SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER: 1-11675
TRITON ENERGY LIMITED
(Exact name of registrant as specified in its charter)
CAYMAN ISLANDS NONE
- ---------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
Organization)
CALEDONIAN HOUSE, MARY STREET, P.O. BOX 1043, GEORGE TOWN, GRAND CAYMAN,
CAYMAN ISLANDS
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (345) 949-0050
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Number of Shares
Title of Each Class Outstanding at July 31, 1998
Ordinary Shares, par value $0.01 per share 36,628,674
----------------------------
<PAGE>
TRITON ENERGY LIMITED AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three and six months ended June 30, 1998 and 1997 2
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1998 and 1997 4
Condensed Consolidated Statement of Shareholders' Equity -
Six months ended June 30, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 24
<FN>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ---------------------
1998 1997 1998 1997
-------------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Sales and other operating revenues:
Oil and gas sales $ 36,378 $ 28,492 $ 72,553 $ 62,251
Other operating revenues --- 4,077 --- 4,077
-------------- ----------- ---------- ---------
36,378 32,569 72,553 66,328
-------------- ----------- ---------- ---------
Costs and expenses:
Operating 21,081 10,912 36,768 22,133
General and administrative 6,495 7,788 14,184 13,492
Depreciation, depletion and amortization 12,804 8,012 24,883 15,455
Writedown of assets 182,672 --- 182,672 ---
-------------- ----------- ---------- ---------
223,052 26,712 258,507 51,080
-------------- ----------- ---------- ---------
Operating income (loss) (186,674) 5,857 (185,954) 15,248
Gain on sale of Triton Pipeline Colombia --- --- 50,227 ---
Interest income 757 2,411 1,492 3,316
Interest expense, net (5,154) (7,223) (10,320) (12,249)
Other income, net 1,536 1,163 3,028 306
-------------- ----------- ---------- ---------
(2,861) (3,649) 44,427 (8,627)
-------------- ----------- ---------- ---------
Earnings (loss) before income taxes
and extraordinary item (189,535) 2,208 (141,527) 6,621
Income tax expense (benefit) (39,473) 2,516 (34,377) 3,443
-------------- ----------- ---------- ---------
Earnings (loss) before extraordinary item (150,062) (308) (107,150) 3,178
Extraordinary item - extinguishment of debt --- (14,491) --- (14,491)
-------------- ----------- ---------- ---------
Net loss (150,062) (14,799) (107,150) (11,313)
Dividends on preference shares --- --- 187 213
-------------- ----------- ---------- ---------
Loss applicable to ordinary shares $ (150,062) $ (14,799) $(107,337) $(11,526)
============== =========== ========== =========
Average ordinary shares outstanding 36,595 36,432 36,581 36,404
============== =========== ========== =========
Basic earnings (loss) per ordinary share:
Earnings (loss) before extraordinary item $ (4.10) $ (0.01) $ (2.93) $ 0.08
Extraordinary item - extinguishment of debt --- (0.40) --- (0.40)
-------------- ----------- ---------- ---------
Net loss $ (4.10) $ (0.41) $ (2.93) $ (0.32)
============== =========== ========== =========
Diluted earnings (loss) per ordinary share:
Earnings (loss) before extraordinary item $ (4.10) $ (0.01) $ (2.93) $ 0.08
Extraordinary item - extinguishment of debt --- (0.40) --- (0.39)
-------------- ----------- ---------- ---------
Net loss $ (4.10) $ (0.41) $ (2.93) $ (0.31)
============== =========== ========== =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS JUNE 30, DECEMBER 31,
<S> <C> <C>
1998 1997
------------ -----------
(UNAUDITED)
Current assets:
Cash and equivalents $ 20,524 $ 13,451
Trade receivables, net 8,415 12,963
Other receivables 41,649 52,162
Inventories, prepaid expenses and other 2,954 5,219
Assets held for sale 2,005 58,178
------------ -----------
Total current assets 75,547 141,973
Property and equipment, at cost, less accumulated depreciation
and depletion of $284,143 for 1998 and $89,014 for 1997 723,369 835,506
Deferred taxes and other assets 120,140 120,560
------------ -----------
$ 919,056 $1,098,039
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt $ 199,977 $ 184,975
Accounts payable and accrued liabilities 29,500 36,964
Deferred income 35,254 35,254
------------ -----------
Total current liabilities 264,731 257,193
Long-term debt, excluding current maturities 418,276 443,312
Deferred income taxes 12,100 50,968
Deferred income and other 32,727 49,946
Convertible debentures due to employees --- ---
Shareholders' equity:
Preference shares 7,473 7,511
Ordinary shares, par value $0.01 366 365
Additional paid-in capital 590,244 588,454
Accumulated deficit (404,731) (297,581)
Accumulated other non-owner changes in shareholders' equity (2,126) (2,126)
------------ -----------
191,226 296,623
Less cost of ordinary shares in treasury 4 3
------------ -----------
Total shareholders' equity 191,222 296,620
Commitments and contingencies (note 8) --- ---
------------ -----------
$ 919,056 $1,098,039
============ ===========
</TABLE>
The Company uses the full cost method to account for its oil and gas producing
activities.
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(107,150) $ (11,313)
Adjustments to reconcile net loss to net cash provided (used)
by operating activities:
Depreciation, depletion and amortization 24,883 15,455
Amortization of deferred income (17,627) (10,839)
Gain on sale of Triton Pipeline Colombia (50,227) ---
Writedown of assets 182,672 ---
Payment of accreted interest on extinguishment of debt --- (124,794)
Extraordinary loss on extinguishment of debt, net of tax --- 14,491
Amortization of debt discount --- 7,937
Deferred income taxes (35,727) 1,699
Other (1,585) (79)
Changes in working capital pertaining to operating activities 10,069 17,627
---------- ----------
Net cash provided (used) by operating activities 5,308 (89,816)
---------- ----------
Cash flows from investing activities:
Capital expenditures and investments (97,849) (107,526)
Proceeds from sale of Triton Pipeline Colombia 97,656 ---
Proceeds from sales of assets 12,953 4,077
Other (899) (27)
---------- ----------
Net cash provided (used) by investing activities 11,861 (103,476)
---------- ----------
Cash flows from financing activities:
Proceeds from revolving lines of credit and long-term debt 114,005 508,880
Payments on revolving lines of credit and long-term debt (135,588) (316,140)
Short-term notes payable, net 10,000 10,000
Issuances of ordinary shares 1,940 4,336
Other (188) (201)
---------- ----------
Net cash provided (used) by financing activities (9,831) 206,875
---------- ----------
Effect of exchange rate changes on cash and equivalents (265) (552)
---------- ----------
Net increase in cash and equivalents 7,073 13,031
Cash and equivalents at beginning of period 13,451 11,048
---------- ----------
Cash and equivalents at end of period $ 20,524 $ 24,079
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Preference shares:
Balance at December 31, 1997 $ 7,511
Conversion of 5% preference shares (38)
--------------
Balance at June 30, 1998 7,473
--------------
Ordinary shares:
Balance at December 31, 1997 365
Issuances under stock plans 1
--------------
Balance at June 30, 1998 366
--------------
Additional paid-in capital:
Balance at December 31, 1997 588,454
Cash dividends, 5% preference shares (187)
Conversion of 5% preference shares 38
Issuances under stock plans 1,939
--------------
Balance at June 30, 1998 590,244
--------------
Treasury shares:
Balance at December 31, 1997 (3)
Purchase of treasury shares (1)
--------------
Balance at June 30, 1998 (4)
--------------
Accumulated deficit:
Balance at December 31, 1997 (297,581)
Net loss (107,150)
--------------
Balance at June 30, 1998 (404,731)
--------------
Accumulated other non-owner changes in
shareholders' equity:
Balance at December 31, 1997 (2,126)
Other non-owner changes in shareholders' equity ---
--------------
Balance at June 30, 1998 (2,126)
--------------
Total shareholders' equity at June 30, 1998 $ 191,222
==============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
TRITON ENERGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN TABLES IN THOUSANDS)
(UNAUDITED)
1. GENERAL
Triton Energy Limited ("Triton") is an international oil and gas exploration
and production company. The term "Company" when used herein means Triton and
its subsidiaries and other affiliates through which the Company conducts its
business. The Company's principal properties, operations, and oil and gas
reserves are located in Colombia and Malaysia-Thailand. The Company is
actively exploring for oil and gas in these areas, as well as in Southern
Europe, Africa, and the Middle East. All sales currently are derived from oil
and gas production in Colombia.
On March 30, 1998, the Company announced that its Board of Directors approved
the retention of CIBC World Markets Lovegrove & Associates and Lehman
Brothers, Inc. as independent advisers to assist in studying strategic
alternatives for the Company. The strategic alternatives under consideration
included the sale or farmout of a portion or all of the Company's interest in
Block A-18 of the Malaysia-Thailand Joint Development Area in the Gulf of
Thailand, the sale of a portion or all of the Company's interest in the
Cusiana and Cupiagua oil fields in Colombia, or both. The Company received
proposals regarding strategic alternatives during the second quarter. See
note 10 - Subsequent Events.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of the Company contain all adjustments of a
normal recurring nature necessary to present fairly the Company's financial
position as of June 30, 1998, and the results of its operations for the three
and six months ended June 30, 1998 and 1997, its cash flows for the six months
ended June 30, 1998 and 1997, and shareholders' equity for the six months
ended June 30, 1998. The results for the three and six months ended June 30,
1998, are not necessarily indicative of the final results to be expected for
the full year.
The condensed consolidated financial statements should be read in conjunction
with the Notes to Consolidated Financial Statements, which are included as
part of the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
Certain other previously reported financial information has been reclassified
to conform to the current period's presentation.
2. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement No.
130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 established
standards for the reporting and display of comprehensive income and its
components, specifically net income and all other changes in shareholders'
equity except those resulting from investments by and distributions to
shareholders. The Company, which adopted the standard beginning January 1,
1998, has elected to display comprehensive income (or non-owner changes in
shareholders' equity) in the Condensed Consolidated Statement of Shareholders'
Equity. This statement does not have any effect on the Company's results of
operations or financial position.
3. WRITEDOWN OF ASSETS
Writedown of assets is summarized as follows:
<TABLE>
<CAPTION>
THREE AND SIX
MONTHS ENDED
JUNE 30, 1998
--------------
<S> <C>
Evaluated oil and gas properties $ 105,354
Unevaluated oil and gas properties 73,890
Other assets 3,428
--------------
$ 182,672
==============
</TABLE>
In June 1998, the carrying amount of the Company's evaluated oil and gas
properties in Colombia were written down by $105.4 million ($68.5 million, net
of tax) through application of the full cost ceiling limitation as prescribed
by the Securities and Exchange Commission ("SEC"), principally as a result of
a decline in oil prices. The SEC ceiling test was calculated using the June
30, 1998, West Texas Intermediate ("WTI") oil price of $14.18 per barrel with
a differential for Cusiana crude delivered at the port of Covenas in Colombia
of $1.18 per barrel, for a net price of $13 per barrel.
In conjunction with the culmination of the "strategic alternatives" process,
the Company assessed its investments in exploration licenses and determined
that certain investments were impaired based on a plan to restructure the
Company's operations and substantially scale back exploration related capital
expenditures. As a result, unevaluated oil and gas properties and other
assets totaling $77.3 million ($72.6 million, net of tax) were expensed. The
writedown included $27.2 million and $22.5 million related to exploration
activity in Guatemala and China, respectively. The remaining writedowns
relate to the Company's exploration projects in certain other areas of the
world.
4. ASSET DISPOSITIONS
In February 1998, the Company sold Triton Pipeline Colombia, Inc. ("TPC"), a
wholly owned subsidiary that held the Company's 9.6% equity interest in the
Colombian pipeline company, Oleoducto Central S. A. ("OCENSA"), to an
unrelated third party (the "Purchaser") for $100 million. Net proceeds were
approximately $97.7 million after $2.3 million of expenses. The sale resulted
in an aftertax gain of $50.2 million. TPC's investment in OCENSA, totaling
$47.4 million at December 31, 1997, was included in assets held for sale.
In conjunction with the sale of TPC, the Company entered into a five-year
equity swap with a creditworthy financial institution (the "Counterparty").
The equity swap has a notional amount of $97 million and requires the Company
to make floating LIBOR-based payments on the notional amount to the
Counterparty. In exchange, the Counterparty is required to make payments to
the Company equivalent to 97% of the dividends TPC receives in respect of its
equity interest in OCENSA. Upon a sale by the Purchaser of the TPC shares,
the Company will receive from the Counterparty, or make a cash payment to the
Counterparty, an amount equal to the excess or deficiency, as applicable, of
the difference between 97% of the net proceeds from the Purchaser's sale of
the TPC shares and the notional amount. The equity swap will be carried in
the Company's financial statements at fair value during the five-year term.
Fluctuations in the fair value of the equity swap will affect other income as
noncash adjustments.
In June 1997, the Company sold its Argentine subsidiary for cash proceeds of
$4.1 million and recognized a gain of $4.1 million in other operating
revenues.
5. EXTRAORDINARY ITEM
In May and June 1997, the Company completed a tender offer and consent
solicitation with respect to its Senior Subordinated Discount Notes due
November 1, 1997 ("1997 Notes") and 9 3/4% Senior Subordinated Discount Notes
due December 15, 2000 ("9 3/4% Notes") that resulted in the retirement of the
1997 Notes and substantially all of the 9 3/4% Notes. The Company's results
of operations for the six months ended June 30, 1997, included an
extraordinary expense of $14.5 million, net of a $7.8 million tax benefit,
associated with the extinguishment of the 1997 Notes and 9 3/4% Notes. The
remainder of the 9 3/4% Notes were retired in 1998.
6. DEBT
During the six months ended June 30, 1998, the Company used proceeds from the
sale of assets and net proceeds from borrowings under other unsecured credit
facilities to repay and terminate its $125 million unsecured credit facility
and fund other capital requirements.
7. EARNINGS PER ORDINARY SHARE
For the three and six months ended June 30, 1998 and the three months ended
June 30, 1997, the computation of diluted net loss per ordinary share was
antidilutive, and therefore, the amounts reported for basic and diluted net
loss per ordinary share were the same.
The following table reconciles the numerators and denominators of the basic
and diluted earnings per ordinary share computation for earnings from
continuing operations for the six months ended June 30, 1997.
<TABLE>
<CAPTION>
INCOME SHARE PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
SIX MONTHS ENDED JUNE 30, 1997:
Earnings before extraordinary item $3,178
Less: Preference share dividends (213)
----------
Earnings before extraordinary item
available to ordinary shareholders 2,965
<S> <C> <C> <C>
Basic earnings per ordinary share 36,404 $ 0.08
==========
Effect of dilutive securities:
Stock options --- 483
Convertible debentures --- 94
---------- -------------
Earnings before extraordinary item
available to ordinary shareholders
and assumed conversions $ 2,965
==========
Diluted earnings before extraordinary
item per ordinary share 36,981 $ 0.08
============= =========
</TABLE>
At June 30, 1998, 217,169 shares of 5% preference shares were outstanding.
Each preference share is convertible any time into one ordinary share, subject
to adjustment in certain events. The preference shares were not included in
the computation of diluted earnings per ordinary share because the effect of
assuming conversion of preference shares was antidilutive.
8. COMMITMENTS AND CONTINGENCIES
Development of the Cusiana and Cupiagua fields (the "Fields"), including
drilling and construction of additional production facilities, will require
further capital outlays. The Company's capital budget for the year ending
December 31, 1998, was approximately $176 million, excluding capitalized
interest, of which approximately $103 million related to the Fields, $23
million related to Block A-18, and $50 million related to the Company's
activities in other parts of the world. See note 10 - Subsequent Events.
The Company expects to fund capital expenditures and repay debt in the future
with a combination of some or all of the following: cash flow from operations,
cash, credit facilities, asset sales and the issuance of debt and equity
securities. (See Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Requirements.)
<PAGE>
GUARANTEES
At June 30, 1998, the Company had guaranteed loans of approximately $2.1
million for a Colombian pipeline company in which the Company has an ownership
interest. The Company also guaranteed performance of $27.9 million in future
exploration expenditures in various countries. These commitments are backed
primarily by unsecured letters of credit.
LITIGATION
In July and August 1998, five lawsuits were filed against the Company and
Thomas G. Finck, the former Chairman and Chief Executive Officer of the
Company, and three of which also are brought against Peter Rugg, the Chief
Financial Officer of the Company. Each case is filed on behalf of a putative
class of persons and/or entities who purchased the Company's securities
between March 30, 1998 and July 17, 1998, inclusive. The cases allege
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as amended, and Rule 10b-5 promulgated thereunder in connection with
disclosures concerning the Company's properties, operations, and value
relating to a prospective sale of the Company or of all or a part of its
assets. Each lawsuit was filed in the United States District Court for the
Eastern District of Texas, Texarkana Division, as follows: D.H. Lee, Jr., et
al. v. Triton Energy Limited, et al.; Richard Strauss, et al. v. Triton Energy
Limited, et al.; Birdie Capital Corp., et al. v. Triton Energy Limited, et
al.; North River Trading Co., LLC, et al. v. Triton Energy, Ltd., et al.; and
Ken Bortner, et.al. v. Triton Energy Limited, et. al.
The Company believes it has meritorious defenses to these claims and intends
to vigorously defend these actions. The date for answer or response is not
yet due, no discovery has been taken at this time, and the ultimate outcome is
not currently predictable.
The Company is subject to certain other litigation matters, none of which is
expected to have a material, adverse effect on the Company's operations or
consolidated financial condition.
9. CERTAIN FACTORS THAT COULD AFFECT FUTURE OPERATIONS
Certain statements in this report, including expectations, intentions, plans
and beliefs of the Company and management, including those contained in or
implied by "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and these Notes to Condensed Consolidated Financial
Statements, are forward-looking statements, as defined in Section 21D of the
Securities Exchange Act of 1934, that are dependent on certain events, risks
and uncertainties that may be outside the Company's control. These
forward-looking statements include statements of management's plans and
objectives for the Company's future operations and statements of future
economic performance; information regarding schedules for the start-up of
production facilities; expected or planned production or transportation
capacity; when the Fields might become self-financing; future production of
the Fields; the negotiation of a gas-sales contract in Malaysia-Thailand; the
Company's capital budget and future capital requirements; the Company's
meeting its future capital needs; the amount by which production from the
Fields may increase or when such increased production may commence; the
Company's realization of its deferred tax asset; the level of future
expenditures for environmental costs; the outcome of regulatory and litigation
matters; the impact of Year 2000 issues; and the assumptions described in this
report underlying such forward-looking statements. Actual results and
developments could differ materially from those expressed in or implied by
such statements due to a number of factors, including those described in the
context of such forward-looking statements, as well as those presented below.
CERTAIN FACTORS RELATING TO THE OIL AND GAS INDUSTRY
The Company's strategy is to focus its exploration activities on what the
Company believes are relatively high-potential prospects. No assurance can be
given that these prospects contain significant oil and gas reserves or that
the Company will be successful in its exploration activities thereon. The
Company follows the full cost method of accounting for exploration and
development of oil and gas reserves whereby all acquisition, exploration and
development costs are capitalized. Costs related to acquisition, holding and
initial exploration of licenses in countries with no proved reserves are
initially capitalized, including internal costs directly identified with
acquisition, exploration and development activities. The Company's
exploration licenses are periodically assessed for impairment on a
country-by-country basis. If the Company's investment in exploration licenses
within a country where no proved reserves are assigned is deemed to be
impaired, the licenses are written down to estimated recoverable value. If
the Company abandons all exploration efforts in a country where no proved
reserves are assigned, all exploration costs associated with the country are
expensed. The Company's assessments of whether its investment within a
country is impaired and whether exploration activities within a country will
be abandoned are made from time to time based on its review and assessment of
drilling results, seismic data and other information it deems relevant. Due
to the unpredictable nature of exploration drilling activities, the amount and
timing of impairment expense are difficult to predict with any certainty.
Financial information concerning the Company's assets at December 31, 1997,
including capitalized costs by geographic area, is set forth in note 21 of
Notes to Consolidated Financial Statements in Triton's Annual Report on Form
10-K for the year ended December 31, 1997.
The markets for oil and natural gas historically have been volatile and are
likely to continue to be volatile in the future. Oil and natural-gas prices
have been subject to significant fluctuations during the past several decades
in response to relatively minor changes in the supply of and demand for oil
and natural gas, market uncertainty and a variety of additional factors that
are beyond the control of the Company. These factors include the level of
consumer product demand, weather conditions, domestic and foreign government
regulations, political conditions in the Middle East and other production
areas, the foreign supply of oil and natural gas, the price and availability
of alternative fuels, and overall economic conditions. It is impossible to
predict future oil and gas price movements with any certainty.
The Company's oil and gas business is also subject to all of the operating
risks normally associated with the exploration for and production of oil and
gas, including, without limitation, blowouts, cratering, pollution,
earthquakes, labor disruptions and fires, each of which could result in
substantial losses to the Company due to injury or loss of life and damage to
or destruction of oil and gas wells, formations, production facilities or
other properties. In accordance with customary industry practices, the
Company maintains insurance coverage limiting financial loss resulting from
certain of these operating hazards. Losses and liabilities arising from
uninsured or underinsured events would reduce revenues and increase costs to
the Company. There can be no assurance that any insurance will be adequate to
cover losses or liabilities. The Company cannot predict the continued
availability of insurance, or its availability at premium levels that justify
its purchase.
The Company's oil and gas business is also subject to laws, rules and
regulations in the countries where it operates, which generally pertain to
production control, taxation, environmental and pricing concerns, and other
matters relating to the petroleum industry. Many jurisdictions have at
various times imposed limitations on the production of natural gas and oil by
restricting the rate of flow for oil and natural-gas wells below their actual
capacity. There can be no assurance that present or future regulation will
not adversely affect the operations of the Company.
The Company is subject to extensive environmental laws and regulations. These
laws regulate the discharge of oil, gas or other materials into the
environment and may require the Company to remove or mitigate the
environmental effects of the disposal or release of such materials at various
sites. The Company does not believe that its environmental risks are
materially different from those of comparable companies in the oil and gas
industry. Nevertheless, no assurance can be given that environmental laws and
regulations will not, in the future, adversely affect the Company's
consolidated results of operations, cash flows or financial position.
Pollution and similar environmental risks generally are not fully insurable.
CERTAIN FACTORS RELATING TO INTERNATIONAL OPERATIONS
The Company derives substantially all of its consolidated revenues from
international operations. Risks inherent in international operations include
loss of revenue, property and equipment from such hazards as expropriation,
nationalization, war, insurrection and other political risks; trade protection
measures; risks of increases in taxes and governmental royalties; and
renegotiation of contracts with governmental entities; as well as changes in
laws and policies governing operations of other companies. Other risks
inherent in international operations are the possibility of realizing economic
currency-exchange losses when transactions are completed in currencies other
than U.S. dollars and the Company's ability to freely repatriate its earnings
under existing exchange control laws. To date, the Company's international
operations have not been materially affected by these risks.
<PAGE>
CERTAIN FACTORS RELATING TO COLOMBIA
The Company is a participant in significant oil and gas discoveries in the
Fields, located approximately 160 kilometers (100 miles) northeast of Bogota,
Colombia. Development of reserves in the Fields is ongoing and will require
additional drilling and completion of the production facilities currently
under construction. The Company expects that the production facilities will
be completed during 1998 and that drilling will continue at least into 1999.
Pipelines connect the major producing fields in Colombia to export facilities
and to refineries.
From time to time, guerrilla activity in Colombia has disrupted the operation
of oil and gas projects causing increased costs. Such activity increased over
the last year, causing delays in the development of the Cupiagua Field.
Although the Colombian government, the Company and its partners have taken
steps to maintain security and favorable relations with the local population,
there can be no assurance that attempts to reduce or prevent guerrilla
activity will be successful or that guerrilla activity will not disrupt
operations in the future.
Colombia is among several nations whose progress in stemming the production
and transit of illegal drugs is subject to annual certification by the
President of the United States. In 1998, the President of the United States
announced that Colombia would not be certified, but was granted a national
interest waiver. There can be no assurance that, in the future, Colombia will
receive certification or a waiver. The consequences of the failure to receive
certification or a national interest waiver generally include the following:
all bilateral aid, except anti-narcotics and humanitarian aid, would be
suspended; the Export-Import Bank of the United States and the Overseas
Private Investment Corporation would not approve financing for new projects in
Colombia; U.S. representatives at multilateral lending institutions would be
required to vote against all loan requests from Colombia, although such votes
would not constitute vetoes; and the President of the United States and
Congress would retain the right to apply future trade sanctions. Each of
these consequences could result in adverse economic consequences in Colombia
and could further heighten the political and economic risks associated with
the Company's operations in Colombia. Any changes in the holders of
significant government offices could have adverse consequences on the
Company's relationship with the Colombian national oil company and the
Colombian government's ability to control guerrilla activities and could
exacerbate the factors relating to foreign operations discussed above.
CERTAIN FACTORS RELATING TO MALAYSIA-THAILAND
The Company is a partner in a significant gas exploration project located in
the upper Malay Basin in the Gulf of Thailand approximately 450 kilometers
northeast of Kuala Lumpur and 750 kilometers south of Bangkok as a contractor
under a production-sharing contract covering Block A-18 of the
Malaysia-Thailand Joint Development Area. Test results to date indicate that
significant gas and oil deposits lie within the block. Development of gas
production is in the early planning stages but is expected to take several
years and require the drilling of additional wells and the installation of
production facilities, which will require significant additional capital
expenditures, the ultimate amount of which cannot be predicted. Pipelines
also will be required to be connected between Block A-18 and ultimate markets.
The terms under which any gas produced from the Company's contract area in
Malaysia-Thailand is sold may be affected adversely by the present monopoly,
gas-purchase and transportation conditions in both Malaysia and Thailand. In
connection with the sale to a subsidiary of Atlantic Richfield Company
("ARCO") of one-half of the shares of the Company's subsidiary that held its
interest in Block A-18, ARCO agreed to pay all future exploration and
development costs attributable to the Company's and ARCO's collective interest
in Block A-18, up to $377 million or until first production from a gas field,
at which time the Company and ARCO would each pay 50% of such costs. See note
10 - Subsequent Events.
COMPETITION
The Company encounters strong competition from major oil companies (including
government-owned companies), independent operators and other companies for
favorable oil and gas concessions, licenses, production-sharing contracts and
leases, drilling rights and markets. Additionally, the governments of certain
countries where the Company operates may from time to time give preferential
treatment to their nationals. The oil and gas industry as a whole also
competes with other industries in supplying the energy and fuel requirements
of industrial, commercial and individual consumers.
MARKETS
Crude oil, natural gas, condensate, and other oil and gas products generally
are sold to other oil and gas companies, government agencies and other
industries. The availability of ready markets for oil and gas that might be
discovered by the Company and the prices obtained for such oil and gas depend
on many factors beyond the Company's control, including the extent of local
production and imports of oil and gas, the proximity and capacity of pipelines
and other transportation facilities, fluctuating demands for oil and gas, the
marketing of competitive fuels, and the effects of governmental regulation of
oil and gas production and sales. Pipeline facilities do not exist in certain
areas of exploration and, therefore, any actual sales of discovered oil or gas
might be delayed for extended periods until such facilities are constructed.
LITIGATION
The outcome of litigation and its impact on the Company are difficult to
predict due to many uncertainties, such as jury verdicts, the application of
laws to various factual situations, the actions that may or may not be taken
by other parties and the availability of insurance. In addition, in certain
situations, such as environmental claims, one defendant may be responsible, or
potentially responsible, for the liabilities of other parties. Moreover,
circumstances could arise under which the Company may elect to settle claims
at amounts that exceed the Company's expected liability for such claims in
order to avoid costly litigation. Judgments or settlements could, therefore,
exceed any reserves.
10. SUBSEQUENT EVENTS
In July 1998, the Company and ARCO signed an agreement providing financing for
the development of the Company's gas reserves on Block A-18 of the
Malaysia-Thailand Joint Development Area. Under terms of the agreement,
consumated in August 1998, the Company sold to a subsidiary of ARCO for $150
million one-half of the shares of the subsidiary through which the Company
owned its 50% share of Block A-18. The agreements also require ARCO to pay
all future exploration and development costs attributable to the Company's and
ARCO's collective interest in Block A-18, up to $377 million or until first
production from a gas field, at which time the Company and ARCO would each pay
50% of such costs. Additionally, the agreements require ARCO to pay the
Company an additional $65 million each at July 1, 2002 and July 1, 2005, if
certain specific development objectives are met by such dates, or $40 million
each if the objectives are met within one year thereafter.
The agreements provide that the Company will recover its investment in
recoverable costs in the project, approximately $105 million, and that ARCO
will recover its investment in recoverable costs, on a first-in, first-out
basis from the cost recovery portion of future production. The sale resulted
in an aftertax gain of approximately $63 million, which will be recorded in
the third quarter of 1998.
In July 1998, the Company announced a plan to restructure the Company's
operations, reduce overhead costs and substantially scale back exploration
related capital expenditures. The plan includes staff reductions, branch
office closings and the sale of the Company's remaining corporate aircraft.
The Company expects to record a restructuring charge of approximately $20
million in the third quarter.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL REQUIREMENTS
-------------------------------------------------
Cash and cash equivalents totaled $20.5 million and $13.5 million at June
30, 1998, and December 31, 1997, respectively. Working capital deficit was
$189.2 million at June 30, 1998, compared with $115.2 million at December 31,
1997. At June 30, 1998, borrowings of $168 million under the Company's bank
credit facilities, which mature during the period November 1998 through March
1999, were classified as a current liability. Current liabilities also
included deferred income totaling $35.3 million at June 30, 1998 and at
December 31, 1997 related to a forward oil sale consummated in 1995.
The Company's capital expenditures and other capital investments were
$97.8 million ($83.2 million excluding capitalized interest) for the six
months ended June 30, 1998, primarily for development of the Cusiana and
Cupiagua fields (the "Fields") in Colombia and exploration in Block A-18 in
the Malaysia-Thailand Joint Development Area in the Gulf of Thailand. The
capital spending program for the six months ended June 30, 1998, was funded
primarily with cash flow from operations, asset sales and borrowings under the
Company's credit facilities.
Development of the Fields, including drilling and construction of
additional production facilities, will require further capital outlays. The
Company's capital budget for the year ending December 31, 1998, was
approximately $176 million, excluding capitalized interest, of which
approximately $103 million related to the Fields ($50.2 million incurred
through June 30), $23 million related to Block A-18 ($10.8 million incurred
through June 30), and $50 million related to the Company's activities in other
parts of the world ($22.2 million incurred through June 30).
In July 1998, the Company and a subsidiary of the Atlantic Richfield
Company ("ARCO") signed an agreement providing financing for the
development of the Company's gas reserves on Block A-18 of the
Malaysia-Thailand Joint Development Area. Under terms of the agreement,
consumated in August 1998, the Company sold to a subsidiary of ARCO for $150
million one-half of the shares of the subsidiary through which the Company
owned its 50% share of Block A-18. The agreements also require ARCO to pay
all future exploration and development costs attributable to the Company's and
ARCO's collective interest in Block A-18, up to $377 million or until first
production from a gas field, at which time the Company and ARCO would each pay
50% of such costs. Additionally, the agreements require ARCO to pay the
Company an additional $65 million each at July 1, 2002 and July 1, 2005, if
certain specific development objectives are met by such dates, or $40 million
each if the objectives are met within one year thereafter.
The Company expects to fund capital expenditures and repay debt in the
future with a combination of some or all of the following: cash flow from
operations, cash, credit facilities, asset sales and the issuance of debt and
equity securities. The Company is currently pursuing a new long-term revolving
credit facility that combined with the proceeds from the sale to ARCO would
replace the Company's existing credit facilities and provide additional
working capital. Under the most restrictive covenant in the Company's
existing credit facilities, the Company generally could not permit total
indebtedness (as defined in the various agreements) to exceed $650 million.
Due to certain covenants contained in the existing revolving credit facilities
specifying minimum levels of production, the Company will be required, if such
levels of production are not met, to obtain waivers from the banks or
refinance the facilities prior to the end of the third quarter. The Company
expects that it will be able to either refinance the facilities or obtain such
waivers, but no assurance can be given. To facilitate a possible future
securities issuance or issuances, the Company has on file with the Securities
and Exchange Commission ("SEC") a shelf registration statement under which the
Company could issue up to an aggregate of $200 million debt or equity
securities.
RESULTS OF OPERATIONS
---------------------
Sales volumes and average prices realized were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1998 1997 1998 1997
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales volumes
Oil (MBbls), excluding forward oil sale 2,069 1,018 3,965 2,431
Forward oil sale (1) (MBbls delivered) 763 763 1,525 938
--------- ------- ------- -------
Total 2,832 1,781 5,490 3,369
========= ======= ======= =======
Gas (MMcf) 102 127 267 204
Weighted average price realized:
Oil (per Bbl) $ 12.80 $ 15.91 $ 13.16 $ 18.40
Gas (per Mcf) $ 1.15 $ 1.17 $ 1.05 $ 1.24
<FN>
(1) Commencing April 1, 1997, the delivery requirements under the forward oil sale increased
by 195,711 barrels of oil per month.
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998,
COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997
Sales and Other Operating Revenues
- --------------------------------------
Revenue increased $7.9 million in 1998, due to higher production ($16.8
million), which was offset by lower average realized oil prices ($8.9
million). Higher production was due to the start-up in late 1997 of two new
80,000 barrels per day ("BPD") oil-production units at the Cusiana central
processing facility. The lower average realized oil price resulted from a
significant decrease in the 1998 average West Texas Intermediate ("WTI") oil
price, compared with the prior-year quarter.
Other operating revenues in 1997 included a gain of $4.1 million
resulting from the sale of the Company's Argentine subsidiary.
Costs and Expenses
- --------------------
Operating expenses increased $10.2 million in 1998, and depreciation,
depletion and amortization increased $4.8 million, primarily due to higher
production volumes, including barrels delivered under the forward oil sale.
The Company pays lifting costs, production taxes and transportation costs to
the Colombian port of Covenas for barrels to be delivered under the forward
oil sale.
The Company's operating costs per equivalent-barrel were $7.67 and $6.57
in 1998 and 1997, respectively. Operating expenses on a per equivalent-barrel
basis were higher primarily due to Oleoducto Central S.A. ("OCENSA") pipeline
tariffs which totaled $15.5 million or $5.69 per barrel, and $6.3 million or
$3.84 per barrel in 1998 and 1997, respectively. OCENSA imposes a tariff on
shippers from the Fields (the "Initial Shippers"), which is estimated to
recoup: the total capital cost of the project over a 15-year period; its
operating expenses, which include all Colombian taxes; interest expense; and
the dividend to be paid by OCENSA to its shareholders. Any shippers of crude
oil who are not Initial Shippers are assessed a premium tariff on a per-barrel
basis, and OCENSA will use revenues from such tariffs to reduce the Initial
Shippers' tariff. The increase in OCENSA pipeline tariffs was partially
offset by a decrease in production taxes of $1.8 million. Beginning in 1998,
no production taxes are assessed on production from the Cusiana Field. The
Company will be required to pay production taxes on production from the
Cupiagua Field equating to approximately 5.5%, 4% and 2.5% of gross realized
oil prices during 1998, 1999 and 2000, respectively.
General and administrative expense before capitalization decreased $2.2
million to $13.2 million in 1998. Capitalized general and administrative
costs were $6.7 million and $7.6 million in 1998 and 1997, respectively.
In June 1998, the carrying amount of the Company's evaluated oil and gas
properties in Colombia were written down by $105.4 million ($68.5 million, net
of tax) through application of the full cost ceiling limitation as prescribed
by the SEC, principally as a result of a decline in oil prices. The SEC
ceiling test was calculated using the June 30, 1998 WTI oil price of $14.18
per barrel with a differential for Cusiana crude delivered at the port of
Covenas in Colombia of $1.18 per barrel, for a net price of $13 per barrel.
An additional writedown may be required if oil prices fall below this level at
later quarter end dates.
In conjunction with the culmination of the "strategic alternatives"
process, the Company assessed its investments in exploration licenses and
determined that certain investments were impaired based on a plan to
restructure the Company's operations and substantially scale back exploration
related capital expenditures. As a result, unevaluated oil and gas properties
and other assets totaling $77.3 million ($72.6 million, net of tax) were
expensed. The writedown included $27.2 million and $22.5 million related to
exploration activity in Guatemala and China, respectively. The remaining
writedowns relate to the Company's exploration projects in certain other areas
of the world.
Income Taxes
- -------------
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes," requires that the Company make projections
about the timing and scope of certain future business transactions in order to
estimate recoverability of deferred tax assets primarily resulting from the
expected utilization of net operating loss carryforwards. Changes in the
timing or nature of actual or anticipated business transactions, projections
and income tax laws can give rise to significant adjustments to the Company's
deferred tax expense or benefit that may be reported from time to time. For
these and other reasons, compliance with SFAS 109 may result in significant
differences between tax expense for income statement purposes and taxes
actually paid.
The income tax provisions for 1998 and 1997 included deferred tax expense
(benefit) of ($39.8 million) and $2.1 million, respectively. The benefit
recognized in 1998 related to the writedown of oil and gas properties. Current
taxes related to the Company's Colombian operations totaled $.3 million and
$.4 million in 1998 and 1997, respectively.
Extraordinary Item
-------------------
In May and June 1997, the Company completed a tender offer and consent
solicitation with respect to its Senior Subordinated Discount Notes due
November 1, 1997 ("1997 Notes") and 9 3/4% Senior Subordinated Discount Notes
due December 15, 2000 ("9 3/4% Notes") that resulted in the retirement of the
1997 Notes and substantially all of the 9 3/4% Notes. The Company's results
of operations for the three months ended June 30, 1997, included an
extraordinary expense of $14.5 million, net of a $7.8 million tax benefit,
associated with the extinguishment of the 1997 Notes and 9 3/4% Notes. The
remainder of the 9 3/4% Notes were retired in 1998.
SIX MONTHS ENDED JUNE 30, 1998
COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
Sales and Other Operating Revenues
- --------------------------------------
Revenue increased $10.3 million in 1998, due to higher production ($39.2
million), which was offset by lower average realized oil prices ($28.9
million). Higher production was due to the start-up in late 1997 of two new
80,000 BPD oil-production units at the Cusiana central processing facility.
The lower average realized oil price primarily resulted from a significant
decrease in the 1998 average WTI oil price, compared with the prior-year
period and increased deliveries under the forward oil sale. In April 1997,
the Company's delivery requirements under the forward oil sale increased from
58,425 barrels per month to 254,136 barrels per month, which had an adverse
effect on the Company's earnings and cash flows on a per-barrel basis during
1998.
Based on the operator's current projections, the Company expects capacity
of the Fields' production facilities to reach 500,000 barrels per day
during 1998. The Company expects that the adverse effect on the Company's
results of operations and cash flows from the forward oil sale deliveries
of 254,136 barrels per month will be mitigated by increased production from
the Fields. There can be no assurance, however, regarding the timing of
any increase in production or as to future prices. Additional wells will
be required to be drilled into 1999. There can be no assurance that the
productivity of these additional wells, when combined with the productivity of
existing wells, will, over time, match the design capacity of the
production facilities.
Costs and Expenses
- --------------------
Operating expenses increased $14.6 million in 1998, and depreciation,
depletion and amortization increased $9.4 million, primarily due to higher
production volumes, including barrels delivered under the forward oil sale.
The Company's operating costs per equivalent-barrel were $6.85 in 1998 and
1997. OCENSA pipeline tariffs totaled $25.6 million or $4.82 per barrel, and
$12.4 million or $3.90 per barrel in 1998 and 1997, respectively. The
increase in OCENSA pipeline tariffs was partially offset by a decrease
in production taxes of $3.9 million.
General and administrative expense before capitalization decreased $1
million in 1998 to $27.2 million. Capitalized general and administrative
costs were $13 million and $14.7 million in 1998 and 1997, respectively. Due
to the Company's announced plan to reduce overhead costs through staff
reductions and branch office closings, the Company expects that gross general
and administrative expense and the portion of general and administrative
expense that will be capitalized will decrease in future periods.
Other Income and Expense
- ---------------------------
In 1998, the Company sold Triton Pipeline Colombia, Inc., a wholly owned
subsidiary that held the Company's 9.6% equity interest in the Colombian
pipeline company, OCENSA, for $100 million. Net proceeds were approximately
$97.7 million after $2.3 million of expenses. The sale resulted in an
aftertax gain of $50.2 million.
Gross interest expense for 1998 and 1997 totaled $25 million and $24.8
million, respectively, while capitalized interest for 1998 increased $2.1
million to $14.6 million. Due to the writedown of unevaluated property
totaling $73.9 million in June 1998 and a sale of 50% of the Company's Block
A-18 project in August 1998, the portion of interest expense that will be
capitalized will decrease in future periods.
Other income (expense), net included foreign exchange gains of $1.7
million and $3 million in 1998 and 1997, respectively, primarily related to
noncash adjustments to deferred tax liabilities in Colombia associated with
devaluation of the Colombian peso versus the U.S. dollar. In 1998, the
Company recognized a gain of $1.9 million on the sale of non-operating assets.
These gains were offset by an unrealized loss of $.1 million and $4 million in
1998 and 1997, respectively, representing the change in the fair market value
of call options purchased in anticipation of a forward oil sale in 1995.
Income Taxes
- -------------
The income tax provisions for 1998 and 1997 included deferred tax expense
(benefit) of ($35.7 million) and $1.7 million, respectively. The benefit
recognized in 1998 related to the writedown of oil and gas properties. Current
taxes related to the Company's Colombian operations totaled $1.4 million and
$1.7 million in 1998 and 1997, respectively.
Subsequent Events
- ------------------
In July 1998, the Company and ARCO signed an agreement providing
financing for the development of the Company's gas reserves on Block A-18 of
the Malaysia-Thailand Joint Development Area. Under terms of the agreement,
consumated in August 1998, the Company sold to a subsidiary of ARCO for $150
million one-half of the shares of the subsidiary through which the Company
owned its 50% share of Block A-18. The agreements also require ARCO to pay
all future exploration and development costs attributable to the Company's and
ARCO's collective interest in Block A-18, up to $377 million or until first
production from a gas field, at which time the Company and ARCO would each pay
50% of such costs. Additionally, the agreements require ARCO to pay the
Company an additional $65 million each at July 1, 2002 and July 1, 2005, if
certain specific development objectives are met by such dates, or $40 million
each if the objectives are met within one year thereafter.
The agreements provide that the Company will recover its investment in
recoverable costs in the project, approximately $105 million, and that ARCO
will recover its investment in recoverable costs, on a first-in, first-out
basis from the cost recovery portion of future production. The sale resulted
in an aftertax gain of approximately $63 million, which will be recorded in
the third quarter of 1998.
In July 1998, the Company announced a plan to restructure the Company's
operations, reduce overhead costs and substantially scale back exploration
related capital expenditures. The plan includes staff reductions, branch
office closings and the sale of the Company's remaining corporate aircraft.
The Company expects to record a restructuring charge of approximately $20
million in the third quarter.
Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities." SFAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires
enterprises to recognize all derivatives as either assets or liabilities in
the balance sheet and measure those instruments at fair value. The requisite
accounting for changes in the fair value of a derivative will depend on the
intended use of the derivative and the resulting designation. The Company
must adopt SFAS 133 effective January 1, 2000. Based on the Company's
outstanding derivatives contracts, the impact of adopting this standard would
not have a material adverse effect on the Company's operations or consolidated
financial condition. However, no assurances can be given with regards to the
level of the Company's derivatives activities at the time SFAS 133 is adopted
or the resulting effect on the Company's operations or consolidated financial
condition.
Information Systems and the Year 2000
-------------------------------------
The Company has reviewed its operational, financial and other information
systems for potential conflicts with the Year 2000. The Company believes that
the Year 2000 will not cause any significant disruptions to its information
systems, and any costs to resolve Year 2000 issues will not be material.
The Company has begun an investigation into the potential impact to its
operations caused by Year 2000 problems that may occur at third parties,
including its oil and gas partners, financial institutions, and vendors. The
Company has identified certain third parties that may encounter Year 2000
problems, but has not yet determined the potential impact to the Company's
operations or the costs to the Company, if any, associated with these issues.
The Company has engaged a third-party Year 2000 consultant to assist the
Company in validating its assumptions and identify nonconformance.
Certain Factors That Could Affect Future Operations
---------------------------------------------------
Certain statements in this report, including expectations, intentions,
plans and beliefs of the Company and management, are forward-looking
statements, as defined in Section 21D of the Securities Exchange Act of 1934,
that are dependent on certain events, risks and uncertainties that may be
outside the Company's control. These forward-looking statements include
statements of management's plans and objectives for the Company's future
operations and statements of future economic performance; information
regarding schedules for the start-up of production facilities; expected or
planned production or transportation capacity; when the Fields might become
self-financing; future production of the Fields; the negotiation of a
gas-sales contract in Malaysia-Thailand; the Company's capital budget and
future capital requirements; the Company's meeting its future capital needs;
the amount by which production from the Fields may increase or when such
increased production may commence; the Company's realization of its deferred
tax asset; the level of future expenditures for environmental costs; the
outcome of regulatory and litigation matters; the impact of Year 2000 issues;
and the assumptions described in this report underlying such forward-looking
statements. Actual results and developments could differ materially from
those expressed in or implied by such statements due to a number of factors,
including those described in the context of such forward-looking statements
and in notes to Notes to Condensed Consolidated Financial Statements.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LITIGATION
In July and August 1998, five lawsuits were filed against the Company and
Thomas G. Finck, the former Chairman and Chief Executive Officer of the
Company, and three of which also are brought against Peter Rugg, the Chief
Financial Officer of the Company. Each case is filed on behalf of a putative
class of persons and/or entities who purchased the Company's securities
between March 30, 1998 and July 17, 1998, inclusive. The cases allege
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as amended, and Rule 10b-5 promulgated thereunder in connection with
disclosures concerning the Company's properties, operations, and value
relating to a prospective sale of the Company or of all or a part of its
assets. Each lawsuit was filed in the United States District Court for the
Eastern District of Texas, Texarkana Division, as follows: D.H. Lee, Jr., et
al. v. Triton Energy Limited, et al.; Richard Strauss, et al. v. Triton Energy
Limited, et al.; Birdie Capital Corp., et al. v. Triton Energy Limited, et
al.; North River Trading Co., LLC, et al. v. Triton Energy, Ltd., et al. and
Ken Bortner, et. al. v. Triton Energy Limited, et. al.
The Company believes it has meritorious defenses to these claims and intends
to vigorously defend these actions. The date for answer or response is not
yet due; no discovery has been taken at this time, and the ultimate outcome is
not currently predictable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on May 12, 1998 at which
the shareholders of the Company voted on the proposal for election of six
directors. The directors elected and the votes cast for or withheld were as
follows: Fitzgerald S. Hudson (29,667,263 votes for and 484,279 votes
withheld), John R. Huff (29,674,185 votes for and 484,279 votes withheld),
James C. Musselman (29,656,333 votes for and 484,279 votes withheld), Lamar
Norsworthy (29,673,507 votes for and 484,279 votes withheld), John P. Lewis
(29,628,146 votes for and 484,279 votes withheld) and Sheldon R. Erickson
(29,674,550 votes for and 484,279 votes withheld). The following directors
continued in office: Ernest E. Cook, Thomas G. Finck, Jesse E. Hendricks,
Thomas P. Kellogg, Jr., Michael E. McMahon and Edwin D. Williamson. In July
1998, the Company announced that Thomas G. Finck had resigned from his
positions as the Company's Chairman, President and Chief Executive Officer.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following documents are filed as part of this Quarterly
Report on Form 10-Q:
1. Exhibits required to be filed by Item 601 of Regulation S-K. (Where
the amount of securities authorized to be issued under any of Triton Energy
Limited's and any of its subsidiaries' long-term debt agreements does not
exceed 10% of the Company's assets, pursuant to paragraph (b)(4) of Item 601
of Regulation S-K, in lieu of filing such as exhibits, the Company hereby
agrees to furnish to the Commission upon request a copy of any agreement with
respect to such long-term debt.)
<TABLE>
<CAPTION>
<C> <S>
3.1 Memorandum of Association. (1)
3.2 Articles of Association. (1)
4.1 Specimen Share Certificate of Ordinary Shares, $.01 par value, of the Company. (2)
4.2 Rights Agreement dated as of March 25, 1996, between Triton and Chemical Bank, as
Rights Agent, including, as Exhibit A thereto, Resolutions establishing the Junior
Preference Shares. (1)
4.3 Resolutions Authorizing the Company's 5% Convertible Preference Shares. (3)
4.4 Amendment No. 1 to Rights Agreement dated as of August 2, 1996, between Triton and
Chemical Bank, as Rights Agent. (4)
10.1 Amended and Restated Retirement Income Plan. (5)
10.2 Amended and Restated Supplemental Executive Retirement Income Plan. (6)
10.3 1981 Employee Non-Qualified Stock Option Plan. (7)
10.4 Amendment No. 1 to the 1981 Employee Non-Qualified Stock Option Plan. (8)
10.5 Amendment No. 2 to the 1981 Employee Non-Qualified Stock Option Plan. (7)
10.6 Amendment No. 3 to the 1981 Employee Non-Qualified Stock Option Plan. (5)
10.7 1985 Stock Option Plan. (9)
10.8 Amendment No. 1 to the 1985 Stock Option Plan. (7)
10.9 Amendment No. 2 to the 1985 Stock Option Plan. (5)
10.10 Amended and Restated 1986 Convertible Debenture Plan. (5)
10.11 1988 Stock Appreciation Rights Plan. (10)
10.12 1989 Stock Option Plan. (11)
10.13 Amendment No. 1 to 1989 Stock Option Plan. (7)
10.14 Amendment No. 2 to 1989 Stock Option Plan. (5)
10.15 Second Amended and Restated 1992 Stock Option Plan. (13)
10.16 Form of Amended and Restated Employment Agreement with Triton Energy Limited
and its executive officers. (6)
10.17 Form of Amended and Restated Employment Agreement with Triton Energy Limited
and certain officers. (6)
10.18 Amended and Restated 1985 Restricted Stock Plan. (5)
10.19 First Amendment to Amended and Restated 1985 Restricted Stock Plan. (12)
10.20 Second Amendment to Amended and Restated 1985 Restricted Stock Plan. (13)
10.21 Executive Life Insurance Plan. (14)
10.22 Long Term Disability Income Plan. (14)
10.23 Amended and Restated Retirement Plan for Directors. (9)
10.24 Amended and Restated Indenture dated as of March 25, 1996 between Triton and
Chemical Bank, with respect to the issuance of Senior Subordinated Discount Notes
due 1997. (13)
10.25 Amended and Restated Senior Subordinated Indenture by and between the Company and
United States Trust Company of New York, dated as of March 25, 1996. (13)
10.26 Contract for Exploration and Exploitation for Santiago de Atalayas I with an effective
date of July 1, 1982, between Triton Colombia, Inc., and Empresa Colombiana
De Petroleos. (9)
10.27 Contract for Exploration and Exploitation for Tauramena with an effective date of July
4, 1988, between Triton Colombia, Inc., and Empresa Colombiana De Petroleos. (10)
10.28 Summary of Assignment legalized by Public Instrument No. 1255 dated September 15,
1987 (Assignment is in Spanish language). (10)
10.29 Summary of Assignment legalized by Public Instrument No. 1602 dated June 11, 1990
(Assignment is in Spanish language). (10)
10.30 Summary of Assignment legalized by Public Instrument No. 2586 dated September 9,
1992 (Assignment is in Spanish language). (10)
10.31 401(K) Savings Plan. (5)
10.32 Contract between Malaysia-Thailand and Joint Authority and Petronas Carigali
SDN.BHD. and Triton Oil Company of Thailand relating to Exploration and Production
of Petroleum for Malaysia-Thailand Joint Development Area Block A-18.(15)
10.33 Triton Crude Purchase Agreement between Triton Colombia, Inc. and Oil Co., LTD.
dated May 25, 1995. (16)
10.34 Credit Agreement among Triton Colombia, Inc., Triton Energy Corporation,
NationsBank, N.A. (Carolinas) and Export-Import Bank of the United States. (12)
10.35 Amendment No. 1 to Credit Agreement among Triton Colombia, Inc., Triton Energy
Corporation, NationsBank, N.A. (Carolinas) and Export-Import Bank of the United
States. (12)
10.36 Amendment No. 2 to Credit Agreement among Triton Colombia, Inc., Triton Energy
Corporation, NationsBank, N.A. (Carolinas) and Export-Import Bank of the United
States. (13)
10.37 Amendment No. 3 to Credit Agreement among Triton Colombia, Inc., Triton Energy
Limited, NationsBank, N.A. (Carolinas) and Export-Import Bank of the United
States. (24)
10.38 Agreement and Plan of Merger among Triton Energy Corporation, Triton Energy
Limited and TEL Merger Corp. (12)
10.39 Credit Agreement among Triton Energy Limited and Triton Energy Corporation, as
Borrowers, and NationsBank of Texas, N.A., Barclays Bank PLC, Meespierson N.V.,
The Chase Manhattan Bank and Societe Generale, Southwest Agency dated
August 30, 1996. (17)
10.40 Form of Indemnity Agreement entered into with each director and officer of the
Company. (17)
10.41 Restated Employment Agreement between John Tatum and the Company. (20)
10.42 Description of Performance Goals for Executive Bonus Compensation. (20)
10.43 Stock Purchase Agreement dated September 2, 1997 between the Strategic
Transaction Company and Triton International Petroleum, Inc. (6)
10.44 Fourth Amendment to Stock Purchase Agreement dated February 2, 1998 between
The Strategic Transaction Company and Triton International Petroleum, Inc. (6)
10.45 Supplemental Indenture dated April 17, 1997 among Triton Energy Corporation, Triton
Energy Limited and The Chase Manhattan Bank (formerly known as Chemical Bank)
amending Amended and Restated Indenture dated as of March 25, 1996 relating to
the Senior Subordinated Discount Notes due 1997. (21)
10.46 Supplemental Indenture dated April 17, 1997 among Triton Energy Corporation, Triton
Energy Limited and United States Trust Company of New York amending Amended
and Restated Senior Subordinated Indenture dated as of March 25, 1996 relating to the
9 3/4% Senior Subordinated Discount Notes due 2000. (21)
10.47 Senior Indenture dated April 10, 1997 among Triton Energy Corporation, Triton
Energy Limited and The Chase Manhattan Bank. (21)
10.48 First Supplemental Indenture dated April 10, 1997 among Triton Energy Corporation,
Triton Energy Limited and The Chase Manhattan Bank amending Senior Indenture
dated as of April 10, 1997 relating to the 8 3/4% Senior Notes due 2002. (21)
10.49 Second Supplemental Indenture dated April 10, 1997 among Triton Energy Corporation,
Triton Energy Limited and The Chase Manhattan Bank amending Senior Indenture
dated as of April 10, 1997 relating to the 9 1/4% Senior Notes due 2005. (21)
10.50 First Amendment to Credit Agreement dated as of April 4, 1997 among Triton Energy
Limited and Triton Energy Corporation, as Borrowers, and NationsBank of Texas, N.A.,
Barclays Bank PLC, Meespierson N.V., The Chase Manhattan Bank and Societe
Generale, Southwest Agency. (21)
10.51 1997 Share Compensation Plan. (21)
10.52 First Amendment to 1997 Share Compensation Plan. (6)
10.53 First Amendment to Amended and Restated Retirement Plan for Directors. (6)
10.54 First Amendment to Second Amended and Restated 1992 Stock Option Plan. (21)
10.55 Second Amendment to Second Amended and Restated 1992 Stock Option Plan. (6)
10.56 Agreement to Release Triton Energy Corporation and Second Amendment to Credit
Agreement dated as of July 21, 1997 among Triton Energy Limited and Triton Energy
Corporation, as Borrowers, and NationsBank of Texas, N.A., Barclays Bank PLC,
MeesPierson N.V., The Chase Manhattan Bank and Societe Generale, Southwest
Agency. (22)
10.57 Amended and Restated Indenture dated July 25, 1997 between Triton Energy Limited
and The Chase Manhattan Bank. (22)
10.58 Amended and Restated First Supplemental Indenture dated July 25, 1997 between Triton
Energy Limited and The Chase Manhattan Bank relating to the 8 3/4% Senior Notes
due 2002. (22)
10.59 Amended and Restated Second Supplemental Indenture dated July 25, 1997 between
Triton Energy Limited and The Chase Manhattan Bank relating to the 9 1/4% Senior
Notes due 2005. (22)
10.60 Third Amendment to Credit Agreement dated as of September 30, 1997 among Triton
Energy Limited, NationsBank of Texas, N.A., Barclays Bank PLC, MeesPierson N.V.,
The Chase Manhattan Bank and Societe Generale, Southwest Agency. (23)
10.61 Amendment to Amended and Restated Retirement Income Plan dated
December 31, 1996. (24)
10.62 Amendment to 401(K) Savings Plan dated December 31, 1996. (24)
10.63 Share Purchase Agreement dated July 17, 1998 among Triton Energy Limited, Triton
Asia Holdings, Inc., Atlantic Richfield Company and ARCO JDA Limited. (25)
10.64 Shareholders Agreement dated August 3, 1998 among Triton Energy Limited, Triton
Asia Holdings, Inc., Atlantic Richfield Company, and ARCO JDA Limited. (25)
10.65 Amendment to the Triton Exploration Services, Inc. Retirement Income Plan dated
August 1, 1998. (25)
10.66 Amendment to the Triton Exploration Services, Inc. 401(k) Savings Plan dated
August 1, 1998. (25)
12.1 Computation of Ratio of Earnings to Fixed Charges. (25)
12.2 Computation of Ratio of Earnings to Combined Fixed Charges and Preference
Dividends. (25)
27.1 Financial Data Schedule.(25)
99.1 Heads of Agreement for the Supply of Gas from the Block A-18 of the Malaysia-
Thailand Joint Development Area. (24)
99.2 Rio Chitamena Association Contract. (19)
99.3 Rio Chitamena Purchase and Sale Agreement. (19)
99.4 Integral Plan - Cusiana Oil Structure. (19)
99.5 Letter Agreements with co-investor in Colombia. (19)
99.6 Colombia Pipeline Memorandum of Understanding. (19)
99.7 Amended and Restated Oleoducto Central S.A. Agreement dated as of March 31,
1995. (18)
_______________________________
(1) Previously filed as an exhibit to the Company's Registration Statement on Form S-3
(No 333-08005) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement on Form 8-A
dated March 25, 1996 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's and Triton Energy Corporation's
Registration Statement on Form S-4 (No. 333-923) and incorporated herein
by reference.
(4) Previously filed as an exhibit to the Company's Registration Statement on Form 8-A/A
(Amendment No. 1) dated August 14, 1996 and incorporated herein by reference.
(5) Previously filed as an exhibit to Triton Energy Corporation's Quarterly Report on Form
10-Q for the quarter ended November 30, 1993 and incorporated by reference herein.
(6) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 and incorporated herein by reference.
(7) Previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended May 31, 1992 and incorporated herein by reference.
(8) Previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended May 31, 1989 and incorporated by reference herein.
(9) Previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended May 31, 1990 and incorporated herein by reference.
(10) Previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended May 31, 1993 and incorporated by reference herein.
(11) Previously filed as an exhibit to Triton Energy Corporation's Quarterly Report on Form
10-Q for the quarter ended November 30, 1988 and incorporated herein by reference.
(12) Previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and incorporated herein by
reference.
(13) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 and incorporated herein by reference.
(14) Previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended May 31, 1991 and incorporated herein by reference.
(15) Previously filed as an exhibit to Triton Energy Corporation's current report on Form
8-K dated April 21, 1994 and incorporated by reference herein.
(16) Previously filed as an exhibit to Triton Energy Corporation's Current Report on Form
8-K dated May 26, 1995 and incorporated herein by reference.
(17) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by reference.
(18) Previously filed as an exhibit to Triton Energy Corporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and incorporated herein by reference.
(19) Previously filed as an exhibit to Triton Energy Corporation's current report on Form
8-K/A dated July 15, 1994 and incorporated by reference herein.
(20) Previously filed as an exhibit to Triton Energy Limited's Annual Report on Form 10-K
For the fiscal year ended December 31, 1996 and incorporated herein by reference.
(21) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 and incorporated herein by reference.
(22) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference.
(23) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and incorporated herein by reference.
(24) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998 and incorporated herein by reference.
(25) Filed herewith.
(b) Reports on Form 8-K
</TABLE>
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRITON ENERGY LIMITED
By: /s/ Peter Rugg
---------------------------
Peter Rugg
Senior Vice President and Chief
Financial Officer
Date: August 13, 1998
Page 1
EXHIBIT 10.63
17 JULY 1998
TRITON ASIA HOLDINGS, INC.
ARCO JDA LIMITED
TRITON ENERGY LIMITED
ATLANTIC RICHFIELD COMPANY
========================
SHARE PURCHASE AGREEMENT
RELATING TO
THE SALE AND PURCHASE OF PART OF THE SHARE CAPITAL
OF TRITON INTERNATIONAL OIL CORPORATION
<PAGE>
CONTENTS
Clause Page
1. Interpretation 5
2. Sale and Purchase 5
3. Conditions 5
4. Price 6
5. Pre-Completion Undertakings 7
6. Completion 8
7. Completion Certificate and Balance Sheet 10
8. Seller's Warranties 12
9. Purchaser's Warranties and Undertaking 14
10. Seller Guarantor 15
11. Purchaser Guarantor 15
12. Waivers 15
13. Assignment 16
14. Further Assurance 16
15. Entire Agreement 16
16. Announcements 17
17. Costs and Expenses 18
18. Counterparts and Amendments 18
19. Severability 18
20. Notices 19
21. Governing Law 21
22. Jurisdiction 21
23. Service of Process 21
24. Agent for Service of Process 21
SCHEDULE 1 23
SCHEDULE 2 25
Part A: Basic Information about the Company 28
Part B: Basic Information about the
Subsidiaries 29
SCHEDULE 3 28
Completion Arrangements 31
SCHEDULE 4 32
The Warranties 32
Intra-Group Guarantees 37
SCHEDULE 5 43
Indemnification Procedures and Limitations on
the Seller's liability for Warranty Claims and
Liabilities Indemnity Claims 46
SCHEDULE 6 49
Part A: Production Sharing Contract 52
<PAGE>
AGREEMENT is made on 17 July 1998
BETWEEN
TRITON ASIA HOLDINGS, INC, a company incorporated under the laws of the
Cayman Islands whose principal place of business is at Caledonian House, Mary
Street, P.O. Box 1043, George Town, Grand Cayman, the Cayman Islands (the
SELLER); and
ARCO JDA LIMITED, a company incorporated under the laws of the Commonwealth of
the Bahamas whose registered office is at #3 Magna Carta Court, P.O. Box,
N-4805, Shirley Street, Nassau, Bahamas (the PURCHASER);
TRITON ENERGY LIMITED, a company incorporated under the laws of the Cayman
Islands whose principal place of business is at Caledonian House, Mary Street,
P.O. Box 1043, George Town, Grand Cayman, the Cayman Islands (the SELLER
GUARANTOR);
ATLANTIC RICHFIELD COMPANY, a company incorporated under the laws of the State
of Delaware, U.S.A., whose principal place of business is located at 515 S.
Flower Street, Los Angeles, California, 90071 (the PURCHASER GUARANTOR).
WHEREAS
(A) Triton International Oil Corporation (the COMPANY) is a company
organised and existing under the laws of the Cayman Islands with an authorised
capital of US$50,000 divided into 50,000 Ordinary Shares of which 1,000 shares
are issued and outstanding.
(B) The Seller is sole legal and beneficial owner of all of the issued
and outstanding shares of capital stock of the Company.
(C) The Seller has agreed to sell fifty percent (50%) of the shares of
issued and outstanding capital stock of the Company to the Purchaser for the
consideration and upon the terms set out in this Agreement.
WHEREBY IT IS AGREED as follows:
INTERPRETATION
1.1 In this Agreement, expressions defined in Schedule 1 shall have the
meaning therein provided.
SALE AND PURCHASE
2. Subject to the terms and conditions herein, at Completion, the Seller
shall sell or procure the sale of and the Purchaser shall purchase the Shares
with full title guarantee. The Shares shall be sold free from all charges,
encumbrances, security interests, options, equities, claims or other third
party rights (including rights of pre-emption) of any nature whatsoever.
CONDITIONS
3.1 The respective obligations of each of the Seller and the Purchaser to
effect the transactions contemplated hereby shall be subject to the fulfilment
in all material respects of the following conditions any of which may be
waived, in whole or in part, by the Party whose obligations are subject to
such condition:
(a) the other Party shall have performed or complied in all material
respects with each obligation, covenant or each agreement contained in this
Agreement required to be performed or complied with on or prior to the
Completion Date including without limitation, the obligations, arrangements
and undertakings set forth in Schedule 3; and the representations and
warranties of the Seller or the Purchaser, as the case may be, contained in
this Agreement shall be true and correct in all material respects when made
and on and as at the Completion Date and the Seller and the Purchaser shall
each have received a certificate of the President or a Vice President of the
other Party certifying to such effect; and
(b) none of the Parties hereto shall be subject to (i) any pending or
threatened litigation or proceeding to restrain or prohibit the transactions
contemplated by this Agreement or to obtain damages or other relief in
connection with the consummation of the transactions contemplated by this
Agreement, or (ii) any order or injunction against the consummation of the
transactions contemplated by this Agreement and in the event any such order or
injunction is granted, each Party agrees to use its reasonable efforts to have
any such injunction lifted.
3.2 The obligations of the Purchaser to effect the transactions
contemplated hereby shall be subject to the fulfilment in all material
respects of the following conditions any of which may be waived, in whole or
in part, by the Purchaser:
(a) the Seller (for and on behalf of the Group Companies) nor the Group
Companies themselves, shall not have entered into a definitive and binding gas
sales agreement for the sale of natural gas from the Malaysian-Thailand Joint
Development Area without the prior written consent of the Purchaser; and
(b) the Seller shall have made the necessary elections on Form 8832
pursuant to the provisions of Section 7701 of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder, to
treat the Company as a disregarded entity of the Seller and to treat the
Subsidiaries as disregarded entities of the Seller. Such elections shall be
filed with the Internal Revenue Service and shall be made effective prior to
the Completion Date; and
(c) there having been no change or development that has, or would
reasonably be expected to have, a Material Adverse Effect; and
(d) TOCT (Texas) having been converted to a limited liability company and
all its issued and outstanding share capital held by Triton International Oil
Corp. (Delaware) having been transferred to the Company; and
(e) TOCT (Texas) having transferred its holding of 9% preferred stock in
the capital of TOCT (JDA) to the Company and TOCT (JDA) having cancelled all
outstanding 9% preferred stock.
3.3 The obligations of the Seller to effect the transactions contemplated
hereby shall be subject to the receipt by the Seller Guarantor of the consents
of the Seller Guarantor's lenders under its revolving credit agreements.
PRICE
4.1 The total purchase price payable by the Purchaser to the Seller for
the Shares shall be US$150,000,000.
4.2 The Purchaser shall pay the purchase price by wire transfer of
immediately available funds to an account to be designated by the Seller on
the Completion Date.
PRE-COMPLETION UNDERTAKINGS
5.1 Pending Completion, the Seller shall ensure that, and shall procure
that Triton International Oil Corporation (Delaware) shall, where relevant,
exercise the voting rights attaching to its shareholding in the capital of
TOCT (Texas) and (through TOCT (Texas)) in CTOC, to ensure that:
(a) each Group Company and CTOC, as the case may be, shall carry on its
business in the ordinary and usual course of normal day-to-day operations,
consistent with the past practices of such Group Company or CTOC;
(b) save as permitted pursuant to Clause 5.2(b), no Group Company or
CTOC, as the case may be, enters into any contract or commitment (or makes a
bid or offer which if accepted would result in a contract or commitment)
having a value or requiring expenditure in excess of $1,000,000, excluding
contracts or commitments entered into pursuant to the 1998 Work Programme and
Budget or otherwise as set out in the Disclosure Letter;
(c) subject to the terms of the Confidentiality Agreement, the
Purchaser's representatives shall be allowed, upon reasonable notice and
during normal business hours, access to the employees, officers, properties,
offices and other facilities, documents, data (including the types of data
listed in Section 9(c) of Schedule 3), books and records of each Group Company
(including, without limitation, all statutory books, minute books, leases,
contracts, supplier lists and customer lists) together with the right to take
copies.
5.2 Pending Completion, the Seller, the Group Companies and any other
subsidiary of the Seller may:
(a) negotiate and (without prejudice to Clause 3.2(a)) enter into for and
on behalf of the Group Companies a definitive gas sales agreement for the sale
of natural gas from the Malaysian-Thailand Joint Development Area;
(b) proceed with the development of the Malaysia-Thailand Joint
Development Area as contemplated by the development plan approved by the
Malaysia-Thailand Joint Authority, a copy of which has been provided to the
Purchaser;
(c) take steps to restructure the capital of the Company as contemplated
under the Shareholders Agreement;
(d) cause the outstanding 9% preferred stock of Triton Oil Company of
Thailand (JDA) Limited to be cancelled in such a manner as the Seller and the
Group Companies may determine; and
(e) subject to Clause 5.3, cause any Intra-Group Indebtedness to be
cancelled, such cancellation to be effective upon Completion.
5.3 To the extent that any Intra-Group Indebtedness comprises amounts
which fall within, or are capable of being taken account of and included in,
the Completion Certificate, such indebtedness shall not be cancelled but shall
be capitalised in accordance with Clause 8.1 of the Shareholders Agreement.
5.4 The Seller shall file with the Internal Revenue Service and shall
make the necessary elections on Form 8832 pursuant to the provisions of
Section 7701 of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder, to treat the Company as a disregarded
entity of the Seller and to treat the Subsidiaries as disregarded entities of
the Seller. Such elections shall be made effective prior to the Completion
Date.
COMPLETION
6.1 Completion shall take place at 10:00 a.m. on the Completion Date at
the offices of W.S. Walker and Company in the Cayman Islands.
6.2 At Completion the Purchaser and the Seller shall do those things
respectively required of them under Schedule 3.
6.3 Neither the Purchaser nor the Seller shall be obliged to complete
this Agreement unless (i) the conditions to such Party's obligations to effect
the transactions contemplated by this Agreement as set forth in Clause 3.1
have been waived or satisfied; (ii) the conditions to the Purchaser's
obligations to effect the transactions contemplated by this Agreement as set
forth in Clause 3.2 have been waived or satisfied; and (iii) the conditions to
the Seller's obligations to effect the transactions contemplated by this
Agreement as set forth in Clause 3.3 have been waived or satisfied; and (iv)
the Seller or, as the case may be, the Purchaser complies with the
requirements of Clause 6.2.
6.4 Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated at any time prior to Completion:
(a) by the mutual written consent of the Purchaser and the Seller;
(b) by either the Purchaser or the Seller if the conditions to such
Party's obligations to effect the transactions contemplated by this Agreement
as set forth in Clauses 3.1, 3.2 or 3.3 as the case may be, have not been
satisfied or waived on or prior to the Completion Date (other than through the
failure of the Party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement); provided, however, that if the
respective obligations of the Seller and the Purchaser under Clause 6.2 are
not complied with on the Completion Date, in addition to having the right to
terminate this Agreement (without limiting its rights hereunder) the Party not
in default may:
(i) defer Completion (so that the provisions of this Clause 6 shall
apply to Completion as so deferred); and/or
(ii) proceed to Completion as far as practicable (without limiting
its rights under this Agreement);
(c) notwithstanding the provisions of Clause 3.1(b)(ii), by either the
Purchaser or the Seller if the Completion has not occurred on or prior to 45
days after the signing date of this Agreement as a result of the entry of any
order or injunction against the consummation of the transactions contemplated
by this Agreement; and
(d) by either the Purchaser or the Seller if the Completion has not
occurred on or prior to forty five (45) days after the signing date of this
Agreement (other than through the failure of any Party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement).
6.5 Each Party's right of termination under Clause 6.4 is in addition to
any other rights it may have under this Agreement or otherwise (including the
right to pursue legal remedies for the other Party's material breach of, or
failure to comply in any material respect with, its obligations under this
Agreement), and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated under Clause 6.4, each party
hereto will pay its own fees and expenses in accordance with Clause 17.1.
6.6 Subject to the provisions of Schedule 5, all representations,
warranties (including without limitation, the Warranties), covenants and
obligations set forth in this Agreement, the Disclosure Letter or the
certificates delivered pursuant to Clause 3.1(a) will survive the Completion.
COMPLETION CERTIFICATE AND BALANCE SHEET
7.1 The Seller shall use all reasonable endeavours to procure that,
promptly after Completion, the Completion Certificate and the Completion
Balance Sheet are prepared and delivered to the Purchaser.
7.2 The Completion Balance Sheet shall be prepared in accordance with U.S.
generally accepted accounting principles on a consistent basis with the
Internal Balance Sheet.
7.3 The Seller shall arrange for a draft of the Completion Certificate and
the Completion Balance Sheet together with all working papers to be prepared
and delivered to the Purchaser within forty five (45) days of Completion.
7.4 The Purchaser shall notify the Seller within 15 days of receipt of
such draft Completion Certificate or Completion Balance Sheet , as the case
may be, whether or not it accepts it for the purposes of this Agreement
provided that the Purchaser shall not be entitled to object to such Completion
Certificate to the extent that the amounts set forth therein have already been
audited by the MTJA as evidenced by documentation reasonably satisfactory to
the Purchaser.
7.5 If the Purchaser notifies the Seller that it does not accept such
draft Completion Certificate or Completion Balance Sheet, as the case may be:
(a) it shall set out in detail its reasons for such non-acceptance and
specify the adjustments (and provide appropriate supporting evidence for each
such adjustment) which, in its opinion, should be made to the draft Completion
Certificate or the Completion Balance Sheet as the case may be, in order to
comply with the requirements of this Agreement; and
(b) the Parties shall use all reasonable endeavours to meet and discuss
the objections of the Purchaser and to reach agreement upon the adjustments
(if any) required to be made to the draft Completion Certificate or Completion
Balance Sheet as the case may be.
7.6 If (a) the Purchaser is satisfied with the draft Completion
Certificate and the Completion Balance Sheet (either as originally submitted
or after adjustments agreed between the Seller and the Purchaser), (b) the
amount in dispute does not exceed $1,000,000 or (c) if the Purchaser fails to
notify the Seller of its non-acceptance of the draft Completion Certificate or
the Completion Balance Sheet, as the case may be, within the 15 day period
referred to in Clause 7.4, then the draft Completion Certificate or the
Completion Balance Sheet, as the case may be, (incorporating any agreed
adjustments) shall constitute the Completion Certificate or the Completion
Balance Sheet, as the case may be, for the purposes of this Agreement.
7.7 If the Seller and the Purchaser do not reach agreement within 30 days
of the Purchaser's notice of non-acceptance under Clause 7.5 and the amount in
dispute equals or exceeds $1,000,000, then the matters in dispute shall be
referred, on the application of either party, for determination by an
independent firm of internationally recognised chartered accountants (the
EXPERT) to be agreed upon by the Seller and the Purchaser or, failing
agreement, to be selected by the accountants for each of the Seller and the
Purchaser. The following terms of reference shall apply:
(a) the Purchaser and the Seller shall each promptly prepare a written
statement on the matters in dispute which (together with the relevant
documents) shall be submitted to the Expert for determination;
(b) in giving such determination, the firm shall state what adjustments
(if any) are necessary to the draft Completion Certificate or the Completion
Balance Sheet, as the case may be, in order to comply with the requirements of
this Agreement;
(c) the Expert shall act as an expert (and not as an arbitrator) in making
any such determination which shall be final and binding on the Parties;
(d) the expenses of any such determination by the Expert shall be borne
equally between the Seller and the Purchaser.
7.8 If the Seller and the Purchaser reach (or pursuant to Clause 7.6 are
deemed to reach) agreement on the Completion Certificate or the Completion
Balance Sheet, as the case may be, is finally determined at any stage in the
procedures set out in this Clause 7:
(a) the Completion Certificate or the Completion Balance Sheet, as the
case may be, as so agreed or determined shall be the Completion Certificate or
the Completion Balance Sheet respectively, for the purposes of this Agreement
and shall be final and binding on the Parties; and
(b) the amount of the Preferred Stock Value shall be derived from the
Completion Certificate.
7.9 Each Party shall use all reasonable endeavours to ensure that each
Group Company provides the other Party with such access to the employees,
accounts, working papers and other financial information of the relevant Group
Company as is reasonably necessary for the purposes of this Clause 7. Each
Party shall similarly use all reasonable endeavours to ensure that the
Purchaser and the Seller each have such access to all relevant working and
other papers of the other as is reasonably necessary for and limited to the
purposes of this Clause 7.
SELLER'S WARRANTIES
8.1 Subject to Clause 8.4, the Seller warrants to the Purchaser that the
Warranties are true and correct in all material respects at the date of this
Agreement, except as set forth in the Disclosure Letter, and that there is no
fact known to the Seller that would reasonably be expected to have a Material
Adverse Effect that has not been set forth in this Agreement or the Disclosure
Letter.
8.2 The Purchaser acknowledges that it does not rely on and has not been
induced to enter into this Agreement on the basis of any warranties,
representations, covenants, undertakings, indemnities or other statements
whatsoever, other than those set forth in this Agreement, and acknowledges
that none of the Seller, the Company, either of the Subsidiaries or any of
their agents, officers or employees have given any such warranties,
representations, covenants, undertakings, indemnities or other statements.
The Seller waives any rights it may have against any Group Company in respect
of incorrect information received from them and passed onto the Purchaser for
the purpose of assisting the Seller to give a warranty or prepare the
Disclosure Letter.
8.3 The Purchaser acknowledges and affirms that it has had full access to
the Data Room and the information contained therein and that it has made its
own independent investigation, analysis and evaluation of the Company and its
assets and the value of the petroleum reserves, business, financial condition,
operation and prospects of the Group Companies from such information.
8.4 Subject to Clause 8.5 and to provisions of Schedule 5 with respect to
Warranty Claims, the Purchaser shall be entitled to claim both before and
after Completion that any of the Warranties has or had been breached and
Completion shall not in any way constitute a waiver of any of the Purchaser's
rights. Subject to the provisions of Schedule 5, the Seller shall indemnify,
defend and hold harmless the Purchaser, each of its affiliates and their
respective directors, officers, employees and agents (collectively referred to
as the "Purchaser" for purposes of this Clause 8 and Schedule 5) from and
against, and will pay to the Purchaser the amount of, any costs, losses,
liabilities, claims, damages, or expenses, whether or not involving a third
party claim, arising, directly or indirectly, from or in connection with a
breach of any of the Warranties.
8.5 After Completion, the sole remedy of the Purchaser for any breach of
any of the Warranties or any other breach of this Agreement by the Seller
shall be an action for damages and the Purchaser shall not be entitled to
rescind this Agreement.
8.6 Subject to the provisions of Schedule 5, with respect to Liabilities
Indemnities Claims and with effect from Completion, the Seller shall
indemnify, defend and hold harmless the Purchaser or any Group Company, as the
case may be, from and against, and will (subject to Clause 8.7) pay to the
Purchaser or Group Company, as the case may be:
(i) an amount equivalent to 100% of any cost, damage, loss or expense or,
to the extent that the same has given rise to an actual cost, damage, loss or
expense, any liability or claim (including interest and penalties) suffered or
incurred by the Purchaser, or
(ii) an amount equivalent to 100% of any cost, damage, loss or expense
(including interest) or, to the extent that the same has given rise to an
actual cost, damage, loss or expense, any liability or claim (including
interest and penalties) suffered or incurred by the Company or any other Group
Company,
in each case, in respect of or arising out of any liability
(whether actual or contingent and regardless of whether such liability
is disclosed in the Accounts, the Completion Balance Sheet, this
Agreement or the Disclosure Letter, and in particular, but without
limitation, as to Tax, whether or not listed in Part C of Schedule 4) of
the Company or any other Group Company:
(a) which arises exclusively as a result of, or attributable to, the
actions of any Group Company prior to Completion; and
(b) which is not specifically set forth or reflected in or reasonably
contemplated by the 1998 Work Programme and Budget;
(the LIABILITIES INDEMNITY).
8.7 If any amount payable under Clause 8.6 represents an amount payable in
respect of Petroleum Operations (as such term is defined in the PSC) which
would be, or deemed to be, recoverable under the PSC, such amount shall, to
the extent that the Purchaser has at such time not paid an amount to the
Company in respect of the same, be paid by the Seller to the Company.
PURCHASER'S WARRANTIES AND UNDERTAKING
9.1 The Purchaser warrants that:
(a) it has obtained all corporate authorisations and all other applicable
governmental, statutory, regulatory or other consents, licences,
authorisations, waivers or exemptions required to empower it to enter into and
perform its obligations under the Transaction Documents;
(b) this Agreement constitutes and the other documents executed by the
Purchaser which are to be delivered at Completion will, when executed,
constitute the valid and binding obligations of the Purchaser, enforceable
against the Purchaser in accordance with their respective terms except that
such enforceability (i) may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to the enforcement of creditors'
rights generally and (ii) is subject to general principles of equity;
(c) the execution and delivery of, and the performance by the Purchaser of
its obligations under the Transaction Documents will not:-
(i) result in a breach of any provision of the memorandum or articles
of association of the Purchaser; or
(ii) result in a breach of any order, judgment or decree of any court
or governmental agency to which the Purchaser is a party or by which the
Purchaser is bound except for any breach that would not materially prejudice
the Purchaser's ability to consummate the transactions contemplated by the
Transaction Documents.
9.2 The Seller shall be entitled to claim both before and after Completion
that any of the warranties contained in this Clause 9 has or had been breached
and (in accordance with Clause 12) Completion shall not in any way constitute
a waiver of any of the Seller's rights; provided, however, that after
Completion, the sole remedy of the Seller for any breach of any of the
warranties contained in this Clause 9 or any other breach of this Agreement by
the Purchaser shall be an action for damages and the Seller shall not be
entitled to rescind this Agreement.
SELLER GUARANTOR
10.1 In consideration of the Purchaser entering into this Agreement, the
Seller Guarantor (as principal obligor and not merely as a surety)
unconditionally and irrevocably guarantees as a continuing obligation the
proper performance by the Seller of all its obligations under or pursuant to
this Agreement.
10.2 The Seller Guarantor's liability hereunder shall not be discharged or
impaired by any amendment to or variation of this Agreement, any release of,
or granting of time or other indulgence to, the Seller or any third party, any
liquidation, administration, receivership or winding-up of the Seller or by
any other act or omission or any other events or circumstances whatsoever
(whether or not known to the Seller, the Purchaser or the Seller Guarantor)
which would or might (but for this Clause) operate to impair or discharge the
Seller Guarantor's liability under this guarantee.
PURCHASER GUARANTOR
11.1 In consideration of the Seller entering into this Agreement, the
Purchaser Guarantor (as principal obligor and not merely as a surety)
unconditionally and irrevocably guarantees as a continuing obligation the
proper performance by the Purchaser of all its obligations under or pursuant
to this Agreement.
11.2 The Purchaser Guarantor's liability hereunder shall not be discharged
or impaired by any amendment to or variation of this Agreement, any release
of, or granting of time or other indulgence to, the Purchaser or any third
party, any liquidation, administration, receivership or winding-up of the
Purchaser or by any other act or omission or any other events or circumstances
whatsoever (whether or not known to the Purchaser, the Seller or the
Purchaser's Guarantor) which would or might (but for this Clause) operate to
impair or discharge the Purchaser Guarantor's liability under this guarantee.
WAIVERS
12. No failure or delay by any Party in exercising any right or remedy
provided by law under or pursuant to this Agreement shall impair such right or
remedy or operate or be construed as a waiver or variation of it or preclude
its exercise at any subsequent time and no single or partial exercise of any
such right or remedy shall preclude any other or further exercise of it or the
exercise of any other right or remedy.
ASSIGNMENT
13.1 Subject to Clause 13.2, neither this Agreement, nor any interest in
it, including the benefit of the Warranties, shall be assignable by the
Purchaser in whole or in part at any time to any third party and the Purchaser
undertakes that it will not assign the whole or any part of any interest in
this Agreement at any time to any person.
13.2 The Purchaser may assign the whole or any part of its interest under
this Agreement to a subsidiary or affiliate of the Purchaser provided that:
(a) the Seller's liability under this Agreement shall not be increased as
a result of such assignment; and
(b) any such assignment shall provide that, immediately prior to such
company ceasing to be a subsidiary or affiliate of the Purchaser, such company
shall re-assign such assigned benefit to the Purchaser provided that this
shall not in any way limit the right to transfer the Shares in accordance with
the provisions of the Shareholders Agreement.
FURTHER ASSURANCE
14.1 Each of the Parties agrees to use all commercially reasonable efforts
to perform (or procure the performance of) all further acts and things, and
execute and deliver (or procure the execution and delivery) of all such
further documents, as may be required by law or as may be necessary or
desirable to give effect to this Agreement and the transactions contemplated
by it.
14.2 The Parties agree to procure that, save for any Intra-Group
Indebtedness which is or will be repaid by the issue of Class A Preferred
Stock in accordance with the terms of the Shareholders Agreement, all
Intra-Group Indebtedness shall be cancelled as soon as is reasonably
practicable following Completion.
ENTIRE AGREEMENT
15.1 This Agreement and the Disclosure Letter set out the entire agreement
and understanding between the Parties in respect of the sale and purchase of
the Shares save for the Shareholders Agreement, the Incentive Payments
Agreement and the Tax Partnership Agreement. The Confidentiality Agreement,
so far as the same relates to confidential information furnished to the
Purchaser or the Purchaser Guarantor concerning the Group Companies or any of
the matters referred to in or contemplated by this Agreement shall be
terminated as of Completion and the confidentiality undertakings of each Party
to the other in relation to such matters as from Completion shall be as set
forth in the Shareholders Agreement provided that paragraphs 11 and 12 of the
Confidentiality Agreement shall continue and remain in effect for the periods
set out therein.
15.2 It is agreed that:
(a) neither Party has entered into this Agreement in reliance upon any
representation, warranty or undertaking of the other party which is not
expressly set out or referred to in this Agreement;
(b) a party may claim in contract for breach of Warranty under this
Agreement but shall have no other claim or remedy under this Agreement in
respect of a misrepresentation (whether negligent or otherwise and whether
made prior to and/or in this Agreement) or untrue statement made by the other
party; and
(c) this Clause 15 shall not exclude any liability for fraudulent
misrepresentation.
ANNOUNCEMENTS
16.1 Except as required by law or by any stock exchange or governmental or
other regulatory or supervisory body or authority of competent jurisdiction to
whose rules the Party making the announcement or disclosure is subject,
whether or not having the force of law, no announcement or disclosure in
connection with the existence or subject matter of this Agreement shall be
made or issued by or on behalf of either Party without the prior written
consent of the other, such consent not to be unreasonably withheld or delayed
provided that the Seller Guarantor may disclose the existence and subject
matter of this Agreement to a bank or other financial institution to the
extent appropriate to a Party arranging for funding for its operations and
commitments.
16.2 Where any announcement or disclosure is made in reliance on the
exception in Clause 16.1, the Party making the announcement or disclosure will
use its reasonable endeavours to consult with the other Party at least twenty
four (24) hours in advance as to the form, content and timing of the
announcement or disclosure.
COSTS AND EXPENSES
17.1 Subject to Clause 17.2, each signatory hereto shall pay its own legal
and accountancy costs, charges and other expenses (including taxation)
incurred in connection with the negotiation, preparation and completion of
this Agreement.
17.2 Each signatory hereto shall bear its own stamp or other documentary
or transaction duties and any other transfer taxes arising as a result or in
consequence of this Agreement or of its implementation.
COUNTERPARTS AND AMENDMENTS
18.1 This Agreement may be executed in any number of counterparts and by
the parties to it on separate counterparts, each of which is an original but
all of which together constitute one and the same instrument.
18.2 Any amendments or modifications to this Agreement must be in writing
and signed by all the signatories hereto.
SEVERABILITY
19. If any provision of this Agreement is held to be invalid or
unenforceable, then such provision shall (so far as invalid or unenforceable)
be given no effect and shall be deemed not to be included in this Agreement
but without invalidating any of the remaining provisions of this Agreement.
The Parties shall then use all reasonable endeavours to replace the invalid or
unenforceable provisions by a valid and enforceable substitute provision the
effect of which is as close as possible to the intended effect of the invalid
or unenforceable provision.
RTPA
20. Notwithstanding any other provisions of this Agreement (or any other
agreement which, together with this Agreement, may form part of an agreement
for the purposes of the Restrictive Trade Practices Act 1976 (the RTPA))
(together the RTPA AGREEMENT), each Party and each of the Seller Guarantor and
the Purchaser Guarantor declares that it will not give effect, and will
procure that none of its subsidiaries shall give effect, to any restriction or
restrictions contained in the RTPA Agreement which cause the RTPA Agreement to
be registrable under the Act until one day after the particulars of the RTPA
Agreement shall have been provided to the Director General of Fair Trading.
The parties shall use their best endeavours to procure the furnishing of such
particulars as soon as possible after the signing of this Agreement and in any
event within the period required by the Act.
NOTICES
21.1 Subject to Clause 25, any notice or other communication to be given
under this Agreement shall be in writing and signed by or on behalf of the
Party giving it and may be served by leaving it at, or sending it (by fax,
prepaid recorded delivery or registered post) to, the address and for the
attention of the relevant person set out in Clause 21.2 (or as otherwise
notified from time to time hereunder). Any notice so served by fax, recorded
delivery or registered post shall be deemed to have been received:
(a) in the case of fax, twelve (12) hours after the time of despatch;
(b) in the case of recorded delivery or registered post, forty eight (48)
hours from the date of posting.
21.2 The addresses of the Parties for the purpose of Clause 21.1 are as
follows:
<PAGE>
SELLER: Triton Asia Holdings, Inc.
Address: c/o Triton Exploration Services, Inc.
6688 North Central Expressway
Suite 1400
Dallas, Texas 75206
USA
For the attention of: Robert B. Holland, III
Fax: + 1 214 691 0198
<PAGE>
PURCHASER: ARCO JDA Limited
Address: #3 Magna Carta Court
P.O. Box, N-4805
Shirley Street, Nassau
Bahamas
with a copy to: Atlantic Richfield Company
515 South Flower Street
Los Angeles, California 90071
For the attention of: Donald R. Voelte
Senior Vice President
Fax: 213-486-3354
SELLER GUARANTOR: Triton Energy Limited
Address: c/o Triton Exploration Services, Inc.
6688 North Central Expressway
Suite 1400
Dallas, Texas 75206
USA
For the attention of: Robert B. Holland, III
Fax: + 1 214 691 0198
PURCHASER GUARANTOR: Atlantic Richfield Company
Address: 515 South Flower Street
Los Angeles, California 90071
For the attention of: Donald R. Voelte
Senior Vice President
Fax: 213-486-3354
<PAGE>
21.3 In proving such service it shall be sufficient to prove that the
envelope containing such notice was properly addressed and delivered either to
the address shown thereon or into the custody of the postal authorities as a
pre-paid recorded delivery or registered post letter, or that the facsimile
transmission was made after receipt of evidence of successful transmission.
GOVERNING LAW
22. This Agreement and the relationship between the Parties shall be
governed by, and interpreted in accordance with, English law excluding rules
governing conflicts of laws which would apply the laws of another
jurisdiction.
JURISDICTION
23. Both Parties agree that the Courts of England are to have exclusive
jurisdiction to settle any dispute (including claims for set-off and
counterclaim) which may arise in connection with the creation, validity,
effect, interpretation or performance of, or the legal relationships
established by this Agreement or otherwise arising in connection with this
Agreement and for such purposes irrevocably submit to the jurisdiction of the
English Courts.
SERVICE OF PROCESS
24. Both Parties irrevocably consent to service of process or any other
documents in connection with proceedings in any court by facsimile
transmission, personal service, delivery at any address specified in this
Agreement or any other usual address, mail or in any other manner permitted by
English law, the law of the place of service or the law of the jurisdiction
where proceedings are instituted.
AGENT FOR SERVICE OF PROCESS
25.1 The Purchaser shall at all times maintain an agent for service of
process and any other documents in proceedings in England or any other
proceedings in connection with this Agreement and the Transaction Documents.
Such agent shall be ARCO British Limited currently of London Square, Cross
Lanes (off London Road), Guildford, Surrey and any writ, judgment or other
notice of legal process shall be sufficiently served on the Purchaser if
delivered to such agent at its address for the time being. The Purchaser
irrevocably undertakes not to revoke the authority of the above agent and if,
for any reason, the Seller requests the Purchaser to do so he shall promptly
appoint another such agent with an address in England and advise the Seller.
If, following such a request, the Purchaser fails to appoint another agent,
the Seller shall be entitled to appoint one on behalf of Purchaser at the
expense of the Purchaser.
25.2 The Seller shall at all times maintain an agent for service of
process and any other documents in proceedings in England or any other
proceedings in connection with this Agreement and the Transaction Documents.
Such agent shall be Triton Resources (UK) Ltd., currently of Wellington House,
125 The Strand, London and any writ, judgment or other notice of legal process
shall be sufficiently served on the Seller if delivered to such agent at its
address for the time being. The Seller irrevocably undertakes not to revoke
the authority of the above agent and if, for any reason, the Purchaser
requests the Seller to do so he shall promptly appoint another such agent with
an address in England and advise the Purchaser. If, following such a request,
the Seller fails to appoint another agent, the Purchaser shall be entitled to
appoint one on behalf of Seller at the expense of the Seller.
IN WITNESS this Agreement has been signed on behalf of the Parties the day and
year first above written.
<PAGE>
SCHEDULE 1
1.1 In this Agreement, the following expressions shall have the following
meanings:
ACCOUNTS means the pro-forma consolidated balance sheet of the Company and
Subsidiaries as at the Accounts Date and the related consolidated statements
of operations for the year ending the Accounts Date, all derived from the
accounting records of the Seller Guarantor, together with any notes, reports,
statements or documents included in or annexed to them;
ACCOUNTS DATE means 31 December 1997;
BUSINESS DAY means a day (other than a Saturday or a Sunday) on which banks
are open for business in London and in Dallas, Texas;
CLAIM means any claim for a breach of the Warranties;
CLAIM LIMITATION PERIOD has the meaning in paragraph 2 of Schedule 5;
COMPANY means Triton International Oil Corporation, basic information
concerning which is set out in Part A of Schedule 2;
COMPLETION means completion of the sale and purchase of the Shares under this
Agreement;
COMPLETION BALANCE SHEET means the balance sheet prepared in accordance with
Clause 7 to be used by the Purchaser and the Purchaser Guarantor in the
preparation of their respective books, records and financial statements;
COMPLETION CERTIFICATE means the certificate showing the Preferred Stock Value
as at Completion, to be prepared in accordance with Clause 7;
COMPLETION DATE means ten (10) Business Days from the date hereof, provided
that if the Conditions shall not have been satisfied, waived or deferred on or
before such date, COMPLETION DATE shall mean three Business Days after the day
on which the Condition shall have been satisfied, waived or deferred or such
other date as the Parties may agree but in any event, no later than forty five
(45) days after the date hereof;
COMPLETION PAYMENT means $150,000,000;
CONDITIONS means the conditions referred to in Clause 3;
CONFIDENTIALITY AGREEMENT means the confidentiality agreement between Triton
Energy Limited and the Purchaser Guarantor dated 8 April 1998;
CTOC means Carigali Triton Operating Company, being the Operator under the
Production Sharing Contract;
DATA ROOM means the room located at the offices of CIBC Wood Gundy plc, 30
Finsbury Square, London, EC2A 1NR, to which the Purchaser has had access;
DISCLOSURE LETTER means the letter in the agreed form from the Seller to the
Purchaser executed and delivered immediately before the execution of this
Agreement;
GROUP COMPANY means the Company and the Subsidiaries as applicable and
GROUP COMPANIES shall be interpreted accordingly;
INCENTIVE PAYMENTS AGREEMENT means the agreement in the agreed terms between
the Seller and the Purchaser in respect of the incentive payments to be made
to the Seller, in substantially the form attached to this Agreement;
INTERNAL BALANCE SHEET means the pro-forma consolidated balance sheet of the
Company and the Subsidiaries as at 31 December 1997 as set out in Schedule 7;
INTRA-GROUP GUARANTEES means all guarantees, indemnities, counter-indemnities
and letters of comfort of any nature whatsoever:
(a) given to any third party by any Group Company in respect of a
liability of any member of the Retained Group; and/or (as the context may
require)
(b) given to any third party by any member of the Retained Group in
respect of a liability of any Group Company;
INTRA-GROUP INDEBTEDNESS means all debts outstanding between any Group Company
and members of the Retained Group;
LIABILITY AMOUNT means the amount equal to the aggregate of $150,000,000 and
the total of all incentive payments made pursuant to the Incentive Payments
Agreement to the extent that such payments have actually been paid by the
Purchaser to the Seller at the time that any determinations regarding
thresholds or aggregate amounts with respect to the Seller's indemnity
liability to the Purchaser are made pursuant to Schedule 5 of this Agreement;
LIABILITIES INDEMNITY shall have the meaning ascribed to it in Clause 8.6;
LIABILITIES INDEMNITY CLAIM means any claim brought by the Purchaser pursuant
to the Liabilities Indemnity;
MTJA means the Malaysia-Thailand Joint Authority which is the joint authority
established by the Kingdom of Thailand and Malaysia pursuant to the Memorandum
of Understanding and the Agreement between the Government of the Kingdom of
Thailand and the Government of Malaysia on the Constitution and Other Matters
relating to the Establishment of the Malaysia-Thailand Joint Authority dated
30 May 1990;
MALAYSIA-THAILAND JOINT DEVELOPMENT AREA means that area defined in the
Memorandum of Understanding;
MATERIAL ADVERSE EFFECT means (i) a material adverse effect on the financial
condition, results of operations, properties or assets of the Group Companies
taken as a whole, or (ii) a change, effect, event, occurrence or state of
facts that would prevent or materially delay the consummation of the
transactions contemplated by this Agreement, excluding any such material
adverse effect described in Clause (i) or any such event described in Clause
(ii) to the extent that the same is the result of (i) changes in the status of
negotiations relating to the gas sales agreement referred to in Clause 5.2(a);
(ii) adverse changes in general economic conditions; or (iii) adverse changes
affecting the worldwide energy industry generally or the region in which the
Group Companies and their subsidiaries operate;
MEMORANDUM OF UNDERSTANDING means the Memorandum of Understanding between the
Kingdom of Thailand and Malaysia on the Establishment of a Joint Authority for
the Exploitation of the Resources of the Sea-Bed in a Defined Area of the
Continental Shelf of the two countries in the Gulf of Thailand dated 21
February 1979;
OIL AND GAS CONTRACTS means the Production Sharing Contract and the Operating
Agreements;
OPERATING AGREEMENTS means the contracts in relation to the exploration for
and exploitation of petroleum resources in specified areas in the
Malaysia-Thailand Joint Development Area as set out in Part B of Schedule 6;
OPERATOR means the operator under an Operating Agreement;
PARTIES means the Purchaser and the Seller, and PARTY means either the
Purchaser or the Seller.
PETROLEUM OPERATIONS shall have the meaning ascribed to it in the Production
Sharing Contract;
PETRONAS means Petronas Carigali (JDA) Sendirian Berhad, a corporation
organised and existing under the laws of Malaysia and having its registered
office at 136, Jalan Pudi, 55100 Kuala Lumpur, Malaysia;
PREFERRED STOCK VALUE means the amount of historical unrecovered costs
expended on behalf of the Group Companies on Petroleum Operations (as defined
in the Production Sharing Contract) up to the date of Completion;
PRODUCTION SHARING CONTRACT means the contract relating to exploration and
exploitation of petroleum for Malaysia-Thailand Joint Development Area Block
A-18 as set out, with ancillary documents, in Part A of Schedule 6;
PSC means a Production Sharing Contract relating to Block A-18 dated 21 April
1994, as amended from time to time;
PURCHASE PRICE means the total purchase price set out in Clause 4.1;
RETAINED GROUP means the Seller, its parent company and their respective
subsidiaries (but excluding any Group Company);
SELLER'S GUARANTEES means any guarantees, indemnities or other contingent
obligations given or undertaken by the Seller, its parent company or their
subsidiaries in relation to or arising out of any obligations or liabilities
of any Group Company;
SENIOR MANAGEMENT means the Chairman of the Board and Senior Vice Presidents
of the Seller;
SHAREHOLDERS AGREEMENT means the Shareholders Agreement referred to in Section
2 of Schedule 3, in substantially the form attached to this Agreement;
SHARES means fifty percent (50%) of the issued and outstanding shares of
common stock, par value $1.00 per share, of the Company to be sold to the
Purchaser;
SUBSIDIARIES means TOCT (JDA) and TOCT (Texas);
TAX or TAXATION means and includes any and all forms of taxation, withholding,
duty, levy or impost imposed by any governmental authority, whether the United
States, Malaysia, Thailand or elsewhere; and all penalties, charges, costs and
interest relating thereto;
TAX PARTNERSHIP AGREEMENT means the agreement to be entered into at Completion
by the Purchaser and the Group Companies;
TAX WARRANTIES means the Seller's Warranties set out in Part C of Schedule 4
(Warranties);
TOCT (JDA) means Triton Oil Company of Thailand (JDA) Limited, a company
incorporated under the laws of the Cayman Islands, basic information
concerning which is set out in Part B of Schedule 2;
TOCT (TEXAS) means Triton Oil Company of Thailand, a company incorporated
under the laws of Texas, basic information concerning which is set out in Part
B of Schedule 2;
TRANSACTION DOCUMENTS means this Agreement, the Shareholders Agreement, the
Incentive Payments Agreement, the Tax Partnership Agreement and the Disclosure
Letter;
WARRANTIES means the warranties set out in Schedule 4 (Warranties) given by
the Seller and WARRANTY shall be construed accordingly; and
1998 WORK PROGRAMME AND BUDGET means the work programme and budget agreed as
at the date of this Agreement under the Production Sharing Contract, a copy of
which is attached to the Disclosure Letter.
1.2 In this Agreement:
(a) the HEADINGS are inserted for convenience only and shall not affect
the construction of this Agreement;
(b) references TO THE BEST KNOWLEDGE OF THE SELLER or SO FAR AS THE SELLER
IS AWARE or any similar expression are references to the actual knowledge or
awareness, as the case may be, of Senior Management;
(c) any reference to a document IN THE AGREED FORM is to the form of the
relevant document agreed between the parties and initialled for the purpose of
identification.
<PAGE>
SCHEDULE 2
PART A: BASIC INFORMATION ABOUT THE COMPANY
1. NAME: Triton International Oil Corporation
2. PLACE OF INCORPORATION: Cayman Islands
3. REGISTERED NUMBER: 65713
4. REGISTERED OFFICE: Caledonian Bank & Trust Limited,
Ground Floor, Caledonian House,
Mary Street, PO Box 1043, George
Town, Grand Cayman, Cayman Islands
5. DIRECTORS: Thomas G. Finck,
Robert B. Holland, III,
Peter Rugg
6. SECRETARY: Robert B. Holland, III
7. AUTHORISED CAPITAL: US$50,000 divided into 50,000
Ordinary Shares of par value of
US$1.00 each
8. ISSUED CAPITAL: 1,000 Ordinary Shares
9. REGISTERED SHAREHOLDERS: Triton Energy Limited to be
transferred to Triton Asia Holdings,
Inc. prior to Completion
10.ACCOUNTING REFERENCE DATE: 31 December
11.TAX RESIDENCE: Cayman Islands
<PAGE>
PART B: BASIC INFORMATION ABOUT THE SUBSIDIARIES
TRITON OIL COMPANY OF THAILAND (JDA) LIMITED
1. NAME: Triton Oil Company of Thailand
(JDA) Limited
2. PLACE OF INCORPORATION: Cayman Islands
3. REGISTERED NUMBER: 58407
4. REGISTERED OFFICE: Caledonian Bank & Trust Limited,
Ground Floor, Caledonian House,
Mary Street, PO Box 1043, George
Town, Grand Cayman, Cayman
Islands
5. DIRECTORS: Thomas G. Finck,
Robert B. Holland III,
Peter Rugg
6. SECRETARY: Robert B. Holland III
7. AUTHORISED CAPITAL: US$50,000 divided into 50,000 shares
of par value US$1.00 each
8. ISSUED CAPITAL: 1,000 ordinary shares
9. REGISTERED SHAREHOLDERS: Triton International Oil Corporation
(Cayman Islands)
10.FISCAL YEAR END 31 December
11.TAX RESIDENCE: Cayman Islands
TRITON OIL COMPANY OF THAILAND
1. NAME: Triton Oil Company of Thailand
2. PLACE OF INCORPORATION: Texas, United States of America
3. REGISTERED NUMBER: 298892
4. REGISTERED OFFICE: 6688 North Central Expressway,
#1400, Dallas, Texas 75206
5. DIRECTORS: Thomas G. Finck,
Robert B. Holland III,
Peter Rugg
6. SECRETARY: Robert B. Holland III
7. AUTHORISED CAPITAL: 1,000 shares of $1.00 par value each
8. ISSUED CAPITAL: 1,000 shares
9. REGISTERED SHAREHOLDERS: Triton International Oil Corporation
(Delaware)
10.FISCAL YEAR END 31 December
11.TAX RESIDENCE: USA
<PAGE>
SCHEDULE 3
COMPLETION ARRANGEMENTS
Referred to in Clause 6 (Completion)
At Completion:-
1. the Seller shall deliver to the Purchaser certificates representing the
Shares duly endorsed and in proper form for transfer by delivery under
applicable law, or accompanied by duly executed instruments of transfer in
blank, for transfer in the name of the Purchaser or such person as the
Purchaser may nominate;
2. the Parties shall execute in substantially the form attached a
Shareholders Agreement;
3. the Seller shall cause the relevant Group Company to convene a board
meeting of such Group Company at which the directors or managers, as
applicable, designated by the Purchaser are appointed;
4. the Seller shall convene a general meeting of stockholders of the
Company at which a new memorandum and articles of association (in a form
mutually acceptable to the Parties) will be adopted and the share capital
structure as contemplated by the Shareholders Agreement will be approved and
created in such form and manner as is mutually acceptable to the Parties;
5. the Seller and the Purchaser shall enter into the Incentive Payments
Agreement;
6. the Purchaser and the Group Companies shall execute the Tax Partnership
Agreement in a form which is mutually acceptable to the Parties;
7. the Purchaser shall pay the Completion Payment to an account to be
specified by the Seller by way of wire transfer of immediately available
funds.
<PAGE>
SCHEDULE 4
THE WARRANTIES
PART A: GENERAL
DISCLOSURE
DISCLOSURE LETTER
1.1 Except as set out in the Disclosure Letter, the Seller represents and
warrants that the following are true and correct in all material respects.
THE SELLER
CAPACITY OF THE SELLER
2.1(a) The Seller is a corporation duly incorporated, is validly existing
and in good standing under the laws of its jurisdiction of organisation and is
duly qualified to transact business in each jurisdiction where a failure to be
so qualified could reasonably be expected to have a Material Adverse Effect.
(b) The Seller has obtained all corporate authorisations and all other
applicable governmental, statutory, regulatory or other consents, licences,
authorisations, waivers or exemptions required to empower it to enter into and
perform its obligations under this Agreement except for any authorisation,
consent, license, waiver or exemption that, if not obtained, would not have a
Material Adverse Effect or materially prejudice the Seller's ability to
consummate the transactions contemplated by the Transaction Documents.
2.2 This Agreement and the other documents executed by the Seller which
are to be delivered at Completion will, when executed, constitute valid and
binding obligations of the Seller in accordance with their respective terms
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of
equity.
2.3 The execution and delivery of, and the performance by the Seller of
its obligations under the Transaction Documents, and the consummation of the
transactions contemplated by the Transaction Documents will not:-
(a) result in a breach of any provision of the memorandum or articles of
association of the Seller or any of the Group Companies; or
(b) result in a breach of any order, judgment or decree of any court or
governmental agency, or any breach or violation of, or default under, any
contract, agreement, indenture, instrument or other document to which the
Seller or any Group Company is a party or by which the Seller or any Group
Company or any of their respective assets is bound, except for any breach,
violation or default that would not have a Material Adverse Effect or
materially prejudice the Seller's ability to consummate the transactions
contemplated by the Transaction Documents.
CORPORATE
THE COMPANY AND THE SHARES
3.1(a) All of the Shares are fully-paid or properly credited as fully-paid
and the Seller is the sole legal and beneficial owner of them free from all
security interests, options, equities, claims or other third party rights,
charges or encumbrances (including rights of pre-emption) of any nature
whatsoever and the Seller has not entered into any agreement (other than the
sale of the Shares to the Purchaser pursuant to the terms of this Agreement)
to sell or otherwise dispose of the Shares or issue further Shares (or other
forms of security) in the capital of the Company.
(b) In addition to the Shares, the Seller is the sole legal and beneficial
owner of all of the remaining share capital of the Company free from all
security interests, options, equities, claims or other third party rights,
charges or encumbrances (including, without limitation, rights of pre-emption)
of any nature whatsoever, and the Seller has not encumbered or agreed to sell,
issue or transfer any of the shares of capital stock of the Company (other
than the sale of the Shares to the Purchaser pursuant to the provisions of
this Agreement).
(c) The information in respect of the Company set out in Part A of
Schedule 2 is true and accurate.
(d) The Company has not encumbered, redeemed, allotted, created, repaid or
agreed to sell, issue or transfer any of the shares of its own capital stock.
(e) The Company has not in the past owned or had an interest, and does not
currently own or have an interest, of any nature whatsoever, in any equity
securities or other securities of any other entity or party (other than the
Subsidiaries), or in any contracts to acquire the same. The Company has not
in the past had and does not currently have any direct or indirect equity or
ownership interest in any other business or assets (other than the share
capital of the Subsidiaries).
(f) The Seller warrants that as of the date of this Agreement:
(i) neither the Company, nor any officer, employee, agent or
representative of the Company, has maintained or is currently maintaining a
register in respect of the Shares within the United Kingdom; and
(ii) the Shares are not paired with any shares issued by a body
corporate incorporated in the United Kingdom.
(g) The Company is a corporation duly incorporated, is validly existing
and in good standing under the laws of its jurisdiction of organisation and is
duly qualified to transact business in each jurisdiction where a failure to be
so qualified could reasonably be expected to have a Material Adverse Effect.
THE SUBSIDIARIES
3.2(a) The Company and/or Triton International Oil Corporation (Delaware)
is the sole legal and beneficial owner of the whole of the issued share
capital of the Subsidiaries free from all security interests, options,
equities, claims or other third party rights, charges or encumbrances
(including, without limitation, rights of pre-emption) of any nature
whatsoever and neither the Seller, the Company or Triton International Oil
Corporation (Delaware) have entered into any agreement to sell or otherwise
dispose of any of the share capital of the Subsidiaries or issue further
shares (or other forms of security) in the capital of the Subsidiaries.
(b) The information in respect of the Subsidiaries set out in Part B of
Schedule 2 is true and accurate.
(c) The Subsidiaries have not encumbered, redeemed, allotted, created,
repaid or agreed to sell, issue or transfer any of the shares of their own
capital stock.
(d) The Subsidiaries have not in the past owned or had an interest, and do
not currently own or have an interest of any nature whatsoever in any equity
securities or other securities of any other entity or party, except for the 9%
Preference Shares of TOCT (JDA) or in any contracts to acquire the same. The
Subsidiaries have not in the past had and do not currently have any direct or
indirect equity or ownership interests in any business or assets other than
their interests in the oil and gas contracts.
(e) Each Subsidiary is a corporation duly incorporated, is validly
existing and in good standing under the laws of its jurisdiction of
organisation and is duly qualified to transact business in each jurisdiction
where a failure to be so qualified could reasonably be expected to have a
Material Adverse Effect.
OTHER INTERESTS
3.3 No Group Company owns or has any interest of any nature whatsoever in
any shares, debentures or other securities issued by any undertaking other
than the Subsidiaries.
FINANCIAL MATTERS
ACCOUNTS
4.1 The Accounts of the Company fairly present the consolidated financial
position of the Company and the Subsidiaries as of the Accounts Date and the
consolidated results of operations for the period then ended, as at the
Accounts Date and of their results for the financial year ended on the
Accounts Date.
4.2 Subject to the absence of footnotes and a cash flow statement and
except with respect to the treatment of capitalised interest, the Accounts
were prepared in accordance with U.S. generally accepted accounting principles
applied on a consistent basis during the periods indicated.
POSITION SINCE ACCOUNTS DATE
4.3 Since the Accounts Date:
(i) the business of each Group Company has been carried on in the ordinary
and usual course of business, consistent with the past practice of such Group
Company;
(ii) no dividend or other distribution has been declared, paid or made by
any Group Company;
(iii) no capital stock or loan capital has been allotted or issued or
agreed to be allotted or issued by any Group Company;
(iv) no contract, liability or commitment (whether in respect of capital
expenditure or otherwise) has been entered into by any Group Company involving
a liability for expenditure in excess of $1,000,000;
(v) no Group Company has (whether in the ordinary and usual course of
business or otherwise) acquired or disposed of, or agreed to acquire or
dispose of, any business or any asset having a value in excess of $1,000,000;
(vi) except as contemplated by this Agreement with respect to Intra-Group
Indebtedness, no debtor has been released by any Group Company on terms that
it pays less than the book value of its debt and no debt owing to any Group
Company has been deferred, subordinated or written off or has proved to any
extent irrecoverable;
(vii) no change has been made in terms of employment, including pension
fund commitments, by any Group Company (other than those required by law)
which would increase the total staff costs of the Group Companies by more than
$500,000 per annum;
(viii) no Group Company has incurred any liability (contingent or
otherwise) which has or is reasonably likely to have a Material Adverse Effect
other than as disclosed in or contemplated by the 1998 Work Programme and
Budget.
ACCOUNTING AND OTHER RECORDS
4.4 The statutory books, books of account and other records of each Group
Company have been maintained in all material respects in accordance with all
applicable laws and United States generally accepted accounting practices on a
proper and consistent basis.
DEBT POSITION
DEBTS OWED TO THE GROUP COMPANIES
5.1 There are no debts owing to any Group Company other than:
(i) the Intra-Group Indebtedness reflected in the Internal Balance Sheet
as increased in the ordinary course of business to the date hereof;
(ii) other trade debts incurred in the ordinary and usual course of
business, not exceeding, in the aggregate, $1,000,000.
DEBTS OWED BY THE GROUP COMPANIES
5.2(a) No Group Company has outstanding any material borrowing or
indebtedness in the nature of borrowing (including, without limitation, any
indebtedness for moneys borrowed or raised under any acceptance credit, bond,
note, bill of exchange or commercial paper, finance lease, hire purchase
agreement, forward sale or purchase agreement or conditional sale agreement or
other transaction having the commercial effect of a borrowing) other than:
(i) the Intra-Group Indebtedness reflected in the Internal Balance
Sheet; and
(ii) moneys borrowed from third parties reflected in the Internal
Balance Sheet and which are listed in the Disclosure Letter.
(b) There is not existing any event of default or any other event or
circumstance which would entitle any person to call for early repayment under
any agreement relating to any borrowing or indebtedness of any Group Company
or to enforce any security given by any Group Company (or, in either case, any
event or circumstance which with the giving of notice and/or the lapse of time
and/or a relevant determination would constitute such an event or
circumstance).
INTRA-GROUP GUARANTEES
5.3 There are no Intra-Group Guarantees currently in force.
REGULATORY MATTERS
LICENCES
6.1 Each Group Company has obtained and has in effect all licences,
permissions, authorisations and consents required for carrying on its business
effectively in the places and in the manner in which such business is now
carried on except for any such licence, permission, authorisation and consent
that, if not obtained or not in effect would not have a Material Adverse
Effect.
COMPLIANCE WITH LAWS
7.1(a) Each Group Company has conducted its business and corporate affairs
in accordance with its Memorandum and Articles of Association.
(b) No Group Company is in violation of any applicable law, ordinance,
rule, regulation, order, decree or judgment of any applicable judicial,
legislative, executive, administrative or regulatory body or any court,
arbitration, board or tribunal where any such violation, individually or in
the aggregate, would have a Material Adverse Effect. Each Group Company is in
compliance with the provisions of the Foreign Corrupt Practices Act and has
not taken any action in furtherance of the Arab League's boycott of Israel, or
in any other boycott of Israel, or in any other boycott and has fully complied
with all reporting requirements to the appropriate governmental authorities
with respect to any request to participate in the Arab League's boycott of
Israel, or such other boycott as the case may be, if any such requests have
been received.
LITIGATION AND INVESTIGATIONS
LITIGATION
8.1 Except as disclosed in the Annual Report on Form 10-K for the year
ended December 31, 1997 of Triton Energy Limited, no Group Company is a
defendant in or otherwise a party to any litigation, arbitration or
administrative proceedings which are in progress and there are no judgments,
decrees, orders or arbitral awards outstanding against any Group Company nor,
so far as the Seller is aware, are there any litigation, arbitration or
administrative proceedings threatened or pending by or against any Group
Company or any of its assets which have had or would be reasonably expected
have a Material Adverse Effect.
DIRECTORS AND EMPLOYEES
EMPLOYEES
9.1(a) Since the Accounts Date, no Group Company has entered into any
agreement imposing an obligation on the Group Company to increase the basis
and/or rates of remuneration and/or the provision of other benefits in kind to
or on behalf of any of its directors or employees at any future date, other
than in the customary and ordinary course of business.
(b) Each Group Company has made all filings and taken all action required
to be made or taken under applicable social security, labour and welfare laws
and regulations where the failure to make any such filing or take such action
would have a Material Adverse Effect. All social security and welfare charges
due under such laws and regulations have been fully paid or adequately
reserved for in the Accounts.
AGREEMENTS
9.2 There is not in existence any written or unwritten contracts of
employment with a director or an employee of any Group Company (or any
contract for services with any person) which either (i) cannot be terminated
by twelve (12) months' notice or less without giving rise to a claim for
damages or compensation that would exceed US$1,000,000 or (ii) in the
aggregate would result in an obligation in excess of US$1,000,000.
COMPLIANCE
9.3 Each Group Company has in relation to each of its employees (and so
far as relevant to each of its former employees) complied in all material
respects with all statutes, regulations, codes of conduct, collective
agreements, terms and conditions of employment or service, orders and awards
relevant to their conditions of service or to the relations between it and its
employees (or former employees, as the case may be) or any recognised trade
union where the failure to have so complied would have a Material Adverse
Effect.
DISPUTES
9.4 No dispute is pending, and to the best knowledge of the Seller no
dispute is threatened, between any Group Company and a material number or
category of its employees (or any trade union or other body representing all
or any of such employees) which would reasonably be expected to have a
Material Adverse Effect.
INCENTIVE SCHEMES
9.5 No Group Company has in existence any share incentive scheme, share
option scheme or profit sharing, bonus, commission or other incentive scheme
for all or any of its directors or employees.
PAYMENTS ON TERMINATION
9.6 Except to the extent (if any) to which provision or allowance has been
made in the Accounts of each Group Company:
(a) there is no existing material liability of any Group Company for
breach of any contract of employment or for services or redundancy payments,
protective awards, compensation for wrongful dismissal or unfair dismissal or
for failure to comply with any order for the reinstatement or re-engagement of
any employee or for any other material liability accruing from the termination
of any contract of employment or for services; and
(b) there is no existing material liability of any Group Company for any
payment in connection with the actual or proposed termination or suspension of
employment, or variation of any contract of employment, of any present or
former director or employee of any Group Company.
INSOLVENCY ETC.
10.1 No order has been made, petition presented, resolution passed or
meeting convened for the purpose of considering a resolution for the winding
up (or other process whereby the business is terminated and the assets of the
company concerned are distributed amongst the creditors and/or shareholders or
other contributories) of any Group Company and there are no cases or
proceedings under any applicable insolvency, reorganisation or similar laws in
any jurisdiction concerning any Group Company.
10.2 No petition has been presented or other proceedings commenced for an
administration order to be made (or any other order to be made by which during
the period it is in force, the affairs, business and property of the company
concerned, are managed by a person appointed for the purpose by a court,
governmental agency or similar body) in relation to any Group Company, nor has
any order been made.
10.3 No receiver (including any administrative receiver), liquidator,
trustee, administrator, custodian or similar official has been appointed in
any jurisdiction in respect of the whole or any part of any of the property,
assets and/or undertaking of any Group Company and no step has been taken for
or with a view to the appointment of such a person.
ENVIRONMENTAL
11.1 The businesses of each of the Group Companies have been and are
operated in compliance with all Federal, state and local environmental
protection, health and safety or similar laws, statutes, ordinances,
restrictions, licenses, rules, regulations, permit conditions and legal
requirements for the countries and areas in which they operate (ENVIRONMENTAL
LAWS), except where the failure to be so in compliance has not had or would
not reasonably be expected to have a Material Adverse Effect.
11.2 None of the Group Companies has caused the generation, treatment,
manufacture, processing, distribution, use, storage, discharge, release,
disposal, transport or handling of any chemicals, pollutants, contaminants,
wastes, sold wastes, toxic substances, hazardous substances, hazardous wastes,
petroleum, petroleum products or any substance regulated under any
Environmental Law (HAZARDOUS SUBSTANCES) at any of its properties or
facilities, except for such instances as have not had or would not reasonably
be expected to have a Material Adverse Effect.
11.3 Neither the Company nor the Subsidiary has received any written
notice from any governmental entity or other third party alleging any
violation by the Company or the Subsidiary of, or responsibility or liability
of the Company or the Subsidiary under, any Environmental Law or for personal
injuries and/or property damages, except for such allegations as have not had
or would not reasonably be expected to have a Material Adverse Effect.
<PAGE>
PART B: CONTRACTS WARRANTIES
MATERIAL CONTRACTS
GENERALLY
1.1 There is not outstanding any agreement or arrangement to which any
Group Company is a party:
(a) which, by virtue of the acquisition of the Shares by the Purchaser or
other performance of the terms of this Agreement, will result in:
(i) any other party being relieved of any obligation to any Group
Company or becoming entitled to exercise any right (including any right of
termination or any right of pre-emption or other option) that would have a
Material Adverse Effect; or
(ii) any Group Company being in default under any such agreement or
arrangement or losing any benefit, right or licence which it currently enjoys
or in a liability or obligation of any Group Company being increased which, in
any such case, would have a Material Adverse Effect;
(b) which requires (or confers any right to require) the allotment or
issue of any shares, debentures or other securities of any Group Company now
or at any time in the future;
(c) which establishes any joint venture, consortium, partnership or profit
(or loss) sharing agreement or arrangement to which any Group Company is a
party other than the Oil and Gas Contracts, the liabilities under which exceed
$250,000 per annum;
(d) (other than existing contracts for drilling and drilling services
associated with wells currently drilling or planned for 1998) which requires
expenditure by any Group Company in excess of $1,000,000 other than the Oil
and Gas Contracts;
(e) which establishes any material agency, distributorship, marketing,
purchasing, manufacturing or licensing agreement or arrangement to which any
Group Company is a party;
(f) which is a currency and/or interest rate swap agreement, asset swap,
future rate or forward rate agreement, interest cap, collar and/or floor
agreement or other exchange or rate protection transaction or combination
thereof or any option with respect to any such transaction or any other
similar transaction to which any Group Company is a party where the notional
amount exceeds $1,000,000;
(g) which is a recognition, procedural or other agreement between any
Group Company and any recognised independent trade union;
(h) which is any other agreement or arrangement having a material effect
on the business, assets, properties, results of operations, financial or
trading position or prospects of any Group Company;
(i) which is a bid, tender, proposal or offer which, if accepted, would
result in any Group Company becoming a party to any agreement or arrangement
of a kind described in sub-paragraphs (a) to (h) above.
1.2 So far as the Seller is aware, no Group Company is in default under
any agreement to which it is a party where such default has had or would
reasonably be expected to have a Material Adverse Effect.
OIL AND GAS CONTRACTS
GENERALLY
2.1 The Oil and Gas Contracts made available to the Purchaser for
inspection in the Data Room are the only material agreements or arrangements
relating to the oil and gas interests of any Group Company in the
Malaysia-Thailand Joint Development Area.
2.2 Each Group Company has complied in all material respects with its
obligations under the Oil and Gas Contracts.
2.3 All payments due and payable by any Group Company as at the date
hereof in relation to the Oil and Gas Contracts have been paid in full.
2.4 To the best knowledge of the Seller, each Oil and Gas Contract is
currently in force and no Group Company has, within the last nine (9) months
received written notice of the revocation, variation, termination or surrender
of any of them, of the withdrawal of any party or of any intention of any
party so to revoke, vary, terminate, surrender or withdraw from any of them.
2.5 No act or omission by any Group Company has occurred which could
reasonably be expected to result in revocation of any of the Oil and Gas
Contracts.
2.6 Subject to the provisions of the Oil and Gas Contracts, the
Subsidiaries are the beneficial owners of their interests under the Oil and
Gas Contracts free from all charges, liens, encumbrances, equities and claims
whatsoever.
PRODUCTION SHARING CONTRACT
2.7 All compulsory work obligations contained in the Production Sharing
Contract which are (subject to extensions granted by the relevant authorities)
required to have been performed by any Group Company at the date hereof have
been fully performed.
2.8 Neither the Seller, the Company nor either of the Subsidiaries has
received any notice from the Malaysia-Thailand Joint Authority or any
government or competent governmental agency of any intention to require
further work of a material nature to be conducted (whether in relation to
exploration, appraisal or development).
OPERATING AGREEMENTS
2.9 No sole risk or non-consent proposals or operations are formally
proposed and currently extant or underway in relation to the Operating
Agreements.
2.10 All cash calls due and payable by the Subsidiaries as at the date
hereof in relation to the Operating Agreements have been paid in full.
ABANDONMENT OBLIGATIONS
2.11 No payments have been made by the Subsidiaries in respect of or on
account of or by way of provision (other than accounting provisions) for any
future abandonment obligations in respect of the Production Sharing Contract
or the Operating Agreements and no abandonment agreement has been entered into
affecting the Production Sharing Contract or the Operating Agreements and,
subject to the documents made available to the Purchaser in the Data Room, and
subject to all legislation and regulation, no obligation to make any such
payments or provision is in existence.
<PAGE>
PART C: TAXATION
1.1 Except as listed below each Group Company has timely filed or caused
to be timely filed all Tax returns required by any Tax authority and has paid
any and all liability with respect to such returns:
(a) Withholding tax imposed by the Kingdom of Thailand;
(b) VAT imposed by the Kingdom of Thailand.
1.2 Except as listed below, there is no dispute outstanding, nor so far as
the Seller is aware, is any threatened as of the date of this Agreement with
any Revenue authority regarding liability or potential liability to any Tax
(including in such case penalties or interest) recoverable, directly or
indirectly, from any Group Companies or regarding any claim for refund,
overpayment or other relief from Tax to any Group Company:
(a) Withholding tax imposed by the Kingdom of Thailand;
(b) VAT imposed by the Kingdom of Thailand.
1.3 Proper provision in accordance with generally accepted accounting
practice has been made in respect of Taxation (whether actual or contingent)
in the Accounts.
1.4 Since the Accounts Date:-
(a) no period of account for tax purposes of any Group Company has ended
except that a tax year for TOCT (Texas) ended on 31 May 1998;
(b) no event has occurred which will result in any Group Company becoming
liable to pay or bear a Tax liability directly or primarily chargeable against
or attributable to another person, firm or company other than any other Group
Company; and
(c) no Group Company has paid or become liable to pay any interest or
penalty in connection with any Tax, has otherwise paid any Tax after its due
date for payment or owes any Tax the due date for payment of which has passed
or will arise in the 30 days after the date of this Agreement.
<PAGE>
SCHEDULE 5
INDEMNIFICATION PROCEDURES AND LIMITATIONS ON
THE SELLER'S LIABILITY FOR WARRANTY CLAIMS AND LIABILITIES INDEMNITY CLAIMS
1. LIMITATION ON QUANTUM FOR WARRANTY CLAIMS
1.1 The Purchaser shall not be entitled in any event to damages or other
amounts in respect of any Warranty Claim or Warranty Claims unless and until:-
(a) the aggregate amount of all such claims exceeds 5% of the Liability
Amount (in which event the liability of the Seller shall be limited to the
amount by which such aggregate amount exceeds 5% of the Liability Amount) and
(b) the amount of any individual claim shall exceed 0.5% of the Liability
Amount (in which event the liability of the Seller shall be limited to the
amount by which such aggregate amount exceeds 0.5% of the Liability Amount);
1.2 The total aggregate liability of the Seller under or pursuant to this
Agreement for Warranty Claims, when aggregated with the total aggregate
liability of the Seller under or pursuant to this Agreement for Liabilities
Indemnity Claims, shall not in any event exceed the Liability Amount.
2. LIMITATION ON QUANTUM FOR LIABILITIES INDEMNITY CLAIMS
The total aggregate liability of the Seller under or pursuant to this
Agreement for Liabilities Indemnity Claims, when aggregated with the total
aggregate liability of the Seller under or pursuant to this Agreement for
Warranty Claims, shall not in any event exceed the Liability Amount.
3. TIME LIMITS FOR BRINGING WARRANTY CLAIMS AND LIABILITIES INDEMNITY
CLAIMS
3.1 The Seller shall not be liable for any Warranty Claim unless the
Purchaser shall have given to the Seller written notice of such Claim:-
(i) on or before the first anniversary of the Completion Date in
respect of Warranty Claims relating to the Tax Warranties; or
(ii) on or before the first anniversary of the Completion Date in
respect of Warranty Claims relating to the Warranties other than the Tax
Warranties.
Such written notice shall specify (in reasonable detail) the matter which
gives rise to the Warranty Claim, the nature of the Warranty Claim and, to the
extent that it is possible for the Purchaser to make a determination of the
amount claimed in respect of a Warranty Claim that is quantifiable and not
contingent, reasonable details concerning the Purchaser's calculation of the
loss thereby alleged to have been suffered by it. Notwithstanding the
foregoing, any defects or inaccuracies in such written notice or failure to
provide such notice promptly after the Purchaser becomes aware of the matter
giving rise to the Warranty Claim, subject to the limitation periods set forth
in Clauses (i) and (ii) above, shall not relieve the Seller of liability for
such Warranty Claim.
3.2 The Seller shall not be liable for any Liabilities Indemnity Claim
unless the Purchaser, for or on behalf of itself or a Group Company, or any
Group Company, as the case may be, shall have given to the Seller written
notice of such Claim:-
(i) on or before the fifth anniversary of the Completion Date in
respect of Liabilities Indemnity Claims relating to Taxation or any
liabilities arising out of non-compliance by the Group Companies with
Environmental Laws (as such term is defined in paragraph 11.1 of Schedule 4);
or
(ii) on or before the third anniversary of the Completion Date in
respect of all other Liabilities Indemnity Claims.
Such written notice shall specify (in reasonable detail) the matter which
gives rise to the Liabilities Indemnity Claim, the nature of the Liabilities
Indemnity Claim and, to the extent that it is possible for the Purchaser or
the relevant Group Company, as the case may be, to make a determination of the
amount claimed in respect of a Liabilities Indemnity Claim that is
quantifiable and not contingent, reasonable details concerning the calculation
of the loss thereby alleged to have been suffered by it. Notwithstanding the
foregoing, any defects or inaccuracies in such written notice or failure to
provide such notice promptly after the Purchaser or the relevant Group
Company, as the case may be, becomes aware of the matter giving rise to the
Liabilities Indemnity Claim, subject to the limitation periods set forth in
Clauses (i) and (ii) above, shall not relieve the Seller of liability for such
Liabilities Indemnity Claim.
(Each period specified in Clauses 3.1(i) and (ii) and 3.2 (i) and (ii) being a
CLAIM LIMITATION PERIOD).
4. EXCLUSION OF LIABILITY FOR DISCLOSED MATTERS WITH RESPECT TO WARRANTY
CLAIMS
The Seller shall not be liable for any Warranty Claim in respect of any fact,
matter, event or circumstance to the extent that:-
(a) such fact, matter, event or circumstance has been disclosed in this
Agreement or the Disclosure Letter; or
(b) specific allowance, provision or reserve has been made for such fact,
matter, event or circumstance in the Accounts or the notes to such Accounts.
5. NO EXCLUSION OF LIABILITY FOR DISCLOSED MATTERS WITH RESPECT TO
LIABILITIES INDEMNITY CLAIMS
The Seller shall be liable for a Liabilities Indemnity Claim regardless of
whether or not the fact, matter, event or circumstance giving rise to such
Liabilities Indemnity Claim:-
(a) has been disclosed in this Agreement or the Disclosure Letter; or
(b) specific allowance, provision or reserve has been made therefor in the
Accounts or the notes to such Accounts.
6. PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS
(a) Upon the Purchaser becoming aware of any third party claim, potential
claim, matter or event (a THIRD PARTY CLAIM) which might lead to a Warranty
Claim or a Liabilities Indemnity Claim being made, the Purchaser (on behalf of
itself or any Group Company, as the case may be) shall:-
(i) within twenty Business Days notify the Seller by written notice
of such third party claim; provided, however, that failure to give the written
notice within such period shall not relieve the Seller of liability except to
the extent that the Seller's ability to defend any proceeding with respect to
such third party claim is materially prejudiced thereby;
(ii) take such action and give such information and access to
personnel, premises, chattels, documents and records to the Seller and their
professional advisers as the Seller may reasonably request (or co-operate to
procure that the relevant Group Company will do so) to avoid, dispute, resist,
mitigate, settle, compromise, defend or appeal such third party claim or any
adjudication with respect thereto;
(iii) at the written request and expense of the Seller, allow the
Seller to assume control of the conduct of such actions as the Seller may deem
appropriate in connection with any such third party claim (with counsel
reasonably satisfactory to the Purchaser), in the name of the Purchaser or the
appropriate Group Company, and, at the Seller's cost and expense, provide such
information and assistance as the Seller may reasonably require in connection
with the preparation for and conduct of such actions; provided, however, that
the Purchaser shall have the right to participate in such actions and to be
represented, solely at the Purchaser's own expense, by separate counsel;
provided, further, that if the Seller fails to diligently conduct such
actions, the Purchaser may assume control thereof, and the Seller shall be
liable for all reasonable costs and expenses incurred by the Purchaser in
connection therewith;
(iv) if the Seller has elected to assume control of the actions
relating to a third party claim, make no admission of liability, agreement,
settlement or compromise with any third party in relation to any such third
party claim without the prior written consent of the Seller, which consent
shall not be unreasonably withheld or delayed; provided, however, that if the
Seller has not elected to assume control of the actions relating to such third
party claim, the Purchaser may make an admission of liability, agreement,
settlement or compromise with respect to such third party claim in its sole
reasonable judgment, and the Seller shall be bound thereby; and
(v) take all reasonable action to mitigate any loss suffered by it or
any Group Company in respect of which a Warranty Claim or Liabilities
Indemnity Claim could be made.
(b) If the Seller has elected to assume control of the actions relating to
a third party claim, it shall not be entitled to make any agreement,
settlement or compromise thereof without the prior written consent of the
Purchaser. If the sole relief and effect of any agreement, settlement or
compromise that the Seller desires to make with a third party in respect of a
third party claim is the payment of monetary damages in full by the Seller
(the "Settlement Offer") and the Purchaser has refused its consent thereto,
then the Seller's maximum liability as to such third party claim will not
exceed the amount of the Settlement Offer.
7. NO RECOVERY TWICE FOR THE SAME LOSS
The Purchaser agrees for itself and on behalf of each Group Company with the
Seller that each of them shall not be entitled to recover damages or obtain
payment, reimbursement, restitution or indemnity more than once in respect of
any one loss, liability, expense, shortfall, damage, deficiency or breach, and
for this purpose recovery by the Purchaser or any Group Company shall be
deemed to be a recovery by each of them.
8. OTHER RECOVERY; REIMBURSEMENT OF AMOUNTS PAID UNDER THE LIABILITIES
INDEMNITY
The Seller's Liability in respect of Indemnity Liabilities Claims and Warranty
Claims shall be net of any Tax benefit (after giving effect to the Tax
consequences of any recovery with respect to such claims) and net of
recoveries under any insurance policies (except to the extent of any increase
in the cost of any experience-rated insurance policies held by the Purchaser
or the relevant Group Company) or from another person. If the Seller pays to
the Purchaser or a Group Company an amount in respect of a Warranty Claim or a
Liabilities Indemnity Claim and the Purchaser or a Group Company subsequently
recovers from another person or from insurance an amount which is attributable
to or arises from the matter giving rise to such Warranty Claim or Liabilities
Indemnity Claim:
(a) if the Total Liability Amount is equal to or less than the Sum
Recovered, the Purchaser or the relevant Group Company, as the case may be,
shall pay to the Seller the Total Liability Amount paid by the Seller to the
Purchaser or the relevant Group Company, as the case may be, in respect of
such Warranty Claim or Liabilities Indemnity Claim; and
(b) if the Total Liability Amount is more than the Sum Recovered, the
Purchaser or the relevant Group Company, as the case may be, shall pay to the
Seller an amount equal to the Sum Recovered.
For the purposes of this Clause SUM RECOVERED means an amount equal to the
total of the amount actually recovered from the other person or insurance plus
any interest in respect of the amount recovered from the person or insurance
less any tax computed by reference to the amount recovered from the person or
insurance payable by the Purchaser or the relevant Group Company and TOTAL
LIABILITY AMOUNT means an amount equal to the amount paid by the Seller in
respect of the Warranty Claim or Liabilities Indemnity Claim. In addition, if
the Seller pays to the Purchaser or a Group Company an amount in respect of a
Warranty Claim or a Liabilities Indemnity Claim that is or becomes
cost-recoverable pursuant to the terms of the PSC and such amount was not
reflected in the Completion Certificate, the Parties shall cause the Company
to issue to the Seller additional shares of Class A Preferred Stock in respect
of such amounts as contemplated by the Shareholders Agreement.
9. ACTS OF THE PURCHASER
No Warranties Claim or Liabilities Indemnities Claim shall lie against the
Seller to the extent that such Warranties Claim or Liabilities Indemnity Claim
is attributable to any voluntary act, omission, transaction or arrangement
carried out by the Purchaser before or after Completion
10. PURCHASER'S KNOWLEDGE
The Seller shall not be liable under the Warranties to the extent that the
Purchaser or any of its management level employees had actual knowledge of the
Claim or of the matters forming the basis of the Claim either at the date of
this Agreement or, if later, Completion.
11. RETROSPECTIVE LEGISLATION
No liability shall arise in respect of any Warranties Claim or under any
Liabilities Indemnity Claim if and to the extent that liability for such
breach occurs or is increased as a result of any legislation not in force at
the date hereof which takes effect retrospectively, and which was not known to
the Seller (or of which the Seller should reasonable have been aware) at the
date hereof.
12. NO CLAIM UNDER WARRANTIES IF MATTER IS SUBJECT OF LIABILITIES
INDEMNITY
If the matter giving rise to a claim under the Liabilities Indemnity is also
one which would give rise to a Warranties Claim, the remedy of the Purchaser
(or the relevant Group Company, as the case may be) in respect of such matter
shall be limited to a claim under the Liabilities Indemnity and the Purchaser
shall not be entitled to bring a Warranties Claim.
<PAGE>
SCHEDULE 6
PART A: PRODUCTION SHARING CONTRACT
Contract dated 21 April 1994 between Malaysia-Thailand Joint Authority and
Petronas Carigali (JDA) Sdn., Bhd. and Triton Oil Company of Thailand relating
to exploration and exploitation of petroleum for Malaysia-Thailand Joint
Development Area Block A-18, together with:
a Deed of Assignment dated 1 September 1995 between Triton Oil Company
of Thailand and Triton Oil Company of Thailand (JDA) Limited;
a Deed of Assignment dated 1 October 1996 between Triton Oil Company
of Thailand and Triton International Oil Corporation; and
a letter dated 23 December 1997 from the Malaysia-Thailand Joint
Authority to Petronas Carigali (JDA) Sdn Bhd and Triton Oil Company of
Thailand (JDA) Ltd. and Triton Oil Company of Thailand confirming permission
to retain the Block A-18, JDA contract area for further exploration.
PART B: OPERATING AGREEMENTS
The following contracts as amended from to time:
1. Joint Operating Agreement dated 21 April 1994 between Petronas Carigali
(JDA) Sendirian Berhad and Triton Oil Company of Thailand relating to
Malaysia-Thailand Joint Development Area Block A-18.
2. Joint Operating Company Agreement dated 21 March 1994 between Petronas
Carigali (JDA) Sendirian Berhad and Triton Oil Company of Thailand relating to
Malaysia-Thailand Joint Development Area Block A-18.
<PAGE>
For and on behalf of
TRITON ASIA HOLDINGS, INC.
For and on behalf of
ARCO JDA LIMITED
For and on behalf of
TRITON ENERGY LIMITED
For and on behalf of
ATLANTIC RICHFIELD COMPANY
EXHIBIT 10.64
3 AUGUST 1998
TRITON ASIA HOLDINGS, INC.
ARCO JDA LIMITED
TRITON ENERGY LIMITED
ATLANTIC RICHFIELD COMPANY
==========================
SHAREHOLDERS AGREEMENT
==========================
<PAGE>
CONTENTS
CLAUSE PAGE
1. Interpretation 5
2. Business of the Company 5
3. Board of Directors 5
4. Proceedings of Board of Directors 6
5. Shareholders Meetings 6
6. Representation in Relevant Forum 7
7. management positions 8
8. Funding and Issue of Preferred Stock 10
9. Costs Recovery 14
10. Distribution Policy 15
11. Taxation 15
12. Transfers of Shares 16
13. Duration and Termination 19
14. Restructuring 20
15. Confidential information 20
16. Rights to Information 22
17. Notices 23
18. Triton Guarantor 23
19. ARCO Guarantor 24
20. General 24
21. Governing Law and Applicable Laws 26
22. Decision Deadlock and Dispute resolution 26
23. Arbitration 27
SCHEDULE 1 28
Definitions 28
SCHEDULE 2 32
Representation in Relevant Forum 32
<PAGE>
THIS AGREEMENT is made on 3 August 1998
BETWEEN
TRITON ASIA HOLDINGS, INC., a company incorporated under the laws of the
Cayman Islands, whose principal place of business is at Caledonian House,
Mary Street, P.O. Box 1044, George Town, Grand Cayman, the Cayman Islands
(TRITON);
ARCO JDA LIMITED, a company incorporated under the laws of the Commonwealth of
the Bahamas whose registered office is at #3 Magna Carta Court, P.O. Box,
N-4805, Shirley Street, Nassau, Bahamas (ARCO);
TRITON ENERGY LIMITED, a company incorporated under the laws of the Cayman
Islands, whose principal place of business is Caledonian House, Mary Street,
P.O. Box 1043, George Town, Grand Cayman, Cayman Islands (the TRITON
GUARANTOR); and
ATLANTIC RICHFIELD COMPANY, a company incorporated under the laws of the State
of Delaware, U.S.A., whose principal place of business is located at 515 S.
Flower Street, Los Angeles, California, 90071 (the ARCO GUARANTOR).
WHEREAS
(A) Triton International Oil Corporation (the COMPANY) is a company
organised and existing under the laws of the Cayman Islands with an authorised
capital of:
(1) US$50,000. divided into 50,000 Ordinary Shares of a nominal or par
value of US$1.00 each (of which 1,000 are issued and outstanding); and
(2) U.S.$487,000,000. divided into 110,000,000 shares of a nominal or par
value of US$1.00 each of Class A Preference Shares and 377,000,000 shares of
nominal or par value of US$1.00 each of Class B Preference Shares.
(B) Triton Oil Company of Thailand (JDA) Limited (TOCTJDA) and Triton Oil
Company of Thailand Ltd. Co. (TOCT (TEXAS)) (together the SUBSIDIARIES) are
wholly owned subsidiaries of the Company.
(C) Pursuant to an agreement dated July 17, 1998 (the SHARE PURCHASE
AGREEMENT) ARCO has acquired from Triton 50% of the issued and outstanding
Ordinary Shares of the Company.
(D) ARCO and Triton have agreed that their respective rights as
shareholders in the Company shall be regulated by the provisions of this
Agreement.
(E) The Triton Guarantor and the ARCO Guarantor wish to guarantee the
obligations of their respective subsidiaries.
INTERPRETATION
1. In this Agreement, expressions defined in Schedule 1 shall have the
meaning therein provided.
BUSINESS OF THE COMPANY
2.1 The business of the Company is participation in the exploration and
development of Block A-18 through a holding of the entire issued share capital
or membership interests, as the case may be, in the Subsidiaries.
2.2 The Parties agree that, except by agreement of the Parties, the
business of the Company shall consist exclusively of the Business.
2.3 The Parties shall consider, when reasonably practicable, changing the
names of the Subsidiaries.
BOARD OF DIRECTORS
3.1 The Company shall be managed by the Board of Directors. The Board of
Directors shall consist of four (4) Directors. Each of the Parties shall be
entitled to nominate two (2) Directors.
3.2 A member of the Board of Directors may only be removed from office by
the Party who nominated such member. Such Party shall be entitled to nominate
a replacement for any member so removed or for any member appointed by it who
is disqualified, dies or resigns from office or whose term of office expires
in accordance with the Articles. The Parties will use their votes as
shareholders as necessary in order to achieve such results.
3.3 Each Party will cast its votes as shareholder in conformity with the
provisions of this Agreement and in such a manner as to result in the
appointment of its own nominees and the other Party's nominees in accordance
with Clauses 3.1 and 3.2.
3.4 The Board of Directors may from time to time establish such other
standing and ad hoc committees as may be required, whose membership (including
the attendance of Board members), responsibilities, duties and procedures in
each case, shall be specified by the Board of Directors resolution pursuant to
which they are established.
PROCEEDINGS OF BOARD OF DIRECTORS
4.1 The Board of Directors shall meet periodically as required to conduct
the Business of the Company. Meetings may take place in such location and in
person or by telephone, as agreed between the Parties. The quorum for the
transaction or business at any meeting of the Board of Directors shall be at
least one nominee of Triton and one nominee of ARCO present at the time when
the relevant business is transacted.
4.2 No resolution of the Board of Directors or any committee of the Board
of Directors to which powers are delegated shall be passed except by unanimous
vote.
4.3 The right to appoint the Chairman of the Board of Directors shall
rotate between the Parties on an annual basis in respect of each calendar
year. The Chairman of the Board of Directors for the remainder of 1998 will
be a nominee of Triton. The Chairman shall not have a second, deciding or
casting vote on any matter presented for decision to the Board of Directors or
a meeting of shareholders of the Company.
4.4 The Directors of the Company shall also be appointed as the Directors
of each of the Subsidiaries, unless otherwise agreed by the Parties.
4.5 If a deadlock arises by reason of a failure by the Directors to reach
agreement on any matter put before a meeting of the Board of Directors or any
committee thereof, the provisions of Clause 22 will apply.
SHAREHOLDERS MEETINGS
5.1 Meetings of shareholders of the Company shall be held annually as
soon as possible, but no later than six months, after the year end and at such
other times as are necessary to transact any business which requires
shareholder approval pursuant to this Agreement or the Articles. Meetings of
shareholders may also be convened as provided in Article 38 of the Articles.
5.2 A resolution of the shareholders of the Company shall be passed by a
simple majority in number, or, where the same is provided for in accordance
with Cayman Islands law or the Articles, a higher majority, of the votes of
those Shares which are represented at a meeting of shareholders.
5.3 The Parties agree and undertake not to propose and in any event to
oppose any resolution put to the shareholders of the Company in general
meeting which is, or the giving of effect to which would be, inconsistent with
the provisions of this Agreement or the exercise of the rights or performance
of the obligations by the Parties hereunder.
5.4 If a deadlock arises by reason of a failure by the Shareholders to
reach agreement on any matter put before the meeting of shareholders of the
Company the provisions of Clause 22 will apply.
REPRESENTATION IN RELEVANT FORUM
6.1 The Parties will use all rights available to them and vote their
shares of the Company, and cause each Relevant Company to exercise any votes
that any of them have under the Block A-18 Agreements, to ensure that the
Parties have equal representation in each Relevant Forum. In particular, as
soon as practicable after the execution of this Agreement, the Parties shall
ensure that each Shareholder Group is represented on each Relevant Forum as
set out in Schedule 2. To the extent that a Relevant Forum is not set out in
Schedule 2, the Parties shall act to ensure that the Parties have equal
representation on such Relevant Forum.
6.2 Where any proposal is made requiring any decision to be taken by a
Relevant Forum, the representatives of the Parties on the Board of Directors
will meet to discuss the proposal and attempt to agree upon a joint decision.
Where such a joint decision is reached, the representative(s) of the Parties
on the Relevant Forum will vote in accordance with such joint decision.
6.3 Where no such joint decision is reached:
(a) the provisions of Clause 22 will apply;
(b) if the deadlock is not resolved and a joint decision is not reached
pursuant to Clause 22 by the time that such joint decision on the proposal is
required in the Relevant Forum, the representative(s) of the Parties on the
Relevant Forum will vote against the proposal unless such vote would result in
a reduction or loss of the Relevant Company's interest in the PSC or JOA in
which event the representative(s) of the Parties shall vote in favour of the
proposal.
6.4 The Parties will ensure that no Relevant Company exercises any right
or gives any consent under any Block A-18 Agreement without the consent of
both Parties.
MANAGEMENT POSITIONS
7.1 ARCO shall be entitled to second employees to Senior Management
Positions as contemplated under Section II clause 4 of the JOCA, in accordance
with this Clause 7.
7.2 The Parties acknowledge that under the terms of the JOCA there will
be rotation in the right to second employees in April 1999. No change in
secondment is anticipated before that date. As of April 1999, the following
provisions of this Clause 7 will apply.
7.3 Where for the purposes of the JOCA Triton has a right to second an
employee to the position of General Manager, then (as between the Parties):
(a) for 1999, ARCO shall have the right to make such nomination; and
(b) for 2009 and subsequent periods, the Parties shall ensure that the
right to nominate the General Manager and other Senior Management Positions is
allocated on an equal basis as between themselves.
7.4 Where for the purposes of the JOCA Triton has the right to appoint
the Exploration Manager, then (as between the Parties);
(a) for 1999 and 2004, Triton shall have the right to make such
nomination;
(b) for 2009 and subsequent periods, the Parties shall ensure that the
right to nominate the Exploration Manager and other Senior Management
Positions is allocated on an equal basis as between themselves.
7.5 Where for the purposes of the JOCA Triton has the right to appoint
the Finance & Administration Manager, then (as between the Parties);
(a) for 2004, ARCO shall have the right to make such nomination;
(b) for 2014 and subsequent periods, the Parties shall ensure that the
right to nominate the Finance & Administration Manager and other Senior
Management Positions is allocated on an equal basis as between themselves.
7.6 In respect of all other Senior Management Positions and any other
posts subordinate to these, the Parties shall ensure that the right to
nominate is allocated on an equal basis as between themselves.
7.7 The Parties will use all reasonable endeavours to give effect to the
principle that both Parties should be treated equally by such representatives
in respect of disclosure of information and consultations.
7.8 The Parties agree, and shall use all reasonable endeavours to
procure, that:
(a) TOCTJDA maintains a branch office in Kuala Lumpur which shall manage
the interests of the Subsidiaries in and relating to Block-A 18; and
(b) the Branch has a sufficient number of appropriately qualified
personnel to perform such management function.
7.9 The Parties agree that they will have the right to nominate senior
executives of TOCTJDA on the following basis:
(a) the General Manager of TOCTJDA will be nominated by Triton until
April 1999 and thereafter;
(i) by the Party which does not have the right to nominate the
General Manager under the JOCA where one of the Parties has such a right; and
(ii) by the Party which most recently had the right to nominate the
General Manager under the JOCA where neither of the Parties has such right;
(b) for so long as a Party shall have the right to nominate the General
Manager of TOCTJDA pursuant to this Agreement, the other Party shall have the
right to nominate the Finance and Administration Manager of TOCTJDA who shall
also serve in the capacity of Assistant General Manager and who shall be
consulted on all significant and material matters and issues;
(c) ARCO shall at all times have the right to nominate the Technical
Manager of TOCTJDA; and
(d) Triton shall at all times have the right to nominate the Commercial
Manager of TOCTJDA.
7.10 The powers and authorities of the General Manager of TOCTJDA shall be
established by the Board of Directors of TOCTJDA subject to such limitations
as the Parties may from time to time agree. The General Manager of TOCTJDA
shall, and the Party which has nominated such manager in accordance with this
Clause 7 shall procure that the General Manager shall, so far as is
practicable in the circumstances, report to the Board of Directors of the
Company regarding the management of the Subsidiaries and the Subsidiaries'
interests in and relating to Block A-18.
7.11 Each Party will consult with the other Party in respect of
nominations to be made by it, and will do all it reasonably can to ensure that
such nominations are acceptable to the other Party.
FUNDING AND ISSUE OF PREFERRED STOCK
8.1 Triton and/or an Affiliated Company of Triton (as the case may be) has
to date funded, by way of inter-company debt, the Petroleum Operations in an
amount equal to approximately $100 million which will be determined, as
between the parties, by the Completion Certificate as the historical
unrecovered costs expended on behalf of the Subsidiaries on Petroleum
Operations under the PSC up to the date of this Agreement (TRITON SUNK COSTS),
and that such debt has been, or to the extent that it has not will be, repaid
by the issue of Class A Preference Shares of the Company to Triton in such
number and value as is equal to the Triton Sunk Costs (TRITON PREFERRED
STOCK). The Company shall issue to Triton such amount of Triton Preferred
Stock as is equal to the amount of the Triton Sunk Costs within ninety (90)
days of the date of this Agreement.
8.2 The Parties further:
(a) acknowledge that Triton may be required to incur Additional Triton
Sunk Costs; and
(b) agree that the Company shall issue to Triton (quarterly or at such
other intervals as may be decided by the Board of Directors) such amount of
Class A Preference Shares of the Company in such number and value as is equal
to the amount of the Additional Triton Sunk Costs (the ADDITIONAL TRITON
PREFERRED STOCK).
8.3 ARCO will bear and pay for 100% of the Company's and each Subsidiary's
costs to conduct Petroleum Operations under the PSC from the date of this
Agreement until First Commercial Production from a Gas Field in the Contract
Area up to a maximum amount (in nominal dollars as spent) of the Limit Amount.
In consideration of such payments, the Company shall issue to ARCO (quarterly
or at such other intervals as may be decided by the Board of Directors) shares
of Class B Preference Shares of the Company (the ARCO PREFERRED STOCK) in such
number and value as is equal to the costs paid by ARCO pursuant to this
Clause.
8.4 The Parties shall each bear and pay for 50% of the Company's and each
Subsidiary's costs to conduct Petroleum Operations under the PSC from and
after the earlier of:
(a) First Commercial Production from a Gas Field in the Contract Area; or
(b) payment by ARCO of costs pursuant to Clause 8.3 up to the Limit
Amount.
The Board of Directors shall adopt a cash call procedure which will ensure
that the Company and each Subsidiary can timely meet funding obligations under
the Block A-18 Agreements.
8.5 Each year the Board of Directors shall review and approve the Support
Activities to be conducted by each Party during the upcoming year. Support
Activities are intended to be allocated equally between the Parties and
Support Costs are to be borne and paid by the Party incurring such Support
Costs, unless such Support Costs are included in a Support Activities Budget
approved by the Board of Directors. The Board of Directors are authorised to
adopt an annual Support Activities Budget, which shall include those Support
Costs which are to be jointly borne and paid by the Parties. A Party paying
Support Costs which are included in a Support Activities Budget shall invoice
the other Party for 50% of such Support Costs. Each invoice will contain
sufficient supporting documentation to substantiate the amount of the Support
Cost paid. A Party receiving such an invoice shall pay the amount of the
invoice within 30 days following receipt. Each Party shall have the right to
audit the books and records of the other Party in respect of Support Costs
included in a Support Activities Budget. Notwithstanding the provisions of
this Clause 8.5, the Parties may elect to contribute Support Costs which are
included in a Support Activities Budget to the Company in which case the
Company shall, upon such election, invoice the Parties for its relevant share
of such Support Costs.
8.6 In the event either Party fails to timely advance its share of equity
in accordance with the cash call procedure adopted by the Board of Directors
(herein the DEFAULTING PARTY and such amount the SHORTFALL AMOUNT), then:
(a) the Company shall notify both Parties of such default;
(b) the Shortfall Amount, as outstanding from time to time, shall bear
interest from the date such payment was due to the Company until paid in full.
Interest will be calculated on the unpaid portion of the Shortfall Amount on a
daily compounded basis, at the rate quoted as LIBOR Rate under the JOA, plus
five percent (5%), applicable on the date payment was due and thereafter on
the first day of each succeeding seven (7) day term.
(c) the other Party (NON-DEFAULTING PARTY) may, but shall not be obligated
to, advance to the Company all or a portion of the Shortfall Amount, and any
such advances, plus interest thereon at the rate provided in Clause 8.6(b)
shall become a debt owed by the Company to the Non-Defaulting Party (herein
the OBLIGATIONS). The Company shall pay such Obligations out of all available
cash flow and shall not make any payment in respect of any Shares or Preferred
Stock until the Obligations shall be discharged in full;
(d) to the extent that Obligations have been in existence and unpaid for
thirty (30) consecutive calendar days and for as long thereafter as such debt
remains, the Directors nominated by the Defaulting Party shall give (and be
deemed to have given) their proxy to the Directors nominated by the
Non-Defaulting Party to vote on any matter coming before the Board of
Directors in respect of the management or operations of the Company, other
than:
(i) the sale, assignment or transfer of any interest in the Company
or any assets of the Company; or
(ii) any matter which might result in a delay in payments to be made
under the Incentive Agreement; and
(e) if Obligations remain in existence for a consecutive period of more
than ninety (90) days, the Non-Defaulting Party shall be entitled to purchase
the Defaulting Party's Shares and Preferred Stock at a price payable in cash
to the Defaulting Party equal to the Defaulting Party's proportionate share of
the Appraised Market Value of such Shares and Preferred Stock, net of any
amounts owed to the Non-Defaulting Party under this Clause. APPRAISED MARKET
VALUE means the average of the value of the Defaulting Party's Shares and
Preferred Stock determined by two international investment banking firms (the
TWO BANKS), one to be appointed by each Party, provided such two values are
within five percent (5%) of the mean of the two values. If the valuations are
not within five percent (5%) of the mean of the two values, the Two Banks
shall (and if the Two Banks cannot agree, the President of the International
Chamber of Commerce shall) appoint a third international investment banking
firm, who on the basis of presentations by the first two international
investment banking firms shall determine which of the two values is closest to
the fair market value, i.e., the value achievable if the Defaulting Party's
Shares and Preferred Stock were sold by a willing seller to a willing buyer,
neither being under compulsion to sell or to buy, and then the valuation
closest to the fair market value as so determined shall be the Appraised
Market Value.
8.7 A Shortfall Amount, plus interest thereon at the rate stated in Clause
8.6(b), shall constitute an equity deficiency on the part of the Defaulting
Party owed to the Company (EQUITY DEFICIENCY). The amount of the Equity
Deficiency shall be reduced to the extent that cash flow used by the Company
to discharge the Obligations would have been payable as dividends or
distributions to the Defaulting Party in respect of its Shares or Preferred
Stock. The Defaulting Party shall have the right to cure an Equity Deficiency
at any time prior to the time provided in Clause 8.6(e) by paying the full
amount thereof to the Company. Any such amount paid by the Defaulting Party
shall be applied by the Company to discharge any Obligations or Additional
Obligations. If an Equity Deficiency has not been cured by the time that all
Obligations are paid by the Company pursuant to Clause 8.6(c), then the
Parties agree that in order to bring their respective capital accounts into
balance the Company shall pay to the Non-Defaulting Party all payments in
respect of any Shares or Preferred Stock which would have otherwise been paid
to the Defaulting Party until the Equity Deficiency has been cured. Should
the Company be restructured, liquidated or otherwise wound up before an Equity
Deficiency is cured then an amount equal to the Equity Deficiency shall first
be paid to the Non-Defaulting Party before any payments are made in respect of
Shares or Preferred Stock to either Party.
8.8 For so long as any Obligations are outstanding, the Non-Defaulting
Party shall have the right to advance funds to the Company for the discharge
of any debts or obligations of the Company which the Non-Defaulting Party
reasonably believes may give rise to the initiation of bankruptcy or other
insolvency proceeding respecting the Company; alternatively, if the Company
does not or cannot discharge any of its debts or obligations, the
Non-Defaulting Party may directly pay and discharge such debts or obligations
if a bankruptcy or insolvency proceeding shall have been filed or is
threatened to be filed on an imminent basis against the Company. In either
circumstance, the amounts so advanced or paid, plus interest thereon at the
rate stated in Clause 8.6 (b), shall become an additional obligation of the
Company to the Non-Defaulting Party (the ADDITIONAL OBLIGATIONS). The Company
shall pay such Additional Obligations out of all available cash flow and shall
not make any payment in respect of any Shares or Preferred Stock until the
Additional Obligations shall be discharged in full. In the event that there
are Obligations and Additional Obligations unpaid at the same time, the
Company shall use all available cash flow to discharge the Additional
Obligations first and then discharge the Obligations. The Company shall
promptly give notice to the Non-Defaulting Party of any unpaid debts or other
obligations which might reasonably give rise to the filing of a bankruptcy or
other insolvency proceeding respecting the Company.
8.9 The Company and the Subsidiaries shall at all times maintain and keep
accurate books and records in accordance with U.S. generally accepted
accounting principles, applicable law and the PSC, including, without
limitation, records, required to enable the Company, the Subsidiaries and
their respective shareholders to comply with income tax laws, rules and
regulations applicable to any of them.
COSTS RECOVERY
9.1 Each Party shall be entitled to recover an amount equal to the
allowable costs for Petroleum Operations under the terms of the PSC actually
paid by such Party or its Affiliated Companies. Recovery of such costs shall
be on a "first in, first out" basis as further provided in this Clause 9.
9.2 To the extent that a Relevant Company recovers allowable costs under
Clause 5.1(b) or 8.5(b) of the PSC, the Parties will procure that:
(a) an amount equal to such costs will be paid by the Relevant Company to
the Company, and
(b) the Company will apply the portion of such payment attributable to
operating costs to the Shares; and
(c) the Company will apply the balance of the payment so received in
redemption of the Preferred Stock in accordance with Clause 9.3.
9.3 The Preferred Stock will be redeemed as follows:
(a) first, in repayment of the Triton Preferred Stock and the Additional
Triton Preferred Stock up to the aggregate of the Triton Allowable Amount and
the Additional Triton Allowable Amount;
(b) next, in repayment of the ARCO Preferred Stock up to the ARCO
Allowable Amount.
9.4 Any Preferred Stock which remains after the application of Clause 9.3
will remain outstanding, will have no further claim on the assets of the
Company and will be cancelled on a liquidation of the Company.
DISTRIBUTION POLICY
10.1 Unless otherwise agreed between the Parties, the Parties shall take
such action as may be necessary to procure:
(a) the distribution by the Relevant Company of 100% of its accumulated
profits lawfully available for distribution to the Company; and
(b) the distribution by the Company to the Parties of 100% of its
accumulated profits (net of tax and extraordinary items) lawfully available
for distribution.
10.2 The Parties agree and shall, so far as is possible procure, that
distributions to be made pursuant to Clauses 9 and 10 shall be made as soon as
reasonably practicable upon the required funds becoming available.
TAXATION
11.1 The Parties acknowledge and agree that they will take all necessary
actions and make all necessary elections to cause the Company and the
Subsidiaries, together, to be treated as a single partnership for U.S. tax
purposes, and the Parties agree that they will enter into a U.S. tax
partnership agreement providing for special allocations under Section 704 of
the Internal Revenue Code of 1986, as amended, of items of income, gain,
expense, loss, deduction or credit to reflect (i) the actual payment by a
Party of items of expense, loss or deduction and (ii) each Party's respective
share of income or gain with corresponding credit. ARCO shall be designated
the tax matters partner in the U.S. tax partnership agreement.
11.2 The Parties shall each:
(a) as to the Company and the Subsidiaries provide such assistance as may
reasonably be required in connection with the preparation of any Tax return,
audit or other examination by any Taxation authority or judicial or
administrative proceedings relating to liability for Taxes; and
(b) cause the Company and the Subsidiaries to
(i) retain and provide to the Parties any records or other
information that may be relevant to any Tax return, audit or examination,
proceeding or determination of the Company, the Subsidiaries or the Parties;
(ii) provide the Parties with any final determination of any such
audit or examination, proceeding, or determination that affects any amount
required to be shown on any Tax return of the other for any period;
(iii) provide the Parties with a copy of all income tax returns and
receipts for all income taxes paid; and
(iv) retain, until any applicable statutes of limitations (including
any extensions) have expired, copies of all Tax returns, supporting work
schedules, and other records or information that may be relevant to such Tax
returns for all tax periods or portions thereof ending before or including the
date of this Agreement and shall not destroy or otherwise dispose of any such
records without first providing the other Party with a reasonable opportunity
to review and copy the same.
TRANSFERS OF SHARES
12.1 No Party may, directly or indirectly, sell, transfer, pledge,
encumber or otherwise dispose of (TRANSFER) all or part of its holding of
Shares save as in accordance with this Clause 12. Provided that in no event
shall this Clause 12 apply to, or transfer be deemed to include, a merger,
amalgamation, consolidation or exchange of shares in the capital of the
ultimate parent company of a Party or to a transaction or series of related
transactions in connection with the sale of all or substantially all of the
assets of the ultimate parent company of a Party to a single Purchaser.
12.2 A Party may transfer all or part of its holding of Shares to an
Affiliated Company of the Triton Guarantor or the ARCO Guarantor, as the case
may be, on terms that if any such company ceases at any time to be an
Affiliated Company of the Triton Guarantor or the ARCO Guarantor, such
transferee prior to so ceasing shall transfer all of the Shares held by it at
the time in question to an Affiliated Company of the Triton Guarantor or the
ARCO Guarantor, as the case may be.
12.3 Subject to Clause 12.6, a Party may at any time transfer all or part
of its holding of Shares (or any interest in Shares) to any person in
accordance with the procedures set out in Clauses 12.4 and 12.5
12.4.1 A Party may transfer all or any part of its holding of Shares, (the
TRANSFEROR PARTY) provided such Transferor Party shall first give to the other
party (the CONTINUING PARTY) notice in writing (a TRANSFER NOTICE) of any
proposed transfer together with details of any proposed third party purchaser
thereof (the THIRD PARTY PURCHASER), the purchase price, the number of Shares
to be transferred (the TRANSFER SHARES) and any other material terms agreed
between the Transferor Party and the Third Party Purchaser. A Transfer Notice
shall, except as hereinafter provided, be irrevocable.
12.4.2 On receipt of the Transfer Notice, the Continuing Party shall have
the right to purchase all (but not some only) of the Transfer Shares at the
purchase price specified in the Transfer Notice by giving written notice to
the Transferor Party within thirty (30) days of receipt of the Transfer Notice
(THE ACCEPTANCE PERIOD). The obligations of the Parties to complete such
purchase shall be subject to the provisions of Clause 12.4.3.
12.4.3 The Continuing Party shall become bound to purchase the Transfer
Shares on giving written notice to the Transferor Party to exercise its rights
under Clause 12.4.2. In such event, completion of the sale and purchase of
the Transfer Shares shall take place within thirty (30) days after the giving
of such notice (or such longer period as may be required to obtain any
necessary governmental approvals which shall be applied for on a timely
basis).
12.4.4 If the Continuing Party does not exercise its rights of purchase
under Clause 9.4.2, the Transferor Party shall be entitled to transfer the
Transfer Shares on a bona fide arm's length sale to a Third Party Purchaser at
a price being not less than the purchase price specified in the Transfer
Notice (after deducting, where appropriate, any dividend or other distribution
declared or made after the date of the Transfer Notice and to be retained by
the Transferor Party) provided that the completion of the sale and purchase by
such Third Party Purchaser shall take place within ninety (90) days of the
date of the Transfer Notice (or such longer period as may be required to
obtain any necessary governmental approvals).
12.5.1 If a Party desires to sell a Substantial Holding pursuant to this
Clause 12.5, a Party may transfer all or any of its holding of shares
comprising a Substantial Holding without regard to the restrictions specified
in Clause 12.4 provided that the following provisions of this Clause 12.5 are
complied with.
12.5.2 If a Party desires to sell a Substantial Holding pursuant to Clause
12.5(the OFFEROR PARTY), such Offeror Party shall give a notice in writing (an
OFFER NOTICE) to the other Party that it desires to transfer the Substantial
Holding, identifying the price at which it proposes to offer the Substantial
Holding to the other Party (the PRESCRIBED PRICE).
12.5.3 On receipt of the Offer Notice, the other Party shall have the
right to purchase all (but not some only) of the Substantial Holding at the
Prescribed Price by giving written notice to the Offeror Party within thirty
(30) days of receipt of the Offer Notice (the PRESCRIBED PERIOD). The
obligations of the Parties to complete such purchase shall be subject to the
provisions of Clause 12.5.4;
12.5.4 The other Party shall become bound to purchase the Substantial
Holding on giving written notice to the Offeror Party to exercise its rights
under Clause 12.5.3. In such event, completion of the sale and purchase of
the Substantial Holding shall take place within thirty (30) days after the
giving of such notice (or such longer period as may be required to obtain any
necessary governmental approvals which shall be applied for on a timely
basis).
12.5.5 If the other Party does not exercise its rights of purchase under
Clause 12.5.3, the Offeror Party shall have a one hundred and eighty (180) day
period (or such longer period as may be required to obtain any necessary
governmental approvals) in which to transfer such Substantial Holding at any
price not being less than the Prescribed Price (after deducting, where
appropriate, any dividend or other distribution declared or made after the
date of the Offer Notice and to be retained by the Offeror Shareholder) which
transfer shall not be subject to Clause 12.4. If the Offeror Party does not
transfer the Substantial Holding at a price not being less than the Prescribed
Price within such one hundred and eighty (180) day period (as extended where
applicable), then the provisions of Clause 12.5 shall be applicable to any
subsequent proposed transfers of a Substantial Holding.
12.6 Nothing in this Clause 12 shall permit a transfer of Shares to any
person if, following such transfer, the restructuring of the interests of the
Parties pursuant to Clause 14 would be liable to result in the transferee and
its Affiliated Companies collectively holding a Participating Interest (as
such term is defined in the JOA) of sixty five percent (65%) or more.
12.7 In the event that a proposed transfer involves consideration other
than cash or involves other properties included in a wider transaction
(package deal) then the Parties shall agree on the cash value of such
consideration or on a reasonable and justifiable allocation of cash value. If
the Parties are not able to agree on such cash value then the cash value of
the consideration will be determined in accordance with procedure specified in
Clause 8.6(f) for determining Appraised Market Value.
12.8 Any transfer of Shares permitted by, or made pursuant to, this Clause
12 shall be on terms that:
(i) the transferee has covenanted with the other Party (in a form
reasonably acceptable to it) to observe this Agreement and to perform all the
obligations of the transferor under this Agreement in respect of the Shares
which are the subject of the transfer; and
(ii) upon giving such covenants the transferee shall be treated as a Party
for the purposes of this Agreement and the obligations of the transferring
Party in respect of the Shares which are the subject of the transfer shall
terminate (save in respect of any antecedent breach).
12.9 For the purposes of this Clause 12, Party shall include ARCO, Triton
and any company in their respective Shareholder Group which directly or
indirectly owns the Shares, excluding the ultimate parent company of each
Party.
DURATION AND TERMINATION
13.1 Except as otherwise provided herein, this Agreement shall continue in
full force and effect without limit in point of time until the earlier of the
following events:
(a) the Parties agree in writing to terminate this Agreement; and
(b) one Party acquires 100% of the Shares; and
(c) an effective resolution is passed or a binding order is made for the
winding-up of the Company;
at which point the Agreement will terminate save for any provisions hereof
which are expressed to continue in force thereafter.
13.2 Termination of this Agreement for any cause shall not release a Party
from any liability which at the time of termination has already accrued to
another Party or which thereafter may accrue in respect of any act or omission
prior to such termination.
13.3 In addition to any requirements under applicable law, the Parties
agree that any decision by the Company to make a voluntary bankruptcy filing
shall require the unanimous consent of the Directors.
RESTRUCTURING
14.1 Unless the Parties are prevented pursuant to the PSC or JOA or by any
other legal or regulatory provisions, the Parties hereby acknowledge that they
will use all reasonable endeavours to restructure their interests in the
Company and the Company's interests in the Subsidiaries (whether by
liquidation, winding up or otherwise) as soon as possible after the completion
of the development phase of the project, as indicated by First Commercial
Production, so that the Parties shall, where possible, hold interests directly
in CTOC, the PSC, the JOA, the JOCA and any other related agreements and that
the entire interest in TOCT (Texas) shall be transferred to and held by Triton
or an Affiliated Company of Triton.
14.2 The Parties agree that they shall use all reasonable endeavours to
minimise the Tax liabilities of each Party arising out of any such
restructuring specified in Clause 14.1.
14.3.1 Subject to Clause 14.3.2, following any restructuring pursuant to
this Clause, the Parties agree that they will, where relevant and so far as is
legally possible, enter into agreements to give effect to and comply with the
provisions of this Agreement, including without limitation the cost recovery
provisions of Clause 9.3.
14.3.2 The Parties agree that, following any restructuring pursuant to
this Clause, the provisions of Clause 12 shall terminate and shall be
superseded in all respects by the relevant provisions of the JOA.
14.4 The Parties agree that the tax partnership established pursuant to
Clause 11.1 shall survive any restructuring made pursuant to this Clause 14.
CONFIDENTIAL INFORMATION
15.1 Each of the Parties shall:
(a) keep confidential and not disclose to any third parties, other than an
Affiliated Company or officers, employees and representatives of a Party or an
Affiliated Company, the terms of this Agreement and all information, whether
in written or any other form, which has been disclosed to it by or on behalf
of the other Party in confidence or which by its nature ought to be regarded
as confidential (including, without limitation, any business information in
respect of the other Party which is not directly applicable or relevant to the
transactions contemplated by this Agreement); and
(b) procure that its Affiliated Companies and its and their officers,
employees and representatives keep secret and treat as confidential all such
documentation and information.
15.2 Clause 15.1 does not apply to information:
(a) which shall after the date of this Agreement become published or
otherwise generally available to the public, except in consequence of a wilful
or negligent act or omission by the other Party in contravention of the
obligations in Clause 15.1;
(b) to the extent made available to the recipient Party by a third party
who is entitled to divulge such information and who is not under any
obligation of confidentiality in respect of such information to the other
Party or which has been disclosed under an express statement that it is not
confidential;
(c) to the extent required to be disclosed by any applicable law or by any
recognised stock exchange or governmental or other regulatory or supervisory
body or authority of competent jurisdiction to whose rules the Party making
the disclosure is subject, whether or not having the force of law, provided
that the Party disclosing the information shall notify the other Party of the
information to be disclosed (and of the circumstances in which the disclosure
is alleged to be required) as early as reasonably possible, but in no event
less than twenty four (24) hours, before such disclosure must be made and
shall take all reasonable action to avoid and limit such disclosure;
(d) which has been independently developed by the recipient Party
otherwise than in the course of the exercise of that Party's rights under this
Agreement or the implementation of this Agreement;
(e) which, in order to perform its obligations under or pursuant to this
Agreement, either Party is required to disclose to a third party;
(f) disclosed to any applicable tax authority either to the extent
required by a legal obligation or to the extent reasonably required to assist
the settlement of the disclosing Party's tax affairs or those of any of its
shareholders or any other person under the same control as the disclosing
Party;
(g) which the recipient Party can prove was already known to it before its
receipt from the disclosing Party;
(h) given to a bona fide prospective purchaser of all or a part of a
Party's holding of Shares or Preferred Stock (including a person with whom a
Party or an Affiliated Company of such Party is conducting bona fide
negotiations directed toward a merger, amalgamation, consolidation or the sale
of a majority of its or the Affiliated Company's, as the case may be, shares)
provided the provisions of Clause 12 have, where relevant, been complied with;
or
(i) given to a bank or other financial institution to the extent
appropriate to a Party arranging for funding for its operations; provided that
the bank or financial institution is subject to confidentiality undertakings
substantially identical to those set forth in this Clause 15.
15.3 The provisions of this Clause 15 shall survive any termination of
this Agreement.
RIGHTS TO INFORMATION
16.1 The Parties (insofar as they are able) shall cause the Company to
permit the Directors to discuss the affairs, finances and accounts of the
Company with the officers and other principal executives and Affiliated
Companies and the professional advisers of the Party by whom such Directors
were nominated.
16.2 At such times as may reasonably be requested, all books, records,
accounts and documents relating to the business and the affairs of the Company
shall be open to the inspection of the Directors who may make such copies
thereof or extracts therefrom as such persons may deem appropriate and pass
such information to the officers, principal executives and professional
advisers of the relevant Party. Any information secured as a consequence of
such discussions and examinations and shared with a Party in accordance with
this Clause 16 shall be kept strictly confidential by that Party.
16.3 Each of the Parties shall be entitled to have access to all
information and data relating to Petroleum Operations under the PSC provided
to the Company.
NOTICES
17.1 Any notice or other communication required to be given or made under
or in connection with this Agreement or with any arbitration or intended
arbitration under this Agreement shall be given or made.
17.2 Any such notice or other communication shall be in writing and shall
be sufficiently given or made if:-
(i) delivered in person during normal business hours on a business day (in
the country or state of the recipient's address) and left with an Officer or
Director of the relevant Party provided that evidence of receipt is obtained;
or
(ii) sent by electronic means of sending messages, including telex or fax,
which produces a paper record (TRANSMISSION) during normal business hours on a
business day (in the country or state of the recipient's address) charges
prepaid;
to the relevant Party at the address set out in this Agreement or such other
address as may be substituted therefor by notice.
17.3 Each notice given or made in accordance with Clauses 17.2(i) and
17.2(ii) shall be deemed to have been received:
(i) in the case of Clause 17.2(i), on the day it was delivered; or
(ii) in the case of Clause 17.2(ii), on the same day it was sent by
Transmission.
17.4 The addresses of the Parties for the purposes of Clause 17.2 are as
first set forth in this Agreement. It is understood that a Party may at any
time change its address for the purposes of Clause 17.2 by written notice to
the other Parties.
TRITON GUARANTOR
18.1 In consideration of ARCO entering into this Agreement, the Triton
Guarantor (as principal obligor and not merely as a surety) unconditionally
and irrevocably guarantees as a continuing obligation the proper performance
by Triton and any Affiliated Company of Triton which becomes a party to this
Agreement of all their obligations under or pursuant to this Agreement.
18.2 The Triton Guarantor's liability hereunder shall not be discharged or
impaired by any amendment to or variation of this Agreement, any release of,
or granting of time or other indulgence to, Triton or any third party, any
liquidation, administration, receivership or winding-up of Triton or by any
other act or omission or any other events or circumstances whatsoever (whether
or not known to Triton, ARCO or the Triton Guarantor) which would or might
(but for this Clause) operate to impair or discharge the Triton Guarantor's
liability under this guarantee.
ARCO GUARANTOR
19.1 In consideration of Triton entering into this Agreement, ARCO
Guarantor (as principal obligor and not merely as a surety) unconditionally
and irrevocably guarantees as a continuing obligation the proper performance
by ARCO and any Affiliated Company of ARCO which becomes a party to this
Agreement of all their obligations under or pursuant to this Agreement.
19.2 ARCO Guarantor's liability hereunder shall not be discharged or
impaired by any amendment to or variation of this Agreement, any release of,
or granting of time or other indulgence to, ARCO or any third party, any
liquidation, administration, receivership or winding-up of ARCO or by any
other act or omission or any other events or circumstances whatsoever (whether
or not known to ARCO, Triton or the ARCO Guarantor) which would or might (but
for this Clause) operate to impair or discharge the ARCO Guarantor's liability
under this guarantee.
GENERAL
20.1 No remedy conferred by any of the provisions of this Agreement is
intended to be exclusive of any other remedy which is otherwise available by
law or otherwise, and each and every other remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing by law or otherwise. The election of any one or more of such
remedies by any of the Parties shall not constitute a waiver by such Party of
the right to pursue any other available remedy.
20.2 No announcement of any kind shall be made in respect of this
Agreement or the operations of the Company except as otherwise agreed in
writing among the Parties or unless required by law or the rules of any stock
exchange on which the shares of any Party are listed or other governmental or
regulatory body to which any Party is subject, in which case the Party
concerned shall take all reasonable steps to obtain the consent of the other
Party to the contents of the announcement which consent shall not be
unreasonably withheld and the Party making the announcement shall (unless it
is not reasonably practicable to do so) give a copy of the text to the other
Parties prior to the announcement being released.
20.3 No variation of this Agreement shall be effective unless in writing
and signed by or on behalf of each of the Parties.
20.4. Each Party shall co-operate with the other and execute and deliver
to the other such other instruments and documents and take such other actions
as may be reasonably requested from time to time in order to carry out,
evidence and confirm its rights and the intended purpose of this Agreement.
20.5. Each Party shall bear its own costs and expenses incurred by it in
connection with entering into and implementing this Agreement.
20.6. If any term or provision in this Agreement is held to be illegal or
unenforceable, in whole or in part, under any enactment or rule of law, such
term or provision or part shall to that extent be deemed not to form part of
this Agreement but the enforceability of the remainder of this Agreement shall
not be affected.
20.7. Except as specifically provided in this Agreement, in the event of
any ambiguity or discrepancy between the provisions of this Agreement (the
RELEVANT PROVISIONS) and the Articles, then the Relevant Provisions shall
prevail. Accordingly, the Parties shall exercise all voting and other rights
and powers available to them so as to give effect to the Relevant Provisions
and shall further if necessary procure any required amendment to the Articles
provided that the Relevant Provisions and such amendment to the Articles will
not contravene Cayman Islands law. If the Relevant Provisions are contrary to
the Governing Law, the Parties shall exercise their rights and powers as
aforesaid to procure any required amendment to this Agreement.
20.8. Nothing in this Agreement shall be deemed to constitute any Party
the agent of any other Party for any purpose.
20.9. This Agreement may be entered into in any number of counterparts,
each of which when executed and delivered shall be an original but all the
counterparts together shall constitute one and the same instrument.
GOVERNING LAW AND APPLICABLE LAWS
21.1 This Agreement, except as expressly referred to herein, shall be
governed by and construed in accordance with English law, excluding any
conflict of laws principles which would apply the laws of another
jurisdiction.
21.2 The Company and the Subsidiaries shall be subject to all applicable
laws, rules and regulations. In this regard, neither the Company, the
Subsidiaries nor any person acting for or on their behalf will, in connection
with this Agreement, the PSC or the Business, offer, pay or agree to pay,
directly or indirectly, any consideration of any nature whatsoever to any
official, agent or employee of any government, or to any candidate for
political office in any country to influence the act, decision or omission of
any such official, agent, employee, political party, political party official
or candidate in his or its official capacity which is contrary to, prohibited
by or penalised under any law, rule or regulation applicable to the Company,
the Subsidiaries or any of their respective shareholders or which would render
the Company, the Subsidiaries or any of their respective shareholders (or the
Affiliated Companies or any of them) in violation of or subject to liability
under any law, rule or regulation applicable to such entity or person,
including but not limited to the Foreign Corrupt Practices Act of the United
States to the extent it is applicable to any such entity or person. Nothing
in this Agreement shall be deemed to be a consent to be subject to the laws or
the jurisdiction the United States of America or any state thereof, or any
court within the United States of America or any state thereof.
DECISION DEADLOCK AND DISPUTE RESOLUTION
22.1. It is the intention of the Parties that all decisions on matters
associated with the management, operation and functioning of the Company or
otherwise involving or affecting the Company shall be made on the basis of a
fully informed consensus of the Board of Directors. However, the Parties
recognise that the proper management, operation and functioning of the Company
will require that decisions be made in a timely manner and that any decision
deadlocks be resolved as expeditiously as possible in accordance with a clear
and well defined procedure which will ensure that the differing viewpoints on
a decision deadlock are heard before a decision is made.
22.2. In the event that the Board of Directors fails to reach agreement on
any matter, whether by failure of the Board of Directors to act on any matter
properly submitted to the Board for resolution within ninety (90) days of the
date such matter was so submitted or by failure of the Board of Directors
after consideration of such matter to resolve it by the required vote, then
any Director may, upon written notice to the Parties refer such matter (the
REFERRED MATTER) for resolution to a senior corporate officer designated by
ARCO and a senior corporate officer designated by Triton. Such written notice
shall be accompanied by a brief written memorandum or other form of written
statement setting out the Referred Matter, the referring Director's position
on the Referred Matter, the referring Director's understanding of the position
of the Directors who are opposed to his position on the Referred Matter and
the referring Director's recommendation on the Referred Matter. Any other
Director may also prepare and distribute to the Parties a similar brief
written memorandum or other form of written statement.
22.3. The senior corporate officers of the Parties will negotiate as soon
as reasonably practicable to attempt to resolve the Referred Matter; and in
all cases shall endeavour to resolve the Referred Matter before the Company is
required to make a decision under a Block A-18 Agreements.
22.4. If the senior corporate officers of the Parties fail to resolve the
Referred Matter, either Party may, at any time after the expiry of thirty (30)
calendar days after delivery of the notice required in Clause 22.2, refer the
matter to arbitration in accordance with Clause 23.
ARBITRATION
23. The parties irrevocably agree that any disputes in relation hereto
shall be submitted to binding arbitration in London conducted in the English
language in accordance with the arbitration rules of the International Chamber
of Commerce.
<PAGE>
SCHEDULE 1
DEFINITIONS
ADDITIONAL OBLIGATIONS has the meaning set out in Clause 8.8.
ADDITIONAL TRITON ALLOWABLE AMOUNT means the amount of Additional Triton Sunk
Costs and determined as allowable for recovery under clause 5.1(b) or 8.5(b)
of the PSC.
ADDITIONAL TRITON SUNK COSTS means costs expended from time to time after the
date of this Agreement on Petroleum Operations pursuant to the Liabilities
Indemnity.
ADDITIONAL TRITON PREFERRED STOCK has the meaning set out in Clause 8.2.
AFFILIATED COMPANY means, in relation to a company, a holding company or
subsidiary of such company or a subsidiary of any holding company of such
company for which purposes (and for the purposes of this Agreement generally)
a company is a subsidiary of another company, its holding company, if that
other company has a shareholding interest entitling that other company to cast
more than half of all votes exercisable at every general meeting of
shareholders on all issues or if it is a subsidiary of company which is itself
a subsidiary of that other company.
ARCO ALLOWABLE AMOUNT means the amount of expenditure incurred by ARCO
pursuant to Clause 8.3 and determined as allowable for recovery under clause
5.1(b) or 8.5(b) of the PSC.
ARCO PREFERRED STOCK has the meaning set out in Clause 8.3.
ARTICLES means the articles of association of the Company (as amended by
special resolution dated 31 July 1998 and as further amended from time to time
hereafter).
BLOCK A-18 means the area designated as Block A-18 of the Malaysia-Thailand
Joint Development Area.
BLOCK A-18 AGREEMENTS means the PSC, the JOA and the JOCA.
BUSINESS means the business of the Company as described in Clause 2.1.
COMPLETION CERTIFICATE shall have the meaning ascribed to it in the Share
Purchase Agreement.
CONTRACT AREA has the meaning set out in the PSC.
CTOC means Carigali-Triton Operating Co. SDN.BHD, a Malaysia corporation.
EQUITY DEFICIENCY has the meaning set out in Clause 8.7.
FIRST COMMERCIAL PRODUCTION has the meaning set out in the PSC.
GAS FIELD has the meaning set out in the PSC.
INCENTIVE AGREEMENT means the agreement made between the Parties of the same
date as this Agreement relating to certain bonus payments payable to the
Company.
JOA means the joint operating agreement relating to Block A-18 dated 21 April
1994, as amended from time to time.
JOCA means the agreement dated 21 March 1994 relating to the establishment,
management and operation of CTOC, as amended from time to time.
LIABILITIES INDEMNITY means the indemnity given by Triton pursuant to the
Share Purchase Agreement.
LIMIT AMOUNT means the amount of U.S.$377 million (in nominal dollars as
spent).
PARTIES means ARCO and Triton and PARTY means ARCO or Triton;
PETROLEUM OPERATIONS has the meaning set out in the PSC.
PREFERRED STOCK means the ARCO Preferred Stock, the Triton Preferred Stock and
the Additional Triton Preferred Stock.
PSC means a Production Sharing Contract relating to Block A-18 dated 21 April
1994, as amended from time to time.
RELEVANT COMPANY means either or both of the Subsidiaries.
RELEVANT FORUM means any of the following:
(i) the Operations Committee under the PSC;
(ii) the Management Committee under the JOA;
(iii) the Board of Directors of CTOC; and
(iv) any other body, committee or group established pursuant to any of the
Block A-18 Agreements.
SENIOR MANAGEMENT POSITIONS has the meaning set out in the JOCA.
SHARES means Ordinary Shares in the capital of the Company.
SHAREHOLDER GROUP means, in respect of a Party, the group of companies
comprising the Shareholder, its holding company and intermediate subsidiaries
of the holding company.
SHARE PURCHASE AGREEMENT has the meaning set out in Recital (C).
SUBSIDIARIES has the meaning set out in Recital (B).
SUBSTANTIAL HOLDING means not less than twenty five percent (25%) of the
Shares in issue and outstanding at the relevant time.
SUPPORT ACTIVITIES means activities performed in direct support of the Company
which are not allowable for cost recovery under the PSC.
SUPPORT ACTIVITIES BUDGET means a budget for the costs of Support Activities
which are to be borne and paid 50% by Triton and 50% by ARCO.
SUPPORT COSTS means the direct costs incurred to conduct Support Activities.
It is understood that the costs of personnel in a Shareholder Group performing
Support Activities shall be charged on the basis of the actual time to perform
such Support Activities and a "manday" rate approved from time to time by the
Board of Directors.
TAX or TAXATION means and includes any and all forms of taxation, withholding,
duty, levy, or impost imposed by any governmental authority, whether the
United States, Malaysia, Thailand or elsewhere and all penalties, charges,
costs and interest relating thereto.
TOCT (TEXAS) has the meaning set out in Recital (B).
TOCTJDA has the meaning set out in Recital (B).
TRITON ALLOWABLE AMOUNT means the amount of the Triton Sunk Costs incurred by
Triton in respect of Petroleum Operations prior to the date of this Agreement
(including those not actually paid until after the date of this Agreement) and
determined as allowable for recovery under Clause 5.1(b) or 8.5(b) of the PSC.
TRITON PREFERRED STOCK has the meaning set out in Clause 8.1.
TRITON SUNK COSTS has the meaning set out in Clause 8.1.
<PAGE>
SCHEDULE 2
REPRESENTATION IN RELEVANT FORUM
1. OPERATIONS COMMITTEE UNDER PSC (CLAUSE 4.2 PSC, CLAUSE 19 JOCA)
Rules relating to appointment:
(a) where one Party has appointed an individual as the representative of
CTOC on the Operations Committee, the other Party is entitled to nominate the
representative of the Contractors on the Operations Committee;
(b) the effect of this is that, at any given time, of the four
representatives on the Operations Committee which are allocated to the
Contractors and the Operator, there will be two appointed by Carigali, one
appointed by Triton and one appointed by ARCO.
2. MANAGEMENT COMMITTEE UNDER JOA
Rules of appointment:
(a) where one Party has the right to nominate the General Manager of
TOCTJDA, that Party will also have the right to appoint the primary
representative and the other Party will have the right to appoint the
alternate;
(b) where neither Party has the right to appoint the General Manager of
CTOC under the JOCA and one Party has the right to nominate the General
Manager of TOCTJDA, the Party that does not have the right to nominate the
General Manager of TOCTJDA will have the right to appoint the primary
representative and the other Party will have the right to appoint the
alternate.
(c) the parties will do all they can to ensure that the alternate is
entitled to attend meetings (including being invited along as a technical
advisor, if necessary).
3. BOARD OF DIRECTORS OF CTOC (SECTION III CLAUSE 15 OF JOCA)
Rules of appointment:
(a) ARCO will have the right to appoint one Director and Triton will have
the right to appoint one Director;
(b) the effect of this is that, at any given time, of the four Directors,
there will be two appointed by Carigali, one appointed by Triton and one
appointed by ARCO.
SIGNED by )
for and on behalf of TRITON ASIA )
HOLDINGS, INC. )
SIGNED by )
for and on behalf of ARCO )
JDA LIMITED )
SIGNED by )
for and on behalf of )
TRITON ENERGY LIMITED )
SIGNED by )
for and on behalf of )
ATLANTIC RICHFIELD )
COMPANY )
JOINDER
TRITON INTERNATIONAL OIL CORPORATION, a company incorporated under the laws of
the Cayman Islands, whose principal place of business is at Caledonian House,
Mary Street, P.O. Box 1044, George Town, Grand Cayman, the Cayman Islands,
hereby joins this Agreement for the limited purpose of agreeing to be bound,
and does hereby agree to be bound, by the provisions of Clauses 8.6, 8.7 and
8.8 of this Agreement.
SIGNED by )
for and on behalf of TRITON )
INTERNATIONAL OIL )
CORPORATION )
<PAGE>
EXHIBIT 10.65
AMENDMENT TO THE
TRITON EXPLORATION SERVICES, INC. RETIREMENT INCOME PLAN
Triton Exploration Services, Inc., a Delaware corporation (the
"Company"), acting by and through its undersigned authorized officer, adopts
this amendment to the Triton Exploration Services, Inc. Retirement Income Plan
(the "Plan"), effective as set forth hereafter.
WHEREAS, the Company is the sponsor of the Plan; and
WHEREAS, the Company desires to amend the Plan; and
WHEREAS, Section 10.01 authorizes the Company to amend the Plan;
NOW, THEREFORE, the Plan is amended as follows:
1. The following is added as a new paragraph after the first
paragraph in Section 1.39 of the Plan to read as follows:
"Notwithstanding the foregoing, the Accrued Benefit of any Participant whose
covered employment under the Plan was terminated by the Employer in connection
with the implementation of the Employer's 1998 restructuring plan shall be
fully vested and immediately nonforfeitable as of the date of termination of
each such person's covered employment."
2. Except as otherwise provided herein, the Plan remains unamended
and in full force and effect.
EXECUTED effective this the 1st day of August, 1998.
TRITON EXPLORATION SERVICES, INC.
By: /s/ Robert B. Holland
Title: Interim CEO
EXHIBIT 10.66
AMENDMENT TO THE
TRITON EXPLORATION SERVICES, INC. 401(K) SAVINGS PLAN
Triton Exploration Services, Inc., a Delaware corporation (the
"Company"), acting by and through its undersigned authorized officer, adopts
this amendment to the Triton Exploration Services, Inc. 401(k) Savings Plan
(the "Plan"), effective as set forth hereafter.
WHEREAS, the Company is the sponsor of the Plan; and
WHEREAS, the Company desires to amend the Plan; and
WHEREAS, Section 10.01 authorizes the Company to amend the Plan;
NOW, THEREFORE, the Plan is amended as follows:
1. The following is added as a new paragraph under the vesting
schedule in Section 1.40 of the Plan to read as follows:
"Notwithstanding the foregoing, the Accrued Benefit of any Participant whose
covered employment under the Plan was terminated by the Employer in connection
with the implementation of the Employer's 1998 restructuring plan shall be
fully vested and immediately nonforfeitable as of the date of termination of
each such person's covered employment."
2. Except as otherwise provided herein, the Plan remains unamended
and in full force and effect.
EXECUTED effective this the 1st day of August, 1998.
TRITON EXPLORATION SERVICES, INC.
By: /s/ Robert B. Holland
Title: Interim CEO
EXHIBIT 12.1
TRITON ENERGY LIMITED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------
1998 1997 1997 1996 1995
----------- ------------ --------- --------- ---------
Fixed charges, as defined
<S> <C> <C> <C> <C> <C>
Interest charges $ 25,487 $ 25,242 $ 50,625 $ 43,884 $ 41,305
Preferred dividend requirements of
subsidiaries adjusted to pre-tax basis --- --- --- --- ---
------------- ---------- --------- --------- ---------
Total fixed charges $ 25,487 $ 25,242 $ 50,625 $ 43,884 $ 41,305
============= ========== ========= ========= =========
Earnings, as defined (2):
Earnings (loss) from continuing operations
before income taxes, minority interest,
extraordinary item and cumulative effect of
accounting change $ (141,527) $ 6,621 $ 16,896 $ 20,945 $ 16,600
Fixed charges, above 25,487 25,242 50,625 43,884 41,305
Less interest capitalized (14,632) (12,505) (25,818) (27,102) (16,211)
Plus undistributed (earnings) loss of affiliates --- --- --- (118) 2,249
Less preferred dividend requirements of
subsidiaries adjusted to pre-tax basis --- --- --- --- ---
------------- ---------- --------- --------- ---------
$ (130,672) $ 19,358 $ 41,703 $ 37,609 $ 43,943
============= ========== ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES (1) (2) --- 0.8 0.8 0.9 1.1
============= ========== ========= ========= =========
____________________
SEVEN MONTHS
ENDED
DEC. 31, YEAR ENDED MAY 31,
------------------------------
1994 1994 1993
------------ ----------- -----------
Fixed charges, as defined
<S> <C> <C> <C>
Interest charges $ 20,285 $ 26,951 $ 16,336
Preferred dividend requirements of
subsidiaries adjusted to pre-tax basis --- 364 1,551
------------ ---------- ----------
Total fixed charges $ 20,285 $ 27,315 $ 17,887
============ ========== ==========
Earnings, as defined (2):
Earnings (loss) from continuing operations
before income taxes, minority interest,
extraordinary item and cumulative effect of
accounting change $ (22,834) $ (23,104) $(147,445)
Fixed charges, above 20,285 27,315 17,887
Less interest capitalized (11,833) (16,863) (6,407)
Plus undistributed (earnings) loss of affiliates 4,102 (645) 3,012
Less preferred dividend requirements of
subsidiaries adjusted to pre-tax basis --- (364) (1,551)
------------ ---------- ----------
$ (10,280) $ (13,661) $(134,504)
============ ========== ==========
RATIO OF EARNINGS TO FIXED CHARGES (1) (2) --- --- ---
============ ========== ==========
</TABLE>
____________________
(1) Earnings were inadequate to cover fixed charges for the six months
ended June 30, 1998 and 1997 by $156,159,000 and $5,884,000, respectively,
for the years ended December 31, 1997 and 1996 by $8,922,000 and $6,275,000,
respectively, for the seven months ended December 31, 1994 by $30,565,000 and
for the years ended May 31, 1994 and 1993 by $40,976,000 and $152,391,000,
respectively.
(2) Earnings reflect nonrecurring writedowns and loss provisions of
$182,672,000 for the six months ended June 30, 1998, $46,153,000 and
$1,058,000 for the years ended December 31, 1996 and 1995, respectively,
$984,000 for the seven months ended December 31, 1994 and $45,754,000 and
$99,883,000 for the years ended May 31, 1994 and 1993, respectively.
Nonrecurring gains from the sale of assets and other gains aggregated
$52,127,000 and $4,842,000 for the six months ended June 30, 1998 and 1997,
respectively, $6,253,000, $22,189,000, $13,617,000 and $56,193,000 for the
years ended December 31, 1997, 1996 and 1995 and May 31, 1994, respectively.
The ratio of earnings to fixed charges if adjusted to remove nonrecurring
items, would have been nil and 0.6 for the six months ended June 30, 1998 and
1997, respectively, 0.7, 1.4 and 0.8 for the years ended December 31, 1997,
1996 and 1995, respectively. Without nonrecurring items, earnings would have
been inadequate to cover fixed charges for the six months ended June 30, 1998
and 1997 by $25,614,000 and $10,726,000, respectively, for the years ended
December 31, 1997 and 1995 by $15,175,000 and $9,921,000, respectively, for
the seven months ended December 31, 1994 by $29,581,000 and for the years
ended May 31, 1994 and 1993 by $51,415,000 and $45,183,000, respectively.
EXHIBIT 12.2
TRITON ENERGY LIMITED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE
DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Fixed charges, as defined:
Interest charges $ 50,625 $ 43,884 $ 41,305
Preference dividend requirements of the Company 400 985 802
Preferred dividend requirements of subsidiaries
adjusted to pre-tax basis --- --- ---
--------- --------- ---------
Total fixed charges $ 51,025 $ 44,869 $ 42,107
--------- --------- ---------
Earnings, as defined (2):
Earnings (loss) from continuing operations
before income taxes, minority interest,
extraordinary item and cumulative effect of
accounting change $ 16,896 $ 20,945 $ 16,600
Fixed charges, above 51,025 44,869 42,107
Less interest capitalized (25,818) (27,102) (16,211)
Plus undistributed (earnings) loss of affiliates --- (118) 2,249
Less preference dividend requirements of the
Company and its subsidiaries adjusted to pre-tax basis (400) (985) (802)
--------- --------- ---------
$ 41,703 $ 37,609 $ 43,943
--------- --------- ---------
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE DIVIDENDS (1) (2) 0.8 0.8 1.0
--------- --------- ---------
SEVEN MONTHS
ENDED
DEC. 31, YEAR ENDED MAY 31,
------------------
1994 1994 1993
--------- --------- ----------
<S> <C> <C> <C>
Fixed charges, as defined:
Interest charges $ 20,285 $ 26,951 $ 16,336
Preference dividend requirements of the Company 449 --- ---
Preferred dividend requirements of subsidiaries
adjusted to pre-tax basis --- 364 1,551
--------- --------- ----------
Total fixed charges $ 20,734 $ 27,315 $ 17,887
--------- --------- ----------
Earnings, as defined (2):
Earnings (loss) from continuing operations
before income taxes, minority interest,
extraordinary item and cumulative effect of
accounting change $ (22,834) $ (23,104) $ (147,445)
Fixed charges, above 20,734 27,315 17,887
Less interest capitalized (11,833) (16,863) (6,407)
Plus undistributed (earnings) loss of affiliates 4,102 (645) 3,012
Less preference dividend requirements of the
Company and its subsidiaries adjusted to pre-tax basis (449) (364) (1,551)
--------- --------- ----------
$ (10,280) $ (13,661) $ (134,504)
--------- --------- ----------
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE DIVIDENDS (1) (2) --- --- ---
--------- --------- ----------
</TABLE>
(1) Earnings were inadequate to cover fixed charges and preference
dividends for the years ended December 31, 1997 and 1996 by $9,322,000 and
$7,260,000, for the seven months ended December 31, 1994 by $31,014,000, and
for the years ended May 31, 1994 and 1993 by $40,976,000 and $152,391,000,
respectively.
(2) Earnings reflect nonrecurring writedowns and loss provisions of
$46,153,000 and $1,058,000 for the years ended December 31, 1996 and 1995,
$984,000 for the seven months ended December 31, 1994, and $45,754,000 and
$99,883,000 for the years ended May 31, 1994 and 1993, respectively.
Nonrecurring gains from the sale of assets and other gains aggregated
$6,253,000, $22,189,000, $13,617,000 and $56,193,000 for the years ended
December 31, 1997, 1996 and 1995 and May 31, 1994, respectively. The ratio of
earnings to combined fixed charges and preference dividends if adjusted to
remove nonrecurring items, would have been 0.7, 1.4 and 0.7 for the years
ended December 31, 1997, 1996 and 1995, respectively. Without nonrecurring
items, earnings would have been inadequate to cover fixed charges and
preference dividends for the years ended December 31, 1997 and 1995 by
$15,575,000 and $10,723,000, for the seven months ended December 31, 1994 by
$30,030,000, and for the years ended May 31, 1994 and 1993 by $51,415,000 and
$45,183,000, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 20,524
<SECURITIES> 0
<RECEIVABLES> 8,415
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,547
<PP&E> 1,007,512
<DEPRECIATION> 284,143
<TOTAL-ASSETS> 919,056
<CURRENT-LIABILITIES> 264,731
<BONDS> 418,276
0
7,473
<COMMON> 366
<OTHER-SE> 183,383
<TOTAL-LIABILITY-AND-EQUITY> 919,056
<SALES> 72,553
<TOTAL-REVENUES> 72,553
<CGS> 36,768
<TOTAL-COSTS> 36,768
<OTHER-EXPENSES> 207,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,320
<INCOME-PRETAX> (141,527)
<INCOME-TAX> (34,377)
<INCOME-CONTINUING> (107,150)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,150)
<EPS-PRIMARY> (2.93)
<EPS-DILUTED> (2.93)
</TABLE>
