,235 100,000 1,465,000 -$10,505,787 $10,424,235 The accompanying notes are an integral part of these statements. -4- CHAMPLIN PETROLEUM COMPANY STATEMENTS OF EARNED SURPLUS t&/jj8ALANCE, December 31, 1962, as previously reported [LESS- Retroactive changes applicable to prior years (Note 2)Provision for deferred Federal income taxes Elimination of depreciation, depletion and amortization costs in petroleum products inventories [BALANCE, beginning of year, as restated I !ADD- Net income for the year (Note 2) I DEDUCTCash dividends declared onConvertible preference stock ($2.25 per share in 1964 and $3 per share in 1963) Common stock ($.90 per share in 1964 and $1.20 per share in 1963) Amount transferred to capital surplus in connection with organization of Champlin Petroleum Company (Note 1) BALANCE, end of year 1964 1963 $66,053,612 $ 1,750,000 1,114,185 $ 2,864,185 $68,241,911 $63,189,427 10,505,787 10,424,235 $78,747,698 $73,613,662 $ 225,000 $ 300,000 3,822,625 5,071,751 72,724,739 - $76,772,364 $ 5,371,751 $ 1,975,334 $68,241,911 The accompanying notes are an integral, part of these statements. -5- CHAMPLIN PETROLEUM COMPANY STATEMENTS OF CAPITAL SURPLUS FOR THE YEARS ENDED DECEMBER 31, 1964 AND 1963 (NOTE 1) DANCE, beginning of year Cash premium on sale of 43,181 shares 1964 and 21,238 shares in 1963 of f'common stock to employees under stock |option agreement (Note 5) |DUCT- Amount transferred to Champlin Petroleum Company in connection with the organization of that Company (Note 1) |IDD- Excess of assets received oyer liabilities assumed in' connection with the organization of Champlin Petroleum Company (Note 1) [BALANCE, end of year 1964 1963 $ 16,191,063 $15,763,808 986,482 $ 17,177,545 427,255 $16,191,063 17,177,545 - $ $16,191,063 124,227,391 - $124,227,391 $16,191,063 The accompanying notes are an integral part of these statements. 6- - CHAMPLIN PETROLEUM COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1964 AND 1963 (1) ORGANIZATION OF THE COMPANY: The Company was organized on September 29, 1964. Shortly thereafter, it issued 44,847 shares of its $100 par value common stock to Champlin Oil & Refining Co. for $4,484,700 in cash. Effective- October 29. 1964 (as of October 31, 1964, for accounting purposes), the Company, acquired by donation from Champlin- Oil St Refining Co. substan tially all of the assets, assumed all current liabilities and succeeded to the business of that company. The assets and liabilities have been recorded in the accounts of the new Company at the amounts carried in the accounts of Champlin Oil & Refining Co. Capital surplus has been credited with the excess of assets over liabilities. On October 29, 1964, Champlin Oil-& Refining* Co. was merged into Celanese Corporation of America and Champlin Petroleum Company became a wholly-owned operating subsidiary of Celanese. The long-term notes of Champlin Oil & Refining Co. were assumed by Celanese in connection with the merger. The accompanying statements of income, earned surplv and capital surplus for 1964 include (1) the operations of Champlin.Petroleum Company for the two months ended December ' 1964, and (2) the operations of its predecessor, Champ.lin Oil & Refining Co., for the ten months ended October 29, 1964. The financial statements for 1963 reflect the financial position and results of operations of Champlin Oil A Refining Co. for the year. (2) CHANGES IN ACCOUNTING POLICY: The Company changed its accounting policy in 1964 to (1) provide for deferred Federal income taxes arising from differences between depreciation recorded for financial accounting and Federal income tax purposes and (2) eliminate depreciation, depletion and amortization costs in the valuati* - of petroleum products inventories. The accompanying balance sheets at December 31, 196 and 1963, and related statements of ihemme^earned surplus an capital surplus give retroactive effect to tlteae--policy chang -7- Such changes had the effect of increasing net income by $22,79 in 196-4 and decreasing net income by $141,034 in 1963, reducin petroleum products inventories by $946,099 and $990,219, and establishing a reserve for deferred Federal income taxes of $2,080,000 and $2,015,000 in 1964 and 1963 respectively. Earned surplus at December 31, 1962, has been - restated to show the decrease in prior years' net income of $2,864,185. (3) INVESTMENTS, ADVANCES, ETC.: Included under this caption are noncurrent notes receivable of $1,597,000 and investments in and advances of $501,000 to three wholly-owned unconsolidated subsidiaries. Based on financial statements not covered by the accompanying auditors' opinion, the aggregate equities underlying these investments are. approximately $124,000 less than the total amount at which the investments are carried. (4) NET SALES.: Net sales for the years ended December 31, 1964 and 1963, were as follows: 1964 1963 Refinery products Crude oil and field distillate Gas plant products Dry gas $50,998,595 $54,044,301 17,652,651 6,883,027 12,973,417 16,550,765 7,022,776 12,376,647 Less- Company produced crude to stills $88,507,690 $89,994,489 13,126,376 11,873,142 Net sales $75,381,314 $78,121,347 (5) STOCK OPTION PLAN: Under a stock option plan, options covering 43,181 shares were outstanding and exercisable at December 31, 1963. All of the options were exercised prior to the merger referred to in Note 1. SCHEDULE OF PRINCIPAL REAL ESTATE HOLDINGS OF CHAMPLIN PETROLEUM COMPANY AND PONTIAC REFINING CORP. Exhibit n Refineries : Enid, Oklahoma........................................... Corpus Christi, Texas.................................. Fee Fee Natural Gas Processing Plants: Bishop, Texas.............................. . (Gulf Plains Plant) Carthage, Texas.......................... . Conroe, Texas............. ................. (Midland Gasoline Corp. Plant) Enid, Oklahoma................... Oklahoma City, Oklahoma .. (Witcher Rant) Fee (subject to reverter upon abandonment of plant) Fee Leasehold Leasehold Fee . Products Pipeline Terminals: Oklahoma City, Oklahoma .. Enid, Oklahoma................... Hutchinson, Kansas.............. Superior, Nebraska.............. Columbus, Nebraska ....... Rock Rapids, Iowa................ < Fee Fee Fee Fee. Fee Fee Office Buildings: Fort Worth, Texas........................................ Enid, Oklahoma........................ Oklahoma City, Oklahoma........................... Fee Fee Fee EXHIBIT III TABLE OF HYDROCARBON RESERVES June 30, 1969 Type Unite Crude ofl and condensate............................................. 46,800,000 bbls. Natural gas liquids........................................... 28,400,000 bbls. Champlin owned royalty............................................... 600,000 bbls. Total liquids ............................................... 75,800,000 bbls. Natural gas................................................................. 1,000,000,000 MCF The above quantities of hydrocarbon reserves were computed by Champiin's engineering department, in accordance with generally accepted petroleum engineering standards, as of January 1, 1968, and are empirically estimated to be within a 10% tolerance of such computations as of June 30, 1969. The reserves tabulated above represent Champiin's net proven recoverable reserves; Le., not includ ing royalties, overriding royalties, oil payments, working interests, or other interests owned by or payable to third parties. The reserves of natural gas liquids include both company owned reserves and reserves which will be earned as a processing fee by Champlin for processing gas owned by others in Champiin's natural gas processing plants. Approximately 60% of such natural gas liquid reserves are from company owned acreage and approximately 40% are from process acreage. EXHIBIT IV GUARANTY Union Pacific Corporation, a Utah corporation, hereby absolutely and unconditionally guarantees he payments when due of the instalment portion of the purchase price payable by Union Pacific Petroleum Corporation to Celanese Corporation under and subject to the terms and conditions of Section 5.2(b) >{ the Agreement dated as of August 28, 1969 between the parties as such payment obligations may renewed, extended or modified by the said parties. Union Pacific Corporation waives notice and lgrees to any extension in the time of payment and further agrees that Celanese Corporation shall have lue remedy under this guaranty without being obliged to resort first to any other remedy or remedies :o enforce payment of the said installment obligations hereby guaranteed and that it may pursue all ind any other of its remedies at one or different times. In Witness Wheeeof, Union Pacific Corporation has caused this guaranty to be signed by its President and its corporate seal to be hereunto affixed and attested to by its Secretary as of [Coxposate Seal] Attest: UNION PACIFIC CORPORATION By