UNITED STATES 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 September 30, 1996
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 1-1463
UNION CARBIDE CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-1421730
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
39 Old Ridgebury Road, Danbury, CT 06817-0001
(Address of principal executive offices) (Zip Code)
203-794-2000
Registrant's telephone number, including area code
(Former name, former address and former fiscal year,
if changed since last report.)
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.
Class Outstanding at October 31, 1996
Common Stock, $1 par value 127,341,593 shares
Total number of sequentially numbered pages in this filing,
including exhibits thereto: 86
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Financial Statements
Condensed Consolidated Statement of Income -
Union Carbide Corporation and Subsidiaries -
Quarter Ended September 30, 1996 and 1995.................... 3
Condensed Consolidated Statement of Income -
Union Carbide Corporation and Subsidiaries -
Nine Months Ended September 30, 1996 and 1995................ 4
Condensed Consolidated Balance Sheet -
Union Carbide Corporation and Subsidiaries -
September 30, 1996 and December 31, 1995..................... 5
Condensed Consolidated Statement of Cash Flows -
Union Carbide Corporation and Subsidiaries -
Nine Months Ended September 30, 1996 and 1995................ 6
Notes to Condensed Consolidated Financial Statements -
Union Carbide Corporation and Subsidiaries................... 7-10
Discussion and Analysis of Results of Operations
and Financial Condition........................................ 11-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................... 16
Item 6. Exhibits and Reports on Form 8-K........................ 16
Signature........................................................ 17
Exhibit Index.................................................... 18
PART I. FINANCIAL INFORMATION
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Millions of dollars
(Except per share figures)
Quarter ended Sept. 30,
1996 1995
NET SALES $ 1,538 $ 1,495
Cost of sales, exclusive of depreciation and
amortization 1,145 1,038
Research and development 39 36
Selling, administration and other expenses(a) 80 148
Depreciation and amortization 81 72
Interest expense 18 23
Partnership income (43) (26)
Other income - net (6) (171)
INCOME BEFORE PROVISION FOR INCOME TAXES 224 375
Provision for income taxes 63 122
INCOME OF CONSOLIDATED COMPANIES 161 253
Income from corporate investments
carried at equity - 24
NET INCOME 161 277
Preferred stock dividend, net of income taxes 2 2
NET INCOME - COMMON STOCKHOLDERS $ 159 $ 275
Earnings per common share
Primary $ 1.19 $ 1.96
Fully diluted $ 1.08 $ 1.77
Cash dividends declared per common share $ 0.1875 $ 0.1875
(a) Selling, administration and other expenses include:
Selling $ 32 $ 32
Administration 32 96
Other expenses 16 20
$ 80 $ 148
The Notes to Condensed Consolidated Financial Statements on Pages 7 through 10
should be read in conjunction with this statement.
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Millions of dollars
(Except per share figures)
Nine Months ended Sept. 30,
1996 1995
NET SALES $ 4,598 $ 4,489
Cost of sales, exclusive of depreciation and
amortization 3,394 3,140
Research and development 115 106
Selling, administration and other expenses(a) 239 306
Depreciation and amortization 235 227
Interest expense 55 64
Partnership income (106) (121)
Other income - net (25) (216)
INCOME BEFORE PROVISION FOR INCOME TAXES 691 983
Provision for income taxes 194 303
INCOME OF CONSOLIDATED COMPANIES 497 680
Income (loss) from corporate investments
carried at equity (6) 55
NET INCOME 491 735
Preferred stock dividend, net of income taxes 7 7
NET INCOME - COMMON STOCKHOLDERS $ 484 $ 728
Earnings per common share
Primary $ 3.52 $ 5.11
Fully diluted $ 3.20 $ 4.61
Cash dividends declared per common share $ 0.5625 $ 0.5625
(a) Selling, administration and other expenses include:
Selling $ 96 $ 95
Administration 91 159
Other expenses 52 52
$ 239 $ 306
The Notes to Condensed Consolidated Financial Statements on Pages 7 through 10
should be read in conjunction with this statement.
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
Millions of dollars
Sept. 30, Dec. 31,
1996 1995
ASSETS
Cash and cash equivalents $ 111 $ 449
Notes and accounts receivable 1,058 996
Inventories 528 544
Other current assets 213 207
Total current assets 1,910 2,196
Property, plant and equipment 6,993 6,357
Less: Accumulated depreciation 3,698 3,549
Net fixed assets 3,295 2,808
Companies carried at equity 761 739
Other investments and advances 85 84
Total investments and advances 846 823
Other assets 467 429
Total assets $6,518 $6,256
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 254 $ 316
Short-term debt and current portion of
long-term debt 263 38
Accrued income and other taxes 175 259
Other accrued liabilities 749 725
Total current liabilities 1,441 1,338
Long-term debt 1,295 1,285
Postretirement benefit obligation 473 480
Other long-term obligations 858 834
Deferred credits 288 201
Minority stockholders' equity in consolidated
subsidiaries 28 24
Convertible preferred stock - ESOP 144 146
Unearned employee compensation - ESOP (93) (97)
Stockholders' equity:
Common stock authorized - 500,000,000 shares
Common stock issued - 154,609,669 shares 155 155
Additional paid-in capital 352 343
Translation and other equity adjustments (19) (15)
Retained earnings 2,555 2,145
3,043 2,628
Less: Treasury stock, at cost-27,170,602 shares
(19,501,701 shares in 1995) 959 583
Total stockholders' equity 2,084 2,045
Total liabilities and stockholders' equity $6,518 $6,256
The Notes to Condensed Consolidated Financial Statements on Pages 7 through 10
should be read in conjunction with this statement.
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Millions of dollars
Nine Months ended Sept. 30,
1996 1995
Increase (decrease) in
cash and cash equivalents
OPERATIONS
Income $ 491 $ 735
Noncash charges (credits) to net income
Depreciation and amortization 235 227
Deferred income taxes 48 (47)
Other noncash charges (10) 183
Net gains on investing transactions - (382)
Increase in working capital(a) (117) (233)
Long-term assets and liabilities 17 44
Cash Flow From Operations 664 527
INVESTING
Capital expenditures (531) (364)
Investments and acquisitions (excluding
cash acquired) (267) (378)
Sale of investments - 552
Sale of fixed and other assets 13 36
Cash Flow Used for Investing (785) (154)
FINANCING
Change in short-term debt (three months or less) 239 (10)
Proceeds from short-term debt 21 -
Repayment of short-term debt (26) -
Proceeds from long-term debt 6 402
Repayment of long-term debt (6) (18)
Issuance of common stock 115 68
Purchase of common stock (483) (343)
Payment of dividends (83) (87)
Other 1 3
Cash Flow From (Used for) Financing (216) 15
Effect of exchange rate changes on cash and
cash equivalents (1) 1
Change in cash and cash equivalents (338) 389
Cash and cash equivalents beginning-of-period 449 109
Cash and cash equivalents end-of-period $ 111 $ 498
Cash paid for interest and income taxes
Interest (net of amount capitalized) $ 41 $ 59
Income taxes $ 150 $ 221
(a) Net change in certain components of working capital (excluding
non-cash transactions):
(Increase) decrease in current assets
Notes and accounts receivable $ (37) $(134)
Inventories 55 (91)
Other current assets (15) 23
Decrease in payables and accruals (120) (31)
Increase in working capital $(117) $(233)
The Notes to Condensed Consolidated Financial Statements on Pages 7 through 10
should be read in conjunction with this statement.
UNION CARBIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments necessary for a
fair statement of the results for the interim periods. These adjustments
consist of only normal recurring adjustments. The accompanying statements
should be read in conjunction with the Notes to Financial Statements of
Union Carbide Corporation and Subsidiaries ("the corporation" or "UCC") in
the 1995 annual report to stockholders.
2. Acquisitions
On January 18, 1996, the corporation completed the purchase of the
polypropylene assets and business of Shell Oil Company. The purchased
assets, located in the U.S., are comprised of Shell's polypropylene
technology and manufacturing facilities and polypropylene assets previously
held jointly by both companies. Additionally, on February 28, 1996, the
corporation completed the purchase of 95 percent of the outstanding shares of
Companhia Alcoolquimica Nacional, a Brazilian producer of vinyl acetate
monomer. The polypropylene resin business is part of the Basic Chemicals &
Polymers segment, while the polypropylene licensing and catalyst businesses
and the Brazilian vinyl acetate monomer business are included within the
Specialties & Intermediates segment.
3. Common Stock
On July 24, 1996, the board of directors of the corporation increased the
number of shares that may be repurchased under the existing common stock
repurchase program to 50 million shares. Through September 30, 1996, since
inception of its common share repurchase program, the corporation repurchased
40,794,429 shares (11,354,951 during 1996) at an average effective price of
$32.18 per share. The corporation intends to acquire additional shares from
time to time at prevailing market prices, at a rate consistent with the
combination of corporate cash flow and market conditions.
In conjunction with the corporation's common stock buyback program, put
options were sold in a series of private placements entitling the holders to
sell 9,455,081 shares of common stock to UCC, at specified prices upon
exercise of the options. Since inception of this program, through
September 30, 1996, options representing 6,518,881 common shares have expired
unexercised, while options representing 1,886,200 shares were exercised for
$68 million, or an average price of $36.26 per share. Options representing
1,050,000 shares remain outstanding at September 30, 1996. Premiums received
since the inception of the program have reduced the average price of
repurchased shares from $32.42 per share to $32.18 per share.
4. Inventories
Millions of dollars
Sept. 30, Dec. 31,
1996 1995
Raw materials and supplies $ 121 $ 117
Work in process 64 46
Finished goods 343 381
$ 528 $ 544
5. Commitments and Contingencies
The corporation has entered into 3 major agreements for the purchase of
ethylene-related products and 2 other purchase agreements in the U.S. and
Canada. The net present value of the fixed and determinable portion of these
obligations at September 30, 1996 totaled $363 million.
The corporation is subject to loss contingencies resulting from environmental
laws and regulations, which include obligations to remove or remediate the
effects on the environment of the disposal or release of certain wastes and
substances at various sites. The corporation has established accruals in
current dollars for those hazardous waste sites where it is probable that a
loss has been incurred and the amount of the loss can be reasonably
estimated. The reliability and precision of the loss estimates are affected
by numerous factors, such as different stages of site evaluation, the
allocation of responsibility among potentially responsible parties and the
assertion of additional claims. The corporation adjusts its accruals as new
remediation requirements are defined, as information becomes available
permitting reasonable estimates to be made, and to reflect new and changing
facts.
At September 30, 1996, the corporation had established environmental
remediation accruals in the amount of $324 million. These accruals have two
components, estimated future expenditures for site investigation/cleanup and
estimated future expenditures for closure/postclosure activities. In addition,
the corporation had environmental loss contingencies of $161 million.
The corporation has sole responsibility for the remediation of approximately
half of its environmental sites. These sites are well advanced in the
investigation/cleanup stage. The corporation's environmental accruals at
September 30, 1996 included $244 million for these sites, of which
$113 million was for estimated future expenditures for site
investigation/cleanup and $131 million was for estimated future expenditures
for closure/postclosure activities. In addition, $75 million of the
corporation's environmental loss contingencies related to these sites. The
site with the largest total potential cost to the corporation is a
non-operating site. Of the above accruals, this site accounted for
$33 million, of which $19 million was for estimated future expenditures for
site investigation/cleanup and $14 million was for estimated future
expenditures for closure/postclosure activities. In addition, $23 million of
the above environmental loss contingencies related to this site.
The corporation does not have sole responsibility at the remainder of its
environmental sites. All of these sites are in the investigation/cleanup
stage. The corporation's environmental accruals at September 30, 1996
included $80 million for estimated future expenditures for site
investigation/cleanup at these sites. In addition, $86 million of the
corporation's environmental loss contingencies related to these sites. The
largest two of these sites are also non-operating sites. Of the above
accruals, these sites accounted for $23 million for estimated future
expenditures for site investigation/cleanup. In addition, $27 million of the
above environmental loss contingencies related to these sites.
In 1995, worldwide expenses of continuing operations related to environmental
protection for compliance with Federal, state and local laws regulating solid
and hazardous wastes and discharge of materials to air and water, as well as
for waste site remedial activities, totaled $138 million. Expenses in 1994
and 1993 were $153 million and $149 million, respectively. While estimates
of the costs of environmental protection for 1996 are necessarily imprecise,
the corporation estimates that the level of these expenses will decline
somewhat as the result of favorable experience associated with remedial
activities.
In 1995, the corporation and two Kuwaiti corporations formed Equate
Petrochemical Company, a joint venture for development of a world-scale
petrochemical complex in Kuwait. The cost of design, construction and
initial working capital is expected to approximate $2 billion by July 1997,
the planned start-up date. As of September 30, 1996, the corporation's
investment in Equate was approximately $126 million, representing its
45 percent equity investment in Equate. The corporation anticipates making
an additional investment of $12 million by early 1997.
By September 30, 1996, Equate had completed its long-term financing
arrangements for construction and operating funds. The corporation has
agreed to severally guarantee 45 percent (approximately $608 million at
September 30, 1996) of Equate's debt and working capital financing needs
until certain completion tests and certain minimum sales volume targets are
achieved; the guarantee is expected to ultimately decline to approximately
$54 million. The corporation has also pledged its shares in Equate as
security for Equate's debt. The corporation has political risk insurance
coverage for substantially all of its guarantee of Equate's debt and its
equity investment. During the month of October, Equate drew down
$600 million under its debt facilities, and utilized a portion to repay
previously outstanding borrowings. The debt is expected to reach its maximum
level by July 1997.
The corporation had additional contingent obligations at September 30, 1996
of $62 million, principally related to guarantees of debt, obligations
assumed by purchasers of UCC facilities for which UCC is primarily liable,
discounted receivables from customers and performance agreements.
The corporation is one of a number of defendants named in approximately
4,400 lawsuits, some of which have more than one plaintiff, involving
silicone breast implants. The corporation was not a manufacturer of breast
implants but did supply generic bulk silicone materials to certain
manufacturers. Also, the corporation in 1990 acquired and in 1992 divested
the stock of a small specialty silicones company that, among other things,
supplied silicone gel intermediates and silicone dispersions for breast
implants. In 1993, most of the suits that were brought in Federal courts
were consolidated for pre-trial purposes in the United States District
Court, Northern District of Alabama. In 1994, the corporation
provisionally joined a multi-billion dollar settlement of the claims
consolidated in that Court.
The District Court later determined that the total amount of current claims
likely to be approved for payment under the original settlement schedule
would substantially exceed the funds available. Consequently, the defendants
and the Plaintiffs' Negotiating Committee, at the request of the court,
initiated negotiations to reconsider the structure and funding of the
settlement. Subsequently, certain defendants, including the corporation,
proposed, and the court approved, a revised settlement program. While the
corporation cannot predict the number of claimants who will participate in
the settlement, based on sample data prepared under supervision of the court,
the corporation estimates that its maximum expenditures under the revised
agreement should not exceed $100 million prior to insurance recovery.
Although insurance coverage is subject to issues as to scope and application
of policies, retention limits, exclusions and policy limits, and the insurers
have reserved their right to deny coverage, the corporation believes that
after probable insurance recoveries neither the settlement nor litigation
outside the settlement will have a material adverse effect on the
consolidated financial position of the corporation.
In addition to the above, the corporation and its consolidated subsidiaries
are involved in a number of legal proceedings and claims with both private
and governmental parties. These cover a wide range of matters including, but
not limited to: product liability; governmental regulatory proceedings;
health, safety and environmental matters; employment; patents; contracts and
taxes. In some of these legal proceedings and claims, the remedies that may
be sought or damages claimed is substantial.
The corporation has recorded nonenvironmental litigation accruals of
$216 million, and related insurance recovery receivables of $134 million,
resulting in net before-tax charges of $82 million for nonenvironmental
litigation. At September 30, 1996, the corporation had nonenvironmental
litigation loss contingencies of $53 million.
While it is impossible at this time to determine with certainty the ultimate
outcome of any legal proceedings and claims referred to in this note,
management believes that adequate provisions have been made for probable
losses with respect thereto and that such ultimate outcome, after provisions
therefor, will not have a material adverse effect on the consolidated
financial position of the corporation but could have a material effect on
consolidated results of operations in a given quarter or year. Should any
losses be sustained in connection with any of such legal proceedings and
claims, in excess of provisions therefor, they will be charged to income in
the future.
6. Long-Term Debt
On October 2, 1996 the corporation issued $200 million of 7.75 percent
debentures maturing in 2096. The maturity of the debentures may be shortened
under certain circumstances in order to preserve the deductibility of the
interest payments for Federal income tax purposes.
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Overview
The corporation reported third quarter 1996 net income available to common
stockholders of $159 million, or $1.08 per share, fully diluted ($1.19 per
share, primary). For the first nine months of 1996 net income available to
common stockholders was $484 million, or $3.20 per share, fully diluted ($3.52
per share, primary).
For the corresponding quarter in 1995, the corporation reported earnings of
$275 million, or $1.77 per share, fully diluted ($1.96 per share, primary).
For the first nine months of 1995, net income available to common stockholders
was $728 million, or $4.61 per share, fully diluted ($5.11 per share,
primary).
The corporation's earnings for the quarter ending September 30, 1996 were
affected by higher feedstock costs and lower average selling prices as
compared to those of the corresponding prior year quarter. Earnings for the
nine month period ending September 30, 1996 were further impacted by weather-
related problems that affected first quarter operations. As a result, third
quarter and nine month margins were lower than those of the comparable periods
of 1995. Increased volumes in both business segments served to mitigate the
impact of these declining margins.
Specialties & Intermediates operating profit in the fourth quarter of 1996 is
anticipated to decrease somewhat from third quarter 1996 levels because of
normal seasonal weakness in demand, primarily in the coatings area, and the
Basic Chemicals & Polymers segment results are expected to be impacted
adversely in the fourth quarter, mainly by increasing average feedstock costs.
Results of Operations
Increased volumes in the current year were partially offset by a decline in
average selling prices, resulting in a sales increase of 2.9 percent in the
third quarter and 2.4 percent in the first nine months of 1996 compared to the
same periods in 1995. Third quarter volumes increased 10.9 percent versus the
comparable 1995 period, while volumes for the first nine months of 1996
increased by 10.1 percent versus the first nine months of 1995. Average
selling prices declined by 7.3 percent and 6.9 percent for the three and nine
month periods, respectively.
Increasing feedstock cost coupled with the declines in average selling prices
caused the corporation's margins to decline from similar periods in the prior
year. The corporation's variable margin for the third quarter of 1996 was
43.0 percent, compared to 48.5 percent in the third quarter of 1995. For the
first nine months of 1996, variable margin was 44.5 percent as opposed to
48.2 percent in the same period last year. Gross margin (variable margin less
fixed manufacturing and distribution costs) declined to 25.6 percent for the
third quarter of 1996 from 30.6 percent for the third quarter of 1995, and
declined to 26.2 percent for the nine months ending September 30, 1996 from
30.1 percent for the nine months ending September 30, 1995. Fixed
manufacturing and distribution costs remained stable in the third quarter, and
increased 3.2 percent in the first nine months of 1996, compared to the same
periods of 1995. The increase in the nine months ended September 30, 1996
versus the same period of 1995 is primarily due to the acquisition of Shell
Oil Company's polypropylene assets and business.
Industry Segments
The company's operations are classified into two main business segments,
Specialties & Intermediates and Basic Chemicals & Polymers. The Specialties &
Intermediates segment includes the corporation's specialty chemicals and
specialty polymers product lines, licensing, solvents and chemical
intermediates. The Basic Chemicals & Polymers segment includes the
corporation's ethylene and propylene manufacturing operations as well as the
production of first level ethylene and propylene derivatives - polyethylene,
ethylene oxide/glycol and polypropylene. The corporation's non-core
operations and financial transactions are included in "Other".
Information about the corporation's operations in its business segments for
the third quarter and nine month periods of 1996 and 1995 follows. Sales of
the Basic Chemicals & Polymers segment include intersegment sales, principally
ethylene oxide, which are made at the estimated market value of the products
transferred. Operating profit represents income before interest expense and
the provision for income taxes.
Quarter ended Nine Months ended
September 30, September 30,
Millions of dollars 1996 1995 1996 1995
Sales
Specialties & Intermediates $1,055 $1,014 $3,241 $3,117
Basic Chemicals & Polymers 552 565 1,598 1,590
Intersegment Eliminations (69) (84) (241) (218)
Total $1,538 $1,495 $4,598 $4,489
Operating Profit
Specialties & Intermediates $ 202 $ 115 $ 585 $ 532
Basic Chemicals & Polymers 40 121 145 329
Other - 162 16 186
Total $ 242 $ 398 $ 746 $1,047
Quarter ended Nine Months ended
September 30, September 30,
Millions of dollars 1996 1995 1996 1995
Depreciation and Amortization
Specialties & Intermediates $ 50 $ 45 $ 144 $ 145
Basic Chemicals & Polymers 31 27 91 82
Total $ 81 $ 72 $ 235 $ 227
Capital Expenditures
Specialties & Intermediates $ 121 $ 114 $ 387 $ 266
Basic Chemicals & Polymers 47 39 144 98
Total $ 168 $ 153 $ 531 $ 364
Sales of the Specialties & Intermediates segment increased 4.0 percent to
$1,055 million in the third quarter of 1996 over that of 1995, and increased
4.0 percent to $3,241 million in the first nine months of 1996 compared to the
first nine months of 1995. Operating profit for the third quarter of 1996 was
$202 million, as compared to $115 million for the same quarter of 1995;
operating profit was $585 million for the nine months ended September 30,
1996, versus $532 million for the nine months ended September 30, 1995.
Included in operating profit for 1995 were a $48 million charge for
postemployment benefits in the third quarter and a $12 million increase in
depreciation expense related to a reduction in the depreciable lives of
certain computer equipment in the nine month period. For the three and nine
month periods ended September 30, 1996, this segment benefited from an
11.3 percent and 8.5 percent increase in volume, respectively, compared to
similar periods in 1995, and experienced a decline in average selling prices
of 6.7 percent and 4.3 percent, respectively.
Sales of the Basic Chemicals & Polymers segment declined 2.3 percent to
$552 million in the third quarter of 1996 versus that of 1995, and increased
0.5 percent to $1,598 million in the nine months ended September 30, 1996
versus the comparable period of 1995. Operating profit for the third quarter
of 1996 declined to $40 million from $121 million for the third quarter of
1995, which included a $20 million charge for postemployment benefits, and
declined on a year-to-date basis to $145 million from $329 million in the
corresponding period of the prior year. This decline reflects the combination
of weak pricing for ethylene glycol and the rapid rise in feedstock costs,
partly offset by an improvement in polyethylene prices.
Selling, administrative and other expenses were $80 million and $239 million
in the three and nine month periods of 1996, respectively, compared to
$148 million and $306 million in the same periods of 1995. Excluding a
$68 million charge for postemployment benefits recognized in the third quarter
of 1995, selling, administrative and other expenses were essentially unchanged
for both periods.
Partnership income increased $17 million in the third quarter of 1996,
compared to the same quarter of 1995, primarily as the result of improved
catalyst sales by UOP to the petroleum refinery industry. Partnership income
declined $15 million in the first nine months of 1996 versus 1995 as a result
of a decline in the earnings of Petromont due to lower polyethylene prices and
higher feedstock costs and the elimination of the earnings of the
polypropylene partnership with Shell Oil Company, which was acquired in
January 1996 and is now included in consolidated earnings, partially offset by
UOP's increased earnings.
Other income - net for the first nine months of 1995 included the following
items: a $381 million gain on the corporation's sale of its equity interest
in UCAR, of which $161 million was recognized in the third quarter, and a non-
cash charge of $191 million for future lease payments on unused office space,
primarily at the corporation's Danbury headquarters.
Interest expense declined by $5 million to $18 million in the quarter ended
September 30, 1996 versus the comparable 1995 quarter, and declined $9 million
to $55 million in the first nine months of 1996 versus the same period of
1995, due to an increase in capitalized interest associated with the
corporation's increased capital program.
Income from corporate investments carried at equity declined to breakeven in
the third quarter of 1996 from $24 million in the third quarter of 1995, and
to a loss of $6 million for the first nine months of 1996 from income of
$55 million in the first nine months of 1995, due to a decline in the earnings
of Polimeri Europa as the result of increased raw material prices and
decreased polyethylene selling prices, and the recognition by Equate
Petrochemical Company of preliminary operating expenses, which will continue
until plant start-up in mid-1997.
Future expenses related to environmental protection for compliance with
Federal, state and local laws regulating solid and hazardous wastes and
discharge of materials to air and water, as well as for waste site remedial
activities, are expected to decline somewhat as the result of favorable
experience associated with remedial activities. The reliability and precision
of the loss estimates are affected by numerous factors, such as different
stages of site evaluation, the allocation of responsibility among potentially
responsible parties and the assertion of additional claims. The corporation's
environmental exposures are discussed in more detail in the Commitments and
Contingencies footnote to the financial statements on pages 8 through 10 of
this report on Form 10-Q.
The corporation continues to be named as one of a number of defendants in
lawsuits, some of which have more than one plaintiff, involving silicone gel
breast implants. The corporation supplied bulk silicone materials to certain
companies that at various times were involved in the manufacture of breast
implants. These cases are discussed in more detail in the "Commitments and
Contingencies" footnote to the financial statements on pages 8 through 10 of
this report on Form 10-Q.
Financial Condition - September 30, 1996
Cash flow from operations was $664 million for the first nine months of 1996,
compared to $527 million for the comparable period of 1995. Decreased
earnings in the first nine months of 1996 versus the comparable period of 1995
were offset by lower working capital requirements as well as reduced tax
payments. Net gains on investing transactions were higher for the nine months
ended September 30, 1995 because of the $381 million gain on the sale of the
corporation's equity interest in UCAR International Inc. Other noncash
charges of $183 million in the first nine months of 1995 included a
$191 million charge for future lease payments on unused office space and a
$68 million charge for postemployment benefits.
Cash flow used for investing totaled $785 million and $154 million for the
first nine months of 1996 and 1995, respectively. In the first nine months of
1996, the corporation purchased the polypropylene assets and business of Shell
Oil Company and 95 percent of the outstanding shares of Companhia
Alcoolquimica Nacional, a Brazilian producer of vinyl acetate monomer.
Investments and acquisitions in the prior year's first nine months included
the acquisition of the ethylene oxide derivatives businesses of ICI and a
50 percent equity interest in Polimeri Europa, while sale of investments
reflected the sale of the corporation's 50 percent equity interest in
UCAR International Inc.
Capital expenditures increased to $531 million in the first nine months of
1996 in comparison to $364 million for the comparable period of 1995. Major
1996 projects include an ethylene propylene rubber project at Seadrift, Tex.,
within the Specialties & Intermediates Segment; a cogeneration facility at
Taft, La., within both business segments; and an upgrade to the information
technology infrastructure, which involves all segments.
Cash flow used for financing in the first nine months of 1996 was
$216 million, as compared to cash flow provided from financing of $15 million
in the comparable 1995 period. The 1996 period included net common stock
repurchases of $368 million under the existing common stock repurchase
program, while net common stock repurchases during the 1995 period totaled
$275 million. For the nine month period ended September 30, 1996 the
corporation purchased approximately 11.4 million shares of common stock for
$483 million. Since 1993, the corporation has purchased 40.8 million shares
of common stock for $1.315 billion. On July 24, 1996, the corporation's board
of directors authorized an increase of 10 million in the number of shares that
may be repurchased under the existing common stock repurchase program to a
total of 50 million shares from the inception of the program. The corporation
intends to acquire additional shares from time to time at prevailing market
rates consistent with the combination of corporate cash flow and market
conditions. Cash dividends to common stockholders amounted to $83 million and
$87 million for the nine month periods ended September 30, 1996 and 1995,
respectively. In the first nine months of 1995, the corporation completed a
$400 million, two-part public offering of debt securities which was used in
part to refinance existing short term debt.
On October 2, 1996 the corporation issued $200 million of 7.75 percent
debentures maturing in 2096, the proceeds of which were used to refinance
existing short term debt.
At September 30, 1996, there were no outstanding borrowings under the existing
bank credit agreement aggregating $1 billion.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 5 to the corporation's condensed consolidated financial
statements on pages 8 through 10 of this 10-Q Report.
In June 1991 the corporation registered with the U.S. Environmental
Protection Agency ("EPA") to participate in a compliance audit
program to determine compliance under Section 8(e) of the Toxic
Substances Control Act. On October 3, 1996, the EPA Environmental
Appeals Board approved a settlement of this matter pursuant to which
the corporation paid a stipulated penalty of $1 million.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are filed as part of this report:
10.1 - Completion Guarantee dated September 15, 1996 between
Petrochemical Industries Company K.S.C. and Union
Carbide Corporation as Guarantors, National Bank of
Kuwait S.A.K. as Intercreditor Agent, and Citicorp
Trustee Company Limited as Debt Trustee.
10.2 - Definitions Agreement dated September 15, 1996
between Equate Petrochemical Co. K.S.C. (Closed) as
the Company, Petrochemical Industries Company
K.S.C., Union Carbide Corporation as the Sponsors,
National Bank of Kuwait S.A.K. as Intercreditor
Agent and Project Assets Security Trustee, and
Citicorp Trustee Company Limited as Debt Trustee.
11 - Computation of Earnings Per Share
27 - Financial Data Schedule.
(b) The corporation's Form 8-K dated October 2, 1996, contained
the legal opinion of Cahill Gordon & Reindel regarding the
issuance of $200 million of 7.75 percent debentures maturing
in 2096.
SIGNATURE
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.
UNION CARBIDE CORPORATION
(Registrant)
Date: November 14, 1996 By: /s/John K. Wulff
JOHN K. WULFF
Vice-President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Page
No. Exhibit No.
10.1 Completion Guarantee dated September 15, 1996
between Petrochemical Industries Company K.S.C.
and Union Carbide Corporation as Guarantors,
National Bank of Kuwait S.A.K. as Intercreditor
Agent, and Citicorp Trustee Company Limited as
Debt Trustee. 19
10.2 Definitions Agreement dated September 15, 1996
between Equate Petrochemical Co. K.S.C. (Closed)
as the Company, Petrochemical Industries Company
K.S.C., Union Carbide Corporation as the Sponsors,
National Bank of Kuwait S.A.K. as Intercreditor
Agent and Project Assets Security Trustee, and
Citicorp Trustee Company Limited as Debt Trustee. 34
11 Computation of Earnings Per Share 85
27 Financial Data Schedule 86
EXHIBIT 10.1
CONFORMED COPY
COMPLETION GUARANTEE
between
PETROCHEMICAL INDUSTRIES COMPANY K.S.C.
and
UNION CARBIDE CORPORATION
as Guarantors
NATIONAL BANK OF KUWAIT S.A.K.
as Intercreditor Agent
and
CITICORP TRUSTEE COMPANY LIMITED
as Debt Trustee
Clifford Chance
London
CONTENTS
Clause Page No.
1. Interpretation................................................... 2
2. Guarantee........................................................ 2
3. Completion Date.................................................. 3
4. Termination of Guarantee on Completion........................... 3
5. Preservation of Rights........................................... 5
6. Payments......................................................... 6
7. Suspense Account................................................. 7
8. Taxes............................................................ 7
9. Tax Receipts..................................................... 7
10. Continuing Security.............................................. 8
11. Assignment and Benefit........................................... 8
12. Amendments....................................................... 8
13. Notices.......................................................... 8
14. Remedies and Waivers............................................. 9
15. Partial Invalidity............................................... 9
16. Law.............................................................. 9
17. Jurisdiction..................................................... 9
SCHEDULE
Form of Letter of Credit................................................ 11
THIS AGREEMENT is made on 15 day of September, 1996
BETWEEN:
(1) PETROCHEMICAL INDUSTRIES COMPANY K.S.C. ("PIC");
(2) UNION CARBIDE CORPORATION ("UCC") (PIC and UCC being hereinafter
referred to individually as a "Guarantor" and together as the "Guarantors");
(3) NATIONAL BANK OF KUWAIT S.A.K. (in its capacity as intercreditor agent
under the Common Terms Agreement for and on behalf of the Banks, the
"Intercreditor Agent"); and
(4) CITICORP TRUSTEE COMPANY LIMITED (in its capacity as debt trustee under
the Security Trust Agreement for and on behalf of the Primary Beneficiaries,
the "Debt Trustee").
WHEREAS:
(A) The Term Loan Banks have, on the terms and subject to the conditions
therein contained, agreed to lend money to the Company for the purposes of the
Project pursuant to the Term Loan Facility Agreement.
(B) The Lessor has, on the terms and subject to the conditions therein
contained, agreed to purchase certain assets from the Company pursuant to the
Sale Agreement and to lease the same to the Company for the purposes of the
Project pursuant to the Lease.
(C) The Working Capital Banks have, on the terms and subject to the
conditions therein contained, agreed to lend money to the Company for the
purposes of the Project pursuant to the Working Capital Facility Agreement.
(D) Each of the Guarantors beneficially owns 45 per cent. of the outstanding
common stock in the capital of the Company on the date hereof.
(E) It is a condition of the Term Loan Banks, the Lessor and the Working
Capital Banks agreeing to make available, respectively, the Term Loan
Facility, the Lease Facility and the Working Capital Facility that the
Guarantors execute this Agreement.
(F) In consideration of the foregoing, the Guarantors have each agreed to
enter into this Agreement on the terms herein contained.
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
1.1 Capitalised terms shall bear the meaning ascribed thereto in Section 1
of the Schedule to the definitions agreement dated of even date herewith
between Equate Petrochemical Co. K.S.C. (Closed), UCC, PIC, the Intercreditor
Agent and the Debt Trustee (as the same may be amended from time to time by
the parties thereto in accordance with the terms thereof, the "Definitions
Agreement").
1.2 The rules of construction set out in Section 2 of the Schedule to the
Definitions Agreement shall be applied in construing various terms and
references used herein.
2. Guarantee
2.1 Subject to the further provisions of this Agreement, each Guarantor
hereby irrevocably and unconditionally:
(i) guarantees to the Primary Beneficiaries the due and punctual
payment and performance of all the Guaranteed Obligations and promises to pay
to the Debt Trustee immediately on demand all amounts from time to time due
and payable (but unpaid) by the Company in respect thereof;
(ii) agrees as a primary obligation to indemnify the Primary
Beneficiaries from time to time immediately on demand from and against any
loss or expense incurred by any or all of the Primary Beneficiaries as a
result of any of the Guaranteed Obligations being or becoming void, voidable
or unenforceable for any reason whatsoever, whether or not known to any of the
Primary Beneficiaries, the amount of such loss or expense being the amount
which any or all of the Primary Beneficiaries would otherwise have been
entitled to recover from the Company in respect of the Guaranteed Obligations;
and
(iii) agrees as a primary obligation to indemnify the Primary
Beneficiaries from time to time immediately on demand from and against any
loss or expense incurred by any or all of them as a result of any breach by
such Guarantor of its obligations under Clause 3,
Provided that the maximum combined liability of the Guarantors under Clause
2.1(i) or Clause 2.1(ii) in respect of any sum becoming payable to any
Approved Hedging Counterparty pursuant to any Approved Hedging Agreement shall
be subject to such caps as the Company, the Guarantors and such Approved
Hedging Counterparty may have agreed in writing prior to the execution of such
Approved Hedging Agreement.
2.2 Each Guarantor's obligations under Clause 2.1 shall be limited to its
Respective Percentage of any amount constituting a Guaranteed Obligation which
is not paid when due or, as the case may be, of any such amount becoming void,
voidable or unenforceable or of any loss or expense incurred by the relevant
Primary Beneficiaries.
2.3 The obligations of the Guarantors under this Agreement shall be several
and not joint. Neither Guarantor shall be responsible for any of the
obligations of the other Guarantor hereunder resulting from the latter's
failure to discharge any such obligation.
2.4 The Debt Trustee agrees that if it makes demand on one Guarantor in
relation to any amount payable by such Guarantor pursuant to this Agreement,
it shall (subject to Clause 4) contemporaneously make a demand on the other
Guarantor for any amount then payable by such other Guarantor pursuant to this
Agreement, but no failure by the Debt Trustee to make demand of a Guarantor
pursuant to this Clause 2.4 shall limit or otherwise affect the obligations of
the other Guarantor hereunder to make immediate payment of the amount demanded
of it hereunder.
2.5 Any demand by the Debt Trustee under this Agreement shall be accompanied
by a certificate from the Debt Trustee certifying the amount of the Guaranteed
Obligations and/or any loss or expense contemplated by Clause 2.1(iii) to
which such demand relates and such certificate shall, in the absence of
manifest error, be conclusive evidence of such amount. Except as expressly
provided herein, each Guarantor hereby waives all requirements as to
diligence, presentment, demand of payment, protest or notice of any kind with
respect to its payment obligations hereunder.
2.6 The Debt Trustee may make multiple demands under this Agreement. Only
the Debt Trustee may make demands under this Agreement.
3. Completion Date
The Guarantors hereby covenant and undertake with the Primary
Beneficiaries to procure that the Plant Completion Tests are satisfied on or
prior to 30 September 2000 (including, without limitation, and to the extent
necessary, by making Extraordinary Shareholder Contributions in an amount
equal to any Cost Overruns).
4. Termination of Guarantee on Completion
4.1 Each Guarantor's obligations under Clause 2 and Clause 3 shall terminate
on:
(i) the date on which the Debt Trustee determines and notifies the
Guarantors, the Company and all Primary Beneficiaries that the Primary
Beneficiary Release Date has occurred; or
(ii) the first date falling after the date (the "Relevant Date") upon
which all the Completion Conditions shall have been satisfied, as determined
and notified to the Company and the Guarantors by the Intercreditor Agent
acting in good faith following consultation, with the Technical Bank, the
Technical Consultant, the Insurance Bank, the Insurance Consultant, the
Modelling Bank, the Market Consultant and the Debt Trustee (and the
Intercreditor Agent agrees to enter into such consultations with a view to
making such determination and giving such notification from time to time upon
the request of the Guarantors), upon which:
(a) any Guaranteed Obligations which remain outstanding on the
Relevant Date; and
(b) any amounts demanded by the Debt Trustee on or prior to the
Relevant Date and payable (but unpaid) by such Guarantor pursuant to the terms
hereof,
(each as notified to the Guarantors by the Debt Trustee within
fourteen (14) days of the Relevant Date), are satisfied (and, for the
avoidance of doubt, with effect from the Relevant Date the liability of the
Guarantors shall be limited to the amounts set out in paragraphs (a) and (b)
of this Clause 4.1).
4.2 If, on any date (the "Financial Test Date"):
(i) the Relevant Date would have occurred but for failure to satisfy
the test set out in paragraph (v) of the definition of Financial Test (and,
for the avoidance of doubt, all other Financial Tests and all other Completion
Conditions had been satisfied on or before such date); and
(ii) the test set out in paragraph (v) of the definition of Financial
Test would have been satisfied if UCC had (a) not been released from its
obligation to provide a Letter of Credit in accordance with Clause 9 of the
Sponsor Support Agreement by virtue of becoming an Expropriated Sponsor and
(b) provided such Letter of Credit; and
(iii) PIC provides a Letter of Credit in an amount equal to its
Respective Percentage of the ASC Facility Amount as required by the Sponsor
Support Agreement,
(as determined and notified to the Company and the Guarantors by the
Intercreditor Agent acting in good faith following consultation, to the extent
applicable, with the Technical Bank, the Technical Consultant, the Insurance
Bank, the Insurance Consultant, the Modelling Bank, the Marketing Consultant
and the Debt Trustee) then on the first date thereafter upon which:
(a) any Guaranteed Obligations which remain outstanding on the
Financial Test Date; and
(b) any amounts demanded by the Debt Trustee on or prior to the
Financial Test Date and payable (but unpaid) by such Guarantor pursuant to the
terms hereof,
(each as notified to the Guarantor by the Debt Trustee within fourteen
(14) days of the Financial Test Date) are satisfied:
(x) (without prejudice to UCC's continuing obligations hereunder) PIC
shall be released from its several obligations under Clauses 2 and 3 (and, for
the avoidance of doubt, with effect from the Financial Test Date, the
liability of PIC shall be limited to its Respective Percentage of the amounts
set out in paragraphs (a) and (b) of this Clause 4.2); and
(y) UCC shall have the right, by arranging for a standby letter of
credit to be issued in accordance with Clauses 4.2 and 4.3 supporting its
obligations hereunder, to limit its continuing obligations under Clause 2 and
Clause 3 (other than in respect of the amounts set forth in (a) and (b) above)
to $54,000,000.
4.3 The standby letter of credit issued in accordance with Clause 4.2(y)
above shall:
(i) be opened and maintained in favour of the Debt Trustee;
(ii) be issued and confirmed by banks acceptable to the Majority Term
Banks with long term credit ratings of not less than A (or any equivalent
replacement thereof) by Standard & Poor's Corporation (or the equivalent
thereof by Moody's Investor Services, Inc.);
(iii) be drawable on demand by the Debt Trustee and shall be drawn, as
between UCC and the Debt Trustee on any day following the day on which an
amount is required to be paid by UCC hereunder, subject to the rights of the
Debt Trustee under Clause 4.4;
(iv) have available for drawing, on one or more occasions, an aggregate
sum of $54,000,000;
(v) have an initial expiry date falling no earlier than two years
after the date of issue; and
(vi) be substantially in the form set out in the Schedule and otherwise
generally on terms and conditions reasonably acceptable to the Majority Term
Banks.
4.4 If:
(i) any standby letter of credit issued in accordance with Clause
4.2(y) is scheduled to expire before the full amount thereof has been drawn
and is not replaced by one or more alternative standby letters of credit
(which satisfy the requirements set out in Clause 4.3) at least two months
prior to such expiry date; or
(ii) if the long term credit rating of any bank by which such letter of
credit is issued or confirmed falls below BBB+ (or any equivalent replacement
thereof) by Standard & Poor's Corporation (or the equivalent thereof by
Moody's Investors Services, Inc.) and such letter of credit is not replaced by
one or more alternative standby letters of credit (which satisfy the
requirements set out in Clause 4.3) within two months of such date,
then, in either such case, the Debt Trustee may draw the full amount of
such letter of credit and place the funds on deposit as security for UCC's
continuing obligations under this Agreement.
5. Preservation of Rights
5.1 The obligations of each Guarantor herein contained shall be in addition
to and independent of every other security which the Debt Trustee or any other
Primary Beneficiary may at any time hold in respect of any of the Guaranteed
Obligations and may be enforced without the Debt Trustee or any other Primary
Beneficiary first having recourse to any such security and without the Debt
Trustee or any other Primary Beneficiary first taking steps or proceedings
against the Company.
5.2 Neither the obligations of each Guarantor herein contained nor the
rights, powers and remedies conferred in respect of each Guarantor upon the
Debt Trustee or any other Primary Beneficiary by the Finance Documents or by
law shall be discharged, impaired or otherwise affected by:
(i) the winding-up, dissolution, administration or re-organisation of
the Company or any other person, or any change in its status, function,
control or ownership;
(ii) any of the obligations of the Company or any other person under
any of the Finance Documents being or becoming illegal, invalid, unenforceable
or ineffective in any respect;
(iii) time or other indulgence being granted or agreed to be granted to
the Company or any other person in respect of its obligations under any of the
Finance Documents;
(iv) any amendment to, or any variation, waiver or release of, any
obligation of the Company or any other person under any of the Finance
Documents;
(v) any failure to take, or fully to take, any security contemplated
by any of Finance Documents or otherwise agreed to be taken in respect of the
Company's obligations under any of the Finance Documents;
(vi) any failure to realise or fully to realise the value of, or any
release, discharge, exchange or substitution of, any security taken in respect
of the Company's obligations under any of the Finance Documents; or
(vii) any other act (other than repayment of the Guaranteed
Obligations), event or omission which, but for this Clause 5.2, might operate
to discharge, impair or otherwise affect any of the obligations of either
Guarantor herein contained or any of the rights, powers or remedies conferred
upon the Debt Trustee by the Finance Documents or by law.
5.3 Any settlement or discharge given by the Debt Trustee or any other
Primary Beneficiary to either Guarantor in respect of such Guarantor's
obligations hereunder or any other agreement reached between the Debt Trustee
or any other Primary Beneficiary and such Guarantor in relation thereto shall
be, and be deemed always to have been, void if any act on the faith of which
the Debt Trustee or such other Primary Beneficiary gave such Guarantor that
settlement or discharge or entered into that agreement is subsequently avoided
by or in pursuance of any provision of law.
5.4 Neither the Debt Trustee nor any other Primary Beneficiary shall be
obliged before the Debt Trustee may exercise any of the rights, powers or
remedies conferred upon it in respect of either Guarantor hereby or by law:
(i) to make any demand of the Company or any other person;
(ii) to take any action or obtain judgment in any court against the
Company or any other person;
(iii) to make or file any claim or proof in a winding-up or dissolution
of the Company or any other person; or
(iv) to enforce or seek to enforce any security taken in respect of any
of the obligations of the Company under any of the Finance Documents.
6. Payments
6.1 On each date on which this Agreement requires an amount to be paid by a
Guarantor to the Debt Trustee such Guarantor shall make the same available to
the Debt Trustee by payment to such Proceeds Account as the Debt Trustee shall
specify for such purpose. Any amount payable by a Guarantor in relation to a
Guaranteed Obligation pursuant to Clause 2.1(i) or Clause 2.1(ii) shall be
paid in the currency of the amount which the Debt Trustee or any or all of the
Primary Beneficiaries would otherwise have been entitled to recover from the
Company in respect of such Guaranteed Obligation. Any amount payable by a
Guarantor pursuant to Clause 2.1(iii) shall be paid in the currency of the
loss or expense incurred by the Debt Trustee or, as the case may be, any or
all of the Primary Beneficiaries as a result of the breach by such Guarantor
of its obligations under Clause 3. Any payment received by the Debt Trustee
in a currency other than those required to discharge Guaranteed Obligations
shall be converted (unless such sums are to be credited for the time being to
a suspense account) by the Debt Trustee from its existing currency of
denomination into any required currency at the Account Bank's then prevailing
spot rate for the purchase of the required currency with the first mentioned
currency at the office of the Account Bank by which such conversion is made
and, following such conversion, credited to a Proceeds Account.
6.2 All payments required to be made by a Guarantor hereunder shall be
calculated without reference to any set-off or counterclaim and shall be made
free and clear of and without any deduction for or on account of any set-off
or counterclaim.
7. Suspense Account
All amounts received, recovered or realised by the Debt Trustee from a
Guarantor in relation to any Guaranteed Obligation may, in the Debt Trustee's
discretion, be credited to an interest bearing suspense account in the name of
the Debt Trustee and may be held in such account until the Debt Trustee is
satisfied that all Secured Obligations owed to the Primary Beneficiaries have
been paid and discharged in full.
8. Taxes
8.1 Each payment to be made by a Guarantor hereunder shall be made without
set-off or counterclaim and free and clear of any withholdings or deductions
for or on account of any present or future taxes, unless such Guarantor is
compelled by law to make payment subject to taxes. In the latter event, such
Guarantor shall at the same time pay such additional amount as may be
necessary to ensure that the recipient receives a net amount equal to the full
amount which it would have received had payment from such Guarantor not been
subject to any such taxes and shall promptly account to the relevant
authorities for the relevant amount of any such taxes so withheld or deducted.
8.2 Without prejudice to the provisions of Clause 8.1, if any Primary
Beneficiary (or the Debt Trustee or any Agent on its behalf) is required to
make any payment on account of tax on or in relation to any sum received or
receivable hereunder from a Guarantor (including, without limitation, any sum
received or receivable under this Clause 8.2) or any liability in respect of
any such payment is asserted, imposed, levied or assessed against such Primary
Beneficiary (or the Debt Trustee or any Agent on its behalf), such Guarantor
shall, upon demand of the Debt Trustee, indemnify such person against such
payment or liability, together with any interest, penalties and expenses
payable or incurred in connection therewith.
9. Tax Receipts
9.1 If, at any time, either Guarantor is required by law to make any
deduction or withholding from any sum that has become payable by it hereunder,
such Guarantor shall so advise the Debt Trustee not later than the time at
which it is obliged to pay the same.
9.2 If either Guarantor makes any payment hereunder in respect of which it
is required to make any deduction or withholding, it shall pay the full amount
required to be deducted or withheld to the relevant taxation or other
authority within the time allowed for such payment under applicable law and
shall deliver to the Debt Trustee, within ten days after it has made such
payment to the applicable authority, an original receipt (or a certified copy
thereof) issued by such authority or other satisfactory evidence of payment in
respect of the payment to such authority of all amounts so required to be
deducted or withheld.
10. Continuing Security
Subject to Clause 4 hereof, the obligations of each Guarantor herein
contained shall constitute and be continuing obligations notwithstanding any
settlement of account or other matter or thing whatsoever and, in particular
but without limitation, shall not be considered satisfied by any intermediate
payment or satisfaction of all or any of the Guaranteed Obligations and shall
continue in full force and effect until final payment in full of all amounts
owing by the Company in respect of such Guaranteed Obligations.
11. Assignment and Benefit
11.1 None of the Company or the Guarantors may assign, transfer, novate or
dispose of its respective rights or obligations hereunder or any rights
arising by way of subrogation or otherwise as a result of any payments made
hereunder (other than pursuant to the Deed of Subordination).
11.2 The Debt Trustee holds the benefit of this Agreement on trust for the
Primary Beneficiaries. For this purpose, the obligations of each Guarantor
under this Agreement are given by it in favour of the Debt Trustee and each
Primary Beneficiary.
12. Amendments
No amendment, waiver, variation, supplementation or modification in
relation to this Agreement shall be effective unless such amendment, waiver,
variation, supplementation or modification is entered into pursuant to an
instrument in writing signed by all the parties hereto.
13. Notices
13.1 Each communication to be made by any party hereto to any other party
hereto, shall be made in writing but, unless otherwise stated, may be made by
telex, facsimile transmission or letter.
13.2 Any communication or document to be made or delivered by any party
hereto to any other party hereto shall (unless that other person has by
fifteen days' prior written notice to the other parties specified another
address, telex number or facsimile number) be made or delivered to that other
person at the address identified with its signature below, shall be deemed to
have been made or delivered when despatched (in the case of any communication
made by telex or facsimile) or (in the case of any communication made by
letter) when left at that address or (as the case may be) ten days after being
deposited in the post postage prepaid in an envelope addressed to it at that
address Provided that any communication or document to be made or delivered to
the Debt Trustee or the Intercreditor Agent shall be effective only when
received by the Debt Trustee or the Intercreditor Agent and then only if the
same is expressly marked for the attention of the department or officer
identified with the Debt Trustee's or, as the case may be, the Intercreditor
Agent's signature below (or such other department or officer as the Debt
Trustee or the Intercreditor Agent shall from time to time specify for this
purpose).
13.3 Each communication and document made or delivered by any party hereto to
any other party hereto shall be in the English language or accompanied by a
translation thereof into English certified (by an officer of the person making
or delivering the same) as being a true and accurate translation thereof.
14. Remedies and Waivers
No failure to exercise, nor any delay in exercising, on the part of the
Debt Trustee, of any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or remedy
prevent any further or other exercise thereof or the exercise of any other
right or remedy. The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies provided by law.
15. Partial Invalidity
If, at any time, any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions hereof nor
the legality, validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or impaired thereby.
16. Law
This Agreement shall be governed by and construed in accordance with
English law.
17. Jurisdiction
17.1 Each Guarantor irrevocably agrees that the courts of England shall have
jurisdiction to hear and determine any suit, action or proceeding, and to
settle any disputes, which may arise out of or in connection with this
Agreement and, for such purposes, irrevocably submits to the jurisdiction of
such courts.
17.2 UCC irrevocably agrees that the courts of the State of New York and the
courts of the United States of America in New York shall have jurisdiction to
hear and determine any suit, action or proceeding, and to settle any disputes,
which may arise out of or in connection with this Agreement and, for such
purposes, irrevocably submits to the jurisdiction of such courts.
17.3 UCC and (in the case of Clause 17.1 only) PIC irrevocably waives any
objection which it might now or hereafter have to any of the courts referred
to in Clauses 17.1 and 17.2 being nominated as a forum to hear and determine
any suit, action or proceeding, and to settle any disputes, which may arise
out of or in connection with this Agreement and agrees not to claim that any
such court is not a convenient or appropriate forum.
17.4 Each Guarantor agrees that the process by which any suit, action or
proceeding in England is begun may be served on it by being delivered to
Hackwood Secretaries Limited of Barrington House, 59-67 Gresham Street, London
EC2V 7JA or its principal place of business in England from time to time. If
the appointment of the person identified in this Clause 17.4 ceases to be
effective UCC or, as the case may be, PIC shall immediately appoint a further
person in England to accept service of process on its behalf in England and,
failing such appointment within 15 days, the Debt Trustee shall be entitled to
appoint such a person by notice to each Guarantor. Nothing contained herein
shall affect the right to serve process in any other manner permitted by law.
17.5 The submission to the jurisdiction of the courts referred to in Clauses
17.1 and 17.2 shall not (and shall not be construed so as to) limit the right
of the Debt Trustee to take proceedings against either Guarantor in any other
court of competent jurisdiction nor shall the taking of proceedings in any one
or more jurisdictions preclude the taking of proceedings in any other
jurisdiction (whether concurrently or not) if and to the extent permitted by
applicable law.
17.6 Each Guarantor hereby consents generally in respect of any legal action
or proceeding arising out of or in connection with this Agreement to the
giving of any relief or the issue of any process in connection with such
action or proceeding including, without limitation, the making, enforcement or
execution against any property whatsoever (irrespective of its use or intended
use) of any order or judgment which may be made or given in such action or
proceeding.
17.7 To the extent that either Guarantor may in any jurisdiction claim for
itself or its assets immunity from suit, execution, attachment (whether in aid
of execution, before judgment or otherwise) or other legal process and to the
extent that in any such jurisdiction there may be attributed to itself or its
assets such immunity (whether or not claimed), it hereby irrevocably agrees
not to claim and hereby irrevocably waives such immunity to the full extent
permitted by the laws of such jurisdiction and, in particular, to the intent
that in any proceedings taken in New York the foregoing waiver of immunity
shall have effect under and be construed in accordance with the United States
Foreign Sovereign Immunities Act of 1976.
17.8 Each party hereto hereby waives any rights that it may have in any
jurisdiction to trial by jury.
IN WITNESS WHEREOF this Agreement has been duly executed on the date first
written at the start of this Agreement.
SCHEDULE
Form of Letter of Credit
To: [ ] (the "Debt Trustee")
L/C No: [ ]
Date: [ ]
Dear Sirs
Irrevocable Letter of Credit in relation to the Equate Petrochemical Project
issued pursuant to the Completion Guarantee (the "Completion Guarantee") dated
[ ] 1996 between Petrochemical Industries Company K.S.C., Union
Carbide Corporation ("UCC"), the Debt Trustee and National Bank of Kuwait
S.A.K.
1. In this letter the following expressions have the meanings set opposite
them:
"Demand": each written notice of demand by the Debt Trustee in the
form set out in the Appendix.
"Expiry Date": [ ] (as the same may be extended in
accordance with paragraph 6 below).
"Issuing Bank": [ ]
"Issuing Bank's
"Address": [ ]
"Total Sum": $54,000,000 [or in the case of subsequent replacement
L/C's the outstanding amount of UCC's cap]
2. Upon the Issuing Bank receiving a Demand before the Expiry Date, the
Issuing Bank irrevocably and unconditionally (but subject to the remaining
provisions of this letter of credit) agrees to pay to the Debt Trustee the
amount specified in the Demand on the date falling five business days after
the receipt by the Issuing Bank of the Demand or such later date (falling not
more than 30 days after the Expiry Date) as may be specified in the Demand.
3. (a) The aggregate amount payable by the Issuing Bank hereunder shall
not exceed the Total Sum.
(b) Any payment made hereunder shall be made by the Issuing Bank by
direct bank transfer to such account with such bank as may be specified in the
Demand, or in such other manner as may be acceptable to the Debt Trustee in
accordance with the terms of the Demand.
(c) The obligations of the Issuing Bank hereunder shall cease upon the
Expiry Date except in respect of any Demand received by the Issuing Bank
hereunder on or prior to such date.
4. Each Demand shall specifically refer to this Letter of Credit Re Equate
Petrochemical Project No. [ ] and shall be given to the Issuing Bank by
notice in writing by an authorised signatory of the Debt Trustee at the
Issuing Bank's Address (marked for the attention of [ ] or such
other person as may have been notified to the Debt Trustee for this purpose)
with a copy to UCC.
5. This Letter of Credit may be amended only by an instrument in writing
signed on behalf of the Issuing Bank and the Debt Trustee.
6. This Letter of Credit shall be governed by the laws of England and is
subject to the Uniform Customs and Practice for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication Number 500 insofar as
the same are applicable (and, in accordance with the second sentence of
Article 17, the Issuing Bank hereby agrees that if this Letter of Credit
expires during any interruption of business referred to in the first sentence
of such Article, the Issuing Bank shall remain liable to make payment under
this Letter of Credit in respect of any Demand made during such interruption
of business or within 15 business days after it has notified the Debt Trustee
that such interruption has ceased).
Yours faithfully
......................................................
For and on behalf of [Issuing Bank]
APPENDIX TO LETTER OF CREDIT
To: [Issuing Bank] L/C No: [ ]
Copy: [UCC]
Irrevocable Letter of Credit Re Equate Petrochemical Project dated [ ] 199[
] (the "Letter of Credit")
1. Terms defined in the Letter of Credit shall have the same meaning in
this Demand.
2. We refer to the Letter of Credit and hereby notify you that UCC is
required to pay $ [ ] in accordance with Clause 2 or Clause 3 of the
Completion Guarantee.
3. Accordingly we hereby demand payment no later than [ ] of the sum of
$[ ], such sum to be credited to the account no. [ ] in [our] name with [
details].
[Authorised Signatory]
for [Debt Trustee]
Dated [ ]
*
The Guarantors
PETROCHEMICAL INDUSTRIES COMPANY K.S.C.
By: KHALED BUHAMRAH
Address: PO Box 1084
Safat
13011 Kuwait
Telex: 22134/22024
Telefax: (965) 246 0224
UNION CARBIDE CORPORATION
By: JOHN P. YIMOYINES
Address: 39 Old Ridgebury Road
Danbury
CT 06817
USA
Telex:
Telefax: (203) 794 5135
The Intercreditor Agent
NATIONAL BANK OF KUWAIT S.A.K.
By: SHAIKHA AL BAHAR
Address: PO Box 95
13001 Safat Kuwait
Telex: 23226 NATBANK
Telefax: (965) 2431888
The Debt Trustee
CITICORP TRUSTEE COMPANY LIMITED
By: WAGDI RABBATT
Address: Lewisham House
25 Molesworth Street
London
SE13 7EX
Telex: 896581
Telefax: (0181) 2979 224
KP$001$6.25
EXHIBIT 10.2
CONFORMED COPY
DEFINITIONS AGREEMENT
between
EQUATE PETROCHEMICAL CO. K.S.C. (CLOSED)
as the Company
PETROCHEMICAL INDUSTRIES COMPANY K.S.C.
UNION CARBIDE CORPORATION
as the Sponsors
NATIONAL BANK OF KUWAIT S.A.K.
as Intercreditor Agent and Project Assets Security Trustee
and
CITICORP TRUSTEE COMPANY LIMITED
as Debt Trustee
Clifford Chance
London
CONTENTS
Clause Page No.
1. Definitions...................................................... 1
2. Amendments....................................................... 1
3. Succession....................................................... 1
4. Determination of whether UCC has become an Expropriated Sponsor.. 1
5. Governing Law.................................................... 3
6. Jurisdiction..................................................... 3
Schedule: Section 1: Defined Terms
Section 2: Rules of Construction and Interpretation
THIS AGREEMENT is made on 15 day of September 1996
BETWEEN:
(1) EQUATE PETROCHEMICAL CO. K.S.C. (CLOSED) (the "Company");
(2) PETROCHEMICAL INDUSTRIES COMPANY K.S.C. ("PIC");
(3) UNION CARBIDE CORPORATION ("UCC");
(4) NATIONAL BANK OF KUWAIT S.A.K. (in its capacity as intercreditor agent
under the Common Terms Agreement, as defined in the Schedule hereto the
"Intercreditor Agent" and in its capacity as project assets security
trustee under the Security Trust Agreement, as defined in the Schedule
hereto, the "Project Assets Security Trustee"); and
(5) CITICORP TRUSTEE COMPANY LIMITED (in its capacity as debt trustee under
the Security Trust Agreement, as defined in the Schedule hereto, the
"Debt Trustee").
NOW IT IS HEREBY AGREED as follows:
1. Definitions
Unless otherwise expressly defined or construed therein, each of the
defined terms and rules of construction and interpretation set out in
the Schedule hereto shall apply in relation to each Finance Document (as
defined in the Schedule hereto) in which such defined terms and rules of
construction and interpretation appear.
2. Amendments
2.1 The Intercreditor Agent and the Trustees may, in accordance with the
relevant provisions of the Common Terms Agreement, agree with the
Company and the Sponsors any amendment to any of the defined terms and
rules of construction and interpretation set out in the Schedule.
2.2 All amendments to the provisions of this Agreement and the Schedule
shall be in writing, signed by the Intercreditor Agent, the Trustees,
the Company and the Sponsors.
3. Succession
3.1 This Agreement shall enure to the benefit of, and be binding upon, the
parties hereto and each of their respective successors, transferees and
assigns.
4. Determination of whether UCC has become an Expropriated Sponsor
4.1 UCC shall promptly after becoming aware of the same notify the
Intercreditor Agent (or, after the occurrence of an Event of Default
which has not been waived by the Majority Term Banks or remedied, the
Debt Trustee) of any facts or circumstances which could result in UCC
becoming an Expropriated Sponsor. If UCC is of the view that it has
become an Expropriated Sponsor it shall notify the Intercreditor Agent
(or, after the occurrence of an Event of Default which has not been
waived by the Majority Term Banks or remedied, the Debt Trustee) and if
the Intercreditor Agent (or, as the case may be, the Debt Trustee),
after consultation with the Term Banks, agrees in writing with UCC's
view then UCC shall be an Expropriated Sponsor for all purposes of the
Finance Documents. If the Intercreditor Agent (or, as the case may be,
the Debt Trustee), does not agree with UCC's view at the end of the
period of 15 days following the notification in the preceding sentence
then the matter shall be referred to arbitration and determined in
accordance with Clause 4.2.
4.2 (a) Arbitration of Disputes as to whether UCC has become an
Expropriated Sponsor
Any disagreement, dispute or controversy relating to whether UCC
has become an Expropriated Sponsor shall be settled exclusively
and finally by arbitration.
(b) Arbitration Rules
Except as set forth otherwise herein, the arbitration shall be
conducted in accordance with UNCITRAL Arbitration Rules as in
effect at the effective date of this Agreement, and such
arbitration shall be administered by the London Court of
International Arbitration ("LCIA").
(c) Situs and language
The place of the arbitration shall be London, England and the
language used for all purposes in connection with the arbitration
shall be English.
(d) Commencement of arbitration
Either UCC or the Intercreditor Agent (or, after the occurrence of
an Event of Default which has not been waived by the Majority Term
Banks or remedied, the Debt Trustee) may initiate the arbitration
at any time by the service of a notice of arbitration on the other
party. The arbitration shall be deemed to commence on the date on
which the notice of arbitration is received by the relevant
addressee.
(e) Number, appointment and qualifications of the arbitrators
The arbitration panel ("tribunal") shall consist of three
arbitrators, one chosen by each of UCC and the Intercreditor Agent
(or, as the case may be, the Debt Trustee) and the third chosen by
the two party-appointed arbitrators. The third arbitrator shall
act as the presiding arbitrator and shall not be resident in or a
citizen of Kuwait or the United States of America. Each party
shall have ten (10) days from the date of the commencement of the
arbitration to select its party-appointed arbitrator. The third
arbitrator shall be chosen as follows: the party-appointed
arbitrators shall attempt to agree on the selection of the third
arbitrator. If no agreement is reached within ten (10) days after
the appointment of the two arbitrators, the two party-appointed
arbitrators shall each exchange a list of three (3) candidates.
Within ten (10) days thereafter, each party-appointed arbitrator
shall strike two names from the other's list. The third
arbitrator shall be selected from the remaining two names by
drawing of lots. If, for any reason, the third arbitrator is not
chosen within the required time frame, the LCIA shall act as
appointing authority for such arbitrator.
The three arbitrators shall be disinterested in the outcome of the
arbitration, shall not in any way be connected with UCC or the
Intercreditor Agent (or, as the case may be, the Debt Trustee) and
each shall be one of the following:
(i) a present, former or retired officer, underwriter or
in-house counsel with an insurance company,
reinsurance company, Lloyd's syndicate, multilateral
or bilateral agency or other government or quasi-
government agency (including without limitation, OPIC,
MIGA or any export credit agency) which, as a
substantial part of its business, underwrites, issues
or provides political risk insurance or reinsurance;
or
(ii) a present, former or retired officer or risk manager
of a company which procures or purchases political
risk insurance, or an individual presently or formerly
with such company who as part of his employment
responsibilities is or was involved in the procurement
of political risk insurance or the submission or
handling of claims connected with policies or
contracts of political risk insurance; or
(iii) an active or retired attorney or judge with more than
five (5) years' experience in the field of insurance
or reinsurance as a substantial part of his/her
practice or professional responsibilities; or
(iv) an active or retired attorney or judge with more than
five (5) years' experience in public international law
as a substantial part of his/her practice or
professional responsibilities.
(f) Statement of Claim and Defence
The party initiating the arbitration ("Claimant") shall submit a
Statement of Claim within thirty (30) working days after its
submission of the Notice of Arbitration. The other party
("Respondent") shall submit a Statement of Defence within twenty
(20) days after receiving the Statement of Claim.
(g) Hearings
At the request of either party (such request to be made no later
than ten (10) days after submission of the Statement of Defence),
the tribunal shall hold hearings for the presentation of evidence
by witnesses, including expert witnesses, or for oral argument.
Any such hearing shall be held no later than fifty (50) days after
the submission of the Respondent's Statement of Defence and the
tribunal shall take all reasonable measures to ensure that the
hearing be concluded as expeditiously as possible and, to the
extent practicable, that the hearing last no longer than ten (10)
days.
(h) Finality of Decision
Any decision by the majority of the arbitrators shall be final and
binding upon the parties. The tribunal shall take all reasonable
measures to render a final, binding decision within the later of
(i) ten (10) days after the completion of the hearing, if any,
referred to in paragraph (g) above or (ii) if no hearing is held,
twenty (20) days after the submission of the Respondent's
Statement of Defence. The parties hereby waive, to the extent
permitted by law, any rights to appeal or to review such decision
by any court or tribunal.
(i) Costs
The Company shall reimburse the Intercreditor Agent (or, as the
case may be, the Debt Trustee) in respect of any costs incurred by
the Intercreditor Agent (or, as the case may be, the Debt Trustee)
in connection with such arbitration.
5. Governing Law
This Agreement shall be governed by, and construed in accordance with,
English law.
6. Jurisdiction
6.1 Subject to Clause 4, each of the Company and the Sponsors irrevocably
agrees that the courts of England shall have jurisdiction to hear and
determine any suit, action or proceeding, and to settle any disputes,
which may arise out of or in connection with this Agreement and, for
such purposes, irrevocably submits to the jurisdiction of such courts.
6.2 Subject to Clause 4, each of the Company and UCC irrevocably agrees
that the courts of the State of New York and the courts of the United
States of America in New York shall have jurisdiction to hear and determine
any suit, action or proceeding, and to settle any disputes, which may arise
out of or in connection with this Agreement and, for such purposes,
irrevocably submits to the jurisdiction of such courts.
6.3 Each of the Company and UCC and (in the case of Clause 6.1 only) PIC
irrevocably waives any objection which it might now or hereafter have to
the courts referred to in Clauses 6.1 and 6.2 being nominated as the
forum to hear and determine any suit, action or proceeding, and to
settle any disputes, which may arise out of or in connection with this
Agreement and agrees not to claim that any such court is not a
convenient or appropriate forum.
6.4 Each of the Company and (with respect to proceedings in England only)
each of the Sponsors agrees that the process by which any suit, action
or proceeding is begun may be served on it by being delivered (in the
case of any suit, action or proceeding in England) to Hackwood
Secretaries Limited of Barrington House, 59-67 Gresham Street, London,
EC2V 7JA or its principal place of business in England from time to time
or (in the case of any suit, action or proceeding in New York) to CT
Corporation System Inc. at 1633 Broadway, New York, N.Y. 10019, USA or
its principal place of business in New York from time to time. If the
appointment of either person identified in this Clause 6.4 ceases to be
effective the Company, UCC or PIC (as the case may be) shall immediately
appoint a further person in England or, as the case may be, New York to
accept service of process on its behalf in England, or as the case may
be, New York and, failing such appointment within 15 days, the Debt
Trustee shall be entitled to appoint such person by notice to the
Company and each of the Sponsors. Nothing contained herein shall affect
the right to serve process in any other manner permitted by law.
6.5 The submission to the jurisdiction of the courts referred to in Clauses
6.1 and 6.2 shall not (and shall not be construed so as to) limit the
right of the Intercreditor Agent, the Debt Trustee, the Project Assets
Security Trustee, or any of them to take proceedings against any of the
Company and either of the Sponsors in any other courts of competent
jurisdiction nor shall the taking of proceedings in any one or more
jurisdictions preclude the taking of proceedings in any other
jurisdiction (whether concurrently or not) if and to the extent
permitted by applicable law.
6.6 Each of the Company and the Sponsors hereby consents generally in
respect of any legal action or proceeding arising out of or in
connection with this Agreement to the giving of any relief or the issue
of any process in connection with such action or proceeding including,
without limitation, the making, enforcement or execution against any
property whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such action or
proceeding.
6.7 To the extent that any of the Company and the Sponsors may in any
jurisdiction claim for itself or its assets immunity from suit,
execution, attachment (whether in aid of execution, before judgment or
otherwise) or other legal process and to the extent that in any such
jurisdiction there may be attributed to itself or its assets such
immunity (whether or not claims), each of the Company and the Sponsors
hereby irrevocably agrees not to claim and herby irrevocably waives such
immunity to the full extent permitted by the laws of such jurisdiction
and, in particular, to the intent that in any proceedings taken in New
York the foregoing waiver of immunity shall have effect under and be
construed in accordance with the United States Foreign Sovereign
Immunities Act 1976.
6.8 Each party hereto hereby waives any rights that it may have in any
jurisdiction to trial by jury.
IN WITNESS WHEREOF this Agreement has been duly executed on the date first
written at the start of the Agreement.
SCHEDULE
Common Defined Terms
Section 1 - Defined Terms
"Accounts" means the Disbursement Account, the Collection Accounts, the
Regional Accounts, the Master Accounts, the Operations Accounts, CERF 1, CERF
2, the Debt Service Payments Account, the Debt Service Reserve Fund, the
Distributions Account, the Excess Cash Flow Fund, the Insurance Accounts, the
Net Swap Receivables Account, the Dinar Petty Cash Account and the
Polypropylene Operations Account;
"Account Bank" means Citibank, N.A., London branch or such other bank as shall
be appointed Account Bank from time to time in accordance with Clause 45.2 of
the Common Terms Agreement;
"Actual EG Sales Volume" in relation to any Relevant EG Period means the
aggregate volume of EG (in tonnes) sold by the Company by way of True Sale
during such Relevant EG Period (but excluding all Excluded EG Sales);
"Actual PE Sales Volume" in relation to any Relevant PE Period means the
aggregate volume of PE (in tonnes) sold by the Company by way of True Sale
during such Relevant PE Period (but excluding all Excluded PE Sales);
"Actual Lease Drawings" means the aggregate amount by which the Available
Lease Facility is reduced (otherwise than on cancellation or on its reduction
to zero on the last day thereof) during the Availability Period, as determined
under Clause 28 of the Common Terms Agreement;
"Actual Term Loan Drawings" means the aggregate amount of all Drawings under
the Term Loan Facility on or before the last day of the Availability Period
(less the aggregate amount of all repayments in accordance with Clause 15
(Illegality) of the Term Loan Facility Agreement on or before such day (if
any));
"Actual Tranche A Term Loan Drawings" means the amount of the Actual Term Loan
Drawings advanced by the Tranche A Term Loan Banks;
"Actual Tranche B Term Loan Drawings" means the amount of the Actual Term Loan
Drawings advanced by the Tranche B Term Loan Banks;
"Additional Company" means any person who, from time to time, becomes an
additional party to the Sponsor Support Agreement and an additional party to
one or more Step-in Documents in accordance with Clause 25 of the Sponsor
Support Agreement;
"Additional Shareholder Contributions" means payments by Shareholders to the
Company under Clause 6 of the Sponsor Support Agreement;
"Affiliate" of any company means any subsidiary or holding company, or any
subsidiary of any holding company, of that company and, with respect to PIC,
the State of Kuwait (or the government thereof) or any of its Agencies;
"Agency" means in respect of any nation, government or state, any political
sub-division thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of any of the foregoing and
shall include, without limitation, any corporation or company which would be
an Affiliate of any Agency referred to above if such Agency were a company;
"Agents" means the Intercreditor Agent, the Facility Agent, the Working
Capital Facility Agent and any New Agent;
"Agreed Form" in relation to any document means the agreed form thereof as
initialled by the appropriate parties or their representatives and delivered
in satisfaction of the condition precedent relating thereto set out in the
Third Schedule to the Common Terms Agreement;
""A" EG Volume" in relation to any Relevant EG Period means the volume of EG
(in tonnes) specified for such Relevant EG Period in Column 3 of the Second
Schedule to the Sales Volume Guarantee;
"A" PE Volume" in relation to any Relevant PE Period means the volume of PE
(in tonnes) specified for such Relevant PE Period in Column 3 of the First
Schedule to the Sales Volume Guarantee;
"Alternate Market Consultants" means Chemical Marketing Associates Inc. and
Petrochemical Consultants International, or, if any of the Sponsors, the
Company or any member of the Approval Group is not satisfied with the services
provided by either Alternate Market Consultant or if either of them ceases to
exist or to be willing to act in such capacity, any replacement approved by
the Approval Group and the Sponsors and appointed as such by the Intercreditor
Agent;
"Annual Bank Case" means a project forecast prepared and approved or otherwise
finalised in accordance with Clause 15 of the Common Terms Agreement;
"Annual Budget" means an operating phase budget prepared and approved or
otherwise finalised in accordance with Clause 14 of the Common Terms
Agreement;
"Annual Debt Service Ratio" for any Fiscal Year means the ratio of:
(i) actual or projected Cash Flow Available for Debt Service for that Fiscal
Year; to
(ii) all Debt Service Payments made or projected to be made in that Fiscal
Year;
"Applicable Margin" means:
(i) with respect to the Term Facilities, 1_% per annum until the earlier of
the date upon which either Sponsor is released from its obligations
under Clauses 2 and 3 of the Completion Guarantee and 30 September 1998,
and 1_% per annum thereafter; and
(ii) with respect to the Working Capital Facility, 3/4% per annum;
"Approved Custodian" means the Account Bank and any other person approved as a
custodian in respect of Permitted Investments by the Approval Group;
"Approval Group" means the Technical Bank, the Modelling Bank, the Insurance
Bank, the Intercreditor Agent, the Lessor (for so long as it is a Bank) and
Citibank, N.A. (for so long as it is a Bank) and (if either the Lessor or
Citibank, N.A., or any successor to it as a member of the Approval Group,
ceases to be a Bank) such other Bank as the Majority Term Banks and the
Company may agree;
"Approved FX/LC Facilities" means any letter of credit, foreign exchange or
guarantee facilities entered into in the ordinary course of the Company's
business provided:
(i) that the maximum aggregate amount of such facilities does not exceed
$100,000,000 (in the case of foreign exchange facilities only, taking
account for this purpose of the maximum net exposure of the relevant
counterparty thereunder):
(ii) each of the counterparties thereto has executed a CTA Deed of Accession
and thereby become party to the Common Terms Agreement as a Bank (and
thereby subject to the restrictions on enforcement and acceleration
contained therein); and
(iii) such facilities shall be unsecured save for any Permitted Liens in
respect thereof;
"Approved Hedging Agreement" means any interest rate swap agreement entered
into by the Company pursuant to an ISDA master agreement substantially in the
form set out in the Tenth Schedule to the Common Terms Agreement and otherwise
in accordance with the Hedging Programme in relation to which a Designating
Instrument has been duly executed and delivered pursuant to Clause 8 of the
Security Trust Agreement and the counterparty to the Company thereunder has
executed and delivered to the Intercreditor Agent a CTA Deed of Accession and
to the Trustees an STA Deed of Accession and thereby become party to the
Common Terms Agreement and the Security Trust Agreement as a Bank;
"Approved Hedging Counterparty" means Citibank, N.A., The Chase Manhattan Bank
and JP Morgan & Co. and any other financial institution which is party to an
Approved Hedging Agreement as counterparty;
"Arrangers" means the persons named as such in the Common Terms Agreement;
"ASC Adjustment Date" means the later to occur of:
(i) the date falling two years after the first date on which a Sponsor is
released from its obligations under Clauses 2 and 3 of the Completion
Guarantee; and
(ii) the fourth Payment Date after the Commencement Date (or the date that
would have been the fourth Payment Date after the Commencement Date if
such Payment Date had not been deferred in accordance with Clause 31 of
the Common Terms Agreement);
"ASC Availability Period" means the period starting on the first date upon
which a Sponsor is released from its obligations under Clauses 2 and 3 of the
Completion Guarantee and ending on the earlier to occur of:
(i) the first date prior to the ASC Adjustment Date upon which either (a)
the credit balance on the Debt Service Reserve Fund (net of any amount
required to discharge any Debt Service Payments to the extent accrued up
to the Completion Date) or (b) the aggregate amount of all Additional
Shareholder Contributions actually made reaches $120,000,000; and
(ii) the first date after the ASC Adjustment Date upon which either (a) the
credit balance on the Debt Service Reserve Fund is equal to or greater
than the maximum aggregate amount of Debt Service Payments forecast in
the current Annual Bank Case to be payable in any subsequent six month
period or (b) the aggregate amount of Additional Shareholder
Contributions made after the ASC Adjustment Date reaches the ASC
Facility Amount;
"ASC Facility Amount" means:
(i) at all times up to and including the ASC Adjustment Date, $120,000,000;
and
(ii) thereafter, an amount equal to the lesser of:
(a) the amount by which $120,000,000 exceeds the aggregate amount of
all Additional Shareholder Contributions made up to and including
the ASC Adjustment Date; and
(b) the amount by which the maximum aggregate amount of Debt Service
Payments forecast in the current Annual Bank Case to be payable in
any subsequent six month period after the ASC Adjustment Date
exceeds the credit balance on the Debt Service Reserve Fund at
close of business in London on the ASC Adjustment Date;
"Assigned Company Property" in relation to:
(i) the English Law Security Agreement means all of the right, title and
interest, present and future, of the Company in and to (a) each Assigned
London Account, all moneys from time to time to standing to the credit
thereof and all entitlements to interest and any other rights and
benefits accruing to or arising in connection therewith, (b) the Sponsor
Support Agreement, the Feedstock Interruption Agreement, the Sales
Volume Guarantee, any hedging agreement from time to time entered into
by the Company and any future Documents governed by English law to which
it is party, (c) all claims, rights and remedies of the Company
(including, without limitation, all damages and compensation payable for
or in respect thereof) arising out of or in connection with a breach of
or default under or in connection with the Sponsor Support Agreement,
the Feedstock Interruption Agreement, the Sales Volume Guarantee, any
hedging agreement from time to time entered into by the Company and any
future Documents governed by English law to which it is party, (d) all
rights of the Company to terminate the Sponsor Support Agreement, the
Feedstock Interruption Agreement, the Sales Volume Guarantee, any
hedging agreement from time to time entered into by the Company and any
future Documents governed by English law to which it is a party and
otherwise to exercise all rights and remedies thereunder, pursuant
thereto or in connection therewith and (e) all sums from time to time
payable to the Company (or EMC on its behalf) in respect of all sales of
Product;
(ii) the New York Law Security Agreement means all of the right, title and
interest, present and future, of the Company in and to (a) the New York
Accounts, all moneys from time to time to standing to the credit thereof
and all entitlements to interest and any other rights and benefits
accruing to or arising in connection therewith, (b) all of the
agreements listed in Schedule 1 thereto, any bonds issued under the
Principal Project Documents included therein and any future Documents
governed by New York law to which it is party, (c) all claims, rights
and remedies of the Company (including, without limitation, all damages
and compensation payable for or in respect thereof) arising out of or in
connection with a breach of or default under or in connection with any
of the agreements listed in Schedule 1 thereto, any bonds issued under
the Principal Project Documents included therein and any future
Documents governed by New York law to which it is party and (d) all
rights of the Company to terminate any of the agreements listed in
Schedule 1 thereto, any bonds issued under the Principal Project
Documents included therein and any future Documents governed by New York
law to which it is party and otherwise to exercise all rights and
remedies thereunder, pursuant thereto or in connection therewith;
"Assigned EMC Property" in relation to:
(i) the English Law Security Agreement means all of the right, title and
interest, present and future, of EMC in and to (a) each Assigned London
Account, all monies from time to time standing to the credit thereof and
all entitlements to interest and any other rights and benefits accruing
to or arising in connection therewith, (b) the Sponsor Support Agreement
and any future Documents governed by English law to which it is party,
(c) all claims, rights and remedies of EMC (including, without
limitation, all damages and compensation payable for or in respect
thereof) arising out of or in connection with a breach of or default
under or in connection with the Sponsor Support Agreement and any future
Documents governed by English law to which it is party, (d) all rights
of EMC to terminate the Sponsor Support Agreement and any future
Documents governed by English law to which it is party and otherwise to
exercise all rights and remedies thereunder, pursuant thereto or in
connection therewith and (e) all sums from time to time payable to EMC
(or to EMC on behalf of the Company) in respect of all sales of Product;
(ii) the New York Law Security Agreement means all of the right, title and
interest, present and future, of EMC in and to (a) each New York
Account, all monies from time to time standing to the credit thereof and
all entitlements to interest and any other rights and benefits accruing
to or arising in connection therewith, (b) all of the agreements listed
in Schedule 1 thereto and any future Documents governed by New York law
to which it is party, (c) all claims, rights and remedies of EMC
(including, without limitation, all damages and compensation payable for
or in respect thereof) arising out of or in connection with a breach of
or default under or in connection with any of the agreements listed in
Schedule 1 thereto and any future Documents governed by New York law to
which it is party and (d) all rights of the EMC to terminate any of the
agreements listed in Schedule 1 thereto and any future Documents
governed by New York law to which it is party and otherwise to exercise
all rights and remedies thereunder, pursuant thereto or in connection
therewith;
"Assigned London Accounts" means each of the following:
(i) the Business Interruption Insurance Account;
(ii) CERF 1;
(iii) CERF 2;
(iv) the Debt Service Payments Account;
(v) the Debt Service Reserve Fund;
(vi) the Distributions Account;
(vii) the Excess Cash Flow Fund;
(viii) the Master Accounts;
(ix) the Net Swap Receivables Account;
(x) the Property Damage Insurance Account; and
(xi) any other account (other than the Polypropylene Operations Account)
opened in the United Kingdom by the Company or EMC, including any
Regional Account, any replacement for any of (i)-(x) above and any
account the credit balance on which constitutes a Permitted Investment;
"Assigned Property" in relation to:
(i) the English Law Security Assignment means, collectively, the Assigned
Company Property and the Assigned EMC Property thereunder;
(ii) the New York Law Security Assignment means, collectively, the Assigned
Company Property and the Assigned EMC Property thereunder;
"Assignment and Assumption Agreements" means the Assignment and Assumption
Agreement governed by Kuwaiti law and the Assignment and Assumption Agreement
governed by New York law, each of even date herewith and made between the
Sponsors and the Company pursuant to which the Sponsors shall transfer or have
transferred their rights and obligations under various Project Documents to
the Company;
"Availability Period" means:
(i) with respect to the Term Facilities, the period from the Effective Date
to the earliest of:
(a) 30 September 2000;
(b) the Plant Completion Date;
(c) the date on which any of the Plant Completion Tests is failed
for the fifth time; and
(d) the date upon which the Available Term Facilities are first
reduced to zero;
(ii) with respect to the Working Capital Facility and provided that the
Intercreditor Agent shall have notified the other parties to the Common
Terms Agreement that all conditions precedent have been satisfied under
Clause 2.7 thereof, the period from 1 January 1997 to the Working
Capital Maturity Date;
"Available Lease Facility" means $200,000,000 less the aggregate amount paid
by the Purchaser to the Company under the Sale Agreement and the aggregate of
the amounts by which the same is reduced under Clause 2.5 of the Common Terms
Agreement;
"Available Term Facilities" means the Available Term Loan Facility and the
Available Lease Facility;
"Available Term Loan Facility" means the sum of the Available Tranche A
Facility and the Available Tranche B Facility;
"Available Tranche A Commitment" in relation to a Term Loan Bank means
(subject as provided in the Term Loan Facility Agreement) the amount set out
opposite its name in Part 1 of the First Schedule to the Term Loan Facility
Agreement less the aggregate amount it has advanced under Tranche A of the
Term Loan Facility;
"Available Tranche B Commitment" in relation to a Term Loan Bank means
(subject as provided in the Term Loan Facility Agreement) the amount set
opposite its name in Part 2 of the First Schedule to the Term Loan Facility
Agreement less the aggregate amount it has advanced under Tranche B of the
Term Loan Facility;
"Available Tranche A Facility" means the sum of the Available Tranche A
Commitments of all the Term Loan Banks;
"Available Tranche B Facility" means the sum of the Available Tranche B
Commitments of all the Term Loan Banks;
"Available WC Commitment" in relation to a Working Capital Bank at any time
means, save as otherwise provided in the Working Capital Facility Agreement,
the amount set out opposite its name in the First Schedule to the Working
Capital Facility Agreement less its share of the Outstandings under the
Working Capital Facility at such time Provided that such amount shall not be
less than zero;
"Available WC Facility" means the sum of the Available WC Commitments of all
the Working Capital Banks;
"Average EG Price" in relation to any Relevant EG Period means the average
price per tonne achieved by the Company for sales of EG Principal Products by
way of True Sale during the last 30 days of such Relevant EG Period (provided
that at least five percent (5%) of such sales of EG during such Relevant EG
Period were made during such 30 day period) or, if no such sales (or
insufficient sales) were made, the immediately prior 30 days of such Relevant
EG Period provided that at least five percent (5%) of such sales of EG during
such Relevant EG Period were made during such thirty day period) or, if prices
still cannot be so determined the average of the prices of EG published during
such period by the Market Consultant adjusted (where necessary to represent
the net revenue, before deducting production costs, received or receivable by
the Company in respect of each tonne of EG sold by the Company at such price)
so as to:
(i) deduct the average cost, per tonne, of freight and insurance to the
Principal Markets (to the extent such costs are not usually borne by the
purchasers);
(ii) reflect credit terms of no longer than thirty days following delivery;
and
(iii) deduct the average cost per tonne to the Company of sales commissions
(calculated, in the case of commissions paid to EMC, on the assumption
that EMC achieved sales of the full Target EG Sales Volume), import and
export duties and sales taxes and duties,
as determined by the Market Consultant;
"Average Ex-Works Price" for any type of Product, any market and any period
means the average price per metric tonne of such type of Product sold into
such market by the Company but so that the actual price of each delivery shall
be adjusted (where necessary) so as to:
(i) reflect credit terms of no longer than thirty days following delivery;
and
(ii) reflect the price that would have applied if the purchaser were to bear
the full cost of freight (by whatever means) and insurance:
"Average PE Price" in relation to any Relevant PE Period means the average
price per tonne achieved by the Company for sales of PE Principal Products by
way of True Sale during the last 30 days of such Relevant PE Period (provided
that at least five percent (5%) of such sales of PE during such Relevant PE
Period were made during such 30 day period) or, if no such sales (or
insufficient sales) were made, the immediately prior 30 days of the Relevant
PE Period (provided that at least five percent (5%) of such sales of PE during
such Relevant PE Period were made during such 30 day period) or, if prices
still cannot be so determined, the average of the prices of PE published
during such period by the Market Consultant adjusted (where necessary to
represent the net revenue, before deducting production costs, received or
receivable by the Company in respect of each tonne of PE sold by the Company
at such price) so as to:
(i) deduct the average cost, per tonne, of freight and insurance to the
Principal Markets (to the extent such costs are not usually borne by the
purchasers);
(ii) reflect credit terms of no longer than thirty days following delivery;
and
(iii) deduct the average cost per tonne to the Company of sales commissions
(calculated, in the case of commissions paid to EMC, on the assumption
that EMC achieves sales of the full Target PE Sales Volume), import and
export duties and sales taxes and duties,
as determined by the Market Consultant;
"Banks" means the Term Loan Banks, the Lessor, the Working Capital Banks and
any other financial institution which accedes to the Common Terms Agreement as
a Bank Provided that any Bank which is no longer owed any sum under the
Facilities and the New Facilities and which has complied with all its
obligations under the Finance Documents shall cease to be a Bank;
"Base Case" means the financial forecast established by using, inter alia, the
price assumptions representing long term averages for the industry provided by
the Market Consultant and cost and production assumptions provided by the
Company, showing the projected cash flows from the Project and set out in
Appendix H to the Information Memorandum under the title "Base Trend Case";
"Beneficiaries" means the Primary Beneficiaries, the Secondary Beneficiaries
and the Tertiary Beneficiaries;
""B" EG Volume" in relation to any Relevant EG Period means the volume of EG
(in tonnes) specified for such Relevant EG Period in Column 4 of the Second
Schedule to the Sales Volume Guarantee;
""B" PE Volume" in relation to any Relevant PE Period means the volume of PE
(in tonnes) specified for such Relevant PE Period in Column 4 of the First
Schedule to the Sales Volume Guarantee;
"Boubyan" means Boubyan Petrochemical Company K.S.C.;
"Boubyan Subordinated Loan Agreement" means the $42,000,000 loan agreement to
be dated on or before the Effective Date between Boubyan and the Company;
"Bridge Agent" means National Bank of Kuwait S.A.K. in its capacity as agent
under the First Bridge Facility and the Second Bridge Facility;
"Bridge Facilities" means the First Bridge Facility and the Second Bridge
Facility;
"Bridge Lenders" means the First Bridge Lenders and the Second Bridge Lenders;
"Budget Month" means any of the successive calendar months comprised in the
period covered by an Annual Budget;
"Business Interruption Insurance Account" means the account in London so
designated in the name of the Company and held with the Account Bank;
"Butene-1 Unit" means the unit to be constructed as part of the Project
designed to produce butene-1;
"Calculation Date" means the date falling 15 business days after the date on
which the Debt Trustee gives notice to the Primary Beneficiaries of the
occurrence of the Enforcement Date;
"Cash Flow Available for Debt Service" for any Fiscal Year or other period
means operating profits and interest income of the Company for that period,
before deductions on account of debt service, depreciation and amortisation
but after taxes (including any mandatory contribution to KFAS) and:
(i) less any increase (or plus any decrease) in Working Capital (excluding
for these purposes any credit balance on the Operations Accounts) over the
period;
(ii) plus any increase over the period in the Outstandings under the Working
Capital Facility and/or the outstanding principal amount of the Company's
borrowings under working capital facilities approved in accordance with the
Common Terms Agreement;
(iii) less capital expenditure incurred in the period (other than that funded
prior to the Plant Completion Date by drawings under the Term Facilities or
other facilities approved in accordance with the Common Terms Agreement, from
CERF 1 and CERF 2 or from Shareholder Contributions); and
(iv) less the sum of $5,000,000, Indexed (being the required annual
contribution to CERF 1 for Major Plant Overhaul),
in each case calculated by the Company from time to time, by reference to
projected values where and to the extent necessary, and confirmed by the
Modelling Bank;
"Catalyst Supply Agreements" means:
(i) the PE Catalyst Supply Agreement dated 28 May 1996 between UCC and the
Company;
(ii) the Ethylene Oxide Catalyst Supply Agreement dated as of 28 May 1996
between UCC and the Company;
(iii) the Hydrolysis Catalyst Supply Agreement dated as of 28 May 1996 between
UCC and the Company; and
(iv) the Catalyst Supply Agreement dated on or prior to the Effective Date
between the Company and IFP Enterprises, Inc.
in the case of (i) to (iii) above, each as amended by the Supplemental
Agreement dated or to be dated on or prior to the Effective Date between UCC
and the Company;
"Cedel" means the clearance system operated in Luxembourg by Cedel;
"CERF 1" means the dollar account in London so designated in the name of the
Company and held with the Account Bank;
"CERF 1 Required Cumulative Balance" for any month means, on the basis of a
thirty-six month cycle (the first such cycle commencing on Start-up and each
successive one commencing with the date on which the Company incurs the
expense of a Major Plant Overhaul), the sum of $15,000,000, Indexed,
multiplied by the number of that month in the cycle and divided by thirty-six
Provided that if the relevant month falls after the end of any such cycle but
a new cycle has not commenced by reason of the Major Plant Overhaul being
delayed, the duration of such first-mentioned cycle shall, for the purposes of
this definition, be increased accordingly but the denominator of thirty-six
shall remain the same;
"CERF 2" means the dollar account in London so designated in the name of the
Company and held with the Account Bank;
"CERF 2 Required Balance" means $15,000,000, Indexed;
"Collection Accounts" means:
(i) each account opened by the Company from time to time and designated by
the Company as a Collection Account:
(a) over which effective security has been granted and perfected by
the Company and EMC in favour of the Debt Trustee on terms and
conditions approved by the Approval Group or in respect of which
the designated account holder is the Debt Trustee;
(b) in respect of which the Debt Trustee has received legal opinions
in form and substance satisfactory to the Approval Group from
counsel in all relevant jurisdictions confirming that effective
security has been granted over such account or (where the
designated account holder is the Debt Trustee) that the Debt
Trustee alone shall have a proprietary interest in funds credited
thereto; and
(c) in respect of which the relevant account bank has (x) (where
security shall have been granted) acknowledged such security, (y)
agreed to make transfers from such account only in accordance with
Clause 16.2 of the Common Terms Agreement (or as otherwise
instructed by the Debt Trustee) and (z) not to permit the Company
otherwise to make withdrawals from such account; or
(ii) such other account (together with the mechanics for deposits therein and
withdrawals therefrom) as the Approval Group (acting reasonably having
regard to, amongst other things, the ability of the Company to market
its Products competitively in the market in which the Collection Account
is proposed to be opened) may have approved in writing,
unless, in any case, the Intercreditor Agent (acting reasonably) or (following
the occurrence of an Event of Default which has not been waived by the
Majority Term Banks or remedied) the Debt Trustee notifies the Company that
such account may no longer be used as a Collection Account;
"Collection Account Bank" means a bank with which a Collection Account is
held;
"Commencement Date" means (subject to Clause 30 of the Common Terms Agreement)
the earliest of:
(i) 30 September, 1998;
(ii) the date falling six months after the Plant Completion Date; and
(iii) the date falling six months after the date on which any of the Plant
Completion Tests is failed for the fifth time;
"Commercial Completion Test" means the test specified in Part 5 of the
Seventh Schedule to the Common Terms Agreement;
"Common Terms Agreement" means the agreement entitled "Common Terms and
Intercreditor Agreement" dated of even date herewith between the Company, EMC,
the Intercreditor Agent, the Project Assets Security Trustee, the Debt
Trustee, the Lessor, the Facility Agent, the Working Capital Agent, the
Political Risk Agent, the Arrangers, the Underwriters, the Function Banks, the
Term Loan Banks and the Working Capital Facility Banks;
"Company" means Equate Petrochemical Co. K.S.C. (Closed);
"Completion" means the occurrence of the Completion Date;
"Completion Conditions" means:
(i) each of the Plant Completion Tests shall have been satisfied (provided
that the Company shall have no more than five opportunities to satisfy any
Plant Completion Test and that the Plant Completion Tests must be satisfied on
or before 30 September 2000);
(ii) the Commercial Completion Test shall have been satisfied;
(iii) the Financial Test shall have been satisfied;
(iv) (subject to the provisions of Clause 4.2 of the Completion Guarantee)
the Letters of Credit required under Clause 9 of the Sponsor Support
Agreement shall have been issued;
(v) no Event of Default or Potential Event of Default (which has not been
waived by the Majority Term Banks or remedied) shall have occurred;
(vi) the Company shall have complied with its obligations under Clause
8.1(xii) of the Common Terms Agreement and granted and perfected
security in favour of the Primary Beneficiaries over the relevant
Approved Hedging Agreements, in form, substance and manner satisfactory
to the Approval Group;
(vii) all of the representations (except for those in Clauses 6.2(x), 6.3(i)
and 6.3(ii) of the Common Terms Agreement and Clauses 12.2(ix) and
12.2(x) of the Sponsor Support Agreement) made by each of the Company,
EMC and the Sponsors in any of the Finance Documents shall be true with
reference to the facts and circumstances then existing;
(viii) the Insurance Bank shall be satisfied that the Insurances shall be in
place; and
(ix) the Company shall have granted to the Project Assets Security Trustee a
commercial premises mortgage and a buildings mortgage, in each case in
respect of the Site and in the Agreed Form;
Provided that, on the date on which it is proposed that either or both of the
Sponsors be released from the Completion Guarantee, the Annual Bank Case
prepared in accordance with Clause 15.6 of the Common Terms Agreement for the
purposes of the Financial Test shall not be more than thirty days old;
"Completion Date" means the first day on which both of the Sponsors shall have
been released from their respective obligations under Clauses 2 and 3 of the
Completion Guarantee;
"Completion Guarantee" means the agreement so entitled dated of even date
herewith between the Sponsors, the Intercreditor Agent and the Debt Trustee;
"Completion Tests" means the Mechanical Completion Test, the Unit Performance
Tests, the Reliability Test, the Commercial Completion Test and the Financial
Test;
"Construction Budget" means a budget for the construction of the Plant and the
preliminary Operating Expenses of the Company (including for this purpose the
fees payable by the Company to the Political Risk Indemnitors under the
Political Risk Indemnity during the period up to the Plant Completion Date)
prepared by the Company and approved by the Technical Bank and the Technical
Consultant;
"Construction Event of Force Majeure" means an Event of Force Majeure under
the EPC Contracts or any of them;
"Construction Schedule" means a progress report with respect to the
construction of the Plant and a schedule up to the estimated Plant Completion
Date, prepared by the Technical Consultant within thirty days prior to the
proposed Effective Date and agreed by the Technical Bank;
"Consultants" means the Market Consultant, the Insurance Consultant and the
Technical Consultant;
"Consultancy Agreements" means:
(i) the Market Consultancy Services Agreement;
(ii) the agreement dated or to be dated on or prior to the Effective
Date between the Technical Bank, the Company and the Technical
Consultant, relating to the services of the Technical Consultant
contemplated in the Finance Documents; and
(iii) the agreement dated or to be dated on or prior to the Effective
Date between the Insurance Bank, the Company and the Insurance
Consultant, relating to the services of the Insurance Consultant
contemplated in the Finance Documents;
"Contingent O&M Services Agreement" means the agreement so entitled to be
dated on or prior to the Effective Date between the Company, UCC and the
Technical Bank;
"Contract Quantities" has the meaning ascribed thereto in the Feedstock Supply
Agreement (namely, in respect of Feed Gas, an amount sufficient to yield
seventy million standard cubic feet of contained ethane per day, and in
respect of Fuel Gas, twenty billion British thermal units per day);
"Contractors" means, together, the persons that, from time to time, supply
goods and/or services to the Company pursuant to the Project Documents;
"Contractual Rights" means all representations, covenants, guarantees,
indemnities and other contractual provisions made, given or otherwise agreed
by any of the Obligors in favour of either Trustee (other than any such made,
given or agreed solely for its own benefit) made, given or granted in or
pursuant to any of the Finance Documents;
"Cost Overrun Facility Agreement" means the $26,000,000 loan agreement to be
dated on or prior to the Effective Date between the Sponsors and the Company;
"Cost Overruns" means Project Costs to the extent they exceed $1,995,000,000;
"CTA Deed of Accession" means a deed of accession in the form set out in the
Fifth Schedule to the Common Terms Agreement;
"Debt Service Payments" means all amounts of principal, interest, lease
rentals, fees, commissions, costs and expenses payable by the Company in
respect of its Indebtedness for Borrowed Money other than:
(i) in respect of Subordinated Liabilities; and
(ii) any repayment of a Working Capital Advance to the extent the same is to
be met from a further Working Capital Advance,
but including all Net Swap Payments;
"Debt Service Payments Account" means the dollar account in London so
designated in the name of the Company and held with the Account Bank;
"Debt Service Reserve Fund" means the dollar account in London so designated
in the name of the Company and held with the Account Bank;
"Debt Service Shortfall" means, in respect of any Payment Date or Intermediate
Payment Date falling during the ASC Availability Period, the amount by which
the aggregate amount of Debt Service Payments due on such Payment Date or
Intermediate Payment Date in respect of Term Outstandings (but not including
such Debt Service Payments to the extent guaranteed by the Completion
Guarantee) exceeds the sum of the funds referred to in sub-paragraphs (i) to
(x) of Clause 18.2 of the Common Terms Agreement as of such date;
"Debt Trustee" means Citicorp Trustee Company Limited as debt trustee and/or
any other person appointed as such from time to time under the Security Trust
Agreement;
"Deed of Subordination" means the agreement so entitled dated of even date
herewith between the Company, the Shareholders, EMC, the Residual Trustee, the
Project Assets Security Trustee, the Political Risk Agent and the Bridge
Agent;
"Deed of Transfer" means the deed of transfer dated of even date herewith
between the Project Assets Security Trustee and the Debt Trustee pursuant to
which all the right, title and interest of the Debt Trustee in the Trust
Property (if any) will, subject to the terms thereof, be transferred to the
Project Assets Security Trustee on the Primary Beneficiary Release Date;
"Definitions Agreement" means this Agreement;
"Designating Instrument" means an instrument in the form set out in the Fourth
Schedule to the Security Trust Agreement;
"Dinar Operations Account" means the dinar account in Kuwait so designated in
the name of the Company and held with National Bank of Kuwait S.A.K. (or such
other account with such other bank, and the security arrangements in relation
to which, as the Approval Group may from time to time approve);
"Dinar Petty Cash Account" means the dinar account in Kuwait so designated in
the name of the Company and held with National Bank of Kuwait S.A.K. (or such
other account or accounts with such other bank or banks, and the security
arrangements in relation to which, as the Approval Group may from time to time
approve);
"Disbursement Account" means the dollar account in New York so designated, in
the name of the Company held with National Bank of Kuwait S.A.K. (or such
other account with such other bank, and the security arrangements in relation
to which, as the Approval Group may from time to time approve);
"Distribution" means (in the particular case of the Company) any payment in
respect of the Subordinated Liabilities and (generally) any dividends on any
class of share capital, any reduction, redemption or repurchase of any class
of share capital or any similar transaction;
"Distributions Account" means the dollar account in London so designated, in
the name of the Company and held with the Account Bank;
"Documents" means the Finance Documents and the Project Documents;
"Dollar Operations Account" means the dollar account in New York so designated
in the name of the Company and held with National Bank of Kuwait S.A.K.;
"Drawings" means drawings by the Company of advances under the Term Loan
Facility and of consideration monies under the Sale Agreement, in accordance
with the provisions of the Common Terms Agreement;
"Drawings Certificate" means a certificate substantially in the form set out
in the Eighth Schedule to the Common Terms Agreement issued by the Technical
Consultant in respect of a Drawing Period in which the Company wishes to make
Drawings;
"Drawing Period" means each successive period of one month as from the date of
the second Drawing under the Term Facilities and commencing in the
Availability Period for the Term Facilities Provided that the final Drawing
Period shall end on the last day of the Availability Period for the Term
Facilities and may, if the Company so requests in writing to the Intercreditor
Agent prior to the commencement thereof, be such period not exceeding forty-
five days as will end on the last day of the Availability Period or on the
date which the Company reasonably believes (as certified by it in such
respect) will be the last day of the Availability Period;
"Due Amounts" at any time in relation to a Beneficiary means all amounts which
are due and payable at such time by the Company to such Beneficiary under or
in relation to the Finance Documents (and for the avoidance of doubt, in the
case of Term Banks who are also Political Risk Indemnitors, amounts which were
due to such Term Banks under the Completion Guarantee which have been properly
set off against amounts due from such Term Banks to UCC pursuant to the
Political Risk Indemnity shall not constitute "Due Amounts" of such Term
Banks);
"Effective Date" means the date on which the Intercreditor Agent notifies each
of the other parties to the Common Terms Agreement, pursuant to Clause 2.7
thereof, that all conditions precedent thereunder have been satisfied;
"EG" means ethylene glycol;
"EG Applicable Amount" in relation to any Relevant EG Period means the
aggregate sums (if any) received by the Company (i) in respect of sales of EG,
other than by way of True Sales, during such Relevant EG Period and (ii) by
way of insurance proceeds in respect of EG lost or destroyed which shall have
been contracted to be sold;
"EG Licence Agreement" means the Ethylene Glycol Licence Agreement between UCC
and the Company dated 28 May 1996;
"EG Marketing Phase III" means Phase III of the marketing plan for EG produced
at the Plant as described in the EG Marketing Services Agreement;
"EG Sales Assumption Date" means the last day of the Relevant EG Period during
which (as demonstrated and certified by the Company, to the satisfaction of
the Majority Term Banks) EMC succeeds in selling on an independent basis (as
such phrase is defined in Clause 5.5 of the Sales Volume Guarantee) at least
fifty percent (50%) of the Target EG Sales Volume for such Relevant EG Period
or such earlier date upon which UCC becomes an Expropriated Sponsor;
"EG Sales Volume Shortfall" in relation to any Relevant EG Period means the
Guaranteed EG Sales Volume for such Relevant EG Period less (but not so as to
produce a negative figure) the Actual EG Sales Volume for such Relevant EG
Period;
"EG Start-up" means the Initial Operation Date as defined in the EG Licence
Agreement;
"EG Unit" means the process unit to be constructed as part of the Project
designed to produce EG at the rate of at least 340,000 tonnes per annum;
"Eligible Sponsor Sales Agreement" mean an agreement (which may, in the case
of PE, constitute an amendment to the PE Sales Support Agreement) for the sale
of fixed quantities of Product, over each year or shorter specified period of
such agreement, by the Company (or EMC on its behalf) to or via either
Sponsor, which agreement:
(i) provides for prices of PE or EG which are reflective of the generally
prevailing prices at the time of sale of PE or, as the case may be, EG
in the market of which the initial country of import forms part;
(ii) provides for the sale of Product over a total period exceeding five
years or shorter periods which are automatically renewed at the end of
each successive period; and
(iii) shall not be terminable except by the Company (or EMC on its behalf)
acting with the written consent of the Majority Term Banks;
"EMC" means Equate Marketing Company E.C., a company organised under the laws
of Bahrain;
"EMC Documents" means each Document to which EMC is party;
"EMC Shares" means the UCC EMC Shares and the PIC EMC Shares;
"Enforcement Date" means the first date on which the Majority Term Banks (or
the Intercreditor Agent acting on the instructions of the Majority Term Banks)
instruct either of the Trustees to enforce any of the Security or the date on
which the Intercreditor Agent or the Debt Trustee declares that an Event of
Default has occurred and requires that the Facilities be repaid in full
pursuant to Clause 33 of the Common Terms Agreement;
"English Law Security Agreement" means the agreement so entitled dated of even
date herewith 1996 between the Company, EMC and the Debt Trustee;
"EPC Contracts" means:
(i) the Engineering, Procurement & Construction Contract (Inside Kuwait)
(Contract No. 511-872418) dated 1 July 1994 between Fluor International
Limited and the Sponsors, as amended by a letter dated as of 26 June
1995;
(ii) the Engineering, Procurement and Construction Contract (Outside Kuwait)
(Contract No. 511-872419) dated 1 July 1994 between Fluor Daniel
Intercontinental, Inc. and the Sponsors, as amended by a letter dated
as of 26 June 1995;
(iii) the Co-ordination Letter (re: Inside and Outside Kuwait EPC Contracts)
dated as of 1 July 1994 between Fluor Daniel Intercontinental, Inc.,
Fluor International Limited and the Sponsors;
(iv) the Parent Company Guarantee relating to the contracts referred to in
(i) and (ii) above dated 1 July 1994 between Fluor Daniel, Inc. and the
Sponsors;
(v) the Engineering, Procurement & Construction Contract (Outside Kuwait)
(Contract No. 688000-9-003K) effective as of 9 March 1995 between Brown
& Root, Inc. and the Sponsors;
(vi) the Engineering, Procurement & Construction Contract (inside Kuwait)
(Contract No. 688000-9-004K) effective as of 9 March 1995 between Brown
& Root International, Inc. and the Sponsors;
(vii) the Parent Company Guarantee relating to the contract referred to in
(v) and (vi) above dated as of 6 November 1995 between Brown & Root
Holdings Inc. and the Sponsors;
(viii) the Outside Kuwait Services Agreement dated as of 5 April 1994 between
Brown & Root, Inc. and the Sponsors, as amended by a letter dated 10
May 1995;
(ix) the Engineering, Procurement & Construction Contract (Inside Kuwait)
(Contract No. 688000-9-006K) effective as of 23 May 1995 between World
Services Italiana S.p.A. and the Sponsors, as amended by a letter
effective as of 11 September 1995;
(x) the Parent Company Guarantee relating to the contract referred to in
(ix) above dated as of 23 May 1995 between Foster Wheeler International
Corporation and the Sponsors;
(xi) the Engineering, Procurement & Construction Contract (Outside Kuwait)
(Contract No. 688000-9-005K) effective as of 23 May 1995 between Foster
Wheeler Italiana S.p.A. and the Sponsors, as amended by a letter
effective as of 11 September 1995;
(xii) the Parent Company Guarantee relating to the Contract referred to in
(xi) above dated as of 23 May 1995 between Foster Wheeler International
Corporation and the Sponsors;
(xiii) the Engineering, Procurement & Construction Contract (Inside Kuwait)
(Contract No. 688000-9-008K) effective as of 9 August 1995 between
Aquater, S.p.A. and the Sponsors, as amended by a letter effective as
of 14 November 1995; and
(xiv) the Engineering, Procurement & Construction Contract (Outside Kuwait)
(Contract No. 688000-9-007K) effective as of 9 August 1995 between
Snamprogetti, S.p.A. and the Sponsors, as amended by a letter effective
as of 15 November 1995; and
(xv) the Parent Company Guarantee relating to the Contracts referred to in
(xiii) and (xiv) above dated as of 15 January 1996 between E.N.I.
S.p.A. and the Company,
each (apart from that mentioned in (xv) above) as assigned by the Sponsors to
the Company pursuant to the Assignment and Assumption Agreements;
"ETR Suspension Period" shall have the meaning ascribed thereto in Clause 23.2
of the Sponsor Support Agreement;
"Ethylene Unit" means the process unit to be constructed as part of the
Project designed to produce ethylene at the rate of at least 650,000 tonnes
per annum;
"Ethylene Glycol Marketing Agreement" means the agreement so entitled dated as
of 28 May, 1996 between the Company and EMC;
"Ethylene Glycol Marketing Services Agreement" means the agreement so entitled
dated 28 May 1996 between EMC and UCC;
"Euroclear" means the clearance system operated by Morgan Guaranty Trust
Company of New York, Brussels office;
"Event of Default" means any of those events listed in Clause 32 of the Common
Terms Agreement;
"Event of Force Majeure" means any event the occurrence of which under the
terms of any of the Project Documents would entitle any party thereto to claim
that its material obligations under such Project Documents were deferred or
suspended for a period or indefinitely, without incurring liability in respect
of its failure to perform such obligations on time;
"Excess Cash Flow" for any period means the excess of:
(i) Cash Flow Available for Debt Service for that period; over
(ii) the sum of:
(a) Debt Service Payments paid during such period;
(b) the Priority Distributions Account Credits paid for that period;
(c) the payments into the Debt Service Reserve Fund for that period
pursuant to Clause 17.1(v) of the Common Terms Agreement; and
(d) the required payments into CERF 2 for that period,
as determined from time to time by the Company and confirmed by the Modelling
Bank;
"Excess Cash Flow Fund" means the dollar account in London so designated in
the name of the Company held with the Account Bank;
"Excluded Company" means at the relevant time:
(i) any person whom the Debt Trustee shall not have demonstrated to be
permitted under all applicable laws and regulations of Kuwait (in case
of the Company) or Bahrain (in the case of EMC) to do business in Kuwait
or, as the case may be, Bahrain and to assume the obligations of the
Company and/or EMC under the specified Step-in Document(s) (it being
acknowledged that a legal opinion from the Debt Trustee's (or such
person's) Kuwaiti legal counsel (in the case of the Company) or Bahraini
legal counsel (in the case of EMC) to such effect will be satisfactory
for these purposes); or
(ii) any person whom KPC shall not have approved (such approval not to be
unreasonably withheld) as an Additional Company or, as the case may be,
a Substitute Company; or
(iii) any of:
(a) BP Chemicals Incorporated;
Montell Polyolefins;
Nova Corporation;
Phillips Petroleum Company;
BASF Aktiengesellschaft;
Mitsui Petrochemical Industries;
Amoco Corporation/Chiesso Corporation;
Shell Oil Company/Royal Dutch Petroleum Company;
Nippon Shokubai Kagaku Kogyo Co., Ltd; and
Scientific Design Co., Inc.,
or any other person created as a result of a merger, amalgamation,
restructuring, reorganisation or sub-division, however effected,
of any of the abovementioned persons and irrespective of any
change of name of any such person after the date hereof; or
(b) any person who at the relevant time is actively licensing either
PE or EG technology other than to an Affiliate (for which purpose
a person shall be considered to be actively licensing PE or EG
technology if it shall have licensed at least one PE or EG unit to
an unaffiliated person within the immediately preceding 6 years or
if the relevant Sponsor(s) can demonstrate to the reasonable
satisfaction of the Approval Group that such person has a
programme to license competitive technology); or
(c) any Affiliate of any of the persons mentioned in (a) or (b) above;
or
(d) any person (the "Relevant Company") in or with which any of the
persons mentioned in (a), (b) or (c) above (the "Competitor"):
(x) holds fifteen percent. (15%) or more of the shares in the
Relevant Company or any shares which give the Competitor
control over the Relevant Company; or
(y) has employee secondment or other similar arrangements
pursuant to which employees of the Competitor are seconded
to the Relevant Company to perform functions which give them
access to engineering, scientific or technical information;
"Excluded EG Sales" means sales of EG into any country in which patent
infringement action in respect of EG has been threatened or commenced against
the Company, EMC, either Sponsor, any purchaser of EG or any agent of any
thereof at any time until such patent infringement action has been settled
such that no future sales into such country will be subject to such action;
"Excluded PE Sales" means sales of PE into any country in which patent
infringement action in respect of PE has been threatened or commenced against
the Company, EMC, either Sponsor, any purchaser of PE or any agent of any
thereof at any time until such patent infringement action has been settled
such that no future sales into such country will be subject to such action;
"Expropriated Sponsor" means a Sponsor:
(i) which suffers, and whose Affiliates (to the extent any Affiliate has an
interest in the Project or the Company) suffer, Total Expropriation; and
(ii) which satisfies the criteria that neither its share capital nor the
share capital of any of its Affiliates nor any guarantor of any of its
obligations in respect of the Project is beneficially owned, directly or
indirectly, as to more than fifty percent (50%) by the State of Kuwait
or any Agency thereof;
"Extraordinary Shareholder Contribution" means any payment by way of loan to
the Company by any of the Shareholders other than an Initial Shareholder
Contribution or an Additional Shareholder Contribution;
"Facilities" means the Term Facilities and the Working Capital Facility;
"Facility Agent" means National Bank of Kuwait S.A.K. as facility agent or any
other person appointed as such from time to time under the Term Loan Facility
Agreement;
"Facility Agreement" means the facility agreement or similar instrument
whereby any of the Facilities or New Facilities is made available to the
Company;
"Facility Office" means, in relation to any Bank, the office identified with
its signature on the Common Terms Agreement (or, in the case of a Transferee,
at the end of the Transfer Certificate to which it is party as Transferee) or
such other office as such person may from time to time select;
"Feed Gas" means ethane rich gas produced at the LPG Plant conforming to the
specifications set out in Section 5.1(a) of the Feedstock Supply Agreement;
"Feedstock Interruption Agreement" means the agreement so entitled dated of
even date herewith between the Sponsors, the Company, the Debt Trustee and the
Intercreditor Agent;
"Feedstock Supply Agreement" means the agreement so entitled dated 1 June 1996
between the Company and PIC;
"Final Maturity Date" in respect of the Term Facilities means the date falling
ninety-six months after the Commencement Date;
"Final Release Date" means the date on which all Secured Obligations owed to
all Beneficiaries have been fully and finally discharged and none of the
Beneficiaries is under any commitment, obligation or liability (whether actual
or contingent) to make advances or provide other financial accommodation to
the Company or UCC;
"Finance Documents" means this Agreement, the Security Documents, the Security
Trust Agreement, the Deed of Transfer, the Second Deed of Transfer, the Common
Terms Agreement, the Term Loan Facility Agreement, the Lease, the Sale
Agreement, the Working Capital Facility Agreement, any facility agreement of
any kind referred to in a Designating Instrument, the Contingent O&M Services
Agreement, any Approved Hedging Agreement, the Completion Guarantee, the
Sponsor Support Agreement, the Feedstock Interruption Agreement, the Sales
Volume Guarantee, the KPC Comfort Letter, the Consultancy Agreements, each New
Facility and the Letters of Credit;
"Financial Model" means the financial spreadsheet prepared by the Modelling
Bank to calculate the sensitivity of cash flows of the Project under multiple
price and cost scenarios and used by the Modelling Bank to prepare the Base
Case;
"Financial Test" means, on the date upon which it is proposed that the last of
the Completion Conditions should be satisfied, the satisfaction of each of the
following:
(i) as demonstrated by the Annual Bank Case prepared under Clause 15.6 of
the Common Terms Agreement:
(a) the Loan Life Cover Ratio is at least 1.25:1;
(b) the projected Annual Debt Service Ratio for the next following
twelve month period is at least 1.1:1: and
(c) the projected Annual Debt Service Ratio for the twelve month
period following that referred to in (b) above is at least 1.25:1;
(ii) the Term Outstandings do not exceed $1,200,000,000;
(iii) the Initial Shareholder Contributions shall have been made in full;
(iv) the ratio of Total Debt to Project Capitalisation shall be no greater
than 7:10; and
(v) the sum of the balance on the Debt Service Reserve Fund and the value of
the Letters of Credit issued pursuant to Clause 9 of the Sponsor Support
Agreement shall be not less than the lesser of (a) $120,000,000 and (b)
the highest aggregate amount of Debt Service Payments (ignoring for
these purposes Debt Service Payments relating to the Working Capital
Facility) shown for any six month period in the Annual Bank Case;
"First Bridge Facility" means the $450,000,000 guaranteed bridge facility made
available to the Company pursuant to a facility agreement dated 24 December,
1995 between the Company as borrower, the Bridge Agent and the financial
institutions named therein;
"First Bridge Lenders" means the lenders under the First Bridge Facility;
"Fiscal Year" means each financial year of the Company;
"FS Interruption" means any complete or partial interruption in the supply by
PIC to the Company of the Contract Quantities of Feed Gas and Fuel Gas in
accordance with and in the manner required by the Feedstock Supply Agreement
(or the manner which would have been required thereby but for any event or
circumstances relaxing or relieving such requirement) at any time and for any
reason (whether by reason of default, or by virtue of force majeure events or
circumstances or otherwise) other than:
(i) interruptions which do not subsist for more than six days (whether
consecutive or otherwise) in any two month period; and
(ii) partial interruptions which do not reduce the supply of Feed Gas to
below 70% of the Contract Quantities;
"FS Interruption Period" means, in respect of an FS Interruption, the period
starting on the first day of such FS Interruption and ending on the last day
such FS Interruption;
"FS Loan" means any loan deemed to be made by a Sponsor to the Company
pursuant to Clause 4.5 of the Feedstock Interruption Agreement (but not, for
the avoidance of doubt, any other loans made or deemed to be made by the
Sponsors to the Company pursuant to the Feedstock Interruption Agreement);
"FS (No Support) Interruption" means any FS Interruption arising as a result
of:
(i) the exercise by the Company of its rights under Clause 4.5 of the
Feedstock Supply Agreement (voluntary reductions);
(ii) a suspension of supply of Feed Gas and/or Fuel Gas to the extent and in
the circumstances permitted by Clause 4.6 of the Feedstock Supply
Agreement ( maintenance outages); or
(iii) PIC being relieved of its obligations under the Feedstock Supply
Agreement pursuant to Clause 10.2(c) thereof;
"FS (PIC) Shortfall" means an FS Shortfall classified as such in accordance
with Clause 4.1(ii) of the Feedstock Interruption Agreement;
"FS (PIC Support) Interruption" means any FS Interruption arising as a result
of:
(i) any breach by PIC of its obligations under the Feedstock Supply
Agreement;
(ii) a reduction in oil production in Kuwait to below 1 million barrels per
day; or
(iii) PIC being relieved of its obligations under the Feedstock Supply
Agreement as a result of the circumstances or events referred to in
Clause 10.2(b) thereof (acts of the Kuwait Government);
"FS (PIC) Support Period" means a number of days equal to the sum of the
number of days of each FS (PIC Support) Interruption provided that whenever
each FS (PIC) Shortfall arising during any particular Budget Month is paid in
full in accordance with Clause 4.3 of the Feedstock Interruption Agreement,
the FS (PIC) Support Period shall be reduced by 30 days;
"FS (PIC & UCC) Shortfall" is an FS Shortfall classified as such in accordance
with Clause 4.1(ii) of the Feedstock Interruption Agreement;
"FS (PIC & UCC Support) Interruption" means any FS Interruption which is not
an FS (PIC Support) Interruption or an FS (No Support) Interruption;
"FS (PIC & UCC) Support Period" means a number of days equal to the sum of the
number of days of each FS (PIC & UCC Support) Interruption provided that:
(i) the FS (PIC & UCC) Support Period in respect of any FS (PIC & UCC
Support) Interruption shall not exceed 1095 days; and
(ii) if all FS (PIC & UCC) Shortfalls arising during any particular Budget
Month are paid in full in accordance with Clause 4.2 of the Feedstock
Interruption Agreement, the FS (PIC & UCC) Support Period shall be
reduced by 30 days;
"FS Shortfall" means, without prejudice to Clause 4.1(i) of the Feedstock
Interruption Agreement, in respect of any Budget Month the sum of:
(i) the amount by which the sums in the Master Accounts and (to the
extent received in respect of an FS Interruption under any
contingent business interruption insurance policies from time to
time taken out by the Company) the Business Interruption Insurance
Account are insufficient to fund the Operations Accounts and the
Debt Service Payments Account with the amounts required to be
deposited therein and/or to fund Debt Service Payments, in
accordance with Clauses 17.1(i) and (iv) and 18.2(ii) of the
Common Terms Agreement; and
(ii) the amount (if any) by which the sums in the Master Accounts are
insufficient to repay that portion of the Working Capital Loan
required to be repaid during such Budget Month to ensure that the
amount of the Working Capital Loan does not exceed the Working
Capital;
"FS Supported Interruption" means any FS (PIC Support) Interruption or FS (PIC
& UCC Support) Interruption;
"Fuel Gas" means methane rich gas available in Kuwait conforming to the
specifications set out in Section 5.1(b) of the Feedstock Supply Agreement;
"Function Banks" means the Account Bank, the Insurance Bank, the Modelling
Bank and the Technical Bank;
"Guaranteed EG Sales Volume" means in respect of any Relevant EG Period or
part thereof falling prior to the date upon which the Sponsors' obligations to
achieve sales of at least the Target EG Sales Volumes have terminated in
accordance with Clause 5 of the Sales Volume Guarantee either:
(i) the Target EG Sales Volume for such Relevant EG Period; or
(ii) such lesser volume as may be determined in accordance with Clause 4 of
the Sales Volume Guarantee for such Relevant EG Period;
"Guaranteed Obligations" means the obligations of the Company to pay:
(i) any monies which become due and payable by it under or pursuant to any
of the Common Terms Agreement, the Term Loan Facility Agreement, the
Lease, the Sale Agreement, the Working Capital Facility Agreement and
any Approved Hedging Agreement on or before the Completion Date; and/or
(ii) in the event that the Completion Date falls on a date which is not a
Payment Date or an Intermediate Payment Date:
(a) any interest which accrues in respect of the Term Loan or the
Working Capital Loan for the period of time up to and including
the Completion Date but which becomes due and payable by it after
the Completion Date;
(b) the first repayment of the Term Loan, the first Lease Payment and
the first payment of principal under or pursuant to the Working
Capital Facility falling due and payable by it after the
Completion Date Provided that the portion of such repayment,
Lease Payment or payment of principal which is a Guaranteed
Obligation shall be limited in each case to a sum which bears the
same proportion to the total amount of such repayment, Lease
Payment or, as the case may be, payment of principal as (1) the
number of days (inclusive) from the Payment Date or, as the case
may be, Intermediate Payment Date which occurs immediately prior
to the Completion Date bears to (2) the total number of days
(inclusive) from such Payment Date or, as the case may be,
Intermediate Payment Date to the date such repayment, Lease
Payment or, as the case may be, payment of principal becomes due
and payable;
"Guaranteed PE Sales Volume" means, in respect of any Relevant PE Period or
part thereof falling prior to the date upon which the Sponsors' obligations to
achieve sales of at least the Target PE Sales Volumes have terminated in
accordance with Clause 5 of the Sales Volume Guarantee either:
(i) the Target PE Sales Volume for such Relevant PE Period; or
(ii) such lesser volume as may be determined in accordance with Clause 4 of
the Sales Volume Guarantee for such Relevant PE Period;
"HDPE" means high density polyethylene;
"Hedging Programme" means the programme for, and agreed form of ISDA Master
Agreement and Schedule to be utilised for the purposes of, hedging the
Company's interest rate exposure under the Finance Documents set out in the
Ninth and Tenth Schedules to the Common Terms Agreement, as the same may be
amended from time to time with the approval of the Approval Group (such
approval not to be unreasonably withheld);
"Imputed Lease Drawings" means the amount agreed as such in accordance with
Clauses 27.3 to 27.5 of the Common Terms Agreement;
"Imputed Term Loan Drawings" mean the amount agreed as such in accordance with
Clauses 27.2, 27.4 and 27.5 of the Common Terms Agreement;
"Imputed Tranche A Term Loan Drawings" means the portion of the Imputed Term
Loan Drawings advanced or to be advanced by the Tranche A Term Loan Banks;
"Imputed Tranche B Term Loan Drawings" means the portion of the Imputed Term
Loan Drawings advanced or to be advanced by the Tranche B Term Loan Banks;
"Indebtedness for Borrowed Money" means any indebtedness for or in respect of
monies borrowed or raised by whatever means, including in respect of loans,
overdrafts, acceptances, finance leases, the obtaining of credit or the
deferral of the purchase price for assets or services (other than trade credit
on ordinary commercial terms), commercial paper, bonds, debentures, notes or
any financial obligation arising out of any financial instrument similar in
form or effect to any of the foregoing;
"Indexed" in relation to any amount means annually such amount increased up to
the date of calculation by three per cent. (3%) per annum (compounded
annually) since 1 January 1995;
"Industrial Licence" means the licence to be granted to the Company by the
Ministry of Commerce and Industry of the State of Kuwait approving the
production by the Company of 650,000 tonnes per annum of ethylene, 340,000
tonnes per annum of EG and 450,000 tonnes per annum of PE;
"Industrial Utility Rates" means the utility rates for the supply of
desalinated water, sea water coolant and electricity generally available to
the industrial sector in Kuwait;
"Information Memorandum" means the information memorandum dated 24 June 1996,
relating to the Project;
"Initial Shareholder Contributions" means the equity injections, subordinated
loans and Technology Licensing which the Shareholders are required to provide
to the Company pursuant to Clause 2 of the Sponsor Support Agreement;
"Initial Working Capital" means budgeted Operating Expenses for the first two
months of the first Annual Budget;
"Insurance Accounts" means the Business Interruption Insurance Account and the
Property Damage Insurance Account;
"Insurance Bank" means Gulf International Bank B.S.C. as insurance bank or
such other person appointed as such from time to time in accordance with
Clause 45.2 of the Common Terms Agreement;
"Insurance Consultant" means Johnson & Higgins as insurance consultant or such
other person appointed as such in connection with the Project and approved by
the Majority Term Banks;
"Insurance Renewal Date" means, in respect of any Insurances, each of the
dates specified in Section 4 of Part 1 of the Fourth Schedule to the Common
Terms Agreement;
"Insurances" means the insurances required to be maintained by the Company
and/or EMC in accordance with the Fourth Schedule to the Common Terms
Agreement;
"Intercreditor Agent" means National Bank of Kuwait S.A.K. as intercreditor
agent or such other person appointed as such from time to time in accordance
with Clause 42.2 of the Common Terms Agreement;
"Interest Period" in relation to the Term Loan Facility means each period from
one Payment Date or Intermediate Payment Date to the next following Payment
Date or Intermediate Payment Date or, in the case of the first Interest Period
for any Term Loan Advance, the period from the date the same was advanced
under the Term Loan Facility to the first Payment Date or Intermediate Payment
Date thereafter;
"Intermediate Payment Date" means any date determined as such under Clauses
29.2 and 31 of the Common Terms Agreement;
"Intermediate Release Date" means the Primary Beneficiary Release Date or, if
any payment has been made under the Completion Guarantee, the date upon which
all payments made by the Political Risk Indemnitors under the Political Risk
Indemnity have been recovered in full pursuant to the Deed of Subordination
and the Security Trust Agreement and none of the Political Risk Indemnitors is
under any commitment, obligation or liability (whether actual or contingent)
under the Political Risk Indemnity;
"International Accounting Standards" means International Accounting Standards
as published by the International Accounting Standards Committee;
"Invoice" means an invoice from the Company to the Purchaser under Clause 6.2
of the Sale Agreement and substantially in the form of the Second Schedule to
the Sale Agreement;
"ISC Facility Amount" means the aggregate amount of Initial Shareholder
Contributions required to be made by the Shareholders in accordance with
Clause 2 of the Sponsor Support Agreement;
"Joint Venture Agreement" means the agreement so entitled dated 15 July 1995
between the Sponsors;
"KFAS" means the Kuwait Fund for the Advancement of Science;
"KIBOR" for any period and any amount means the rate per annum which is the
arithmetic mean (rounded upwards, if not already such a multiple, to the
nearest whole multiple of one-sixteenth of one per cent.) of the rates (as
notified to the Working Capital Facility Agent) at which each of the Reference
Banks was offering to prime banks in the Kuwait Interbank Market deposits in
dinars for such period, in each case at or about 10.00 am (Kuwait time) on the
Quotation Date for such period;
"KNPC" means Kuwait National Petroleum Company K.S.C;
"KPC" means Kuwait Petroleum Corporation;
"KPC Comfort Letter" means the letter so entitled dated 20 May 1996 from KPC
to PIC and the Intercreditor Agent;
"Kuwait Law Assignment" means the Arabic language assignment dated or to be
dated on or prior to the Effective Date between the Company, EMC, the Lessor
and the Debt Trustee;
"Kuwait Law Mortgage" means the Arabic language agreement dated or to be dated
on or prior to the Effective Date between, among others, the Company, EMC, the
Sponsors, the Lessor and the Project Assets Security Trustee;
"Kuwait Law Security Agreements" means the Kuwait Law Mortgage and the Kuwait
Law Assignment;
"Land Licence" means the Contract for the Allotment of a Plot of Land between
the Company and the Directorate General of Shuaiba Area;
"Lease" means the Lease Agreement of even date herewith between the Company
and the Lessor;
"Lease Assets" means the Project Assets acquired or to be acquired by the
Lessor pursuant to the Sale Agreement;
"Lease Facility" means the lease facility made available by the Lessor
pursuant to the Sale Agreement and the Lease;
"Lease Outstandings" means the aggregate of the Reimbursement Elements of all
future Lease Payments (or, prior to such Reimbursement Elements being
ascertained, the aggregate of all Drawings under the Lease and all reductions
in the Available Lease Facility pursuant to Clause 2.5 of the Common Terms
Agreement, less the sum of all rentals paid to the Lessor pursuant to
Clause 5.5 of the Common Terms Agreement, if applicable);
"Lease Payments" means rental payments in respect of the leasing under the
Lease;
"Lease Payments Adjustment" means the difference between:
(i) the aggregate of the Reimbursement Elements of all Lease Payments paid
before the Actual Lease Drawings shall have been ascertained; and
(ii) what would have been the aggregate of the Reimbursement Elements of all
such Lease Payments had the Imputed Lease Drawings equalled the Actual
Lease Drawings;
"Lessor" means Kuwait Finance House K.S.C. or such other person party to the
Lease from time to time as lessor and/or the party to the Sale Agreement from
time to time as purchaser which shall have executed a CTA Deed of Accession;
"Letters of Credit" means:
(i) the standby letters of credit which the Sponsors are required to provide
pursuant to Clause 9.1 of the Sponsor Support Agreement;
(ii) any standby letter of credit which UCC provides under Clause 4.2 of the
Completion Guarantee; and
(iii) any letter of credit which the Sponsors provide under the provisions of
Section 5 of Part 1 of the Fourth Schedule to the Common Terms
Agreement;
and/or any replacement of any of them satisfying the requirements of the
relevant provisions of such Agreements;
"LIBOR" for any period and any amount means the rate per annum determined by
the Intercreditor Agent which is the arithmetic mean (rounded upwards, if not
already such a multiple, to the nearest whole multiple of one-sixteenth of one
per cent.) of the Screen Rates for such period, at or about 11.00 a.m. (London
time) on the Quotation Date for such period;
"Licences" means the Land Licence, the Industrial Licence and the Commercial
Licence of the Company;
"Liquid Air Contract" means the purchase order dated 8 June 1996 and accepted
on 28 June 1996 (as amended by a charge order dated 28 June 1996) between
Fluor Daniel Intercontinental Inc. (as agent for the Company) and Liquid Air
Engineering Corporation, for the purchase of an air separation unit;
"LLDPE" means linear low density polyethylene;
"Loan Facility" means the Term Loan Facility, the Working Capital Facility or
any New Loan Facility;
"Loan Life Cover Ratio" at any time means the ratio of:
(i) the figure referred to in Clause 15.2(v)(d) of the Common Terms
Agreement (present value of future cash flows); to
(ii) the figure referred to in Clause 15.2(v)(b) of the Common Terms
Agreement (current Term Outstandings),
in each case derived from the then current Annual Bank Case;
"LPG Plant" means KNPC's liquid petroleum gas plant located in Shuaiba,
Kuwait;
"Majority Term Banks" means, subject to Clause 57 of the Common Terms
Agreement, Term Banks which are owed at least 66_% of both the Tranche A Term
Outstandings and the Tranche B Term Outstandings, for which purpose:
(i) the "Tranche A Term Outstandings" shall mean the sum of:
(a) Tranche A of the Term Loan;
(b) one half of each Bank's Outstandings under any New Term Facility;
and
(c) one half of the Lease Outstandings; and
(ii) the "Tranche B Term Outstandings" shall mean the sum of:
(a) Tranche B of the Term Loan;
(b) one half of each Bank's Outstandings under any New Term Facility;
and
(c) one half of the Lease Outstandings,
Provided that if on any particular issue which is required to be determined or
approved by the Majority Term Banks, Term Banks holding at least 66_% of the
Tranche A Term Outstandings vote differently from Term Banks holding at least
66_% of the Tranche B Term Outstandings, the Majority Term Banks shall be
those owed more than 50% of all Term Outstandings and Provided further that if
there are no Term Outstandings at the relevant time, references above to sums
owed to Term Banks shall be construed as references to the maximum commitments
of the Term Banks to advance or otherwise pay monies to the Company under the
Term Facilities (unless all Term Outstandings shall have been discharged, in
which case they shall be taken to be at their levels immediately prior to
their discharge);
"Majority Term Loan Banks" means, subject to Clause 57 of the Common Terms
Agreement, Term Loan Banks which are owed at least 66_% of both the Tranche A
and Tranche B of the Term Loan, Provided that if on any particular issue which
is required to be determined or approved by the Majority Term Loan Banks, Term
Loan Banks holding at least 66_% of Tranche A of the Term Loan vote
differently from Term Loan Banks holding at least 66_% of Tranche B of the
Term Loan, the Majority Term Loan Banks shall be those owed more than 50% of
the Term Loan and Provided further that if there are is no Term Loan
outstanding at the relevant time, references above to sums owed to Term Loan
Banks shall be construed as references to the maximum commitments of the Term
Loan Banks to advance or otherwise pay monies to the Company under the Term
Loan Facility (unless all commitments shall have been discharged, in which
case they shall be taken to be at the levels immediately prior to their
discharge);
"Majority Working Capital Banks" means Working Capital Banks which are owed at
least 66_% of the Working Capital Loan Provided that if there is no Working
Capital Loan outstanding at the relevant time, the reference above to sums
owed to Working Capital Banks shall be construed as a reference to the maximum
commitments of the Working Capital Banks to advance monies to the Company
under the Working Capital Facility (unless all commitments shall have been
discharged, in which case they shall be deemed to be at their levels
immediately prior to their discharge);
"Major Plant Overhaul" means an overhaul of each of the Units and other
elements of the Plant which, in accordance with the maintenance cycle for the
Plant, takes place approximately three years after commencement of production
and at three yearly intervals thereafter;
"Management Contracts" means:
(i) the Kuwait Management Contract - Inside Kuwait Services (Contract No.
0511-872416) dated as of 1 July 1994 between Fluor International Limited
and the Sponsors;
(ii) the Kuwait Management Contract - Outside Kuwait Services (Contract No.
0511-872417) dated as of 1 July 1994 between Fluor Daniel
Intercontinental, Inc. and the Sponsors;
(iii) the Co-ordination Letter (re: Inside and Outside Kuwait Management
Contracts) dated as of 1 July 1994 between Fluor International Limited,
Fluor Daniel Intercontinental, Inc. and the Sponsors; and
(iv) the Parent Company Guarantee (re: Inside and Outside Kuwait Management
Contracts) dated 1 July 1994 between Fluor Daniel, Inc. and the
Sponsors,
each as assigned by the Sponsors to the Company pursuant to the Assignment and
Assumption Agreements;
"Market Consultant" means Chem Systems Limited or such other firm or company
as the Majority Term Banks may approve from time to time or, as the context
may require, such Alternate Consultant as, in accordance with Clause 19.2 of
the Sponsor Support Agreement, is agreed upon to provide a Pricing Forecast
Report for the purposes of the preparation of a particular Annual Bank Case;
"Market Consultancy Services Agreement" means the agreement dated or to be
dated on or prior to the Effective Date between the Market Consultant, the
Company, the Sponsors, the Intercreditor Agent and the Modelling Bank;
"Marketing Agreements" means the PE Sales Support Agreement, the Polyethylene
Marketing Agreement, the Ethylene Glycol Marketing Agreement, and the Ethylene
Glycol Marketing Services Agreement;
"Mark-up" means, in connection with the Lease and at any time, such amount as
shall be calculated in accordance with the letter of even date herewith from
the Lessor to the Intercreditor Agent and the Company;
"Master Accounts" means each of the accounts in London so designated (each by
reference to a particular currency) in the name of the Company and held with
the Account Bank;
"Material Loss" in relation to the Plant or any part thereof means any loss,
damage or destruction where the estimated cost of repair or restoration
exceeds $100,000,000;
"Maximum Drawing Amount" in respect of any Drawing Period means the amount
which the Technical Consultant considers, on the basis of information provided
to it by the Company which it shall have considered adequate for the purpose,
is equal to the amount of expenditure (including interest accruing on the Term
Loan Facility) falling within the Construction Budget which the Company will
make during such Drawing Period, net of the balance on the Disbursements
Account at the commencement of such Drawing Period;
"Mechanical Completion Test" means the test specified in Part 1 of the Seventh
Schedule to the Common Terms Agreement;
"Modelling Bank" means JP Morgan & Co. as modelling bank or such other person
appointed as such from time to time in accordance with Clause 45.2 of the
Common Terms Agreement;
"Net Debt" at any time means Term Outstandings less an amount equal to the
lower of:
(i) the maximum aggregate amount of Debt Service Payments (ignoring for
these purposes Debt Service Payments in respect of the Working Capital
Facility) for any future six month period as shown in the then current
Annual Bank Case; and
(ii) the sum of:
(a) the credit balance on the Debt Service Reserve Fund;
(b) the credit balance on the Excess Cash Flow Fund; and
(c) the undrawn balance of Additional Shareholder Contributions to the
extent covered by the Letters of Credit,
as determined by time to time by the Company and confirmed by the Modelling
Bank;
"Net Swap Receivables" means net swap payments receivable by the Company from
time to time under Approved Hedging Agreements;
"Net Swap Payments" means net swap payments payable by the Company from time
to time under Approved Hedging Agreement;
"Net Swap Receivables Account" means the account in London so designated in
the name of the Company and held with the Account Bank;
"Net Worth" of any company means its share capital and consolidated net
reserves, as those terms are interpreted in accordance with International
Accounting Standards;
"New Agent" means any financial institution which accedes as such to the
Common Terms Agreement and the Security Trust Agreement;
"New Facility" means any New Secured Facility or any New Unsecured Facility;
"New Loan Facility" means any New Facility pursuant to which a loan facility
is provided to the Company;
"New Secured Facility" means any Approved Hedging Agreement or any other
facility which would otherwise have been a New Unsecured Facility but for the
fact that (i) the Majority Term Banks have agreed that the relevant financiers
or hedging counterparty may share in the Security, (ii) a Designating
Instrument has been duly executed and delivered in respect thereof pursuant to
Clause 8 of the Security Trust Agreement and (iii) such financiers or such
hedging counterparty have executed an STA Deed of Accession and thereby become
party to the Security Trust Agreement as Primary Beneficiaries;
"New Term Facility" means any New Loan Facility other than a working capital
facility;
"New Unsecured Facility" means any facility (including a hedge facility and an
unsecured Approved FX/LC Facility but excluding any New Secured Facility) in
favour of the Company approved by the Majority Term Banks, provided each of
the financiers or the hedging counterparty thereunder shall have executed a
CTA Deed of Accession and thereby become party to the Common Terms Agreement
as a Bank;
"New York Accounts" means the Dollar Operations Account and the Disbursement
Account;
"New York Law Security Agreement" means the agreement entitled "New York
Assignment and Security Agreement" dated of even date herewith between the
Company, EMC and the Debt Trustee;
"Novation Date" shall have the meaning ascribed thereto in Clause 26.3(iii) of
the Sponsor Support Agreement;
"Obligors" means Boubyan, the Company, EMC, PIC, UCC and (for the purposes
only of the Security Trust Agreement and until the Primary Beneficiary Release
Date) the Lessor;
"Operating Expenses" means all costs and expenses (other than Subordinated
Liabilities) incurred or to be incurred in operating and maintaining the Plant
and the Site and the production, transportation and sale of Product and all
treasury and other legitimate business expenses of the Company relating to the
Project (and not, for the avoidance of doubt, relating to the Company's
obligations under the Polypropylene Agreements), including taxes payable by
the Company, mandatory contributions to KFAS, the fees payable by the Company
to the Political Risk Indemnitors under the Political Risk Indemnity, all
payments payable under Article 4.1(b) of the Contingent O&M Services Agreement
and all fees payable to, or indemnities given to any of the Function Banks in
respect of fees payable to, any of the Consultants;
"Operations Accounts" means the Dollar Operations Account, the Dinar
Operations Account and the Dinar Petty Cash Account;
"Operations Event of Force Majeure" means (i) an Event of Force Majeure under
any of the Project Documents (other than the Feedstock Supply Agreement), or
any other event beyond the reasonable control of any Obligor (other than an FS
Supported Interruption) which results in the Plant being unable to produce
substantially all of the Product assumed by the current Annual Bank Case to be
produced for a period exceeding seven days or (ii) any SVG Transportation
Force Majeure Event which prevents the Company being able to distribute
substantially all its Product to the relevant markets;
"Original Financial Statements" means:
(i) in relation to PIC, its audited financial statements for the year ended
30 June 1995 ; and
(ii) in relation to UCC, its audited financial statements for the year ended
31 December 1995;
"Outstandings" in relation to any Loan Facility means the aggregate principal
amount outstanding thereunder (which, for the avoidance of doubt, may include
capitalised interest) or, generally, the Lease Outstandings and the
Outstandings under all Loan Facilities together;
"Payment Dates" for the purposes of the Lease and the Term Loan means the
dates established as such under Clause 29 of the Common Terms Agreement;
"PE" means polyethylene;
"PE Applicable Amount" in relation to any Relevant PE Period means the
aggregate sums (if any) received by the Company (i) in respect of sales of PE,
other than by way of True Sales, during such Relevant PE Period and (ii) by
way of insurance proceeds in respect of PE lost or destroyed which shall have
been contracted to be sold;
"PE Licence Agreement" means the UNIPOL Polyethylene Technology Agreement
dated 28 May, 1996 between UCC and the Company;
"Permitted Investment" means:
(i) a certificate of deposit, promissory note or other debt security,
denominated in dollars and for which a recognised market exists and for
which quotations are readily available, which either:
(a) is issued or guaranteed by the Government of the United States of
America; or
(b) has a rating of not less than:
(i) in the case of a short term security, A1 by Standard &
Poor's Corporation or P1 if granted by Moody's Investors
Service, Inc.; or
(ii) in the case of a long term security, AA by Standard & Poor's
Corporation or Aa2 by Moody's Investors Service, Inc.;
(ii) a deposit in dollars callable on not more than twelve (12) months'
notice or otherwise maturing within twelve (12) months placed with the
London branch of a financial institution authorised by the Bank of
England some or all of the issued securities of which have a rating of
not less than:
(a) in the case of its short term securities, A1 by Standard & Poor's
Corporation or P1 by Moody's Investors Service, Inc.; and
(b) in the case of its long term securities, A+ by Standard & Poor's
Corporation or A1 by Moody's Investors Service; Inc.;
(iii) a certificate of deposit, promissory note or other debt security,
denominated in dollars maturing within twelve (12) months, issued by a
financial institution authorised by the Bank of England which has a
rating of not less than:
(a) in the case of its short term securities, A1 by Standard & Poor's
Corporation or P1 by Moody's Investors Service, Inc.; and
(b) in the case of its long term securities, A+ by Standard & Poor's
Corporation or A1 by Moody's Investors Service; Inc.; or
(iv) such other debt instrument or deposit as may be approved by the Approval
Group;
Provided that the above-mentioned instruments shall only be capable of being
Permitted Investments if capable of being valued in accordance with Clause
16.9 of the Common Terms Agreement;
"Permitted Investment Conditions" means
(i) all Permitted Investments will be registered or held in the name of the
Debt Trustee (or in the name of an Approved Custodian for account of the
Debt Trustee) and the Company will ensure that any person with whom any
investment is made places that investment in the name of the Debt
Trustee (or in the name of an Approved Custodian for account of the Debt
Trustee);
(ii) the Company will at all time procure that there are maintained a prudent
spread of Permitted Investments (and will, if so requested by the
Intercreditor Agent, demonstrate the same to its reasonable
satisfaction), will match the maturities of the Permitted Investments
made out of monies standing to the credit of each relevant Account and
shall liquidate (or procure that there are liquidated) Permitted
Investments to the extent necessary, for the purpose of payment of any
amount due under the Finance Documents;
(iii) all documents of title or other documentary evidence of ownership with
respect to Permitted Investments made out of any Account will be held in
the custody of the Account Bank for the Debt Trustee and, if any such
document or other evidence comes into the possession or control of the
Company, it shall procure that the same is to be promptly delivered to
the Account Bank on behalf of the Debt Trustee; and
(iv) all Permitted Investments held in Cedel shall be held through the
Account Bank in its capacity as an Approved Custodian;
"Permitted Investments Security Agreement" means the document so entitled
dated of even date hereof between the Company, EMC, the Debt Trustee and the
Account Bank as custodian;
"Permitted Lien" means
(i) liens arising as a matter of law in the ordinary course of such person's
business and for the purposes thereof; or
(ii) encumbrances as contemplated or created by the Finance Documents; or
(iii) pledges of goods, the related documents of title and/or other related
documents arising or created in the ordinary course of such person's
business as security for indebtedness to a bank or financial institution
directly relating to the goods or documents on or over which that pledge
exists; or
(iv) security arising out of title retention provisions in a supplier's
standard conditions of supply of goods acquired by such person in the
ordinary course of its business; or
(v) any other encumbrance created or outstanding with the prior consent of
the Majority Term Banks;
"Personnel Services Agreements" means:
(i) the Personnel Services Agreement of even date herewith between the
Company and PlC;
(ii) the Personnel Services Agreement of even date herewith between the
Company and UCC;
(iii) the Secondment Agreement of even date herewith between the Company and
PIC; and
(iv) the Secondment Agreement of even date herewith between the Company and
UCC;
"PE Sales Support Agreement" means the UCC PE Support Agreement dated 28 May,
1996 between UCC and the Company;
"PE Sales Volume Shortfall" in relation to any Relevant PE Period means the
Guaranteed PE Sales Volume for such Relevant PE Period less (but not so as to
produce a negative figure) the Actual PE Sales Volume for such Relevant PE
Period;
"PE Start-up" means Start-up as defined in the PE Licence Agreement;
"PE Units" means the two process units to be constructed as part of the
Project designed to produce together PE at the rate of at least 450,000 tonnes
per annum;
"PIC" means Petrochemical Industries Company, K.S.C.;
"PIC Charged EMC Securities" means (i) all rights, title and interest of PIC
in and to the PIC EMC Shares (and all dividends, distributions, interest or
other monies paid or payable thereon), (ii) all stocks, shares, warrants,
rights, monies or property (and the dividends, distributions, interest or
other monies paid or payable thereon) accruing or acquired at any time and
from time to time by way of redemption, purchase, bonus, preference, option or
otherwise to or in respect of or derived from all or any of the PIC EMC Shares
or any derivative thereof and (iii) any cash or other consideration for the
time being forming part of the net proceeds of sale of any of the above
mentioned property;
"PIC Current Ratio" means the ratio of PIC's consolidated current assets to
its consolidated current liabilities, as those terms are interpreted in
accordance with generally accepted international accounting standards;
"PIC EMC Shares" means the shares in EMC details of which are set out in the
First Schedule to the PIC EMC Share Pledge Agreement;
"PIC EMC Share Pledge Agreement" means the Deposit and Pledge Agreement of
even date herewith between PIC and the Debt Trustee relating to the PIC EMC
Shares;
"PIC Leverage Ratio" means the ratio of all PIC's consolidated liabilities
(including all contingent liabilities whether or not noted on any financial
statements of PIC and also, for this purpose, its commitments to make
Additional Shareholder Contributions) to its Net Worth;
"PIC Subordinated Loan Agreement" means the $220,000,000 loan agreement dated
30 April, 1996 between PIC and the Company;
"Plant" means the Units and the other Project Assets and facilities on the
Site designed for the purposes of the Project;
"Plant Completion Date" means the first date on which all the Plant Completion
Tests shall have been satisfied (provided that (i) the Company shall have no
more than five opportunities to satisfy any of the Plant Completion Tests and
(ii) the Plant Completion Date shall not be capable of occurring after 30
September, 2000);
"Plant Completion Tests" means the Mechanical Completion Test, the Unit
Performance Tests and the Reliability Test;
"Political Risk Agent" means National Bank of Kuwait S.A.K. in its capacity as
administrative agent under the Political Risk Indemnity;
"Political Risk Indemnity" means the agreement so entitled of even date
herewith between UCC, the Company, the Political Risk Agent and certain
financial institutions;
"Political Risk Indemnitors" means the financial institutions which are party
to the Political Risk Indemnity as indemnitors of UCC;
"Polyethylene Marketing Agreement" means the agreement so entitled dated as of
28 May 1996 between the Company and EMC;
"Polypropylene Agreements" means:
(i) the Equate Material Supply Agreement dated on or about the Effective
Date between the Company and PIC; and
(ii) the Operation and Maintenance Services Agreement dated on or about the
Effective Date between the Company and PIC;
"Polypropylene Operations Account" means an account in the name of the
Company and held with National Bank of Kuwait S.A.K. for the purpose of
holding advance payments from PIC in respect of the Company's services under
any Polypropylene Agreement (or such other account as the Company may from
time to time open and maintain for the same purpose provided that the Company
has notified the Intercreditor Agent thereof);
"Potential Event of Default" means any event which will (assuming no
intervening remedy or waiver), with the passage of time and/or the giving of
notice and/or the making of any required determination, become an Event of
Default;
"Pricing Forecast Report" means each project pricing forecast provided or, as
the case may be, to be provided by the Market Consultant or an Alternate
Market Consultant, containing relevant economic assumptions in relation to the
Project and the sale of Product and to be utilised by the Company in preparing
Annual Bank Cases in accordance with Clause 15 of the Common Terms Agreement;
"Primary Beneficiaries" means any of the Agents, the Trustees, the Arrangers,
the Underwriters, the Banks, the Function Banks, the Approved Hedging
Counterparties and any other party providing financial accommodation under a
New Secured Facility;
"Primary Beneficiary Release Date" means the date upon which the Secured
Obligations owed to the Primary Beneficiaries have been fully and finally
discharged and none of the Primary Beneficiaries is under any commitment,
obligation or liability (whether actual or contingent) to make advances or
provide other financial accommodation to the Company;
"Primary Trustees" means the Debt Trustee and the Project Assets Security
Trustee;
"Principal Documents" means the Finance Documents and the Principal Project
Documents;
"Principal Markets" means Europe, the Far East (Taiwan and Japan) and the
Middle East;
"Principal Products" means:
(i) in the case of EG, fibre grade monoethylene glycol and diethylene
glycol; and
(ii) in the case of PE, film grade LLPDE and injection moulding grade HDPE;
"Principal Project Documents" means:
(i) the EPC Contracts;
(ii) the Management Contracts;
(iii) the Marketing Agreements;
(iv) the Technology Agreements;
(v) the Feedstock Supply Agreement;
(vi) the Catalyst Supply Agreements;
(vii) the Licences;
(viii) the Subordinated Loan Agreements;
(ix) the Utility Agreements;
(x) the Personnel Services Agreements;
(xi) the Joint Venture Agreement;
(xii) the Assignment and Assumption Agreements;
(xiii) the Political Risk Indemnity;
(xiv) any Polypropylene Agreements;
(xv) the Eligible Sponsor Sale Agreements (if any);
(xvi) the Liquid Air Contract;
(xvii) all sales agency contracts relating to the sale of Product; and
(xviii) each contract between the Company and any other person under which
such other person is to supply to the Company goods and/or services
having an approximate contract value in excess of $10,000,000;
"Priority Distributions Account Credits" means payments into the Distributions
Account pursuant to Clause 17.1(vi) of the Common Terms Agreement;
"Proceeds" means all receipts or recoveries by either Trustee (or by any of
the Obligors and paid over to either Trustee) pursuant to, or upon enforcement
of, any of the Rights and all other monies which are by the terms of any of
the Finance Documents to be applied in accordance with Clause 3.2 of the
Security Trust Agreement, (excluding any such sums which have been paid by the
Debt Trustee to the credit of any suspense account and which are for the time
being standing to the credit of such account, but including any sums withdrawn
from any such account by the Debt Trustee for the purpose of further applying
the same in accordance with Clause 3.2 of the Security Trust Agreement), after
deducting (to the extent not already deducted or retained prior to such
receipt or recovery by either Trustee):
(i) all sums which are by law or contract payable to any Receiver;
(ii) all sums which such Trustee is required by the terms of any of the
Security Documents to pay to any other person before any such receipts
or recoveries are to be available to any of the Beneficiaries and/or
discharging any of the obligations secured thereby; and
(iii) all sums which such Trustee is by law required to pay to any person in
priority to the Beneficiaries;
"Proceeds Account" means any account in London in the name of the Debt
Trustee, the Project Assets Security Trustee or the Residual Trustee opened by
it for the purposes of the Security Trust Agreement;
"Product" means all commercially saleable petrochemical products produced at
the Plant;
"Profit Element" in relation to a Lease Payment means (subject to Clause 2.5
of the Lease) an amount equal to the Profit Element Reference Amount
multiplied by the sum of LIBOR for the period covered by such Lease Payment
and the Applicable Margin (expressed as a percentage rate per annum),
multiplied further by the number of days in such period and divided by 360;
"Profit Element Reference Amount" means the sum of (i) all Drawings under the
Sale Agreement and (ii) all reductions of the Available Lease Facility under
Clause 2.5 of the Common Terms Agreement less the aggregate (a) all payments
of the Reimbursement Elements of all Lease Payments under the Lease and (b) of
all prepayments of the Reimbursement Elements of the Lease Payments under
Clauses 4 and 5 of the Common Terms Agreement (or, if the Actual Lease
Drawings (and hence the final amount of the Reimbursement Elements of the
Lease Payments) have yet to be calculated, all amounts paid to the Lessor
which in accordance with Clause 5.7 of the Common Terms Agreement constitute
rentals);
"Project" means the design, financing, construction and operation of an
olefins complex in Shuaiba, Kuwait with a production capability of 650,000
tonnes per year of ethylene, 450,000 tonnes per year of PE and 340,000 tonnes
per year of EG and the sale of Product produced thereby;
"Project Assets" means all physical assets acquired and to be acquired by the
Company for the purposes of the Project, whether by purchase or lease;
"Project Assets Security Trustee" means National Bank of Kuwait S.A.K. as
project assets security trustee or such other person appointed as such from
time to time under the Security Trust Agreement;
"Project Capitalisation" at any time means the aggregate of:
(i) Total Debt;
(ii) Initial Shareholder Contributions and Extraordinary Shareholder
Contributions (as reduced by repayments of Subordinated Liabilities and any
permitted redemptions of the equity element of the Initial Shareholder
Contributions or any Extraordinary Shareholder Contributions); and
(iii) any net positive shareholder reserves in the Company (as demonstrated by
the most recently delivered financial statements delivered by the Company),
in each case as at such time;
"Project Costs" means the aggregate of:
(i) all capital costs (determined in accordance with International
Accounting Standards) of whatever nature incurred by the Company in
connection with the Project prior to the first date on which a Sponsor
is released from its obligations under Clauses 2 and 3 of the Completion
Guarantee, including the full capital cost of all Project Assets
acquired under finance leases;
(ii) to the extent not included in (i) above, and to the extent capitalised
by the Company, the landed costs of Project-related equipment and
facilities, construction and installation expenditure (including re-
work, engineering, testing and pre-production expenses), payments under
Approved Hedging Agreements (taken as a positive sum for Net Swap
Payments and as a negative sum for Net Swap Receivables), interest,
duties, taxes, management and commitment fees and other interim
expenditure, in each case incurred by the Company prior to the first
date on which a Sponsor is released from its obligations under Clauses 2
and 3 of the Completion Guarantee,
(iii) to the extent not included in (i) or (ii) above, the capitalised cost to
the Company of the Technology Licensing, such cost being $220,000,000;
and
(iv) (whether or not capitalised by the Company) all preliminary Operating
Expenses related to the Project incurred prior to the first date on
which a Sponsor is released from its obligations under Clauses 2 and 3
of the Completion Guarantee, to the extent provided for in the
Construction Budget
Provided that
(a) the cost referred to in (iii) above shall be treated as incurred
after all other Project Costs for the purposes of Clause 2.2(v) of the
Common Terms Agreement and Clause 5(i) of the Sponsor Support Agreement;
and
(b) Project Costs shall not include any costs relating to the
provision of materials, utilities, and/or services under the
Polypropylene Agreements;
"Project Documents" means all the Principal Project Documents and all other
agreements (other than any of the Finance Documents) whereunder any person is
to provide services or supply goods for the purposes of the Project or to
market Product produced by the Project on behalf of the Company or EMC;
"Property Damage Insurance Account" means the account in London so designated
in the name of the Company and held with the Account Bank;
"Purchaser" means Kuwait Finance House K.S.C. or such other person party to
the Sale Agreement from time to time as purchaser;
"Quotation Date" means, in relation to any date on which an interest rate is
to be determined, the day on which quotation would ordinarily be given by
prime banks in the relevant market for deposits in the relevant currency for
delivery on the first day of that period Provided that, if for such period
quotations would ordinarily be given on more than one date, it shall be the
last of those dates;
"Receiver" means a receiver and/or manager, administrative receiver, trustee
or similar officer appointed by a Trustee pursuant to any of the Security
Documents or by any court for the purposes of realising, getting in or
disposing of any of the assets or revenues the subject of any of the Security;
"Recognised PE Sales" means sales of PE by UCC into the UCC Territory
satisfying in whole or in part its obligations under the PE Sales Support
Agreement, during the period of twelve consecutive months (the "First PE
Period") immediately preceding a twelve month period (the "Second PE Period")
in respect of which either of the following conditions shall be satisfied,
namely:
(i) EMC shall have entered into an agreement with an independent third party
whereby such third party shall have achieved sales of PE in the UCC
Territory during the Second PE Period of an aggregate volume of PE at
least equal to that sold by UCC in the UCC Territory during the First PE
period; or
(ii) EMC shall, through its own sales organisation, have achieved sales of PE
in the UCC Territory during the Second PE Period of an aggregate volume
of PE at least equal to that sold by UCC in the UCC Territory during the
First PE Period;
"Reference Banks" means (for the purposes of determining LIBOR) the principal
London offices of Citibank, N.A., The Chase Manhattan Bank, National Bank of
Kuwait S.A.K. and Gulf International Bank B.S.C. and (for the purposes of
determining KIBOR) the principal Kuwait City offices of National Bank of
Kuwait S.A.K., The Gulf Bank K.S.C. and Burgan Bank S.A.K.;
"Regional Accounts" means:
(i) each account opened by the Company from time to time and designated by
the Company as a Regional Account :
(a) over which effective security has been granted and perfected by
the Company and EMC in favour of the Debt Trustee (for and on
behalf of the Primary Beneficiaries), and acknowledged by the
account bank, on terms and conditions approved by the Approval
Group;
(b) in respect of which the Debt Trustee (for and on behalf of the
Primary Beneficiaries) has received legal opinions in form and
substance satisfactory to the Approval Group from counsel in all
relevant jurisdictions confirming that effective security has been
granted over such account;
(c) in respect of which the proposed regional account bank, the
Company and the Approval Group have reached agreement as to:
(1) the timing and manner of the clearing of such account, once
a month, to one of the Master Accounts; and
(2) the procedures for the settlement from such account of
forward foreign exchange contracts for the purchase of
dollars or dinars; and
(d) in respect of which the proposed regional account bank has agreed
that it shall only permit withdrawals by the Company as referred
to in (c) above or otherwise with the approval of the
Intercreditor Agent or, following its receipt of notification by
the Debt Trustee of the occurrence of an Event of Default, upon
the instruction of the Debt Trustee,
unless, in any case, the Intercreditor Agent (acting reasonably) or (following
the occurrence of an Event of Default which has not been waived by the
Majority Term Banks or remedied) the Debt Trustee notifies the Company that
such account may no longer be used as a Regional Account;
"Regional Account Bank" means a bank with which a Regional Account is held;
"Reimbursement Element" of any Lease Payment means an amount equal to the
Tranche A Reimbursement Element and the Tranche B Reimbursement Element
thereof;
"Relevant Approval Body" means:
(i) (at all times prior to the Primary Beneficiary Release Date) the
Majority Term Banks (or, in circumstances where the Political Risk
Indemnitors in their capacity as Term Banks are, in accordance
with Clause 57 of the Common Terms Agreement, precluded from
voting on Relevant Decisions (as defined in Clause 57 of the
Common Terms Agreement), the Non-Political Risk Majority (as
defined in that Clause);
(ii) (at all times after the Primary Beneficiary Release Date but prior
to the Intermediate Release Date) the Political Risk Agent; and
(iii) (at all times after the Intermediate Release Date but prior to the
Final Release Date) the Residual Trustee;
"Relevant EG Period" means a period specified in Column 1 of the Second
Schedule to the Sales Volume Guarantee;
"Relevant PE Period" means a period specified in Column 1 of the First
Schedule to the Sales Volume Guarantee;
"Reliability Test" means the process specified in Part 3 of the Seventh
Schedule to the Common Terms Agreement;
"Residual Trustee" means EMC in its capacity as residual trustee for the
Tertiary Beneficiaries under the Security Trust Agreement;
"Respective Percentage" means, in the case of PIC, 55 per cent. and, in the
case of UCC, 45 per cent.;
"Rights" means the Security, all Contractual Rights, all rights vested by law
in the Trustees by virtue of their holding the Security and all rights to make
demands, bring proceedings or take any other action in respect thereof;
"Royalty Payment" means any payment of royalties or technology fees under any
of the Technology Agreements;
"Sale Agreement" means the agreement so entitled dated of even date herewith
between the Company and the Lessor;
"Sales Volume Guarantee" means the agreement so entitled dated of even date
herewith between UCC, PIC, the Company, the Debt Trustee and the
Intercreditor Agent;
"Screen Rates" for the purposes of the definition of "LIBOR" means:
(i) the page LIBO of the Reuter Monitor Money Rates Service for the display
of London Interbank Offered Rates for dollars (or, if such page or such
service shall cease to be available, such other page or such other
service (as the case may be) for the purpose of displaying London
Interbank Offered Rates for dollars as the Intercreditor Agent, after
consultation with the Term Banks and the Company, shall select); or
(ii) if less than two quotations for the relevant period are displayed and
the Intercreditor Agent has not selected an alternative service on which
two or more such quotations are displayed the rates (as notified to the
Intercreditor Agent) at which each of the Reference Banks was offering
to prime banks in the London Interbank Market deposits in dollars and
for such period at or about 11.00 a.m. (London time) on the Quotation
Date for such period;
"Second Bridge Facility" means the $200,000,000 bridge facility made available
to the Company pursuant to a facility agreement dated 19 August 1996 between
the Company as borrower, the Bridge Agent and the financial institutions named
therein;
"Second Bridge Lenders" means the lenders under the Second Bridge Facility;
"Secondary Beneficiaries" means, with effect from the Primary Beneficiary
Release Date and at all times thereafter until the Intermediate Release Date,
PIC and the Political Risk Indemnitors;
"Second Deed of Transfer" means the deed of transfer dated of even date
herewith between the Project Assets Security Trustee and the Residual Trustee
pursuant to which all the rights, title and interest of the Project Assets
Security Trustee in the Trust Property (if any) will, subject to the terms
thereof, be transferred to the Residual Trustee on the Intermediate Release
Date;
"Secured Obligations" means (i) all of the present and future, and actual and
contingent, obligations of the Company under the Finance Documents owed to the
Primary Beneficiaries and (ii) all such obligations owed by the Company to
PIC, UCC and the Political Risk Indemnitors (to the extent that there are any)
arising as a result of any payments made by the Sponsors to the Primary
Beneficiaries under the Completion Guarantee or of any payments made by the
Political Risk Indemnitors to UCC under the Political Risk Indemnity whether
by way of set-off or otherwise;
"Security" means all encumbrances constituted or created by the Security
Documents;
"Security Documents" means each of the following:
(i) the Kuwait Law Security Agreements;
(ii) the English Law Security Agreement;
(iii) the New York Law Security Agreement;
(iv) the Deed of Subordination;
(v) any security agreement entered into from time to time in respect of
Regional Accounts or Collection Accounts;
(vi) the UCC EMC Share Pledge Agreement;
(vii) the PIC EMC Share Pledge Agreement;
(viii) the Permitted Investments Security Agreement;
(ix) the Completion Guarantee;
(x) the Bahrain account assignment agreement of even date herewith between
EMC and the Debt Trustee;
(xi) any other agreement pursuant to which security is granted to either
Primary Trustee from time to time to secure the Secured Obligations,
and all notices and acknowledgements required to be executed or delivered in
connection therewith;
"Security Period" means the period commencing on the date of this Agreement
and terminating on the Final Release Date;
"Security Trust Agreement" means the agreement so entitled dated of even date
herewith between the Company, EMC, the Sponsors, the Trustees, the Agents, the
Political Risk Agent, the Lessor, the Term Loan Banks, the Working Capital
Banks and the Political Risk Indemnitors;
"Senior Creditors" means:
(i) up until and including the Primary Beneficiary Release Date, the Primary
Beneficiaries; and
(ii) after the Primary Beneficiary Release Date until and including the
Intermediate Release Date, the Political Risk Indemnitors and (to the
extent that it shall be owed Secured Obligations by virtue of payments
by it under the Completion Guarantee), PIC;
"Senior Liabilities" means (a) (up until and including the Primary Beneficiary
Release Date) all Secured Obligations owed to the Primary Beneficiaries and
(b) (after the Primary Beneficiary Release Date) any amounts owed by the
Company to the Sponsors and/or the Political Risk Indemnitors arising as a
result of any payments made by the Sponsors to the Primary Beneficiaries under
the Completion Guarantee or payments made by the Political Risk Indemnitors to
UCC under the Political Risk Indemnity by way of set-off or otherwise;
"Shareholders" means Boubyan, PIC and UCC;
"Shareholder Contributions" means any of the Initial Shareholder
Contributions, the Additional Shareholder Contributions and any Extraordinary
Shareholder Contributions;
"Site" means the area within the Shuaiba Industrial Area described in the Land
Licence;
"Sponsor Documents" means all the Documents to which either or both of the
Sponsors are party;
"Sponsors" means PIC and UCC;
"Sponsor Support Agreement" means the agreement so entitled of even date
herewith between the Sponsors, the Company, EMC, the Debt Trustee and the
Intercreditor Agent;
"Start-up" means the first day on which the Plant shall have operated at an
annual rate of 337,500 tonnes of PE and 255,000 tonnes of EG for seven
consecutive days, whilst meeting product quality standards throughout, as
determined by the Technical Bank after consulting the Technical Consultant and
the Company;
"STA Deed of Accession" means a deed of accession in the form set out in the
Fifth Schedule to the Security Trust Agreement;
"Step-in Date" shall have the meaning ascribed thereto in Clause 25.3 of the
Sponsor Support Agreement;
"Step-in Documents" means the Feedstock Supply Agreement, the Feedstock
Interruption Agreement, the Sales Volume Guarantee, the PE Licence Agreement,
the EG Licence Agreement, the Catalyst Supply Agreements, the Marketing
Agreements, the Contingent O & M Services Agreement and any other Document
entered into from time to time between either or both of the Sponsors and
either or both of EMC and the Company, or between EMC and the Company;
"STR Suspension Period" shall have the meaning ascribed thereto in Clause 23.1
of the Sponsor Support Agreement;
"Subordinated Creditors" means:
(i) up until and including the Primary Beneficiary Release Date, the
Shareholders and the Political Risk Indemnitors;
(ii) after the Primary Beneficiary Release Date up until and including
the Intermediate Release Date, the Shareholders (save, in the case
of PIC, to the extent of any Secured Obligations owed to it by
virtue of payments made by it under the Completion Guarantee);
"Subordinated Liabilities" means any present and future sums, liabilities and
obligations whatsoever (actual or contingent) payable, owing due or incurred
by the Company to any Shareholder under or in relation to any of the
Subordinated Loan Agreements, the Finance Documents, the Technology
Agreements, Article 4.1(a) of the Contingent O&M Services Agreement and any
Polypropylene Agreement (including, without limitation, until the Primary
Beneficiary Release Date, any amounts owed by the Company to the Sponsors
and/or the Political Risk Indemnitors arising as a result of any payments made
by the Sponsors to the Primary Beneficiaries under the Completion Guarantee or
payments made by the Political Risk Indemnitors to UCC under the Political
Risk Indemnity by way of set-off or otherwise), but excluding any FS Loans or
interest payable thereon Provided that the following payments to UCC under the
Technology Agreements shall not constitute Subordinated Liabilities:
(i) any costs and expenses incurred by UCC in providing goods and/or
services pursuant to the Technology Agreements which the Company is
obliged to reimburse to UCC thereunder; and
(ii) any increase in the Royalty Payments payable to UCC under the Technology
Agreements which relate to improvements in the licensed processes the
subject thereof, which are covered by any Annual Budget;
"Subordinated Loan Agreements" means:
(i) the PIC Subordinated Loan Agreement";
(ii) the Boubyan Subordinated Loan Agreement; and
(iii) the Cost Overrun Facility Agreement;
"Substitute Company" any person who, from time to time, becomes an additional
party to the Sponsor Support Agreement and a party (in place of the Company
and/or EMC) to one or more Step-in Documents, in accordance with Clause 26.1
of the Sponsor Support Agreement;
"Supplier" in relation to any Lease Asset means the person which shall have
contracted to supply the same to the Company;
"SVG Transportation Force Majeure Event" means an occurrence, beyond the
reasonable control of the Company, EMC and the Sponsors, which consists of an
act of God, fire, flood, war, blockade, voluntary or involuntary compliance
with acts or regulations of governmental agencies and authorities, or strikes
or labour disputes (except where the same relate only to personnel of the
Company, EMC or either Sponsor) which:
(i) affects Kuwait, the Arabian Gulf or the Straits of Hormuz and prevents
the transportation of Product out of Kuwait; or
(ii) affects any dispatched shipment of Product and prevents delivery of such
Product to the intended purchasers;
"Target EG Sales Volume" in relation to any Relevant EG Period means the
target sales volume (in tonnes) of EG specified for such Relevant EG Period in
Column 2 of the Second Schedule to the Sales Volume Guarantee;
"Target PE Sales Volume" in relation to any Relevant PE Period means the
target sales volume (in tonnes) of PE specified for such Relevant PE Period in
Column 2 of the First Schedule to the Sales Volume Guarantee;
"Technology Agreements" means:
(i) the PE Licence Agreement;
(ii) the EG Licence Agreement;
(iii) the Olefin Technology Agreement dated as of 5 April 1994 as amended by a
letter effective as of 10 May 1995 between Brown & Root International
Inc., Union Carbide Chemicals and Plastics Company Inc. and PIC as
assigned by the Sponsors to the Company pursuant to the Assignment and
Assumption Agreement governed by New York law;
(iv) the Alphabutol Technology Agreement dated as of 15 January, 1995 between
Institut Francais du Petrole, UCC and PIC as assigned by the Sponsors to
the Company pursuant to the Assignment and Assumption Agreement governed
by New York law;
(v) the Amine Guard System License Agreement dated or to be dated on or
before the Effective Date between UOP and the Company; and
(vi) the Benfield Technology License Agreement dated or to be dated on or
before the Effective Date between UOP and the Company;
"Technical Bank" means Arab Petroleum Investments Corporation (APICORP) as
technical bank or such other person appointed as such from time to time in
accordance with Clause 45.2 of the Common Terms Agreement;
"Technical Consultant" means The Pace Consultants Inc. or any other person
appointed as such in connection with the Project and approved by the Majority
Term Banks;
"Technology Licensing" means the licensing by UCC to the Company of technology
under the PE Licence Agreement and the EG Licence Agreement in return for
Royalty Payments;
"Term" in relation to any Working Capital Advance means, save as otherwise
provided in the Working Capital Facility Agreement, the period for which such
Working Capital Advance is borrowed Provided that, if any event contemplated
by Clauses 32(xiii) or 32(xiv) of the Common Terms Agreement occurs, the term
of such Working Capital Advance shall be extended to the Working Capital
Maturity Date;
"Term Banks" means the Term Loan Banks and the Lessor;
"Term Facilities" means the Term Loan Facility and the Lease Facility;
"Term Facilities Notice of Drawdown" means a notice of drawdown in the form
set out in the Sixth Schedule to the Common Terms Agreement;
"Term Loan" means the principal amount outstanding from time to time under the
Term Loan Facility;
"Term Loan Advance" means, save as otherwise provided in the Term Loan
Facility Agreement, an advance made or to be made by the Term Loan Banks under
the Term Loan Facility (or, as the case may be, the principal amount thereof
outstanding from time to time);
"Term Loan Arrangers" means the Arrangers other than the Lessor;
"Term Loan Banks" means the Tranche A Term Loan Banks and the Tranche B Term
Loan Banks;
"Term Loan Facility Agreement" means the agreement so entitled of even date
herewith between the Company, the Facility Agent, the Term Loan Arrangers, the
Term Loan Underwriters and the Term Loan Banks;
"Term Loan Facility" means the loan facility made available by the Term Loan
Banks pursuant to the Term Loan Facility Agreement;
"Term Loan Underwriters" means the Underwriters other than the Lessor;
"Term Outstandings" means the Lease Outstandings and the Outstandings under
the Term Loan Facility and any New Term Facility;
"Tertiary Beneficiaries" means, with effect from the Intermediate Release Date
and at all times thereafter until the Final Release Date, PIC and UCC in their
respective capacities as guarantors under the Completion Guarantee;
"Total Debt" means the aggregate of all Outstandings and the principal amounts
actually owed by the Company to any other persons constituting Indebtedness
for Borrowed Money (other than Subordinated Liabilities);
"Total Expropriation" means any acts attributable to a governmental authority,
in violation of international law, that deprive a Sponsor and its Affiliates
(to the extent any Affiliate has an interest in the Project) of their
fundamental rights in their investments in the Project ("fundamental rights"
meaning rights the deprivation of which substantially deprive a Sponsor and
its Affiliates of the benefits of their investments);
"Total Project Costs" means the aggregate of all Project Costs incurred by the
Company in connection with the Project up to the first date upon which either
Sponsor is released from its obligations under Clauses 2 and 3 of the
Completion Guarantee (or, if earlier, 30 September, 2000);
"Tranche A" in relation to the Term Loan or the Term Loan Facility means the
portion thereof so designated under the Term Loan Facility Agreement;
"Tranche A Reimbursement Element" in relation to any Lease Payment means the
sum of:
(i) one half of the Imputed Lease Drawings (or, after they have been
ascertained, one half of the Actual Lease Drawings), divided by
seventeen; and
(ii) in the case only of the first Lease Payment after the Actual Lease
Drawings have been ascertained, one half of the Lease Payments
Adjustment (expressed as a negative figure if the Actual Lease Drawings
are less than the Imputed Lease Drawings);
"Tranche A Term Loan Adjustment" means the difference between:
(i) the aggregate of all instalments of Tranche A of the Term Loan repaid in
accordance with Clause 9 of the Term Loan Agreement before the Actual
Tranche A Term Loan Drawings shall have been ascertained; and
(ii) what would have been the aggregate of such instalments of Tranche A of
the Term Loan had the Imputed Tranche A Term Loan Drawings equalled the
Actual Tranche A Term Loan Drawings;
"Tranche A Term Loan Banks" means the lenders making Tranche A of the Term
Loan Facility available under the Term Loan Facility Agreement;
"Tranche B Final Maturity Date" means 31 March 2005;
"Tranche B" in relation to the Term Loan or the Term Loan Facility means the
portion thereof so designated under the Term Loan Facility Agreement;
"Tranche B Reimbursement Element" in relation to any Lease Payment means the
sum of:
(i) one half of the Imputed Lease Drawings (or, after they have been
ascertained, one half of the Actual Lease Drawings), divided by
thirteen; and
(ii) in the case only of the first Lease Payment after the Actual Lease
Drawings have been ascertained, one half of the Lease Payments
Adjustment (expressed as a negative figure if the Actual Lease Drawings
are less than the Imputed Lease Drawings);
"Tranche B Term Loan Adjustment" means the difference between:
(i) the aggregate of all instalments of Tranche B of the Term Loan repaid in
accordance with Clause 9 of the Term Loan Agreement before the Actual
Tranche B Term Loan Drawings shall have been ascertained; and
(ii) what would have been the aggregate of such instalments of Tranche B of
the Term Loan had the Imputed Tranche B Term Loan Drawings equalled the
Actual Tranche B Term Loan Drawings;
"Tranche B Term Loan Banks" means the lenders making Tranche B of the Term
Loan Facility available under the Term Loan Facility Agreement;
"Transfer Certificate" means in relation to any Bank the form of certificate
required to be executed under its Facility Agreement to effect a transfer of
all or part of such Bank's rights, benefits and obligations to a Transferee;
"Transfer Date" means in relation to any Transfer Certificate the date for the
making of the transfer as specified in such Transfer Certificate;
"Transferee" in relation to a Bank means a bank or other financial institution
to which such Bank seeks to transfer all or part of its rights, benefits and
obligations under its Facility Agreement;
"True Sale" in relation to any sale by the Company of any given volume of EG
or PE produced by the Plant means a sale where:
(i) the sale price for such volume of EG or, as the case may be, PE is no
less than the then prevailing price for EG or, as the case may be, PE in
the relevant markets therefor at the time of the contract for such sale;
and
(ii) the terms and conditions of the sale are consistent with market practice
for the relevant market;
"Trustee" means either the Projects Assets Security Trustee or the Debt
Trustee, and "Trustees" means both of them;
"Trust Property" means the Rights, the Proceeds and all Proceeds Accounts;
"UCC" means Union Carbide Corporation;
"UCC Charged EMC Securities" means (i) all rights, title and interest of UCC
in and to the UCC EMC Shares (and all dividends, distributions, interest or
other monies paid or payable thereon), (ii) all stocks, shares, warrants,
rights, monies or property (and the dividends, distributions, interest or
other monies paid or payable thereon) accruing or acquired at any time and
from time to time by way of redemption, purchase, bonus, preference, option or
otherwise to or in respect of or derived from all or any of the UCC EMC Shares
or any derivative thereof and (iii) any cash or other consideration from the
time being forming part of the net proceeds of sale of any of the above
mentioned property;
"UCC EMC Share Pledge Agreement" means the Deposit and Pledge Agreement of
even date herewith between UCC and the Debt Trustee relating to the UCC EMC
Shares;
"UCC EMC Shares" means the shares in EMC details of which are set out in the
First Schedule to the UCC EMC Share Pledge Agreement;
"UCC Territory" means the countries for which UCC is appointed the Company's
exclusive sub-agent for sales of PE;
"Underwriters" means the persons named as such in the Common Terms Agreement;
"Unit" means any of the Butene-1 Unit, the Ethylene Unit, the EG Unit and the
PE Units;
"Unit Performance Tests" means the series of individual operating tests
specified in Part 2 of the Seventh Schedule to the Common Terms Agreement;
"Utility Agreements" means:
(i) the Cooling Water Supply Agreement dated or to be dated on or prior to
the Effective Date between the General Administration of the Shuaiba
Area Authority and the Company;
(ii) the Power Supply Letter dated 12 July 1994 from the Ministry of
Electricity and Water of Kuwait to PIC; and
(iii) the Utilities and Services Letter dated or to be dated on or prior to
the Effective Date from Shuaiba Area Authority to the Company;
"WC Notice of Drawdown" means a notice of drawdown in the form set out in the
Third Schedule to the Working Capital Facility Agreement;
"WC Repayment Date" means, in relation to any Working Capital Advance, the
last day of the Term thereof;
"Working Capital" means the sum of:
(i) the balance on the Operations Accounts;
(ii) the Company's inventory of raw materials, spare parts (other than its
capital stock of spare parts), work in progress and unsold Product;
(iii) the amount of the Company's receivables (adjusted for bad and doubtful
debts in respect of sales of Product);
(iv) all prepaid expenses and security deposits; and
(v) in respect of the first two months of the first Annual Budget, the
amount of the Initial Working Capital;
less sums owed to trade creditors, all (other than paragraph (v) above) as
calculated in accordance with International Accounting Standards and the bases
of valuation applied in the Company's audited financial statements;
"Working Capital Advance" means, save as otherwise provided in the Working
Capital Facility Agreement, an advance made or to be made by the Working
Capital Banks under the Working Capital Facility (or, as the case may be, the
principal amount thereof outstanding from time to time);
"Working Capital Agent" means National Bank of Kuwait S.A.K. as working
capital agent or such other person appointed as such from time to time under
the Working Capital Facility Agreement;
"Working Capital Banks" means the financial institutions which are party to
the Working Capital Facility Agreement as lenders;
"Working Capital Facility" means the facility provided to the Company under
the Working Capital Facility Agreement;
"Working Capital Facility Agreement" means the agreement so entitled of even
date herewith between the Company, the Working Capital Facility Agent and the
Working Capital Banks;
"Working Capital Loan" means the principal amount outstanding from time to
time under the Working Capital Facility; and
"Working Capital Maturity Date" means 30 September 2004.
Section 2 - Rules of Interpretation and Construction
2.1 References to:
"this Agreement", "this Assignment", "this Deed" or "this Schedule" shall be
construed as references to the agreement or document or Schedule in which such
reference appears together with all recitals and Schedules thereto;
an "Annex" or an "Appendix" or a "Schedule" shall, subject to any contrary
indication, be construed as a reference to an annex or appendix or schedule of
or to the agreement or document in which such reference appears;
a "business day" shall be construed as a reference to a day on which banks are
generally open for business in London, New York and Kuwait City Provided
however that if any such reference includes a reference to a day on which
payment or purchase of any sum is due, then on such day, in addition to the
above requirements, banks must generally be open in the principal financial
centre of the country of such currency;
a "Clause" shall, subject to any contrary indication, be construed as a
reference to a clause of the agreement or document in which such reference
appears;
an "encumbrance" shall be construed as a reference to a mortgage, charge,
pledge, lien or other encumbrance of any kind whatsoever securing any
obligation of any person or any other type of preferential arrangement having
a similar effect (including, without limitation, title transfer and retention
arrangements but excluding the Lease Facility and its effects);
the "equivalent" on any given date in any currency (the "first currency") of
an amount denominated in another currency (the "second currency") is a
reference to the amount of the first currency which could be purchased with
the amount of the second currency at the spot rate of exchange (or spot cross
rates of exchange using dollars) quoted on the relevant page of the Reuters
Screen or, if no such rate of exchange is quoted, the rate of exchange quoted
by the relevant Agent at or about 11.00 a.m. on such date for the purchase of
the first currency with the second currency for delivery on the second
business day thereafter;
"hereunder", "herein" and similar expressions shall mean "under" or "in" the
agreement or document in which they appear and shall not be restricted to the
Clause or Schedule of the agreement or document in which they appear;
a "holding company" of a company or corporation shall be construed as a
reference to any company or corporation of which the first-mentioned company
or corporation is a subsidiary;
"indebtedness" shall be construed so as to include any obligation (whether
incurred as principal or as surety) for the payment or repayment of money,
whether present or future, actual or contingent;
"interest" shall be construed so as to include any financing charge or cost
(howsoever described) calculated with respect to the amount of any
Indebtedness for Borrowed Money and any period for which such indebtedness is
outstanding;
a "month" is a reference to a period starting on one day in a calendar month
and ending on the numerically corresponding day in the next succeeding
calendar month save that, where any such period would otherwise end on a day
which is not a business day, it shall end on the next succeeding business day,
unless that day falls in the calendar month succeeding that in which it would
otherwise have ended, in which case it shall end on the immediately preceding
business day Provided that, if a period starts on the last business day in a
calendar month or if there is no numerically corresponding day in the month in
which that period ends, that period shall end on the last business day in that
later month (and references to "months" shall be construed accordingly);
a "Part" shall, subject to any contrary indication, be construed as a
reference to a part of the agreement or document in which such reference
appears;
a "person" shall be construed as a reference to any person, firm, company,
corporation, government, state or agency of a state or any association or
partnership (whether or not having separate legal personality) of two or more
of the foregoing;
"repay" (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include "prepay" (or, as the case may be, the
corresponding derivative form thereof);
a Clause or a Schedule shall, subject to any contrary indication, be construed
as a reference to the particular Clause of or Schedule to the agreement or
document in which such reference appears;
a "subsidiary" of a person shall be construed as a reference to any company or
corporation:
(i) which is controlled, directly or indirectly, by such person;
(ii) more than half the issued share capital of which is beneficially owned,
directly or indirectly, by such person; or
(iii) which is a subsidiary of another subsidiary of such person;
a company or corporation shall be treated as being "controlled" by a person if
such person is able to direct its affairs and/or to control the composition of
its board of directors or equivalent body;
"tax" means any present or future tax, levy, duty, charge, fee, deduction or
withholding in the nature of tax, whatever called, wherever imposed, levied,
collected, withheld or assessed and shall include, without limitation, any
failure to pay or any delay in paying any of the same ;
"transferee" shall be construed so as to include any Transferee;
"VAT" shall be construed as a reference to value added tax including any
similar tax which may be imposed in place thereof from time to time; and
the "winding-up", "dissolution", "administration", "insolvency" or
"reorganisation" of a company or corporation and references to the
"liquidator", "assignee", "administrator", "receiver", "administrative
receiver", "receiver" and "manager", "manager" or "trustee" of a company or
corporation shall be construed so as to include any equivalent or analogous
proceedings or, as the case may be, insolvency representatives or officers
under the law of the jurisdiction in which such company or corporation is
incorporated or any jurisdiction in which such company or corporation or, as
the case may be, insolvency representatives or officers is incorporated or
constituted or any jurisdiction in which such company or corporation or, as
the case may be, insolvency representatives or officers carries on business
including the seeking of liquidation, winding-up, reorganisation, dissolution,
administration, arrangement, adjustment, protection or relief of debtors.
2.2 "$" and "dollars" denote lawful currency of the United States of
America, and "KD" and "dinars" denotes the lawful currency of the State of
Kuwait.
2.3 Words in any agreement or document importing the singular shall include
the plural and vice versa.
2.4 Save where the contrary is indicated, any reference in any Finance
Document to:
(i) any person shall be construed so as to include (a) its and any
subsequent successors, transferees and assigns in accordance with their
respective interests and (b) any person to whom its rights and/or obligations
are novated, assigned and/or transferred pursuant to any of the Documents;
(ii) such agreement or document or any other agreement or document
shall be construed as a reference to each such agreement or document or, as
the case may be, such other agreement or document as the same may have been,
or may from time to time be, amended, varied, novated, replaced or
supplemented;
(iii) a statute or enactment shall be construed as a reference to such
statute as the same may have been, or may from time to time be,
amended or re-enacted; and
(iv) a time of day shall, save as otherwise provided in any agreement
or document, be construed as a reference to London time.
2.5 Clause, Part and Schedule headings contained in, and any index or table
of contents to, any agreement or document are for ease of reference only.
2.6 All calculations or determinations to be made under any of the Security
Documents in respect for the purposes of determining voting rights and
distribution shall be made in dollars and any amount denominated in a currency
other than dollars shall be taken into account for the purposes of such
calculation or, as the case may be, determination at its equivalent in dollars
on the date such calculation or determination falls to be made.
The Company
EQUATE PETROCHEMICAL CO. K.S.C. (CLOSED)
By: CHARLES R. KLINE
The Sponsors
PETROCHEMICAL INDUSTRIES COMPANY K.S.C.
By: KHALED BUHAMRAH
UNION CARBIDE CORPORATION
By: THOMAS J. LA FORGE
The Intercreditor Agent and Project Assets Security Trustee
NATIONAL BANK OF KUWAIT S.A.K.
By: ISAM AL SAGER
The Debt Trustee
CITICORP TRUSTEE COMPANY LIMITED
By: WAGDI RABBATT
KP$01D6.29
<TABLE>
Exhibit 11
UNION CARBIDE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In millions of dollars except per share amounts)
<CAPTION>
Quarter Ended Sept. 30,
1996 1995
Earnings Per Share - Primary
<S> <C> <C>
Income $ 161 $ 277
Less: Preferred stock dividend 3 3
Net income available to common stockholders
for primary income calculation $ 158 $ 274
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of shares outstanding 129,104,998 135,666,903
Dilutive effect of stock options 4,331,086 4,657,138
133,436,084 140,324,041
Earnings per share - primary $ 1.19 $ 1.96
Earnings Per Share - Fully Diluted
Income $ 161 $ 277
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of shares outstanding 129,104,998 135,666,903
Dilutive effect of stock options 4,576,637 4,896,059
Shares issuable upon conversion of UCC
convertible preferred stock 16,100,050 16,311,909
149,781,685 156,874,871
Earnings per share - fully diluted $ 1.08 $ 1.77
<CAPTION>
Nine Months Ended Sept. 30,
1996 1995
Earnings Per Share - Primary
<S> <C> <C>
Income $ 491 $ 735
Less: Preferred stock dividend 9 9
Net income available to common stockholders
for primary income calculation $ 482 $ 726
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of shares outstanding 132,320,586 137,723,307
Dilutive effect of stock options 4,554,764 4,363,287
136,875,350 142,086,594
Earnings per share - primary $ 3.52 $ 5.11
Earnings Per Share - Fully Diluted
Income $ 491 $ 735
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of shares outstanding 132,320,586 137,723,307
Dilutive effect of stock options 4,701,880 5,126,829
Shares issuable upon conversion of UCC
convertible preferred stock 16,144,822 16,373,537
153,167,288 159,223,673
Earnings per share - fully diluted $ 3.20 $ 4.61
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE - UNION CARBIDE CORPORATION
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNION
CARBIDE CORPORATION'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000100790
<NAME> UNION CARBIDE CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 111
<SECURITIES> 0
<RECEIVABLES> 1058
<ALLOWANCES> 0
<INVENTORY> 528
<CURRENT-ASSETS> 1910
<PP&E> 6993
<DEPRECIATION> 3698
<TOTAL-ASSETS> 6518
<CURRENT-LIABILITIES> 1441
<BONDS> 1295
144
0
<COMMON> 155
<OTHER-SE> 1929
<TOTAL-LIABILITY-AND-EQUITY> 6518
<SALES> 4598
<TOTAL-REVENUES> 4598
<CGS> 3394
<TOTAL-COSTS> 3394
<OTHER-EXPENSES> 350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 691
<INCOME-TAX> 194
<INCOME-CONTINUING> 497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 491
<EPS-PRIMARY> 3.52
<EPS-DILUTED> 3.20
</TABLE>
