UNIMAR COMPANY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Earnings
For the Three Months and Six Months ended
June 30, 1997 and June 30, 1996 . . . . . . . 1
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996. . . . . . 2
Condensed Consolidated Statements of
Cash Flows for the Six Months ended
June 30, 1997 and June 30, 1996. . . . . . . . 3
Notes to Condensed Consolidated Financial
Statements as of June 30, 1997 . . . . . . . . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
PART I. FINANCIAL INFORMATION
UNIMAR COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Oil and gas production
revenues $50,042 $57,615 $116,325 $126,211
Production costs 6,524 6,009 12,400 11,882
Depletion, depreciation
and amortization 9,893 10,856 21,513 23,704
Exploration costs
including dry holes 64 (111) 312 247
Operating profit 33,561 40,861 82,100 90,378
General and administrative
expenses 234 332 544 569
Other income (87) (66) (203) (155)
Earnings before income
taxes 33,414 40,595 81,759 89,964
Income tax expense
Current 23,992 30,284 56,842 64,068
Deferred (1,932) (1,876) (3,863) (3,752)
22,060 28,408 52,979 60,316
Net earnings $11,354 $12,187 $ 28,780 $ 29,648
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Thousands of dollars)
June 30, December 31,
1997 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,156 $ 3,274
Accounts receivable 6,998 13,943
Inventories 8,092 8,177
Other current assets 3,020 2,951
Total current assets 23,266 28,345
Property, plant and equipment, at cost:
Oil and gas properties
(successful efforts method) 1,083,479 1,070,819
Other 2,306 2,287
1,085,785 1,073,106
Less: accumulated depreciation and
depletion 742,613 720,976
Net property, plant and equipment 343,172 352,130
Other assets 2,531 3,002
$ 368,969 $ 383,477
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 463 $ 1,043
Advances from joint venture partners 1,602 1,234
Accrued liabilities 15,293 17,892
Income and other taxes 11,287 19,924
Total current liabilities 28,645 40,093
Deferred income taxes 150,224 154,087
Other liabilities 15,173 14,859
Partners' capital 254,927 254,438
Less: demand notes receivable 80,000 80,000
174,927 174,438
$ 368,969 $ 383,477
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Thousands of dollars)
(Unaudited)
Six Months Ended
June 30,
1997 1996
Net earnings $ 28,780 $ 29,648
Adjustments to reconcile to net cash
provided by operating activities:
Depletion, depreciation and amortization 21,637 23,841
Deferred income taxes (3,863) (3,752)
Changes in working capital and other (3,961) (2,397)
Net cash provided by operating activities 42,593 47,340
Investment activities:
Capital expenditures (12,679) (10,832)
Net cash used in investing activities (12,679) (10,832)
Financing activities:
Capital contributions 11,200 12,940
Capital distributions (39,600) (47,840)
Net cash used in financing activities (28,400) (34,900)
Increase (decrease) in advances from joint
venture partners 368 (1,829)
Net increase (decrease) in cash and cash 1,882 (221)
equivalents
Cash and cash equivalents at beginning
of period 3,274 4,882
Cash and cash equivalents at end of period $ 5,156 $ 4,661
IPU distributions paid $ 14,336 $ 11,641
Income taxes paid $ 65,479 $ 62,984
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1997
(Unaudited)
(1) Unimar Company (the Company) is a general partnership
organized under the Texas Uniform Partnership Act, whose
partners are Unistar, Inc., a Delaware corporation and a
direct subsidiary of Union Texas Petroleum Holdings, Inc., a
Delaware corporation, and LASMO (Ustar) Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of LASMO
plc, a public limited company organized under the laws of
England. Each partner shares equally in the Company's net
earnings, distributions and capital contributions.
(2) These condensed consolidated financial statements should be
read in the context of the consolidated financial statements
and notes thereto included in the Company's 1996 annual report
on Form 10-K. In the opinion of management, the accompanying
financial statements contain all adjustments of a normal
recurring nature necessary for a fair presentation. Interim
results are not necessarily indicative of results on an
annualized basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
June 30, 1997
(Unaudited)
(3) The table below outlines the calculation of the Indonesian
Participating Unit (IPU) participation payment for the second
quarter of 1997.
1997
Second Quarter
(Thousands of dollars)
Positive cash flow:
Gas receipts $ 51,047
Oil and condensate receipts 8,149
Other non-revenue cash receipts
from Joint Venture 976
Total positive cash flow 60,172
Less negative cash flow:
Expenditures to Joint Venture 13,535
Indonesian income taxes 25,107
Total negative cash flow 38,642
Net positive cash flow from
23.125% interest in Joint Venture $ 21,530
Net cash flow for benefit of
IPU holders* $ 5,282
Participation Payment per IPU* $ .49
* Each IPU is entitled to 1/14,077,747 of 32% of net positive
cash flow until September 25, 1999 at which time the Units
will expire with no residual value. As of June 30, 1997,
there were 10,778,590 IPUs issued and outstanding.
<PAGE>
The following discussion should be read in conjunction with the
business section, consolidated financial statements, notes, and
management's discussion contained in the Company's 1996 annual
report on Form 10-K, and condensed consolidated financial
statements and notes contained in this report.
Liquidity and Capital Resources
Cash flow from operations for the six months ended June 30, 1997
amounted to $43 million, a decrease of $5 million as compared to
the same period in 1996. The decrease resulted primarily from
lower sales volumes which were partially offset by higher prices.
Capital expenditures and net distributions to the partners for the
first six months of 1997 were $13 million and $28 million,
respectively. For the six months ended June 30, 1996, capital
expenditures and net distributions to the partners were $11 million
and $35 million, respectively.
The Company's share of 1997 Indonesian Joint Venture (IJV)
expenditures is currently expected to approximate $55 million, a $3
million increase from the amount projected at year-end 1996. The
increase includes a $6 million increase in operating expenditures
associated primarily with the Operator's business process
reengineering plan, offset by a $3 million decrease in exploration
expenditures as a result of reductions in planned exploratory
seismic and drilling activity for 1997. During the first six
months of 1997, $27 million was called by the IJV as compared to
$25 million for the six months ended June 30, 1996.
The Company's ability to generate cash is primarily dependent on
the prices it receives for the sale of liquefied natural gas (LNG),
and to a lesser extent, the sale of crude oil and liquefied
petroleum gas (LPG). LNG and LPG are primarily sold under long
term contracts whose prices are indexed by a basket of Indonesian
crudes. In the event cash generated from operations is not
sufficient to meet capital investment and other requirements, any
shortfall will be funded through additional cash contributions by
the partners. The Company cannot predict with any degree of
certainty the prices it will receive in future periods for its
crude oil, LNG and LPG. The Company's financial condition,
operating results and liquidity will be materially affected by any
significant fluctuations in its sales prices.
<PAGE>
Results of Operations
Quarter Ended June 30, 1997
Compared to Quarter Ended June 30, 1996
Net earnings for the second quarter of 1997 were $11 million, as
compared to $12 million in the prior year's quarter. The decrease
in earnings was mainly due to lower revenues as discussed below.
Second quarter 1997 revenues were $50 million, a decrease of $8
million as compared to the corresponding 1996 quarter. The
decrease was mainly due to a 17 percent decrease in LNG sales
volumes which was partially offset by a 27 percent increase in
crude oil sales volumes. Prices for LNG sales increased 2 percent
and crude oil sales prices decreased slightly.
The IJV's share of LNG sold during the second quarter of 1997 was
83 trillion BTUs (28.1 net equivalent cargoes) as compared to 100
trillion BTUs (33.8 net equivalent cargoes) in the second quarter
of 1996. The IJV's share of LNG shipments for 1997 is expected to
decline by approximately 15 percent as compared to 1996, due
primarily to the reduction in deliveries under the IJV's first
contract in which the IJV has a higher participation interest. A
further decline in LNG shipments is expected in 1998.
Crude oil volumes net to the Company increased by 88 thousand
barrels to 411 thousand barrels, mainly due to the timing of crude
oil liftings.
The average price received for LNG during the second quarter of
1997 was $3.05 per million BTUs, a $0.05 per million BTU increase
as compared to the same period in 1996. The average crude oil
price in the second quarter of 1997 was $18.88 per barrel, a $0.03
per barrel decrease as compared to the corresponding 1996 quarter.
Production costs for the second quarter of 1997 increased by
approximately $0.5 million as compared to the same quarter in 1996
due primarily to recoverable costs associated with the Operator's
ongoing business process reengineering plan.
Depletion, depreciation and amortization charges decreased $1
million to $10 million, due to the lower overall level of
production in the second quarter of 1997 as compared to the second
quarter of 1996.
Income tax expense in the second quarter of 1997 decreased $6
million to $22 million, due primarily to lower second quarter
revenues and an increase in cost recoverable expenditures. The
effective tax rates for the 1997 and 1996 second quarters were 66
percent and 70 percent, respectively. These rates are the
aggregate of Indonesian source income taxed at a 56 percent rate,
and certain expenses attributable to the Company which are not
deductible in the partnership.
Six months Ended June 30, 1997
Compared to Six months Ended June 30, 1996
Net earnings for the first six months of 1997 were $29 million,
a decrease of $1 million as compared to the same period in 1996.
The decrease in earnings was mainly the result of lower revenues as
discussed below.
Revenues for the first six months of 1997 were $116 million, or
$10 million lower than the first six months of 1996. Although LNG
and crude oil sales prices increased 12 percent and 8 percent,
respectively, volumes of LNG and crude oil sales decreased 18
percent and 6 percent, respectively.
The average price received for LNG was $3.33 per million BTUs,
a $0.35 per million BTU increase as compared to the first six
months of 1996. The price received for crude oil sales averaged
$20.44 per barrel, an increase of $1.60 per barrel as compared to
the 1996 six month average.
The IJV's share of LNG sold during the first six months of 1997
was 174 trillion BTUs (59.1 net equivalent cargoes) as compared to
213 trillion BTUs (72.4 net equivalent cargoes) in the first six
months of 1996. The IJV's share of LNG shipments for 1997 is
expected to decline by approximately 15 percent as compared to
1996, due primarily to the reduction in deliveries under the IJV's
first contract in which the IJV has a higher participation
interest. A further decline in LNG shipments is expected in 1998.
Crude oil volumes net to the Company decreased by 48 thousand
barrels to 821 thousand barrels, mainly due to the timing of crude
oil liftings.
Production costs for the first six months of 1997 increased by
approximately $0.5 million as compared to the same period in 1996
due primarily to recoverable costs associated with the Operator's
ongoing business process reengineering plan.
Depletion, depreciation and amortization charges decreased $2
million to $22 million, mainly due to the lower overall level of
production in the first six months of 1997.
Income taxes in the first six months of 1997 decreased $7 million
to $53 million. The decrease in current tax expense during the
first six months of 1997 was primarily due to lower revenues and an
increase in cost recoverable expenditures. The effective tax rates
for the first six months of 1997 and 1996 were 65 percent and 67
percent, respectively. These rates are the aggregate of Indonesian
source income taxed at a 56 percent rate, and certain expenses
attributable to Unimar activities which are not deductible in the
partnership.<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10)-1- Amendment No. 2 to Amended and Restated Bontang
Excess Sales Trustee and Paying Agent Agreement,
dated as of March 4, 1997, among BankAmerica
International, as Trustee, and the Producers.
(10)-2- Bontang VI Disbursement Trustee and Paying Agent
Agreement dated as of March 19, 1997, between
Bank of America National Trust and Savings
Association, as Bontang VI Trustee, and Bank of
America National Trust and Savings Association,
as Disbursement Trustee.
(27)-1- Financial Data Schedule for the six months ended
June 30, 1997.
(b) Reports on Form 8-K
None.
<PAGE>
UNIMAR COMPANY
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.
UNIMAR COMPANY
By: /S/ George W. Berko
George W. Berko
Member of the Management
Board
(principal financial officer
and the officer duly authorized to sign
on behalf of the registrant.)
DATE: August 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,156
<SECURITIES> 0
<RECEIVABLES> 6,998
<ALLOWANCES> 0
<INVENTORY> 8,092
<CURRENT-ASSETS> 23,266
<PP&E> 1,085,785
<DEPRECIATION> 742,613
<TOTAL-ASSETS> 368,969
<CURRENT-LIABILITIES> 28,645
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 368,969
<SALES> 116,325
<TOTAL-REVENUES> 116,325
<CGS> 33,913
<TOTAL-COSTS> 34,225
<OTHER-EXPENSES> 544
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 81,759
<INCOME-TAX> 52,979
<INCOME-CONTINUING> 28,780
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,780
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
AMENDMENT NO. 2
TO
AMENDED AND RESTATED
BONTANG EXCESS SALES TRUSTEE
AND PAYING AGENT AGREEMENT
AMENDMENT No. 2 dated as of March 4, 1997 among
(i) BANKAMERICA INTERNATIONAL (as successor in interest to
Continental Bank International), not in its individual capacity but
solely as Trustee under the Bontang Excess Sales Trustee and Paying
Agent Agreement; and
(ii) PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA,
VIRGINIA INTERNATIONAL COMPANY, VIRGINIA INDONESIA COMPANY, LASMO
SANGA SANGA LIMITED, UNION TEXAS EAST KALIMANTAN LIMITED, OPICOIL
HOUSTON, INC., UNIVERSE GAS & OIL COMPANY, INC., TOTAL INDONESIE,
UNOCAL INDONESIA COMPANY and INDONESIA PETROLEUM, LTD.
W I T N E S S E T H :
WHEREAS, the parties hereto are parties to the Bontang
Excess Sales Trustee and Paying Agent Agreement originally dated as
of November 1, 1986, as amended and restated as of February 9, 1988
and as further amended by Amendment No. 1 to Amended and Restated
Bontang Excess Sales Trustee and Paying Agent Agreement dated July
1, 1995 (the "Trust Agreement"); and
WHEREAS, the parties hereto have determined that the
Trust Agreement should be further amended as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Article 1 of the Trust Agreement is hereby amended
by adding new definitions of "Badak V Sales Contract" and "Badak VI
Sales Contract" to be inserted immediately following the definition
of "Approved Level of Working Capital" and reading in their
entirety as follows:
"Badak V Sales Contract" means the LNG Sales and
Purchase Contract (Badak V) dated August 12, 1995, by and between
PERTAMINA and Korea Gas Corporation, as amended or modified from
time to time.
"Badak VI Sales Contract" means the LNG Sale and
Purchase Contract (Badak VI) between PERTAMINA and Chinese
Petroleum Corporation dated as of October 25, 1995, as amended or
modified from time to time.
2. The definition of "Excess Sales Contracts" in
Article 1 of the Trust Agreement is hereby amended so as to read in
its entirety as follows:
"Excess Sales Contracts" shall mean:
(i) "Agreement for Sale and Purchase of
Liquefied Natural Gas" dated August 29, 1986 between PERTAMINA and
Total International Limited, as hereafter amended;
(ii) "Invoice Settlement Agreement for 1973 LNG
Sales Contract" and "Invoice Settlement Agreement for 1981 LNG
Sales Contract" both dated as of March 31, 1987 between PERTAMINA
and divers Japanese buyers of LNG, as hereafter amended, including
any extension or renewal thereof;
(iii) "LNG Sales and Purchase Contract
(Yokkaichi LNG Trade)" dated August 28, 1987 between PERTAMINA and
Nusantara Gas Services Company, Inc., as hereafter amended,
including any extension or renewal thereof;
(iv) the Korean Quantities Agreement, it being
understood that after December 31, 1999 the Korean Carry-Over
Quantities will not be supplied under the 1973 LNG Sales Contract
(as defined in the Korean Quantities Agreement) and the 1973 LNG
Sales Contract will not be the Designated LNG Sales Contract (as
defined in the Korean Quantities Agreement); and
any other contract (other than any Excluded Excess Sales Contracts,
the CPC 1994 Sales Contract, the KGC 1994 Sales Contract, the Badak
V Sales Contract and the Badak VI Sales Contract), for the sale of
LNG to be manufactured using existing or future excess capacity at
the Bontang Plant; provided, that (x) the KGC 1994 Sales Contract
will constitute an Excess Sales Contract solely with respect to
cargoes delivered thereunder through and including December 31,
1997 and (y) the Badak V Sales Contract and the Badak VI Sales
Contract each will constitute an Excess Sales Contract solely with
respect to LNG purchased thereunder through and including December
31, 1999; and provided further, that quantities of LNG shall be
deemed to have been purchased when title thereto passes to the
relevant Buyer under the terms of the Badak V Sales Contract or the
Badak VI Sales Contract, except that any quantities of LNG included
in (i) the Fixed Quantity Period (as defined in the Badak V Sales
Contract) ending on December 31, 1999 pursuant to Section 7.3(c) of
the Badak V Sales Contract or (ii) the Fixed Quantity Period (as
defined in the Badak VI Sales Contract) ending on December 31, 1999
pursuant to Section 7.3(c) of the Badak VI Sales Contract that
would otherwise be deemed to have been purchased on or after
January 1, 2000 shall instead be deemed to have been purchased on
December 31, 1999.
3. Section 2.3 of the Trust Agreement is hereby amended
by amending and restating the last sentence thereof in its entirety
to read as follows:
"Notwithstanding the foregoing or any other
provision hereof to the contrary, the parties hereto acknowledge
and agree that (a) all amounts which become due and payable by the
buyer under the KGC 1994 Sales Contract for, or otherwise relating
to, cargoes delivered under the KGC 1994 Sales Contract at any time
on or after January 1, 1998, (b) all amounts which become due and
payable by the buyer under the CPC 1994 Sales Contract, (c) all
amounts which become due and payable on or after January 1, 2000 by
the buyers under the 1973 LNG Sales Contract (as defined in the
Korean Quantities Agreement) (the amounts described in (a), (b) and
(c) referred to collectively as the "Bontang V Trust Funds"), (d)
all amounts which become due and payable by the buyer under the
Badak VI Sales Contract for quantities of LNG purchased on or after
January 1, 2000 or otherwise with respect to the period commencing
on January 1, 2000 and (e) all amounts which become due and payable
by the buyer under the Badak V Sales Contract for quantities of LNG
purchased on or after January 1, 2000 or otherwise with respect to
the period commencing on January 1, 2000 (the amounts defined in
(d) and (e) referred to collectively as the "Bontang VI Trust
Funds") shall not constitute Bontang Excess Sales Trust Funds. Any
Bontang V Trust Funds received by the Bontang Excess Sales Trustee
shall be paid over to the trustee under the Bontang V Trustee and
Paying Agent Agreement dated as of July 1, 1995. Any Bontang VI
Trust Funds received by the Bontang Excess Sales Trustee shall be
paid over to the trustee under the Bontang VI Trustee and Paying
Agent Agreement dated as of March 4, 1997."
4. Except as amended hereby, the Trust Agreement
remains unchanged and in full force and effect.
5. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES
OF AMERICA.
6. This Amendment may be executed in any number of
counterparts by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective duly authorized
signatories as of the date hereof.
The Trustee
BANKAMERICA INTERNATIONAL
as Trustee aforesaid
By /s/
Name: Vincent P. Chorney
Title: Assistant Vice
President
Producers
PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA
(PERTAMINA)
By /s/
Name: F. Abda'oe
Title: President Director
and
Chief Executive Officer
VIRGINIA INDONESIA COMPANY
By /s/
Name: Charles M. Reimer
Title: Chairman and Chief
Executive Officer
VIRGINIA INTERNATIONAL COMPANY
By /s/
Name: Richard L. Smernoff
Title: Vice President
LASMO SANGA SANGA LIMITED
By /s/
Name: Richard L. Smernoff
Title: Director and
Chief Financial Officer
UNION TEXAS EAST KALIMANTAN
LIMITED
By /s/
Name: Dean Henry
Title:Assistant Treasurer
OPICOIL HOUSTON, INC.
By /s/
Name: Roy C.H. Chiu
Title: President
UNIVERSE GAS & OIL COMPANY,
INC.
By /s/
Name: Toshio Norimatsu
Title: General manager of Business
Dept.
TOTAL INDONESIE
By /s/
Name: Michel Seguin
Title: Vice-Chairman and
Chief Executive Officer
UNOCAL INDONESIA COMPANY
By /s/
Name: Donald A. MacKay
Title: Assistant Treasurer
INDONESIA PETROLEUM, LTD.
By /s/
Name: Yusuke Sawatari
Title: Managing Director and General Manager
of Accounting & Finance Dept.
BONTANG VI
DISBURSEMENT TRUSTEE AND
PAYING AGENT AGREEMENT
(Series 97-1)
THIS AGREEMENT, made and entered into as of this 19th day of
March, 1997, by and between Bank of America National Trust and
Savings Association, not in its individual capacity but solely as
trustee and paying agent (in such capacity, the "Bontang VI
Trustee") under the Bontang VI Trustee and Paying Agent Agreement
dated as of March 4, 1997, as the same may be amended from time to
time (the "Bontang VI Trust Agreement"); and Bank of America
National Trust and Savings Association, not in its individual
capacity but solely as disbursement trustee and paying agent under
this Agreement:
W I T N E S S E T H:
WHEREAS, the Bontang VI Trustee has entered into a Loan
Agreement, dated as of March ___, 1997, among the Bontang VI
Trustee, as Borrower, Bank of Taiwan, New York Agency, as Lead
Arranger, Bontang LNG Train-H Investment Co., Ltd., as Co-Lead
Arranger, the Co-Arrangers, the Co-Agents, the Lenders named
therein and The Chase Manhattan Bank, as Agent (as amended or
modified from time to time, the "Bontang VI Loan Agreement"); and
WHEREAS, as a matter of convenience, certain loan proceeds to
be received by the Bontang VI Trustee under the Bontang VI Loan
Agreement may be maintained in a disbursement trust fund until such
time as they are to be disbursed in accordance with the terms
hereof and of the Bontang VI Trust Agreement;
NOW, THEREFORE, in consideration of the above premises and the
mutual promises hereinafter contained and other good and valuable
consideration, the parties hereto hereby agree as follows:
Article 1
Definitions
When used herein, the following terms shall have the meanings
set forth below:
"Bontang VI Loan Agreement" shall have the meaning specified
in the recitals to this Agreement.
"Bontang VI Trust Agreement" shall have the meaning specified
in the introduction to this Agreement.
"Bontang VI Trustee" shall have the meaning specified in the
introduction to this Agreement.
"Capital Project Creditors" shall mean those persons to whom
payments are to be made hereunder as specified in payment
instructions duly given in accordance with the terms hereof.
"Depositary" shall mean the United States headquarters or a
United States branch of the following institutions appointed
pursuant to Section 3.1 hereof as a depositary of funds, properties
and rights in the Disbursement Trust Fund:
(a) any branch or affiliate of Bank of America National
Trust and Savings Association, with the power to act as a
depositary, or
(b) any other bank, trust company or financial
institution (in each case with trust powers) which (i) has a
net worth in excess of $100,000,000.00 or (ii) has outstanding
debt securities rated A or better by Standard and Poor's
Rating Group or its equivalent by Moody's Investors Service or
another nationally recognized rating agency in the United
States and, in either case, has been approved in writing by
the Bontang VI Trustee.
"Disbursement Trust Account" shall mean the records of account
established and maintained by the Trustee pursuant to Section 2.4
hereof with respect to the Disbursement Trust Fund, which shall be
designated by the Trustee and referred to by the parties hereto as
the "Series 97-1 Disbursement Trust Account."
"Disbursement Trust Fund" shall mean the disbursement trust
fund established pursuant to Article 2 hereof, which shall be
designated as the "Series 97-1 Disbursement Trust Fund."
"Escrow Agent" shall have the meaning specified in Section 3.4
hereof.
"Lenders" shall mean the lenders advancing funds to the
Bontang VI Trustee under the Bontang VI Loan Agreement.
"Loan Proceeds" means funds advanced to the Bontang VI Trustee
under the Bontang VI Loan Agreement, and any Transferred Amounts
(as defined in Section 3.7(a) of the Bontang VI Trust Agreement).
"Producers" shall have the meaning specified in the Bontang VI
Trust Agreement.
"Trustee" shall mean Bank of America National Trust and
Savings Association, acting not in its individual capacity but
solely as disbursement trustee and paying agent under this
Agreement, and its successors.
Any capitalized terms used herein that are not defined herein
shall have the meanings ascribed to them in the Bontang VI Trust
Agreement.
Article 2
Appointment and Status of Trustee
2.1 Appointment. The Bontang VI Trustee hereby appoints Bank
of America National Trust and Savings Association, and Bank of
America National Trust and Savings Association hereby accepts
appointment as, and agrees to act as, the Trustee hereunder,
subject to the terms and conditions hereof. The appointment of the
Trustee is made hereunder pursuant to and for the implementation of
Section 3.7 of the Bontang VI Trust Agreement. The appointment
hereunder may be changed only by the agreement in writing of the
Bontang VI Trustee; provided, however, that the resignation of or
the appointment of a successor to the Bontang VI Trustee in
accordance with the Bontang VI Trust Agreement shall be deemed also
to be a resignation or, as the case may be, an appointment of a
successor to the Trustee hereunder.
2.2 Receipt of Loan Proceeds. The Trustee shall receive and
hold, or cause to be held as part of the Disbursement Trust Fund,
all disbursements of Loan Proceeds received by it from the Lenders
under the Bontang VI Loan Agreement.
2.3 Disbursement Trust Fund. All such amounts received
hereunder, including, without limitation, and together with any
security or securities acquired or other investments made for or
with such amounts, all appreciation and interest or dividends
thereon and other income or property received therefrom, shall
constitute and be part of the Disbursement Trust Fund to be held in
trust for the benefit of those having a right, to the extent
provided herein, to disbursements hereunder.
2.4 Disbursement Trust Account. The Trustee shall establish
and maintain at the Trustee's office, records of account in which
necessary entries shall be made with respect to all receipts into
and payments out of the Disbursement Trust Account, which shall be
consistent with the treatment of Bontang VI Trust Funds under
Section 9.3 (excluding the first sentence thereof) of the Bontang
VI Trust Agreement.
2.5 Recording of Entries. In the records of account of the
Disbursement Trust Account, the Trustee shall, after receipt of
payment instructions pursuant to Article 4 hereof, record and make
entries for each of the Capital Project Creditors and the Bontang
VI Trustee to reflect clearly the interest of each party in the
assets of the Disbursement Trust Fund that arise pursuant to such
instructions for payment to each respective party and the receipts
and payments therefrom.
2.6 Currencies. The Trustee shall hold or cause to be held
in the Disbursement Trust Fund all sums of money in the same
currencies as shall have been paid into it, unless otherwise
directed by the Bontang VI Trustee for effecting necessary
payments, and the Trustee may establish and maintain bank accounts
in such currencies as shall be necessary for the foregoing.
2.7 Reports. The Trustee shall furnish to the Bontang VI
Trustee:
(a) within 20 days after the close of each calendar
quarter, a statement prepared by the Trustee setting forth the
amount and source (by category) of funds received and
disbursed pursuant to this Agreement during such preceding
calendar quarter, and a statement of the cash and investments
held under this Agreement as of the end of such period; and
(b) within 45 days after the close of each calendar
year, a statement prepared by the Trustee setting forth the
amount and source (by category) of funds received and
disbursed pursuant to this Agreement during the previous
calendar year and the income earned on funds held in the
Disbursement Trust Fund during the previous calendar year, and
a statement of the cash and investments held under this
Agreement as of the end of such period.
Article 3
Depositary and Escrow Agent
3.1 Appointment. The Trustee may, upon the consent of the
Bontang VI Trustee, appoint and remove any Depositary for the
purposes of safekeeping, investment or disbursement of funds,
properties and rights in the Disbursement Trust Fund, and may
entrust the Depositary with the exclusive custody and possession of
such funds, properties and rights in the Disbursement Trust Fund.
3.2 Notification. If the Trustee shall have appointed a
Depositary, the Trustee shall notify the Bontang VI Trustee of the
appointment as soon as practicable.
3.3 Responsibilities of Trustee. If the Trustee shall have
appointed a Depositary, the Trustee's responsibilities with respect
to the funds, properties and rights held by the Depositary shall
only be to maintain and administer the accounting of the
Disbursement Trust Account, and the Depositary shall have the
exclusive custody, responsibility for and possession of the funds,
properties and rights held by it.
3.4 Escrow Agent. The Trustee may, upon the consent of the
Bontang VI Trustee, appoint and remove any bank, trust company or
financial institution that conforms to the definition of
"Depositary" as an escrow agent ("Escrow Agent"), and with respect
thereto, the provisions of Sections 3.2 and 3.3 above shall apply
mutatis mutandis.
3.5 Conditions of Appointment. It shall be a condition to
the appointment of any Depositary or Escrow Agent hereunder that
the bank, trust company or financial institution so appointed shall
agree to hold the funds, properties and rights held by it in trust
on the same basis, and subject to the same rights and obligations,
as are set forth in this Agreement with respect to the Trustee, and
upon such agreement, such rights and obligations shall be enjoyed
by and binding upon such Depositary or Escrow Agent. The terms of
appointment of any Depositary or Escrow Agent shall not be
inconsistent with the provisions of this Agreement, the Bontang VI
Trust Agreement or the Bontang VI Loan Agreement.
3.6 Required Consent. Without the consent of the Bontang VI
Trustee, no funds, properties or rights shall be transferred from
the custody and possession of the Trustee to the custody and
possession of a Depositary or Escrow Agent, nor shall any such
funds, properties or rights be transferred from a Depositary or
Escrow Agent to the Trustee without such consent, unless such
transfer shall be required for effecting necessary payments
hereunder.
Article 4
Payment Instructions and Interest
4.1 No Interest. Except as otherwise provided in Article 6
below, no party shall have any interest or any right of whatever
kind or nature in the Disbursement Trust Fund until payment
instructions shall have been duly provided pursuant hereto. Upon
receipt by the Trustee of payment instructions provided in
accordance with and meeting the requirements of Section 4.2 below,
the payee (including any Capital Project Creditor) named therein
shall acquire an interest in the funds and assets of the
Disbursement Trust Fund only to the extent set forth in said
payment instructions.
4.2 Payment Instructions. With respect to any particular
payment, payment instructions hereunder will be honored only upon
the receipt by the Trustee of payment instructions from the Bontang
VI Trustee. Each payment instruction from the Bontang VI Trustee
hereunder shall include the following information:
(i) the designation of this Agreement as that under
which payment is to be made;
(ii) the name of payee and the place and manner of
payment;
(iii)the amount of such payment and the currency to be
used; and
(iv) a brief description of the purpose of such payment,
together with the relevant invoice number or
designation of other relevant payment
documentation.
4.3 Incompleteness. If any payment instruction does not include
all of the information required by Section 4.2 above, the Trustee
shall promptly so notify the Bontang VI Trustee by telex or
telecopier transmission (with a copy to the Producers) and shall
not comply with such incomplete instructions.
4.4 Entitled to Rely. The Trustee and any Depositary or
Escrow Agent shall be entitled to rely upon payment instructions
provided in accordance with this Article 4 in making payments out
of the funds in the Disbursement Trust Fund.
4.5 Making of Payments. Each of the Trustee and any
Depositary or Escrow Agent shall honor each payment instruction
submitted to it in accordance with this Article 4 by making the
payments specified therein only to the extent and out of amounts
then held in the Disbursement Trust Fund. In honoring such payment
instruction, neither the Trustee nor any Depositary or Escrow Agent
shall have any responsibility for determining whether or not the
payment disbursed is being made in accordance with the Bontang VI
Loan Agreement, the Bontang VI Trust Agreement or any other
agreements or understandings, it being understood that the
Trustee's and any Depositary's or Escrow Agent's sole
responsibility with regard to any payment instructions shall be to
make disbursements in accordance therewith.
4.6 Sufficient Funds Required. Neither the Trustee nor any
Depositary or Escrow Agent shall be obligated to make a payment
unless and until it holds sufficient funds in the Disbursement
Trust Fund to make all payments referred to in the related payment
instruction, unless a partial payment is directed by the Bontang VI
Trustee, but the Trustee or Depositary or Escrow Agent shall honor
any subsequent payment instruction if there shall be sufficient
funds to do so in the Disbursement Trust Fund.
4.7 Currencies of Payments. All payments made by the Trustee
or any Depositary or Escrow Agent in currencies other than those
held in the Disbursement Trust Fund shall be effected by such
exchange transactions pursuant to procedures directed by the
Producers and advised to the Trustee or such Depositary or Escrow
Agent, and the honoring of a payment instruction may be delayed for
any period necessary to effect such transactions. Expenses and
risk of exchange shall be borne by the Disbursement Trust Fund.
4.8 Distribution of Annual Income. The Trustee shall invest
monies in the Disbursement Trust Account in the same type of
investments and in the same manner as provided for in Sections 10.1
and 10.2 of the Bontang VI Trust Agreement. Upon receipt of
payment instructions from the Bontang VI Trustee on or after
February 15 of each year, which payment instructions shall include
notification from the Accountants regarding the amount of
investment income earned during such previous calendar year, the
Trustee shall promptly pay to the Bontang VI Trustee the amount of
such investment income.
Article 5
Concerning the Trustee
5.1 Duties. In connection with its duties, rights and powers
under this Agreement (including in relation to transactions it may
enter into pursuant thereto), the Trustee shall be subject to the
following:
(a) The Trustee shall be entitled to act upon any
notice, certificate, request, direction, waiver, receipt or
other document that it in good faith believes to be genuine;
and it shall be entitled to rely upon the due execution,
validity and effectiveness, and the truth and acceptability of
any provisions contained therein.
(b) The Trustee shall not be liable for any error of
judgment or for any act done or omitted by it in good faith or
for any mistake of fact or law, or for anything which it may
do or refrain from doing, except for its own gross negligence
or willful misconduct, nor shall the Trustee be liable for
special, indirect or consequential loss or damage of any kind,
including, without limitation, lost profits, except such
losses or damages resulting from its willful misconduct.
(c) Neither the Trustee nor any Depositary or Escrow
Agent shall be required to furnish any bond or other security
for the faithful performance of its duties as such, in any
jurisdiction.
(d) The Trustee may consult with, and obtain advice
from, accounting and legal advisers, and it shall incur no
liability or loss and shall be fully protected in acting in
good faith in accordance with the opinion and advice of such
advisors.
(e) The Trustee shall have no duties other than those
specifically set forth or provided for in this Agreement. The
Trustee shall have no obligation to familiarize itself with
and shall have no responsibility with respect to any agreement
to which it is not a party relating to the transactions
contemplated by this Agreement nor any obligation to inquire
whether any notice, instruction, statement or calculation is
in conformity with the terms of any such agreement, except for
those irregularities, errors or mistakes apparent on the face
of such document or to the knowledge of the Trustee. If,
however, any remittance or communication received by the
Trustee appears erroneous or irregular on its face, the
Trustee shall be under a duty to make prompt inquiry to the
person or party originating such remittance or communication
in order to determine whether a clerical error or inadvertent
mistake has occurred.
5.2 Compensation. The Trustee shall be entitled to
reasonable compensation to be agreed upon from time to time between
the parties for the services to be performed by the Trustee
hereunder and to be reimbursed for all reasonable out-of-pocket
expenses incurred by the Trustee in connection therewith. The
Trustee may charge such agreed compensation and expenses to the
Disbursement Trust Fund, providing the Bontang VI Trustee with such
evidence as to the nature and amount of such expenses as the
Bontang VI Trustee may reasonably require. If the balance in the
Disbursement Trust Fund is insufficient therefor, then the Bontang
VI Trustee shall pay such compensation and expenses to the Trustee.
Article 6
Termination
This Agreement and the Disbursement Trust Fund shall continue
until the Trustee shall have received instructions from the Bontang
VI Trustee to terminate the Disbursement Trust Fund. Upon receipt
of such instructions, the Trustee shall forthwith convert to cash
any investments then held by it and promptly pay over to the
parties specified in such instructions such cash proceeds plus any
other amounts then held in the Disbursement Trust Fund, less any
amounts payable to the Trustee under Sections 5.2 and 7.3 hereof.
Article 7
General Provisions
7.1 Amendment. This Agreement may not be revoked, amended,
modified, varied or supplemented except by a written instrument
duly executed by the Trustee and the Bontang VI Trustee.
7.2 Enforcement. Enforcement of any provision of this
Agreement shall not be affected by any previous waiver or course of
dealing.
7.3 Indemnification. The Bontang VI Trustee shall indemnify
the Trustee and all Depositaries and Escrow Agents for, and hold
each of them harmless against, any loss, liability, claim,
judgment, settlement, compromise or reasonable expense incurred or
suffered without gross negligence or willful misconduct on the part
of the Trustee or any Depositary or Escrow Agent, arising out of or
in connection with its entering into this Agreement and carrying
out its duties or exercising its rights hereunder.
7.4 Claims against Trustee. If either party shall claim
compensation for any damage sustained by reason of the failure to
perform, or the breach of, any provision of this Agreement, such
person shall, within 30 days after sustaining such damage or
acquiring knowledge of such event or failure or breach of
performance, make a written statement to the breaching person of
the nature of the damage sustained and the details and amount
thereof. Should such person fail to make the statements required
hereunder within the 30-day period, its claim for such compensation
shall be deemed to be forfeited and waived and upon expiration of
the 30-day period such claim for damages shall be invalidated.
7.5 Incumbency Certificates. The Bontang VI Trustee shall
furnish the Trustee and all Depositaries and Escrow Agents from
time to time with duly executed incumbency certificates showing the
names, titles and specimen signatures of the persons authorized on
behalf of the Bontang VI Trustee to take the actions and give the
notifications, approvals and instructions required by this
Agreement.
7.6 Notices. All notices, approvals, instructions, and other
communications for purposes of this Agreement shall be in writing,
which shall include transmission by telex or telecopier. All
communications given by telex or telecopier shall be directed as
set forth below, provided that, if any communication is received by
the Trustee from a telex or telecopy number other than those set
forth below, its responses thereto may be directed to the number
from which such communication was received:
A. To the Bontang VI Trustee at the following mail,
telex and telecopier addresses:
Bank of America National Trust and Savings
Association
One World Trade Center, 9th Floor
New York, New York 10048-1191
Attention: Vice President-Manager
Telex: 62 944
Answerback: BOA UW
Telecopier No.: (212) 390-3595
B. To the Trustee at the following mail, telex and
telecopier addresses:
Bank of America National Trust and Savings
Association
One World Trade Center, 9th Floor
New York, New York 10048
Attention: Vice President-Manager
Telex: 62 944
Answerback: BOA UW
Telecopier No.: (212) 390-3595
Any party hereto may designate additional addresses for
particular communications as required from time to time, and may
change any address, by notice given 10 days in advance of such
additions or changes. Immediately upon receiving communications by
telex or telecopier, a party may request a repeat transmittal of
the entire communication or confirmation of particular matters.
7.7 DISPUTES. ALL DISPUTES ARISING BETWEEN THE PARTIES
RELATING TO THIS AGREEMENT OR THE INTERPRETATION OR PERFORMANCE
HEREOF, SHALL BE FINALLY SETTLED BY ARBITRATION CONDUCTED IN THE
ENGLISH LANGUAGE IN PARIS, FRANCE, BY THREE ARBITRATORS UNDER THE
RULES OF ARBITRATION OF THE INTERNATIONAL CHAMBER OF COMMERCE.
JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION, OR APPLICATION BE MADE TO SUCH COURT FOR A JUDICIAL
ACCEPTANCE OF THE AWARD AND AN ORDER OF ENFORCEMENT AS THE CASE MAY
BE. ANY AWARD MADE UNDER THIS SECTION 7.7 SHALL BE BINDING UPON
ALL PARTIES CONCERNED.
7.8 Governing Law. This agreement shall be governed by and
construed in accordance with the law of the State of New York,
United States of America, applicable to agreements made and to be
performed entirely within such state.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized signatories as of
the date first above written.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Trustee and Paying Agent under
the Bontang VI Trustee and Paying
Agent Agreement dated as of March
4, 1997
By: /s/
Name: Hanafi Gan Bin Abdullah
Title: a/k/a/ Gan Kah Chai
Senior Vice President and
Country Manager
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Disbursement Trustee and
Paying Agent hereunder
By: /s/
Name: Hanafi Gan Bin Abdullah
Title: a/k/a/ Gan Kah Chai
Senior Vice President and
Country Manager
