<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-14380
CITGO PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 73-1173881
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
ONE WARREN PLACE
6100 SOUTH YALE AVENUE
TULSA, OKLAHOMA 74136
(Address of principal executive office) (Zip Code)
(918) 495-4000
(Registrant's telephone number, including area code)
N. A.
(Former name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- --------------------------------------------- ---------------------------------------------
7 7/8% Senior Notes, Due 2006 New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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 [ ]
The registrant meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K and is therefore omitting (i) the information
otherwise required by Item 601 of Regulation S-K relating to a list of
subsidiaries of the registrant as permitted by General Instruction (I)(2)(b),
(ii) certain information otherwise required by Item 10 of Form 10-K relating to
Directors and Executive Officers as permitted by General Instruction (I)(2)(c)
and (iii) certain information otherwise required by Item 11 of Form 10-K
relating to executive compensation as permitted by General Instruction
(I)(2)(c).
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K: NOT
APPLICABLE
Aggregate market value of the voting stock held by non-affiliates of the
registrant: NOT APPLICABLE
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
COMMON STOCK, $1.00 PAR VALUE 1,000
- --------------------------------------------- ---------------------------------------------
<S> <C>
(Class) (outstanding at December 31, 1998)
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE> 2
CITGO PETROLEUM CORPORATION
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS.......................... 3
PART I
Items 1. and 2. Business and Properties............................... 4
Item 3. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 16
Item 6. Selected Financial Data..................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 17
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 24
Item 8. Financial Statements and Supplementary Data................. 25
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial
Disclosure.................................................. 25
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 26
Item 11. Executive Compensation...................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 26
Item 13. Certain Relationships and Related Transactions.............. 26
PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K...... 28
</TABLE>
2
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FACTORS AFFECTING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Specifically, all statements under the captions "Item 1 and 2 -- Business and
Properties" and "Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to capital expenditures and
investments related to environmental compliance and strategic planning,
purchasing patterns of refined products and capital resources available to the
Company (as defined herein) are forward looking statements. In addition, when
used in this document, the words "anticipate," "estimate," "prospect" and
similar expressions are used to identify forward looking statements. Such
statements are subject to certain risks and uncertainties, such as increased
inflation, continued access to capital markets and commercial bank financing on
favorable terms, increases in regulatory burdens, changes in prices or demand
for the Company's products as a result of competitive actions or economic
factors and changes in the cost of crude oil, feedstocks, blending components or
refined products. Such statements are also subject to the risks of increased
costs in related technologies and such technologies producing anticipated
results. Should one or more of these risks or uncertainties, among others,
materialize, actual results may vary materially from those estimated,
anticipated or projected. Although CITGO believes that the expectations
reflected by such forward looking statements are reasonable based on information
currently available to the Company, no assurances can be given that such
expectations will prove to have been correct.
3
<PAGE> 4
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
OVERVIEW
CITGO Petroleum Corporation ("CITGO" or the "Company") is a direct
wholly-owned operating subsidiary of PDV America, Inc. ("PDV America"), a
wholly-owned subsidiary of PDV Holding, Inc. The Company's ultimate parent is
Petroleos de Venezuela, S.A. ("PDVSA", which may also be used herein to refer to
one or more of its subsidiaries), the national oil company of the Republic of
Venezuela. CITGO and its subsidiaries are engaged in the refining, marketing and
transportation of petroleum products including gasoline, diesel fuel, jet fuel,
petrochemicals, lubricants, asphalt and refined waxes, mainly within the
continental United States east of the Rocky Mountains.
CITGO's transportation fuel customers include CITGO branded wholesale
marketers, convenience stores and airlines. Asphalt is generally marketed to
independent paving contractors on the East Coast of the United States.
Lubricants are sold to independent marketers, mass marketers and industrial
customers, and petrochemical feedstocks and industrial products are sold to
various manufacturers and industrial companies throughout the United States.
Petroleum coke is sold primarily in international markets.
COMPETITIVE NATURE OF THE PETROLEUM REFINING BUSINESS
The petroleum refining industry is cyclical and highly volatile, reflecting
capital intensity with high fixed and low variable costs. Petroleum industry
operations and profitability are influenced by a large number of factors, over
some of which individual petroleum refining and marketing companies have little
control. Governmental regulations and policies, particularly in the areas of
taxation, energy and the environment, have a significant impact on petroleum
activities, regulating how companies conduct their operations and formulate
their products. The U.S. petroleum refining industry has entered a period of
consolidation in which a number of former competitors have combined their
operations. Demand for crude oil and its products is largely driven by the
health of local and worldwide economies, although weather patterns and taxation
relative to other energy sources also play significant parts. Generally, U.S.
refiners compete for sales on the basis of price and brand image and, in some
areas, product quality.
4
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REFINING
CITGO's aggregate net interest in rated crude oil refining capacity is 691
thousand barrels per day ("MBPD"). The following table shows the capacity of
each U.S. refinery in which CITGO holds an interest and CITGO's share of such
capacity as of December 31, 1998.
CITGO REFINING CAPACITY
<TABLE>
<CAPTION>
NET
TOTAL CITGO
RATED OWNERSHIP
CRUDE IN
CITGO REFINING REFINING
OWNER INTEREST CAPACITY CAPACITY
----- -------- -------- ---------
(%) (MBPD) (MBPD)
<S> <C> <C> <C> <C>
LOCATION
Lake Charles, LA.......................... CITGO 100 320 320
Corpus Christi, TX........................ CITGO 100 150 150
Paulsboro, NJ............................. CITGO 100 84 84
Savannah, GA.............................. CITGO 100 28 28
Houston, TX(1)............................ LYONDELL-CITGO 41 265 109
--- ---
Total Rated Refining Capacity as
of December 31, 1998............ 847 691
=== ===
</TABLE>
- ---------------
(1) Initial interest acquired on July 1, 1993. CITGO's interest in
LYONDELL-CITGO at December 31, 1998 approximates 41%. CITGO has a one-time
option, exercisable after January 1, 2000 but not later than September 30,
2000, to increase for an additional investment, its participation interest
up to a maximum of 50%. See "CITGO -- Refining -- LYONDELL-CITGO". See also
"Factors Affecting Forward Looking Statements".
5
<PAGE> 6
The following table shows CITGO's aggregate interest in refining capacity,
refinery input and product yield for the three years in the period ended
December 31, 1998.
CITGO REFINERY PRODUCTION(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1998(2) 1997(3) 1996(4)
--------------- --------------- ---------------
(MBPD, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
RATED REFINING CAPACITY(5).................. 691 693 606
Refinery Input
Crude oil................................. 615 81.0% 548 79.3% 488 80.3%
Other feedstocks.......................... 144 19.0% 143 20.7% 120 19.7%
--- ----- --- ----- --- -----
Total............................. 759 100.0% 691 100.0% 608 100.0%
=== ===== === ===== === =====
Product Yield
Light fuels
Gasoline............................... 334 43.3% 309 44.0% 269 44.0%
Jet Fuel............................... 66 8.5% 66 9.4% 65 10.6%
Diesel/#2 fuel......................... 134 17.4% 112 15.9% 103 16.8%
Asphalt................................... 45 5.8% 42 6.0% 34 5.6%
Petrochemicals and industrial products.... 193 25.0% 174 24.7% 141 23.0%
--- ----- --- ----- --- -----
Total............................. 772 100.0% 703 100.0% 612 100.0%
=== ===== === ===== === =====
UTILIZATION OF RATED REFINING CAPACITY...... 89% 79% 81%
</TABLE>
- ---------------
(1) Includes all of CITGO refinery production, except as otherwise noted.
(2) Includes a weighted average of 41.25% of the Houston refinery for 1998.
(3) Includes a weighted average of 34.44% of the Houston refinery for 1997.
(4) Includes a weighted average of 12.89% of the Houston refinery for 1996.
(5) At year end.
CITGO produces its light fuels and petrochemicals primarily through its
Lake Charles and Corpus Christi refineries. Asphalt refining operations are
carried out through CITGO's Paulsboro and Savannah refineries. CITGO also owns
an interest in and obtains refined products from a refinery in Houston.
Lake Charles, Louisiana Refinery. This refinery was originally built in
1944 and since then has been continuously upgraded. Today it is a modern,
complex, high conversion refinery, which is one of the largest in the United
States. It has a rated refining capacity of 320 MBPD and is capable of
processing large volumes of heavy crude oil into a flexible slate of refined
products, including significant quantities of high-octane unleaded gasoline and
reformulated gasoline. The Lake Charles refinery has a Solomon Process
Complexity Factor of 17.0 (as compared to an average of 13.8 for U.S. refineries
in the most recently available Solomon Associates, Inc. survey). The Solomon
Process Complexity Rating is an industry measure of a refinery's ability to
produce higher value-added products. A higher rating indicates a greater
capability to produce such products.
6
<PAGE> 7
The following table shows the rated refining capacity, refinery input and
product yield at the Lake Charles refinery for the three years in the period
ended December 31, 1998.
LAKE CHARLES REFINERY PRODUCTION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
----------- ----------- -----------
(MBPD, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
RATED REFINING CAPACITY(1)...................... 320 320 320
Refinery Input
Crude oil..................................... 288 84.2% 291 87.9% 274 85.1%
Other feedstocks.............................. 54 15.8% 40 12.1% 48 14.9%
--- ----- --- ----- --- -----
Total................................. 342 100.0% 331 100.0% 322 100.0%
=== ===== === ===== === =====
Product Yield
Light fuels
Gasoline................................... 187 53.7% 177 52.4% 164 50.3%
Jet Fuel................................... 59 17.0% 60 17.7% 62 19.0%
Diesel/#2 fuel............................. 47 13.5% 45 13.3% 38 11.7%
Petrochemicals and Industrial Products........ 55 15.8% 56 16.6% 62 19.0%
--- ----- --- ----- --- -----
Total................................. 348 100.0% 338 100.0% 326 100.0%
=== ===== === ===== === =====
UTILIZATION OF RATED REFINING CAPACITY.......... 90% 91% 86%
</TABLE>
- ---------------
(1) At year end.
Approximately 66%, 63% and 67% of the total crude runs at the Lake Charles
refinery, in the years 1998, 1997 and 1996, respectively, consisted of crude oil
with an average API gravity of 24 degrees or less. Due to the complex processing
required to refine such crude oil, the Lake Charles refinery's economic crude
oil throughput capacity is approximately 290 MBPD, which is approximately 90% of
its rated capacity of 320 MBPD.
The Lake Charles refinery's Gulf Coast location provides it with access to
crude oil deliveries from multiple sources. Imported crude oil and feedstock
supplies are delivered by ship directly to the Lake Charles refinery, and
domestic crude oil supplies are delivered by pipeline and barge. In addition,
the refinery is connected by pipelines to the Louisiana Offshore Oil Port and to
terminal facilities in the Houston area through which it can receive crude oil
deliveries if the Lake Charles docks are temporarily inaccessible. For delivery
of refined products, the refinery is connected through the Lake Charles Pipeline
directly to the Colonial and Explorer Pipelines, which are the major refined
product pipelines supplying the northeast and midwest regions of the United
States, respectively. The refinery also uses adjacent terminals and docks, which
provide access for ocean tankers and barges.
The Lake Charles refinery's main petrochemical products are propylene and
benzene. Industrial products include sulphur, residual fuels and petroleum coke.
Located adjacent to the Lake Charles refinery is a lubricants refinery
operated by CITGO and owned by Cit-Con Oil Corporation ("Cit-Con"), which is
owned 65% by CITGO and 35% by Conoco, Inc. ("Conoco"). Primarily because of its
specific design, the Cit-Con refinery produces extremely high quality oils and
waxes, and is one of the few in the industry designed as a stand-alone
lubricants refinery. Feedstocks are supplied 65% from CITGO's Lake Charles
refinery and 35% from Conoco's nearby refinery. Finished refined products are
shared on the same pro rata basis by CITGO and Conoco.
Corpus Christi, Texas Refinery. This refinery complex consists of the East
and West Plants, located within five miles of each other. Construction began on
the East Plant in 1937, and it was extensively reconstructed and modernized
during the 1970's and 1980's. The West plant was completed in 1983. The Corpus
Christi refinery is an efficient and highly complex facility, capable of
processing high volumes of heavy crude oil into a flexible slate of refined
products, with a Solomon Process Complexity Factor of 20.5 (as
7
<PAGE> 8
compared to an average 13.8 for U.S. refineries in the most recently available
Solomon Associates, Inc. survey).
The following table shows rated refining capacity, refinery input and
product yield at the Corpus Christi refinery for the three years in the period
ended December 31, 1998.
CORPUS CHRISTI REFINERY PRODUCTION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
----------- ----------- -----------
(MBPD, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
RATED REFINING CAPACITY(1)...................... 150 150 140
Refinery Input
Crude oil..................................... 152 71.4% 115 59.3% 133 66.8%
Other feedstocks.............................. 61 28.6% 79 40.7% 66 33.2%
--- ----- --- ----- --- -----
Total................................. 213 100.0% 194 100.0% 199 100.0%
=== ===== === ===== === =====
Product Yield
Light fuels
Gasoline................................... 97 45.7% 93 47.9% 93 47.0%
Diesel/#2 fuel............................. 58 27.4% 45 23.2% 59 29.8%
Petrochemicals and Industrial Products........ 57 26.9% 56 28.9% 46 23.2%
--- ----- --- ----- --- -----
Total................................. 212 100.0% 194 100.0% 198 100.0%
=== ===== === ===== === =====
UTILIZATION OF RATED REFINING CAPACITY.......... 101% 77% 95%
</TABLE>
- ---------------
(1) At year end.
Corpus Christi crude runs during 1998 consisted of 100% heavy sour
Venezuelan crude. The average API gravity of the composite crude slate run at
the Corpus Christi refinery is approximately 24 degrees. Crude oil supplies are
delivered directly to the Corpus Christi refinery through the Port of Corpus
Christi.
CITGO operates the West plant under a sublease agreement (the "Sublease")
from Union Pacific Corporation ("Union Pacific"). The basic term of the Sublease
ends on January 1, 2004, but CITGO may renew the Sublease for successive renewal
terms through January 31, 2011. CITGO has the right to purchase the West Plant
from Union Pacific at the end of the basic term, the end of any renewal term, or
on January 31, 2011 at a nominal price.
During the last several years, CITGO has increased the capacity of the
Corpus Christi refinery to produce petrochemical products. The Corpus Christi
refinery's main petrochemical products include cumene, cyclohexane, methyl
tertiary butyl ether ("MTBE") and aromatics (including benzene, toluene, and
xylene). The Company produces a significant quantity of cumene, an important
petrochemical product used in the engineered plastics market. The production of
xylene, a basic building block used in the manufacture of consumer plastics,
allows the refinery to take advantage of its reforming capacity while staying
within the gasoline specifications of the Clean Air Act Amendments of 1990.
Paulsboro, New Jersey Refinery. This is an asphalt refinery, which consists
of Unit I, with a rated capacity of 44 MBPD, and Unit II, with a rated capacity
of 40 MBPD. Unit I was constructed in 1979 primarily to process low sulphur,
light crude oil but has been modified to run heavier crudes. Unit II, originally
constructed in 1980 to produce asphalt from high sulphur, heavy crude oil high
in naphthenic acid, is a combination atmospheric and vacuum distillation
facility.
Savannah, Georgia Refinery. This is an asphalt refinery, which includes two
crude distillation units, with a combined rated capacity of 28 MBPD.
LYONDELL-CITGO Refining LP. On July 1, 1993, subsidiaries of CITGO and
Lyondell Chemical Company ("Lyondell") formed LYONDELL-CITGO Refining LP
("LYONDELL-CITGO"), which
8
<PAGE> 9
owns and operates a sophisticated 265 MBPD refinery previously owned by Lyondell
and located on the ship channel in Houston, Texas. At December 31, 1998, CITGO's
investment in LYONDELL-CITGO was $597 million. In addition, at December 31,
1998, CITGO held notes receivable from LYONDELL-CITGO of $36 million. (See
Consolidated Financial Statements of CITGO -- Note 3 in Item 14a). The crude oil
processed by this refinery is supplied by PDVSA under a long-term crude oil
supply agreement through the year 2017. CITGO purchases substantially all of the
refined products produced at this refinery under a long-term contract. (See
Consolidated Financial Statements of CITGO -- Notes 3 and 4 in Item 14a).
CITGO's participation interest in LYONDELL-CITGO was approximately 41% at
December 31, 1998. CITGO has a one-time option, exercisable after January 1,
2000 but not later than September 30, 2000, to increase, for an additional
investment, its participation interest to 50%.
CRUDE OIL AND REFINED PRODUCT PURCHASES
CITGO owns no crude oil reserves or production facilities, and must
therefore rely on purchases of crude oil and feedstocks for its refinery
operations. In addition, because CITGO's refinery operations do not produce
sufficient refined products to meet the demands of its branded marketers, CITGO
purchases refined products, primarily gasoline, from other refiners, including
LYONDELL-CITGO, PDV Midwest Refining, L.L.C. ("PDVMR"), Chalmette Refining,
L.L.C. ("Chalmette") and a joint venture that owns and operates a refinery in
St. Croix, U.S. Virgin Islands ("HOVENSA"). See "Item 13. Certain Relationships
and Related Transactions".
Crude Oil Purchases. The following chart shows CITGO's purchases of crude
oil for the three years in the period ended December 31, 1998:
CITGO CRUDE OIL PURCHASES
<TABLE>
<CAPTION>
LAKE CHARLES, LA CORPUS CHRISTI, TX PAULSBORO, NJ SAVANNAH, GA
------------------ ------------------ ------------------ ------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(MBPD)
SUPPLIERS (MBPD) (MBPD) (MBPD)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PDVSA.................. 134 130 142 153 117 130 52 49 39 17 14 17
PEMEX.................. 51 61 44 0 0 0 0 0 0 0 0 0
Occidental............. 20 40 43 0 0 0 0 0 0 0 0 0
Other Sources.......... 88 57 45 0 0 3 0 0 0 0 0 0
--- --- --- --- --- --- -- -- -- -- -- --
Total......... 293 288 274 153 117 133 52 49 39 17 14 17
=== === === === === === == == == == == ==
</TABLE>
CITGO's largest supplier of crude oil is PDVSA, and CITGO has entered into
long-term crude oil supply agreements with PDVSA with respect to the crude oil
requirements for each of CITGO's refineries. See "Item 13. Certain Relationships
and Related Transactions". The following table shows the base and incremental
volumes of crude oil contracted for delivery and the volumes of crude oil
actually delivered under these contracts in the three years ended December 31,
1998.
9
<PAGE> 10
The crude supply contracts include force majeure clauses that have been
exercised on certain occasions. Exercise of these clauses requires that the
Company locate alternative sources of supply for its crude oil requirements, and
such action may result in lower operating margins.
CITGO CRUDE OIL SUPPLY CONTRACTS WITH PDVSA
<TABLE>
<CAPTION>
VOLUMES OF CRUDE
OIL PURCHASED
CONTRACT CRUDE FOR THE YEAR ENDED
OIL VOLUME DECEMBER 31, CONTRACT
--------------------- ---------------------- EXPIRATION
BASE INCREMENTAL(1) 1998 1997 1996 DATE
---- -------------- ---- ---- ---- ----------
(MBPD) (MBPD) (YEAR)
<S> <C> <C> <C> <C> <C> <C>
LOCATION
Lake Charles, LA....................... 120 50 121(2) 115(2) 121(2) 2006
Corpus Christi, TX..................... 130 -- 128(2) 125(2) 130 2012
Paulsboro, NJ.......................... 30 -- 35(2) 35(2) 34(2) 2010
Savannah, GA........................... 12 -- 12(2) 12(2) 11(2) 2013
Houston, TX(3)......................... 200 -- 223 216 134 2017
</TABLE>
- ---------------
(1) The supply agreement for the Lake Charles refinery gives PDVSA the right to
sell to CITGO incremental volumes up to the maximum amount specified in the
table, subject to certain restrictions relating to the type of crude oil to
be supplied, refining capacity and other operational considerations at the
refinery.
(2) Volumes purchased under the supply agreements do not equal purchases from
PDVSA shown in the previous table as a result of spot purchases or transfers
between refineries.
(3) CITGO acquired a participation interest in LYONDELL-CITGO, the owner of the
Houston refinery, on July 1, 1993. In connection with such transaction,
LYONDELL-CITGO entered into a long-term crude oil supply agreement with
PDVSA that provided for delivery volumes of 135 MBPD until the completion of
a refinery enhancement project at which time the delivery volumes increased
to a range that extends from 200 MBPD to 230 MBPD.
Most of the crude oil and feedstocks purchased by CITGO from PDVSA are
delivered on tankers owned by PDV Marina, S.A. ("PDV Marina"), a wholly-owned
subsidiary of PDVSA, or by other PDVSA subsidiaries. In 1998, 82% of the PDVSA
contract crude oil delivered to the Lake Charles and Corpus Christi refineries
was delivered on tankers operated by PDVSA subsidiaries.
CITGO purchases additional crude oil under a 90-day evergreen agreement
with an affiliate of Petroleos Mexicanos ("PEMEX"). CITGO's refineries are
particularly well suited to refine PEMEX's Maya heavy, sour crude oil, which is
similar in many respects to several types of Venezuelan crude oil.
CITGO was a party to a contract with an affiliate of Occidental Petroleum
Corporation ("Occidental") for the purchase of light, sweet crude oil to produce
lubricants. This contract expired on August 31, 1998. CITGO also purchases sweet
crude oil under long-standing relationships with numerous other producers.
10
<PAGE> 11
Refined Product Purchases. CITGO is required to purchase refined products
to supplement the production of the Lake Charles and Corpus Christi refineries
in order to meet demand of CITGO's marketing network. During 1998, CITGO's
shortage in gasoline production approximated 329 MBPD. However, due to
logistical needs, timing differences and product grade imbalances, CITGO
purchased approximately 581 MBPD of gasoline and sold into the spot market, or
to refined product traders or other refiners approximately 254 MBPD of gasoline.
The following table shows CITGO's purchases of refined products for the three
years in the period ended December 31, 1998.
CITGO REFINED PRODUCT PURCHASES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1998 1997 1996
----- ----- -----
(MBPD)
<S> <C> <C> <C>
LIGHT FUELS
Gasoline.................................................. 581 518 484
Jet Fuel.................................................. 69 74 92
Diesel/#2 fuel............................................ 208 190 153
--- --- ---
Total............................................. 858 782 729
=== === ===
</TABLE>
As of December 31, 1998, CITGO purchased substantially all of the refined
products, excluding petrochemicals, produced at the LYONDELL-CITGO refinery
under a long-term contract through the year 2017. LYONDELL-CITGO was a major
supplier in 1998 providing CITGO with 120 MBPD of gasoline, 79 MBPD of diesel/#2
fuel and 17 MBPD of jet fuel. See "-- Refining -- LYONDELL-CITGO".
As of May 1, 1997, CITGO began purchasing, under a contract with a
sixty-month term, substantially all of the refined products produced at the
PDVMR refinery. During the period ended December 31, 1998, the PDVMR refinery
provided CITGO with 78 MBPD of gasoline, 42 MBPD of diesel/#2 fuel and 5 MBPD of
jet fuel.
An affiliate of PDVSA acquired a 50 percent equity interest in a refinery
in Chalmette, Louisiana ("Chalmette") in October 1997 and has assigned to CITGO
its option to purchase up to 50 percent of the refined products produced at the
refinery through December 31, 1999. CITGO exercised this option on November 1,
1997, and acquired approximately 65 MBPD of refined products from the refinery
during 1998, approximately one-half of which was gasoline.
In October 1998 an affiliate of PDVSA acquired a 50 percent equity interest
in HOVENSA and has the right under a product sales agreement to assign
periodically to CITGO, or other related parties, its option to purchase 50% of
the refined products produced by HOVENSA (less a certain portion of such
products that HOVENSA will market directly in the local and Caribbean markets).
In addition, under the product sales agreement, the PDVSA affiliate has
appointed CITGO as its agent in designating which of its affiliates shall from
time to time take deliveries of the refined products available to it. The
product sales agreement will be in effect for the life of the joint venture,
subject to termination events based on default or mutual agreement. Pursuant to
the above arrangement, CITGO began acquiring approximately 120 MBPD of refined
products from HOVENSA on November 1, 1998, approximately one-half of which was
gasoline.
11
<PAGE> 12
MARKETING
CITGO's major products are light fuels (including gasoline, jet fuel, and
diesel fuel), industrial products and petrochemicals, asphalt, and lubricants
and waxes. The following table shows revenue and volumes of each of these
product categories for the three years in the period ended December 31, 1998.
CITGO REFINED PRODUCT SALES REVENUES AND VOLUMES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- -----------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
($ IN MILLIONS) (MM GALLONS)
<S> <C> <C> <C> <C> <C> <C>
LIGHT FUELS
Gasoline................... $ 6,252 $ 7,754 $ 7,451 13,241 11,953 11,308
Jet Fuel................... 828 1,183 1,489 1,919 2,000 2,346
Diesel/#2 fuel............. 1,945 2,439 2,312 4,795 4,288 3,728
ASPHALT...................... 300 398 257 774 749 569
PETROCHEMICALS AND INDUSTRIAL
PRODUCTS................... 937 1,172 846 2,440 1,940 1,408
LUBRICANTS AND WAXES......... 441 467 426 230 239 220
------- ------- ------- ------- ------- -------
Total.............. $10,703 $13,413 $12,781 23,399 21,169 19,579
======= ======= ======= ======= ======= =======
</TABLE>
Light Fuels. Gasoline sales accounted for 58% of CITGO's refined product
sales in the years 1998, 1997 and 1996. CITGO markets CITGO branded gasoline
through over 15,000 independently owned and operated CITGO branded retail
outlets (including 13,165 branded retail outlets owned and operated by
approximately 824 independent marketers and 1,888 7-Eleven(TM) convenience
stores) located throughout the United States, primarily east of the Rocky
Mountains. CITGO purchases gasoline to supply its marketing network, as the
gasoline production from the Lake Charles and Corpus Christi refineries was only
equivalent to approximately 48%, 47% and 49% of the volume of CITGO branded
gasoline sold in 1998, 1997 and 1996, respectively. See "-- Crude Oil and
Refined Product Purchases -- Refined Product Purchases".
CITGO's strategy is to enhance the value of the CITGO brand in order to
obtain premium pricing for its products by appealing to consumer preference for
quality petroleum products and services. This is accomplished through a
commitment to quality, dependability and customer service to its independent
marketers, which constitute CITGO's primary distribution channel.
Sales to independent branded marketers typically are made under contracts
that range from three to seven years. Sales to 7-Eleven(TM) convenience stores
are made under a contract that extends through the year 2006. Under this
contract, CITGO arranges all transportation and delivery of motor fuels and
handles all product ordering. CITGO also acts as processing agent for the
purpose of facilitating and implementing orders and purchases from third-party
suppliers. CITGO receives a processing fee for such services.
CITGO markets jet fuel directly to airline customers at 26 airports,
including such major hub cities as Atlanta, Chicago, Dallas/Fort Worth, New York
and Miami.
Growth in wholesale rack sales to marketers has been the primary focus of
diesel/#2 marketing efforts. Such marketing efforts have resulted in increases
in wholesale rack sales volume from approximately 1,561 million gallons in 1996
to approximately 1,928 million gallons in 1998. The remaining diesel/#2 fuel
production is sold either in bulk through contract sales (primarily as heating
oil in the Northeast) or on a spot basis.
CITGO's delivery of light fuels to its customers is accomplished in part
through 49 refined product terminals located throughout CITGO's primary market
territory. Of these terminals, 34 are wholly-owned by CITGO and 15 are jointly
owned. Fifteen of CITGO's product terminals have waterborne docking facilities,
which greatly enhance the flexibility of CITGO's logistical system. In addition,
CITGO operates eight terminals owned by PDVMR in the Midwest. Refined product
terminals owned or operated by CITGO provide a total storage capacity of
approximately 23 million barrels. Also, CITGO has active exchange
12
<PAGE> 13
relationships with over 270 other refined product terminals, providing
flexibility and timely response to distribution needs.
Petrochemicals and Industrial Products. CITGO sells petrochemicals in bulk
to a variety of U.S. manufacturers as raw materials for finished goods. The
majority of CITGO's cumene production is sold to Mount Vernon Phenol Plant
Partnership ("MVPPP"), a joint venture phenol production plant in which CITGO is
a limited partner. The phenol plant produces phenol and acetone for sale
primarily to the principal partner in the phenol plant for the production of
plastics. Sulphur is sold to the U.S. and international fertilizer industry;
cycle oils are sold for feedstock processing and blending; natural gas liquids
are sold to the U.S. fuel and petrochemical industry; petroleum coke is sold
primarily in international markets, through a joint venture, for use as kiln and
boiler fuel; and residual fuel blendstocks are sold to a variety of fuel oil
blenders and customers.
Asphalt. CITGO markets asphalt through 15 terminals located along the East
Coast, from Savannah, Georgia to Albany, New York. Asphalt is sold primarily to
independent contractors for use in the construction and resurfacing of roadways.
Demand for asphalt in the Northeastern U.S. peaks in the summer months.
Lubricants and Waxes. CITGO markets many different types, grades and
container sizes of lubricants and wax products, with the bulk of sales
consisting of automotive oil and lubricants and industrial lubricants. Other
major lubricant products include 2-cycle engine oil and automatic transmission
fluid.
PIPELINE OPERATIONS
CITGO owns and operates 339 miles of crude oil pipeline systems and
approximately 1,080 miles of products pipeline systems. CITGO also has equity
interests in three crude oil pipeline companies with a total of nearly 5,400
miles of pipeline plus equity interest in six refined product pipeline companies
with a total of approximately 8,000 miles of pipeline. CITGO's pipeline
interests provide it with access to substantial refinery feedstocks and reliable
transportation to refined product markets, as well as cash flows from dividends.
One of the refined product pipelines in which CITGO has an interest, Colonial
Pipeline, is the largest refined product pipeline in the United States
transporting gasoline, jet fuel and diesel/#2 fuel oil from the Gulf Coast to
the mid-Atlantic and eastern seaboard states.
EMPLOYEES
CITGO and its subsidiaries have a total of approximately 4,500 employees,
approximately 1,900 of whom are covered by 15 union contracts. Approximately
1,600 of the union employees are employed in refining operations. The remaining
union employees are located primarily at a lubricant blending and packaging
plant and at various refined product terminals.
Effective February 28, 1998, the stock of Petro-Chemical Transport, Inc.
("PCT"), a wholly owned subsidiary of CITGO, was sold. As a result of this sale,
approximately 420 employees were terminated. The operations of PCT were not
material to CITGO.
ENVIRONMENT AND SAFETY
Environment
Beginning in 1994, the U.S. refining industry was required to comply with
stringent product specifications under the 1990 Clean Air Act ("CAA") Amendments
for reformulated gasoline and low sulphur diesel fuel which necessitated
additional capital and operating expenditures, and altered significantly the
U.S. refining industry and the return realized on refinery investments. In
addition, numerous other factors affect the Company's plans with respect to
environmental compliance and related expenditures. See "Factors Affecting
Forward Looking Statements".
In addition, the Company is subject to various federal, state and local
environmental laws and regulations which may require the Company to take action
to correct or improve the effects on the environment of prior disposal or
release of petroleum substances by the Company or other parties. Management
believes the
13
<PAGE> 14
Company is in compliance with these laws and regulations in all material
aspects. Maintaining compliance with environmental laws and regulations in the
future could require significant capital expenditures and additional operating
costs.
Under a 1992 agreement with the Company, a former owner of certain of the
Company's operations and assets, including the Lake Charles refinery,
indemnifies the Company for certain environmental remediation costs, "Superfund"
liabilities and tort liabilities related to those operations and assets
according to relative ownership periods and the terms of the agreement.
A February 1999 order of a Louisiana agency specifies requirements to
complete closure of certain surface impoundments at the Lake Charles refinery.
CITGO and the former owner are participating in this closure and sharing the
related costs based on estimated contributions of waste and ownership periods.
Final closure is expected to begin in 2000.
Based on publicly available information, CITGO believes that the former
owner has the financial capability to fulfill all of its responsibilities under
the 1992 agreement. Accordingly, CITGO believes that its liability exposure
under the Federal Superfund and similar state laws with respect to those sites
for which the former owner provides indemnity is not material.
In July 1997, the Texas Natural Resources Conservation Commission ("TNRCC")
issued a Preliminary Report and Petition alleging that CITGO Refining and
Chemicals Company LP ("CITGO Refining") violated TNRCC rules relating to
operation of a hazardous waste management unit without a permit and recommended
a penalty of $699,200. CITGO Refining disagrees with those allegations and the
proposed penalties. As part of the continuing negotiations, TNRCC has proposed
to settle the alleged violation of hazardous waste management rules and
regulations in addition to alleged unauthorized emissions to the atmosphere and
alleged unauthorized discharge to the waters of the state in return for payment
of a penalty of $786,300.
CITGO's accounting policy establishes environmental reserves as probable
site restoration and remediation obligations become reasonably capable of
estimation. Based on currently available information, including the continuing
participation of former owners in remediation actions and indemnification
agreements with third parties, CITGO believes that its accruals are sufficient
to address its environmental clean-up obligations.
Conditions which require additional expenditures may exist with respect to
various Company sites including, but not limited to, CITGO's operating refinery
complexes, closed refineries, service stations and crude oil and petroleum
storage terminals. The amount of such future expenditures, if any, is
indeterminable.
Increasingly stringent regulatory provisions periodically require
additional capital expenditures. During 1998, CITGO expended approximately $65
million for environmental and regulatory capital improvements in its operations.
Management currently estimates that CITGO will spend approximately $303 million
for environmental and regulatory capital projects over the five-year period
1999-2003. These estimates may vary due to a variety of factors. See "Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources". See also "Factors Affecting
Forward Looking Statements".
Safety
Due to the nature of petroleum refining and distribution, CITGO is subject
to stringent occupational health and safety laws and regulations. CITGO
maintains comprehensive safety, training and maintenance programs. CITGO
believes that it is in substantial compliance with occupational health and
safety laws.
ITEM 3. LEGAL PROCEEDINGS
Various lawsuits and claims arising in the ordinary course of business are
pending against the Company. The Company records accruals for potential losses
when, in management's opinion, such losses are probable and reasonably
estimable. If known lawsuits and claims were to be determined in a manner
adverse to the
14
<PAGE> 15
Company, and in amounts greater than the Company's accruals, then such
determinations could have a material adverse effect on the Company's results of
operations in a given reporting period. However, in management's opinion the
ultimate resolution of these lawsuits and claims will not exceed by a material
amount, the amount of the accruals and the insurance coverage available to the
Company. This opinion is based upon management's and counsel's current
assessment of these lawsuits and claims. The most significant lawsuits and
claims are discussed below.
In a pending case in federal court, Oil Chemical and Atomic Workers, Local
7-517 ("the Union") has asserted claims against CITGO, PDVSA, PDV America,
PDVMR, UNO-VEN and Unocal pursuant to the Labor Management Relations Act. The
Union alleges that CITGO and the other defendants are bound by the terms of a
collective bargaining agreement between UNO-VEN and the Union covering certain
employees at a refinery in Lemont, Illinois. This refinery was acquired by PDVMR
on May 1, 1997 in a transaction involving the former partners of UNO-VEN.
Pursuant to an operating agreement with PDVMR, CITGO became the operator of this
refinery and employed the substantial majority of the employees previously
employed by UNO-VEN pursuant to its initial terms and conditions of employment,
but CITGO did not assume the existing labor agreement. The Union seeks monetary
compensation for certain differences in employee benefits and reinstatement of
all of the UNO-VEN benefit plans. The union also seeks to require CITGO to abide
by the terms of the collective bargaining agreement between the Union and
UNO-VEN. In June 1998, the trial court granted the motions for summary judgment
filed by CITGO and the other defendants; the Union has appealed this ruling.
In May 1997, an explosion and fire occurred at CITGO's Corpus Christi
refinery. No serious personal injuries were reported. The Company received
approximately 7,500 individual claims for personal injury and property damage
related to the above noted incident. Approximately 1,300 of these claims have
been resolved for amounts which individually and collectively are not material.
There are presently six lawsuits pending against the Company in federal and
state courts alleging property damages, personal injury and punitive damages. A
trial in one of the federal court lawsuits in October 1998 involving ten
bellwether plaintiffs, out of approximately 400 plaintiffs, resulted in a
verdict for the Company. The remaining cases are not currently scheduled for
trial. The Company anticipates that the claims of the remaining plaintiffs in
this lawsuit will be resolved for an immaterial amount.
A class action lawsuit is pending in Corpus Christi, Texas state court
against the Company and other operators and owners of nearby industrial
facilities which claims damages for reduced value of residential properties
located in the vicinity of the industrial facilities as a result of air, soil
and groundwater contamination. In 1997, the Company offered to purchase about
275 properties in a neighborhood adjacent to the Company's Corpus Christi
refinery, which were included in the lawsuit. Related to this offer, $15.7
million was expensed in 1997. To date, the Company has reached agreements to buy
all but 18 of such properties, which include settlements of property damage
claims, and has offers open to purchase the remaining properties. Two related
personal injury and wrongful death lawsuits were filed against the same
defendants in 1996 and are scheduled for trial in 1999.
Litigation is pending in federal court in Lake Charles, Louisiana, against
CITGO by a number of current and former Lake Charles refinery employees and
applicants asserting claims of racial discrimination in connection with the
Company's employment practices. Trials in this case are set to begin in the fall
of 1999.
The Company is among defendants to lawsuits in California and North
Carolina alleging contamination of water supplies by methyl tertiary butyl ether
("MTBE"), a component of gasoline. The action in California was filed in
November 1998 by the South Tahoe Public Utility District and the Company was
added as a defendant in February 1999. The North Carolina case, filed in January
1999, is a putative class action on behalf of owners of water wells and other
drinking water supplies in the state. Both actions allege that MTBE poses public
health risks. Both actions seek damages as well as remediation of the alleged
contamination. These matters are in early stages and no discovery has been
conducted against the Company. The Company intends to deny all of the
allegations and is pursuing its defenses.
15
<PAGE> 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is not publicly traded. All of the Company's
common stock is held by PDV America, a Delaware corporation whose ultimate
parent is PDVSA. In 1998, CITGO declared and paid dividends of $486 million to
PDV America.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial and operating data of CITGO as of the end of and for each of the five
years in the period ended December 31, 1998. The following table should be read
in conjunction with the consolidated financial statements of CITGO as of
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, included in Item 8. The audited consolidated financial
statements of CITGO for each of the five years in the period ended December 31,
1998, have been prepared on the basis of United States generally accepted
accounting principles.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996 1995(1) 1994
------- ------- ------- ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales....................................... $10,912 $13,591 $12,952 $10,522 $9,247
Equity in earnings of affiliates............ 77 64 21 34 29
Net revenues................................ 10,981 13,645 12,969 10,553 9,269
Income before extraordinary items and
cumulative effect of accounting change... 194 207 127 136 191
Extraordinary gain (charge)(2).............. -- -- -- 4 (2)
Cumulative effect of accounting change(3)... -- -- -- -- (4)
Net income.................................. 194 207 127 140 185
Ratio of Earnings to Fixed Charges(4)......... 3.92x 3.21x 2.45x 2.71x 3.85x
BALANCE SHEET DATA
Total assets................................ $ 5,254 $ 5,412 $ 5,630 $ 4,924 $4,440
Long-term debt (excluding current
portion)(5).............................. 1,361 1,275 1,599 1,301 1,160
Total debt(6)............................... 1,460 1,386 1,759 1,432 1,283
Shareholder's equity........................ 1,846 2,081 1,870 1,732 1,577
</TABLE>
- ---------------
(1) Includes operations of Cato Oil & Grease since May 1, 1995.
(2) Represents extraordinary gain (or charges) for the early extinguishment of
debt (net of related income tax provision of $2 million and income tax
benefit of $1 million) in 1995 and 1994, respectively.
(3) Represents the cumulative effect of the accounting change to Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Post-Employment Benefits" in 1994 (net of related income tax benefits of $3
million).
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<PAGE> 17
(4) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes and cumulative effect of
accounting changes plus fixed charges (excluding capitalized interest),
amortization of previously capitalized interest and certain adjustments to
equity in income of affiliates. "Fixed charges" include interest expense,
capitalized interest, amortization of debt issuance costs and a portion of
operating lease rent expense deemed to be representative of interest.
(5) Includes long-term debt to third parties and capital lease obligations.
(6) Includes short-term bank loans, current portion of capital lease obligations
and long-term debt, long-term debt and capital lease obligations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion of the financial condition and results of
operations of CITGO should be read in conjunction with the consolidated
financial statements of CITGO included elsewhere herein.
Petroleum industry operations and profitability are influenced by a large
number of factors, some of which individual petroleum refining and marketing
companies cannot entirely control. Governmental regulations and policies,
particularly in the areas of taxation, energy and the environment, have a
significant impact on petroleum activities, regulating how companies conduct
their operations and formulate their products, and, in some cases, limiting
their profits directly. Demand for crude oil and refined products is largely
driven by the condition of local and worldwide economies, although weather
patterns and taxation relative to other energy sources also play a significant
part. CITGO's consolidated operating results are affected by these industry-
specific factors and by company-specific factors, such as the success of
marketing programs and refinery operations.
The earnings and cash flows of companies engaged in the refining and
marketing business in the United States are primarily dependent upon producing
and selling quantities of refined products at margins sufficient to cover fixed
and variable costs. The refining and marketing business is characterized by high
fixed costs resulting from the significant capital outlays associated with
refineries, terminals and related facilities. This business is also
characterized by substantial fluctuations in variable costs, particularly costs
of crude oil, feedstocks and blending components, and in the prices realized for
refined products. Crude oil and refined products are commodities whose price
levels are determined by market forces beyond the control of CITGO.
In general, prices for refined products are significantly influenced by the
price of crude oil, feedstocks and blending components. Although an increase or
decrease in the price for crude oil, feedstocks and blending components
generally results in a corresponding increase or decrease in prices for refined
products, generally there is a lag in the realization of the corresponding
increase or decrease in prices for refined products. The effect of changes in
crude oil prices on CITGO's consolidated operating results therefore depends in
part on how quickly refined product prices adjust to reflect these changes. A
substantial or prolonged increase in crude oil prices without a corresponding
increase in refined product prices, a substantial or prolonged decrease in
refined product prices without a corresponding decrease in crude oil prices, or
a substantial or prolonged decrease in demand for refined products could have a
significant negative effect on the Company's earnings and cash flows. CITGO
purchases a significant amount of its crude oil requirements from PDVSA under
long-term supply agreements (expiring in the years 2006 through 2013). These
supply agreements were designed to reduce the volatility of earnings and cash
flows from CITGO's refining operations by providing a relatively stable level of
gross margin on crude oil supplied by PDVSA. This supply represented
approximately 58% percent of the crude oil processed in refineries operated by
CITGO in the year ended December 31, 1998. The crude supply contracts include
force majeure clauses that have been exercised on certain occasions. Exercise of
these clauses requires that the Company locate alternative sources of supply for
its crude oil requirements, and such action may result in lower operating
margins. CITGO also purchases significant volumes of refined products to
supplement the production from its refineries to meet marketing demands and to
resolve logistical issues. CITGO's earnings and cash flows are also affected by
the cyclical nature of petrochemical prices. As a result of these factors, the
earnings and cash flows of CITGO may experience substantial fluctuations.
17
<PAGE> 18
Inflation was not a significant factor in the operations of CITGO during the
three years ended December 31, 1998.
In July 1997 the Company's senior management implemented a Transformation
Program designed to ensure that numerous expense controls, business information
systems and business efficiency initiatives underway were effectively
coordinated to achieve desired results. Included in this program were reviews of
the Company's business units, assets, strategies, and business processes. These
combined actions include personnel reductions (the "Separation Programs"). The
cost of the Separation Programs was approximately $8 million and $22 million for
the years ended December 31, 1998 and 1997, respectively. In addition, as part
of the Transformation Program, the first phase of Systems, Applications and
Products in Data Processing ("SAP") implementation, which included the financial
reporting and materials management systems, was brought into production on
January 1, 1998. Additional SAP modules, including plant maintenance work order
and cost tracking, were implemented throughout 1998. The implementation will
continue in 1999.
The following table summarizes the sources of CITGO's sales revenues and
volumes.
CITGO SALES REVENUES AND VOLUMES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------ ------ ------
($ IN MILLIONS) (MM GALLONS)
<S> <C> <C> <C> <C> <C> <C>
Gasoline............................... $ 6,252 $ 7,754 $ 7,451 13,241 11,953 11,308
Jet Fuel............................... 828 1,183 1,489 1,919 2,000 2,346
Diesel/#2 fuel......................... 1,945 2,439 2,312 4,795 4,288 3,728
Asphalt................................ 300 398 257 774 749 569
Petrochemicals and industrial
products............................. 937 1,172 846 2,440 1,940 1,408
Lubricants and waxes................... 441 467 426 230 239 220
------- ------- ------- ------ ------ ------
Total refined product
sales...................... $10,703 $13,413 $12,781 23,399 21,169 19,579
Other sales............................ 209 178 171
------- ------- ------- ------ ------ ------
Total sales.................. $10,912 $13,591 $12,952 23,399 21,169 19,579
======= ======= ======= ====== ====== ======
</TABLE>
The following table summarizes CITGO's cost of sales and operating
expenses.
CITGO COST OF SALES AND OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997 1996
------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Crude oil................................................... $ 1,928 $ 2,917 $ 3,053
Refined products............................................ 6,078 7,634 7,139
Intermediate feedstocks..................................... 826 1,152 1,000
Refining and manufacturing costs............................ 767 793 775
Other operating costs and expenses and inventory changes.... 741 524 524
------- ------- -------
Total cost of sales and operating expenses........ $10,340 $13,020 $12,491
======= ======= =======
</TABLE>
RESULTS OF OPERATIONS -- 1998 COMPARED TO 1997
Sales revenues and volumes. Sales decreased by $2,679 million, representing
a 20% decrease from 1997 to 1998. This was due to a decrease in average sales
price of 28% partially offset by an increase in sales volumes of 11%. (See CITGO
Sales Revenue and Volumes table above.)
Equity in earnings (losses) of affiliates. Equity in earnings of affiliates
increased by approximately $13 million, or 20% from $64 million in 1997 to $77
million in 1998. This increase was due primarily to a
18
<PAGE> 19
$14 million increase in CITGO's equity in earnings of LYONDELL-CITGO as a result
of the change in CITGO's interest in LYONDELL-CITGO which increased from
approximately 13% at December 31, 1996 to approximately 42% on April 1, 1997 and
the improvement in LYONDELL-CITGO's operations since completion of its refinery
enhancement project during the first quarter of 1997 (See Consolidated Financial
Statements of CITGO -- Note 3 in Item 14a).
Cost of sales and operating expenses. Cost of sales and operating expenses
decreased by $2,680 million, or 21% from 1997 to 1998. (See CITGO Cost of Sales
and Operating Expenses table above.)
CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. The refined
product purchases represented 59% of cost of sales for the years 1998 and 1997.
These refined product purchases included purchases from LYONDELL-CITGO, PDVMR,
Chalmette and HOVENSA. CITGO estimates that margins on purchased products, on
average, are lower than margins on produced products due to the fact that CITGO
can only receive the marketing portion of the total margin received on the
produced refined products. However, purchased products are not segregated from
CITGO produced products and margins may vary due to market conditions and other
factors beyond the Company's control. As such, it is difficult to measure the
effects on profitability of changes in volumes of purchased products. CITGO
anticipates its purchased product requirements will continue to increase, in
volume and as a percentage of refined products sold, in order to meet marketing
demands, although in the near term, other than normal refinery turnaround
maintenance, CITGO does not anticipate operational actions or market conditions
which might cause a material change in anticipated purchased product
requirements; however, there could be events beyond the control of CITGO which
impact the volume of refined products purchased. See also "Factors Affecting
Forward Looking Statements".
Gross margin. The gross margin in 1998 was $572 million, which is
essentially unchanged from 1997. This occurred because a sales volume increase
of approximately 11% was sufficient to offset the 9% erosion of gross margin on
a per gallon basis which includes a lower of cost or market adjustment of $159
million.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $42 million, or 21% in 1998. The increase is
due primarily to salary and related burden allocations as well as increases in
advertising expense and depreciation.
Interest expense. Interest expense decreased $25.6 million from 1997 to
1998. The decrease was primarily due to the decrease in average debt outstanding
related to a decrease in working capital requirements and the deferral of a
significant 1998 excise tax payment. Also the average interest rate decreased
due to a decrease in key rates and replacement of higher rate debt with lower
rate debt.
Income taxes. CITGO's provision for income taxes in 1998 was $103 million,
representing an effective tax rate of 35%. In 1997, CITGO's provision for income
taxes was $91 million, representing an effective tax rate of 31%. The relatively
low rate in 1997 was due primarily to the favorable resolution of a significant
tax issue with the Internal Revenue Service in the second quarter of 1997. The
resolution resulted in the reduction of a contingency reserve previously
established related to this matter. The decrease was partially offset by the
recording of a valuation allowance related to a capital loss carryforward. In
1998 the effective tax rate decreased slightly compared to the 1996 rate due to
a decrease in state taxes.
RESULTS OF OPERATIONS -- 1997 COMPARED TO 1996
Sales revenues and volumes. Sales increased by $639 million, representing a
5% increase from 1996 to 1997. The increase was due to an increase in sales
volumes of 8% partially offset by a decrease in average sales prices of 3%. (See
CITGO Sales Revenue and Volumes table above.)
Equity in earnings (losses) of affiliates. Equity in earnings of affiliates
increased by approximately $43 million, or 205% from $21 million in 1996 to $64
million in 1997. This increase was due primarily to a $43 million increase in
CITGO's equity earnings of LYONDELL-CITGO. This increase was due primarily to
the change in CITGO's interest in LYONDELL-CITGO which increased from
approximately 13% at December 31, 1996 to approximately 42% on April 1, 1997 and
the improvement in LYONDELL-CITGO's
19
<PAGE> 20
operations since completion of its refinery enhancement project during the first
quarter of 1997 (See Consolidated Financial Statements of CITGO -- Note 3 in
Item 14a).
Other income (expense). Other income (expense) was $(10.5) million for the
year ended December 31, 1997 as compared to $(4.2) million for the same period
in 1996. The 1997 amount includes $8.7 million in loss reserves on a lubricants
plant and retail properties, a $5.8 million write off of a capital project, $5.8
million in fees related to the sale of trade accounts, notes and credit card
receivables in June and November 1997 and a $2.6 million write off of
miscellaneous assets. These items were offset by a net $8.3 million property
insurance recovery relating to the Corpus Christi alkylation unit fire during
the third quarter, a $3.1 million net management fee charged to PDVMR over the
year and a $1.3 million gain on the sale of pipeline assets in the first quarter
of 1997.
Cost of sales and operating expenses. Cost of sales and operating expenses
increased by $529 million, or 4% from 1996 to 1997. (See CITGO Cost of Sales and
Operating Expenses table above.)
CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. The refined
product purchases represented 59% and 57% of cost of sales for the years 1997
and 1996, respectively. These refined product purchases included purchases from
LYONDELL-CITGO, PDVMR and Chalmette.
Gross margin. The gross margin for 1997 was $571 million, or 4.2%, compared
to $461 million, or 3.6% for 1996. Gross margins in 1997 were positively
affected by high crude runs during periods of strong refining margins as well as
asphalt and petrochemical activities.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $35 million, or 21%, due primarily to
increased selling expenses in 1997 including the effect of the change in focus
of the Company's marketing programs initiated in April 1996 and increases in
several other areas including purchasing, administrative services, information
systems, corporate executive, credit card and other charges, none of which
increased more than $6 million individually, but in the aggregate increased
approximately $30 million for the year.
Interest expense. Interest expense increased $11.5 million from 1996 to
1997. The increase was primarily due to the public debt and certain industrial
revenue bonds which were outstanding for the entire year in 1997 compared to
only a partial year during 1996 and CITGO's revolving bank loan which had a
higher outstanding balance during most of 1997 as compared to 1996.
Income taxes. CITGO's provision for income taxes in 1997 was $91 million,
representing an effective tax rate of 31%. In 1996, CITGO's provision for income
taxes was $70 million, representing an effective tax rate of 36%. The decrease
is due primarily to the favorable resolution of a significant tax issue with the
Internal Revenue Service in the second quarter of 1997. The resolution resulted
in the reduction of a contingency reserve previously established related to this
matter. The decrease was partially offset by the recording of a valuation
allowance related to a capital loss carryforward.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1998, CITGO's net cash provided by
operating activities totaled approximately $583 million, primarily reflecting
$194 million of net income, $222 million of depreciation and amortization, a
lower of cost or market adjustment to inventory of $159 million and the net
effect of other items of $8 million. The more significant changes in other items
included the decrease in accounts receivable, including receivables from
affiliates, of approximately $94 million, the decrease in accounts payable and
other current liabilities, including payables to affiliates, of approximately
$126 million and the increase of other assets of approximately $52 million.
Net cash used in investing activities in 1998 totaled $215 million
consisting primarily of capital expenditures of $200 million and a loan to
LYONDELL-CITGO of $19.8 million.
20
<PAGE> 21
During the same period, consolidated net cash used in financing activities
totaled approximately $363 million comprised primarily of $486 million of
dividends offset by net additional borrowings of $73 million and a $50 million
capital contribution from PDV America.
CITGO currently estimates that its capital expenditures for the years 1999
through 2003 will total approximately $1.5 billion. These include:
CITGO ESTIMATED CAPITAL EXPENDITURES -- 1999 THROUGH 2003(1)
<TABLE>
<S> <C>
Strategic................................................... $ 775 million
Maintenance................................................. 439 million
Regulatory/Environmental.................................... 303 million
--------------
Total............................................. $1,517 million
==============
</TABLE>
- ---------------
(1) These estimates may change as future regulatory events unfold. See "Factors
Affecting Forward Looking Statements".
As of December 31, 1998, the Company and its subsidiaries had an aggregate
of $1,343 million of indebtedness outstanding that matures on various dates
through the year 2028. As of December 31, 1998, the Company's contractual
commitments to make principal payments on this indebtedness were $84.1 million,
$47.1 million and $47.1 million for 1999, 2000 and 2001, respectively. The
Company's bank credit facility consists of a $400 million, five year, revolving
bank loan and a $150 million, 364 day, revolving bank loan, both of which are
unsecured and have various borrowing maturities, of which $165 million was
outstanding at December 31, 1998. Cit-Con has a separate credit agreement under
which $21.4 million was outstanding at December 31, 1998. The Company's other
principal indebtedness consists of (i) $199.7 million in senior notes issued in
1996, (ii) $260 million in senior notes issued pursuant to a master shelf
agreement with an insurance company, (iii) $177 million in senior notes issued
in 1991, (iv) $276 million in obligations related to tax exempt bonds issued by
various governmental units, and (v) $208 million in obligations related to
taxable bonds issued by a governmental unit. (See Consolidated Financial
Statements of CITGO -- Note 9 and 10 in Item 14a.)
As of December 31, 1998, capital resources available to CITGO included cash
provided by operations, available borrowing capacity of $385 million under
CITGO's revolving credit facility and $138 million in unused availability under
uncommitted short-term borrowing facilities with various banks. Additionally,
the remaining $400 million from CITGO's shelf registration with the Securities
and Exchange Commission for $600 million of debt securities may be offered and
sold from time to time. CITGO believes that it has sufficient capital resources
to carry out planned capital spending programs, including regulatory and
environmental projects in the near term, and to meet currently anticipated
future obligations as they arise. CITGO periodically evaluates other sources of
capital in the marketplace and anticipates long-term capital requirements will
be satisfied with current capital resources and future financing arrangements,
including the issuance of debt securities. The Company's ability to obtain such
financing will depend on numerous factors, including market conditions and the
perceived creditworthiness of the Company at that time. See "Factors Affecting
Forward Looking Statements".
CITGO's debt instruments impose restrictions on CITGO's ability to incur
additional debt, place liens on property, sell or acquire fixed assets, and make
restricted payments, including dividends.
CITGO is a member of the PDV America consolidated Federal income tax return.
CITGO has a tax allocation agreement with PDV America, which is designed to
provide PDV America with sufficient cash to pay its consolidated income tax
liabilities. (See Consolidated Financial Statements of CITGO -- Note 1 and Note
4 in Item 14a).
21
<PAGE> 22
NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." The Company had
no items of other comprehensive income during the three years ended December 31,
1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"), which is effective for the fiscal year ending December 31,
1998. SFAS No. 131 modifies current segment reporting requirements and
establishes, for public companies, criteria for reporting disclosures about a
company's products and services, geographic areas and major customers in annual
and interim financial statements. The Company has determined that its operations
comprise a single reportable segment.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS No. 132") which is effective for the Company's
fiscal year ending December 31, 1998. The statement revises current employers'
disclosure requirements for pensions and other postretirement benefits. It does
not change the measurement or recognition of costs or liabilities associated
with those plans.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). The statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an entity
recognize all derivatives, at fair value, as either assets or liabilities in the
statement of financial position with an offset either to shareholder's equity
and comprehensive income or income depending upon the classification of the
derivative. The Company has not determined the impact on its financial
statements that may result from adoption of SFAS No. 133, which is required no
later than January 1, 2000.
YEAR 2000 READINESS
General. The inability of computers, software and other equipment using
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 issue. As the Year 2000
approaches, such systems may be unable to accurately process certain date-based
information.
To mitigate any adverse impact this may cause, CITGO has established a
company wide Year 2000 Project ("Project") to address the issue of computer
programs and embedded computer chips which may be unable to correctly function
with the Year 2000. The Project is proceeding on schedule. In addition, CITGO is
updating major elements of its information systems by implementing programs
purchased from SAP. The first phase of SAP implementation, which included the
financial reporting and materials management systems, was brought into
production on January 1, 1998. Additional SAP modules including plant
maintenance work order and cost tracking were implemented throughout 1998. The
implementation will continue in 1999. The total cost of the SAP implementation
is estimated to be approximately $110 million, which includes software,
hardware, reengineering and change management. Management has determined that
SAP is an appropriate solution to the Year 2000 issue related to the systems for
which SAP is implemented. Such systems comprise approximately 80 percent of
CITGO's total information systems. The implementation of SAP is 70 to 75 percent
complete, and is on schedule and on budget as of December 31, 1998. Remaining
business software systems are expected to be made Year 2000 ready through the
Year 2000 Project or they will be replaced.
The Project. CITGO's Year 2000 Project Team is divided into two groups. One
group is working with Information Systems ("I.S.") and Information Technology
("I.T.") related matters, while the other is analyzing non-I.S./I.T. business
and asset integrity matters. A risk-based approach toward Year 2000 readiness
was applied to non-SAP systems and processes, with most fix-or-replace decisions
made by year-end 1998. The strategy for achieving Year 2000 business and asset
integrity is focused on equipment, software and relationships that are critical
to the Company's primary business operations, including refinery operations,
terminal operations, crude oil purchase and shipment operations, and refined
product distribution operations. The Company engaged third party consultants to
review and validate the methodology and organization of the
22
<PAGE> 23
Project. The Project strategy involves a number of phases: Inventory and
Assessment of Critical Equipment, Software and Relationships; Contingency
Planning; Remediation; Testing; and Readiness.
The Inventory and Assessment of Critical Equipment and Software phase of
the Project has been completed. The Inventory and Assessment of business
relationships with customers and suppliers to assure continuity of purchases,
sales and inter-company communications began in June 1998. CITGO now requires
that all new contracts with vendors, suppliers, or business partners include a
clause covering Year 2000 readiness. CITGO also seeks evidence of Year 2000
readiness from service providers prior to procuring new services.
While the CITGO Project is systematically assessing the Year 2000 readiness
of third party suppliers and customers, there can be no guarantee that third
parties of business importance to the Company will successfully and timely
reprogram, replace, or test all of their own computer hardware, software and
process control systems. CITGO has therefore chosen to continue assessment and
reevaluation of third party relationships beyond the deadline for completion of
other aspects of Inventory and Assessment phases of the Project. Reviews of
third party Year 2000 readiness will continue through 1999.
CITGO has also established a Year 2000 Contingency Planning Team. The
strategy for Contingency Planning includes a review and analysis of existing
contingency plans for CITGO refineries, terminals, pipelines and other
operations, in light of potential Year 2000 issues discovered in the Inventory
and Assessment phases of the Project. The Contingency Planning phase will also
evaluate and implement changes to the existing contingency plans. Contingency
plans based on this process are scheduled to be enacted in phases, with
completion scheduled for June 30, 1999. Additional planning is underway for the
Remediation phase of the Project. Remediation has begun and includes technical
analysis, testing and, if necessary, retrofitting or replacement of systems and
equipment determined to be incapable of reliable operations in the Year 2000.
Target for completion of the Remediation phase is August 1, 1999. The final
phase of the Project, Readiness, is being conducted concurrently with other
Project phases. As systems, equipment, processes and business relationships are
determined and documented as Year 2000 ready, Project resources are being
shifted to pursue Readiness in remaining areas of the enterprise.
The following is CITGO's definition of Year 2000 Readiness:
- Correctly and accurately handle date information before, during and after
midnight, December 31, 1999.
- Function correctly and accurately, and without disruption, before, during
and after January 1, 2000.
- Respond to two-digit year date input in a way that resolves ambiguity as
to the century in a disclosed, defined and predetermined manner.
- Process all date data to reflect the year 2000 as a leap year.
- Correctly and accurately recognize and process any date with a year
specified as "99" and "00".
Costs. The estimated total cost of the Project is not more than $25
million, down from an original estimate of $35 million. The reduction is due to
less than expected need for remediation of embedded systems and refinements in
expense estimates. This estimate does not include CITGO's potential share of
Year 2000 costs that may be incurred by partnerships and joint ventures in which
CITGO participates but is not the managing partner or operator. The total amount
expended through December 31, 1998 was approximately $5.9 million. Approximately
65% of these expenditures were for internal costs to conduct the company-wide
Inventory and Assessment phases of the Project. The remaining 35% of the cost
was for consultants in the specialized areas of Project Management, Contingency
Planning, Information Technology, Database Administration and Operations
Analysis, as well as fees paid to third parties for Quality Assessment analysis
of Project organization and methodology.
The costs of the Project are being funded with cash from operations. No
existing or planned I.T. projects have been deferred or delayed due to Year 2000
readiness initiatives. The cost of implementing SAP replacement systems is not
included in these estimates.
23
<PAGE> 24
The majority of estimated future costs for completing the Project are
anticipated to be directed toward the replacement and repair of systems and
equipment found to be incapable of reliable operation in the Year 2000.
Estimates for replacement and repair costs will be refined over time as the
Remediation phase progresses.
Risks. The failure to correct a material Year 2000 problem could result in
an interruption, or failure of, certain normal business activities or
operations. Because the Company is dependent, to a very substantial degree, upon
the proper functioning of its computer systems and its interaction with third
parties, including vendors and customers and their computer systems, a failure
of any of these systems to be Year 2000 compliant could have a material adverse
effect on the Company. Failure of this kind could, for example, cause disruption
in the supply of crude oil, cause disruption in refinery operations, cause
disruption in the distribution of refined products, lead to incomplete or
inaccurate accounting, recording, or processing of purchases of supplies or
sales of refined products, or result in generation of erroneous results. If not
remedied, potential risks include business interruption, financial loss,
regulatory actions, reputational harm, and legal liability. Such failures could
adversely affect CITGO's results of operations, liquidity and financial
condition. Unlike other business interruption scenarios, Year 2000 implications
could include multiple, simultaneous events which could result in unpredictable
outcomes.
Due to the general uncertainty inherent in the Year 2000 problem, resulting
in part from the uncertainty of the Year 2000 readiness of third party suppliers
and customers, CITGO management is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company's
operations, liquidity or financial position. The Project is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
impact. CITGO management believes that, with the implementation of new SAP
business systems and completion of the Project as scheduled, the possibility of
significant interruptions of normal operations should be minimized. See also
"Factors Affecting Forward Looking Statements".
ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction. CITGO has exposure to price fluctuations of crude oil and
refined products as well as fluctuations in interest rates. To manage these
exposures, management has defined certain benchmarks consistent with its
preferred risk profile for the environment in which the Company operates and
finances its assets. CITGO does not attempt to manage the price risk related to
all of its inventories of crude oil and refined products. As a result, at
December 31, 1998, CITGO was exposed to the risk of broad market price declines
with respect to a substantial portion of its crude oil and refined product
inventories. The following disclosures do not attempt to quantify the price risk
associated with such commodity inventories.
Commodity Instruments. CITGO balances its crude oil and petroleum product
supply/demand and manages a portion of its price risk by entering into petroleum
futures contracts, options and other over-the-counter commodity derivatives.
Generally, CITGO's risk management strategies qualify as hedges. However,
certain strategies do not qualify as hedges. CITGO may take commodity positions
based on its views or expectations of specific commodity prices or price
differentials between commodity types.
NON TRADING COMMODITY DERIVATIVES
OPEN POSITIONS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
MATURITY VOLUMES OF CONTRACT MARKET
COMMODITY DERIVATIVE DATE CONTRACTS(1) VALUE(2) VALUE
--------- ---------- -------- ------------ -------- ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
No Lead Gasoline Futures Purchased 1999 500 $8 $8
Heating Oil Futures Purchased 1999 371 $7 $6
Futures Sold 1999 110 $2 $2
</TABLE>
- ---------------
(1) 1,000 barrels per contract
(2) Weighted average price
24
<PAGE> 25
Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
toward a benchmark of 40 to 60 percent fixed rate debt to total fixed and
floating rate debt. These instruments have the effect of changing the interest
rate with the objective of minimizing CITGO's long-term costs. At December 31,
1998, CITGO's primary exposures were to U.S. dollar LIBOR and U.S. Treasury
rates.
For interest rate swaps, the table below presents notional amounts and
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contracts.
NON TRADING INTEREST RATE DERIVATIVES
OPEN POSITIONS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NOTIONAL
EXPIRATION FIXED RATE PRINCIPAL
VARIABLE RATE INDEX DATE PAID AMOUNT
- ------------------- ---------- ---------- ---------------
($ IN MILLIONS)
<S> <C> <C> <C>
One-month LIBOR....................... May 2000 6.28% $25
J.J. Kenny............................ May 2000 4.72% 25
J.J. Kenny............................ February 2005 5.30% 12
J.J. Kenny............................ February 2005 5.27% 15
J.J. Kenny............................ February 2005 5.49% 15
---
$92
===
</TABLE>
For debt obligations, the table below presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.
LONG-TERM DEBT
AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
AVERAGE EXPECTED
FIXED AVERAGE
FIXED INTEREST VARIABLE VARIABLE
EXPECTED MATURITIES RATE DEBT RATE RATE DEBT INTEREST RATE
- ------------------- --------------- ------------- --------------- ----------------
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C>
1999.................... $ 40 9.11% $ 44 5.01%
2000.................... 40 9.11% 7 5.09%
2001.................... 40 9.11% 7 5.23%
2002.................... 36 8.78% -- --
2003.................... 61 8.79% 165 5.44%
Thereafter.............. 422 8.02% 481 6.00%
---- ---- ---- ----
Total................... $639 8.34% $704 5.79%
==== ==== ==== ====
Fair Value.............. $625 $704
==== ====
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, the Notes to Consolidated Financial
Statements and the Independent Auditors' Report are included in Item 14a of this
report. The Quarterly results of Operations are reported in Note 16 of the Notes
to Consolidated Financial Statements included in Item 14a.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
25
<PAGE> 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The registrant meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K and is therefore omitting certain information
otherwise required by Item 10 of Form 10-K relating to Directors and Executive
Officers as permitted by General Instruction (I)(2)(c).
ITEM 11. EXECUTIVE COMPENSATION
The registrant meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K and is therefore omitting certain information
otherwise required by Item 11 of Form 10-K relating to executive compensation as
permitted by General Instruction (I)(2)(c).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain members of the Board of Directors of CITGO are also directors or
executive officers of PDVSA.
CITGO has entered into several transactions with PDVSA or other affiliates
of PDVSA, including crude oil and feedstock supply agreements, agreements for
the purchase of refined products and transportation agreements. These crude oil
supply agreements require PDVSA to supply minimum quantities of crude oil and
other feedstocks to CITGO for a fixed period, usually 20 to 25 years. The supply
agreements differ somewhat for each entity and each CITGO refinery but generally
incorporate formula prices based on the market value of a slate of refined
products deemed to be produced for each particular grade of crude oil or
feedstock, less (i) certain deemed refining costs; (ii) certain actual costs,
including transportation charges, import duties and taxes; and (iii) a deemed
margin, which varies according to the grade of crude oil or feedstock delivered.
Under each supply agreement, deemed margins and deemed costs are adjusted
periodically by a formula primarily based on the rate of inflation. Because
deemed operating costs and the slate of refined products deemed to be produced
for a given barrel of crude oil or other feedstock do not necessarily reflect
the actual costs and yields in any period, the actual refining margin earned by
a purchaser under the various supply agreements will vary depending on, among
other things the efficiency with which such purchaser conducts its operations
during such period. These supply agreements are designed to reduce the inherent
earnings volatility of the refining operations of CITGO. Prior to 1995, certain
costs were used in the CITGO supply agreement formulas, aggregating
approximately $70 million per year, which were to cease being deductible after
1996. Commencing in the third quarter of 1995, a portion of such deductions were
deferred from 1995 and 1996 to the years 1997 through 1999. In 1998, the effect
of the adjustments to the original modifications was to reduce the price of
crude oil purchased from PDVSA by approximately $25 million. The Company
anticipates that the effect of the adjustments to the original modifications
will be to reduce the price of crude oil purchased from PDVSA under these
agreements by approximately $25 million in 1999, as compared to the original
modification and without giving effect to any other factors that may affect the
price payable for crude oil under these agreements. Due to the pricing formula
under the supply agreements, the aggregate price actually paid for crude oil
purchased from PDVSA under these agreements depends primarily upon the current
prices for refined products and certain actual costs of CITGO. This estimate is
based on the assumption that CITGO will purchase the base volumes of crude oil
under the agreements. See also "Factors Affecting Forward Looking Statements".
LYONDELL-CITGO owns and operates a 265 MBPD refinery in Houston, Texas.
LYONDELL-CITGO was formed in 1993 by subsidiaries of CITGO and Lyondell,
referred to as the owners. CITGO contributed cash during the years 1993 through
1997 for a participation interest and other commitments related to
LYONDELL-CITGO's refinery enhancement project, and Lyondell contributed the
Houston refinery and related assets for the remaining participation interest.
The refinery enhancement project to
26
<PAGE> 27
increase the refinery's heavy crude oil high conversion capacity was
substantially completed at the end of 1996 with an in-service date of March 1,
1997. The heavy crude oil processed by the Houston refinery is supplied by PDVSA
under a long-term crude oil supply agreement through the year 2017, and CITGO
purchases substantially all of the refined products produced at the Houston
refinery under a long-term contract (See Consolidated Financial Statements of
CITGO -- Notes 3 and 4 in Item 14a).
Under such long-term supply agreements and refined product purchase
agreements, CITGO and LYONDELL-CITGO purchased approximately $1.4 billion and
$0.5 billion respectively, of crude oil, feedstocks and refined products at
market related prices from PDVSA in 1998. At December 31, 1998, $74 million was
included in CITGO's current payable to affiliates as a result of its
transactions with PDVSA.
CITGO's participation interest in LYONDELL-CITGO was approximately 41% at
December 31, 1998, in accordance with agreements between the owners concerning
such interest. CITGO has a one-time option exercisable after January 1, 2000 but
before September 30, 2000, to increase, for an additional investment, its
participation interest to 50%.
CITGO loaned $19.8 million and $16.5 million to LYONDELL-CITGO during 1998
and 1997, respectively. The notes bear interest at market rates which were
approximately 5.9% at December 31, 1998 and 1997, and are due July 1, 2003.
These notes are included in other assets at December 31, 1998 and 1997.
CITGO accounts for its investment in LYONDELL-CITGO using the equity method
of accounting and records its share of the net earnings of LYONDELL-CITGO based
on allocations of income agreed to by the owners.
On May 1, 1997, PDV America and Union Oil Company of California ("Unocal")
closed a transaction relating to The UNO-VEN Company ("UNO-VEN"). The
transaction transferred certain assets and liabilities to PDVMR, a subsidiary of
PDV America, in liquidation of PDV America's 50% ownership interest in UNO-VEN.
The assets include a refinery in Lemont, Illinois, as well as product
distribution terminals and retail sites located in the Midwest. CITGO operates
these facilities and purchases the products produced at the refinery (See
Consolidated Financial Statements of CITGO -- Note 2 in Item 14a). A portion of
the crude oil processed by PDVMR is supplied by PDVSA under a long-term crude
supply contract.
An affiliate of PDVSA acquired a 50 percent equity interest in Chalmette in
October 1997 and has assigned to CITGO its option to purchase up to 50 percent
of the refined products produced at the refinery through December 31, 1999 (See
Consolidated Financial Statements of CITGO -- Note 2 in Item 14a). CITGO
exercised this option on November 1, 1997, and acquired approximately 65 MBPD of
refined products from the refinery during 1998, approximately one-half of which
was gasoline.
In October 1998 an affiliate of PDVSA acquired a 50 percent equity interest
in HOVENSA and has the right under a product sales agreement to assign
periodically to CITGO, or other related parties, its option to purchase 50% of
the refined products produced by HOVENSA (less a certain portion of such
products that HOVENSA will market directly in the local and Caribbean markets).
In addition, under the product sales agreement, the PDVSA affiliate has
appointed CITGO as its agent in designating which of its affiliates shall from
time to time take deliveries of the refined products available to it. The
product sales agreement will be in effect for the life of the joint venture,
subject to termination events based on default or mutual agreement (See
Consolidated Financial Statements of CITGO -- Note 2 in Item 14a). Pursuant to
the above arrangement, CITGO began acquiring approximately 120 MBPD of refined
products from HOVENSA on November 1, 1998, approximately one-half of which was
gasoline.
The purchase agreements with LYONDELL-CITGO, PDVMR, Chalmette and HOVENSA
incorporate various formula prices based on published market prices and other
factors. Such purchases totaled $2.9 billion for 1998. At December 31, 1998, $64
million was included in payables to affiliates as a result of these
transactions.
27
<PAGE> 28
CITGO had refined product, feedstock, crude oil and other product sales of
$164 million to affiliates, including LYONDELL-CITGO and MVPPP, in 1998. At
December 31, 1998, $34 million was included in Due from affiliates as a result
of these transactions.
CITGO has guaranteed approximately $99 million of debt of certain
affiliates, including $50 million related to HOVENSA and $11 million related to
Nelson Industrial Steam Company. (See Consolidated Financial Statements of
CITGO -- Note 13 in Item 14a.)
Under a separate guarantee of rent agreement, PDVSA has guaranteed payment
of rent, stipulated loss value and termination value due under the lease of the
Corpus Christi Refinery West Plant facilities. (See Consolidated Financial
Statements of CITGO -- Note 14 in Item 14a.)
The Company and PDV America are parties to a tax allocation agreement that
is designed to provide PDV America with sufficient cash to pay its consolidated
income tax liabilities. In 1996, $12.7 million due from CITGO to PDV America
under this tax allocation agreement for the tax years 1992 through 1994 was
reclassified as a noncash contribution of capital. In December 1996, $0.8
million due from PDV America to CITGO under this tax allocation agreement for
the 1995 tax year was reclassified as a noncash dividend. In 1997, $10 million
due from PDV America under this tax allocation agreement for the 1996 tax year
was classified as a noncash dividend. In 1998, $7.6 million due from CITGO to
PDV America under this agreement for the 1997 tax year was classified as a
noncash contribution of capital. In the event that CITGO should cease to be part
of the consolidated federal income tax return, any amounts included in
shareholder's equity under this agreement are required to be paid to PDV
America. At December 31, 1998, CITGO has income taxes receivable of $12 million
included in prepaid expenses and a $5 million receivable from PDV America
included in due from affiliates.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
A. CERTAIN DOCUMENTS FILED AS PART OF THIS REPORT
(1) Financial Statements:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Balance Sheets at December 31, 1998 and 1997... F-2
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996.......................... F-3
Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1998, 1997 and 1996.............. F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-5
Notes to Consolidated Financial Statements.................. F-6
</TABLE>
(2) Exhibits:
The Exhibit Index in part c. below lists the exhibits that are filed as
part of, or incorporated by reference into, this report.
B. REPORTS ON FORM 8-K
None
28
<PAGE> 29
C. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*3.1 -- Certificate of Incorporation, Certificate of Amendment of
Certificate of Incorporation and By-laws of CITGO
Petroleum Corporation.
*4.1 -- Indenture, dated as of May 1, 1996, between CITGO
Petroleum Corporation and the First National Bank of
Chicago, relating to the 7 7/8% Senior Notes due 2006 of
CITGO Petroleum Corporation.
*4.2 -- Form of Senior Note (included in Exhibit 4.1).
**10.1 -- Crude Supply Agreement between CITGO Petroleum
Corporation and Petroleos de Venezuela, S.A., dated as of
September 30, 1986.
**10.2 -- Supplemental Crude Supply Agreement dated as of September
30, 1986 between CITGO Petroleum Corporation and
Petroleos de Venezuela, S.A.
**10.3 -- Crude Oil and Feedstock Supply Agreement dated as of
March 31, 1987 between Champlin Refining Company and
Petroleos de Venezuela, S.A.
**10.4 -- Supplemental Crude Oil and Feedstock Supply Agreement
dated as of March 31, 1987 between Champlin Refining
Company and Petroleos de Venezuela, S.A.
**10.5 -- Contract for the Purchase/Sale of Boscan Crude Oil dated
as of June 2, 1993 between Tradecal, S.A. and CITGO
Asphalt Refining Company.
**10.6 -- Restated Contract for the Purchase/Sale of Heavy/Extra
Heavy Crude Oil dated December 28, 1990 among Maraven,
S.A., Lagoven, S.A. and Seaview Oil Company.
**10.7 -- Sublease Agreement dated as of March 31, 1987 between
Champlin Petroleum Company, Sublessor, and Champlin
Refining Company, Subleasee.
**10.8 -- Operating Agreement dated as of May 1, 1984 among Cit-Con
Oil Corporation, CITGO Petroleum Corporation and Conoco,
Inc.
**10.9 -- Amended and Restated Limited Liability Company
Regulations of LYONDELL-CITGO Refining Company, Ltd.,
dated July 1, 1993.
**10.10 -- Contribution Agreement between Lyondell Petrochemical
Company and LYONDELL-CITGO Refining Company, Ltd. and
Petroleos de Venezuela, S.A.
**10.11 -- Crude Oil Supply Agreement between LYONDELL-CITGO
Refining Company, Ltd. and Lagoven, S.A. dated as of May
5, 1993.
**10.12 -- Supplemental Supply Agreement dated as of May 5, 1993
between LYONDELL-CITGO Refining Company, Ltd. and
Petroleos de Venezuela, S.A.
**10.13 -- Tax Allocation Agreement dated as of June 24, 1993 among
PDV America, Inc., VPHI Midwest, Inc., CITGO Petroleum
Corporation and PDV USA, Inc., as amended.
**10.14 -- CITGO Credit Facility.
*10.15(i) -- First Amendment to the Second Amended and Restated Senior
Term Loan Agreement, by and between CITGO Petroleum
Corporation and Bank of America National Trust and
Savings Association et al, dated as of February 15, 1994.
*10.15(ii) -- Second Amendment to Second Amended and Restated Senior
Term Loan Agreement by and among CITGO Petroleum
Corporation and Bank of America Illinois et al, dated as
of October 21, 1994.
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.15(iii) -- First Amendment to the Second Amended and Restated Senior
Revolving Credit Facility Agreement by and among CITGO
Petroleum Corporation and Bank of America National Trust
and Savings Association et al, dated as of February 15,
1994.
*10.15(iv) -- Second Amendment to Second Amended and Restated Senior
Revolving Credit Facility Agreement by and among CITGO
Petroleum Corporation and Bank of America Illinois et al,
dated as of October 21, 1994.
*10.16 -- Master Shelf Agreement (1994) by and between Prudential
Insurance Company of America and CITGO Petroleum
Corporation ($100,000,000), dated March 4, 1994.
*10.17(i) -- Letter Agreement by and between the Company and
Prudential Insurance Company of America, dated March 4,
1994.
*10.17(ii) -- Letter Amendment No. 1 to Master Shelf Agreement with
Prudential Insurance company of America, dated November
14, 1994.
**10.18 -- CITGO Senior Debt Securities (1991) Agreement.
*10.19 -- CITCON Credit Agreement between CITCON Oil Corporation
and The Chase Manhattan Bank N.A., as Agent, dated as of
April 30, 1992.
*10.20(i) -- First Amendment to the CITCON Credit Agreement, between
CITCON Oil Corporation and The Chase Manhattan Bank
(National Association), dated as of June 30, 1992.
*10.20(ii) -- Second Amendment to the CITCON Credit Agreement, between
CITCON Oil Corporation and The Chase Manhattan Bank
(National Association), dated as of March 31, 1994.
*10.20(iii) -- Third Amendment to the CITCON Credit Agreement, between
CITCON Oil Corporation and The Chase Manhattan Bank
(National Association), dated as of June 10, 1994.
***10.21 -- Selling Agency Agreement dated as of October 28, 1997
among CITGO Petroleum Corporation, Salomon Brothers Inc.
and Chase Securities Inc.
10.22 -- $150,000,000 Credit Agreement, dated May 13, 1998.
10.23 -- $400,000,000 Credit Agreement, dated May 13, 1998.
10.24 -- Limited Partnership Agreement of LYONDELL-CITGO Refining
LP, dated December 31, 1998.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
23.1 -- Consent of Independent Auditors.
27 -- Financial Data Schedule (filed electronically only).
</TABLE>
- ---------------
* Previously filed in connection with the Registrant's Report on Form 10,
Registration No. 333-3226.
** Incorporated by reference to the Registration Statement on Form F-1 of PDV
America, Inc. (No. 33-63742).
*** Incorporated by reference to the Registrant's Report on Form 8-K filed with
the Commission on November 18, 1997.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CITGO PETROLEUM CORPORATION
/s/ R. M. BRIGHT
------------------------------------
R. M. Bright
Controller (Chief Accounting
Officer)
Date: March 17, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
By /s/ LUIS URDANETA Chairman of the Board and Director March 17, 1999
--------------------------------------------------
Luis Urdaneta
By /s/ EDUARDO BLANCO Director March 17, 1999
--------------------------------------------------
Eduardo Blanco
By /s/ RODOLFO GUISTI Director March 17, 1999
--------------------------------------------------
Rodolfo Guisti
By /s/ EDUARDO LOPEZ QUEVEDO Director March 17, 1999
--------------------------------------------------
Eduardo Lopez Quevedo
By /s/ DAVID J. TIPPECONNIC President, Chief Executive Officer March 17, 1999
-------------------------------------------------- and Director
David J. Tippeconnic
By /s/ EZRA C. HUNT Senior Vice President and Chief March 17, 1999
-------------------------------------------------- Financial Officer
Ezra C. Hunt
</TABLE>
31
<PAGE> 32
CITGO PETROLEUM CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1998 AND 1997, AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31,
1998 AND INDEPENDENT AUDITORS' REPORT
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
CITGO Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of CITGO
Petroleum Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, shareholder's equity and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CITGO Petroleum Corporation and
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Tulsa, Oklahoma
February 5, 1999
F-1
<PAGE> 34
CITGO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 30,338 $ 24,363
Accounts receivable, net.................................. 540,501 657,864
Due from affiliates....................................... 33,780 23,498
Inventories............................................... 719,625 857,598
Deferred income taxes..................................... 65,234 3,192
Prepaid expenses and other................................ 18,317 6,466
---------- ----------
Total current assets.............................. 1,407,795 1,572,981
PROPERTY, PLANT AND EQUIPMENT -- Net........................ 2,860,427 2,849,262
RESTRICTED CASH............................................. 9,436 6,920
INVESTMENTS IN AFFILIATES................................... 781,481 813,923
OTHER ASSETS................................................ 195,113 168,949
---------- ----------
$5,254,252 $5,412,035
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term bank loans..................................... $ 37,000 $ 3,000
Accounts payable.......................................... 384,532 469,556
Payables to affiliates.................................... 141,607 197,852
Taxes other than income................................... 219,642 180,143
Other..................................................... 209,327 240,270
Current portion of long-term debt......................... 47,078 95,240
Current portion of capital lease obligation............... 14,660 13,140
---------- ----------
Total current liabilities......................... 1,053,846 1,199,201
LONG-TERM DEBT.............................................. 1,259,270 1,158,528
CAPITAL LEASE OBLIGATION.................................... 101,926 116,586
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS................. 200,281 199,765
OTHER NONCURRENT LIABILITIES................................ 219,466 205,533
DEFERRED INCOME TAXES....................................... 543,464 423,242
MINORITY INTEREST........................................... 29,559 28,337
COMMITMENTS AND CONTINGENCIES (NOTE 13)
SHAREHOLDER'S EQUITY:
Common stock -- $1.00 par value, 1,000 shares authorized,
issued and outstanding................................. 1 1
Additional capital........................................ 1,312,616 1,255,009
Retained earnings......................................... 533,823 825,833
---------- ----------
Total shareholder's equity........................ 1,846,440 2,080,843
---------- ----------
$5,254,252 $5,412,035
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 35
CITGO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Net sales........................................... $10,747,577 $13,369,808 $12,762,453
Sales to affiliates................................. 164,144 221,495 189,607
----------- ----------- -----------
10,911,721 13,591,303 12,952,060
Equity in earnings of affiliates.................... 77,105 64,460 21,481
Other income (expense), net......................... (8,185) (10,535) (4,178)
----------- ----------- -----------
10,980,641 13,645,228 12,969,363
----------- ----------- -----------
COST OF SALES AND EXPENSES:
Cost of sales and operating expenses (including
purchases of $4,318,958, $4,791,307 and
$4,001,471 from
affiliates)...................................... 10,340,219 13,019,754 12,491,003
Selling, general and administrative expenses........ 242,496 200,777 166,108
Interest expense, excluding capital lease........... 85,691 109,895 97,171
Capital lease interest charge....................... 14,235 15,597 16,818
Minority interest................................... 1,223 1,706 1,013
----------- ----------- -----------
10,683,864 13,347,729 12,772,113
----------- ----------- -----------
INCOME BEFORE INCOME TAXES............................ 296,777 297,499 197,250
INCOME TAXES.......................................... 102,787 90,955 70,281
----------- ----------- -----------
NET INCOME............................................ $ 193,990 $ 206,544 $ 126,969
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 36
CITGO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- ADDITIONAL RETAINED SHAREHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996................... 1 $1 $1,222,345 $ 509,161 $1,731,507
Net income............................... -- -- -- 126,969 126,969
Noncash capital contributions received
from Parent........................... -- -- 12,664 -- 12,664
Noncash dividend to Parent............... -- -- -- (804) (804)
-- -- ---------- --------- ----------
BALANCE, DECEMBER 31, 1996................. 1 1 1,235,009 635,326 1,870,336
Net income............................... -- -- -- 206,544 206,544
Capital contributions received from
Parent................................ -- -- 20,000 -- 20,000
Noncash dividend to Parent............... -- -- -- (10,037) (10,037)
Dividend to Parent....................... -- -- -- (6,000) (6,000)
-- -- ---------- --------- ----------
BALANCE, DECEMBER 31, 1997................. 1 1 1,255,009 825,833 2,080,843
Net income............................... -- -- -- 193,990 193,990
Capital contributions received from
Parent................................ -- -- 50,000 -- 50,000
Noncash capital contributions received
from Parent........................... -- -- 7,607 -- 7,607
Dividends to Parent...................... -- -- -- (486,000) (486,000)
-- -- ---------- --------- ----------
BALANCE, DECEMBER 31, 1998................. 1 $1 $1,312,616 $ 533,823 $1,846,440
== == ========== ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 37
CITGO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 193,990 $ 206,544 $ 126,969
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 222,191 210,790 189,063
Provision for losses on accounts receivable............. 13,826 17,827 13,275
Gain on sale of Petro-Chemical Transport................ (2,590) -- --
Deferred income taxes................................... 59,421 60,617 4,612
Distributions in excess of equity in earnings of
affiliates............................................ 44,939 27,282 9,677
Inventory adjustment to market.......................... 159,000 -- --
Other adjustments....................................... 2,062 7,997 2,577
Changes in operating assets and liabilities:
Accounts receivable and due from affiliates........... 93,611 332,240 (198,080)
Inventories........................................... (21,216) (24,407) (47,916)
Prepaid expenses and other current assets............. (10,481) 4,477 6,434
Accounts payable and other current liabilities........ (126,290) (148,608) 225,288
Other assets.......................................... (51,879) (74,709) (83,858)
Other liabilities..................................... 6,910 27,158 17,325
--------- --------- ---------
Total adjustments.................................. 389,504 440,664 138,397
--------- --------- ---------
Net cash provided by operating activities.......... 583,494 647,208 265,366
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (199,988) (243,875) (437,743)
Proceeds from sales of property, plant and equipment...... 3,432 12,295 3,923
Decrease (increase) in restricted cash.................... (2,516) 2,449 (8,111)
Investments in LYONDELL-CITGO Refining LP................. -- (45,635) (142,638)
Loans to LYONDELL-CITGO Refining LP....................... (19,800) (16,509) --
Proceeds from sale of Petro-Chemical Transport............ 7,160 -- --
Investments in and advances to other affiliates........... (3,247) (2,442) (10)
--------- --------- ---------
Net cash used in investing activities.............. (214,959) (293,717) (584,579)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term bank loans... 34,000 (50,000) 28,000
Net borrowings from (repayments of) revolving bank loans.. 30,000 (215,000) 60,000
Payments on term bank loan................................ (58,823) (29,412) (29,412)
Payments on private placement senior notes................ (58,686) (58,685) (58,685)
Proceeds from issuance of senior notes.................... -- -- 199,694
Proceeds from issuance of taxable bonds................... 100,000 -- 120,000
Proceeds from issuance of tax-exempt bonds................ 47,200 -- 25,000
Payments of capital lease obligations..................... (13,140) (11,778) (11,248)
Repayments of other debt.................................. (7,111) (5,109) (7,143)
Capital contributions received from Parent (PDV
America)................................................ 50,000 20,000 --
Dividends to Parent (PDV America)......................... (486,000) (6,000) --
--------- --------- ---------
Net cash provided by (used in) financing
activities....................................... (362,560) (355,984) 326,206
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 5,975 (2,493) 6,993
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 24,363 26,856 19,863
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 30,338 $ 24,363 $ 26,856
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized.................... $ 99,872 $ 126,879 $ 120,532
========= ========= =========
Income taxes............................................ $ 60,360 $ 41,807 $ 54,939
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Noncash capital contribution from Parent (PDV America).... $ 7,607 $ -- $ 12,664
========= ========= =========
Noncash dividend to Parent (PDV America).................. $ -- $ (10,037) $ (804)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 38
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business -- CITGO Petroleum Corporation ("CITGO" or the
"Company") is a subsidiary of PDV America, Inc. ("PDV America" or the "Parent"),
an indirect wholly owned subsidiary of Petroleos de Venezuela, S.A. ("PDVSA"),
the national oil company of the Republic of Venezuela.
CITGO manufactures or refines and markets quality transportation fuels as
well as lubricants, refined waxes, petrochemicals, asphalt and other industrial
products. CITGO owns and operates two modern, highly complex crude oil
refineries (Lake Charles, Louisiana, and Corpus Christi, Texas) and two asphalt
refineries (Paulsboro, New Jersey, and Savannah, Georgia) with a combined
aggregate rated crude oil refining capacity of 582 thousand barrels per day
("MBPD"). CITGO also owns a minority interest in LYONDELL-CITGO Refining LP, a
limited partnership (formerly a limited liability company) that owns and
operates a refinery in Houston, Texas, with a rated crude oil refining capacity
of 265 MBPD. CITGO also operates a 153 MBPD refinery in Lemont, Illinois, owned
by PDV Midwest Refining L.L.C. CITGO's consolidated financial statements also
include accounts relating to a 65 percent owned lubricant and wax plant,
pipelines, and equity interests in pipeline companies and petroleum storage
terminals.
CITGO's transportation fuel customers include primarily CITGO branded
wholesale marketers, convenience stores and airlines located mainly east of the
Rocky Mountains. Asphalt is generally marketed to independent paving contractors
on the East Coast of the United States. Lubricants are sold to independent
marketers, mass marketers and industrial customers, and petrochemical feedstocks
and industrial products are sold to various manufacturers and industrial
companies throughout the United States. Petroleum coke is sold primarily in
international markets.
Principles of Consolidation -- The consolidated financial statements
include the accounts of CITGO and its subsidiaries (collectively referred to as
the "Company"). All subsidiaries are wholly owned except for Cit-Con Oil
Corporation ("Cit-Con"), which is 65 percent owned. All material intercompany
transactions and accounts have been eliminated.
The Company's investments in less than majority-owned affiliates are
accounted for by the equity method. The excess of the carrying value of the
investments over the equity in the underlying net assets of the affiliates is
amortized on a straight-line basis over 40 years, which is based upon the
estimated useful lives of the affiliates' assets.
Estimates, Risks and Uncertainties -- The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CITGO's operations can be influenced by domestic and international
political, legislative, regulatory and legal environments. In addition,
significant changes in the prices or availability of crude oil and refined
products could have a significant impact on CITGO's results of operations for
any particular year.
Impairment of Long-Lived Assets -- The Company periodically evaluates the
carrying value of long-lived assets to be held and used when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the separately identifiable anticipated undiscounted
cash flow from such asset is less than its carrying value. In that event, a loss
is recognized based on the amount by which the carrying value exceeds the fair
value of the long-lived asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on long-lived assets to be disposed of are determined in a similar
manner, except that fair values are reduced for disposal costs.
F-6
<PAGE> 39
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition -- Revenue from sales of products is recognized upon
transfer of title, based upon the terms of delivery.
Supply and Marketing Activities -- The Company engages in the buying and
selling of crude oil to supply its refineries. The net results of this activity
are recorded in cost of sales. The Company also engages in the buying and
selling of refined products to facilitate the marketing of its refined products.
The results of this activity are recorded in cost of sales and sales.
Refined product exchange transactions that do not involve the payment or
receipt of cash are not accounted for as purchases or sales. Any resulting
volumetric exchange balances are accounted for as inventory in accordance with
the Company's last-in, first-out ("LIFO") inventory method. Exchanges that are
settled through payment or receipt of cash are accounted for as purchases or
sales.
Excise Taxes -- The Company collects excise taxes on sales of gasoline and
other motor fuels. Excise taxes of approximately $3 billion, $3.2 billion, and
$2.7 billion were collected from customers and paid to various governmental
entities in 1998, 1997, and 1996, respectively. Excise taxes are not included in
sales.
Cash and Cash Equivalents -- Cash and cash equivalents consist of
highly-liquid short-term investments and bank deposits with initial maturities
of three months or less.
Restricted Cash -- Restricted cash represents highly-liquid, short-term
investments held in trust accounts in accordance with a tax-exempt bond
agreement. Funds are released solely for financing construction of environmental
facilities as defined in the bond agreements.
Inventories -- Crude oil and refined product inventories are stated at the
lower of cost or market and cost is determined using the LIFO method. Materials
and supplies are valued using the average cost method.
Property, Plant and Equipment -- Property, plant and equipment is reported
at cost, less accumulated depreciation. Depreciation is based upon the estimated
useful lives of the related assets using the straight-line method. Depreciable
lives are generally as follows: buildings and leaseholds -- 10 to 24 years;
machinery and equipment -- 5 to 24 years; and vehicles -- 3 to 10 years.
Upon disposal or retirement of property, plant and equipment, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in income.
The Company capitalizes interest on projects when construction entails
major expenditures over extended time periods. Such interest is allocated to
property, plant and equipment and amortized over the estimated useful lives of
the related assets. Interest capitalized totaled $5 million, $7 million, and $12
million during 1998, 1997, and 1996, respectively.
Commodity and Interest Rate Derivatives -- The Company uses commodity and
financial instrument derivatives to manage defined commodity price and interest
rate risks arising out of the Company's core business activities. The Company
has only limited involvement with other derivative financial instruments and
does not use them for trading purposes.
The Company enters into petroleum futures contracts, options and other over
the counter commodity derivatives, primarily to hedge a portion of the price
risk associated with crude oil and refined products. In order for a transaction
to qualify for hedge accounting, the Company requires that the item to be hedged
exposes the Company to price risk and that the commodity contract reduces that
risk and is designated as a hedge. The high correlation between price movements
of a product and the commodity contract in that product is well demonstrated in
the petroleum industry and, generally, the Company relies on those historical
relationships and on periodic comparisons of market price changes to price
changes of futures and options contracts accounted for as hedges. Gains or
losses on contracts, which qualify as hedges, are recognized when the related
inventory is sold or the hedged transaction is consummated. Changes in the
market value of commodity derivatives, which are not hedges, are recorded as
gains or losses in the period in which they occur.
F-7
<PAGE> 40
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also enters into various interest rate swap and cap agreements
to manage its risk related to interest rate changes on its debt. Premiums paid
for purchased interest rate swap and cap agreements are amortized to interest
expense over the terms of the agreements. Unamortized premiums are included in
other assets. The interest rate differentials received or paid by the Company
related to these agreements are recognized as adjustments to interest expense
over the term of the agreements. Gains or losses on terminated swap agreements
are either amortized over the original term of the swap agreement if the hedged
borrowings remain in place, or are recognized immediately if the hedged
borrowings are no longer held.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The statement establishes accounting
and reporting standards for derivative instruments and for hedging activities.
It requires that an entity recognize all derivatives, at fair value, as either
assets or liabilities in the statement of financial position with an offset
either to shareholder's equity and comprehensive income or income depending upon
the classification of the derivative. The Company has not determined the impact
on its financial statements that may result from adoption of SFAS No. 133, which
is required no later than January 1, 2000.
Refinery Maintenance -- Costs of major refinery turnaround maintenance are
charged to operations over the estimated period between turnarounds. Turnaround
periods range approximately from one to seven years. Unamortized costs are
included in other assets. Amortization of refinery turnaround costs is included
in depreciation and amortization expense. Amortization was $47 million, $49
million, and $53 million for 1998, 1997, and 1996, respectively. Ordinary
maintenance is expensed as incurred.
Environmental Expenditures -- Environmental expenditures that relate to
current or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or cleanups are
probable and the costs can be reasonably estimated. Environmental liabilities
are not discounted to their present value. Subsequent adjustments to estimates,
to the extent required, may be made as more refined information becomes
available.
Income Taxes -- The Company is included in the consolidated U.S. Federal
income tax return filed by PDV America. The Company's current and deferred
income tax expense has been computed on a stand-alone basis using an asset and
liability approach.
Comprehensive Income -- Effective January 1, 1998, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." The Company had no items of other comprehensive income during the three
years ended December 31, 1998.
Reclassifications -- Certain reclassifications have been made to the 1997
financial statements to conform with the classifications used in 1998.
2. REFINERY AGREEMENTS
Effective May 1, 1997, CITGO became the operator of a refinery owned by PDV
Midwest Refining, L.L.C. ("PDVMR"), a subsidiary of PDV America. CITGO also
purchases the products produced at the refinery (Note 4).
An affiliate of PDVSA acquired a 50 percent equity interest in a refinery
in Chalmette, Louisiana ("Chalmette") in October, 1997 and has assigned to CITGO
its option to purchase up to 50 percent of the refined products produced at the
refinery through December 31, 1999 (Note 4). CITGO exercised this option on
November 1, 1997, and acquired approximately 65 MBPD of refined products from
the refinery during 1998, approximately one-half of which was gasoline.
F-8
<PAGE> 41
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In October, 1998 an affiliate of PDVSA acquired a 50 percent equity
interest in a joint venture that owns and operates a refinery in St. Croix, U.S.
Virgin Islands ("HOVENSA") and has the right under a product sales agreement to
assign periodically to CITGO, or other related parties, its option to purchase
50% of the refined products produced by HOVENSA (less a certain portion of such
products that HOVENSA will market directly in the local and Caribbean markets).
In addition, under the product sales agreement, the PDVSA affiliate has
appointed CITGO as its agent in designating which of its affiliates shall from
time to time take deliveries of the refined products available to it. The
product sales agreement will be in effect for the life of the joint venture,
subject to termination events based on default or mutual agreement (Note 4).
Pursuant to the above arrangement, CITGO began acquiring approximately 120 MBPD
of refined products from HOVENSA on November 1, 1998, approximately one-half of
which was gasoline.
3. INVESTMENT IN LYONDELL-CITGO REFINING LP
LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265 MBPD
refinery in Houston, Texas. LYONDELL-CITGO was formed in 1993 by subsidiaries of
CITGO and Lyondell Chemical Company ("Lyondell"), referred to as the owners.
CITGO contributed cash for a participation interest and other commitments
related to LYONDELL-CITGO's refinery enhancement project and Lyondell
contributed the Houston refinery and related assets for the remaining
participation interest. The refinery enhancement project to increase the
refinery's heavy crude oil high conversion capacity was substantially completed
at the end of 1996 with an in-service date of March 1, 1997. The heavy crude oil
processed by the Houston refinery is supplied by a subsidiary of PDVSA under a
long-term crude oil supply contract that expires in 2017, and CITGO purchases
substantially all of the refined products produced at the Houston refinery under
a long-term contract (Note 4).
CITGO's participation interest in LYONDELL-CITGO increased from 13% at
December 31, 1996 to approximately 42% on April 1, 1997, in accordance with
agreements between the owners concerning such interest. CITGO has a one-time
option to increase, for an additional investment, its participation interest to
50 percent. This option may be exercised after January 1, 2000 but not later
than September 30, 2000.
CITGO loaned $19.8 million and $16.5 million to LYONDELL-CITGO during 1998
and 1997, respectively. The notes bear interest at market rates which were
approximately 5.9% at December 31, 1998 and 1997, and are due July 1, 2003.
These notes are included in other assets in the accompanying consolidated
balance sheets.
F-9
<PAGE> 42
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CITGO accounts for its investment in LYONDELL-CITGO using the equity method
of accounting and records its share of the net earnings of LYONDELL-CITGO based
on allocations of income agreed to by the owners. Information on CITGO's
investment in LYONDELL-CITGO follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C>
Carrying value of investment at December 31.............. $ 597,373 $ 630,060 $ 604,729
Notes receivable at December 31.......................... 36,309 16,509 --
Participation interest at December 31.................... 41% 42% 13%
Equity in net income..................................... $ 58,827 $ 44,429 $ 1,254
Cash distributions received.............................. 91,763 64,734 --
Summary of financial position:
Current assets......................................... $ 197,000 $ 243,000 $ 273,000
Non current assets..................................... 1,440,000 1,438,000 1,434,000
Current liabilities.................................... 203,000 293,000 373,000
Non current liabilities................................ 785,000 715,000 671,000
Member's equity........................................ 649,000 673,000 663,000
Summary of operating results:
Revenue................................................ $2,055,000 $2,697,000 $2,823,000
Gross profit........................................... 291,000 255,000 70,000
Net income............................................. 169,000 147,000 11,000
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Company purchases approximately two-thirds of the crude oil processed
in its refineries from subsidiaries of PDVSA under long-term supply agreements.
These supply agreements extend through the year 2006 for the Lake Charles
refinery, 2010 for the Paulsboro refinery, 2012 for the Corpus Christi refinery
and 2013 for the Savannah refinery. The Company purchased $1.4 billion, $2
billion, and $2.4 billion of crude oil, feedstocks and other products from
wholly owned subsidiaries of PDVSA in 1998, 1997, and 1996, respectively, under
these and other purchase agreements. The crude supply contracts include force
majeure clauses that have been exercised on various occasions. Exercise of these
clauses requires that the Company locate alternative sources of supply for its
crude oil requirements, and such action may result in lower operating margins.
The crude oil supply contracts incorporate formula prices based on the
market value of a number of refined products deemed to be produced from each
particular crude oil, less (i) certain deemed refining costs adjustable for
inflation, (ii) certain actual costs, including transportation charges, import
duties and taxes and (iii) a deemed margin, which varies according to the grade
of crude oil. At December 31, 1998 and 1997, $74 million and $138 million,
respectively, were included in payables to affiliates as a result of these
transactions.
The Company also purchases refined products from various other affiliates
including LYONDELL-CITGO, PDVMR, HOVENSA and Chalmette, under long-term
contracts. These agreements incorporate various formula prices based on
published market prices and other factors. Such purchases totaled $2.9 billion,
$2.8 billion, and $1.6 billion for 1998, 1997, and 1996, respectively. At
December 31, 1998 and 1997, $64 million and $59 million, respectively, were
included in payables to affiliates as a result of these transactions.
The Company had refined product, feedstock, and other product sales to
affiliates of $164 million, $221 million, and $190 million, in 1998, 1997, and
1996, respectively. The Company's sales of crude oil to affiliates were $18
million, $3 million, and $64 million in 1998, 1997, and 1996, respectively. At
December 31,
F-10
<PAGE> 43
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1998 and 1997, $34 million and $23 million, respectively, were included in due
from affiliates as a result of these and related transactions.
Pursuant to the PDVMR operating agreement (Note 2), on May 1, 1997, CITGO
became the operator of the PDVMR refinery and employed a substantial number of
employees previously employed by UNO-VEN and as a result, CITGO assumed a
liability for postretirement benefits other than pensions (Note 11) of
approximately $27 million related to those employees. A corresponding amount due
from PDVMR is included in other assets at December 31, 1998 and 1997, pending
final determination of the method of settlement by the Parent company. CITGO
charges PDVMR a management fee which covers various support services ($8 million
and $7 million in 1998 and 1997, respectively) which is included in other
income. PDVMR reimburses CITGO for all payroll expenses, including pension and
benefit costs, related to CITGO employees engaged in the operation of the
refinery. Such employee costs and the related reimbursements ($52 million and
$36 million in 1998 and 1997, respectively) are not included in CITGO's cost of
sales or revenues.
Under a separate guarantee of rent agreement, PDVSA has guaranteed payment
of rent, stipulated loss value and terminating value due under the lease of the
Corpus Christi refinery facilities described in Note 14. The Company has also
guaranteed debt of certain affiliates (Note 13).
The Company and PDV America are parties to a tax allocation agreement that
is designed to provide PDV America with sufficient cash to pay its consolidated
income tax liabilities. In 1996, $12.7 million due from CITGO to PDV America
under this tax allocation agreement for the tax years 1992 through 1994 was
reclassified as a noncash contribution of capital. In December 1996, $0.8
million due from PDV America to CITGO under this tax allocation agreement for
the 1995 tax year was reclassified as a noncash dividend. In 1997, $10 million
due from PDV America under this tax allocation agreement for the 1996 tax year
was classified as a noncash dividend. In 1998, $7.6 million due from CITGO to
PDV America under this agreement for the 1997 tax year was classified as a
noncash contribution of capital. In the event that CITGO should cease to be part
of the consolidated federal income tax return, any amounts included in
shareholder's equity under this agreement are required to be paid to PDV
America. At December 31, 1998, CITGO has income taxes receivable of $12 million
included in prepaid expenses and a $5 million receivable from PDV America
included in due from affiliates. At December 31, 1997, amounts payable to PDV
America of $9.7 million are included in other current liabilities.
5. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1998 1997
-------- --------
(000'S OMITTED)
<S> <C> <C>
Trade....................................................... $487,627 $571,947
Credit card................................................. 47,096 45,896
Other....................................................... 22,491 62,474
-------- --------
557,214 680,317
Allowance for uncollectible accounts........................ (16,713) (22,453)
-------- --------
$540,501 $657.864
======== ========
</TABLE>
Sales are made on account, based on pre-approved unsecured credit terms
established by CITGO management, except sales to airlines, which are made
primarily on a prepaid basis. The Company also has a proprietary credit card
program and a Companion VISA bankcard program which allow retail consumers to
purchase fuel and convenience items at CITGO branded outlets. Allowances for
uncollectible accounts are established based on several factors that include,
but are not limited to, analysis of specific customers, historical trends,
current economic conditions and other information.
F-11
<PAGE> 44
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective June 27, 1997, and November 19, 1997, the Company established two
new limited purpose subsidiaries, CITGO Funding Corporation and CITGO Funding
Corporation II, which entered into non-recourse agreements to sell trade
accounts and credit card receivables. Under the terms of the agreements, new
receivables are added to the pool as collections reduce previously sold
receivables. The amounts sold at any one time are limited to a maximum of $125
million of trade accounts receivable and $150 million of credit card
receivables. These agreements are renewable for successive one-year terms by
mutual agreement. Both agreements were renewed during 1998. Fees and expenses of
$16.1 million and $5.8 million related to the agreements were recorded as other
expense during the years ended December 31, 1998 and 1997, respectively.
Proceeds of approximately $275 million from the initial sales in 1997 were used
primarily to make payments on the Company's revolving bank loan.
6. INVENTORIES
<TABLE>
<CAPTION>
1998 1997
-------- --------
(000'S OMITTED)
<S> <C> <C>
Refined product............................................. $539,675 $662,061
Crude oil................................................... 123,927 138,049
Materials and supplies...................................... 56,023 57,488
-------- --------
$719,625 $857,598
======== ========
</TABLE>
Inventories at December 31, 1998, are carried at estimated net market value
and results of operations for 1998 include a charge of $159 million representing
the excess of cost over net market value. At December 31, 1997, replacement
costs approximated LIFO carrying values.
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Land........................................................ $ 107,961 $ 112,746
Buildings and leaseholds.................................... 490,780 478,912
Machinery and equipment..................................... 2,972,646 2,851,396
Vehicles.................................................... 28,913 41,952
Construction in process..................................... 163,845 119,106
---------- ----------
3,764,145 3,604,112
Accumulated depreciation and amortization................... (903,718) (754,850)
---------- ----------
$2,860,427 $2,849,262
========== ==========
</TABLE>
Depreciation expense for 1998, 1997, and 1996 was $176 million, $161
million, and $136 million, respectively.
In 1997 the Company incurred property damages from a fire at the Company's
Corpus Christi, Texas, refinery (Note 13). As a result, the Company capitalized
$14.5 million of replacement machinery and equipment in 1997. Other income
(expense) for the year ended December 31, 1997 includes $9.4 million of gains
from insurance recoveries related to this event.
Other income (expense) includes gains and losses on disposals and
retirements of property, plant and equipment. Such net losses were approximately
$2 million, $14 million, and $2 million in 1998, 1997, and 1996, respectively.
F-12
<PAGE> 45
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INVESTMENTS IN AFFILIATES
In addition to LYONDELL-CITGO, the Company's investments in affiliates
consist of equity interests of 6.8 to 50 percent in joint interest pipelines and
terminals, including a 13.98 percent interest in Colonial Pipeline Company; a
49.5 percent partnership interest in Nelson Industrial Steam Company ("NISCO"),
which is a qualified cogeneration facility; and a 49 percent partnership
interest in Mount Vernon Phenol Plant. The carrying value of these investments
exceeded the Company's equity in the underlying net assets by approximately $151
million and $155 million at December 31, 1998 and 1997, respectively.
At December 31, 1998 and 1997, NISCO had a partnership deficit. CITGO's
share of this deficit, as a general partner, was $56.5 million and $49.6 million
at December 31, 1998 and 1997, respectively, which is included in other
noncurrent liabilities in the accompanying consolidated balance sheets.
Information on the Company's investments, including LYONDELL-CITGO,
follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C>
Company's investments in affiliates (excluding
NISCO)............................................. $781,481 $813,923 $790,576
Company's equity in net income of affiliates......... 77,105 64,460 21,481
Dividends and distributions received from
affiliates......................................... 122,044 91,742 31,157
</TABLE>
Selected financial information for the affiliates is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C>
Summary of financial position:
Current assets................................. $ 464,047 $ 511,848 $ 543,692
Noncurrent assets.............................. 2,817,165 2,830,568 2,859,091
Current liabilities............................ 670,045 627,296 697,046
Noncurrent liabilities......................... 1,934,378 2,025,709 1,999,276
Summary of operating results:
Revenues....................................... $3,337,449 $4,076,429 $4,158,684
Gross profit................................... 757,678 628,559 475,227
Net income..................................... 384,810 371,006 242,434
</TABLE>
9. SHORT-TERM BANK LOANS
As of December 31, 1998, the Company has established $175 million of
uncommitted, unsecured, short-term borrowing facilities with various banks.
Interest rates on these facilities are determined daily based upon the Federal
funds' interest rates, and maturity options vary up to 30 days. The weighted
average interest rates actually incurred in 1998, 1997, and 1996 were 5.8
percent, 5.9 percent, and 5.7 percent, respectively. The Company had $37 million
and $3 million of borrowings outstanding under these facilities at December 31,
1998 and 1997, respectively.
F-13
<PAGE> 46
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. LONG-TERM DEBT
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Revolving bank loans........................................ $ 165,000 $ 135,000
Term bank loan.............................................. -- 58,823
Shelf registration:
7.875% Senior Notes, $200 million face amount, due 2006... 199,776 199,745
Private Placement:
8.75% Series A Senior Notes due 1998...................... -- 18,750
9.03% Series B Senior Notes due 1998 to 2001.............. 85,714 114,286
9.30% Series C Senior Notes due 1998 to 2006.............. 90,909 102,273
Master Shelf Agreement:
8.55% Senior Notes due 2002............................... 25,000 25,000
8.68% Senior Notes due 2003............................... 50,000 50,000
7.29% Senior Notes due 2004............................... 20,000 20,000
8.59% Senior Notes due 2006............................... 40,000 40,000
8.94% Senior Notes due 2007............................... 50,000 50,000
7.17% Senior Notes due 2008............................... 25,000 25,000
7.22% Senior Notes due 2009............................... 50,000 50,000
Tax-Exempt Bonds:
Pollution control revenue bonds due 2004.................. 15,800 15,800
Port facilities revenue bonds due 2007.................... 11,800 11,800
Louisiana wastewater facility revenue bonds due 2023...... 3,020 3,020
Louisiana wastewater facility revenue bonds due 2024...... 20,000 20,000
Louisiana wastewater facility revenue bonds due 2025...... 40,700 40,700
Louisiana wastewater facility revenue bonds due 2026...... 12,000 2,000
Gulf Coast solid waste facility revenue bonds due 2025.... 50,000 50,000
Gulf Coast solid waste facility revenue bonds due 2026.... 50,000 50,000
Gulf Coast solid waste facility revenue bonds due 2028.... 25,000 --
Industrial development facilities revenue bonds due
2028................................................... 22,200 --
Port of Corpus Christi sewage and solid waste disposal
revenue bonds due 2026................................. 25,000 25,000
Taxable Bonds:
Louisiana wastewater facility revenue bonds due 2026...... 108,000 118,000
Gulf Coast environmental facilities revenue bonds due
2028................................................... 100,000 --
Cit-Con bank credit agreement............................... 21,429 28,571
---------- ----------
1,306,348 1,253,768
Current portion of long-term debt........................... (47,078) (95,240)
---------- ----------
$1,259,270 $1,158,528
========== ==========
</TABLE>
Revolving and Term Bank Loans -- On May 13, 1998 the Company terminated its
$675 million revolving bank loan and replaced it with a credit agreement with
various banks consisting of (i) a $400 million, five year, revolving bank loan
and (ii) a $150 million, 364 day, revolving bank loan, both of which are
unsecured and have various borrowing maturities and interest rate options.
Interest rates on the revolving bank loans were 7.5 percent and 6.9 percent at
December 31, 1998 and 1997, respectively.
On September 3, 1998 the Company terminated its term bank loan.
F-14
<PAGE> 47
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Shelf Registration -- In April 1996, the Company filed a registration
statement with the Securities and Exchange Commission relating to the shelf
registration of $600 million of debt securities that may be offered and sold
from time to time. In May 1996, the registration became effective and CITGO sold
a tranche of debt securities with an aggregate offering price of $200 million.
On October 28, 1997, the Company entered into a Selling Agency Agreement with
Salomon Brothers Inc. and Chase Securities Inc. providing for the sale of up to
an additional $235 million in aggregate principal amount of notes in tranches
from time to time by the Company under the shelf registration. No amounts were
sold under this agreement as of December 31, 1998.
Private Placement -- At December 31, 1998, the Company has outstanding
approximately $177 million of privately placed, unsecured Senior Notes.
Principal amounts are payable in annual installments in November and interest is
payable semi-annually in May and November.
Master Shelf Agreement -- At December 31, 1998, the Company has outstanding
$260 million of privately-placed senior notes under an unsecured Master Shelf
Agreement with an insurance company. The notes have various fixed interest rates
and maturities.
Covenants -- The various agreements above contain certain covenants that,
depending upon the level of the Company's capitalization and earnings, could
impose limitations on the Company's ability to pay dividends, incur additional
debt, place liens on property, and sell fixed assets. The Company was in
compliance with the debt covenants at December 31, 1998.
Tax-Exempt Bonds -- Through state entities, the Company has issued $49.8
million of industrial development bonds for certain Lake Charles port facilities
and pollution control equipment and $226 million of environmental revenue bonds
to finance a portion of the Company's environmental facilities at its Lake
Charles and Corpus Christi refineries and at the LYONDELL-CITGO refinery.
Additional credit support for these bonds is provided through letters of credit.
The bonds bear interest at various floating rates which ranged from 4.1 percent
to 6 percent at December 31, 1998, and 3.7 percent to 5.2 percent at December
31, 1997.
Taxable Bonds -- Through state entities, the Company has issued and
currently outstanding $208 million of taxable environmental revenue bonds to
finance a portion of the Company's environmental facilities at its Lake Charles
refinery and at the LYONDELL-CITGO refinery. Such bonds are secured by letters
of credit and have floating interest rates (5.3 percent at December 31, 1998,
and 5.8 percent at December 31, 1997). At the option of the Company and upon the
occurrence of certain specified conditions, all or any portion of such taxable
bonds may be converted to tax-exempt bonds. At December 31, 1998, $12 million of
the original $120 million in taxable Louisiana revenue bonds had been converted
to tax-exempt bonds.
Cit-Con Bank Credit Agreement -- The Cit-Con bank credit agreement consists
of a term loan collateralized by throughput agreements of the owner companies.
The loan contains various interest rate options (weighted average effective
rates of 6.7 percent and 6.5 percent at December 31, 1998 and 1997,
respectively), and requires quarterly principal payments through December 2001.
Debt Maturities -- Future maturities of long-term debt as of December 31,
1998, are: 1999 -- $47.1 million, 2000 -- $47.1 million, 2001 -- $47.1 million,
2002 -- $36.4 million, 2003 -- $226.4 million, and $902.2 million thereafter.
F-15
<PAGE> 48
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Rate Swap and Cap Agreements -- The Company has entered into the
following interest rate swap agreements to reduce the impact of interest rate
changes on its variable interest rate debt:
<TABLE>
<CAPTION>
NOTIONAL PRINCIPAL
AMOUNT
EXPIRATION FIXED RATE ------------------
VARIABLE RATE INDEX DATE PAID 1998 1997
- ------------------- ---------- ---------- ------- --------
(000'S OMITTED)
<S> <C> <C> <C> <C>
One-month LIBOR.............................. September 1998 4.85% $ -- $ 25,000
One-month LIBOR.............................. November 1998 5.09% -- 25,000
One-month LIBOR.............................. May 2000 6.28% 25,000 25,000
J.J. Kenny................................... May 2000 4.72% 25,000 25,000
J.J. Kenny................................... February 2005 5.30% 12,000 12,000
J.J. Kenny................................... February 2005 5.27% 15,000 15,000
J.J. Kenny................................... February 2005 5.49% 15,000 15,000
------- --------
$92,000 $142,000
======= ========
</TABLE>
Interest expense includes $1.0 million, $0.8 million, and $1.1 million, in
1998, 1997, and 1996, respectively, related to the net settlements on these
agreements.
11. EMPLOYEE BENEFIT PLANS
Employee Savings -- The Company sponsors three qualified defined
contribution retirement and savings plans covering substantially all eligible
salaried and hourly employees. Participants make voluntary contributions to the
plans and the Company makes contributions, including matching of employee
contributions, based on plan provisions. The Company expensed $19 million, $19
million, and $16 million related to its contributions to these plans for the
years 1998, 1997, and 1996, respectively.
Pension Benefits -- The Company sponsors three qualified noncontributory
defined benefit pension plans, two covering eligible hourly employees and one
covering eligible salaried employees. The Company also sponsors three
nonqualified defined benefit plans for certain eligible employees. The qualified
plans' assets include corporate securities and shares in a fixed income mutual
fund, two collective funds and a short-term investment fund. The nonqualified
plans are not funded.
The Company's policy is to fund the qualified pension plans in accordance
with applicable laws and regulations and not to exceed the tax-deductible
limits. The nonqualified plans are funded as necessary to pay retiree benefits.
The plan benefits for each of the qualified pension plans are primarily based on
an employee's years of plan service and compensation as defined by each plan.
Postretirement Benefits Other Than Pensions -- In addition to pension
benefits, the Company also provides certain health care and life insurance
benefits for eligible salaried and hourly employees at retirement. These
benefits are subject to deductibles, copayment provisions and other limitations
and are primarily funded on a pay as you go basis. The Company reserves the
right to change or to terminate the benefits at any time.
F-16
<PAGE> 49
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following sets forth the changes in benefit obligations and plan assets
for the pension and postretirement plans for the years ended December 31, 1998
and 1997, and the funded status of such plans reconciled with amounts reported
in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- ---------------------
1998 1997 1998 1997
-------- -------- --------- ---------
(000'S OMITTED) (000'S OMITTED)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year......... $233,486 $193,074 $ 180,406 $ 149,150
Service cost.................................... 17,742 15,759 6,610 6,786
Interest cost................................... 16,058 14,246 12,770 12,359
Actuarial (gain) loss........................... 11,958 17,911 1,631 (12,218)
Assumption of affiliate's postretirement
liability (Note 4)............................ -- -- -- 26,975
Benefits paid................................... (8,862) (7,504) (5,489) (2,646)
-------- -------- --------- ---------
Benefit obligation at end of year............... 270,382 233,486 195,928 180,406
-------- -------- --------- ---------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of
year.......................................... 221,261 184,236 889 843
Actual return on plan assets.................... 38,139 42,727 50 46
Employer contribution........................... 4,110 1,802 5,489 2,646
Benefits paid................................... (8,862) (7,504) (5,489) (2,646)
-------- -------- --------- ---------
Fair value of plan assets at end of year........ 254,648 221,261 939 889
-------- -------- --------- ---------
Funded status................................... (15,734) (12,225) (194,989) (179,517)
Unrecognized net actuarial gain................. (41,146) (36,249) (11,896) (23,948)
Unrecognized prior service cost................. 147 186 -- --
Net gain at date of adoption.................... (1,280) (1,548) -- --
-------- -------- --------- ---------
Net amount recognized........................... $(58,013) $(49,836) $(206,885) $(203,465)
======== ======== ========= =========
Amounts recognized in the Company's consolidated
balance sheets consist of:
Accrued benefit liability..................... $(61,991) $(53,953) $(206,885) $(203,465)
Intangible asset.............................. 3,978 4,117 -- --
-------- -------- --------- ---------
Net amount recognized........................... $(58,013) $(49,836) $(206,885) $(203,465)
======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
1998 1997 1998 1997
------- ------ ------ -----
<S> <C> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate............................................... 6.75% 7.0% 6.75% 7.0%
Expected return on plan assets.............................. 9.0% 9.0% 6.0% 6.0%
Rate of compensation increase............................... 5.0% 5.0% -- --
</TABLE>
F-17
<PAGE> 50
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For measurement purposes, a 7.5 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998. The rate was
assumed to decrease gradually to 5.5 percent for 2002 and remain at that level
thereafter.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------------ ----------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------- -------- -------
(000'S OMITTED) (000'S OMITTED)
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit
cost:
Service cost....................... $ 17,742 $ 15,759 $ 13,356 $ 6,610 $ 6,786 $ 7,047
Interest cost...................... 16,058 14,246 12,787 12,770 12,359 11,982
Expected return on plan assets..... (19,660) (15,453) (13,520) (53) (47) (50)
Amortization of prior service
cost............................ 40 40 39 -- -- --
Amortization of net gain at date of
adoption........................ (268) (268) (268) -- -- --
Recognized net actuarial (gain)
loss............................ (1,625) (1,228) (828) (8,823) (27,581) --
-------- -------- -------- ------- -------- -------
Net periodic benefit cost (credit)... $ 12,287 $ 13,096 $ 11,566 $10,504 $ (8,483) $18,979
======== ======== ======== ======= ======== =======
</TABLE>
Actuarial gains (or losses) related to the postretirement benefit
obligation are recognized as a component of net postretirement benefit cost by
the amount the beginning of year unrecognized net gain (or loss) exceeds 7.5
percent of the accumulated postretirement benefit obligation.
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets were $18.2 million, $17.5 million and $-0-,
respectively, as of December 31, 1998 and $16.2 million, $16 million and $-0-,
respectively, as of December 31, 1997.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Increase (decrease) in total of service and interest cost
components.............................................. $ 3,930,100 $ (3,268,000)
Increase (decrease) in postretirement benefit
obligation.............................................. 35,267,000 (29,887,000)
</TABLE>
Employee Separation Programs -- During 1997, the Company's senior
management implemented a Transformation Program that resulted in certain
personnel reductions (the "Separation Programs"). The Company expensed
approximately $8 million and $22 million for the years ended December 31, 1998
and 1997, respectively, relating to the Separation Programs.
F-18
<PAGE> 51
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INCOME TAXES
The provisions for income taxes are comprised of the following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
(000'S OMITTED)
<S> <C> <C> <C>
Current:
Federal.............................................. $ 40,040 $28,277 $63,056
State................................................ 3,326 2,061 2,613
-------- ------- -------
43,366 30,338 65,669
Deferred............................................... 59,421 60,617 4,612
-------- ------- -------
$102,787 $90,955 $70,281
======== ======= =======
</TABLE>
The federal statutory tax rate differs from the effective tax rate due to
the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate.................................. 35.0% 35.0% 35.0%
State taxes, net of federal benefit......................... 1.2% 2.2% 2.9%
Dividend exclusions......................................... (2.5)% (2.6)% (3.8)%
Tax settlement.............................................. --% (5.4)% --%
Other....................................................... 0.9% 1.4% 1.5%
---- ---- ----
Effective tax rate.......................................... 34.6% 30.6% 35.6%
==== ==== ====
</TABLE>
The effective tax rate for 1997 decreased due primarily to the favorable
resolution with the Internal Revenue Service of a significant tax issue related
to environmental expenditures. In 1998 the effective tax rate decreased slightly
compared to the 1996 rate due to a decrease in state taxes.
Deferred income taxes reflect the net tax effects of (i) temporary
differences between the financial and tax bases of assets and liabilities, and
(ii) loss and tax credit carryforwards. The tax effects of significant items
comprising the Company's net deferred tax liability as of December 31, 1998 and
1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(000'S OMITTED)
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment............................. $533,432 $480,696
Inventories (including effect of adjustment to market).... 22,638 90,270
Investments in affiliates................................. 110,192 81,855
Other..................................................... 41,097 34,138
-------- --------
707,359 686,959
-------- --------
Deferred tax assets:
Postretirement benefit obligations........................ 74,331 72,412
Employee benefit accruals................................. 34,029 34,229
Alternative minimum tax credit carryforwards.............. 31,376 67,432
Marketing and promotional accruals........................ 12,773 19,139
Other..................................................... 76,620 73,697
-------- --------
229,129 266,909
-------- --------
Net deferred tax liability (of which $65,234 and $3,192 are
included in current assets at December 31, 1998 and 1997,
respectively)............................................. $478,230 $420,050
======== ========
</TABLE>
F-19
<PAGE> 52
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, the Company has capital loss carryforwards of $6.7
million, $2.5 million of which expire in 1999, $0.4 million of which expire in
2000, $2.3 million of which expire in 2001, and $1.5 million of which expire in
2002. At December 31, 1998 and 1997, a valuation allowance of $1.0 million and
$1.4 million was established related to that portion of the carryforwards for
which it was considered more likely than not that the related tax benefits would
not be realized before expiration.
The Company's alternative minimum tax credit carryforwards are available to
offset regular federal income taxes in future years without expiration, subject
to certain alternative minimum tax limitations.
13. COMMITMENTS AND CONTINGENCIES
Litigation and Injury Claims -- Various lawsuits and claims are pending
against the Company. The Company records accruals for potential losses when, in
management's opinion, such losses are probable and reasonably estimable. If
known lawsuits and claims were to be determined in a manner adverse to the
Company, and in amounts greater than the Company's accruals, then such
determinations could have a material adverse effect on the Company's results of
operations in a given reporting period. However, in management's opinion the
ultimate resolution of these lawsuits and claims will not exceed by a material
amount, the amount of the accruals and the insurance coverage available to the
Company. This opinion is based upon management's and counsel's current
assessment of these lawsuits and claims. The most significant lawsuits and
claims are discussed below.
In a pending case in federal court, Oil Chemical and Atomic Workers, Local
7-517 ("the Union") has asserted claims against CITGO, PDVSA, PDV America,
PDVMR, UNO-VEN and Unocal pursuant to the Labor Management Relations Act. The
Union alleges that CITGO and the other defendants are bound by the terms of a
collective bargaining agreement between UNO-VEN and the Union covering certain
employees at a refinery in Lemont, Illinois. This refinery was acquired by PDVMR
on May 1, 1997 in a transaction involving the former partners of UNO-VEN.
Pursuant to an operating agreement with PDVMR, CITGO became the operator of this
refinery and employed the substantial majority of the employees previously
employed by UNO-VEN pursuant to its initial terms and conditions of employment,
but CITGO did not assume the existing labor agreement. The Union seeks monetary
compensation for certain differences in employee benefits and reinstatement of
all of the UNO-VEN benefit plans. The union also seeks to require CITGO to abide
by the terms of the collective bargaining agreement between the Union and
UNO-VEN. In June 1998, the trial court granted the motions for summary judgment
filed by CITGO and the other defendants; the Union has appealed this ruling.
In May 1997, an explosion and fire occurred at CITGO's Corpus Christi
refinery. No serious personal injuries were reported. The Company received
approximately 7,500 individual claims for personal injury and property damage
related to the above noted incident. Approximately 1,300 of these claims have
been resolved for amounts which individually and collectively are not material.
There are presently six lawsuits pending against the Company in federal and
state courts alleging property damages, personal injury and punitive damages. A
trial in October 1998 involving ten bellwether plaintiffs, out of approximately
400 plaintiffs in one of the federal court lawsuits resulted in a verdict for
the Company. The trial of another ten plaintiffs is scheduled for February,
1999; the remaining cases are not currently scheduled for trial.
A class action lawsuit is pending in Corpus Christi, Texas state court
against the Company and other operators and owners of nearby industrial
facilities which claims damages for reduced value of residential properties
located in the vicinity of the industrial facilities as a result of air, soil
and groundwater contamination. In 1997, the Company offered to purchase about
275 properties in a neighborhood adjacent to the Company's Corpus Christi
refinery, which were included in the lawsuit. Related to this offer, $15.7
million was expensed in 1997. To date, the Company has reached agreements to buy
all but 18 of such properties, which include settlements of property damage
claims, and has offers open to purchase the remaining
F-20
<PAGE> 53
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
properties. Two related personal injury and wrongful death lawsuits were filed
against the same defendants in 1996 and are in preliminary stages of discovery.
Litigation is pending in federal court in Lake Charles, Louisiana, against
CITGO by a number of current and former Lake Charles refinery employees and
applicants on behalf of themselves and others asserting claims of racial
discrimination in connection with the Company's employment practices. The trial
court's denial of class certification has been upheld on appeal; the plaintiffs
are seeking review by the U.S. Supreme Court. Trials in this case are set for
fall, 1999.
Environmental Compliance and Remediation -- The Company is subject to
various federal, state and local environmental laws and regulations which may
require the Company to take action to correct or improve the effects on the
environment of prior disposal or release of petroleum substances by the Company
or other parties. Management believes the Company is in compliance with these
laws and regulations in all material aspects. Maintaining compliance with
environmental laws and regulations in the future could require significant
capital expenditures and additional operating costs.
In 1992, the Company reached an agreement with a state agency to cease
usage of certain surface impoundments at the Company's Lake Charles refinery by
1994. A mutually acceptable closure plan was filed with the state in 1993. The
Company and its former owner are participating in the closure and sharing the
related costs based on estimated contributions of waste and ownership periods.
The remediation commenced in December 1993. In 1997, the Company presented a
proposal to a state agency revising the 1993 closure plan. In 1998, the Company
amended its 1997 proposal as requested by the state agency. A ruling on the
proposal, as amended, is expected in 1999 with final closure to begin in 2000.
In 1992, an agreement was reached between the Company and its former owner
concerning a number of environmental issues. The agreement consisted, in part,
of payments to the Company totaling $46 million. The former owner will continue
to share the costs of certain specific environmental remediation and certain
tort liability actions based on ownership periods and specific terms of the
agreement.
Based on currently available information, including the continuing
participation of the former owner in remediation actions, management believes
its accruals for potential environmental liabilities are adequate. Conditions
which would require additional expenditures may exist for various Company sites
including, but not limited to, the Company's operating refinery complexes,
former refinery sites, service stations and crude oil and petroleum product
storage terminals. The amount of such future expenditures, if any, is
indeterminable.
Capital Expenditures -- The Company's anticipated capital expenditures,
excluding the investments in LYONDELL-CITGO, for the five-year period 1999 to
2003 total approximately $1.5 billion (unaudited). The expenditures include
environmental and regulatory capital projects as well as strategic capital
expenditures. At December 31, 1998, remaining authorized expenditures on
incomplete capital projects totaled approximately $269 million.
Supply Agreements -- CITGO purchases the crude oil processed at its
refineries and also purchases refined products to supplement the production from
its refineries to meet marketing demands and resolve logistical issues. In
addition to supply agreements with various affiliates (Note 4), the Company has
various other crude oil, refined product and feedstock purchase agreements with
unaffiliated entities with terms ranging from monthly to annual renewal. The
Company believes these sources of supply are reliable and adequate for its
current requirements.
Throughput Agreements -- The Company has throughput agreements with certain
pipeline affiliates (Note 8). These throughput agreements may be used to secure
obligations of the pipeline affiliates. Under these agreements, the Company may
be required to provide its pipeline affiliates with additional funds through
advances against future charges for the shipping of petroleum products. The
Company currently ships on these
F-21
<PAGE> 54
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
pipelines and has not been required to advance funds in the past. At December
31, 1998, the Company has no fixed and determinable, unconditional purchase
obligations under these agreements.
Commodity Derivative Activity -- The Company's commodity derivatives are
generally entered into through major brokerage houses and traded on national
exchanges and can be settled in cash or through delivery of the commodity. Such
contracts generally qualify for hedge accounting and correlate to market price
movements of crude oil and refined products. Resulting gains and losses,
therefore, will generally be offset by gains and losses on the Company's hedged
inventory or future purchases and sales. The Company's derivative commodity
activity is closely monitored by management and contract periods are generally
less than 30 days. Unrealized and deferred gains and losses on these contracts
at December 31, 1998 and 1997 and the effects of realized gains and losses on
cost of sales and pretax earnings for 1998, 1997, and 1996 were not material. At
times during 1998 and 1996, the Company entered into commodity derivatives
activities that were not related to the hedging program discussed above. This
activity and resulting gains and losses were not material in 1998 or 1996. There
was no non-hedging activity in 1997.
Other Credit and Off-Balance Sheet Risk Information as of December 31,
1998 -- The Company has guaranteed approximately $8 million of debt of certain
CITGO marketers. Such debt is substantially collateralized by assets of these
entities. The Company has also guaranteed approximately $99 million of debt of
certain affiliates, including $50 million related to HOVENSA (Note 2) and $11
million related to NISCO (Note 8). The Company has outstanding letters of credit
totaling approximately $520 million, which includes $500 million related to the
Company's tax-exempt and taxable revenue bonds (Note 10). The Company has also
acquired surety bonds totaling $42 million primarily due to requirements of
various government entities. The Company does not expect liabilities to be
incurred related to such guarantees, letters of credit or surety bonds.
Neither the Company nor the counterparties are required to collateralize
their obligations under interest rate swaps or caps or over-the-counter
derivative commodity agreements. The Company is exposed to credit loss in the
event of nonperformance by the counterparties to these agreements, but has no
off-balance sheet risk of accounting loss for the notional amounts. The Company
does not anticipate nonperformance by the counterparties, which consist
primarily of major financial institutions.
Management considers the market risk to the Company related to its
commodity and interest rate derivatives to be insignificant during the periods
presented.
14. LEASES
The Company leases certain of its Corpus Christi refinery facilities under
a capital lease. The basic term of the lease expires on January 1, 2004;
however, the Company may renew the lease until January 31, 2011, the date of its
option to purchase the facilities for a nominal amount. Capitalized costs
included in property, plant and equipment related to the leased assets were
approximately $209 million at December 31, 1998 and 1997. Accumulated
amortization related to the leased assets was approximately $102 million and $94
million at December 31, 1998 and 1997, respectively. Amortization is included in
depreciation expense.
F-22
<PAGE> 55
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also has various noncancelable operating leases, primarily for
product storage facilities, office space, computer equipment and vehicles. Rent
expense on all operating leases totaled $34 million in 1998, $39 million in
1997, and $33 million in 1996. Future minimum lease payments for the capital
lease and noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
YEAR CAPITAL LEASE OPERATING LEASES TOTAL
---- ------------- ---------------- --------
(000'S OMITTED)
<S> <C> <C> <C>
1999........................................... $ 27,375 $ 27,020 $ 54,395
2000........................................... 27,375 22,811 50,186
2001........................................... 27,375 20,393 47,768
2002........................................... 27,375 18,020 45,395
2003........................................... 27,375 13,618 40,993
Thereafter..................................... 36,000 24,018 60,018
-------- -------- --------
Total minimum lease payments................... 172,875 $125,880 $298,755
======== ========
Amount representing interest................... (56,289)
--------
Present value of minimum lease payments........ 116,586
Current portion................................ 14,660
--------
$101,926
========
</TABLE>
15. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
The carrying amounts of cash equivalents, restricted cash and variable-rate
debt approximate fair values. The carrying amounts and estimated fair values of
the Company's other financial instruments are as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(000'S OMITTED) (000'S OMITTED)
<S> <C> <C> <C> <C>
LIABILITIES:
Short-term bank loans................... $ 37,000 $ 37,000 $ 3,000 $ 3,000
Long-term debt.......................... 1,306,348 1,292,050 1,253,768 1,296,940
DERIVATIVE AND OFF-BALANCE SHEET
FINANCIAL INSTRUMENTS --
UNREALIZED LOSSES:
Interest rate swap agreements........... -- (2,983) -- (2,925)
Guarantees of debt...................... -- (601) -- (59)
Letters of credit....................... -- (2,896) -- (1,748)
Surety bonds............................ -- (147) -- (119)
</TABLE>
F-23
<PAGE> 56
CITGO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Short-term bank loans and long-term debt -- The fair value of short-term
bank loans and long-term debt is based on interest rates that are currently
available to the Company for issuance of debt with similar terms and remaining
maturities.
Interest rate swap and cap agreements -- The fair value of these agreements
is based on the estimated amount that the Company would receive or pay to
terminate the agreements at the reporting dates, taking into account current
interest rates and the current creditworthiness of the counterparties.
Guarantees, letters of credit and surety bonds -- The estimated fair value
of contingent guarantees of third-party debt, letters of credit and surety bonds
is based on fees currently charged for similar one-year agreements or on the
estimated cost to terminate them or otherwise settle the obligations with the
counterparties at the reporting dates.
The fair value estimates presented herein are based on pertinent
information available to management as of the reporting dates. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
16. QUARTERLY RESULTS OF OPERATIONS -- UNAUDITED
The following is a summary of the quarterly results of operations for the
years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
1998
Sales........................................ $2,741,694 $2,935,889 $2,718,308 $2,515,830
========== ========== ========== ==========
Cost of sales and operating expenses......... $2,555,147 $2,773,602 $2,540,806 $2,470,664
========== ========== ========== ==========
Net income (loss)............................ $ 83,396 $ 56,480 $ 71,310 $ (17,196)
========== ========== ========== ==========
1997
Sales........................................ $3,262,726 $3,430,087 $3,555,825 $3,342,665
========== ========== ========== ==========
Cost of sales and operating expenses......... $3,177,759 $3,261,419 $3,343,417 $3,237,159
========== ========== ========== ==========
Net income................................... $ 12,825 $ 72,710 $ 92,345 $ 28,664
========== ========== ========== ==========
</TABLE>
F-24
<PAGE> 57
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*3.1 -- Certificate of Incorporation, Certificate of Amendment of
Certificate of Incorporation and By-laws of CITGO
Petroleum Corporation.
*4.1 -- Indenture, dated as of May 1, 1996, between CITGO
Petroleum Corporation and the First National Bank of
Chicago, relating to the 7 7/8% Senior Notes due 2006 of
CITGO Petroleum Corporation.
*4.2 -- Form of Senior Note (included in Exhibit 4.1).
**10.1 -- Crude Supply Agreement between CITGO Petroleum
Corporation and Petroleos de Venezuela, S.A., dated as of
September 30, 1986.
**10.2 -- Supplemental Crude Supply Agreement dated as of September
30, 1986 between CITGO Petroleum Corporation and
Petroleos de Venezuela, S.A.
**10.3 -- Crude Oil and Feedstock Supply Agreement dated as of
March 31, 1987 between Champlin Refining Company and
Petroleos de Venezuela, S.A.
**10.4 -- Supplemental Crude Oil and Feedstock Supply Agreement
dated as of March 31, 1987 between Champlin Refining
Company and Petroleos de Venezuela, S.A.
**10.5 -- Contract for the Purchase/Sale of Boscan Crude Oil dated
as of June 2, 1993 between Tradecal, S.A. and CITGO
Asphalt Refining Company.
**10.6 -- Restated Contract for the Purchase/Sale of Heavy/Extra
Heavy Crude Oil dated December 28, 1990 among Maraven,
S.A., Lagoven, S.A. and Seaview Oil Company.
**10.7 -- Sublease Agreement dated as of March 31, 1987 between
Champlin Petroleum Company, Sublessor, and Champlin
Refining Company, Sublease.
**10.8 -- Operating Agreement dated as of May 1, 1984 among Cit-Con
Oil Corporation, CITGO Petroleum Corporation and Conoco,
Inc.
**10.9 -- Amended and Restated Limited Liability Company
Regulations of LYONDELL-CITGO Refining Company, Ltd.,
dated July 1, 1993.
**10.10 -- Contribution Agreement between Lyondell Petrochemical
Company and LYONDELL-CITGO Refining Company, Ltd. and
Petroleos de Venezuela, S.A.
**10.11 -- Crude Oil Supply Agreement between LYONDELL-CITGO
Refining Company, Ltd. and Lagoven, S.A. dated as of May
5, 1993.
**10.12 -- Supplemental Supply Agreement dated as of May 5, 1993
between LYONDELL-CITGO Refining Company, Ltd. and
Petroleos de Venezuela, S.A.
**10.13 -- Tax Allocation Agreement dated as of June 24, 1993 among
PDV America, Inc., VPHI Midwest, Inc., CITGO Petroleum
Corporation and PDV USA, Inc., as amended.
**10.14 -- CITGO Credit Facility.
*10.15(i) -- First Amendment to the Second Amended and Restated Senior
Term Loan Agreement, by and between CITGO Petroleum
Corporation and Bank of America National Trust and
Savings Association et al, dated as of February 15, 1994.
*10.15(ii) -- Second Amendment to Second Amended and Restated Senior
Term Loan Agreement by and among CITGO Petroleum
Corporation and Bank of America Illinois et al, dated as
of October 21, 1994.
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.15(iii) -- First Amendment to the Second Amended and Restated Senior
Revolving Credit Facility Agreement by and among CITGO
Petroleum Corporation and Bank of America National Trust
and Savings Association et al, dated as of February 15,
1994.
*10.15(iv) -- Second Amendment to Second Amended and Restated Senior
Revolving Credit Facility Agreement by and among CITGO
Petroleum Corporation and Bank of America Illinois et al,
dated as of October 21, 1994.
*10.16 -- Master Shelf Agreement (1994) by and between Prudential
Insurance Company of America and CITGO Petroleum
Corporation ($100,000,000), dated March 4, 1994.
*10.17(i) -- Letter Agreement by and between the Company and
Prudential Insurance Company of America, dated March 4,
1994.
*10.17(ii) -- Letter Amendment No. 1 to Master Shelf Agreement with
Prudential Insurance company of America, dated November
14, 1994.
**10.18 -- CITGO Senior Debt Securities (1991) Agreement.
*10.19 -- CITCON Credit Agreement between CITCON Oil Corporation
and The Chase Manhattan Bank N.A., as Agent, dated as of
April 30, 1992.
*10.20(i) -- First Amendment to the CITCON Credit Agreement, between
CITCON Oil Corporation and The Chase Manhattan Bank
(National Association), dated as of June 30, 1992.
*10.20(ii) -- Second Amendment to the CITCON Credit Agreement, between
CITCON Oil Corporation and The Chase Manhattan Bank
(National Association), dated as of March 31, 1994.
*10.20(iii) -- Third Amendment to the CITCON Credit Agreement, between
CITCON Oil Corporation and The Chase Manhattan Bank
(National Association), dated as of June 10, 1994.
***10.21 -- Selling Agency Agreement dated as of October 28, 1997
among CITGO Petroleum Corporation, Salomon Brothers Inc.
and Chase Securities Inc.
10.22 -- $150,000,000 Credit Agreement, dated May 13, 1998.
10.23 -- $400,000,000 Credit Agreement, dated May 13, 1998.
10.24 -- Limited Partnership Agreement of LYONDELL-CITGO Refining
LP, dated December 31, 1998.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
23.1 -- Consent of Independent Auditors.
27 -- Financial Data Schedule (filed electronically only).
</TABLE>
- ---------------
* Previously filed in connection with the Registrant's Report on Form 10,
Registration No. 333-3226.
** Incorporated by reference to the Registration Statement on Form F-1 of PDV
America, Inc. (No. 33-63742).
*** Incorporated by reference to the Registrant's Report on Form 8-K filed with
the Commission on November 18, 1997.
<PAGE> 1
EXHIBIT 10.22
================================================================================
$150,000,000
CREDIT AGREEMENT
DATED AS OF MAY 13, 1998
AMONG
CITGO PETROLEUM CORPORATION
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT
THE BANK OF NEW YORK
AND
ROYAL BANK OF CANADA,
AS SYNDICATION AGENTS
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANCAMERICA ROBERTSON STEPHENS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
ARTICLE I DEFINITIONS..............................................................................1
1.2 Other Interpretive Provisions...........................................................25
1.3 Accounting Principles...................................................................26
ARTICLE II THE CREDITS.............................................................................26
2.1 Amounts and Terms of Commitments........................................................26
2.2 Loan Accounts...........................................................................27
2.3 Procedure for Borrowings................................................................27
2.4 Conversion and Continuation Elections for Loans.........................................28
2.5 Voluntary Termination or Reduction of Commitments.......................................29
2.6 Optional Prepayments....................................................................30
2.7 General.................................................................................30
2.8 Repayment...............................................................................30
2.9 Interest................................................................................30
2.10 Limitation on Interest..................................................................31
2.11 Fees....................................................................................32
2.12 Computation of Fees and Interest........................................................33
2.13 Payments by the Company.................................................................33
2.14 Payments by the Banks to the Administrative Agent.......................................34
2.15 Sharing of Payments, Etc................................................................34
2.16 Extension of Transition Date and of Commitments to make
Revolving Loans.........................................................................35
ARTICLE III [INTENTIONALLY OMITTED].................................................................37
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY..................................................37
4.1 Net Payments; Tax Exemptions............................................................37
4.2 Illegality..............................................................................38
4.3 Increased Costs and Reduction of Return.................................................39
4.4 Funding Losses..........................................................................40
4.5 Inability to Determine Rates............................................................41
4.6 Notice of Claim.........................................................................41
4.7 Certificates of Banks...................................................................41
4.8 Replacement of Certain Banks............................................................41
4.9 Deletion of Certain Banks...............................................................42
4.10 Survival................................................................................42
ARTICLE V CONDITIONS PRECEDENT....................................................................42
5.1 Conditions of Initial Borrowing.........................................................42
5.2 Conditions to All Loans, Conversions and Continuations..................................45
5.3 Condition to Term Loan..................................................................46
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VI REPRESENTATIONS AND WARRANTIES..........................................................46
6.1 Corporate Existence; Power; Compliance with Laws........................................46
6.2 Corporate Authorization; No Contravention...............................................47
6.3 Governmental Authorization..............................................................47
6.4 Binding Effect..........................................................................47
6.5 Litigation..............................................................................48
6.6 No Default..............................................................................48
6.7 Fire, Strike, Act of God, etc...........................................................48
6.8 Liens...................................................................................48
6.9 ERISA...................................................................................48
6.10 Use of Proceeds; Margin Regulations.....................................................49
6.11 Title to Properties.....................................................................49
6.12 Taxes...................................................................................49
6.13 Financial Condition.....................................................................50
6.14 Environmental Matters...................................................................50
6.15 Regulated Entities......................................................................51
6.16 Copyrights, Patents, Trademarks and Licenses, etc.......................................51
6.17 Subsidiaries............................................................................51
6.18 Key Contracts...........................................................................51
6.19 Solvency................................................................................51
6.20 Full Disclosure.........................................................................52
6.21 Addressing the Year 2000 Problem........................................................52
ARTICLE VII AFFIRMATIVE COVENANTS...................................................................52
7.1 Financial Statements....................................................................52
7.2 Certificates; Other Information.........................................................53
7.3 Notices.................................................................................54
7.4 Preservation of Corporate Existence, Etc................................................55
7.5 Insurance...............................................................................55
7.6 Taxes...................................................................................55
7.7 Compliance with Laws....................................................................55
7.8 Inspection of Property and Books and Records............................................56
ARTICLE VIII NEGATIVE COVENANTS......................................................................57
8.1 Negative Covenants Applicable to the Company and Restricted
Subsidiaries............................................................................57
8.2 Financial Covenants.....................................................................63
8.3 Negative Covenants Applicable to the Company and its
Unrestricted Subsidiaries...............................................................63
8.4 Designation of Unrestricted Subsidiaries and Restricted Subsidiaries....................64
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE IX EVENTS OF DEFAULT.......................................................................64
9.1 Event of Default........................................................................64
9.2 Remedies................................................................................67
9.3 Rights Not Exclusive....................................................................67
ARTICLE X THE ADMINISTRATIVE AGENT................................................................68
10.1 Appointment and Authorization...........................................................68
10.2 Delegation of Duties....................................................................68
10.3 Liability of Administrative Agent.......................................................68
10.4 Reliance by Administrative Agent........................................................69
10.5 Notice of Default.......................................................................69
10.6 Credit Decision.........................................................................69
10.7 Indemnification.........................................................................70
10.8 Agents in Individual Capacity...........................................................70
10.9 Successor Administrative Agent..........................................................71
10.10 Withholding Tax.........................................................................71
ARTICLE XI MISCELLANEOUS...........................................................................73
11.1 Amendments and Waivers..................................................................73
11.2 Notices.................................................................................74
11.3 No Waiver; Cumulative Remedies..........................................................74
11.4 Expenses................................................................................74
11.5 Indemnity; Damage Waiver................................................................75
11.6 Payments Set Aside......................................................................76
11.7 Successors and Assigns..................................................................76
11.8 Assignments, Participations, etc........................................................76
11.9 [Intentionally Omitted].................................................................78
11.10 Confidentiality.........................................................................78
11.11 Set-off.................................................................................78
11.12 Intentionally Omitted...................................................................78
11.13 Notification of Addresses, Lending Offices, Etc.........................................79
11.14 Counterparts............................................................................79
11.15 Severability............................................................................79
11.16 No Third Parties Benefited..............................................................79
11.17 Governing Law and Jurisdiction..........................................................79
11.18 Waiver of Jury Trial....................................................................80
11.19 Entire Agreement........................................................................80
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
SCHEDULES
- ---------
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.1 Qualification as a Foreign Corporation
Schedule 6.5 Litigation
Schedule 6.13 Expected Material Adverse Effects
Schedule 6.14 Environmental Matters
Schedule 6.17 Subsidiaries
Schedule 11.2 Lending Offices; Addresses for Notices
EXHIBITS
- --------
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Company's Counsel
Exhibit D-2 Form of Legal Opinion of Company's General Counsel
Exhibit D-3 Form of Legal Opinion of PDVSA Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Form of Confidentiality Agreement
Exhibit H Form of Certificate of Extension
</TABLE>
-v-
<PAGE> 6
$150,000,000
CREDIT AGREEMENT
This $150,000,000 CREDIT AGREEMENT is entered into as of May 13, 1998,
among CITGO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), Royal Bank of Canada and
The Bank of New York, as syndication agents (each a "Syndication Agent" and
collectively, the "Syndication Agents")and Bank of America National Trust and
Savings Association, as Administrative Agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility pursuant to which Revolving Loans which, at the
Company's request, may be converted into Term Loans, shall be made from time to
time upon the terms and conditions set forth in this Agreement; and
WHEREAS, the parties hereto are entering into a separate credit
agreement of even date herewith which provides for revolving loans, bid facility
loans and the issuance of letters of credit (the "$400,000,000 Credit
Agreement");
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
I.1 Certain Defined Terms. The following terms have the following
meanings:
"$400,000,000 Credit Agreement" is defined in the second
recital.
"Accepting Bank" is defined in Section 2.16.
"Administrative Agent" means BofA in its capacity as
administrative agent for the Banks hereunder, and any successor
administrative agent arising under Section 10.9.
"Administrative Agent's Payment Office" means the address for
payments set forth in Schedule 11.2 in relation to the Administrative
Agent, or such other address as the Administrative Agent may from time
to time specify.
<PAGE> 7
"Affected Bank" means any Bank claiming compensation under
Section 4.1 or Section 4.3 and any Bank which has determined that it is
unlawful to maintain Offshore Rate Loans pursuant to Section 4.2.
"Affiliate" means, as to any Person, (a) any other Person
which, directly or indirectly, is in control of, is controlled by, or
is under common control with, such Person or (b) in the case of the
Company or any Subsidiary, any Person who is a director or officer of
such Person or of any Person described in the foregoing clause (a). For
purposes of this definition, "control" (and with correlative meaning
"controlled" and "under common control") of a Person shall mean (i) the
power, direct or indirect, (A) to vote 50% or more of the securities
having ordinary voting power for the election of directors of such
Person or (B) to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise or (ii) the ownership, direct or
indirect, of 10% or more of any class of Voting Stock of such Person
(if such class of Voting Stock is publicly held).
"Agent-Related Persons" means BofA and any successor
administrative agent arising under Section 10.9, each Syndication
Agent, together with their respective Affiliates (including, in the
case of BofA, the Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
"Agreement" means this Credit Agreement.
"Applicable Facility Fee Rate" means, with respect to each
Bank, for any Calculation Date (as defined below) on which the
Capitalization Ratio is as described in a particular category below,
the percentage per annum set forth below opposite such category:
<TABLE>
<CAPTION>
Percentage Per
Capitalization Ratio Annum
-------------------- -----
<S> <C>
Less than 35% .0800%
Equal to or greater than 35% but less than
40% .0900%
Equal to or greater than 40% but less than
50% .1000%
Equal to or greater than 50% but less than
55% .1250%
Equal to or greater than 55% .1750%
</TABLE>
<PAGE> 8
The Applicable Facility Fee Rate for a particular Fiscal Quarter (the
"Relevant Quarter") (a) shall become effective on the first day of the
Relevant Quarter, (b) shall remain constant throughout all of the
Relevant Quarter and (c) shall be determined on the basis of the
Capitalization Ratio calculated as of the last day of the second Fiscal
Quarter preceding the Relevant Quarter (each such date, a "Calculation
Date").
"Applicable Law" with respect to any Person or matter means
any law, rule, regulation, judgment, order, decree or other requirement
having the force of law relating to such Person or matter and, where
applicable, any interpretation thereof by any Person having
jurisdiction with respect thereto or charged with the administration or
interpretation thereof.
"Applicable Margin" means
(i) with respect to Base Rate Loans, 0%;
(ii) with respect to CD Rate Loans, for any Calculation
Date that the Capitalization Ratio is as described in a
particular category below, the margin, expressed as a
percentage per annum, set forth below opposite such category:
<TABLE>
<CAPTION>
Percentage Per
Capitalization Ratio Annum
-------------------- -----
<S> <C>
Less than 35% .3450%
Equal to or greater than 35% but less than
40% .4100%
Equal to or greater than 40% but less than
50% .4500%
Equal to or greater than 50% but less than
55% .5750%
Equal to or greater than 55% .7000%
</TABLE>
(iii) with respect to Offshore Rate Loans, for any
Calculation Date that the Capitalization Ratio is as described
in a particular category below, the margin, expressed as a
percentage per annum, set forth below opposite such category:
-3-
<PAGE> 9
<TABLE>
<CAPTION>
Percentage Per
Capitalization Ratio Annum
-------------------- -----
<S> <C>
Less than 35% .2200%
Equal to or greater than 35% but less than
40% .2850%
Equal to or greater than 40% but less than
50% .3250%
Equal to or greater than 50% but less than
55% .4500%
Equal to or greater than 55% .5750%
</TABLE>
The margins applicable to the Relevant Quarter (as defined above in the
definition of "Applicable Facility Fee Rate") (i) shall become
effective on the first day of the Relevant Quarter for all new and
existing Loans, (ii) shall remain constant throughout all of the
Relevant Quarter and (iii) shall be determined on the basis of the
Capitalization Ratio calculated as of the Calculation Date.
"Arranger" means BancAmerica Robertson Stephens.
"Assignee" has the meaning specified in subsection 11.8(a).
"Assignment and Acceptance" has the meaning specified
in Section 11.8(a).
"Attorney Costs" means and includes (a) with respect to the
negotiation, syndication, preparation, execution and delivery of this
Agreement and each other Loan Document and any modifications or waivers
related thereto, all reasonable fees and disbursements of any law firm
or other external counsel and the allocated cost of internal legal
services and all disbursements of internal counsel to the extent that
the services performed by internal counsel do not duplicate services
performed by external counsel; provided that invoices for such fees and
disbursements shall be rendered in reasonable detail; and (b) with
respect to each particular matter regarding enforcement or protection
of the rights of any Bank or the Administrative Agent in connection
with enforcement or protection of its rights pursuant to this
Agreement, all reasonable fees and disbursements of any law firm or
other external counsel (including, if such Person has not elected to
use outside counsel for such particular matter or if the Company shall
have consented, the allocated cost of internal legal services and all
disbursements of internal legal counsel for such matter).
"Authorized Signatory" means any Responsible Officer or any
other person authorized by a Responsible Officer in compliance with
resolutions of the Board of Directors of the Company to sign Notices of
Borrowing and Notices of Conversion/Continuation and other documents
(except for Loan Documents) related to and required for any Borrowing
and
-4-
<PAGE> 10
whose signatures and incumbency have been certified to the
Administrative Agent and each other Bank pursuant to clause (B) or
clause (C) of subsection 5.1.(a)(ii), or in a certificate delivered to
the Administrative Agent replacing or amending such certificate. Each
Bank may conclusively rely on each such certificate until it shall have
received a copy of a certificate of a Responsible Officer amending,
canceling or replacing such certificate.
"Bank" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BofA.
"Bank Confidentiality Agreement" has the meaning specified in
Section 11.10.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. ss.101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.)
Any change in the reference rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans of
the same Type made to the Company on the same day by the Banks ratably
according to their Pro Rata Shares under Article II, and, other than in
the case of Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.3.
"Business Day" means (a) in the case of a Business Day which
relates to fees, a day on which the Administrative Agent is open at its
address specified in or pursuant to the provisions of Section 11.2 for
the purpose of conducting a commercial banking business, (b) in the
case of a Business Day which relates to an Offshore Rate Loan, a day on
which the requirements of clause (a) of this definition are met, and,
in addition, dealings are carried on in the interbank eurodollar market
and banks are open for business in London, and (c) in the
-5-
<PAGE> 11
case of Base Rate Loans and CD Rate Loans, a day on which the
requirements of clause (a) of this definition are met and, in addition,
banks are open for business in New York.
"Calculation Date" is defined in the last paragraph of the
definition of "Applicable Facility Fee Rate."
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capitalization" means, at any time, an amount equal to the
sum of:
(a) Indebtedness of the Company and its Restricted
Subsidiaries;
plus
(b) Net Worth.
"Capitalization Ratio" means, at the end of any Fiscal Quarter
of the Company, the ratio of Indebtedness of the Company and its
Restricted Subsidiaries to Capitalization; provided, however, there
shall be excluded from Indebtedness an amount equal to (a) the
Indebtedness of each Restricted Subsidiary that is not a Wholly-Owned
Subsidiary and whose Indebtedness is not guaranteed by the Company or
any Wholly-Owned Subsidiary multiplied by (b) a fraction, the
denominator of which is the number of shares of outstanding capital
stock of such Restricted Subsidiary and the numerator of which is the
number of shares of capital stock of such Restricted Subsidiary not
held by the Company or another Restricted Subsidiary.
"CARCO" means CITCO Asphalt Refining Company, a New Jersey
general partnership.
"CD Rate" means, for any Interest Period with respect to CD
Rate Loans comprising part of the same Borrowing, the rate of interest
(rounded upward to the next 1/100th of 1%) determined as follows:
CD Rate = Certificate of Deposit Rate + Assessment Rate
1.00 - Reserve Percentage
Where:
-6-
<PAGE> 12
"Assessment Rate" means, for any day of such Interest
Period, the rate determined by the Administrative Agent as
equal to the annual assessment rate in effect on such day
payable to the FDIC by a member of the Bank Insurance Fund
that is classified as well capitalized and within supervisory
subgroup "A" (or a comparable successor assessment risk
classification within the meaning of 12 C.F.R. ss.327.4) for
insuring time deposits at offices of such member in the United
States; or, in the event that the FDIC shall at any time
hereafter cease to assess time deposits based upon such
classifications or successor classifications, equal to the
minimum annual assessment rate in effect on such day that is
payable to the FDIC by commercial banks (whether or not
applicable to any particular Bank) for insuring time deposits
at offices of such banks in the United States.
"Certificate of Deposit Rate" means the rate of
interest per annum determined by the Administrative Agent to
be the arithmetic mean (rounded upward to the next 1/100th of
1%) of the rates notified to the Administrative Agent as the
rates of interest bid by two or more certificate of deposit
dealers of recognized standing selected by the Administrative
Agent for the purchase at face value of dollar certificates of
deposit issued by major United States banks, for a maturity
comparable to such Interest Period and in the approximate
amount of the CD Rate Loans to be made, at the time selected
by the Administrative Agent on the first day of such Interest
Period.
"Reserve Percentage" means, for any day of such
Interest Period, the maximum reserve percentage (expressed as
a decimal, rounded upward to the next 1/100th of 1%), as
determined by the Administrative Agent, in effect on such day
(including any ordinary, marginal, emergency, supplemental,
special and other reserve percentages), prescribed by the FRB
for determining the maximum reserves to be maintained by
member banks of the Federal Reserve System with deposits
exceeding $1,000,000,000 for new non-personal time deposits
for a period comparable to such Interest Period and in an
amount of $100,000 or more.
The CD Rate shall be adjusted, as to all CD Rate Loans then
outstanding, automatically as of the effective date of any change in
the Assessment Rate or the Reserve Percentage.
"CD Rate Loan" means a Loan that bears interest based on the
CD Rate.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et
seq.).
"Certificate of Extension" means a certificate of the Company,
executed by a Responsible Officer and delivered to the Administrative
Agent, in substantially the form of
-7-
<PAGE> 13
Exhibit H, which requests an extension of the then scheduled Transition
Date pursuant to Section 2.16.
"Change of Control" means any condition or occurrence such
that less than 50% of the Voting Stock of any class of the Company
shall be owned, directly or indirectly, by PDVSA.
"CIC" means CITGO Investment Company, a Delaware corporation.
"Cit-Con" means Cit-Con Oil Corporation, a Delaware
corporation.
"CIVESCO" means CITGO Venezuela Supply Company, a Delaware
corporation.
"Closing Date" means the date on which all conditions
precedent set forth in Section 5.1 with respect to the obligation of
each Bank to make its initial Loan are satisfied or waived by all Banks
(or, in the case of subsection 5.1(f), waived by the Person entitled to
receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in
Section 2.1.
"Company" has the meaning specified in the introductory clause
hereto.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Computation Period" shall mean, when used in the Compliance
Certificate or in Section 8.2(b) with reference to the calculation as
of the last day of the Fiscal Quarter, the four consecutive Fiscal
Quarters ending on such day.
"Confidentiality Agreement" means that certain letter
agreement dated March 5, 1998 between the Company and BofA.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any written
agreement, undertaking, contract, indenture, mortgage, deed of trust or
other instrument or document to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.4, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the
-8-
<PAGE> 14
same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Corpus Christi Refinery West Plant Lease" means that certain
Sublease Agreement dated as of March 31, 1987 between Champlin
Petroleum Company (now known as Union Pacific Resources Company), as
the Sublessor, and Champlin Refining Company (now known as CRCCLP), as
the Sublessee.
"CPIC" means CITGO Pipeline Investment Company, a Delaware
corporation.
"CRCCLP" means CITGO Refining and Chemicals Company, L.P., a
Delaware limited partnership, formerly known as CITGO Refining and
Chemicals, Inc., the partners in which are CIC and the Company.
"CRCCLP Crude Supply Agreement" means that certain Crude Oil
and Feedstock Supply Agreement, dated as of March 31, 1987, by and
between CRCCLP and Petroleos.
"Crude Supply Agreement" means that certain Crude Supply
Agreement, dated as of September 30, 1986, by and between the Company
and Petroleos.
"Declining Bank" is defined in Section 2.16.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Default Rate" means that rate of interest set forth in
subsection 2.9(c) as applicable to amounts outstanding after such
amounts are due and payable.
"Disposition" has the meaning set forth in Section 8.2(b)(iv).
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"EBITDA" means, for any period, an amount equal to the sum of:
-9-
<PAGE> 15
(a) Net Income of the Company and its Restricted Subsidiaries
for such period; plus (b) the aggregate amount of Interest Expense of
the Company and its Restricted Subsidiaries that was deducted for such
period in determining Net Income for such entities; plus (c) the
aggregate amount which was deducted in respect of Federal, state and
local income taxes of the Company and its Restricted Subsidiaries for
such period in determining Net Income for such entities, plus (d) the
aggregate amount which was deducted in respect of depreciation and
amortization in determining Net Income for such entities for such
period.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000 at the time any
assignment is made pursuant to Section 11.8; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or
a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000 at the time any assignment
is made pursuant to Section 11.8, provided that such bank is acting
through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; and
(c) a Person that is primarily engaged in the business of commercial
lending and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (iii) a Person of which a
Bank is a Subsidiary; provided, however, no Eligible Assignee shall be
a Person who is an Affiliate of any Person in the petroleum or
petroleum products industry, except with the consent of the Company.
"Environmental Laws" means all federal, state or local laws,
statutes, rules, regulations, ordinances and codes, together with all
administrative orders, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.1.
"Excluded Taxes" means, in the case of each Bank and the
Administrative Agent, such taxes (including income taxes or franchise
taxes), which are imposed on or measured by such Bank's or the
Administrative Agent's net income by the United States or its political
subdivisions or the jurisdiction (or any political subdivision thereof)
under the laws of which such Bank or the Administrative Agent, as the
case may be, is organized or maintains a lending office.
-10-
<PAGE> 16
"Exemption Agreement" has the meaning specified in Section
4.1.
"Exemption Representation" has the meaning specified in
Section 4.1.
"Existing Revolving Credit Agreement" means the Second Amended
and Restated Senior Revolving Credit Facility Agreement dated as of
July 31, 1992 (as amended) among the Company, various banks and other
financial institutions from time to time party thereto (the "Existing
Revolving Facility Banks"), BofA as successor agent for the Existing
Revolving Facility Banks, Royal Bank of Canada as senior co-agent for
the Existing Revolving Facility Banks and Chase Bank of Texas, National
Association (formerly Texas Commerce Bank National Association) and
Credit Lyonnais New York Branch as co-agents for the Existing Revolving
Facility Banks.
"Existing Revolving Facility Banks" is defined in the
definition of Existing Revolving Credit Agreement.
"Facility Fee" has the meaning specified in Section 2.11(b).
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by the
Administrative Agent.
"Fee Letter" has the meaning specified in subsection 2.11(a).
"Fiscal Quarter" means each fiscal quarter of the Company and
its Subsidiaries.
"Fiscal Year" means each fiscal year of the Company and its
Subsidiaries.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
-11-
<PAGE> 17
"GAAP" means, as of any date, the generally accepted
accounting principles set forth from time to time in the opinions,
statements and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies
with similar functions of comparable stature and authority within the
U.S. accounting profession), which (except as otherwise provided in
Section 1.3) are applicable to the circumstances as of such date and
have been adopted by the Company in compliance with such opinions,
statements and pronouncements.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any Person
owned or controlled, through stock or capital ownership or otherwise,
by any of the foregoing.
"Hazardous Materials" means materials defined as "hazardous
substances," "hazardous waste" or "hazardous constituents" or any
similar term in (a) CERCLA, (b) RCRA, or (c) any other Federal, state
or local environmental law or regulation.
"Impermissible Qualification" means, relative to any opinion
by independent public accountants as to any financial statement of the
Company or any of its Subsidiaries or of the Company and any of its
Subsidiaries, any qualification or exception to such opinion:
(a) which is of a "going concern" or a similar nature;
(b) which relates to the limited scope of examination
of matters relevant to such financial statement (other than
scope limitations included in the standard form of opinion
utilized by such accountants); or
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition
to its removal, would require an adjustment to such item the
effect of which would be to cause the Company to be in default
of any of its obligations under Section 8.2;
provided, that a qualification to any such opinion rendered in
connection with any consolidated financial statements of the Company
and its Restricted Subsidiaries to the effect that such financial
statement has not been prepared in conformity with GAAP to the extent
GAAP requires consolidating Unrestricted Subsidiaries, shall not be an
Impermissible Qualification.
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<PAGE> 18
"Indebtedness" with respect to any Person means, without
duplication, (a) all interest-bearing obligations (including therein
debt instruments issued at a discount from face value) of such Person,
including, to the extent the same are interest-bearing, (i) all
indebtedness for borrowed money of such Person or for the deferred
purchase price of property acquired by, or services rendered to, such
Person, (ii) all indebtedness of such Person created or arising under
any conditional sale or other title retention agreement with respect to
any property acquired by such Person, (iii) all indebtedness for
borrowed money or for the deferred purchase price of property or
services secured by any Lien upon or in any property owned by such
Person whether or not such Person has assumed or become liable for the
payment of such indebtedness for borrowed money; and (iv) at all times
such liability is interest bearing, any finally assessed withdrawal
liability of such Person or a commonly enrolled entity to a
Multiemployer Plan; (b) the present value determined in accordance with
GAAP of all obligations of such Person under leases which shall have
been or should be recorded as capitalized leases in accordance with
GAAP; (c) indebtedness arising under acceptance facilities, any surety
bond as to which such Person is liable for reimbursement and the
undrawn maximum face amount of all outstanding letters of credit issued
for the account of such Person (except to the extent such letters of
credit are issued to secure the payment by such Person of obligations
for Indebtedness otherwise included herein) and, without duplication,
the outstanding amount of all drafts drawn thereunder; and (d) to the
extent not included in clauses (a) through (c) above, all direct or
indirect guarantees by such Person of indebtedness described in this
definition of any other Person; provided, that, for purposes of this
definition, trade payables incurred within the ordinary course of
business and payable within 90 days of the incurrence thereof shall not
be included as Indebtedness.
"Indemnified Liabilities" has the meaning specified in Section
11.5.
"Indemnitee" has the meaning specified in Section 11.5.
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Expense" means, without duplication, for any period,
the sum of:
(i) aggregate interest expense of the Company and its
Restricted Subsidiaries for such period, as determined in
accordance with GAAP and in any event including, without
duplication, all commissions, discounts and other fees and
charges owed with respect to letters of credit and banker's
acceptances and net costs under
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<PAGE> 19
Swap Contracts and the portion of any obligation under
capitalized leases allocable to interest expense;
plus
(ii) interest expense of the Company and its Restricted
Subsidiaries capitalized during such period;
minus
(iii) amortization of capitalized interest expense of
the Company and its Restricted Subsidiaries for such period.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to such
Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter and each date such Loan is converted into another Type
of Loan, provided, however, that if any Interest Period for a CD Rate
Loan or Offshore Rate Loan exceeds 90 days or three months,
respectively, the date that falls 90 days or three months (as the case
may be) after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, (a) as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date seven or
fourteen days or one, two, three or six months thereafter as selected
by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation and (b) as to any CD Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as a CD Rate Loan, and ending 30, 60, 90 or 180 days
thereafter, as selected by the Company in its Notice of Borrowing or
Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore Rate
Loan that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest
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<PAGE> 20
Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Maturity Date then in effect.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Key Contracts" means the Crude Supply Agreement, the
Supplemental Crude Supply Agreement and the CRCCLP Crude Supply
Agreement.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.2, or such other office or offices as such Bank may from time to
time notify the Company and the Administrative Agent in writing.
"Lien" means, with respect to any property, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien (statutory or other), charge, easement,
encumbrance, preference, priority or other security or similar
agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such property (including any conditional sale or
other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Loan" means an extension of credit by a Bank to the Company
under Article II, and may be a Base Rate Loan, CD Rate Loan or an
Offshore Rate Loan (each, a "Type" of Loan), and includes any Revolving
Loan or Term Loan.
"Loan Documents" means this Agreement, any Notes and the Fee
Letter.
"Majority Banks" means at any time Banks having at least
66-2/3% of the Commitments, or if the Commitments have been terminated,
Banks then holding at least 66-2/3% of the then aggregate unpaid
principal amount of the Loans.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Acquisition" means any acquisition where either the
purchase price or the book value of the assets acquired equals or
exceeds the greater of (a) $250,000,000 and (b) 5% of Capitalization.
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<PAGE> 21
"Material Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding) and after
taking into account insurance coverage and effective indemnification
with respect to such occurrence, a materially adverse effect on a
consolidated basis for the Company and its Subsidiaries in accordance
with GAAP, on:
(a) the consolidated financial condition, business,
operations or properties of the Company and its Subsidiaries;
or
(b) the ability of the Company to perform any of its
payment or other material obligations under this Agreement or
under any other Loan Document.
"Material Term" means:
(a) any provision of the Supplemental Crude Supply
Agreement;
(b) any provision of Section 2.10, 2.11, 3.1, 3.2 or
4.3 of the Crude Supply Agreement, as in effect on the date
hereof;
(c) any provision of the Crude Supply Agreement or the
CRCCLP Crude Supply Agreement, the proposed amendment,
modification or waiver of which, directly or indirectly, would
materially and adversely affect the price the Company or any
other Restricted Subsidiary shall pay thereunder for oil and
naphtha;
(d) (i) any provision of Section 2.1(b)(i) of the Crude
Supply Agreement, as in effect on the date hereof, the
proposed amendment, modification or waiver of which, directly
or indirectly, would reduce the "Base Volume" (as defined in
the Crude Supply Agreement, as in effect on the date hereof)
Petroleos shall be required to sell, and the Company shall be
required or entitled to purchase, pursuant to such section;
(ii) any provision of Section 2.1(b)(ii) of the
Crude Supply Agreement, as in effect on the date hereof, the
proposed amendment, modification or waiver of which, directly
or indirectly, would impair the Company's right to nominate
"Incremental Volumes" (as defined in the Crude Supply
Agreement, as in effect on the date hereof) pursuant to such
section; and
(iii) any provision of Section 2.1(b)(iii) of the
Crude Supply Agreement, as in effect on the date hereof, the
proposed amendment, modification or waiver of which, directly
or indirectly, would reasonably be expected to have a Material
Adverse Effect; and
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<PAGE> 22
(e) any provision of Section 2.1(a), 2.10, 2.11, 3.1,
3.2 or 5.3 of the CRCCLP Crude Supply Agreement, as in effect
on the date hereof.
"Maturity Date" means as of any date (i) if, on such date,
there has been no Borrowing of Term Loans, the Transition Date or (ii)
if, on such date, there has been a Borrowing of Term Loans, the Term
Loan Maturity Date.
"Multiemployer Plan" means any "multiemployer plan" (as that
term is defined under section 3(37) of ERISA) under which the Company
or any Related Person has contributed or with respect to which the
Company or such Related Person may have any liability.
"Net Income" means, for any period,
(a) the gross revenues of the Company and its
Restricted Subsidiaries for such period;
reduced by
(b) the sum (without duplication) of the following
items for such period (to the extent, except in the case of
clause (i), included in gross revenues for such period):
(i) operating and non-operating expenses of the
Company and its Restricted Subsidiaries according to
GAAP (including current and deferred taxes on income,
provision for taxes on unremitted foreign earnings
included in such gross revenues and current additions
to reserves but excluding the lower of cost or market
inventory write-downs and write-ups of current assets);
(ii) all material gains (net of expense and taxes
applicable thereto) arising from the Disposition of
capital assets (i.e., assets other than current
assets);
(iii) all gains arising from the write-up of assets
(other than the write-up of current assets as a result
of the lower of cost or market adjustments to
inventory);
(iv) all equity of the Company or any Restricted
Subsidiary in the unremitted earnings of any Person in
which the Company has a minority interest;
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<PAGE> 23
(v) all earnings of each Person acquired by the
Company or any Restricted Subsidiary through purchase,
merger, consolidation or otherwise for any year prior
to the year of acquisition;
(vi) all deferred credits representing the excess
of equity in any Restricted Subsidiary at the date of
acquisition thereof over the cost of the investment in
such Restricted Subsidiary; and
(vii) the aggregate amount of dividends paid by all
Unrestricted Subsidiaries to the Company or any
Restricted Subsidiary during such period.
"Net Worth" means, for any date, the sum of capital stock,
additional paid-in capital and retained earnings (minus accumulated
deficits) of the Company and its Restricted Subsidiaries, all as shown
on a consolidated balance sheet of the Company and its Restricted
Subsidiaries prepared as of such date.
"Note" means a promissory note executed by the Company in
favor of a Bank pursuant to Section 2.2(b), in substantially the form
of Exhibit F and any promissory note accepted in replacement thereof or
substitution therefor.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A signed by any Authorized Signatory.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B signed by any Authorized Signatory.
"Obligations" means at any time all advances, debts,
liabilities, obligations, covenants and duties arising under any Loan
Document then owing by the Company to any Bank or to the Administrative
Agent.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Administrative Agent as follows:
LIBOR
Offshore Rate = ------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next
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<PAGE> 24
1/100th of 1%) in effect on such day (whether or not
applicable to any Bank) under regulations issued from time to
time by the FRB for determining the maximum reserve
requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency liabilities");
and
"LIBOR" means (a) relative to any Interest Period for
Offshore Rate Loans, the rate of interest per annum equal to
the average of the offered quotations appearing on Dow Jones
Market Service (formerly Telerate) Page 3750 (or if such page
shall not be available, any successor or similar service as
may be selected by the Administrative Agent and the Company)
as of 11:00 a.m., London, England time (or as soon thereafter
as practicable), two Business Days prior to the beginning of
such Interest Period, or (b) if none of such page 3750 nor any
successor or similar service is available, relative to any
Interest Period for Offshore Rate Loans, the rate of interest
per annum determined by the Administrative Agent to be the
arithmetic mean (rounded upward to the next 0.01%) of the
rates of interest per annum at which dollar deposits in the
approximate amount of the amount of the Loan to be made or
continued as, or converted into, an Offshore Rate Loan by the
Administrative Agent and having a maturity comparable to such
Interest Period are offered in immediately available funds to
the Administrative Agent in the London interbank market at its
request at approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to
all Offshore Rate Loans then outstanding as of the effective
date of any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate that is a rate determined by reference to LIBOR.
"Operational Term" shall mean any provision of the Crude
Supply Agreement or the CRCCLP Crude Supply Agreement concerning the
day-to-day performance of such agreement, including those provisions
customarily waived or modified on a temporary basis in the ordinary
course of business or pursuant to industry custom or practice, and
which is not a Material Term.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws and any
certificate of designation or other instrument relating to the rights
of preferred shareholders of such corporation.
"Participant" has the meaning specified in subsection 11.8(d).
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<PAGE> 25
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"PDVAI" means PDV America, Inc., a Delaware corporation. On
the Closing Date, PDVAI holds all the issued and outstanding stock of
the Company.
"PDVSA" means Petroleos de Venezuela, S.A., a Venezuelan
corporation.
"Permitted Liens" has the meaning specified in subsection
8.1(a).
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Petroleos" means PDVSA Petroleos y Gas, S.A., a Venezuelan
corporation.
"Plan" means any plan described in section 4021(a) of ERISA
and not excluded pursuant to section 4021(b) thereof, under which the
Company or any Related Person to the Company has contributed or with
respect to which the Company or such Related Person is liable.
"Principal Properties" means (a) the Company's refinery
located at Lake Charles, Louisiana, and (b) CRCCLP's refinery located
at Corpus Christi, Texas.
"Principal Subsidiary" means Cit-Con, CARCO, CPIC, CRCCLP,
CIC, CIVESCO or any other Subsidiary whose assets have an aggregate
book value exceeding $100,000,000.
"Private Placement Agreement" means that certain Note Purchase
Agreement dated as of November 1, 1991 among the Company and each of
the purchasers named therein relating to the Company's issuance, and
such purchasers' purchase, of the Private Placement Notes.
"Private Placement Notes" means the senior notes issued by the
Company pursuant to the Private Placement Agreement, consisting of an
issue of $75,000,000 aggregate principal amount of the Company's 8.75%
Guaranteed Series A Senior Notes due 1998, an issue of $200,000,000
aggregate principal amount of the Company's 9.03% Guaranteed Series B
Senior Notes due 2001, and an issue of $125,000,000 aggregate principal
amount of the Company's 9.30% Guaranteed Series C Senior Notes due
2006.
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<PAGE> 26
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
Total Commitment of all Banks.
"RCRA" means the Resource Conservation and Recovery Act of
1976 (42 U.S.C. ss.6901 et seq.)
"Receivable" of the Company or CRCCLP means, as at any date of
determination thereof, the unpaid principal portion of the obligation,
as stated on the respective invoice, of any customer of the Company or
CRCCLP to pay money to the Company or CRCCLP in respect of any services
performed by the Company or CRCCLP or inventory purchased from the
Company or CRCCLP net of all credits, rebates and offsets owed to such
customer by the Company or CRCCLP and also net of all commissions
payable by the Company or CRCCLP to third parties (and for purposes
hereof, a credit or rebate paid by check or draft of the Company or
CRCCLP shall be deemed to be outstanding until such check or draft
shall have been debited to the respective account of the Company or
CRCCLP on which such check or draft was drawn).
"Receivables Purchase Facility" means, as to the Company or
CRCCLP any facility providing for the sale, transfer, conveyance, lease
or assignment, with or without recourse, of the Receivables of such
Person.
"Recipient" has the meaning specified in Section 4.1.
"Register" has the meaning specified in Section 11.8(d).
"Related Person" with respect to any Person means any other
Person which, together with such Person, is under common control as
described in section 414 of the Code.
"Replacement Bank" is defined in Section 2.16.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Requirement of Law" means, as to any Person, any law, treaty,
rule, regulation, judgment or order of a Governmental Authority or
other requirement having the force of law, in each case applicable to
or binding upon the Person or any of its property or to which the
Person or any of its property is subject and any interpretation thereof
by any Person having jurisdiction with respect thereto or charged with
the administration or interpretation thereof.
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<PAGE> 27
"Responsible Officer" means the President, the Chief Financial
Officer, the Treasurer, the Controller or any Assistant Treasurer of
the Company the signatures of whom, in each case, have been certified
to the Administrative Agent and each other Bank pursuant to clause (B)
of subsection 5.1(a)(ii), or in a certificate delivered to the
Administrative Agent replacing or amending such certificate. Each Bank
may conclusively rely on the each certificate so delivered until it
shall have received a copy of a certificate from the Secretary or an
Assistant Secretary of the Company amending, canceling or replacing
such certificate.
"Restricted Subsidiary" means any Subsidiary other than (i)
any Unrestricted Subsidiary and (ii) any Subsidiary any of whose Voting
Stock or other equity interests (as appropriate) shall at the time be
owned by one or more Unrestricted Subsidiaries. "Restricted Subsidiary"
may include Subsidiaries which were formerly Unrestricted Subsidiaries
but have been designated as Restricted Subsidiaries pursuant to the
provisions of Section 8.4.
"Revolving Loan" has the meaning specified in Section 2.1.
"Revolving Loan Termination Date" means the earlier to occur
of:
(a) the Transition Date; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"Sale Leaseback Transaction" means a transaction or series of
transactions pursuant to which the Company or any Subsidiary shall sell
or transfer to any Person (other than the Company or a Subsidiary) any
Principal Property, whether now owned or hereafter acquired, and, as
part of the same transaction or series of transactions, the Company or
such Subsidiary shall rent or lease as lessee (other than pursuant to a
Capital Lease), or similarly acquire the right to possession or use of,
such Principal Property.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
50% of the Voting Stock or other equity interests (in the case of
Persons other than corporations), is, at the time, owned or controlled
directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof; provided that
Lake Charles Pipeline Company, a Delaware corporation, shall be deemed
not to be a Subsidiary. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
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<PAGE> 28
"Supplemental Crude Supply Agreement" means that certain
Supplemental Crude Supply Agreement, dated as of September 30, 1986, by
and between the Company and Petroleos.
"Swap Contract" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to any
single transaction) that is an interest rate swap agreement, basis
swap, forward rate agreement, commodity swap, commodity option, equity
or equity index swap or option, bond option, interest rate option,
forward foreign exchange agreement, rate cap, collar or floor
agreement, currency swap agreement, cross-currency rate swap agreement,
swaption, currency option or any other, similar agreement (including
any option to enter into any of the foregoing).
"Syndication Agent" means each of Royal Bank of Canada and The
Bank of New York and the successors of each in such capacity.
"Synthetic Lease" means a lease designed to have the
characteristics of a loan for federal income tax purposes while
obtaining operating lease treatment for financial accounting purposes.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto imposed by any taxing authority, excluding all Excluded
Taxes.
"Term Loan" has the meaning specified in Section 2.1(b).
"Term Loan Maturity Date" means, with respect to any Term Loan
made pursuant to Section 2.1(b), the date one year after the Transition
Date.
"Termination Date" means the earlier to occur of:
(a) the Maturity Date (as such may be extended upon the
Borrowing of Term Loans); and
(b) the date on which the Commitments terminate and/or
the Loans become due and payable pursuant to Section 9.2.
"Total Commitment" at the time any determination thereof is to
be made means the sum of the then Commitments of the Banks.
"Trading Subsidiary" means any Wholly-Owned Restricted
Subsidiary which, at the time of any determination thereof, is the
assignee of the rights of the Company under the
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<PAGE> 29
Crude Supply Agreement and/or the Supplemental Crude Supply Agreement.
The Trading Subsidiary on the date hereof is CIVESCO.
"Transition Date" means May 12, 1999, or such later date to
which the Transition Date may be extended pursuant to Section 2.16
which date shall be no later than the Stated Termination Date as
defined in the $400,000,000 Credit Agreement.
"Type" has the meaning specified in the definition of "Loan."
"Unfunded Vested Liability" means, relative to any Plan,
including any Multiemployer Plan, at any time, the excess (if any) of
(a) the present value of all vested nonforfeitable benefits under such
Plan or such Multiemployer Plan, as the case may be, over (b) the fair
market value of all Plan assets or Multiemployer Plan assets, as the
case may be, allocable to such benefits, all determined as of the then
most recent valuation date for such Plan or such Multiemployer Plan, as
the case may be, but only to the extent that such excess represents a
potential liability of the Company to the PBGC, such Plan or such
Multiemployer Plan under Title IV of ERISA.
"United States" and "U.S." each means the United States of
America.
"Unrestricted Subsidiary" means any Subsidiary which is listed
as such on Schedule 6.17 or which has hereafter been designated as an
Unrestricted Subsidiary pursuant to the provisions of Section 8.4.
"Unrestricted Subsidiary" shall not include any former Unrestricted
Subsidiary (whether or not listed as such on Schedule 6.17) which, at
the time in question, is a duly designated Restricted Subsidiary
pursuant to the provisions of Section 8.4.
"Voting Stock" means, with respect to any corporation, any
class of shares of stock of such corporation having general voting
power under ordinary circumstances to elect a majority of the board of
directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any
contingency).
"Welfare Plan" means a "welfare plan" as such term is defined
in section 3(1) of ERISA.
"Wholly-Owned" means, with respect to any Subsidiary that,
except for directors' qualifying shares required by law, 100% of the
capital stock of such Subsidiary of each class having ordinary voting
power, and 100% of the capital stock of such Subsidiary of every other
class, in each case, at the time as of which any determination is being
made, is owned, beneficially and of record, by the Company, or by one
or more of the other Wholly-Owned Subsidiaries, or both.
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<PAGE> 30
"Year 2000 Problem" means any significant risk that computer
hardware or software used in the Company's or its Subsidiaries'
businesses or operations will not, in the case of dates occurring or
time periods ending after December 31, 1999, function at least as
effectively as in the case of dates and time periods occurring prior to
December 31, 1999.
I.2 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks
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<PAGE> 31
or the Administrative Agent merely because of the Administrative Agent's or
Banks' involvement in their preparation.
I.3 Accounting Principles. Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied provided, that such determinations
and computations with respect to financial covenants and ratios hereunder, shall
be made, in accordance with GAAP as in effect on the date hereof.
ARTICLE II
THE CREDITS
II.1 Amounts and Terms of Commitments. (a) The Revolving Credit.
Each Bank severally agrees, on the terms and conditions set forth herein, to
make loans to the Company (each such loan, a "Revolving Loan") from time to time
on any Business Day during the period from the Closing Date to the Revolving
Loan Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth on Schedule 2.1 (such amount as the same may be
reduced under Section 2.5 or as a result of one or more assignments under
Section 11.8, the Bank's "Commitment"); provided, however, that, after giving
effect to any Borrowing and the incurrence or repayment of any other Revolving
Loans, without duplication, the aggregate principal amount of all outstanding
Revolving Loans shall not at any time exceed the Total Commitment; and provided
further, that the aggregate principal amount of any Bank's, outstanding
Revolving Loans shall not at any time exceed such Bank's Commitment. Within the
limits of each Bank's Commitment, and subject to the other terms and conditions
hereof, the Company may borrow under this Section 2.1(a), prepay under Section
2.6 and reborrow under this Section 2.1(a).
(b) The Term Credit. Each Bank severally agrees, on the terms
and conditions set forth herein, to make a single loan to the Company (each such
loan, a "Term Loan") such that, on the Transition Date such Bank's Revolving
Loans shall be converted, in whole or in part, into a Term Loan in the amount of
such Bank's Pro Rata Share of the aggregate amount as the Company may request
from the Banks. Each Bank's obligation to make a Term Loan is subject to the
condition that (i) the aggregate principal amount of the Term Loan which any
Bank shall be committed to make hereunder to the Company shall not exceed the
lesser of (A) such Bank's Commitment, as in effect on the Transition Date and
(B) such Bank's Pro Rata Share of the aggregate principal amount of all
Revolving Loans outstanding as of the Transition Date. Amounts borrowed as Term
Loans which are repaid or prepaid by the Company may not be reborrowed. After
making its Term Loan pursuant to this subsection (b), no Bank shall have any
further commitment to lend.
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II.2 Loan Accounts. (a) The Loans made by each Bank shall be
evidenced by one or more loan accounts or records maintained by such Bank in the
ordinary course of its business. The loan accounts or records maintained by the
Administrative Agent shall be rebuttable presumptive evidence of the amount of
the Loans made by the Banks to the Company and the interest and payments
thereon. To the extent not prohibited by law, any failure so to record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of the Company hereunder to pay any amount owing with respect to the Loans.
(b) Upon the request of any Bank made through the
Administrative Agent, the Loans made by such Bank may be evidenced by one or
more Notes, instead of or in addition to loan accounts. Each such Bank shall
endorse on the schedules annexed to its Note(s) the date, amount and maturity of
each Loan made by it and the amount of each payment of principal made by the
Company with respect thereto. Each such Bank is irrevocably authorized by the
Company to endorse its Note(s) and each Bank's record shall be rebuttable
presumptive evidence of the items referred to in the preceding sentence;
provided, however, to the extent not prohibited by law, that the failure of a
Bank to make, or an error in making, a notation thereon with respect to any Loan
shall not limit or otherwise affect the obligations of the Company hereunder or
under any such Note to such Bank.
II.3 Procedure for Borrowings.
(a) Notices of Borrowing. (i) Subject to clause (ii) of this
subsection 2.3(a), each Borrowing consisting of Revolving Loans and the single
Borrowing of Term Loans shall be made upon the Company's irrevocable notice
delivered to the Administrative Agent (which notice must be received by the
Administrative Agent prior to 10:00 a.m. (San Francisco time) (x) three Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans;
(y) two Business Days prior to the requested Borrowing Date, in the case of CD
Rate Loans, and (z) on the requested Borrowing Date, in the case of Base Rate
Loans. Each such notice given to the Administrative Agent (which shall promptly
give notice thereof to each Bank), shall be by telecopier or by telephone
(confirmed in writing promptly thereafter by the delivery of a Notice of
Borrowing). Notwithstanding the foregoing, no Notice of Borrowing shall be
required for the single Borrowing of Term Loans if such Borrowing of Term Loans
shall be made as Base Rate Loans, except for that notice provided pursuant to
clause (ii) of this Section 2.3(a).
(ii) In addition, for a Borrowing of Term Loans, the
Company shall notify the Administrative Agent at least 5 Business Days
prior to the Transition Date that pursuant to Section 2.1(b) it wishes
to convert the Revolving Loans outstanding on the Transition Date, in
whole or in part, into Term Loans. If such notice is not received by
such date, the Banks shall have no further obligation to make Term
Loans.
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(b) Funding Mechanics.
(i) The Administrative Agent will promptly notify each
Bank of its receipt of any Notice of Borrowing and of the amount of
such Bank's Pro Rata Share of that Borrowing.
(ii) Each Bank will make the amount of its Pro Rata Share
of each Borrowing of Revolving Loans available to the Administrative
Agent for the account of the Company at the Administrative Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the Company in funds immediately available to the
Administrative Agent. The proceeds of all such Loans will then be made
available promptly to the Company by the Administrative Agent at such
office by crediting the account of the Company on the books of the
Administrative Agent (or elsewhere as the Company may from time to time
instruct the Administrative Agent) not later than 11:30 a.m. (San
Francisco time) on the Borrowing Date with the aggregate of the amounts
made available to the Administrative Agent by the Banks and in like
funds as received by the Administrative Agent.
(c) After giving effect to any Borrowing, there may not be
more than 6 different Interest Periods in effect in respect of Loans.
II.4 Conversion and Continuation Elections for Loans. (a) The
Company may, upon irrevocable written notice to the Administrative Agent in
accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base
Rate Loans, or as of the last day of the applicable Interest Period, in
the case of any other Type of Loans, to convert any such Loans (or any
part thereof in an amount not less than $5,000,000, or that is in an
integral multiple of $1,000,000 in excess thereof) into Loans of any
other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Loans having Interest Periods expiring on such
day (or any part thereof in an amount not less than $5,000,000, or that
is in an integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of CD Rate Loans or Offshore
Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or
conversion of part thereof to be less than $5,000,000, such CD Rate Loans or
Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and
after such date the right of the Company to continue such Loans as, and convert
such Loans into, Offshore Rate Loans or CD Rate Loans, as the case may be, shall
terminate.
(b) The Company shall deliver a Notice of Conversion to be
received by the Administrative Agent not later than 10:00 a.m. (San Francisco
time) at least (i) three Business Days in advance of the Conversion/Continuation
Date, if the Loans are to be converted into or continued
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as Offshore Rate Loans; (ii) two Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as CD Rate Loans; and (iii) on the Conversion/Continuation Date, if the Loans
are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
renewed;
(C) the Type of Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to CD Rate Loans or Offshore Rate Loans, the Company has failed to select timely
a new Interest Period to be applicable to such CD Rate Loans or Offshore Rate
Loans, as the case may be, or if any Default or Event of Default then exists,
the Company shall be deemed to have elected to convert such CD Rate Loans or
Offshore Rate Loans into Base Rate Loans, in each case, effective as of the
expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Bank of
its receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Administrative Agent will promptly notify each Bank
of the details of any automatic conversion. All conversions and continuations
shall be made ratably according to the respective outstanding principal amounts
of the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued as an Offshore Rate Loan or a CD Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, there may not be more than six different Interest Periods in effect.
II.5 Voluntary Termination or Reduction of Commitments. Prior to
the Transition Date, the Company may, upon not less than five Business Days'
prior notice to the Administrative Agent, terminate the Commitments, or
permanently reduce the Total Commitment in part by an aggregate minimum amount
of $5,000,000 or any multiple of $1,000,000 in excess thereof; unless, after
giving effect thereto and to any prepayments of Loans made on the effective date
thereof, the outstanding aggregate principal amount of all Loans would exceed
the amount of the Total Commitment then in effect. Once reduced in accordance
with this Section, the Total Commitment may not be increased. Any reduction of
the Total Commitment shall be applied to each Bank according to its Pro Rata
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Share. All accrued facility fees to, but not including the effective date of any
reduction or termination of the Total Commitment, shall be paid on the effective
date of such reduction or termination.
II.6 Optional Prepayments. Subject to Section 4.4, the Company may,
at any time or from time to time, upon not less than three Business Days'
irrevocable notice to the Administrative Agent, ratably prepay Loans in whole or
in part, in minimum amounts of $5,000,000 or any multiple of $1,000,000 in
excess thereof. Such notice of prepayment shall specify the date and amount of
such prepayment and the Type(s) of Loans to be prepaid. The Administrative Agent
will promptly notify each Bank of its receipt of any such notice, and of such
Bank's Pro Rata Share of such prepayment. If such notice is given by the
Company, the Company shall make such prepayment and the payment amount specified
in such notice shall be due and payable on the date specified therein, together
with accrued interest to each such date on the amount prepaid and any amounts
required pursuant to Section 4.4.
II.7 General. If on any date prior to the Transition Date the
outstanding aggregate principal amount of all Revolving Loans exceeds the Total
Commitment, the Company shall immediately, and without notice or demand, prepay
the outstanding principal amount of the Revolving Loans owed by it to the extent
necessary to eliminate such excess over the Total Commitment.
II.8 Repayment.
(a The Revolving Loans. The Company shall repay to the Banks
on the Revolving Loan Termination Date the aggregate principal amount of all
Revolving Loans outstanding on such date, which payment may be concurrent with
any Borrowing consisting of Term Loans and shall be deemed to be made, in whole
or in part, with the proceeds of any Borrowing of Term Loans.
(b The Term Loans. The Company shall repay the Term Loans on
the Termination Date.
II.9 Interest. (a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the CD Rate, the Offshore Rate or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans under
Section 2.4), plus the Applicable Margin.
(b Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of Loans under Section 2.6 for the portion of the Loans so prepaid and upon
payment (including prepayment and repayment of Revolving Loans on the Transition
Date) in full thereof and, during the existence of any Event of Default,
interest shall be paid on demand of the Administrative Agent at the request or
with the consent of the Majority Banks.
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(c Notwithstanding subsection (a) of this Section, if any
amount of principal of or interest on any Loan, or any other amount payable
hereunder or under any other Loan Document is not paid in full when due (whether
at stated maturity, by acceleration, demand or otherwise), the Company agrees to
pay interest on such unpaid principal or other amount, from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon to the extent permitted by law, payable on
demand, at a fluctuating rate per annum equal to the Base Rate plus 2%.
II.10 Limitation on Interest. It is the intention of the parties
hereto to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the obligations of the Company to each Bank under this
Agreement and the other Loan Documents shall be subject to the limitation that
payments of interest shall not be required to the extent that receipt thereof
would be contrary to provisions of law applicable to such Bank limiting rates of
interest which may be charged or collected by such Bank. Accordingly, if the
transactions contemplated hereby would be usurious under any Applicable Law
(including the Federal and state laws of the United States of America, or of any
other jurisdiction whose laws may be mandatorily applicable) with respect to any
Bank, then, in that event, notwithstanding anything to the contrary in this
Agreement, it is agreed as follows:
(a the following provisions of this Section 2.10 shall govern
and control;
(b with respect to the Company, the aggregate of all
consideration that constitutes interest under Applicable Law that is contracted
for, charged or received under this Agreement, or under any of the other Loan
Documents or otherwise in connection herewith or therewith by such Bank, shall
under no circumstances exceed the maximum amount of interest allowed by such
Applicable Law (such maximum lawful interest rate, if any, with respect to such
Bank herein called the "Highest Lawful Rate"), and any excess shall be credited
to the Company by such Bank (or, if such consideration shall have been finally
paid in full, such excess refunded to the Company);
(c all sums paid, or agreed to be paid, to such Bank for the
use, forbearance and detention of the indebtedness of the Company to such Bank
hereunder shall, to the extent permitted by such Applicable Law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full of such indebtedness so that the actual rate of interest
is uniform throughout the full term thereof;
(d if, with respect to such Bank, at any time the interest
provided pursuant to Section 2.9, together with any other fees payable to such
Bank pursuant to this Agreement or any other Loan Document and deemed interest
under such Applicable Law, exceeds that amount which would have accrued to such
Bank at the Highest Lawful Rate, the amount of interest and any such fees to
accrue pursuant to this Agreement or any other Loan Document shall be limited,
for such Bank, notwithstanding anything to the contrary in this Agreement or any
other Loan Document, to that amount which would have accrued at the Highest
Lawful Rate, but any subsequent reductions in the
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amount of such interest and/or fees, as applicable, which would otherwise occur
shall not reduce the interest to accrue to such Bank pursuant to this Agreement
and the other Loan Documents below the Highest Lawful Rate until the total
amount of interest accrued pursuant to this Agreement and the other Loan
Documents and such fees deemed to be interest equals the amount of interest
which would have accrued to such Bank if a varying rate per annum equal to the
interest provided pursuant to Section 2.9 had at all times been in effect, plus
the amount of fees which would have been received but for the effect of this
Section 2.10; and
(e if the total amount of interest paid or accrued for payment
by the Company together with any other fees payable by the Company pursuant to
this Agreement and the other Loan Documents and deemed interest under Applicable
Law, with respect to such Bank pursuant to this Agreement and the other Loan
Documents under the foregoing provisions of this Section 2.10, is less than the
total amount of interest which would have accrued with respect to the Company if
a varying rate per annum equal to the interest provided to Section 2.9 had at
all times been in effect and all fees provided for in this Agreement and the
other Loan Documents had been paid, then the Company agrees to pay to such Bank,
upon demand, an amount equal to the difference between (i) the lesser of (A) the
amount of interest and fees which would have accrued with respect to the Company
if the Highest Lawful Rate had at all times been in effect, and (B) the amount
of interest and fees which would have accrued with respect to the Company if a
varying rate per annum equal to the interest provided pursuant to Section 2.9
had at all times been in effect and all fees provided for in this Agreement and
the other Loan Documents had been paid and (ii) the amount of interest and fees
paid by the Company in accordance with the other provisions of this Agreement
and the other Loan Documents.
For purposes of Chapter 1D of Article 5069 of the Texas Credit Title,
Title 79, Vernon's Texas Civil Statutes, as amended (formerly Article 5069-1.04,
Vernon's Texas Civil Statutes, as amended), to the extent, if any, applicable to
a Bank, the Company agrees that the Highest Lawful Rate shall be the applicable
"weekly ceiling" as defined in said Chapter, provided that such Bank may also
rely, to the extent permitted by applicable laws, on alternative maximum rates
of interest under other laws applicable to such Bank if greater. Chapter 346 of
the Texas Finance Code (which regulates certain revolving credit accounts
(formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this
Agreement or the Notes or any other Loan Document.
II.11 Fees. (a) Arrangement, Agency Fees. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account, and shall pay an
agency fee to the Administrative Agent for the Administrative Agent's own
account, as required by the letter agreement ("Fee Letter") among the Company
and the Arranger and Administrative Agent dated March 20, 1998.
(b Facility Fees. The Company shall pay to the Administrative
Agent for the account of each Bank a facility fee (each a "Facility Fee") on (i)
for any date prior to and including the Transition Date, such Bank's Commitment,
and (ii) for any date after the Transition Date, the
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outstanding principal of such Bank's Term Loan computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter equal to such Bank's
Commitment in effect or the principal amount of such Bank's Term Loan
outstanding, as the case may be, for that quarter as calculated by the
Administrative Agent, times the Applicable Facility Fee Rate for such period.
The Facility Fee shall accrue from the Closing Date to the Termination Date and
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter commencing on June 30, 1998 through the Termination Date, with
the final payment to be made on the Termination Date; provided that, (i) in
connection with any reduction or termination of Commitments under Section 2.5
the accrued Facility Fee calculated for the period ending on such date shall
also be paid on the date of such reduction or termination and (ii) the Facility
Fee shall be due and payable on the Transition Date, with the following
quarterly payment being calculated on the basis of the period from such
reduction or termination date or Transition Date to such quarterly payment date.
The Facility Fees provided in this subsection shall accrue at all times after
the above-mentioned commencement date, including at any time during which one or
more conditions in Article V are not met.
II.12 Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by BofA's
"reference rate" shall be made on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b Each determination of an interest rate by the
Administrative Agent if made in good faith shall be rebuttable presumptive
evidence of the accuracy thereof.
II.13 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Administrative Agent for the account of the Banks at the Administrative
Agent's Payment Office, and shall be made in dollars and in immediately
available funds, no later than the close of business at the Administrative
Agent's Payment Office on the date specified herein; provided, however, the
Company shall use its best efforts to make all such payments at the
Administrative Agent's Payment Office no later than 2:00 p.m. (San Francisco
time).
(b Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the next succeeding day on which the
Administrative Agent is open at its address set forth on Schedule 11.2 for such
purpose, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
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(c Unless the Administrative Agent receives notice from the
Company prior to the date on which any payment is due to the Banks that the
Company will not make such payment in full as and when required, the
Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Administrative Agent, each Bank shall repay to the
Administrative Agent on demand such amount distributed to such Bank, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
II.14 Payments by the Banks to the Administrative Agent. (a) Unless
the Administrative Agent receives notice from a Bank on or prior to the Closing
Date or, with respect to any Borrowing of Revolving Loans after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Bank will not make available as and when required hereunder to the
Administrative Agent for the account of the Company the amount of that Bank's
Pro Rata Share of such Borrowing, the Administrative Agent may assume that each
Bank has made such amount available to the Administrative Agent in immediately
available funds on the Borrowing Date and the Administrative Agent may (but
shall not be so required), in reliance upon such assumption, make available to
the Company on such date a corresponding amount. If and to the extent any Bank
shall not have made its full amount available to the Administrative Agent in
immediately available funds and the Administrative Agent in such circumstances
has made available to the Company such amount, that Bank shall on the Business
Day following such Borrowing Date make such amount available to the
Administrative Agent, together with interest at the Federal Funds Rate for each
day during such period. A notice of the Administrative Agent submitted to any
Bank with respect to amounts owing under this subsection (a) shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Administrative Agent shall constitute such Bank's Loan on the
date of Borrowing for all purposes of this Agreement. If such amount is not made
available to the Administrative Agent on the Business Day following the
Borrowing Date, the Administrative Agent will notify the Company of such failure
to fund and, upon demand by the Administrative Agent, the Company shall pay such
amount to the Administrative Agent for the Administrative Agent's account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Loans comprising such Borrowing.
(b The failure of any Bank to make any Loan on any Borrowing
Date shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
II.15 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary,
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through the exercise of any right of set-off, or otherwise) in excess of its Pro
Rata Share, such Bank shall immediately (a) notify the Administrative Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Administrative Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
II.16 Extension of Transition Date and of Commitments to make
Revolving Loans.
(a Subject to the other provisions of this Agreement, the
commitment of each Bank to make Revolving Loans pursuant to Section 2.1(a) shall
be effective for an initial period from the Closing Date to the initial
Transition Date (unless Commitments are terminated earlier pursuant to the
provisions of this Agreement); provided that each scheduled Transition Date, and
concomitantly the commitment of each Bank to make Revolving Loans, may be
extended for successive 364 day periods each expiring on the date which is 364
days from the then current Transition Date. If the Company shall request in a
Certificate of Extension delivered to the Administrative Agent not more than 60
days and not less than 45 days prior to the Transition Date that the Transition
Date be extended for 364 days from the then scheduled Transition Date, then the
Administrative Agent shall promptly notify each Bank of such request and each
Bank shall notify the Administrative Agent, no later than 30 days prior to the
Transition Date, whether such Bank, in the exercise of its sole discretion, will
extend the Transition Date for such additional 364 day period. Any Bank which
shall not timely notify the Administrative Agent whether it will extend the
Transition Date shall be deemed to not have agreed to extend the Transition
Date. No Bank shall have any obligation whatsoever to agree to extend the
Transition Date. Any agreement to extend the Transition Date by any Bank shall
be irrevocable, except as provided in clause (c) of this Section.
(b If all Banks notify the Administrative Agent pursuant to
clause (a) of this Section 2.16 of their agreement to extend the Transition
Date, then the Administrative Agent shall so notify each Bank and the Company,
and such extension shall be effective without other or further action by any
party hereto for such additional 364 day period.
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(c If the Majority Banks approve the extension of the then
scheduled Transition Date (such Banks agreeing to extend the Transition Date
herein called the "Accepting Banks") and if one or more Banks shall notify, or
be deemed to notify, the Administrative Agent pursuant to clause (a) of this
Section that they will not extend the then scheduled Transition Date (such Banks
herein called the "Declining Banks"), then (A) the Administrative Agent shall
promptly so notify the Company and the Accepting Banks, (B) the Accepting Banks
shall, upon the Company's election to extend the then scheduled Transition Date
in accordance with clause (i) or (ii) below, extend the then scheduled
Transition Date and (C) the Company shall, pursuant to a notice delivered to the
Administrative Agent, the Accepting Banks and the Declining Banks, no later than
5 Business Days before the Transition Date then in effect, either:
(i elect to extend the Transition Date with respect to the
Accepting Banks and direct the Declining Banks to terminate
their Commitments, which termination shall become effective on
the date which would have been the Transition Date except for
the operation of this Section. On such date, (x) the Company
shall deliver a notice of the effectiveness of such
termination to the Administrative Agent and each Declining
Bank and (y) the Company shall pay in full in immediately
available funds all Notes, Loans and other Obligations of the
Company owing to the Declining Banks, including any amounts
required pursuant to Section 4.4, and (z) upon the occurrence
of the events set forth in clauses (x) and (y), the Declining
Banks shall each cease to be a Bank hereunder for all
purposes, other than for purposes of Sections 4.1, 4.3, 4.4,
11.4 and 11.5 and shall cease to have any obligations or any
Commitment hereunder, other than to the Administrative Agent
pursuant to Article X, and the Administrative Agent shall
promptly notify the Accepting Banks and the Company of the new
Pro Rata Shares; or
(ii elect to extend the Transition Date with respect to the
Accepting Banks and, prior to or no later than the then
scheduled Transition Date, (A) to replace one or more of the
Declining Bank or Declining Banks with another Bank or, if not
a Bank, an Eligible Assignee consented to by the
Administrative Agent to the extent required by Section 11.8
(such banks herein called the "Replacement Banks") and (B) the
Company shall pay in full in immediately available funds all
Note(s), Loans and other Obligations of the Company owing to
any Declining Banks which are not being replaced, as provided
in clause (i) above; provided that (x) the Replacement Bank or
Replacement Banks shall purchase, and the Declining Bank or
Declining Banks which are being so replaced shall sell, such
Declining Bank's or Declining Banks' rights and obligations
hereunder pursuant to an Assignment and Acceptance for a
purchase price equal to the aggregate outstanding principal
amount of the Note(s), Loans and other Obligations payable to
such Declining Bank or Declining Banks plus any accrued but
unpaid interest on such Loans and other Obligations and
accrued but unpaid fees or other amounts owing in respect of
such Declining Bank's or Declining Banks' Loans and
Commitments hereunder, and (y) upon the payment of such
amounts referred to in clause (x) and the execution of an
Assignment and Acceptance by the Replacement Bank or
Replacement Banks and the Declining Bank or Declining Banks so
being replaced (which each such Declining Bank
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agrees to execute promptly), the Replacement Bank or
Replacement Banks shall each constitute a Bank hereunder and
such Declining Bank or Declining Banks shall no longer
constitute a Bank (other than for purposes of Sections 4.1,
4.3, 4.4, 11.4 and 11.5 relating to or arising out of events
and occurrences prior to the date of its replacement by the
Replacement Bank), and shall no longer have any obligations
hereunder, other than to the Administrative Agent pursuant to
Article X relating to or arising out of events and occurrences
prior to the date of its replacement by the Replacement Bank
and the Administrative Agent shall promptly notify the
Accepting Banks, the Replacement Banks and the Company of the
new Pro Rata Shares.
(iii elect to revoke and cancel the extension request in
such Certificate of Extension by giving notice of such
revocation and cancellation to the Administrative Agent (which
shall promptly notify the Banks thereof) no later than 5
Business Days prior to the Transition Date then in effect.
If the Company fails to timely provide the election notice referred to
in this clause (c), the Company shall be deemed to have revoked and canceled the
extension request in the Certificate of Extension and to have elected not to
extend the Transition Date, and, unless the Company shall have fulfilled all
requirements pursuant to this Agreement to convert Revolving Loans to Term Loans
on the then scheduled Transition Date, the Company shall repay in full all
Notes, Loans and Obligations pursuant to this Agreement.
ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
IV.1 Net Payments; Tax Exemptions. (a) All payments by the Company
of principal, interest, fees, indemnities and other amounts payable to any
recipient (each, a "Recipient") hereunder shall be made without set off or
counterclaim and free and clear of, and without withholding or deduction for or
on account of, any present or future Taxes now or hereafter imposed on such
Recipient or its income, property, assets or franchises (such Recipient's
"Recipient's Taxes"), except to the extent that such withholding or deduction
(i) is required by Requirements of Law, (ii) results from the breach by such
Recipient of its Exemption Agreement, if any, (iii) would not be required if
such Recipient's Exemption Representation were true, or (iv) would not be
required if such Recipient were exempt from such withholding or deduction on
account of the prior delivery by such Recipient to the Company of the
appropriate Internal Revenue Service form specified in Section 10.10 claiming
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complete exemption. If any such withholding or deduction is required by
Requirements of Law, the Company will:
(A pay to the relevant authorities the full amount so
required to be withheld or deducted when and as the same shall
become due and payable to such authorities;
(B promptly forward to the Administrative Agent and each
Affected Bank an official receipt or other documentation
satisfactory to the Administrative Agent evidencing such
payment to such authorities; and
(C except to the extent that such withholding or deduction
(i) is for Excluded Taxes, (ii) results from the breach, by a
Recipient of a payment, of its Exemption Agreement, if any, or
(iii) would not be required if such Recipient's Exemption
Representation were true or if such Recipient were exempt from
such withholding or deduction on account of the prior delivery
by such Recipient to the Company of the appropriate Internal
Revenue Service form specified in Section 10.10 claiming
complete exemption, pay to the Administrative Agent for the
account of the relevant Recipient such additional amount as is
necessary to ensure that the net amount actually received by
each Recipient will equal the full amount such Recipient would
have received had no such withholding or deduction been
required.
(b In consideration of the Company's agreements in Section 4.1(a), each
Bank which is not a US Person hereby agrees (such Bank's "Exemption Agreement"),
to the extent permitted by Requirements of Law (including any applicable double
taxation treaty of the jurisdiction of its incorporation or the jurisdiction in
which its lending office is located), to execute and deliver to the Company, on
or about the first scheduled payment date in each Fiscal Year, a United States
Internal Revenue Service Form 1001 or 4224 (or successor form), as appropriate,
properly completed and claiming a complete or partial exemption, as the case may
be, from withholding or deduction for or on account of "United States Federal
Recipient Taxes" (as defined in the Code) of such Bank.
(c Each Bank hereby represents and warrants (such Bank's "Exemption
Representation") to the Company that on the date hereof its lending office is
entitled to receive payments of principal of, and interest on, Loans made by
such Bank from such lending office without withholding or deduction for or on
account of such Bank's Recipient Taxes imposed by the United States of America
or any political subdivision thereof.
IV.2 Illegality. (a) If any Bank determines and notifies the
Administrative Agent that the introduction of any Requirement of Law, or any
change in any Requirement of Law, or in the interpretation or administration of
any Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Bank or its
applicable
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Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank
to the Company through the Administrative Agent, any obligation of that Bank to
make Offshore Rate Loans shall be suspended until the Bank notifies the
Administrative Agent and the Company that the circumstances giving rise to such
determination no longer exist.
(b If a Bank determines and notifies the Administrative Agent
that it is unlawful to maintain any Offshore Rate Loan, the Company shall, upon
its receipt of notice of such fact and demand from such Bank delivered by such
Bank through the Administrative Agent, prepay in full such Offshore Rate Loans
of that Bank then outstanding, together with interest accrued thereon and
amounts required under Section 4.4, either on the last day of the Interest
Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan. If the Company is required to so prepay any
Offshore Rate Loan, then concurrently with such prepayment, the Company shall
borrow from the Affected Bank, in the amount of such repayment, a Base Rate
Loan.
(c If the obligation of any Bank to make or maintain Offshore
Rate Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Affected Bank through the Administrative Agent that all Loans
which would otherwise be made by the Bank as Offshore Rate Loans shall be
instead Base Rate Loans.
(d Before giving any notice to the Administrative Agent under
this Section, the Affected Bank shall designate a different Lending Office with
respect to its Offshore Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Affected Bank, be illegal or otherwise disadvantageous to the Affected Bank.
IV.3 Increased Costs and Reduction of Return. (a) If any Bank
determines and notifies the Administrative Agent that, due to either (i) after
the date hereof the introduction of or any change (other than any change by way
of imposition of or increase in reserve requirements included in the calculation
of the CD Rate or the Offshore Rate or in respect of the assessment rate payable
by any Bank to the FDIC for insuring U.S. deposits) in or in the interpretation
of any law or regulation or (ii) the compliance by that Bank with any guideline
or request from any central bank or other Governmental Authority (whether or not
having the force of law), promulgated after the date hereof, there shall be any
increase in the cost to such Bank of agreeing to make or making, funding or
maintaining any Offshore Rate Loans or CD Rate Loans then the Company shall be
liable for, and shall from time to time, within 10 days after a demand
(accompanied by a certificate setting forth the basis of such demand) which is
provided to the Administrative Agent and delivered by the Administrative Agent
to the Company, pay to the Administrative Agent for the account of such Bank,
additional amounts as are sufficient to compensate such Bank for such increased
costs.
(b If any Bank reasonably shall have determined that (i) after
the date hereof the introduction of any Capital Adequacy Regulation, (ii) after
the date hereof any change in any Capital
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Adequacy Regulation, (iii) after the date hereof any change in the
interpretation or administration of any Capital Adequacy Regulation by any
central bank or other Governmental Authority charged with the interpretation or
administration thereof, or (iv) compliance by the Bank (or its Lending Office)
or any corporation controlling the Bank with any Capital Adequacy Regulation,
affects or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and (taking into
consideration such Bank's or such corporation's policies with respect to capital
adequacy and such Bank's desired return on capital) determines that the amount
of such capital is increased as a consequence of its Commitment, loans, credits
or obligations under this Agreement, then, within 10 days after demand of such
Bank to the Company through the Administrative Agent, the Company shall pay to
the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.
IV.4 Funding Losses. The Company shall reimburse each Bank and hold
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
(a the failure of the Company to make on a timely basis any
payment of principal of any Offshore Rate Loan or CD Rate Loan;
(b the failure of the Company to borrow, continue or convert a
Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;
(c the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.6;
(d the prepayment (including pursuant to Sections 2.6, 2.7,
2.16, 4.8 and 4.9) or other payment (including after acceleration thereof) of an
Offshore Rate Loan or a CD Rate Loan on a day that is not the last day of the
relevant Interest Period; or
(e the automatic conversion under Section 2.4 of any Offshore
Rate Loan or CD Rate Loan to a Base Rate Loan on a day that is not the last day
of the relevant Interest Period; including any such loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain its Offshore
Rate Loans or CD Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained. For purposes of calculating amounts payable by
the Company to the Banks under this Section and under subsection 4.3(a), (i)
each Offshore Rate Loan made by a Bank (and each related reserve, special
deposit or similar requirement) shall be conclusively deemed to have been funded
at the LIBOR used in determining the Offshore Rate for such Offshore Rate Loan
by a matching deposit or other borrowing in the interbank eurodollar market for
a comparable amount and for a comparable period, whether or not such Offshore
Rate Loan is in fact so funded, and (ii) each CD Rate Loan made by a Bank (and
each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the Certificate of Deposit
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Rate used in determining the CD Rate for such CD Rate Loan by the issuance of
its certificate of deposit in a comparable amount and for a comparable period,
whether or not such CD Rate Loan is in fact so funded.
IV.5 Inability to Determine Rates. If the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate or the CD Rate for any requested Interest Period
with respect to a proposed Offshore Rate Loan or CD Rate Loan, or that the
Offshore Rate or the CD Rate applicable pursuant to subsection 2.9(a) for any
requested Interest Period with respect to a proposed Offshore Rate Loan or CD
Rate Loan does not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Administrative Agent will promptly so notify the Company
and each Bank. Thereafter, the obligation of the Banks to make or maintain CD
Rate Loans or Offshore Rate Loans, as the case may be, hereunder shall be
suspended until the Administrative Agent revokes such notice in writing. Upon
receipt of such notice, the Company may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as CD Rate Loans
instead of Offshore Rate Loans, or as Base Rate Loans instead of CD Rate Loans ,
as the case may be.
IV.6 Notice of Claim. Promptly after any Bank becomes aware of any
event that would entitle it to compensation under Section 4.1, Section 4.3 or
Section 4.4, such Bank shall notify the Company thereof; provided, that the
failure to give such notice shall not affect such Bank's rights under Section
4.1, Section 4.3 or Section 4.4.
IV.7 Certificates of Banks. Any Bank claiming reimbursement or
compensation under Section 4.4 shall provide to the Administrative Agent for
delivery by the Administrative Agent to the Company a certificate setting forth
in reasonable detail the basis of such claim and the amount payable to the Bank
hereunder and such certificate if made in good faith shall be rebuttable
presumptive evidence of the accuracy of such claim.
IV.8 Replacement of Certain Banks. In the event that any Bank(s) is
an Affected Bank, such Bank(s) may accept a purchase offer as described
hereinafter. If the Company shall find one or more banks that, if not a Bank,
are each an Eligible Assignee consented to by the Administrative Agent to the
extent required by Section 11.8, and that unconditionally offer in writing (with
a copy to the Administrative Agent) collectively to assume all of such Affected
Bank's obligations hereunder and to purchase all of such Affected Bank's rights
hereunder and principal and interest in the Loans owing to such Bank(s) and the
Notes, if any, held by such Affected Bank(s)without recourse, representation or
warranty (other than as provided in Exhibit E) for an amount to be received by
such Affected Bank(s) equal to the principal amount of such Affected Bank's Note
and Loans plus interest accrued thereon to the date of such purchase plus any
other amounts then payable hereunder on a date therein specified, then upon
acceptance of such purchase offer, the Company shall be obligated to pay
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the amounts and Taxes to such Affected Bank(s) pursuant to Article IV to the
date of such purchase (at which time such Affected Bank shall cease to be a Bank
hereunder); provided, that (a) if an Affected Bank accepts the proposed purchase
offer and the proposed purchasing bank(s) fails to purchase such rights and
interest and to assume such obligations on such specified date in accordance
with the terms of such offer, the Company shall continue to be obligated to pay
the amounts or Taxes to such Affected Bank pursuant to Section 4.1 and/or
Section 4.3, and (b) if such Affected Bank fails to accept such purchase offer,
the Company shall not be obligated to pay to such Bank such amounts pursuant to
Article IV for the period from the date of such purchase offer with respect to
claims pursuant to Section 4.1 and/or 4.3 existing as of such date, and such
Affected Bank shall no longer be an Affected Bank with respect to claims
pursuant to Section 4.1 and/or Section 4.3 existing as of the date of its
failure to accept such purchase.
IV.9 Deletion of Certain Banks. In the event that any Bank shall be
an Affected Bank, such Bank may be deleted from this Agreement, at the option of
the Company; provided, that no Event of Default has occurred and is continuing
or would result therefrom, and that immediately following such deletion there
will be no other Affected Bank or Bank so claiming payment and the aggregate
Commitments of the remaining Banks will be at least 80% of the Total Commitment
existing immediately before such deletion. The deletion shall be effective on a
date (which shall be a Business Day) specified by the Company in a notice to the
Administrative Agent, such Bank and the other Banks to be given at least 10
Business Days before such date, if (a) all principal of and interest on the
Loans of such Bank and all other amounts payable to such Bank are paid in full
pursuant to the terms hereof on such date specified by the Company, and (b) the
Commitment of such Bank is permanently terminated as of such date. Upon and
after the date such deletion becomes effective, such Bank shall no longer be a
party to this Agreement or be included as a "Bank" except for purposes of claims
pursuant to Sections 4.1, 4.3, 4.4, 11.4 and 11.5 relating to or arising out of
events and occurrences prior to the date its deletion becomes effective.
IV.10 Survival. The provisions of Section 4.1, Section 4.3 and
Section 4.4 shall survive the payment of all other Obligations for a period of
two years.
ARTICLE V
CONDITIONS PRECEDENT
V.1 Conditions of Initial Borrowing. The obligation of each Bank
to make its initial Loan hereunder is subject to the prior satisfaction of the
conditions set forth below:
(a Delivery of Documents. The Administrative Agent shall have
received all of the following, in form and substance satisfactory to the
Administrative Agent:
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(i Credit Agreement and Notes. This Agreement (in
sufficient copies for each Bank) and the Notes executed by
each party thereto;
(ii Officer's Certificate. The signed certificate of the
President or a Vice President or the Treasurer and the
Secretary or an Assistant Secretary of the Company, dated the
Closing Date, certifying as to, among other things:
(A Copies of the resolutions of the board of directors
of the Company authorizing the transactions contemplated
hereby;
(B the names and true signatures of the officers of
the Company authorized to execute, deliver and perform, as
applicable, this Agreement, all other Loan Documents,
Notices of Borrowing, Notices of Conversion/Continuation
and other documents, instruments and certificates to be
delivered by the Company hereunder or pursuant to any Loan
Document;
(C the names and true signatures of the employees of
the Company who, in addition to those officers set forth
in subsection (B) above, are authorized to execute and
deliver Notices of Borrowing, Notices of
Conversion/Continuation and other documents (except for
Loan Documents) related to and required for any Borrowing;
and
(D the certificate of incorporation and the bylaws of
the Company as in effect on the Closing Date.
(iii Organization Documents; Good Standing. Each of the
following documents:
(A the signed long-form certificate for the Company
from the Secretary of State of the State of Delaware
listing the Certificate of Incorporation and each
amendment, if any, thereto, on file in his office and
stating that such documents are the only charter
documents of the Company on file in his office and that
the Company is duly incorporated and in good standing in
the State of Delaware, and has filed all franchise tax
returns and has paid all franchise taxes required by law
to be filed and paid by the Company as of the date of his
certificate; and
(B signed certificates of the Secretaries of State
(or other appropriate officials) of each appropriate
State set forth on Schedule 5.1, dated reasonably near
the Closing Date, certifying that the Company is duly
qualified and in good standing as a foreign corporation
in such State.
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(iv Legal Opinions.
(A a signed copy for each Bank of an opinion of Andrews &
Kurth L.L.P., counsel to the Company, dated the Closing Date
addressed to the Administrative Agent and the Banks,
substantially in the form of Exhibit D-1 with such changes (if
any) therein as may be acceptable to the Administrative Agent;
(B a signed copy for each Bank of an opinion of Peer L.
Anderson, General Counsel of the Company, dated the Closing
Date in the form of Exhibit D-2, with such changes (if any)
therein as may be acceptable to the Administrative Agent;
(C a signed copy for each Bank of a favorable opinion of
Mayer, Brown & Platt, special counsel to the Administrative
Agent dated the Closing Date; and
(D a signed copy for each Bank of an opinion of Carlos E.
Padron Amare, General Counsel for PDVSA, dated a date
reasonably near the Closing Date, in the form of Exhibit D-3,
with such changes (if any) therein as may be acceptable to the
Administrative Agent.
(b Pending Litigation. There shall be no threatened or pending
litigation, inquiry, or investigation contesting this Agreement, the other Loan
Documents, or any transaction contemplated by any of the above.
(c No Material Adverse Effect. Except as disclosed in the
financial statements referred to in Section 6.13 or in Schedule 6.5 or Schedule
6.13, as in effect on the date hereof, no event shall have occurred and no
condition shall exist, which could reasonably be expected to have a Material
Adverse Effect and no change shall have occurred since December 31, 1997 which
has had a Material Adverse Effect.
(d Regulatory Approvals. All regulatory approvals (including
from the Central Bank, Ministry of Finance or any other regulatory authority in
Venezuela) required, if any, to be obtained by the Company, PDVSA or any
Affiliate of the Company in connection with this Agreement, or any transaction
contemplated hereby or connected herewith, shall have been obtained and copies
thereof shall have been delivered to the Administrative Agent.
(e Insurance. The Company shall have furnished to the
Administrative Agent certificates of insurance demonstrating that the Company
and each of its Subsidiaries has procured with responsible insurance companies
insurance with respect to its properties and business (including business
interruption insurance) against such casualties and contingencies and of such
types, in such amounts and with such deductibles as is required by Section 7.5.
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(f Payment of Fees. The Administrative Agent shall have
received the Fee Letter, duly executed by the Company, and payment by the
Company of all accrued and unpaid fees, costs and expenses to the extent due and
payable on the Closing Date, together with Attorney Costs of BofA to the extent
invoiced prior to or on the Closing Date (provided that such invoiced amount
shall not thereafter preclude final settling of accounts between the Company and
BofA), including any such costs, fees and expenses arising under or referenced
in Sections 2.11 and 11.4.
(g Credit Agreement. The Company and the other parties thereto
shall have executed and delivered the $400,000,000 Credit Agreement and the
"Closing Date" under the $400,000,000 Credit Agreement shall have occurred, or
shall concurrently occur.
(h Existing Revolving Credit Agreement. The Administrative
Agent shall have received evidence that the Existing Revolving Facility Banks
shall have concurrently been paid all obligations and payments owed them
pursuant to the Existing Revolving Credit Agreement and all commitments of the
Existing Revolving Banks thereunder have terminated.
(i Certificate. The Administrative Agent shall have received a
certificate in form and substance satisfactory to it , signed by a Responsible
Officer, dated as of the Closing Date stating that:
(A the representations and warranties contained in Article
VI are true and correct on and as of such date, as though made
on and as of such date;
(B) no Default or Event of Default exists; and
(C) there has occurred since December 31, 1997, no event or
circumstance that has resulted or could reasonably be expected
to result in a Material Adverse Effect.
(j) Other Documents. The Administrative Agent shall have
received such other approvals, opinions, documents or materials as the
Administrative Agent or any Bank may reasonably request.
V.2 Conditions to All Loans, Conversions and Continuations. The
obligation of each Bank to make any Loan, including its initial Loan, to convert
its Revolving Loans into a Term Loan, or to continue or convert any Loan,
including its initial Loan and its Term Loan, is subject to the satisfaction of
the following conditions precedent on the relevant Borrowing Date,
Conversion/Continuation Date or Transition Date:
(a) Notice; Application. The Administrative Agent shall have
received a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable.
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(b) Continuation of Representations and Warranties. If there
is any Borrowing of Revolving Loans, or any Borrowing of Term Loans as CD Rate
Loans or Offshore Rate Loans on the Transition Date, or if there is any
continuation of any Loan as, or conversion of any Loan into, a CD Rate Loan or
an Offshore Rate Loan, in each case requested pursuant to subsection (a) of this
Section 5.2, the representations and warranties in Article VI (except for
Section 6.6) shall be true and correct in all material respects on and as of
such Borrowing Date, Conversion/Continuation Date or Transition Date, as the
case may be, with the same effect as if made on and as of such Borrowing Date,
Conversion/Continuation Date or Transition Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct in all material respects as of such earlier
date). Each Conversion/Continuation Notice which continues any Loan as, or
converts any Loan into, a CD Rate Loan or an Offshore Rate Loan and each Notice
of Borrowing submitted by the Company hereunder shall constitute a
representation and warranty by the Company hereunder, as of the date of each
such notice and as of each Borrowing Date, Conversion/Continuation Date or
Transition Date, as the case may be, that the conditions in Sections 5.2(b) and
(c) are satisfied.
(c) No Existing Default. If there is any Borrowing of
Revolving Loans, or any Borrowing of Term Loans as CD Rate Loans or Offshore
Rate Loans on the Transition Date, or if there is any continuation of any Loan
as, or conversion of any Loan into, a CD Rate Loan or an Offshore Rate Loan
requested pursuant to subsection (a) of this Section 5.2, no Default or Event of
Default shall exist or shall result from such Borrowing or continuation or
conversion.
V.3 Condition to Term Loan. The obligation of each Bank to make
its Term Loan is, in addition to the conditions precedent specified in Section
5.2 hereof, subject to the conditions precedent that the Company shall have
delivered to the Administrative Agent that certain notice required pursuant to
clause (ii) of subsection 2.3(a).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative Agent and
each Bank that:
VI.1 Corporate Existence; Power; Compliance with Laws.
(a) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and each
Subsidiary of the Company is a corporation or partnership, as the case may be,
duly incorporated or otherwise formed, validly existing and (in the
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case of corporate Subsidiaries) in good standing under the laws of the state of
its incorporation or other formation;
(b) the Company has all requisite corporate power and
authority , governmental licenses, authorizations, consents and approvals to own
its assets, carry on its business as currently conducted, to execute, deliver,
and perform its obligations under the Loan Documents, and to issue the Notes in
the manner and for the purpose contemplated by this Agreement, and each
Subsidiary has all requisite corporate or partnership, as the case may be, power
and authority to own its assets and to carry on the business in which it is
engaged;
(c) the Company and each Subsidiary of the Company is duly
qualified as a foreign Person authorized to do business and is licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license other than where the failure to be so qualified or in good standing
would not reasonably be expected to have a Material Adverse Effect; and
(d) the Company and each of its Subsidiaries is in compliance
in all material respects with all Requirements of Law, except to the extent that
the failure to do so would not reasonably be expected to have a Material Adverse
Effect.
VI.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of the Loan Documents have been duly
authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's Organization
Documents;
(b) result in any breach or contravention of, or result in the
creation of any Lien under, any document evidencing any Contractual Obligation
to which the Company is a party or any order, injunction, writ or decree of any
Governmental Authority to which the Company or its property is subject (other
than such violations, breaches, defaults or Liens which would not reasonably be
expected to have a Material Adverse Effect); or
(c) violate any Requirement of Law.
VI.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary for the validity of the execution, delivery
or performance by, or enforcement against, the Company of this Agreement or any
Note other than routine informational filings with the SEC and/or other
Governmental Authorities.
VI.4 Binding Effect. This Agreement and (when executed and
delivered for value) each other Loan Document constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as limited by applicable
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bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability, and by judicial discretion regarding the
enforcement of or any applicable laws affecting remedies (whether considered in
a court of law or a proceeding in equity).
VI.5 Litigation. No litigation (including derivative actions),
arbitration proceedings or governmental proceedings are pending or, to the best
knowledge of the Company after due inquiry, threatened against the Company or
any Subsidiary which would, if adversely determined, reasonably be expected to
result in liability to the Company and its Subsidiaries in excess of $5,000,000
(net of actual insurance coverage or effective indemnification with respect
thereto), except as set forth (including estimates of the dollar amounts
involved, if practicable,) in Schedule 6.5. Neither the Company nor any of its
Subsidiaries has knowledge of any material contingent liabilities, including
those disclosed in the financial statements referred to in Section 6.13 or in
Schedule 6.5., which would reasonably be expected to have a Material Adverse
Effect.
VI.6 No Default. No Default or Event of Default exists. As of the
Closing Date, neither the Company nor any Subsidiary is in default under or with
respect to its Organization Documents or any Contractual Obligation in any
respect which, individually or together with all other such defaults, would
reasonably be expected to have a Material Adverse Effect.
VI.7 Fire, Strike, Act of God, etc. Neither the business nor the
properties of the Company or any of its Subsidiaries are now affected by any
fire, explosion, accident, labor controversy, strike, lockout or other dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty which would reasonably be expected to have a Material Adverse
Effect, or if any such existing event or condition were to continue for more
than 30 additional days (unless in the reasonable opinion of the Company such
event or condition is not likely to continue for such period) would reasonably
be expected to have a Material Adverse Effect.
VI.8 Liens. None of the properties or assets of the Company or the
Restricted Subsidiaries is subject to any Lien except for Permitted Liens.
VI.9 ERISA. Each Plan and, to the best of the Company's knowledge,
each Multiemployer Plan, complies in all material respects with all Requirements
of Law and,
(a) no Reportable Event for which the PBGC has not waived the
30-day notice requirement has occurred with respect to any Plan or, to the best
of the Company's knowledge, any Multiemployer Plan;
(b) no steps have been taken to terminate any Plan which could
result in the Company's making a contribution, or incurring a liability or
obligation, to such Plan in excess of $10,000,000; no steps have been taken to
appoint a receiver to administer any such Plan; to the best of the Company's
knowledge, no steps have been taken to terminate or appoint a receiver to
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administer any Multiemployer Plan which could result in the Company's making a
contribution, or incurring a liability or obligation, to such Multiemployer Plan
in excess of $10,000,000; and neither the Company nor any Related Person has
withdrawn from any such Multiemployer Plan or initiated steps to do so;
(c) There is no Unfunded Vested Liability with respect to any
Plan or, to the best of the Company's knowledge, any Multiemployer Plan, that
would reasonably be expected to have, in the event of termination of such Plan
or withdrawal from such Multiemployer Plan, a Material Adverse Effect; and
(d) no contribution failure has occurred with respect to any
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; no
condition exists or event or transaction has occurred with respect to any Plan
which would reasonably be expected to have a Material Adverse Effect; and
neither the Company nor any of its Subsidiaries has any contingent liability
with respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA,
that would reasonably be expected to have a Material Adverse Effect.
VI.10 Use of Proceeds; Margin Regulations. The proceeds of the Loans
are to be used solely for purposes not in contravention of subsection 8.1(e) or
subsection 8.1(i) or subsection 8.3(c). Not more than 25% of the assets of the
Company consists of any Margin Stock, and no part of the proceeds of any Loan
will be used to buy or carry any Margin Stock. Neither the Company nor any
Subsidiary is generally engaged in the business of buying or selling Margin
Stock or extending credit for the purpose of buying or carrying Margin Stock.
VI.11 Title to Properties. Each of the Company and each of its
Subsidiaries (i) has valid fee title to, or valid leasehold interests in, all
material real property, and has good and valid title to all of its respective
material personal properties and assets, of any nature whatsoever which are
reflected on the audited balance sheet referred to in Section 6.13 or acquired
by the Company or such Subsidiary after the date thereof except for assets sold,
transferred or otherwise disposed of since such date in the ordinary course of
business, except for such defects in title as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect, and (ii)
each of the Company and each of its Subsidiaries owns or holds all permits
necessary to construct, own, operate, use and maintain its property and assets
and to conduct its business as now conducted except where the failure to have
such interest or title or to own or hold such permit would not reasonably be
expected to have a Material Adverse Effect.
VI.12 Taxes. The Company and each Subsidiary has filed (or obtained
extensions with respect to the filing of) all United States federal income tax
returns and all other material tax returns which are required to be filed by it
and has paid all taxes as shown on such returns or pursuant to any assessment
received by the Company or any Subsidiary , except to the extent the same may be
contested in good faith and for which reserves have been established to the
extent required by GAAP.
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The charges, accruals and reserves on the books of the Company and each
Subsidiary in respect of Taxes and other governmental charges are adequate to
the best knowledge of the Company.
VI.13 Financial Condition. (a) The audited consolidated financial
statements of the Company and its consolidated Subsidiaries dated December 31,
1997, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein; and
(ii) fairly present the financial position of the Company
and its consolidated Subsidiaries as of the date thereof and results of
operations for the period covered thereby.
(b) Since December 31, 1997, no events or conditions have
occurred which would reasonably be expected to have a Material Adverse Effect,
except as disclosed on Schedule 6.13 or on Schedule 6.5.
VI.14 Environmental Matters. The Company and its Subsidiaries are
each in compliance in all material respects with all Federal, state and local
laws and regulations (i) now applicable to the Company or any Subsidiary, or
(ii) which, to the best knowledge of the Company will be applicable (or, if not
in compliance with such laws and regulations referred to in this clause (ii),
the Company or such Subsidiary is taking appropriate action diligently pursued
to be in compliance therewith on a timely basis or to be exempt from
compliance), relating to pollution control and environmental contamination,
including all laws and regulations governing the generation, use, collection,
treatment, storage, transportation, recovery, removal, discharge or disposal of
Hazardous Materials, except to the extent that the failure to comply or take
such action would not reasonably be expected to have a Material Adverse Effect.
Except as disclosed on Schedule 6.14 (as updated from time to time), (A) there
are no presently outstanding allegations by governmental officials that the
Company or any of its Subsidiaries is now or at any time prior to the date
hereof was in material violation of such laws or regulations, (B) there are no
material administrative or judicial proceedings presently pending against the
Company or any of its Subsidiaries pursuant to such laws or regulations, and (C)
there is no material claim presently outstanding against the Company or any of
its Subsidiaries which was asserted pursuant to such laws or regulations that in
each case would reasonably be expected to result in a liability to the Company
or any Subsidiary in excess of $20,000,000 or $50,000,000 in the aggregate for
all such claims (net in each case of actual insurance coverage or effective
indemnification with respect thereto). Except as disclosed in Schedule 6.14 (as
updated from time to time), the Company reasonably believes that no facts or
circumstances known to it or any Subsidiary could form the basis for the
assertion of any material claim against the Company or any Subsidiary relating
to environmental matters, including any material claim arising from past or
present environmental practices asserted under CERCLA, RCRA, or any
Environmental Law that in each case
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would reasonably be expected to result in a liability to the Company or any
Subsidiary in excess of $20,000,000 or $50,000,000 in the aggregate for all such
claims (net in each case of actual insurance coverage or effective
indemnification with respect thereto).
VI.15 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. The Company is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or any state public utilities code.
VI.16 Copyrights, Patents, Trademarks and Licenses, etc. The Company
or its Subsidiaries own or are licensed or otherwise have the right to use all
of the patents, trademarks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for the operation
of their respective businesses as currently conducted (other than where the
failure to so own, be licensed or have the right to use would reasonably be
expected to have a Material Adverse Effect). To the best knowledge of the
Company, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Company or any Subsidiary infringes upon any rights held by any
other Person, except for any such infringement that would not reasonably be
expected to have a Material Adverse Effect.
VI.17 Subsidiaries. The Company has no Subsidiaries on the date
hereof other than those disclosed in Schedule 6.17 hereto.
VI.18 Key Contracts. The Company has delivered to the Administrative
Agent true, correct and complete copies of the Key Contracts as in effect on the
date hereof, including in each case all amendments thereto, assignments thereof
and waivers of any Material Terms thereof. Each of the Crude Supply Agreement
and the Supplemental Crude Supply Agreement has been duly authorized, executed
and delivered by the Company. The CRCCLP Crude Supply Agreement has been duly
authorized, executed and delivered by CRCCLP. Each of the Key Contracts has been
duly authorized, executed and delivered by the parties thereto that are
Affiliates of the Company and, to the best knowledge of the Company, the other
parties thereto, and is in full force and effect in all material respects. To
the best knowledge of the Company, no event has occurred and is continuing which
would constitute, or with the giving of notice or lapse of time or both would
constitute, an event of default on the part of the Company, CRCCLP, CIVESCO or
Petroleos under the Key Contracts or would give any Person the right to
terminate or to modify the terms of any thereof in a manner which would
reasonably be expected to have a Material Adverse Effect.
VI.19 Solvency. The Company has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage and is now solvent and able to pay its respective debts as they
mature, and the Company now owns property having a value, both at fair valuation
and at present fair salable value, greater than the amount required to pay its
existing debts.
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VI.20 Full Disclosure. None of the representations or warranties
made by the Company or any Subsidiary in this Agreement as of the date such
representations and warranties are made or deemed made, and none of the factual
information (taken as a whole) contained in any written notice, exhibit, report,
statement or certificate furnished by or on behalf of the Company or any
Subsidiary in connection with this Agreement (including the offering and
disclosure materials delivered by or on behalf of the Company to the Banks prior
to the Closing Date), contains any untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
VI.21 Addressing the Year 2000 Problem. The Company is developing a
program to address on a timely basis the Year 2000 Problem. In connection with
developing this program, the Company has reviewed its operations and those of
its Subsidiaries with a view to assessing whether its or its Subsidiaries'
respective businesses will, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of data,
be vulnerable to a Year 2000 Problem.
Based on such review, the Company has no reason to believe that a Material
Adverse Effect will occur with respect to its or its Subsidiaries' businesses or
operations resulting from a Year 2000 Problem.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
VII.1 Financial Statements. The Company shall deliver to the
Administrative Agent and concurrently therewith to each Bank (in accordance with
Section 11.2, which shall be deemed received by each Bank when received by the
Administrative Agent):
(a) as soon as available and in any event within 120 days
after the end of each Fiscal Year, (A) audited consolidated financial statements
of the Company and its consolidated Subsidiaries, in each case setting forth, in
comparative form, the corresponding figures for the preceding Fiscal Year and
certified, without Impermissible Qualification, by independent certified public
accountants of recognized national standing and reputation selected by the
Company or otherwise reasonably acceptable to the Administrative Agent, (B)
consolidated financial information accompanied by consolidating statements with
eliminating entries for the Company and its Restricted Subsidiaries with
disclosure in an explanatory footnote for eliminating entries and a report from
independent accountants stating that such information has been subjected to the
same auditing
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procedures applied in the audit of the basic consolidated financial statements
of the Company and its consolidated Subsidiaries and providing an opinion as to
the fairness of the presentation of such information in all material respects in
relation to the Company's consolidated financial statements taken as a whole, in
each case for purposes of clauses (A) and (B) consisting of a balance sheet as
at the end of such Fiscal Year and statements of income and retained earnings
and statements of cash flows and (C) with respect to the audited consolidated
financial statements of the Company and its consolidated Subsidiaries and the
consolidated financial information of the Company and its Restricted
Subsidiaries, a report from such accountants addressed to the Company's
management containing a review of the Company's calculations which show
compliance with each of the financial ratios and restrictions contained in
Section 8.2 and affirmatively indicating that, while the audit of the
consolidated financial statements of the Company and its consolidated
Subsidiaries was not directed primarily toward obtaining knowledge of such
compliance with these specific financial ratios and restrictions, such
accountants have not become aware of events or transactions that would render
such calculations unreliable or misleading; and
(b) as soon as available and in any event within 60 days after
the end of each Fiscal Quarter (except the last Fiscal Quarter of each Fiscal
Year), (A) internal financial working papers in the form of consolidating
financial statements and such other financial information as may customarily be
prepared by or on behalf of the Company with respect to each Unrestricted
Subsidiary with assets in excess of $50,000,000, (B) consolidated financial
statements of the Company and its consolidated Subsidiaries, and (C)
consolidated financial information (consolidating statements with eliminating
entries for Unrestricted Subsidiaries) of the Company and its Restricted
Subsidiaries, in each case consisting of a balance sheet as at the end of such
quarter and statements of income, retained earnings, and cash flows for such
Fiscal Quarter then ended and for the Fiscal Year through such quarter, setting
forth in comparative form the corresponding figures for the corresponding dates
and periods of the preceding Fiscal Year, all in reasonable detail and certified
(subject to year-end audit adjustments) by an authorized financial officer of
the Company to the best of such officer's knowledge and belief as fairly
presenting in accordance with GAAP (to the extent applicable) the financial
position and results of operations of such Unrestricted Subsidiary, the Company
and its consolidated Subsidiaries or the Company and its Restricted
Subsidiaries, as the case may be, as at the date thereof and for the period
covered thereby (provided, that footnotes to such financial statements will not
be required) consistently applied (except as noted therein); but
(c) notwithstanding the preceding provisions of this Section
7.1, if and so long as the Company shall file regular and periodic reports with
the SEC pursuant to Sections 13 and 15 of the Securities Exchange Act of 1934,
delivery to the Administrative Agent of copies of its reports on Forms 10K and
10Q promptly following filing thereof with the SEC shall constitute full
compliance with this Section 7.1.
VII.2 Certificates; Other Information. The Company shall furnish to
the Administrative Agent:
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(a) concurrently with the delivery of the financial statements
(or reports on Forms 10K or 10Q, as the case may be) referred to in subsections
7.1(a) and (b) or (c), as the case may be, a Compliance Certificate
substantially in the form of Exhibit C, executed by a Responsible Officer;
(b) promptly, to the extent not provided pursuant to Section
7.1(c), copies of all financial statements and regular, periodic or special
reports (including registration statements (without exhibits) and Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
and
(c) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as the
Administrative Agent, at the request of any Bank, may from time to time
reasonably request in writing.
VII.3 Notices. The Company shall notify the Administrative Agent and
each Bank in writing:
(a) as soon as possible and in any event within 5 Business
Days after the Company becomes aware of the occurrence of any Default, the
statement of the President, any Vice President or the Treasurer of the Company
setting forth the details of each such Default which has occurred and the action
which the Company has taken and proposes to take with respect thereto;
(b) forthwith upon learning thereof, a description of (A) the
institution of any litigation, arbitration proceeding or governmental proceeding
to which the Company or any Subsidiary of the Company is a party that, if
adversely determined, would reasonably be expected to result in a liability to
the Company or any Subsidiary of the Company in excess of $25,000,000 (net of
actual insurance coverage or effective indemnification with respect thereto) and
(B) any material adverse determination as to liability or amount of damages in
any such litigation, arbitration proceeding or proceeding;
(c) promptly upon learning thereof, a description of the
institution of any steps by the Company or any other Person to terminate any
Plan or any Multiemployer Plan, or the appointment of a receiver to administer
any Plan or any Multiemployer Plan, or the withdrawal by the Company or any
Related Person from any Multiemployer Plan, or the failure to make a required
contribution to any Plan if such failure is sufficient to give rise to a Lien
under section 302(f) of ERISA, or the taking of any action with respect to a
Plan which could result in the requirement that the Company furnish a bond or
other security to the PBGC or such Plan, or the occurrence of any event with
respect to any Plan which could reasonably be expected to result in the
incurrence by the Company of any material liability, fine or penalty, or any
material increase in the contingent liability of the Company with respect to any
post-retirement Welfare Plan benefit; and
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(d) within 10 Business Days after the close of a Material
Acquisition by the Company or any Subsidiary, the most recent annual and
quarterly financial reports of the acquired entity which are available to the
Company, and, a summary of the environmental due diligence work done for or by
the Company in connection with such Material Acquisition (it being understood
that any Person(s) engaged by the Company to prepare such a summary and to
complete such due diligence must be of recognized national standing in the
environmental field).
VII.4 Preservation of Corporate Existence, Etc. The Company shall,
and shall cause each Subsidiary to, except for any sale, dissolution,
liquidation or merger not otherwise prohibited hereby, preserve and maintain its
existence and good standing and its rights, privileges and franchises under the
laws of its state or jurisdiction of incorporation or other formation, and
remain qualified as a foreign Person authorized to do business in each other
jurisdiction in which the failure to so qualify would reasonably be expected to
have a Material Adverse Effect.
VII.5 Insurance. The Company shall maintain, and cause each
Subsidiary to maintain, or obtain on its behalf (to the extent available at
commercially reasonable rates), with Lloyds of London, or with other financially
sound and reputable insurers with (i) an A.M. Best Rating of B+ or higher (or an
equivalent rating) and a surplus of at least $10,000,000, or (ii) any alien
insurer, reasonably acceptable to the Administrative Agent, whose name appears
on the most current non-admitted insurance carrier listing published by the
National Association of Insurance Commissioners, insurance with respect to their
respective properties and businesses against such liabilities, casualties, risks
and contingencies (including business interruption insurance) in such types and
with such reasonable deductibles as are customary in the case of Persons engaged
in the same or similar businesses and similarly situated. Upon the execution of
this Agreement and at any time thereafter at the request of the Administrative
Agent, the Company shall furnish or cause to be furnished to the Administrative
Agent evidence, in form and substance satisfactory to the Administrative Agent,
of the required insurance coverage of the Company and each Subsidiary and, upon
request, copies of the applicable policies. The Company shall use reasonable
efforts to provide at least twenty (20) days' prior written notice to the
Administrative Agent of any termination, cancellation, reduction or other
material modifications of any insurance coverage.
VII.6 Taxes. The Company shall, and shall cause each Subsidiary to,
pay and discharge all Taxes relating to the Company or such Subsidiary, as the
case may be, prior to the date on which penalties attach thereto; provided, that
neither the Company nor any Subsidiary shall be required to pay or discharge any
such Tax while the same is being contested by it in good faith and by
appropriate proceedings and so long as reserves have been established to the
extent required by GAAP.
VII.7 Compliance with Laws. The Company shall comply, and shall
cause each Subsidiary to comply, in all material respects with all Requirements
of Law , including Environmental Laws; provided, that neither the Company nor
any Subsidiary shall be required to comply with any such Requirement of Law so
long as the validity or application thereof is being contested in good faith and
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reserves have been established with respect to such contest to the extent, if
any, required by GAAP or where such non-compliance would not reasonably be
expected to have a Material Adverse Effect; and obtain and maintain, and cause
each Subsidiary to obtain and maintain, all permits, licenses and approvals
necessary to construct, own, operate, use and maintain their respective
properties and assets and to conduct their respective businesses, except where
the failure to obtain or maintain such permit, license or approval would not
reasonably be expected to have a Material Adverse Effect.
VII.8 Inspection of Property and Books and Records. (a) The Company
shall keep or cause to be kept, and shall cause each Subsidiary to keep or cause
to be kept, adequate records and books of account in which complete entries are
to be made reflecting its business and financial transactions and as required by
applicable rules and regulations of any Governmental Authority having
jurisdiction over the Company or any Subsidiary or the transactions contemplated
by this Agreement. Such books of account shall be kept in a manner consistent
with GAAP if so kept on the date hereof. The Company shall permit, and shall
cause each Subsidiary to permit, the Administrative Agent or the Banks or their
representatives at any reasonable time and from time to time at the request of
the Administrative Agent, to visit and inspect any of their respective
properties, to examine their respective corporate, financial and operating
records, and, subject to Section 11.10, and to the Confidentiality Agreement or
a Bank Confidentiality Agreement, as the case may be, make copies thereof or
abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers, all at such reasonable times during
normal business hours and as often as may be reasonably desired, upon prior
notice to the Company at least 24 hours in advance. One or more officers,
employees or representations of the Company may accompany the Administrative
Agent or a Bank or the representatives of such when making any visit or
inspection described in the preceding sentence.
(b) Neither the Administrative Agent nor any Bank has any duty
to visit or inspect the Company's or any Subsidiary's properties or to examine
or copy such records and neither the Administrative Agent nor any Bank shall
incur any obligation or liability by reason of not making any such visit or
inspection. In the event that the Administrative Agent or any Bank shall do any
of the foregoing it will be acting solely for the purposes of protecting the
Administrative Agent or such Bank and preserving its rights under this
Agreement. Neither the Company nor any other party is entitled to rely on any
inspection or other inquiry by the Administrative Agent or any Bank. Neither the
Administrative Agent nor any Bank owes any duty of care to protect the Company
or any other party against, or to inform the Company or any other party of, any
adverse condition that may be observed as affecting the Company's or any
Subsidiary's properties or business. The Administrative Agent or any Bank may in
its discretion disclose to the Company or any other Person any findings made as
a result of, or in connection with, any inspection of any such properties or
records.
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ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
VIII.1 Negative Covenants Applicable to the Company and Restricted
Subsidiaries. The Company shall not, and shall not suffer or permit any
Subsidiary to, directly or indirectly do any of the following:
(a) Limitation on Liens. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, incur or
suffer to exist any Lien on or with respect to any asset or property of the
Company or such Restricted Subsidiary, whether now owned or hereafter acquired,
or any interest therein or any income or profits therefrom, except the following
(collectively, "Permitted Liens", and individually, a "Permitted Lien"):
(i) Liens existing on the date hereof;
(ii) Liens on property existing at the time of acquisition
thereof or Liens affecting property of a Person existing at
the time it becomes a Subsidiary of the Company or at the time
it is merged into or consolidated with the Company or a
Subsidiary of the Company; provided, however, that, in either
case, such Liens do not extend to or cover any property of the
Company or of any of its Restricted Subsidiaries other than
the property that secured the acquired Indebtedness prior to
the time such Indebtedness became Indebtedness of the Company
or a Subsidiary;
(iii) Liens on property incurred to secure payment of all
or a part of the purchase price thereof or to secure
indebtedness incurred prior to, at the time of, or within 12
months after the acquisition thereof for the purpose of
financing all or part of the purchase price thereof;
(iv) Liens on any property to secure all or part of the
cost of improvements thereon or Indebtedness incurred to
provide funds for such purpose in a principal amount not
exceeding the cost of such improvements or construction and
incurred within 12 months after completion of such
improvements or construction;
(v) Liens to government entities granted to secure
pollution control or industrial revenue bond financings;
(vi) Liens which secure Indebtedness owing by a Restricted
Subsidiary of the Company, to the Company or by one Restricted
Subsidiary to another Restricted Subsidiary;
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(vii) Liens imposed by law, including mechanics',
materialmen's, carriers' or other like Liens, arising in the
ordinary course of business;
(viii) any Lien incurred to secure the performance of
surety or appeal bonds incurred in the ordinary course of
business consistent with past practice;
(ix) any Lien incidental to the normal conduct of the
business of the Company or any Restricted Subsidiary or the
ownership of its property or the conduct of the ordinary
course of its business, including (A) zoning restrictions,
easements, rights of way, reservations, restrictions on the
use of real property and other minor irregularities of title,
(B) rights of lessees under leases, (C) rights of collecting
banks having rights of setoff, revocation, refund or
chargeback with respect to money or instruments of the Company
or any Restricted Subsidiary on deposit with or in the
possession of such banks, (D) Liens to secure the performance
of statutory obligations, tenders, bids, leases, progress
payments, performance or return-of-money bonds, performance or
other similar bonds or other obligations of a similar nature
incurred in the ordinary course of business, (E) Liens
required by any contract or statute in order to permit the
Company or a Subsidiary of the Company to perform any contract
or subcontract made by it with or pursuant to the requirements
of a governmental entity and (F) "first purchaser" Liens on
crude oil, in each case which are not incurred in connection
with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of
Property and which do not in the aggregate impair the use of
property in the operation of the business of the Company and
its Restricted Subsidiaries taken as a whole;
(x) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, so long as
reserves have been established to the extent required by GAAP;
(xi) Liens securing obligations in respect of Swap
Contracts;
(xii) any Lien granted by the Company or CRCCLP on its
Receivables with regard to any ownership or security interest
under any Receivables Purchase Facility established after the
date hereof;
(xiii) Liens on the assets of the Company or any
Restricted Subsidiary created or existing to secure stay or
appeal bonds or otherwise resulting from any litigation or
legal proceeding which are currently being contested in good
faith by appropriate action promptly initiated and diligently
conducted, including the Lien of any judgment; provided,
however, that the aggregate amount secured by all such Liens
does not exceed $25 million;
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(xiv) any Lien granted by CRCCLP on the real estate upon
which CRCCLP's Corpus Christi refinery is located arising from
the Corpus Christi Refinery West Plant Lease;
(xv) any extension, renewal, replacement or refinancing of
any Lien referred to in the foregoing clauses (i) through
(xiv); provided, however, that
(A) such new Lien shall be limited to all or part of
the same property that secured the original Lien (plus
improvements on such property) and
(B) the amount secured by such Lien at such time is
not increased to any amount greater than the sum of (1)
the outstanding amount or, if greater, committed amount
described under clauses (i) through (xiv) at the time the
original Lien became a Lien permitted under this Section
8.1(a) and (2) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement;
(xvi) any Lien granted, after the date hereof and in
addition to those permitted by clause (i) to clause (xv)
above, by the Company or any Restricted Subsidiary to secure
its own direct (as opposed to guaranteed) Indebtedness if (A)
all such Liens for the Company and all Restricted Subsidiaries
together at any one time outstanding do not secure
Indebtedness in excess of $10,000,000, and (B) such Liens do
not encumber the Principal Properties or any right, title or
interest of the Company or any Restricted Subsidiary in, to or
under any Key Contract;
(xvii) rights of collecting banks having a right of setoff,
revocation, refund or chargeback with respect to money or
instruments of the Company or any Restricted Subsidiary on
deposit with or in the possession of such bank;
(xviii) Liens on assets or property of the Company or a
Restricted Subsidiary, other than a Principal Property, in
connection with Synthetic Leases pursuant to which, for
financial accounting purposes, the Company or a Restricted
Subsidiary is the lessee; and
(xix) Liens not otherwise permitted by the provisions of
this Section 8.1(a) securing indebtedness in an aggregate
principal amount at any time outstanding for the Company and
its Restricted Subsidiaries not in excess of 10% of Net Worth
of the Company and its Restricted Subsidiaries.
(b) Consolidations and Mergers; Sales of Assets. The Company
shall not, and shall not permit any Restricted Subsidiary to:
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(i) be a party to any merger or consolidation, except that,
so long as no Default then exists or would exist immediately
after giving effect thereto or would result therefrom, (A) the
Company may merge with any other Person, provided that the
Company is the survivor of such merger, and (B) any
Wholly-Owned Restricted Subsidiary of the Company may merge or
consolidate into the Company or with or into any other
Wholly-Owned Restricted Subsidiary of the Company;
(ii) sell, transfer, convey or lease the Principal
Properties other than in connection with any Permitted Lien
granted thereon, and other than the sale of all or any portion
of the Principal Properties pursuant to one or more
Dispositions permitted pursuant to clause (iv) of this
subsection 8.1(b) or one or more Sale Leaseback Transactions
permitted pursuant to Section 8.1(g);
(iii) sell, transfer, assign or convey (other than in
connection with any Permitted Lien granted thereon and other
than any disposition to the Company or any Restricted
Subsidiary) any shares of capital stock of any Restricted
Subsidiary that, at the time of such sale, transfer,
assignment or conveyance, either (A) owns, leases or has
material contract rights in respect of any Principal Property
or (B) is a party to a Key Contract; or
(iv) sell, transfer, assign or convey any assets or any
shares of capital stock of any Restricted Subsidiary
(collectively, a "Disposition") if, on the day on which such
proposed Disposition is to occur, the aggregate book value (at
the time of the proposed disposition thereof) of such assets
or such shares (as the case may be), when added to the
aggregate book value (at the time or times of the disposition
thereof) of all other assets or shares disposed of by the
Company and its Restricted Subsidiaries under this clause (iv)
during the then current Fiscal Quarter and the three then most
recently completed Fiscal Quarters exceeds 20% of the
aggregate book value of the assets of the Company and its
Restricted Subsidiaries as of the date of the most recent
balance sheet of the Company delivered pursuant to Section
7.1(a); provided that, if concurrently with any Disposition
made pursuant to this clause (iv) or within one year thereof,
all or substantially all of the net proceeds of such
Disposition are either (x) reinvested (whether by acquisition,
improvement, repair, construction or otherwise) in assets
related to the business of the Company or any Restricted
Subsidiary or (y) applied ratably to (1) (A) on any date prior
to the Transition Date, reduce the Total Commitment hereunder
(it being understood that the Company will repay Loans in such
principal amount as is required such that the sum of the
aggregate principal of all Loans outstanding after such
repayment does not exceed the Total Commitment as so reduced)
and (B) reduce the Total Commitment (as therein defined) under
the $400,000,000 Credit Agreement (it being understood that
the Company will repay loans and unreimbursed letter of credit
drawings thereunder in such principal amounts such that the
aggregate principal of all Loans and Letter of Credit
Obligations (in each case as defined therein) outstanding do
not exceed the Total Commitment thereunder) and (2) repay all
other Indebtedness then
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outstanding (including Indebtedness resulting from the Term
Loans and the Private Placement Notes), such Disposition shall
be disregarded for purposes of calculations pursuant to this
clause (iv) from and after the time of such reinvestment or
application; provided, further, that a Disposition of all or
any portion of the Company's lubricants blending plant located
at Cicero, Illinois shall not be prohibited by this clause
(iv) and shall be disregarded for purposes of calculations
pursuant to this clause (iv).
Nothing in this Section 8.1(b) shall prohibit the Company or any Wholly-Owned
Restricted Subsidiary from purchasing or otherwise acquiring the assets or stock
of any Wholly-Owned Restricted Subsidiary.
(c) No Conflicts. The Company shall not, and shall not permit
any Restricted Subsidiary to, enter into any material agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any other Loan Document or any instrument or
document delivered or to be delivered by it hereunder or thereunder or in
connection herewith or therewith.
(d) Transactions with Affiliates. The Company shall not, and
shall not suffer or permit any Restricted Subsidiary to, enter into any
transaction or series of transactions, whether or not in the ordinary course of
business, with any Affiliate (other than as provided in or contemplated by the
Key Contracts) other than on terms and conditions at least as favorable to the
Company or its Restricted Subsidiary as would be obtainable by the Company or
such Restricted Subsidiary at the time in a comparable arm's-length transaction
with a Person other than an Affiliate or own, purchase or acquire any stock
obligations or securities of, or any other interest in, or make any capital
contribution to, PDVSA or any Affiliate of PDVSA other than the Company or any
Subsidiary.
(e) Use of Proceeds in an Unfriendly Takeover. The Company
shall not, and shall not permit any Restricted Subsidiary to, use the proceeds
of any Loan to purchase or otherwise acquire any publicly owned securities of
another Person (or to refinance any indebtedness incurred for such purpose) if
following such acquisition the Company and its Subsidiaries would own in excess
of 15% of the Voting Stock of such Person and either (i) such purchase or
acquisition is opposed by such Person's board of directors or other governing
body or by a shareholder or shareholders controlling more than 15% of the Voting
Stock of such Person, or (ii) the Company knows of facts or circumstances that
would make it likely that such purchase or other acquisition would be hostile or
unfriendly.
(f) [Intentionally Omitted.]
(g) Sale Leaseback Transaction. The Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any Sale Leaseback
Transaction, except for arrangements providing for the sale of all or any
portion of the Principal Properties to one or more lenders or
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investors if such assets so sold are leased back by the Company, CRCCLP or a
Restricted Subsidiary, provided that, any Sale Leaseback Transaction involving
such a sale shall be treated as a Disposition for purposes of Section
8.1(b)(iv).
(h) Key Contracts. The Company shall not, and shall not permit
any Restricted Subsidiary to, amend, supplement, assign (other than an
assignment of the Crude Supply Agreement or the Supplemental Crude Supply
Agreement (or the benefits under either) to the Trading Subsidiary), terminate,
waive or be a party to a waiver of any provision of, or otherwise modify,
directly or indirectly, in any respect (i) the Crude Supply Agreement, (ii) the
Supplemental Crude Supply Agreement, or (iii) the CRCCLP Crude Supply Agreement;
provided that the Company or the Trading Subsidiary may take any such action if:
(A) such action would affect an Operational Term and would
not affect a Material Term, and if the Company shall determine
in good faith that such action (1) is not detrimental to the
Company, (2) would not reasonably be expected to have a
Material Adverse Effect, and (3) would not be in any way
prejudicial to the Banks; or
(B) such action would affect a term other than a Material
Term or an Operational Term and the Administrative Agent shall
have received a certified resolution duly adopted by the Board
of Directors of the Company to the effect that such action (1)
is not detrimental to the Company, (2) would not reasonably be
expected to have a Material Adverse Effect, and (3) would not
be in any way prejudicial to the Banks.
(i) Restriction on Use of Proceeds. The Company shall not, and
shall not allow any Restricted Subsidiary to use the proceeds of any Loan,
directly or indirectly, to make or invest in any loan or advance to, or to
purchase or acquire any obligations or securities of, PDVSA or an Affiliate of
PDVSA except for the Company or any Restricted Subsidiary.
(j) Nature of Business. The Company shall not, and shall not
permit any Restricted Subsidiary to, engage in any business or operations except
those in which the Company and its Subsidiaries are engaged on the date hereof
or any related business or operations.
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VIII.2 Financial Covenants.
(a) Capitalization Ratio. The Company shall not permit its
Capitalization Ratio to be more than .65 to 1.00 at the end of any Fiscal
Quarter.
(b) Indebtedness Interest Coverage Ratio. The Company shall
not permit the ratio of (i) EBITDA for the Computation Period to (ii) Interest
Expense for the Computation Period to be less than 3.00 to 1.00 at the end of
any Fiscal Quarter.
(c) Minimum Net Worth. The Company shall not permit, as of the
last day of each Fiscal Quarter, Net Worth of the Company and its Restricted
Subsidiaries to be less than $1,750,000,000 plus 25% of aggregate, cumulative
Net Income accruing for all Fiscal Quarters ending after December 31, 1997 for
which Net Income was positive.
VIII.3 Negative Covenants Applicable to the Company and its
Unrestricted Subsidiaries. The Company shall not permit any Unrestricted
Subsidiary to:
(a) No Conflicts. Enter into any material agreement containing
any provision which would be violated or breached by the performance of its
obligations hereunder or under any other Loan Document or any instrument or
document delivered or to be delivered hereunder or thereunder or in connection
herewith or therewith.
(b) Nature of Business. Engage in any business or operations
except those in which the Company and its Subsidiaries are engaged on the date
hereof, or any related business or operations.
(c) Use of Proceeds in an Unfriendly Takeover. Use the
proceeds of any Loan to purchase or otherwise acquire any publicly owned
securities of another Person (or to refinance any indebtedness incurred for such
purpose) if following such acquisition the Company and its Subsidiaries would
own in excess of 15% of the Voting Stock of such Person and either (i) such
purchase or acquisition is opposed by such Person's board of directors or other
governing body or by a shareholder or shareholders controlling more than 15% of
the Voting Stock of such Person, or (ii) the Company knows of facts or
circumstances that would make it likely that such purchase or other acquisition
would be hostile or unfriendly.
(d) Transactions with Affiliates. Enter into any transaction
or series of transactions, whether or not in the ordinary course of business,
with any Affiliate other than on terms and conditions at least as favorable to
the Company or its Unrestricted Subsidiary as would be obtainable by the Company
or such Unrestricted Subsidiary at the time in a comparable arm's-length
transaction with a Person other than an Affiliate, or own, purchase or acquire
any stock, obligations
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or securities of, or any other interest in, or make any capital contribution to,
PDVSA or any Affiliate of PDVSA other than the Company or any Subsidiary.
VIII.4 Designation of Unrestricted Subsidiaries and Restricted
Subsidiaries. (a) Any Responsible Officer may, at any time and from time to
time, designate a Restricted Subsidiary as an Unrestricted Subsidiary; provided
that a notice of such designation is given to the Administrative Agent
substantially contemporaneously with such designation and, provided further,
that immediately before such designation and after giving effect thereto, (i) no
Default shall have occurred and be continuing and (ii) the Company would still
be in compliance with Section 8.2 as of the end of the most recent Fiscal
Quarter. The foregoing provisions of this Section 8.4(a) to the contrary
notwithstanding, the Company may not designate CPIC or any Subsidiary which owns
any Principal Property or is a party to any Key Contract as an Unrestricted
Subsidiary.
(b) Any Responsible Officer may, at any time and from time to
time, designate an Unrestricted Subsidiary as a Restricted Subsidiary; provided
that a notice of such designation is given to the Administrative Agent
substantially contemporaneously with such designation and, provided further,
that immediately before such designation and after giving effect thereto, (i) no
Default shall have occurred and be continuing and (ii) the Company would still
be in compliance with Section 8.1 and Section 8.2 as of the end of the most
recent Fiscal Quarter.
(c) Any Person that becomes a Subsidiary after the date hereof
shall be designated as a Restricted Subsidiary within the definition hereof
unless (i) such Person shall be designated as an Unrestricted Subsidiary by a
Responsible Officer prior to the time such Person becomes a Subsidiary and (ii)
a notice of such designation is given to the Administrative Agent prior to the
date which is 15 Business Days after the date on which such Person becomes a
Subsidiary.
(d) Any notice of designation pursuant to this Section 8.4
shall be accompanied by a certificate of the Secretary or an Assistant Secretary
of the Company (i) stating that the Person providing such notice is a
Responsible Officer, (ii) setting forth the name of each Subsidiary which has or
will change its characterization as a result of such designation, and (iii) to
the extent applicable, setting forth reasonably detailed computations
demonstrating compliance with any conditions precedent to such designation.
ARTICLE IX
EVENTS OF DEFAULT
IX.1 Event of Default. Any of the following shall constitute an
"Event of Default":
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(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan, or (ii) within
5 days after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty
by the Company made or deemed made herein, or in or under any other Loan
Document or in any written notice, report or certificate delivered pursuant
hereto or thereto is incorrect in any material respect on or as of the date made
or deemed made or reaffirmed, as the case may be; or
(c) Specific Defaults. (i) Except to the extent and subject to
subclause (ii) of this Section 9.1(c), the Company fails to perform or observe
any term, covenant or agreement contained in any of Section 8.1, 8.2 or 8.3, or
(ii) default in any respect in the performance or observance of any term,
covenant, condition or agreement on its part to be performed or observed under
subsection 8.1(a), 8.1(c), 8.1(j), 8.3(a) or 8.3(b) and such default shall
continue unremedied for 30 days; or
(d) Other Defaults. The Company fails to perform or observe in
any material respect any other term, covenant condition or agreement contained
in this Agreement or any other Loan Document, (and not constituting an Event of
Default under any other clause of this Section 9.1) and such default shall
continue unremedied for a period of 30 days after the date upon which written
notice thereof is given to the Company by the Administrative Agent or any Bank;
or
(e) Non-Payment of Other Indebtedness. The Company or any
Subsidiary (i) fails to make any payment in respect of any Indebtedness (except
for such indebtedness of any Subsidiary to the Company or to any other
Subsidiary) having an aggregate principal amount of more than $25,000,000 when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure;
or (ii) fails to perform or observe any other condition or covenant, or any
other event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness , if, in either event, the effect of such
failure, event or condition is to cause, or to permit the holder or holders
thereof or beneficiary or beneficiaries thereof (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause (after the
expiration of any applicable grace period or notice period, if any, specified in
the relevant document on the date of such failure) such Indebtedness to become
due and payable prior to its expressed maturity (unless such default is waived
without the payment of some or all of such Indebtedness); or
(f) Insolvency; Voluntary Proceedings. The Company or any
Principal Subsidiary (i) ceases or fails to be solvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due,
subject to applicable grace periods, if any; (ii) commences any Insolvency
Proceeding with respect to itself; or (iii) takes any action to effectuate or
authorize any of the foregoing; or
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(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Principal
Subsidiary, and any such proceeding or petition shall not be dismissed within 60
days after commencement; (ii) the Company or any Principal Subsidiary admits the
material allegations of a petition against it in any Insolvency Proceeding, or
an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Principal Subsidiary
acquiesces in the appointment of a receiver, trustee, custodian or liquidator
for itself or a substantial portion of its property or business; or
(h) ERISA. If (i) any Reportable Event constituting grounds
for the termination of any Plan by the PBGC and the maximum amount of current
liability that may be asserted under Title IV of ERISA by reason of the
termination of such Plan and all other Plans with respect to which any such
event has occurred, shall exceed $10,000,000 or for the appointment by the
appropriate United States District Court of a trustee to administer or liquidate
any such Plan or Plans shall have occurred and be continuing 30 days after
written, telegraphic or telephonic notice to such effect shall have been given
to the Company by the PBGC and the maximum amount of current liability that may
be asserted under Title IV of ERISA by reason of the termination of such Plan
and all other Plans with respect to which any such event has occurred, shall
exceed $25,000,000, or (ii) any Plan shall be terminated with Unfunded Vested
Liabilities which could reasonably be expected to have a Material Adverse
Effect, or (iii) any contribution failure shall occur with respect to a Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, (including judgments entered on arbitration awards) is entered
against the Company or any Subsidiary involving in the aggregate a liability (to
the extent not covered by independent third-party insurance or effective
indemnification) as to any single or related series of transactions, incidents
or conditions, exceeds $25,000,000, and the same shall not have been discharged
or execution thereof stayed pending appeal for a period of 30 days after the
entry thereof or 60 days after the expiration of any such stay, such judgment
shall not have been discharged; or
(j) Change of Control. There occurs any Change of Control,
unless prior written consent for such lesser percentage ownership is obtained
from the Majority Banks; or
(k) Key Contracts. Any Key Contract shall, for any reason
whatsoever, (i) be terminated (or notice to terminate shall have been given by
any Person), disaffirmed or, in any material respect, cease to be valid and
binding on and enforceable against Petroleos, or (ii) if the Company, CRCCLP,
CIVESCO (or any successor as Trading Subsidiary), or Petroleos fails to perform
or observe in any material respect any material covenant, term or condition
contained in any Key Contract which it is required to perform or observe (except
covenants, terms and conditions that have been waived or modified pursuant to
subsection 8.1(h)) and such failure shall not be remedied within 30 days after
the earlier of (A) the President, the Chief Financial Officer or the Vice
President
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and General Counsel of the Company obtaining actual knowledge thereof, or (B)
the Company having received written notice thereof from the Administrative
Agent; or
(l) Other Material Obligations. Default in the payment when
due, or in the performance or observance of, any material obligation of, or
condition agreed to by, the Company or any Subsidiary with respect to any
material purchase or lease of goods or services (except only to the extent that
the existence of any such default is being contested by the Company or such
Subsidiary in good faith and by appropriate proceedings) if such default would
reasonably be expected to have a Material Adverse Effect; or
(m) Default of $400,000,000 Credit Agreement. Any Event of
Default shall occur and be continuing pursuant to the $400,000,000 Credit
Agreement.
IX.2 Remedies. If any Event of Default occurs, the Administrative
Agent shall, at the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans to be
terminated, whereupon such commitments shall be terminated; and
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, to the extent permitted by law, that upon the occurrence of
any event specified in subsection (f) or (g) of Section 9.1 (in the case of
clause (i) of subsection (g) upon the expiration of the 60-day period mentioned
therein), (x) the obligation of each Bank to make Loans shall automatically
terminate; (y) the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically become due and
payable, in each case, without further act of the Administrative Agent or any
Bank.
IX.3 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
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ARTICLE X
THE ADMINISTRATIVE AGENT
X.1 Appointment and Authorization. Each Bank hereby irrevocably
(subject to Section 10.9) appoints, designates and authorizes the Administrative
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall the Administrative Agent have or be deemed to have any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
X.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
X.3 Liability of Administrative Agent. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence ,
willful misconduct or unlawful acts), or (ii) be responsible in any manner to
any of the Banks for any recital, statement, representation or warranty made by
the Company or any Subsidiary or Affiliate of the Company, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Bank to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's Subsidiaries
or Affiliates.
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X.4 Reliance by Administrative Agent. (a) The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Majority Banks as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Banks against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Majority Banks, subject to Section 11.1 and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.1, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
X.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Banks, unless the Administrative Agent shall have received written notice from a
Bank or the Company referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". The
Administrative Agent will notify the Banks of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Banks in accordance with
Article IX; provided, however, that unless and until the Administrative Agent
has received any such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Banks.
X.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Administrative Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its
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own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Administrative Agent, the Administrative Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
X.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Bank shall be liable
for the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Administrative Agent.
X.8 Agents in Individual Capacity. BofA, Royal Bank of Canada and
The Bank of New York and the respective Affiliates of each may make loans to,
issue letters of credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Company and its Subsidiaries
and Affiliates as though such Person were not the Administrative Agent or a
Syndication Agent (as the case may be) hereunder and without notice to or
consent of the Banks. The Banks acknowledge that, pursuant to such activities,
BofA, Royal Bank of Canada and The Bank of New York or the respective Affiliates
of any of the foregoing may receive information regarding the Company or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that the
Administrative Agent and Syndication Agents shall be
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under no obligation to provide such information to them. With respect to its
Loans, each of BofA, Royal Bank of Canada and The Bank of New York shall have
the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Administrative Agent or a
Syndication Agent (as the case may be) and the terms "Bank" and "Banks" include
each of BofA, Royal Bank of Canada and The Bank of New York in its individual
capacity.
X.9 Successor Administrative Agent. The Administrative Agent may,
and at the request of the Majority Banks shall, resign as Administrative Agent
upon 30 days' notice to the Banks. If the Administrative Agent resigns under
this Agreement, the Majority Banks shall appoint from among the Banks a
successor agent for the Banks which successor agent shall be approved by the
Company. If no successor agent is appointed prior to the effective date of the
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Banks and the Company, a successor agent from among
the Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Administrative Agent and the term "Administrative Agent" shall mean
such successor agent and the retiring Administrative Agent's appointment, powers
and duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article X and Sections 11.4 and 11.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Majority Banks appoint a successor
agent as provided for above.
X.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Administrative Agent
and the Company, to deliver to the Administrative Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed
IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement, and IRS Form W-9; and
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(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Administrative Agent and the Company of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Administrative Agent and the Company of the percentage amount in
which it is no longer the beneficial owner of Obligations of the Company to such
Bank. To the extent of such percentage amount, the Administrative Agent will
treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Administrative
Agent did not properly withhold tax from amounts paid to or for the account of
any Bank (because the appropriate form was not delivered, was not properly
executed, or because such Bank failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall indemnify
the Administrative Agent fully for all amounts paid, directly or indirectly, by
the Administrative Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Administrative Agent under this Section, together with all costs and
expenses (including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.
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ARTICLE XI
MISCELLANEOUS
XI.1 Amendments and Waivers. Except as expressly provided in
Sections 4.8, 4.9 and 11.8(c), no amendment or waiver of any provision of any
Loan Document, and no consent with respect to any departure by the Company
therefrom, shall be effective unless the same shall be in writing and signed by
the Majority Banks (or by the Administrative Agent at the written request of the
Majority Banks) and the Company and acknowledged by the Administrative Agent,
and then any such amendment or waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that, except pursuant to Section 4.8, 4.9 and 11.8(c), no such waiver,
amendment, or consent shall, unless in writing and signed by the affected Bank
or Banks and the Company and acknowledged by the Administrative Agent, do any of
the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 9.2);
(b) postpone or delay any date fixed by any Loan Document for
any payment of principal, interest, fees or other amounts due to any Bank under
any Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (i) below) any fees or other amounts
payable under any Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.15, or any provision
herein providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Majority Banks
or all the Banks, as the case may be, affect the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document, and (ii)
the Fee Letter may be amended, or rights or privileges thereunder waived, in a
writing executed by the parties thereto.
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XI.2 Notices. (a) Except as otherwise expressly provided in this
Agreement, all notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission or electronic mail, provided that any matter transmitted by the
Company by facsimile or electronic mail (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on Schedule 11.2, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 11.2; or, as directed to the Company or the Administrative
Agent, to such other address as shall be designated by such party in a written
notice to the other parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice to the Company
and the Administrative Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, faxed or electronic mail, be effective when
delivered for overnight (next-day) delivery, or transmitted in legible form by
facsimile machine or by electronic mail, respectively, or if mailed, upon the
third Business Day after the date deposited into the U.S. mail, or if delivered,
upon delivery; except that notices pursuant to Article II or X shall not be
effective until actually received by the Administrative Agent.
(c) Any agreement of the Administrative Agent and the Banks
herein to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Administrative Agent and the
Banks shall be entitled to rely on the authority of any Person believed in good
faith by the Administrative Agent to be an Authorized Signatory, for purposes of
such notice and the Administrative Agent and the Banks shall not have any
liability to the Company or other Person on account of any action taken or not
taken by the Administrative Agent or the Banks in reliance upon such telephonic
or facsimile notice. The obligation of the Company to repay the Loans shall not
be affected in any way or to any extent by any failure by the Administrative
Agent and the Banks to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Administrative Agent and the Banks of a
confirmation which is at variance with the terms understood by the
Administrative Agent and the Banks to be contained in the telephonic or
facsimile notice.
XI.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Bank, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
XI.4 Expenses. The Company shall pay (i) all reasonable
out-of-pocket expenses incurred by BofA (including in its capacity as
Administrative Agent), and its respective Affiliates, including all Attorney
Costs for the Administrative Agent in connection with the preparation,
negotiation, syndication and administration (provided, however, that all such
expenses, fee charges and disbursements in connection with such administration
shall not exceed $10,000 in any calendar year)
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<PAGE> 80
of this Agreement or any amendments, modifications or waivers of the provisions
hereof whether or not the transactions contemplated hereby or thereby shall be
consummated, and (ii) all reasonable out-of-pocket expenses incurred by the
Administrative Agent or any Bank, including all Attorney Costs of counsel for
the Administrative Agent or any Bank in each case, in connection with the
enforcement or protection of its rights in connection with this Agreement,
including its rights under this Agreement, or in connection with the Loans made
hereunder, including in connection with any workout, restructuring or
negotiations in respect thereof.
XI.5 Indemnity; Damage Waiver. (a) The Company shall indemnify the
Administrative Agent, the Agent-Related Persons and each Bank, and each of their
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
(including the allocated cost of internal legal services and all disbursements
of internal legal counsel) for any Indemnitee, (collectively, the "Indemnified
Liabilities") incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the transactions contemplated hereby, (ii) any Loan or the use of the
proceeds therefrom, (iii) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and non-appealable judgement to have resulted from the gross negligence, willful
misconduct or unlawful act of such Indemnitee. If any action, suit or proceeding
arising from any of the foregoing is brought against the Administrative Agent,
any Bank or any other Person indemnified or intended to be indemnified pursuant
to this Section 11.5 the Company will resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel designated
by the Company (which counsel shall be reasonably satisfactory to the Person or
Persons indemnified or intended to be indemnified). The agreements in this
Section 11.5(a) shall survive payment of all other Obligations and the
termination of this Agreement.
(b) To the extent permitted by applicable law, the Company
shall not assert, and hereby waives, any claim against any Indemnitee, and each
Bank, and to the extent that a Bank may bind a related Indemnitee, each
Indemnitee shall not assert and waives any claim against the Company, in each
case, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the transactions contemplated hereby, any Loan
or the use of the proceeds thereof. The agreements in this Section 11.5(b) shall
survive payment of all other Obligations for a period of two years.
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<PAGE> 81
XI.6 Payments Set Aside. To the extent that the Company makes a
payment to the Administrative Agent or the Banks, or the Administrative Agent or
the Banks exercise their right of set-off, and such payment or the proceeds of
such set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent to
the extent such amount had been previously paid to such Bank.
XI.7 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent and each Bank.
XI.8 Assignments, Participations, etc. (a) Any Bank may, with the
written consent of the Company at all times other than during the existence of
an Event of Default and the Administrative Agent, which consents shall not be
unreasonably withheld, at any time assign and delegate to one or more Eligible
Assignees (provided that no written consent of the Company, the Administrative
Agent shall be required in connection with any assignment and delegation by a
Bank to another Bank or to an Eligible Assignee that is an Affiliate of such
assigning Bank) (each an "Assignee") all, or any ratable part of all, of the
Loans, the Commitments and the other rights and obligations of such Bank
hereunder, in a minimum amount of $5,000,000; provided, however, that the
Company and the Administrative Agent may continue to deal solely and directly
with such Bank in connection with the interest so assigned to an Assignee until
(i) written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Company and the Administrative Agent by such Bank and the Assignee;
(ii) such Bank and its Assignee shall have delivered to the Company and the
Administrative Agent an Assignment and Acceptance substantially in the form of
Exhibit E ("Assignment and Acceptance") together with any Note or Notes subject
to such assignment and (iii) the assignor Bank or Assignee has paid to the
Administrative Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Administrative Agent
notifies the assignor Bank that it has received (and, if required, the
Administrative Agent and the Company has each provided its consent with respect
to) an executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan
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<PAGE> 82
Documents have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Documents.
(c) Within five Business Days after its receipt of notice by
the Administrative Agent that it has received an executed Assignment and
Acceptance and payment of the processing fee, (and provided that it consents to
such assignment in accordance with subsection 11.8(a)), the Company shall, if
requested by the Administrative Agent, execute and deliver to the Administrative
Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and,
if the assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held by
such Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) The Administrative Agent shall maintain at its address set
forth in accordance with Section 11.2 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Banks and the Commitments of, and principal amount of the
Loans owing to, each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Company, the Administrative Agent and the Banks may treat each
Person whose name is currently recorded in the Register as a Bank hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Company or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an assignee representing that it is an Eligible
Assignee, together with any Note or Notes subject to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit E, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company.
(f) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Loans, the Commitment of that Bank and the other
interests of that Bank (the " Originating Bank") and under the Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company and the
Administrative Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under and the Loan Documents, and (iv) no Bank shall transfer or
grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver
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<PAGE> 83
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Banks
as described in the first proviso to Section 11.1. In the case of any such
participation, the Participant shall not have any rights under the Loan
Documents, and all amounts payable by the Company hereunder shall be determined
as if such Bank had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
to the extent permitted by law, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.
(g) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law. Notwithstanding the foregoing, no such assignment shall release
the assigning Bank from its obligations hereunder.
XI.9 [Intentionally Omitted].
XI.10 Confidentiality. Each Bank acknowledges that it has executed
an agreement with the Company in substantially the form of Exhibit G (each a
"Bank Confidentiality Agreement") and agrees that it will not provide Evaluation
Material (as defined therein) to prospective assignees, transferees or
participants unless such Person has executed a Bank Confidentiality Agreement
substantially in the form of Exhibit G.
XI.11 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists pursuant to Section 9.1(a) or the
Loans have been accelerated, each Bank is authorized at any time and from time
to time, without prior notice to the Company, any such notice being waived by
the Company to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Bank to or for
the credit or the account of the Company against any and all Obligations owing
to such Bank, now or hereafter existing, irrespective of whether or not the
Administrative Agent or such Bank shall have made demand under this Agreement or
any Loan Document and although such Obligations may be contingent or unmatured.
Each Bank agrees promptly to notify the Company and the Administrative Agent
after any such set-off and application made by such Bank; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.
XI.12 Intentionally Omitted.
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<PAGE> 84
XI.13 Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Administrative Agent and the Company in writing of any changes
in the address to which notices to the Bank should be directed, of addresses of
any Lending Office, of payment instructions in respect of all payments to be
made to it hereunder and of such other administrative information as the
Administrative Agent shall reasonably request.
XI.14 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
XI.15 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
XI.16 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Administrative Agent and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
XI.17 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK; PROVIDED THAT THE ADMINISTRATIVE AGENT AND THE BANKS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE
ADMINISTRATIVE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
COMPANY, THE ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY WAIVES TO THE EXTENT
NOT PROHIBITED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE
ADMINISTRATIVE AGENT AND THE BANKS EACH WAIVE TO THE EXTENT NOT PROHIBITED BY
LAW, PERSONAL SERVICE OF ANY
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SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
XI.18 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE
ADMINISTRATIVE AGENT WAIVE TO THE EXTENT NOT PROHIBITED BY LAW, THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE. THE COMPANY, THE BANKS AND
THE ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
XI.19 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Administrative Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
CITGO PETROLEUM CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 87
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 88
ROYAL BANK OF CANADA,
as Syndication Agent and as a Bank
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 89
THE BANK OF NEW YORK,
as Syndication Agent and as a Bank
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 90
CHASE MANHATTAN BANK,
as Co-Agent and as a Bank
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 91
THE BANK OF TOKYO-MITSUBISHI, LTD.
as Co-Agent and as a Bank
By:
--------------------------------------
Michael G. Meiss
Vice President & Manager
<PAGE> 92
BANQUE NATIONALE DE PARIS,
as Co-Agent and as a Bank
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 93
THE FUJI BANK, LIMITED - HOUSTON AGENCY,
as Co-Agent and as a Bank
By:
--------------------------------------
Jacques Azagury
Vice President & Manager
<PAGE> 94
ABN AMRO BANK, N.V.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 95
BANKBOSTON, N.A.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 96
THE FIRST NATIONAL BANK OF CHICAGO
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 97
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 98
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By:
--------------------------------------
Paul K. Carter
Vice President
<PAGE> 99
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH
By:
--------------------------------------
Paul K. Carter
Vice President
<PAGE> 100
NATIONSBANK, N.A.
By:
--------------------------------------
Denise A. Smith
Title:
-----------------------------------
<PAGE> 101
CITIBANK, N.A.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 102
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 103
SUNTRUST BANK, ATLANTA
By:
--------------------------------------
Todd Davis
Assistant Vice President
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 104
BANK AUSTRIA AKTIENGESELLSCHAFT -
NEW YORK BRANCH
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 105
THE NORTHERN TRUST COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 106
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
By:
--------------------------------------
Denise L. Maltby
Senior Vice President
<PAGE> 107
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 108
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- -----
<S> <C> <C>
Bank of America NT & SA $ 17,045,454.57 11.36%
The Bank of New York $ 13,636,363.64 9.09%
Royal Bank of Canada $ 13,636,363.64 9.09%
The Chase Manhattan Bank $ 9,545,454.55 6.36%
The Bank of Tokyo-Mitsubishi Limited $ 9,545,454.55 6.36%
Banque Nationale de Paris $ 9,545,454.55 6.36%
The Fuji Bank, Limited $ 9,545,454.55 6.36%
ABN AMRO Bank, N.V. $ 5,454,545.45 3.64%
BankBoston $ 5,454,545.45 3.64%
The First National Bank of Chicago $ 5,454,545.45 3.64%
The Industrial Bank of Japan, Limited $ 5,454,545.45 3.64%
National Westminister Bank, PLC $ 5,454,545.45 3.64%
NationsBank $ 5,454,545.45 3.64%
Citibank $ 5,454,545.45 3.64%
DG Bank $ 5,454,545.45 3.64%
SunTrust $ 5,454,545.45 3.64%
West LB $ 5,454,545.45 3.64%
Bank Austria $ 5,454,545.45 3.64%
Northern Trust $ 4,090,909.09 2.73%
Bank of Oklahoma $ 3,409,090.91 2.27%
TOTAL $ 150,000,000.00 100.00%
</TABLE>
<PAGE> 109
SCHEDULE 5.1
Qualification as a Foreign Corporation
Texas
Louisiana
Oklahoma
New York
<PAGE> 110
SCHEDULE 6.5
LITIGATION
<PAGE> 111
SCHEDULE 6.13
EXPECTED MATERIAL ADVERSE EFFECTS
None
<PAGE> 112
SCHEDULE 6.14
ENVIRONMENTAL MATTERS
None
<PAGE> 113
SCHEDULE 6.17
SUBSIDIARIES
<PAGE> 114
SCHEDULE 11.2
BANK OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
COMPANY ADDRESS
CITGO PETROLEUM CORPORATION
One Warren Place
Tulsa, Oklahoma 74102
Attention:
Geoffry Reid
Telephone: (918) 495-5185
Facsimile: (918) 495-5492
BANKS AND AGENTS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
Bank of America National Trust
and Savings Association
Agency Administration Services #5596
1850 Gateway Blvd, 5th Floor
Concord, California 94520
Attention:
Alexandra Bax
Telephone: (925) 675-8373
Facsimile: (925) 675-8369
with copy to:
Bank of America National
Trust and Savings Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention:
Schedule 11.2 - Page 1
<PAGE> 115
Claire Liu
Telephone: (713) 651-4855
Facsimile: (713) 651-4841
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office:
231 So. LaSalle Street
Chicago, Illinois 60697
Attention:
Ida Rubens
Telephone: (312) 828-5239
Facsimile: (312) 974-9626
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank of America National
Trust and Savings Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention:
Claire Liu
Telephone: (713) 651-4855
Facsimile: (713) 651-4841
THE BANK OF NEW YORK, as
Syndication Agent and as a Bank
Domestic and Offshore Lending Office:
One Wall Street, 19th Floor
New York, New York 10286
Attention:
Kathy D'Elena
Telephone: (212) 635-7550
Facsimile: (212) 635-7923/4
Schedule 11.2 - Page 2
<PAGE> 116
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Bank of New York
Energy Industries Division
One Wall Street, 19th Floor
New York, New York 10286
Attention:
Raymond J. Palmer
Telephone: (212) 635-7834
Facsimile: (212) 635-7924
ROYAL BANK OF CANADA,
as Syndication Agent and as a Bank
Domestic and Offshore Lending Office:
One Financial Square, 24th Floor
New York, New York 10005-3531
Attention:
Danielle Gilles
Telephone: (212) 428-6332
Facsimile: (212) 428-2372
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Royal Bank of Canada
12450 Greenspoint Drive, Suite 1450
Houston, Texas 77060
Attention:
J. Doug Frost
Telephone: (281) 874-5664
Facsimile: (281) 874-0081
Schedule 11.2 - Page 3
<PAGE> 117
CHASE MANHATTAN BANK,
as a Co-Agent and as a Bank
Domestic and Offshore Lending Office:
270 Park Avenue 32nd Floor
New York, New York 10017
Attention:
Tonya Mitchell
Telephone: (212) 552-7206
Facsimile: (212) 552-5777
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Chase Manhattan Bank
2200 Ross Avenue 3rd Floor
Dallas, Texas 75201
Attention:
Donna German
Telephone: (214) 965-2540
Facsimile: (214) 965-2389
THE BANK OF TOKYO-MITSUBISHI, LTD.
Domestic and Offshore Lending Office:
1100 Louisiana Street, Suite 2800
Houston, Texas 77002
Attention:
Nadra Breir
Telephone: (713) 655-3847
Facsimile: (713) 655-3855
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Bank of Tokyo-Mitsubishi, Ltd.
1100 Louisiana, Suite 2800
Houston, Texas 77002
Attention:
Michael G. Meiss
Telephone: (713) 655-3815
Facsimile: (713) 655-3855
Schedule 11.2 - Page 4
<PAGE> 118
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
as a Co-Agent and as a Bank
Domestic and Offshore Lending Office:
333 Clay Street, Suite 3400
Houston, Texas 77002
Attention:
Donna Rose
Telephone: (713) 951-1240
Facsimile: (713) 659-1414
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Banque Nationale de Paris, Houston Agency
717 North Harwood Street, Suite 2630
Dallas, Texas 75201
Attention:
Lloyd G. Cox
Telephone: (214) 969-7388
Facsimile: (214) 969-0060
THE FUJI BANK, LIMITED-HOUSTON AGENCY,
as Co-Agent and as Bank
Domestic and Offshore Lending Office:
One Houston Center, Suite 4100
1221 McKinney
Houston, Texas 77010
Attention:
Jenny Lin
Telephone: (713) 650-7821
Facsimile: (713) 951-0590
Schedule 11.2 - Page 5
<PAGE> 119
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Fuji Bank, Limited-Houston Agency
One Houston Center, Suite 4100
1221 McKinney
Houston, Texas 77010
Attention:
Jacques Azagury
Telephone: (713) 650-7845
Facsimile: (713) 759-0048
ABN AMRO BANK, N.V.
Domestic and Offshore Lending Office:
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 625
Chicago, Illinois 60603
Attention:
Loan Administration
Telephone: (312) 904-8865
Facsimile: (312) 904-6893
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 2805
Chicago, Illinois 60603
Attention:
Credit Administration
Telephone: (312) 904-8835
Facsimile: (312) 904-8840
with copy to:
ABN AMRO North America, Inc.
Three Riverway, Suite 1700
Houston, Texas 77056
Attention:
Michael Nepveux
Telephone: (713) 964-3316
Facsimile: (713) 621-5810
Schedule 11.2 - Page 6
<PAGE> 120
BOSTONBANK, N.A.
Domestic and Offshore Lending Office:
100 Federal Street
Boston, Massachusetts 02110
Attention:
Debra Williams
Telephone: (617) 434-9623
Facsimile: (617) 434-9820
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attention:
Stephen Carll
Telephone: (617) 434-9697
Facsimile: (617) 434-3652
THE FIRST NATIONAL BANK OF CHICAGO
Domestic and Offshore Lending Office:
One First National Plaza
0634, 1FNP, 10
Chicago, Illinois 60670
Attention:
John Beirne
Telephone: (312) 732-3659
Facsimile: (312) 732-4840
Schedule 11.2 - Page 7
<PAGE> 121
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The First National Bank of Chicago
One First National Plaza
0634, 1FNP, 10
Chicago, Illinois 60670
Attention:
John Beirne
Telephone: (312) 732-3659
Facsimile: (312) 732-4840
with copy to:
The First National Bank of Chicago
1100 Louisiana, Suite 3200
Houston, Texas 77002
Attention:
Dixon Schultz
Telephone: (713) 654-7329
Facsimile: (713) 654-7370
THE INDUSTRIAL BANK OF JAPAN, LIMITED
Domestic and Offshore Lending Office:
The Industrial Bank of Japan, Limited
New York Branch
1251 Avenue of the Americas
New York, New York 10020-1104
Attention:
Bob Cummings, Credit Administration
Telephone: (212) 282-4067
Facsimile: (212) 282-4480 or
(212) 282-4250
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Industrial Bank of Japan, Limited
New York Branch
1251 Avenue of the Americas
New York, New York 10020-1104
Attention:
Bob Cummings, Credit Administration
Telephone: (212) 282-4067
Facsimile: (212) 282-4480 or
(212) 282-4250
Schedule 11.2 - Page 8
<PAGE> 122
with copy to:
The Industrial Bank of Japan, Limited
Three Allen Center, Suite 4850
333 Clay Street
Houston, Texas 77002
Attention:
Ms. Jessica Cowan (re: bid notices)
Telephone: (713) 651-9444 ext. 124
Facsimile: (713) 651-9209
Mr. Lynn Williford (other notices)
Telephone: (713) 651-9444 ext. 104
Facsimile: (713) 651-9209
NATIONAL WESTMINSTER BANK PLC., NEW YORK BRANCH
NATIONAL WESTMINSTER BANK PLC., NASSAU BRANCH
Domestic Lending Office:
National Westminster Bank Plc., New York Branch
175 Water Street
New York, New York 10038
Attention:
Evonne Wearing
Telephone: (212) 602-4180
Facsimile: (212) 602-4118
Offshore Lending Office:
National Westminster Bank Plc., Nassau Branch
175 Water Street
New York, New York 10038
Attention:
Evonne Wearing
Telephone: (212) 602-4180
Facsimile: (212) 602-4118
Schedule 11.2 - Page 9
<PAGE> 123
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
National Westminster Bank, Plc.
600 Travis Street, Suite 6070
Houston, Texas 77002
Attention:
Kristi DeMaiolo, Vice President
Telephone: (713) 221-2429
Facsimile: (713) 221-2431
NATIONSBANK, N.A.
Domestic and Offshore Lending Office:
901 Main Street, 14th Floor
Dallas, Texas 75202
Attention:
Betty Canales
Telephone: (214) 508-1225
Facsimile: (214) 508-1215
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
NationsBank, N.A.
901 Main Street, 64th Floor
Dallas, Texas 75202
Attention:
Denise A. Smith
Telephone: (214) 508-1261
Facsimile: (214) 508-1285
CITIBANK, NA
Domestic and Offshore Lending Office:
399 Park Avenue
New York, New York 10043
Attention:
Patrice Williams
Telephone: (302) 894-6068
Facsimile: (302) 894-6120
Schedule 11.2 - Page 10
<PAGE> 124
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
Citibank, N.A.
c/o Citicorp Securities, Inc.
1200 Smith Street, Suite 2000
Houston, Texas 77002
Attention:
Greg Morzano
Telephone: (713) 654-3559
Facsimile: (713) 654-2869
DG BANK DEUTSCHE GENOSSENSCHAFTS BANK, CAYMAN ISLAND BRANCH
Domestic and Offshore Lending Office:
609 Fifth Avenue
New York, New York 10017-1021
Attention:
Mark K. Connelly, Vice President
Telephone: (212) 745-1560
Facsimile: (212) 745-1556/1550
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
DG Bank
609 Fifth Avenue
New York, New York 10017-1021
Attention:
Mark K. Connelly, Vice President
Telephone: (212) 745-1560
Facsimile: (212) 745-1556/1550
Schedule 11.2 - Page 11
<PAGE> 125
SUNTRUST BANK, ATLANTA
Domestic and Offshore Lending Office
25 Park Place, MC-120
Atlanta, Georgia 30303
Attention:
Ernestine Fambrough
Telephone: (404) 581-1612
Facsimile: (404) 575-2730
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
SunTrust Bank, Atlanta
25 Park Place, MC-120
Atlanta, Georgia 30303
Attention:
Todd Davis
Telephone: (404) 658-4917
Facsimile: (404) 827-6270
WESTDEUTSCHE LANDESBANK GIROZENTRALE
Domestic and Offshore Lending Office:
1211 Avenue of the Americas
New York, New York 10036
Attention:
Cheryl Wilson
Telephone: (212) 852-6152
Facsimile: (212) 302-7946
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Westdeutsche Landesbank Girozentrale, New York Branch
1211 Avenue of the Americas
New York, New York 10036
Attention:
Richard R. Newman
Telephone: (212) 852-6120
Facsimile: (212) 852-6307
Schedule 11.2 - Page 12
<PAGE> 126
BANK AUSTRIA AKTIENGESELLSCHAFT- NEW YORK BRANCH
Domestic and Offshore Lending Office:
565 Fifth Avenue
New York, New York 10017
Attention:
Robert Malendez
Telephone: (212) 880-1173
Facsimile: (212) 880-1180
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank Austria AG
565 Fifth Avenue
New York, New York 10017
Attention:
Karen L. Jill
Telephone: (212) 880-1079
Facsimile: (212) 880-1080
THE NORTHERN TRUST COMPANY
Domestic and Offshore Lending Office:
50 S. LaSalle
Chicago, Illinois 60675
Attention:
Linda Honda (re: Loans, Borrowing Notices,
Conversion/Continuation Notices)
Telephone: (312) 444-3532
Facsimile: (312) 630-1566
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Northern Trust Company
50 S. LaSalle B-11
Chicago, Illinois 60675
Attention:
John Burda
Telephone: (312) 444-4575
Facsimile: (312) 444-5055
Schedule 11.2 - Page 13
<PAGE> 127
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
Domestic and Offshore Lending Office:
P.O. Box 2300
Tulsa, Oklahoma 74192
Attention:
Pam Cratin
Telephone: (405) 936-3731
Facsimile: (405) 936-3771
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank of Oklahoma, National Association
One Williams Center, 8th Floor
Tulsa, Oklahoma 74103
Attention:
Robert D. Mattax
Telephone: (918) 588-6217
Facsimile: (918) 588-6880
Schedule 11.2 - Page 14
<PAGE> 128
Exhibit A-2
EXHIBIT A
NOTICE OF BORROWING
Date: _______, [199_] [200_]
To: Bank of America National Trust and Savings Association as
Administrative Agent for the Banks parties to the $150,000,000 Credit
Agreement dated as of May 13, 1998 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") among CITGO
Petroleum Corporation, certain Banks which are signatories thereto and
Bank of America National Trust and Savings Association, as
Administrative Agent
Ladies and Gentlemen:
The undersigned, CITGO Petroleum Corporation (the "Company"), refers to
the Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.3 of the
Credit Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is _________,
19__.
2. The aggregate amount of the proposed Borrowing is $ ______.
(1)
3. The Borrowing is to be comprised of $ _______ of [Base
Rate] [CD Rate] [Offshore Rate] Loans.
4. The duration of the Interest Period for the [CD Rate Loans]
[Offshore Rate Loans] included in the Borrowing shall be [_____ days]
[_____ months].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company
contained in Article VI of the Credit Agreement are true and correct in
all material respects as though made on and as
- --------------
(1) Such amount shall be a minimum of $10,000,000 or, if greater, any
multiple of $1,000,000.
Exhibit A-1
<PAGE> 129
of such date (except to the extent such representations and warranties
relate to an earlier date, in which case they are true and correct in
all material respects as of such date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Borrowing; and
(2)(c) The proposed Borrowing will not cause the aggregate
principal of all outstanding Loans to exceed the Total Commitment.
CITGO PETROLEUM CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- --------------
(2) Need not be included for Term Loan.
Exhibit A-2
<PAGE> 130
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
Date: _______, [199_] [200_]
To: Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks parties to the $150,000,000 Credit
Agreement dated as of May 13, 1998 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") among CITGO
Petroleum Corporation, certain Banks which are signatories thereto and
Bank of America National Trust and Savings Association, as
Administrative Agent
Ladies and Gentlemen:
The undersigned, CITGO Petroleum Corporation (the "Company"), refers to
the Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.4 of the
Credit Agreement, of the [conversion] [continuation] of the Loans specified
herein, that:
1. The Conversion/Continuation Date is _______, [199_][200_].
2. The aggregate amount of the Loans to be [converted]
[continued] is $ ________.
3. The Loans are to be [converted into] [continued as] [CD
Rate] [Offshore Rate] [Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period for
the Loans included in the [conversion] [continuation] shall be [
__days] [ __ months].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the proposed Conversion/Continuation
Date, before and after giving effect thereto and to the application of the
proceeds therefrom:
(1)(a) the representations and warranties of the Company
contained in Article VI of the Credit Agreement (except for Section
6.6) are true and correct in all material respects
- --------------
(1) Need not be included for a conversion into or continuation as Base Rate
Loans.
Exhibit B-1
<PAGE> 131
as though made on and as of such date (except to the extent such
representations and warranties relate to an earlier date, in which case
they are true and correct in all material respects as of such date);
(2)(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [conversion]
[continuation]; and
(3)(c) the proposed [conversion][continuation] will not cause
the aggregate principal of all outstanding Loans to exceed the Total
Commitment.
CITGO PETROLEUM COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
- -------------------
(2) Need not be included for a conversion into or continuation as Base Rate
Loans.
(3) Need not be included for Term Loans.
Exhibit B-2
<PAGE> 132
EXHIBIT C
CITGO PETROLEUM CORPORATION
COMPLIANCE CERTIFICATE
Financial
Statement Date: _______, [199_] [200_]
Reference is made to that certain $150,000,000 Credit Agreement and
that certain $400,000,000 Credit Agreement, each dated as of May 13, 1998 (as
extended, renewed, amended or restated from time to time, collectively, the
"Credit Agreement") among CITGO PETROLEUM CORPORATION, a Delaware corporation
(the "Company"), the several financial institutions from time to time parties to
this Credit Agreement (the "Banks") and Bank of America National Trust and
Savings Association, as administrative agent for the Banks (in such capacity,
the "Administrative Agent"). Unless otherwise defined herein, capitalized terms
used herein have the respective meanings assigned to them in the Credit
Agreement.
The undersigned Responsible Officer of the Company, hereby certifies as
of the date hereof that he/she is the of the Company, and that, as such, he/she
is authorized to execute and deliver this Certificate to the Banks and the
Administrative Agent on the behalf of the Company and its consolidated
Subsidiaries, and that:
1. The ratio of Indebtedness to Capitalization is __________, which
does not exceed .65 to 1.00 which is required by Section 8.2(a).
2. The Net Worth of the Company is _________, which exceeds the minimum
required in Section 8.2(a).
3. The ratio of EBITDA to the Interest Expense for the Computation
Period is ________ which is not less than 3.00 to 1.00 as required by Section
8.2(b).
4. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and conditions (financial or
otherwise) of the Company during the accounting period covered by the attached
financial statements.
5. To the best of the undersigned's knowledge, except as specified on
Schedule 1 attached hereto, the Company, during such period, has observed,
performed or satisfied all of its covenants and other agreements, and satisfied
every condition in the Credit Agreement to be observed, performed
Exhibit C-1
<PAGE> 133
or satisfied by the Company, and the undersigned has no knowledge of any Default
or Event of Default.
6. The following financial covenant analyses and information set forth
on Schedule 2 attached hereto are true and accurate on and as of the date of
this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
_________, [199_][200_].
CITGO PETROLEUM CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Exhibit C-2
<PAGE> 134
SCHEDULE 1
Exceptions
Exhibit C-3
<PAGE> 135
SCHEDULE 2
To the Compliance Certificate
($ in 000's)
<TABLE>
<CAPTION>
<S> <C>
1. Section 8.2(a) Capitalization Ratio:
A. Indebtedness of Company and its Restricted Subsidiaries $__________
B. Net Worth of the Company and its Restricted Subsidiaries $__________
C. Capitalization (A+B) $__________
D. Capitalization (A/C) __________%
Maximum permitted 65%
2. Section 8.2(b) Indebtedness Interest Coverage Ratio:
A. Net Income of the Company and its Restricted Subsidiaries $__________
B. Income Taxes For the Company and its Restricted Subsidiaries $__________
C. Interest Expense for the Company and its Restricted Subsidiaries $__________
D. Depreciation and amortization for the Company and its Restricted Subsidiaries $__________
E. EBITDA (A+B+C+D) $__________
F. EBITDA/Interest Expense (E/C) $__________
Minimum required 3.00%
3. Section 8.2(c) Minimum Net Worth
Net Worth of the Company and its Restricted Subsidiaries $__________
Minimum required:
25% of cumulative Net Income (without allowance for losses) of the Company and its
Restricted Subsidiaries for each Fiscal Quarter ending after December 31, 1997 + $1,750,000 $__________
</TABLE>
Exhibit C-4
<PAGE> 136
EXHIBIT D-1
[FORM OF] OPINION OF COMPANY'S COUNSEL
Page 1 of 1
<PAGE> 137
EXHIBIT D-2
[FORM OF] OPINION OF GENERAL COUNSEL OF COMPANY
Page 1 of 1
<PAGE> 138
EXHIBIT D-3
[FORM OF] OPINION OF COUNSEL FOR PDVSA
Page 1 of 1
<PAGE> 139
EXHIBIT E
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________, [199__] [200 ] is made between
______________________________ (the "Assignor") and __________________________
(the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain $150,000,000
Credit Agreement dated as of May 13, 1998 (as amended, amended and restated,
modified, supplemented or renewed, the "Credit Agreement") among CITGO Petroleum
Corporation, a Delaware corporation (the "Company"), the several financial
institutions from time to time party thereto (including the Assignor, the
"Banks"), and Bank of America National Trust and Savings Association, as
administrative agent for the Banks (the "Administrative Agent"). Any terms
defined in the Credit Agreement and not defined in this Assignment and
Acceptance are used herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor
has committed to making Loans (the "Loans") to the Company in an aggregate
amount not to exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Loans in the aggregate
principal amount of $__________ to the Company] [no Loans are outstanding under
the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part
of the] [all] rights and obligations of the Assignor under the Credit Agreement
in respect of its Commitment, [together with a corresponding portion of each of
its outstanding Loans] in an amount equal to $__________ (the "Assigned Amount")
on the terms and subject to the conditions set forth herein and the Assignee
wishes to accept assignment of such rights and to assume such obligations from
the Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
Exhibit E-1
<PAGE> 140
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
Share") of (A) the Commitment [and the Loans] of the Assignor and (B) all
related rights, benefits, obligations, liabilities and indemnities of the
Assignor under and in connection with the Credit Agreement and the Loan
Documents.
[If appropriate, add paragraph specifying payment to Assignor
by Assignee of outstanding principal of, accrued interest on, and fees with
respect to, Loans assigned.]
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its rights under
Article IV Sections 11.4 and 11.5 of the Credit Agreement to the extent such
rights relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignee's Commitment will be
$__________.
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignor's Commitment will be
$__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the
Administrative Agent a processing fee in the amount specified in Section 11.8(a)
of the Credit Agreement.
Exhibit E-2
<PAGE> 141
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective
Date with respect to the Commitment and Loans shall be for the account of the
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of
the Credit Agreement and the Schedules and Exhibits thereto, together with
copies of the most recent financial statements referred to in Section 7.1 of the
Credit Agreement, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter into
this Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Administrative Agent or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit and legal decisions in taking or not
taking action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be __________, [199__] [200 ] (the
"Effective Date"); provided that the following conditions precedent have been
satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed
and delivered by the Assignor and the Assignee;
(ii) the consent of the Company and the
Administrative Agent if required for an effective assignment of the
Assigned Amount by the Assignor to the Assignee under Section 11.8(a)
of the Credit Agreement shall have been duly obtained and shall be in
full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Assignment and Acceptance;
(iv) the Assignee shall have complied with Section
11.10 of the Credit Agreement (if applicable);
Exhibit E-3
<PAGE> 142
(v) the processing fee referred to in Section 2(b)
hereof and in Section 11.8(a) of the Credit Agreement shall have been
paid to the Administrative Agent; and
(vi) the Assignor shall have assigned and the
Assignee shall have assumed a percentage equal to the Assignee's
Percentage Share of the rights and obligations of the Assignor under
the Credit Agreement (if such agreement exists).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company and the Administrative
Agent for acknowledgment by the Administrative Agent and the Company a Notice of
Assignment substantially in the form attached hereto as Schedule 1.
[6. Administrative Agent. [INCLUDE ONLY IF ASSIGNOR IS ADMINISTRATIVE
AGENT]
(a) The Assignee hereby appoints and authorizes the Assignor
to take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Administrative Agent by the Banks
pursuant to the terms of the Credit Agreement.
[(b) The Assignee shall assume no duties or obligations held
by the Assignor in its capacity as Administrative Agent (as the case may be)
under the Credit Agreement.]]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Bank, the
Administrative Agent and the Company that under applicable law and treaties no
tax will be required to be withheld by the Bank with respect to any payments to
be made to the Assignee hereunder, (b) agrees to furnish (if it is organized
under the laws of any jurisdiction other than the United States or any State
thereof) to the Administrative Agent and the Company prior to the time that the
Administrative Agent or Company is required to make any payment of principal,
interest or fees hereunder, duplicate executed originals of either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein
the Assignee claims entitlement to the benefits of a tax treaty that provides
for a complete exemption from U.S. federal income withholding tax on all
payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by the Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
Exhibit E-4
<PAGE> 143
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any Lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance and a Bank Confidentiality Agreement have been
duly executed and delivered by it and constitutes the legal, valid and binding
obligation of the Assignor, enforceable against the Assignor in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto. The Assignor makes no representation or warranty in connection with,
and assumes no responsibility with respect to, the solvency, financial condition
or statements of the Company, or the performance or observance by the Company,
of any of its respective obligations under the Credit Agreement or any other
instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is an
Eligible Assignee.
Exhibit E-5
<PAGE> 144
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and
deliver such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Administrative Agent, which may
be required in connection with the assignment and assumption contemplated
hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Assignor and
the Assignee each irrevocably submits to the non-exclusive jurisdiction of any
State or Federal court sitting in the Southern District of New York over any
suit, action or proceeding arising out of or relating to this Assignment and
Acceptance and irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State or Federal court.
Each party to this Assignment and Acceptance hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
Exhibit E-6
<PAGE> 145
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
Exhibit E-7
<PAGE> 146
[ASSIGNEE]
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
Exhibit E-8
<PAGE> 147
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, [199_] [200 ]
Bank of America National Trust
and Savings Association, as Administrative Agent
1850 Gateway Blvd. 5th Floor
Concord, California 94520
Attn: Agency Administration Services #5596
CITGO Petroleum Corporation
One Warren Place
Tulsa, Oklahoma 74102
Attn: Geoffry Reid
Ladies and Gentlemen:
We refer to the $150,000,000 Credit Agreement dated as of May 13, 1998
(as amended, amended and restated, modified, supplemented or renewed from time
to time the "Credit Agreement") among CITGO Petroleum Corporation (the
"Company"), the Banks referred to therein and Bank of America National Trust and
Savings Association, as administrative agent for the Banks (the "Administrative
Agent"). Terms defined in the Credit Agreement are used herein as therein
defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor and all
outstanding Loans made by the Assignor pursuant to the Assignment and Acceptance
Agreement attached hereto (the "Assignment and Acceptance"). Before giving
effect to such assignment the Assignor's Commitment is $___________ and the
aggregate amount of its outstanding Loans is $_____________.
2. The Assignee agrees that, upon receiving the consent of the
Administrative Agent and, if applicable, CITGO Petroleum Corporation to such
assignment, the Assignee will be bound by the
Exhibit E-9
<PAGE> 148
terms of the Credit Agreement as fully and to the same extent as if the Assignee
were the Bank originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Lending Office Address:
Assignee name: ______________________________
Address: ____________________________
Attention: ____________________________
Telephone: (___) ______________________
Telecopier: (___) ______________________
Telex (Answerback): ________________________
(B) Notice Address:
Assignee name: ______________________________
Address: ____________________________
Attention: ____________________________
Telephone: (___) ______________________
Telecopier: (___) ______________________
Telex (Answerback): ________________________
(C) Payment Instructions:
Account No.: _______________________________
At: _______________________________
Reference: _______________________________
Attention: _______________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
Exhibit E-10
<PAGE> 149
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Exhibit E-11
<PAGE> 150
[NAME OF ASSIGNEE]
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
CITGO PETROLEUM CORPORATION
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Exhibit E-12
<PAGE> 151
EXHIBIT F
[FORM OF] PROMISSORY NOTE
$________ May 13, 1998
FOR VALUE RECEIVED, the undersigned, CITGO PETROLEUM CORPORATION, a
Delaware corporation (the "Company"), hereby promises to pay to the order of
(the "Bank") the principal sum of Dollars ($ ) or, if less, the aggregate unpaid
principal amount of all Loans made by the Bank to the Company pursuant to the
$150,000,000 Credit Agreement, dated as of May 13, 1998 (such $150,000,000
Credit Agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being hereinafter called the "Credit Agreement"),
among the Company, the Bank, the other banks parties thereto, the Syndication
Agents (as defined therein), Bank of America National Trust and Savings
Association, as Administrative Agent for the Banks, on the dates and in the
amounts provided in the Credit Agreement. The Company further promises to pay
interest on the unpaid principal amount of the Loans evidenced hereby from time
to time at the rates, on the dates, and otherwise as provided in the Credit
Agreement. Terms defined in the Credit Agreement are used herein with their
defined meanings therein unless otherwise defined herein.
The Bank is authorized to endorse the amount and the date on which each
Loan is made, the maturity date therefor and each payment of principal with
respect thereto on the schedules annexed hereto and made a part hereof, or on
continuations thereof which shall be attached hereto and made a part hereof;
provided however, that any failure to endorse such information on such schedule
or continuation thereof shall not in any manner affect any obligation of the
Company under the Credit Agreement or this Promissory Note (this "Note").
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
Exhibit F Page 1
<PAGE> 152
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
CITGO PETROLEUM CORPORATION
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Exhibit F Page 2
<PAGE> 153
Schedule A to Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
<TABLE>
<CAPTION>
(2) (3)
Amount Amount of (4)
(1) of Base Base Rate Notation
Date Rate Loan Loan Repaid Made By
---- --------- ----------- --------
<S> <C> <C> <C>
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- --------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
- ---------------------- ------------------------ ---------------------------- ------------------------
</TABLE>
Exhibit F Page 3
<PAGE> 154
Schedule B to Note
OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
<TABLE>
<CAPTION>
(2) (3) (4)
Amount Maturity Date Amount (5)
(1) of Offshore of Offshore of Offshore Rate Notation
Date Rate Loan Rate Loan Loan Repaid Made By
---- ----------- ------------- ---------------- --------
<S> <C> <C> <C> <C>
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
</TABLE>
Exhibit F Page 4
<PAGE> 155
Schedule C to Note
CD RATE LOANS AND REPAYMENT OF CD RATE LOANS
<TABLE>
<CAPTION>
(2) (3) (4)
Amount Maturity Amount of (5)
(1) of CD Date of CD CD Rate Notation
Date Rate Loan Rate Loan Loan Repaid Made By
---- --------- ---------- ----------- --------
<S> <C> <C> <C> <C>
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
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- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
</TABLE>
Exhibit F Page 5
<PAGE> 156
EXHIBIT G
CONFIDENTIALITY AGREEMENT
CITGO PETROLEUM CORPORATION
One Warren Place
P.O. Box 3758
Tulsa, Oklahoma 74102
_______, [199_] [200_]
[NAME AND ADDRESS OF BANK OR DESIGNATED BIDDER]
Re: CITGO Petroleum Corporation
Ladies/Gentlemen:
We refer to that certain $400,000,000 Credit Agreement and that certain
$150,000,000 Credit Agreement, each dated as of May 13, 1998, (together with all
amendments, supplements, amendments and restatements and other modifications, if
any, from time to time made thereto, collectively the "Credit Agreement"), by
and between CITGO PETROLEUM CORPORATION (the "Company"), the various financial
institutions party thereto, the Syndication Agents (as defined therein), and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent.
Capitalized terms used but not defined herein have the meanings assigned to such
terms in the Credit Agreement.
You have been furnished certain non-public information relating to the
Company and the Subsidiaries. As a condition to your receiving such information,
the Company requires that you agree to treat confidentially such information and
any other such information which the Company or any of the Company's
representatives or agents may hereafter furnish you or to which you have been or
may in the future be afforded access which is designated by the Company as
confidential (collectively, the "Evaluation Material") and to abstain from
taking certain actions as set forth below.
You agree that the Evaluation Material and all information derived,
directly or indirectly, therefrom shall be held and treated by you and your
directors, officers, agents, employees and persons and attorneys retained and
engaged by you (collectively, your "Agents") in utmost and strictest confidence,
and shall not, except as provided herein, without the prior written consent of
the Company, be disclosed by you or your Agents. You may disclose the Evaluation
Material or portions thereof in summary form to prospective participants in or
assignees of your Commitment, Loans, Letter of Credit Obligations and other
Obligations under the Credit Agreement provided that such persons have
previously entered into a Confidentiality Agreement on terms and conditions
Exhibit G Page 1
<PAGE> 157
substantially similar to those set forth herein. You may disclose Evaluation
Materials to the Administrative Agent and/or any Bank which is party to the
Credit Agreement or any Affiliate which is a Designated Bidder. You agree that
the Company shall be entitled to equitable relief, including injunction, in the
event of any breach of the provisions of this paragraph, in addition to any
right at law to damages.
If you are required in connection with judicial or governmental
proceedings or by Applicable Law (by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand or similar
process) to disclose any Evaluation Material, it is agreed, to the extent
permissible under Applicable Law and to the extent practicable, that you will
provide the Company with prompt notice of such request(s) so that the Company
may seek an appropriate protective order and/or waive your compliance with the
provisions of this Confidentiality Agreement; provided, that you may allow bank
regulators to examine the Evaluation Material. It is further agreed that if, in
the absence of a protective order or the receipt of a waiver hereunder, you are
nonetheless, in the opinion of your counsel, compelled by a court order or other
legal requirement to disclose Evaluation Material or else stand liable for
contempt or suffer other censure or penalty, you may disclose such information
to such tribunal without liability hereunder.
Notwithstanding the foregoing, the following will not constitute
Evaluation Material for purposes of this Confidentiality Agreement:
A. Information which is obtained or was previously obtained by
you or your Agent from a third person who, insofar as is known to you
after reasonable inquiry, is not prohibited from transmitting the
information to you by a contractual, legal or fiduciary obligation to
the Company.
B. Information which is or becomes generally available to the
public other than as a result of a disclosure by you or your Agents.
Whenever possible, each provision of this Confidentiality Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any such provision hereof is held to be prohibited by or
invalid under Applicable Law, such provisions shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions hereof.
This Confidentiality Agreement is intended to replace any previously
executed agreement respecting confidentiality which shall upon the execution
hereof be null and void and of no further force and effect. This Agreement may
be executed in several counterparts, each of which shall be deemed an original,
and all such counterparts shall together constitute one and the same instrument.
Sincerely,
CITGO PETROLEUM CORPORATION
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Exhibit G Page 2
<PAGE> 158
Please acknowledge your understanding of this Confidentiality Agreement and your
willingness to abide by its provisions, by signing below and returning by
telecopy to:
CITGO Petroleum Corporation
Attn: Legal Department
Fax #: (918) 495-5559
[NAME OF BANK OR DESIGNATED BIDDER]
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Date:
----------------------
Exhibit G Page 3
<PAGE> 159
Exhibit H
[Form of]
Certificate of Extension
, [199__] [200__]
Bank of America National Trust and Savings
Association, as Administrative Agent
Agency Administration Services #5596
1850 Gateway Blvd., 5th Floor
Concord, California 94520
Attention: Alexandra Bax
Bank of America National Trust and
Savings Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: Claire Liu
Re: Extension of Transition Date - $150,000,000 Credit Agreement
Gentlemen:
Reference is made to that certain $150,000,000 Credit Agreement dated
as of May 13, 1998 (as from time to time amended, supplemented, restated or
otherwise modified, the "Credit Agreement"), by and among CITGO Petroleum
Corporation (the "Company"), and the Banks from time to time parties thereto,
the Syndication Agents named therein and Bank of America National Trust and
Savings Association, as Administrative Agent. Terms which are defined in the
Credit Agreement and which are used but not defined herein are used herein with
the meanings ascribed to them in the Credit Agreement.
Pursuant to the terms of Section 2.16 of the Credit Agreement, the
Company hereby requests an extension of the Transition Date under the Credit
Agreement for a period of 364 days from the current Transition Date.
To induce the Banks to make such an extension of the current Transition
Date, the Company hereby represents, warrants, acknowledges, and agrees to and
with the Administrative Agent and each Bank that:
(a) The representations and warranties of the Company contained in
Article VI of the Credit Agreement are true and correct in all material respects
as though made on and as of the date
Exhibit H Page 1
<PAGE> 160
hereof (except to the extent such representations and warranties relate to an
earlier date, in which case they are true and correct in all material respects
as of such date).
(b) No Default or Event of Default has occurred and is continuing, or
would result from such proposed extension of the Transition Date.
The Company agrees that if, prior to the time of the extension of the
current Transition Date requested hereby, any matter certified to herein by it
will not be true and correct at such time as if then made, it will immediately
so notify the Administrative Agent. Except to the extent, if any, that, prior to
the time of the extension of the current Transition Date requested hereby, the
Administrative Agent shall have received written notice from the Company to the
contrary, each matter certified herein shall be deemed once again to be
certified as true and correct as of the date of such extension as if then made.
Each of the Responsible Officers of the Company signing this instrument
hereby certifies that, to the best of his knowledge, the above representations,
warranties, acknowledgments and agreements of the Company are true, correct and
complete.
CITGO PETROLEUM CORPORATION
By:
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Title:
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By:
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Name:
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Exhibit H Page 2
<PAGE> 1
EXHIBIT 10.23
===============================================================================
$400,000,000
CREDIT AGREEMENT
DATED AS OF MAY 13, 1998
AMONG
CITGO PETROLEUM CORPORATION
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT
THE BANK OF NEW YORK
AND
ROYAL BANK OF CANADA,
AS SYNDICATION AGENTS
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANCAMERICA ROBERTSON STEPHENS
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE I DEFINITIONS...................................................................................1
1.1 Certain Defined Terms................................................................1
1.2 Other Interpretive Provisions.......................................................27
1.3 Accounting Principles...............................................................28
ARTICLE II THE CREDITS..................................................................................28
2.1 The Committed Credit................................................................28
2.2 Loan Accounts.......................................................................28
2.3 Procedure for Borrowings of Committed Loans.........................................29
2.4 Conversion and Continuation Elections for Committed Loans...........................30
2.5 [Intentionally Omitted].............................................................31
2.6 Bid Borrowings......................................................................31
2.7 Procedure for Bid Borrowings........................................................32
2.8 Voluntary Termination or Reduction of Commitments...................................35
2.9 Optional Prepayments................................................................35
2.10 General.............................................................................36
2.11 Repayment...........................................................................36
2.12 Interest............................................................................36
2.13 Limitation on Interest..............................................................37
2.14 Fees................................................................................38
2.15 Computation of Fees and Interest....................................................39
2.16 Payments by the Company.............................................................39
2.17 Payments by the Banks to the Administrative Agent...................................40
2.18 Sharing of Payments, Etc............................................................40
ARTICLE III THE LETTERS OF CREDIT; CASH COLLATERAL.......................................................41
3.1 The Letter of Credit Subfacility....................................................41
3.2 Issuance, Amendment and Renewal of Letters of Credit................................42
3.3 Risk Participations, Drawings and Reimbursements....................................44
3.4 Repayment of Participation..........................................................45
3.5 Role of Issuing Banks...............................................................46
3.6 Obligations Absolute................................................................47
3.7 Letter of Credit Fees...............................................................48
3.8 Cash Collateralization..............................................................48
3.9 Uniform Customs and Practice........................................................49
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY.......................................................49
4.1 Net Payments; Tax Exemptions........................................................49
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.2 Illegality..........................................................................50
4.3 Increased Costs and Reduction of Return.............................................51
4.4 Funding Losses......................................................................52
4.5 Inability to Determine Rates........................................................52
4.6 Notice of Claim.....................................................................53
4.7 Certificates of Banks...............................................................53
4.8 Replacement of Certain Banks........................................................53
4.9 Deletion of Certain Banks...........................................................54
4.10 Survival............................................................................54
ARTICLE V CONDITIONS PRECEDENT.........................................................................54
5.1 Conditions of Initial Credit Extension..............................................54
5.2 Conditions to All Credit Extensions, Conversions and Continuations..................57
ARTICLE VI REPRESENTATIONS AND WARRANTIES...............................................................58
6.1 Corporate Existence ; Power; Compliance with Laws...................................58
6.2 Corporate Authorization; No Contravention...........................................59
6.3 Governmental Authorization..........................................................59
6.4 Binding Effect......................................................................59
6.5 Litigation..........................................................................60
6.6 No Default..........................................................................60
6.7 Fire, Strike, Act of God, etc.......................................................60
6.8 Liens...............................................................................60
6.9 ERISA...............................................................................60
6.10 Use of Proceeds; Margin Regulations.................................................61
6.11 Title to Properties.................................................................61
6.12 Taxes...............................................................................61
6.13 Financial Condition.................................................................62
6.14 Environmental Matters...............................................................62
6.15 Regulated Entities..................................................................63
6.16 Copyrights, Patents, Trademarks and Licenses, etc...................................63
6.17 Subsidiaries........................................................................63
6.18 Key Contracts.......................................................................63
6.19 Solvency............................................................................63
6.20 Full Disclosure.....................................................................64
6.21 Addressing the Year 2000 Problem....................................................64
ARTICLE VII AFFIRMATIVE COVENANTS........................................................................64
7.2 Certificates; Other Information.....................................................66
7.3 Notices.............................................................................66
7.4 Preservation of Corporate Existence, Etc............................................67
7.5 Insurance...........................................................................67
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
7.6 Taxes...............................................................................67
7.7 Compliance with Laws................................................................68
7.8 Inspection of Property and Books and Records........................................68
ARTICLE VIII NEGATIVE COVENANTS...........................................................................69
8.1 Negative Covenants Applicable to the Company and
Restricted Subsidiaries.............................................................69
8.2 Financial Covenants.................................................................75
8.3 Negative Covenants Applicable to the Company and
its Unrestricted Subsidiaries.......................................................75
8.4 Designation of Unrestricted Subsidiaries and Restricted Subsidiaries................76
ARTICLE IX EVENTS OF DEFAULT............................................................................76
9.1 Event of Default....................................................................76
9.2 Remedies............................................................................79
9.3 Rights Not Exclusive................................................................80
ARTICLE X THE ADMINISTRATIVE AGENT; ISSUING BANKS......................................................80
10.1 Appointment and Authorization.......................................................80
10.2 Delegation of Duties................................................................80
10.3 Liability of Administrative Agent...................................................80
10.4 Reliance by Administrative Agent....................................................81
10.5 Notice of Default...................................................................81
10.6 Credit Decision.....................................................................82
10.7 Indemnification.....................................................................82
10.8 Agents in Individual Capacity.......................................................83
10.9 Successor Administrative Agent......................................................83
10.10 Withholding Tax.....................................................................84
ARTICLE XI MISCELLANEOUS................................................................................85
11.1 Amendments and Waivers..............................................................85
11.2 Notices.............................................................................86
11.3 No Waiver; Cumulative Remedies......................................................87
11.4 Expenses............................................................................87
11.5 Indemnity; Damage Waiver............................................................87
11.6 Payments Set Aside..................................................................88
11.7 Successors and Assigns..............................................................89
11.8 Assignments, Participations, etc....................................................89
11.9 Designated Bidders..................................................................91
11.10 Confidentiality.....................................................................91
11.11 Set-off.............................................................................91
11.12 Intentionally Omitted...............................................................92
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
11.13 Notification of Addresses, Lending Offices, Etc.....................................92
11.14 Counterparts........................................................................92
11.15 Severability........................................................................92
11.16 No Third Parties Benefited..........................................................92
11.17 Governing Law and Jurisdiction......................................................92
11.18 Waiver of Jury Trial................................................................93
11.19 Entire Agreement....................................................................93
</TABLE>
<PAGE> 6
SCHEDULES
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.1 Qualification as a Foreign Corporation
Schedule 6.5 Litigation
Schedule 6.13 Expected Material Adverse Effects
Schedule 6.14 Environmental Matters
Schedule 6.17 Subsidiaries
Schedule 11.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Company's Counsel
Exhibit D-2 Form of Legal Opinion of Company's General Counsel
Exhibit D-3 Form of Legal Opinion of PDVSA Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F-1 Form of Committed Loan Note
Exhibit F-2 Form of Bid Loan Note
Exhibit G Form of Invitation for Competitive Bids
Exhibit H Form of Competitive Bid Request
Exhibit I Form of Competitive Bid
Exhibit J Form of Designation Agreement
Exhibit K [Reserved]
Exhibit L Form of Confidentiality Agreement
-vi-
<PAGE> 7
$400,000,000
CREDIT AGREEMENT
This $400,000,000 CREDIT AGREEMENT is entered into as of May 13, 1998,
among CITGO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), Royal Bank of Canada and
The Bank of New York, as syndication agents (each a "Syndication Agent" and
collectively, the "Syndication Agents") and Bank of America National Trust and
Savings Association, as Administrative Agent and Bid Agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility with a letter of credit subfacility upon the terms
and conditions set forth in this Agreement; and
WHEREAS, the parties hereto are entering into a separate credit
agreement of even date herewith which provides for revolving loans with an
initial term of 364-days which may, on the conditions set forth therein,
convert to term loans (the "$150,000,000 Credit Agreement");
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
I.1 Certain Defined Terms. The following terms have the following
meanings:
"$150,000,000 Credit Agreement" is defined in the second
recital.
"Absolute Rate" has the meaning specified in Section 2.7(c).
"Administrative Agent" means BofA in its capacity as
administrative agent for the Banks hereunder, and any successor
administrative agent arising under Section 10.9.
"Administrative Agent's Payment Office" means the address for
payments set forth in Schedule 11.2 in relation to the Administrative
Agent, or such other address as the Administrative Agent may from time
to time specify.
<PAGE> 8
"Affected Bank" means any Bank claiming compensation under
Section 4.1 or Section 4.3 and any Bank which has determined that it
is unlawful to maintain Offshore Rate Loans pursuant to Section 4.2.
"Affiliate" means, as to any Person, (a) any other Person
which, directly or indirectly, is in control of, is controlled by, or
is under common control with, such Person or (b) in the case of the
Company or any Subsidiary, any Person who is a director or officer of
such Person or of any Person described in the foregoing clause (a).
For purposes of this definition, "control" (and with correlative
meaning "controlled" and "under common control") of a Person shall
mean (i) the power, direct or indirect, (A) to vote 50% or more of the
securities having ordinary voting power for the election of directors
of such Person or (B) to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract, or otherwise or (ii) the
ownership, direct or indirect, of 10% or more of any class of Voting
Stock of such Person (if such class of Voting Stock is publicly held).
"Agent-Related Persons" means BofA and any successor
administrative agent arising under Section 10.9, each Syndication
Agent, the Issuing Banks and the Bid Agent, together with their
respective Affiliates (including, in the case of BofA, the Arranger),
and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
"Agreement" means this Credit Agreement.
"Applicable Facility Fee Rate" means, with respect to each
Bank, for any Calculation Date (as defined below) on which the
Capitalization Ratio is as described in a particular category below,
the percentage per annum set forth below opposite such category:
<TABLE>
<CAPTION>
Percentage Per
Capitalization Ratio Annum
-------------------- -----
<S> <C>
Less than 35% .1000%
Equal to or greater than 35% but less than 40%
.1250%
Equal to or greater than 40% but less than 50%
.1500%
Equal to or greater than 50% but less than 55%
.1750%
Equal to or greater than 55% .2500%
</TABLE>
<PAGE> 9
The Applicable Facility Fee Rate for a particular Fiscal Quarter (the
"Relevant Quarter") (a) shall become effective on the first day of the
Relevant Quarter, (b) shall remain constant throughout all of the
Relevant Quarter and (c) shall be determined on the basis of the
Capitalization Ratio calculated as of the last day of the second
Fiscal Quarter preceding the Relevant Quarter (each such date, a
"Calculation Date").
"Applicable Law" with respect to any Person or matter means
any law, rule, regulation, judgment, order, decree or other
requirement having the force of law relating to such Person or matter
and, where applicable, any interpretation thereof by any Person having
jurisdiction with respect thereto or charged with the administration
or interpretation thereof.
"Applicable Margin" means
(i) with respect to Base Rate Loans, 0%;
(ii) with respect to CD Rate Loans, for any
Calculation Date that the Capitalization Ratio is as described
in a particular category below, the margin, expressed as a
percentage per annum, set forth below opposite such category:
<TABLE>
<CAPTION>
Percentage Per
Capitalization Ratio Annum
-------------------- -----
<S> <C>
Less than 35% .3250%
Equal to or greater than 35% but less than 40% .3750%
Equal to or greater than 40% but less than 50% .4000%
Equal to or greater than 50% but less than 55% .5250%
Equal to or greater than 55% .6250%
</TABLE>
(iii) with respect to Offshore Rate Loans, for any
Calculation Date that the Capitalization Ratio is as described
in a particular category below, the margin, expressed as a
percentage per annum, set forth below opposite such category:
-3-
<PAGE> 10
<TABLE>
<CAPTION>
Percentage Per
Capitalization Ratio Annum
-------------------- -----
<S> <C>
Less than 35% .2000%
Equal to or greater than 35% but less than 40% .2500%
Equal to or greater than 40% but less than 50% .2750%
Equal to or greater than 50% but less than 55% .4000%
Equal to or greater than 55% .5000%
</TABLE>
The margins applicable to the Relevant Quarter (as defined above in
the definition of "Applicable Facility Fee Rate") (i) shall become
effective on the first day of the Relevant Quarter for all new and
existing Loans, (ii) shall remain constant throughout all of the
Relevant Quarter and (iii) shall be determined on the basis of the
Capitalization Ratio calculated as of the Calculation Date.
"Arranger" means BancAmerica Robertson Stephens.
"Assignee" has the meaning specified in subsection 11.8(a).
"Assignment and Acceptance" has the meaning specified in
Section 11.8(a).
"Attorney Costs" means and includes (a) with respect to the
negotiation, syndication, preparation, execution and delivery of this
Agreement and each other Loan Document and any modifications or
waivers related thereto, all reasonable fees and disbursements of any
law firm or other external counsel and the allocated cost of internal
legal services and all disbursements of internal counsel to the extent
that the services performed by internal counsel do not duplicate
services performed by external counsel; provided that invoices for
such fees and disbursements shall be rendered in reasonable detail;
and (b) with respect to each particular matter regarding enforcement
or protection of the rights of any Bank, the Administrative Agent or
Bid Agent in connection with enforcement or protection of its rights
pursuant to this Agreement, all reasonable fees and disbursements of
any law firm or other external counsel (including, if such Person has
not elected to use outside counsel for such particular matter or if
the Company shall have consented, the allocated cost of internal legal
services and all disbursements of internal legal counsel for such
matter).
"Authorized Signatory" means any Responsible Officer or any
other person authorized by a Responsible Officer in compliance with
resolutions of the Board of Directors of the Company to sign Notices
of Borrowing, Notices of Conversion/Continuation and
-4-
<PAGE> 11
Competitive Bid Requests and other documents (except for Loan
Documents) related to and required for any Borrowing or the Issuance
of a Letter of Credit and whose signatures and incumbency have been
certified to the Administrative Agent and each other Bank pursuant to
clause (B) or clause (C) of subsection 5.1.(a)(ii), or in a
certificate delivered to the Administrative Agent replacing or
amending such certificate. Each Bank may conclusively rely on each
such certificate until it shall have received a copy of a certificate
of a Responsible Officer amending, canceling or replacing such
certificate.
"Bank" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BofA, including in its
capacity as an Issuing Bank and shall also include any other Bank
acting in its capacity as Issuing Bank; for purposes of clarification
only, to the extent that BofA or another Bank may have any rights or
obligations in addition to those of the Banks due to its status as an
Issuing Bank, its status as such will be specifically referenced.
"Bank Confidentiality Agreement" has the meaning specified in
Section 11.10.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of
interest in effect for such day as publicly announced from time to
time by BofA in San Francisco, California, as its "reference rate."
(The "reference rate" is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.)
Any change in the reference rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Committed Loan or a Letter of Credit
Advance that bears interest based on the Base Rate.
"Bid Agent" means BofA or any successor in such capacity.
"Bid Borrowing" means a Borrowing hereunder consisting of one
or more Bid Loans made to the Company on the same day by one or more
Banks or Designated Bidders.
"Bid Loan" means a Loan by a Bank or a Designated Bidder to
the Company under Section 2.6.
-5-
<PAGE> 12
"Bid Loan Bank" means, in respect of any Bid Loan, the Bank
or a Designated Bidder making such Bid Loan to the Company.
"Bid Loan Note" means a note substantially in the form of
Exhibit F-2 and delivered to a Bank pursuant to Section 2.2.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of either
Bid Loans or Committed Loans of the same Type made to the Company on
the same day by the Banks (or, in the case of Bid Borrowings, Bid Loan
Banks) under Article II, and, other than in the case of Base Rate
Loans, having the same Interest Period. A Borrowing may be a Committed
Borrowing or a Bid Borrowing.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.3 or Section 2.7.
"Business Day" means (a) in the case of a Business Day which
relates to fees, a day on which the Administrative Agent is open at
its address specified in or pursuant to the provisions of Section 11.2
for the purpose of conducting a commercial banking business, (b) in
the case of a Business Day which relates to an Offshore Rate Loan, a
day on which the requirements of clause (a) of this definition are
met, and, in addition, dealings are carried on in the interbank
eurodollar market and banks are open for business in London, (c) in
the case of a Business Day which relates to a Letter of Credit, a day
on which the relevant Issuing Bank and the Administrative Agent are
each open at their respective addresses specified in or pursuant to
Section 11.2 for the purpose of conducting a commercial banking
business, and (d) in the case of Bid Loans, Base Rate Loans and CD
Rate Loans, a day on which the requirements of clause (a) of this
definition are met and, in addition, banks are open for business in
New York.
"Calculation Date" is defined in the last paragraph of the
definition of "Applicable Facility Fee Rate."
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capitalization" means, at any time, an amount equal to the
sum of:
-6-
<PAGE> 13
(a) Indebtedness of the Company and its Restricted
Subsidiaries;
plus
(b) Net Worth.
"Capitalization Ratio" means, at the end of any Fiscal
Quarter of the Company, the ratio of Indebtedness of the Company and
its Restricted Subsidiaries to Capitalization; provided, however,
there shall be excluded from Indebtedness an amount equal to (a) the
Indebtedness of each Restricted Subsidiary that is not a Wholly-Owned
Subsidiary and whose Indebtedness is not guaranteed by the Company or
any Wholly-Owned Subsidiary multiplied by (b) a fraction, the
denominator of which is the number of shares of outstanding capital
stock of such Restricted Subsidiary and the numerator of which is the
number of shares of capital stock of such Restricted Subsidiary not
held by the Company or another Restricted Subsidiary.
"CARCO" means CITCO Asphalt Refining Company, a New Jersey
general partnership.
"Cash Collateral Account" is defined in Section 3.8.
"CD Rate" means, for any Interest Period with respect to CD
Rate Loans comprising part of the same Borrowing, the rate of interest
(rounded upward to the next 1/100th of 1%) determined as follows:
CD Rate = Certificate of Deposit Rate + Assessment Rate
---------------------------
1.00 - Reserve Percentage
Where:
"Assessment Rate" means, for any day of such
Interest Period, the rate determined by the Administrative
Agent as equal to the annual assessment rate in effect on
such day payable to the FDIC by a member of the Bank
Insurance Fund that is classified as well capitalized and
within supervisory subgroup "A" (or a comparable successor
assessment risk classification within the meaning of 12
C.F.R. Section 327.4) for insuring time deposits at offices of
such member in the United States; or, in the event that the
FDIC shall at any time hereafter cease to assess time
deposits based upon such classifications or successor
classifications, equal to the minimum annual assessment rate
in effect on such day that is payable to the FDIC by
commercial banks (whether or not applicable to any particular
Bank) for insuring time deposits at offices of such banks in
the United States.
-7-
<PAGE> 14
"Certificate of Deposit Rate" means the rate of
interest per annum determined by the Administrative Agent to
be the arithmetic mean (rounded upward to the next 1/100th of
1%) of the rates notified to the Administrative Agent as the
rates of interest bid by two or more certificate of deposit
dealers of recognized standing selected by the Administrative
Agent for the purchase at face value of dollar certificates
of deposit issued by major United States banks, for a
maturity comparable to such Interest Period and in the
approximate amount of the CD Rate Loans to be made, at the
time selected by the Administrative Agent on the first day of
such Interest Period.
"Reserve Percentage" means, for any day of such
Interest Period, the maximum reserve percentage (expressed as
a decimal, rounded upward to the next 1/100th of 1%), as
determined by the Administrative Agent, in effect on such day
(including any ordinary, marginal, emergency, supplemental,
special and other reserve percentages), prescribed by the FRB
for determining the maximum reserves to be maintained by
member banks of the Federal Reserve System with deposits
exceeding $1,000,000,000 for new non-personal time deposits
for a period comparable to such Interest Period and in an
amount of $100,000 or more.
The CD Rate shall be adjusted, as to all CD Rate Loans then
outstanding, automatically as of the effective date of any change in
the Assessment Rate or the Reserve Percentage.
"CD Rate Loan" means a Committed Loan that bears interest
based on the CD Rate.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et
seq.).
"Change of Control" means any condition or occurrence such
that less than 50% of the Voting Stock of any class of the Company
shall be owned, directly or indirectly, by PDVSA.
"CIC" means CITGO Investment Company, a Delaware corporation.
"Cit-Con" means Cit-Con Oil Corporation, a Delaware
corporation.
"CIVESCO" means CITGO Venezuela Supply Company, a Delaware
corporation.
"Closing Date" means the date on which all conditions
precedent set forth in Section 5.1 with respect to the obligation of
each Bank to make its initial Credit Extension are satisfied or waived
by all Banks (or, in the case of subsection 5.1(f), waived by the
Person entitled to receive such payment).
-8-
<PAGE> 15
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in
Section 2.1.
"Committed Borrowing" means a Borrowing hereunder consisting
of Committed Loans of the same Type made to the Company on the same
day by the Banks ratably according to their respective Pro Rata Shares
and, other than in the case of Base Rate Loans, having the same
Interest Periods.
"Committed Loan" has the meaning specified in Section 2.1,
and may be an Offshore Rate Loan, a CD Rate Loan or a Base Rate Loan
(each, a "Type" of Committed Loan).
"Committed Loan Note" means a note substantially in the form
of Exhibit F-1 and delivered to a Bank pursuant to Section 2.2.
"Company" has the meaning specified in the introductory
clause hereto.
"Competitive Bid" means an offer by a Bank or a Designated
Bidder to make a Bid Loan in accordance with Section 2.7(c).
"Competitive Bid Request" has the meaning specified in
Section 2.7(a).
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Computation Period" shall mean, when used in the Compliance
Certificate or in Section 8.2(b) with reference to the calculation as
of the last day of the Fiscal Quarter, the four consecutive Fiscal
Quarters ending on such day.
"Confidentiality Agreement" means that certain letter
agreement dated March 5, 1998 between the Company and BofA.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any written
agreement, undertaking, contract, indenture, mortgage, deed of trust
or other instrument or document to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.4, the Company (a) converts Committed Loans of one Type to
another Type, or (b) continues as Committed Loans of the same Type,
but with a new Interest Period, Loans having Interest Periods expiring
on such date.
-9-
<PAGE> 16
"Corpus Christi Refinery West Plant Lease" means that certain
Sublease Agreement dated as of March 31, 1987 between Champlin
Petroleum Company (now known as Union Pacific Resources Company), as
the Sublessor, and Champlin Refining Company (now known as CRCCLP), as
the Sublessee.
"CPIC" means CITGO Pipeline Investment Company, a Delaware
corporation.
"CRCCLP" means CITGO Refining and Chemicals Company, L.P., a
Delaware limited partnership, formerly known as CITGO Refining and
Chemicals, Inc., the partners in which are CIC and the Company.
"CRCCLP Crude Supply Agreement" means that certain Crude Oil
and Feedstock Supply Agreement, dated as of March 31, 1987, by and
between CRCCLP and Petroleos.
"Credit Extension" means and includes (a) the making of any
Committed Loans and Bid Loans hereunder and (b) the Issuance of any
Letters of Credit hereunder.
"Crude Supply Agreement" means that certain Crude Supply
Agreement, dated as of September 30, 1986, by and between the Company
and Petroleos.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Default Rate" means that rate of interest set forth in
subsection 2.12(c) as applicable to amounts outstanding after such
amounts are due and payable.
"Designated Bidder" means an Affiliate of a Bank that is an
entity described in clause (a) or (b) of the definition of "Eligible
Assignee" and that has become a party hereto pursuant to Section 11.9.
"Designation Agreement" means an agreement substantially in
the form of Exhibit J.
"Disposition" has the meaning set forth in Section
8.2(b)(iv).
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"EBITDA" means, for any period, an amount equal to the sum
of:
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<PAGE> 17
(a) Net Income of the Company and its Restricted Subsidiaries
for such period; plus (b) the aggregate amount of Interest Expense of
the Company and its Restricted Subsidiaries that was deducted for such
period in determining Net Income for such entities; plus (c) the
aggregate amount which was deducted in respect of Federal, state and
local income taxes of the Company and its Restricted Subsidiaries for
such period in determining Net Income for such entities, plus (d) the
aggregate amount which was deducted in respect of depreciation and
amortization in determining Net Income for such entities for such
period.
"Effective Amount" means, without duplication, (a) with
respect to any Committed Loans and Bid Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to
any Borrowings and prepayments or repayments of Committed Loans and
Bid Loans occurring on such date and (b) with respect to any
outstanding Letter of Credit Obligations on any date, the amount of
such Letter of Credit Obligations on such date after giving effect to
any Issuances of Letters of Credit occurring on such date and any
other changes in the aggregate amount of the Letter of Credit
Obligations as of such date, including as a result of any
reimbursements of drawings under any Letters of Credit or any
reductions in the maximum amount available for drawing under Letters
of Credit taking effect on such date.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $100,000,000 at the time
any assignment is made pursuant to Section 11.8; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or
a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000 at the time any
assignment is made pursuant to Section 11.8, provided that such bank
is acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the OECD;
and (c) a Person that is primarily engaged in the business of
commercial lending and that is (i) a Subsidiary of a Bank, (ii) a
Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a
Person of which a Bank is a Subsidiary; provided, however, no Eligible
Assignee shall be a Person who is an Affiliate of any Person in the
petroleum or petroleum products industry, except with the consent of
the Company.
"Environmental Laws" means all federal, state or local laws,
statutes, rules, regulations, ordinances and codes, together with all
administrative orders, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating
to environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
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<PAGE> 18
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.1.
"Excluded Taxes" means, in the case of each Bank and the
Administrative Agent, such taxes (including income taxes or franchise
taxes), which are imposed on or measured by such Bank's or the
Administrative Agent's net income by the United States or its
political subdivisions or the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank or the
Administrative Agent, as the case may be, is organized or maintains a
lending office.
"Exemption Agreement" has the meaning specified in Section
4.1.
"Exemption Representation" has the meaning specified in
Section 4.1.
"Existing Revolving Credit Agreement" means the Second
Amended and Restated Senior Revolving Credit Facility Agreement dated
as of July 31, 1992 (as amended) among the Company, various banks and
other financial institutions from time to time party thereto (the
"Existing Revolving Facility Banks"), BofA as successor agent for the
Existing Revolving Facility Banks, Royal Bank of Canada as senior
co-agent for the Existing Revolving Facility Banks and Chase Bank of
Texas, National Association (formerly Texas Commerce Bank National
Association) and Credit Lyonnais New York Branch as co-agents for the
Existing Revolving Facility Banks.
"Existing Revolving Facility Banks" is defined in the
definition of Existing Revolving Credit Agreement.
"Facility Fee" has the meaning specified in Section 2.14(b).
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00
a.m. (New York City time) on that day by
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<PAGE> 19
each of three leading brokers of Federal funds transactions in New
York City selected by the Administrative Agent.
"Fee Letter" has the meaning specified in subsection 2.14(a).
"Fiscal Quarter" means each fiscal quarter of the Company and
its Subsidiaries.
"Fiscal Year" means each fiscal year of the Company and its
Subsidiaries.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Fronting Fee" has the meaning set forth in Section 3.7(b).
"GAAP" means, as of any date, the generally accepted
accounting principles set forth from time to time in the opinions,
statements and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority
within the U.S. accounting profession), which (except as otherwise
provided in Section 1.3) are applicable to the circumstances as of
such date and have been adopted by the Company in compliance with such
opinions, statements and pronouncements.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
Person owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Hazardous Materials" means materials defined as "hazardous
substances," "hazardous waste" or "hazardous constituents" or any
similar term in (a) CERCLA, (b) RCRA, or (c) any other Federal, state
or local environmental law or regulation.
"Honor Date" has the meaning specified in Section 3.3(b).
"Impermissible Qualification" means, relative to any opinion
by independent public accountants as to any financial statement of the
Company or any of its Subsidiaries or of the Company and any of its
Subsidiaries, any qualification or exception to such opinion:
(a) which is of a "going concern" or a similar
nature;
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<PAGE> 20
(b) which relates to the limited scope of
examination of matters relevant to such financial statement
(other than scope limitations included in the standard form
of opinion utilized by such accountants); or
(c) which relates to the treatment or
classification of any item in such financial statement and
which, as a condition to its removal, would require an
adjustment to such item the effect of which would be to cause
the Company to be in default of any of its obligations under
Section 8.2;
provided, that a qualification to any such opinion rendered in
connection with any consolidated financial statements of the Company
and its Restricted Subsidiaries to the effect that such financial
statement has not been prepared in conformity with GAAP to the extent
GAAP requires consolidating Unrestricted Subsidiaries, shall not be an
Impermissible Qualification.
"Indebtedness" with respect to any Person means, without
duplication, (a) all interest-bearing obligations (including therein
debt instruments issued at a discount from face value) of such Person,
including, to the extent the same are interest-bearing, (i) all
indebtedness for borrowed money of such Person or for the deferred
purchase price of property acquired by, or services rendered to, such
Person, (ii) all indebtedness of such Person created or arising under
any conditional sale or other title retention agreement with respect
to any property acquired by such Person, (iii) all indebtedness for
borrowed money or for the deferred purchase price of property or
services secured by any Lien upon or in any property owned by such
Person whether or not such Person has assumed or become liable for the
payment of such indebtedness for borrowed money; and (iv) at all times
such liability is interest bearing, any finally assessed withdrawal
liability of such Person or a commonly enrolled entity to a
Multiemployer Plan; (b) the present value determined in accordance
with GAAP of all obligations of such Person under leases which shall
have been or should be recorded as capitalized leases in accordance
with GAAP; (c) indebtedness arising under acceptance facilities, any
surety bond as to which such Person is liable for reimbursement and
the undrawn maximum face amount of all outstanding letters of credit
issued for the account of such Person (except to the extent such
letters of credit are issued to secure the payment by such Person of
obligations for Indebtedness otherwise included herein) and, without
duplication, the outstanding amount of all drafts drawn thereunder;
and (d) to the extent not included in clauses (a) through (c) above,
all direct or indirect guarantees by such Person of indebtedness
described in this definition of any other Person; provided, that, for
purposes of this definition, trade payables incurred within the
ordinary course of business and payable within 90 days of the
incurrence thereof shall not be included as Indebtedness.
"Indemnified Liabilities" has the meaning specified in Section
11.5.
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<PAGE> 21
"Indemnitee" has the meaning specified in Section 11.5.
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Expense" means, without duplication, for any
period, the sum of:
(i) aggregate interest expense of the Company and
its Restricted Subsidiaries for such period, as determined in
accordance with GAAP and in any event including, without
duplication, all commissions, discounts and other fees and
charges owed with respect to letters of credit and banker's
acceptances and net costs under Swap Contracts and the
portion of any obligation under capitalized leases allocable
to interest expense;
plus
(ii) interest expense of the Company and its
Restricted Subsidiaries capitalized during such period;
minus
(iii) amortization of capitalized interest expense
of the Company and its Restricted Subsidiaries for such
period.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to
such Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter and each date such Loan is converted into another
Type of Loan, provided, however, that if any Interest Period for a CD
Rate Loan or Offshore Rate Loan (including any Bid Loans of such
Types) exceeds 90 days or three months, respectively, the date that
falls 90 days or three months (as the case may be) after the beginning
of such Interest Period and after each Interest Payment Date
thereafter is also an Interest Payment Date.
"Interest Period" means, (a) as to any Offshore Rate Loan,
the period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date seven or
fourteen days or one, two, three or six months thereafter as selected
by the Company in its
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<PAGE> 22
Notice of Borrowing or Notice of Conversion/Continuation; (b) as to
any CD Rate Loan, the period commencing on the Borrowing Date of such
Loan or on the Conversion/Continuation Date on which the Loan is
converted into or continued as a CD Rate Loan, and ending 30, 60, 90
or 180 days thereafter, as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation and (c) as to any Bid
Loan, the period commencing on the Borrowing Date of such Loan and
ending on a date no less than 1 and no more than 180 days thereafter,
as selected by the Company in its Competitive Bid Request;
provided that:
(i) if any Interest Period would otherwise end
on a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless, in
the case of an Offshore Rate Loan, the result of such
extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end
on the preceding Business Day;
(ii) any Interest Period pertaining to an
Offshore Rate Loan that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall
extend beyond the Stated Termination Date.
"Invitation for Competitive Bids" means a solicitation for
Competitive Bids, substantially in the form of Exhibit G.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal functions
under the Code.
"Issuance Date" has the meaning specified in subsection
3.1(a).
"Issue" means, with respect to any Letter of Credit, to issue
or to extend the expiry of, or to renew or increase the amount of,
such Letter of Credit; and the terms "Issued," "Issuing" and
"Issuance" have corresponding meanings.
"Issuing Bank" means any of BofA or any other Bank which
agrees to Issue a Letter of Credit, in their capacity as issuer of one
or more Letters of Credit hereunder, together with any successor to
any of the foregoing in its capacity as letter of credit issuer
pursuant to Section 11.8 and any replacement letter of credit issuer.
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<PAGE> 23
"Key Contracts" means the Crude Supply Agreement, the
Supplemental Crude Supply Agreement and the CRCCLP Crude Supply
Agreement.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.2, or such other office or offices as such Bank may from time to
time notify the Company and the Administrative Agent in writing.
"Letter of Credit" means any letter of credit Issued by an
Issuing Bank pursuant to Article III.
"Letter of Credit Advance" means each Bank's participation in
any Letter of Credit Borrowing in accordance with its Pro Rata Share
funded pursuant to Section 3.3(d).
"Letter of Credit Application" and "Letter of Credit
Amendment Application" means an application form for Issuance of, and
for amendment of, Letters of Credit as shall at any time be in use at
the relevant Issuing Bank, as such Issuing Bank shall request.
"Letter of Credit Borrowing" means an extension of credit
resulting from a drawing under any Letter of Credit which shall not
have been reimbursed by the Company on the date when made in
accordance with subsection 3.3(b) nor converted into a Borrowing of
Committed Loans under subsection 3.3(c).
"Letter of Credit Commitment" means the commitment of an
Issuing Bank to Issue, and the commitment of the Banks severally to
participate in, Letters of Credit from time to time Issued or
outstanding under Article III, in an aggregate amount not to exceed on
any date the amount of $200,000,000; provided that the Letter of
Credit Commitment is a part of the Total Commitment, rather than a
separate, independent commitment.
"Letter of Credit Obligations" means, without duplication, at
any time the sum of (a) the aggregate undrawn amount of all Letters of
Credit then outstanding, plus (b) all outstanding Letter of Credit
Borrowings.
"Letter of Credit-Related Documents" means Letter of Credit
Applications and Letter of Credit Amendment Applications that have
been executed by the Company pursuant to the Issuance of any Letter of
Credit.
"Lien" means, with respect to any property, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien (statutory or other), charge, easement,
encumbrance, preference, priority or other security or similar
agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such property
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<PAGE> 24
(including any conditional sale or other title retention agreement
having substantially the same economic effect as any of the
foregoing).
"Loan" means an extension of credit by a Bank to the Company
under Article II or pursuant to subsection 3.3(c), and may be a Base
Rate Loan, CD Rate Loan or an Offshore Rate Loan (each, a "Type" of
Loan), and includes any Committed Loan or Bid Loan.
"Loan Documents" means this Agreement, any Notes, the Fee
Letter and the Letter of Credit-Related Documents.
"Majority Banks" means at any time Banks having at least
66-2/3% of the Commitments, or if the Commitments have been
terminated, Banks then holding at least 66-2/3% of the then aggregate
unpaid principal amount of the Loans and the Letter of Credit
Obligations. For purposes of this definition, each Bank shall be
deemed to hold all outstanding Bid Loans of such Bank's Designated
Bidder.
"Margin Stock" means "margin stock" as such term is defined
in Regulation G, T, U or X of the FRB.
"Material Acquisition" means any acquisition where either the
purchase price or the book value of the assets acquired equals or
exceeds the greater of (a) $250,000,000 and (b) 5% of Capitalization.
"Material Adverse Effect" means, relative to any occurrence
of whatever nature (including any adverse determination in any
litigation, arbitration or governmental investigation or proceeding)
and after taking into account insurance coverage and effective
indemnification with respect to such occurrence, a materially adverse
effect on a consolidated basis for the Company and its Subsidiaries in
accordance with GAAP, on:
(a) the consolidated financial condition,
business, operations or properties of the Company and its
Subsidiaries; or
(b) the ability of the Company to perform any of
its payment or other material obligations under this
Agreement or under any other Loan Document.
"Material Term" means:
(a) any provision of the Supplemental Crude
Supply Agreement;
(b) any provision of Section 2.10, 2.11, 3.1,
3.2 or 4.3 of the Crude Supply Agreement, as in effect on the
date hereof;
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<PAGE> 25
(c) any provision of the Crude Supply Agreement
or the CRCCLP Crude Supply Agreement, the proposed amendment,
modification or waiver of which, directly or indirectly,
would materially and adversely affect the price the Company
or any other Restricted Subsidiary shall pay thereunder for
oil and naphtha;
(d) (i) any provision of Section 2.1(b)(i) of
the Crude Supply Agreement, as in effect on the date hereof,
the proposed amendment, modification or waiver of which,
directly or indirectly, would reduce the "Base Volume" (as
defined in the Crude Supply Agreement, as in effect on the
date hereof) Petroleos shall be required to sell, and the
Company shall be required or entitled to purchase, pursuant
to such section;
(ii) any provision of Section 2.1(b)(ii) of
the Crude Supply Agreement, as in effect on the date hereof,
the proposed amendment, modification or waiver of which,
directly or indirectly, would impair the Company's right to
nominate "Incremental Volumes" (as defined in the Crude
Supply Agreement, as in effect on the date hereof) pursuant
to such section; and
(iii) any provision of Section 2.1(b)(iii)
of the Crude Supply Agreement, as in effect on the date
hereof, the proposed amendment, modification or waiver of
which, directly or indirectly, would reasonably be expected
to have a Material Adverse Effect; and
(e) any provision of Section 2.1(a), 2.10, 2.11,
3.1, 3.2 or 5.3 of the CRCCLP Crude Supply Agreement, as in
effect on the date hereof.
"Multiemployer Plan" means any "multiemployer plan" (as that
term is defined under section 3(37) of ERISA) under which the Company
or any Related Person has contributed or with respect to which the
Company or such Related Person may have any liability.
"Net Income" means, for any period,
(a) the gross revenues of the Company and its
Restricted Subsidiaries for such period;
reduced by
(b) the sum (without duplication) of the
following items for such period (to the extent, except in the
case of clause (i), included in gross revenues for such
period):
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<PAGE> 26
(i) operating and non-operating expenses
of the Company and its Restricted Subsidiaries
according to GAAP (including current and deferred
taxes on income, provision for taxes on unremitted
foreign earnings included in such gross revenues and
current additions to reserves but excluding the lower
of cost or market inventory write-downs and write-ups
of current assets);
(ii) all material gains (net of expense
and taxes applicable thereto) arising from the
Disposition of capital assets (i.e., assets other
than current assets);
(iii) all gains arising from the write-up
of assets (other than the write-up of current assets
as a result of the lower of cost or market
adjustments to inventory);
(iv) all equity of the Company or any
Restricted Subsidiary in the unremitted earnings of
any Person in which the Company has a minority
interest;
(v) all earnings of each Person acquired
by the Company or any Restricted Subsidiary through
purchase, merger, consolidation or otherwise for any
year prior to the year of acquisition;
(vi) all deferred credits representing the
excess of equity in any Restricted Subsidiary at the
date of acquisition thereof over the cost of the
investment in such Restricted Subsidiary; and
(vii) the aggregate amount of dividends
paid by all Unrestricted Subsidiaries to the Company
or any Restricted Subsidiary during such period.
"Net Worth" means, for any date, the sum of capital stock,
additional paid-in capital and retained earnings (minus accumulated
deficits) of the Company and its Restricted Subsidiaries, all as shown
on a consolidated balance sheet of the Company and its Restricted
Subsidiaries prepared as of such date.
"Note" means a Committed Loan Note or Bid Loan Note executed
by the Company in favor of a Bank or Designated Bidder and "Notes"
means all Committed Loan Notes and all Bid Loan Notes issued by the
Company.
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<PAGE> 27
"Notice of Borrowing" means a notice in substantially the
form of Exhibit A signed by any Authorized Signatory.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B signed by any Authorized
Signatory.
"Obligations" means at any time all advances, debts,
liabilities, obligations, covenants and duties arising under any Loan
Document then owing by the Company to any Bank (including in its
capacity as Issuing Bank) or to the Administrative Agent.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Administrative Agent as follows:
Offshore Rate = LIBOR
-------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day
for any Interest Period the maximum reserve percentage
(expressed as a decimal, rounded upward to the next 1/100th
of 1%) in effect on such day (whether or not applicable to
any Bank) under regulations issued from time to time by the
FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"LIBOR" means (a) relative to any Interest Period
for Offshore Rate Loans, the rate of interest per annum equal
to the average of the offered quotations appearing on Dow
Jones Market Service (formerly Telerate) Page 3750 (or if
such page shall not be available, any successor or similar
service as may be selected by the Administrative Agent and
the Company) as of 11:00 a.m., London, England time (or as
soon thereafter as practicable), two Business Days prior to
the beginning of such Interest Period, or (b) if none of such
page 3750 nor any successor or similar service is available,
relative to any Interest Period for Offshore Rate Loans, the
rate of interest per annum determined by the Administrative
Agent to be the arithmetic mean (rounded upward to the next
0.01%) of the rates of interest per annum at which dollar
deposits in the approximate amount of the amount of the Loan
to be made or continued as, or converted into, an Offshore
Rate Loan by the Administrative Agent and having a maturity
comparable to such Interest Period are offered in immediately
available funds to the Administrative Agent in the London
interbank market at its request at
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<PAGE> 28
approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as
to all Offshore Rate Loans then outstanding as of the
effective date of any change in the Eurodollar Reserve
Percentage.
"Offshore Rate Loan" means a Loan that bears interest based
on the Offshore Rate that is a rate determined by reference to LIBOR.
"Operational Term" shall mean any provision of the Crude
Supply Agreement or the CRCCLP Crude Supply Agreement concerning the
day-to-day performance of such agreement, including those provisions
customarily waived or modified on a temporary basis in the ordinary
course of business or pursuant to industry custom or practice, and
which is not a Material Term.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws and any
certificate of designation or other instrument relating to the rights
of preferred shareholders of such corporation.
"Participant" has the meaning specified in subsection 11.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"PDVAI" means PDV America, Inc., a Delaware corporation. On
the Closing Date, PDVAI holds all the issued and outstanding stock of
the Company.
"PDVSA" means Petroleos de Venezuela, S.A., a Venezuelan
corporation.
"Permitted Liens" has the meaning specified in subsection
8.1(a).
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Petroleos" means PDVSA Petroleos y Gas, S.A., a Venezuelan
corporation.
"Plan" means any plan described in section 4021(a) of ERISA
and not excluded pursuant to section 4021(b) thereof, under which the
Company or any Related Person to the
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<PAGE> 29
Company has contributed or with respect to which the Company or such
Related Person is liable.
"Principal Properties" means (a) the Company's refinery
located at Lake Charles, Louisiana, and (b) CRCCLP's refinery located
at Corpus Christi, Texas.
"Principal Subsidiary" means Cit-Con, CARCO, CPIC, CRCCLP,
CIC, CIVESCO or any other Subsidiary whose assets have an aggregate
book value exceeding $100,000,000.
"Private Placement Agreement" means that certain Note
Purchase Agreement dated as of November 1, 1991 among the Company and
each of the purchasers named therein relating to the Company's
issuance, and such purchasers' purchase, of the Private Placement
Notes.
"Private Placement Notes" means the senior notes issued by
the Company pursuant to the Private Placement Agreement, consisting of
an issue of $75,000,000 aggregate principal amount of the Company's
8.75% Guaranteed Series A Senior Notes due 1998, an issue of
$200,000,000 aggregate principal amount of the Company's 9.03%
Guaranteed Series B Senior Notes due 2001, and an issue of
$125,000,000 aggregate principal amount of the Company's 9.30%
Guaranteed Series C Senior Notes due 2006.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
Total Commitment of all Banks.
"RCRA" means the Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901 et seq.)
"Receivable" of the Company or CRCCLP means, as at any date
of determination thereof, the unpaid principal portion of the
obligation, as stated on the respective invoice, of any customer of
the Company or CRCCLP to pay money to the Company or CRCCLP in respect
of any services performed by the Company or CRCCLP or inventory
purchased from the Company or CRCCLP net of all credits, rebates and
offsets owed to such customer by the Company or CRCCLP and also net of
all commissions payable by the Company or CRCCLP to third parties (and
for purposes hereof, a credit or rebate paid by check or draft of the
Company or CRCCLP shall be deemed to be outstanding until such check
or draft shall have been debited to the respective account of the
Company or CRCCLP on which such check or draft was drawn).
"Receivables Purchase Facility" means, as to the Company or
CRCCLP any facility providing for the sale, transfer, conveyance,
lease or assignment, with or without recourse, of the Receivables of
such Person.
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<PAGE> 30
"Recipient" has the meaning specified in Section 4.1.
"Register" has the meaning specified in Section 11.8(d).
"Related Person" with respect to any Person means any other
Person which, together with such Person, is under common control as
described in section 414 of the Code.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Requirement of Law" means, as to any Person, any law,
treaty, rule, regulation, judgment or order of a Governmental
Authority or other requirement having the force of law, in each case
applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject and any
interpretation thereof by any Person having jurisdiction with respect
thereto or charged with the administration or interpretation thereof.
"Responsible Officer" means the President, the Chief
Financial Officer, the Treasurer, the Controller or any Assistant
Treasurer of the Company the signatures of whom, in each case, have
been certified to the Administrative Agent and each other Bank
pursuant to clause (B) of subsection 5.1(a)(ii), or in a certificate
delivered to the Administrative Agent replacing or amending such
certificate. Each Bank may conclusively rely on the each certificate
so delivered until it shall have received a copy of a certificate from
the Secretary or an Assistant Secretary of the Company amending,
canceling or replacing such certificate.
"Restricted Subsidiary" means any Subsidiary other than (i)
any Unrestricted Subsidiary and (ii) any Subsidiary any of whose
Voting Stock or other equity interests (as appropriate) shall at the
time be owned by one or more Unrestricted Subsidiaries. "Restricted
Subsidiary" may include Subsidiaries which were formerly Unrestricted
Subsidiaries but have been designated as Restricted Subsidiaries
pursuant to the provisions of Section 8.4.
"Risk Participation Fee" means the fee payable pursuant to
Section 3.7 of this Agreement.
"Sale Leaseback Transaction" means a transaction or series of
transactions pursuant to which the Company or any Subsidiary shall
sell or transfer to any Person (other than the Company or a
Subsidiary) any Principal Property, whether now owned or hereafter
acquired, and, as part of the same transaction or series of
transactions, the Company or such Subsidiary shall rent or lease as
lessee (other than pursuant to a Capital Lease), or similarly acquire
the right to possession or use of, such Principal Property.
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"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Stated Termination Date" means the date that is five
calendar years after the date of this Agreement.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
50% of the Voting Stock or other equity interests (in the case of
Persons other than corporations), is, at the time, owned or controlled
directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof; provided that
Lake Charles Pipeline Company, a Delaware corporation, shall be deemed
not to be a Subsidiary. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"Supplemental Crude Supply Agreement" means that certain
Supplemental Crude Supply Agreement, dated as of September 30, 1986,
by and between the Company and Petroleos.
"Swap Contract" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to
any single transaction) that is an interest rate swap agreement, basis
swap, forward rate agreement, commodity swap, commodity option, equity
or equity index swap or option, bond option, interest rate option,
forward foreign exchange agreement, rate cap, collar or floor
agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or any other, similar agreement
(including any option to enter into any of the foregoing).
"Syndication Agent" means each of Royal Bank of Canada and
The Bank of New York and the successors of each in such capacity.
"Synthetic Lease" means a lease designed to have the
characteristics of a loan for federal income tax purposes while
obtaining operating lease treatment for financial accounting purposes.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto imposed by any taxing authority, excluding all
Excluded Taxes.
"Termination Date" means the earlier to occur of:
(a) the Stated Termination Date; and
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(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"Total Commitment" at the time any determination thereof is
to be made means the sum of the then Commitments of the Banks.
"Trading Subsidiary" means any Wholly-Owned Restricted
Subsidiary which, at the time of any determination thereof, is the
assignee of the rights of the Company under the Crude Supply Agreement
and/or the Supplemental Crude Supply Agreement. The Trading Subsidiary
on the date hereof is CIVESCO.
"Type" has the meaning specified in the definition of "Loan."
"Unfunded Vested Liability" means, relative to any Plan,
including any Multiemployer Plan, at any time, the excess (if any) of
(a) the present value of all vested nonforfeitable benefits under such
Plan or such Multiemployer Plan, as the case may be, over (b) the fair
market value of all Plan assets or Multiemployer Plan assets, as the
case may be, allocable to such benefits, all determined as of the then
most recent valuation date for such Plan or such Multiemployer Plan,
as the case may be, but only to the extent that such excess represents
a potential liability of the Company to the PBGC, such Plan or such
Multiemployer Plan under Title IV of ERISA.
"United States" and "U.S." each means the United States of
America.
"Unrestricted Subsidiary" means any Subsidiary which is
listed as such on Schedule 6.17 or which has hereafter been designated
as an Unrestricted Subsidiary pursuant to the provisions of Section
8.4. "Unrestricted Subsidiary" shall not include any former
Unrestricted Subsidiary (whether or not listed as such on Schedule
6.17) which, at the time in question, is a duly designated Restricted
Subsidiary pursuant to the provisions of Section 8.4.
"Voting Stock" means, with respect to any corporation, any
class of shares of stock of such corporation having general voting
power under ordinary circumstances to elect a majority of the board of
directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency).
"Welfare Plan" means a "welfare plan" as such term is defined
in section 3(1) of ERISA.
"Wholly-Owned" means, with respect to any Subsidiary that,
except for directors' qualifying shares required by law, 100% of the
capital stock of such Subsidiary of each class
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having ordinary voting power, and 100% of the capital stock of such
Subsidiary of every other class, in each case, at the time as of which
any determination is being made, is owned, beneficially and of record,
by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
"Year 2000 Problem" means any significant risk that computer
hardware or software used in the Company's or its Subsidiaries'
businesses or operations will not, in the case of dates occurring or
time periods ending after December 31, 1999, function at least as
effectively as in the case of dates and time periods occurring prior
to December 31, 1999.
I.2 Other Interpretive Provisions. (a) The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
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(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the
Administrative Agent, the Company and the other parties, and are the products
of all parties. Accordingly, they shall not be construed against the Banks or
the Administrative Agent merely because of the Administrative Agent's or Banks'
involvement in their preparation.
I.3 Accounting Principles. Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied provided, that such determinations
and computations with respect to financial covenants and ratios hereunder,
shall be made, in accordance with GAAP as in effect on the date hereof.
ARTICLE II
THE CREDITS
II.1 The Committed Credit. Each Bank severally agrees, on the terms
and conditions set forth herein, to make loans to the Company (each such loan,
a "Committed Loan") from time to time on any Business Day during the period
from the Closing Date to the Termination Date, in an aggregate amount not to
exceed at any time outstanding the amount set forth on Schedule 2.1 (such
amount as the same may be reduced under Section 2.8 or as a result of one or
more assignments under Section 11.8, the Bank's "Commitment"); provided,
however, that, after giving effect to any Borrowing of Committed Loans, the
incurrence or repayment of any other Loans and the issuance and expiry of any
Letters of Credit, without duplication, the Effective Amount of all outstanding
Committed Loans and Bid Loans plus the Effective Amount of all Letter of Credit
Obligations shall not at any time exceed the Total Commitment; and provided
further, that (a) the Effective Amount of any Bank's Committed Loans plus (b)
the participation of such Bank in the Effective Amount of all Letter of Credit
Obligations, shall not at any time exceed such Bank's Commitment. Within the
limits of each Bank's Commitment, and subject to the other terms and conditions
hereof, the Company may borrow under this Section 2.1, prepay under Section 2.9
and reborrow under this Section 2.1.
II.2 Loan Accounts. (a) The Loans made by each Bank or Designated
Bidder, the Letters of Credit issued by each Issuing Bank and the Letter of
Credit Advances of each Bank in respect of a Letter of Credit Borrowing shall
be evidenced by one or more loan accounts or records maintained by such Bank,
Designated Bidder or Issuing Bank, as the case may be, in the ordinary course
of its business. The loan accounts or records maintained by the Administrative
Agent, each Issuing Bank and each Bank or Designated Bidder shall be rebuttable
presumptive evidence of (i) the amount of the Loans made by the Banks and
Designated Bidders to the Company and the interest and payments thereon and
(ii) the amount of each Letter of Credit issued by an Issuing Bank and the
Letter of Credit Borrowings advanced by any Issuing Bank. To the extent not
prohibited by law, any failure so to
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record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Company hereunder to pay any amount owing with respect to
the Loans or any Letter of Credit Obligations.
(b) Upon the request of any Bank or Designated Bidder
made through the Administrative Agent, the Loans made by such Bank or
Designated Bidder and the Letter of Credit Advances of any Bank may be
evidenced by one or more Notes, instead of or in addition to loan accounts.
Each such Bank or Designated Bidder shall endorse on the schedules annexed to
its Note(s) the date, amount and maturity of each Loan made by it, the amount
of each Letter of Credit Advance made by it and the amount of each payment of
principal made by the Company with respect thereto. Each such Bank or
Designated Bidder is irrevocably authorized by the Company to endorse its
Note(s) and each Bank's or Designated Bidder's record shall be rebuttable
presumptive evidence of the items referred to in the preceding sentence;
provided, however, to the extent not prohibited by law, that the failure of a
Bank or Designated Bidder to make, or an error in making, a notation thereon
with respect to any Loan shall not limit or otherwise affect the obligations of
the Company hereunder or under any such Note to such Bank or Designated Bidder.
II.3 Procedure for Borrowings of Committed Loans.
(a Notices of Borrowing. Each Borrowing consisting of
Committed Loans shall be made upon the Company's irrevocable notice delivered
to the Administrative Agent (which notice must be received by the
Administrative Agent prior to 10:00 a.m. (San Francisco time) (x) three
Business Days prior to the requested Borrowing Date, in the case of Offshore
Rate Loans; (y) two Business Days prior to the requested Borrowing Date, in the
case of CD Rate Loans, and (z) on the requested Borrowing Date, in the case of
Base Rate Loans. Each such notice given to the Administrative Agent (which
shall promptly give notice thereof to each Bank), shall be by telecopier or by
telephone (confirmed in writing promptly thereafter by the delivery of a Notice
of Borrowing).
(b Funding Mechanics.
(i The Administrative Agent will promptly notify
each Bank of its receipt of any Notice of Borrowing relating to
Committed Loans and of the amount of such Bank's Pro Rata Share of
that Borrowing.
(ii Each Bank will make the amount of its Pro Rata
Share of each Committed Borrowing available to the Administrative
Agent for the account of the Company at the Administrative Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing
Date requested by the Company in funds immediately available to the
Administrative Agent. The proceeds of all such Loans will then be made
available promptly to the Company by the Administrative Agent at such
office by crediting the account of the Company on the books of the
Administrative Agent (or elsewhere as the Company may from
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time to time instruct the Administrative Agent) not later than 11:30
a.m. (San Francisco time) on the Borrowing Date with the aggregate of
the amounts made available to the Administrative Agent by the Banks
and in like funds as received by the Administrative Agent.
(c After giving effect to any Borrowing, there may not
be more than 10 different Interest Periods in effect in respect of Loans,
including Committed Loans and Bid Loans.
II.4 Conversion and Continuation Elections for Committed Loans.
(a) The Company may, upon irrevocable written notice to the Administrative Agent
in accordance with subsection 2.4(b):
(i elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Loans, to convert any such
Loans (or any part thereof in an amount not less than $5,000,000, or
that is in an integral multiple of $1,000,000 in excess thereof) into
Committed Loans of any other Type; or
(ii elect, as of the last day of the applicable
Interest Period, to continue any Committed Loans having Interest
Periods expiring on such day (or any part thereof in an amount not
less than $5,000,000, or that is in an integral multiple of $1,000,000
in excess thereof);
provided, that if at any time the aggregate amount of CD Rate Loans or Offshore
Rate Loans in respect of any Committed Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than $5,000,000, such CD
Rate Loans or Offshore Rate Loans shall automatically convert into Base Rate
Loans, and on and after such date the right of the Company to continue such
Committed Loans as, and convert such Committed Loans into, Offshore Rate Loans
or CD Rate Loans, as the case may be, shall terminate.
(b The Company shall deliver a Notice of Conversion to
be received by the Administrative Agent not later than 10:00 a.m. (San
Francisco time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Committed Loans are to be converted into
or continued as Offshore Rate Loans; (ii) two Business Days in advance of the
Conversion/Continuation Date, if the Committed Loans are to be converted into
or continued as CD Rate Loans; and (iii) on the Conversion/Continuation Date,
if the Committed Loans are to be converted into Base Rate Loans, specifying:
(A the proposed Conversion/Continuation Date;
(B the aggregate amount of Committed Loans to
be converted or renewed;
(C the Type of Committed Loans resulting from
the proposed conversion or continuation; and
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(D other than in the case of conversions into
Base Rate Loans, the duration of the requested Interest
Period.
(c If upon the expiration of any Interest Period
applicable to CD Rate Loans or Offshore Rate Loans, the Company has failed to
select timely a new Interest Period to be applicable to such CD Rate Loans or
Offshore Rate Loans, as the case may be, or if any Default or Event of Default
then exists, the Company shall be deemed to have elected to convert such CD
Rate Loans or Offshore Rate Loans into Base Rate Loans, in each case, effective
as of the expiration date of such Interest Period.
(d The Administrative Agent will promptly notify each
Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely
notice is provided by the Company, the Administrative Agent will promptly
notify each Bank of the details of any automatic conversion. All conversions
and continuations shall be made ratably according to the respective outstanding
principal amounts of the Committed Loans with respect to which the notice was
given held by each Bank.
(e Unless the Majority Banks otherwise agree, during the
existence of a Default or Event of Default, the Company may not elect to have a
Committed Loan converted into or continued as an Offshore Rate Loan or a CD
Rate Loan.
(f After giving effect to any conversion or continuation
of Committed Loans, there may not be more than ten different Interest Periods
in effect.
II.5 [Intentionally Omitted.]
II.6 Bid Borrowings. In addition to Committed Borrowings pursuant
to Section 2.3, each Bank severally agrees that the Company may, as set forth
in Section 2.7, from time to time request the Banks prior to the Termination
Date to submit offers to make Bid Loans to the Company; provided, however, that
the Banks may, but shall have no obligation to, submit such offers and the
Company may, but shall have no obligation to, accept any such offers, and any
Bank may designate one Designated Bidder to make such offers from time to time
and, if such offers are accepted by the Company, to make such Bid Loans; and
provided, further, that (a) at no time shall the Effective Amount of all Bid
Loans made by all Banks and Designated Bidders, plus the Effective Amount of
all Committed Loans made by all Banks, plus the Effective Amount of all Letter
of Credit Obligations, exceed the Total Commitment and (b) each Bid Loan made
by a Bid Loan Bank shall be a usage of the Total Commitment and so long as such
Bid Loan is outstanding, shall apply against each Bank's Commitment ratably in
accordance with its Pro Rata Share.
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II.7 Procedure for Bid Borrowings.
(a When the Company wishes to request the Banks to submit
offers to make Bid Loans hereunder, they shall transmit to the Bid Agent by
telephone call followed promptly by facsimile transmission a notice with a copy
to the Administrative Agent in substantially the form of Exhibit H signed by an
Authorized Signatory (a "Competitive Bid Request") so as to be received no
later than 11:00 a.m. (San Francisco time) two Business Days prior to the date
of a proposed Bid Borrowing, specifying:
(i the date of such Bid Borrowing, which shall
be a Business Day;
(ii the aggregate amount of such Bid Borrowing,
which shall be a minimum amount of $5,000,000 or in multiples of
$1,000,000 in excess thereof; and
(iii the duration of each Interest Period
applicable thereto, subject to the provisions of the definition of
"Interest Period" herein.
The Company may not request or invite Competitive Bids for more than
three Interest Periods in a single Competitive Bid Request and may not request
Competitive Bids more than twice in any period of five consecutive Business
Days.
(b Upon receipt of a Competitive Bid Request, the
Administrative Agent will determine the availability of Bid Borrowings under
Section 2.6 and the Bid Agent will promptly send to the Banks and Designated
Bidders by facsimile transmission an Invitation for Competitive Bids with a
copy to the Administrative Agent (if the Bid Agent is not the Administrative
Agent). Each Invitation for Competitive Bid transmitted by the Bid Agent shall
constitute an invitation by the Company to each Bank and Designated Bidder to
submit Competitive Bids offering to make the Bid Loans to which such
Competitive Bid Request relates in accordance with this Section 2.7.
(c (i Each Bank and Designated Bidder may at its
discretion submit a Competitive Bid containing an offer or offers to make Bid
Loans in response to any Invitation for Competitive Bids. Each Competitive Bid
must comply with the requirements of this Section 2.7(c) and must be submitted
to the Bid Agent by facsimile transmission not later than 9:00 a.m. (San
Francisco time) on the proposed Borrowing Date; provided that, if the
Administrative Agent is then the Bid Agent, Competitive Bids submitted by the
Administrative Agent (or any Affiliate of the Administrative Agent) in the
capacity of a Bank or a Designated Bidder must be submitted not later than 8:45
a.m. (San Francisco time) on the proposed Borrowing Date, and the
Administrative Agent shall notify the Company thereof promptly.
(ii Each Competitive Bid shall be in substantially
the form of Exhibit I, specifying therein:
(A the proposed Borrowing Date;
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(B the principal amount of each Bid Loan for which
such Competitive Bid is being made, which principal amount
(x) must be $5,000,000 or in multiples of $1,000,000 in
excess thereof, and (y) may not exceed the aggregate
principal amount of Bid Loans for which Competitive Bids were
requested;
(C the Interest Period;
(D the rate of interest per annum (rounded upward
to the next 1/100th of 1%) (the "Absolute Rate") offered for
each Bid Loan; and
(E the identity of the quoting Bank or Designated
Bidder.
A Competitive Bid may contain up to three separate offers by the
quoting Bank or Designated Bidder with respect to each Interest Period
specified in the related Invitation for Competitive Bids. A
Competitive Bid may be made for a principal amount which is in excess
of the quoting Bank's unused Commitment.
(iii Any Competitive Bid shall be disregarded if it:
(A is not substantially in conformity with Exhibit
I or does not specify all of the information required by
subsection (c)(ii) of this Section;
(B contains qualifying, conditional or similar
language;
(C proposes terms other than or in addition to
those set forth in the applicable Invitation for Competitive
Bids; or
(D arrives after the time set forth in Section
2.7(c)(i).
(iv Notwithstanding anything to the contrary
contained in this Section 2.7(c), a Competitive Bid by a Bank may
contain, and will not be disregarded if it does contain, a restriction
on the use of proceeds thereof in connection with a purchase of
securities from such Bank's Affiliate which exercises powers related
to securities; provided that the Company shall disregard such
Competitive Bid unless the Company agrees to be bound by such
restriction (which agreement shall be manifested by accepting such
Competitive Bid).
(d Promptly on receipt, but not later than 9:30 a.m.
(San Francisco time) on the proposed Borrowing Date, the Bid Agent shall notify
the Company of the terms of any Competitive Bid submitted by a Bank or
Designated Bidder that is in accordance with Section 2.7(c) or, if no
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Competitive Bids have been submitted, the absence of any Competitive Bids.
Subject only to the provisions of Section 5.2, any Competitive Bid shall be
irrevocable.
(e Not later than 10:00 a.m. (San Francisco time) on the
proposed Borrowing Date, the Company shall notify the Administrative Agent and
the Bid Agent of its acceptance or non-acceptance of the Competitive Bids of
which it has received notice pursuant to Section 2.7(d) or which have been sent
to it pursuant to Section 2.7(c). The Company shall be under no obligation to
accept any Competitive Bid and may choose to reject all Competitive Bids. In
the case of acceptance, such notice shall specify the Bid Loan lenders and
their respective principal amounts and the aggregate amount of Competitive Bids
for each Interest Period that are accepted. The Company may accept any
Competitive Bid in whole or in part; provided that:
(i the aggregate principal amount of each Bid
Borrowing may not exceed the applicable amount set forth in the
related Competitive Bid Request;
(ii the principal amount of each Bid Borrowing
must be $5,000,000 or in any multiple of $1,000,000 in excess thereof;
(iii acceptance of Competitive Bids may only be
made on the basis of ascending Absolute Rates within each Interest
Period, as the case may be; and
(iv the Company may not accept any Competitive
Bid that is described in Section 2.7(c)(iii) (other than to the extent
permitted pursuant to Section 2.7(c)(iv)) or that otherwise fails to
comply with the requirements of this Agreement.
The Bid Agent shall give the information contained in Section 2.7(d) to the
Administrative Agent for all Competitive Bids accepted.
(f If Competitive Bids are made by two or more Banks or
Designated Bidders with the same Absolute Rates for a greater aggregate
principal amount than the amount in respect of which such Competitive Bids are
permitted to be accepted for the related Interest Period, the principal amount
of Bid Loans in respect of which such Competitive Bids are accepted shall be
allocated by the Bid Agent among such Banks or Designated Bidders in proportion
to the aggregate principal amounts of such Competitive Bids. Determination by
the Bid Agent of the amounts of Bid Loans shall be conclusive in the absence of
manifest error.
(g (i The Bid Agent will promptly notify each Bank
or Designated Bidder having submitted a Competitive Bid if its
Competitive Bid has been accepted or not and, if its offer has been
accepted, of the amount of the Bid Loan or Bid Loans to be made on the
date of the Bid Borrowing together with the Absolute Rate or Rates and
the Interest Period or the Interest Periods with respect thereto.
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(ii Each Bank or Designated Bidder which has
received notice pursuant to Section 2.7(g)(i) that its Competitive Bid
has been accepted shall, subject to the satisfaction of all conditions
precedent, make the amounts of such Bid Loans available to the Bid
Agent for the account of the Company by 1:00 p.m. (San Francisco time)
on the Borrowing Date.
(iii Promptly following each Bid Borrowing, the Bid
Agent shall notify each Bank, each Designated Bidder and the
Administrative Agent (if different from the Bid Agent) of the ranges
of Competitive Bids submitted and the highest and lowest Absolute
Rates accepted for each Interest Period requested by the Company and
the aggregate amount borrowed pursuant to such Bid Borrowing.
(iv From time to time, the Company and the Banks
and the Designated Bidders shall furnish such information to the Bid
Agent as the Bid Agent may request relating to the making of Bid
Loans, including the amounts, Absolute Rates, Borrowing Dates and
maturities thereof, for purposes of the allocation of amounts received
from the Company for payment of all amounts owing hereunder.
II.8 Voluntary Termination or Reduction of Commitments. The Company
may, upon not less than five Business Days' prior notice to the Administrative
Agent, terminate the Commitments, or permanently reduce the Total Commitment in
part by an aggregate minimum amount of $5,000,000 or any multiple of $1,000,000
in excess thereof; unless, after giving effect thereto and to any prepayments
of Loans and Letter of Credit Borrowings made on the effective date thereof,
(a) the Effective Amount of all Loans including Committed Loans and Bid Loans
plus the Effective Amount of all Letter of Credit Obligations would exceed the
amount of the Total Commitment then in effect or (b) the Effective Amount of
all Letter of Credit Obligations then outstanding would exceed the Letter of
Credit Commitment. Once reduced in accordance with this Section, the Total
Commitment may not be increased. Any reduction of the Total Commitment shall be
applied to each Bank according to its Pro Rata Share. All accrued facility fees
to, but not including the effective date of any reduction or termination of the
Total Commitment, shall be paid on the effective date of such reduction or
termination.
II.9 Optional Prepayments. (a) Subject to Section 4.4 and
subsection (b) of this Section 2.9, the Company may, at any time or from time
to time, upon not less than three Business Days' irrevocable notice to the
Administrative Agent, ratably prepay Loans in whole or in part, in minimum
amounts of $5,000,000 or any multiple of $1,000,000 in excess thereof. Such
notice of prepayment shall specify the date and amount of such prepayment and
the Type(s) of Loans to be prepaid. The Administrative Agent will promptly
notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata
Share of such prepayment. If such notice is given by the Company, the Company
shall make such prepayment and the payment amount specified in such notice
shall be due
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and payable on the date specified therein, together with accrued interest to
each such date on the amount prepaid and any amounts required pursuant to
Section 4.4; and
(b Bid Loans may not be voluntarily prepaid, except with
the consent of the Bank or Designated Bidder holding the applicable Bid Loan.
II.10 General. If on any date the Effective Amount of all Committed
Loans and Bid Loans then outstanding plus the Effective Amount of all Letter of
Credit Obligations exceeds the Total Commitment, the Company shall immediately,
and without notice or demand, prepay the outstanding principal amount of the
Committed Loans, Bid Loans and Letter of Credit Borrowings owed by it to the
extent necessary to eliminate such excess over the Total Commitment.
II.11 Repayment.
(a The Company shall repay to the Banks on the
Termination Date the aggregate principal amount of Loans and Letter of Credit
Borrowings outstanding on such date and shall deposit cash collateral in an
amount as required by Section 3.8.
(b The Company shall repay each Bid Loan on the last day
of the relevant Interest Period.
II.12 Interest. (a) Each Committed Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date or, in
the case of Committed Loans made pursuant to Section 3.3(c), the Honor Date, at
a rate per annum equal to the CD Rate, the Offshore Rate or the Base Rate, as
the case may be (and subject to the Company's right to convert to other Types
of Loans under Section 2.4), plus the Applicable Margin. Each Bid Loan shall
bear interest on the outstanding principal amount thereof from the relevant
Borrowing Date to the last day of the applicable Interest Period at a rate per
annum equal to the Absolute Rate.
(b Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any
prepayment of Loans under Section 2.9 for the portion of the Loans so prepaid
and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the
Administrative Agent at the request or with the consent of the Majority Banks.
(c Notwithstanding subsection (a) of this Section, if any
amount of principal of or interest on any Loan, or any other amount payable
hereunder or under any other Loan Document is not paid in full when due
(whether at stated maturity, by acceleration, demand or otherwise), the Company
agrees to pay interest on such unpaid principal or other amount, from the date
such amount becomes due until the date such amount is paid in full, and after
as well as before any entry of
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judgment thereon to the extent permitted by law, payable on demand, at a
fluctuating rate per annum equal to the Base Rate (or in the case of Bid Loans,
the Absolute Rate) plus 2%.
II.13 Limitation on Interest. It is the intention of the parties
hereto to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the obligations of the Company to each Bank under
this Agreement and the other Loan Documents shall be subject to the limitation
that payments of interest shall not be required to the extent that receipt
thereof would be contrary to provisions of law applicable to such Bank limiting
rates of interest which may be charged or collected by such Bank. Accordingly,
if the transactions contemplated hereby would be usurious under any Applicable
Law (including the Federal and state laws of the United States of America, or
of any other jurisdiction whose laws may be mandatorily applicable) with
respect to any Bank, then, in that event, notwithstanding anything to the
contrary in this Agreement, it is agreed as follows:
(a the following provisions of this Section 2.13 shall
govern and control;
(b with respect to the Company, the aggregate of all
consideration that constitutes interest under Applicable Law that is contracted
for, charged or received under this Agreement, or under any of the other Loan
Documents or otherwise in connection herewith or therewith by such Bank, shall
under no circumstances exceed the maximum amount of interest allowed by such
Applicable Law (such maximum lawful interest rate, if any, with respect to such
Bank herein called the "Highest Lawful Rate"), and any excess shall be credited
to the Company by such Bank (or, if such consideration shall have been finally
paid in full, such excess refunded to the Company);
(c all sums paid, or agreed to be paid, to such Bank for
the use, forbearance and detention of the indebtedness of the Company to such
Bank hereunder shall, to the extent permitted by such Applicable Law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full of such indebtedness so that the actual rate
of interest is uniform throughout the full term thereof;
(d if, with respect to such Bank, at any time the
interest provided pursuant to Section 2.12, together with any other fees
payable to such Bank pursuant to this Agreement or any other Loan Document and
deemed interest under such Applicable Law, exceeds that amount which would have
accrued to such Bank at the Highest Lawful Rate, the amount of interest and any
such fees to accrue pursuant to this Agreement or any other Loan Document shall
be limited, for such Bank, notwithstanding anything to the contrary in this
Agreement or any other Loan Document, to that amount which would have accrued
at the Highest Lawful Rate, but any subsequent reductions in the amount of such
interest and/or fees, as applicable, which would otherwise occur shall not
reduce the interest to accrue to such Bank pursuant to this Agreement and the
other Loan Documents below the Highest Lawful Rate until the total amount of
interest accrued pursuant to this Agreement and the other Loan Documents and
such fees deemed to be interest equals the amount of interest which would have
accrued to such Bank if a varying rate per annum equal to the interest provided
pursuant to
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Section 2.12 had at all times been in effect, plus the amount of fees which
would have been received but for the effect of this Section 2.13; and
(e if the total amount of interest paid or accrued for
payment by the Company together with any other fees payable by the Company
pursuant to this Agreement and the other Loan Documents and deemed interest
under Applicable Law, with respect to such Bank pursuant to this Agreement and
the other Loan Documents under the foregoing provisions of this Section 2.13,
is less than the total amount of interest which would have accrued with respect
to the Company if a varying rate per annum equal to the interest provided to
Section 2.12 had at all times been in effect and all fees provided for in this
Agreement and the other Loan Documents had been paid, then the Company agrees
to pay to such Bank, upon demand, an amount equal to the difference between (i)
the lesser of (A) the amount of interest and fees which would have accrued with
respect to the Company if the Highest Lawful Rate had at all times been in
effect, and (B) the amount of interest and fees which would have accrued with
respect to the Company if a varying rate per annum equal to the interest
provided pursuant to Section 2.12 had at all times been in effect and all fees
provided for in this Agreement and the other Loan Documents had been paid and
(ii) the amount of interest and fees paid by the Company in accordance with the
other provisions of this Agreement and the other Loan Documents.
For purposes of Chapter 1D of Article 5069 of the Texas Credit Title,
Title 79, Vernon's Texas Civil Statutes, as amended (formerly Article
5069-1.04, Vernon's Texas Civil Statutes, as amended), to the extent, if any,
applicable to a Bank, the Company agrees that the Highest Lawful Rate shall be
the applicable "weekly ceiling" as defined in said Chapter, provided that such
Bank may also rely, to the extent permitted by applicable laws, on alternative
maximum rates of interest under other laws applicable to such Bank if greater.
Chapter 346 of the Texas Finance Code (which regulates certain revolving credit
accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not
apply to this Agreement or the Notes or any other Loan Document.
II.14 Fees. (a) Arrangement, Agency Fees. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account, and shall pay
an agency fee to the Administrative Agent for the Administrative Agent's own
account, as required by the letter agreement ("Fee Letter") among the Company
and the Arranger and Administrative Agent dated March 20, 1998.
(b Facility Fees. The Company shall pay to the
Administrative Agent for the account of each Bank a facility fee (each a
"Facility Fee") on such Bank's Commitment, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter equal to such Bank's
Commitment in effect for that quarter as calculated by the Administrative
Agent, times the Applicable Facility Fee Rate for such period. The Facility Fee
shall accrue from the Closing Date to the Termination Date and shall be due and
payable quarterly in arrears on the last Business Day of each calendar quarter
commencing on June 30, 1998 through the Termination Date, with the final
payment to be made on the Termination Date; provided that, in connection with
any reduction or termination of Commitments under Section 2.8, the accrued
Facility Fee calculated for the period ending on such
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date shall also be paid on the date of such reduction or termination, with the
following quarterly payment being calculated on the basis of the period from
such reduction or termination date to such quarterly payment date. The Facility
Fees provided in this subsection shall accrue at all times after the
above-mentioned commencement date, including at any time during which one or
more conditions in Article V are not met.
II.15 Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by BofA's
"reference rate" shall be made on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b Each determination of an interest rate by the
Administrative Agent if made in good faith shall be rebuttable presumptive
evidence of the accuracy thereof.
II.16 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Administrative Agent for the account of the Banks at the Administrative
Agent's Payment Office, and shall be made in dollars and in immediately
available funds, no later than the close of business at the Administrative
Agent's Payment Office on the date specified herein; provided, however, the
Company shall use its best efforts to make all such payments at the
Administrative Agent's Payment Office no later than 2:00 p.m.
(San Francisco time).
(b Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the next succeeding day on which
the Administrative Agent is open at its address set forth on Schedule 11.2 for
such purpose, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
(c Unless the Administrative Agent receives notice from the
Company prior to the date on which any payment is due to the Banks that the
Company will not make such payment in full as and when required, the
Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank and Designated Bidder on such due date an
amount equal to the amount then due such Bank or Designated Bidder. If and to
the extent the Company has not made such payment in full to the Administrative
Agent, each Bank or Designated Bidder shall repay to the Administrative Agent
on demand such amount distributed to such Bank or Designated Bidder, together
with interest thereon
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at the Federal Funds Rate for each day from the date such amount is distributed
to such Bank or Designated Bidder until the date repaid.
II.17 Payments by the Banks to the Administrative Agent. (a) Unless
the Administrative Agent receives notice from a Bank on or prior to the Closing
Date or, with respect to any Committed Borrowing after the Closing Date, at
least one Business Day prior to the date of such Borrowing, that such Bank will
not make available as and when required hereunder to the Administrative Agent
for the account of the Company the amount of that Bank's Pro Rata Share of such
Committed Borrowing, the Administrative Agent may assume that each Bank has
made such amount available to the Administrative Agent in immediately available
funds on the Borrowing Date and the Administrative Agent may (but shall not be
so required), in reliance upon such assumption, make available to the Company
on such date a corresponding amount. If and to the extent any Bank shall not
have made its full amount available to the Administrative Agent in immediately
available funds and the Administrative Agent in such circumstances has made
available to the Company such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Administrative
Agent, together with interest at the Federal Funds Rate for each day during
such period. A notice of the Administrative Agent submitted to any Bank with
respect to amounts owing under this subsection (a) shall be conclusive, absent
manifest error. If such amount is so made available, such payment to the
Administrative Agent shall constitute such Bank's Loan on the date of Borrowing
for all purposes of this Agreement. If such amount is not made available to the
Administrative Agent on the Business Day following the Borrowing Date, the
Administrative Agent will notify the Company of such failure to fund and, upon
demand by the Administrative Agent, the Company shall pay such amount to the
Administrative Agent for the Administrative Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the
Committed Loans comprising such Borrowing.
(b The failure of any Bank to make any Committed Loan on
any Borrowing Date shall not relieve any other Bank of any obligation hereunder
to make a Committed Loan on such Borrowing Date, but no Bank shall be
responsible for the failure of any other Bank to make the Committed Loan to be
made by such other Bank on any Borrowing Date.
II.18 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Committed Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its Pro Rata Share, such Bank
shall immediately (a) notify the Administrative Agent of such fact, and (b)
purchase from the other Banks such participations in the Committed Loans made
by them as shall be necessary to cause such purchasing Bank to share the excess
payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion
of (i) the amount of such paying
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Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Company agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 11.10) with respect to such
participation as fully as if such Bank were the direct creditor of the Company
in the amount of such participation. The Administrative Agent will keep records
(which shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
ARTICLE III
THE LETTERS OF CREDIT; CASH COLLATERAL
III.1 The Letter of Credit Subfacility.
(a On the terms and conditions set forth herein (i) each
Issuing Bank agrees, (A) from time to time on any Business Day during the
period from the Closing Date to the Termination Date to issue Letters of Credit
for the account of the Company, and to amend or renew Letters of Credit
previously issued by it, in accordance with subsections 3.2(c), 3.2(d) and
3.2(e), and (B) to honor drafts under the Letters of Credit; and (ii) the Banks
severally agree to participate in Letters of Credit Issued for the account of
the Company; provided, that no Issuing Bank shall be obligated to Issue, and no
Bank shall be obligated to participate in, any Letter of Credit if, as of the
date of Issuance of such Letter of Credit (the "Issuance Date"): (1) the
Effective Amount of all Letter of Credit Obligations plus the Effective Amount
of all Committed Loans and all Bid Loans exceeds the Total Commitment, (2) the
sum of (x) the participation of any Bank in the Effective Amount of all Letter
of Credit Obligations plus (y) the Effective Amount of the Committed Loans of
such Bank exceeds such Bank's Commitment, or (3) the Effective Amount of Letter
of Credit Obligations exceeds the Letter of Credit Commitment. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
ability of the Company to obtain Letters of Credit shall be fully revolving,
and, accordingly, the Company may, during the foregoing period, obtain Letters
of Credit to replace Letters of Credit which have expired or which have been
drawn upon and reimbursed.
(b No Issuing Bank is under any obligation to Issue any
Letter of Credit if: (i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain such
Issuing Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to such Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction over
such Issuing Bank shall prohibit, or request that such Issuing Bank refrain
from, the Issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon such Issuing Bank with respect to such Letter
of Credit any
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restriction, reserve or capital requirement (for which such Issuing Bank is not
otherwise compensated hereunder) not in effect on the Closing Date, or shall
impose upon such Issuing Bank any unreimbursed loss, cost or expense which was
not applicable on the Closing Date and which such Issuing Bank in good faith
deems material to it; (ii) such Issuing Bank has received written notice from
any Bank, the Administrative Agent or the Company, on or prior to the Business
Day prior to the requested date of Issuance of such Letter of Credit, that one
or more of the applicable conditions contained in Article V is not then
satisfied; (iii) the expiry date of any requested Letter of Credit is after the
Stated Termination Date; (iv) any requested Letter of Credit does not provide
for drafts, or is not otherwise, in form and substance acceptable to such
Issuing Bank, or the Issuance of a Letter of Credit shall violate any
applicable policies of such Issuing Bank; provided, however, that clause (iii)
of this subsection 3.1(b) shall not be deemed to prohibit a Letter of Credit
that provides that it shall automatically renew unless the beneficiary thereof
receives notice from the Issuing Bank therefor that such Letter of Credit shall
not be renewed.
III.2 Issuance, Amendment and Renewal of Letters of Credit.
(a Each Letter of Credit shall be issued upon the
irrevocable written request of the Company received by an Issuing Bank (with a
copy sent by the Company to the Administrative Agent) at least three days (or
such shorter time as such Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of issuance. Each such request
for issuance of a Letter of Credit shall be by facsimile, confirmed immediately
in an original writing, in the form of a Letter of Credit Application (with a
copy furnished to the Administrative Agent by the Company), and shall specify
in form and detail satisfactory to the Issuing Bank receiving such Letter of
Credit Application such matters as that Issuing Bank may require. Each Letter
of Credit (i) will be for the account of the Company or the Company and any of
its Subsidiaries, (ii) will be a direct pay, trade or standby letter of credit
to support certain performance or payment obligations of the Company that are
not prohibited by this Agreement and for purposes which are not prohibited by
this Agreement and do not violate any applicable policies of the Issuing Bank
which have not been waived by such Issuing Bank, and (iii) will contain such
terms and provisions as may be customarily required by the Issuing Bank of such
Letter of Credit.
(b At least two Business Days prior to the Issuance of any
Letter of Credit, the Issuing Bank issuing such Letter of Credit will confirm
with the Administrative Agent (by telephone or in writing) that the
Administrative Agent has received a copy of the Letter of Credit Application or
Letter of Credit Amendment Application from the Company and, if not, such
Issuing Bank will provide the Administrative Agent with a copy thereof. Unless
an Issuing Bank has received notice on or before the Business Day immediately
preceding the date such Issuing Bank is to Issue a requested Letter of Credit
from the Administrative Agent (A) directing such Issuing Bank not to issue such
Letter of Credit because such Issuance is not then permitted under subsection
3.1(a) as a result of the limitations set forth in clauses (1) through (3)
thereof; or (B) that one or more conditions specified in Article V are not then
satisfied or waived; then, subject to the terms and conditions hereof,
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such Issuing Bank shall, on the requested date, issue a Letter of Credit for
the account of the Company in accordance with such Issuing Bank's usual and
customary business practices.
(c From time to time while a Letter of Credit is
outstanding and prior to the Termination Date, the Issuing Bank which Issued
such Letter of Credit will, upon the written request of the Company received by
such Issuing Bank (with a copy sent by the Company to the Administrative Agent)
at least three days (or such shorter time as such Issuing Bank may agree in a
particular instance in its sole discretion) prior to the proposed date of
amendment, amend any Letter of Credit issued by it. Each such request for
amendment of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, made in such form as the relevant Issuing
Bank shall require. No Issuing Bank shall be under any obligation to amend any
Letter of Credit if: (A) such Issuing Bank would have no obligation at such
time to Issue such Letter of Credit in its amended form under the terms of this
Agreement; or (B) the beneficiary of any such Letter of Credit does not accept
the proposed amendment to the Letter of Credit.
(d Upon receipt of notice from an Issuing Bank, the
Administrative Agent will promptly notify the Banks of the Issuance of a Letter
of Credit and any amendment thereto.
(e If any outstanding Letter of Credit shall provide that
it shall be automatically renewed unless the beneficiary thereof receives
notice from the Issuing Bank therefor that such Letter of Credit shall not be
renewed, the Issuing Bank with respect to such Letter of Credit shall be
permitted to allow such Letter of Credit to renew, and the Company and the
Banks hereby authorize such renewal; provided that, the final expiry date shall
not be after the Stated Termination Date. No Issuing Bank shall be obligated to
allow such Letter of Credit to renew if such Issuing Bank would have no
obligation at such time to issue or amend such Letter of Credit under the terms
of this Agreement.
(f An Issuing Bank may, at its election (or as required by
the Administrative Agent at the direction of the Majority Banks), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of any Letter of
Credit to be a date not later than the Stated Termination Date.
(g This Agreement shall control in the event of any
conflict or inconsistency with any Letter of Credit-Related Document.
(h Each Issuing Bank will also deliver to the
Administrative Agent, concurrently or promptly following its delivery of a
Letter of Credit, or amendment to a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or
amendment to a Letter of Credit.
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III.3 Risk Participations, Drawings and Reimbursements.
(a Immediately upon the Issuance of each Letter of Credit
in accordance with the terms hereof, each Bank shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing Bank that
Issued such Letter of Credit a participation therein and each drawing
thereunder in an amount equal to the product of (i) the Pro Rata Share of such
Bank, times (ii) the maximum amount available to be drawn under such Letter of
Credit and the amount of such drawing, respectively. For purposes of Sections
2.1 and 3.1(a), each Issuance of a Letter of Credit shall be deemed to utilize
the Commitment of each Bank by an amount equal to the amount of such
participation.
(b In the event of any request for a drawing under a Letter
of Credit by the beneficiary thereof, the Issuing Bank of such Letter of Credit
will promptly notify the Company. In the case of Letters of Credit under which
drawings are payable one or more Business Days after the drawing is made, the
Issuing Bank of such Letter of Credit will give such notice to the Company at
least one Business Day prior to the Honor Date. The Company shall reimburse the
Issuing Bank of a Letter of Credit prior to 10:00 a.m. (San Francisco time), on
each date that any amount is paid by such Issuing Bank pursuant to such Letter
of Credit (each such date with respect to such Issuing Bank, an "Honor Date"),
in an amount equal to the amount so paid by the Issuing Bank. In the event the
Company fails to reimburse such Issuing Bank of a Letter of Credit for the full
amount of any drawing under such Letter of Credit by 10:00 a.m. (San Francisco
time) on the Honor Date, such Issuing Bank will promptly notify the
Administrative Agent and the Administrative Agent will promptly notify each
Bank thereof. By delivery of a Notice of Borrowing and subject to the
satisfaction of the other provisions of Section 5.2, the Company may request
that Committed Base Rate Loans be made by the Banks to be disbursed on the
Honor Date under such Letter of Credit, subject to the amount of the unutilized
portion of the Commitment of each Bank pursuant to Section 2.1. Any notice
given by an Issuing Bank or the Administrative Agent pursuant to this
subsection 3.3(b) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(c Each Bank shall upon any notice from the Administrative
Agent to such Bank pursuant to subsection 3.3(b) make available to the
Administrative Agent for the account of the relevant Issuing Bank an amount in
Dollars and in immediately available funds equal to its Pro Rata Share of the
amount of the drawing. If any Bank so notified fails to make available to the
Administrative Agent for the account of the relevant Issuing Bank the amount of
such Bank's Pro Rata Share of the amount of the drawing by no later than 12:00
noon (San Francisco time) on the Honor Date, then interest payable to such
Issuing Bank on such Letter of Credit shall accrue on such Bank's obligation to
make such payment, from the Honor Date to the date such Bank makes such
payment, at a rate per annum equal to the Federal Funds Rate in effect from
time to time during such period. Upon the payment of its Pro Rata Share of the
amount of the drawing as set forth in this subsection 3.3(c) and the
satisfaction by the Company of the conditions set forth in Section 5.2, each
participating
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Bank shall (subject to subsection 3.3(d)) be deemed to have made a Committed
Loan consisting of a Base Rate Loan to the Company in that amount. The
Administrative Agent will promptly give notice to each Bank of the occurrence
of the Honor Date, but failure of the Administrative Agent to give any such
notice on the Honor Date or in sufficient time to enable any Bank to effect
such payment on such date shall not relieve such Bank from its obligations
under this Section 3.3.
(d Any Letter of Credit Borrowing incurred by the Company
from the Issuing Bank which, in whole or in part, is not converted into
Committed Loans consisting of Base Rate Loans to the Company because of failure
of the Company to deliver a Notice of Borrowing or otherwise satisfy the
conditions set forth in Section 5.2 or for any other reason, shall be due and
payable on demand (together with interest) and shall bear interest at a rate
per annum equal to the Base Rate plus two percent (2%) per annum. Each Bank's
payment to the relevant Issuing Bank pursuant to subsection 3.3(c) shall be
deemed payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a Letter of Credit Advance from such Bank in
satisfaction of its participation obligation under this Section 3.3.
(e) Each Bank's obligation in accordance with this Agreement
to make the Committed Loans or Letter of Credit Advances, as contemplated by
this Section 3.3, as a result of a drawing under a Letter of Credit, shall be
absolute and unconditional and without recourse to any Issuing Bank and shall
not be affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the
relevant Issuing Bank, the Company or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default, an Event of
Default or a Material Adverse Effect; or (iii) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing;
provided, however, that each Bank's obligation to make Committed Loans under
this Section 3.3 is subject to the conditions set forth in Section 5.2.
III.4 Repayment of Participation.
(a) When the Administrative Agent receives (and only if the
Administrative Agent receives), for the account of any Issuing Bank of a Letter
of Credit, immediately available funds from the Company (i) in reimbursement of
any payment made by such Issuing Bank under the Letter of Credit with respect
to which any Bank has paid the Administrative Agent for the account of such
Issuing Bank for such Bank's participation in the Letter of Credit pursuant to
Section 3.3 or (ii) in payment of interest thereon, the Administrative Agent
will pay to each Bank, in the same funds as those received by the
Administrative Agent for the account of such Issuing Bank, the amount of such
Bank's Pro Rata Share of such funds, and the relevant Issuing Bank shall
receive the amount of the Pro Rata Share of such funds of any Bank that did not
so pay the Administrative Agent for the account of such Issuing Bank. If the
Administrative Agent fails to send to any Bank its portion of any payment
timely received by the Administrative Agent hereunder by the close of business
on the day such payment is deemed received pursuant to subsection 2.16(a), the
Administrative Agent shall pay
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to such Bank interest on its portion of such payment from the day such payment
is deemed received by the Administrative Agent until the date such Bank's
portion of such payment is sent to such Bank, at the Federal Funds Rate.
(b) If the Administrative Agent or an Issuing Bank is
required at any time to return to the Company, or to a trustee, receiver,
liquidator, custodian, or any official in any Insolvency Proceeding, any
portion of the payments made by the Company to the Administrative Agent for the
account of such Issuing Bank pursuant to subsection 3.4(a) in reimbursement of
a payment made under the Letter of Credit or interest or fee thereon which have
been remitted to and received by a Bank, such Bank shall, on demand of the
Administrative Agent, forthwith return to the Administrative Agent or the
relevant Issuing Bank the amount of its Pro Rata Share of any amounts so
received which are to be returned by the Administrative Agent or such Issuing
Bank plus interest thereon from the date such demand is made to the date such
amounts are returned by each such Bank to the Administrative Agent or such
Issuing Bank, at a rate per annum equal to the Federal Funds Rate in effect
from time to time.
III.5 Role of Issuing Banks. To the extent not prohibited by law:
(a) Each Bank and the Company agree that, in paying any
drawing under a Letter of Credit, the Issuing Bank which issued such Letter of
Credit shall not have any responsibility to obtain any document (other than any
sight draft, certificates and other documents, if any, expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or delivering any
such document.
(b) No Issuing Bank or any of its correspondents,
participants or assignees shall be liable to any Bank for: (i) any action of
such Issuing Bank taken or omitted in connection herewith at the request or
with the approval of the Banks (including the Majority Banks, as applicable);
(ii) any action taken or omitted in the absence of gross negligence , willful
misconduct or unlawful acts; or (iii) the due execution, effectiveness,
validity or enforceability of this Agreement or any Letter of Credit-Related
Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude the Company from pursuing such rights and remedies as
it may have against the beneficiary or transferee at law or under any other
agreement. No Issuing Bank, and no correspondents, participants or assignees of
an Issuing Bank, shall be liable or responsible for any of the matters
described in clauses (i) through (vii) of Section 3.6; provided, however, that
the Company may have a claim against an Issuing Bank, and such Issuing Bank may
be liable to the Company, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered or incurred by the
Company which are caused by such Issuing Bank's willful misconduct , gross
negligence or unlawful acts (i) in failing to pay under any
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Letter of Credit after the presentation to it by the beneficiary of a sight
draft, certificate(s) and other documents, if any, strictly complying with the
terms and conditions of such Letter of Credit, (ii) in its paying under a
Letter of Credit against presentation of a sight draft, certificate(s) or other
documents not complying with the terms of such Letter of Credit or (iii)
otherwise with respect to the Letters of Credit Issued by it; provided,
however, that (i) the Issuing Bank of a Letter of Credit may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary; and
(ii) the Issuing Bank of a Letter of Credit shall not be responsible for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason, provided that any such instrument
appears on its face to be in order.
III.6 Obligations Absolute. To the extent not prohibited by law,
the obligations of the Company under this Agreement and any Letter of
Credit-Related Document to reimburse an Issuing Bank for a drawing under a
Letter of Credit Issued by such Issuing Bank, and to repay any Letter of Credit
Borrowing and any drawing under a Letter of Credit converted into Committed
Loans, shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other Letter of
Credit-Related Document under all circumstances, including the following: (i)
any lack of validity or enforceability of this Agreement or any Letter of
Credit-Related Document; (ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of the
Company in respect of any Letter of Credit or any other amendment or waiver of
or any consent to departure from all or any of this Agreement or the Letter of
Credit-Related Documents; (iii) the existence of any claim, set-off, defense or
other right that the Company may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank for such
Letter of Credit or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the Letter of
Credit-Related Documents or any unrelated transaction; (iv) any draft, demand,
certificate or other document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect (provided, that such forgery,
fraud, invalidity or insufficiency shall not have been the result of gross
negligence, willful misconduct or unlawful acts of the Issuing Bank, or any of
its officers, employees or agents) or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any Letter
of Credit; (v) any payment by an Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of such Letter of Credit (provided, that such payment shall not
have constituted or resulted from gross negligence, willful misconduct or
unlawful acts of the Issuing Bank, or any of its respective officers, employees
or agents) or any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, or any payment made by the Issuing Bank of a
Letter of Credit under such Letter of Credit to any trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of such Letter of Credit, including any arising in connection with
any
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Insolvency Proceeding; (vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any other guarantee, for all or any of the obligations of the Company in
respect of any Letter of Credit; or (vii) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, a Company or a
guarantor; provided, that such other circumstance or happening shall not have
been the result of gross negligence, willful misconduct or unlawful acts of the
Issuing Bank, or any of its respective officers, employees or agents.
III.7 Letter of Credit Fees.
(a) Risk Participation Fees. The Company shall pay to the
Administrative Agent for the account of each of the Banks a letter of credit
fee (a "Risk Participation Fee") with respect to Letters of Credit equal to the
Applicable Margin then in effect for Offshore Rate Loans multiplied by the
average daily maximum amount available to be drawn on the outstanding Letters
of Credit.
(b) Fronting Fees. The Company shall pay to the
Administrative Agent for the account of the Issuing Bank Issuing a Letter of
Credit a letter of credit fronting fee (the "Fronting Fee") for each Letter of
Credit Issued by the Issuing Bank equal to 0.125% per annum multiplied by the
average daily maximum amount available to be drawn on the outstanding Letters
of Credit.
(c) Calculation of Fees. The Risk Participation and the
Fronting Fee each shall be computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon Letters of Credit outstanding
for that quarter as calculated by the Administrative Agent. Such fees shall be
due and payable quarterly in arrears on the last Business Day of each calendar
quarter during which Letters of Credit are outstanding, commencing on the first
such quarterly date to occur after the Closing Date, through the Termination
Date (or such later date upon which the outstanding Letters of Credit shall
expire), with the final payment to be made on the Termination Date (or such
later expiration date).
(d) Other. The Company shall pay to any Issuing Bank any
issuance, presentation, amendment and other processing fees, and other standard
costs and charges, of such Issuing Bank relating to letters of credit Issued by
it as from time to time in effect.
III.8 Cash Collateralization. If upon either the occurrence of an
Event of Default and the acceleration of the Obligations or the occurrence of
the Termination Date, any Letters of Credit may for any reason remain
outstanding and partially or wholly undrawn, then, the Company agrees that it
shall on the Business Day it receives notice from the Administrative Agent,
acting upon instructions of the Majority Banks, deposit in an account (the
"Cash Collateral Account") held by the Administrative Agent, for the benefit of
the Banks, an amount in cash equal to the undrawn face amount of the Letters of
Credit outstanding as of such date. Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
Obligations. The
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Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Cash collateral shall be held
in a blocked, non-interest bearing account held by the Administrative Agent or
any Affiliate of the Administrative Agent upon such terms and in such type of
account as customary at that depository institution. The Company shall pay any
fees charged by such depository institution which fees are of the type
customarily charged by such institution with respect to such accounts. Moneys
in such account shall (i) be applied by the Administrative Agent to the payment
of Letter of Credit Borrowings and interest thereon, (ii) be held and used for
the satisfaction of the reimbursement obligations of the Company in respect of
Letters of Credit and (iii) if the maturity of the Loans has been accelerated,
with the consent of the Majority Banks, be applied to satisfy the Obligations.
III.9 Uniform Customs and Practice. The Uniform Customs and Practice
for Documentary Credits as published by the International Chamber of Commerce
("UCP") most recently published in final form at the time of issuance of any
Letter of Credit shall (unless otherwise expressly provided in such Letter of
Credit) apply to such Letter of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
IV.1 Net Payments; Tax Exemptions. (a) All payments by the Company
of principal, interest, fees, indemnities and other amounts payable to any
recipient (each, a "Recipient") hereunder shall be made without set off or
counterclaim and free and clear of, and without withholding or deduction for or
on account of, any present or future Taxes now or hereafter imposed on such
Recipient or its income, property, assets or franchises (such Recipient's
"Recipient's Taxes"), except to the extent that such withholding or deduction
(i) is required by Requirements of Law, (ii) results from the breach by such
Recipient of its Exemption Agreement, if any, (iii) would not be required if
such Recipient's Exemption Representation were true, or (iv) would not be
required if such Recipient were exempt from such withholding or deduction on
account of the prior delivery by such Recipient to the Company of the
appropriate Internal Revenue Service form specified in Section 10.10 claiming
complete exemption. If any such withholding or deduction is required by
Requirements of Law, the Company will:
(A) pay to the relevant authorities the full
amount so required to be withheld or deducted when and as the
same shall become due and payable to such authorities;
(B) promptly forward to the Administrative Agent
and each Affected Bank an official receipt or other
documentation satisfactory to the Administrative Agent
evidencing such payment to such authorities; and
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(C) except to the extent that such withholding or
deduction (i) is for Excluded Taxes, (ii) results from the
breach, by a Recipient of a payment, of its Exemption
Agreement, if any, or (iii) would not be required if such
Recipient's Exemption Representation were true or if such
Recipient were exempt from such withholding or deduction on
account of the prior delivery by such Recipient to the
Company of the appropriate Internal Revenue Service form
specified in Section 10.10 claiming complete exemption, pay
to the Administrative Agent for the account of the relevant
Recipient such additional amount as is necessary to ensure
that the net amount actually received by each Recipient will
equal the full amount such Recipient would have received had
no such withholding or deduction been required.
(b) In consideration of the Company's agreements in Section
4.1 (a), each Bank which is not a US Person hereby agrees (such Bank's
"Exemption Agreement"), to the extent permitted by Requirements of Law
(including any applicable double taxation treaty of the jurisdiction of its
incorporation or the jurisdiction in which its lending office is located), to
execute and deliver to the Company, on or about the first scheduled payment
date in each Fiscal Year, a United States Internal Revenue Service Form 1001 or
4224 (or successor form), as appropriate, properly completed and claiming a
complete or partial exemption, as the case may be, from withholding or
deduction for or on account of "United States Federal Recipient Taxes" (as
defined in the Code) of such Bank.
(c) Each Bank hereby represents and warrants (such Bank's
"Exemption Representation") to the Company that on the date hereof its lending
office is entitled to receive payments of principal of, and interest on, Loans
made by such Bank and Letter of Credit Advances funded by such Bank from such
lending office without withholding or deduction for or on account of such
Bank's Recipient Taxes imposed by the United States of America or any political
subdivision thereof.
IV.2 Illegality. (a) If any Bank determines and notifies the
Administrative Agent that the introduction of any Requirement of Law, or any
change in any Requirement of Law, or in the interpretation or administration of
any Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Bank or its
applicable Lending Office to make Offshore Rate Loans, then, on notice thereof
by the Bank to the Company through the Administrative Agent, any obligation of
that Bank to make Offshore Rate Loans shall be suspended until the Bank
notifies the Administrative Agent and the Company that the circumstances giving
rise to such determination no longer exist.
(b) If a Bank determines and notifies the Administrative
Agent that it is unlawful to maintain any Offshore Rate Loan, the Company
shall, upon its receipt of notice of such fact and demand from such Bank
delivered by such Bank through the Administrative Agent, prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 4.4, either on the last day
of the Interest Period thereof, if the Bank
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may lawfully continue to maintain such Offshore Rate Loans to such day, or
immediately, if the Bank may not lawfully continue to maintain such Offshore
Rate Loan. If the Company is required to so prepay any Offshore Rate Loan, then
concurrently with such prepayment, the Company shall borrow from the Affected
Bank, in the amount of such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Company may elect,
by giving notice to the Affected Bank through the Administrative Agent that all
Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be
instead Base Rate Loans.
(d) Before giving any notice to the Administrative Agent
under this Section, the Affected Bank shall designate a different Lending
Office with respect to its Offshore Rate Loans if such designation will avoid
the need for giving such notice or making such demand and will not, in the
judgment of the Affected Bank, be illegal or otherwise disadvantageous to the
Affected Bank.
IV.3 Increased Costs and Reduction of Return. (a) If any Bank
determines and notifies the Administrative Agent that, due to either (i) after
the date hereof the introduction of or any change (other than any change by way
of imposition of or increase in reserve requirements included in the
calculation of the CD Rate or the Offshore Rate or in respect of the assessment
rate payable by any Bank to the FDIC for insuring U.S. deposits) in or in the
interpretation of any law or regulation or (ii) the compliance by that Bank
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), promulgated after the date
hereof, there shall be any increase in the cost to such Bank of agreeing to
make or making, funding or maintaining any Offshore Rate Loans or CD Rate Loans
or participating in any Letters of Credit, or, in the case of an Issuing Bank,
any increase in the cost to such Issuing Bank of agreeing to issue, issuing or
maintaining Letters of Credit or of agreeing to make or making, funding or
maintaining any unpaid drawing under any Letter of Credit then the Company
shall be liable for, and shall from time to time, within 10 days after a demand
(accompanied by a certificate setting forth the basis of such demand) which is
provided to the Administrative Agent and delivered by the Administrative Agent
to the Company, pay to the Administrative Agent for the account of such Bank,
additional amounts as are sufficient to compensate such Bank for such increased
costs.
(b) If any Bank reasonably shall have determined that (i)
after the date hereof the introduction of any Capital Adequacy Regulation, (ii)
after the date hereof any change in any Capital Adequacy Regulation, (iii)
after the date hereof any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance
by the Bank (or its Lending Office) or any corporation controlling the Bank
with any Capital Adequacy Regulation, affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration such Bank's or such
corporation's policies with respect to capital adequacy and such Bank's desired
return on capital) determines that the amount of such capital
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is increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, within 10 days after demand of such Bank to the
Company through the Administrative Agent, the Company shall pay to the Bank,
from time to time as specified by the Bank, additional amounts sufficient to
compensate the Bank for such increase.
IV.4 Funding Losses. The Company shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(a) the failure of the Company to make on a timely basis
any payment of principal of any Offshore Rate Loan or CD Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.9;
(d) the prepayment (including pursuant to Sections 2.9,
2.10, 4.8 and 4.9) or other payment (including after acceleration thereof) of
an Offshore Rate Loan or a CD Rate Loan on a day that is not the last day of
the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any
Offshore Rate Loan or CD Rate Loan to a Base Rate Loan on a day that is not the
last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or CD Rate Loans or
from fees payable to terminate the deposits from which such funds were
obtained. For purposes of calculating amounts payable by the Company to the
Banks under this Section and under subsection 4.3(a), (i) each Offshore Rate
Loan made by a Bank (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the LIBOR used
in determining the Offshore Rate for such Offshore Rate Loan by a matching
deposit or other borrowing in the interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Offshore Rate Loan is
in fact so funded, and (ii) each CD Rate Loan made by a Bank (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed
to have been funded at the Certificate of Deposit Rate used in determining the
CD Rate for such CD Rate Loan by the issuance of its certificate of deposit in
a comparable amount and for a comparable period, whether or not such CD Rate
Loan is in fact so funded.
IV.5 Inability to Determine Rates. If the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate or the CD Rate
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for any requested Interest Period with respect to a proposed Offshore Rate Loan
or CD Rate Loan, or that the Offshore Rate or the CD Rate applicable pursuant
to subsection 2.12(a) for any requested Interest Period with respect to a
proposed Offshore Rate Loan or CD Rate Loan does not adequately and fairly
reflect the cost to the Banks of funding such Loan, the Administrative Agent
will promptly so notify the Company and each Bank. Thereafter, the obligation
of the Banks to make or maintain CD Rate Loans or Offshore Rate Loans, as the
case may be, hereunder shall be suspended until the Administrative Agent
revokes such notice in writing. Upon receipt of such notice, the Company may
revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such Notice, the Banks shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as CD Rate Loans instead of Offshore Rate
Loans, or as Base Rate Loans instead of CD Rate Loans , as the case may be.
IV.6 Notice of Claim. Promptly after any Bank becomes aware of any
event that would entitle it to compensation under Section 4.1, Section 4.3 or
Section 4.4, such Bank shall notify the Company thereof; provided, that the
failure to give such notice shall not affect such Bank's rights under Section
4.1, Section 4.3 or Section 4.4.
IV.7 Certificates of Banks. Any Bank claiming reimbursement or
compensation under Section 4.4 shall provide to the Administrative Agent for
delivery by the Administrative Agent to the Company a certificate setting forth
in reasonable detail the basis of such claim and the amount payable to the Bank
hereunder and such certificate if made in good faith shall be rebuttable
presumptive evidence of the accuracy of such claim.
IV.8 Replacement of Certain Banks. In the event that any Bank(s) is
an Affected Bank, such Bank(s) may accept a purchase offer as described
hereinafter. If the Company shall find one or more banks that, if not a Bank,
are each an Eligible Assignee consented to by the Administrative Agent and each
Issuing Bank to the extent required pursuant to Section 11.8, and that
unconditionally offer in writing (with a copy to the Administrative Agent)
collectively to assume all of such Affected Bank's obligations hereunder and to
purchase all of such Affected Bank's rights hereunder and principal and
interest in the Loans owing to such Bank(s) and the Notes, if any, held by such
Affected Bank(s), and such Affected Bank's participation in any Letter of
Credit Obligations without recourse, representation or warranty (other than as
provided in Exhibit E) for an amount to be received by such Affected Bank(s)
equal to the principal amount of such Affected Bank's Notes and Loans and
Letter of Credit Advances plus interest accrued thereon to the date of such
purchase plus any other amounts then payable hereunder on a date therein
specified, and make arrangements reasonably satisfactory to such Bank(s), with
respect to all outstanding Letters of Credit as to which such Affected Bank is
the Issuing Bank, then upon acceptance of such purchase offer, the Company
shall be obligated to pay the amounts and Taxes to such Affected Bank(s)
pursuant to Article IV to the date of such purchase (at which time such
Affected Bank shall cease to be a Bank hereunder); provided, that (a) if an
Affected Bank accepts the proposed purchase offer and the proposed purchasing
bank(s) fails to
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purchase such rights and interest and to assume such obligations on such
specified date in accordance with the terms of such offer, the Company shall
continue to be obligated to pay the amounts or Taxes to such Affected Bank
pursuant to Section 4.1 and/or Section 4.3, and (b) if such Affected Bank fails
to accept such purchase offer, the Company shall not be obligated to pay to
such Bank such amounts pursuant to Article IV for the period from the date of
such purchase offer with respect to claims pursuant to Section 4.1 and/or 4.3
existing as of such date, and such Affected Bank shall no longer be an Affected
Bank with respect to claims pursuant to Section 4.1 and/or Section 4.3 existing
as of the date of its failure to accept such purchase.
IV.9 Deletion of Certain Banks. In the event that any Bank shall
be an Affected Bank, such Bank may be deleted from this Agreement, at the
option of the Company; provided, that no Event of Default has occurred and is
continuing or would result therefrom, and that immediately following such
deletion there will be no other Affected Bank or Bank so claiming payment and
the aggregate Commitments of the remaining Banks will be at least 80% of the
Total Commitment existing immediately before such deletion. The deletion shall
be effective on a date (which shall be a Business Day) specified by the Company
in a notice to the Administrative Agent, such Bank and the other Banks to be
given at least 10 Business Days before such date, if (a) all principal of and
interest on the Loans and Letter of Credit Advances of such Bank and all other
amounts payable to such Bank are paid in full pursuant to the terms hereof on
such date specified by the Company, (b) reasonably satisfactory arrangements
are made with respect to all outstanding Letters of Credit as to which such
Bank is the Issuing Bank, and (c) the Commitment of such Bank is permanently
terminated as of such date. Upon and after the date such deletion becomes
effective, such Bank shall no longer be a party to this Agreement or be
included as a "Bank" except for purposes of claims pursuant to Sections 4.1,
4.3, 4.4, 11.4 and 11.5 relating to or arising out of events and occurrences
prior to the date its deletion becomes effective.
IV.10 Survival. The provisions of Section 4.1, Section 4.3 and
Section 4.4 shall survive the payment of all other Obligations for a period of
two years.
ARTICLE V
CONDITIONS PRECEDENT
V.1 Conditions of Initial Credit Extension. The obligation of each
Bank to make its initial Credit Extension hereunder is subject to the prior
satisfaction of the conditions set forth below:
(a) Delivery of Documents. The Administrative Agent shall
have received all of the following, in form and substance satisfactory to the
Administrative Agent:
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(i) Credit Agreement and Notes. This Agreement (in
sufficient copies for each Bank) and the Notes executed by each party
thereto;
(ii) Officer's Certificate. The signed certificate
of the President or a Vice President or the Treasurer and the
Secretary or an Assistant Secretary of the Company, dated the Closing
Date and in sufficient copies for each Bank, certifying as to, among
other things:
(A) Copies of the resolutions of the board of
directors of the Company authorizing the transactions
contemplated hereby;
(B) the names and true signatures of the
officers of the Company authorized to execute, deliver and
perform, as applicable, this Agreement, all other Loan
Documents, Notices of Borrowing, Notices of
Conversion/Continuation, Competitive Bid Requests and other
documents, instruments and certificates to be delivered by
the Company hereunder or pursuant to any Loan Document;
(C) the names and true signatures of the
employees of the Company who, in addition to those officers
set forth in subsection (B) above, are authorized to execute
and deliver Notices of Borrowing, Notices of
Conversion/Continuation, Competitive Bid Requests and other
documents (except for Loan Documents) related to and required
for any Borrowing or Letter of Credit Issuance; and
(D) the certificate of incorporation and the
bylaws of the Company as in effect on the Closing Date.
(iii) Organization Documents; Good Standing. Each of
the following documents (one signed original with sufficient
photocopies for each Bank):
(A) the signed long-form certificate for
the Company from the Secretary of State of the State of
Delaware listing the Certificate of Incorporation and each
amendment, if any, thereto, on file in his office and stating
that such documents are the only charter documents of the
Company on file in his office and that the Company is duly
incorporated and in good standing in the State of Delaware,
and has filed all franchise tax returns and has paid all
franchise taxes required by law to be filed and paid by the
Company as of the date of his certificate; and
(B) signed certificates of the Secretaries
of State (or other appropriate officials) of each appropriate
State set forth on Schedule 5.1, dated reasonably near the
Closing Date, certifying that the Company is duly qualified
and in good standing as a foreign corporation in such State.
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(iv) Legal Opinions.
(A) a signed copy for each Bank of an opinion
of Andrews & Kurth L.L.P., counsel to the Company, dated the
Closing Date addressed to the Administrative Agent and the
Banks, substantially in the form of Exhibit D-1 with such
changes (if any) therein as may be acceptable to the
Administrative Agent;
(B) a signed copy for each Bank of an opinion
of Peer L. Anderson, General Counsel of the Company, dated
the Closing Date in the form of Exhibit D-2, with such
changes (if any) therein as may be acceptable to the
Administrative Agent;
(C) a signed copy for each Bank of a
favorable opinion of Mayer, Brown & Platt, special counsel to
the Administrative Agent dated the Closing Date; and
(D) a signed copy for each Bank of an opinion
of Carlos E. Padron Amare, General Counsel for PDVSA, dated a
date reasonably near the Closing Date, in the form of Exhibit
D-3, with such changes (if any) therein as may be acceptable
to the Administrative Agent.
(b) Pending Litigation. There shall be no threatened or
pending litigation, inquiry, or investigation contesting this Agreement, the
other Loan Documents, or any transaction contemplated by any of the above.
(c) No Material Adverse Effect. Except as disclosed in the
financial statements referred to in Section 6.13 or in Schedule 6.5 or Schedule
6.13, as in effect on the date hereof, no event shall have occurred and no
condition shall exist, which could reasonably be expected to have a Material
Adverse Effect and no change shall have occurred since December 31, 1997 which
has had a Material Adverse Effect.
(d) Regulatory Approvals. All regulatory approvals
(including from the Central Bank, Ministry of Finance or any other regulatory
authority in Venezuela) required, if any, to be obtained by the Company, PDVSA
or any Affiliate of the Company in connection with this Agreement, or any
transaction contemplated hereby or connected herewith, shall have been obtained
and copies thereof shall have been delivered to the Administrative Agent.
(e) Insurance. The Company shall have furnished to the
Administrative Agent certificates of insurance demonstrating that the Company
and each of its Subsidiaries has procured with responsible insurance companies
insurance with respect to its properties and business (including business
interruption insurance) against such casualties and contingencies and of such
types, in such amounts and with such deductibles as is required by Section 7.5.
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(f) Payment of Fees. The Administrative Agent shall have
received the Fee Letter, duly executed by the Company, and payment by the
Company of all accrued and unpaid fees, costs and expenses to the extent due
and payable on the Closing Date, together with Attorney Costs of BofA to the
extent invoiced prior to or on the Closing Date (provided that such invoiced
amount shall not thereafter preclude final settling of accounts between the
Company and BofA), including any such costs, fees and expenses arising under or
referenced in Sections 2.14 and 11.4.
(g) Credit Agreement. The Company and the other parties
thereto shall have executed and delivered the $150,000,000 Credit Agreement and
the "Closing Date" under the $150,000,000 Credit Agreement shall have occurred,
or shall concurrently occur.
(h) Existing Revolving Credit Agreement. The
Administrative Agent shall have received evidence that the Existing Revolving
Facility Banks shall have concurrently been paid all obligations and payments
owed them pursuant to the Existing Revolving Credit Agreement and all
commitments of the Existing Revolving Facility Banks thereunder have
terminated.
(i) Certificate. The Administrative Agent shall have
received a certificate in form and substance satisfactory to it , signed by a
Responsible Officer, dated as of the Closing Date stating that:
(A) the representations and warranties contained
in Article VI are true and correct on and as of such date, as
though made on and as of such date;
(B) no Default or Event of Default exists; and
(C) there has occurred since December 31, 1997,
no event or circumstance that has resulted or could reasonably
be expected to result in a Material Adverse Effect.
(j) Other Documents. The Administrative Agent shall have
received such other approvals, opinions, documents or materials as the
Administrative Agent or any Bank may reasonably request.
V.2 Conditions to All Credit Extensions, Conversions and
Continuations. The obligation of each Bank to make any Credit Extension or to
continue or convert any Loan is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Issuance Date of a
Letter of Credit or Conversion/ Continuation Date:
(a) Notice; Application. The Administrative Agent shall
have received a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable, or the Bid Agent shall have
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received a Competitive Bid Request, or an Issuing Bank shall have received a
Letter of Credit Application or Letter of Credit Amendment Application.
(b) Continuation of Representations and Warranties. If
there is any Credit Extension, or if there is any continuation of any Loan as,
or conversion of any Loan into, a CD Rate Loan or an Offshore Rate Loan
requested pursuant to subsection (a) of this Section 5.2, the representations
and warranties in Article VI (except for Section 6.6) shall be true and correct
in all material respects on and as of such Borrowing Date,
Conversion/Continuation Date, Issuance Date or, in the case of Committed Loans
made pursuant to Section 3.3(c), Honor Date as the case may be, with the same
effect as if made on and as of such Borrowing Date, Conversion/Continuation
Date, Issuance Date or Honor Date, as the case may be (except to the extent
such representations and warranties expressly refer to an earlier date, in
which case they shall be true and correct in all material respects as of such
earlier date). Each Conversion/Continuation Notice which continues any Loan as,
or converts any Loan into, a CD Rate Loan or an Offshore Rate Loan and each
Notice of Borrowing, Competitive Bid Request and Letter of Credit Application
or Letter of Credit Amendment Application submitted by the Company hereunder
shall constitute a representation and warranty by the Company hereunder, as of
the date of each such notice and as of each Borrowing Date, Issuance Date or
Conversion/Continuation Date, as the case may be, that the conditions in
Sections 5.2(b) and (c) are satisfied.
(c) No Existing Default. If there is any Credit Extension,
or if there is any continuation of any Loan as, or conversion of any Loan into,
a CD Rate Loan or an Offshore Rate Loan requested pursuant to subsection (a) of
this Section 5.2, no Default or Event of Default shall exist or shall result
from such Credit Extension or continuation or conversion.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative Agent and
each Bank that:
VI.1 Corporate Existence; Power; Compliance with Laws.
(a) the Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and each Subsidiary of the Company is a corporation or partnership, as the case
may be, duly incorporated or otherwise formed, validly existing and (in the
case of corporate Subsidiaries) in good standing under the laws of the state of
its incorporation or other formation;
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(b) the Company has all requisite corporate power and
authority , governmental licenses, authorizations, consents and approvals to
own its assets, carry on its business as currently conducted, to execute,
deliver, and perform its obligations under the Loan Documents, and to issue the
Notes in the manner and for the purpose contemplated by this Agreement, and
each Subsidiary has all requisite corporate or partnership, as the case may be,
power and authority to own its assets and to carry on the business in which it
is engaged;
(c) the Company and each Subsidiary of the Company is duly
qualified as a foreign Person authorized to do business and is licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification or license other than where the failure to be so qualified or in
good standing would not reasonably be expected to have a Material Adverse
Effect; and
(d) the Company and each of its Subsidiaries is in
compliance in all material respects with all Requirements of Law, except to the
extent that the failure to do so would not reasonably be expected to have a
Material Adverse Effect.
VI.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of the Loan Documents have been duly
authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's
Organization Documents;
(b) result in any breach or contravention of, or result
in the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Company or its property is
subject (other than such violations, breaches, defaults or Liens which would
not reasonably be expected to have a Material Adverse Effect); or
(c) violate any Requirement of Law.
VI.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary for the validity of the execution, delivery
or performance by, or enforcement against, the Company of this Agreement or any
Note other than routine informational filings with the SEC and/or other
Governmental Authorities.
VI.4 Binding Effect. This Agreement and (when executed and
delivered for value) each other Loan Document constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability, and by judicial
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discretion regarding the enforcement of or any applicable laws affecting
remedies (whether considered in a court of law or a proceeding in equity).
VI.5 Litigation. No litigation (including derivative actions),
arbitration proceedings or governmental proceedings are pending or, to the best
knowledge of the Company after due inquiry, threatened against the Company or
any Subsidiary which would, if adversely determined, reasonably be expected to
result in liability to the Company and its Subsidiaries in excess of $5,000,000
(net of actual insurance coverage or effective indemnification with respect
thereto), except as set forth (including estimates of the dollar amounts
involved, if practicable,) in Schedule 6.5. Neither the Company nor any of its
Subsidiaries has knowledge of any material contingent liabilities, including
those disclosed in the financial statements referred to in Section 6.13 or in
Schedule 6.5., which would reasonably be expected to have a Material Adverse
Effect.
VI.6 No Default. No Default or Event of Default exists. As of the
Closing Date, neither the Company nor any Subsidiary is in default under or
with respect to its Organization Documents or any Contractual Obligation in any
respect which, individually or together with all other such defaults, would
reasonably be expected to have a Material Adverse Effect.
VI.7 Fire, Strike, Act of God, etc. Neither the business nor the
properties of the Company or any of its Subsidiaries are now affected by any
fire, explosion, accident, labor controversy, strike, lockout or other dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty which would reasonably be expected to have a Material Adverse
Effect, or if any such existing event or condition were to continue for more
than 30 additional days (unless in the reasonable opinion of the Company such
event or condition is not likely to continue for such period) would reasonably
be expected to have a Material Adverse Effect.
VI.8 Liens. None of the assets or properties of the Company or the
Restricted Subsidiaries is subject to any Lien except for Permitted Liens.
VI.9 ERISA. Each Plan and, to the best of the Company's knowledge,
each Multiemployer Plan, complies in all material respects with all
Requirements of Law and,
(a) no Reportable Event for which the PBGC has not waived
the 30-day notice requirement has occurred with respect to any Plan or, to the
best of the Company's knowledge, any Multiemployer Plan;
(b) no steps have been taken to terminate any Plan which
could result in the Company's making a contribution, or incurring a liability
or obligation, to such Plan in excess of $10,000,000; no steps have been taken
to appoint a receiver to administer any such Plan; to the best of the Company's
knowledge, no steps have been taken to terminate or appoint a receiver to
administer any Multiemployer Plan which could result in the Company's making a
contribution, or
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incurring a liability or obligation, to such Multiemployer Plan in excess of
$10,000,000; and neither the Company nor any Related Person has withdrawn from
any such Multiemployer Plan or initiated steps to do so;
(c) There is no Unfunded Vested Liability with respect to
any Plan or, to the best of the Company's knowledge, any Multiemployer Plan,
that would reasonably be expected to have, in the event of termination of such
Plan or withdrawal from such Multiemployer Plan, a Material Adverse Effect; and
(d) no contribution failure has occurred with respect to any
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; no
condition exists or event or transaction has occurred with respect to any Plan
which would reasonably be expected to have a Material Adverse Effect; and
neither the Company nor any of its Subsidiaries has any contingent liability
with respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA,
that would reasonably be expected to have a Material Adverse Effect.
VI.10 Use of Proceeds; Margin Regulations. The proceeds of the Loans
are to be used solely for purposes not in contravention of subsection 8.1(e) or
subsection 8.1(i) or subsection 8.3(c). Not more than 25% of the assets of the
Company consists of any Margin Stock, and no part of the proceeds of any Loan
will be used to buy or carry any Margin Stock. Neither the Company nor any
Subsidiary is generally engaged in the business of buying or selling Margin
Stock or extending credit for the purpose of buying or carrying Margin Stock.
VI.11 Title to Properties. Each of the Company and each of its
Subsidiaries (i) has valid fee title to, or valid leasehold interests in, all
material real property, and has good and valid title to all of its respective
material personal properties and assets, of any nature whatsoever which are
reflected on the audited balance sheet referred to in Section 6.13 or acquired
by the Company or such Subsidiary after the date thereof except for assets
sold, transferred or otherwise disposed of since such date in the ordinary
course of business, except for such defects in title as would not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect,
and (ii) each of the Company and each of its Subsidiaries owns or holds all
permits necessary to construct, own, operate, use and maintain its property and
assets and to conduct its business as now conducted except where the failure to
have such interest or title or to own or hold such permit would not reasonably
be expected to have a Material Adverse Effect.
VI.12 Taxes. The Company and each Subsidiary has filed (or obtained
extensions with respect to the filing of) all United States federal income tax
returns and all other material tax returns which are required to be filed by it
and has paid all taxes as shown on such returns or pursuant to any assessment
received by the Company or any Subsidiary, except to the extent the same may
be contested in good faith and for which reserves have been established to the
extent required by GAAP.
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The charges, accruals and reserves on the books of the Company and each
Subsidiary in respect of Taxes and other governmental charges are adequate to
the best knowledge of the Company.
VI.13 Financial Condition. (a) The audited consolidated financial
statements of the Company and its consolidated Subsidiaries dated December 31,
1997, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; and
(ii) fairly present the financial position of the
Company and its consolidated Subsidiaries as of the date thereof and
results of operations for the period covered thereby.
(b) Since December 31, 1997, no events or conditions have
occurred which would reasonably be expected to have a Material Adverse Effect,
except as disclosed on Schedule 6.13 or on Schedule 6.5.
VI.14 Environmental Matters. The Company and its Subsidiaries are
each in compliance in all material respects with all Federal, state and local
laws and regulations (i) now applicable to the Company or any Subsidiary, or
(ii) which, to the best knowledge of the Company will be applicable (or, if not
in compliance with such laws and regulations referred to in this clause (ii),
the Company or such Subsidiary is taking appropriate action diligently pursued
to be in compliance therewith on a timely basis or to be exempt from
compliance), relating to pollution control and environmental contamination,
including all laws and regulations governing the generation, use, collection,
treatment, storage, transportation, recovery, removal, discharge or disposal of
Hazardous Materials, except to the extent that the failure to comply or take
such action would not reasonably be expected to have a Material Adverse Effect.
Except as disclosed on Schedule 6.14 (as updated from time to time), (A) there
are no presently outstanding allegations by governmental officials that the
Company or any of its Subsidiaries is now or at any time prior to the date
hereof was in material violation of such laws or regulations, (B) there are no
material administrative or judicial proceedings presently pending against the
Company or any of its Subsidiaries pursuant to such laws or regulations, and
(C) there is no material claim presently outstanding against the Company or any
of its Subsidiaries which was asserted pursuant to such laws or regulations
that in each case would reasonably be expected to result in a liability to the
Company or any Subsidiary in excess of $20,000,000 or $50,000,000 in the
aggregate for all such claims (net in each case of actual insurance coverage or
effective indemnification with respect thereto). Except as disclosed in
Schedule 6.14 (as updated from time to time), the Company reasonably believes
that no facts or circumstances known to it or any Subsidiary could form the
basis for the assertion of any material claim against the Company or any
Subsidiary relating to environmental matters, including any material claim
arising from past or present environmental practices asserted under CERCLA,
RCRA, or any Environmental Law that in each case
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would reasonably be expected to result in a liability to the Company or any
Subsidiary in excess of $20,000,000 or $50,000,000 in the aggregate for all
such claims (net in each case of actual insurance coverage or effective
indemnification with respect thereto).
VI.15 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. The Company is not subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or any state public utilities code.
VI.16 Copyrights, Patents, Trademarks and Licenses, etc. The Company
or its Subsidiaries own or are licensed or otherwise have the right to use all
of the patents, trademarks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for the operation
of their respective businesses as currently conducted (other than where the
failure to so own, be licensed or have the right to use would reasonably be
expected to have a Material Adverse Effect). To the best knowledge of the
Company, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Company or any Subsidiary infringes upon any rights held by
any other Person, except for any such infringement that would not reasonably be
expected to have a Material Adverse Effect.
VI.17 Subsidiaries. The Company has no Subsidiaries on the date
hereof other than those disclosed in Schedule 6.17 hereto.
VI.18 Key Contracts. The Company has delivered to the Administrative
Agent true, correct and complete copies of the Key Contracts as in effect on
the date hereof, including in each case all amendments thereto, assignments
thereof and waivers of any Material Terms thereof. Each of the Crude Supply
Agreement and the Supplemental Crude Supply Agreement has been duly authorized,
executed and delivered by the Company. The CRCCLP Crude Supply Agreement has
been duly authorized, executed and delivered by CRCCLP. Each of the Key
Contracts has been duly authorized, executed and delivered by the parties
thereto that are Affiliates of the Company and, to the best knowledge of the
Company, the other parties thereto, and is in full force and effect in all
material respects. To the best knowledge of the Company, no event has occurred
and is continuing which would constitute, or with the giving of notice or lapse
of time or both would constitute, an event of default on the part of the
Company, CRCCLP, CIVESCO or Petroleos under the Key Contracts or would give any
Person the right to terminate or to modify the terms of any thereof in a manner
which would reasonably be expected to have a Material Adverse Effect.
VI.19 Solvency. The Company has capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about to engage and is now solvent and able to pay its respective debts as they
mature, and the Company now owns property having a value, both at fair
valuation and at present fair salable value, greater than the amount required
to pay its existing debts.
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VI.20 Full Disclosure. None of the representations or warranties
made by the Company or any Subsidiary in this Agreement as of the date such
representations and warranties are made or deemed made, and none of the factual
information (taken as a whole) contained in any written notice, exhibit,
report, statement or certificate furnished by or on behalf of the Company or
any Subsidiary in connection with this Agreement (including the offering and
disclosure materials delivered by or on behalf of the Company to the Banks
prior to the Closing Date), contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
VI.21 Addressing the Year 2000 Problem. The Company is developing a
program to address on a timely basis the Year 2000 Problem. In connection with
developing this program, the Company has reviewed its operations and those of
its Subsidiaries with a view to assessing whether its or its Subsidiaries'
respective businesses will, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of data,
be vulnerable to a Year 2000 Problem. Based on such review, the Company has no
reason to believe that a Material Adverse Effect will occur with respect to its
or its Subsidiaries' businesses or operations resulting from a Year 2000
Problem.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Credit
Extension or other Obligation shall remain unpaid or unsatisfied or any Letter
of Credit shall remain outstanding, unless the Majority Banks waive compliance
in writing:
VII.1 Financial Statements. The Company shall deliver to the
Administrative Agent and concurrently therewith to each Bank (in accordance
with Section 11.2, which shall be deemed received by each Bank when received by
the Administrative Agent):
(a) as soon as available and in any event within 120 days
after the end of each Fiscal Year, (A) audited consolidated financial
statements of the Company and its consolidated Subsidiaries, in each case
setting forth, in comparative form, the corresponding figures for the preceding
Fiscal Year and certified, without Impermissible Qualification, by independent
certified public accountants of recognized national standing and reputation
selected by the Company or otherwise reasonably acceptable to the
Administrative Agent, (B) consolidated financial information accompanied by
consolidating statements with eliminating entries for the Company and its
Restricted Subsidiaries with disclosure in an explanatory footnote for
eliminating entries and a report from
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independent accountants stating that such information has been subjected to the
same auditing procedures applied in the audit of the basic consolidated
financial statements of the Company and its consolidated Subsidiaries and
providing an opinion as to the fairness of the presentation of such information
in all material respects in relation to the Company's consolidated financial
statements taken as a whole, in each case for purposes of clauses (A) and (B)
consisting of a balance sheet as at the end of such Fiscal Year and statements
of income and retained earnings and statements of cash flows and (C) with
respect to the audited consolidated financial statements of the Company and its
consolidated Subsidiaries and the consolidated financial information of the
Company and its Restricted Subsidiaries, a report from such accountants
addressed to the Company's management containing a review of the Company's
calculations which show compliance with each of the financial ratios and
restrictions contained in Section 8.2 and affirmatively indicating that, while
the audit of the consolidated financial statements of the Company and its
consolidated Subsidiaries was not directed primarily toward obtaining knowledge
of such compliance with these specific financial ratios and restrictions, such
accountants have not become aware of events or transactions that would render
such calculations unreliable or misleading; and
(b) as soon as available and in any event within 60 days
after the end of each Fiscal Quarter (except the last Fiscal Quarter of each
Fiscal Year), (A) internal financial working papers in the form of
consolidating financial statements and such other financial information as may
customarily be prepared by or on behalf of the Company with respect to each
Unrestricted Subsidiary with assets in excess of $50,000,000, (B) consolidated
financial statements of the Company and its consolidated Subsidiaries, and (C)
consolidated financial information (consolidating statements with eliminating
entries for Unrestricted Subsidiaries) of the Company and its Restricted
Subsidiaries, in each case consisting of a balance sheet as at the end of such
quarter and statements of income, retained earnings, and cash flows for such
Fiscal Quarter then ended and for the Fiscal Year through such quarter, setting
forth in comparative form the corresponding figures for the corresponding dates
and periods of the preceding Fiscal Year, all in reasonable detail and
certified (subject to year-end audit adjustments) by an authorized financial
officer of the Company to the best of such officer's knowledge and belief as
fairly presenting in accordance with GAAP (to the extent applicable) the
financial position and results of operations of such Unrestricted Subsidiary,
the Company and its consolidated Subsidiaries or the Company and its Restricted
Subsidiaries, as the case may be, as at the date thereof and for the period
covered thereby (provided, that footnotes to such financial statements will not
be required) consistently applied (except as noted therein); but
(c) notwithstanding the preceding provisions of this Section
7.1, if and so long as the Company shall file regular and periodic reports with
the SEC pursuant to Sections 13 and 15 of the Securities Exchange Act of 1934,
delivery to the Administrative Agent of copies of its reports on Forms 10K and
10Q promptly following filing thereof with the SEC shall constitute full
compliance with this Section 7.1.
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VII.2 Certificates; Other Information. The Company shall furnish to
the Administrative Agent:
(a) concurrently with the delivery of the financial
statements (or reports on Forms 10K or 10Q, as the case may be) referred to in
subsections 7.1(a) and (b) or (c), as the case may be, a Compliance Certificate
substantially in the form of Exhibit C, executed by a Responsible Officer;
(b) promptly, to the extent not provided pursuant to
Section 7.1(c), copies of all financial statements and regular, periodic or
special reports (including registration statements (without exhibits) and Forms
10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with,
the SEC; and
(c) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as
the Administrative Agent, at the request of any Bank, may from time to time
reasonably request in writing.
VII.3 Notices. The Company shall notify the Administrative Agent and
each Bank in writing:
(a) as soon as possible and in any event within 5 Business
Days after the Company becomes aware of the occurrence of any Default, the
statement of the President, any Vice President or the Treasurer of the Company
setting forth the details of each such Default which has occurred and the
action which the Company has taken and proposes to take with respect thereto;
(b) forthwith upon learning thereof, a description of (A)
the institution of any litigation, arbitration proceeding or governmental
proceeding to which the Company or any Subsidiary of the Company is a party
that, if adversely determined, would reasonably be expected to result in a
liability to the Company or any Subsidiary of the Company in excess of
$25,000,000 (net of actual insurance coverage or effective indemnification with
respect thereto) and (B) any material adverse determination as to liability or
amount of damages in any such litigation, arbitration proceeding or proceeding;
(c) promptly upon learning thereof, a description of the
institution of any steps by the Company or any other Person to terminate any
Plan or any Multiemployer Plan, or the appointment of a receiver to administer
any Plan or any Multiemployer Plan, or the withdrawal by the Company or any
Related Person from any Multiemployer Plan, or the failure to make a required
contribution to any Plan if such failure is sufficient to give rise to a Lien
under section 302(f) of ERISA, or the taking of any action with respect to a
Plan which could result in the requirement that the Company furnish a bond or
other security to the PBGC or such Plan, or the occurrence of any event with
respect to any Plan which could reasonably be expected to result in the
incurrence by the
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Company of any material liability, fine or penalty, or any material increase in
the contingent liability of the Company with respect to any post-retirement
Welfare Plan benefit; and
(d) within 10 Business Days after the close of a Material
Acquisition by the Company or any Subsidiary, the most recent annual and
quarterly financial reports of the acquired entity which are available to the
Company, and, a summary of the environmental due diligence work done for or by
the Company in connection with such Material Acquisition (it being understood
that any Person(s) engaged by the Company to prepare such a summary and to
complete such due diligence must be of recognized national standing in the
environmental field).
VII.4 Preservation of Corporate Existence, Etc. The Company shall,
and shall cause each Subsidiary to, except for any sale, dissolution,
liquidation or merger not otherwise prohibited hereby, preserve and maintain
its existence and good standing and its rights, privileges and franchises under
the laws of its state or jurisdiction of incorporation or other formation, and
remain qualified as a foreign Person authorized to do business in each other
jurisdiction in which the failure to so qualify would reasonably be expected to
have a Material Adverse Effect.
VII.5 Insurance. The Company shall maintain, and cause each
Subsidiary to maintain, or obtain on its behalf (to the extent available at
commercially reasonable rates), with Lloyds of London, or with other
financially sound and reputable insurers with (i) an A.M. Best Rating of B+ or
higher (or an equivalent rating) and a surplus of at least $10,000,000, or (ii)
any alien insurer, reasonably acceptable to the Administrative Agent, whose
name appears on the most current non-admitted insurance carrier listing
published by the National Association of Insurance Commissioners, insurance
with respect to their respective properties and businesses against such
liabilities, casualties, risks and contingencies (including business
interruption insurance) in such types and with such reasonable deductibles as
are customary in the case of Persons engaged in the same or similar businesses
and similarly situated. Upon the execution of this Agreement and at any time
thereafter at the request of the Administrative Agent, the Company shall
furnish or cause to be furnished to the Administrative Agent evidence, in form
and substance satisfactory to the Administrative Agent, of the required
insurance coverage of the Company and each Subsidiary and, upon request, copies
of the applicable policies. The Company shall use reasonable efforts to provide
at least twenty (20) days' prior written notice to the Administrative Agent of
any termination, cancellation, reduction or other material modifications of any
insurance coverage.
VII.6 Taxes. The Company shall, and shall cause each Subsidiary to,
pay and discharge all Taxes relating to the Company or such Subsidiary, as the
case may be, prior to the date on which penalties attach thereto; provided,
that neither the Company nor any Subsidiary shall be required to pay or
discharge any such Tax while the same is being contested by it in good faith
and by appropriate proceedings and so long as reserves have been established to
the extent required by GAAP.
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VII.7 Compliance with Laws. The Company shall comply, and shall
cause each Subsidiary to comply, in all material respects with all Requirements
of Law , including Environmental Laws; provided, that neither the Company nor
any Subsidiary shall be required to comply with any such Requirement of Law so
long as the validity or application thereof is being contested in good faith
and reserves have been established with respect to such contest to the extent,
if any, required by GAAP or where such non-compliance would not reasonably be
expected to have a Material Adverse Effect; and obtain and maintain, and cause
each Subsidiary to obtain and maintain, all permits, licenses and approvals
necessary to construct, own, operate, use and maintain their respective
properties and assets and to conduct their respective businesses, except where
the failure to obtain or maintain such permit, license or approval would not
reasonably be expected to have a Material Adverse Effect.
VII.8 Inspection of Property and Books and Records. (a) The Company
shall keep or cause to be kept, and shall cause each Subsidiary to keep or
cause to be kept, adequate records and books of account in which complete
entries are to be made reflecting its business and financial transactions and
as required by applicable rules and regulations of any Governmental Authority
having jurisdiction over the Company or any Subsidiary or the transactions
contemplated by this Agreement. Such books of account shall be kept in a manner
consistent with GAAP if so kept on the date hereof. The Company shall permit,
and shall cause each Subsidiary to permit, the Administrative Agent or the
Banks or their representatives at any reasonable time and from time to time at
the request of the Administrative Agent, to visit and inspect any of their
respective properties, to examine their respective corporate, financial and
operating records, and, subject to Section 11.10, and to the Confidentiality
Agreement or a Bank Confidentiality Agreement, as the case may be, make copies
thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers, all at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon prior notice to the Company at least 24 hours in advance. One or more
officers, employees or representations of the Company may accompany the
Administrative Agent or a Bank or the representatives of such when making any
visit or inspection described in the preceding sentence.
(b) Neither the Administrative Agent nor any Bank has any
duty to visit or inspect the Company's or any Subsidiary's properties or to
examine or copy such records and neither the Administrative Agent nor any Bank
shall incur any obligation or liability by reason of not making any such visit
or inspection. In the event that the Administrative Agent or any Bank shall do
any of the foregoing it will be acting solely for the purposes of protecting
the Administrative Agent or such Bank and preserving its rights under this
Agreement. Neither the Company nor any other party is entitled to rely on any
inspection or other inquiry by the Administrative Agent or any Bank. Neither
the Administrative Agent nor any Bank owes any duty of care to protect the
Company or any other party against, or to inform the Company or any other party
of, any adverse condition that may be observed as affecting the Company's or
any Subsidiary's properties or business. The Administrative Agent or any Bank
may in its discretion disclose to the Company or any other Person any findings
made as a result of, or in connection with, any inspection of any such
properties or records.
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ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Credit
Extension or other Obligation shall remain unpaid or unsatisfied or any Letter
of Credit shall remain outstanding, unless the Majority Banks waive compliance
in writing:
VIII.1 Negative Covenants Applicable to the Company and Restricted
Subsidiaries. The Company shall not, and shall not suffer or permit any
Subsidiary to, directly or indirectly do any of the following:
(a) Limitation on Liens. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, incur or
suffer to exist any Lien on or with respect to any asset or property of the
Company or such Restricted Subsidiary, whether now owned or hereafter acquired,
or any interest therein or any income or profits therefrom, except the
following (collectively, "Permitted Liens", and individually, a "Permitted
Lien"):
(i) Liens existing on the date hereof;
(ii) Liens on property existing at the time of
acquisition thereof or Liens affecting property of a Person existing
at the time it becomes a Subsidiary of the Company or at the time it
is merged into or consolidated with the Company or a Subsidiary of the
Company; provided, however, that, in either case, such Liens do not
extend to or cover any property of the Company or of any of its
Restricted Subsidiaries other than the property that secured the
acquired Indebtedness prior to the time such Indebtedness became
Indebtedness of the Company or a Subsidiary;
(iii) Liens on property incurred to secure payment
of all or a part of the purchase price thereof or to secure
indebtedness incurred prior to, at the time of, or within 12 months
after the acquisition thereof for the purpose of financing all or part
of the purchase price thereof;
(iv) Liens on any property to secure all or part of
the cost of improvements thereon or Indebtedness incurred to provide
funds for such purpose in a principal amount not exceeding the cost of
such improvements or construction and incurred within 12 months after
completion of such improvements or construction;
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(v) Liens to government entities granted to secure
pollution control or industrial revenue bond financings;
(vi) Liens which secure Indebtedness owing by a
Restricted Subsidiary of the Company, to the Company or by one
Restricted Subsidiary to another Restricted Subsidiary;
(vii) Liens imposed by law, including mechanics',
materialmen's, carriers' or other like Liens, arising in the ordinary
course of business;
(viii) any Lien incurred to secure the performance
of surety or appeal bonds incurred in the ordinary course of business
consistent with past practice;
(ix) any Lien incidental to the normal conduct of
the business of the Company or any Restricted Subsidiary or the
ownership of its property or the conduct of the ordinary course of its
business, including (A) zoning restrictions, easements, rights of way,
reservations, restrictions on the use of real property and other minor
irregularities of title, (B) rights of lessees under leases, (C)
rights of collecting banks having rights of setoff, revocation, refund
or chargeback with respect to money or instruments of the Company or
any Restricted Subsidiary on deposit with or in the possession of such
banks, (D) Liens to secure the performance of statutory obligations,
tenders, bids, leases, progress payments, performance or
return-of-money bonds, performance or other similar bonds or other
obligations of a similar nature incurred in the ordinary course of
business, (E) Liens required by any contract or statute in order to
permit the Company or a Subsidiary of the Company to perform any
contract or subcontract made by it with or pursuant to the
requirements of a governmental entity and (F) "first purchaser" Liens
on crude oil, in each case which are not incurred in connection with
the borrowing of money, the obtaining of advances or credit or the
payment of the deferred purchase price of Property and which do not in
the aggregate impair the use of property in the operation of the
business of the Company and its Restricted Subsidiaries taken as a
whole;
(x) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, so long as
reserves have been established to the extent required by GAAP;
(xi) Liens securing obligations in respect of Swap
Contracts;
(xii) any Lien granted by the Company or CRCCLP on
its Receivables with regard to any ownership or security interest
under any Receivables Purchase Facility established after the date
hereof;
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(xiii) Liens on the assets of the Company or any
Restricted Subsidiary created or existing to secure stay or appeal
bonds or otherwise resulting from any litigation or legal proceeding
which are currently being contested in good faith by appropriate
action promptly initiated and diligently conducted, including the Lien
of any judgment; provided, however, that the aggregate amount secured
by all such Liens does not exceed $25 million;
(xiv) any Lien granted by CRCCLP on the real estate
upon which CRCCLP's Corpus Christi refinery is located arising from
the Corpus Christi Refinery West Plant Lease;
(xv) any extension, renewal, replacement or
refinancing of any Lien referred to in the foregoing clauses (i)
through (xiv); provided, however, that
(A) such new Lien shall be limited to all
or part of the same property that secured the original Lien
(plus improvements on such property) and
(B) the amount secured by such Lien at such
time is not increased to any amount greater than the sum of
(1) the outstanding amount or, if greater, committed amount
described under clauses (i) through (xiv) at the time the
original Lien became a Lien permitted under this Section
8.1(a) and (2) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement;
(xvi) any Lien granted, after the date hereof and in
addition to those permitted by clause (i) to clause (xv) above, by the
Company or any Restricted Subsidiary to secure its own direct (as
opposed to guaranteed) Indebtedness if (A) all such Liens for the
Company and all Restricted Subsidiaries together at any one time
outstanding do not secure Indebtedness in excess of $10,000,000, and
(B) such Liens do not encumber the Principal Properties or any right,
title or interest of the Company or any Restricted Subsidiary in, to
or under any Key Contract;
(xvii) rights of collecting banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of the Company or any Restricted Subsidiary on deposit
with or in the possession of such bank;
(xviii) Liens on assets or property of the Company
or a Restricted Subsidiary, other than a Principal Property, in
connection with Synthetic Leases pursuant to which, for financial
accounting purposes, the Company or a Restricted Subsidiary is the
lessee; and
(xix) Liens not otherwise permitted by the provisions
of this Section 8.1(a) securing indebtedness in an aggregate principal
amount at any time outstanding for the Company and its Restricted
Subsidiaries not in excess of 10% of Net Worth of the Company and its
Restricted Subsidiaries.
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(b) Consolidations and Mergers; Sales of Assets. The
Company shall not, and shall not permit any Restricted Subsidiary to:
(i) be a party to any merger or consolidation,
except that, so long as no Default then exists or would exist
immediately after giving effect thereto or would result therefrom, (A)
the Company may merge with any other Person, provided that the Company
is the survivor of such merger, and (B) any Wholly-Owned Restricted
Subsidiary of the Company may merge or consolidate into the Company or
with or into any other Wholly-Owned Restricted Subsidiary of the
Company;
(ii) sell, transfer, convey or lease the Principal
Properties other than in connection with any Permitted Lien granted
thereon, and other than the sale of all or any portion of the
Principal Properties pursuant to one or more Dispositions permitted
pursuant to clause (iv) of this subsection 8.1(b) or one or more Sale
Leaseback Transactions permitted pursuant to Section 8.1(g);
(iii) sell, transfer, assign or convey (other than
in connection with any Permitted Lien granted thereon and other than
any disposition to the Company or any Restricted Subsidiary) any
shares of capital stock of any Restricted Subsidiary that, at the time
of such sale, transfer, assignment or conveyance, either (A) owns,
leases or has material contract rights in respect of any Principal
Property or (B) is a party to a Key Contract; or
(iv) sell, transfer, assign or convey any assets
or any shares of capital stock of any Restricted Subsidiary
(collectively, a "Disposition") if, on the day on which such proposed
Disposition is to occur, the aggregate book value (at the time of the
proposed disposition thereof) of such assets or such shares (as the
case may be), when added to the aggregate book value (at the time or
times of the disposition thereof) of all other assets or shares
disposed of by the Company and its Restricted Subsidiaries under this
clause (iv) during the then current Fiscal Quarter and the three then
most recently completed Fiscal Quarters exceeds 20% of the aggregate
book value of the assets of the Company and its Restricted
Subsidiaries as of the date of the most recent balance sheet of the
Company delivered pursuant to Section 7.1(a); provided that, if
concurrently with any Disposition made pursuant to this clause (iv) or
within one year thereof, all or substantially all of the net proceeds
of such Disposition are either (x) reinvested (whether by acquisition,
improvement, repair, construction or otherwise) in assets related to
the business of the Company or any Restricted Subsidiary or (y)
applied ratably to (1) (A) reduce the Total Commitment hereunder (it
being understood that the Company will repay Loans and Letter of
Credit Borrowings in such principal amount as is required such that
the sum of the Effective Amount of all Loans,
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whether Committed Loans or Bid Loans, plus the Effective Amount of all
Letter of Credit Obligations outstanding after such repayment does not
exceed the Total Commitment as so reduced) and (B) prior to the
Transition Date (as defined in the $150,000,000 Credit Agreement)
reduce the Total Commitment (as therein defined) pursuant to the
$150,000,000 Credit Agreement (it being understood that the Company
will repay Revolving Loans thereunder in such principal amount such
that the aggregate principal amount of all Revolving Loans thereunder
does not exceed the Total Commitment thereunder as so reduced) and (2)
repay all other Indebtedness then outstanding (including Indebtedness
evidenced by the Term Loans made pursuant to the $150,000,000 Credit
Agreement and the Private Placement Notes), such Disposition shall be
disregarded for purposes of calculations pursuant to this clause (iv)
from and after the time of such reinvestment or application; provided,
further, that a Disposition of all or any portion of the Company's
lubricants blending plant located at Cicero, Illinois shall not be
prohibited by this clause (iv) and shall be disregarded for purposes
of calculations pursuant to this clause (iv).
Nothing in this Section 8.1(b) shall prohibit the Company or any Wholly-Owned
Restricted Subsidiary from purchasing or otherwise acquiring the assets or
stock of any Wholly-Owned Restricted Subsidiary.
(c) No Conflicts. The Company shall not, and shall not
permit any Restricted Subsidiary to, enter into any material agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder or under any other Loan Document or any instrument
or document delivered or to be delivered by it hereunder or thereunder or in
connection herewith or therewith.
(d) Transactions with Affiliates. The Company shall not,
and shall not suffer or permit any Restricted Subsidiary to, enter into any
transaction or series of transactions, whether or not in the ordinary course of
business, with any Affiliate (other than as provided in or contemplated by the
Key Contracts) other than on terms and conditions at least as favorable to the
Company or its Restricted Subsidiary as would be obtainable by the Company or
such Restricted Subsidiary at the time in a comparable arm's-length transaction
with a Person other than an Affiliate or own, purchase or acquire any stock
obligations or securities of, or any other interest in, or make any capital
contribution to, PDVSA or any Affiliate of PDVSA other than the Company or any
Subsidiary.
(e) Use of Proceeds in an Unfriendly Takeover. The Company
shall not, and shall not permit any Restricted Subsidiary to, use the proceeds
of any Loan to purchase or otherwise acquire any publicly owned securities of
another Person (or to refinance any indebtedness incurred for such purpose) if
following such acquisition the Company and its Subsidiaries would own in excess
of 15% of the Voting Stock of such Person and either (i) such purchase or
acquisition is opposed by such Person's board of directors or other governing
body or by a shareholder or shareholders controlling more than 15% of the
Voting Stock of such Person, or (ii) the Company knows of facts or
circumstances that would make it likely that such purchase or other acquisition
would be hostile or unfriendly.
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(f) [Intentionally Omitted.]
(g) Sale Leaseback Transaction. The Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any Sale Leaseback
Transaction, except for arrangements providing for the sale of all or any
portion of the Principal Properties to one or more lenders or investors if such
assets so sold are leased back by the Company, CRCCLP or a Restricted
Subsidiary, provided that, any Sale Leaseback Transaction involving such a sale
shall be treated as a Disposition for purposes of Section 8.1(b)(iv).
(h) Key Contracts. The Company shall not, and shall not
permit any Restricted Subsidiary to, amend, supplement, assign (other than an
assignment of the Crude Supply Agreement or the Supplemental Crude Supply
Agreement (or the benefits under either) to the Trading Subsidiary), terminate,
waive or be a party to a waiver of any provision of, or otherwise modify,
directly or indirectly, in any respect (i) the Crude Supply Agreement, (ii) the
Supplemental Crude Supply Agreement, or (iii) the CRCCLP Crude Supply
Agreement; provided that the Company or the Trading Subsidiary may take any
such action if:
(A) such action would affect an Operational
Term and would not affect a Material Term, and if the Company
shall determine in good faith that such action (1) is not
detrimental to the Company, (2) would not reasonably be
expected to have a Material Adverse Effect, and (3) would not
be in any way prejudicial to the Banks or any Issuing Bank;
or
(B) such action would affect a term other
than a Material Term or an Operational Term and the
Administrative Agent shall have received a certified
resolution duly adopted by the Board of Directors of the
Company to the effect that such action (1) is not detrimental
to the Company, (2) would not reasonably be expected to have
a Material Adverse Effect, and (3) would not be in any way
prejudicial to the Banks or any Issuing Bank.
(i) Restriction on Use of Proceeds. The Company shall not,
and shall not allow any Restricted Subsidiary to use the proceeds of any Loan,
directly or indirectly, to make or invest in any loan or advance to, or to
purchase or acquire any obligations or securities of, PDVSA or an Affiliate of
PDVSA except for the Company or any Restricted Subsidiary.
(j) Nature of Business. The Company shall not, and shall not
permit any Restricted Subsidiary to, engage in any business or operations
except those in which the Company and its Subsidiaries are engaged on the date
hereof or any related business or operations.
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VIII.2 Financial Covenants.
(a) Capitalization Ratio. The Company shall not permit
its Capitalization Ratio to be more than .65 to 1.00 at the end of any Fiscal
Quarter.
(b) Indebtedness Interest Coverage Ratio. The Company shall
not permit the ratio of (i) EBITDA for the Computation Period to (ii) Interest
Expense for the Computation Period to be less than 3.00 to 1.00 at the end of
any Fiscal Quarter.
(c) Minimum Net Worth. The Company shall not permit, as of
the last day of each Fiscal Quarter, Net Worth of the Company and its
Restricted Subsidiaries to be less than $1,750,000,000 plus 25% of aggregate,
cumulative Net Income accruing for all Fiscal Quarters ending after December
31, 1997 for which Net Income was positive.
VIII.3 Negative Covenants Applicable to the Company and its
Unrestricted Subsidiaries. The Company shall not permit any Unrestricted
Subsidiary to:
(a) No Conflicts. Enter into any material agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder or under any other Loan Document or any instrument
or document delivered or to be delivered hereunder or thereunder or in
connection herewith or therewith.
(b) Nature of Business. Engage in any business or operations
except those in which the Company and its Subsidiaries are engaged on the date
hereof, or any related business or operations.
(c) Use of Proceeds in an Unfriendly Takeover. Use the
proceeds of any Loan to purchase or otherwise acquire any publicly owned
securities of another Person (or to refinance any indebtedness incurred for
such purpose) if following such acquisition the Company and its Subsidiaries
would own in excess of 15% of the Voting Stock of such Person and either (i)
such purchase or acquisition is opposed by such Person's board of directors or
other governing body or by a shareholder or shareholders controlling more than
15% of the Voting Stock of such Person, or (ii) the Company knows of facts or
circumstances that would make it likely that such purchase or other acquisition
would be hostile or unfriendly.
(d) Transactions with Affiliates. Enter into any transaction
or series of transactions, whether or not in the ordinary course of business,
with any Affiliate other than on terms and conditions at least as favorable to
the Company or its Unrestricted Subsidiary as would be obtainable by the
Company or such Unrestricted Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an Affiliate, or own,
purchase or acquire any stock, obligations
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or securities of, or any other interest in, or make any capital contribution
to, PDVSA or any Affiliate of PDVSA other than the Company or any Subsidiary.
VIII.4 Designation of Unrestricted Subsidiaries and Restricted
Subsidiaries. (a) Any Responsible Officer may, at any time and from time to
time, designate a Restricted Subsidiary as an Unrestricted Subsidiary; provided
that a notice of such designation is given to the Administrative Agent
substantially contemporaneously with such designation and, provided further,
that immediately before such designation and after giving effect thereto, (i)
no Default shall have occurred and be continuing and (ii) the Company would
still be in compliance with Section 8.2 as of the end of the most recent Fiscal
Quarter. The foregoing provisions of this Section 8.4(a) to the contrary
notwithstanding, the Company may not designate CPIC or any Subsidiary which
owns any Principal Property or is a party to any Key Contract as an
Unrestricted Subsidiary.
(b) Any Responsible Officer may, at any time and from time
to time, designate an Unrestricted Subsidiary as a Restricted Subsidiary;
provided that a notice of such designation is given to the Administrative Agent
substantially contemporaneously with such designation and, provided further,
that immediately before such designation and after giving effect thereto, (i)
no Default shall have occurred and be continuing and (ii) the Company would
still be in compliance with Section 8.1 and Section 8.2 as of the end of the
most recent Fiscal Quarter.
(c) Any Person that becomes a Subsidiary after the date
hereof shall be designated as a Restricted Subsidiary within the definition
hereof unless (i) such Person shall be designated as an Unrestricted Subsidiary
by a Responsible Officer prior to the time such Person becomes a Subsidiary and
(ii) a notice of such designation is given to the Administrative Agent prior to
the date which is 15 Business Days after the date on which such Person becomes
a Subsidiary.
(d) Any notice of designation pursuant to this Section 8.4
shall be accompanied by a certificate of the Secretary or an Assistant
Secretary of the Company (i) stating that the Person providing such notice is a
Responsible Officer, (ii) setting forth the name of each Subsidiary which has
or will change its characterization as a result of such designation, and (iii)
to the extent applicable, setting forth reasonably detailed computations
demonstrating compliance with any conditions precedent to such designation.
ARTICLE IX
EVENTS OF DEFAULT
IX.1 Event of Default. Any of the following shall constitute an
"Event of Default":
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(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan or any Letter
of Credit Borrowing, or (ii) within 5 days after the same becomes due, any
interest, fee or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company made or deemed made herein, or in or under any other
Loan Document or in any written notice, report or certificate delivered
pursuant hereto or thereto is incorrect in any material respect on or as of the
date made or deemed made or reaffirmed, as the case may be; or
(c) Specific Defaults. (i) Except to the extent and subject
to subclause (ii) of this Section 9.1(c), the Company fails to perform or
observe any term, covenant or agreement contained in any of Section 8.1, 8.2 or
8.3, or (ii) default in any respect in the performance or observance of any
term, covenant, condition or agreement on its part to be performed or observed
under subsection 8.1(a), 8.1(c), 8.1(j), 8.3(a) or 8.3(b) and such default
shall continue unremedied for 30 days; or
(d) Other Defaults. The Company fails to perform or observe
in any material respect any other term, covenant condition or agreement
contained in this Agreement or any other Loan Document, (and not constituting
an Event of Default under any other clause of this Section 9.1) and such
default shall continue unremedied for a period of 30 days after the date upon
which written notice thereof is given to the Company by the Administrative
Agent or any Bank; or
(e) Non-Payment of Other Indebtedness. The Company or any
Subsidiary (i) fails to make any payment in respect of any Indebtedness (except
for such indebtedness of any Subsidiary to the Company or to any other
Subsidiary) having an aggregate principal amount of more than $25,000,000 when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure;
or (ii) fails to perform or observe any other condition or covenant, or any
other event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness , if, in either event, the effect of such
failure, event or condition is to cause, or to permit the holder or holders
thereof or beneficiary or beneficiaries thereof (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause
(after the expiration of any applicable grace period or notice period, if any,
specified in the relevant document on the date of such failure) such
Indebtedness to become due and payable prior to its expressed maturity (unless
such default is waived without the payment of some or all of such
Indebtedness); or
(f) Insolvency; Voluntary Proceedings. The Company or any
Principal Subsidiary (i) ceases or fails to be solvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due,
subject to applicable grace periods, if any; (ii) commences any Insolvency
Proceeding with respect to itself; or (iii) takes any action to effectuate or
authorize any of the foregoing; or
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(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Principal
Subsidiary, and any such proceeding or petition shall not be dismissed within
60 days after commencement; (ii) the Company or any Principal Subsidiary admits
the material allegations of a petition against it in any Insolvency Proceeding,
or an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Principal Subsidiary
acquiesces in the appointment of a receiver, trustee, custodian or liquidator
for itself or a substantial portion of its property or business; or
(h) ERISA. If (i) any Reportable Event constituting grounds
for the termination of any Plan by the PBGC and the maximum amount of current
liability that may be asserted under Title IV of ERISA by reason of the
termination of such Plan and all other Plans with respect to which any such
event has occurred, shall exceed $10,000,000 or for the appointment by the
appropriate United States District Court of a trustee to administer or
liquidate any such Plan or Plans shall have occurred and be continuing 30 days
after written, telegraphic or telephonic notice to such effect shall have been
given to the Company by the PBGC and the maximum amount of current liability
that may be asserted under Title IV of ERISA by reason of the termination of
such Plan and all other Plans with respect to which any such event has
occurred, shall exceed $25,000,000, or (ii) any Plan shall be terminated with
Unfunded Vested Liabilities which could reasonably be expected to have a
Material Adverse Effect, or (iii) any contribution failure shall occur with
respect to a Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, (including judgments entered on arbitration awards) is entered
against the Company or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance or effective
indemnification ) as to any single or related series of transactions, incidents
or conditions, exceeds $25,000,000 , and the same shall not have been
discharged or execution thereof stayed pending appeal for a period of 30 days
after the entry thereof or 60 days after the expiration of any such stay, such
judgment shall not have been discharged; or
(j) Change of Control. There occurs any Change of Control,
unless prior written consent for such lesser percentage ownership is obtained
from the Majority Banks; or
(k) Key Contracts. Any Key Contract shall, for any reason
whatsoever, (i) be terminated (or notice to terminate shall have been given by
any Person), disaffirmed or, in any material respect, cease to be valid and
binding on and enforceable against Petroleos, or (ii) if the Company, CRCCLP,
CIVESCO (or any successor as Trading Subsidiary), or Petroleos fails to perform
or observe in any material respect any material covenant, term or condition
contained in any Key Contract which it is required to perform or observe
(except covenants, terms and conditions that
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have been waived or modified pursuant to subsection 8.1(h)) and such failure
shall not be remedied within 30 days after the earlier of (A) the President,
the Chief Financial Officer or the Vice President and General Counsel of the
Company obtaining actual knowledge thereof, or (B) the Company having received
written notice thereof from the Administrative Agent; or
(l) Other Material Obligations. Default in the payment when
due, or in the performance or observance of, any material obligation of, or
condition agreed to by, the Company or any Subsidiary with respect to any
material purchase or lease of goods or services (except only to the extent that
the existence of any such default is being contested by the Company or such
Subsidiary in good faith and by appropriate proceedings) if such default would
reasonably be expected to have a Material Adverse Effect; or
(m) Default of $150,000,000 Credit Agreement. Any Event of
Default shall occur and be continuing pursuant to the $150,000,000 Credit
Agreement.
IX.2 Remedies. If any Event of Default occurs, the Administrative
Agent shall, at the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans and
any obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments shall be terminated; and
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Company and require cash collateral
as set forth in Section 3.8; and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, to the extent permitted by law, that upon the occurrence of
any event specified in subsection (f) or (g) of Section 9.1 (in the case of
clause (i) of subsection (g) upon the expiration of the 60-day period mentioned
therein), (x) the obligation of each Bank to make Loans and any obligation of
an Issuing Bank to Issue Letters of Credit shall automatically terminate; (y)
the unpaid principal amount of all outstanding Loans and Letter of Credit
Borrowings and all interest and other amounts as aforesaid shall automatically
become due and payable and (z) cash collateral as set forth in Section 3.8
shall automatically be required to be paid with respect to all Letter of Credit
Obligations, in each case, without further act of the Administrative Agent, any
Issuing Bank or any Bank.
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IX.3 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
ARTICLE X
THE ADMINISTRATIVE AGENT; ISSUING BANKS
X.1 Appointment and Authorization. (a) Each Bank hereby
irrevocably (subject to Section 10.9) appoints, designates and authorizes the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Administrative Agent have or be
deemed to have any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent.
(b) Each Issuing Bank shall act on behalf of the Banks with
respect to any Letters of Credit Issued by it and the documents associated
therewith, until such time and for so long as, the Administrative Agent may
agree at the request of the Majority Banks to act for such Issuing Bank with
respect thereto; provided, however, that each Issuing Bank shall have all of
the benefits and immunities (i) provided to the Administrative Agent in this
Article X with respect to any acts taken or omissions suffered by such Issuing
Bank in connection with Letters of Credit Issued by it or proposed to be Issued
by it and the application and agreements for letters of credit pertaining to
the Letters of Credit Issued by it as fully as if the term "Administrative
Agent", as used in this Article X, included the Issuing Banks with respect to
such acts or omissions, and (ii) as additionally provided in this Agreement
with respect to such Issuing Bank.
X.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
X.3 Liability of Administrative Agent. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this
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Agreement or any other Loan Document or the transactions contemplated hereby
(except for its own gross negligence , willful misconduct or unlawful acts), or
(ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or
other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
the Company or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Bank to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of the
Company or any of the Company's Subsidiaries or Affiliates.
X.4 Reliance by Administrative Agent. (a) The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Majority Banks as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Majority Banks (subject to Section 11.1) and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 5.1, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Administrative Agent to
such Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Bank.
X.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Banks, unless the Administrative Agent shall have received written notice from
a Bank or the Company referring to this Agreement, describing such Default or
Event of Default and stating that
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such notice is a "notice of default". The Administrative Agent will notify the
Banks of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Default or Event of Default as may be
requested by the Majority Banks in accordance with Article IX; provided,
however, that unless and until the Administrative Agent has received any such
request, the Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of the
Banks.
X.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Administrative Agent hereinafter taken, including any review of
the affairs of the Company and its Subsidiaries, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Bank. Each
Bank represents to the Administrative Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the
Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
X.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and
without limiting the obligation of the Company to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Bank
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Administrative Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including Attorney Costs) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that the
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Administrative Agent is not reimbursed for such expenses by or on behalf of the
Company. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Administrative
Agent.
X.8 Agents in Individual Capacity. BofA, Royal Bank of Canada and
The Bank of New York and the respective Affiliates of each may make loans to,
issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though such Person were not the Administrative
Agent or a Syndication Agent (as the case may be) hereunder and without notice
to or consent of the Banks. The Banks acknowledge that, pursuant to such
activities, BofA, Royal Bank of Canada and The Bank of New York or the
respective Affiliates of any of the foregoing may receive information regarding
the Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Administrative Agent and Syndication Agents shall be under
no obligation to provide such information to them. With respect to its Loans
and Letter of Credit Advances, each of BofA, Royal Bank of Canada and The Bank
of New York shall have the same rights and powers under this Agreement as any
other Bank and may exercise the same as though it were not the Administrative
Agent or a Syndication Agent (as the case may be) and the terms "Bank" and
"Banks" include each of BofA, Royal Bank of Canada and The Bank of New York in
its individual capacity.
X.9 Successor Administrative Agent. The Administrative Agent may,
and at the request of the Majority Banks shall, resign as Administrative Agent
upon 30 days' notice to the Banks. If the Administrative Agent resigns under
this Agreement, the Majority Banks shall appoint from among the Banks a
successor agent for the Banks which successor agent shall be approved by the
Company. If no successor agent is appointed prior to the effective date of the
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Banks and the Company, a successor agent from among
the Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Administrative Agent and the term "Administrative Agent" shall mean
such successor agent and the retiring Administrative Agent's appointment,
powers and duties as Administrative Agent shall be terminated. After any
retiring Administrative Agent's resignation hereunder as Administrative Agent,
the provisions of this Article X and Sections 11.4 and 11.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become
effective and the Banks shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Majority Banks appoint a
successor agent as provided for above.
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X.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Administrative
Agent and the Company, to deliver to the Administrative Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of
such Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Administrative Agent and the Company of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Administrative Agent and the Company of the percentage amount in
which it is no longer the beneficial owner of Obligations of the Company to
such Bank. To the extent of such percentage amount, the Administrative Agent
will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Administrative Agent may withhold from any
interest payment to such Bank an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other
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documentation required by subsection (a) of this Section are not delivered to
the Administrative Agent, then the Administrative Agent may withhold from any
interest payment to such Bank not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Administrative
Agent did not properly withhold tax from amounts paid to or for the account of
any Bank (because the appropriate form was not delivered, was not properly
executed, or because such Bank failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall indemnify
the Administrative Agent fully for all amounts paid, directly or indirectly, by
the Administrative Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Administrative Agent under this Section, together with all costs and
expenses (including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.
ARTICLE XI
MISCELLANEOUS
XI.1 Amendments and Waivers. Except as expressly provided in
Sections 4.8, 4.9 and 11.8(c), no amendment or waiver of any provision of any
Loan Document, and no consent with respect to any departure by the Company
therefrom, shall be effective unless the same shall be in writing and signed by
the Majority Banks (or by the Administrative Agent at the written request of
the Majority Banks) and the Company and acknowledged by the Administrative
Agent, and then any such amendment or waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
provided, however, that, except pursuant to Section 4.8, 4.9 and 11.8(c), no
such waiver, amendment, or consent shall, unless in writing and signed by the
affected Bank or Banks and the Company and acknowledged by the Administrative
Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 9.2);
(b) postpone or delay any date fixed by any Loan Document
for any payment of principal, interest, fees or other amounts due to any Bank
under any Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan or Letter of Credit Advance, or (subject to clause
(i) below) any fees or other amounts payable under any Loan Document;
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(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.18, or any provision
herein providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the relevant Issuing Bank in addition to the Majority
Banks or all the Banks, as the case may be, affect the rights or duties of such
Issuing Bank under this Agreement or any Letter of Credit-Related Document
relating to such Letter of Credit Issued or to be Issued by it, (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Bid
Agent in addition to the Majority Banks or all the Banks, as the case may be,
affect the rights or duties of the Bid Agent under this Agreement or any other
Loan Document, (iii) no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to the Majority Banks or all
the Banks, as the case may be, affect the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document, and (iv)
the Fee Letters may be amended, or rights or privileges thereunder waived, in a
writing executed by the parties thereto.
XI.2 Notices. (a) Except as otherwise expressly provided in this
Agreement, all notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission or electronic mail, provided that any matter transmitted by the
Company by facsimile or electronic mail (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on Schedule 11.2, and
(ii) shall be followed promptly by delivery of a hard copy original thereof)
and mailed, faxed or delivered, to the address or facsimile number specified
for notices on Schedule 11.2; or, as directed to the Company or the
Administrative Agent, to such other address as shall be designated by such
party in a written notice to the other parties, and as directed to any other
party, at such other address as shall be designated by such party in a written
notice to the Company and the Administrative Agent.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, faxed or electronic mail, be effective
when delivered for overnight (next-day) delivery, or transmitted in legible
form by facsimile machine or by electronic mail, respectively, or if mailed,
upon the third Business Day after the date deposited into the U.S. mail, or if
delivered, upon delivery; except that notices pursuant to Article II, III or X
shall not be effective until actually received by the Administrative Agent and
notices pursuant to Article III to an Issuing Bank shall not be effective until
actually received by such Issuing Bank at the address specified for such
"Issuing Bank" in Schedule 11.2 or such other address as shall be designated by
such Issuing Bank pursuant to subsection 11.2(a).
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(c) Any agreement of the Administrative Agent and the Banks
herein to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Administrative Agent and the
Banks shall be entitled to rely on the authority of any Person believed in good
faith by the Administrative Agent to be an Authorized Signatory, for purposes
of such notice and the Administrative Agent and the Banks shall not have any
liability to the Company or other Person on account of any action taken or not
taken by the Administrative Agent or the Banks in reliance upon such telephonic
or facsimile notice. The obligation of the Company to repay the Loans and
Letter of Credit Obligations shall not be affected in any way or to any extent
by any failure by the Administrative Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the
Administrative Agent and the Banks of a confirmation which is at variance with
the terms understood by the Administrative Agent and the Banks to be contained
in the telephonic or facsimile notice.
XI.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Bank, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
XI.4 Expenses. The Company shall pay (i) all reasonable
out-of-pocket expenses incurred by BofA (including in its capacity as
Administrative Agent, Bid Agent and Issuing Bank), and its respective
Affiliates, including all Attorney Costs for the Administrative Agent in
connection with the preparation, negotiation, syndication and administration
(provided, however, that all such expenses, fee charges and disbursements in
connection with such administration shall not exceed $10,000 in any calendar
year) of this Agreement or any amendments, modifications or waivers of the
provisions hereof whether or not the transactions contemplated hereby or
thereby shall be consummated, (ii) all reasonable out-of-pocket expenses
incurred by any Issuing Bank in connection with the Issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all reasonable out-of-pocket expenses incurred by the
Administrative Agent, any Issuing Bank or any Bank, including all Attorney
Costs of counsel for the Administrative Agent, the Bid Agent, any of the
Issuing Banks or any Bank in each case, in connection with the enforcement or
protection of its rights in connection with this Agreement, including its
rights under this Agreement, or in connection with the Loans made, Letters of
Credit Issued or Letter of Credit Borrowings advanced hereunder, including in
connection with any workout, restructuring or negotiations in respect thereof.
XI.5 Indemnity; Damage Waiver. (a) The Company shall indemnify the
Administrative Agent, the Bid Agent, the Agent-Related Persons, each Issuing
Bank and each Bank, and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each such Person being called
an "Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel
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(including the allocated cost of internal legal services and all disbursements
of internal legal counsel) for any Indemnitee, (collectively, the "Indemnified
Liabilities" incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance
by the parties hereto of their respective obligations hereunder or the
consummation of the transactions contemplated hereby, (ii) any Loan, Letter of
Credit Borrowing or Letter of Credit or the use of the proceeds therefrom
(including any refusal by any Issuing Bank to honor a demand for payment under
a Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any actual
or prospective claim, litigation, investigation or proceeding relating to any
of the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and non-appealable judgement to have
resulted from the gross negligence, willful misconduct or unlawful act of such
Indemnitee. If any action, suit or proceeding arising from any of the foregoing
is brought against the Administrative Agent, the Bid Agent, any Bank or any
other Person indemnified or intended to be indemnified pursuant to this Section
11.5 the Company will resist and defend such action, suit or proceeding or
cause the same to be resisted and defended by counsel designated by the Company
(which counsel shall be reasonably satisfactory to the Person or Persons
indemnified or intended to be indemnified). The agreements in this Section
11.5(a) shall survive payment of all other Obligations and the termination of
this Agreement.
(b) To the extent permitted by applicable law, the Company
shall not assert, and hereby waives, any claim against any Indemnitee, and each
Bank, and to the extent that a Bank may bind a related Indemnitee, each
Indemnitee shall not assert and waives any claim against the Company, in each
case, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the transactions contemplated hereby, any Loan,
any Letter of Credit Borrowing or any Letter of Credit or the use of the
proceeds thereof. The agreements in this Section 11.5(b) shall survive payment
of all other Obligations for a period of two years.
XI.6 Payments Set Aside. To the extent that the Company makes a
payment to the Administrative Agent or the Banks, or the Administrative Agent
or the Banks exercise their right of set-off, and such payment or the proceeds
of such set-off or any part thereof are subsequently invalidated, declared to
be fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to the Administrative Agent upon demand
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its pro rata share of any amount so recovered from or repaid by the
Administrative Agent to the extent such amount had been previously paid to such
Bank.
XI.7 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Administrative Agent and each Bank.
XI.8 Assignments, Participations, etc. (a) Any Bank (including any
Issuing Bank) may, with the written consent of the Company at all times other
than during the existence of an Event of Default and the Administrative Agent
and the Issuing Banks, which consents shall not be unreasonably withheld, at
any time assign and delegate to one or more Eligible Assignees (provided that
no written consent of the Company, the Administrative Agent or any Issuing Bank
shall be required in connection with any assignment and delegation by a Bank to
another Bank or to an Eligible Assignee that is an Affiliate of such assigning
Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the
Commitments, the Letter of Credit Obligations and the other rights and
obligations of such Bank hereunder, in a minimum amount of $10,000,000;
provided, however, that the Company and the Administrative Agent may continue
to deal solely and directly with such Bank in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to
the Assignee, shall have been given to the Company and the Administrative Agent
by such Bank and the Assignee; (ii) such Bank and its Assignee shall have
delivered to the Company and the Administrative Agent an Assignment and
Acceptance substantially in the form of Exhibit E ("Assignment and Acceptance")
together with any Note or Notes subject to such assignment and (iii) the
assignor Bank or Assignee has paid to the Administrative Agent a processing fee
in the amount of $3,500; and provided, further, the assignment may, at the
option of the assigning Bank and the Assignor, not assign any portion of any
outstanding Bid Loans.
(b) From and after the date that the Administrative Agent
notifies the assignor Bank that it has received (and, if required, the
Administrative Agent, each Issuing Bank and the Company has each provided its
consent with respect to) an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Bank under the Loan Documents, and (ii) the
assignor Bank shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by
the Administrative Agent that it has received an executed Assignment and
Acceptance and payment of the processing fee, (and provided that it consents to
such assignment in accordance with subsection 11.8(a)), the
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Company shall, if requested by the Administrative Agent, execute and deliver to
the Administrative Agent, new Notes evidencing such Assignee's assigned Loans
and Commitment and, if the assignor Bank has retained a portion of its Loans
and its Commitment, replacement Notes in the principal amount of the Loans
retained by the assignor Bank (such Notes to be in exchange for, but not in
payment of, the Notes held by such Bank). Immediately upon each Assignee's
making its processing fee payment under the Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Bank pro tanto.
(d) The Administrative Agent shall maintain at its address
set forth in accordance with Section 11.2 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation
of the names and addresses of the Banks and the Commitments of, and principal
amount of the Loans and Letter of Credit Advances owing to, each Bank from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Company, the
Administrative Agent and the Banks may treat each Person whose name is
currently recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Company or any
Bank at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and an assignee representing that it is an
Eligible Assignee, together with any Note or Notes subject to such assignment,
the Administrative Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit E, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Company.
(f) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Loans, any Letters of Credit, the Commitment of
that Bank and the other interests of that Bank (the " Originating Bank") and
under the Loan Documents; provided, however, that (i) the originating Bank's
obligations under this Agreement shall remain unchanged, (ii) the originating
Bank shall remain solely responsible for the performance of such obligations,
(iii) the Company, the Administrative Agent and each Issuing Bank shall
continue to deal solely and directly with the originating Bank in connection
with the originating Bank's rights and obligations under and the Loan
Documents, and (iv) no Bank shall transfer or grant any participating interest
under which the Participant has rights to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment, consent or waiver would require unanimous
consent of the Banks as described in the first proviso to Section 11.1. In the
case of any such participation, the Participant shall not have any rights under
the Loan Documents, and all amounts payable by the Company hereunder shall be
determined as if such Bank had not sold such participation; except that,
-90-
<PAGE> 97
if amounts outstanding under this Agreement are due and unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, to the extent permitted by law, each Participant shall be
deemed to have the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement.
(g) Notwithstanding any other provision in this Agreement,
any Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law. Notwithstanding the foregoing, no such assignment shall release
the assigning Bank from its obligations hereunder.
XI.9 Designated Bidders. Any Bank may designate one Designated
Bidder to have a right to offer and make Bid Loans pursuant to Section 2.6;
provided, however, that (i) no such Bank may make more than one such
designation, (ii) each such Bank making any such designation shall retain the
right to make Bid Loans, and (iii) the parties to each such designation shall
execute and deliver to the Administrative Agent a Designation Agreement. Upon
its receipt of an appropriately completed Designation Agreement executed by a
designating Bank and a designee representing that it is a Designated Bidder,
the Administrative Agent will accept such Designation Agreement and give prompt
notice thereof to the Company, whereupon such designation of such Designated
Bidder shall become effective and such designee shall become a party to this
Agreement as a "Designated Bidder."
XI.10 Confidentiality. Each Bank and each Designated Bidder
acknowledges that it has executed an agreement with the Company in
substantially the form of Exhibit L (each a "Bank Confidentiality Agreement")
and agrees that it will not provide Evaluation Material (as defined therein) to
prospective assignees, transferees or participants unless such Person has
executed a Bank Confidentiality Agreement substantially in the form of Exhibit
L.
XI.11 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists pursuant to Section 9.1(a) or
the Loans have been accelerated, cash collateral for Letter of Credit
Obligations has been required or demand for payment has been made with respect
to such Bank's portion of any Letter of Credit Borrowing, each Bank is
authorized at any time and from time to time, without prior notice to the
Company, any such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit or the
account of the Company against any and all Obligations owing to such Bank, now
or hereafter existing, irrespective of whether or not the Administrative Agent
or such Bank shall have made demand under this Agreement or any Loan Document
and although such Obligations may be contingent or unmatured. Each Bank agrees
-91-
<PAGE> 98
promptly to notify the Company and the Administrative Agent after any such
set-off and application made by such Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.
XI.12 Intentionally Omitted.
XI.13 Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Administrative Agent and the Company in writing of any changes
in the address to which notices to the Bank should be directed, of addresses of
any Lending Office, of payment instructions in respect of all payments to be
made to it hereunder and of such other administrative information as the
Administrative Agent shall reasonably request.
XI.14 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
XI.15 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
XI.16 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Administrative Agent and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
XI.17 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK; PROVIDED THAT THE ADMINISTRATIVE AGENT, EACH ISSUING BANK
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE
ADMINISTRATIVE AGENT, EACH ISSUING BANK AND THE BANKS CONSENTS, FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT, EACH ISSUING BANK AND THE BANKS
IRREVOCABLY WAIVES TO THE EXTENT NOT PROHIBITED BY LAW, ANY OBJECTION,
INCLUDING
-92-
<PAGE> 99
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE AGENT, EACH ISSUING BANK AND
THE BANKS EACH WAIVE TO THE EXTENT NOT PROHIBITED BY LAW, PERSONAL SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
XI.18 Waiver of Jury Trial. THE COMPANY, THE BANKS, THE
ADMINISTRATIVE AGENT, AND EACH ISSUING BANK WAIVE TO THE EXTENT NOT PROHIBITED
BY LAW, THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE. THE COMPANY, THE BANKS, EACH ISSUING BANK AND THE ADMINISTRATIVE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
XI.19 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Administrative Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
-93-
<PAGE> 100
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CITGO PETROLEUM CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 101
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Bid Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 102
ROYAL BANK OF CANADA,
as Syndication Agent and as a Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 103
THE BANK OF NEW YORK,
as Syndication Agent and as a Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 104
CHASE MANHATTAN BANK,
as Co-Agent and as a Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 105
THE BANK OF TOKYO-MITSUBISHI, LTD.
as Co-Agent and as a Bank
By:
------------------------------------
Michael G. Meiss
Vice President & Manager
<PAGE> 106
BANQUE NATIONALE DE PARIS,
as Co-Agent and as a Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 107
THE FUJI BANK, LIMITED - HOUSTON AGENCY,
as Co-Agent and as a Bank
By:
------------------------------------
Jacques Azagury
Vice President & Manager
<PAGE> 108
ABN AMRO BANK, N.V.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 109
BANKBOSTON, N.A.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 110
THE FIRST NATIONAL BANK OF CHICAGO
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 111
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 112
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By:
------------------------------------
Paul K. Carter
Vice President
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH
By:
------------------------------------
Paul K. Carter
Vice President
<PAGE> 113
NATIONSBANK, N.A.
By:
------------------------------------
Denise A. Smith
Title:
---------------------------------
<PAGE> 114
CITIBANK, N.A.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 115
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 116
SUNTRUST BANK, ATLANTA
By:
------------------------------------
Todd Davis
Assistant Vice President
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 117
BANK AUSTRIA AKTIENGESELLSCHAFT -
NEW YORK BRANCH
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 118
THE NORTHERN TRUST COMPANY
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 119
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
By:
------------------------------------
Denise L. Maltby
Senior Vice President
<PAGE> 120
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 121
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- -----
<S> <C> <C>
Bank of America NT & SA $ 45,454,545.43 11.36%
The Bank of New York $ 36,363,636.36 9.09%
Royal Bank of Canada $ 36,363,636.36 9.09%
The Chase Manhattan Bank $ 25,454,545.45 6.36%
The Bank of Tokyo-Mitsubishi Limited $ 25,454,545.45 6.36%
Banque Nationale de Paris $ 25,454,545.45 6.36%
The Fuji Bank, Limited $ 25,454,545.45 6.36%
ABN AMRO Bank, N.V. $ 14,545,454.55 3.64%
BankBoston $ 14,545,454.55 3.64%
The First National Bank of Chicago $ 14,545,454.55 3.64%
The Industrial Bank of Japan, Limited $ 14,545,454.55 3.64%
National Westminister Bank, PLC $ 14,545,454.55 3.64%
NationsBank $ 14,545,454.55 3.64%
Citibank $ 14,545,454.55 3.64%
DG Bank $ 14,545,454.55 3.64%
SunTrust $ 14,545,454.55 3.64%
West LB $ 14,545,454.55 3.64%
Bank Austria $ 14,545,454.55 3.64%
Northern Trust $ 10,909,090.91 2.73%
Bank of Oklahoma $ 9,090,909.09 2.27%
TOTAL $400,000,000.00 100.00%
</TABLE>
<PAGE> 122
SCHEDULE 5.1
Qualification as a Foreign Corporation
Texas
Louisiana
Oklahoma
New York
<PAGE> 123
SCHEDULE 6.5
LITIGATION
<PAGE> 124
SCHEDULE 6.13
EXPECTED MATERIAL ADVERSE EFFECTS
None
<PAGE> 125
SCHEDULE 6.14
ENVIRONMENTAL MATTERS
None
<PAGE> 126
SCHEDULE 6.17
SUBSIDIARIES
<PAGE> 127
SCHEDULE 11.2
BANK OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
COMPANY ADDRESS
CITGO PETROLEUM CORPORATION
One Warren Place
Tulsa, Oklahoma 74102
Attention:
Geoffry Reid
Telephone: (918) 495-5185
Facsimile: (918) 495-5492
BANKS AND AGENTS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
Bank of America National Trust
and Savings Association
Agency Administration Services #5596
1850 Gateway Blvd, 5th Floor
Concord, California 94520
Attention:
Alexandra Bax
Telephone: (925) 675-8373
Facsimile: (925) 675-8369
with copy to:
Bank of America National
Trust and Savings Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention:
Claire Liu
Telephone: (713) 651-4855
Facsimile: (713) 651-4841
Schedule 11.2 - Page 1
<PAGE> 128
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office:
231 So. LaSalle Street
Chicago, Illinois 60697
Attention:
Ida Rubens
Telephone: (312) 828-5239
Facsimile: (312) 974-9626
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank of America National
Trust and Savings Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention:
Claire Liu
Telephone: (713) 651-4855
Facsimile: (713) 651-4841
THE BANK OF NEW YORK, as
Syndication Agent and as a Bank
Domestic and Offshore Lending Office:
One Wall Street, 19th Floor
New York, New York 10286
Attention:
Kathy D'Elena
Telephone: (212) 635-7550
Facsimile: (212) 635-7923/4
Schedule 11.2 - Page 2
<PAGE> 129
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Bank of New York
Energy Industries Division
One Wall Street, 19th Floor
New York, New York 10286
Attention:
Raymond J. Palmer
Telephone: (212) 635-7834
Facsimile: (212) 635-7924
Attention: William Mastrandrea
(re: Competitive Bids)
Telephone: (212) 804-2050
Facsimile: (212) 809-5272
ROYAL BANK OF CANADA,
as Syndication Agent and as a Bank
Domestic and Offshore Lending Office:
One Financial Square, 24th Floor
New York, New York 10005-3531
Attention:
Danielle Gilles
Telephone: (212) 428-6332
Facsimile: (212) 428-2372
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Royal Bank of Canada
12450 Greenspoint Drive, Suite 1450
Houston, Texas 77060
Attention:
J. Doug Frost
Telephone: (281) 874-5664
Facsimile: (281) 874-0081
Schedule 11.2 - Page 3
<PAGE> 130
CHASE MANHATTAN BANK,
as a Co-Agent and as a Bank
Domestic and Offshore Lending Office:
270 Park Avenue 32nd Floor
New York, New York 10017
Attention:
Tonya Mitchell
Telephone: (212) 552-7206
Facsimile: (212) 552-5777
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Chase Manhattan Bank
2200 Ross Avenue 3rd Floor
Dallas, Texas 75201
Attention:
Donna German
Telephone: (214) 965-2540
Facsimile: (214) 965-2389
THE BANK OF TOKYO-MITSUBISHI, LTD.
Domestic and Offshore Lending Office:
1100 Louisiana Street, Suite 2800
Houston, Texas 77002
Attention:
Nadra Breir
Telephone: (713) 655-3847
Facsimile: (713) 655-3855
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Bank of Tokyo-Mitsubishi, Ltd.
1100 Louisiana, Suite 2800
Houston, Texas 77002
Attention:
Michael G. Meiss
Telephone: (713) 655-3815
Facsimile: (713) 655-3855
Schedule 11.2 - Page 4
<PAGE> 131
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
as a Co-Agent and as a Bank
Domestic and Offshore Lending Office:
333 Clay Street, Suite 3400
Houston, Texas 77002
Attention:
Donna Rose
Telephone: (713) 951-1240
Facsimile: (713) 659-1414
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Banque Nationale de Paris, Houston Agency
717 North Harwood Street, Suite 2630
Dallas, Texas 75201
Attention:
Lloyd G. Cox
Telephone: (214) 969-7388
Facsimile: (214) 969-0060
THE FUJI BANK, LIMITED-HOUSTON AGENCY,
as Co-Agent and as Bank
Domestic and Offshore Lending Office:
One Houston Center, Suite 4100
1221 McKinney
Houston, Texas 77010
Attention:
Jenny Lin
Telephone: (713) 650-7821
Facsimile: (713) 951-0590
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Fuji Bank, Limited-Houston Agency
One Houston Center, Suite 4100
1221 McKinney
Houston, Texas 77010
Attention:
Jacques Azagury
Telephone: (713) 650-7845
Facsimile: (713) 759-0048
Schedule 11.2 - Page 5
<PAGE> 132
ABN AMRO BANK, N.V.
Domestic and Offshore Lending Office:
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 625
Chicago, Illinois 60603
Attention:
Loan Administration
Telephone: (312) 904-8865
Facsimile: (312) 904-6893
Office for Letters of Credit:
ABN AMRO Bank N.V.
200 West Monroe Street, Suite 1100
Chicago, Illinois
Attention:
Trade Services
Telephone: (888) 226-5113
Facsimile: (888) 226-5119
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 2805
Chicago, Illinois 60603
Attention:
Credit Administration
Telephone: (312) 904-8835
Facsimile: (312) 904-8840
with copy to:
ABN AMRO North America, Inc.
Three Riverway, Suite 1700
Houston, Texas 77056
Attention:
Michael Nepveux
Telephone: (713) 964-3316
Facsimile: (713) 621-5810
Schedule 11.2 - Page 6
<PAGE> 133
BOSTONBANK, N.A.
Domestic and Offshore Lending Office:
100 Federal Street
Boston, Massachusetts 02110
Attention:
Debra Williams
Telephone: (617) 434-9623
Facsimile: (617) 434-9820
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attention:
Stephen Carll
Telephone: (617) 434-9697
Facsimile: (617) 434-3652
THE FIRST NATIONAL BANK OF CHICAGO
Domestic and Offshore Lending Office:
One First National Plaza
0634, 1FNP, 10
Chicago, Illinois 60670
Attention:
John Beirne
Telephone: (312) 732-3659
Facsimile: (312) 732-4840
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The First National Bank of Chicago
One First National Plaza
0634, 1FNP, 10 Chicago, Illinois 60670
Attention:
John Beirne
Telephone: (312) 732-3659
Facsimile: (312) 732-4840
Schedule 11.2 - Page 7
<PAGE> 134
with copy to:
The First National Bank of Chicago
1100 Louisiana, Suite 3200
Houston, Texas 77002
Attention:
Dixon Schultz
Telephone: (713) 654-7329
Facsimile: (713) 654-7370
THE INDUSTRIAL BANK OF JAPAN, LIMITED
Domestic and Offshore Lending Office:
The Industrial Bank of Japan, Limited
New York Branch
1251 Avenue of the Americas
New York, New York 10020-1104
Attention:
Bob Cummings, Credit Administration
Telephone: (212) 282-4067
Facsimile: (212) 282-4480 or
(212) 282-4250
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Industrial Bank of Japan, Limited
New York Branch
1251 Avenue of the Americas
New York, New York 10020-1104
Attention:
Bob Cummings, Credit Administration
Telephone: (212) 282-4067
Facsimile: (212) 282-4480 or
(212) 282-4250
Schedule 11.2 - Page 8
<PAGE> 135
with copy to:
The Industrial Bank of Japan, Limited
Three Allen Center, Suite 4850
333 Clay Street
Houston, Texas 77002
Attention:
Ms. Jessica Cowan (re: bid notices)
Telephone: (713) 651-9444 ext. 124
Facsimile: (713) 651-9209
Mr. Lynn Williford (other notices)
Telephone: (713) 651-9444 ext. 104
Facsimile: (713) 651-9209
NATIONAL WESTMINSTER BANK PLC., NEW YORK BRANCH
NATIONAL WESTMINSTER BANK PLC., NASSAU BRANCH
Domestic Lending Office:
National Westminster Bank Plc., New York Branch
175 Water Street
New York, New York 10038
Attention:
Evonne Wearing
Telephone: (212) 602-4180
Facsimile: (212) 602-4118
Offshore Lending Office:
National Westminster Bank Plc., Nassau Branch
175 Water Street
New York, New York 10038
Attention:
Evonne Wearing
Telephone: (212) 602-4180
Facsimile: (212) 602-4118
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Schedule 11.2 - Page 9
<PAGE> 136
National Westminster Bank, Plc.
600 Travis Street, Suite 6070
Houston, Texas 77002
Attention:
Kristi DeMaiolo, Vice President
Telephone: (713) 221-2429
Facsimile: (713) 221-2431
NATIONSBANK, N.A.
Domestic and Offshore Lending Office:
901 Main Street, 14th Floor
Dallas, Texas 75202
Attention:
Betty Canales
Telephone: (214) 508-1225
Facsimile: (214) 508-1215
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
NationsBank, N.A.
901 Main Street, 64th Floor
Dallas, Texas 75202
Attention:
Denise A. Smith
Telephone: (214) 508-1261
Facsimile: (214) 508-1285
CITIBANK, NA
Domestic and Offshore Lending Office:
399 Park Avenue
New York, New York 10043
Attention:
Patrice Williams
Telephone: (302) 894-6068
Facsimile: (302) 894-6120
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Schedule 11.2 - Page 10
<PAGE> 137
Citibank, N.A.
c/o Citicorp Securities, Inc.
1200 Smith Street, Suite 2000
Houston, Texas 77002
Attention:
Greg Morzano
Telephone: (713) 654-3559
Facsimile: (713) 654-2869
DG BANK DEUTSCHE GENOSSENSCHAFTS BANK, CAYMAN ISLAND BRANCH
Domestic and Offshore Lending Office:
609 Fifth Avenue
New York, New York 10017-1021
Attention:
Mark K. Connelly, Vice President
Telephone: (212) 745-1560
Facsimile: (212) 745-1556/1550
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
DG Bank
609 Fifth Avenue
New York, New York 10017-1021
Attention:
Mark K. Connelly, Vice President
Telephone: (212) 745-1560
Facsimile: (212) 745-1556/1550
SUNTRUST BANK, ATLANTA
Domestic and Offshore Lending Office
25 Park Place, MC-120
Atlanta, Georgia 30303
Attention:
Ernestine Fambrough
Telephone: (404) 581-1612
Facsimile: (404) 575-2730
Schedule 11.2 - Page 11
<PAGE> 138
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
SunTrust Bank, Atlanta
25 Park Place, MC-120
Atlanta, Georgia 30303
Attention:
Todd Davis
Telephone: (404) 658-4917
Facsimile: (404) 827-6270
Schedule 11.2 - Page 12
<PAGE> 139
WESTDEUTSCHE LANDESBANK GIROZENTRALE
Domestic and Offshore Lending Office:
1211 Avenue of the Americas
New York, New York 10036
Attention:
Cheryl Wilson
Telephone: (212) 852-6152
Facsimile: (212) 302-7946
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Westdeutsche Landesbank Girozentrale, New York Branch
1211 Avenue of the Americas
New York, New York 10036
Attention:
Richard R. Newman
Telephone: (212) 852-6120
Facsimile: (212) 852-6307
BANK AUSTRIA AKTIENGESELLSCHAFT- NEW YORK BRANCH
Domestic and Offshore Lending Office:
565 Fifth Avenue
New York, New York 10017
Attention:
Robert Malendez
Telephone: (212) 880-1173
Facsimile: (212) 880-1180
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank Austria AG
565 Fifth Avenue
New York, New York 10017
Attention:
Karen L. Jill
Telephone: (212) 880-1079
Facsimile: (212) 880-1080
Schedule 11.2 - Page 13
<PAGE> 140
THE NORTHERN TRUST COMPANY
Domestic and Offshore Lending Office:
50 S. LaSalle
Chicago, Illinois 60675
Attention:
Linda Honda (re: Loans, Borrowing Notices,
Conversion/Continuation Notices)
Telephone: (312) 444-3532
Facsimile: (312) 630-1566
Attention:
Charles Gerlach (re: Letters of Credit)
Telephone: (312) 444-4715
Facsimile: (312) 630-5015
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Northern Trust Company
50 S. LaSalle B-11
Chicago, Illinois 60675
Attention:
John Burda
Telephone: (312) 444-4575
Facsimile: (312) 444-5055
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
Domestic and Offshore Lending Office:
P.O. Box 2300
Tulsa, Oklahoma 74192
Attention:
Pam Cratin
Telephone: (405) 936-3731
Facsimile: (405) 936-3771
Schedule 11.2 - Page 14
<PAGE> 141
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank of Oklahoma, National Association
One Williams Center, 8th Floor
Tulsa, Oklahoma 74103
Attention:
Robert D. Mattax
Telephone: (918) 588-6217
Facsimile: (918) 588-6880
Schedule 11.2 - Page 15
<PAGE> 142
EXHIBIT A
NOTICE OF BORROWING
Date: ________________ , [199_] [200_]
To: Bank of America National Trust and Savings Association as
Administrative Agent for the Banks parties to the $400,000,000 Credit
Agreement dated as of May 13, 1998 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") among CITGO
Petroleum Corporation, certain Banks which are signatories thereto and
Bank of America National Trust and Savings Association, as
Administrative Agent
Ladies and Gentlemen:
The undersigned, CITGO Petroleum Corporation (the "Company"), refers
to the Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.3 of
the Credit Agreement, of the Committed Borrowing specified below:
1. The Business Day of the proposed Committed Borrowing is
__________, 19__.
2. The aggregate amount of the proposed Borrowing is $_______.(1)
3. The Borrowing is to be comprised of $ ________ of [Base Rate]
[CD Rate] [Offshore -- Rate] Loans.
4. The duration of the Interest Period for the [CD Rate Loans]
[Offshore Rate Loans] included in the Borrowing shall be [_____ days]
[_____ months].
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed
Borrowing, before and after giving effect thereto and to the application of the
proceeds therefrom:
- ---------
(1) Such amount shall be a minimum of $10,000,000 or, if greater, any multiple
of $1,000,000.
Exhibit A-1
<PAGE> 143
(a) the representations and warranties of the Company
contained in Article VI of the Credit Agreement are true and correct
in all material respects as though made on and as of such date (except
to the extent such representations and warranties relate to an earlier
date, in which case they are true and correct in all material respects
as of such date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Borrowing; and
(c) The proposed Borrowing will not cause the aggregate
Effective Amount of all outstanding Loans, including Committed Loans
and Bid Loans, plus the Effective Amount of all Letter of Credit
Obligations to exceed the Total Commitment.
CITGO PETROLEUM CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Exhibit A-2
<PAGE> 144
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
Date: _______, [199 ] [200_]
To: Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks parties to the $400,000,000 Credit
Agreement dated as of May 13, 1998 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") among CITGO
Petroleum Corporation, certain Banks which are signatories thereto and
Bank of America National Trust and Savings Association, as
Administrative Agent
Ladies and Gentlemen:
The undersigned, CITGO Petroleum Corporation (the "Company"), refers
to the Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.4 of
the Credit Agreement, of the [conversion] [continuation] of the Loans specified
herein, that:
1. The Conversion/Continuation Date is ________, [199_][200_].
2. The aggregate amount of the Loans to be [converted] [continued]
is $ __________.
3. The Loans are to be [converted into] [continued as] [CD Rate]
[Offshore Rate] [Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period for the
Loans included in the [conversion] [continuation] shall be [____days]
[months].
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the proposed Conversion/
Continuation Date, before and after giving effect thereto and to the
application of the proceeds therefrom:
(1)(a) the representations and warranties of the Company
contained in Article VI of the Credit Agreement (except for Section
6.6) are true and correct in all material respects as
- ---------
(1) Need not be included for a conversion into or continuation as Base Rate
Loans.
Exhibit B-1
<PAGE> 145
though made on and as of such date (except to the extent such
representations and warranties relate to an earlier date, in which
case they are true and correct in all material respects as of such
date);
(2)(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [conversion]
[continuation]; and
(c) the proposed [conversion][continuation] will not cause
the Effective Amount of all outstanding Loans, including Committed
Loans and Bid Loans, plus the Effective Amount of all Letter of Credit
Obligations to exceed the Total Commitment.
CITGO PETROLEUM COMPANY
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
- ---------
(2) Need not be included for a conversion into or continuation as Base Rate
Loans
Exhibit B-2
<PAGE> 146
EXHIBIT C
CITGO PETROLEUM CORPORATION
COMPLIANCE CERTIFICATE
Financial
Statement Date: , [199_] [200__]
Reference is made to that certain $150,000,000 Credit Agreement and
that certain $400,000,000 Credit Agreement, each dated as of May , 1998 (as
extended, renewed, amended or restated from time to time, the "Credit
Agreement") among CITGO PETROLEUM CORPORATION, a Delaware corporation (the
"Company"), the several financial institutions from time to time parties to
this Credit Agreement (the "Banks") and Bank of America National Trust and
Savings Association, as administrative agent for the Banks (in such capacity,
the "Administrative Agent"). Unless otherwise defined herein, capitalized terms
used herein have the respective meanings assigned to them in the Credit
Agreement.
The undersigned Responsible Officer of the Company, hereby certifies
as of the date hereof that he/she is the of the Company, and that, as such,
he/she is authorized to execute and deliver this Certificate to the Banks and
the Administrative Agent on the behalf of the Company and its consolidated
Subsidiaries, and that:
1. The ratio of Indebtedness to Capitalization is __________, which
does not exceed .65 to 1.00 which is required by Section 8.2(a).
2. The Net Worth of the Company is _________, which exceeds the
minimum required in Section 8.2(a).
3. The ratio of EBITDA to the Interest Expense for the Computation
Period is ________ which is not less than 3.00 to 1.00 as required by Section
8.2(b).
4. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and conditions (financial or
otherwise) of the Company during the accounting period covered by the attached
financial statements.
5. To the best of the undersigned's knowledge, except as specified on
Schedule 1 attached hereto, the Company, during such period, has observed,
performed or satisfied all of its covenants and other agreements, and satisfied
every condition in the Credit Agreement to be observed, performed
Exhibit C-1
<PAGE> 147
or satisfied by the Company, and the undersigned has no knowledge of any
Default or Event of Default.
6. The following financial covenant analyses and information set forth
on Schedule 2 attached hereto are true and accurate on and as of the date of
this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of ________ , [199_][200__].
CITGO PETROLEUM CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Exhibit C-2
<PAGE> 148
SCHEDULE 1
Exceptions
Exhibit C-3
<PAGE> 149
SCHEDULE 2
To the Compliance Certificate
($ in 000's)
<TABLE>
<S> <C>
1. Section 8.2(a) Capitalization Ratio:
------------------------------------
A. Indebtedness of Company and its Restricted Subsidiaries $__________
B. Net Worth of the Company and its Restricted Subsidiaries $__________
C. Capitalization (A+B) $__________
D. Capitalization (A/C) _________%
Maximum permitted 65%
2. Section 8.2(b) Indebtedness Interest Coverage Ratio:
----------------------------------------------------
A. Net Income of the Company and its Restricted Subsidiaries $__________
B. Income Taxes For the Company and its Restricted Subsidiaries $__________
C. Interest Expense for the Company and its Restricted Subsidiaries $__________
D. Depreciation and amortization for the Company and its Restricted Subsidiaries $__________
E. EBITDA (A+B+C+D) $__________
F. EBITDA/Interest Expense (E/C) $__________
Minimum required 3.00%
3. Section 8.2(c) Minimum Net Worth
--------------------------------
Net Worth of the Company and its Restricted Subsidiaries $__________
Minimum required:
25% of cumulative Net Income (without allowance for losses) of the Company and its
Restricted Subsidiaries for each Fiscal Quarter ending after December 31, 1997 + $1,750,000 $__________
</TABLE>
Exhibit C-4
<PAGE> 150
EXHIBIT D-1
[FORM OF] OPINION OF COMPANY'S COUNSEL
Page 1 of 1
<PAGE> 151
EXHIBIT D-2
[FORM OF] OPINION OF GENERAL COUNSEL OF COMPANY
Page 1 of 1
<PAGE> 152
EXHIBIT D-3
[FORM OF] OPINION OF COUNSEL FOR PDVSA
Page 1 of 1
<PAGE> 153
EXHIBIT E
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this
"Assignment and Acceptance") dated as of __________, [199__] [200 ] is
made between ______________________________ (the "Assignor") and
__________________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain $400,000,000
Credit Agreement dated as of May 13, 1998 (as amended, amended and restated,
modified, supplemented or renewed, the "Credit Agreement") among CITGO
Petroleum Corporation, a Delaware corporation (the "Company"), the several
financial institutions from time to time party thereto (including the Assignor,
the "Banks"), and Bank of America National Trust and Savings Association, as
administrative agent for the Banks (the "Administrative Agent"). Any terms
defined in the Credit Agreement and not defined in this Assignment and
Acceptance are used herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor
has committed to making Loans (the "Committed Loans") to the Company in an
aggregate amount not to exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Committed Loans in the
aggregate principal amount of $__________ to the Company] [no Committed Loans
are outstanding under the Credit Agreement];
WHEREAS, [the Assignor has acquired a participation in the
Issuing Bank's liability under Letters of Credit in an aggregate principal
amount of $____________ (its "Letter of Credit Obligations")] [no Letters of
Credit are outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part
of the] [all] rights and obligations of the Assignor under the Credit Agreement
in respect of its Commitment, [together with a corresponding portion of each of
its outstanding Committed Loans and Letter of Credit Obligations] in an amount
equal to $__________ (the "Assigned Amount") on the terms and subject to the
conditions set forth herein and the Assignee wishes to accept assignment of
such rights and to assume such obligations from the Assignor on such terms and
subject to such conditions;
Exhibit E-1
<PAGE> 154
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment
and Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except
as provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
Share") of (A) the Commitment [and the Committed Loans and the Letter of Credit
Obligations] of the Assignor and (B) all related rights, benefits, obligations,
liabilities and indemnities of the Assignor under and in connection with the
Credit Agreement and the Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor
by Assignee of outstanding principal of, accrued interest on, and fees with
respect to, Committed Loans and Letter of Credit Obligations assigned.]
(b) With effect on and after the Effective Date (as defined
in Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its rights under
Article IV Sections 11.4 and 11.5 of the Credit Agreement to the extent such
rights relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignee's Commitment will be
$__________.
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignor's Commitment will be
$__________.
Exhibit E-2
<PAGE> 155
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all
Committed Loans [and Letter of Credit Advances].
(b) The [Assignor] [Assignee] further agrees to pay to the
Administrative Agent a processing fee in the amount specified in Section
11.8(a) of the Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the
Effective Date with respect to the Commitment, Committed Loans and Letter of
Credit Obligations shall be for the account of the Assignor. Any interest, fees
and other payments accrued on and after the Effective Date with respect to the
Assigned Amount shall be for the account of the Assignee. Each of the Assignor
and the Assignee agrees that it will hold in trust for the other party any
interest, fees and other amounts which it may receive to which the other party
is entitled pursuant to the preceding sentence and pay to the other party any
such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of
the Credit Agreement and the Schedules and Exhibits thereto, together with
copies of the most recent financial statements referred to in Section 7.1 of
the Credit Agreement, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter
into this Assignment and Acceptance; and (b) agrees that it will, independently
and without reliance upon the Assignor, the Administrative Agent or any other
Bank and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit and legal decisions in taking or
not taking action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be __________, [199__] [200_]
(the "Effective Date"); provided that the following conditions precedent have
been satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be
executed and delivered by the Assignor and the Assignee;
Exhibit E-3
<PAGE> 156
(ii) the consent of the Company, each Issuing
Bank and the Administrative Agent if required for an effective assignment of
the Assigned Amount by the Assignor to the Assignee under Section 11.8(a) of
the Credit Agreement shall have been duly obtained and shall be in full force
and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor
all amounts due to the Assignor under this Assignment and Acceptance;
(iv) the Assignee shall have complied with
Section 11.10 of the Credit Agreement (if applicable);
(v) the processing fee referred to in Section
2(b) hereof and in Section 11.8(a) of the Credit Agreement shall have been paid
to the Administrative Agent; and
(vi) the Assignor shall have assigned and the
Assignee shall have assumed a percentage equal to the Assignee's Percentage
Share of the rights and obligations of the Assignor under the Credit Agreement
(if such agreement exists).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company, each Issuing Bank and
the Administrative Agent for acknowledgment by the Administrative Agent, each
Issuing Bank and the Company a Notice of Assignment substantially in the form
attached hereto as Schedule 1.
[6. Administrative Agent. [INCLUDE ONLY IF ASSIGNOR IS ADMINISTRATIVE
AGENT OR AN ISSUING BANK]
(a) The Assignee hereby appoints and authorizes the Assignor
to take such action as agent on its behalf and to exercise such powers under
the Credit Agreement as are delegated to the Administrative Agent by the Banks
pursuant to the terms of the Credit Agreement.
(b) The Assignee hereby appoints and authorizes the Assignor
to take such action on its behalf and to exercise such powers under the Credit
Agreement as are delegated to an Issuing Bank by the Banks pursuant to the
terms of the Credit Agreement.
[(c) The Assignee shall assume no duties or obligations held
by the Assignor in its capacity as Administrative Agent or Issuing Bank (as the
case may be) under the Credit Agreement.]]
Exhibit E-4
<PAGE> 157
7. Withholding Tax.
The Assignee (a) represents and warrants to the Bank, the
Administrative Agent and the Company that under applicable law and treaties no
tax will be required to be withheld by the Bank with respect to any payments to
be made to the Assignee hereunder, (b) agrees to furnish (if it is organized
under the laws of any jurisdiction other than the United States or any State
thereof) to the Administrative Agent and the Company prior to the time that the
Administrative Agent or Company is required to make any payment of principal,
interest or fees hereunder, duplicate executed originals of either U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001
(wherein the Assignee claims entitlement to the benefits of a tax treaty that
provides for a complete exemption from U.S. federal income withholding tax on
all payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto,
duly executed and completed by the Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any Lien or other adverse claim; (ii)
it is duly organized and existing and it has the full power and authority to
take, and has taken, all action necessary to execute and deliver this
Assignment and Acceptance and any other documents required or permitted to be
executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; and (iv) this Assignment and Acceptance and a Bank Confidentiality
Agreement have been duly executed and delivered by it and constitutes the
legal, valid and binding obligation of the Assignor, enforceable against the
Assignor in accordance with the terms hereof, subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors' rights and to general equitable
principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto. The Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of the Company, or the performance or
Exhibit E-5
<PAGE> 158
observance by the Company, of any of its respective obligations under the
Credit Agreement or any other instrument or document furnished in connection
therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is an
Eligible Assignee.
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute
and deliver such other instruments, and take such other action, as either party
may reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Administrative Agent, which may
be required in connection with the assignment and assumption contemplated
hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.
Exhibit E-6
<PAGE> 159
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Assignor and
the Assignee each irrevocably submits to the non-exclusive jurisdiction of any
State or Federal court sitting in the Southern District of New York over any
suit, action or proceeding arising out of or relating to this Assignment and
Acceptance and irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State or Federal court.
Each party to this Assignment and Acceptance hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
OR STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between
the Assignor and the Assignee, provided that such provisions are not
inconsistent with the Credit Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Exhibit E-7
<PAGE> 160
Address:
Exhibit E-8
<PAGE> 161
[ASSIGNEE]
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
Exhibit E-9
<PAGE> 162
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, [199_] [200_]
Bank of America National Trust
and Savings Association, as Administrative Agent
1850 Gateway Blvd. 5th Floor
Concord, California 94520
Attn: Agency Administration Services #5596
Each Issuing Bank listed on Annex A hereto
CITGO Petroleum Corporation
One Warren Place
Tulsa, Oklahoma 74102
Attn: Geoffry Reid
Ladies and Gentlemen:
We refer to the $400,000,000 Credit Agreement dated as of May 13, 1998
(as amended, amended and restated, modified, supplemented or renewed from time
to time the "Credit Agreement") among CITGO Petroleum Corporation (the
"Company"), the Banks referred to therein and Bank of America National Trust
and Savings Association, as administrative agent for the Banks (the
"Administrative Agent"). Terms defined in the Credit Agreement are used herein
as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and
to the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor[,] [and] all
outstanding Committed Loans made by the Assignor and the Assignor's
participation in the Letters of Credit) pursuant to the Assignment and
Acceptance Agreement attached hereto (the "Assignment and Acceptance"). Before
giving effect to such assignment the Assignor's Commitment is $___________[,]
[and] the aggregate amount of its outstanding Committed Loans is
$_____________, and its participation in Letter of Credit Obligations is
$_____________.
Exhibit E-10
<PAGE> 163
2. The Assignee agrees that, upon receiving the consent of the
Administrative Agent, each Issuing Bank and, if applicable, CITGO Petroleum
Corporation to such assignment, the Assignee will be bound by the terms of the
Credit Agreement as fully and to the same extent as if the Assignee were the
Bank originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Lending Office Address:
Assignee name: _____________________________
Address: _____________________________
_____________________________
_____________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) _______________________
Telex (Answerback): _______________________
(B) Notice Address:
Assignee name: _____________________________
Address: _____________________________
_____________________________
_____________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) _______________________
Telex (Answerback): _______________________
(C) Payment Instructions:
Account No.: _____________________________
At: _____________________________
_____________________________
_____________________________
Reference: _____________________________
Attention: _____________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
Exhibit E-11
<PAGE> 164
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
[NAME OF ASSIGNEE]
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
CITGO PETROLEUM CORPORATION
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
Exhibit E-12
<PAGE> 165
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Issuing Bank
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
[OTHER ISSUING BANKS]
Exhibit E-13
<PAGE> 166
Annex A to
Notice of Assignment
and Acceptance
Issuing Banks
Exhibit E-14
<PAGE> 167
Exhibit F-1
[FORM OF] COMMITTED LOAN NOTE
$__________ May 13, 1998
FOR VALUE RECEIVED, the undersigned, CITGO PETROLEUM CORPORATION, a
Delaware corporation (the "Company"), hereby promises to pay to the order of
____________________________ (the "Bank") the principal sum of ______________
Dollars ($ _______ ) or, if less, the aggregate unpaid principal amount of all
Committed Loans made by the Bank to the Company pursuant to the $400,000,000
Credit Agreement, dated as of May 13, 1998 (such $400,000,000 Credit Agreement,
as it may be amended, restated, supplemented or otherwise modified from time to
time, being hereinafter called the "Credit Agreement"), among the Company, the
Bank, the other banks parties thereto, the Syndication Agents (as defined
therein), Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, on the dates and in the amounts provided in
the Credit Agreement. The Company further promises to pay interest on the
unpaid principal amount of the Loans evidenced hereby from time to time at the
rates, on the dates, and otherwise as provided in the Credit Agreement. Terms
defined in the Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
The Bank is authorized to endorse the amount and the date on which
each Committed Loan is made, the maturity date therefor and each payment of
principal with respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto and made a
part hereof; provided however, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner affect any
obligation of the Company under the Credit Agreement or this Committed Loan
Note (this "Note").
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
Exhibit F-1 Page 1
<PAGE> 168
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
CITGO PETROLEUM CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Exhibit F-1 Page 2
<PAGE> 169
Schedule A to Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
<TABLE>
<CAPTION>
(2) (3)
(1) Amount Amount of (4)
Date of Base Base Rate Notation
---- Rate Loan Loan Repaid Made By
--------- ----------- -------
<S> <C> <C> <C>
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
- ------------------ -------------------- ---------------------- -------------------
</TABLE>
Exhibit F-1 Page 3
<PAGE> 170
Schedule B to Note
OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
<TABLE>
<CAPTION>
(2) (3) (4)
(1) Amount Maturity Date Amount (5)
Date of Offshore of Offshore of Offshore Rate Notation
---- Rate Loan Rate Loan Loan Repaid Made By
--------- --------- ----------- -------
<S> <C> <C> <C> <C>
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
</TABLE>
Exhibit F-1 Page 4
<PAGE> 171
Schedule C to Note
CD RATE LOANS AND REPAYMENT OF CD RATE LOANS
<TABLE>
<CAPTION>
(2) (3) (4)
(1) Amount Maturity Amount of (5)
Date of CD Date of CD CD Rate Notation
---- Rate Loan Rate Loan Loan Repaid Made By
--------- --------- ----------- -------
<S> <C> <C> <C> <C>
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
</TABLE>
Exhibit F-1 Page 5
<PAGE> 172
EXHIBIT F-2
FORM OF BID LOAN NOTE
$ ________
May 13, 1998
FOR VALUE RECEIVED, the undersigned, CITGO PETROLEUM CORPORATION (the
"Company"), hereby jointly and severally promises to pay to the order of
_______________ (the "Bank") the principal sum of ____________________ DOLLARS
($_______________) or, if less, the aggregate unpaid principal amount of all
Bid Loans made by the Bank to the Company pursuant to the $400,000,000 Credit
Agreement dated as of May 13, 1998 (such Credit Agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time, being
hereinafter called the "Credit Agreement") among the Company, the Bank, the
other banks parties thereto, the Syndication Agents (as defined therein) and
Bank of America National Trust and Savings Association, as Administrative Agent
for the Banks, on the dates and in the amounts provided in the Credit
Agreement. The Company further promises to pay interest on the unpaid principal
amount of the Bid Loans evidenced hereby from time to time at the rates, on the
dates, and otherwise as provided in the Credit Agreement. Terms defined in the
Credit Agreement are used herein with their defined meanings therein unless
otherwise defined herein.
The Bank is authorized to endorse the amount and the date on which
each Bid Loan is made, the maturity date therefor and each payment of principal
with respect thereto on the schedule annexed hereto and made a part hereof, or
on continuations thereof which shall be attached hereto and made a part hereof;
provided, however, that any failure to endorse such information on such
schedule or continuation thereof shall not in any manner affect any obligation
of the Company under the Credit Agreement or this Bid Loan Note (this "Note").
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
Exhibit F-2 Page 1
<PAGE> 173
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
CITGO PETROLEUM CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Exhibit F-2 Page 2
<PAGE> 174
Schedule A to Bid Loan Note
LOANS AND REPAYMENT OF LOANS
<TABLE>
<CAPTION>
(2) (3) (4) (5)
(1) Amount Maturity Date Amount of Notation
Date of Loan of Loan Loan Repaid Made By
---- ------- ------- ----------- -------
<S> <C> <C> <C> <C>
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
- ------------------ -------------------- -------------------- ---------------------- -------------------
</TABLE>
Exhibit F-2 Page 3
<PAGE> 175
EXHIBIT G
INVITATION FOR COMPETITIVE BIDS
Via Facsimile
To the Banks Listed on Schedule A attached hereto:
Re: CITGO Petroleum Corporation $400,000,000 Credit Agreement dated as of May
13, 1998 (the "Credit Agreement")
Ladies and Gentlemen:
Capitalized terms used herein have the meanings specified in the Credit
Agreement. Pursuant to Section 2.7 of the Credit Agreement, you are hereby
invited to submit offers to make Bid Loans to the Companies based on the
following specifications:
1. Bid Type: Absolute
2. Auction Date: -----------------------------------
-----------------------------------
Day Month Year
3. Borrowing Date: -----------------------------------
-----------------------------------
Day Month Year
4. Aggregate Amount Requested by Company:
5. Specified Interest Periods:
<TABLE>
<CAPTION>
Date From Date To # of Days
============================================================================================
<S> <C> <C> <C>
Interest Period #1 / / / / #
====== ====== ======
Interest Period #2 / / / / #
====== ====== ======
Interest Period #3 / / / / #
============================================================================================
</TABLE>
6. Bid Loan principal amounts must be $________ or in multiples of
$_______ in excess thereof and may not exceed the amount of Bid Loans
which were requested.
Exhibit G Page 1
<PAGE> 176
8. The rate of interest should be rounded to 1/1000th of 1%.
Exhibit G Page 2
<PAGE> 177
All Competitive Bids must be in the form of Exhibit I to the Credit
Agreement and must be received by the undersigned no later than_______________
on _________________, _____.
--------------------------------,
as Bid Agent
By:
-----------------------------
Title:
-------------------------- Facsimile:
----------------------
Exhibit G Page 3
<PAGE> 178
Schedule A
List of Banks
Exhibit G Page 4
<PAGE> 179
EXHIBIT H
COMPETITIVE BID REQUEST
---------------, ----
Bid Agent
[Address]
Re: CITGO Petroleum Corporation $400,000,000 Credit Agreement dated as of May
13, 1998 (the "Credit Agreement")
Ladies and Gentlemen:
This is a Competitive Bid Request for Bid Loans pursuant to Section 2.7 of
the Credit Agreement as follows:
1. Bid Type: Absolute
2. Auction Date: -------------------------------------
Day Month Year
-------------------------------------
3. Borrowing Date: -------------------------------------
Day Month Year
-------------------------------------
4. Aggregate Bid Amount:
5. Bid Details:
<TABLE>
<CAPTION>
Date From Date To # of Days
=================================================================================================
<S> <C> <C> <C>
Interest Period #1 / / / / #
======= ======= ======
Interest Period #2 / / / / #
======= ======= ======
Interest Period #3 / / / / #
=================================================================================================
</TABLE>
Exhibit H Page 1
<PAGE> 180
Capitalized terms used herein have the meanings specified in the Credit
Agreement.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties contained in Article VI of
the Credit Agreement and in the other Loan Documents are true and correct in
all material respects as though made on and as of such date (except to the
extent such representations and warranties relate to an earlier date, in which
case they are true and correct in all material respects as of such date),
except for the representation contained in Section 6.5;
(b) no Default or Event of Default exists or would result from
such proposed Borrowing; and
(c) to the best of our knowledge, this request will not put the
undersigned above the maximum Commitment limits set forth in the Credit
Agreement.
CITGO PETROLEUM CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Exhibit H Page 3
<PAGE> 181
EXHIBIT I
COMPETITIVE BID
------------------, ----
Bid Agent
[Address]
Re: $400,000,000 Credit Agreement dated as of May 13, 1998 (the "Credit
Agreement")
Ladies and Gentlemen:
Capitalized terms used herein have the meanings specified in the Credit
Agreement. In response to the Competitive Bid Request of the Company dated
______________, ____ and in accordance with subsection 2.7(c)(ii) of the Credit
Agreement, the undersigned Bank offers to make [a] Bid Loan[s] thereunder in
the following principal amount[s] at the following interest rates for the
following Interest Period[s]:
1. Bid Type: Absolute
--------------------------------------
2. Auction Date:
Day Month Year
--------------------------------------
--------------------------------------
3. Borrowing Date:
Day Month Year
--------------------------------------
4. Aggregate Bid Amount:
5. Bid Details:
<TABLE>
<CAPTION>
Date From Date To # of Days Offer Principal Interest Rate
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Interest Period #1 / / / / # 1 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
2 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
3 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
Interest Period #2 / / / / # 1 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
2 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
3 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
Interest Period #3 / / / / # 1 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
2 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
3 $ %
- --------------------------- ------------------ --------------- ----------- ----- --------- --------------
</TABLE>
Exhibit I Page 1
<PAGE> 182
[NAME OF BANK]
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
Exhibit I Page 2
<PAGE> 183
EXHIBIT J
FORM OF DESIGNATION AGREEMENT
Dated ______________, 19__
Reference is made to the $400,000,000 Credit Agreement dated as of May
13, 1998 (as amended from time to time, the "Credit Agreement") among CITGO
Petroleum Corporation (the "Company"), various financial institutions parties
thereto, the Syndication Agents (defined therein) and Bank of America National
Trust and Savings Association, as administrative agent for the Banks (the
"Administrative Agent"). Capitalized terms used herein have the meanings
specified in the Credit Agreement. Terms defined in the Credit Agreement are
used herein with the same meaning.
_________________ (the "Designator") and ___________________ the
("Designee") agree as follows:
1. The Designator hereby designates the Designee, and the Designee hereby
accepts such designation, to have a right to make Bid Loans pursuant
to Section 2.6 of the Credit Agreement.
2. The Designator makes no representation or warranty and assumes no
responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or
any other instrument or document furnished pursuant thereto or the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other instrument
or document furnished pursuant thereto or (ii) the financial condition
of the Company or any of their respective Subsidiaries or the
performance or observance by the Company of any of their respective
obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto.
3. The Designee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred
to in Section 7.1 thereof and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision
to enter into this Designation Agreement; (ii) agrees that it will,
independently and without reliance upon the Administrative Agent,
either Syndication Agent, the Designator or any other Bank and based
on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under the Credit Agreement; (iii) confirms that it is an
entity qualified to be a Designated Bidder; (iv) appoints and
authorizes the Administrative Agent to take such
Exhibit J Page 1
<PAGE> 184
action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Designated Bidder; (vi) specifies
as its Lending Office with respect to Bid Loans (and address for
notices) the offices set forth beneath its name on the signature page
hereof; and (vii) acknowledges that it has executed and delivered a
Bank Confidentiality Agreement.
4. Following the execution of this Designation Agreement by the
Designator and its Designee, it will be delivered to the
Administrative Agent for acceptance by the Administrative Agent. The
effective date of this Designation Agreement shall be the date of
acceptance thereof by the Administrative Agent, unless otherwise
specified on the signature page hereto (the "Effective Date").
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, the Designee shall be a party to the Credit
Agreement as a "Designated Bidder" with a right to make Bid Loans as a
Bank pursuant to Sections 2.6 and 2.7 of the Credit Agreement and the
rights and obligations of a Designated Bidder related thereto.
6. This Designation Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
Exhibit J Page 2
<PAGE> 185
IN WITNESS WHEREOF, the parties hereto have caused this Designation Agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
Effective Date: ________________, 19 __
[NAME OF DESIGNATOR]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
[NAME OF DESIGNEE]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Lending Office (and
address for notices)
[Address]
Accepted this ___ day
of ____________, 19__
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- ---------
Exhibit J Page 3
<PAGE> 186
* This date should be no earlier than the date of acceptance by the
Administrative Agent.
Exhibit J Page 4
<PAGE> 187
EXHIBIT K
[RESERVED]
Exhibit K Page 1
<PAGE> 1
EXHIBIT 10.24
CONFIDENTIAL
LIMITED PARTNERSHIP AGREEMENT OF
LYONDELL-CITGO REFINING LP
- -------------------------------------------------------------------------------
UNDER THE DELAWARE
REVISED UNIFORM LIMITED PARTNERSHIP ACT
- -------------------------------------------------------------------------------
DATED DECEMBER 31, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS.............................................................1
2. ORGANIZATION MATTERS....................................................1
2.1. Name.......................................................1
2.2. Conversion to Partnership and Partners.....................1
2.3. Purpose and Business.......................................2
2.4. Principal Office...........................................3
2.5. Term.......................................................3
2.6. Filings....................................................3
2.7. Power of Attorney..........................................3
3. MANAGEMENT..............................................................4
3.1. Partnership Governance Committee..........................4
3.2. Partnership Governance Committee Composition. ............4
3.3. Partnership Governance Committee: Duties, Powers and
Authority.................................................4
3.4. Partnership Governance Committee: Meetings...............6
3.5. Compensation of Representatives...........................8
3.6. Partnership Governance Committee Action...................8
3.7. Partnership Governance Committee: Quorum and Voting......8
3.8. Partnership Governance Committee Actions for Which
Unanimous Consent Necessary...............................9
3.9. Majority Approval........................................11
3.10. Auxiliary Committees.....................................11
4. OFFICERS AND EMPLOYEES.................................................12
4.1. Partnership Officers.....................................12
4.2. Selection; Term; Qualification...........................12
4.3. Removal and Vacancies....................................12
4.4. Duties...................................................13
4.5. CEO......................................................14
4.6. Vice Presidents..........................................14
4.7. Secretary................................................14
4.8. Assistant Officers.......................................14
4.9. Other Officers...........................................15
4.10. Salaries.................................................15
4.11. Bonds of Officers........................................15
4.12. Delegation...............................................15
4.13. Loaned Employees.........................................15
4.14. Employee Transfers.......................................16
5. RIGHTS, DUTIES AND COVENANTS OF PARTNERS...............................16
5.1. Delegation...............................................16
5.2. General Authority........................................16
5.3. Nature of Partner Obligations............................17
5.4. Limited Partners.........................................17
</TABLE>
(ii)
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
5.5. Partner Not Agent of Other Partners......................17
5.6. Transactions with the Partnership........................17
5.7. Control of Certain Claims and Certain Transactions.......18
5.8. Partnership Interest.....................................19
5.9. Access to and Copies of Records and Documents............19
5.10. Partner Covenants........................................19
5.11. Indemnification..........................................20
6. CAPITAL CONTRIBUTIONS AND PARTICIPATION PERCENTAGE.....................22
6.1. Prior Capital Contributions..............................22
6.2. Capital Contributions....................................22
6.3. Partner Loans............................................23
6.4. Participation Percentages................................23
6.5. Capital Expenditure Funding..............................24
6.6. CITGO Partners' Option to Increase Their Collective
Participation Percentage.................................24
6.7. Return of Capital Contributions..........................26
6.8. Administration and Investment of Funds...................26
7. ALLOCATIONS AND DISTRIBUTIONS..........................................26
7.1. Capital Accounts.........................................26
7.2. Income and Distribution Determinations; Restriction on
Distributions and Advances...............................27
7.3. Distributable Cash.......................................28
7.4. Distributions............................................29
7.5. Interim Loans............................................29
7.6. Internal Revenue Code Section 704(b) Book Allocations
for Tax Purposes.........................................30
7.7. Tax Allocations..........................................31
7.8. Transfers of Interest....................................33
8. BOOKS OF ACCOUNT AND TAX MATTERS.......................................33
8.1. Books of Account.........................................33
8.2. Tax Treatment............................................34
8.3. Tax Returns..............................................34
8.4. Tax Controversies........................................35
8.5. Tax Rulings..............................................36
9. ANNUAL BUDGETS, FIVE YEAR PLAN AND COMMERCIAL LOANS....................36
9.1. Fiscal Year..............................................36
9.2. Annual Budgets...........................................36
9.3. Approval of Budgets......................................37
9.4. Funding of Budgets.......................................37
9.5. Implementation of Budgets and Discretionary Expenditures
by CEO...................................................37
9.7. Commercial Loans.........................................38
9.8. Insurance and Risk Management............................38
</TABLE>
(iii)
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
10. TRANSFERS AND PLEDGES..................................................38
10.1. Prohibition of Transfer..................................38
10.2. Transfers Prior to the Option Date.......................39
10.3. Transfers After the Option Date..........................39
10.4. Transferees..............................................41
10.5. Pledge of Interest.......................................41
11. REMEDIES AND DISSOLUTION...............................................42
11.1. Security for Performance.................................42
11.2. Default..................................................43
11.3. Remedies for Default.....................................45
11.4. Consequences of Default..................................46
11.5. Purchase of Defaulting Partners' Interest................46
11.6. Liquidation..............................................47
11.7. Closing of Purchase Rights...............................47
11.8. Recision. ..............................................47
11.9. Dissolution..............................................48
11.10. Reconstitution of Partnership............................48
11.11. Liquidation; Winding Up and Distributions upon
Dissolution..............................................48
11.12. Enforcement..............................................49
12. MISCELLANEOUS..........................................................49
12.1. Confidentiality and Use of Information...................49
12.2. Auditors.................................................50
12.3. Indemnification of Officers..............................50
12.4. Waivers, Modifications and Amendments....................52
12.5. Further Assurances.......................................52
12.6. Successors and Assigns...................................52
12.7. Benefits of Agreement Restricted to the Parties..........52
12.8. Expenses. ..............................................52
12.9. Currency Conversions.....................................52
12.10. Payment Terms and Interest Calculations..................52
12.11. Usury Savings Clause.....................................53
12.12. Notices..................................................53
12.13. Waiver of Immunity.......................................54
12.14. Governing Law............................................55
12.15. Jurisdiction; Consent to Service of Process; Waiver......55
12.16. Entire Agreement.........................................56
12.17. Severability.............................................56
12.18. Construction.............................................56
12.19. Counterparts.............................................57
</TABLE>
(iv)
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBITS.
<S> <C>
Exhibit 1 Definition of Terms in Agreement
Exhibit 1A Related Agreements
Exhibit 6.1(B) Working Capital Valuation
Exhibit 6.4 Qualified Capital Contributions; Participation Percentages
Exhibit 6.6(E) Form of Note for Portion of Option Date Payment
</TABLE>
(v)
<PAGE> 6
LIMITED PARTNERSHIP AGREEMENT OF
LYONDELL-CITGO REFINING LP
(THE "PARTNERSHIP")
1. DEFINITIONS
The definitions of the capitalized defined terms used in this Limited
Partnership Agreement (the "Agreement"), including the Exhibits hereto
other than Exhibit 1, and not elsewhere defined herein or therein, as
well as cross-references to all capitalized defined terms, are set
forth in Exhibit 1 to this Agreement.
2. ORGANIZATION MATTERS
2.1. Name. The name of the limited partnership is "LYONDELL-CITGO
Refining LP" (the "Partnership"). The Partnership Business may
be conducted under such name or any other name or names deemed
advisable by the Partnership Governance Committee. The General
Partners will comply or cause the Partnership to comply with all
applicable laws and other requirements relating to fictitious or
assumed names.
2.2. Conversion to Partnership and Partners. The Partnership
converted from LYONDELL-CITGO Refining Company Ltd., a limited
liability company formed under the laws of the State of Texas
(the "Company"), effective as of the date of this Agreement (the
"Conversion Date"), pursuant to Articles of Conversion filed
pursuant to the Texas Limited Liability Company Act, and a
Certificate of Conversion and a Certificate of Limited
Partnership, each filed pursuant to the Delaware Revised Uniform
Limited Partnership Act (the "Act"). In connection with such
conversion, the Amended and Restated Regulations of the Company
dated July 1, 1993 (the "Closing Date"), as amended (the
"Regulations"), were superseded by this Agreement. On the
Conversion Date, the limited liability company interests in the
Company were converted into partnership interests in the
Partnership held by (i) Lyondell Refining LP, LLC, a Delaware
limited liability company ("Lyondell LP"), a Wholly Owned
Subsidiary of Lyondell Chemical Company (formerly known as
Lyondell Petrochemical Company), a Delaware corporation
("LParent"), (ii) CITGO Refining Investment Company, an Oklahoma
corporation ("CITGO LP"), a Wholly Owned Subsidiary of CITGO
Petroleum Corporation, a Delaware corporation ("CParent"), (iii)
Lyondell Refining Company, a Delaware corporation ("Lyondell
GP"), a Wholly Owned Subsidiary of LParent, and (iv) CITGO Gulf
Coast Refining, Inc., a Delaware corporation ("CITGO GP"), a
Wholly Owned Subsidiary of CParent.
Upon the Conversion Date, the percentage ownership of the
Partnership was as follows:
<TABLE>
<S> <C>
Lyondell GP 10.10%
CITGO GP 1.00%
</TABLE>
1
<PAGE> 7
<TABLE>
<S> <C> <C>
Lyondell LP 48.65%
CITGO LP 40.25%
</TABLE>
Upon the Conversion Date, Lyondell GP's 10.10% interest consists
of a 1.00% general partnership interest and a 9.10% limited
partnership interest; provided, however, that for all other
purposes under this Agreement, Lyondell GP shall be considered
only a General Partner (as defined herein) and not a Limited
Partner (as defined herein).
Except as expressly provided herein to the contrary, the rights
and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act.
Without the need for the consent of any other Person, upon the
execution of this Agreement: (i) each of Lyondell GP and CITGO
GP is hereby admitted to the Partnership as a general partner of
the Partnership (together, the "General Partners"), and (ii)
each of Lyondell LP and CITGO LP is hereby admitted to the
Partnership as a limited partner of the Partnership (together,
the "Limited Partners"). Subject to the restrictions set forth
in this Agreement, the Partnership shall have the power to
exercise all the powers and privileges granted by this Agreement
and by the Act, together with any powers incidental thereto, so
far as such powers and privileges are necessary, appropriate,
convenient or incidental for the conduct, promotion or
attainment of the purposes of the Partnership. As of the
Conversion Date, the Regulations (i) are superseded by this
Agreement except to the extent of their ongoing relevance in
governing matters relating to the Company and (ii) shall no
longer have any force or effect except to the extent of their
ongoing relevance in governing matters relating to the Company,
provided, however, that all prior acts of Lyondell Refining
Company, a Delaware corporation, and CITGO Refining Investment
Company, an Oklahoma corporation, as members, or acts of or on
behalf of the Company, under the Regulations shall remain in
effect until modified or rescinded by Partnership Governance
Committee Action.
2.3. Purpose and Business. The business of the Partnership (the
"Partnership Business") shall be as follows: (i) to own and
operate the Refinery Business, (ii) to carry out any Capital
Enhancement Projects, (iii) to purchase, sell, exchange and
refine crude oil and other feedstocks, (iv) to market the
products produced by the Partnership, (v) to engage in the
refining business generally, and (vi) to do all things necessary
or incidental in connection with the foregoing as are permitted
under the Act, all such business being managed, subject to then
existing contractual obligations, with the objectives of (a)
operating the Refinery, as modified by any Capital Enhancement
Projects, and any other refinery or refining business owned or
operated by the Partnership so as to maximize long-term
Partnership value as measured by cash flow and earnings and (b)
achieving the highest levels of efficiency, productivity and
profitability consistent with good safety and environmental
practices and performance. The Partnership shall be strictly
limited to the Partnership Business, and the Partnership
Business shall not be extended by implication or otherwise,
except by express written amendment to this Agreement or by
Unanimous Partnership Governance Committee Action pursuant to
Section 3.8.(A).
2
<PAGE> 8
2.4. Principal Office. The principal business office of the
Partnership shall be at 12000 Lawndale, Houston, Texas 77017 or
such other place as may be designated from time to time by the
Partnership Governance Committee. The registered agent of the
Partnership in the State of Delaware is The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801.
2.5. Term. The Partnership shall continue until dissolved as
described in Section 11.9.
2.6. Filings. The General Partners shall, or shall cause the
Partnership to, execute, swear to, acknowledge, deliver, file or
record in public offices and publish all such certificates,
notices, statements or other instruments, and take all such
other actions, as may be required by law for the formation,
reformation, qualification, registration, operation or
continuation of the Partnership in any jurisdiction, to maintain
the limited liability of the Limited Partners, to preserve the
Partnership's status as a partnership for tax purposes or
otherwise to comply with applicable law. Upon request of the
General Partners, the Limited Partners shall execute all such
certificates and other documents as may be necessary, in the
sole judgment of the General Partners, in order for the General
Partners to accomplish all such executions, swearings,
acknowledgments, deliveries, filings, recordings in public
offices, publishings and other acts. Each General Partner hereby
agrees and covenants that it will execute any appropriate
amendment to the Certificate of Limited Partnership of the
Partnership pursuant to Section 17-204 of the Act to reflect any
admission of a Substitute General Partner in accordance with
this Agreement.
2.7. Power of Attorney. Each Limited Partner hereby irrevocably
makes, constitutes and appoints its Affiliated General Partner
and any successor thereto permitted as provided herein, with
full power of substitution and resubstitution, as the true and
lawful agent and attorney-in-fact of such Limited Partner, with
full power and authority in the name, place and stead of such
Limited Partner to execute, swear, acknowledge, deliver, file or
record in public offices and publish: (i) all certificates and
other instruments (including counterparts thereof) which such
General Partner deems appropriate to reflect any amendment,
change or modification of or supplement to this Agreement in
accordance with and as permitted by the terms of this Agreement;
(ii) all certificates and other instruments and all amendments
thereto which such General Partner deems appropriate or
necessary to form, qualify or continue the Partnership in any
jurisdiction, to maintain the limited liability of such Limited
Partner, to preserve the Partnership's status as a partnership
for tax purposes or otherwise to comply with applicable law; and
(iii) all conveyances and other instruments or documents which
such General Partner deems appropriate or necessary to reflect
the transfers or assignments of interests in, to or under this
Agreement, including the Interests, the dissolution, liquidation
and termination of the Partnership, and the distribution of
assets of the Partnership in connection therewith, in accordance
with and as permitted by the terms of this Agreement.
3
<PAGE> 9
Each Limited Partner hereby agrees to execute and deliver to its
Affiliated General Partner within five (5) Business Days after
receipt of a written request therefor such other further
statements of interest and holdings, designations, powers of
attorney and other instruments as such General Partner deems
necessary. The power of attorney granted herein is hereby
declared irrevocable and a power coupled with an interest, shall
survive the bankruptcy, dissolution or termination of such
Limited Partner and shall extend to and be binding upon such
Limited Partner's successors and permitted assigns. Each Limited
Partner hereby (i) agrees to be bound by any representations
made by the agent and attorney-in-fact acting in good faith
pursuant to such power of attorney; and (ii) waives any and all
defenses which may be available to contest, negate, or disaffirm
any action of the agent and attorney-in-fact taken in accordance
with such power of attorney.
3. MANAGEMENT.
3.1. Partnership Governance Committee.
(1) To facilitate the management of the Partnership by the
General Partners, the General Partners hereby establish a
committee (the "Partnership Governance Committee") to
manage and control the business, property and affairs of
the Partnership, including the determination and
implementation of the Partnership's strategic direction.
Except to the extent expressly set forth in this
Agreement, each General Partner agrees to exercise its
authority to manage the affairs of the Partnership only
through Partnership Governance Committee Action. Further,
each General Partner agrees not to exercise, or purport
or attempt to exercise, its authority (notwithstanding
that each General Partner may have such authority
pursuant to the Act) (i) to act for or incur, create or
assume any obligation, liability or responsibility on
behalf of the Partnership or any other General Partner,
or (ii) to execute any documents on behalf of, or
otherwise bind, or purport or attempt to bind, the
Partnership, or (iii) to otherwise transact any business
in the Partnership's name, in each case except pursuant
to Partnership Governance Committee Action or except as
provided in Section 5.7.
(2) Except as expressly set forth in this Agreement, no
Person or Persons other than (i) the General Partners,
acting through the Partnership Governance Committee, and
(ii) the officers of the Partnership appointed in
accordance with this Agreement and acting as agents or
employees, as applicable, of the Partnership in
conformity with this Agreement and any applicable
Partnership Governance Committee Action, shall be
authorized (a) to exercise the powers of the Partnership,
(b) to manage the business, property and affairs of the
Partnership or (c) to contract for, or incur on behalf
of, the Partnership any debts, liabilities or other
obligations.
4
<PAGE> 10
3.2. Partnership Governance Committee Composition.
(1) The Partnership Governance Committee shall consist of six
representatives (each a "Representative") and each
General Partner shall designate three Representatives.
All the Representatives of both General Partners shall
together constitute the Partnership Governance Committee.
Representatives shall not be employees of the Partnership
or otherwise serve the Partnership in any capacity except
that, as provided in Section 3.10., a Representative may
also serve as a member of an Auxiliary Committee.
(2) Each General Partner may designate one or more
individuals (each an "Alternate") who (i) shall be
authorized, in the event a Representative is absent from
any meeting of the Partnership Governance Committee (and
in the order of succession designated by the General
Partner so designating the Alternates), to attend such
meeting in the place of, and as substitute for, such
Representative and (ii) shall be vested with all the
powers to cast votes on behalf of such General Partner
which the absent Representative could have exercised at
such meeting. Alternates shall not be employees of the
Partnership or otherwise serve the Partnership in any
capacity except that, as provided in Section 3.10., an
Alternate may also serve as a member of an Auxiliary
Committee. The term "Representative," when used herein
with reference to any Representative who is absent from a
meeting of the Partnership Governance Committee, shall
mean and refer to any Alternate attending such meeting in
place of such absent Representative.
(3) Each General Partner may, by written notice delivered
to the other General Partner and the CEO, at any time or
from time to time, remove or replace one or more of its
Representatives or Auxiliary Committee members or change
one or more of its Alternates. If a Representative,
Auxiliary Committee member or Alternate dies, resigns, or
becomes disabled or incapacitated, the General Partner
that designated such Representative, Auxiliary Committee
member or Alternate, as the case may be, shall promptly
designate a replacement. Each Representative, each
Auxiliary Committee member and each Alternate shall serve
until replaced by the General Partner that designated
such Representative, Auxiliary Committee member or
Alternate, as the case may be. The Owners Committee
Representatives, the Auxiliary Committee members and the
Alternates representing Lyondell GP and CITGO LP,
respectively (in their capacities as members of the
Company), who are serving in such capacities in respect
of the Company as of the Conversion Date will continue to
hold such positions representing
5
<PAGE> 11
Lyondell GP and CITGO GP, respectively (in their
capacities as General Partners), following the Conversion
Date until removed or replaced in accordance with the
terms of this Section 3.2.(C).
(4) Copies of all written notices designating
Representatives, Auxiliary Committee members and
Alternates shall be delivered to the Secretary and shall
be placed in the Partnership minute books, but the
failure to deliver a copy of any such notice to the
Secretary shall not affect the validity or effectiveness
of such notice or the designation described therein. (1)
(5) Each Representative, in his capacity as such, shall be
the agent of the General Partner that designated such
Representative. Accordingly, (i) each Representative, as
such, shall act (or refrain from acting) with respect to
the business, property and affairs of the Partnership
solely in accordance with the wishes of the General
Partner that designated such Representative and (ii) no
Representative, as such, shall owe (or be deemed to owe)
any duty (fiduciary or otherwise) to the Partnership, to
any General Partner (other than the General Partner that
designated such Representative), or to any Limited
Partner; provided, however, that nothing in this
Agreement is intended to or shall relieve or discharge
any Representative or General Partner from liability to
the Partnership or the Partners on account of any
fraudulent or intentional misconduct of such
Representative; and provided further, that each
Representative shall not disclose any material
information regarding the business of the Partnership and
shall not use any such information, in either case, in
any manner not related to the Partnership Business.
3.3. Partnership Governance Committee: Duties, Powers and Authority.
(1) Except as otherwise provided by this Agreement, the
Partnership Governance Committee (on behalf of the
General Partners) shall have (i) the full authority of
the General Partners to exercise all of the powers of the
Partnership and (ii) full control (on behalf of the
General Partners) over the business, property and affairs
of the Partnership.
(2) The Partnership Governance Committee shall adopt
policies and procedures, not inconsistent with this
Agreement (including Section 3.8.) or the Act, governing
financial controls and legal compliance, including
delegations of authority (and limitations thereon) to the
officers of the Partnership as described in Section 4.
Such policies and procedures may be revised or revoked
(in a manner consistent with this Agreement and the Act)
from time to time as determined by the Partnership
Governance Committee. Without
6
<PAGE> 12
limiting the generality of the foregoing, the General
Partners intend that the Partnership's policies and
procedures will address such matters as conflicts of
interest, political contributions, illegal or unethical
business practices, antitrust compliance, anti-boycott
compliance, Foreign Corrupt Practices Act compliance,
employee practices, agreements with employees relating to
inventions, contractual obligations, purchasing and
advertising. To the extent any authority is not delegated
to officers of the Partnership in this Agreement or in
accordance with Partnership Governance Committee Action,
it shall remain with the Partnership Governance
Committee.
3.4. Partnership Governance Committee: Meetings.
(1) Regular meetings of the Partnership Governance Committee
shall be held at such times (no less frequently than
quarterly) and at such places (within the States of Texas
or Oklahoma or any other state designated by the
Partnership Governance Committee) as shall from time to
time be determined by the Partnership Governance
Committee. The first regular meeting of the Partnership
Governance Committee during each fiscal year of the
Partnership shall be deemed to be the "Annual Meeting."
No notice need be given with respect to any regular
meeting of the Partnership Governance Committee; however,
the Secretary following receipt of comments thereto from
each General Partner shall deliver, by messenger or other
hand delivery or by facsimile transmission (with proof of
confirmation from the transmitting machine), an agenda
for such meeting to each of the Representatives at least
five (5) Business Days prior to such meeting. At any
regular meeting of the Partnership Governance Committee
at which a quorum is present, any and all business of the
Partnership may be transacted.
(2) Special meetings of the Partnership Governance Committee
may be called by any Representative or the CEO by
delivering, via messenger or other hand delivery or by
facsimile transmission (with proof of confirmation from
the transmitting machine), written notice to each of the
other Representatives, or, in the case of a meeting
called by the CEO, each of the Representatives, at least
three (3) Business Days before such meeting. Each notice
of a special meeting shall specify, to a reasonable
degree, the business to be transacted at, or the purpose
of, such meeting; provided, however, that additional
business may be transacted at any special meeting as
agreed by all the Representatives present at such
meeting. Special meetings of the Partnership Governance
Committee shall be held at such times and at such places
within the State of Texas or Oklahoma as may be stated in
the notice of such meeting or in a duly executed waiver
of notice thereof. Any Representative may waive notice of
any special meeting (whether before or after the time of
such meeting) but only if the waiver is in
7
<PAGE> 13
writing. Attendance of any Representative at any special
meeting shall constitute a waiver of notice of such
meeting by such Representative, unless the Representative
states at the beginning of the meeting his objection to
the transaction of business because the meeting was not
lawfully called or convened.
(3) One Representative shall serve as chair of each
meeting (regular or special) of the Partnership
Governance Committee. The right to designate the chair of
meetings of the Partnership Governance Committee shall
rotate between the respective General Partners every
calendar year. The Representative who on the Conversion
Date is serving as chair of the meetings shall continue
to so serve until December 31, 1998, which is the next
rotation date.
(4) Following each meeting of the Partnership Governance
Committee, the Secretary shall promptly draft and
distribute minutes of such meeting to the Representatives
for approval at the next meeting, and after such approval
shall retain the minutes in the Partnership minute books.
(5) Representatives may participate in or hold regular or
special meetings of the Partnership Governance Committee
by means of a telephone conference or any comparable
device or technology by which all individuals
participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence
in person at such meeting.
(6) Any action required or permitted to be taken at a meeting
of the Partnership Governance Committee may be taken
without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by at least two (2)
Representatives (or their Alternates) of each General
Partner, and such consent shall have the same force and
effect as a duly conducted vote of the Partnership
Governance Committee. A counterpart of each such consent
to action shall be delivered to the Secretary for
placement in the minute books of the Partnership, but the
failure to deliver a counterpart of any such consent to
action to the Secretary shall not affect the validity or
effectiveness of such consent to action.
3.5. Compensation of Representatives. Representatives shall not
receive from the Partnership any compensation for their service
or any reimbursement for attendance at meetings of the
Partnership Governance Committee.
8
<PAGE> 14
3.6. Partnership Governance Committee Action.
(1) The Partnership Governance Committee shall act
exclusively by means of Partnership Governance Committee
Action. As used in this Agreement, "Partnership
Governance Committee Action" means any action which the
Partnership Governance Committee is authorized and
empowered to take in accordance with this Agreement and
the Act and which is taken by the Partnership Governance
Committee either (i) by votes cast at a meeting of the
Partnership Governance Committee duly called and held in
accordance with this Agreement or (ii) by a formal
written consent complying with the requirements of
Section 3.4.(F). In no event shall the Partnership
Governance Committee be authorized to act other than by
Partnership Governance Committee Action, and any action
or purported action by the Partnership Governance
Committee (including any authorization, consent,
approval, waiver, decision or vote) not constituting a
Partnership Governance Committee Action shall be null and
void and of no force and effect.
(2) Each Partnership Governance Committee Action shall be
binding on the Partnership.
3.7. Partnership Governance Committee: Quorum and Voting.
(1) The presence of one Representative (including any
duly present Alternates) from each General Partner shall
constitute a quorum of the Partnership Governance
Committee for the transaction of business and the taking
of any Partnership Governance Committee Action at any
meeting, except that no quorum of the Partnership
Governance Committee will be deemed to exist (i) with
respect to any regular meeting of the Partnership
Governance Committee unless an agenda for such meeting is
delivered in accordance with Section 3.4.(A) or (ii) with
respect to any special meeting of the Partnership
Governance Committee unless a notice of such meeting is
given or waived in accordance with Section 3.4.(B). No
Partnership Governance Committee Action may be taken at
any meeting at which a quorum is not present.
(2) All actions of the Partnership Governance Committee
shall be determined by vote of the Representatives.
Collectively, the Representatives shall have 100 votes.
The Representatives of a General Partner shall have, in
the aggregate, such number of votes as is equal to the
product of 100 and the sum of the Participation
Percentages of such General Partner and its Affiliated
Limited Partner. The Representatives of each General
Partner present at the meeting
9
<PAGE> 15
shall together and by joint action cast all of the votes
held by all of the Representatives of such General
Partner.
3.8. Partnership Governance Committee Actions for Which
Unanimous Consent Necessary. Subject to Section 5.7., Section
11.4. and Section 11.11.(A), no Partnership Governance
Committee Action will be deemed for any purpose to have been
taken at any Partnership Governance Committee meeting unless
and until 100 votes (constituting all the outstanding votes)
are duly cast at such meeting in favor of such Partnership
Governance Committee Action which would cause or permit the
Partnership (or any Person acting in the name or on behalf of
the Partnership), directly or indirectly, to take (or commit to
take) any of the actions (each a "Unanimous Partnership
Governance Committee Action") described below in this Section
3.8. (whether in a single transaction or series of related
transactions):
(1) to engage, participate or invest in any business
outside the scope of the Partnership Business;
(2) to make any acquisition or divestiture of any other
entity or of any material line of business or business
unit, or to merge or consolidate the Partnership with any
other entity;
(3) to amend or alter this Agreement or the Certificate
of Limited Partnership;
(4) to issue, redeem or acquire any Interests (or rights
to acquire, or any securities convertible into,
Interests) in the Partnership;
(5) to borrow money or to engage in other financing
activities, including the grant or use of credit and the
pledge of any assets or the granting of a security
interest in any asset; (1)
(6) to file a petition in bankruptcy or seeking any
reorganization, liquidation or similar relief on behalf
of the Partnership; or to consent to the filing of a
petition in bankruptcy against the Partnership; or to
consent to the appointment of a receiver, custodian,
liquidator or trustee for the Partnership or for all or
any substantial portion of its property;
(7) to approve the entry into of, amendments to, or
termination or modification of, any material permit,
government approval or other right;
10
<PAGE> 16
(8) to approve any Capital Enhancement Project or any
expenditures pursuant to a Capital Budget pursuant to
Section 9.2.(B), or to increase the amount below which a
capital expenditure would not require Partnership
Governance Committee Action regarding an "authority for
commitment" as contemplated by Section 9.5.(A);
(9) to make distributions other than those expressly
provided for in Section 7.;
(10) to enter into, amend, terminate or modify any
product sales agreement or any raw materials purchase
agreement pursuant to which the Partnership's commitments
can reasonably be expected to exceed $50 million annually
or that is for a term in excess of 18 months;
(11) to enter into, amend, terminate or modify any
agreement other than as described in Section 3.8.(J)
pursuant to which the Partnership's commitments can
reasonably be expected to exceed $25 million;
(12) to commence or settle any litigation or arbitration
proceeding by or on behalf of, or in the name or right
of, the Partnership involving any claims or payments in
excess of $1 million;
(13) to make determinations with respect to the
Partnership's commercial insurance program in accordance
with Section 9.8.;
(14) to designate or disband Auxiliary Committees and to
establish the purposes thereof in all cases as described
in Section 3.10.;
(15) to delegate to any Auxiliary Committee powers or
authority to take any action that would otherwise require
unanimous approval by the Partnership Governance
Committee, or to delegate to any officer powers or
authority to take any action that would otherwise require
approval by the Partnership Governance Committee;
(16) to adopt or amend, as the Partnership Governance
Committee, the policies and procedures referred to in
Section 3.3.(B);
(17) to enter into, materially amend or terminate any
employee benefit plan; (1)
11
<PAGE> 17
(18) to fix the salary and other compensation of Executive
Officers in accordance with Section 4.10.;
(19) to consent to the loan of an employee to the Partnership
by a Partner as provided in Section 4.13. or to consent
to the hiring of employees of the Partnership by a
General Partner (or a General Partner's Affiliate) as
anticipated by Section 4.14.;
(20) to make any determinations concerning indemnification of
officers pursuant to Section 12.3.;
(21) to adopt or effect any change in the Partnership's
accounting policies or practices in regards to
Maintenance Capital;
(22) to approve, amend or supplement either annual budget
referred to in Section 9.2., including any Financing Plan
thereunder;
(23) to change at any time the Cash Balance Amount as provided
for in Section 7.5;
(24) to appoint the CEO or to designate an officer as an
Executive Officer; or
(25) to change the Partnership's method of accounting for
inventory as provided in Section 8.2.(C).
3.9. Majority Approval. Except as otherwise expressly provided in
this Agreement, the approval of Representatives representing a
majority of the total 100 votes will be sufficient for the
Partnership Governance Committee to take any Partnership
Governance Committee Action.
3.10. Auxiliary Committees.
(1) The Partnership Governance Committee shall, by
Partnership Governance Committee Action, designate an (i)
Operating Committee, (ii) a Finance and Control Committee
and (iii) a Compensation Committee. Each such committee
shall be a standing committee.
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<PAGE> 18
(2) From time to time, the Partnership Governance
Committee may, by resolution adopted by the Partnership
Governance Committee, designate one or more additional
committees or disband any committee.
(3) Each committee designated by the Partnership Governance
Committee pursuant to this Section 3.10. (each an
"Auxiliary Committee") shall (i) operate under the
auspices of the Partnership Governance Committee for the
purpose of assisting the Partnership Governance Committee
in managing (on behalf of the General Partners) the
business and affairs of the Partnership and (ii) report
to the Partnership Governance Committee.
(4) Each Auxiliary Committee shall consist of two or more
members and each General Partner shall have the right to
appoint one member. The remaining members, if any, of
each Auxiliary Committee shall be appointed by the
Partnership Governance Committee.
(5) Auxiliary Committee members may (but need not) be
members of the Partnership Governance Committee or
employees of the Partnership. No Auxiliary Committee
member shall be compensated by the Partnership for
service as a member of such Auxiliary Committee.
(6) Each resolution adopted by the Partnership Governance
Committee for the purpose of designating an Auxiliary
Committee shall set forth (i) the size, name and rotation
and designation of a chairman of such Auxiliary Committee
and (ii) in such detail as the Partnership Governance
Committee deems appropriate, the purposes, powers and
authorities of such Auxiliary Committee; provided,
however, that in no event shall any Auxiliary Committee
have any powers or authority not permitted by this
Agreement or the Act.
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<PAGE> 19
4. OFFICERS AND EMPLOYEES
4.1. Partnership Officers. The officers of the Partnership
shall consist of a President and Chief Executive Officer
("CEO"), one or more Vice Presidents, a Secretary and such
other officers and assistant officers and agents as may be
deemed necessary or desirable by the Partnership Governance
Committee. Officers shall be elected or appointed pursuant to
Partnership Governance Committee Action (subject to Section
3.8.(X)) and shall have such authority and shall perform such
duties in the management of the Partnership as may be provided
in this Agreement or as may be determined by resolution of the
Partnership Governance Committee (consistent with Section
3.8.(O)). In its discretion, the Partnership Governance
Committee may leave unfilled any office or offices, except
those of CEO and Secretary. Two or more offices may be held by
the same person. The officers of the Company on the Conversion
Date shall remain in office until such officers are changed by
Partnership Governance Committee Action.
4.2. Selection; Term; Qualification. All officers shall be
chosen by the Partnership Governance Committee annually at the
Annual Meeting of the Partnership Governance Committee. Prior
to each Annual Meeting the CEO shall present the Partnership
Governance Committee with a list of nominees, but the
Partnership Governance Committee shall not be bound to select
officers solely from such list. The CEO and each other officer
shall hold office until a successor has been chosen and
qualified, or until the officer's death, resignation, or
removal.
4.3. Removal and Vacancies. Any officer or agent may be removed by
Partnership Governance Committee Action, with or without cause,
whenever in the judgment of the Partnership Governance
Committee the best interests of the Partnership would be served
thereby. Any vacancy in any office may be filled by the
Partnership Governance Committee at any time. The CEO may, at
any time, recommend to the Partnership Governance Committee the
appointment or removal of any officer.
4.4. Duties.
(1) Each officer or employee of the Partnership shall owe
to the Partnership, but not to any Partner, all such
duties (fiduciary or otherwise) as are imposed upon such
an officer or employee of a Delaware corporation. Without
limitation of the foregoing, each officer and employee in
any dealings with a Partner shall have a duty to act in
good faith and to deal fairly.
(2) The policies and procedures of the Partnership adopted by
the Partnership Governance Committee may set forth the
powers and duties of the officers of the Partnership to
the extent not set forth in or
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<PAGE> 20
inconsistent with this Agreement. The officers of the
Partnership shall have such powers and duties, except as
modified by the Partnership Governance Committee, as
generally pertain to their respective offices in the case
of a Delaware corporation, as well as such powers and
duties as from time to time may be conferred by the
Partnership Governance Committee and by this Agreement.
The CEO and the other officers and employees of the
Partnership shall develop and implement management and
other Partnership policies and procedures consistent with
this Agreement and the general policies and procedures
established by the Partnership Governance Committee. The
duties of each officer shall include the obligation to
notify the Partnership Governance Committee of any facts
or circumstances of which such officer becomes aware that
indicate a Partner or any of its Affiliates is or may be
in breach of its obligations under this Agreement or
under any of the Related Agreements.
(3) Notwithstanding any other provision of this
Agreement, no Partner, Representative, officer, employee
or agent of the Partnership shall have the power or
authority, without specific authorization from the
Partnership Governance Committee, to undertake any of the
following:
(i) to do any act which contravenes (or
otherwise is inconsistent with) this
Agreement or which would make it
impossible to carry on the Partnership
Business;
(ii) to confess a judgment against the
Partnership;
(iii) to possess Partnership property other
than in the ordinary conduct of the
Partnership Business; or
(iv) to take, or cause to be taken, any of the
actions described in Section 3.8.
4.5. CEO. The CEO shall be the chief executive and chief
operating officer of the Partnership, shall have general
authority for direction of the business and affairs of the
Partnership and general supervision over its several officers,
subject, however, to the control of the Partnership Governance
Committee and shall see that all orders and resolutions of the
Partnership Governance Committee or, as applicable, any
Auxiliary Committee(s) are carried into effect. The CEO shall
be authorized to execute and deliver, in the name and on behalf
of the Partnership, (i) contracts or other instruments
authorized by Partnership Governance Committee Action and (ii)
contracts or instruments in the usual and regular course of
business, except in cases when the execution and delivery
thereof shall be expressly delegated by the Partnership
Governance Committee to some other officer or agent of the
Partnership, and, in general, shall perform all duties incident
to the office of CEO and such other duties as from time to time
may be
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assigned to him or her by the Partnership Governance Committee
(consistent with Section 3.8.(O)) or as are prescribed by this
Agreement. Unless otherwise requested by a Representative, the
CEO shall attend all meetings of the Partnership Governance
Committee.
4.6. Vice Presidents. The Vice Presidents shall perform such
duties as may, from time to time, be assigned to them by the
Partnership Governance Committee (consistent with Section
3.8.(O)). In addition, at the request of the CEO, or in the
absence or disability of the CEO, the Vice Presidents, or any
of them, in the order of their election or in any other order
determined by the Partnership Governance Committee, temporarily
shall perform all (or if limited through the scope of the
delegation, some of) the duties of the CEO, and, when so
acting, shall have all the powers of, and be subject to all
restrictions upon, the CEO.
4.7. Secretary. The Secretary shall keep the minutes of all
meetings (and copies of written records of action taken without
a meeting) of the Partnership Governance Committee and the
Auxiliary Committees in minute books provided for such purpose
and shall see that all notices are duly given in accordance
with the provisions of this Agreement. The Secretary shall be
the custodian of the records. The Secretary shall have general
charge of books and papers of the Partnership as the
Partnership Governance Committee may direct and, in general,
shall perform all duties and exercise all powers incident to
the office of Secretary and such other duties and powers as the
Partnership Governance Committee (consistent with Section
3.8.(O)) or the CEO from time to time may assign to or confer
upon the Secretary.
4.8. Assistant Officers. Any assistant officer appointed by the
Partnership Governance Committee shall have power to perform,
and shall perform, all duties incumbent upon the officer he or
she is assisting, subject to the general direction of such
officer, and shall perform such other duties as this Agreement
may require or the Partnership Governance Committee (consistent
with Section 3.8.(O)) may prescribe.
4.9. Other Officers. The Partnership Governance Committee may
appoint such other officers and delegate (consistent with
Section 3.8.(O)) to them such duties as it sees fit.
4.10. Salaries. The salaries or other compensation of the
Executive Officers of the Partnership shall be fixed from time
to time by the Partnership Governance Committee. Except for
previously granted stock options, stock appreciation rights,
deferred compensation and other similar arrangements, the
benefits of which might be realized subsequent to the officer
becoming an employee of the Partnership, no officer or employee
(other than an employee of a Partner or an Affiliate of a
Partner) of the Partnership shall receive any fees or
compensation
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from any Partner or any Affiliate of any Partner. Further, all
fees and compensation of the officers and employees of the
Partnership with respect to their services as such officers and
employees shall be payable solely by the Partnership and no
Partner or its Affiliates shall pay (or offer to pay) any such
fees or compensation to any officer or employee, except to the
extent permitted by Section 4.13. in the case of loaned
employees or that the Partnership shall have agreed with a
Partner or one of its Affiliates pursuant to a separate
agreement that a portion of the compensation of such officer or
employee shall be paid by such Partner or Affiliate.
4.11. Bonds of Officers. The Partnership Governance Committee
may (but shall have no obligation to) secure the fidelity of
any officer of the Partnership by bond or otherwise, on such
terms and with such surety or sureties, conditions, penalties
or securities as shall be deemed proper by the Partnership
Governance Committee.
4.12. Delegation. The Partnership Governance Committee may
delegate temporarily the powers and duties of any officer of
the Partnership, in case of absence or for any other reason, to
any other officer of the Partnership, and may authorize the
delegation by any officer of the Partnership of any of such
officer's powers and duties to any other officer or employee of
the Partnership, subject to the general supervision of such
officer.
4.13. Loaned Employees. If there is a vacancy in a job position above
a certain grade (but below the level of the Executive Officers)
in the Partnership (such grade to be established by the
Partnership Governance Committee), either General Partner shall
be entitled to nominate one of its (or its Affiliate's) own
employees to fill such vacancy for a fixed period of up to
three years, subject to renewal or extension by the CEO with
the consent of each General Partner. The selection of a
nominating General Partner's (or its Affiliate's) employee to
fill a Partnership vacancy and all of the terms of such
selection and the nominated employee's service shall be subject
to the approval and control of the CEO; provided, however, that
the selection and appointment of a nominating General Partner's
(or its Affiliate's) employee to fill a vacancy shall be
confirmed by Partnership Governance Committee Action. A
nominating General Partner's (or its Affiliate's) employee who
fills a Partnership vacancy shall in all respects perform as an
employee of the Partnership and, as such, shall have the duties
to the Partnership and the General Partners set forth or
referred to in Section 4.4. (and each General Partner shall at
all times cause all of its (or its Affiliate's) employees on
loan to the Partnership to perform in a manner consistent with
the requirements of Section 4.4.); provided, however, that such
employees shall continue to participate in the compensation and
benefit plans of the nominating General Partner or its
Affiliate. Each General Partner shall at any one time have no
more than 10 of its (or its Affiliate's) employees filling
Partnership vacancies. The Partnership shall compensate the
nominating General Partner (or its Affiliate) for the services
of the employee in accordance with terms determined by the
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<PAGE> 23
nominating General Partner and the CEO prior to the employee's
commencing work for the Partnership.
4.14. Employee Transfers. With the prior approval of the
Partnership Governance Committee, which approval shall not be
unreasonably withheld, either General Partner (or its
Affiliates) shall be entitled to hire specific employees of the
Partnership to fill vacancies with such General Partner or its
Affiliate. With the prior approval of the relevant General
Partner, which approval shall not be unreasonably withheld, the
Partnership shall be entitled to hire specific employees of
either General Partner (or its Affiliates) to fill vacancies
with the Partnership. The granting of credit for past service
with the prior employer for purposes of the hired employee's
compensation and benefit plans shall be within the discretion
of the General Partner who is hiring such employee, or in the
case of the Partnership, shall be determined in accordance with
an appropriate Partnership policy or procedure.
4.15. General Authority. Persons dealing with the Partnership
are entitled to rely conclusively on the power and authority of
each of the officers as set forth in this Agreement. No Person
dealing with any officer with respect to any business or
property of the Partnership shall be obligated to ascertain
that the terms of this Agreement have been complied with. No
Person dealing with the Partnership shall be required to
investigate or inquire as to the authority of the officers of
the Partnership to execute contracts, agreements, deeds,
mortgages, security agreements, promissory notes or other
instruments or documents with respect to any business or
property of the Partnership or to take actions on behalf of the
Partnership.
5. RIGHTS, DUTIES AND COVENANTS OF PARTNERS
5.1. Delegation. The Partners acknowledge that the General
Partners (acting through the Partnership Governance Committee)
are permitted to delegate responsibility for day-to-day
operations of the Partnership to officers and employees of the
Partnership.
5.2. General Authority. Persons dealing with the Partnership
are entitled to rely conclusively on the power and authority of
each of the General Partners as set forth in this Agreement or
as specifically authorized by Partnership Governance Committee
Action. No Person dealing with either General Partner or such
General Partner's agents or representatives with respect to any
business or property of the Partnership shall be obligated to
ascertain that the terms of this Agreement have been complied
with, or be obligated to inquire into the necessity or
expedience of any act or action of a General Partner or a
General Partner's representatives. Nothing in this Section 5.2.
shall be deemed to be a waiver or release of any General
Partner's obligations to the other Partners as set forth
elsewhere in this Agreement.
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5.3. Nature of Partner Obligations. Each Partner (directly or
through its Affiliates) is a sophisticated party possessing
extensive knowledge of and experience relating to, and is
actively engaged in, significant businesses, in addition to the
Refinery Business, has been represented by legal counsel, is
capable of evaluating and has thoroughly considered the merits,
risks and consequences of the provisions of this Section 5.3.
and is agreeing to such provisions knowingly and advisedly. The
liability of each of the General Partners (including any
liability of its Affiliates or its and their respective
officers, directors, agents and employees), either to the
Partnership or to any other Partner, for any act or omission by
such Partner in its capacity as a partner of the Partnership
that is imposed by such Partner's status as a "general partner"
or "limited partner" (as such terms are used in the Act) of a
limited partnership is hereby eliminated, waived and limited to
the fullest extent permitted by law. Nothing in this subsection
shall relieve any Partner from liability for any breach of this
Agreement and each General Partner shall at all times owe to
the other General Partner a duty to act in good faith with
respect to all matters involving the Partnership; provided,
however, that the duty of a Nonconflicted General Partner in
exercising the authority described in Section 5.7. shall be as
set forth in Section 5.7.(B).
5.4. Limited Partners.
(1) No Limited Partner shall take part in the management
or control of the Partnership Business, transact any
business in the Partnership's name or have the power to
sign documents for or otherwise to bind the Partnership.
(2) Each Limited Partner shall have the rights with
respect to the Partnership's books and records as set
forth in Section 5.9.
5.5. Partner Not Agent of Other Partners. Except as expressly
provided in Section 2.7., Section 5.7., Section 10.5. or
Section 11.1., nothing in this Agreement shall be deemed to
constitute a Partner as an agent or legal representative of any
other Partner.
5.6. Transactions with the Partnership. Subject to any required
approval of the Nonconflicted General Partner in accordance
with Section 5.7., each Partner and its Affiliates shall be
entitled without restriction to enter into contracts and
transactions with the Partnership. Upon receipt of any required
approval by the Nonconflicted General Partner Representatives,
all contracts and transactions between the Partnership and a
Partner or its Affiliates shall be deemed to be entered into on
an arm's-length basis and to be subject to ordinary contract
and commercial law.
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5.7. Control of Certain Claims and Certain Transactions.
(1) With respect to each Conflict Circumstance, the
Nonconflicted General Partner (through its
Representatives) shall have the sole and exclusive power
and right for and on behalf, and at the sole expense, of
the Partnership (i) to control (including the right from
time to time, in its discretion, to make delegations to
officers or employees of the Partnership as to) all
decisions, elections, notifications, actions, exercises
or nonexercises and waivers of all rights, privileges and
remedies provided to, or possessed by, the Partnership
with respect to a Conflict Circumstance and (ii) in the
event of any potential, threatened or asserted claim,
dispute or action with respect to such Conflict
Circumstance, to retain and direct legal counsel and to
control, assert, enforce, defend, litigate, mediate,
arbitrate, settle, compromise or waive any and all such
claims, disputes and actions. Accordingly, Partnership
Governance Committee Action with respect to a Conflict
Circumstance shall require only the approval of the
Representatives of the Nonconflicted General Partner. As
used herein, the term "Conflict Circumstance" shall mean
any transaction, dealing or agreement between the
Partnership, on the one hand, and a General Partner (the
"Conflicted General Partner") or any of its Affiliates,
on the other hand, including each of the Related
Agreements to which the Partnership is a party and each
transaction thereunder; provided, however, that a
Conflict Circumstance shall cease to exist (i) upon the
Conflicted General Partner ceasing to be a Partner or
(ii) upon the third party with which the transaction,
dealing or agreement exists, ceasing to be an Affiliate
of a General Partner. As used herein the term
"Nonconflicted General Partner" shall mean the General
Partner that is not the Conflicted General Partner. Each
General Partner shall, and shall cause its Affiliates to,
take all such actions, execute all such documents and
enter into all such agreements as may be necessary or
appropriate to facilitate or further assure the
accomplishment of this Section 5.7.
(2) The Nonconflicted General Partner, in exercising its
control, power and rights pursuant to this Section 5.7.,
shall act in good faith and in a manner it reasonably
believes to be in the best interests of the Partnership.
The Conflicted General Partner (or its Affiliate) that is
the other party to such negotiation, contract,
transaction, claim, dispute or action shall have the
right to deal with the Partnership and with the
Nonconflicted General Partner on an arm's-length basis
and in its own best interests, but in any event in good
faith.
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(3) This Section 5.7. shall not apply to: (i) any sale by the
Partnership of a product or service that the Partnership
also sells to unrelated third parties; provided, however,
that any agreement for such sales by the Partnership to a
Partner or one of its Affiliates shall, to the extent not
previously performed, be terminable without penalty upon
not more than sixty (60) days notice and such sales shall
be at market-based prices that are not less than the
prices the Partnership charges third parties for such
products or services; or (ii) any purchase by the
Partnership of a product or service that the Partnership
also purchases from unrelated third parties; provided,
however, that any agreement for such purchases by the
Partnership from a Partner or one of its Affiliates
shall, to the extent not previously performed, be
terminable without penalty upon not more than sixty (60)
days notice and such purchases shall be at market-based
prices that are not more than the prices the Partnership
pays third parties for such products or services.
5.8. Partnership Interest. All assets contributed to or
acquired by the Partnership shall be owned by the Partnership.
Each Partner shall have a right only to its "partnership
interest" (as such term is used in the Act) in the Partnership
(an "Interest"), and to the maximum extent permitted by
applicable law each Partner waives any right to partition of
the Partnership's assets and agrees that it will not seek or be
entitled to partition any such assets, whether by way of
physical partition, judicial sale or otherwise, prior to the
termination of the Partnership.
5.9. Access to and Copies of Records and Documents.
(1) Except as otherwise required by law, any Partner may
examine and copy, in person or by representative, at any
reasonable time, all records and other information of the
Partnership.
(2) Upon request by any Partner, the Partnership shall
provide without charge true copies of the Certificate of
Limited Partnership, this Agreement, all amendments or
restatements thereto, and copies of all federal, state,
and local information or income tax returns for each of
the Partnership's six most recent tax years.
5.10. Partner Covenants. Except to the extent it takes action
pursuant to its rights as a Nondefaulting Partner under Section
11., each Partner covenants and agrees with the Partnership and
with each other Partner as follows:
(1) It shall not exercise, or purport or attempt to exercise,
its authority (i) to withdraw, retire, resign, or assert
that it has been expelled from the Partnership, or (ii)
to dissolve or enter into any proceeding seeking any
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dissolution of such Partner, or (iii) to make any
application for judicial dissolution of the Partnership;
(2) It shall not do any act that would make it impossible or
impracticable to carry on the Partnership Business;
(3) It shall not, directly or indirectly through any
entity, conduct or engage in any business other than the
holding of its Interest and the doing of things necessary
or incidental in connection therewith, the exercise of
its authority as a Partner, the exercise of its authority
pursuant to Section 5.7., and the performance and
enforcement of its obligations and rights pursuant to
this Agreement; and (1)
(4) It shall not act or purport or attempt to act in a
manner inconsistent with any Partnership Governance
Committee Action or in a manner contrary to the
agreements of the Partners set forth in this Agreement.
5.11. Indemnification.
(1) (1) Indemnification by Partnership. The Partnership
shall, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless
each Partner, its Affiliates and their respective
officers, directors and employees from, against and
in respect of any losses, claims, damages, costs
and expenses (including costs of investigation,
defense and attorneys' fees) and liabilities
arising out of or in connection with the business
or affairs of the Partnership (collectively,
"Indemnified Losses"), except to the extent that it
is finally judicially determined that such
Indemnified Losses arose out of or were related to
actions or omissions of the indemnified Partner,
its Affiliates or any of their respective officers,
directors or employees (acting in their capacities
as such) constituting (a) bad faith, fraud,
violation of law or intentional misconduct or (b) a
breach of this Agreement. The Partnership shall
periodically reimburse any Person entitled to
indemnity under this Section 5.11.(A)(1) for its
legal and other expenses incurred in connection
with defending any claim (other than a claim by the
Partnership or a Partner) with respect to such
Indemnified Losses if such Person shall agree to
reimburse promptly the Partnership for such amounts
if it is finally judicially determined that such
Person was not entitled to indemnity hereunder.
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(2) Partner's Right of Contribution. Each Affiliated
Partner Group hereby agrees to indemnify, defend
and hold harmless the other Affiliated Partner
Group and their respective officers, directors and
employees from and against the indemnifying
Affiliated Partner Group's Participation Percentage
of any Indemnified Losses (calculated at the time
any such Indemnified Loss was incurred), except to
the extent that it is finally judicially determined
that such Indemnified Losses arose out of or were
related to actions or omissions of the indemnified
Affiliated Partner Group or any of their respective
officers, directors or employees (acting in their
capacity as such) constituting (a) bad faith,
fraud, violation of law or intentional misconduct
or (b) a breach of this Agreement; provided,
however, that such indemnified Affiliated Partner
Group, and their respective officers, directors and
employees shall not be entitled to indemnity under
this Section 5.11.(A)(2) unless (i) the indemnified
Affiliated Partner Group shall make a written
demand for indemnification from the Partnership in
accordance with Section 5.11.(D) and the
Partnership shall fail to satisfy such demand in a
manner reasonably satisfactory to the indemnified
Affiliated Partner Group within sixty (60) days of
such notice or (ii) the Partnership is Insolvent or
otherwise unable to satisfy its obligations.
(2) Indemnification by Partners. Each Partner hereby
indemnifies and shall hold harmless the Partnership and
the other Partners, their Affiliates and each director,
officer and employee of such other Partners, its
Affiliates and the Partnership without duplication from
and against any and all Indemnified Losses arising out of
any act of, or any purported assumption of any obligation
or responsibility by, such indemnifying Partner or its
Affiliates, or any of the directors, officers or
employees of such indemnifying Partner or its Affiliates,
in violation of this Agreement.
(3) Indemnification Under Related Agreements. Notwithstanding
any other provision of this Agreement, no Partner or its
Affiliates or their respective officers, directors or
employees shall be entitled to indemnification under this
Section 5.11. in respect of any breach by such Partner or
its Affiliates of the Related Agreements or in respect of
any matter for which such Partner or its Affiliates is
required to indemnify the Partnership under the
applicable terms of any of the Related Agreements.
(4) Procedures. Promptly after receipt by a person
entitled to indemnification under Section 5.11.(A) or
Section 5.11.(B) (an "Indemnified Party") of notice of
any pending or threatened claim against it (an "Action"),
such Indemnified Party shall give notice to the
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party to whom the Indemnified Party is entitled to look
for indemnification (the "Indemnifying Party") of the
commencement thereof, but the failure so to notify the
Indemnifying Party shall not relieve it of any liability
that it may have to any Indemnified Party except to the
extent the Indemnifying Party demonstrates that it is
prejudiced thereby. In case any Action that is subject to
indemnification under Section 5.11.(A) or Section
5.11.(B) shall be brought against an Indemnified Party
and it shall give notice to the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be
entitled to participate therein and, to the extent that
it shall wish, to assume the defense thereof with counsel
reasonably satisfactory to such Indemnified Party and,
after notice from the Indemnifying Party to the
Indemnified Party of its election to assume the defense
thereof, the Indemnifying Party shall not be liable to
such Indemnified Party under this Section for any fees of
other counsel or any other expenses, in each case
subsequently incurred by such Indemnified Party in
connection with the defense thereof, other than
reasonable costs of investigation. Notwithstanding an
Indemnifying Party's election to assume the defense of
any such Action that is subject to indemnification under
Section 5.11.(A) or Section 5.11.(B), the Indemnified
Party shall have the right to employ separate counsel and
to participate in the defense of such Action, and the
Indemnifying Party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of
counsel chosen by the Indemnifying Party to represent the
Indemnified Party would present such counsel with a
conflict of interest; (ii) the actual or potential
defendants in, or targets of, any such Action include
both the Indemnifying Party and the Indemnified Party,
and the Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it which
are different from or additional to those available to
the Indemnifying Party (in which case the Indemnifying
Party shall not have the right to assume the defense of
such Action on the Indemnified Party's behalf); (iii) the
Indemnifying Party shall not have employed counsel
satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice
of the institution of such Action; or (iv) the
Indemnifying Party shall authorize the Indemnified Party
to employ separate counsel at the Indemnifying Party's
expense. If an Indemnifying Party assumes the defense of
such Action, (a) no compromise or settlement thereof may
be effected by the Indemnifying Party without the
Indemnified Party's consent (which shall not be
unreasonably withheld) unless (I) there is no finding or
admission of any violation of law or any violation of the
rights of any person and no effect on any other claims
that may be made against the Indemnified Party and (II)
the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party and (b) the
Indemnified Party shall have no liability with respect to
any compromise or settlement thereof effected without its
consent (which shall not be unreasonably withheld). The
indemnities contained in this Section 5.11. shall survive
the termination and liquidation of the Partnership.
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6. CAPITAL CONTRIBUTIONS AND PARTICIPATION PERCENTAGE
6.1. Prior Capital Contributions. Upon formation of the
Company, LParent on behalf of Lyondell GP and CParent on behalf
of CITGO LP, contributed certain Assets to and the Company
assumed certain liabilities and obligations, as provided for in
the Regulations and the Contribution Agreement. From time to
time prior to the Conversion Date, Lyondell GP and CITGO LP, as
the two members of the Company, made Capital Contributions and
loans to the Company as provided for in the Regulations.
Capital Contributions and proceeds of loans made prior to the
Conversion Date that were of a specific character or designated
for a specific purpose shall retain such character or
designation and be subject to the restrictions applicable
thereto set forth in the Regulations.
6.2. Capital Contributions. Except as expressly provided in
this Section 6., Section 7.1(D) or as determined by the
Partnership Governance Committee, the Partners (i) shall have
no obligation to contribute any capital to the Partnership for
any purpose and (ii) shall not be entitled to contribute any
capital to the Partnership.
6.3. Partner Loans. A Partner or its Affiliates may loan funds
to the Partnership on such terms and conditions as may be
approved by the Partnership Governance Committee pursuant to
Section 3.8.(E), and, subject to other applicable law, have the
same rights and obligations with respect thereto as a Person
who is neither a Partner nor an Affiliate of a Partner. The
existence of such a relationship and acting in such a capacity
will not result in a Limited Partner being deemed to be
participating in the control of the business of the Partnership
or otherwise affect the limited liability of a Limited Partner.
If a Partner or any Affiliate thereof is a lender, in
exercising its rights as a lender, including making its
decision whether to foreclose on property of the Partnership,
such lender will have no duty to consider (i) its status as a
Partner or an Affiliate of a Partner, (ii) the interests of the
Partnership, or (iii) any duty it may have to any other Partner
or the Partnership.
6.4. Participation Percentages.
(1) Capital Contributions and Participation Percentages.
(1) As of and following the Conversion Date, the
Partners' respective Capital Contributions shall be
equal to the respective amounts set forth in
Exhibit 6.4 hereto plus any adjustments thereto
made following the Conversion Date in accordance
with the terms of this Section 6.4.
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(2) Each Partner's respective Capital Contributions
shall be adjusted to reflect the Distributions (as
hereinafter defined), if any, from any financing by
the Partnership from the Conversion Date until the
Option Date (the "Refinancing"). As used herein,
the term "Distributions" shall mean the net
proceeds of the Refinancing after the Partnership
(i) repays any existing indebtedness of the
Partnership (including any and all indebtedness
owed to the Partners) which the Partners have
agreed to repay but excluding any repayment of the
Partnership's revolving credit facility which may
be refinanced subsequent to the Refinancing and
(ii) withholds any amount of such Refinancing
proceeds which the Partnership Governance Committee
determines should be maintained by the Partnership.
(3) The Participation Percentage for each Partner
shall equal the sum of the Capital Contributions of
such Partner divided by the sum of the Capital
Contributions of all Partners.
(4) For the Calendar Quarter in which the Conversion
occurs, the Participation Percentages through the
end of that Calendar Quarter shall be as set forth
on Exhibit 6.4. For each Calendar Quarter following
such Calendar Quarter, the Participation
Percentages of the Partners shall be calculated and
in effect as of the first day of the Calendar
Quarter based on all events which occurred or are
deemed to have occurred through the close of
business on the last day of the preceding Calendar
Quarter. Except as otherwise provided, the
Participation Percentages in effect as of the first
day of the Calendar Quarter shall be operative for
the entire Calendar Quarter and shall not be
changed for any reason until the first day of the
next succeeding Calendar Quarter.
(2) From the Option Date, if any: (i) each of the CITGO
Partners' Capital Contributions shall include the amount
of the Option Date Payment and shall be adjusted by the
CITGO Partners Option Date Amount; and (ii) each of the
Lyondell Partners' Capital Contributions shall be
adjusted by their respective amounts of the Lyondell
Partners Option Date Amount.
6.5. Capital Expenditure Funding. To the extent that the Partnership
Governance Committee determines at any time after the
Conversion Date that certain capital expenditures will be
required and that funds are needed by the Partnership for such
capital expenditures, the Partners shall fund the amount needed
by the Partnership for such purposes. With respect to the
funding required under this Section, the Partnership Governance
Committee or the CEO shall inform the Partners as to the
aggregate amount required to be funded, the intended use of the
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funds, and the due date or dates for each Partner's funding
obligation. The amount required to be funded by each Partner on
any given date shall equal the aggregate amount due on such
date multiplied by the Partner's Participation Percentage on
such date. The amounts to be funded by the Partners shall be
funded with Capital Contributions, if such amounts are funded
prorated in accordance with the Partners' Participation
Percentage, or may be funded with loans (by unanimous consent
of the Partnership Governance Committee). The amounts funded
hereunder shall be used solely for the purposes set forth
herein as determined by the Partnership Governance Committee.
6.6. CITGO Partners' Option to Increase Their Collective
Participation Percentage.
(1) CITGO Partners may elect (and in the event of such
election shall give the Partnership and Lyondell Partners
written notice of CITGO Partners' election), as provided
herein, to increase CITGO Partners' Participation
Percentage to any Participation Percentage up to fifty
percent (50%), in the aggregate (the "Intended
Percentage"). The notice shall set forth (i) the Intended
Percentage, (ii) CITGO Partners' tentative calculation of
the amount it must contribute in order to achieve the
Intended Percentage and (iii) the date on which CITGO
Partners will make the Capital Contribution to achieve
the Intended Percentage, which date ("Option Date") shall
be the last date of a calendar quarter, subsequent to
January 1, 2000 and not later than September 30, 2000 and
must not be less than thirty (30) days following the date
of the notice.
(2) CITGO Partners shall be permitted to elect to
increase their Participation Percentage only one time
under the provisions of this Section 6.6.
(3) On the Option Date, CITGO Partners shall contribute
to the Partnership cash in an amount equal to 50% of the
Option Date Payment and a promissory note equal to 50% of
the Option Date Payment given to the Partnership in
accordance with the terms of Section 6.6.(E). "Option
Date Payment" shall mean the amount of a Capital
Contribution by CITGO Partners such that on the day
following the Option Date, and after giving effect to the
CITGO Partners Option Date Amount and the Lyondell
Partners Option Date Amount, CITGO Partners Participation
Percentage would equal the Intended Percentage.
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(4) To the extent the exact amount of the Option Date
Payment cannot be determined on the Option Date, CITGO
Partners shall contribute on the Option Date an amount
equal to CITGO Partners' good faith estimate of the
amount of cash due hereunder. At least ten (10) Business
Days prior to the Option Date, CITGO Partners shall
furnish the Partnership and Lyondell Partners with a
written determination of CITGO Partners' good faith
estimate of the total amount due under Section 6.6.(C).
Promptly after the Option Date, the Partnership
Governance Committee shall determine such amounts as are
necessary to be contributed by CITGO Partners under this
Section 6.6. Within five (5) Business Days of the
determination by the Partnership Governance Committee of
the amount of cash required to be contributed by CITGO
Partners under this Section 6.6., CITGO Partners shall
contribute to the Partnership (i) the difference between
such amount and the amount of cash contributed by CITGO
Partners on the Option Date plus (ii) interest on the
amount contributed under clause (i) at the Agreed Rate
(subject to Section 12.11.) from the Option Date through
the date CITGO Partners makes the contribution required
herein. If the amount of cash contributed by CITGO
Partners on the Option Date is greater than the amount
required to have been contributed by CITGO Partners, then
within five (5) Business Days of such determination the
Partnership shall pay such excess to CITGO Partners with
interest at the Agreed Rate (subject to Section 12.11.)
from the Option Date through the date the Partnership
makes the required payment. For purposes of determining
Participation Percentages, only the final net amount of
CITGO Partners' contribution under this Section 6.6.
shall be taken into account and any interim contributions
or distributions or interest payments shall be
disregarded.
(5) CITGO Partners shall deliver to the Partnership a
promissory note equal to 50% of the Option Date Payment.
The promissory note shall be delivered to the Partnership
as soon as the exact amount of the Option Date Payment is
determined pursuant to the procedures set forth in
Section 6.6.(D). The promissory note shall be in the form
set forth in Exhibit 6.6(E) to this Agreement. All
scheduled payments of principal under the promissory note
shall be used or deemed used by the Partnership for
capital expenditures incurred by the Partnership
subsequent to the Option Date and such payments shall be
treated as having been used to acquire property in
accordance with Section 7.7.(B)(2). The Partnership shall
have the right to withhold from distributions payable to
CITGO Partners any amounts then due under the promissory
note and to apply such withheld amounts to the amounts
payable by CITGO Partners to the Partnership under the
promissory note.
(6) The amount contributed by CITGO Partners under Section
6.6.(C) shall be applied, in order of priority, towards
repayment of the Initial
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Construction Loan, the Additional Construction Loan and,
to the extent funds are available, any loan from Lyondell
Partners. Any such amounts used to repay Lyondell
Partners Loans shall be applied in inverse order by
reference to the date each such loan was extended, that
is the first repayment shall be of the loans most
recently made by Lyondell Partners. If no such loans are
outstanding on the Option Date, the amount contributed by
CITGO Partners under Section 6.6.(C) shall be used or
deemed used by the Partnership for capital expenditures
incurred by the Partnership subsequent to the Option Date
and such payments shall be treated as having been used to
acquire property in accordance with Section 7.7.(B)(2)
and all depreciation, cost recovery, or amortization
deductions associated with said capital expenditures
shall be allocated to CITGO Partners in accordance with
Section 7.7.(B)(2).
6.7. Return of Capital Contributions. Except as otherwise expressly
provided by this Agreement, no Partner shall be entitled to
have all or any part of its Capital Contribution returned and
no Partner shall be paid interest or any other return on any
Capital Contribution or on the balance of its Capital Account,
as that term is hereafter defined.
6.8. Administration and Investment of Funds. The administration
and investment of Partnership funds shall be in accordance with
the procedures and guidelines as shall be adopted by the
Partnership Governance Committee. The Partnership may delegate
to a third party (which may be a Partner or an Affiliate of one
of the Partners) the responsibility for administering and
investing Partnership funds pursuant to such guidelines.
7. ALLOCATIONS AND DISTRIBUTIONS
7.1. Capital Accounts. A separate capital account (each a
"Capital Account") will be maintained for each Partner. Each
Partner's Capital Account shall be credited and debited in
accordance with the following provisions:
(1) To each Partner's Capital Account there shall be credited
such Partner's capital contributions (including the
principal amount of any promissory note contributed by a
CITGO Partner pursuant to Section 6.6.(E) but excluding
the payment of principal on such promissory note), such
Partner's distributive share of Profits as determined
under Section 7.6(A), and the amount of any Partnership
liabilities secured by any Partnership properties
distributed to such Partner such that the Partner is
considered to assume or take subject to such liabilities
under Section 752 of the Code;
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(2) To each Partner's Capital Account there shall be
debited the amount of cash and the fair market value of
any Partnership properties distributed to such Partner
pursuant to any provision of this Agreement and such
Partner's distributive share of Losses as determined
under Section 7.6(A);
(3) On the day following an Option Date Payment, if any, the
Capital Accounts of the Partners shall be adjusted
pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(f) to reflect the Asset Value on such
date of (i) the Working Capital, (ii) the Assets and
(iii) any capital assets acquired with funds contributed
to the Partnership by a Partner so that the balances in
such accounts are in the Proper Ratio on the date of such
adjustment; provided, however, that for purposes of this
Section 7.1.(C), the Asset Value of such assets shall be
adjusted to the extent necessary to cause the balances in
the Partners' Capital Accounts to be in the Proper Ratio;
(D) Any payment made by LParent or the Lyondell Partners to
the Partnership pursuant to LParent's obligations to the
Partnership under the Contribution Agreement or any
Related Agreement shall be considered a Capital
Contribution; provided, however, the increase to Lyondell
Partners' Capital Accounts as a result of any such
Capital Contribution shall occur simultaneously with the
corresponding reduction in Lyondell Partners' Capital
Accounts due to the reduction in Asset Value of the
Assets because of the receipt by the Partnership of any
such payment. Subject to the provisions of Section
7.4.(B), to the extent any such payment is not expended
by the Partnership to pay costs for which it is being
indemnified by LParent or Lyondell Partners, such amount
shall be deposited in the operating fund; and
(E) Any adjustment of Capital Accounts under this Section
7.1. shall have no impact upon the determination of
Participation Percentages.
7.2. Income and Distribution Determinations; Restriction on
Distributions and Advances. Profits and Losses shall be
allocated as of the close of business on the last day of each
Calendar Quarter. Distributions of Distributable Cash shall be
made on a monthly basis and, regardless of the date a
distribution is actually paid, distributions shall be treated
as having been made on the last day of the calendar month
immediately preceding the date of the distribution. Any other
provisions of this Agreement to the contrary notwithstanding,
however, the Partnership shall not make any distribution of
Distributable Cash or any advances for so long as, under the
terms of any agreement, contract or instrument evidencing,
governing or securing any indebtedness for borrowed money
(including loans or capital leases), an event of default exists
(or would exist upon the making of such distribution or
advance) and such agreement, contract or instrument prohibits
the
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making of such distribution or advance during the continuance
of such event of default.
7.3. Distributable Cash.
(1) Following the end of each calendar month the amount
of Distributable Cash for the immediately preceding
calendar month shall be determined, and, subject to the
provisions set forth herein, such Distributable Cash
amount shall be distributed promptly to the Partners as
provided in Section 7.4. Notwithstanding any other
provision of this Agreement, the Partnership shall not be
required to make any distribution if such distribution is
prohibited by Section 17-607 of the Act.
(2) The amount of the Partnership's Distributable Cash
for any calendar month shall be the Partnership's net
cash provided or used by operating activities for such
month (determined in accordance with GAAP) less (i) cash
used in financing activities for repayment of long term
debt (including but not limited to bonds and Partner
Loans) and (ii) any capitalized interest. If the
resulting Distributable Cash for any calendar month is
negative, no distribution of cash will be made to any
Partner until after such amount is reserved from future
positive amounts.
A Partner's Distributable Cash for any calendar month
shall be equal to the product of (i) the Partnership's
Distributable Cash for such month and (ii) such Partner's
Participation Percentage for the Calendar Quarter in
which such month occurs.
(3) To the extent that the Partnership does not have
sufficient cash or remaining capacity under its working
capital credit facility to make the distributions as
provided in Section 7.4., then, except as otherwise
expressly provided, distributions shall be made in
proportion to the amounts distributable to each Partner.
Any amount which is required to be distributed pursuant
to Section 7.3.(A), but which is not distributed for any
reason, including, without limitation, by reason of
insufficient cash or by virtue of the last sentence of
Section 7.2., shall constitute a debt owed by the
Partnership to the Partner entitled to such distribution,
which debt is to be paid, with interest at the Agreed
Rate (subject to Section 12.11.), as quickly as possible,
but in all events before any other distributions with
respect to subsequent months are paid to the Partners.
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7.4. Distributions.
(A) Except as otherwise expressly provided in this
Agreement, each Partner's Distributable Cash for each
calendar month shall be distributed to such Partner. If,
following the end of a Calendar Quarter, it is
determined that the sum of the monthly distributions to
a Partner attributable to the Calendar Quarter exceeds
the Partner's Distributable Cash for the Calendar
Quarter, such Partner shall promptly contribute the
excess to the Partnership together with interest thereon
at the Agreed Rate (subject to Section 12.11.).
Additional distributions shall be made in such amounts
as the Partnership Governance Committee shall determine;
provided, however, that such distributions shall be made
in proportion to the Partners' Participation Percentages
for the Calendar Quarter in which the distribution is
made.
(B) After the earlier of the Option Date or the expiration
of the period during which CITGO Partners may exercise
its option to increase its Participation Percentage
under Section 6.6., any cash attributable to a payment
described in Section 7.1.(D) but which is not expended
by the Partnership to pay costs for which it is being
indemnified by LParent or Lyondell Partners, shall be
distributed to the Partners in proportion to their
Participation Percentages.
7.5. Internal Loans. Distributions under this Section 7.5 may be
made, as provided herein, to both Partners of an Affiliated
Partner Group at any time. Each Affiliated Partner Group shall
be entitled to receive distributions hereunder not more than
once during each calendar quarter provided additional
distributions can be made with the consent of the General
Partner of the other Affiliated Partner Group, which consent
shall be granted or withheld in the sole discretion of such
other General Partner. Any time the Partnership's cash
(excluding cash in the capital fund and any other cash held
for a specific project) is greater than the Cash Balance
Amount, by written notice to the Partnership both Partners of
an Affiliated Partner Group shall be entitled to borrow from
the Partnership and the Partnership shall promptly advance to
such Partners, their respective Participation Percentages of
the Partnership's cash in excess of the Cash Balance Amount.
The "Cash Balance Amount" shall initially be $20 million,
which amount may be changed from time to time by Unanimous
Partnership Governance Committee Action. Any advance hereunder
shall (subject to Section 12.11) bear interest at the same
rate payable by the Partnership on its working capital
facility or if the Partnership has no such facility then at
the Agreed Rate. Any advance hereunder shall be repaid by
withholding from all distributions otherwise payable to the
Partner the amount of the advance plus interest thereon.
Amounts withheld shall first be applied to interest and
thereafter to principal. Each loan shall have a term of 90
days so that if the amount of the loan plus interest thereon
is not repaid from distributions otherwise payable to the
Partner within 90 days of the loan, then the Partner shall be
required to repay the loan with other funds.
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7.6. Internal Revenue Code Section 704(b) Book Allocations for
Tax Purposes.
(1) General. For each Calendar Quarter or portion thereof,
except as provided in this Section 7.6., each item
comprising Profits or Losses shall be allocated to the
Partners in proportion to their Participation
Percentages.
(2) Internal Revenue Code Section 704(b) Book
Depreciation. For each Calendar Quarter or portion
thereof, Depreciation shall be allocated to the Partners
in proportion to their Participation Percentages.
(3) Partnership Minimum Gain Chargeback. Notwithstanding
any other provision of Section 7., if there is a net
decrease in "partnership minimum gain" (as defined in
Treasury Regulation Sections 1.704-2(b)(2)) during any
Partnership taxable year, each Partner shall be
specifically allocated, before any other allocation is
made, items of income and gain for such year (and, if
necessary, subsequent years) equal to such Partner's
share of the net decrease in minimum gain (determined in
accordance with Treasury Regulation Section 1.704-2(g)).
Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to
be allocated to Partners. This provision shall be applied
so that it will constitute a "minimum gain chargeback"
within the meaning of Treasury Regulation Section
1.704-2(f).
(4) Partner Minimum Gain Chargeback. Notwithstanding any
provision of Section 7. except Section 7.6.(C), if there
is a net decrease in "partner nonrecourse debt minimum
gain" (as defined in Treasury Regulation Section
1.704-2(i)(2)) during any Partnership taxable year, each
Partner with a share of that partnership nonrecourse debt
minimum gain (determined under Treasury Regulation
Section 1.704-2(i)(5)) as of the beginning of the year
shall be specifically allocated, before any other
allocation is made, items of income and gain for such
year (and if necessary, subsequent years) equal to that
Partner's share of the net decrease in partner
nonrecourse debt minimum gain. Allocations pursuant to
the previous sentence shall be made in proportion to the
respective amounts required to be allocated to Partners.
This provision shall be applied so that it will
constitute a "chargeback of Partner nonrecourse debt
minimum gain" as prescribed by Treasury Regulation
Section 1.704-2(i)(4).
(5) Distribution of Property to Partners. In the event that
any property (other than cash) is distributed by the
Partnership to a Partner, gain or
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loss will be allocated to the Partners as if there were a
taxable disposition of such property on the date of
distribution.
(6) Indemnity Payment Expenditure. All deductions
attributable to the expenditure of all amounts described
in Section 7.1.(D) shall be allocated to Lyondell LP.
(7) Qualified Income Offset. Notwithstanding any other
provisions of Section 7.6. or 7.7., if a Partner
unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which would create a
deficit balance in its Capital Account (and reduced by
the amount described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and the outstanding principal amount
of any promissory note(s) contributed by the CITGO
Partners to the Partnership pursuant to Section 6.6.(E)
such Partner(s) will be allocated gross income and gain
in an amount and manner sufficient to eliminate such
deficit as quickly as possible. Allocations under this
Section 7.6.(G) shall be comprised of a pro rata share of
each item of Partnership income and gain for the period.
This provision shall be applied so that it will
constitute a "qualified income offset" within the meaning
of Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
(8) Curative Allocations. If items of income, gain, loss or
deduction are allocated under Section 7.6.(G), to the
extent possible the allocation of any remaining items of
income, gain, loss or deduction pursuant to Section 7.6.
shall be allocated such that the net amount allocated to
each Partner will be the same amount that would have been
allocated if no items of income gain, loss or deduction
had been allocated under Section 7.6.(G).
(9) Gain or Loss in Liquidation. To the extent the
Partners' Capital Account balances are not in the Proper
Ratio, gain or loss on the sale or distribution of assets
under Section 11.11. shall be allocated, to the maximum
extent possible, so as to cause the Partners' Capital
Account balances to be in the Proper Ratio.
7.7. Tax Allocations.
(1) General. Except as otherwise provided in this Section
7.7., for income tax purposes, each item of income, gain,
deduction, loss and credit shall be allocated among the
Partners in the same manner as the corresponding items
are otherwise allocated under Section 7.6.
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(2) 704(c) Depreciation Allocations. For income tax
purposes, pursuant to Section 704(c) of the Code and the
Treasury Regulations promulgated thereunder,
depreciation, cost recovery and amortization deductions
shall be allocated to the Partners as set forth in this
Section 7.7.(B) in order to take into account any
difference between (x) the Asset Value (as adjusted
pursuant to the proviso in Section 7.1.(C)) of the assets
on the date the assets are contributed to the Partnership
or on any date on which the Capital Accounts are adjusted
pursuant to Section 7.1.(C) and (y) the Partnership's
adjusted tax basis in the assets on each such date. The
foregoing allocation shall be implemented through the
following provisions:
(1) If a Partner contributes property to the
Partnership, all depreciation, cost recovery or
amortization deductions attributable to the
property shall be allocated to the Partner
contributing the property;
(2) Subject to Section 7.7.(B)(6) below, if a Partner
contributes cash (including the amounts described
in Section 7.1.(D) and payments made with respect
to the promissory note, if any, delivered under
Section 6.6.(E)) which is used or deemed to be used
to acquire property, all depreciation, cost
recovery or amortization deductions attributable to
the property acquired with the Partner's
contribution shall be allocated to the Partner
contributing the cash;
(3) All depreciation, cost recovery or amortization
deductions attributable to the expenditure of any
funds paid by LParent or a Lyondell Partner to the
Partnership pursuant to LParent's indemnity
obligation to the Partnership under the
Contribution Agreement or any Related Agreement
shall be allocated to Lyondell Partner LP;
(4) Subject to Section 7.7.(B)(5) and Section
7.7.(B)(6), all depreciation, cost recovery or
amortization deductions attributable to property
acquired with funds loaned to the Partnership by a
third party shall be allocated to the Partners in
accordance with their Participation Percentages;
(5) Subject to Section 7.7.(B)(6), all depreciation,
cost recovery or amortization deductions
attributable to funds loaned to the Partnership by
a Partner shall be allocated to the Partner loaning
such funds; and
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(6) If a Partner contributes cash to the Partnership
which is used to repay a debt of the Partnership,
any remaining deductions for depreciation, cost
recovery or amortization attributable to the
property acquired with the borrowed funds shall be
allocated to the Partner contributing the funds
used to repay the debt. If the Partnership borrows
funds from a third party which are used to repay a
debt of the Partnership from a Partner, any
remaining deductions from depreciation, cost
recovery or amortization attributable to the
property acquired with the funds so borrowed from a
Partner shall be allocated to the Partners in
accordance with their Participation Percentages.
(3) 704(c) Gain or Loss Allocations. Solely for income
tax purposes, gain or loss resulting from any sale,
exchange or disposition of an asset shall be allocated
among the Partners, in accordance with Section 704(c) of
the Code and the Treasury Regulations promulgated
thereunder, so as to take into account any difference
between (i) the Asset Value (as adjusted pursuant to the
proviso in Section 7.1.(C)) of such asset, adjusted to
reflect Depreciation and (ii) the Partnership's adjusted
tax basis in such asset.
(4) Recapture. Solely for income tax purposes, in the event
that a portion of the taxable gain recognized on the
sale, exchange or other disposition of a Partnership
asset is characterized as ordinary income under the
recapture provisions of the Code, each Partner's
distributive share of taxable gain from the sale of
Partnership assets (to the extent possible) shall include
a proportionate share of the recapture income equal to
that Partner's share of prior depreciation deductions
with respect to the assets that gave rise to the
recapture income.
(5) Imputed Interest Income. To the extent the Partnership
recognizes imputed interest income in connection with any
transaction involving a Partner, such interest income
shall, for tax purposes, be allocated to the Partner who
is a party to the transaction which generated the imputed
interest income.
(6) Production Expenditures. All "production expenditures",
as defined for purposes of Section 263A of the Code,
which result from any construction that is financed with
funds contributed by a Partner, shall be allocated to the
Partner which contributed such funds.
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(7) Payments. To the extent that the Partnership recognizes
income or gain as a result of any payment (other than any
interest payments) made by LParent or Lyondell LP to the
Partnership pursuant to LParent's obligations to the
Partnership under the Contribution Agreement or any
Related Agreement, such income or gain shall be allocated
to Lyondell LP.
7.8. Transfers of Interest. Each item of income, gain, loss,
deduction and credit allocable to any Interest transferred
during a quarter shall be allocated between the transferor and
transferee in proportion to the number of days during the
quarter for which each was the owner of the Interest, without
regard to the results of Partnership operations during the
portions of the quarter the transferor and transferee owned the
Interest. Distributions attributable to the ownership of a
transferred Interest shall be paid to the Person who owned the
Interest on the last day of the calendar month preceding the
date of the distribution.
8. BOOKS OF ACCOUNT AND TAX MATTERS
8.1. Books of Account. The Partnership will maintain at its
principal office proper books of account on the accrual method
of accounting in accordance with GAAP. The Partnership shall
also maintain proper books of account necessary to enable the
Partnership to file all required tax returns and reports and to
make all determinations required under this Agreement.
Financial statements and a list of commitments for expenditures
will be delivered to the Partners monthly. The books of account
shall be reviewed quarterly and audited annually and certified
financial statements in accordance with GAAP will be delivered
to each Partner. Further, the Partnership shall keep and
maintain books and records at its principal office as required
by applicable law.
8.2. Tax Treatment.
(1) Amounts reimbursed pursuant to Section 6.6.(D) shall be
treated as distributions described in Treasury Regulation
1.707-4(d).
(2) The Partnership will be taxed as a partnership and no
Partner will elect to be excluded from the application of
any of the provisions of Subchapter K, Chapter 1 of
Subtitle A of the Code or any similar provision of any
applicable state law.
(3) The Partnership will use the LIFO method of
accounting for inventory unless the Partnership
Governance Committee unanimously decides to use an
alternative method.
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(4) The Partnership will file an election under Section
754 of the Code to cause the tax basis of Partnership
property to be adjusted for federal income tax purposes
as provided in Sections 734, 743 and 754 of the Code.
8.3. Tax Returns.
(1) Lyondell GP shall be the Tax Matters Partner as defined
in Section 6231(a)(7) of the Code ("TMP") for all taxable
years of the Partnership through the earlier of the
taxable year that includes the Option Date or the
expiration of the period during which CITGO Partners may
exercise its option to increase its Participation
Percentage under Section 6.6. Thereafter, at any time
during the first sixty (60) days of a taxable year, CITGO
GP, by written notice to Lyondell GP, may elect to be the
TMP for the current taxable year and the next two
succeeding taxable years; provided, however, that CITGO
GP shall serve as TMP at no cost to the Partnership.
Thereafter, the Partnership Governance Committee shall
select one of the General Partners to serve as TMP for a
specified term. If the Partnership Governance Committee
cannot agree as to which General Partner shall be the
TMP, the General Partners shall alternate serving as TMP
for a term of three taxable years each, beginning with
the General Partner that has not served as TMP for the
most recent taxable year; provided, however, that any
General Partner serving as TMP shall serve at no cost to
the Partnership. In the event of any change of TMP, the
General Partner serving as TMP for a given taxable year
shall (unless such General Partner ceases to be a General
Partner) continue as TMP with respect to all matters
concerning that year. The TMP shall use its best efforts
to cause the Partnership to file all tax returns and
reports by the due date thereof (after taking into
account any extensions thereof). At least twelve (12)
weeks prior to the filing of the Partnership's U.S.
Partnership Return of Income, a draft of such return
shall be circulated to the other Partners for their
review. The TMP shall circulate to the other Partners a
draft of any state income tax return promptly after it is
available, and, in any event, at least four (4) weeks
prior to the filing of any such return. Prior to the
filing of any other federal, state or local tax return,
the TMP shall cause a draft of such tax return to be
circulated to the other Partners for their review
promptly after it is available.
(2) If a Partner objects to the tax treatment of an item on
any income tax return, such Partner shall promptly inform
the TMP of its objection and the grounds upon which the
objection is based and shall in any event use its best
efforts to inform the TMP of such objection and the
grounds upon which such objection is based at least two
(2) weeks
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(eight (8) weeks as to any U.S. Partnership Return of
Income) prior to the date on which the tax return is
required to be filed. However, if the TMP, after due
consideration of a Partner's objection, is of the view
that the tax treatment of the item in question on the
return as originally submitted is reasonable, then the
TMP shall cause the Partnership to file the return
reporting the item in question in the manner originally
submitted. A Partner may treat the item in question (but
no other item) in a manner different from that reported
on the return and file a statement of inconsistent
treatment with its tax return. If any Partner files a
statement of inconsistent treatment of a Partnership
item, the Partner filing the statement shall use its best
efforts to inform the Partnership at least two (2) weeks
prior to filing the statement.
8.4. Tax Controversies. The Partners shall comply with the
responsibilities outlined in this Section 8.4. and in Sections
6222 through 6231 and 6050K of the Code (including any Treasury
Regulations promulgated thereunder) and in doing so shall incur
no liability to any other Partner. The TMP shall not agree to
any extension of the statute of limitations for making
assessments of tax on behalf of any other Partner without first
obtaining the written consent of such other Partner. The TMP
shall not bind any other Partner to a settlement agreement in
respect of taxes without obtaining the written consent of such
other Partner. If a notice or assessment for any tax (Federal
or State) is agreed to by the TMP, the TMP shall notify each
other partner of such agreement within 30 days from the date
such notice or assessment is agreed to. Any Partner who enters
into a settlement agreement with the Secretary of the Treasury
with respect to any "partnership items", as defined by Section
6231(a)(3) of the Code, shall notify each other Partner of such
settlement agreement and its terms within ninety (90) days from
the date of settlement. No Partner shall file a request
pursuant to Section 6227 of the Code for an administrative
adjustment of partnership items for any partnership taxable
year without first notifying each other Partner. If each of the
other Partners agrees with a requested adjustment, the TMP
shall file the request for administrative adjustment on behalf
of the Partnership. If any other Partner does not agree with
the requested adjustment within thirty (30) days from such
notice, or, if shorter, within the period required to timely
file the request for administrative adjustment, then the
requesting Partner may file a request for administrative
adjustment on its own behalf. The TMP shall not, in its
capacity as TMP, file a petition under Code Sections 6226, 6228
or any other Code Sections with respect to any Partnership
item, or other tax matters involving the Partnership, without
the consent of each Partner. A Partner intending to file a
petition under Section 6226, 6228 or any other Code Sections
with respect to any Partnership item, or other tax matters
involving the Partnership, will notify each of the other
Partners of that intention and the nature of the contemplated
proceeding. If any Partner intends to seek review of any court
decision rendered as a result of a proceeding instituted under
the preceding part of this Section 8.4., that Partner will
notify the other Partners of that intended action. The
provisions of this Section 8.4. will survive the termination of
the Partnership and the transfer of any Partner's Interest and
will remain binding on the Partners for a period of time
necessary to resolve any and all matters regarding the federal
and, if
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applicable, state income taxation of the Partnership. The
Partnership shall retain its records with respect to each
fiscal year until the expiration of ninety (90) days after the
period within which additional federal or state income tax may
be assessed for such year.
8.5. Tax Rulings. No Person other than the TMP shall request an
administrative ruling (or similar administrative procedures)
from any taxing authority with respect to any tax issue
relating to the Partnership or affecting the taxation of any
other Partner. The TMP shall not request such a ruling (or
similar procedure) without the consent of each General Partner.
9. ANNUAL BUDGETS, FIVE YEAR PLAN AND COMMERCIAL LOANS
9.1. Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
9.2. Annual Budgets. The Partnership will operate on the basis
of the following annual budgets:
(1) "Operating Budget," which shall be an estimate for a
fiscal year of all of the Partnership's operating
revenues and expenses, including expenses required to
maintain, repair and restore to good and usable condition
the Partnership's assets; and
(2) "Capital Budget", which shall be an estimate for a
fiscal year of the capital expenditures (i) necessary to
maintain the Partnership's assets; (ii) necessary to
achieve or maintain compliance with any Environmental
Law; (iii) necessary to accomplish capital enhancement
projects approved by the Partnership Governance Committee
("Capital Enhancement Projects"); and (iv) permitted,
pursuant to Partnership Governance Committee Action, to
be undertaken by the CEO in his or her discretion (the
funding and overrun provisions with respect to such
expenditures being set forth in such budget).
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9.3. Approval of Budgets.
(1) Each budget shall be approved by Partnership Governance
Committee Action. Prior to November 15 of each fiscal
year, the CEO shall prepare and submit to the Partnership
Governance Committee for approval each of the budgets for
the ensuing fiscal year (and, as appropriate, for
subsequent periods), and on or before December 1, the
Partnership Governance Committee shall by Partnership
Governance Committee Action approve, with such
modifications as it considers appropriate, each such
budget.
(2) If the Partnership Governance Committee does not approve
the Operating Budget for the next fiscal year by December
1, pending approval of such budget by Partnership
Governance Committee Action, the preceding fiscal year's
Operating Budget shall, to the extent practicable, guide
the operation of the Partnership. The failure to approve
an Operating Budget shall in no way limit or restrain the
authority of the Partnership or its officers to conduct
operations.
(3) The Partnership Governance Committee may, by Partnership
Governance Committee Action, amend or supplement any
previously approved budget at any time.
9.4. Funding of Budgets. The Operating Budget and all operating
expenses regardless of whether included in any such budget
shall be funded from operating cash flows. The Capital Budget
shall be funded in accordance with Section 6.5. and no other
additional Capital Contributions by the Partners shall be
required with respect thereto unless otherwise agreed by the
Partnership Governance Committee.
9.5. Implementation of Budgets and Discretionary Expenditures
by CEO.
(1) After the Capital Budget has been approved, the
Partnership will be authorized, without further action by
the Partnership Governance Committee, to make any
expenditures specifically identified within such budget;
provided, however, that all internal control policies and
procedures, including those regarding the required
authority for certain expenditures, shall have been
followed and that with respect to each capital
expenditure above an amount established from time to time
by Unanimous Partnership Governance Committee Action
there shall have been a Partnership Governance Committee
Action approval of the "authority for commitment."
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(2) In any emergency, the CEO or the CEO's designee shall be
authorized to take such actions and to make such
expenditures as may be reasonably necessary to react to
the emergency, regardless of whether such expenditures
have been included in an approved budget. As soon as
practical after the commencement of an emergency, the CEO
or such designee shall notify the Representatives of the
response that has been made, or is committed or proposed
to be made, with respect to the emergency.
9.6. Five Year Plan. The CEO of the Partnership shall prepare
and furnish annually to the Partnership Governance Committee a
projected five year business plan.
9.7. Commercial Loans.
(1) Other Loans. The Partnership Governance Committee may by
Partnership Governance Committee Action, authorize the
CEO to cause the Partnership to borrow funds from third
party lenders. No Partner shall be required, and the
Partnership Governance Committee shall not be authorized
to require any Partner, to guarantee or to provide other
credit or financial support for any loan.
(2) Partner Loans. The Partnership Governance Committee
may by unanimous Partnership Governance Committee Action,
subject to Section 3.8., authorize the CEO to cause the
Partnership to borrow money from a Partner.
9.8. Insurance and Risk Management. The Company is either an
additional named insured under LParent's insurance program or
has its own policy of insurance under LParent's insurance
program and as of the Conversion Date, LParent shall substitute
the Partnership for the Company, making the Partnership an
additional named insured, if applicable, under LParent's
insurance program. As such coverages become subject to renewal
or otherwise expire, the Partnership, by Partnership Governance
Committee Action, shall approve any material change in the
amount and scope of such coverages (including the extent to
which the Partnership will continue to be included as an
additional named insured under LParent's insurance program), or
in the portion of the premium charges for such coverages
allocable to the Partnership.
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10. TRANSFERS AND PLEDGES
10.1. Prohibition of Transfer. Except pursuant to Section 11. or as
described below in this Section 10., a Partner shall not, in
any transaction or series of transactions, directly or
indirectly, (i) sell, assign or otherwise in any manner dispose
of all or any part of its Interest (such term, as used in this
Section 10.1., including any Profits Interest), whether by act,
deed, merger or otherwise (any of the foregoing, as referred to
in this Section 10., a "transfer"), or (ii) mortgage, pledge or
create a lien or security interest upon all or any part of its
Interest; provided, however, that notwithstanding this Section
10.1., a General Partner may transfer all or any portion of its
Interest to its Affiliated Limited Partner and a Limited
Partner may transfer all or any portion of its Interest to its
Affiliated General Partner. Any attempt by a Partner to
transfer all or a portion of its Interest in violation of this
Agreement shall be void ab initio and shall not be effective to
transfer such Interest or any portion thereof.
10.2. Transfers Prior to the Option Date. No Partner shall
transfer all or any part of its Interest or Profits Interest
prior to the Option Date; provided, however, that in any event
this restriction shall cease upon the expiration of the period
during which the CITGO Partners may exercise their option to
increase their Participation Percentages under Section 6.6.
10.3. Transfers After the Option Date.
(1) After the earlier of the Option Date or the expiration of
the period during which the CITGO Partners may exercise
their option to increase their Participation Percentages
under Section 6.6., an Affiliated Partner Group (the
"transferring Partners") may transfer all (but not less
than all) of its Profits Interests; provided, however,
that it complies with all of the provisions of Sections
10.3.(C), 10.3.(D), 10.3.(E) and 10.3.(F).
(2) After the earlier of the Option Date or the expiration of
the period during which the CITGO Partners may exercise
their option to increase their Participation Percentages
under Section 6.6., any Affiliated Partner Group may
transfer all (but not less than all) of its Interests,
collectively, but only if: (i) it obtains the prior
written consent of the other Affiliated Partner Group
(the "nontransferring Partners"), which consent may be
withheld in the sole discretion of such other Affiliated
Partner Group; (ii) it complies with the provisions of
Sections 10.3.(C), 10.3.(D), 10.3.(E) and 10.3.(F); and
(iii) the purchaser or transferee of such Interests
executes a written agreement to be bound by this
Agreement (including the encumbrance of such Interest
pursuant to this Agreement including Section 11.1.), to
assume and satisfy all the liabilities and pay and
perform all the obligations and duties of the
transferring Partners and, subject to the consent of the
nontransferring
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Partners as provided in Section 10.4., to become
substituted Partners in place of the transferring
Partners.
(3) Any Affiliated Partner Group desiring to transfer its
Interest (such term, as used in Sections 10.3.(C),
10.3.(D), 10.3.(E) and 10.3.(F), meaning either its
Interest or its Profits Interest, as applicable) shall
deliver a written notice to the other Affiliated Partner
Group, which notice shall specify the Interests desired
to be transferred and shall constitute an offer to sell
all (but not less than all) of the transferring Partners'
Interests (the "Purchase Offer"). The Purchase Offer
shall specify the price (which shall be cash payable in
same-day funds in Houston, Texas) and other terms (e.g.,
provisions for the elimination of loans to or from the
Partners, the release of any guarantees, the procedure
for closing the books on the effective date of the sale
and the treatment of Partnership distributions payable to
the transferring Partners) upon which the transferring
Partners are willing to sell all (but not less than all)
of their Interests to the nontransferring Partners. The
nontransferring Partners shall have sixty (60) days from
the date of receipt of the Purchase Offer within which to
accept the Purchase Offer and shall have the right to
assign their rights with respect to the Purchase Offer in
whole or in part to an Affiliate or to any other person
or entity. If the nontransferring Partners or their
assignee accept the Purchase Offer, the closing shall
take place within sixty (60) days of such acceptance.
(4) If the nontransferring Partners do not accept a
Purchase Offer pursuant to Section 10.3.(C), the
transferring Partners shall, as provided herein, have one
hundred eighty (180) days after expiration of the first
60-day period described in Section 10.3.(C) (or after the
earlier express written rejection of the Purchase Offer
by the nontransferring Partners) within which, subject to
the provisions of this Section 10.3.(D), Section 10.1.,
Section 10.3.(B) and Section 10.4., the transferring
Partners may attempt to sell all of their Interests,
subject to Section 10.3.(F), to a single (and only a
single) third party at a price and on terms and
conditions that are identical to (or more favorable in
all respects to the transferring Partners than) the cash
price, terms and conditions contained in the Purchase
Offer. If during this 180-day period, the transferring
Partners identify a proposed purchaser (i) that is a
single entity that is organized under the laws of the
United States, (ii) that is not insolvent prior to or
immediately upon consummation of the proposed transfer,
and (iii) that makes a bona fide offer (not subject to
due diligence, financing or any other similar
contingencies) to purchase the transferring Partners'
Interests at a cash price and on terms and conditions
that are identical to (or more favorable in all respects
to the transferring Partners than) the cash price, terms
and conditions contained in the Purchase Offer, the
transferring Partners shall notify the nontransferring
Partners of the identity of the proposed purchaser
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and the terms of the proposed sale (the "Second Notice").
The nontransferring Partners or their assignee then shall
have thirty (30) days from the Second Notice within which
to elect to purchase the transferring Partner's Interests
at the cash price and on the terms and conditions
contained in the Second Notice. If the nontransferring
Partners elect to make the purchase, the closing shall
take place within sixty (60) days of its election to
purchase.
(5) If the nontransferring Partners or their assignee do not
elect to purchase the transferring Partners' Interest
after receiving the Second Notice, then subject to
Section 10.1., Section 10.3.(B) and Section 10.4. the
transferring Partners may then sell such Interest to the
third party at the cash price and on the terms and
conditions specified in the Second Notice; provided,
however, that if the transferring Partners do not dispose
of their Interest at the cash price and on the terms and
conditions specified in the Second Notice, and in all
events within sixty (60) days after expiration of the
30-day period described in the penultimate sentence of
Section 10.3.(D) (or after the earlier express written
rejection by the nontransferring Partners after receiving
the Second Notice), the transferring Partners' Interest
shall not be transferred and shall again be subject to
the restrictions contained in Section 10.3. (1)
(6) Inclusion of General or Limited Partner Interest. No
Limited Partner may transfer its Interest to any Person
unless the Interest of its Affiliated General Partner is
simultaneously transferred to such Person or a Wholly
Owned Subsidiary of such Person. No General Partner may
transfer its Interest to any Person unless the Interest
of its Affiliated Limited Partner is simultaneously
transferred to such Person or a Wholly Owned Subsidiary
of such Person.
10.4. Transferees. The purchaser or transferee of a Partner's
Interest pursuant to Section 10.3. or Section 10.5. shall not
become a Partner without the consent of the nontransferring
Partners as provided for in clause (i) of Section 10.3.(B). A
transferee who acquires an Interest pursuant to Section 10.3.
or Section 10.5. but who does not receive such consent shall be
entitled only to allocations of income and loss and
distributions with respect to such Interest in accordance with
this Agreement and shall not be or become entitled to exercise
the rights or powers of a Partner. However, the nontransferring
Partners may, in the exercise of their sole discretion, at any
time thereafter consent to such purchaser or transferee
becoming a Partner or withhold such consent. A purchaser or
transferee as to whom the nontransferring Partners at any time
grants such consent shall be deemed to become a substituted
Partner in place of the transferring Partners when and as
provided in such consent.
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10.5. Pledge of Interest.
(1) Except as contemplated by Section 10.5.(B) and Section
11.1., no Partner shall mortgage, pledge, encumber or
create or suffer to exist any pledge, lien or encumbrance
upon, or security interest in ("pledge"), all or any part
of its Interest (such term, as used in this Section
10.5., including any Profits Interest). Any attempt by a
Partner to pledge all or a portion of its Interest in
violation of this Agreement shall be void ab initio and
shall not be effective to pledge such Interest.
(2) Any Affiliated Partner Group (the "pledging Partners")
may pledge its Interest; provided, however, that (i) any
such pledge, shall expressly be subject and fully
subordinated, on terms reasonably acceptable to the other
Affiliated Partner Group (the "nonpledging Partners"), to
the encumbrance of the pledging Partners' Interests
pursuant to this Agreement including Section 11.1. and
(ii) no such pledge shall give any right to the pledgee
as a Partner (as such term is used in the Act) with
respect to the Partnership or the nonpledging Partners or
create any duty to the pledgee on the part of the
Partnership or the nonpledging Partners other than the
payment to the extent pledged of distributions from the
Partnership under Section 7.
(3) Prior to any pledge under Section 10.5.(B), (i) the
pledging Partners shall submit to the nonpledging
Partners all documentation relating to the proposed
pledge for the approval of the nonpledging Partners and
shall not effect such pledge without the prior written
approval of the nonpledging Partners (such approval not
to be unreasonably withheld); (ii) the proposed pledgee
shall deliver a written agreement of such pledgee (which
shall be binding upon any of its successors or assigns)
to the Partnership and the nonpledging Partners,
providing that (a) the right to foreclose upon the
pledging Partners' Interests pursuant to the pledge shall
be conditioned upon delivery to the nonpledging Partners
of an opinion of counsel satisfactory to the nonpledging
Partners that such foreclosure would not cause the
Partnership to be treated as an association taxable as a
corporation and that any "termination" of the Partnership
within the meaning of Section 708 of the Code caused by
such foreclosure would not create any adverse
consequences for the nonpledging Partners and (b) the
pledgee's right to receive any distributions that are
pledged is subject to being reduced pursuant to the
provisions of this Agreement; and (iii) the proposed
pledgee and the pledging Partners shall deliver to the
nonpledging Partners a written agreement, in form
reasonably satisfactory to the nonpledging Partners,
providing that (a) the pledgee shall notify the
nonpledging Partners in writing at least one hundred
twenty (120) days prior to initiation of foreclosure
proceedings, (b) the nonpledging Partners shall have the
right during such 120-day period to purchase the debt
owed
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by the pledging Partners to the pledgee, together with
all rights of the pledgee in, to and with respect to the
pledged Partners' Interests, for an amount equal to the
outstanding principal amount of such debt plus the
interest due and payable on and any cost of collection
associated with such debt, (c) immediately upon the
purchase of the debt, together with all rights of the
pledgee in, to and with respect to the pledged Partners'
Interests, by the nonpledging Partners pursuant to clause
(iii)(b) of this Section 10.5.(C), the pledgee shall (1)
deliver to the nonpledging Partners a written
acknowledgment that its debt has been satisfied in full
and (2) take any action necessary to transfer to the
nonpledging Partners possession of a perfected first
priority security interest in the pledging Partners'
Interest and (d) the pledging Partners appoint the
nonpledging Partners as its attorney-in-fact authorized
to take on the pledging Partners' behalf all actions
required to effect any purchase of the pledgee's debt and
any transfer of the pledging Partners' Interest pursuant
to this clause (iii) of this Section 10.5.(C).
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11. REMEDIES AND DISSOLUTION
11.1. Security for Performance. Each Affiliated Partner Group (the
"Pledgor Group") shall and hereby does pledge and grant to the
other Affiliated Partner Group (the "Pledgee Group") a first
priority lien on and security interest in the Pledgor Group's
Interests in the Partnership as security for the satisfaction
of all the Pledgor Group's liabilities and the payment and
performance of all the Pledgor Group's obligations and duties
under this Agreement. At any time and from time to time, the
Pledgor Group also will promptly execute and deliver all such
further agreements, instruments and documents and take all such
further action that may be necessary or desirable or that the
Pledgee Group may reasonably request in order (i) to perfect
and protect the lien and security interest created hereby,
including the execution and filing of appropriate financing
statements and directing the Partnership to register, on the
Partnership's books and records, the pledge of the Pledgor
Group's Interest to the Pledgee Group; (ii) to enable the
Pledgee Group to exercise and enforce its rights and remedies
under this Agreement in respect to the Pledgor Group's
Interest; or (iii) otherwise to effect the purposes of this
Section 11.1. The Pledgor Group hereby authorizes the Pledgee
Group to file, without the signature of such Pledgor Group
granting the security interest provided for herein, where
permitted by applicable law, at any time the Pledgee Group
acting as a secured party deems necessary or appropriate to
protect its lien and security interest under this Agreement,
one or more financing or continuation statements, and
amendments thereto, relating to such lien and security
interest. If the Pledgor Group fails to perform any agreement
or obligation contained in this Section 11.1., the Pledgee
Group may perform, or cause performance of, such agreement or
obligation, and the expenses of the Pledgee Group so performing
incurred in connection therewith shall be payable to the
Pledgee Group, on demand, by the Pledgor Group that has failed
to so perform. The Pledgee Group shall not, without the prior
written consent of the Pledgor Group, sell, assign, transfer,
mortgage, pledge or otherwise encumber any of its rights in the
Pledgor Group's Interests as pledged to the Pledgee Group under
this Section 11.1. except with regard to a failure by the
Pledgor Group to satisfy the Pledgor Group's liabilities, and
the payment and performance of all its obligations and duties
under this Agreement.
11.2. Default.
(1) Each of the following events shall, upon determination of
the existence thereof as provided in Section 11.2.(B),
constitute a "Default" and create the rights provided for
in this Agreement in favor of the Nondefaulting Partners
against the Defaulting Partners:
(1) the failure by a Partner to make any contribution,
including, without limitation, a Partner's failure
to make when due any contribution for capital
expenditures as determined by Partnership
Governance Committee Action to be due form the
Partners, or loan to the Partnership as required
by this Agreement, which failure continues for at
least three (3)
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Business Days from the date such contribution
should have been received;
(2) other than as described in item (1) above, a
material breach or violation under this Agreement
by a Partner, which breach or violation continues
unremedied for at least ninety (90) days after the
Nondefaulting Partners have given written notice
of such breach or violation to the Defaulting
Partners;
(3) as to Lyondell Partners, a material breach or
default by LParent under the terms of the
Contribution Agreement, which breach or default
continues unremedied or uncured for at least 90
days after the Partnership or the CITGO GP has
given written notice of such breach or default to
LParent; (1)
(4) as to CITGO Partners, a material breach or default
by CParent under the terms of the Product Purchase
Agreement, which breach or default continues
unremedied or uncured for at least ninety (90)
days after the Partnership or Lyondell GP has
given written notice of such breach or default to
CParent; or
(5) the withdrawal, retirement, resignation or
dissolution of a Partner; or the bankruptcy of a
Partner or its Parent (including the filing
against a Partner or its Parent of a petition in
bankruptcy or seeking any reorganization,
liquidation or similar relief, which petition
shall remain undismissed or unstayed for an
aggregate of ninety (90) days; the adjudication of
a Partner or its Parent as Insolvent, or the
institution by a Partner or its Parent of
proceedings to be adjudicated as a voluntary
bankrupt, or the consent by a Partner or its
Parent to the filing of a bankruptcy proceeding
against it, or the failure of a Partner or its
Parent to contest a bankruptcy proceeding against
it; or the appointment, or any consent by a
Partner or its Parent to the appointment, of a
receiver, custodian, liquidator or trustee for the
Partner or its Parent or for all or any
substantial portion of its property, which
appointment remains undismissed or unstayed for a
period of ninety (90) days).
(2) The existence of a Default shall be determined either by
written agreement among the Partners or by resort to an
appropriate court. Once such Default has been determined
to exist (including, as appropriate, exhausting all
appeals), then the Defaulting Partners shall have thirty
(30) days from the determination date to cure such
Default; provided, however, that there shall not be a
cure period for a Default described in Section
11.2.(A)(5) and that the cure period for a Default
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described in Section 11.2.(A)(1) shall be limited to
three (3) Business Days.
(3) The day upon which the Default is determined to exist (or
if the Default is subject to a cure period and is not
timely cured, then the day following the end of the
applicable cure period) shall be the "Default Date."
Without prejudice to a Partner's (or any of its
Affiliates') rights to seek temporary or preliminary
judicial relief, prior to any such Default Date all
rights and obligations of the Partners under this
Agreement shall remain in full force and effect.
(4) With respect to any Default, the term "Damages" shall
mean (in each case to the extent reasonably and
necessarily incurred) any and all obligations (including
all obligations to take an affirmative or curative act),
liabilities, damages (including, damages arising out of
any breach of any representation or warranty, damages
related to investigations, proceedings, audits, the
interruption of the Partnership's Business, restrictions
upon the use of, or adverse impact on, the assets or the
Partnership's Business, or the interruption, breach or
termination of any Related Agreements, including any lost
profits attributable thereto), fines, penalties,
deficiencies, losses, judgments, settlements, costs and
expenses (including costs and expenses incurred in
connection with performing obligations, bonding and
appellate costs and attorneys', accountants', engineers',
health, safety, environmental and other consultants' and
investigators' fees and disbursements, liquidating,
selling or offering for sale the Partnership Business and
assets or winding up the Partnership Business, or other
payments in respect of such payments) arising out of or
incurred in connection with such Default, regardless of
whether any of the foregoing are foreseeable,
unforeseeable, matured or unmatured, existing or
contingent as of the date of such Default. "Damages" also
shall include, if and to the extent interest is not
already included therein under applicable law or other
provisions hereof and subject to Section 12.11., interest
on amounts actually due until payment thereof is made at
a rate per annum equal to the rate set forth in Section
12.10.(B).
11.3. Remedies for Default. Provided that there shall be no
duplication of remedies, without prejudice to the Nondefaulting
Partners' right to foreclose upon the Defaulting Partners'
Interest pursuant to the lien and security interest created in
Section 11.1. or to pursue independently and at any time,
including simultaneously, any other remedy it may have under
law, including the right to seek to recover Damages, or equity,
upon determination (either judicially or otherwise) of a
Default and the related Damages, and the failure of the
Defaulting Partners to cure such Default as provided in Section
11.2.(B), the Nondefaulting Partners in their sole discretion
may elect to pursue the following remedies:
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(1) At any time prior to the expiration of sixty (60) days
from the Default Date (or if later, from the judicial or
other determination of the Default Date and the related
Damages), the Nondefaulting Partners may elect to
exercise their purchase right for the Defaulting
Partners' Interest as described in Section 11.5. and
thereby cause the Partnership to dissolve under Section
11.9(D); provided, however, that within ten (10) days
after the determination of the Fair Market Value, the
Nondefaulting Partners may elect not to proceed with a
purchase of the Defaulting Partners' Interest, in which
case the Nondefaulting Partners shall have an additional
thirty (30) days from its determination not to proceed to
elect as an alternative remedy Section 11.3.(B) below;
and
(2) At any time prior to the expiration of sixty (60) days
from the Default Date (or if later, from the judicial or
other determination of the Default Date and the related
Damages) (or if the Nondefaulting Partners initially
elected to pursue its remedy under Section 11.3.(A)
above, then at any time prior to the expiration of the
30-day extension period), the Nondefaulting Partners may
elect to effect a liquidation of the Partnership under
Section 11.6. and thereby cause the Partnership to
dissolve under Section 11.9.(E).
11.4. Consequences of Default. Notwithstanding any other provision of
this Agreement, commencing on the Default Date and (i) prior to
the Nondefaulting Partners' collection of Damages through the
exercise of its legal remedies or otherwise, or (ii) while the
Nondefaulting Partners are pursuing its remedies under Section
11.5. or Section 11.6., the Defaulting Partners'
Representatives on the Partnership Governance Committee shall
not have any voting rights and all matters requiring
Partnership Governance Committee Action shall be determined
solely by the Nondefaulting Partners' Representatives;
provided, however, that the foregoing loss of voting rights
shall not occur as a result of a Default caused solely by the
insolvency, bankruptcy or similar proceedings of a Partner or a
Parent described in the second through final clauses of Section
11.2.(A)(5); and provided further, that the foregoing loss of
voting rights shall not apply to those voting rights contained
in Sections 3.8.(A), 3.8.(B), 3.8.(C), 3.8.(D), 3.8.(F), and
3.8.(Y), which voting rights shall continue in full force and
effect at all times.
11.5. Purchase of Defaulting Partners' Interest
(1) The Nondefaulting Partners shall have the right to elect
to purchase the Interest of the Defaulting Partners by
delivering notice of such election in writing to the
Partnership Governance Committee and the Defaulting
Partners (the "Purchase Notice"). The purchase of such
Interest shall be consummated prior to the expiration of
thirty (30) days from the determination of the purchase
price as provided herein.
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(2) The purchase price that the Nondefaulting Partners shall
pay to the Defaulting Partners for the Defaulting
Partners' Interest shall be an amount equal to (i) the
amount that the Defaulting Partners would receive in a
Liquidation (assuming that the sale under Section
11.11.(B)(1) is for an amount equal to the Fair Market
Value) reduced by (ii) the Damages incurred by the
Partnership.
(3) "Fair Market Value" shall be the fair market value of all
of the Partnership Business and assets (including
tangible and intangible assets) as of the date of the
Purchase Notice, without giving effect to the Damages,
determined as follows:
(1) The Defaulting Partners and the Nondefaulting
Partners shall first attempt to agree on such
value, which if agreed to shall be the Fair Market
Value;
(2) If the Partners are unable to agree within twenty
(20) days of the Purchase Notice, then the
Defaulting Partners, on the one hand, and the
Nondefaulting Partners, on the other hand, shall
(at their own cost) cause an independent,
qualified appraiser to deliver a written appraisal
of such value within fifty (50) days of the
Purchase Notice. If the lower appraised value is
greater than or equal to ninety percent (90%) of
the higher appraised value, then the average of
the two appraised values shall be the Fair Market
Value; and (1)
(3) If the lower appraised value is less than ninety
percent (90%) of the higher appraised value, then
the Partners shall jointly appoint a mutually
acceptable neutral person or entity (the
"Neutral") not affiliated with either of the
Partners within seventy (70) days of the Purchase
Notice (and if the Partners have been unable to
agree upon such appointment within sixty (60) days
of the Purchase Notice, then such Neutral shall
upon the application of either the Defaulting
Partners or the Nondefaulting Partners be
appointed within seventy (70) days of the Purchase
Notice by the Center for Public Resources, or if
such appointment is not so made then promptly
thereafter by the American Arbitration Association
in New York, New York, or if such appointment is
not so made then promptly thereafter by the senior
United States District Court judge sitting in the
Borough of Manhattan, in New York, New York), and
the Neutral shall within ninety (90) days of the
Purchase Notice or, if later, within twenty (20)
days of the appointment of the Neutral determine
which of the two appraised values is closest
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to the fair market value of the Partnership's
assets as determined by the Neutral, and that
appraised value shall be the Fair Market Value.
11.6. Liquidation. The Nondefaulting Partners shall have the right to
elect to dissolve and liquidate the Partnership pursuant to the
procedures in Section 11.11. (such procedures constituting a
"Liquidation"); provided, however, that any amount payable to
the Defaulting Partners in such Liquidation pursuant to Section
11.11.(B)(7) shall be reduced by the Nondefaulting Partners'
Participation Percentage of the Damages incurred by the
Partnership. The Nondefaulting Partners shall deliver notice of
such election to dissolve and liquidate in writing to the
Partnership Governance Committee and the Defaulting Partners.
11.7. Closing of Purchase Rights. In the event of the exercise of
purchase rights pursuant to Section 11.5. (any such event a
"Purchase"), the Purchase shall be consummated by appropriate
and customary documentation (including customary
representations and warranties) as soon as practicable and in
any event within the applicable time period specified in
Section 11.5 or Section 11.8. The Partners entitled or
obligated to Purchase shall have the right to transfer or
assign, in whole or in part, its right or obligation to
Purchase to an Affiliate or to a third party.
11.8. Recision. In the event that the Partnership is rendered
Insolvent by reason of a breach, default or failure of an
agreement, covenant, indemnity, representation or warranty made
by LParent in the Contribution Agreement (including the
exhibits and schedules thereto) and such breach, default or
failure has not been cured as provided in the Contribution
Agreement (a "Recision Event"), then CITGO GP shall deliver a
notice to Lyondell GP specifying in reasonable detail the
particulars of such Recision Event (a "Recision Event Notice").
Within 60 days after the earlier to occur of agreement between
the Partners or final judicial determination that a Recision
Event has occurred, Lyondell Partners shall purchase CITGO
Partners' Interest (a "Recision Purchase") for an amount of
cash (the "Recision Purchase Price") equal to the sum, without
duplication, of the following amounts, each calculated or
determined from the Closing Date to the date of purchase: (i)
CITGO Partners' capital contributions made pursuant to Section
6., plus (ii) all Profits allocated to CITGO Partners, minus
(iii) all Losses allocated to CITGO Partners and minus (iv) the
amount of all distributions actually made to CITGO Partners
pursuant to Section 7.4. In the event of a Recision Purchase,
CITGO Partners shall execute and deliver to Lyondell Partners
such documents as Lyondell Partners shall reasonably require to
evidence and effect the Recision Purchase against receipt by
CITGO Partners of the Recision Purchase Price. The amount of
any debt to CITGO Partners under Section 7.3.(C) shall be
deemed to be paid upon payment of the Recision Purchase Price.
11.9. Dissolution. The Partnership shall be dissolved within the
meaning of the Act upon the first to occur of the following:
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(1) the written determination of all General Partners to
dissolve the Partnership;
(2) the bankruptcy (including the matters referred to in
Section 11.2.(A)(5) of the Partnership;
(3) the withdrawal, retirement, resignation, dissolution
or bankruptcy (including the matters referred to in
Section 11.2.(A)(5)) of a Partner;
(4) the closing of a Purchase as the result of a Default;
(5) the election of the Nondefaulting Partners to effect
a dissolution of the Partnership under Section 11.6.; or
(6) any other act or event which results in the
dissolution of a limited partnership under the Act.
11.10. Reconstitution of Partnership. If the Partnership dissolves
pursuant to Section 11.9.(C) or Section 11.9(D) (even if other
dissolution provisions also are invoked), it may be
reconstituted and continued upon the written consent of all
remaining Partners other than the former Partner that sold its
Interest.
11.11. Liquidation; Winding Up and Distributions upon Dissolution.
(1) Upon a dissolution, absent a reconstitution and
continuation of the Partnership under Section 11.10., the
Partnership shall commence to wind up its affairs and the
Partners shall file appropriate documents of dissolution
and proceed to effect the Liquidation of the Partnership
pursuant to the procedures set forth in this Section
11.11.; provided, however, that in the event of a
dissolution resulting from an event described in Section
11.9.(D), sufficient time shall be allowed prior to any
liquidation or winding up of the Partnership to give
effect to the remedies provided by Section 11.5. and
Section 11.6. Notwithstanding any other provision of this
Agreement, during the period of the winding up, the
Nondefaulting Partners (or the Partnership Governance
Committee if the Partners have agreed to terminate the
Partnership or there are otherwise not Nondefaulting
Partners) shall make all decisions relating to the
conduct of any business or operations, and the sale or
disposition of the Partnership's assets.
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(2) Upon dissolution of the Partnership, the following
shall occur unless the Partners agree otherwise:
(1) The Partnership's assets shall be collected and
sold to unaffiliated third parties in arm's-length
transactions; provided, however, that any Partner
or its Affiliates shall have the right to
participate in any public sale or auction of the
Partnership's property or any other reasonable
competitive bid process (such as a private sale
pursuant to a "data room" process conducted by an
independent investment banking firm);
(2) Gain or loss with respect to the Partnership's
sale or distribution of assets shall be allocated
to the Partners' Capital Accounts as provided in
Section 7.6.;
(3) Any liabilities owed to third parties shall be
paid in full;
(4) Appropriate reserves for contingencies shall
be established;
(5) Any outstanding loans that have been made to
the Partnership by any Partner shall be repaid in
full;
(6) CITGO Partners' Capital Accounts shall be reduced
by the amount of the outstanding principal of any
promissory note contributed to the Partnership
pursuant to Section 6.6.(E); and
(7) Any remaining cash or non-cash assets that cannot
be sold for cash shall be distributed to the
Partners in accordance with their positive Capital
Account balances.
No Partner shall have any obligation to contribute capital to
restore any negative balance in its Capital Account.
11.12. Enforcement. Only a General Partner shall have the ability to
enforce the provisions of this Section 11.
12. MISCELLANEOUS
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12.1. Confidentiality and Use of Information. Each Partner will keep
confidential all information regarding the business of the
Partnership and will not use any such information in any manner
not related to the business of the Partnership; provided,
however, that the term "information" as used in this Section
does not include any information that (i) is or becomes
generally available to and known by the public or the petroleum
refining industry (other than as a result of an unpermitted
disclosure directly or indirectly by the Partnership or a
Partner), (ii) is or becomes available to a Partner on a
nonconfidential basis from a source other than the Partnership
or a Partner; provided, however, that such source is not and
was not bound by a confidentiality agreement with, or other
obligation of secrecy to, the Partnership or any other Partner,
(iii) has already been or is hereafter independently acquired
or developed by a Partner without violating any confidentiality
agreement with or other obligation of secrecy to the
Partnership or another Partner or (iv) is generated by the
Partnership with the intention that it not be held as
confidential.
12.2. Auditors. Selection of the Partnership's auditors will be
delegated to the Finance-Control Committee. The Partnership
Governance Committee will have final authority to select,
appoint and establish the terms of the engagement of the
Partnership's auditors. The Partnership Governance Committee
shall, in consultation with the Finance and Control Committee,
establish the accounting policies for the Partnership,
including the policy for determining whether an expenditure
should be capitalized or expensed.
12.3. Indemnification of Officers.
(1) The Partnership shall indemnify any person who was or is
a named defendant or respondent or is threatened to be
made a named defendant or respondent to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or
investigative, any appeal to such an action, suit or
proceeding and any inquiry or investigation that could
lead to such an action, suit or proceeding (collectively,
such actions, suits, proceedings, appeals, inquiries and
investigations are referred to collectively as
"Proceedings" and individually as "Proceeding") by reason
of the fact that such person either is or was an officer
of the Partnership, or, while an officer of the
Partnership, is or was serving at the request of the
Partnership as a director, manager, officer, partner,
venturer, proprietor, trustee, employee, agent or similar
functionary of another domestic or foreign corporation,
limited partnership, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other
enterprise, against judgments, penalties (including
excise and similar taxes), fines, settlements and
reasonable expenses actually incurred by such person in
connection with such Proceeding if it is determined that
such person conducted himself in good faith, and if such
conduct was in such person's official capacity as an
officer of the Partnership, in a manner
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he reasonably believed to be in the best interests of the
Partnership and, in all other cases, in a manner he
reasonably believed was not opposed to the best interests
of the Partnership, and, in the case of any criminal
Proceeding, had no reasonable cause to believe his
conduct was unlawful; provided, however, that if a person
is found liable to the Partnership or is found liable on
the basis that personal benefit was improperly received
by him, the indemnification shall not be available. The
Partnership may pay or reimburse expenses incurred by an
officer in connection with such person's appearance as a
witness or other participation in a Proceeding at a time
when such person is not a named defendant or respondent
in such Proceeding.
(2) The determination to be made in the preceding subsection
(A) shall be made (i) by the Partnership Governance
Committee; or (ii) by special legal counsel selected by
the Partnership Governance Committee. A determination as
to the reasonableness of expenses (including court costs
and attorneys' fees) shall be made in the same manner as
the determination that indemnification is permissible.
(3) Reasonable expenses incurred by an officer in connection
with a Proceeding may be paid by the Partnership in
advance of the final disposition of such Proceeding and
without any of the determinations specified in the
preceding subsection (B) upon receipt by the Partnership
of a written affirmation by the officer of his good faith
belief that he has met the standard of conduct necessary
for indemnification under this Section 12.3. and a
written undertaking by or on behalf of the officer to
repay such amount if it is ultimately determined that he
is not entitled to be indemnified by the Partnership as
authorized in this Section 12.3., which undertaking shall
be an unlimited general obligation of such officer and
may be unsecured.
(4) The right to indemnification conferred in this Section
12.3. shall be a contract right and shall not be deemed
exclusive of any other rights to which those indemnified
may be entitled under any other law, agreement,
Partnership Governance Committee Action, or otherwise,
both as to action in their official capacities and as to
action in another capacity while acting as an officer and
shall continue as to a person who has ceased to be an
officer and shall inure to the benefit of the heirs,
executors and administrators of such person. Any
indemnification of or advance of expenses to an officer
in accordance with this Section 12.3. shall be reported
in writing to the Partnership Governance Committee.
(5) The Partnership may purchase and maintain insurance on
behalf of any person who is or was an officer or employee
of the Partnership, or who
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is or was serving at the request of the Partnership as a
manager, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another
foreign or domestic corporation, limited partnership,
partnership, joint venture, sole proprietorship, trust,
other enterprise, or employee benefit plan, against any
liability asserted against or incurred by that person in
such a capacity or arising out of his status as such a
person, whether or not the Partnership would have the
power to indemnify such person against such liability
under this Section 12.3.
(6) Except as indicated in the proviso in Section
12.3.(A), the Partnership intends that the
indemnification provided hereunder shall indemnify its
officers to the fullest extent possible under the Act;
and if any indemnification which would otherwise be
granted by this Section 12.3. shall be disallowed by any
competent court or administrative body as illegal, then
any officer with respect to whom such adjudication was
made, and any other officer, shall be indemnified to the
fullest extent permitted under the Act.
12.4. Waivers, Modifications and Amendments. All modifications or
amendments of this Agreement or the Certificate of Limited
Partnership shall require the approval of Representatives
representing 100 percent of the total votes as provided in
Section 3.8.(C).
12.5. Further Assurances. From time to time, each Partner agrees to
execute and deliver such additional documents, and will provide
such additional information and assistance as the Partnership
may reasonably require to carry out the terms of this Agreement
and to accomplish the Partnership's Business.
12.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors of the Partners,
but, except as expressly provided herein, no Limited Partner or
its Affiliated General Partner may assign or delegate any of
their rights or obligations under this Agreement without the
prior written consent of the other Partners, which consent
shall be in the sole and absolute discretion of such other
Partners. Any purported assignment or delegation without such
consent shall be void and ineffective.
12.7. Benefits of Agreement Restricted to the Parties. This Agreement
is made solely for the benefit of the Partnership and the
Partners, and no other person or entity shall have any right,
claim or cause of action under or by virtue of this Agreement.
12.8. Expenses. Except as otherwise provided herein, each party
hereto shall be responsible for its own expenses incurred in
connection with this Agreement.
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12.9. Currency Conversions. All contributions, allocations,
distributions and other payments shall be made, and all
calculations performed and books and records kept, in United
States currency, without any reference to foreign currency
exchange rates or other conversion calculations.
12.10. Payment Terms and Interest Calculations
(1) If the payment due date for any payment hereunder
(including Capital Contributions and Damages) falls on a
Saturday or a bank or federal holiday, other than a
Monday, the payment shall be due on the past preceding
business day. If the payment due date falls on a Sunday
or Monday bank or federal holiday, the payment shall be
due on the following business day.
(2) Interest shall accrue on any unpaid and outstanding
amount from the time such amount is due and payable
through the date upon which such amount, together with
accrued interest thereon, is paid in full. Interest
shall, subject to the provisions of Section 12.11.,
accrue at a per annum rate equal to the lesser of (i) 125
percent of the Agreed Rate, compounded quarterly, to the
extent permitted by law or (ii) the Highest Lawful Rate.
(3) A wire transfer or delivery of a check shall not
operate to discharge any payment under this Agreement and
shall be accepted subject to collection.
12.11. Usury Savings Clause. Notwithstanding any other provision of
this Agreement, it is the intention of the parties hereto to
conform strictly to applicable usury laws regarding the use,
forbearance or detention of any indebtedness arising under this
Agreement whether such laws are now or hereafter in effect,
including the laws of the United States of America or any other
jurisdiction whose laws are applicable, and including any
subsequent revisions to or judicial interpretations of those
laws, in each case to the extent they are applicable to this
Agreement (the "Applicable Usury Laws"). Accordingly, if any
payments made pursuant to this Agreement result in any person
having paid any interest in excess of the Maximum Amount, as
hereinafter defined, or if any transaction contemplated hereby
would otherwise be usurious under any Applicable Usury Laws,
then, in that event, it is agreed as follows: (i) the
provisions of this Section 12.11. shall govern and control;
(ii) the aggregate of all interest under Applicable Usury Laws
that is contracted for, charged or received under this
Agreement shall under no circumstances exceed the Maximum
Amount, and any excess shall be promptly refunded to the payor
by the recipient hereof; (iii) no person shall be obligated to
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pay the amount of such interest to the extent that it is in
excess of the Maximum Amount; and (iv) the effective rate of
any interest payable under this Agreement shall be ipso facto
reduced to the Highest Lawful Rate, as hereinafter defined, and
the provisions of this Agreement immediately shall be deemed
reformed, without the necessity of the execution of any new
document or instrument, so as to comply with all Applicable
Usury Laws. All sums paid, or agreed to be paid, to any person
pursuant to this Agreement for the use, forbearance or
detention of any indebtedness arising hereunder shall, to the
fullest extent permitted by the Applicable Usury Laws, be
amortized, pro rated, allocated and spread throughout the full
term of any such indebtedness so that the actual rate of
interest does not exceed the Highest Lawful Rate in effect at
any particular time during the full term thereof. As used
herein, the term "Maximum Amount" means the maximum nonusurious
amount of interest that may be lawfully contracted for, charged
or received by any person in connection with any indebtedness
arising under this Agreement under all Applicable Usury Laws,
and the term "Highest Lawful Rate" means the maximum rate of
interest, if any, that may be charged to any person under all
Applicable Usury Laws on any principal balance from time to
time outstanding pursuant to this Agreement.
12.12. Notices. All notices, requests, demands and other
communications that are required or may be given under this
Agreement shall, unless otherwise provided for elsewhere in
this Agreement, be in writing and shall be deemed to have been
duly given if and when (i) transmitted by telecopier facsimile,
(ii) delivered personally or (iii) mailed, first class mail,
postage prepaid, return receipt requested, as follows:
(a) if to CITGO LP, CITGO GP or its Representatives:
CITGO Refining Investment Company
P. O. Box 3758
Tulsa, Oklahoma 74556
Attention: Treasurer
Telecopy: 918-495-4511
with a copy to:
Vice President and General Counsel
CITGO Petroleum Corporation
P. O. Box 3758
Tulsa, Oklahoma 74556
Telecopy: 918-495-5559
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(b) if to Lyondell LP, Lyondell GP or its Representatives:
Lyondell Refining Company
P. O. Box 3646
Houston, Texas 77253-3646
Attention: Vice President, General Counsel & Secretary
with a copy to:
Lyondell Refining LP, LLC
300 Delaware Avenue
Wilmington, Delaware 19801-1622
Attention: Vice President, General Counsel & Secretary
(c) if to the Partnership:
LYONDELL-CITGO Refining LP
P. O. Box 2451
Houston, Texas 77252-2451
Attention: President & CEO
Telecopy: 713-321-6900
Any changes to the addresses set forth above shall be made by
written notice delivered to the Secretary of the Partnership
who shall maintain such addresses.
12.13. Waiver of Immunity. EACH OF THE CITGO PARTNERS HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO CLAIM FOR ITSELF OR
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12.14. WITH RESPECT TO ITS REVENUES, ASSETS OR PROPERTIES IMMUNITY
FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS.
TO THE EXTENT ANY JURISDICTION WOULD ATTRIBUTE SUCH IMMUNITY TO
EITHER OR BOTH OF THE CITGO PARTNERS, EACH OF THE CITGO
PARTNERS HEREBY WAIVES ANY RIGHT TO CLAIM SUCH IMMUNITY AND TO
ANY DEFENSES AVAILABLE TO IT UNDER THE FOREIGN SOVEREIGN
IMMUNITIES ACT, AND ANY DEFENSE BASED ON IMMUNITY ARISING UNDER
U.S. FEDERAL OR STATE LAW, OR UNDER ANY INTERNATIONAL, FOREIGN
OR OTHER APPLICABLE LAW.
12.15. Governing Law. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS
PRINCIPLES OF CONFLICTS OF LAW.
12.16. Jurisdiction; Consent to Service of Process; Waiver. ANY
JUDICIAL PROCEEDING BROUGHT AGAINST ANY OF THE PARTNERS OR THE
PARTNERSHIP OR ANY DISPUTE UNDER OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY MATTER RELATED HERETO
SHALL BE BROUGHT IN THE FEDERAL OR STATE COURTS OF THE STATE OF
NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTNERS AND THE
PARTNERSHIP ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT (AS FINALLY
ADJUDICATED) RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. EACH OF THE PARTNERS AND THE PARTNERSHIP SHALL
APPOINT C T CORPORATION SYSTEM, THE PRENTICE-HALL CORPORATION
SYSTEM, INC. OR A SIMILAR ENTITY (THE "AGENT") AS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF PROCESS IN ANY PROCEEDING IN
ANY SUCH COURT IN THE STATE OF NEW YORK BY ENTERING INTO AN
AGREEMENT WITH THE AGENT TO SUCH EFFECT, AND EACH PARTNER AND
THE PARTNERSHIP SHALL MAINTAIN SUCH AGREEMENT (OR AN
APPROPRIATE SUBSTITUTE TO THE SAME EFFECT WITH THE SAME OR A
DIFFERENT AGENT) FOR THE ENTIRE TERM OF EXISTENCE OF THE
PARTNERSHIP. THE FOREGOING CONSENTS TO JURISDICTION AND
APPOINTMENTS OF AGENT TO RECEIVE SERVICE OF PROCESS SHALL NOT
CONSTITUTE GENERAL CONSENTS TO SERVICE OF PROCESS IN THE STATE
OF NEW YORK FOR ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND SHALL
NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE
PARTNERSHIP AND THE PARTNERS.
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IN LIGHT OF THE EXPRESS INTENT OF THE PARTIES TO
SUBMIT TO THE JURISDICTION OF NEW YORK COURTS FOR THE
RESOLUTION OF ANY AND ALL DISPUTES ARISING UNDER THIS
AGREEMENT, THE PARTIES FURTHER HEREBY WAIVE ANY AND ALL
AFFIRMATIVE DEFENSES THEY COULD OR MIGHT OTHERWISE BE ABLE TO
ASSERT BASED ON AN ALLEGED INCAPACITY OF THE PARTNERSHIP TO
ASSERT A CLAIM OR COUNTER-CLAIM IN EITHER THE FEDERAL OR STATE
COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF
MANHATTAN. THE AFFIRMATIVE DEFENSES AND MOTIONS HEREBY WAIVED
INCLUDE BUT ARE NOT LIMITED TO OBJECTIONS TO SUIT PURSUANT TO
N.Y. BUSINESS CORPORATION LAW SS. 1312, N.Y. PARTNERSHIP LAW
SS. 121-907, N.Y. CLS GENERAL BUSINESS LAW SS. 130 SUBD.
1(II)(A) AND N.Y. GENERAL ASSOCIATIONS LAW SS. 18(4). THE
PARTIES WAIVE ALL AFFIRMATIVE DEFENSES AND DEFENSIVE MOTIONS
PREDICATED ON, BUT NOT LIMITED TO, THE FOREGOING STATUTORY
PROVISIONS WITH FULL KNOWLEDGE OF THEIR RIGHTS, IF ANY, UNDER
THOSE PROVISIONS. IT IS THE EXPRESS AND KNOWING INTENTION OF
THE PARTIES TO WAIVE THE RIGHT TO ASSERT AS AN AFFIRMATIVE
DEFENSE THE LEGAL INCAPACITY OF THE PARTNERSHIP TO MAINTAIN A
CLAIM OR COUNTER-CLAIM ON THE GROUNDS THAT THE PARTNERSHIP
FAILED TO COMPLY WITH ANY OR ALL REGISTRATION, CERTIFICATION,
NOTIFICATION, FILING OR DESIGNATION-OF-AGENT REQUIREMENTS SET
FORTH AND ENFORCED BY THE FOREGOING OR ANY SIMILAR STATUTORY
PROVISIONS.
12.17. Entire Agreement. This Agreement, together with the Certificate
of Limited Partnership, the Master Transaction Agreement, the
Confidentiality Agreements (as defined in the Master
Transaction Agreement) and the Related Agreements constitute
the entire agreement between the parties and supersedes all
prior agreements and understandings, oral and written, between
the parties with respect to the subject matter hereof, with the
exception of those matters which will continue to be governed
under the Regulations.
12.18. Severability. In the event that any provision of this Agreement
shall finally be determined to be unlawful, such provision
shall, so long as the economic and legal substance of the
transactions contemplated hereby is not affected in any
materially adverse manner as to any Partner, be deemed severed
from this Agreement and every other provision of this Agreement
shall remain in full force and effect.
12.19. Construction. In construing this Agreement, the following
principles shall be followed: (i) no consideration shall be
given to the captions of the articles, sections, subsections or
clauses, which are inserted for convenience in locating the
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provisions of this Agreement and not as an aid in construction;
(ii) no consideration shall be given to the fact or
presumptions that any Partner had a greater or lesser hand in
drafting this Agreement; (iii) examples shall not be construed
to limit, expressly or by implication, the matter they
illustrate; (iv) the word "includes" and its syntactic variants
mean "includes, but is not limited to" and corresponding
syntactic variant expressions; (v) the plural shall be deemed
to include the singular, and vice versa; (vi) each gender shall
be deemed to include the other genders; and (vii) each exhibit,
attachment and schedule to this Agreement is a part of this
Agreement.
12.20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, and
all of which when taken together shall constitute one and the
same original document.
[signature page follows]
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IN WITNESS WHEREOF, this Limited Partnership Agreement has been
executed on behalf of each Partner, by their respective officers thereunto duly
authorized, effective as of the 31st day of December, 1998.
LYONDELL REFINING LP, LLC
a Delaware limited liability company (Lyondell LP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
CITGO GULF COAST REFINING, INC.
a Delaware corporation (CITGO GP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
LYONDELL REFINING COMPANY,
a Delaware corporation (Lyondell GP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
CITGO REFINING INVESTMENT COMPANY
an Oklahoma corporation (CITGO LP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
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EXHIBIT 1
TO PARTNERSHIP AGREEMENT
DEFINITION OF TERMS IN PARTNERSHIP AGREEMENT
Act. The Delaware Revised Uniform Limited Partnership Act, as amended
and in effect from time to time. See Section 2.2.
Action. See Section 5.11.(D).
Additional Construction Loan. As defined in the Regulations.
Affiliate. As to any specified Person, any other Person that directly
or indirectly through one or more intermediaries controls or is controlled by or
is under common control with the specified Person; provided, however, that for
purposes of this Agreement and regardless of whether the specified Person would
otherwise be deemed an Affiliate for any other purpose or under any other
agreement, the Partnership or any entities controlled by the Partnership shall
not be deemed to be an Affiliate of LParent, Lyondell GP or Lyondell LP or any
entities controlled by LParent, Lyondell GP or Lyondell LP or of CParent, CITGO
GP or CITGO LP or any entities controlled by CParent, or CITGO GP or CITGO LP.
For purposes of this definition the term "control" shall have the meaning set
forth in 17 CFR 230.405.
Affiliated General Partner. In the case of Lyondell LP, the "Affiliated
General Partner" shall mean Lyondell GP. In the case of CITGO LP, the
"Affiliated General Partner" shall mean CITGO GP.
Affiliated Limited Partner. In the case of Lyondell GP, the "Affiliated
Limited Partner" shall mean Lyondell LP. In the case of CITGO GP, the
"Affiliated Limited Partner" shall mean CITGO LP.
Affiliated Partner Group. A General Partner and its Affiliated Limited
Partner.
Agent. See Section 12.15.
Agreed Rate. With respect to any period for which interest is to be
calculated, the Citibank, N.A. "base rate" from time to time in effect for each
day in such period, calculated by multiplying the Citibank, N.A. "base rate" by
the number of days such "base rate" is in effect, determining the sum of the
products obtained thereby and dividing such sum by the number of days in such
period.
Alternate. See Section 3.2.(B).
Annual Meeting. See Section 3.4.(A).
Applicable Usury Laws. See Section 12.11.
Assets. The assets defined as such in the Contribution Agreement
together with all assets provided to the Partnership pursuant to the Related
Agreements.
Exhibit 1, Page 1
<PAGE> 72
Asset Value. With respect to any asset, the asset's adjusted basis for
federal income tax purposes, except that the Asset Value of any asset
contributed by a Partner to the Partnership or acquired with funds contributed
by a Partner shall be the fair market value of such asset on the date of
contribution or on any date on which the asset is revalued pursuant to Section
7.1.(C) hereof; provided, however, that the fair market value of the Assets (net
of the Assumed Liabilities) on each such date shall be deemed to be $825
million, reduced, without duplication, (i) by the amount of any payment
described in Section 7.1.(D) and (ii) by the amount of any indemnification
forgone by the Partnership pursuant to the proviso of Section 5.2 of the
Contribution Agreement; and provided further (a) that the fair market value of
the Working Capital on each such date shall be the amount determined pursuant to
Exhibit 6.1(B) and (b) that the fair market value of the assets which are
acquired with funds contributed by a Partner in each such date shall be the
original cost of such assets. Any such adjustments shall be effective on a
prospective basis only.
Auxiliary Committee. See Section 3.10.
Average Participation Percentage. The mathematical average of a
Partner's Participation Percentages, by Calendar Quarter, for any applicable
period.
Blended Rate. For any Calendar Quarter or portion thereof, a fraction
(i) the numerator of which is equal to the aggregate federal income tax
depreciation, amortization or other cost recovery deductions for such period
with respect to all assets and (ii) the denominator of which is equal to the
aggregate adjusted tax basis of the assets on the date such assets were
contributed to the Partnership or, if any adjustment to the Capital Accounts has
occurred pursuant to Section 7.1.(C), the date of the most recent such
adjustment.
Business Day. Any day other than a Saturday, Sunday or other day on
which banks are closed in New York City, New York.
Calendar Quarter. In each year, each calendar quarter.
Capital Account. See Section 7.1.
Capital Budget. See Section 9.2.(B).
Capital Contribution. See Section 6.4.
Capital Enhancement Projects. See Section 9.2.(B).
Cash Balance Amount. See Section 7.5.
CEO. The President and Chief Executive Officer of the Partnership. See
Section 4.5.
CERCLA shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
Chemical Substance shall mean (i) any chemical substance, pollutant,
contaminant, constituent, chemical, mixture, raw material, intermediate, product
or byproduct that is regulated (including any requirement for the reporting of
any Release thereof) under any Environmental Law, as now or hereafter in effect,
or defined or listed as an industrial, toxic, deleterious, harmful,
Exhibit 1, Page 2
<PAGE> 73
radioactive, infectious, disease-causing or hazardous substance, material or
Waste under any Environmental Law, as now or hereafter in effect, and (ii)
petroleum or any fraction thereof, asbestos or asbestos-containing material or
polychlorinated biphenyls.
CITGO GP. CITGO Gulf Coast Refining, Inc., a Delaware corporation, the
General Partner that is an Affiliate of CParent. See Section 2.2.
CITGO LP. CITGO Refining Investment Company, an Oklahoma corporation,
the Limited Partner that is an Affiliate of CParent. See Section 2.2.
CITGO Partners. CITGO GP and CITGO LP.
CITGO Partners Option Date Amount. The product of (i) CITGO Partners
Average Participation Percentage for the period beginning on the day following
the In-Service Date and ending on the Option Date times (ii) the remainder of
Option Date Working Capital minus In-Service Date Working Capital.
Closing Date. See Section 2.2.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time and any successor thereto.
Company. LYONDELL-CITGO Refining Company Ltd., a Texas limited
liability company, which was converted into the Partnership as of the date of
this Agreement.
Compensation Committee. See Section 3.10.(A).
Conflict Circumstance. See Section 5.7.
Conflicted General Partner. See Section 5.7.
Contribution Agreement. The agreement dated July 1, 1993 between the
Company and LParent pursuant to which the Refinery Business and certain other
Assets and Working Capital were contributed to the Company by LParent on behalf
of Lyondell Refining Company n/k/a Lyondell GP.
Conversion Date. See Section 2.2.
CParent. CITGO Petroleum Corporation, a Delaware corporation. See
Section 2.2.
Damages. See Section 11.2.(D).
Default. See Section 11.2.(A).
Default Date. See Section 11.2.(C).
Defaulting Partners. Lyondell GP and Lyondell LP, in the case of a
Default by Lyondell GP or Lyondell LP; and CITGO GP and CITGO LP, in the case of
a Default by CITGO GP or CITGO LP.
Exhibit 1, Page 3
<PAGE> 74
Depreciation. For each Calendar Quarter or portion thereof, an amount
equal to the federal income tax depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such period.
Notwithstanding the preceding sentence, if the Asset Value (after taking into
account any adjustment pursuant to the proviso of Section 7.1.(C)) of an asset
differs from its adjusted tax basis on the date such asset is contributed or, if
applicable, on the date of any adjustment to Capital Accounts which has taken
place pursuant to Section 7.1.(C), Depreciation for any period shall be an
amount which bears the same ratio to such Asset Value (as adjusted pursuant to
the proviso of Section 7.1.(C)) as the federal income tax depreciation,
amortization or other cost recovery deduction for such period bears to such
adjusted tax basis, except that in the case of any asset that has a zero
adjusted tax basis on either the date of its contribution to the Partnership or
on the date of any adjustment pursuant to Section 7.1.(C), Depreciation for any
period shall be an amount equal to the product of (i) the Asset Value (as
adjusted pursuant to the proviso of Section 7.1.(C)) of such asset on the date
of contribution, or, if applicable, the date of the most recent adjustment to
Capital Accounts pursuant to Section 7.1.(C) and (ii) the Blended Rate.
Distributable Cash. The amount of cash distributable to the Partners as
determined under Section 7.3., and in regard to each Partner.
Distributions. See 6.4.(A)(2).
Environment shall mean any ambient air, surface water, drinking water,
groundwater, land surface, subsurface strata, river sediment, natural resources
or real property and the physical buildings, structures and fixtures thereon,
including sewer, septic and waste treatment, storage or disposal systems.
Environmental Law shall mean any legal requirement or permit relating
to (i) the Environment, including pollution, contamination, cleanup,
preservation, protection and reclamation of the Environment; (ii) health or
safety, including the exposure of employees and other Persons to any Chemical
Substance; (iii) the Release or threatened Release of any Chemical Substance,
noxious noise or odor, including investigation, study, assessment, testing,
monitoring, containment, removal, remediation, response, cleanup and abatement
of such Release or threatened Release; and (iv) the management of any Chemical
Substance, including the manufacture, generation, formulation, processing,
labeling, use, treatment, handling, storage, disposal, transportation,
distribution, re-use, recycling or reclamation of any Chemical Substance.
Executive Officers. Those officers of the Partnership then designated
as Executive Officers by Partnership Governance Committee Action.
Fair Market Value. See Section 11.5.(C).
Finance-Control Committee. See Section 3.10(A).
Financing Plan. Certain Partnership plans, as approved by unanimous
actions of the Partnership Governance Committee, setting forth the Partnership's
funding requirements for the Capital Budget and the sources of funds to finance
such requirements.
GAAP. Generally accepted accounting principles.
Exhibit 1, Page 4
<PAGE> 75
General Partners. Each Person who executes this Agreement and who is
hereby admitted to the Partnership as a general partner of the Partnership,
unless such General Partner ceases to be a General Partner hereunder or sells,
transfers, forfeits or otherwise disposes of its Interest and is replaced by a
Substitute General Partner in accordance with this Agreement and the Act, and
each Person that becomes a Substitute General Partner, if any, of the
Partnership as provided herein, in such Person's capacity as a general partner
of the Partnership.
Highest Lawful Rate. See Section 12.11.
Indemnified Losses. See Section 5.11.(A)(1).
Indemnified Party. See Section 5.11.(D).
Indemnifying Party. See Section 5.11.(D).
Initial Construction Loan. As defined in the Regulations.
In-Service Date. February 28, 1997, except for the Working Capital
Valuation for which the In-Service Date is March 31, 1997.
In-Service Date Working Capital. The value of the Working Capital on
the In-Service Date determined pursuant to Exhibit 6.1(B).
Insolvent and Insolvency. The Partnership is insolvent if it has ceased
to pay its debts in the ordinary course of business or cannot pay its debts as
they become due or is insolvent within the meaning of the federal bankruptcy
law.
Intended Percentage. See Section 6.6.(A).
Interest. At any point in time, the entire ownership interest of a
Partner in the Partnership at such time. See Section 5.8.
Limited Partner. Each Person who executes this Agreement and who is
hereby admitted to the Partnership as a limited partner of the Partnership,
unless such Limited Partner ceases to be a Limited Partner hereunder or sells,
transfers, forfeits or otherwise disposes of its Interest and is replaced by a
Substitute Limited Partner in accordance with this Agreement and the Act, and
each Person that becomes a Substitute Limited Partner, if any, of the
Partnership as provided herein, in such Person's capacity as a limited partner
of the Partnership.
Liquidation. See Section 11.6.
LParent. Lyondell Chemical Company, a Delaware corporation, formerly
known as Lyondell Petrochemical Company. See Section 2.2.
Lyondell GP. Lyondell Refining Company, a Delaware corporation, the
General Partner that is an Affiliate of LParent.
Lyondell LP. Lyondell Refining LP, LLC, a Delaware limited liability
company, the Limited Partner that is an Affiliate of LParent.
Exhibit 1, Page 5
<PAGE> 76
Lyondell Partners. Lyondell GP and Lyondell LP.
Lyondell Partners Option Date Amount. The product of (i) Lyondell
Partners Average Participation Percentage for the period beginning on the first
day following the In-Service Date and ending on the Option Date times (ii) the
remainder of the Option Date Working Capital minus In-Service Date Working
Capital.
Maintenance Capital. Those capital expenditures reasonably required to
fund capital expenditures that are necessary to maintain the Refinery in
substantially the same condition existing on the Closing Date.
Master Transaction Agreement. The agreement so named, dated as of May
5, 1993, among LParent, CParent, Lyondell GP and CITGO LP.
Maximum Amount. See Section 12.11.
Neutral. See Section 11.5.(C)(3).
Nonconflicted General Partner. See Section 5.7.
Nondefaulting Partners. The Partners other than the Defaulting
Partners. See Section 11.2.
Operating Budget. See Section 9.2.(A).
Operating Committee. See Section 3.10.(A).
Option Date. See Section 6.6.(A).
Option Date Payment. See Section 6.6.(C).
Option Date Working Capital. The value of Working Capital on the Option
Date determined pursuant to Section 6.6.
Owners. Lyondell GP and CITGO LP in their capacity as members of the
Company.
Parents. LParent and CParent.
Partners. The General Partners and the Limited Partners on the date of
this Agreement until such Person ceases to be a partner of the Partnership.
Partnership Business. See Section 2.3.
Partnership Governance Committee. The committee of six Representatives
through which the General Partners manage the Partnership. See Section 3.1.(A).
Partnership Governance Committee Action. The formal actions taken by
vote of the Partnership Governance Committee, which is the exclusive method by
which the General Partners manage the Partnership. See Section 3.6.(A).
Exhibit 1, Page 6
<PAGE> 77
Participation Percentage. The percentage calculated for each Partner,
from time to time, pursuant to Section 6.4.
Person. Any natural person or any corporation, limited liability
company, partnership, group, joint venture, trust or other entity.
Pledgee Group. See Section 11.1.
Pledgor Group. See Section 11.1.
Product Sales Agreement. The Product Sales Agreement-Refined Products
dated July 1, 1993 between the Company and CITGO Petroleum Corporation, as
amended from time to time.
Profits and/or Losses. For each Calendar Quarterly period or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined for federal income tax purposes in accordance with
Code Section 703(a) (for this purpose, all items of income, gain, loss,
deduction or credit required to be stated separately pursuant to Code Section
703(a)(1) shall be included in Profits or Losses), with the following
adjustments:
(i) any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition shall be added to such Profits or
subtracted from such Losses;
(ii) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this definition, shall be subtracted from
such Profits or added to such Losses;
(iii) gain or loss resulting from any disposition of an asset
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Asset Value (as adjusted
pursuant to the proviso in Section 7.1.(C), adjusted to reflect
Depreciation; and
(iv) in lieu of the depreciation, amortization, and other cost
recovery deductions otherwise required to be taken into account in
computing such Profits or Losses, there shall be taken into account
Depreciation.
Profits Interest. The right of any Partner to receive Profits allocated
or cash distributed to such Partner pursuant to Section 7, but not including the
right to participate in or manage the affairs of the Partnership as a Partner,
the right to receive any information or accounting of the affairs of the
Partnership, the right to inspect the books or records of the Partnership or any
other right of a Partner pursuant to this Agreement.
Proper Ratio. With respect to the Capital Account balances of the
Partners at any time, the ratio of the Partners' Participation Percentages at
such time.
Purchase. See Section 11.7.
Exhibit 1, Page 7
<PAGE> 78
Purchase Notice. Notice given by the Nondefaulting Partners exercising
their purchase rights. See Section 11.5.(A).
Purchase Offer. See Section 10.3.(C).
Recision Event. See Section 11.8.
Recision Event Notice. See Section 11.8.
Refinery. The Refinery located at 12000 Lawndale in Houston, Texas.
Refinery Business. The Refinery and lube blending facility located in
Birmingport, Alabama and all related assets (of every kind, nature, character
and description, tangible and intangible, real, personal or mixed, wherever
located), businesses, contracts and permits, that are used solely in the
operations of such Refinery and lube blending facility, and all activities
reasonably related or incidental thereto.
Regulations. See Section 2.2.
Related Agreements. Those agreements defined as such in Exhibit 1A to
this Agreement.
Release shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, dumping, discharge, dispersal, leaching, escaping,
emanation or migration of any Chemical Substance in, into or onto the
Environment of any kind whatsoever, including the movement of any Chemical
Substance through or in the Environment, exposure of any type in any workplace,
any release as defined under CERCLA or any other Environmental Law and any
noxious noise or odor emission.
Representatives. Those persons designated by each General Partner to
serve as such General Partner's representatives on the Partnership Governance
Committee. See Section 3.2.(A).
Second Notice. See Section 10.3.(D).
Secretary. See Section 4.7.
Substitute General Partner. A Person who is admitted as a General
Partner to the Partnership in place of and with the rights of a General Partner.
Substitute Limited Partner. A Person who is admitted as a Limited
Partner to the Partnership in place of and with the rights of a Limited Partner.
TMP. The "tax matters partner" as defined in Section 6231(a)(7) of the
Code. See Section 8.3.(A).
Treasury Regulations. The income tax regulations promulgated by the
Department of Treasury, as amended from time to time. Treasury Regulations
include final and temporary regulations.
Unanimous Partnership Governance Committee Action. See Section 3.8.
Exhibit 1, Page 8
<PAGE> 79
U.S. Partnership Return of Income. See Section 8.3.(A).
Vice President. See Section 4.6.
Wholly Owned Subsidiary. As to any Person, a subsidiary of such Person
all of the equity interests of which are owned, directly or indirectly, by such
Person.
Working Capital. The Partnership's current assets minus current
liabilities (excluding the current portion of long-term debt and capital
leases). Current assets and current liabilities will be determined in accordance
with current accounting principles under GAAP as in effect at the Conversion
Date, except (i) that any cash, cash equivalents and short-term investments
included in the capital fund will be excluded and (ii) that inventory will be
carried at its Fair Market Value. The inventory value on the Conversion Date
will be its actual Fair Market Value as determined by Exhibit 6.1.(B) and on
other valuation dates will be valued in accordance with Exhibit 6.1.(B).
Exhibit 1, Page 9
<PAGE> 80
EXHIBIT 1A
RELATED AGREEMENTS
TIER 1 RELATED AGREEMENTS
13. Amended and Restated Regulations
14. Performance Guaranty and Control Agreement 15. Contribution Agreement,
including the following exhibits:
15.1. General Warranty Deed (relating to Houston Land) (Exhibit A-1)
15.2. General Warranty Deed (relating to Birmingport Land) (Exhibit A-2)
15.3. Assignment of Real Property Interests (relating to the "Ballpark)
(Exhibit A-3)
15.4. Pipeline Deed, Bill of Sale and Assignment of Easements (relating
to the Company Pipelines) (Exhibit (A-4)
15.5. Assignment and Assumption Agreement (between Lyondell and the
Company relating to Assets other than real property) (Exhibit A-5)
15.6. Grants of Easements for Pipelines and Meter Sites (Exhibit B)
16. Crude Supply Agreement
17. Supplemental Supply Agreement
18. Product Sales Agreement Refined Products , CITGO
19. Inter-Plant Agreements:
19.1. Company Feedstock Purchase Agreements:
(1) Heavy Pyrolysis Gasoline
(2) Light Pyrolysis Gasoline
(3) C5 Raffinate
(4) OP Hydrogen
Exhibit 1A, Page 1
<PAGE> 81
(5) MeOH Hydrogen
(6) Pyrolysis Gas Oil
(7) Toluene
(8) Methanol
(9) RAFF II
(10) RAFF II Isomerate
(11) MTBE
(12) Isopentane/Heavy Py Mix
(13) Ethylene
19.2. Company Product Sales Agreement , Lyondell:
(1) OP , 400
(2) OP , 700
(3) Mixed Propylene
(4) Refinery Normal Butane
(5) Refinery Propane
Exhibit 1A, Page 2
<PAGE> 82
(6) Alkylation Normal Butane
(7) Alkylation Propane
(8) Benzene
(9) Toluene
19.3. Tolling Agreement
TIER 2 RELATED AGREEMENTS
20. Employee Transfer and Benefits Agreement
21. Intellectual Property Rights Agreement
22. Trademark Assignment Agreement
23. Trademark License Agreement
24. Tradename Licensing Agreement
25. Software Agreement
26. Terminal and Storage Agreement
27. Mont Belvieu Storage and Pipeline Agreement
28. Marketing Services Agreement , Aromatics
29. Paraffinic Lubricants Base Oil Sales Agreement
30. Naphthenic Lubricants, White Mineral Oils and Specialty Oils Sales
Agreement
31. Lubricant Facility Operating Agreement
32. Manufacturing Services Agreement
33. Employee Services Agreement
34. Administrative Services Agreement
35. Product Sales Agreement MTBE , Lyondell and CITGO
36. Refinery Office Lease
37. Exchange Agreement
38. Assignment and Assumption Agreement - CITGO and LCR (Lubricants)
Exhibit 1A, Page 3
<PAGE> 83
EXHIBIT 6.4
<TABLE>
<CAPTION>
CONVERSION
CAPITAL DATE
CONTRIBUTION PARTICIPATION
PERCENTAGES
<S> <C> <C>
Lyondell LP 784,315,812 48.65
Lyondell GP 162,828, 154 10.10
$ 947,143,966 58.75%
--------------- ---------
CITGO LP 648,866,453 40.25
CITGO GP 16,120,906 1.00
--------------- ---------
$ 664,987,359 41.25%
--------------- ---------
$ 1,612,131,325 100.00%
=============== =========
</TABLE>
<PAGE> 1
EXHIBIT 12.1
CITGO PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Income before provision for income taxes $296,777 $297,499 $197,250 $215,872 $301,233
Distributions in excess of equity
earnings of affiliates 44,939 27,282 9,677 -- --
Equity earnings (losses) in excess of
distributions -- -- -- (4,490) (3,930)
Interest 99,926 125,492 113,989 106,568 77,792
Amortization of previously capitalized
interest 2,858 4,115 3,600 3,440 3,039
Portion of rent representative of
interest factor 11,333 13,000 11,000 10,928 11,305
-------- -------- -------- -------- --------
Income as adjusted $455,833 $467,388 $335,516 $332,318 $389,439
======== ======== ======== ======== ========
Fixed charges
Interest expense $ 99,926 $125,492 $113,989 $106,568 $ 77,792
Capitalized interest 5,000 7,000 12,000 5,000 12,000
Portion of rent representative of
interest factor 11,333 13,000 11,000 10,928 11,305
-------- -------- -------- -------- --------
Total fixed charges $116,259 $145,492 $136,989 $122,496 $101,097
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges 3.92x 3.21x 2.45x 2.71x 3.85x
</TABLE>
4
<PAGE> 1
(a) Net Income of the Company and its Restricted Subsidiaries
for such period; plus (b) the aggregate amount of Interest Expense of
the Company and its Restricted Subsidiaries that was deducted for such
period in determining Net Income for such entities; plus (c) the
aggregate amount which was deducted in respect of Federal, state and
local income taxes of the Company and its Restricted Subsidiaries for
such period in determining Net Income for such entities, plus (d) the
aggregate amount which was deducted in respect of depreciation and
amortization in determining Net Income for such entities for such
period.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000 at the time any
assignment is made pursuant to Section 11.8; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or
a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000 at the time any assignment
is made pursuant to Section 11.8, provided that such bank is acting
through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; and
(c) a Person that is primarily engaged in the business of commercial
lending and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (iii) a Person of which a
Bank is a Subsidiary; provided, however, no Eligible Assignee shall be
a Person who is an Affiliate of any Person in the petroleum or
petroleum products industry, except with the consent of the Company.
"Environmental Laws" means all federal, state or local laws,
statutes, rules, regulations, ordinances and codes, together with all
administrative orders, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.1.
"Excluded Taxes" means, in the case of each Bank and the
Administrative Agent, such taxes (including income taxes or franchise
taxes), which are imposed on or measured by such Bank's or the
Administrative Agent's net income by the United States or its political
subdivisions or the jurisdiction (or any political subdivision thereof)
under the laws of which such Bank or the Administrative Agent, as the
case may be, is organized or maintains a lending office.
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 30,338
<SECURITIES> 0
<RECEIVABLES> 590,994
<ALLOWANCES> 16,713
<INVENTORY> 719,625
<CURRENT-ASSETS> 1,407,795
<PP&E> 3,764,145
<DEPRECIATION> 903,718
<TOTAL-ASSETS> 5,254,252
<CURRENT-LIABILITIES> 1,053,846
<BONDS> 1,259,270
0
0
<COMMON> 1
<OTHER-SE> 1,846,439
<TOTAL-LIABILITY-AND-EQUITY> 5,254,252
<SALES> 10,911,721
<TOTAL-REVENUES> 10,980,641
<CGS> 10,340,219
<TOTAL-COSTS> 10,582,715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,826
<INTEREST-EXPENSE> 99,926
<INCOME-PRETAX> 296,777
<INCOME-TAX> 102,787
<INCOME-CONTINUING> 193,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 193,990
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
